<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 1, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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PUBLICARD, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
PENNSYLVANIA 23-0991870
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification No.)
organization)
</TABLE>
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
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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. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] --------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] --------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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<CAPTION>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common stock, par value $0.10 per
share(2)........................ 2,370,000 shares $6.75 $15,997,500 $4,447.31
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Common stock, par value $0.10 per
share(3)........................ 899,500 shares $6.8125 $6,127,843.75 $1,703.54
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c).
(2) This row represents the calculation of the registration fee for the
2,370,000 shares included in this Registration Statement as originally filed
on September 22, 1999. Such fee was paid on September 22, 1999.
(3) This row represents the calculations of the registration fee for the 899,500
additional shares included in this Amendment No. 1 to the Registration
Statement.
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.
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<PAGE> 2
PROSPECTUS
3,269,500 SHARES
COMMON STOCK
PUBLICARD, INC.
Certain of our shareholders identified in this prospectus are offering for sale
from time to time under this prospectus up to 3,269,500 shares of our common
stock, which were acquired by the selling shareholders in Regulation S and
private placement transactions in September 1999. The selling shareholders may
sell these shares from time to time on the over-the-counter market in regular
brokerage transactions, in transactions directly with market makers or in
privately negotiated transactions. For additional information on the methods of
sale, you should refer to the section entitled "Plan of Distribution" on page
15. We will not receive any portion of the proceeds from the sale of these
shares by the selling shareholders.
Our common stock is traded on the Nasdaq National Market under the symbol
"CARD." On September 29, 1999, the last reported sale price of our common stock
on the Nasdaq National Market was $7.625 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 3 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
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
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Risk Factors................................................ 3
Use of Proceeds............................................. 13
Selling Shareholders........................................ 14
Plan of Distribution........................................ 15
Where You Can Find More Information......................... 15
Legal Matters............................................... 16
Experts..................................................... 16
</TABLE>
In this prospectus, unless we indicate otherwise, "we," "us," "our" and
"PubliCARD" refer to PubliCARD, Inc. and our subsidiaries.
PubliCARD was incorporated in the Commonwealth of Pennsylvania in 1913. Our
principal executive offices are located at 75 Kings Highway Cutoff, Fifth Floor,
Fairfield, Connecticut 06430. Our telephone number is (203) 368-6800.
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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.
Sections of this prospectus contain forward-looking statements, including,
without limitation, statements concerning possible or assumed future results of
operations of PubliCARD preceded by, followed by or that include the words
"believes," "expects," "anticipates," "estimates," "intends," "plans" or similar
expressions. For those statements, we claim the protection of the safe harbor
for forward-looking statements contained in the U.S. Private Securities
Litigation Reform Act of 1995.
Forward-looking statements are not guarantees of future performance. They
involve risks, uncertainties and assumptions. You should understand that such
statements made under "Risk Factors" and elsewhere in this document could affect
our future results and could cause those results to differ materially from those
expressed in such forward-looking statements.
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 September
15, 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" in our
Annual Report for the year ended December 31, 1998 and our Consolidated
Financial Statements.
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.
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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;
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- 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;
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- 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 believe that the principal competitive factors affecting our coin
products business are:
- quality of product;
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- 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 $83.0 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 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
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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 our company 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
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incorrectly or stop processing data altogether. In that event, our products or
the products of our suppliers could fail to perform, which could result in
claims against us and could otherwise have a material adverse effect on our
business and operating results.
Status of Assessment
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. New products are being designed to be Year
2000 ready. Although our products have undergone, or will undergo, our usual
quality testing procedures, there can be no assurance 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
Our Year 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.
9
<PAGE> 11
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
10
<PAGE> 12
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.
11
<PAGE> 13
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:
<TABLE>
<S> <C>
Issued and outstanding...................................... 18,472,809
Issuable upon exercise of currently-exercisable stock
options and warrants(1)................................... 4,304,267
Issuable upon exercise of outstanding stock options and
warrants, whether or not currently-exercisable(2)......... 5,833,457
Restricted stock(3)......................................... 56,666
</TABLE>
- ---------------
(1) Currently exercisable at exercise prices ranging from $1.12 to $10.25 per
share.
(2) Of these, 532,385 become exercisable during the remainder of 1999 and in
2000 at exercise prices ranging from $1.12 to $12.50 per share; 743,212
become exercisable in 2001 at exercise prices ranging from $1.12 to $12.50
per share; and 253,593 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, 4,129,949 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
12
<PAGE> 14
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
The proceeds from the sale of shares of common stock under this prospectus
are solely for the account of the selling shareholders. Accordingly, we will not
receive any proceeds from the sale of the shares being sold by the selling
shareholders under this prospectus.
