Registration No. 33-9344
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
POST-EFFECTIVE AMENDMENT NO. 4
TO FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
__________________
PubliCARD, Inc.
(Exact name of registrant as specified in its charter)
Pennsylvania
(State or other
jurisdiction of
incorporation or
organization)
23-0991870
(I.R.S. Employer
Identification No.)
75 Kings Highway Cutoff
Fifth Floor
Fairfield, Connecticut 06430
(203) 368-6800
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
JAMES J. WEIS
President and Chief Executive Officer
PubliCARD, Inc.
75 Kings Highway Cutoff
Fifth Floor
Fairfield, Connecticut 06430
(203) 368-6800
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
__________________
Copies to:
Joel I. Greenberg, Esq.
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
(212) 836-8000
__________________
Approximate date of commencement of proposed sale to public: As
soon as practicable after this Registration Statement becomes effective.
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.
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) 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 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.
__________________
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 this
Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
PROSPECTUS
PubliCARD, Inc.
We are offering under this prospectus 1,479,281 shares of our
common stock to the holders of our outstanding common stock purchase
warrants. We issued these common stock purchase warrants to purchasers
in our December 1986 public offering and to the underwriter of that
offering. In that offering, we issued to the purchasers units, each
consisting of $1,000 principal amount of 13% subordinated notes due
December 15, 1996 and 120 warrants.
Each warrant currently entitles the holder to purchase 1.037
shares of our common stock at an exercise price of $2.17 per share. The
number of shares purchasable under the warrants and the exercise price
are subject to adjustment and modification, as described in "Description
of Warrants."
We will receive proceeds upon the exercise of warrants, but we
will not receive any proceeds from the sale or resale of the common
stock issuable to the warrant holders upon exercise of the warrants.
Our common stock is quoted on The Nasdaq National Market under the
symbol "CARD." On August 30, 1999, the last reported sale price of our
common stock on the Nasdaq National Market was $6.25 per share. There
is no active market for the warrants.
Our principal executive offices are located at 75 Kings Highway
Cutoff, Fifth Floor, Fairfield, Connecticut 06430. Our telephone number
is (203) 368-6800.
See "Risk Factors" beginning on page 4 to read about certain risks
that you should consider before buying shares of our common stock.
Neither the Securities and Exchange Commission nor any regulatory
body has approved or disapproved 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 __________________, 1999
TABLE OF CONTENTS
Page Number
Where You Can Find More Information. . . . . . . . . . . . . . . . 2
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . .16
Description of Warrants. . . . . . . . . . . . . . . . . . . . . .16
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . .19
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Legality . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-3
relating to the common stock offered by this prospectus, which
registration statement was subsequently amended by pre-effective
amendments and post-effective amendments. On August 14, 1997, we filed
with the SEC a prospectus relating to these shares under Rule 424(b) of
the Securities Act of 1933. We also filed a post-effective amendment to
the registration statement in August 1999. This prospectus is part of
that registration statement. Other parts of the registration statement
are omitted from this prospectus. Statements made in this prospectus
concerning the contents of any contract or other document are not
necessarily complete. For a more complete description of the matter
involved, you should read the entire contract or other document, as
applicable.
We are required by the Securities Exchange Act of 1934 to file
reports, proxy statements and other information with the SEC. You may
read and copy these reports, proxy statements and other information at
the SEC's public reference facilities:
Washington, D.C.
Judiciary Plaza
450 Fifth Street, N.W.
Room 1024
Washington, D.C. 20549
New York
Seven World Trade Center
Suite 1300
New York, New York 10048
Chicago
Citicorp Center
500 West Madison Street
Suite 1400
Chicago, Illinois 60661-2511
You may call 1-800-SEC-0330 for further information about the
public reference facilities. For a fee, the SEC will send copies of any
of our filings to you. In addition, our filed reports, proxy statements
and other information are contained in the Internet website maintained
by the SEC. The address is http://www.sec.gov.
Our common stock is quoted on the Nasdaq National Market under the
symbol "CARD," and our SEC filings can also be read at the following
address:
Nasdaq Operations
1735 K Street, N.W.
Washington, D.C. 20006
The SEC allows us to incorporate by reference the information we
file with it, which means we can disclose important information to you
by referring you to those documents. The information incorporated by
reference is considered to be a part of this prospectus, and later
information that we file with the SEC will automatically update and
supersede this information. We incorporate by reference the documents
listed below and any future filings made with the SEC under Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until
all of the securities are sold:
our Annual Report on Form 10-K for the year ended December
31, 1998, as amended;
our Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1999 and June 30, 1999; and
our Current Reports on Form 8-K dated February 5, 1999,
February 26, 1999, March 8, 1999, April 27, 1999 and May 6, 1999.
We will provide without charge, upon written or oral request, a
copy of any or all of the documents which are incorporated by reference
into this prospectus. Requests should be directed to:
PubliCARD, Inc.
75 Kings Highway Cutoff
Fifth Floor
Fairfield, Connecticut 06430
Attention: Antonio L. DeLise
(203) 368-6800
RISK FACTORS
You should carefully consider each of the following risks and
all of the other information set forth in this prospectus before
deciding to invest in our common stock. Some of the following risks
relate principally to our business and the industries in which we
operate. Other risks relate principally to the
securities markets and ownership of our common stock.
If any of the following risks and uncertainties develop into
actual events, our business, financial condition and results of
operations could be materially adversely affected. In this case, the
trading price of our common stock could decline, and you may lose all
or part of your investment.
Risks Related to the Business of PubliCARD
WE HAVE A HISTORY OF OPERATING LOSSES AND NEGATIVE CASH FLOW,
AND WE HAVE ONGOING FUNDING OBLIGATIONS. We have incurred losses and
experienced negative cash flow from operating activities in the past,
and we expect to incur losses and experience negative cash flow from
operating activities in the foreseeable future. We incurred losses
from continuing operations in 1996, 1997, 1998 and the six months
ended June 30, 1999 of approximately $3.5 million, $1.9 million, $6.1
million and $8.9 million, respectively. In addition, we experienced
negative cash flow from continuing operating activities of $11.4
million, $3.0 million, $3.1 million and $5.7 million in 1996, 1997,
1998 and the six months ended June 30, 1999, respectively.
We have been and may continue to be obligated to assume or
extinguish obligations of the companies we recently acquired. We
expect that these acquired companies will require ongoing funding to
support the expansion of their sales and marketing efforts, new
product development, working capital growth and capital expenditures.
We also have continuing obligations to fund payments due under
an environmental consent decree and an underfunded pension plan. As
of June 30, 1999, we were required to make future aggregate payments
of $2.8 million through April 2002 in connection with the
environmental consent decree to which we are subject. Consistent with
the general practices of environmental enforcement agencies, the
consent decree does not eliminate our potential liability for
remediation of contamination that had not been known at the time of
the settlement. As of December 31, 1998, the present value of the
accrued benefit liabilities of our pension plan exceeded the plan's
assets by approximately $6.0 million. In addition to the cash
contribution of approximately $1.0 million we expect to make to the
plan in 1999, we are obligated to make continued contributions to the
plan in accordance with the rules and regulations
prescribed by the Employee Retirement Income Security Act of 1974.
Future contribution levels depend in large measure on the mortality
rate of plan participants and the investment return on the plan
assets. For a discussion of these obligations and our results of
operations, see "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and
our Consolidated Financial Statements in our Annual Report on Form
10-K for the year ended December 31, 1998, which is incorporated by
reference into this prospectus.
WE HAVE LIMITED EXPERIENCE IN THE SMART CARD MARKET. We
acquired our first smart card company in February 1998, and in
September 1998, our board of directors decided to significantly
expand our presence in the smart card industry. We are therefore
subject to the risks inherent in establishing a new business
enterprise.
