SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 23, 1998
PUBLICARD, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 0-29794 23-0991870
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
One Post Road, Fairfield, Connecticut 06430
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 254-3900
(Former name or former address, if changed since last report.)
The undersigned registrant hereby amends in its entirety Item 7 of its
Current Report on Form 8-K originally filed with the Securities and Exchange
Commission on December 7, 1998 as set forth below.
Item 7. Financial Statements and Exhibits
(a) Financial statements of businesses acquired
Audited financial statements of Tritheim Technologies, Inc.
Report of Independent Certified Public Accountants
Balance Sheet as of December 31, 1997
Statement of Operations for the year ended December 31, 1997
Statement of Changes in Stockholders' Deficit for the year ended
December 31, 1997
Statement of Cash Flows for the year ended December 31, 1997
Notes to Financial Statements
Unaudited financial statements of Tritheim Technologies, Inc.
Balance Sheet as of September 30, 1998
Statement of Operations for the nine months ended September 30, 1998
and 1997
Statement of Changes in Stockholders' Deficit for the nine months
ended September 30, 1998
Statement of Cash Flows for the nine months ended September 30, 1998
and 1997
Notes to Unaudited Financial Statements
(b) Pro forma financial information
Unaudited pro forma condensed combined balance sheet as of September 30,
1998 and unaudited pro forma condensed combined statements of income
for the year ended December 31, 1997 and the nine months ended
September 30, 1998
Notes to unaudited pro forma condensed combined financial information
(c) Exhibits:
2.1 Agreement and Plan of Merger dated as of October 30, 1998 among
PubliCARD, Inc., Publicker Smart Card Acquisition Co., Tritheim
Technologies, Inc. and the Security Holders of Tritheim Technologies,
Inc. (previously filed with Current Report on Form 8-K filed on
December 7, 1998)
23.1 Consent of Independent Certified Public Accountants
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PUBLICARD, INC.
(Registrant)
February 5, 1999
/s/ Antonio L. DeLise
Antonio L. DeLise, Vice President
Chief Financial Officer and Secretary
TRITHEIM TECHNOLOGIES, INC.
FINANCIAL STATEMENTS
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1997,
TOGETHER WITH REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of
Tritheim Technologies, Inc.:
We have audited the accompanying balance sheet of Tritheim Technologies, Inc.
(a Florida Subchapter S corporation) as of December 31, 1997, and the related
statements of operations, changes in stockholders' deficit and cash flows for
the year then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Tritheim Technologies, Inc.
as of December 31, 1997, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
Tampa, Florida,
November 6, 1998
<PAGE>
TRITHEIM TECHNOLOGIES, INC.
BALANCE SHEET -- DECEMBER 31, 1997
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $247,430
Accounts receivable, net of allowance
of approximately $11,000 8,259
Inventories 45,513
Total current assets 301,202
PROPERTY AND EQUIPMENT, net 36,340
Total assets $337,542
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 30,386
Accrued expenses 31,900
Note payable to bank 100,451
Notes payable to stockholders current, net of
unamortized discount of approximately
$15,000 (Note 5) 317,033
Total current liabilities 479,770
NOTES PAYABLE TO STOCKHOLDERS, net of current maturities
and unamortized discount of approximately $17,000
(Note 5) 33,333
COMMITMENTS AND CONTINGENCIES (Note 6)
STOCKHOLDERS' DEFICIT:
Common stock, no par value; 10,000,000 shares
authorized, 6,260,386 shares issued and
outstanding 466,891
Accumulated deficit (642,452)
Total stockholders' deficit (175,561)
Total liabilities and stockholders' deficit $337,542
The accompanying notes are an integral part of this balance sheet.
<PAGE>
TRITHEIM TECHNOLOGIES, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
REVENUES $ 61,074
OPERATING EXPENSES:
Cost of goods sold 26,335
Research and development expenses 125,835
Selling and marketing expenses 128,796
General and administrative expenses 155,708
Total operating expenses 436,674
Loss from operations (375,600)
INTEREST EXPENSE, net (33,122)
NET LOSS $(408,722)
The accompanying notes are an integral part of this statement.