13
<PAGE> 15
SELLING SHAREHOLDERS
The following table sets forth certain information known to us with respect
to beneficial ownership of PubliCARD common stock as of September 30, 1999 by
each selling shareholder. The following table assumes that the selling
shareholders sell all of the shares acquired by them in Regulation S and private
placement transactions in September 1999. PubliCARD is unable to determine the
exact number of shares that actually will be sold.
The number and percentage of shares beneficially owned is based on
21,742,309 shares issued and outstanding as of the date of this prospectus,
determined in accordance with Rule 13d-3 of the Securities Exchange Act of 1934,
and the information is not necessarily indicative of beneficial ownership for
any other purpose. Under such rule, beneficial ownership includes any shares as
to which the individual has sole or shared voting power or investment power and
also any shares which the individual has the right to acquire within 60 days of
the date of this prospectus through the exercise of any stock option or other
rights.
<TABLE>
<CAPTION>
MAXIMUM NUMBER
COMMON STOCK OF SHARES OF COMMON STOCK
BENEFICIALLY COMMON BENEFICIALLY
OWNED PRIOR TO STOCK TO BE SOLD OWNED AFTER
THIS OFFERING IN THIS OFFERING THIS OFFERING(1)
----------------- ---------------- -----------------
SELLING SHAREHOLDER NUMBER PERCENT NUMBER PERCENT
- ------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Baltic Overseas Finance Ltd....................... 170,000 * 170,000 0 0
Benjamin J. Jesselson 8/21/74 Trust............... 25,000 * 25,000 0 0
Citicorp Trustee Co. Ltd. a/c The Partners Fund... 45,000 * 45,000 0 0
Peter Frederick Dicks............................. 30,000 * 30,000 0 0
GAM Worldwide Inc................................. 71,500 * 71,500 0 0
CM Investment Nominees Ltd........................ 123,000 * 100,000 23,000 *
J. Rothschild Assurance plc -- Life............... 900,000 4.1% 900,000 0 0
J. Rothschild Assurance plc -- Pension............ 555,000 2.6% 555,000 0 0
J. Rothschild International
Assurance -- Managed............................ 295,000 1.4% 295,000 0 0
J. Rothschild International Assurance -- U$
Managed......................................... 27,500 * 27,500 0 0
Karen Ann Hendler Trust........................... 291,600 1.3% 15,000 276,600 1.3%
Leonard M. Ross Revocable Trust u/d/t 12/20/85.... 830,661 3.8% 350,000 480,661 2.2%
Lewis C. Pell, Custodian for Candice N. Pell...... 56,000 * 20,000 36,000 *
Ronald Koenig..................................... 45,000 * 20,000 25,000 *
Michael G. Jesselson 4/8/71 Trust................. 25,000 * 25,000 0 0
Nancy Gail Hendler Trust.......................... 291,600 1.3% 15,000 276,600 1.3%
Jack Nash......................................... 360,000 1.7% 160,000 200,000 *
October 1983 Trust f/b/o Jesselson
Grandchildren................................... 200,000 * 50,000 150,000 *
Jessica H. Pell................................... 95,000 * 20,000 75,000 *
Joseph Schueller.................................. 430,950 2.0% 27,500 403,450 1.9%
Dr. Edward Steinberg.............................. 50,000 * 10,000 40,000 *
TDG Funds Ltd..................................... 106,000 * 106,000 0 0
Vicki Lynn Hendler Trust.......................... 291,600 1.3% 15,000 276,600 1.3%
Karen Weil........................................ 347,506 1.6% 17,000 330,506 1.5%
Uzi Zucker........................................ 200,000 * 200,000 0 0
</TABLE>
- ---------------
(1) Assumes the maximum number of shares registered under the registration
statement of which this prospectus forms a part is sold.
* Less than 1%.
14
<PAGE> 16
PLAN OF DISTRIBUTION
A total of 3,269,500 shares of PubliCARD common stock may be offered and
sold from time to time by the selling shareholders under this prospectus. Each
selling shareholder will act independently from PubliCARD in making decisions
with respect to the timing, manner and size of each sale. Each selling
shareholder may sell all or a portion of the shares owned by him from time to
time through the Nasdaq National Market and may sell shares of PubliCARD common
stock to or through one or more broker-dealers at prices prevailing on the
Nasdaq National Market at the times of such sales. Each selling shareholder may
also make private sales directly or through one or more broker-dealers.
Broker-dealers participating in such transactions may receive compensation in
the form of discounts, concessions or commissions from the selling shareholder
effecting such sales. The selling shareholders and any broker-dealers who act in
connection with sales of PubliCARD common stock may be deemed to be
"underwriters" as that term is defined in the Securities Act, and any
commissions received by them and profit on any resale of the shares of PubliCARD
common stock might be deemed to be underwriting discounts and commissions under
the Securities Act. In effecting sales, broker-dealers engaged by a selling
shareholder may arrange for other broker-dealers to participate.