THE MARKET FOR SMART CARD PRODUCTS IS NOT WELL DEVELOPED AND
MAY NOT GROW. Existing demand for smart card products in the United
States is not large enough for all the companies seeking to engage in
the smart card business to succeed. Current participants in the smart
card business rely upon anticipated growth in demand, which may not
occur. The success of the smart card industry depends on the ability
of market participants, including our company, to convince
governmental authorities, commercial enterprises and other potential
system sponsors to adopt a smart card system in lieu of existing or
alternative systems such as magnetic stripe card and paper-based
systems. Smart card-based systems may not prove economically feasible
for some potential system sponsors. For example, municipal transit
authorities and colleges and universities, many of which use magnetic
stripe card systems, may resist the introduction of smart card
products. Moreover, a portion of the sales of smart card products
will depend upon emerging communications and commerce networks, such
as the Internet. We cannot assure you that there will be significant
market opportunities for smart card systems in the United States or
that the acceptance of smart card systems in other countries will be
sustained. If the expected growth does not occur, our strategy will
not be successful.
THE MARKET'S ACCEPTANCE OF OUR PRODUCTS IS UNCERTAIN. Demand
for, and market acceptance of, our products is subject to a high
level of uncertainty due to rapidly changing technology, new product
introductions and changes in customer requirements and preferences.
The success of our products also depends upon our ability to enhance
our existing products and to develop and introduce new products and
technologies to meet customer requirements.
We face the risk that smart card technology generally, and our
products specifically, will not be chosen to replace existing
technology or will not otherwise achieve market acceptance. With
respect to our digital camera products, the market for digital
photography is still in the early stages of development and there has
not yet been broad acceptance of our products developed for that
market.
OUR FUTURE PROFITABILITY DEPENDS LARGELY UPON PRODUCTS THAT
HAVE NOT YET PRODUCED ANY REVENUES. Certain of the technology
companies we have recently acquired have products which we believe
are viable, but which have not yet generated any material sales. Our
future revenues and earnings depend in large part on the success of
these products.
OUR GROWTH STRATEGY FOCUSES ON ACQUISITIONS WHICH MAY INVOLVE
RISKS. An important element of our growth strategy has been and
continues to be the acquisition of businesses that complement,
enhance or geographically expand our existing business segments,
product lines or channels of distribution. The companies we have
acquired have no prior history of operating as a combined enterprise
and have experienced net losses prior to being acquired by us.
In February 1998, we acquired, through a joint venture
arrangement in Greenwald Intellicard, Inc., the assets and
intellectual property of Intellicard Systems, Ltd. We currently own
65% of Greenwald Intellicard and have an option that becomes
exercisable in 2000 to acquire the remaining interest. In November
1998, we acquired Tritheim Technologies, Inc. In February 1999, we
acquired Amazing! Smart Card Technologies, Inc. and Greystone
Peripherals, Inc. Our recently completed acquisitions, and our
strategy generally, present a number of significant risks and
uncertainties, including the risks that:
we will not be able to retain the employees or business
relationships of acquired companies;
we will fail to realize any anticipated synergies or
other cost reduction objectives expected from the
acquisitions;
we will not be able to integrate the operations,
products, personnel and facilities of any acquired
company;
management's attention will be diverted to pursuing
acquisition opportunities and integrating acquired
products, technologies or companies and will be
distracted from performing its regular responsibilities;
the companies we acquire will fail to achieve or sustain
profitability;
we will incur or assume liabilities, including
liabilities that are unknown or not fully known to us at
the time of an acquisition; and
we will enter markets in which we have no prior
experience.
Additional acquisitions would require us to invest financial
resources and may have a dilutive effect on our earnings or book
value per share of common stock. We cannot assure you that we will
consummate any acquisitions in the future, that financing required
for future acquisitions will be available on acceptable terms or at
all, or that any past or future acquisitions will not materially
adversely affect our results of operations and financial condition.
WE DEPEND ON A RELATIVELY SMALL NUMBER OF CUSTOMERS FOR A
MAJORITY OF OUR REVENUES. Whirlpool Corp. accounted for
approximately 13% of our revenues on a consolidated basis in 1998. We
rely on a limited number of customers in the coin products segment of
our business. We expect to continue to depend upon a relatively small
number of customers for a majority of the revenues in our coin
products segment.
We generally do not enter into long-term supply commitments
with our technology and coin products customers. Instead, we bid on a
project basis and have supply contracts in place for each project.
Significant reductions in sales to any of our largest customers would
have a material adverse effect on our business. In addition, we
generate significant accounts receivable and inventory balances in
connection with providing products to our customers. A customer's
inability to pay for our products could have a material adverse
effect on our results of operations.
WE DEPEND ON A RELATIVELY SMALL NUMBER OF SUPPLIERS IN OUR COIN
PRODUCTS SEGMENT. We purchase mechanical coin chutes using our
patented designs and proprietary tooling exclusively from one
supplier in Taiwan. Our reliance on sole source suppliers involves
several risks, including a potential inability to obtain an adequate
supply of required components, price increases, late deliveries and
poor component quality. We cannot assure you that we will be able to
obtain our full requirements of such components in the future, that
prices of such components will not increase and that problems with
respect to quality and timely delivery will not occur. Disruption or
termination of the supply of these components could delay shipments
of our products, have a material adverse effect on our business and
operations and damage our relationships with our customers and our
reputation.
WE DEPEND ON THIRD PARTY MANUFACTURERS WHO ARE OUTSIDE OF OUR
CONTROL. We outsource manufacturing needs of a significant portion
of our technology products to third party contract manufacturers.
Outsourcing of manufacturing involves risks with respect to quality
assurance, cost and the absence of close engineering support. In
addition, financial, operational or supply problems encountered by
the third party manufacturers we use or may use in the future, their
subcontractors or their suppliers could result in our inability to
obtain timely delivery, if at all, of finished products. Any such
difficulties would adversely affect our financial results.
OUR FUTURE SUCCESS DEPENDS ON OUR ABILITY TO KEEP PACE WITH
TECHNOLOGICAL CHANGES AND INTRODUCE NEW PRODUCTS IN A TIMELY
MANNER.
The smart card industry is subject to rapid technological change.
Because new product development commitments must be made well in
advance of actual sales, new product decisions must anticipate future
demand as well as the speed and direction of technological change.
Our ability to remain competitive will depend upon our ability to
develop in a timely and cost effective manner new and enhanced
products at competitive prices. New product introductions or
enhancements by our competitors could cause a decline in sales or
loss of market acceptance of our existing products and lower profit
margins.
Our success in developing, introducing and selling new and
enhanced products depends upon a variety of factors, including:
product selections;
timely and efficient completion of product design and
development;
timely and efficient implementation of manufacturing
processes;
effective sales, service and marketing;
price; and
product performance in the field.
Our ability to develop new products also depends upon the
success of our research and development efforts. Our research and
development expenditures, on a pro forma basis for 1998, were $1.7
million, and are planned to increase substantially in the near term.
We cannot assure you that these expenditures will lead to the
development of viable products. We may need to devote substantially
more resources to our research and development efforts in the future.
THE DEMAND FOR THE MECHANICAL COIN METER SYSTEMS THAT WE
MANUFACTURE IS DECLINING. We design and manufacture mechanical coin
meter systems used primarily in the commercial laundry appliance
industry. Sales of mechanical coin meter systems accounted for
approximately 93% and 66% of our revenues in 1998 and for the six
months ended June 30, 1999, respectively. Our sales of mechanical
coin meter systems were $15.5 million, $17.0 million, $15.4 million
and $7.6 million in 1996, 1997, 1998 and the six month period ended
June 30, 1999, respectively. We expect the demand for the coin
handling equipment that we manufacture to decline as advances are
made towards the development of equipment utilizing electronic, smart
card or other technologies.
THE HIGHLY COMPETITIVE MARKETS IN WHICH WE OPERATE COULD HAVE A
MATERIAL ADVERSE EFFECT ON OUR BUSINESS AND OPERATING RESULTS. The
markets in which we operate are intensely competitive and
characterized by rapidly changing technology. We compete against
numerous companies, many of which have greater resources than we do,
and we believe that competition is likely to intensify.
We believe that the principal competitive factors affecting the
smart card market are:
the extent to which products support industry standards
and are capable of being operated or integrated with
other products;
technical features and level of security;
strength of distribution channels;
price;
product reputation, reliability, quality, performance and
customer support;
product features such as adaptability, functionality and
ease of use; and
competitor reputation, positioning and resources.
