<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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<S> <C>
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY
PERIOD ENDED MARCH 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
</TABLE>
COMMISSION FILE NUMBER: 0-27470
---------------------------
CYBERCASH, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 54-1725021
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
2100 RESTON PARKWAY, RESTON, VA 20191
(Address of principal executive offices, including zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (703) 620-4200
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
<TABLE>
<S> <C>
COMMON STOCK, $0.001 PAR VALUE 12,215,437 SHARES
(CLASS) (OUTSTANDING AT MARCH 31, 1998)
</TABLE>
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<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
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PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Statements of Operations for the three months
ended March 31, 1998 and 1997............................. 2
Consolidated Balance Sheets as of March 31, 1998 and
December 31, 1997......................................... 3
Consolidated Statements of Cash Flows for the three months
ended March 31, 1998 and 1997............................. 4
Notes to Consolidated Financial Statements.................. 5
Item 2. Management's Discussion and Analysis of Financial Conditions
and Results of Operations................................. 6
Item 3. Qualitative and Quantitative Market Risk Disclosure......... 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................... 10
Item 2. Changes in Securities....................................... 10
Item 3. Defaults upon Senior Securities............................. 11
Item 4. Submission of Matters to a Vote of Security-Holders......... 11
Item 5. Other Information........................................... 11
Item 6. Exhibits and Reports on Form 8-K............................ 11
Signatures.................................................. 12
</TABLE>
<PAGE> 3
PART I -- FINANCIAL INFORMATION
ITEM I. CONSOLIDATED FINANCIAL STATEMENTS
CYBERCASH, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------
1998 1997
----------- -----------
<S> <C> <C>
Revenues.................................................... $ 1,141,630 $ 155,395
Cost of revenues............................................ 1,107,830 749,447
----------- -----------
Gross profit (loss).................................... 33,800 (594,052)
Costs and expenses:
Research and development............................... 1,671,498 2,761,939
Sales and marketing.................................... 2,948,579 2,460,342
General and administrative............................. 1,695,207 1,610,408
Write-off of NetBill technology license................ -- 2,162,500
----------- -----------
Loss from operations........................................ (6,281,484) (9,589,241)
Interest income and expense................................. 695,730 381,675
Other expense............................................... (87,805) --
----------- -----------
Net loss.................................................... $(5,673,559) $(9,207,566)
=========== ===========
Net loss per share.......................................... $ (0.53) $ (0.86)
=========== ===========
</TABLE>
See accompanying notes.
2
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CYBERCASH, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 31,374,134 $ 13,222,234
Short-term investments.................................... -- 8,779,773
Restricted cash........................................... 270,466 263,132
Accounts receivable....................................... 2,260,842 2,706,776
Prepaid expenses and other current assets................. 1,339,803 816,730
------------ ------------
Total current assets.............................. 35,245,245 25,788,645
Property and equipment, net................................. 5,724,398 4,671,350
Investment in affiliates.................................... 344,127 342,155
Other long-term assets...................................... 860,057 557,124
------------ ------------
Total assets...................................... $ 42,173,827 $ 31,359,274
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 1,832,879 $ 801,252
Accrued bonus and employee benefits....................... 690,195 474,942
Other accrued expenses.................................... 757,725 266,946
Deferred revenue.......................................... 208,968 209,806
------------ ------------
Total current liabilities......................... 3,489,767 1,752,946
Commitments
Series C Convertible Preferred Stock, $.001 par value;
15,000 shares authorized and designated, 1,000 shares
issued and outstanding as of March 31, 1998 and 13,500
shares issued and outstanding as of December 31, 1997;
liquidation preference of $1,032,603 at
March 31, 1998............................................ 264,204 13,013,772
Series D Convertible Preferred Stock, $.001 par value;
15,000 shares authorized and designated, 15,000 shares
issued and outstanding; liquidation preference of
$15,110,959 at March 31, 1998............................. 14,529,205 --
Stockholders' equity:
Common Stock, $.001 par value; 25,000,000 shares
authorized; 12,235,437 shares issued and 12,215,437
outstanding as of March 31, 1998 and 11,075,246 shares
issued and 11,055,246 outstanding as of December 31,
1997................................................... 12,235 11,075
Additional paid-in capital................................ 94,618,022 81,896,532
Accumulated deficit....................................... (69,609,899) (63,936,340)
Treasury stock, at cost, 20,000 shares.................... (120,000) (120,000)
Accumulated other comprehensive income.................... (214,252) (332,288)
Receivable from sale of Common Stock...................... (719,846) (803,338)
Unearned compensatory stock options....................... (75,609) (123,085)
------------ ------------
Total stockholders' equity........................ 23,890,651 16,592,556
------------ ------------
Total liabilities and stockholders' equity........ $ 42,173,827 $ 31,359,274
============ ============
</TABLE>
See accompanying notes.
