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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 3, 1998
REGISTRATION NO. 333-46965
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO.1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CyberCash, Inc.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
54-1725021
(I.R.S. Employer Identification No.)
2100 Reston Parkway
Third Floor
Reston, Virginia 20191
(703) 620-4200
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
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RUSSELL B. STEVENSON, JR.
2100 RESTON PARKWAY
THIRD FLOOR
RESTON, VIRGINIA 20191
(703) 620-4200
(name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
MICHAEL J. SILVER
HOGAN & HARTSON L.L.P.
111 S. CALVERT STREET, SUITE 1600
BALTIMORE, MARYLAND 21202
(410) 659-2741
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933 other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box: X
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
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SUBJECT TO COMPLETION
APRIL 3, 1998
CYBERCASH, INC.
COMMON STOCK, PAR VALUE $.001 PER SHARE
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This Prospectus relates to the offer and sale of up to 4,885,731
shares (the "Shares") of common stock, $.001 par value ("Common Stock") of
CyberCash, Inc. ("CyberCash" or the "Company"). The Shares will be offered for
sale by certain stockholders of the Company, or by donees or certain other
permitted transferees (the "Selling Stockholders"), from time to time in one or
more transactions (which may involve block transactions) effected on the Nasdaq
Stock Market (or any national securities exchange or U.S. inter-dealer
quotation system of a registered national securities association, on which the
Shares are then listed), in sales occurring in the public market off such
exchange, in privately negotiated transactions, through the writing of options
on the Shares, short sales or in a combination of such methods of sale. Such
methods of sale may be conducted at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at negotiated
prices. The Selling Stockholders may effect such transactions directly, or
indirectly, through broker-dealers, underwriters or agents acting on their
behalf, and in connection with such sales, such broker-dealers or agents may
receive compensation in the form of commissions or discounts from the Selling
Stockholders and/or the purchasers of the Shares for whom they may act as agent
or to whom they sell Shares as principal or both (which commissions or
discounts are not anticipated to exceed those customary in the types of
transactions involved). In connection with any sales by the Selling
Stockholders of Common Stock hereunder, the Selling Stockholders and any
broker-dealers participating in such sales may be deemed to be "underwriters"
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act"). To the extent required, the names of any agents or broker-dealers, and
applicable commissions or discounts and any other required information with
respect to any particular offer of Shares by the Selling Stockholders, will be
set forth in a Prospectus Supplement. Any securities covered by this Prospectus
which qualify for sale pursuant to Rule 144 under the Securities Act of 1933,
as amended (the "Securities Act"), may be sold under Rule 144 rather than
pursuant to this Prospectus. See "Selling Stockholders" and "Plan of
Distribution."
None of the proceeds from the sale of the Shares by the Selling
Stockholders will be received by the Company. All expenses of registration
incurred in connection with this offering are being borne by the Company, but
all brokerage commissions and other expenses incurred by individual Selling
Stockholders will be borne by each such Selling Stockholder.
The Selling Stockholders and any dealer acting in connection with the
offering of any of the Shares or any broker executing selling orders on behalf
of the Selling Stockholders may be deemed to be "underwriters" within the
meaning of the Securities Act, in which event any profit on the sale of any or
all of the Shares by them and any discounts or commissions received by any such
brokers or dealers may be deemed to be underwriting discounts and commissions
under the Securities Act.
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SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR CERTAIN CONSIDERATIONS
RELEVANT TO AN INVESTMENT IN CYBERCASH.
The Company's Common Stock is traded on the Nasdaq Stock Market under
the symbol "CYCH." On March 31, 1998, the reported last sale price of the
Common Stock on Nasdaq was $16.25 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is April , 1998
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
Regional Offices in New York (Seven World Trade Center, Suite 1300, New York,
New York 10048) and Chicago (Suite 1400, Northwestern Atrium Center, 500 West
Madison Street, Chicago, Illinois 60661). Copies of such material can also be
obtained at prescribed rates from the Public Reference Section of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549. The Commission also maintains a World Wide Web site that contains
reports, proxy statements and other information regarding registrants,
including the Company, that file such information electronically with the
Commission. The address of the Commission's Web site is http:\\www.sec.gov.
The Company has filed with the Commission a Registration Statement on
Form S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act")
with respect to the Common Stock. This Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission
pursuant to the Exchange Act are incorporated herein by reference and made a
part hereof: the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, the Company's current reports on Form 8-K filed on February
10 and March 18, 1998 and the description of the Company's Common Stock set
forth in the Company's Registration Statements on Form 8-A filed under the
Exchange Act including all amendments and reports filed for the purpose of
updating such descriptions. All documents filed by the Company with the
Commission pursuant to Sections 13(a) of the Exchange Act and any definitive
proxy statement filed pursuant to Section 14 of the Exchange Act and any
reports filed pursuant to Section 15(d) of the Exchange Act after the date of
this Prospectus and prior to the termination of the offering of the Common
Stock shall be deemed to be incorporated by reference into this Prospectus and
to be a part hereof from the date of filing of such documents. Any statement
contained in a document incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which is
incorporated by reference herein modifies or supersedes such earlier statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus. Copies of all
documents incorporated by reference herein (other than exhibits to such
documents which are not specifically incorporated by reference into such
documents) will be provided without charge to each person who receives a copy
of this Prospectus, upon request of such person, directed to James J. Condon,
CyberCash, Inc., 2100 Reston Parkway, Reston, VA 20191, 703-620-4200, or via
e-mail: [email protected].
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RISK FACTORS
In addition to the other information contained or incorporated by
reference in this Prospectus, prospective investors should consider carefully
the following risk factors in evaluating the Company and its business before
purchasing Common Stock. The following discussion identifies important factors
that could cause CyberCash's actual results to differ materially from results
predicted or implied in any forward-looking statements made in this Prospectus
or elsewhere by or on behalf of CyberCash.
LIMITED OPERATING HISTORY; ACCUMULATED DEFICIT
The Company was founded in August 1994, and has not yet operated at a
profit. The Company's limited operating history offers little upon which an
evaluation of the Company and its long-term prospects can be based. The
Company's prospects must be considered in light of the risks, expenses and
difficulties frequently encountered by companies in their earlier stage of
development, particularly companies in new and rapidly evolving markets. To
address these risks, the Company must, among other things, continue to provide
enhancements to its payment services and supporting software, successfully
implement its marketing strategy, respond to competitive developments, continue
to attract, retain and motivate qualified personnel, expand its management
processes and capabilities, and develop and upgrade its technology. There can
be no assurance that the Company will succeed in addressing these risks, and
the failure to do so could have a material adverse effect on the Company's
business, financial condition and operating results.
As of December 31, 1997, the Company had an accumulated deficit of
$63,936,000. Since its inception, the Company's revenues have been small
relative to its expenses. The Company's ability to generate significant revenue
remains subject to substantial uncertainty. The Company expects to continue to
incur significant operating losses at least through 1998, and perhaps for some
time thereafter. There can be no assurance that the Company will achieve or
sustain profitability.
UNCERTAINTY OF DEVELOPMENT OF MARKET
The market for the Company's services is at an early stage and is
rapidly evolving. There is an increasing number of market entrants who have
introduced or are developing competing products and services. As is typical for
a new and rapidly evolving industry, demand and market acceptance for recently
introduced products and services are uncertain. Moreover, critical issues
concerning the Internet (including security, reliability, cost, ease of use and
quality of service) remain unresolved and may affect growth of the use of the
Internet in general and of electronic commerce in particular. The widespread
adoption of the Internet for commerce will require a broad acceptance of new
methods of conducting business and exchanging information. Enterprises that
have invested substantial resources in other methods of conducting business
have tended to be slow to adopt a new strategy that may limit or compete with
their existing business. They have also had to overcome technical obstacles and
develop new business models to succeed in this new environment.
Electronic commerce, and consequently the market for the Company's
services, have developed more slowly than some had predicted. Although
electronic commerce continues to grow, it is not known how soon, if ever, the
demand for payment services will become sufficient to sustain a viable market
for the Company's services. The Company's business includes services that have
never existed before, which operate in a market that previously did not exist.