We cannot assure you that competitive pressures will not have a
material adverse effect on our business and operating results. Many
of our current and potential competitors have longer operating
histories in the smart card industry and significantly greater
financial, technical, sales, customer support, marketing and other
resources, as well as greater name recognition and a larger installed
base of their products and technologies than our company.
Additionally, there can be no assurance that new competitors will not
enter our business segments. Increased competition would likely
result in price reductions, reduced margins and loss of market share,
any of which would have a material adverse effect on our business and
operating results.
We experience competition from a number of companies across our
range of businesses. We also compete with original equipment
manufacturers, peripheral equipment manufacturers and others that
have greater resources than we do. We compete with Gemplus and
Schumberger Technologies, among others, in the manufacture and sale
of smart cards. Competitors for our smart card readers and writers
include SCM Microsystems, Gemplus, Utimaco, Towitoko Electronics and
Philips Electronics. In the future, we may also experience
competition from IBM and Microsoft. We compete with Danyl, ESD and
Set-O-Matic for our commercial laundry smart card products. Our
competitors in the disk duplication market include Intelligent
Computer Systems, CSC, Wytron, Symantec Corp. and MicroHouse.
Competitors in the digital flash camera market include SanDisk, Lexar
and SCM Microsystems.
We believe that the principal competitive factors affecting our
coin products business are:
quality of product;
delivery times;
ease of use;
marketing and customer service; and
price.
In the coin products segment of our business, we compete with
ESD, Set-O-Matic and Monarch, as well as alternative technologies
including electronic systems and smart card products. We also
experience indirect competition from certain of our customers that
currently offer alternative products or are expected to introduce
competitive products in the future.
OUR LONG PRODUCT SALES CYCLES SUBJECT US TO RISK. Our products
fall into two categories, those that are standardized and ready to
install and use and those that require significant development
efforts to implement within the purchasers' own systems. Those
products requiring significant development efforts tend to be newly
developed technologies that can represent major investments for
customers. We rely on potential customers' internal review processes
and systems requirements. The implementation of some of our products
involves deliveries of small quantities for pilot programs and
significant testing by the customers before firm orders are received
for production volumes. For these more complex products, the sales
process may take one year or longer, during which time we may expend
significant financial, technical and management resources, without
any certainty of a sale.
WE MAY BE LIMITED IN OUR USE OF OUR FEDERAL NET OPERATING LOSS
CARRYFORWARDS. As of June 30, 1999, we had federal net operating
loss carryforwards, subject to review by the Internal Revenue
Service, totaling approximately $80.0 million for federal income tax
purposes, approximately $6.0 million of which will expire at the end
of 1999, $12.0 million of which will expire at the end of 2000, $9.0
million of which will expire at the end of 2001 and $25.0 million of
which will expire at the end of 2002. We do not expect to earn any
significant taxable income prior to 2001, and may not do so until
later. A federal net operating loss can generally be carried back two
or three years and then forward fifteen or twenty years, depending on
the year in which the loss was incurred, and used to offset taxable
income earned by a company, and thus reduce its income tax liability.
Section 382 of the Internal Revenue Code provides that when a
company undergoes an ownership change, the corporation's use of its
net operating losses is limited in each subsequent year. An ownership
change occurs when, as of any testing date, the sum of the increases
in ownership of each shareholder that owns five percent or more of
the value of a company's stock as compared to that shareholder's
lowest percentage ownership during the preceding three-year period
exceeds fifty percentage points. For purposes of this rule, certain
shareholders who own less than five percent of a company's stock are
aggregated and treated as a single five-percent shareholder. We
intend to issue a substantial number of shares of our common stock in
connection with future acquisitions and public or private offerings.
In addition, the exercise of outstanding warrants and certain options
to purchase shares of our common stock may require us to issue
additional shares of our common stock. The issuance of a significant
number of shares of common stock could result in an ownership change.
If we were to experience such an ownership change, we estimate that
we would not be able to use a substantial amount of our available
federal net operating loss carryforwards to reduce our taxable
income.
The extent of the actual future use of our federal net
operating loss carryforwards is subject to inherent uncertainty
because it depends on the amount of otherwise taxable income we may
earn. We cannot give any assurance that we will have sufficient
taxable income in future years to use any of our federal net
operating loss carryforwards before they would otherwise expire.
OUR PROPRIETARY TECHNOLOGY IS DIFFICULT TO PROTECT AND MAY
INFRINGE ON THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES. Our
success depends significantly upon our proprietary technology. We
rely on a combination of patent, copyright and trademark laws, trade
secrets, confidentiality agreements and contractual provisions to
protect our proprietary rights. We seek to protect our software,
documentation and other written materials under trade secret and
copyright laws, which afford only limited protection. We currently
have a number of patent applications pending. We cannot assure you
that any of our applications will be approved, that any new patents
will be issued, that we will develop proprietary products or
technologies that are patentable, that any issued patent will provide
us with any competitive advantages or will not be challenged by third
parties. Furthermore, we cannot assure you that the patents of others
will not have a material adverse effect on our business and operating
results.
If our technology or products are determined to infringe upon
the rights of others, and we were unable to obtain licenses to use
the technology, we could be required to cease using the technology
and stop selling the products. We may not be able to obtain a license
in a timely manner on acceptable terms or at all. Any of these events
would have a material adverse effect on our financial condition and
results of operations.
Patent disputes are common in technology-related industries. We
cannot assure you that we will have the financial resources to
enforce or defend a patent infringement or proprietary rights action.
As the number of products and competitors in our target markets
grows, the likelihood of infringement claims also increases. Any
claim or litigation may be time-consuming and costly, cause product
shipment delays or require us to redesign our products or require us
to enter into royalty or licensing agreements. Any of these events
would have a material adverse effect on our business and operating
results. Despite our efforts to protect our proprietary rights,
unauthorized parties may attempt to copy aspects of our products or
to use our proprietary information and software. In addition, the
laws of some foreign countries do not protect proprietary and
intellectual property rights to as great an extent as do the laws of
the United States. Our means of protecting our proprietary and
intellectual property rights may not be adequate. There is a risk
that our competitors will independently develop similar technology,
duplicate our products or design around patents or other intellectual
property rights.
THE NATURE OF OUR PRODUCTS SUBJECTS US TO PRODUCT LIABILITY
RISKS. Our customers may rely on certain of our current products and
products in development to prevent unauthorized access to computer
networks, personal computers, computer files, cellular telephones,
digital video broadcasting, websites and real property. A malfunction
of or design defect in certain of our products could result in tort
or warranty claims. Although we attempt to reduce the risk of
exposure from such claims through warranty disclaimers and liability
limitation clauses in our sales agreements and by maintaining product
liability insurance, we cannot assure you that these measures will be
effective in limiting our liability for any damages. Any liability
for damages resulting from security breaches could be substantial and
could have a material adverse effect on our business and operating
results. In addition, a well-publicized actual or perceived security
breach involving our conditional access or security products could
adversely affect the market's perception of our products in general,
regardless of whether any breach is attributable to our products.
This could result in a decline in demand for our products, which
would have a material adverse effect on our business and operating
results.
WE MAY NOT BE ABLE TO ATTRACT AND RETAIN MANAGEMENT, TECHNICAL
AND OTHER KEY PERSONNEL. Our future success depends on our ability to
attract and retain management, technical and other key personnel at
the corporate level and at each of our subsidiaries. We cannot assure
you that we will be able to do so.
Our ability to execute our acquisition and growth plan depends
upon the continued services of Harry I. Freund, Chairman, Jay S.
Goldsmith, Vice Chairman, James J. Weis, President and Chief
Executive Officer and M. Richard Phillimore, Executive Vice
President/Smart Card Businesses. Our ability to execute our strategic
plan could be materially adversely affected should the services of
any of these individuals cease to be available to us. None of these
employees is subject to an agreement not to compete with us in the
event his services are terminated. We cannot guarantee that we will
be able to attract and retain our key personnel in the future.
Failure to attract or retain key personnel could have a material
adverse effect on our operations.