3
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CYBERCASH, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------
1998 1997
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss.................................................... $(5,673,559) $(9,207,566)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation.............................................. 665,820 587,701
Write-off of NetBill technology license................... -- 2,162,500
Accrued interest on receivable from sale of Common
Stock.................................................. (9,678) (11,802)
Compensation expense related to stock options............. 34,138 190,654
Changes in operating assets and liabilities:
Accounts receivable.................................... 445,934 (8,803)
Prepaid expenses and other current assets.............. (530,407) 115,872
Other long-term assets................................. (302,933) 23,645
Accounts payable and accrued expenses.................. 1,737,659 (679,211)
Deferred revenue....................................... (838) (26,950)
----------- -----------
Net cash used in operating activities....................... (3,633,864) (6,853,960)
INVESTING ACTIVITIES
Sales of short-term investments............................. 8,779,773 --
Investment in affiliates.................................... (1,972) --
Purchases of property and equipment......................... (1,718,868) (526,551)
----------- -----------
Net cash provided by (used in) investing activities......... 7,058,933 (526,551)
FINANCING ACTIVITIES
Proceeds from issuance of Preferred Stock................... 14,409,171 --
Proceeds from receivable from sale of Common Stock.......... 93,170 19,580
Proceeds from the issuance of Common Stock through the
Employee Stock Option Plan................................ 106,454 62,435
----------- -----------
Net cash provided by financing activities................... 14,608,795 82,015
----------- -----------
Effect of exchange rates changes on cash and cash
equivalents............................................... 118,036 (12,433)
----------- -----------
Net increase (decrease) in cash and cash equivalents........ 18,151,900 (7,310,929)
Cash and cash equivalents at beginning of period............ 13,222,234 33,687,076
----------- -----------
Cash and cash equivalents at end of period.................. $31,374,134 $26,376,147
=========== ===========
</TABLE>
See accompanying notes.
4
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CYBERCASH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND NATURE OF OPERATIONS
CyberCash, Inc. ("CyberCash" or the "Company") was incorporated on August
29, 1994 in the State of Delaware and was in the development stage from date of
inception through December 31, 1996. CyberCash is a leading provider of
technology and services to enable secure financial transactions. The Company
provides payment services, which enable merchants to accept various payment
instruments over the Internet; the CashRegister service, which provides Internet
merchants with the electronic equivalent of a cash register designed
specifically for electronic commerce; and other services, for merchants and
financial institutions engaged in electronic commerce. CyberCash currently
offers four distinct payment services: a secure payment card transport service;
CyberCoin(R), a small payments service; PayNow(TM) Secure Electronic Check
Service, a service that enables billers to accept "electronic checks" from
consumers or other businesses; and, through the Company's joint venture in
Germany, an Internet implementation of the leading European debit card.
