As filed with the Securities and Exchange Commission on February 12, 1999
Registration No. 333-68781
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
----------
Amendment No.1
Form S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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DIGITAL COURIER TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Commission file number: 0-20771
Delaware 87-0461856
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
136 Heber Avenue, Suite 204
Park City, Utah 84060
(435) 655-3617
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
MITCHELL EDWARDS
Executive Vice President
DIGITAL COURIER TECHNOLOGIES, INC.
P.O. Box 8000
136 Heber Avenue, Suite 204
Park City, Utah 84060
(435) 655-3617
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
copies to:
WILLIAM C. GIBBS
SNELL & WILMER
111 East Broadway, Suite 900
Salt Lake City, Utah 84111
(801) 237-1900
--------------------
Approximate date of commencement of proposed sale to public: From time
to time after this Registration Statement becomes effective.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. |_|
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in
connection with dividend or interest reinvestment plans, check the
following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number
of the earlier effective registration statement for the same offering.
|_|
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
======================= ==================== ===================== ===================== =====================
Title of each Proposed Proposed
class of Amount Maximum maximum Amount of
securities to be to be offering price aggregate Registration
registered (1) registered(2) per unit(3) offering price(3) Fee
------------ ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Common Stock 2,174,338 $6.66 $14,481,091 $6,319
======================= ==================== ===================== ===================== =====================
</TABLE>
(1) This registration statement ("Registration Statement") covers the
resale by certain selling security holders ("Selling Stockholders") of
up to an aggregate of 2,174,338 shares of Common Stock, $.0001 par
value, of Digital Courier Technologies, Inc. (the "Company"), 1,174,338
shares of which were previously acquired by such Selling Stockholders,
and 1,000,000 shares of which may be acquired by such Selling
Stockholders upon the exercise of presently outstanding warrants.
(2) In the event of a stock split, stock dividend, or similar transaction
involving the Registrant's Common Stock, in order to prevent dilution,
the number of shares registered shall automatically be increased to
cover the additional shares in accordance with Rule 416(a) under the
Securities Act.
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933, based on the
average of the high and low prices of the Registrant's Common Stock on
December 4, 1998, as reported by Nasdaq National Market.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to Section 8(a), may determine.
<PAGE>
PROSPECTUS
136 Heber Avenue, Suite 204
P.O. Box 8000
Park City, Utah 84060
Telephone (435) 655-3617
DIGITAL COURIER TECHNOLOGIES, INC.
2,174,338 SHARES OF COMMON STOCK
With this prospectus, the selling stockholders identified in this
prospectus are offering 2,174,338 shares of our common stock.
Before purchasing any of the shares, you should
consider very carefully the information
presented under the caption "Risk Factors"
beginning on page 3 of this prospectus.
Our common stock is traded on the Nasdaq National Market under the
symbol "DCTI."
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
The Date of this Prospectus is February 12, 1999
<PAGE>
THE COMPANY
We develop and market proprietary electronic commerce and publishing
software for Internet businesses and online information services. We are also
developing electronic commerce and publishing software for consumer products
such as cellular phones and personal digital assistants connected to the
Internet. The electronic commerce software enables businesses to buy and sell
goods safely and reliably using the Internet. It is combined with a payment
processing system that provides consumers and businesses with the capability to
accept credit card payments on the Internet. The publishing software efficiently
delivers electronic information, such as weather conditions and forecasts, to a
wide range of computing devices including personal and business computers,
cellular phones, and pagers.
We operate through four online business divisions:
o netClearing(TM)
o WeatherLabs(TM)
o Books Now(TM)
o Videos Now(TM)
Each division integrates the proprietary software technology to provide
customized applications and business transaction services via the Internet.
These product and service offerings are currently licensed by global Internet
companies such as Excite, Netscape, @Home, and America Online.
netClearing. The netClearing division integrates all of our electronic
commerce software into a comprehensive payment processing service for businesses
and consumers that sell goods and services on the Internet. The netClearing
service is designed to process credit card transactions for over 1,000
businesses and consumers simultaneously. It also ensures that the transactions
occur quickly, securely, and reliably. The service is centrally located at our
technology facility in Salt Lake City, Utah so that transaction processing for
every customer can be controlled and monitored efficiently. netClearing will
generate revenue by charging a processing fee for each transaction conducted and
by charging a fee for additional services such as reporting and reconciliation.
Because the system is largely automated, the cost to process 100 transactions or
10,000 transactions is almost the same. This represents a significant
opportunity for profitability as the number of transactions increase and the
cost of processing is held constant.
WeatherLabs. The WeatherLabs division supplies proprietary real-time
weather forecasts and other weather-related reports to online businesses
throughout the world, and operates its own web site www.weatherlabs.com for
consumers and business customers. WeatherLabs also licenses completely developed
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web pages that provide weather information on customers' web sites. These web
pages can be easily integrated into a customer's web site and even branded with
the customer's logo to increase its brand value. The weather products and
services are also licensed to our customers on a fixed price and/or
revenue-sharing basis. The revenue-sharing pricing model allows WeatherLabs to
collect a percentage of the revenue that the customer generates through the use
of its weather-related products and services. This approach enables customers
and partners to integrate our technology into their own to build additional
value for their online businesses.
Videos Now and Books Now. Videos Now and Books Now utilize our software
to operate web sites that sell books and videos to consumers and businesses.
Videos Now operates the web site www.videosnow.com, which sells VHS, DVD, and
LaserDisc videos ranging from newly released theatrical and Hollywood titles,
such as "Titanic," to special interest videos on topics such as home improvement
or Italian cooking. Videos Now offers over 100,000 video titles through its
relationships with various distributors that supply and manage the inventory.
Videos Now has created a communication network that links the distributors to
the Videos Now web site using the Internet, enabling the customer to see exactly
what products are available for purchase at any given time. Using the same
business and technology infrastructure, Books Now operates the web site
www.booksnow.com, which offers over 1 million paperback and hardcover books for
purchase on the Internet. These divisions generate revenue through sales of
books and videos, and by licensing the software to other companies seeking to
sell books and videos on the Internet. The divisions receive a licensing fee for
the software along with a share of the revenue from the sale of each product
sold through the affiliated web site. The two web sites are linked together
allowing customers to more easily purchase books and videos. This cross
promotion is intended to help increase the awareness and popularity of these web
sites, and ultimately increase sales.
Corporate History. We were incorporated in Delaware in 1985. We began
as a national direct marketing company under the name DataMark Holding, Inc.,
and began incorporating online business strategies five years ago. We recruited
an experienced management and technical team to design and implement a high-end
Internet services business model. In addition to engineering and constructing a
state-of-the-art computer and data facility in Salt Lake City, we acquired an
Internet access business and entered into strategic alliances with companies in
the electronic mail business. We formed a division to create a network of
interconnected web sites to be promoted by local television stations. We sold
our direct marketing and internet access businesses, as well as certain assets
related to our television web site hosting activities during fiscal 1998. In
September 1998, we acquired Digital Courier International, Inc., a private
Internet software development company and changed our name to Digital Courier
Technologies, Inc.
RISK FACTORS
Before purchasing the shares, you should carefully consider the risk
factors described below. If any of the following risks actually occurs, it could
materially adversely affect our business, financial condition, and results of
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operations. The risks and uncertainties described below are not the only ones we
are facing. While the risks described below are all the material risks of which
we are currently aware, we may have other risks and uncertainties of which we
are not yet aware or which we currently believe are immaterial that may also
impair our business operations.