YEAR 2000 COMPLIANCE ISSUES COULD NEGATIVELY IMPACT OUR
BUSINESS. The Year 2000 issue concerns the potential exposures that
we and other companies have because certain computer systems,
computer chips and hardware use two digits, rather than four, to
define the applicable year. On January 1, 2000, these systems and
programs may recognize the date as January 1, 1900 and may process
data incorrectly or stop processing data altogether.
Status of Remediation
Our assessment of the impact of the Year 2000 issue focuses on
three functional areas:
information technology, which includes computer systems
and related application software;
embedded chips, which are hidden internal components of
many non-computer devices and equipment as well as
our own products; and
business partners, which include suppliers, vendors,
third party manufacturers and customers.
Based on our assessment to date, we believe that the current
versions of our products are Year 2000 ready. We are designing our
new products to be Year 2000 ready. Although our products have
undergone, or will undergo, our usual quality testing procedures, we
cannot assure you that our products will contain all necessary date
code changes. Furthermore, use of our products in connection with
other products which are not Year 2000 compliant, including
non-compliant hardware, software and firmware, may result in
inaccurate exchange of dates and result in performance problems or
system failures. In addition, older product versions may not be Year
2000 ready. Any failure of our products to perform properly or at
all, or any system malfunctions associated with the onset of Year
2000, could result in claims against us and have a material adverse
effect on us.
We have conducted a process to identify and assess potential
Year 2000 exposures to our business processes, infrastructure and
communications. Substantially all of the internal information
systems, communications systems, building security systems and
embedded chips in areas such as manufacturing processes have been
identified, assessed and categorized for Year 2000 compliance. We
have included computer hardware and software, operating systems and
utilities, desktop applications, computer peripherals, business
partners, embedded chips and plant facilities in the project scope.
The only items for which we do not know Year 2000 compliance
status are low-risk devices, such as certain alarm systems and office
equipment, which would not materially impact normal operations if
they malfunctioned, and certain embedded chips and packaged software
where the remediation is believed to require minimal effort. We have
several application programs used for certain critical functions such
as order entry, inventory management and accounting, which we expect
to remediate during the third quarter of 1999. In addition, we have
identified certain older generation personal computers, file servers,
embedded chips and telephone systems as requiring Year 2000 software
upgrades or replacement. While we expect all systems to be Year 2000
compliant, we can give no assurance that compliance will be achieved
with respect to those items not currently compliant or for which
compliance is not known. In addition, we cannot assure you that the
failure to ensure Year 2000 compliance will not have a material
adverse impact on our business and operating results.
Third Party Compliance
OurYear 2000 project scope extends to identifying and assessing
issues affecting suppliers' and customers' products, services,
systems and operations. We have identified approximately 150 major
suppliers and other third parties integral to the operations of our
business and have initiated communications with those parties. To
date, we have received responses from approximately 50% of those
contacted. For those suppliers or vendors deemed to be critical or
important to our business, we are following up on all unsatisfactory
responses or non-responses. We intend to arrange, to the extent
available, alternate supplier sources in the event a third party
vendor is deemed to be non-compliant or is materially impacted by
Year 2000 issues. However, we cannot assure you that we will be able
to identify and resolve any significant Year 2000 problems related to
third party products or services. Any failure of these suppliers or
other third parties to resolve Year 2000 problems with their systems
in a timely manner could have a material adverse effect on our
business, financial condition and results of operations.
Contingency Plans
We are currently in the process of developing contingency plans
for potential Year 2000 failures. We intend to develop, where
practicable, contingency plans for all mission critical processes by
the end of 1999. Any failure by us to address any unforeseen Year
2000 issues could adversely affect our business, financial condition
and results of operations.
Estimated Costs
We currently estimate that the costs for defined Year 2000
remediation projects and for project management, inventory and
identification of non-compliant systems will be less than $250,000.
We have not completed the scope, definition and contingency plans for
every identified non-compliant system, device or third party
provider, nor can we assure you that we have identified all possible
Year 2000 deficiencies. Accordingly, we cannot assure you that we
will timely identify and remedy all significant Year 2000 problems,
that any such remediation efforts will not involve significant time
and expense or that such problems or additional remediation
expenditures will not have a material adverse effect on our business,
financial condition and results of operations. We finance our Year
2000 expenditures through cash on hand and funds generated from
operations, and capitalize them to the extent they enhance the
capabilities and useful life of the underlying systems.
We have not assessed the specific financial impact of not being
Year 2000 compliant. In connection with our acquisitions of each of
Tritheim, Amazing and Greystone, certain of the sellers gave us
representations and warranties with respect to the Year 2000
compliance of the applicable company's information technology.
Subject to certain financial limitations, certain of the sellers are
required to indemnify us for any losses we may incur as a result of
any breach of such representations and warranties. These
indemnification obligations of such sellers expire in May 2000.
However, any failure to be Year 2000 compliant could have a material
adverse effect on our business, results of operations and financial
condition.
OUR ARTICLES OF INCORPORATION AND BY-LAWS, CERTAIN CHANGE OF
CONTROL AGREEMENTS, OUR RIGHTS PLAN AND PROVISIONS OF
PENNSYLVANIA
LAW COULD DETER TAKEOVER ATTEMPTS.
Blank check preferred stock. Our board of directors has the
authority to issue up to 136,566 shares of preferred stock and to fix
the rights, preferences, privileges and restrictions, including
voting rights, of these shares without any further vote or action by
the holders of our common stock. The rights of the holders of any
preferred stock that may be issued in the future may adversely affect
the rights of the holders of our common stock. The issuance of
preferred stock could make it more difficult for a third party to
acquire a majority of our outstanding voting stock, thereby delaying,
deferring or preventing a change of control. Such preferred stock may
have other rights, including economic rights, senior to our common
stock, and as a result, the issuance of the preferred stock could
limit the price that investors might be willing to pay in the future
for shares of our common stock and could have a material adverse
effect on the market value of our common stock.
Rights plan. Our rights plan entitles the registered holders of
rights to purchase shares of our class A preferred stock upon the
occurrence of certain events, and may have the effect of delaying,
deferring or preventing a change of control.
Change of control agreements. We are a party to change of
control agreements which provide for payments to certain of our
directors and executive officers under certain circumstances
following a change of control. Since the change of control agreements
require large cash payments to be made by any person effecting a
change of control, these agreements may discourage takeover attempts.
The change of control agreements provide that, if the services
of any person party to a change of control agreement is terminated
within three years following a change of control, that individual
will be entitled to receive, in a lump sum within 10 days of the
termination date, a payment equal to 2.99 times that individual's
average annual compensation for the shorter of the five years
preceding the change of control and the period the individual
received compensation from us for personal services. Assuming a
change of control were to occur at the present time, payments in the
following amounts would be required: Mr. Harry I. Freund $942,709;
Mr. Jay S. Goldsmith $942,709; Mr. David L. Herman $394,376 and Mr.
James J. Weis $1,419,180. If any such payment, either alone or
together with others made in connection with the individual's
termination, is considered to be an excess parachute payment under
the Internal Revenue Code, the individual will be entitled to receive
an additional payment in an amount which, when added to the initial
payment, would result in a net benefit to the individual, after
giving effect to excise taxes imposed by Section 4999 of the Internal
Revenue Code and income taxes on such additional payment, equal to
the initial payment before such additional payment. We would not be
able to deduct these payments for income tax purposes.
Pennsylvania law. We are a Pennsylvania corporation.
Anti-takeover provisions of Pennsylvania law could make it difficult
for a third party to acquire control of us, even if such change of
control would be beneficial to our shareholders.
Limited use of net operating loss carryforwards. As discussed
in " We may be limited in our use of our federal net operating loss
carryforwards," the potential loss of our available federal net
operating loss carryforwards to reduce our taxable income in the
event of an ownership change may have the effect of discouraging, or
otherwise preventing, a change of control of our company.
FLUCTUATIONS IN THE CURRENCY EXCHANGE RATE BETWEEN THE U.S.