In this regard, it is unknown whether any significant market for effecting
payments by electronic check or for making low denomination cash transfers over
the Internet will develop. The use of the Company's services is dependent in
part upon the continued development of an infrastructure for providing adequate
Internet access and the proper management of Internet traffic. The Internet may
not prove to be a viable commercial marketplace because of inadequate
development of the necessary infrastructure, such as adequate capacity, a
reliable network backbone or timely development of complementary products, such
as high speed modems. There can be no assurance that commerce over the Internet
will become widespread, that a significant market for the Company's services
will emerge, or that the Company's services will become generally adopted. If
the market fails to continue to develop, develops more slowly than expected or
becomes saturated with competitors,
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the infrastructure for the Internet is not adequately developed or the
Company's services do not achieve market acceptance by a significant number of
individuals, businesses and financial institutions, the Company's business,
financial condition and operating results will be materially and adversely
affected.
POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
Because electronic commerce is still at an early stage, the Company's
revenue expectations are based largely on expectations regarding the growth of
demand for its services and its ability to license its technology. Moreover,
the Company must continue to control its operating expenses. The Company
currently anticipates that its operating expenses for its existing business
will grow only slightly during 1998. However, operating expenses may increase
as the Company continues to develop its services and technology, increase its
sales and marketing operations, develop new distribution channels, improve its
operational and financial systems and broaden its customer support
capabilities. Any material shortfall of demand for the Company's services in
relation to the Company's expectations would have a material adverse effect on
the Company's business and financial condition and could cause significant
fluctuations in the Company's results of operations.
During 1997, the majority of the Company's revenues were derived from
licensing its technology and fees for development work associated with
licensing activities. While the Company anticipates that recurring revenues
from fees paid by merchants and other customers will represent an increasing
proportion of its total revenues during the next several quarters, revenues
from licensing and development will continue to be material. Revenues from
these sources are generally less predictable and more inclined to vary from
period to period than revenues from fees paid by merchants and other customers.
Accordingly, the Company may experience significant fluctuations in future
quarterly operating results. In addition, as a strategic response to changes in
the competitive environment, the Company may from time to time make pricing,
marketing or licensing decisions or business combinations that could have a
material adverse effect on the Company's business, results of operations or
financial condition. As a result, the Company believes that period-to-period
comparisons of its results of operations should not be relied upon as an
indication of future performance. Because of all of the foregoing factors, it
is likely that the Company's quarterly operating results from time to time will
be below the expectations of public market analysts and investors. In such
event, the price of the Company's common stock would likely be materially
adversely affected.
COMPETITION
The Internet payment services industry is new and rapidly evolving,
resulting in a dynamic competitive environment. The Company expects competition
to persist, intensify and increase in the future. Many of the Company's current
and potential competitors have longer operating histories, greater name
recognition, larger installed customer bases and significantly greater
financial, technical and marketing resources than the Company. In addition,
many of the Company's current or potential competitors, such as Microsoft, have
broad distribution channels that may be used to bundle competing products
directly to end-users or purchasers. If these competitors were to bundle
competing products for their customers, it could adversely affect the Company's
ability to market its services. There can be no assurance that the Company will
be able to compete effectively with current or future competitors or that the
competitive pressures faced by the Company will not have a material adverse
effect on the Company's business, financial condition or operating results.
DEVELOPMENT OF NEW SERVICES, INDUSTRY ACCEPTANCE AND TECHNOLOGICAL CHANGE
The Company expects a large portion of its revenues will be derived
from relatively small fees charged to financial institutions, businesses and
individuals for transactions effected using the Company's services.
Accordingly, broad acceptance of the Company's services and their use in large
numbers of transactions is critical to the Company's success.
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The Company must also design, develop, test, introduce and support new
services to meet changing customer needs and respond to technological
developments and emerging industry standards. Technical standards in the
Company's market are at an early stage of development and are evolving rapidly.
The Company's technology has not been accepted as a standard. To be successful,
the Company must obtain widespread acceptance of its technology, or modify its
services to meet whatever industry standards do ultimately develop. It is not
certain that it will be able to do either.
RISKS OF DEFECTS AND DEVELOPMENT DELAYS
Services based on sophisticated software and computing systems often
encounter development delays and the underlying software may contain undetected
errors or failures when introduced or when the volume of services provided
increases. The Company may experience delays in the development of the software
and computing systems underlying the Company's services. In addition, despite
testing by the Company and potential customers, it is possible that its
software may nevertheless contain errors, and this could have a material
adverse effect on the Company's business.
SYSTEM INTERRUPTION AND SECURITY RISKS
The Company's operations are dependent on its ability to protect its
system from interruption by damage from fire, earthquake, power loss,
telecommunications failure, unauthorized entry or other events beyond the
Company's control. Most of the Company's computer equipment, including its
processing equipment, are currently located at a single site. Moreover, the
Company has experienced growing transaction volumes that have from time to time
stressed the capacity of its systems. There is a possibility that the Company's
existing systems may prove inadequate and cause serious failures of its
services. Moreover, while the Company is increasing its operational capacity
and plans to deploy geographically redundant systems in the future, there is no
assurance that these measures will be sufficient, or that the Company can
implement them quickly enough, to prevent unplanned system outages. Finally,
although the Company regularly backs up data from operations, and takes other
measures to protect against loss of data, there is still some risk of such
losses. A system outage or data loss could materially and adversely affect the
Company's business.
Despite the security measures it maintains, the Company's
infrastructure may be vulnerable to computer viruses, hackers or similar
disruptive problems caused by its customers or other Internet users. Any damage
or failure that causes interruptions in the Company's operations could have a
material adverse effect on the Company's business. Any problem of this nature
could result in significant liability to customers or financial institutions
and also may deter potential customers from using the Company's services. The
Company attempts to limit its liability through contractual provisions and
insurance. There can be no assurance, however that the contractual limitations
on liability would be enforceable, or that the Company's insurance coverage
would be adequate to cover any liabilities the Company did sustain.
YEAR 2000 COMPLIANCE
The Company uses computer software, operating systems, and embedded
processors containing programs both in the delivery of its services and in its
administrative and management operations. The software used in the delivery of
the Company's services contains, in addition to code written by the Company's
programmers, some software licensed from third parties. The Company is
reviewing the programs it uses to assure that they are all able to handle
properly the upcoming calendar year 2000. On the basis of its work so far, the
Company does not anticipate that the so-called "year 2000 issue" will have a
material effect on its business. It is, however, possible that problems will
surface that have not yet been identified that will require substantial time
and resources to remedy. It is also possible that the Company could fail to
identify a problem with a resulting failure or disruption of its operations.
Either eventuality could have a material adverse effect on the Company's
business.
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DEPENDENCE ON KEY PERSONNEL
The Company's performance is substantially dependent on the
performance of its executive officers and key employees. The Company is
dependent on its ability to retain and motivate high quality personnel,
especially its management and highly skilled development teams. The Company
does not have "key person" life insurance policies on any of its employees. The
loss of the services of any of its key employees, particularly its founder,
William N. Melton, could have a material adverse effect on the Company. Its
future success also depends on its continuing ability to identify, hire, train
and retain other highly qualified technical and managerial personnel.
Competition for such personnel is intense and increasing. There can be no
assurance that the Company will be able to attract, assimilate or retain
qualified technical and managerial personnel in the future, and the failure of
the Company to do so would have a material adverse effect on the Company.
LIMITED SALES FORCE; EVOLVING DISTRIBUTION CHANNELS
The Company has a limited number of sales and marketing employees. The
Company must therefore rely heavily on distribution channels for sales of its
payment services. Because of the rapidly-evolving nature of electronic
commerce, it is not certain that the channels with which the Company is working
will provide an adequate distribution network to enable the Company to achieve
its goals, or that the Company will be able to develop alternative channels.
