-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OXkIQTf6nnNz0K7ZYpHn4fhIvwls+k9AOomf0YEGjdkCHl7YLqBxYzJZHjTTSHIU G1Zn8A9VHOZRakShGNOk0w== 0000081050-99-000021.txt : 19990507 0000081050-99-000021.hdr.sgml : 19990507 ACCESSION NUMBER: 0000081050-99-000021 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990506 ITEM INFORMATION: FILED AS OF DATE: 19990506 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUBLICARD INC CENTRAL INDEX KEY: 0000081050 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 230991870 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 333-72411 FILM NUMBER: 99612243 BUSINESS ADDRESS: STREET 1: ONE POST RD CITY: FAIRFIELD STATE: CT ZIP: 06430 BUSINESS PHONE: 2032543900 MAIL ADDRESS: STREET 1: ONE POST ROAD CITY: FAIRFIELD STATE: CT ZIP: 06430 FORMER COMPANY: FORMER CONFORMED NAME: PUBLICKER INDUSTRIES INC DATE OF NAME CHANGE: 19920703 8-K/A 1 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): February 22, 1999 PUBLICARD, INC. (Exact name of registrant as specified in its charter) Pennsylvania 0-29794 23-0991870 (State or other (Commission (IRS Employer jurisdiction File Number) Identification No.) of incorporation) 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 March 8, 1999 as set forth below. Item 7. Financial Statements and Exhibits (a) Financial statements of businesses acquired Audited financial statements of Greystone Peripherals, Inc. Report of Independent Public Accountants Consolidated Balance Sheet as of December 31, 1998 Consolidated Statement of Operations for the year ended December 31, 1998 Consolidated Statement of Shareholders' Equity for the year ended December 31, 1998 Consolidated Statement of Cash Flows for the year ended December 31, 1998 Notes to Consolidated Financial Statements (b) Pro forma financial information Unaudited Pro Forma Condensed Combined Balance Sheet as of December 31, 1998 and Unaudited Pro Forma Condensed Combined Statement of Income for the year ended December 31, 1998 Notes to Unaudited Pro Forma Condensed Combined Financial Information (c) Exhibits: 2.1 Agreement and Plan of Merger dated as of February 22, 1999 among PubliCARD, Inc., GPI Acquisition, Inc., Greystone Peripherals, Inc. and the Security Holders of Greystone Peripherals, Inc. (previously filed with Current Report on Form 8-K filed on March 8, 1999) 23.1 Consent of Independent 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) May 6, 1999 /s/ Antonio L. DeLise Antonio L. DeLise, Vice President Chief Financial Officer and Secretary GREYSTONE PERIPHERALS, INC. CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1998 TOGETHER WITH REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors and Shareholders of Greystone Peripherals, Inc.: We have audited the accompanying consolidated balance sheet of Greystone Peripherals, Inc. (a California corporation) and subsidiary as of December 31, 1998, and the related consolidated statements of operations, shareholders' equity and cash flows for the year ended December 31, 1998. 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 aspects, the financial position of Greystone Peripherals, Inc. and subsidiary as of December 31, 1998, and the results of their operations and their cash flows for the year ended December 31, 1998, in conformity with generally accepted accounting principles. /s/ Arthur Andersen LLP San Jose, California April 23, 1999 GREYSTONE PERIPHERALS, INC. CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1998 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 27,797 Accounts receivable, less allowances of $22,000 250,075 Inventories (Note 3) 928,485 Other assets 249 Total current assets 1,206,606 PROPERTY AND EQUIPMENT, net (Note 3) 86,107 OTHER ASSETS 10,656 Total assets $1,303,369 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Line of credit (Note 4) $414,950 Accounts payable and accruals 447,066 Total liabilities 862,016 COMMITMENTS (Note 6) SHAREHOLDERS' EQUITY: Common stock: no par value; 20,000,000 shares authorized; 6,674,749 shares issued and outstanding 449,725 Accumulated deficit (8,372) Total shareholders' equity 441,353 $1,303,369 The accompanying notes are an integral part of these financial statements. GREYSTONE PERIPHERALS, INC. CONSOLIDATED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1998 REVENUES $4,196,145 COST OF REVENUES 2,552,260 Gross profit 1,643,885 OPERATING EXPENSES: Research and development 397,346 Sales and marketing 424,617 General and administrative 1,021,962 Total operating expenses 1,843,925 LOSS FROM OPERATIONS (200,040) INTEREST AND OTHER INCOME, net 1,269 LOSS BEFORE TAXES (198,771) INCOME TAXES 3,991 NET LOSS $(202,762) The accompanying notes are an integral part of these financial statements. GREYSTONE PERIPHERALS, INC. CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY YEAR ENDED DECEMBER 31, 1998 Retained Earnings Total Common Stock (Accumulated Shareholders' Shares Amount Deficit) Equity BALANCE, DECEMBER 31, 1997 6,674,749 $449,725 $194,390 $644,115 Net loss - - (202,762) (202,762) BALANCE, DECEMBER 31, 1998 6,674,749 $449,725 $ (8,372) $441,353 The accompanying notes are an integral part of these financial statements. GREYSTONE PERIPHERALS, INC. CONSOLIDATED STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 1998 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(202,762) Adjustments to reconcile net loss to net cash provided by operating activities: Provision for inventory reserves 105,000 Depreciation and amortization 68,675 Loss on disposition of fixed assets 20,223 Changes in current assets and liabilities: Accounts receivable 477,503 Inventories 19,257 Other assets 18,249 Accounts payable (448,323) Accrued liabilities (12,665) Net cash provided by operating activities 45,157 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (67,927) Net cash used in investing activities (67,927) CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings on line of credit 39,950 Net cash provided by financing activities 39,950 NET INCREASE IN CASH AND CASH EQUIVALENTS 17,180 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 10,617 CASH AND CASH EQUIVALENTS AT END OF YEAR $27,797 The accompanying notes are an integral part of these financial statements. GREYSTONE PERIPHERALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1998 1. ORGANIZATION AND OPERATIONS OF THE COMPANY The Company Greystone Peripherals, Inc. (the "Company") was incorporated in California on March 10, 1992. The Company develops and manufactures high capacity disk drive duplication products for OEM's, as well as smart card readers and other peripheral devices such as PCMCIA card ports and readers for digital photography applications. On February 22, 1999 (the "Closing Date"), PubliCARD, Inc. ("PubliCARD") completed the acquisition of the Company, pursuant to an Agreement and Plan of Merger dated as of February 22, 1999 (the "Merger Agreement"), whereby a wholly-owned subsidiary of PubliCARD merged with and into the Company. As a result of this merger, the Company became a wholly-owned subsidiary of PubliCARD. As consideration in the merger, the holders of the Company's common stock received a total of 666,401 shares of common stock of PubliCARD and $6,180 in exchange for all of the shares of common stock of the Company. The Company is subject to a number of risks, including but not limited to, the dependence upon PubliCARD for its continuing financial support; competition from larger, more established companies in the industry; the successful development and marketing of its products; rapid technological changes in the industry; and the dependence on key individuals. PubliCARD has committed to continue to support the Company's working capital needs for the foreseeable future. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of the Company and a wholly-owned subsidiary which was dormant during 1998. All significant intercompany transactions and balances have been eliminated. 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 reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash Equivalents The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Concentration of Credit Risk Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash, cash equivalents and accounts receivable. The Company places its cash and cash equivalents with high credit quality financial institutions. The Company's accounts receivable are derived from revenue earned from customers located primarily in the U.S. The Company performs ongoing credit evaluations of its customers' financial condition and, generally, requires no collateral from its credit customers. The Company maintains an allowance for doubtful accounts receivable based upon the expected collectibility of all accounts receivable. Inventories Inventories are stated at the lower of cost (first-in, first-out) or market and include materials, labor and manufacturing overhead costs. Property and Equipment Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally five to seven years. Income Taxes The Company has elected under the Internal Revenue Code to be treated as an S corporation. Tax attributes, including profits or losses for such corporations, are passed through to their respective shareholders, and no provision for income taxes is required at the corporate level except for state tax in California of 1.5% and certain taxes in some states. Revenue Recognition Revenue from product sales is recognized at the time the product is shipped, with provisions established for estimated product returns and allowances. Research and Development Research and development costs are expensed as incurred and consist primarily of payroll costs, other direct expenses and overhead. Warranty Costs Anticipated costs related to product warranties are