TRITHEIM TECHNOLOGIES, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1997
Common Stock Accumulated
Shares Amount Deficit Total
BALANCE, December 31, 1996 5,280,000 $10,560 $(233,730) $(223,170)
Issuance of common stock 980,386 456,331 - 456,331
Net loss - - (408,722) (408,722)
BALANCE, December 31, 1997 6,260,386 $466,891 $(642,452) $(175,561)
The accompanying notes are an integral part of this statement.
<PAGE>
TRITHEIM TECHNOLOGIES, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(408,722)
Adjustments to reconcile net loss to net
cash used in operating activities-
Depreciation and amortization 6,558
Increase in operating assets and liabilities-
Accounts receivable (8,259)
Inventory (45,513)
Accounts payable and accrued expenses 46,023
Net cash used in operating activities (409,913)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (35,142)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable to stockholders 160,878
Proceeds from note payable to bank 200,878
Principal payments on note payable to bank (100,427)
Proceeds from issuance of common stock 422,669
Net cash provided by financing activities 683,998
NET INCREASE IN CASH AND CASH EQUIVALENTS 238,943
CASH AND CASH EQUIVALENTS, beginning of year 8,487
CASH AND CASH EQUIVALENTS, end of year $ 247,430
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 5,240
SUPPLEMENTAL DISCLOSURE OF NON-CASH
FINANCING ACTIVITIES:
Allocation of proceeds from notes payable to
stockholders to common stock $ 33,662
The accompanying notes are an integral part of this statement.
<PAGE>
TRITHEIM TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ORGANIZATION AND LIQUIDITY:
Tritheim Technologies, Inc. (the Company) was incorporated in the State of
Florida on October 5, 1995. Prior to 1997, the Company was in the
development stage. The Company designs, develops and manufactures
intelligent personal smart card readers and writers designed specifically
for (1) companies who integrate these products with their existing
applications, (2) financial institutions who distribute the products to
customers for electronic commerce, (3) cable television companies who wish
to authenticate customers and purchases, and (4) distributors and
value-added resellers who resell the products. The Company also designs
software for developing smart card applications. The majority of the
Company's customers are located in the United States.
The Company incurred a substantial operating loss and negative cash flows
from operations for the year ended December 31, 1997. As further discussed
in Note 10 to the financial statements, management plans to obtain future
funding from its new parent company, PubliCARD, Inc. (formerly Publicker
Industries, Inc.) (PubliCARD). PubliCARD has committed to funding the
operations of the Company through at least December 31, 1998. Management
believes that this funding will allow the Company to increase sales and
marketing efforts, which in turn should generate increased revenues and
improve operating results.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
Short-term investments totaling $202,879 are classified within cash and
cash equivalents at December 31, 1997.
Inventories
Inventories consist of electronic parts and components purchased for
resale. All inventories are stated at the lower of cost or market using
the first-in, first-out method.
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the estimated useful lives of depreciable
assets.
Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments, which extend the
useful lives of existing equipment, are capitalized and depreciated. Upon
retirement or disposition of property and equipment, the cost and related
accumulated depreciation are removed from the accounts, and any resulting
gain or loss is recognized in the statement of operations.
Computer Software Development Costs
All costs incurred to establish the technological feasibility of a computer
software product to be sold, leased or otherwise marketed are charged to
research and development expense as incurred. Technological feasibility
of a computer software product is established when the Company has
completed all planning, designing, coding and testing activities that are
necessary to establish that the product can be produced to meet its design
specifications including functions, features and technical performance
requirements.
The Company's policy is to capitalize costs incurred after the
development of a working model. Costs to date, subsequent to the
development of a working model, have not been material.
Revenue Recognition
During 1997, the majority of the Company's revenues resulted from sales of
kits that include smart card readers and software for developing smart card
applications. Revenue from these sales is recognized when a contract has
been executed and the product has been shipped, at which time there are no
significant remaining obligations. Provisions are made at the time of sale
for any insignificant obligations, including telephone support.