DEPENDENCE ON INTELLECTUAL PROPERTY RIGHTS; RISK OF INFRINGEMENT; POSSIBLE
LITIGATION
The Company's success and ability to compete is dependent in part upon
its proprietary technology. The Company relies primarily on copyright, trade
secret and trademark law to protect its technology. The Company holds one
United States patent, and has applied for several others in the United States
and foreign countries. It intends to continue to file patent applications on
inventions that it may make in the future. There can be no assurance that any
of these patents will be granted, or that if granted such patents would survive
a legal challenge to their validity, or provide meaningful levels of
protection.
The source code for the Company's proprietary software is protected
both as a trade secret and as a copyrighted work. The Company generally enters
into confidentiality and assignment agreements with its employees, consultants
and vendors, and generally controls access to and distribution of its software,
documentation and other proprietary information. Despite these precautions, it
may be possible for a third party to copy or otherwise obtain and use the
Company's services or technology without authorization, or to develop similar
services or technology independently. In addition, effective copyright and
trade secret protection may be unenforceable or limited in certain foreign
countries, and the global nature of the Internet makes it difficult to control
the ultimate destinations of the Company's services. To license its services,
the Company often relies on "on-screen" licenses that are not manually signed
by the end-users and, therefore, may be unenforceable under the laws of certain
jurisdictions. Despite the Company's efforts to protect its proprietary rights,
third parties may attempt to copy aspects of the Company's services or to
obtain and use information that the Company regards as proprietary. Policing
unauthorized use of the Company's services is difficult, particularly in the
global environment in which the Company operates, and the laws of other
countries may afford the Company little or no effective protection of its
intellectual property. There can be no assurance that the steps taken by the
Company will prevent misappropriation of its technology or that such agreements
will be enforceable. In addition, litigation may be necessary in the future to
enforce the Company's intellectual property rights, to protect the Company's
trade secrets, to determine the validity and scope of the proprietary rights of
others, or to defend against claims of infringement or invalidity. Such
litigation, whether successful or unsuccessful, could result in substantial
costs and diversions of resources, either of which could have a material
adverse effect on the Company's business, financial condition or operating
results.
DigiCash bv has registered the trademark "CyberCash," in the Benelux
countries on an "intent-to-use" basis. The Company has not applied to register
its CyberCash mark in the Benelux countries. DigiCash has filed an application,
based on the Benelux registration, to register the CyberCash mark in the United
States but the United States Patent and Trademark Office has issued an office
action denying the registration. The Company believes it has a basis to
challenge this application but, if DigiCash overcomes the USPTO's objection,
its registration of the
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mark may create rights superior to the Company's rights in the CyberCash mark.
Nevertheless, CyberCash has filed an application to register the CyberCash mark
in the United States, as well as in certain overseas jurisdictions. No
assurance can be given as to the ability of the Company to secure any
registration of or the right to continue to use the name and mark CyberCash nor
can there be any assurance that a license to or assignment of the CyberCash
name and mark would be available to the Company on reasonable terms or at all
should the Company be unable to secure registration of, or the right to
continue to use, the CyberCash name and mark. The prosecution of claims
relating to the CyberCash mark, including the securing of an injunction
preventing the Company's use of CyberCash, could have a material adverse effect
on the Company's business, financial condition or operating results.
The Company is aware of various patents held by independent third
parties in the area of electronic payment systems. It is possible that the
holders of rights under these patents could assert them against the Company;
indeed, the Company has already received notices of claims of infringement of
other parties' proprietary rights. There can be no assurance that the Company's
services are not within the scope of patents held by others, either now or in
the future. If any such claims are asserted, the Company may seek to obtain a
license under a third party's intellectual property rights. There can be no
assurance that such a license would be available on reasonable terms or at all.
The Company may also decide to defend against a claim of infringement, but
litigation, even if successful, is costly and may have a material adverse
effect on the Company regardless of the eventual outcome.
The Company also relies on certain technology which it licenses from
third parties, including software which is integrated with internally developed
software and used in the Company's software to perform key functions. In this
regard, all of the Company's services incorporate data encryption and
authentication technology licensed from RSA Data Security, Inc. RSA Data
Security has agreed to indemnify CyberCash for any claim against the Company on
the basis of proprietary rights infringement with respect to the licensed
technology. CyberCash has agreed to a similar indemnity of its licensees.
There also can be no assurance that the Company's other third party
technology licenses will continue to be available to the Company on
commercially reasonable terms or at all. The loss of or inability to maintain
any of these technology licenses could result in delays in introduction of the
Company's services until equivalent technology, if available, is identified,
licensed and integrated, which could have a material adverse effect on the
Company's business, financial condition or operating results.
RISKS ASSOCIATED WITH ENCRYPTION TECHNOLOGY
A significant barrier to electronic commerce is the secure exchange of
value over public networks. The Company relies on encryption and authentication
technology to provide the security and authentication necessary to effect the
secure exchange of value, including public key cryptography technology licensed
from RSA and private key Data Encryption Standard ("DES") cryptography. There
can be no assurance that advances in computer capabilities, new discoveries in
the field of cryptography or other events or developments will not result in a
compromise or breach of the RSA, DES or other algorithms used by the Company to
protect customer transaction data. Such a development could have a material
adverse effect on the Company's business, financial condition or operating
results.
GOVERNMENT REGULATION
The Company's operations are subject to various state and federal
regulations. Because electronic commerce in general, and the Company's services
in particular, are so new, the application of many of these regulations is
uncertain and difficult to interpret. The agencies responsible for the
interpretation and enforcement of these regulations could amend those
regulations or issue new interpretations of existing regulations. It is also
possible that new legislation may be passed that imposes additional regulation
on the Company. Any such change in the regulations applicable to the Company's
business could lead to increased operating costs and could also reduce the
convenience and functionality of the Company's services, possibly resulting in
reduced market acceptance. In addition, if a regulatory agency or law
enforcement authority should assert that the Company is failing to comply with
existing regulations, the costs of responding to such a challenge could result
in significant drains on the
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Company's financial and management resources, which could have a material
adverse effect on the Company's business, financial condition or operating
results.
Due to the increasing popularity of the Internet, it is possible that
laws and regulations may be enacted with respect to the Internet, covering
issues such as user privacy, pricing, content, characteristics and quality of
products and services. The adoption of any such laws or regulations may
decrease the growth of the Internet, which could in turn decrease the demand
for the Company's services and increase the Company's cost of doing business or
could otherwise have a material adverse effect on the Company's business,
financial condition or operating results.
All of the Company's services utilize encryption technology, the
export of which is regulated by the U.S. government. The Company has obtained
authority to export the encryption technology in its consumer and merchant
software worldwide, except to Libya, Syria, Cuba, North Korea, Sudan, Iraq and
Iran. This authority may be revoked or modified at any time, however, for any
particular jurisdiction or in general. The Company also intends to apply for an
export license covering the encryption technology in its gateway server
software. There can be no assurance, however, that such a license will be
obtained. Some countries restrict the import of encryption software. In
addition, there can be no assurance that export controls or import controls,
either in their current form or as may be subsequently enacted, will not limit
the Company's ability to distribute its software outside of the United States.
While the Company takes precautions against unlawful exportation of its
software, the global nature of the Internet makes it virtually impossible to
effectively control the distribution of its software. Moreover, federal, state
or foreign legislation or regulation may further limit levels of encryption or
authentication technology. Any such export restrictions, the unlawful
exportation of the Company's software, new legislation or regulation could have
a material adverse effect on the Company's business, financial condition or
operating results.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FINANCING
The Company believes that its available cash resources combined with
funds from operations will be sufficient to meet its working capital and
capital expenditure requirements until its cash flow from operations turns
positive. If this belief should prove mistaken, the Company may be required to
raise additional funds. If it does so through the issuance of equity
securities, the percentage ownership of the stockholders of the Company will be
reduced, stockholders may experience additional dilution, or such equity
securities may have rights, preferences or privileges senior to those of the
holders of the Company's Common Stock. Moreover, there can be no assurance that
additional financing will be available. If adequate funds are not available or
are not available on acceptable terms, the Company may be unable to develop or
enhance its services, take advantage of future opportunities or respond to
competitive pressures, which could have a material adverse effect on the
Company's business, financial condition or operating results.