charged to expense as sales are recognized. The Company has not experienced significant warranty claims to date. Stock-Based Compensation The Company accounts for stock-based employee compensation arrangements in accordance with provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB No. 25"), and complies with the disclosure provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation ("SFAS No. 123"). Under APB No. 25, compensation cost is recognized based on the difference, if any, of the date of grant between the fair value of the Company's stock and the amount an employee must pay to acquire the stock. Recent Accounting Pronouncements In June 1997, the FASB issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 establishes standards for the reporting of comprehensive income and its components in a full set of general-purpose financial statements for periods ending after December 15, 1997. As the Company has no material items of other comprehensive income, this statement has no impact on the Company's financial statements. During 1998, the Company adopted SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information." SFAS No. 131 requires a new basis for determining reportable business segments, i.e., the management approach. This approach requires that business segment information used by management to assess performance and manage company resources be the source for information disclosure. On this basis, the Company is organized and operates in one business segment the development and manufacturing of high capacity disk drive duplication products and smart card reader-related products. As a result, the adoption of SFAS No. 131 had no impact on the Company's disclosures or financial statements. 3. BALANCE SHEET COMPONENTS December 31, 1998 Inventories, net Finished goods $625,867 Raw materials 302,618 $928,485 Property and equipment: Furniture and fixtures 28,546 Manufacturing equipment 58,740 Engineering test equipment 10,797 Office equipment 76,333 Software 28,906 Motor vehicles 6,303 209,625 Less: Accumulated depreciation and amortization (123,518) $86,107 4. LINE OF CREDIT As of December 31, 1998, the Company has a line of credit agreement with a bank that provides for borrowings of up to $1,000,000 secured by the Company's accounts receivable, inventories and fixed assets. As of December 31, 1998, the Company had an outstanding balance on this line of credit of $414,950. This agreement expires on May 1, 1999. Interest is paid monthly at the reference rate plus 0.5%, which equated to 8.25% as of December 31, 1998. Additionally, all debt outstanding under this line of credit, up to the full amount of the line, was covered by a guarantee to the bank from the primary shareholder of the Company as of December 31, 1998. The Company is subject to covenants under this agreement, including minimum current ratio, minimum tangible net worth and maximum ratio of debt to tangible net worth. As of December 31, 1998, the Company was in violation of these covenants and, as such, all debt outstanding on this line as of that date is reflected as a current liability in the accompanying financial statements. On March 3, 1999, subsequent to the closing date of the merger discussed in Note 1, PubliCARD paid the entire outstanding balance on the line of credit as of that date, and terminated the line of credit agreement. 5. COMMON STOCK The Company's Articles of Incorporation, as amended, authorize the Company to issue 20,000,000 shares of no par value common stock. Stock Option Plan In February 1997, the Company adopted the Incentive Stock Option Plan (the "Plan"). The Plan provides for the granting of stock options to employees and consultants of the Company. Options granted under the Plan may be either incentive stock options or nonqualified stock options. Incentive stock options ("ISO") may be granted only to Company employees (including officers and directors who are also employees). Nonqualified stock options ("NSO") may be granted only to Company employees and consultants. The Company has reserved 1,600,000 shares of common stock for issuance under the Plan. Options under the Plan may be granted for periods of up to ten years and at prices no less than 85% of the estimated fair value of the shares on the date of grant as determined by the Board of Directors, provided, however, that (i) the exercise price of an ISO and NSO shall not be less than 100% and 85% of the estimated fair value of the shares on the date of grant, respectively, and (ii) the exercise price of an ISO and NSO granted to a shareholder who holds more than 10% of the total combined voting power of all classes of stock shall not be less than 110% of the estimated fair value of the shares on the date of grant. To date, options granted generally vest over four years with 25% vesting after one year, and the remaining shares vesting 1/36th