The selling shareholders will pay all discounts and selling commissions, if
any, fees and expenses of counsel and other advisors to the selling
shareholders, or any of them, and any other expenses incurred in connection with
the registration and sale of the PubliCARD common stock, other than the
registration fee payable to the SEC hereunder, the listing fee to be paid for
listing the shares of PubliCARD common stock on the Nasdaq National Market, fees
and expenses relating to the registration or qualification of the shares of
PubliCARD common stock pursuant to any applicable state securities or "blue sky"
laws and the fees and expenses of PubliCARD's counsel and independent
accountants, which will be paid by PubliCARD.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-3 relating to
the common stock being offered. This prospectus is filed as part of the
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 such
reports, proxy statements and other information at the SEC's public reference
facilities:
<TABLE>
<S> <C> <C>
WASHINGTON, D.C. NEW YORK CHICAGO
Judiciary Plaza
450 Fifth Street, N.W. Seven World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661-2511
</TABLE>
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
15
<PAGE> 17
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
LEGAL MATTERS
The validity of the common stock being offered hereby is being passed upon
for PubliCARD by Schnader Harrison Segal & Lewis LLP, Philadelphia,
Pennsylvania. In addition, certain other matters in connection with this
offering will be passed upon for PubliCARD by Kaye, Scholer, Fierman, Hays &
Handler, LLP, New York, New York.
EXPERTS
The audited financial statements of PubliCARD incorporated by reference
from PubliCARD's Annual Report on Form 10-K for the year ended December 31,
1998, as amended, the audited financial statements of Greystone for the year
ended December 31, 1998 incorporated by reference from PubliCARD's Current
Report on Form 8-K/A dated May 6, 1999, the audited financial statements of
Amazing for the years ended December 31, 1998 and 1997 incorporated by reference
from PubliCARD's Current Report on Form 8-K/A dated April 27, 1999 and the
audited financial statements of Tritheim for the year ended December 31, 1997
incorporated by reference from PubliCARD's Current Report on Form 8-K/A dated
February 5, 1999 have been audited by Arthur Andersen LLP, independent auditors,
as set forth in their reports thereon appearing therein, and are included in
reliance upon such reports given upon the authority of such firm as experts in
accounting and auditing.
16
<PAGE> 18
- ------------------------------------------------------
- ------------------------------------------------------
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.
3,269,500 SHARES
COMMON STOCK
--------------------
PROSPECTUS
--------------------
, 1999
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 19
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, the National Association of Securities Dealers, Inc. (the
"NASD") filing fee and the Nasdaq National Market listing fee, fees and
expenses, other than underwriting discounts and commissions, in connection with
the offering described in this registration statement:
<TABLE>
<S> <C>
SEC registration fee........................................ $ 6,151
Printing and engraving costs................................ 10,000
Legal fees and expenses..................................... 10,000
Accounting fees and expenses................................ 7,500
Nasdaq National Market listing fee.......................... 17,500
Miscellaneous............................................... 1,349
-------
Total.................................................. $52,500
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
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 an action by or in the right of the corporation, a "derivative action"),
and permits such 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 PubliCARD's By-laws or otherwise. Such
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 such capacity, whether or not
the corporation would have the power to indemnify the director or officer
against such 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 PubliCARD's By-laws provides for both the limitation of the
monetary liability of the directors of PubliCARD and for the mandatory
indemnification of directors and officers.
II-1
<PAGE> 20
Under Article V of PubliCARD's By-laws, a director will not be held
personally liable to PubliCARD, its 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 PubliCARD's 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 PubliCARD 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 such 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.
PubliCARD currently maintains directors' and officers' liability insurance
providing for coverage of up to $15,000,000. PubliCARD's assets and equity,
however, may be called upon to provide indemnification to officers and directors
to the extent any indemnified amount exceeds PubliCARD's liability insurance
limit, or to the extent any matter required to be indemnified by PubliCARD's
By-laws falls outside the scope of the policy's coverage.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors and officers pursuant to the foregoing provisions,
PubliCARD has 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.
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -------
<S> <C>
4.1 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.
4.2 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.
4.3 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.
4.4 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.
4.5 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.
4.6 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.
</TABLE>
II-2
<PAGE> 21
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -------
<S> <C>
4.7 Form of Warrant Agreement, dated 1986, between PubliCARD and
Drexel Burnham Lambert Incorporated. Incorporated by
reference from PubliCARD's Registration Statement on Form
S-1, dated October 8, 1986.
4.8 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.
4.9 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,
among PubliCARD, Publicker Smart Card Acquisition Co.,
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 of this
registration statement).