RISK OF LOSS FROM RETURNED TRANSACTIONS, MERCHANT FRAUD OR ERRONEOUS
TRANSMISSIONS
The Company currently uses two principal fund transfer systems: the
automated clearing house ("ACH") system for electronic fund transfers; and the
national payment card systems (e.g., MasterCard, Visa, American Express and
Discover) for electronic payment card settlements. In its use of these
established payment systems, the Company may bear some of the credit risks
normally assumed by other users of these systems arising from returned
transactions caused by unauthorized use, disputes, theft or fraud. The Company
also may bear some risk of merchant fraud and transmission errors if it is
unable to have erroneously transmitted funds returned by an unintended
recipient. In addition, the agreement between the Company's users of its
services for allocation of these risks will be in electronic form, and while
digitally signed, will not be manually signed and hence may not be enforceable.
Finally, the Company may be subject to merchant fraud, including such actions
as inputting false sales transactions or false credits. The Company intends to
manage all of these risks through risk management systems, internal controls
and system security. There can be no assurance that the Company's risk
management practices or reserves will be sufficient to protect the Company from
returned transactions, merchant fraud or erroneous transmissions which could
have a material adverse effect on the Company's business, financial condition
or operating results.
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<PAGE> 11
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
A component of the Company's strategy is to expand its operations into
international markets. The Company has created joint ventures in Japan and
Germany and has arranged with a local strategic ally for the delivery of
certain of its services in the United Kingdom. The majority of the Company's
revenues for 1997 were derived from fees and development work charged to these
joint ventures and foreign strategic allies. The deployment of the Company's
services in these countries is at an early stage, and revenues to the Company
from the operation of the services have so far been small. The Company
anticipates that revenues derived from development work and initial licensing
fees from international operations will decline over time. There can be no
assurance that the services will be commercially successful in these or other
foreign markets, or that revenues to the Company resulting from ongoing
commercial operations will ever be significant. In addition, there are certain
risks inherent in doing business in international markets, such as unexpected
changes in regulatory requirements, export restrictions, export controls
relating to encryption technology, tariffs and other trade barriers,
difficulties in staffing and managing foreign operations, political
instability, fluctuations in currency exchange rates, seasonal reductions in
business activity during the summer months in Europe and certain other parts of
the world and potentially adverse tax consequences, which could adversely
affect the success of the Company's international operations. There can be no
assurance that one or more of such factors will not have a material adverse
effect on the Company's future operations and, consequently, on the Company's
business, financial condition or operating results.
DEPENDENCE ON THE INTERNET
The Company's operating performance depends in large part on
the emergence of the Internet as a widely-used commercial marketplace. The
Internet may not prove to be a viable commercial marketplace because of
inadequate development of the necessary infrastructure (e.g., reliable network
backbone), untimely development of complementary products (e.g., high speed
modems), delays in the development or adoption of new standards and protocols
required to handle increased levels of Internet activity, or due to increased
government regulation. In addition, to the extent that the Internet continues
to experience significant growth in the number of users and the level of use,
there can be no assurance that the Internet infrastructure will continue to be
able to support the demands placed on it by such potential growth. Because
global commerce on the Internet and other similar open wide area networks are
new and evolving, it is difficult to predict with any assurance whether the
Internet will prove to be a viable commercial marketplace. If the necessary
infrastructure or complementary products are not developed, or if the Internet
does not become a viable commercial marketplace, the Company's business,
operating results and financial condition will be materially adversely
affected.
RISKS ASSOCIATED WITH ACQUISITIONS
Part of the Company's strategy for growth includes acquisitions of
complementary products, technologies, or businesses. The Company has entered
into an agreement in principle with one such company, ICVerify, Inc. Any
significant acquisition, including the ICVerify acquisition, entails a risk
that the Company will be unable successfully to integrate and operate the
acquired business, product or technology. A failure to do so could have a
material adverse effect on the Company. There is significant competition for
acquisition opportunities in the Internet technology industry. The Company may
compete for acquisition opportunities with other companies that have
significantly greater financial and management resources. There can be no
assurance that the Company will be successful in completing any such
acquisitions, including the ICVerify acquisition, or integrating any such
products, technologies or businesses.
EXTREME VOLATILITY OF STOCK PRICE AND RISK OF LITIGATION
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<PAGE> 12
The Company's Common Stock price has been extremely volatile and has
experienced substantial and sudden fluctuations, particularly as a result of
announcements by the Company and its competitors, changes in financial
estimates by securities analysts and announcements with respect to the industry
generally. In addition, the stock market has experienced significant price and
volume fluctuations that have especially affected the market prices of equity
securities of many high technology companies, particularly Internet-related
companies, and that often have been unrelated to the operating performance of
such companies. These broad market fluctuations have adversely affected and may
continue to adversely affect the market price of the Company's Common Stock. In
the past, following periods of volatility in the market price of a company's
securities, securities class action litigation has often been instituted
against such a company. Such litigation could result in substantial costs and a
diversion of management's attention and resources, which would have a material
adverse effect on the Company's business, operating results and financial
condition.
EFFECTS OF CERTAIN CHARTER AND BYLAW PROVISIONS
The Company's Certificate of Incorporation authorizes the Board of
Directors to issue up to 5,000,000 shares of preferred stock and to determine
the price, rights, preferences and privileges, including voting rights, of
those shares without any further vote or action by the stockholders. The
Company issued 15,000 shares of Series C Convertible Preferred Stock (the
"Series C Stock") in August 1997. The Company also issued 15,000 shares of
Series D Convertible Preferred Stock (the "Series D Stock") in February 1998
and is contractually obligated to issue an additional 15,000 shares of Series D
Stock upon the satisfaction of certain conditions and the receipt of
consideration for the shares. The rights of the holders of the Company's Common
Stock will be subject to, and may be adversely affected by, the rights of the
holders of any preferred stock that may be issued in the future. The
Certificate of Incorporation provides for staggered terms for the members of
the Board of Directors. Certain provisions of the Company's Bylaws, the
issuance of preferred stock, certain provisions in the Certificate of
Incorporation, the staggered Board of Directors as well as applicable
provisions of Delaware law could have a depressive effect on the Company's
stock price or discourage a hostile bid in which stockholders could receive a
premium for their shares. In addition, these provisions could have the effect
of making it more difficult for a third party to acquire a majority of the
outstanding voting stock of the Company, or delay, prevent or deter a merger,
acquisition, tender offer or proxy contest for the Company.
POTENTIAL FOR DILUTION; MARKET OVERHANG
As of March 31, 1998, there were 1,000 shares of Series C Preferred
Stock and 15,000 shares of Series D Preferred Stock issued and outstanding.
Each share of Preferred Stock is convertible into a number of shares of Common
Stock determined by dividing the stated value of $1,000, plus a premium based
on the number of days the Preferred Stock is held, by the then current
Conversion Price (which is based on the market price of the Common Stock). If
converted on April 1, 1998, the Series C Stock would have been convertible
into approximately 70,909 shares of Common Stock. If converted on April 1,
1998, the Series D Stock would have been convertible into approximately
937,241 shares of Common Stock. Assuming the issuance on April 1, 1998 of
the additional 15,000 shares of Series D Stock, the additional shares of Series
D Stock would have been convertible into 930,233 shares of Common Stock on
April 1, 1998. Depending on market conditions at the time of conversion, the
number of shares issuable could prove to be significantly greater in the event
of a decrease in the trading price of the Common Stock. Purchasers of Common
Stock could therefore experience substantial dilution upon conversion of the
Preferred Stock.
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<PAGE> 13
As of March 20, 1998, Investment Options to purchase 354,191 shares of
Common Stock issued to the purchasers of the Series D Stock were outstanding.
These Investment Options are exercisable between January 1, 1999 and February
5, 2003. The resale of the shares of Common Stock into which the Preferred
Stock may be converted and the shares of Common Stock issuable upon exercise
of the Investment Options is being registered pursuant to this Registration
Statement.
