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PROSPECTUS SUPPLEMENT
APRIL 5, 1999
The information in this Prospectus Supplement concerning the Selling
Stockholders supplements the statements set forth under the caption "Selling
Stockholders" in the Prospectus. Capitalized items used and not defined herein
shall have the meanings given to them in the Prospectus.
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SELLING STOCKHOLDERS
The information set forth under the caption "Selling Stockholders" in the
Prospectus is supplemented as follows:
- This prospectus relates to the offering by the selling
stockholders named in this prospectus for resale of up to 2,301,586
shares of common stock. After giving effect to the offering and the
sale of shares we have primarily registered for these selling
shareholders, the selling stockholders will beneficially own no
shares of CyberCash common stock. The selling stockholders have
acquired common stock in a private placement and may acquire
additional shares of common stock upon the exercise of warrants
issued in the private placement.
We will supplement this prospectus from time to time to reflect the
number of shares of common stock acquired by the selling stockholders, as those
selling stockholders exercise their warrants or acquire additional securities
subject to resale under this prospectus. The following table sets forth
important information with respect to the selling stockholders as of April 5,
1999, as follows:
- the name and position or other relationship with CyberCash within the
past three years of the selling stockholders;
- the number of CyberCash's outstanding shares of common stock
beneficially owned by the selling stockholders (including shares
obtainable under warrants exercisable within sixty (60) days of April
5, 1999) prior to this offering;
- the number of shares of common stock being offered through this
prospectus; and
- the number and percentage of CyberCash's outstanding shares of common
stock to be beneficially owned by the selling stockholders after the
sale of common stock being offered through this prospectus.
The selling stockholders do not have to sell all of the shares that they
own.
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<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SHARES
BENEFICIALLY OWNED NUMBER OF SHARES BENEFICIALLY OWNED
SELLING STOCKHOLDERS PRIOR TO THE OFFERING OFFERED HEREBY AFTER OFFERING
- -------------------- --------------------- ---------------------- ----------------------
<S> <C> <C> <C>
RGC International
Investors, LDC (1) 1,996,644 (2)(3)(5) 1,524,390(4)(5) 0
Halifax Fund, L.P. 1,839,725(2)(6)(5) 762,196(7)(5) 0
Donino, White & Partners, 15,000 15,000 0
Inc.
</TABLE>
(1) RGC is a party to an investment management agreement with Rose Glen
Capital Management, L.P., a limited partnership of which the general
partner is RGC General Partner Corp. Messrs. Wayne Bloch, Gary
Kaminsky and Steven Katznelson own all of the outstanding capital
stock of RGC General Partner Corp. and are parties to a shareholders
agreement pursuant to which they collectively control RGC General
Partner Corp. Through RGC General Partner Corp., these individuals
control Rose Glen Capital Management, L.P. These individuals disclaim
beneficial ownership of CyberCash's common stock owned by RGC.
(2) The number of shares of common stock beneficially owned by the
referenced selling stockholders is based on an exercise price of
$20.00. Pursuant to the terms of the warrants, the exercise price may
be reset on January 6, 2000, January 6, 2001 and January 6, 2002, if
the average closing bid price of CyberCash's common stock over the 10
trading days preceding any of these dates is less than $20.00. In any
of these circumstances, the exercise price would be reset to equal the
average closing bid price of CyberCash's common stock over the 10
trading days preceding the applicable reset date. Beginning January
6, 2002, the exercise price also could be reduced if CyberCash issues
securities below the market price of CyberCash's common stock. If an
adjustment of the exercise price occurs, the number of shares of
common stock issuable upon exercise of the warrants would
proportionately increase.
(3) Includes (i) 472,254 shares of common stock underlying investment
options that will not be offered by this prospectus and (ii) 609,756
shares of common stock and an estimated 914,634 shares underlying
warrants which are being offered by this prospectus. See footnote 5.
(4) Consists of 609,756 shares of outstanding common stock and an
estimated 914,634 shares of common stock underlying warrants issued to
RGC.
(5) The actual number of shares of common stock issuable upon exercise of
the warrants is indeterminate, is subject to adjustment and could be
materially less or more than the estimated number depending on
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factors which we cannot predict at this time, including, among other
factors, the future market price of the common stock. We have
registered two times the number of shares which are currently issuable
upon exercise of the warrants. This number is our good faith estimate
of the maximum number of shares we may issue upon exercise of the
warrants. The warrants contain provisions which limit the number of
shares of common stock into which the warrants are exercisable. Under
these provisions, the number of shares of common stock into which the
warrants are exercisable on any given date (together with any
additional shares of common stock held by this selling stockholder)
will not exceed 9.9% of CyberCash's then outstanding common stock.
(6) Includes (i) an aggregate of 1,077,529 shares of common stock and
shares of common stock underlying investment options that will not be
offered by this prospectus and (ii) 304,878 shares of common stock and
an estimated 457,318 shares underlying warrants, which are being
offered by this prospectus. See footnote 5.
(7) Consists of 304,878 shares of outstanding common stock and an
estimated 457,318 shares of common stock underlying warrants issued to
Halifax.
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PROSPECTUS
MARCH 31, 1999
CYBERCASH INC.
2,301,586 SHARES OF COMMON STOCK
We have prepared this prospectus to allow three of our shareholders,
RGC International Investors, LDC, Halifax Fund, L.P., and Donino, White &
Partners, Inc., to sell up to 2,301,586 shares of our common stock. See "Plan
of Distribution". The selling stockholders may drive the price of our common
stock down if they sell all or a large number of these shares. The selling
stockholders also may drive the price of our common stock down if they sell
their shares at a price below market.
Our common stock is traded on the Nasdaq Stock Market under the symbol
"CYCH". On March 23, 1999, the last reported sale price of our common stock on
Nasdaq was $14.3125 per share.