Additional Cash from Outside Sources is Essential to Continued Operations
We have recently completed a private placement of common stock and
warrants which provided us with $3.6 million in cash. The investors committed to
purchase an additional $5.6 million of our equity securities if certain
conditions are met. The most important of these conditions are that the closing
bid price of our stock is above $7 for fifteen consecutive days and that this
registration statement is effective. In addition, the exercise of the warrants
would bring us an additional $13.6 million in cash. We will be able to force the
exercise of the warrants if our stock trades at twice the warrant exercise price
for fifteen consecutive days. If our stock trades at $11.06 per share for the
period, we would generate $2.2 million in cash; the remainder would be available
if our stock trades at $18.98 per share. If we receive the full amount
committed, we anticipate that we will have sufficient cash to operate during the
next twelve months. If we do not receive the full amount committed, we project
that we may not have sufficient cash flows from operating activities during the
next twelve months to provide the necessary capital to fully implement our
marketing strategy or to sustain operations at current levels.
We are attempting to obtain additional debt or equity funding, and we are
negotiating with several funds and investment banks in this regard. If we are
unable to obtain additional cash from outside sources, we may be required to
revise our plans and reduce future expenditures.
We Have Incurred Substantial Losses
We incurred a loss of $6,264,265 from continuing operations during the
year ended June 30, 1998 and a loss of $15,370,438 during the six months ended
December 31, 1998. Our operating activities used $6,377,970 of cash during the
during the year ended June 30, 1998 and $4,972,485 during the six months ended
December 31, 1998. We also had a tangible working capital deficit of $272,968 at
June 30, 1998 and a tangible working capital deficit of $118,980 at December 31,
1998. We expect that we will require additional funding, the amount of which is
not known, before our continuing operations will achieve and sustain
profitability, if at all.
Only One Year of Internet Based Revenues
We began generating Internet-based revenues from our existing
businesses in January 1998, when we acquired Books Now, Inc. At that time, Books
Now was generating revenues of approximately $50,000 per month, with about 10%
of that amount being derived from the sale of books through the web site
Booksnow.com. We acquired WeatherLabs, Inc. in May 1998, which had been
generating a small amount of revenue from its Internet-only weather service
since the beginning of 1998. We therefore have a limited history of generating
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revenue on the Internet. Prior to 1998, most of our revenues came from
non-Internet businesses. This relatively brief experience with Internet revenues
is a risk that you should consider.
Unpredictability of Future Revenues
Due to our limited operating history and the uncertain nature of the
Internet industry, we are unable to predict future results of operations. Our
prospects are subject to the risks, expenses and uncertainties frequently
encountered by companies in the new and rapidly evolving market for Internet
products and services, including e-commerce and web-based advertising. These
risks include, without limitation:
o web consumers' and/or advertisers' rejection of our services;
o our inability to maintain and increase the levels of traffic and
purchasers on our web sites;
o competitors' development of equal or superior services or products;
o the market's failure to use the web to advertise;
o our internal sales force's failure to successfully sell web-based
products and services;
o consumers' failures to purchase goods from our web sites;
o our inability to effectively integrate the technology and
operations of any acquired businesses or technologies with our
operations; and
o our inability to identify, attract, retain and motivate qualified
personnel.
We may not be successful in addressing these risks.
Significant Future Losses Are Anticipated
We have incurred operating losses from continuing operations in each
fiscal quarter since we were formed. We expect operating losses and negative
cash flows to continue for the foreseeable future as we grow our business. As of
December 31, 1998, we had an accumulated deficit of $30,050,511. We incurred a
net loss of $1,790,934 for the year ended June 30, 1998 and a net loss of
$9,340,816 for the year ended June 30, 1997. We also incurred a net loss of
$15,370,438 for the six months ended December 31, 1998. We will likely incur
significant losses on a quarterly and annual basis in the future until
advertising, licensing and sales revenue significantly increases.
Fluctuations in Quarterly Operating Results
Our quarterly operating results may fluctuate significantly in the
future as a result of a variety of factors, many of which are outside of our
control. These factors include:
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o Seasonality:
o We have not been in our current businesses long enough to know
whether the quantity of products purchased from our web sites will
vary during different seasons;
o We have not been in our current businesses long enough to know
whether the amount advertisers spend on Internet advertising
varies by season (advertisers historically spend less during our
first and third fiscal quarters);
o Unexpected Expenditures:
o The amount and timing of costs related to marketing efforts or
other initiatives is unpredictable and dependent upon market
conditions and developments;
o The amount we must pay for distribution or content agreements or
other costs we incur as we expand our operations may change as
e-commerce develops;
o Unpredictable Internet Usage:
o The general level of Internet usage varies in unpredictable
amounts;
o The early stage of development of our Internet-based businesses
makes it difficult to predict usage;
o Traffic levels on our weather, videos and books web sites, can
fluctuate significantly;
o The Economics of the Internet Are Evolving:
o Changes in rates paid for advertising on our web sites may result
from competition or other factors;
o The Internet advertising budgets of individual advertisers may
vary;
o The demand for advertising on our web sites may vary due to
competition;
o New services introduced by us or our competitors may alter
Internet usage;
o Conversion rates (the number of visitors to our sites that
actually purchase a product) may fluctuate in unpredictable ways;
o We may from time to time make certain pricing, service or
marketing decisions or enter into business combinations that could
cause our operating results to significantly fluctuate;
o Technology Costs Remain Fixed:
o Our technology costs are largely fixed, while our revenues may
fluctuate;
o Internet connections, the cost of servers and equipment, and
maintenance do not vary as revenues vary;
o Technical difficulties or system downtime may affect the Web
generally or the operation of our web sites.
Many of these factors are outside our control. Due to all of the
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foregoing factors, in future quarters our operating results may fall below
securities analysts' and investors' expectations. In such event, the trading
price of our common stock would likely be materially and adversely affected.
Therefore, we believe that period to period comparisons of our
operating results are not meaningful and that you should not rely on the results
for any period as an indication of our future performance. Although we expect
sales, licensing and advertising revenue on our sites to eventually increase,
there can be no assurance in this regard. Moreover, the market for e-commerce
and the sales of advertisement on the web is an emerging market that is
difficult to forecast accurately.
Going Concern Opinion by our Auditors
In the Report of Independent Public Accountants included in our Annual
Report on Form 10-K, our independent auditors stated that "None of the Company's
continuing operations are generating positive cash flows. These matters raise
substantial doubt about the Company's ability to continue as a going concern."
Although we have since raised capital in a private placement of our common
stock, from a loan, through the exercise of stock options by directors of our
company, and are working on raising additional capital, the matters described by
our auditors nevertheless remain relevant.
Integration of Digital Courier International, Inc.
Uncertainty Relating to Integration. We acquired Digital Courier
International, Inc. ("DCI") in September 1998, and we believe there are risks in
attempting to integrate the operations of these two previously separate
companies. We are putting forth a significant effort to successfully combine the
two companies. Our efforts include coordinating development of new products,
commercializing in-process development, integrating product offerings, and
coordinating sales and marketing efforts and business development efforts. We
have different systems and procedures from DCI in many operational areas and
these systems and procedures must be rationalized and integrated. To be
profitable, we will need to integrate and streamline overlapping functions
successfully. Among the risks we face are:
o We must incur the costs generally associated with this type of
integration including the costs to:
o integrate product lines;
o cross-train the sales force;
o position products in the market;
o We do not yet know what the ultimate cost of integration will be
and how significant the impact will be: the cost may have an
adverse effect on our operating results;
o Our integration of the two companies will require management
resources that may distract attention from normal operations .