During 1997, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) 97-2, "Software Revenue
Recognition," which is effective for financial statements beginning after
December 15, 1997, and supersedes SOP 91-1. The AICPA subsequently
issued SOP 98-4, which deferred for one year the effective date of certain
provisions of SOP 97-2 with respect to vendor-specific objective evidence.
The Company has early adopted SOP 97-2 during the year ended December 31,
1997, which did not have a material impact on the financial statements.
Income Taxes
The Company has elected to be taxed under the provisions of Subchapter S of
the Internal Revenue Code. Accordingly, the accompanying statement of
operations does not include a provision for income taxes. All income or
loss is reported through the stockholders' personal tax returns. The tax
returns and the amount of taxable income are subject to examination by
federal and state taxing authorities. If such examinations result in
changes to taxable income, the tax liabilities of the stockholders could
be changed accordingly.
Fair Value of Financial Instruments
The Company believes that the carrying value of financial instruments on the
accompanying balance sheet approximates their fair value.
New Accounting Pronouncements
In June 1997, Statement of Financial Accounting Standards (SFAS) No. 131,
"Disclosures About Segments of an Enterprise and Related Information" (SFAS
131) was issued. SFAS 131 requires that companies report financial and
descriptive information about their reportable operating segments. Segment
information to be reported is to be based upon the way management organizes
the segments for making operating decisions and assessing performance. The
Company believes that the future effects of SFAS 131 will not be significant
to its financial statements.
3. PROPERTY AND EQUIPMENT:
A summary of property and equipment at December 31, 1997, is as follows:
Useful
Lives in
Years Amount
Computer equipment 5 $10,748
Production equipment 5 29,537
Furniture and fixtures 5 2,179
42,464
Less- Accumulated depreciation (6,124)
$36,340
4. NOTE PAYABLE TO BANK:
Note payable to bank consists of a promissory note, bearing interest at 8.5
percent, with principal and interest due on March 4, 1998. The note is
collateralized by a certificate of deposit owned by a stockholder of the
Company.
5. NOTES PAYABLE TO STOCKHOLDERS:
Notes payable to stockholders are unsecured and consist of the following as
of December 31, 1997:
Amount
Notes payable to stockholder, bearing interest at 9%,
principal and interest due in balloon payments at
various dates through December 1998, net of
unamortized discount of approximately $15,000 $317,033
Note payable to stockholder, bearing interest at 8%,
interest payable quarterly, principal due in
August 2008, net of unamortized discount of
approximately $17,000 33,333
Less- Current maturities (317,033)
Notes payable to stockholders,
net of current maturities $ 33,333
6. COMMITMENTS AND CONTINGENCIES:
Operating Leases
The Company leases office space on a month-to-month basis and leases
certain computer equipment under an operating lease.
Future aggregate minimum rental payments are as follows as of December
31, 1997:
Year Ending
December 31, Amount
1998 $ 5,916
1999 5,916
2000 4,930
$16,762
Rent expense under operating leases for the year ended December 31, 1997,
totaled $10,914.
Product Royalty Agreements
The Company has entered into two product royalty agreements with various
entities that have provided their licenses or product designs to the
Company. One agreement requires that royalties shall be paid on the
basis of the quantity of units manufactured. Royalty fees range from
$0.10 to $0.20 per unit manufactured. The other agreement requires a
royalty of $2 to $12 for each time a product is licensed to an end user.
No significant royalty fees were incurred under these arrangements during
1997.
7. RELATED-PARTY TRANSACTIONS:
The Company's management consists of stockholders who are employed by the
Company and are either not paid a salary or are paid salaries at amounts
which are significantly below market rates. Management intends to
increase these salaries once funding is obtained from an outside
investor.
8. CAPITAL STOCK:
Upon the Company's incorporation on October 5, 1995, authorized
capitalization consisted of 10,000 shares of $1.00 par value common
stock. The stockholders amended the articles of incorporation on
November 22, 1995, to authorize 100,000 shares of $0.10 par value common
stock.
On July 1, 1997, the stockholders amended the Company's articles of
incorporation to increase the number of authorized shares of common stock
to 10,000,000, with no par value, and declared a 50 to 1 stock split on
the Company's outstanding common stock. The shares outstanding and all
other references to shares of common stock reported have been restated to
give retroactive effect to the stock split.