-------------------------
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 3.
-------------------------
Neither the SEC nor any state securities commission has approved the
common stock, nor have these organizations determined that this prospectus is
accurate or complete. Any representation to the contrary is a criminal
offense.
The date of this prospectus is March 31, 1999.
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THE COMPANY
CyberCash, Inc. is the world's leading provider of secure electronic
commerce payment technologies and services spanning the retail point of sale
through the Internet. We believe that we are well-positioned to capitalize on
the emerging market for electronic commerce because we offer a range of
software products and payment services that work with the existing transaction
processing systems of financial institutions. In addition, we believe our new
InstaBuy service will successfully simplify the on-line buying experience for
consumers. Our principal executive offices are located at 2100 Reston Parkway,
3rd Floor, Reston, Virginia 20191 and our phone number is 703/620-4200.
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RISK FACTORS
In evaluating our business, you should carefully consider the
following factors, as well as other information in this prospectus before
purchasing our common stock.
WE HAVE A LIMITED OPERATING HISTORY AND HAVE NOT YET OPERATED PROFITABLY
We were founded in August 1994, and we have not yet operated at a
profit. Our limited operating history offers little information to serve as a
basis for evaluating us and our long-term prospects. You should consider our
prospects in light of the risks, expenses and difficulties that companies in
their earlier stage of development encounter, particularly companies in new and
rapidly evolving markets. Our success depends upon our ability to address
those risks successfully, which include, among other things:
- Whether we can continue to build and maintain a strong management
structure that can develop and execute our business strategy, and
respond effectively to changes in the markets for our services and
software products;
- Whether we can respond quickly and effectively to technological
changes and competitive forces in our markets;
- Whether we will be able to assemble and maintain the necessary
resources, especially talented software programmers, we will need
to develop and upgrade our technology to meet evolving market
demands;
- Whether we will be successful in continuing to evolve and
successfully implement a sales and marketing strategy;
- Whether we will be able to develop and manage strategic
relationships to maximize widespread acceptance of our products
and services; and
- Whether the effect of the volatility of the market price of our
stock will adversely affect our ability to sell our products and
services, develop strategic relationships, attract and maintain
qualified employees, and raise additional capital if necessary.
If we do not succeed in addressing these risks, our business likely
will be materially and adversely affected.
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WE MAY CONTINUE TO EXPERIENCE LOSSES, WHICH WOULD DEPRESS OUR STOCK PRICE
As of December 31, 1998, we had an accumulated deficit of $94,880,788.
Since we started our business, our revenues have been small compared to our
expenses. Our ability to generate significant revenue remains uncertain. We
expect to continue to incur operating losses at least through 1999, and perhaps
for some time thereafter. We may never achieve, or be able to sustain,
profitability.
A MARKET MAY NOT DEVELOP OR GROW FOR OUR PRODUCTS AND SERVICES ELIMINATING THE
POTENTIAL FOR US TO BECOME PROFITABLE
The market for our services is still immature and is evolving rapidly.
An increasing number of market entrants have introduced or are developing
competing products and services to enable payment transactions over the
Internet. Critical issues concerning the Internet (including security,
reliability, cost, ease of use and quality of service) remain unresolved and
may limit the growth of electronic commerce. Delays in the deployment of
improvements to the infrastructure for Internet access, including higher speed
modems and other access devices, adequate capacity and a reliable network
backbone, also could hinder the development of the Internet as a viable
commercial marketplace. For all of these reasons, it remains uncertain whether
commerce over the Internet will continue to grow, a significant market for our
products and services will emerge, or our products and services will become
generally adopted. Even if a market does develop, competitive pressures may
make it difficult, or impossible, for us to operate profitably.
THE MARKET FOR OUR PRODUCTS AND SERVICES MAY NOT GROW FAST ENOUGH TO SUPPORT
OUR LEVEL OF INVESTMENT, IF THIS HAPPENS, OUR EXPENSES WILL GROW FASTER THAN
OUR REVENUES AND WE MAY NOT BECOME PROFITABLE
The growth of our business depends upon widespread acceptance of our
products and services. This is particularly true of our new InstaBuy service,
the deployment of which is a major element of our business strategy for 1999.
The success of this service will depend on our ability to obtain the agreement
of several large financial institutions to sponsor the issuance of InstaBuy
wallets, to have the service adopted by a substantial number of Internet
merchants, and to distribute InstaBuy wallets to large numbers of consumers.
Moreover, our ability to persuade merchants to use the service is dependent in
part on the number of consumers who are using wallets; and our ability to
motivate consumers to use wallets is dependent in part on the number and type
of merchants that are using the service. To succeed, we will
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have to motivate both groups to adopt the service simultaneously, which is
particularly difficult. We have only recently commenced operating the InstaBuy
service, and we cannot assure you that we will succeed in accomplishing any of
these goals. Our failure to accomplish these goals, or our inability to
accomplish them on the anticipated schedule, would have a material adverse
effect on our business.
OUR QUARTERLY OPERATING RESULTS ARE UNPREDICTABLE CAUSING OUR STOCK PRICE TO
DECREASE UNEXPECTEDLY
Our quarterly operating results have varied significantly and probably
will continue to do so in the future as a result of a variety of factors, many
of which are outside our control:
- Sales of our ICVERIFY payment software and our CashRegister
service are affected by the reluctance of merchants to modify
their payment systems during the fourth calendar quarter holiday
period and during the first calendar quarter accounting and
auditing period. Consequently, revenues from sales of our payment
software and sign-up fees for our CashRegister service are likely
to be lower during these periods than the balance of the year.
- In some cases our customers pay one-time licensing or consulting
fees in connection with acquiring our payment services. The
timing of the recognition of fees varies, which contributes to
quarterly fluctuations in revenues. In addition, many of our
distribution channels integrate our services with other electronic
commerce solutions. The timing for these channels to complete the
integration and deploy their solutions into their distribution
channel is unpredictable.