DOLLAR AND THE NEW TAIWAN DOLLAR COULD HAVE AN ADVERSE EFFECT ON
OUR
OPERATING RESULTS. One of our principal suppliers is located in
Taiwan. Our purchases from this supplier were approximately $2.1
million in 1998 and are expected to continue at that level in the
future. As a result, a portion of our purchases is subject to certain
risks, including tariffs and other trade barriers, currency exchange risks
and exchange controls. These factors could have a material adverse
effect on our business and operating results.
Also, as a result of our Taiwanese purchases, a portion of our
supply costs are subject to significant fluctuations based upon
changes in the exchange rate of the new Taiwan dollar in relation to
the U.S. dollar. We do not currently engage in hedging activities
with respect to foreign currency exposure. Our management will
continue to monitor our exposure to currency fluctuations and, when
appropriate, may use financial hedging techniques in the future to
minimize the effect of these fluctuations.
WE ARE SUBJECT TO GOVERNMENT REGULATION. Market needs and
competitive pressures require that our products contain mathematical
methods used to protect data or establish the genuineness of data
called cryptographic algorithms, in order to protect information and
cash substitutes stored in smart cards. The U.S. and many other
governments restrict the export of products containing strong
cryptography for reasons of national security. In the case of the
U.S., strong cryptography means any product exceeding 40 bits of
symmetric algorithms or 512 bits of asymmetric algorithms. Companies
wishing to export products of this nature are subject to a license
requirement. Our PCDefender(TM) product uses a 448 bit symmetric key
for its privacy function, and would therefore require a license for
export. Currently, we do not export this product. However, if we
decide to export PCDefender(TM), we could not do so without obtaining
an export license. Export, import and usage of such cryptographic
algorithms are subject to a large and changing body of regulations in
the United States. Our failure to comply with any regulations that
may be enacted with respect to cryptographic algorithms would have a
material adverse effect on our business.
Federal, state and local regulations impose various
environmental controls on the discharge of chemicals and gases which
may be used in our present or future assembly processes. Moreover,
changes in such environmental rules and regulations may require us to
invest in capital equipment and implement compliance programs in the
future. Any failure by our company to comply with environmental rules
and regulations, including the discharge of hazardous substances,
would subject us to liabilities and would materially adversely affect
our operations.
Risks Related to Common Stock
THE MARKET PRICE OF OUR COMMON STOCK MAY FLUCTUATE
SIGNIFICANTLY. The stock market in general and the market for shares
of technology companies in particular have recently experienced
extreme price fluctuations, which have often been unrelated to the
operating performance of the affected companies. We believe that the
principal factors that may cause price fluctuations are:
fluctuations in our financial results;
general conditions or developments in the technology and
coin-products industries and the worldwide economy;
sales of our common stock into the marketplace;
the number of market makers for our common stock;
announcements of technological innovations or new or
enhanced products by us or our competitors or customers;
a shortfall in revenue, gross margin, earnings or other
financial results from operations or changes in analysts'
expectations; and
developments in our relationships with our customers and
suppliers.
We cannot be certain that the market price of our common stock
will not experience significant fluctuations in the future, including
fluctuations that are adverse and unrelated to our performance.
THE MARKET PRICE OF OUR COMMON STOCK MAY DECREASE IF A LARGE
NUMBER OF SHARES IS SOLD IN THE FUTURE. Future sales of our common
stock in the public market, or the issuance of shares of common stock
upon the exercise of stock options and warrants or otherwise, could
adversely affect the market price of our common stock and impair our
ability to raise capital through the sale of equity or equity-related
securities. As of the date of this prospectus, the following number
of shares of common stock will be issued or issuable:
Issued and outstanding . . . . . . . . . . . . . . . . . .18,465,194
Issuable upon exercise of currently-exercisable
stock options and warrants(1). . . . . . . . . . . . . . . 4,191,882
Issuable upon exercise of outstanding stock options
and warrants, whether or not
currently-exercisable(2) . . . . . . . . . . . . . . . . . 5,662,072
Restricted stock(3). . . . . . . . . . . . . . . . . . . . . .56,666
_____________________
(1) Currently exercisable at exercise prices ranging from
$1.12 to $10.25 per share.
(2) Of these, 512,718 become exercisable during the remainder
of 1999 and in 2000 at exercise prices ranging from $1.12
to $12.50 per share; 723,545 become exercisable in 2001
at exercise prices ranging from $1.12 to $12.50 per
share; and 233,927 become exercisable in 2002 and
thereafter at exercise prices ranging from $1.12 to
$10.75 per share.
(3) Includes 50,000 shares of common stock that an executive
officer will be entitled to receive in January 2000.
Of the unissued shares and the shares held by non-affiliates
identified in the table above, 4,169,949 are restricted securities
within the meaning of Rule 144 under the Securities Act, and may not
be sold in the absence of registration under the Securities Act
unless an exemption from registration is available. Such restricted
securities will be eligible for sale in the public market subject to
compliance with Rule 144. In addition, other exemptions may be
available for sales of such restricted securities held by
non-affiliates of our company.
We cannot predict the effect, if any, that market sales of
shares of common stock, or the availability of such shares of common
stock for sale, will have on the market price of the shares of common
stock prevailing from time to time. Nevertheless, sales of
substantial amounts of shares of common stock in the public market,
or the perception that such sales could occur, could adversely affect
prevailing market prices for the shares of common stock and could
impair our ability to raise capital through an offering of our equity
securities.
USE OF PROCEEDS
On July 2, 1997, our shareholders approved a modification of
the warrants. This modification provided, in part, that in order to
retain the warrants, each holder was required to exercise at any time
after August 14, 1997 but prior to 5:00 p.m., New York City time, on
September 15, 1997, at an exercise price of $1.95 per share of common
stock, at least 25% of the warrants owned by that holder as of
December 15, 1996, or December 17, 1996, in the case of the
underwriter's warrants. Warrant holders exercised an aggregate of
475,500 warrants into a total of 486,912 shares of common stock at an
exercise price of $1.95 per share in accordance with the
modification. The net proceeds we received amounted to $927,000. We
used these proceeds for general corporate purposes.
If all of the remaining warrants were exercised today at the
current exercise price, we would receive additional proceeds of
approximately $3.2 million. We cannot assure you that any warrant
will be exercised or that we will realize any proceeds upon the
exercise of warrants.
Because we do not know when we will receive any proceeds from
the exercise of warrants, or the amount of any proceeds we may
receive, we have not dedicated the proceeds to any particular use and
intend to add any proceeds to working capital.
Until used, we intend to invest any proceeds in government
securities, certificates of deposit, commercial paper, and other
short-term investments.
DESCRIPTION OF WARRANTS
Outstanding Common Stock
Purchase Warrants . . . . . . . . . . . 526,500, each of which entitles
the holder to purchase 1.037
shares of common stock, subject to
adjustment
Outstanding Underwriter's Warrants . . 900,000, each of which entitles
the holder to purchase 1.037
shares of commonstock, subject
to adjustment
Exercise Price
Exercise Price of Warrants . . . . . . Period per Share (1)
July 3, 1999 - July 2, 2000 $2.17
July 3, 2000 - July 2, 2001 $2.27
July 3, 2001 - July 2, 2002 $2.37
Expiration Date of Warrants . . . . . . 5:00 p.m., New York City time,
on July 2, 2002
Shares Outstanding as of
August 30, 1999 (2). . . . . . . . . . . 18,465,194
Shares Outstanding After Offering (3) . .19,944,475
_________________________
(1) Subject to adjustment in certain circumstances. See "Description
of Warrants."
(2) Does not include the following as of August 30, 1999:
an aggregate of 4,182,791 shares of common stock issuable
upon the exercise of outstanding options, of which
2,712,601 options were then exercisable at an average
weighted price of $2.83 per share.
the 1,479,281 shares of common stock issuable upon exercise
of the warrants;
an additional 247,500 shares which were reserved for
issuance under our stock option plans; and
56,666 shares of restricted stock.
(3) Assumes that the warrants are fully exercised. Does not include
the other exclusions set forth in Note 2 above.