Employee uncertainty and lack of focus may also disrupt our
business; and
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o Our failure to quickly and effectively accomplish the integration
could harm us. Uuncertainty in the marketplace or customer concern
regarding the impact of our acquisition of DCI could also have a
material adverse effect on our consolidated business, financial
condition and results of operations.
Inability to Retain Our Employees. Our success depends in part on our
ability to retain and integrate management, technical, marketing, sales and
customer support personnel. There can be no assurance that we will be able to
retain our personnel or that we will be able to attract, hire and retain
replacements for employees that leave. Our failure to attract, hire, retain and
integrate skilled employees could have a material adverse effect on our
business, operating results and financial condition.
Dilutive Effect to Our Stockholders. Our issuance of 4,659,080 shares of
common stock to acquire DCI could reduce the market price of our common stock,
as more shares are outstanding and DCI does not bring a substantial revenue
stream to our business. This dilutive effect can be overcome if unless we can
achieve revenue growth or cost savings sufficient to offset the effect of such
issuance.
Inability to Realize Cost Savings. Although we believe that we will
eventually experience cost savings due to elimination of overlapping functions
and costs from our acquisition of DCI, we are not certain when these cost
savings will be achieved. We have not yet made significant layoffs since the
acquisition, and thus labor costs have not declined . We are not sure that the
combined results of operations and financial condition will be superior to what
would have been achieved by each company independently, although cost savings
was not necessarily a material factor in the decision by our Board of Directors
to acquire DCI.
We Depend on Continued Growth in Use of the Internet
Our success is substantially dependent upon continued growth in the use
of the Internet to support our sale of weather information, books, videos and
advertising on our web sites. Rapid growth in the use of and interest in the
Internet is a recent phenomenon. The Internet may not prove to be a viable
commercial marketplace for a number of reasons, including (1) potentially
inadequate development of the necessary infrastructure, such as a reliable
network backbone, or (2) untimely development and commercialization of
performance improvements, including high speed modems. Some of our weather
information, for example, is best viewed with high speed modems or broadband
internet connections.
Additionally, if use of the Internet does not continue to grow, or if
the Internet infrastructure does not effectively support growth that may occur,
we may not be successful.
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Unproven Business Model for Our Internet-based Products and Services
The markets for Internet-based weather reports and forecasts, for the
sale of books and videos on the Internet, and for Internet-based credit card
clearing, have only recently begun to develop and may prove unprofitable.
WeatherLabs. Although more and more users of the Internet seek
weather-related information at some point during an Internet "session," it is
still unclear whether users will ever be willing to pay for such information.
Until such time as a market develops for the sale of weather-related
information, providers of weather on the Internet, including WeatherLabs, will
have to rely on selling advertising to generate revenue. WeatherLabs is not yet
profitable from the sale of advertising on the web sites that utilize
WeatherLabs.
VideosNow and Books Now. Although sales of books and videos on the
Internet by some of our competitors continue to climb, we are unaware of any
company that has generated operating profits from the sale of books or videos on
the Internet. We do not know when we will be able to generate a profit from the
sale of these media products on the Internet.
Credit Card Clearing. The software and services that are currently
under development have the potential to be profitable, but as our revenues to
date from the processing of credit card transactions is minimal, we cannot give
assurances in this regard. If we are able to develop software and services and
raise sufficient capital to market those products and services, we may be able
to generate profits.
All of these markets are rapidly evolving and are characterized by an
increasing number of market entrants who have introduced or developed products
and services for use on the Internet.
If consumers fail to use our web sites or such usage fails to continue
to grow, we may be unable to sell enough products, services or advertising to
become profitable. As is typical in the case of a new and rapidly evolving
industry, demand and market acceptance for recently introduced products and
services are subject to a high level of uncertainty and risk. Because the market
for virtual commerce and advertising on the Internet is new and evolving, we are
unable to predict the future growth rate and size of this market. If the market
fails to develop, develops more slowly than expected or becomes saturated with
competitors, or if our web sites do not achieve or sustain market acceptance, we
may not be successful.
Brand Development is Important to our Business
We believe that establishing and maintaining our "netClearing," "Books
Now," "WeatherLabs" and "Videos Now" brands is a critical aspect of our efforts
to attract and expand our Internet audience. If consumers do not perceive our
existing or future products and services to be of high quality and therefore do
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not use our brands, sales will be adversely affected and advertisers will not be
attracted to our audiences. Although our software and services are engineered to
appear as though they were created by the web portals and merchants on the
Internet, our brands are important to generate interest in our software and
services by such portals and merchants. We also believe that the importance of
brand recognition will increase due to the growing number of Internet sites and
the relatively low barriers to entry. In response to competitive pressures, we
may be forced to substantially increase our financial commitment to creating and
maintaining a distinct brand loyalty among our consumers. If we are unable to
promote and maintain our brands, or if we incur excessive expenses in
maintaining brand loyalty, we may not be successful.
We Rely on Internet Advertising Revenues
We currently derive approximately one-quarter of our revenues from
selling advertisements on our web sites, and we believe there are risks
associated with this revenue stream. Our ability to generate significant
advertising revenues will depend upon, among other things, advertisers'
acceptance of the Internet as an effective place to advertise. Most Internet
advertising customers, however, have only limited experience with the Internet
as an advertising medium. Additionally, most of these customers have not devoted
a significant portion of their advertising expenditures to web-based advertising
and may not find such advertising to be effective for promoting their products
and services relative to traditional print and broadcast media. Any inability by
us to sell advertising on our web sites, particularly the WeatherLabs co-branded
web sites, will adversely affect our revenues and profitability.
We face many other challenges in selling web-based advertising. For
example:
o there are no widely accepted standards for measuring the
effectiveness of web-based advertising;
o certain advertising filter software programs are available that
limit or remove advertising from an Internet user's desktop; such
software may have a materially adverse effect upon the viability
of Internet advertising. There is intense competition in the sale
of Internet advertising, including competition from other Internet
navigational tools as well as other high-traffic sites;
o competition for advertising sales could result in significant
price competition and reductions in advertising revenues to our
web sites; and
o our advertising customers may not accept the internal and
third-party measurements of impressions received by advertisements
on our web sites, and such measurements may contain errors.
We Depend Upon Third Parties
We depend substantially upon third parties for several critical
elements of our business, including:
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o Sprint, for telecommunications services;
o Internet Portals, including America Online, Netscape, Excite and
the At Home Network, for use of our WeatherLabs products and
services;
o Hewlett Packard, for maintenance and upgrades of the HP-9000
computers in our data center;
o Sun Microsystems, for maintenance and upgrades of the Sun
Enterprise 500 servers in our data center;
o Cisco, for maintenance and upgrades of our routers; and
o Other vendors of software and hardware for maintenance and
upgrades of software, systems, and hardware used to deliver our
products on the Internet.
Although we believe that there are other third party providers who can
provide the same services as those providers we currently use, loss or
interruption of service by such providers would have an adverse effect on our
business and prospects.