- Our InstaBuy service is new, and the pricing structures and timing
of the recognition of revenues for this service is unpredictable
at this time.
In addition to these factors, as a strategic response to changes in
the competitive environment, we may from time to time make pricing, marketing
decisions, licensing decisions or business combinations that adversely affect
our revenues or increase our costs. We also anticipate that revenues may
decline as customers focus their financial and technical resources on
responding to year 2000 issues instead of buying our products and services.
Extraordinary events, for example, such as material litigation or acquisitions
also could result in fluctuations in our operating results from one reporting
period to the next.
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For these reasons, period-to-period comparisons of our results of
operations are not necessarily a reliable indication of future performance.
Because of all of the foregoing factors, it is likely that our quarterly
operating results from time to time will be below the expectations of public
market analysts and investors. In that case, we expect that the price of our
common stock would be materially and adversely affected.
COMPETITION IS INTENSE AND HAS CAUSED US TO REDUCE PRICES FOR OUR PRODUCTS
The Internet payment services industry is new and evolving rapidly,
resulting in a dynamic, competitive environment. We expect competition to
persist, intensify and increase in the future. Many of our current and
potential competitors have longer operating histories, greater name
recognition, larger installed customer bases and significantly greater
financial, technical and marketing resources than us. In addition, many of our
current or potential competitors, like Microsoft, have broad distribution
channels that they may use 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 our ability to market our services.
Competitive pressures have led us on occasion to reduce our prices. We
expect that competition in our markets will continue to increase and may force
us to reduce prices for some of our products and services. Unless we can
increase our volume or reduce our costs, any reductions in our prices would
have an adverse effect on our profitability.
WE MUST ACHIEVE MARKET ACCEPTANCE AND DEVELOP NEW PRODUCTS AND SERVICES TO
ADDRESS TECHNOLOGICAL CHANGE
Broad acceptance of our products and services and their use in large
numbers is critical to our success because a large portion of our revenues
derive from one-time fees charged to customers buying our products and
services. In addition, our ability to earn significant revenues from our
InstaBuy service will depend in part on its acceptance by a substantial number
of prominent on-line merchants. One obstacle to widespread market acceptance
for our products and services is that widely adopted technological standards
for accepting and processing payments over the Internet have not yet emerged.
As a result, merchants and financial institutions have been slow to select
which service to use. Until one or more predominant standards emerge, we must
design, develop, test, introduce and support new services to meet changing
customer needs and respond to other technological developments. Our
technologies have not been accepted as standards. To be successful, we must
obtain widespread acceptance of our technologies, or
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modify our products and services to meet whatever industry standards do
ultimately develop. We may not be able to do either.
WE MAY EXPERIENCE SOFTWARE DEFECTS AND DEVELOPMENT DELAYS, DAMAGING CUSTOMER
RELATIONS AND DECREASING OUR POTENTIAL PROFITABILITY
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. We may experience delays in the development of our software
products or the software and computing systems underlying our services. In
addition, despite testing by us and potential customers, it is possible that
our software may nevertheless contain errors, and this could have a material
adverse effect on our business.
WE MAY EXPERIENCE BREAKDOWNS IN OUR PAYMENT PROCESSING SYSTEM, DAMAGING
CUSTOMER RELATIONS AND EXPOSING US TO LIABILITY TO OTHERS
The operations for our payment and InstaBuy services depend on whether
we are able to protect our system from interruption by events that are beyond
our control. Events that could cause system interruptions are:
- fire,
- earthquake,
- power loss,
- telecommunications failure, and
- unauthorized entry or other events.
We have established two separate operations centers in Northern
Virginia that provide backup support for our services. In addition, we are
building out a third operations center, which we anticipate will be in
operation before June 30, 1999. If one of these sites should cease operations
because of a power outage, fire, or natural disaster, the others should be able
to take over with only a minimal disruption in service. We have not, however,
been able to test the transfer of operations under emergency conditions, and we
cannot be sure that the transfer would be successful. Also, we have experienced
growing transaction volumes that have from time to time stressed the capacity
of our systems. There is a possibility that our existing systems may be
inadequate and cause serious failures of our services. Finally, although we
regularly back up data from operations, and take other
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measures to protect against loss of data, there is still some risk that we may
lose data. A system outage or data loss could materially and adversely affect
our business.
Despite the security measures we maintain, our infrastructure may be
vulnerable to computer viruses, hackers, rogue employees or similar sources of
disruption. Any damage or failure that causes interruptions in our operations
could have a material adverse effect on our business. Any problem of this
nature could result in significant liability to customers or financial
institutions and also may deter potential customers from using our services. We
attempt to limit this sort of liability through back-up systems, contractual
provisions and insurance. However, we cannot assure you that these contractual
limitations on liability would be enforceable, or that our insurance coverage
would be adequate to cover any liabilities we did sustain.
OUR OPERATIONS AND BUSINESS COULD BE DISRUPTED OR DAMAGED IF OUR SYSTEMS AND
PRODUCTS ARE NOT YEAR 2000 COMPLIANT
We use computer software, operating systems, and embedded processors
containing programs in the development of our products and services, in the
delivery of our services and in our administrative and management operations.
The software we use in our products and in the delivery of our services
contains, in addition to code written by our programmers, some software that we
license from third parties. In addition, we rely on equipment and services
provided by other vendors that are susceptible to year 2000 problems. We are
reviewing the critical programs, systems and services we use (including those
provided by third party vendors) to assure that they are all able to handle
properly the upcoming calendar year 2000. On the basis of our work so far, we
do not anticipate that the so-called "year 2000 issue" will have a material
effect on our 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 we could fail to identify a
problem with a resulting failure or disruption of our operations. Either
eventuality could have a material adverse effect on our business.