The accompanying interim consolidated financial statements and notes
thereto are unaudited, but have been prepared in accordance with generally
accepted accounting principles for interim financial information and should be
read in conjunction with the Company's consolidated financial statements found
in the Company's Form 10-K. In the opinion of management, all adjustments
(consisting only of normal, recurring adjustments) considered necessary to
reflect fairly the Company's consolidated financial position and consolidated
results of operations have been included. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. The results of operations for the three
months ended March 31, 1998 and 1997 are not necessarily indicative of the
results for the full year.
2. PRIVATE PLACEMENT
On February 5, 1998, the Company issued 15,000 shares of Series D
redeemable convertible Preferred Stock with a stated value of $1,000 per share
(the "Series D Preferred Stock") and options to purchase up to 354,191 shares of
the Company's Common Stock (the "Investment Options") resulting in net proceeds
of approximately $14,409,000. The Series D Preferred Stock has no voting rights
and is convertible into the number of shares of the Company's Common Stock equal
to the stated value of $1,000 per share plus a premium of 5% per annum of the
stated value from the date of issuance of the Series D Preferred Stock divided
by a conversion price. The conversion price is equal to the lowest closing price
of the Company's Common Stock during the measurement period ending one trading
day prior to the conversion date, multiplied by a "conversion percentage." The
conversion percentage is 100% through February 4, 1999, 92.5% from February 5,
1999 to August 4, 1999 and 85% thereafter. The Company has accreted the premium
of 5% per annum to the Series D Preferred Stock carrying value.
The Series D Preferred Stock is convertible at the option of the holders
subject to certain limits and redeemable upon the occurrence of certain events
such as dissolution. The Company has on file an effective registration statement
for the resale of the underlying common stock under the Securities Act of 1933.
During April 1998, the investors converted 8,750 shares of Series D Preferred
Stock into 530,865 shares of Common Stock.
The exercise price of the Investment Options is equal to the lesser of the
average of $10.59 and the market price of the Company's Common Stock at the end
of 1998 and 110% of the stock market price at the end of 1998. The Investment
Options may be exercised between January 1, 1999 and February 5, 2003.
In addition, the Company is committed to sell, and the investors are
committed to buy, additional shares of Series D Preferred Stock and Investment
Options for $15,000,000 in cash upon the satisfaction of certain
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conditions, including that the market price of the Common Stock is at least
$13.76 per share and that stockholder approval is obtained at the Company's
annual meeting in late June 1998.
3. NET LOSS PER SHARE
The following table sets forth the computation of basic and diluted net
loss per share:
<TABLE>
<CAPTION>
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
---------------------------
1998 1997
------------ ------------
<S> <C> <C>
Numerator:
Net loss................................................. $ (5,673,559) $ (9,207,566)
Accrued dividends to Preferred Stockholders.............. (178,916) --
Net loss available to Common Stockholders................ $ (5,852,475) $ (9,207,566)
Denominator:
Weighted average shares outstanding...................... 11,060,231 10,730,657
Basic earnings per share................................. $ (0.53) $ (0.86)
Diluted earnings per share............................... $ (0.53) $ (0.86)
</TABLE>
4. COMPREHENSIVE INCOME
As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130 ("SFAS No. 130"), Reporting Comprehensive Income.
SFAS No. 130 establishes new rules for the reporting and display of
comprehensive income and its components. SFAS No. 130 requires unrealized gains
or losses on the Company's foreign currency translation adjustments, which prior
to adoption was reported separately in stockholders' equity, to be included in
other comprehensive income. Prior year financial statements have been
reclassified to conform to the requirements of SFAS No. 130.
The components of comprehensive income for the three months ended March 31,
1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Net loss................................................... $(5,673,559) $(9,207,566)
Foreign currency translation adjustments................... 118,036 (12,433)
----------- -----------
Comprehensive income....................................... $(5,555,523) $(9,219,999)
=========== ===========
</TABLE>
The components of accumulated other comprehensive income at March 31, 1998
and December 31, 1997 are as follows:
<TABLE>
<CAPTION>
FOREIGN
CURRENCY
TRANSLATION
-----------
<S> <C>
December 31, 1997........................................... $(332,288)
Current period other comprehensive income................... 118,036
---------
March 31, 1998.............................................. $(214,252)
=========
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
accompanying interim consolidated financial statements and notes thereto.