We Depend on our Existing Technology and Infrastructure
We depend substantially upon our computer equipment and its maintenance
and technical support to ensure accurate and rapid presentation of content and
advertising to our customers. Our failure to effectively maintain our equipment
and provide such information could have a material adverse effect on our
business, operating results and financial condition. In addition, if we
terminate any of our telecom agreements with Sprint, or Sprint fails to renew
our agreements upon expiration, we could incur substantial additional costs to
develop or license replacement telecom capacity.
We Must Continually Enhance our Products To Remain Competitive
Our failure to effectively improve our software, web sites or other
products, or our failure to achieve market acceptance of design modifications,
could adversely affect our business, results of operations and financial
condition. To remain competitive in the sale of products over the Internet, in
delivering information over the Internet, and in providing e-commerce services
on the Internet, we must continue to enhance and improve the responsiveness,
functionality, features and content of our main product offerings. If we are
unable to develop increasingly complex technologies to improve our products, we
may not successfully maintain competitive user response time or implement new
features and functions. Furthermore, enhancements of or improvements to our
products may contain undetected errors that require significant design
modifications. Such errors could result in a loss of customer confidence and
user support and a decrease in the value of our products and services. These
market characteristics are exacerbated by the emerging nature of this market and
the fact that many companies are expected to introduce new Internet products and
services in the near future.
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Capacity Constraints and Systems Failures
Any disruption in Internet access or any failure of our technology to
handle higher volumes of user traffic could have a material adverse effect on
our business, operating results and financial condition. A key element of our
business strategy is to generate high volume usage of our products and content
offerings. Accordingly, our technology performance is critical to our
reputation. Our technology performance also affects our ability to attract
advertisers to our products, and achieve market acceptance of these products and
media properties.
The risks we face in this regard include:
o If we experience a system failure that causes an interruption or
an increase in response time of our web sites, we may have less
traffic to our content destinations;
o If the interruptions or delays are sustained or repeated, our
advertisers may find our content offerings less attractive and our
customers may choose to shop elsewhere;
o An increase in the volume of traffic to our web sites could strain
our software or hardware capacity, which could lead to slower
response time or system failures;
o As the number of users increases, our infrastructure may not be
able to scale accordingly;
o We are dependent upon our own technology and link to the Internet;
o We are dependent on hardware suppliers for prompt delivery,
installation and service of servers and other equipment which we
use to deliver our products and services.
o Our operations are dependent in part upon our ability to protect
our operating systems against physical damage from fires, floods,
earthquakes, power losses, telecommunications failures, break-ins
and similar events. We do not presently have redundant,
multiple-site capacity in the event of any such occurrence; and
o Our servers are vulnerable to computer viruses, break-ins and
similar disruptions from unauthorized tampering.
If we experience any of these events, the users of our web sites may
encounter interruptions, delays or cessations in service, which could have a
material adverse effect on our business, operating results and financial
conditions.
Management of Internal Growth
As we grow, we may not be able to effectively manage the expansion of
our operations and our systems, procedures or controls may not be adequate to
support our operations. Additionally, we may not be able to achieve the rapid
execution necessary to fully exploit our market opportunities.
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Integration of Acquisitions We May Make
If we enter into future acquisitions, we may not be successful in
overcoming risks or any other problems typically encountered in connection with
such acquisitions. During fiscal year 1998 and the first quarter of fiscal year
1999, we have acquired several companies and we have evaluated several potential
acquisitions. As part of our business strategy we expect to enter into further
business combinations and/or make significant investments in complementary
companies, products or technologies.
Any such transactions would be accompanied by the risks commonly
encountered in such transactions. Such risks include, among other things:
o the difficulty of assimilating the operations and personnel of the
acquired companies;
o the potential disruption of our ongoing business;
o the inability of management to maximize our financial and
strategic position through the successful incorporation of
acquired technology or content and rights into our products and
services;
o the difficulties of integrating personnel of acquired entities;
o the additional expenses associated with amortization of acquired
intangible assets;
o the maintenance of uniform standards, controls, procedures and
policies;
o the impairment of relationships with employees and customers as a
result of any new management integration; and
o the potential unknown liabilities associated with acquired
businesses.
Markets for Our Products and Services are Highly Competitive
The market for Internet products and services is highly competitive and
we expect the competition to increase. We also expect the market for
Internet-based commerce and advertising to be intensely competitive. There are
no substantial barriers to entry in these markets.
NetClearing. We have a number of competitors that provide software to
merchants and financial institutions for processing payment card transactions
over the Internet. They include VeriFone, Inc., IBM Corporation, and AT&T
Corporation. Several other competitors, including CyberCash, Inc., CyberSource,
Inc. and ClearCommerce Corporation, offer software that enables Internet
merchants to obtain credit card authorizations. Several of these companies are
developing software to process transactions in compliance with the SET standard
which we use. Additional competition could come from web browser companies and
software and hardware vendors that incorporate Internet payment capabilities
into their products.
Videos Now and Books Now. Companies such as Reel.com, Amazon, Barnes &
Noble, CD Universe and others sell videos and books on the Internet, directly
competing with our Videos Now and Books Now divisions. Many of these competitors
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have longer operating histories, greater name recognition, more existing
customers, and significantly greater financial, technical and marketing
resources than we do.
WeatherLabs. Our main competitors in providing weather forecasting on
the Internet are The Weather Channel and Accu-Weather. They are both larger,
more strongly capitalized and have longer operating histories than WeatherLabs.
In the future we expect to face additional competition for all of our
products and services. This competition will likely include companies that are
larger and better capitalized than us. They are likely to also have more
expertise and established brand recognition. These competitors could develop
Internet product and services that are superior to ours and have greater market
acceptance. Moreover, some of our current customers and partners have
established relationships with our competitors. Future customers and partners
may establish similar relationships.
Trademarks and Proprietary Rights
We are not certain that the steps we have taken to protect our
proprietary rights will be adequate or that third parties will not infringe or
misappropriate our copyrights, trademarks, trade dress and similar proprietary
rights. In addition, we cannot be certain that other parties will not assert
infringement claims against us. We believe our copyrights, trademarks, trade
dress, trade secrets and similar intellectual property are critical to our
success. We rely upon trademark and copyright law, trade secret protection and
confidentiality and/or license agreements with our employees, customers,
partners and others to protect our proprietary rights.
We could be subject to legal proceedings and claims alleging
infringement by us and our licensees of the trademarks and other intellectual
property rights of others. We may be forced to use significant financial and
managerial resources to defend such claims, even if they are not meritorious. We
are not aware of any legal proceedings or claims in this regard.
Dependence on Key Executives
Our performance is substantially dependent on the effectiveness of our
senior management and key technical personnel. In particular, our success
depends substantially on the continued efforts of our senior management team,
which currently is composed of a small number of individuals who only recently
joined the Company. We do not carry key person life insurance on any of our
senior management personnel. The loss of the services of any of our executive
officers or other key employees could detrimentally affect us.
Attracting and Retaining Qualified Employees
Our future success depends on our continuing ability to attract and
retain highly qualified technical and managerial employees. Competition for java
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software programmers and other people experienced in the technical areas in
which we operate is intense and as a small company, we may not be able to
attract them. We also may not have the resources to provide the salaries and
benefits that our competitors can. Other companies in the software development
field may try to entice our best technical employees to change jobs.