In December 1986, we completed an underwritten public offering
under which we issued $30.0 million of 13% subordinated notes due
December 15, 1996 together with warrants to purchase 3,600,000 shares
of our common stock. We also issued warrants to purchase 1,200,000
shares of our common stock to the underwriter of that public
offering. Each of the warrants issued entitled the holder to
purchase shares of our common stock for five years, which period was
subsequently extended by five years. Subsequent to a reset of the
warrant price and exercise price per share in 1987, each warrant
entitled its holder to purchase 1.024 shares of common stock for
$1.95 per share, subject to adjustment. Unexercised warrants were to
expire on December 15, 1996, or December 17, 1996 in the case of the
underwriter's warrants.
On November 8, 1996, our board of directors, acting upon the
recommendation of a special committee of disinterested directors,
determined that it would be in our best interests to modify the
warrants. On November 7, 1996, the closing price of our common stock
was $1.375 per share. Our shareholders subsequently approved the
modification on July 2, 1997. As of July 2, 1997, a total of
2,257,050 warrants were outstanding entitling the holders to purchase
an aggregate of 2,311,220 shares of common stock.
The modification of the warrants approved by our shareholders
provided, in part, that in order to retain the warrants, each holder
was required to exercise at any time after August 14, 1997 but prior
to 5:00 p.m., New York City time, on September 15, 1997, at an
exercise price of $1.95 per share of common stock, at least 25% of
the warrants owned by that holder as of December 15, 1996, or
December 17, 1996, in the case of the underwriter's warrants.
Warrant holders exercised an aggregate of 475,500 warrants into a
total of 486,912 shares of common stock at an exercise price of $1.95
per share in accordance with the modification. The net proceeds we
received amounted to $927,000.
The modification resulted in the following changes to the
holders' unexercised warrants owned on December 15, 1996 or December
17, 1996, as the case may be:
Five-Year Extension. The expiration date was extended to
July 2, 2002; and
Increased Exercise Price. Subject to certain reset
provisions, the exercise price of the holders' remaining
warrants was increased from $1.95 per share to:
$2.00 per share for the period from September 15, 1997 through
July 2, 1998;
$2.10 per share during the year ending July 2, 1999;
$2.20 per share during the year ending July 2, 2000;
$2.30 per share during the year ending July 2, 2001; and
$2.40 per share during the year ending July 2, 2002.
As of August 30, 1999, 1,426,500 warrants were outstanding.
Members of our board of directors hold 1,417,500 of those warrants.
Under the terms of the agreements under which we issued the warrants,
an adjustment to the number of shares purchasable upon exercise of
the warrants is required if the issuance of options would result in
an increase or decrease of at least 1% of the warrant price. In
accordance with these reset provisions, in January 1999, the number
of shares of common stock purchasable upon the exercise of each
warrant increased to 1.037 and the exercise price per share decreased
to $2.07. On July 2, 1999, the exercise price per share increased to
$2.17.
Holders may exercise their warrants by surrendering to us, as
warrant agent, a warrant certificate signed by the warrant holder or
his duly authorized agent, at our principal executive offices:
PubliCARD, Inc.
75 Kings Highway Cutoff
Fifth Floor
Fairfield, Connecticut 06430
Attention: Antonio L. DeLise
(203) 368-6800
Upon any surrender of a warrant certificate, the holder must
indicate his election to exercise all or a portion of the warrants
evidenced by that certificate. Surrendered warrant certificates must
be accompanied by payment of the full applicable aggregate exercise
price of the warrants to be exercised. This payment may be made in
the form of a certified or official bank check, or any combination.
The warrants provide that the exercise price may be paid by the
surrender of the related notes, including accrued interest, if
applicable. Those notes are no longer outstanding and, accordingly,
the exercise price of the warrants may no longer be paid by the
surrender to us of notes.
Upon surrender of the warrants and payment of the aggregate
applicable exercise price, we will deliver or cause to be delivered,
to or upon the written order of the exercising warrant holders,
certificates representing the number of shares of common stock
purchased. If fewer than all of the warrants evidenced by any
certificate are exercised, we, as warrant agent, will deliver to the
exercising warrant holder a new warrant certificate representing the
unexercised warrants.
The number of shares purchasable upon the exercise of the
warrants and the purchase price per share are subject to further
adjustment in certain events, including:
the payment of stock dividends;
certain distributions of evidence of our indebtedness or
of assets; and
certain changes in our common stock.
We will not issue fractional shares of common stock upon the
exercise of warrants, but we will pay the cash value of any
fractional shares otherwise issuable.
Any or all of the warrants are redeemable at our option at any
time at $1.25 per warrant, except that we may not make any redemption
unless the closing price for our common stock has been at least 150%
of the exercise price of the warrants on any 20 trading days within a
period of 30 consecutive trading days ending no more than five days
prior to the date of the notice of redemption. We, as warrant agent,
will select warrants to be redeemed will be made in any manner we
deem in our discretion to be fair and appropriate. At least 30 days
prior to the redemption date, we will mail notice to each holder of a
warrant which has been called for redemption and we will publish
notice in the Wall Street Journal, National Edition, or, if that
edition is no longer published, then in a newspaper of general
circulation in New York City no more than 60 nor less than 30 days
prior to the mailing of notice to the holders. Any warrant so
redeemed may be exercised until the close of business on the business
day 15 days preceding the redemption date specified in the notice of
redemption.
We serve as the warrant agent. The transfer agent and
registrar for the our common stock is Continental Stock Transfer &
Trust Company, New York, New York.
PLAN OF DISTRIBUTION
We are offering the shares of common stock underlying the
warrants directly, without an underwriter. The holders of the
warrants may purchase shares of common stock directly from us upon
their exercise of the warrants in the manner described under
"Description of Warrants."
EXPERTS
The financial statements and schedules incorporated by
reference in this registration statement have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their
reports with respect to those financial statements and schedules, and
are incorporated by reference in this registration statement in
reliance upon the authority of that firm as experts in accounting and
auditing in giving those reports.
LEGALITY
The legality of the common stock being offered by this
prospectus is being passed upon by Schnader Harrison Segal & Lewis,
LLP, 1600 Market Street, Philadelphia, Pennsylvania 19103. In
addition, certain other matters in connection with this offering will
be passed upon for us by Kaye, Scholer, Fierman, Hays & Handler, LLP,
425 Park Avenue, New York, New York 10022.
You should rely only on the information contained in this prospectus.
No dealer, sales person or other person is authorized to give information
that is not contained in this prospectus. This prospectus is not an offer
to sell nor is it seeking an offer to buy these securities in any
jurisdiction where the offer or sale is not permitted. The information
contained in this prospectus is correct only as of the date of this prospectus,
regardless of the time of the delivery of this prospectus or any sale of
these securities.
PubliCARD, Inc.
1,479,281 Shares of
Common Stock, issuable
upon exercise of Warrants
_____________________
PROSPECTUS
____________________
_____________, 1999
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the estimated, except for the
SEC registration fee, fees and expenses in connection with the
issuance and distribution of the securities being registered:
SEC registration fee . . . . . . . . . . . . . . . . . . . $7,635.00 (1)
Reproducing registration statement and other
documents. . . . . . . . . . . . . . . . . . . . . . . . . 500.00
Legal fees and expenses. . . . . . . . . . . . . . . . . . 15,000.00
Trustee and warrant agent fees . . . . . . . . . . . . . . 20,000.00 (2)
Accounting fees and expenses . . . . . . . . . . . . . . . 2,500.00
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . 500.00
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 46,135.00
(1) This fee was paid in connection with the Registration Statement
on Form S-1 of the Registrant (No. 33-9344), dated December 17, 1986.
(2) These fees were incurred in connection with the initial offering
of the warrants in 1986.
Item 15. Indemnification of Directors and Officers.
The Pennsylvania Business Corporation Law, known as the PBCL,
permits a corporation to indemnify its directors and officers against
expenses, judgments, fines and amounts paid in settlement incurred by
them in connection with any pending, threatened or completed action
or proceeding, other than an action by or in the right of the
corporation, other than a derivative action by or in the right of the
corporation, and permits indemnification against expenses incurred in
connection with any pending, threatened or completed derivative
action, if the director or officer has acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the
best interests of the corporation; and, with respect to any criminal
proceeding in a third-party action, had no reasonable cause to
believe his or her conduct was unlawful. The PBCL provides that
expenses incurred in defending any action or proceeding may be paid
by the corporation in advance of the final disposition upon receipt
of an undertaking by or on behalf of the director or officer to repay
the amount if it is ultimately determined that the director or
officer is not entitled to be indemnified by the corporation under
Pennsylvania law.