IF WE ARE UNABLE TO ATTRACT AND RETAIN QUALIFIED MANAGEMENT AND TECHNICAL
PERSONNEL, WE MAY NOT BE ABLE TO BECOME PROFITABLE
Our performance is substantially dependent on the performance of our
executive officers and key employees. We depend on our ability to retain and
motivate high quality personnel, especially our management and highly skilled
development teams. We do not have "key person" life insurance policies on any
of our employees. The loss of the services of any of our key employees,
particularly our founder and Chief Executive Officer, William N.
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Melton or our President and Chief Operating Officer, James J. Condon, could
have a material adverse effect on us. Our future success also depends on our
continuing ability to identify, hire, train and retain other highly qualified
technical and managerial personnel. Competition for these employees is intense
and increasing. We may not be able to attract, assimilate or retain qualified
technical and managerial personnel in the future, and the failure of us to do
so would have a material adverse effect on our business.
OUR SMALL SALES FORCE AND DISTRIBUTION CHANNELS MAY NOT ENABLE US TO BECOME
PROFITABLE
We have only a limited number of sales and marketing employees and,
therefore, we rely heavily on distribution channels for sales of our products
and payment services. Because of the rapidly evolving nature of electronic
commerce, we cannot be sure that the distribution channels that we are working
with will provide enough of a distribution network for us to achieve our goals.
If these distribution channels do not work, we may not be able to develop
alternative channels.
WE MAY BE UNABLE TO PROTECT OUR PROPRIETARY RIGHTS, PERMITTING COMPETITORS TO
DUPLICATE OUR PRODUCTS AND SERVICES
Our success and ability to compete is dependent in part upon our
proprietary technology. We rely primarily on copyright, trade secret and
trademark law to protect our technology. We hold one United States patent, and
have applied for several others in the United States and foreign countries. We
intend to continue to file patent applications on inventions that we may make
in the future. We cannot be sure that of these patents will be granted, or
that if they are granted that the patents would prove to be valid or provide
the protection that we need.
WE MAY HAVE DIFFICULTIES PROTECTING OUR SOURCE CODE, ENABLING COMPETITORS TO
DUPLICATE OUR PRODUCTS AND SERVICES
The source code for our proprietary software is protected both as a
trade secret and as a copyrighted work. We generally enter into confidentiality
and assignment agreements with our employees, consultants and vendors, and
generally control access to and distribution of our software, documentation and
other proprietary information. Despite these precautions, it may be possible
for a third party to copy or otherwise obtain and use our products, services or
technology without authorization, or to develop similar products, services or
technology independently. In addition, effective copyright and trade secret
protection may be unenforceable or limited in foreign countries, and the global
nature of the Internet makes it difficult to control the ultimate destinations
of our products or services. To license our
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products or services, we often rely on "on-screen" licenses that are not
manually signed by the end-users and, therefore, may be unenforceable under
some laws.
WE MAY BE REQUIRED TO ENGAGE IN EXPENSIVE AND TIME CONSUMING LITIGATION TO
ENFORCE OUR PROPRIETARY RIGHTS
Despite our efforts to protect our proprietary rights, third parties
may attempt to copy aspects of our products and services or to obtain and use
information that we regard as proprietary. Policing unauthorized use of our
products and services is difficult, particularly in the global environment in
which we operate, and the laws of other countries may afford us little or no
effective protection of our intellectual property. We cannot assure you that
the steps that we have taken will prevent others from misappropriating our
technology or that these agreements will be enforceable.
We may engage in litigation related to our intellectual property for a
number of reasons, including to:
- Enforce our intellectual property rights,
- Protect our trade secrets,
- Determine the validity and scope of the proprietary rights of
others, or
- Defend against claims of infringement or invalidity.
This litigation, whether successful or unsuccessful, could result in
substantial costs and diversions of resources, either of which could have a
material adverse effect on our business, financial condition or operating
results.
OUR PRODUCTS AND SERVICES MAY INFRINGE CLAIMS OF THIRD-PARTY PATENTS, WHICH
COULD CAUSE US TO SPEND MONEY ON LITIGATION AND LICENSE FEES
We are 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 us. In fact, we have
already received notices of claims of infringement of other parties'
proprietary rights. We cannot assure you that our products and services are not
within the scope of patents held by others, either now or in the future. If any
claims are asserted, we may seek to obtain a license under a third party's
intellectual property rights. There can be no assurance that a license would be
available on reasonable terms or at all. We may also decide to defend
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against a claim of infringement, but litigation, even if successful, is costly
and may have a material adverse effect on us regardless of the eventual
outcome.
WE ARE VULNERABLE BECAUSE WE DO NOT OWN ALL OF THE TECHNOLOGY THAT WE NEED FOR
OUR PRODUCTS
We also rely on technology which we license from third parties,
including software which is integrated with internally developed software and
used in our software to perform key functions. We cannot assure you that third
party technology licenses will continue to be available to us on commercially
reasonable terms or at all. If we lose or cannot maintain any of these
technology licenses we might have to delay our introduction of our services,
which could have a material adverse effect on our business, financial condition
or operating results.
WE ARE SUBJECT TO EXTENSIVE GOVERNMENT REGULATION AND CHANGES IN THESE
REGULATIONS MAY MAKE OUR BUSINESS MORE EXPENSIVE TO OPERATE AND DECREASE OUR
POTENTIAL FOR PROFITABILITY
Our operations are subject to various state and federal regulations.
Because electronic commerce in general, and most of our products and services
in particular, are so new, the application of many of these regulations is
uncertain and difficult to interpret. The agencies responsible for interpreting
and enforcing 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 burdens. Any changes could
lead to increased operating costs and could also reduce the convenience and
functionality of our products or services, possibly resulting in reduced market
acceptance. It is possible that new laws and regulations may be enacted with
respect to the Internet, covering issues like user privacy, pricing, content,
characteristics and quality of products and services. The adoption of any of
these laws or regulations may decrease the growth of the Internet, which could
in turn decrease the demand for our products or services and increase our cost
of doing business or could otherwise have a material adverse effect on our
business, financial condition or operating results.