Government Regulation of the Internet
Any new legislation or regulation or the application of existing laws
and regulations to the Internet could have a material adverse effect on our
business, operating results and financial condition. We are not currently
subject to direct regulation by any United States government agency, other than
regulations applicable to businesses generally. There are currently few laws or
regulations directly applicable to access to or commerce on the Internet. Due to
the increasing popularity and use of the Internet, it is possible that a number
of laws and regulations may be adopted with respect to the Internet, covering
issues such as user privacy, pricing and characteristics and quality of products
and services. For example, we may be subject to the provisions of the
Communications Decency Act. Although the constitutionality of the CDA, the
manner in which the CDA may be interpreted and enforced and the effect of the
CDA on our operations cannot be determined, it is possible that the CDA could
expose us to substantial liability. A number of other countries also have
enacted or may enact laws that regulate Internet content. The adoption of such
laws or regulations may decrease the growth of the Internet, which could in turn
decrease the demand for our products. Such laws and regulations also could
increase our cost of doing business or otherwise have an adverse effect on our
business, operating results and financial condition. Moreover, existing laws
governing issue such as property ownership, defamation, obscenity and personal
privacy may also be applicable to the Internet, and we may be subject to claims
that our services and web sites violate such laws.
State Sales and Use Tax Laws
Several states have attempted to tax online retailers and service
providers even when they have no physical presence in the state. There is a
currently a three year moratorium on taxing Internet commerce that the federal
government imposed on the states. We currently charge sales tax for goods sold
to customers in California and Utah, the states where we have operations. If
after the moratorium, other states assert tax claims for products we have sold
over the Internet, it could be costly and burdensome for us to comply.
Liability for Information Services
Because materials may be downloaded by the online or Internet services
which we operate or facilitate and may be subsequently distributed to others, we
may be subject to a variety of claims. These claims may include defamation,
negligence, copyright or trademark infringement, personal injury or other
theories based on the nature and content of such downloaded materials. In the
past, other online services have been sued for such claims and in some cases
have lost. In addition, we could be exposed to liability with respect to the
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<PAGE>
books, videos, content and links that may be accessible through our web sites,
or through content and materials that may be posted by users on web sites. It is
also possible that if we provide any information through our web sites or
services which contains errors, third parties could make claims against us for
losses incurred in reliance on such information. Also, to the extent we provide
users with information relating to purchases of goods and services, we could
face claims relating to injuries or other damages arising from such goods and
services. Although we carry general liability insurance, our insurance may not
cover potential claims of this type or may not be adequate to indemnify us for
all liability that may be imposed. Our business, operating results and financial
condition could be adversely affected by any liability or legal defense expenses
that are not covered by insurance or that are in excess of our insurance
coverage.
Concentration of Stock Ownership
Our present directors, executive officers, greater than 5% stockholders
and their respective affiliates beneficially own approximately 44% of our
outstanding common stock. As a result of their ownership, the directors,
executive officers, greater than 5% stockholders and their respective affiliates
collectively are able to control or significantly influence all matters
requiring shareholder approval, including the election of directors and approval
of significant corporate transactions. Such concentration of ownership may also
have the effect of delaying or preventing a change in control of the Company.
Volatility of Stock Price
Broad market and industry fluctuations may adversely affect the trading
price of our common stock, regardless of our operating performance. The trading
price of our common stock has been and may continue to be subject to wide
fluctuations. In the last twelve months our stock has traded as low as $1.875
and as high as $17.125. The wide swings in the price of our stock have not
always been in response to logical reasons. Some events and factor that we know
of which may affect our stock price include:
o quarterly variations in operating results;
o technological innovations or new affiliations announcements by us
or by our competitors;
o changes in financial estimates and recommendations by securities
analysts;
o performance of operating and stock price of other companies that
investors may deem comparable to us; and
o 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 extreme volatility
that often has been unrelated to the operating performance of such companies.
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Future Issuance of Preferred Stock Could Hurt Common Stockholders
Rights of preferred stockholders take priority over common
stockholders. Although we do not currently have any preferred stock outstanding,
the rights of the holders of common stock may come behind the subject to, and
may be adversely affected by, the rights of the holders of any preferred stock
that may be issued in the future. Our Board of Directors has the authority to
issue up to 2,500,000 shares of preferred stock. and to They can determine the
price, rights, preferences, privileges and restrictions, including voting
rights, of those shares without any further vote or action by the stockholders.
Preferred stockholders could delay, defer or prevent a change of control of
which our common stockholders may have been in favor.
Shares Eligible for Future Sale
Up to 8,860,016 shares of our common stock will be freely trading or
eligible for sale in the public market. 1,174,338 shares (excluding shares
issuable upon exercise of warrants) are being registered in this prospectus
which will make them available for sale. If the selling shareholders
stockholders sell a substantial number of shares in the public market following
this registration, or if the public believes that such sales could occur, the
market price of our common stock could decline. Under the federal securities
laws, shares may not be sold unless they are registered with the SEC or are
exempt from registration. In addition approximately 6,283,925 shares of our
stock are immediately eligible for resale in the public market without
restriction under Section 4(1) of the Securities Act, which permits sales by
people other than the issuer, underwriter or dealer. Approximately another
1,401,753 shares of common stock have been held long enough to now be eligible
for sale in the public market, subject to the provisions of Rule 144 under the
Securities Act.
As of February 8, 1999, an aggregate of 1,879,000 shares of common
stock were reserved for issuance pursuant to certain warrants. Of the common
stock which will be issued on exercise of these warrants, 1,000,000 shares are
being registered in this prospectus.
As of February 8, 1999, 998,125 shares of common stock were subject to
options outstanding under our employee stock option plan at a weighted average
exercise price of $ 3.49 per share. Of these options, 500,625 were exercisable
at that date at a weighted average exercise price of $ 5.54 per share. The
remainder of these options become exercisable at various points over the next 2
years. An additional 1,447,500 shares of common stock are reserved for future
issuance under the plan. We filed a registration statement on Form S-8
registering the shares of common stock reserved for future issuance under the
plan, thus permitting the resale of such shares in the public market without
restriction under the Securities Act, subject to Rule 144.
Some of Our Equipment May Fail in Year 2000
Computer systems, software applications, and microprocessor dependent
equipment may cease to function properly or generate erroneous data when the
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year 2000 arrives. The problem affects those systems or products that are
programmed to accept a two-digit code in date code fields. To correctly identify
the year 2000, a four-digit date code field will be required to be what is
commonly termed "year 2000 compliant."
To date we have invested $60,000 in an effort to certify all aspects of
the business are year 2000 compliant. The areas of the business which have been
targeted for compliance testing are our operations and our software products and
services. We conducted the certification process over a three-month period in
which all software products and service components under our direct control
certified Year 2000 compliant. For the operational components and remaining
software and service that are under the control of third party organizations, we
have sought their efforts to provide written confirmation and evidence of
compliance. We may realize operational exposure and risk if the systems for
which we are dependent upon to conduct day-to-day operations are not year 2000
compliant. The potential areas of software exposure include:
o electronic data exchange systems operated by third parties with
whom we transact business;
o server software which we use to present content and advertising to
our customers and partners; and
o computers, software, telephone systems and other equipment used
internally.
In October 1997, we initiated the review and assessment of all of our
computerized hardware and internal-use software systems to ensure that such
systems will function properly in the year 2000 and beyond. During the last two
years, our computerized information systems have been substantially upgraded to
be year 2000 compliant.
