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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
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- 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.
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
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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.
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
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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 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:
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- 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 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
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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. 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
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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.
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.
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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 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.
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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.
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
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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
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
Marvin Sirbu 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>
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(1) The number of shares set forth in the table represents an estimate of the
number of shares of common stock to be offered by the selling stockholder.
The actual number of shares of common stock issuable 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.
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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 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
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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 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 15, 1999.
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