WE MAY BE UNABLE TO OBTAIN ADDITIONAL CAPITAL NEEDED TO OPERATE AND GROW OUR
BUSINESS
We believe that our available cash resources combined with funds from
operations will be sufficient to meet our working capital and capital
expenditure requirements until our cash flow from operations turns positive. If
this belief should prove mistaken, we may be required to raise additional
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funds. Alternatively, we may decide to raise additional funds in order to
expand operations, finance acquisitions or to finance other activities we
decide may be beneficial to our business. If we raise additional funds through
the issuance of equity securities, the percentage ownership of the stockholders
of record will be reduced, and stockholders may experience additional dilution.
It is also possible that new equity securities may have rights, preferences or
privileges senior to those of the holders of our common stock. Moreover, we
cannot assure you that additional financing will be available if we should need
it. If adequate funds are not available or are not available on acceptable
terms, we may be unable to develop or enhance our products and services, take
advantage of future opportunities or respond to competitive pressures, which
could have a material adverse effect on our business, financial condition or
operating results.
WE HAVE EXTENSIVE INTERNATIONAL OPERATIONS AND CHANGES IN THESE MARKETS MAY
UNDERMINE OUR BUSINESS TRADE
A component of our strategy is to expand our operations into
international markets. We have created joint ventures in Japan and Germany and
have arranged with Barclays Bank for the delivery of our services in the United
Kingdom. The majority of our revenues in 1997 were derived from licensing fees
and customization work charged to these joint ventures and foreign strategic
allies. We anticipate that revenues derived from customization work and initial
licensing fees from these international operations will continue to decline
over time. We also have subsidiaries in the United Kingdom and Germany to
customize and market our products in Europe. The deployment of our products and
services through our joint ventures, alliances and subsidiaries in Japan and
Europe is at an early stage, and revenues have so far have been small. We do
not know if our products and services will be commercially successful in these
markets, or will generate significant revenues for our business.
WE MAY BE UNABLE TO SUCCESSFULLY ACQUIRE NEW BUSINESSES NEEDED TO EFFECTIVELY
COMPETE, OR TO MAKE THESE BUSINESSES PERFORM ONCE ACQUIRED
As our business evolves, we may acquire complementary products,
technologies, and businesses. Any significant acquisition would entail a risk
that we would not be successful in integrating and operating the acquired
business, product or technology. A failure to do so could have a material
adverse effect on us.
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OUR STOCK PRICE IS VOLATILE WHICH MAY INCREASE THE LIKELIHOOD THAT WE WILL BE
SUED IN A SECURITIES CLASS ACTION LAWSUIT
The price of our common stock has been and likely will continue to be
subject to wide fluctuations in response to a number of events and factors,
including:
- quarterly variations in operating results,
- variances of our quarterly results of operations from securities
analyst estimates,
- announcements of technological innovations, new products,
acquisitions, capital commitments or strategic alliances by
CyberCash or our competitors,
- changes in financial estimates and recommendations by securities
analysts,
- the operating and stock price performance of other companies that
investors may deem comparable to us, and
- news reports relating to trends in our markets.
In addition, the stock market in general, and the market prices for
Internet-related companies in particular, have experienced significant price
and volume fluctuations that often have been unrelated to the operating
performance of the companies affected by these fluctuations. These broad
market fluctuations may adversely affect the market price of our common stock,
regardless of our operating performance. Securities class action litigation has
often been instituted against companies that have experienced periods of
volatility in the market price for their securities. If we were to become the
target of this kind of litigation, the cost in dollars and management
attention could be substantial, and the diversion of management's attention and
resources could have a material adverse affect on our business.
EFFECTING A CHANGE OF CONTROL OF CYBERCASH WOULD BE DIFFICULT, WHICH MAY
DISCOURAGE OFFERS FOR SHARES OF OUR COMMON STOCK
Our 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 rights of the
holders of our 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
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future. We also have a stockholders rights plan. It provides for the issuance
of rights if an acquiror purchases 15 percent or more of our common stock
without the approval of our board of directors. The rights plan may have the
effect of delaying, deterring, or preventing changes in control or management
of CyberCash, which may discourage potential acquirors who otherwise might wish
to acquire CyberCash without the consent of the board of directors.
Our certificate of incorporation provides for staggered terms for the
members of the board of directors. Our bylaws do not allow stockholders to act
by written consent. Our certificate of incorporation allows us to issue "blank
check" preferred stock. These provisions as well as applicable provisions of
Delaware law could have a depressive effect on our 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, or
delay, prevent or deter a merger, acquisition, tender offer or proxy contest
for us.
THE COMMON STOCK SOLD IN THIS OFFERING MAY INCREASE THE AMOUNT OF OUR COMMON
STOCK ON THE PUBLIC MARKET, CAUSING OUR STOCK PRICE TO DECLINE
As of March 23, 1999, there were no issued or outstanding shares of
preferred stock. As of March 23, 1999, we had granted warrants, investment
options and stock options to acquire an aggregate of 6,749,933 shares of our
common stock. In addition, we entered into a firm commitment to issue 304,878
shares and warrants to acquire 228,659 shares of our common stock for $5
million. We granted these securities and entered into these commitments in
connection with acquiring technologies, raising capital in private placement
transactions, entering into strategic alliances and providing incentives to
employees, consultants and non-employee directors under our stock option plans.