We have not yet determined a contingency plan in the event that any
non-compliant critical systems are not remedied by the year 2000, nor have we
formulated a timetable to create such a contingency plan. It is possible that
costs associated with year 2000 compliance efforts may exceed our current
projections of an additional $40,000 to reach total compliance. In such a case,
these costs could have a material negative impact on our financial position and
results of operations. It is also possible that if systems material to our
operations have not been made year 2000 compliant, or if third parties fail to
make their systems compliant in a timely manner, the year 2000 issue could have
a material adverse effect on our business, financial condition, and results of
operations. This would result in an inability to provide functioning software
and services to our clients in a timely manner, and could then result in lost
revenues from these clients, until such problems are resolved by us or the
responsible third parties.
FORWARD-LOOKING STATEMENTS
This prospectus, including all documents incorporated by reference,
includes forward-looking statements. Forward-looking statements are generally
those preceded by, followed by or including the words "believes," "expects,"
"anticipates" or similar expressions.
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<PAGE>
These forward-looking statements are based largely on our current
expectations and are subject to a number of risks and uncertainties including
those risks described in the "Risk Factors" section. Our actual results could
differ materially from these forward-looking statements. In light of these risks
and uncertainties, there can be no assurance that the events contemplated by the
forward-looking statements contained in this prospectus will, in fact, occur.
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement we have filed with
the Securities and Exchange Commission ("SEC") to register 2,174,338 shares of
our common stock, par value $.0001 (the "Shares"). This prospectus does not
include all of the information contained in the registration statement and the
exhibits to the registration statement. For further information about us and the
shares being registered, you should read the registration statement and the
exhibits to the registration statement. Statements contained in this prospectus
concerning documents we have filed with the SEC as exhibits to the registration
statement or otherwise are not necessarily complete and, in each instance, you
should refer to the actual filed document.
We have not authorized anyone to provide you any information different
from that contained in this prospectus. The selling stockholders may offer to
sell the shares only in jurisdictions where offers and sales are permitted. The
information contained in this prospectus is accurate only as of the date of this
prospectus, regardless of the time of delivery of this prospectus or of any sale
of the shares.
In this prospectus, the "Company," "Digital Courier," "we," "us," and
"our" refer to Digital Courier Technologies, Inc.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's public reference rooms at 450 Fifth Street, Mail Stop 1-2, N.W.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Our SEC filings are also available to
the public at the SEC's web site at "http://www.sec.gov."
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 those 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. Our SEC file
number is 000-20771. We incorporate by reference the documents listed below, and
any future filings made by us with the SEC under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934, as amended:
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(1) Annual Report on Form 10-K for the fiscal year ended June 30,
1998, as amended through the date hereof;
(2) Quarterly Report on Form 10-Q for the quarter ended September 30,
1998, as amended through the date hereof;
(3) Quarterly Report on Form 10-Q for the quarter ended December 31,
1998, as amended through the date hereof;
(4) Proxy Statement for the Special Meeting of Shareholders held
September 16, 1998;
(5) Proxy Statement for the Annual Meeting of Shareholders to be held
December 15, 1998;
(6) Current Report on Form 8-K filed October 1, 1998;
(7) Current Report on Form 8-K filed December 11, 1998;
(8) Current Report on Form 8-K filed February 12, 1999; and
(9) Description of our capital stock contained in our registration
statement on Form 8-A, including all amendments or reports filed
for the purpose of updating such description.
You may request a copy of these filings, at no cost, by writing or
telephoning DCTI at P.O. Box 8000, 136 Heber Avenue, Park City, Utah 84060,
telephone (435) 655-3617, attention: Investor Relations.
USE OF PROCEEDS
We are registering the shares of common stock for the benefit of
the selling stockholders and the selling stockholders will sell
the shares from time to time under this prospectus. Other than the
exercise price the selling stockholders will pay to exercise their
warrants, we will not receive any proceeds from the sale of the
shares offered in this prospectus. We will pay the costs of this
offering which are estimated to be $75,000. The selling
stockholders are not obligated to exercise their warrants, and
there can be no assurance that they will choose to exercise all or
any of the warrants. If all the warrants are exercised, we will
receive $ 9,474,375. We intend to use any proceeds we receive from
any warrant exercise to augment our working capital for general
corporate purposes.
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SELLING STOCKHOLDERS
The following table sets forth certain information as of February 8,
1999, with respect to the selling stockholders. Beneficial ownership after this
offering will depend on the number of shares actually sold by the selling
stockholders. To our knowledge, all selling stockholders have sole voting and
investment power with respect to their securities, except as otherwise
indicated. Except for the purchase of the shares and except as noted below, none
of the selling stockholders has had any position, office or other material
relationship with us within the past three years.
The percentage shown in the second column includes all common stock
beneficially owned by the selling stockholder as a percentage of the 13,959,211
shares of common stock outstanding on February 8, 1999, together with all
currently exercisable warrants or options for such selling stockholder. Shares
of common stock subject to warrants or options are deemed outstanding for
computing the percentage ownership of the person holding such rights, but are
not deemed outstanding for computing the percentage of any other person. We
calculated the amounts in the last two columns on the right of the table
assuming that each selling stockholder disposes of all of the shares covered by
this prospectus and does not acquire any additional common stock. We also
assumed that the selling stockholder did not exercise any other options,
warrants or conversion rights.
<TABLE>
<CAPTION>
Shares of
Shares of Common Stock Common
Beneficially Stock Being Shares of Common
Owned Registered Stock Owned
Prior To Offering for Resale After the Offering
----------------- ---------- ------------------
Name of Selling
Stockholder
-----------
Number % of Number Number % of
------ ---- ------ ------ ----
Class Class
----- -----
<S> <C> <C> <C> <C> <C>
At Home Network 220,534 1.55 220,534 (1) 0 -
Brown Simpson Strategic Growth Fund, Ltd.
970,000 6.75 1,120,000 (2) 0 -
Brown Simpson Strategic Growth Fund, L.P.
430,000 3.06 480,000 (3) 0 -
America Online, Inc. 353,804 2.53 1,592,356 0 -
</TABLE>
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(1) Includes 200,000 shares of common stock which have not been issued
but which are issuable upon exercise of warrants. 100,000 of the
warrants will vest only upon the attainment by At Home Network of
certain performance criteria.
(2) Includes 410,000 shares of common stock which have not been issued
but which are issuable upon exercise of warrants and 150,000
shares which have not yet been issued and which are not currently
exercisable.
(3) Includes 90,000 shares of common stock which have not been issued
but which are issuable upon exercise of warrants and 50,000 shares
which have not yet been issued and which are not currently
exercisable.
PLAN OF DISTRIBUTION
The selling stockholders may offer and sell the shares covered by this
prospectus from time to time. The selling stockholders will act as principals
for their own accounts in selling the shares. The selling stockholders may sell
the shares through public or private transactions, on or off the Nasdaq National
Market, at prevailing market prices or at privately negotiated prices. The
selling stockholders will receive all of the net proceeds from the sale of the
shares offered with this prospectus. The selling stockholders will pay all
commissions in connection with the sale of those shares. Other than the exercise
price the selling stockholders will pay to exercise their warrants, we will not
receive any proceeds from the sale of the shares offered in this prospectus.