Under the PBCL, the statutory provisions for indemnification
and advancement of expenses are non-exclusive with respect to any
other rights, such as contractual rights, to which a person seeking
indemnification or advancement of expenses may be entitled under our
by-laws or otherwise. These contractual or other rights may require
indemnification against judgments, fines and amounts paid in
settlement incurred by the indemnified person both in connection with
derivative actions and third-party actions, except where the act or
failure to act giving rise to the claim for indemnification is
determined by a court to have constituted willful misconduct or
recklessness.
The PBCL permits a corporation to purchase and maintain
insurance on behalf of any director or officer of the corporation
against any liability asserted against the director or officer and
incurred in that capacity, whether or not the corporation would have
the power to indemnify the director or officer against that
liability.
Under Section 1713 of the PBCL, if a by-law adopted by the
shareholders so provides, a director shall not be personally liable,
as such, for monetary damages for any action taken or omitted unless
the director both (a) breached or failed to perform the duties of his
or her office under Pennsylvania law and (b) the breach or failure
constituted self dealing, willful misconduct or recklessness.
Article V of our by-laws provides for both the limitation of
the monetary liability of our directors and for the mandatory
indemnification of directors and officers.
Under Article V of our by-laws, a director will not be held
personally liable to us, our shareholders or third parties for
monetary damages as a consequence of any act or omission unless the
director both (a) breached or failed to perform the duties of his or
her office under Pennsylvania law and (b) the breach or failure
constituted self dealing, willful misconduct or recklessness.
In addition, under Article V of our by-laws, a director,
officer or, at the board of directors' discretion, employee or other
person who is or was serving in any capacity at the request of or for
the benefit of PubliCARD, will be indemnified and held harmless by us
for all actions taken by him or her and for all failure to take
action to the fullest extent permitted by Pennsylvania law against
all expense, liability and loss, including, without limitation,
attorneys' fees, judgments, fines, taxes, penalties and amounts paid
or to be paid in settlement, actually and reasonably incurred by that
director, officer, employee or other person in connection with any
threatened, pending or completed action, suit or proceeding,
including, without limitation, an action, suit or proceeding by or in
the right of PubliCARD, whether civil, criminal, administrative or
investigative. No indemnification is permitted where the act or
failure to act by the person seeking to be indemnified constitutes
willful misconduct or recklessness as determined by a court of
competent jurisdiction.
We currently maintain directors' and officers' liability
insurance providing for coverage of up to $15,000,000. Our assets
and equity, however, may be called upon to provide indemnification to
officers and directors to the extent any indemnified amount exceeds
our liability insurance limit, or to the extent any matter required
to be indemnified by our by-laws falls outside the scope of the
policy's coverage.
To the extent that indemnification for liabilities arising
under the Securities Act may be permitted to directors and officers
pursuant to the provisions described above, we have been informed
that, in the opinion of the SEC, such indemnification is against
public policy as expressed in the Securities Act and is therefore
unenforceable.
Item 16. Exhibits and Financial Statement Schedules.
Exhibit No. Exhibit
3.1 Amended and Restated Articles of Incorporation,
amended and restated through November 2, 1998, of
PubliCARD. Incorporated by reference to
PubliCARD's Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 1998, dated
November 9, 1998.
3.2 By-laws of PubliCARD. Incorporated by reference
to PubliCARD's Annual Report on Form 10-K for the
fiscal year ended December 31, 1990, dated
March 28,1991.
3.3 Certificate of Designation, Preferences and
Rights of Class A Preferred Stock, First Series.
Incorporated by reference from PubliCARD's
Registration Statement on Form 8-A, dated
September 26, 1988.
4.1 Form of option to purchase common stock of
PubliCARD issued in connection with the Stock
Purchase Agreement, dated April 12, 1985, among
PubliCARD, Balfour Securities Corporation and the
Purchasers. Incorporated by reference from
PubliCARD's Annual Report on Form 10-K for the
year ended December 31, 1994, dated March 31, 1995.
4.2 Form of Warrant Agreement, dated 1986, between
PubliCARD and J. Henry Schroder Bank & Trust
Company, as Warrant Agent. Incorporated by
reference from PubliCARD's Registration Statement
on Form S-1, dated October 8, 1986.
4.3 Form of Amendment No. 1 to Warrant Agreement,
dated August 13, 1997, between PubliCARD and
Publicker Industries Inc., successor to J. Henry
Schroder Bank & Trust Company, as Warrant Agent.
Incorporated by reference from PubliCARD's
Current Report on Form 8-K, filed on August 15, 1997.
4.4 Form of Warrant Agreement, dated 1986, between
PubliCARD and Drexel Burnham Lambert
Incorporated. Incorporated by reference from
PubliCARD's Registration Statement on S-1, dated
October 8, 1986.
4.5 Form of Amendment No. 1 to Warrant Agreement,
dated August 13, 1997, between PubliCARD and
Harry I. Freund and Jay S. Goldsmith. Incorporated by
reference from PubliCARD's Current Report on Form 8-K,
filed on August 15, 1997.
4.6 Amended and Restated Rights Agreement, dated as
of August 7, 1998, between PubliCARD and
Continental Stock Transfer & Trust Company, as
Rights Agent. Incorporated by reference from
PubliCARD's Current Report on Form 8-K, filed on
September 17, 1998.
5.1 Opinion of Schnader, Harrison, Segal & Lewis with
respect to legality of securities being registered.*
10.1 Agreements, dated as of August 1987, between PubliCARD and
Harry I. Freund, Jay S. Goldsmith, David L. Herman and
James J. Weis concerning a change of control of PubliCARD.
Incorporated by reference from PubliCARD's Form 8 Amendment to
PubliCARD's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1987, filed on December 18, 1987.
10.2 PubliCARD 1991 Stock Option Plan. Incorporated by reference
from PubliCARD's Form 8 Amendment to PubliCARD's Annual Report
on Form 10-K for the year ended December 31, 1991, dated
August 14, 1992.
10.3 Employment Agreement between PubliCARD and James J. Weis
dated February 17, 1987. Incorporated by reference from
PubliCARD's Form 8 Amendment to PubliCARD's Annual Report
on Form 10-K for the year ended December 31, 1991, dated
August 14, 1992.
10.4 PubliCARD 1993 Long Term Incentive Plan. Incorporated by
reference from PubliCARD's Annual Report on Form 10-K for the
year ended December 31, 1993, dated March 29, 1994.
10.5 PubliCARD Non-employee Director Stock Option Plan. Incorporated
by reference from PubliCARD's Annual Report on Form 10-K for
the year ended December 31, 1993, dated March 29, 1994.
10.6 Asset Purchase Agreement, dated August 16, 1996, among
Masterview Window Company, Inc., PubliCARD, Hanten Acquisition
Co. and Masterview Acquisition Corp. Incorporated by reference
from PubliCARD's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1996, dated November 14, 1996.
10.7 Agreement and Plan of Merger, dated as of October 30, 1998,
Tritheim Technologies, Inc. and the Security Holders of Tritheim
Technologies, Inc. Incorporated by reference from PubliCARD's
Current Report on Form 8-K, filed on December 7, 1998.
23.1 Consent of Arthur Andersen LLP, Stamford, Connecticut.
23.2 Consent of Arthur Andersen LLP, Tampa, Florida.
23.3 Consent of Arthur Andersen LLP, San Jose, California.
23.4 Consent of Schnader, Harrison, Segal & Lewis (included in
Exhibit 5.1).*
24.1 Power of Attorney (included on the signature page).
_______________________
* Previously filed.
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes 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.
(b)The undersigned registrant hereby undertakes that, for the
purpose of determining any liability under the Securities Act of
1933, 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.
(c) The undersigned registrant hereby undertakes 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.