The issuance of preferred stock, or sales in the public market of substantial
amounts of shares acquired upon exercise of the warrants and options, or the
prospect of sales of substantial amounts of shares, could adversely affect the
market price of our common stock.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. Our SEC filings are available to the public
over the Internet at the SEC's web site at http://www.sec.gov. You may also
read and copy any document we file at the SEC's public reference rooms in
Washington, D.C., New York, New York and Chicago, Illinois. Please call the
SEC at 1-800-732-0330 for further information on the public reference rooms.
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<PAGE> 19
The SEC allows us to "incorporate by reference" the information we
file with them, which means that we can disclose important information to you
by referring you to these documents. The information incorporated by reference
is an important part of this prospectus, and information that we file later
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings made
with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange
Act of 1934 until the Selling Stockholders sell all of their common stock:
- Annual Report on Form 10-K for the year ended December 31, 1998;
and
- The description of the Company's common stock contained in Form
8-A.
To obtain a copy of these filings at no cost, you may write or
telephone us at the following address:
Corporate Secretary
CyberCash, Inc.
2100 Reston Parkway
Third Floor
Reston, Virginia 20191
(703) 620-4200
This prospectus contains forward-looking statements relating to future
events or our future financial performance. These statements are only
predictions and actual events or results may be materially different from our
predictions. In evaluating these statements, you should consider the various
factors identified in this prospectus, including but not limited to the matters
set forth under the heading "Risk Factors," which could cause actual results to
differ materially from those indicated by such forward-looking statements.
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. Neither we nor the
Selling Stockholders have authorized anyone else to provide you with different
information. Neither we nor the Selling Stockholders are making an offer of
these securities in any state where the offer is not permitted. You should not
assume that the information in this prospectus is accurate as of any date other
than the date on the front of the prospectus.
The CyberCash logo, ICVERIFY, PCVERIFY, NetVERIFY, CyberCoin and
PayNow Secure Electronic Check Service are registered trademarks or service
marks of CyberCash or its affiliates in the United States and other
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<PAGE> 20
countries. CyberCash, PayNow, InstaBuy and Agile Wallet are trademarks of
CyberCash in the United States and other countries. This prospectus also
includes names, trademarks, service marks and registered trademarks and service
marks of other companies.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the common stock by
the selling stockholders. Upon exercise of warrants held by RGC International
Investors and Halifax Fund, L.P., we may receive additional proceeds which will
be used for general corporate purposes.
SELLING STOCKHOLDERS
This prospectus relates to the offering by the selling stockholders
named in this prospectus for resale of up to 2,301,586 shares of common stock.
After giving effect to the offering and the sale of shares we have primarily
registered for these selling shareholders, the selling stockholders will
beneficially own no shares of CyberCash common stock. The selling stockholders
have acquired common stock in a private placement and may acquire additional
shares of common stock upon
- the exercise of warrants issued in the private placement and
- upon satisfaction of conditions which are outside of the control
of these selling stockholders, including the effectiveness of this
registration statement.
We will supplement this prospectus from time to time to reflect the
number of shares of common stock acquired by the selling stockholders, as those
selling stockholders exercise their warrants or acquire additional securities
subject to resale under this prospectus. The following table sets forth
important information with respect to the selling stockholders as of March 23,
1999, as follows:
- the name and position or other relationship with CyberCash within
the past three years of the selling stockholders;
- the number of CyberCash's outstanding shares of common stock
beneficially owned by the selling stockholders (including shares
obtainable under warrants exercisable within sixty (60) days of
March 23, 1999) prior to this offering;
- the number of shares of common stock being offered through this
prospectus; and
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<PAGE> 21
- the number and percentage of CyberCash's outstanding shares of
common stock to be beneficially owned by the selling stockholders
after the sale of common stock being offered through this
prospectus.
The selling stockholders do not have to sell all of the shares that
they own.
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SHARES
BENEFICIALLY OWNED NUMBER OF SHARES BENEFICIALLY OWNED
SELLING STOCKHOLDERS PRIOR TO THE OFFERING OFFERED HEREBY AFTER OFFERING
- -------------------- --------------------- ---------------------- ----------------------
<S> <C> <C> <C>
RGC International
Investors, LDC (1) 1,489,021(2)(3)(5) 1,016,767(4)(5) 0
Halifax Fund, L.P. 1,585,152(2)(6)(5) 507,623(7)(5) 0
Donino, White & Partners, 15,000 15,000 0
Inc.
</TABLE>
(1) RGC is a party to an investment management agreement with Rose Glen
Capital Management, L.P., a limited partnership of which the general
partner is RGC General Partner Corp. Messrs. Wayne Bloch, Gary
Kaminsky and Steven Katznelson own all of the outstanding capital
stock of RGC General Partner Corp. and are parties to a shareholders
agreement pursuant to which they collectively control RGC General
Partner Corp. Through RGC General Partner Corp., these individuals
control Rose Glen Capital Management, L.P. These individuals disclaim
beneficial ownership of CyberCash's common stock owned by RGC.
(2) The number of shares of common stock beneficially owned by the
referenced selling stockholders is based on an exercise price of
$20.00. Pursuant to the terms of the warrants, the exercise price may
be reset on January 6, 2000, January 6, 2001 and January 6, 2002, if
the average closing bid price of CyberCash's common stock over the 10
trading days preceding any of these dates is less than $20.00. In any
of these circumstances, the exercise price would be reset to equal the
average closing bid price of CyberCash's common stock over the 10
trading days preceding the applicable reset date. Beginning January 6,
2002, the exercise price also could be reduced if CyberCash issues
securities below the market price of CyberCash's common stock. If an
adjustment of the exercise price occurs, the number of shares of
common stock issuable upon exercise of the warrants would
proportionately increase.
(3) Includes 1,183,991 shares referenced in a form 13G filed January 14,
1999 by RGC International Investors, LDC, of which 472,254 common
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<PAGE> 22
stock shares underlie investment options that will not be offered by
this prospectus. The form 13G also includes 406,707 shares of
outstanding common stock and 305,030 shares of common stock underlying
warrants, which are being offered by this prospectus. In addition, the
number includes an estimated additional 305,030 shares of common stock
underlying warrants. See footnote 5.