Historical results and percentage relationships among any amounts in the
financial statements are not necessarily indicative of trends in operating
results for any future period. This discussion contains, in addition to
historical information, forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ significantly from the
results discussed in the forward-looking statements. The uncertainties and risks
include the pace of growth of Internet commerce, development
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by the Company and its competitors of new products and services, strategic
decisions by major participants in the industry, competitive pricing pressures,
legal and regulatory developments, and general economic conditions. Further
information about these and other relevant risks and uncertainties may be found
in the Company's Annual Report on Form 10-K.
Overview. The Company's future operating performance will depend in large
part on the rate of growth of electronic commerce and what role payment systems,
like those offered by the Company, will play in electronic commerce. Moreover,
the market for electronic payment services is still immature and is changing
rapidly. It is not certain that the Company's services will find acceptance in
the market. The Company's revenue expectations have been based largely on
expectations of future demand rather than on actual experience. Since its
inception in August 1994, the Company has devoted most of its efforts to
development and marketing in preparation for and anticipation of the growth in
electronic commerce that it expected would create a substantial market for its
Internet payment services. The Company also has made significant investments in
computers, networking systems and telecommunications equipment. Largely, as a
result of the expenses associated with these efforts, the Company's operating
expenses increased each quarter through the end of 1996, but have been
maintained at approximately $7.5 million for each quarter through March 31,
1998.
Internet commerce has developed more slowly than was generally anticipated
at the time of the Company's initial public offering. As a result, the Company's
revenues from transaction processing and other recurring sources have not grown
as quickly as expected, and the Company has had to find other sources of
revenue.
During 1998 and 1997, the Company has continued its efforts to establish a
strong market position and to lay the foundations for growth in recurring
revenues if and when Internet commerce becomes substantial. At the same time,
the Company has been able to generate revenues from some of these initiatives by
getting strategic allies or joint venture partners to finance all or part of the
development work necessary to adapt the Company's technology to new uses or to
foreign markets. The Company intends to continue whenever possible to seek
revenues from development work it performs in connection with strategic
alliances in order to help finance its overall development program.
If electronic commerce continues to grow during 1998, and if there is a
resulting increase in the demand for electronic payment services, the Company
believes it is strategically positioned to be able to capture a significant
share of its market. The rate of growth of the electronic market and the
Company's success in it are, however, subject to considerable uncertainty.
On April 30, 1998, the Company completed the acquisition of ICVerify, Inc.,
a company that develops and markets payment systems software, for $16,250,000 in
cash and 2,300,000 shares of Common Stock. The following discussion does not
take into account the effects on the Company's financial condition or operating
results that will result from the combined companies.
RESULTS OF OPERATIONS
Revenues. The Company's revenues for the three months ended March 31, 1998
and 1997 were $1,142,000 and $155,000, respectively. For the three months ended
March 31, 1998 and during the year ended December 31, 1997, the majority of the
Company's revenues were derived from licensing its technology and from 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 portion 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.
Cost of Revenues. Cost of revenues consist primarily of labor costs for
providing development work associated with licensing activities and the cost of
operations to provide transaction processing. Cost of revenues increased
$359,000 from $749,000 for the three months ended March 31, 1997 to $1,108,000
for the
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three months ended March 31, 1998 primarily as a result of increased revenues
for the three months ended March 31, 1998 from development associated with
licensing activities.
Research and Development. Research and development expenses consist
primarily of compensation expense and consulting fees to support the development
of the Company's services and technologies. Research and development expenses
decreased $1,091,000 from $2,762,000 for the three months ended March 31, 1997
to $1,671,000 for the three months ended March 31, 1998. This decrease was
primarily due to the Company's ability to finance a portion of its development
work in the first quarter of 1998 through development contracts with its joint
ventures and strategic allies. In addition, the Company is carrying out an
increasing amount of development work at its low-cost Bangalore, India facility
instead of using outside consultants or employees working in the United States.
