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FILED UNDER RULE 424(c) OF REGULATION C
SEC FILE NUMBER: 333-46965
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED APRIL 8, 1998)
CYBERCASH, INC.
COMMON STOCK, PAR VALUE $.001 PER SHARE
The information contained in this Prospectus Supplement under
the captions "Risk Factors", "Selling Stockholders" and "Description of Capital
Stock" supplements the statements set forth under the captions "Risk Factors",
"Selling Stockholders" and "Description of Capital Stock", respectively, in the
Prospectus.
RISK FACTORS
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.
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If we do not succeed in addressing these risks, our business likely
will be materially and adversely affected.
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 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.
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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.
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.
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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 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
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- 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 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"
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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. 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 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.
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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 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
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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
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
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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.
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.
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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
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.
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SELLING STOCKHOLDERS
On March 24, 1999, Carnegie Mellon University assigned an aggregate of
72,000 shares of the CyberCash common stock and warrants to purchase up to
30,000 shares of common stock to Visa International Service Association, Justin
Douglas Tygar, Thomas Wagner and Benjamin Cox. The following table supplements
the information contained in the table under the caption "Selling Stockholders"
in the Prospectus by adding important information with respect to the reduced
number of shares being offered by CMU under the Prospectus and the persons to
whom CMU assigned its rights in these securities. In particular, the following
table lists, for CMU and each of these new selling stockholders, as of April 8,
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 8, 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.
<TABLE>
<CAPTION>
Shares Shares
Owned Shares Owned
Selling Before to be After
Stockholders (1) Offering Offered Offering
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Carnegie Mellon University 68,000 68,000 0
Visa International Service Association 34,000 34,000 0
Justin Douglas Tygar 13,600 13,600 0
Thomas Wagner 10,200 10,200 0
Benjamin Cox 10,200 10,200 0
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The number of shares set forth in the table represents an estimate of the
number of shares of common stock to be offered by the selling stockholder.
The actual number of shares of
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common stock issuable could increase if the exercise price were to
decrease, for example, 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.
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 and March 31, 1999. The warrants are initially exercisable for
685,976 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.
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.
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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. On March 24, 1999, Carnegie Mellon
University assigned 30,000 Warrants to Visa International Service Association,
Justin Douglas Tygar, Thomas Wagner and Benjamin Cox.
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.
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.
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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 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
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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
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.
The date of this Prospectus Supplement is April 8, 1999.
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