The proposed acquisition of ICVerify, Inc. would entail the issuance
of an additional 2,300,000 shares of the Company's Common Stock to shareholders
of ICVerify. The Company has agreed to register the resale of those shares. If
the acquisition is consummated, the availability of those additional shares for
resale would exacerbate the market overhang related to the Preferred Stock.
THE COMPANY
CyberCash was incorporated in Delaware in 1994. The Company's home
page can be located on the Web at http://www.cybercash.com. CyberCash, Inc.
("CyberCash" or the "Company") is a leading provider of software and services
to enable secure financial transactions on the Internet. The Company's suite
of Internet payment services features the electronic counterparts to cash,
credit cards and checks. The Company believes that it is well-positioned to
capitalize on the emerging market for Internet commerce because it offers a
range of payment services that work with the existing transaction processing
systems of financial institutions. The Company's address is 2100 Reston
Parkway, 3rd Floor, Reston, Virginia 20191 and its phone number is
703/620-4200.
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<PAGE> 14
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Common
Stock by the Selling Stockholders. Upon exercise of Warrants held by Carnegie
Mellon University ("CMU"), the Company will receive approximately $822,500,
which will be used for general corporate purposes. Upon exercise of the
Investment Options (as defined below) the Company will receive approximately
$3,750,880, which will be used for general corporate purposes.
SELLING STOCKHOLDERS
This Prospectus relates to the offering by the Selling Stockholders
for resale of up to 4,885,731 shares of Common Stock. After giving effect to
the Offering, the Selling Stockholders will beneficially own no shares of
Common Stock of the Company. CMU owns 120,000 shares of Common Stock and
warrants to purchase 50,000 shares of Common Stock. RGC International
Investors, LDC and Halifax Fund, L.P. (the "Series D Holders") will acquire
Common Stock upon (i) conversion, from time to time, of the Series C Preferred
Stock and the Series D Preferred Stock they acquired in a private placement in
August 1997 and February 1998, respectively, (ii) the exercise of options (the
"Investment Options") acquired in February 1998 and (iii) upon the conversion,
from time to time, of shares of Series D Preferred Stock and upon exercise of
the Investment Options the Series D Holders will acquire upon satisfaction of
conditions which are outside of the control of the Selling Stockholders,
including obtaining the approval of the Company's stockholders. This second
closing will occur no later than February 1999. See "Description of Capital
Stock -- Series D Convertible Preferred Stock." If the Series D Holders had
converted all of their respective shares of Series C Preferred Stock and
Series D Preferred Stock and exercised the Investment Options as of April 1,
1998, RGC International Investors would have received 931,863 shares of
Common Stock upon conversion of the 1,000 shares of Series C Preferred Stock it
owns, conversion of the 10,000 shares of Series D Preferred Stock it owns and
exercise of its Investment Option and Halifax Fund, L.P. would have received
430,478 shares of Common Stock upon conversion of the 5,000 shares of Series D
Preferred Stock it owns and exercise of its Investment Option. This Prospectus
will be supplemented from time to time to reflect the number of shares of
Common Stock acquired by each Series D Holder, as each Series D Holder converts
its shares of Series C Preferred Stock or Series D Preferred Stock and
exercises its Investment Option. The following table sets forth certain
information with respect to the Selling Stockholders as of April 1, 1998, as
follows: (i) the name and position or other relationship with the Company
within the past three years of each Selling Stockholder; (ii) the number of the
Company's outstanding shares of Common Stock beneficially owned by each Selling
Stockholder (including shares obtainable under options exercisable within sixty
(60) days of such date) prior to the offering hereby; (iii) the number of
shares of Common Stock being offered hereby; and (iv) the number and percentage
of the Company's outstanding shares of Common Stock to be beneficially owned by
each Selling Stockholder after completion of the sale of Common Stock being
offered hereby. There is no assurance that any of the Selling Stockholders will
sell any or all of the shares offered hereby.
<TABLE>
<CAPTION>
Number of Shares Number of Shares
Beneficially Owned Number of Shares Being Beneficially Owned
Selling Stockholders Prior to the Offering Offered After Offering
- ---------------------------- ------------------------------- ----------- --------------------
<S> <C> <C> <C>
Carnegie Mellon University (1) 170,000 170,000 0
RGC International Investors, LDC (1)(2) 1,492,407 1,492,407 0
Halifax Fund L.P. (1)(2) 432,869 432,869 0
</TABLE>
(1) The number of shares set forth in the table represents an estimate of
the number of shares of Common stock to be offered by the Selling Stockholder.
The actual number of shares of Common Stock issuable upon conversion of Series
C Preferred Stock or Series D Preferred Stock and exercise of the Investment
Options is indeterminate, is subject to adjustment and could be materially less
or more than such estimated number depending on factors which cannot be
predicted by the Company at this time, including, among other factors, the
future market price of the Common Stock. The actual number of shares of Common
Stock offered hereby, and included in the Registration Statement of which this
Prospectus is a part, includes such additional number of shares of Common Stock
as may be issued or issuable upon conversion of the Series C Preferred
Stock or Series D Preferred Stock and exercise of the Investment Options by
reason of the floating conversion price mechanisms described therein, or by
reason of any stock split, stock dividend or similar transaction involving the
Common Stock, in order to prevent dilution, in accordance with Rule 416 under
the Securities Act.
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<PAGE> 15
(2) The number of shares of Common Stock beneficially owned by the Selling
Stockholder with respect to Series D Preferred Stock is based on a conversion
price of $16.125, which is the single lowest closing price of the Common
Stock during the ten consecutive trading days ending March 31, 1998. The
number of shares of Common Stock beneficially owned by the Selling Stockholder
with respect to Series C Preferred Stock is based on a conversion price of
$14.5625. If the Series C Preferred Stock had been actually converted on
April 1, 1998, the conversion price would have been $14.5625 (the single
lowest closing price during the sixteen (16) consecutive trading days ended
March 31, 1998). Pursuant to the terms of the Series D Preferred Stock, if
the Series D Preferred Stock had been actually converted on April 1, 1998,
the conversion price would have been $16.125 (the single lowest closing price
of the Common Stock during the ten (10) consecutive trading days ending
March 31, 1998). Pursuant to the terms of the Series C Preferred Stock, the
Series D Preferred Stock and the Investment Options, the shares of Series C
Preferred Stock and Series D Preferred Stock are convertible and the Investment
Options are exercisable by any holder only to the extent that the number of
shares of Common Stock owned by such holder and its affiliates (but not
including shares of Common Stock underlying unconverted shares of Series C
Preferred Stock or Series D Preferred Stock, or unexercised portions of the
Investment Options, as appropriate) would not exceed 4.9% of the then
outstanding Common Stock as determined in accordance with Section 13(l) of the
Exchange Act. Accordingly, the number of shares of Common Stock set forth in
the table for this Selling Stockholder exceeds the number of shares of Common
Stock that this Selling Stockholder could own beneficially at any given time
through their ownership of the Series C Preferred Stock, Series D Preferred
Stock and the Investment Options. In that regard, beneficial ownership of this
Selling Stockholder set forth in the table is not determined in accordance with
Rule 13d-3 under the Exchange Act.
PLAN OF DISTRIBUTION
The Shares being offered by the Selling Stockholders or their
respective pledgees, donees, transferees or other successors in interest, will
be sold in one or more transactions (which may involve block transactions) on
the Nasdaq Stock Market or on such other market on which the Common Stock may
from time to time be trading, in privately-negotiated transactions, through the
writing of options on the Shares, short sales or any combination thereof. The
sale price to the public may be the market price prevailing at the time of
sale, a price related to such prevailing market price or such other price as
the Selling Stockholders determine from time to time. The Shares may also be
sold pursuant to Rule 144.
The Selling Stockholders or their respective pledgees, donees,
transferees or other successors in interest, may also sell the Shares directly
to market makers acting as principals and/or broker-dealers acting as agents
for themselves or their customers. Brokers acting as agents for the Selling
Stockholders will receive usual and customary commissions for brokerage
transactions, and market makers and block purchasers purchasing the Shares will
do so for their own account and at their own risk. It is possible that a
Selling Stockholder will attempt to sell shares of Common Stock in block
transactions to market makers or other purchasers at a price per share which
may be below the then market price. There can be no assurance that all or any
of the Shares offered hereby will be issued to, or sold by, the Selling
Stockholders. The Selling Stockholders and any brokers, dealers or agents, upon
effecting the sale of any of the Shares offered hereby, may be deemed
"underwriters" as that term is defined under the Securities Act or the Exchange
Act, or the rules and regulations thereunder.