On September 29, 1997, the Company issued 50,000 shares of common stock
to a stockholder in exchange for loaning the Company $50,000. On
November 8, 1997, the Company issued 50,986 shares of common stock to a
stockholder in exchange for extending the maturity date on a loan until
November 8, 1998. Approximately $34,000 in debt proceeds were allocated
to common stock and recorded as a discount to the related debt. The
discounts are being amortized over the remaining terms of the respective
notes.
During the fourth quarter of 1997, the Company issued approximately
844,000 shares of common stock to employees and new investors at a price
of $0.50 per share, the estimated fair value of the common stock during
that period.
9. STOCK COMPENSATION PLANS:
Stock Option Plan
During October 1997, the Company adopted a stock option plan (the Plan)
which allows the issuance of incentive stock options at an exercise price
of $0.50 per share. Options granted under the Plan vest immediately and
expire 10 years from the date of grant. As of December 31, 1997,
354,616 options were outstanding at an exercise price of $0.50 per share.
Stock option activity for the year ended December 31, 1997, was as
follows:
Weighted
Average
Number of Exercise
Shares Price
Outstanding, beginning of period - $ -
Granted 354,616 0.50
Exercised - -
Canceled or expired - -
Outstanding, end of period 354,616 $0.50
Options vested at year-end 354,616 $0.50
The weighted-average remaining contractual life for options outstanding
at December 31, 1997, was 4.75 years.
The Company accounts for its stock-based compensation plan under
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
to Employees" (APB 25), under which no compensation expense has been
recognized. In October 1995, the Financial Accounting Standards Board
issued SFAS No. 123, "Accounting for Stock-Based Compensation"
(SFAS 123), which allows companies to continue following the accounting
guidance of APB 25, but requires disclosure of net income and earnings
per share for the effects on compensation expense, had the accounting
guidance of SFAS 123 been adopted.
The Company has elected SFAS 123 for disclosure purposes. Under SFAS
123, the fair value of each option granted has been estimated as of the
grant date using the minimum value method, which is equivalent to using
the Black-Scholes valuation method for a non-public company, with the
following weighted-average assumptions: risk-free interest rate of 6
percent, expected life of five years and no expected dividends. Adopting
the accounting guidance of SFAS 123 would have resulted in an increase in
compensation expense of approximately $2,500 for the year ended December
31, 1997.
10. SUBSEQUENT EVENTS:
On October 30, 1998, the Company executed a definitive merger agreement
with PubliCARD, whereby PubliCARD would acquire 100 percent of the common
stock of the Company in exchange for 1,495,000 shares of PubliCARD common
stock plus certain other considerations. Consummation of the transaction
is subject to approval of the Company's shareholders and other customary
conditions. In conjunction with the execution of the letter of intent,
PubliCARD provided an interest free advance of $300,000 to the Company.
The advance is evidenced by a note payable and secured by all of the
assets of the Company. The note payable is due the earlier of September
18, 1999, or the date on which the Company receives any debt or equity
capital from any person.
Subsequent to December 31, 1997, the Company entered into agreements with
various entities related to software licensing arrangements and
distribution partnerships. Under the software licensing arrangements,
the Company generally grants the rights and license to its software
technology in exchange for other technology, or in exchange for the
distribution and marketing of the related software. Under the
distribution agreements, the Company generally partners with a
distributor in exchange for providing that distributor with volume
discounts on the Company's products.
The Company adopted an Employee Stock Purchase Plan (ESPP) effective
January 1, 1998. Under the terms of the ESPP, employees who have been
with the Company for at least three months may choose to have up to 15
percent of their salary withheld to purchase the Company's common stock.
The purchase price of the stock is $0.50 per share. Approximately 17,000
shares were purchased under the ESPP during 1998. On September 30, 1998,
the ESPP was terminated.
TRITHEIM TECHNOLOGIES, INC.