The distribution of the shares by the selling stockholders is not
subject to any underwriting agreement. We expect that the selling stockholders
will sell the shares covered by this prospectus through customary brokerage
channels, either through:
o broker-dealers acting as principals, who may then resell the
shares through Nasdaq;
o in private sales;
o in a combination of such methods of sale;
o in transactions pursuant to Rule 144 under the Securities Act;
or
o in block trades in which the broker or dealer so engaged will
attempt to sell the shares as agent but may position and resell a
portion of the block as principal to facilitate the transaction.
We expect the selling stockholders will sell the shares at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices. The selling stockholders may pledge all
or a portion of the shares as collateral in loan transactions. Upon default by
the selling stockholders, the pledgee in such loan transaction would have the
same rights of sale as such selling stockholders under this prospectus. The
selling stockholders may also transfer s hares in other ways not involving
market makers or established trading markets, including directly by gift,
distribution, or other transfer without consideration, and upon any such
transfer the transferee would have the same rights of sale as such selling
stockholders under this prospectus. Finally, the selling stockholders and any
brokers and dealers through whom sales of the shares are made may be deemed to
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be "underwriters" within the meaning of the Securities Act, and the commissions
or discounts an other compensation paid to such persons may be regarded as
underwriters' compensation.
From time to time the selling stockholders may engage in short sales,
short sales against the box, puts and calls and other transactions in our
securities or derivatives thereof, and may sell and deliver the shares in
connection therewith or in settlement of securities loans.
In effecting sales, brokers and dealers engaged by the selling
stockholder may arrange for other brokers or dealers to participate in such
sales. Brokers or dealers may receive commissions or discounts from the selling
stockholders (or, if any such broker-dealer acts as agent for the purchaser of
such shares, from such purchaser) in amounts to be negotiated which are not
expected to exceed those customary in the types of transactions involved.
Broker-dealers may agree with the selling stockholders to sell a specified
number of such shares at a stipulated price per share, and, to the extent such
broker-dealer is unable to do so acting as agent for a selling stockholder, to
purchase as principal any unsold shares at the price required to fulfill the
broker-dealer commitment to the selling stockholders. Broker-dealers who acquire
shares as principal may thereafter resell such shares from time to time in
transactions (which may involve block transactions and sales to and through
other broker-dealers, including transactions of the nature described above) in
the over-the-counter market or otherwise at prices and on terms then prevailing
at the time of the sale, at prices then related to the then-current market price
or in negotiated transactions and, in connection with such re-sales, may pay to
or receive from the purchasers of such shares commissions as described above. We
will pay all expenses of registration incurred in connection with this offering,
but the selling stockholders will pay all brokerage commissions and other
similar expenses incurred by the selling stockholders.
At the time a particular offer of the shares is made, to the extent
required, we will distribute a supplement to this prospectus which will identify
and set forth the aggregate amount of shares being offered and the terms of the
offering.
The selling stockholders may sell the shares at any price. Sales of the
shares at less than market prices may depress the market price of our common
stock. Moreover, generally the selling stockholders are not restricted as to the
number of shares which may be sold at any one time, and it is possible that a
significant number of shares could be sold at the same time. However, to the
extent the selling stockholders are affiliates of the Company, such selling
stockholders are subject to the volume limitations of Rule 144 under the
Securities Act.
The selling stockholders and any other person participating in such
distribution will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including, without limitation, Regulation
M, which may limit the timing of purchases and sales of the shares by the
selling shareholders and any other such person. Furthermore, Regulation M of the
Exchange Act may restrict the ability of any person engaged in the distribution
of the shares to engage in market- making activities with respect to the
particular shares being distributed for a period of up to five business days
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prior to the commencement of such distribution. All of the foregoing may affect
the marketability of the shares and the ability of any person or entity to
engage in market-making activities with respect to the shares.
To comply with certain states' securities laws, if applicable, the
shares may be sold in any such jurisdictions only through registered or licensed
brokers or dealers. In certain states the shares may not be sold unless the
seller meets the applicable state notice and filing requirements.
LEGAL MATTERS
For purposes of this offering, Snell & Wilmer L.L.P., Salt Lake City,
Utah, counsel to the Company, is giving its opinion on the validity of the
Shares.
EXPERTS
The audited financial statements as of June 30, 1998 and 1997 and for
each of the three years in the period ended June 30, 1998, incorporated by
reference in this prospectus and elsewhere in the registration statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said report. We
refer you to the report on those financial statements, dated September 23, 1998,
which includes an explanatory paragraph with respect to the uncertainty
regarding the Company's ability to continue as a going concern as discussed in
Note 1 to the financial statements.
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<PAGE>
We have not 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 only as of its date.
2,174,338 Shares
DIGITAL COURIER
TECHNOLOGIES, INC.
Common Stock
-----------------------
PROSPECTUS
-----------------------
TABLE OF CONTENTS
PAGE
ABOUT THIS PROSPECTUS..............................19
WHERE YOU CAN FIND MORE
INFORMATION........................................19
RISK FACTORS........................................3
THE COMPANY.........................................2
USE OF PROCEEDS....................................20
SELLING STOCKHOLDERS...............................21
PLAN OF DISTRIBUTION...............................22
LEGAL MATTERS......................................24
EXPERTS............................................24 February 12, 1999
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The Company estimates that expenses in connection with the transactions
described in this registration statement will be as follows. All expenses
incurred with respect to the transactions will be paid by the Company.
SEC Registration Fee........................$6,319
Printing Expenses..............................500
Accounting Fees and Expenses................40,000
Legal Fees and Expenses.....................25,000
Transfer Agent Fees and Expenses.............1,500
Total..........................$ 73,319
Item 15. Indemnification of Directors and Officers
The General Corporation Law of the State of Delaware provides for
indemnification as set forth in Section 145 thereof. The Company's Bylaws
provide for indemnification of the Company's directors, officers and others
against all expenses and amounts of liability incurred by them in connection
with any action, suit or proceeding in which they are involved by reason of
their affiliation with the Company. This indemnification is to the fullest
extent permitted by law upon receipt of an undertaking by or on behalf of such
person (and the heirs and legal representatives of such person) to repay such
advances if it shall ultimately be determined that such person is not entitled
to indemnification by the Company.
Insofar as indemnification for liabilities under the Securities Act may
be permitted to directors, officers or persons controlling the Company pursuant
to the foregoing provisions, the Company has been informed that in the opinion
of the Commission, such indemnification is against public policy as expressed in
the Securities Act and is therefore unenforceable.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
Exhibits Description
4.1 Interactive Marketing Agreement with America Online, Inc.,
filed with the Form 10-K for the year ended June 30, 1998,
incorporated herein by reference
4.2 Content License and Distribution Agreement with At Home
Corporation, filed with the Form 10-K for the year ended June
30, 1998, incorporated herein by reference.