The Selling Stockholders and any other persons participating in the
sale or distribution of the Shares will be subject to applicable provisions of
the Exchange Act and the rules and regulations thereunder, which provisions may
limit the timing of purchases and sales of any of the Shares by the Selling
Stockholders or any other such person. The foregoing may affect the
marketability of the Shares.
The Company has agreed to indemnify the Selling Stockholders, or their
transferees or assignees, against certain liabilities, including liabilities
under the Securities Act, or to contribute to payments the Selling Stockholders
or their respective pledgees, donees, transferees or other successors in
interest, may be required to make in respect thereof.
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<PAGE> 16
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 25,000,000
shares of Common Stock, $.001 par value, and 5,000,000 shares of Preferred
Stock, $.001 par value ("Preferred Stock").
COMMON STOCK
As of March 20, 1998, there were 11,787,313 shares of Common Stock
outstanding and held of record by 7,015 stockholders.
The holders of Common Stock are entitled to one vote for each share
held of record on all matters submitted to a vote of the stockholders. The
holders of Common Stock are entitled to receive ratably such dividends as may
be declared by the Board of Directors out of funds legally available therefor.
In the event of a liquidation, dissolution or winding up of the Company,
holders of the Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities. Holders of Common Stock have no
preemptive rights and no right to convert their Common Stock into any other
securities. There are no redemption or sinking fund provisions applicable to
the Common Stock. All outstanding shares of Common Stock are, and all shares
of Common Stock to be outstanding upon completion of this Offering will be,
fully paid and nonassessable.
PREFERRED STOCK
The Board of Directors has the authority to issue up to 5,000,000
shares of Preferred Stock in one or more series and to fix the rights,
preferences and privileges thereof, including dividend rights, conversion
rights, voting rights, terms of redemption, liquidation preferences, sinking
fund terms and the number of shares constituting any series or the designation
of such series, without any further vote or action by stockholders. The
issuance of Preferred Stock could adversely affect the voting power of holders
of Common Stock and the likelihood that such holders will receive dividend
payments and payments upon liquidation and could have the effect of delaying,
deterring or preventing a change in control of the Company.
SERIES D CONVERTIBLE PREFERRED STOCK
Pursuant to the Company's Certificate of Incorporation, the Board has
classified 30,000 shares of the Preferred Stock as Series D Convertible
Preferred Stock with the rights, preferences, privileges and terms set forth in
the Certificate of Designations filed pursuant thereto. The Stated Value Per
Share of the Series D Stock is $1000.00. With respect to rights upon
liquidation, winding up or dissolution and redemption rights, the Series D
Stock will rank (i) junior to the Series C Stock, (ii) with the consent of the
holders of the Series D Convertible Preferred Stock obtained in accordance with
the Certificate of Designation, junior to any other series of Preferred Stock
duly established by the Board of Directors of the Company, the terms of which
shall specifically provide that such series shall rank prior to the Preferred
Stock, whether now existing or hereafter created (the "Senior Preferred
Stock"), (iii) with the consent of the holders of the Series D Convertible
Preferred Stock obtained in accordance with the Certificate of Designation, on
a parity with any other series of Preferred Stock duly established by the Board
of Directors of the Company, the terms of which shall specifically provide that
such series shall rank on a parity with the Preferred Stock, whether now
existing or hereafter created (the "Parity Preferred Stock"), and (iv) prior to
any other class or series of capital stock of the Company, including, without
limitation, all classes of the Common Stock, par value $0.001 per share, of the
Company, whether now existing or hereafter created (the "Common Stock"; all of
such classes or series of capital stock of the Company to which the Series D
Stock ranks prior, including without limitation the Common Stock, and
including, without limitation, junior securities convertible into or
exchangeable for other junior securities or phantom stock representing junior
securities, are collectively referred to herein as "Junior Securities").
Of the 30,000 shares of Series D Stock authorized by the Board, 15,000
shares are currently outstanding. The Series D Holders will acquire the
remaining 15,000 shares upon the occurrence of certain events which are beyond
their control, including, but not limited to, the approval of the Company's
Stockholders. This second closing will occur no later than February 1999.
Dividends. Holders of the Series D Stock are not entitled to receive
dividends. So long as the Series D Stock is outstanding, however, no dividends
may be declared or paid on, nor shall any distribution be made on, any Junior
Securities, the Company may not redeem or repurchase any Junior Securities, nor
may any moneys be paid to or made available for a sinking fund for the benefit
of any Junior Securities, without the written consent of the holders of a
majority of the outstanding shares of Series D Stock.
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<PAGE> 17
Liquidation. In the event of any dissolution, liquidation or winding
up of the Company, whether voluntary or involuntary, or any bankruptcy,
insolvency or similar proceedings, whether voluntary or involuntary, shall be
commenced with respect to the Company (a "Liquidation"), the holders of shares
of Series D Stock shall be entitled to receive out of the assets of the Company
legally available for distribution to stockholders (whether representing
capital or surplus), before any payment or distribution shall be made on the
Common Stock or any other Junior Securities (but after distribution of such
assets among, or payment thereof over to, creditors of the Company and to
holders of any stock of the Company with liquidation rights senior to the
Series D Stock, including holders of Series C Preferred Stock and Senior
Preferred Stock), the Stated Value Per Share plus an amount equal to 5% per
annum for the period beginning February 5, 1998 and ending on the date of final
distribution to the holder thereof (pro rated for any portion of such period)
(the "Preferred Stock Liquidation Distribution"). After the Preferred Stock
Liquidation Distribution has been made, the holders of shares of Series D Stock
shall not be entitled to any further participation in any distribution of
assets of the Company. If the assets distributable upon such dissolution,
liquidation or winding up (as provided above) shall be insufficient to pay cash
in an amount equal to the amount of the Preferred Stock Liquidation
Distribution to the holders of shares of Series D Stock, then such assets or
the proceeds thereof shall be distributed among the holders of the Series D
Stock ratably in proportion to the respective amounts of the Preferred Stock
Liquidation Distribution to which they otherwise would be entitled. The merger
or consolidation of the Company into or with another corporation, a merger or
consolidation of any other corporation with or into the Company upon the
completion of which the stockholders of the Company prior to the merger or
consolidation no longer hold a majority of the outstanding equity securities of
the Company or the sale, conveyance, exchange or transfer of all or
substantially all of the property or assets of the Company (any such event, a
"Reorganization Event") shall, at the option of the holders of at least 50 % of
the Series D Stock, be deemed to be a Liquidation of the Company.
Voting Rights. The holders of the Series D Stock shall be entitled to
notice of all stockholders meetings in accordance with the Company's bylaws.
Except as otherwise provided by the Delaware General Corporation Law (the
"DGCL"), the holders of the Series D Stock have no voting power whatsoever.
Conversion. Each share of Series D Stock is convertible into the
number of shares of the Company's Common Stock equal to (i) the Stated Value
Per Share plus a premium of 5% of the stated value from the date of issuance of
the Series D Stock divided by (ii) the Conversion Price. The Conversion Price
is equal to the lowest closing price of the Company's Common Stock on Nasdaq
during a measurement period ending one trading day prior to the conversion date
multiplied by a certain percentage. The measurement period initially is 10
consecutive trading days and will increase by 2 trading days each month
beginning August 1, 1998 and ending February 1, 1999, when the measurement
period will be 22 trading days. The percentage used to calculate the
Conversion Price shall be 100% through February 4, 1999, 92.5% from February 5,
1999 to August 4, 1999, and 85% thereafter.