BALANCE SHEET -- SEPTEMBER 30, 1998
UNAUDITED
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $283,538
Accounts receivable, net of allowance of approximately $21,376 81,901
Inventories 29,852
Total current assets 395,291
PROPERTY AND EQUIPMENT, net 42,705
Total assets $437,996
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 35,917
Accrued expenses 68,500
Note payable to bank 105,024
Note payable to PubliCARD, Inc. 300,000
Notes payable to stockholders-current, net of unamortized
discount of approximately $2,000 442,462
Total current liabilities 951,903
NOTES PAYABLE TO STOCKHOLDERS, net of current maturities
and unamortized discount of approximately $10,000 51,345
STOCKHOLDERS' DEFICIT:
Common stock, no par value; 10,000,000 shares authorized,
6,366,620 shares issued and outstanding 483,299
Accumulated deficit (1,048,551)
Total stockholders' deficit (565,252)
Total liabilities and stockholders' deficit $437,996
See accompanying note to unaudited financial statements.
<PAGE>
TRITHEIM TECHNOLOGIES, INC.
STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
UNAUDITED
September 30,
1998 1997
REVENUES $ 202,908 $ 41,865
OPERATING EXPENSES:
Cost of goods sold 71,633 7,001
Research and development expenses 206,001 56,979
Selling and marketing expenses 94,739 72,728
General and administrative expenses 188,085 102,031
Total operating expenses 560,458 238,739
Loss from operations (357,550) (196,874)
INTEREST EXPENSE, net 48,549 4,242
NET LOSS $(406,099) $(201,116)
See the accompanying notes to unaudited financial statements
<PAGE>
TRITHEIM TECHNOLOGIES, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
UNAUDITED
Common Stock Accumulated
Shares Amount Deficit Total
BALANCE, December 31, 1997 6,260,386 $466,891 $(642,452) $(175,561)
Issuance of common stock 106,234 16,408 - 16,408
Net loss - - (406,099) (406,099)
BALANCE, September 30, 1998 6,366,620 $483,299 $(1,048,551) $(565,252)
See the accompanying notes to unaudited financial statements.
<PAGE>
TRITHEIM TECHNOLOGIES, INC.
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
UNAUDITED
September 30,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES: $(406,099) $(201,116)
Net loss
Adjustments to reconcile net loss to net
cash used in operating activities-
Depreciation and amortization 4,290 4,060
Increase in operating assets and
liabilities-
Accounts receivable (73,642) (6,484)
Inventories 15,661 (30,986)
Accounts payable and accrued expenses 42,132 10,308
Net cash used in operating activities (417,658) (224,218)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (10,656) (41,074)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable to stockholders 143,441 173,925
Proceeds from note payable to bank 4,573 100,000
Proceeds from note payable to PubliCARD, Inc. 300,000 -
Proceeds from issuance of common stock 16,408 311,008
Net cash provided by financing
activities 464,422 584,933
NET INCREASE IN CASH AND CASH EQUIVALENTS 36,108 319,641
CASH AND CASH EQUIVALENTS, beginning of period 247,430 8,487
CASH AND CASH EQUIVALENTS, end of year $283,538 $328,128
See the accompanying notes to unaudited financial statements.
<PAGE>
TRITHEIM TECHNOLOGIES, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
UNAUDITED
1. BASIS OF PRESENTATION:
The accompanying unaudited financial statements reflect all normal and
recurring adjustments that are, in the opinion of management, necessary to
present fairly the financial position of Tritheim Technologies, Inc.
("Tritheim") as of September 30, 1998 and the results of their operations
and their cash flows for the nine months ended September 30, 1998 and 1997.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted. These financial statements should be read in
conjunction with the audited financial statements and notes thereto of
Tritheim Technologies, Inc. as of and for the year ended December 31, 1997.