per month over the remaining three years. Additionally, under the Plan, the Company has the right, at its option, to repurchase any and all shares of stock acquired via exercise of options under this Plan from a terminated employee, regardless of the cause of termination, at the then fair market value of the shares. Activity under the Option Plan was as follows: Weighted Average Available Options Option Price for Grant Outstanding Per Share Outstanding at December 31, 1997 1,451,000 149,000 $0.25 Granted (75,000) 75,000 $0.50 Outstanding at December 31, 1998 1,376,000 224,000 $0.33 Weighted Average Weighted Remaining Average Number Contractual Exercise Options with exercise price of: Outstanding Life (in years) Price $0.25 149,000 8.25 $0.25 $0.50 75,000 9.40 $0.50 Fair Value Disclosures The Company accounts for the Plan under Accounting Principles Board Opinion No. 25 under which no compensation expense has been recognized, as all stock options are exercisable at a price equal to the fair market value of the underlying shares on the date of grant. Had compensation expense for the Plan been determined consistent with SFAS No. 123, the impact on the Company's net loss for fiscal 1998 would have been immaterial. 6. COMMITMENTS Leases The Company leases office space under noncancellable operating leases with various expiration dates through December 31, 2001. Rent expense for the year ended December 31, 1998 was $69,000. The terms of the facility lease provide for rental payments on a graduated scale. The Company recognizes rent expense on a straight-line basis over the lease period and has accrued for rent expense incurred but not paid. Future minimum lease payments under noncancellable operating leases, including lease commitments entered into subsequent to December 31, 1998, are as follows: Year Ending December 31, Operating Lease 1999 $ 121,354 2000 128,709 2001 136,064 Total $ 386,127 7. EMPLOYEE BENEFIT PLANS The Company sponsors a 401(k) defined contribution plan covering all employees. Contributions are made solely by the employees with no matching or discretionary contributions made by the Company. Employee contributions under this plan amounted to approximately $22,000 for the year ended December 31, 1998. 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 Greystone Peripherals, Inc. ("Greystone") 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 Greystone. The Unaudited Pro Forma Condensed Combined Balance Sheet gives effect to the acquisition as if it had occurred on December 31, 1998. The Unaudited Pro Forma Condensed Combined Statement of Income for the year ended December 31, 1998 gives effect to the acquisition as if it had occurred on January 1, 1998. 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, 1998 included in the Company's Form 10-K for the year ended December 31, 1998, and the audited financial statements of Greystone included elsewhere in this Form 8-K/A. PUBLICARD, INC. AND SUBSIDIARY COMPANIES UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF DECEMBER 31, 1998 (in thousands of dollars) PubliCARD Greystone Pro forma Pro forma Historical Historical Adjustments Balances ASSETS Cash $18,482 $28 $(415)(b) $ 17,789 (306)(c) Trade receivables 1,988 250 - 2,238 Inventories 2,810 928 - 3,738 Other 1,999 1 - 2,000 Total current assets 25,279 1,207 (721) 25,765 Property, plant & equipment, net 3,606 86 - 3,692 Goodwill 9,781 - 7,454 (a) 17,235 Other assets 1,262 10 - 1,272 $39,928 $ 1,303 $6,733 $47,964 LIABILITIES AND SHAREHOLDERS' EQUITY Current maturities of long-term debt $147 $415 $(415)(b) $147 Trade accounts payable 1,331 447 - 1,778 Accrued liabilities 4,384 - - 4,384 Total current liabilities 5,862 862 (415) 6,309 Long-term debt 991 - - 991 Other non-current liabilities 7,780 - - 7,780 Total liabilities 14,633 862 (415) 15,080 Redeemable shares 3,378 - - 3,378 Shareholders' equity Common shares 2,030 449 (449)(d) 2,104 74 (e) Additional paid-in capital 67,091 - 8,655 (e) 75,746 Accumulated deficit (38,891) (8) 8 (d) (40,031) (1,140)(a) Common shares held in treasury (8,207) - - (8,207) Unearned compensation (106) - - (106) Total shareholders' equity 21,917 441 7,148 29,506 $39,928 $ 1,303 $ 6,733 $47,964 PUBLICARD, INC. AND SUBSIDIARY COMPANIES UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1998 (in thousands of dollars except share and per share amounts) PubliCARD Greystone Pro forma Pro forma Historical Historical Adjustments Balances Net sales $16,519 $4,196 $ - $20,715 Cost of sales 10,906 2,552 - 13,458 Gross Margin 5,613 1,644 - 7,257 Operating expenses: General and administrative 5,488 1,022 - 6,510 Sales and marketing 792 425 - 1,217 Product development 740 397 - 1,137 In-process research and development 2,800 - - 2,800 Goodwill amortization 225 - 1,452(f) 1,677 10,045 1,844 1,452 13,341 Income (loss) from operations (4,432) (200) (1,452) (6,084) Other