</TABLE>
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes to file, during any period
in which offers or sales are being made, a post-effective amendment to this
registration statement to include any material
II-3
<PAGE> 22
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.
II-4
<PAGE> 23
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 October 1, 1999.
PUBLICARD, INC.
By: /s/ JAMES J. WEIS
------------------------------------
Name: James J. Weis
Title: President and Chief
Executive Officer
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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ JAMES J. WEIS Director, Chief Executive October 1, 1999
- --------------------------------------------- Officer and President
James J. Weis (principal executive officer)
* Director and Chairman October 1, 1999
- ---------------------------------------------
Harry I. Freund
* Director and Vice Chairman October 1, 1999
- ---------------------------------------------
Jay S. Goldsmith
* Director October 1, 1999
- ---------------------------------------------
Clifford B. Cohn
* Director October 1, 1999
- ---------------------------------------------
David L. Herman
* Director October 1, 1999
- ---------------------------------------------
L.G. Schafran
- --------------------------------------------- Director
Hatim A. Tyabji
/s/ ANTONIO L. DELISE Vice President, Chief Financial October 1, 1999
- --------------------------------------------- Officer and Secretary
Antonio L. DeLise (principal financial and
accounting officer)
*By: /s/ ANTONIO L. DELISE October 1, 1999
- --------------------------------------------
Antonio L. DeLise
Attorney-in-Fact
</TABLE>
II-5
<PAGE> 24
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT PAGE NO.
- ----------- ------- --------
<S> <C> <C>
4.1 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.
4.2 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.
4.3 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.
4.4 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.
4.5 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.
4.6 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.
4.7 Form of Warrant Agreement, dated 1986, between PubliCARD and
Drexel Burnham Lambert Incorporated. Incorporated by
reference from PubliCARD's Registration Statement on Form
S-1, dated October 8, 1986.
4.8 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.
4.9 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.
</TABLE>
<PAGE> 25
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT PAGE NO.
- ----------- ------- --------
<S> <C> <C>
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,
among PubliCARD, Publicker Smart Card Acquisition Co.,
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 of this
registration statement).
</TABLE>
<PAGE> 1
EXHIBIT 5.1
[LETTERHEAD OF SCHNADER HARRISON SEGAL & LEWIS LLP]
October 1, 1999
PubliCARD, Inc.
75 Kings Highway Cutoff, 5th Floor
Fairfield, CT 06430
Re: PubliCARD, Inc.; Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as Pennsylvania counsel to PubliCARD, Inc., a Pennsylvania
corporation (the "Company"), in connection with the preparation of the
above-referenced Registration Statement on Form S-3 (the "Registration
Statement"), relating to the offering of up to 3,269,500 shares of the Company's
common stock, par value $0.10 per share (the "Common Stock"). All of the shares
covered by the Registration Statement (the "Shares") may be sold by certain
shareholders of the Company, who have agreed to purchase those shares on the
terms and conditions set forth in Securities Purchase Agreements between such
persons and the Company.
In rendering the opinion set forth below, we have reviewed the Company's
Articles of Incorporation, as amended, the Company's Bylaws, as amended,
resolutions adopted by its Board of Directors, and such other documents as we
have deemed appropriate. In our examination, we have assumed the genuineness of
all signatures, the authenticity of all documents submitted to us as originals
and the conformity with the original of all documents submitted to us as copies
thereof.
Based upon the foregoing, we are of the opinion that the Shares, when
issued by the Company and paid for in the manner contemplated by the terms of
the Securities Purchase Agreements referred to above, will be duly authorized,
validly issued, fully paid and nonassessable.
Our opinion set forth above is limited to the laws of the Commonwealth of
Pennsylvania, and we express no opinions as to any other laws, statutes, rules
or regulations.
We hereby consent to the use of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters." In giving such opinion, we do not thereby admit that we are
acting within the category of persons whose consent is required under Section 7
of the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
/s/ SCHNADER HARRISON SEGAL & LEWIS
LLP
<PAGE> 1
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 Amendment No. 1 to the Registration Statement on
Form S-3 and the related Prospectus of PubliCARD, Inc. dated October 1, 1999.
/s/ ARTHUR ANDERSEN LLP
Stamford, Connecticut
September 29, 1999
<PAGE> 1
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 Technologics, 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 Amendment No. 1 to the Registration
Statement on Form S-3 and the related Prospectus of PubliCARD, Inc. dated
October 1, 1999.
/s/ ARTHUR ANDERSEN LLP
Tampa, Florida
September 29, 1999
<PAGE> 1
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 Technologics, 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 Amendment No. 1 to the
Registration Statement on Form S-3 and the related Prospectus of PubliCARD, Inc.
dated October 1, 1999.
/s/ ARTHUR ANDERSEN LLP
San Jose, California
September 29, 1999