2. SUBSEQUENT EVENT
On November 24, 1998 (the "Closing Date"), PubliCARD, Inc. ("PubliCARD")
completed the acquisition of Tritheim pursuant to an Agreement and Plan of
Merger dated as of October 30, 1998 (the "Merger Agreement") whereby a
wholly-owned subsidiary of PubliCARD merged with and into Tritheim. As a
result of this merger, Tritheim became a wholly-owned subsidiary of
PubliCARD. As consideration in the merger, holders of Tritheim's common
stock received a total of 1,495,037 shares of common stock of PubliCARD in
exchange for their shares of common stock of Tritheim. In addition,
pursuant to the Merger Agreement options to purchase 354,616 shares of
Tritheim common stock outstanding immediately prior to the closing of the
merger were converted into options to purchase 83,270 shares of PubliCARD
common stock with an exercise price of $2.00 per share (subject to anti-
dilution adjustments). These PubliCARD options are exercisable from the
Closing Date until the fifth anniversary of the Closing Date. Furthermore,
pursuant to the Merger Agreement, PubliCARD issued on the Closing Date
options to purchase 250,000 shares of PubliCARD common stock to all of
the salaried employees of Tritheim to encourage them to remain in the
employ of Tritheim. These options have an exercise price of $2.00 per share
(subject to anti-dilution adjustments) and will be exercisable from the
third anniversary of the Closing Date until the eighth anniversary of the
Closing Date. Pursuant to the Merger Agreement, PubliCARD satisfied
Tritheim's indebtedness, including accrued interest, to a bank in the amount
of $102,000 and to former shareholders of Tritheim in the amount of
$531,000.
<PAGE>
PUBLICARD, INC.
AND SUBSIDIARY COMPANIES
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial statements
give effect to the acquisition by PubliCARD, Inc. ("PubliCARD" or the
"Company") of all of the issued and outstanding common stock of Tritheim
Technologies, Inc. ("Tritheim") in a business combination accounted for by
the purchase method of accounting. The unaudited pro forma condensed
combined financial statements are derived from the historical financial
statements of PubliCARD and Tritheim.
The unaudited pro forma condensed combined balance sheet gives effect to the
acquisition as if it had occurred on September 30, 1998. The unaudited pro
forma condensed combined statements of income for the year ended
December 31, 1997 and the nine months ended September 30, 1998 give effect
to the acquisition as if it had occurred at the beginning of such period.
The pro forma adjustments are based on certain assumptions that management
believes are reasonable under the circumstance. The pro forma information
is not necessarily indicative of the results that would have been reported
had such event actually occurred on the dates specified, nor is it intended
to project PubliCARD's results of operations or financial position for
any future period or date. The information set forth should be read in
conjunction with PubliCARD's audited financial statements for the year
ended December 31, 1997 included in the Company's Form 10-K for the year
ended December 31, 1997, the Company's unaudited consolidated financial
statements for the periods ended March 31, 1998, June 30, 1998 and
September 30, 1998 included in the Company's Forms 10-Q for such periods
and the financial statements of Tritheim included elsewhere in this
Form 8-K/A.
<PAGE>
PUBLICARD, INC.
AND SUBSIDIARY COMPANIES
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF SEPTEMBER 30, 1998
(in thousands of dollars)
PubliCARD Tritheim Pro forma Pro forma
Historical Historical Adjustments Balances
ASSETS
Cash $10,024 $284 ($598)(b) $9,153
(557)(c)
Trade receivables 4,162 82 - 4,244
Inventories 2,744 29 - 2,773
Other 284 - - 284
Total current assets 17,214 395 (1,155) 16,454
Property, plant & equipment, net 3,904 43 - 3,947
Goodwill 2,824 - 7,865(a) 10,689
Other assets 1,777 - (300)(d) 1,477
$25,719 $438 $6,410 $32,567
LIABILITIES AND
SHAREHOLDERS' EQUITY
Notes payable and current
maturities of long-term debt $134 $847 ($547)(b) $134
(300)(d)
Accounts payable 1,286 36 - 1,322
Accrued liabilities 5,257 69 - 5,326
Total current liabilities 6,677 952 (847) 6,782
Long-term debt 1,039 51 (51)(b) 1,039
Other non-current liabilities 8,500 - - 8,500
Total liabilities 16,216 1,003 (898) 16,321
Redeemable shares - - 1,357(e) 1,357
Shareholders' equity
Common shares 1,695 483 (483)(f) 1,821
126 (e)
Additional paid-in capital 50,475 - 8,260 (e) 58,735
Accumulated deficit (34,460) (1,048) 1,048 (f) (37,460)
(3,000)(a)
Common shares held in treasury (8,207) - - (8,207)
Total shareholders' equity 9,503 (565) 5,951 14,889
$25,719 $438 $6,410 $32,567
PUBLICARD, INC.