(d) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of
1933, each filing of the registrant's annual report pursuant to
section 13(a) or section 15(d) of the Securities Exchange Act of
1934 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
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(e) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 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 Securities and Exchange
Commission such indemnification is against public policy as
expressed in the 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 Act and will be governed by the final adjudication of such
issue.
(f) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under
the Securities Act of 1933, the information omitted
from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of
this registration statement as of the time it was
declared effective.
(2) For the purpose of determining any liability under
the Securities Act of 1933, each post-effective
amendment that contains a form of prospectus 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.
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, 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 registration statement
to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Fairfield, State of Connecticut,
on August 31, 1999.
PUBLICARD, INC.
By: /s/ JAMES J. WEIS
Name: James J. Weis
Title: President and Chief Executive Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of
1933, this Registration Statement has been signed by the
following persons in the capacities and on the dates
indicated.
Each person whose signature appears below hereby
authorizes and appoints James J. Weis and Antonio L. DeLise,
and either of them, with full power of substitution and
resubstitution, as his true and lawful attorney-in-fact, to
sign and file with the Securities and Exchange Commission on
his behalf, individually and in all capacities, all
amendments and post-effective amendments to this Registration
Statement, with exhibits thereto, and other documents in
connection therewith.
Signature Title Date
/S/ JAMES J. WEIS Director, Chief Executive August 31, 1999
James J. Weis and President (principal
executive officer)
/S/HARRY I. FREUND Director and Chairman August 31, 1999
Harry I. Freund
/S/ JAY S. GOLDSMITH Director and Vice Chairman August 31, 1999
Jay S. Goldsmith
/S/ CLIFFORD B. COHN
Clifford B. Cohn Director August 31, 1999
/S/ DAVID L. HERMAN
David L. Herman Director August 31, 1999
/S/ L. G. SCHAFRAN
L. G. Schafran Director August 31, 1999
____________________
Hatim A. Tyabji Director August 31, 1999
/S/ ANTONIO L.DELISE
Antonio L. DeLise Vice President, Chief August 31, 1999
Financial Officer and
Secretary (principal
financial and accounting
officer)
EXHIBIT INDEX
Exhibit No. Exhibit Page No.
3.1 Amended and Restated Articles of Incorporation,
amended and restated through November 2, 1998, of
PubliCARD. Incorporated by reference to
PubliCARD's Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 1998, dated
November 9, 1998.
3.2 By-laws of PubliCARD. Incorporated by reference
to PubliCARD's Annual Report on Form 10-K for the
fiscal year ended December 31, 1990, dated March 28, 1991.
3.3 Certificate of Designation, Preferences and
Rights of Class A Preferred Stock, First Series.
Incorporated by reference from PubliCARD's
Registration Statement on Form 8-A, dated
September 26, 1988.
4.1 Form of option to purchase common stock of
PubliCARD issued in connection with the Stock
Purchase Agreement, dated April 12, 1985, among
PubliCARD, Balfour Securities Corporation and the
Purchasers. Incorporated by reference from
PubliCARD's Annual Report on Form 10-K for the
year ended December 31, 1994, dated March 31, 1995.
4.2 Form of Warrant Agreement, dated 1986, between
PubliCARD and J. Henry Schroder Bank & Trust
Company, as Warrant Agent. Incorporated by
reference from PubliCARD's Registration Statement
on Form S-1, dated October 8, 1986.
4.3 Form of Amendment No. 1 to Warrant Agreement,
dated August 13, 1997, between PubliCARD and
Publicker Industries Inc., successor to J. Henry
Schroder Bank & Trust Company, as Warrant Agent.
Incorporated by reference from PubliCARD's
Current Report on Form 8-K, filed on August 15, 1997.
4.4 Form of Warrant Agreement, dated 1986, between
PubliCARD and Drexel Burnham Lambert
Incorporated. Incorporated by reference from
PubliCARD's Registration Statement on S-1, dated
October 8, 1986.
4.5 Form of Amendment No. 1 to Warrant Agreement,
dated August 13, 1997, between PubliCARD and
Harry I. Freund and Jay S. Goldsmith. Incorporated by
reference from PubliCARD's Current Report on Form 8-K,
filed on August 15, 1997.
4.6 Amended and Restated Rights Agreement, dated as
of August 7, 1998, between PubliCARD and
Continental Stock Transfer & Trust Company, as
Rights Agent. Incorporated by reference from
PubliCARD's Current Report on Form 8-K, filed on
September 17, 1998.
5.1 Opinion of Schnader, Harrison, Segal & Lewis with
respect to legality of securities being registered.*
10.1 Agreements, dated as of August 1987, between PubliCARD and
Harry I. Freund, Jay S. Goldsmith, David L. Herman and
James J. Weis concerning a change of control of PubliCARD.
Incorporated by reference from PubliCARD's Form 8 Amendment to
PubliCARD's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1987, filed on December 18, 1987.
10.2 PubliCARD 1991 Stock Option Plan. Incorporated by reference
from PubliCARD's Form 8 Amendment to PubliCARD's Annual Report
on Form 10-K for the year ended December 31, 1991, dated
August 14, 1992.
10.3 Employment Agreement between PubliCARD and James J. Weis
dated February 17, 1987. Incorporated by reference from
PubliCARD's Form 8 Amendment to PubliCARD's Annual Report
on Form 10-K for the year ended December 31, 1991, dated
August 14, 1992.
10.4 PubliCARD 1993 Long Term Incentive Plan. Incorporated by
reference from PubliCARD's Annual Report on Form 10-K for the
year ended December 31, 1993, dated March 29, 1994.
10.5 PubliCARD Non-employee Director Stock Option Plan. Incorporated
by reference from PubliCARD's Annual Report on Form 10-K for
the year ended December 31, 1993, dated March 29, 1994.
10.6 Asset Purchase Agreement, dated August 16, 1996, among
Masterview Window Company, Inc., PubliCARD, Hanten Acquisition
Co. and Masterview Acquisition Corp. Incorporated by reference
from PubliCARD's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1996, dated November 14, 1996.
10.7 Agreement and Plan of Merger, dated as of October 30, 1998,
Tritheim Technologies, Inc. and the Security Holders of Tritheim
Technologies, Inc. Incorporated by reference from PubliCARD's
Current Report on Form 8-K, filed on December 7, 1998.
23.1 Consent of Arthur Andersen LLP, Stamford, Connecticut.
23.2 Consent of Arthur Andersen LLP, Tampa, Florida.
23.3 Consent of Arthur Andersen LLP, San Jose, California.
23.4 Consent of Schnader, Harrison, Segal & Lewis (included in
Exhibit 5.1).*
24.1 Power of Attorney (included on the signature page).
_______________________
* Previously filed.
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to
the reference to our Firm under the caption "Experts" and to
the use of our report on the consolidated financial
statements of PubliCARD, Inc. dated March 26, 1999,
incorporated by reference in Post Effective Amendment No. 4
to the Registration Statement on Form S-3 and the related
Prospectus of PubliCARD, Inc. dated August 31, 1999.
/s/ Arthur Andersen LLP
Stamford, Connecticut
August 30, 1999
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to
the reference to our Firm under the caption "Experts" and to
the use of our report on the financial statements of Tritheim
Technologies, Inc. dated November 6, 1998 included in
PubliCARD, Inc.'s Current Report on Form 8-K/A dated February
5, 1999 and incorporated by reference in Post Effective
Amendment No. 4 to the Registration Statement on Form S-3 and
the related Prospectus of PubliCARD, Inc. dated August 31,
1999.
/s/ Arthur Andersen LLP
Tampa, Florida
August 30, 1999
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to
the reference to our Firm under the caption "Experts" and to
the use of our reports on the financial statements of
Amazing! Smart Card Technologies, Inc. and Greystone
Peripherals, Inc. dated April 16, 1999 and April 23, 1999,
respectively included in PubliCARD, Inc.'s Current Reports on
Forms 8-K/A dated April 27, 1999 and May 6, 1999,
respectively, and incorporated by reference in Post Effective
Amendment No. 4 to the Registration Statement on Form S-3 and
the related Prospectus of PubliCARD, Inc. dated August 31,
1999.
/s/ Arthur Andersen LLP
San Jose, California
August 30, 1999