The holders of the Series D Stock are subject to limits on the number
of shares they can convert at any one time. Unless the trading price of the
Common Stock on the date of conversion is greater than either $11.65 per share
or 125% of the then applicable Conversion Price, the following limits apply:
from the date of issuance until August 3, 1998, the Series D Stock may not be
converted; beginning on August 3, 1998, each holder of Series D Stock may
convert up to 30% of its initial holding of Series D Stock into Common Stock
("Initial Holding"); beginning on September 2, 1998, it may convert up to 60%
of its Initial Holding; beginning on October 2, 1998, it may convert up to 90%
of its Initial Holding; and beginning on November 1, 1998, it may convert up to
100% of its Initial Holding.
The Series D Stock will automatically convert into Common Stock, at
the then applicable Conversion Price, on February 4, 2003.
SERIES C CONVERTIBLE PREFERRED STOCK
Pursuant to the Company's Certificate of Incorporation, the Board has
classified 15,000 shares of the Preferred Stock as Series C Convertible
Preferred Stock with the rights, preferences, privileges and terms set forth in
the Certificate of Designations filed pursuant thereto. The Stated Value Per
Share of the Series C Stock is $1000.00. With respect to rights upon
liquidation, winding up or dissolution and redemption rights, the Series C
Stock will rank (i) with the consent of the holders of the Series C Convertible
Preferred Stock obtained in accordance with the Certificate of Designation,
junior to any other series of Preferred Stock duly established by the Board of
Directors of the
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<PAGE> 18
Company, the terms of which shall specifically provide that such series shall
rank prior to the Preferred Stock, whether now existing or hereafter created
(the "Senior Preferred Stock"), (ii) with the consent of the holders of the
Series C Convertible Preferred Stock obtained in accordance with the
Certificate of Designation, on a parity with any other series of Preferred
Stock duly established by the Board of Directors of the Company, the terms of
which shall specifically provide that such series shall rank on a parity with
the Preferred Stock, whether now existing or hereafter created (the "Parity
Preferred Stock"), and (iii) prior to any other class or series of capital
stock of the Company, including, without limitation, all classes of the Common
Stock, par value $0.001 per share, of the Company, whether now existing or
hereafter created (the "Common Stock"; all of such classes or series of capital
stock of the Company to which the Series C Stock ranks prior, including without
limitation the Common Stock, and including, without limitation, junior
securities convertible into or exchangeable for other junior securities or
phantom stock representing junior securities, are collectively referred to
herein as "Junior Securities").
Dividends. Holders of the Series C Stock are not entitled to receive
dividends. So long as the Series C Stock is outstanding, however, no dividends
may be declared or paid on, nor shall any distribution be made on, any Junior
Securities, the Company may not redeem or repurchase any Junior Securities, nor
may any moneys be paid to or made available for a sinking fund for the benefit
of any Junior Securities, without the written consent of the holders of a
majority of the outstanding shares of Series C Stock.
Liquidation. In the event of any dissolution, liquidation or winding
up of the Company, whether voluntary or involuntary, or any bankruptcy,
insolvency or similar proceedings, whether voluntary or involuntary, shall be
commenced with respect to the Company (a "Liquidation"), the holders of shares
of Series C Stock shall be entitled to receive out of the assets of the Company
legally available for distribution to stockholders (whether representing
capital or surplus), before any payment or distribution shall be made on the
Common Stock or any other Junior Securities (but after distribution of such
assets among, or payment thereof over to, creditors of the Company and to
holders of any stock of the Company with liquidation rights senior to the
Series C Stock, including holders of Senior Preferred Stock), the Stated Value
Per Share plus an amount equal to 5% per annum for the period beginning August
5, 1997 and ending on the date of final distribution to the holder thereof (pro
rated for any portion of such period) (the "Preferred Stock Liquidation
Distribution"). After the Preferred Stock Liquidation Distribution has been
made, the holders of shares of Series C Stock shall not be entitled to any
further participation in any distribution of assets of the Company. If the
assets distributable upon such dissolution, liquidation or winding up (as
provided above) shall be insufficient to pay cash in an amount equal to the
amount of the Preferred Stock Liquidation Distribution to the holders of shares
of Series C Stock, then such assets or the proceeds thereof shall be
distributed among the holders of the Series C Stock ratably in proportion to
the respective amounts of the Preferred Stock Liquidation Distribution to which
they otherwise would be entitled. The merger or consolidation of the Company
into or with another corporation, a merger or consolidation of any other
corporation with or into the Company upon the completion of which the
stockholders of the Company prior to the merger or consolidation no longer hold
a majority of the outstanding equity securities of the Company or the sale,
conveyance, exchange or transfer of all or substantially all of the property or
assets of the Company (any such event, a "Reorganization Event") shall, at the
option of the holders of at least 50 % of the Series C Stock, be deemed to be a
Liquidation of the Company.
Voting Rights. The holders of the Series C Stock shall be entitled to
notice of all stockholders meetings in accordance with the Company's bylaws.
Except as otherwise provided by the DGCL, the holders of the Series C Stock
have no voting power whatsoever.
Conversion. Each share of Series C Stock is convertible into the
number of shares of the Company's Common Stock equal to (i) the Stated Value
Per Share plus a premium of 5% of the stated value from the date of issuance of
the Series C Stock divided by (ii) the Conversion Price. The Conversion Price
is equal to the lowest closing price of the Company's Common Stock on Nasdaq
during a measurement period ending one trading day prior to the conversion
date. The measurement period initially is 10 consecutive trading days and will
increase by 2 trading days each month beginning January 16, 1998 and ending
June 16, 1998, when the measurement period will be 22 trading days.
The holders of the Series C Stock are subject to limits on the number
of shares they can convert at any one time. Unless the trading price of the
Common Stock on the date of conversion is greater than either $17 per share or
125% of the then applicable Conversion Price, the following limits apply: from
the date of issuance until January 3, 1998, the Series C Stock may not be
converted; beginning on January 3, 1998, each holder of Series C Stock may
convert up to 30% of its initial holding of Series C Stock into Common Stock
("Initial Holding"); beginning on February 2, 1998, it may convert up to 60% of
its Initial Holding; beginning on March 4, 1998, it may convert up to 90% of
its Initial Holding; and beginning on April 3, 1998, it may convert up to 100%
of its Initial Holding.
-16-
<PAGE> 19
The Series C Stock will automatically convert into Common Stock, at
the then applicable Conversion Price, on August 4, 2002.
The issuance of the Series C Stock is subject to Nasdaq's MarketPlace
Rule 4460(i) and the holders of the Series C Stock have agreed that the Company
will not issue more than 19.99% of the Common Stock upon conversion of the
Series C Stock in the absence of (i) the approval of such issuance by the
Company's stockholders, (ii) a waiver by Nasdaq of the provisions of Rule
4460(i), or (iii) the provisions of Rule 4460(i) no longer being applicable to
the Company.
DELAWARE LAW AND CERTAIN ANTI-TAKEOVER CHARTER PROVISIONS
The Company is subject to the provisions of Section 203 of the DGCL.
In general, the statute prohibits a publicly held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date that the person became an interested
stockholder unless (with certain exceptions) the business combination or the
transaction in which the person became an interested stockholder is approved in
a prescribed manner. Generally, a "business combination" includes a merger,
asset or stock sale, or other transaction resulting in a financial benefit to
the stockholder. Generally, an "interested stockholder" is a person who,
together with affiliates and associates, owns (or within three years prior, did
own) 15% or more of the corporation's voting stock.
The Company's Certificate of Incorporation provides that any action
required or permitted to be taken by stockholders of the Company must be
effected at a duly called annual or special meeting of stockholders and may not
be effected by any consent in writing. The Company's Certificate of
Incorporation also provides that the authorized number of directors may be
changed only by resolution of the Board of Directors, and that directors can
only be removed for cause by a majority vote of the stockholders and without
cause by a vote of the stockholders. In addition, the Company's Certificate of
Incorporation provides for the classification of the Board of Directors into
three classes, only one of which shall be elected at any given annual meeting.
These provisions, which require the vote of at least two-thirds of the
stockholders to amend, could have the effect of delaying, deterring or
preventing a change in control of the Company or depressing the market price of
Common Stock or discouraging hostile bids in which stockholders of the Company
could receive a premium for their shares of Common Stock.