income (expenses): Interest income 551 - (31)(h) 520 Interest expense (339) (57) 57 (g) (339) Cost of pensions-non operating (846) - - (846) Other income (expense), net (1,021) 58 - (963) (1,655) 1 26 (1,628) Net income (loss) from continuing operations $(6,087) $(199) $(1,426) $(7,712) Earnings (loss) per common share $(0.44) $(0.53) Weighted average number of shares outstanding 13,716,243 746,401(i) 14,462,644 PUBLICARD, INC. AND SUBSIDIARY COMPANIES NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION On February 22, 1999 (the "Closing Date"), PubliCARD, Inc. ("PubliCARD" or the "Company") completed the acquisition of Greystone Peripherals, Inc. ("Greystone"), pursuant to an Agreement and Plan of Merger dated as of February 22, 1999 (the "Merger Agreement") whereby a wholly-owned subsidiary of the Company merged with and into Greystone. As a result of this merger, Greystone became a wholly-owned subsidiary of the Company. As consideration in the merger, holders of Greystone's common stock received a total of 666,401 shares of common stock of the Company and $6,180 in exchange for all of the outstanding shares of common stock of Greystone. Mr. John Usher, President of Greystone, held shares representing approximately 89.4% of Greystone's outstanding common stock. Pursuant to the Merger Agreement, 80,000 shares of common stock of the Company were issued to certain service providers of Greystone. In addition, pursuant to the Merger Agreement, options to purchase 224,000 shares of Greystone common stock outstanding immediately prior to the closing of the merger were converted into options to purchase 22,388 shares of PubliCARD common stock with exercise prices ranging from $2.50 to $5.00 per share. These PubliCARD options vest over four years and are exercisable for a period of one year after the respective vesting dates. Furthermore, pursuant to the Merger Agreement, the Company issued on the Closing Date options to purchase 110,000 shares of PubliCARD common stock to certain key employees of Greystone. These options have an exercise price of $10.75 per share, vest over a three year period and will be exercisable until the fifth anniversary of the Closing Date. The merger consideration was determined as a result of arms length negotiations between the Company and Greystone. The merger will be accounted for under the purchase method of accounting. Pursuant to the Merger Agreement, the Company is required to register the shares of PubliCARD common stock issued in connection with the merger under a shelf registration statement under the Securities Act of 1933. Pursuant to the Merger Agreement, the Company satisfied certain indebtedness of Greystone, including accrued interest, to a bank in the amount of approximately $604,000. The repayment of such indebtedness of Greystone by the Company was financed with available cash on hand. 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 acquired 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 $ 8,729 Estimated acquisition expenses 306 $ 9,035 Allocation of purchase price: Net assets of Greystone $ 441 In-process research and development 1,140 Goodwill 7,454 $ 9,035 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 Greystone. 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 be approximately $1,140,000. The unaudited pro forma condensed combined statement of income excludes 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 $1,140,000 to in-process research and development. (b) Represents the repayment of Greystone's indebtedness, including accrued interest, to a bank and to former shareholders of Greystone. (c) Represents payment of acquisition related expenses. (d) Represents the elimination of Greystone's equity accounts. (e) Represents the estimated value of common stock and stock options issued by the Company as consideration in the merger transaction. (f) Represents the amortization of goodwill over an estimated life of five years. (g) Represents the elimination of interest expense on Greystone's indebtedness which is assumed to be repaid as of the beginning of the period presented. (h) Represents the reduction of interest income due to the repayment of Greystone's indebtedness and payment of acquisition expenses as of the beginning of the period presented. (i) Represents the issuance of shares of the Company's common stock to the former shareholders of Greystone. Exhibit 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference of our report dated April 23, 1999, relating to the financial statements of Greystone Peripherals, Inc. as of and the for year ended December 31, 1998 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, and Registration Statements on Form S-8 File Nos. 33-56838, 33-88876, 333-72411, 333-73037, 333-73307 and 333-74169. /s/Arthur Andersen LLP San Jose, California May 5, 1999 -----END PRIVACY-ENHANCED MESSAGE-----