(4) Consists of 406,707 shares of outstanding common stock and an
estimated 610,060 shares of common stock underlying warrants issued to
RGC.
(5) The actual number of shares of common stock issuable upon exercise of
the warrants is indeterminate, is subject to adjustment and could be
materially less or more than the estimated number depending on factors
which we cannot predict at this time, including, among other factors,
the future market price of the common stock. We have registered two
times the number of shares which are currently issuable upon exercise
of the warrants. This number is our good faith estimate of the
maximum number of shares we may issue upon exercise of the warrants.
The warrants contain provisions which limit the number of shares of
common stock into which the warrants are exercisable. Under these
provisions, the number of shares of common stock into which the
warrants are exercisable on any given date (together with any additional
shares of common stock held by this selling stockholder) will not
exceed 9.9% of CyberCash's then outstanding common stock.
(6) Includes 1,432,865 shares referenced in a form 13G filed February 10,
1999 by Halifax Fund LP, of which 1,077,529 common stock shares or
common stock shares underlying investment options will not be offered
by this prospectus. The form 13G also includes 203,049 shares of
outstanding common stock and 152,287 shares underlying warrants, which
are being offered by this prospectus. In addition, the number includes
an estimated additional 152,287 shares of common stock underlying
warrants. See footnote 5.
(7) Consists of 203,049 shares of outstanding common stock and an
estimated 304,574 shares of common stock underlying warrants issued to
Halifax.
PLAN OF DISTRIBUTION
The common stock being offered by the selling stockholders, or by
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 another market on which the
common stock
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<PAGE> 23
may from time to time be trading, in privately-negotiated transactions, through
the writing of options on the common stock, 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 the prevailing market price or at any other
price as the selling stockholders determine from time to time. The common stock
may also be sold pursuant to Rule 144. The selling stockholders shall have the
sole and absolute discretion not to accept any purchase offer or make any sale
of common stock if they deem the purchase price to be unsatisfactory at any
particular time.
The selling stockholders may also sell the common stock 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 common
stock will do so for their own account and at their own risk. It is possible
that the selling stockholders 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. In addition, the selling stockholders
or their successors in interest may enter into hedging transactions with
broker-dealers who may engage in short sales of common stock in the course of
hedging the positions they assume with a selling stockholder. There can be no
assurance that all or any of the common stock 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 common stock 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 common stock will be subject to applicable
provisions of the Exchange Act and the rules and regulations thereunder. These
rules may limit the timing of purchases and sales of any of the common stock by
the selling stockholders or any other person participating in the distribution.
Furthermore, under Regulation M, persons engaged in a distribution of
securities are prohibited from simultaneously engaging in market making and
other market activities with respect to the common stock for a specified period
of time before the distribution begins. These restrictions may reduce the
marketability of the common stock.
CyberCash has agreed to indemnify RGC International Investors, LDC and
Halifax Fund, L.P., or their respective transferees or assignees, against
potentially significant liabilities, including liabilities under the Securities
Act, or to contribute to payments these selling stockholders or their
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<PAGE> 24
respective pledgees, donees, transferees or other successors in interest, may
be required to make.
DESCRIPTION OF CAPITAL STOCK
CyberCash's authorized capital stock consists of 40,000,000 shares of
common stock, $.001 par value, and 5,000,000 shares of preferred stock, $.001
par value.
COMMON STOCK
As of March 19, 1999, there were 19,781,291 shares of common stock
outstanding and held of record by 367 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 in proportion to the number of
shares that they own, any dividends declared by the board of directors. In the
event of a liquidation, dissolution or winding up of CyberCash, 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.
WARRANTS
CyberCash issued warrants in a private placement which took place on
January 6, 1999. The warrants are initially exercisable for 457,317 shares of
common stock. The warrants will expire on January 6, 2004. The exercise price
for each warrant is initially set at $20.00. The exercise price may be reset
on January 6, 2000, January 6, 2001 and January 6, 2002, if the average closing
bid price of CyberCash's common stock over the 10 trading days preceding any of
these dates is less than $20.00. In any of these circumstances, the exercise
price would be reset to equal the average closing bid price of CyberCash's
common stock over the 10 trading days preceding the applicable reset date.
Beginning January 6, 2002, the exercise price also could be reduced if
CyberCash issues securities below the market price of CyberCash's common stock.
If an adjustment of the exercise price occurs, the number of shares of common
stock issuable upon exercise of the warrants would proportionately increase.
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<PAGE> 25
Under the warrants, a holder can elect to pay the exercise price in
immediately available funds, through the cancellation of a portion of the
warrants or through the delivery of shares of common stock. If the holder
elects to pay the exercise price through the delivery of common stock, the
common stock will be valued at $16.40.
Upon the effectiveness of this registration statement, CyberCash is
obligated to issue 304,878 additional shares of common stock and additional
warrants to RGC and Halifax, initially exercisable for 228,659 shares of common
stock for $5 million, on the same terms and conditions as the warrants
described above.
CARNEGIE MELLON UNIVERSITY WARRANT
On March 21, 1997, CyberCash entered into a technology licensing
agreement with Carnegie Mellon University in connection with its acquisition of
CMU's exclusive worldwide rights to its NetBill technology for use in
network-based electronic commerce. The consideration included warrants to
purchase 50,000 shares of CyberCash's common stock at an exercise price of
$16.45 per share. The warrants are divided into 25,000 Class A Warrants and
25,000 Class B Warrants. Each class will become exercisable in five equal
annual installments of 5,000 warrant shares, commencing on the first
anniversary of the license. CyberCash registered the shares underlying these
warrants for resale. As of February 4, 1999, Carnegie Mellon had not exercised
any of its Class A or Class B Warrants.