II-1
<PAGE>
4.3 Loan Agreement between the Company and Certain Lenders dated
as of October 22, 1998, filed with the Form 8-K dated December
11, 1998, incorporated herein by reference
4.4 Securities Purchase Agreement among the Company, Brown Simpson
Strategic Growth Fund, Ltd. and Brown Simpson Strategic Growth
Fund, L.P. dated as of November 23, 1998, as amended on
December 2, 1998, filed with the Form 8-K dated December 11,
1998, incorporated herein by reference
5.1 Opinion of Snell & Wilmer L.L.P.
23.1 Consent of Arthur Andersen L.L.P.
23.2 Consent of Snell & Wilmer L.L.P. (included in opinion filed
as Exhibit 5.1)
23.3 Consent of Hansen, Barnett & Maxwell
24.1 Power of Attorney (contained on signature page)
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than a twenty percent (20%) change in the
maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration
statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
II-2
<PAGE>
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8, or Form F-3 and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the registrant pursuant to Section 13 or
Section 15(d) of the Exchange Act that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Exchange Act
(and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange
Act) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering
of suc securities at that time shall be deemed to be the
initial bona fide offering thereof.
(5) To deliver or cause to be delivered with the prospectus, to
each person to whom the prospectus is sent or given, the
latest annual report, to security holders that is incorporated
by reference in the prospectus and furnished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the
Exchange Act; and, where interim financial information
required to be presented by Article 3 of Regulation S-X is not
set forth in the prospectus, to deliver, or cause to be
delivered to each person to whom the prospectus is sent or
given, the latest quarterly report that is specifically
incorporated by reference in the prospectus to provide such
interim financial information.
(6) That, insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers and
controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the
final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
the registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of Park City, Utah on February 12, 1998.
DIGITAL COURIER TECHNOLOGIES, INC.
a Delaware corporation
By: /s/ Raymond J. Pittman
----------------------------------------------
Raymond J. Pittman
Chief Executive Officer
<PAGE>
POWER OF ATTORNEY
Each person whose individual signature appears below hereby authorizes
and appoints Mitchell Edwards with full power of substitution and
re-substitution and full power to act without the other, as his true and lawful
attorney-in-fact and agent to act in his name, place and stead and to execute in
the name and on behalf of each person, individually and in each capacity stated
below, and to file, any and all amendments to this registration statement,
including any and all post-effective amendments and any registration statement
relating to the same offering as this registration statement that is to be
effective upon filing pursuant to Rule 462(b) under the Securities Act, as
amended, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing, ratifying and confirming all that
said attorneys-in-fact and agents or any of them or their substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities indicated
below on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C>
/s/ * 2/12/99
------------------------------ -------
Raymond J. Pittman Chief Executive Officer and Director
(Principal Executive Officer)
/s/ * 2/12/99
------------------------------ -------
Michael S. Bard Senior Vice President and Controller
Principal Financial and Accounting
(Officer)
/s/ Mitchell Edwards 2/12/99
------------------------------ -------
Mitchell Edwards Executive Vice President and Director
/s/ * 2/12/99
------------------------------ -------
Kenneth M. Woolley Director
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
/s/ * 2/12/99
------------------------------ -------
Glen Hartman Director
/s/ * 2/12/99
------------------------------ -------
James A. Egide Chairman of the Board
/s/ Mitchell Edwards 2/12/99
------------------------------ -------
*By Mitchell Edwards Attorney-in-Fact
</TABLE>
EXHIBIT INDEX
Exhibit Number Exhibit
-------------- -------
4.1 Interactive Marketing Agreement with America Online, Inc.,
filed with the Form 10-K for the year ended June 30, 1998,
incorporated herein by reference
4.2 Content License and Distribution Agreement with At Home
Corporation, filed with the Form 10-K for the year ended
June 30, 1998, incorporated herein by reference
4.3 Loan Agreement between the Company and Certain Lenders dated
as of October 22, 1998, filed with the Form 8-K dated
December 11, 1998, incorporated herein by reference
4.3 Securities Purchase Agreement among the Company, Brown
Simpson Strategic Growth Fund, Ltd. And Brown Simpson
Strategic Growth Fund, L.P. dated as of November 23, 1998,
as amended on December 2, 1998, filed with the Form 8-K
dated December 11, 1998, incorporated herein by reference
5.1 Opinion of Snell & Wilmer LLP
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Snell & Wilmer LLP (included in Exhibit 5.1)
23.3 Consent of Hansen, Barnett & Maxwell
24 Power of Attorney (included on signature page of
registration statement)
EXHIBIT 5.1
OPINION OF SNELL & WILMER L.L.P.
December 10, 1998
Digital Courier Technologies, Inc.
136 Heber Avenue, Suite 204
Park City, Utah 84060
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as counsel to Digital Courier Technologies, Inc., a
Delaware corporation (the "Company"), and in such capacity have examined the
Company's Registration Statement on Form S-3 (the Form S-3, including the
amendments thereto being referred to collectively herein as the "Registration
Statement"), to be filed by the Company with the Securities and Exchange
Commission ("Commission") on December 10, 1998 under the Securities Act of 1933,
as amended ("Act"). The Registration Statement relates to the proposed
registration for resale by certain selling shareholders ("Selling Shareholders")
of up to an aggregate of 3,412,890 shares of common stock, $.0001 par value per
share of the Company, 1,775,948 of such shares which were previously acquired by
such Selling Shareholders, and 1,636,942 of such shares which may be acquired by
such Selling Shareholders upon the exercise of outstanding warrants.
As counsel for the Company and for purposes of this opinion, we have
made those examinations and investigations of legal and factual matters we
deemed advisable and have examined originals or copies, certified or otherwise
identified to our satisfaction as true copies of the originals, of those
corporate records, certificates, documents and other instruments which, in our
judgment, we considered necessary or appropriate to enable us to render the
opinion expressed below, including the Company's Certificate of Incorporation,
as amended to date, the Company's Bylaws, as amended to date, and the minutes of
meetings of the Company's Board of Directors and other corporate proceedings
relating to the authorization and issuance of the Selling Shareholder's shares.
We have assumed the genuineness and authorization of all signatures and the
conformity to the originals of all copies submitted to us or inspected by us as
certified, conformed or photostatic copies. Also, we have assumed the proper
exercis and payment for the warrants underlying the shares being registered in
the Registration Statement. Further, we have assumed the due execution and
delivery of certificates representing the Selling Shareholder's shares.
<PAGE>
Based upon the foregoing, and relying solely thereon, we are of the
opinion that the Selling Shareholders' shares have been duly authorized and when
issued, were or will be legally and validly issued, fully paid and
non-assessable.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the reference to our name under the caption "Legal
Matters" in the Prospectus included in the Registration Statement. In giving
this consent we do not hereby admit that we are in the category of persons whose
consent is required under Section 7 of the Act or the rules and regulations of
the Commission thereunder.
Very truly yours,
SNELL & WILMER L.L.P.
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this registration statement on Form S-3 of our
report dated September 23, 1998 included in Digital Courier Technologies, Inc.'s
Form 10-K for the year ended June 30, 1998 and to all references to our Firm
included in this registration statement.
ARTHUR ANDERSEN LLP
Salt Lake City, Utah
February 11, 1999
Exhibit 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation by reference in this Registration Statement on Form S-3 of Digital
Courier Technologies, Inc. of our report dated October 5, 1995, except for Note
11, Sale of Direct Mail Advertising Business, as to which the date is August 3,
1998, relating to the consolidated statements of operastions, stockholders'
equity and cash flows for the year ended June 30, 1995 of DataMark Holding, Inc.
and subsidiaries which report is included in the Notice of Special Meeting of
Stockholders to be held September 16, 1998 of DataMark Holding, Inc. (d/b/a
Digital Courier Technologies, Inc.).
HANSEN, BARNETT & MAXWELL
February 10, 1999
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