The Company plans to continue to perform a significant amount of research and
development. Its ability to continue to finance a portion of its research and
development with revenues from work paid for by joint ventures and strategic
allies is uncertain. Accordingly, research and development expenses could
increase in the future. To date, all of the Company's software development costs
have been expensed as incurred. The Company will continue to expense such costs
until it can demonstrate that it may realize future benefits from costs incurred
on its software.
Sales and Marketing. Sales and marketing expenses consist primarily of
compensation expense and advertising and marketing costs. Sales and marketing
expenses increased $489,000 from $2,460,000 for the three months ended March 31,
1997 to $2,949,000 for the three months ended March 31, 1998. A large portion of
1998 sales and marketing expense was related to raising brand awareness of
CyberCash through television and magazine advertisements. The Company
anticipates that its sales and marketing expenses will continue to be
significant.
General and Administrative. General and administrative expenses consist
primarily of compensation expense and fees for professional services and other
expenses associated with the general management and administration of the
Company. General and administrative expenses increased $85,000 from $1,610,000
for the three months ended March 31, 1997 to $1,695,000 for the three months
ended March 31, 1998. This increase is primarily due to an increase in
depreciation. The Company anticipates that its general and administrative
expenses will continue to be significant as it continues to develop and expand
its operations.
Acquisition of NetBill Technology License. On March 21, 1997, CyberCash
entered into a technology licensing agreement with Carnegie Mellon University
("CMU") whereby the Company acquired the exclusive worldwide rights to CMU's
NetBill technology for use in network-based electronic commerce. Due to the
uncertainty associated with the realizability of the license acquired, the
Company recorded a non-cash charge to operations of $2,163,000 during the three
months ended March 31, 1997, for the fair value of the Common Stock and Class A
Warrants issued in the acquisition of the NetBill technology license.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998, the Company had cash and cash equivalents of
$31,374,000, which represented an increase of $18,152,000 over cash and cash
equivalents of $13,222,000 at December 31, 1997. The increase resulted primarily
from the net cash proceeds of $14,409,000 from the Company's private placement
of its Series D Preferred Stock on February 5, 1998, and $8,780,000 from sales
of short-term investments. This was offset by a net loss of $5,674,000 and cash
outflows for capital expenditures of $1,719,000. Other less significant items
also affected changes in the Company's cash position during the period. On April
30, 1998, the Company paid $16,250,000 in cash as part of the consideration for
its acquisition of ICVERIFY, Inc.
The Company anticipates raising approximately $15 million in cash from a
sale of convertible preferred stock in July 1998. This sale is contingent, among
other things, on approval by the Company's shareholders at its annual meeting on
June 26, 1998 and also the price of the Company's common stock remaining above
$13.76. Although Internet commerce has been slower to develop than originally
expected, the Company currently anticipates that its existing cash resources
(taking into account the ICVERIFY acquisition), supplemented by the planned
financing and future cash flows from operations, will be sufficient to meet the
Company's anticipated cash needs, including working capital, for at least twelve
to fifteen months. Thereafter, the Company may need to raise additional funds.
The Company may need to raise additional funds sooner
8
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than anticipated in order to fund more rapid expansion, to develop new or
enhanced services, to respond to competitive pressures or to acquire
complementary businesses or technologies. If the Company does raise additional
funds 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. There
can be no assurance that additional financing will be available now or in the
future. 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.
ITEM 3. QUALITATIVE AND QUANTITATIVE MARKET RISK DISCLOSURE
Not Applicable.