INVESTMENT OPTIONS
On February 5 and July 14, 1998, CyberCash issued investment options
to purchase up to 708,382 shares of its common stock to purchasers of its
Series D Convertible Preferred Stock. These investment options are exercisable
between January 1, 1999 and February 5, 2003. The exercise price of the
investment options is equal to the lesser of
- the average of $10.59 and the market
price of CyberCash's common stock at the
end of 1998, and
- of the stock market price at the end of
1998.
CyberCash registered the shares underlying these investment options
for resale. As of March 23, 1999, the holders had not exercised any of these
investment options.
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<PAGE> 26
FIRST USA WARRANTS
On November 6, 1998, CyberCash entered into an agreement with First
USA Bank to market the InstaBuy service. In connection with that agreement, we
issued three warrants for First USA to purchase an aggregate of 2,200,000
shares. Under the first warrant, First USA may acquire 600,000 shares of common
stock from January 1, 1999 through June 30, 1999 at a per share price of
$12.50. From July 1, 1999 through December 31, 1999, these same shares may be
acquired at a per share price of $17.00. From January 1, 2000 through September
30, 2003, these same shares may be acquired at a per share price of $32.00.
Under the second warrant, 600,000 shares of common stock may be acquired from
January 1, 1999 through December 31, 1999 at a per share price of $17.00. From
January 1, 2000 through September 30, 2003, these same shares may be acquired
at a per share price of $32.00. Under the third warrant, 1,000,000 shares of
common stock may be acquired from January 1, 1999 through September 30, 2003 at
a per share price of $32.00. As of February 4, 1999, the holders had not
exercised any of these Warrants.
PREFERRED STOCK
As of March 23, 1999, there were no shares of preferred stock issued
and outstanding.
CyberCash's 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 that 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 holders will receive dividend
payments and payments upon liquidation and could have the effect of delaying,
deterring or preventing a change in control of CyberCash.
DELAWARE LAW AND ANTI-TAKEOVER CHARTER PROVISIONS
STOCKHOLDER RIGHTS PLAN
CyberCash has adopted a rights agreement, which provides for the
issuance of a right to the holder of each share of CyberCash common stock. Upon
any person or group acquiring 15% or more of the outstanding CyberCash common
stock (a "CyberCash Acquiring Person"), each right will entitle the holder to
purchase shares of CyberCash common stock or securities of CyberCash that are
equivalent to common stock or cash or other
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<PAGE> 27
property, having a current market value of two times the exercise price of
$100. A CyberCash Acquiring Person would not be entitled to exercise rights.
In addition, if CyberCash is acquired in a merger or other business combination
or 50% or more of its assets or earning power is sold, each right will entitle
the holder to purchase, at the exercise price, common stock of the acquiror
having a current market value of two times the exercise price. Prior to there
being a CyberCash Acquiring Person, CyberCash can redeem the rights in whole,
but not in part, for $0.001 per right, or may amend the rights agreement in any
way without the consent of the holders of the rights.
The rights may have anti-takeover effects. The rights will cause
substantial dilution to a person or group that attempts to acquire CyberCash
without conditioning the offer on a substantial number of rights being
acquired, or in a manner or on terms not approved by the board of directors.
The rights, however, should not deter any prospective offeror that is willing
to negotiate in good faith with the board of directors. The rights also should
not interfere with any merger or other business combination approved by the
board of directors.
DELAWARE LAW
CyberCash 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 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.
CyberCash's certificate of incorporation provides that any action
required or permitted to be taken by CyberCash's stockholders must be effected
at a duly called annual or special meeting of stockholders and may not be
effected by any consent in writing. CyberCash'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, CyberCash'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
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<PAGE> 28
preventing a change in control of CyberCash or depressing the market price of
common stock or discouraging hostile bids in which CyberCash's stockholders
could receive a premium for their shares of common stock.
TRANSFER AGENT AND REGISTRAR
BankBoston N.A. is the transfer agent and registrar for CyberCash's
common stock.
EXPERTS
Ernst & Young LLP, independent auditors, have audited the consolidated
financial statements of: (i) CyberCash, Inc. included in our Annual Report on
Form 10-K for the year ended December 31, 1997; (ii) and ICVerify, Inc.
included in our Current Report on Form 8-K/A dated May 27, 1998 for the year
ended December 31, 1997, as set forth in their reports, which are incorporated
in this prospectus by reference. These consolidated financial statements are
incorporated by reference in reliance on their reports, given on their
authority as experts in accounting and auditing.
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================================================================================
NEITHER WE NOR THE SELLING SHAREHOLDERS HAVE
AUTHORIZED ANY DEALER, SALESPERSON OR OTHER
PERSON TO GIVE ANY INFORMATION OR REPRESENT
ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU
MUST NOT RELY ON ANY UNAUTHORIZED INFORMATION.
THIS PROSPECTUS DOES NOT OFFER TO SELL OR BUY ANY
SHARES IN ANY JURISDICTION WHERE IT IS UNLAWFUL.
THE INFORMATION IN THIS PROSPECTUS IS CURRENT AS 2,301,586
OF MARCH 31, 1999.
-------------
Prospectus
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TABLE OF CONTENTS
Page
----
Where You Can Find More
Information . . . . . . . . . . . . . . 2
Risk Factors . . . . . . . . . . . . . . . 3
The Company . . . . . . . . . . . . . . . . 10
Use of Proceeds . . . . . . . . . . . . . . 11
Selling Stockholders . . . . . . . . . . . 11
Plan of Distribution . . . . . . . . . . . 12
Description of Capital Stock . . . . . . . 13
Legal Matters . . . . . . . . . . . . . . . 16 March 31, 1999
Experts . . . . . . . . . . . . . . . . . . 16
================================================================================