TRANSFER AGENT AND REGISTRAR
BankBoston N.A. has been appointed as the transfer agent and registrar
for the Company's Common Stock.
LEGAL MATTERS
Certain legal matters with respect to the Common Stock offered hereby
will be passed upon for the Company by its Assistant General Counsel.
EXPERTS
The consolidated financial statements of CyberCash, Inc. appearing in
CyberCash, Inc.'s Annual Report (Form 10-K), for the year ended December 31,
1997, have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
-17-
<PAGE> 20
<TABLE>
<S> <C>
================================================================== =================================================
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH
THE OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE SELLING STOCKHOLDERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR CYBERCASH, INC.
A SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES
OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS COMMON STOCK
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE
SUBSEQUENT TO THE DATE HEREOF.
--------
PROSPECTUS
--------
------------------------
TABLE OF CONTENTS PAGE
----
Available Information . . . . . . . . . . 2
Incorporation of Certain Documents by
Reference . . . . . . . . . . . . 2
Risk Factors . . . . . . . . . . . . 3
The Company . . . . . . . . . . . . 11
Use of Proceeds . . . . . . . . . . . . 12
Selling Stockholders . . . . . . . . . . 12
Plan of Distribution . . . . . . . . . . 13
Description of Capital Stock . . . . . . 14
Legal Matters . . . . . . . . . . . . 17
Experts . . . . . . . . . . . . 17
April , 1998
================================================================== =================================================
</TABLE>
II-1
<PAGE> 21
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the fees and expenses in connection with the
issuance and distribution of the securities being registered hereunder. Except
for the SEC registration fee, all amounts are estimates.
<TABLE>
<S> <C>
SEC registration fee . . . . . . . . . . . . . . . $ 18,321
Accounting fees and expenses . . . . . . . . . . . 5,000
Legal fees and expenses . . . . . . . . . . . . . . 5,000
Blue Sky fees and expenses (including counsel fees) 11,000
Printing and engraving expenses . . . . . . . . . . 5,000
Transfer agent's and registrar's fees and expenses 2,000
Miscellaneous expenses, including Listing Fees . . 35,000
--------
Total $ 81,321
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors
and officers under certain circumstances for liabilities incurred in connection
with their activities in such capacities (including reimbursement for expenses
incurred). Article SIXTH of the Registrant's Certificate of Incorporation
provides that the Registrant will indemnify its directors and officers to the
fullest extent permitted by law and that directors shall not be liable for
monetary damages to the Registrant or its stockholders for breach of fiduciary
duty, except to the extent not permitted under Delaware General Corporation
Law.
Section 145 of the Delaware General Corporation Law ("DGCL")
authorizes a court to award, or a corporation's board of directors to grant
indemnity to directors and officers under certain circumstances for liabilities
incurred in connection with their activities in such capacities (including
reimbursement for expenses incurred). The Registrant's Amended and Restated
Certificate of Incorporation provides that no director of the Registrant will
be personally liable to the Registrant or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Registrant or to its
stockholders, (ii) for acts or omissions not made in good faith or with
involved intentional misconduct or a knowing violation of the law, (iii) under
Section 174 of the DGCL, or (iv) for any transactions from which the director
derives an improper personal benefit. In addition, the Registrant's Amended
and Restated Bylaws provide that any director or officer who was or is a party
or is threatened to be made a party to any action or proceeding by reason of
his or her services to the Registrant will be indemnified to the fullest extent
permitted by the DGCL.
The Registrant has entered into agreements with each of its executive
officers and directors under which the Registrant has agreed to indemnify each
of them against expenses and losses incurred for claims brought against them by
reason of their being an officer or director of the Registrant. There is no
pending litigation or proceeding involving a director or officer of the
Registrant as to which indemnification is being sought, nor is the Registrant
aware of any pending or threatened litigation that may result in claims for
indemnification by any director or executive officer.
II-2
<PAGE> 22
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
3.01 Amended and Restated Certificate of Incorporation (1)
3.02 Bylaws (1)
3.03 Certificate of Designation of Series C Convertible
Preferred Stock (2)
3.04 Certificate of Designation of Series D Convertible
Preferred Stock (3)
4.01 Specimen Stock Certificate (1)
4.02 Securities Purchase Agreement (3)
4.03 Registration Rights Agreement (3)
4.04 Investment Option issued to RGC International
Investors LDC (3)
4.05 Investment Option issued to Halifax Fund L.P. (3)
*5.01 Legal Opinion
*23.01 Consent of Assistant General Counsel (contained in
Exhibit 5.01)
23.02 Consent of Ernst & Young LLP, independent auditors (filed herewith)
24.01 Power of Attorney
</TABLE>
-----------------
* Previously filed.
(1) Incorporated by reference to the Company's Registration
Statement on Form S-1 (SEC File No. 33-80725).
(2) Incorporated by reference to the Company's current Report on
Form 8-K filed with the Securities and Exchange Commission on
August 5, 1997.
(3) Incorporated by reference to the Company's current Report on
Form 8-K filed with the Securities and Exchange Commission on
February 10, 1998
(b) Financial Statement Schedules.
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable, and therefore have been omitted.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the registration statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Securities and Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-3
<PAGE> 23
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-4
<PAGE> 24
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the County of Fairfax, Commonwealth of Virginia on April 3,
1998.
CYBERCASH, INC.
By: /s/ William N. Melton
-------------------------------------
William N. Melton
President and Chief Executive Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<S> <C>
Date: April 3, 1998 /s/ William N. Melton*
-------------------------------------------
William N. Melton
President and Chief Executive Officer
Date: April 3, 1998 /s/ James J. Condon*
-------------------------------------------
James J. Condon
Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)
Date: April 3, 1998 /s/ Daniel C. Lynch*
-------------------------------------------
Daniel C. Lynch
Chairman of the Board of Directors
Date: April 3, 1998 /s/ Michael Rothschild*
-------------------------------------------
Michael Rothschild
Director
</TABLE>
<PAGE> 25
<TABLE>
<S> <C>
Date: April 3, 1998 /s/ Charles T. Russell*
-------------------------------------------
Charles T. Russell
Director
Date: April 3, 1998 /s/ Garen K. Staglin*
-------------------------------------------
Garen K. Staglin
Director
By: Russell B. Stevenson, Jr.
-------------------------
Attorney-in-Fact
</TABLE>
<PAGE> 26
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
3.01 Amended and Restated Certificate of Incorporation (1)
3.02 Bylaws (1)
3.03 Certificate of Designation of Series C Convertible
Preferred Stock (2)
3.04 Certificate of Designation of Series D Convertible
Preferred Stock (3)
4.01 Specimen Stock Certificate (1)
4.02 Securities Purchase Agreement (3)
4.03 Registration Rights Agreement (3)
4.04 Investment Option issued to RGC International
Investors LDC (3)
4.05 Investment Option issued to Halifax Fund L.P. (3)
*5.01 Legal Opinion
*23.01 Consent of Assistant General Counsel (contained in
Exhibit 5.01)
23.02 Consent of Ernst & Young LLP, independent auditors (filed herewith)
24.01 Power of Attorney
</TABLE>
-----------------
* Previously filed.
(1) Incorporated by reference to the Company's Registration
Statement on Form S-1 (SEC File No. 33-80725).
(2) Incorporated by reference to the Company's current Report on
Form 8-K filed with the Securities and Exchange Commission on
August 5, 1997.
(3) Incorporated by reference to the Company's current Report on
Form 8-K filed with the Securities and Exchange Commission on
February 10, 1998
<PAGE> 1
EXHIBIT 23.02
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
the Amendment No. 1 to the Registration Statement (Form S-3 No. 333-46965)
and related Prospectus of CyberCash, Inc. for the registration of 2,070,000
shares of its common stock and to the incorporation by reference therein of our
report dated March 13, 1998, except for Note 13, as to which the date is March
16, 1998, with respect to the consolidated financial statements of CyberCash,
Inc. included in its Annual Report on Form 10-K for the year ended December
31, 1997, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Vienna, Virginia
April 1,1998