AND SUBSIDIARY COMPANIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(in thousands of dollars except share amount)
PubliCARD Tritheim Pro forma Pro forma
Historical Historical Adjustments Balances
Net sales and revenues $19,580 $203 - $19,783
Costs and expenses:
Costs of sales and services 13,636 72 - 13,708
Selling expenses 1,016 95 - 1,111
General, administrative and
research and development
expenses 5,287 394 1,121 (g) 6,802
19,939 561 1,121 21,621
Income (loss) from operations (359) (358) (1,121) (1,838)
Other (income) expenses:
Interest income (420) - 34 (i) (386)
Interest expense 245 48 (48) (h) 245
Cost of pensions-non operating 641 - - 641
Other expense 819 - - 819
1,285 48 (14) 1,319
Net income (loss) from
continuing operations ($1,644) ($406) ($1,107) ($3,157)
Earnings (loss) per common
share ($.013) ($0.22)
Weighted average number of
shares outstanding 13,124,601 1,495,037(j) 14,619,638
PUBLICARD, INC.
AND SUBSIDIARY COMPANIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(in thousands of dollars except share amount)
PubliCARD Tritheim Pro forma Pro forma
Historical Historical Adjustments Balances
Net sales and revenues $26,134 $61 - $26,195
Costs and expenses:
Costs of sales and services 17,610 26 - 17,636
Selling expenses 1,238 129 - 1,367
General, administrative and
research and development 8,251 282 1,505(g) 10,038
27,099 437 1,505 29,041
Income (loss) from operations (965) (376) (1,505) (2,846)
Other (income) expenses:
Interest income (696) - 34 (i) (662)
Interest expense 381 33 (33)(h) 381
Cost of pensions-non operating 768 - - 768
Other expense 270 - - 270
723 33 1 757
Income (loss) from continuing
operations ($1,688) ($409) (1,506) (3,603)
Earnings (loss) per common share ($0.12) ($0.23)
Weighted average number of shares
outstanding 14,057,396 1,495,037(j) 15,552,433
PUBLICARD, INC.
AND SUBSIDIARY COMPANIES
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
On November 24, 1998 (the "Closing Date"), PubliCARD, Inc. ("PubliCARD" or the
"Company") completed the acquisition of Tritheim pursuant to an Agreement and
Plan of Merger dated as of October 30, 1998 (the "Merger Agreement") whereby a
wholly-owned subsidiary of PubliCARD merged with and into Tritheim. As a result
of this merger, Tritheim became a wholly-owned subsidiary of PubliCARD. As
consideration in the merger, holders of Tritheim's common stock received a
total of 1,495,037 shares of common stock of PubliCARD in exchange for their
shares of common stock of Tritheim. The merger will be accounted for as a
purchase.
In addition, pursuant to the Merger Agreement options to purchase 354,616
shares of Tritheim common stock outstanding immediately prior to the closing
of the merger were converted into options to purchase 83,270 shares of PubliCARD
common stock with an exercise price of $2.00 per share (subject to anti-dilution
adjustments). These PubliCARD options are exercisable from the Closing Date
until the fifth anniversary of the Closing Date. Furthermore, pursuant to the
Merger Agreement, PubliCARD issued on the Closing Date options to purchase
250,000 shares of PubliCARD common stock to all of the salaried employees of
Tritheim to encourage them to remain in the employ of Tritheim. These options
have an exercise price of $2.00 per share (subject to anti-dilution adjustments)
and will be exercisable from the third anniversary of the Closing Date until
the eighth anniversary of the Closing Date.