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PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
On February 5, 1998, the Company completed a private placement with two
private equity funds in reliance upon Regulation D. The Company issued an
aggregate of 15,000 shares of its Series D Preferred Stock and Investment
Options to acquire up to 354,191 shares of the Company's Common Stock, resulting
in net proceeds of approximately $14,409,000. The Series D Preferred Stock has
no voting rights and is convertible into the number of shares of the Company's
Common Stock equal to the stated value of $1,000 per share plus a premium of 5%
per annum of the stated value from the date of issuance of the Series D
Preferred Stock divided by a 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 "conversion percentage." The conversion percentage is 100%
through February 4, 1999, 92.5% from February 5, 1999 to August 4, 1999 and 85%
thereafter. The Company has accreted the premium of 5% per annum to the Series D
Preferred Stock carrying value. The measurement period initially is 10
consecutive trading days and will increase by 2 trading days each month
beginning August 1, 1998 and ending January 1, 1999, when the measurement period
will be 22 trading days.
The holders of the Series D Preferred 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 August 1, 1998, the Series D Preferred Stock may
not be converted; beginning on November 1, 1998, each holder of Series D
Preferred Stock may convert up to 30% of its initial holding of Series D
Preferred Stock into Common Stock ("Initial Holding"); beginning on February 1,
1998, it may convert up to 60% of its Initial Holding; beginning on April 4,
1998, it may convert up to 90% of its Initial Holding; and beginning on July 1,
1998, it may convert up to 100% of its Initial Holding.
The Series D Preferred Stock will automatically convert into Common Stock,
at the then applicable Conversion Price, on February 4, 2003.
The exercise price of the Investment Options is equal to the lesser of (a)
the average of $10.59 and the market price of the Company's common stock at the
end of 1998 and (b) 110% of the stock market price at the end of 1998. The
Investment Options may be exercised between January 1, 1999 and February 5,
2003.
The Company did not register the Series D Preferred Stock pursuant to the
Securities Act of 1933 in reliance upon representations made by each of the two
investors that it was an "accredited investor" within the meaning of Rule 501(a)
of Regulation D and that it was purchasing the Series D Preferred Stock, the
shares of Common Stock issuable upon conversion thereof, the Investment Options
and the shares of Common Stock issuable upon exercise thereof for its own
account for investment only and not with a view toward the public sale or
distribution thereof. Under an agreement with the purchasers, the Company agreed
to register under the Securities Act of 1933 the resale of the Common Stock to
be issued upon conversion of the Series D Preferred Stock and upon exercise of
the Investment Options. That registration statement has been filed and is
effective. During April 1998, the investors converted 8,750 shares of Series D
Preferred Stock into 530,865 shares of Common Stock. None of the Investment
Options has been exercised.
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
None.
ITEM 5. OTHER INFORMATION
On April 30, 1998, the Company and ICVerify, Inc. completed a merger of the
two companies. The Company paid $16,250,000 in cash and distributed 2,300,000
shares of its Common Stock to the shareholders of ICVerify, Inc. The Company
will account for this business combination using the purchase method of
accounting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<S> <C>
2.01 Plan of Acquisition -- ICVERIFY, Inc.
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)
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
On February 10, 1998, the Company filed a Form 8-K that reported under
items 5 and 7 the closing of a private placement of convertible preferred stock
on February 5, 1998.
On March 18, 1998, the Company filed a Form 8-K that reported under item 5
that, on March 16, 1998, the Company had entered into a non-binding agreement to
acquire ICVERIFY, Inc., of Oakland, California for 2,300,000 shares of the
Company's Common Stock and $16,250,000 in cash.
- ---------------
(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 Form 8-K filed with the SEC on
August 8, 1997.
(3) Incorporated by reference to the Company's Form 8-K filed with the SEC on
February 10, 1998.
11
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CyberCash, Inc.
--------------------------------------
(Registrant)
Date: May 13, 1998 /s/ WILLIAM N. MELTON
------------------------------------------------------
William N. Melton
President and Chief Executive Officer
Date: May 13, 1998 /s/ JAMES J. CONDON
------------------------------------------------------
James J. Condon
Chief Operating Officer and Chief Financial Officer
12
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