Pursuant to the Merger Agreement, the Company is required to register the
shares of PubliCARD common stock issued as the merger consideration (other
than the approximately 1,253,771 shares issued to officers of Tritheim and one
additional employee of Tritheim), approximately 241,266 shares, under a shelf
registration statement under the Securities Act of 1933. In the event that
the shelf registration statement is not effective by the six month anniversary
of the Closing Date, the holders of the shares entitled to such registration
rights will have the right, for a specified period of time, to cause the
Company to repurchase their shares for a cash purchase price equal to the fair
market value (as defined in the Merger Agreement) of the shares on the date
of repurchase.
Pursuant to the Merger Agreement, the PubliCARD satisfied Tritheim's
indebtedness, including accrued interest, to a bank and to former shareholders
of Tritheim.
The pro forma adjustments included in the unaudited pro forma condensed
combined financial statements were as follows:
(a) Under the purchase method of accounting, the purchase price is allocated
to the assets and liabilities assumed based on their estimated fair
values. Allocations are subject to valuations as of the date of the
purchase transaction. The amount and components of the estimated purchase
price along with the preliminary allocation of the estimated purchase
price are as follows (in thousands):
Purchase price:
Estimated value of common stock and stock options $ 9,743
Estimated acquisition expenses 557
$10,300
Allocation of purchase price:
Negative book value of net assets of Tritheim $ (565)
In-process research and development 3,000
Goodwill 7,865
$10,300
For purposes of the accompanying unaudited pro forma condensed combined
financial statements, the aggregate purchase price has been allocated to
the net assets acquired, with the remainder recorded as goodwill on the
basis of preliminary estimates of fair values. These preliminary
estimates of fair value were determined by management based on information
currently available. The Company has retained independent valuation
professionals to assist in the determination of the value to be assigned
to the individual assets acquired, including intangible assets and
in-process research and development. While the pro forma information
has been presented based on the best information currently available to
management, the final allocation of the purchase price will be based on
a complete evaluation of the assets and liabilities of Tritheim. The
final valuation may result in values that are different from management's
estimates as included in the unaudited pro forma condensed combined
financial statements.
As stated above, the purchase price has been allocated on the basis of
preliminary estimates of fair value. Management currently estimates that
the allocation to in-process research and development will range from
$3,000,000 to $5,000,000. The unaudited pro forma condensed combined
statements of income exclude the write off of the estimated value of the
acquired in-process research and development due to its non-recurring
nature. The unaudited pro forma condensed combined balance sheet reflects
an allocation of $3,000,000 to in-process research and development.
(b) Represents the repayment of Tritheim's indebtedness, including accrued
interest, to a bank and to former shareholders of Tritheim.
(c) Represents payment of acquisition related expenses.
(d) Represents the elimination of a $300,000 loan made by the Company to
Tritheim on September 18, 1998.
(e) Represents the estimated value of common stock and stock options issued
by the Company as consideration in the merger transaction. Pursuant to
the Merger Agreement, the holders of 241,266 shares are entitled for a
specified period of time, to cause the Company to repurchase their shares
for a cash purchase price equal to the fair market value (as defined in
the Merger Agreement) of the shares on the date of repurchase. As such,
these shares have been reflected under the caption "Redeemable shares".
(f) Represents the elimination of Tritheim's equity accounts.
(g) Represents the amortization of goodwill over an estimated life of five
years.
(h) Represents the elimination of interest expense on Tritheim's indebtedness
which is assumed to be repaid as of the beginning of the period presented.
(i) Represents the reduction of interest income due to the repayment of
Tritheim's indebtedness and payment of acquisition expenses as of the
beginning of the period presented.
(j) Represents the issuance of shares of the Company's common stock to the
former shareholders of Tritheim.
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation by reference of our report dated November 6, 1998, relating
to the financial statements of Tritheim Technologies, Inc. as of and for the
year ended December 31, 1997 included in this Form 8-K/A Amendment No. 1 into
PubliCARD, Inc.'s previously filed Registration Statement on Form S-1 File
No. 33-9344, Registration Statement on Form S-3 File No. 33-9344, Registration
Statement on Form S-8 File No. 33-56838 and Registration Statement on Form
S-8 File No. 33-88876.
/s/Arthur Andersen LLP
Tampa, Florida
February 5, 1999
