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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 19, 1998
REGISTRATION NO. 333-50743
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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
YIELDUP INTERNATIONAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 77-0341206
(State or Other Jurisdiction (IRS Employer Identification Number)
of Incorporation or Organization)
117 EASY STREET
MOUNTAIN VIEW, CALIFORNIA 94043
(650) 964-0100
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Officers)
---------------
RAJ MOHINDRA
CHIEF EXECUTIVE OFFICER
YIELDUP INTERNATIONAL CORPORATION
117 EASY STREET
MOUNTAIN VIEW, CALIFORNIA 94043
(650) 964-0100
(Name, Address, Including Zip Code, and Telephone Number, Including
Area Code, of Agent for Service)
---------------
COPIES TO:
DOUGLAS J. REIN, ESQ.
GRAY CARY WARE & FREIDENRICH, LLP
4365 EXECUTIVE DRIVE, SUITE 1600
SAN DIEGO, CA 92121
TELEPHONE: (619) 677-1400
FACSIMILE: (619) 677-1477
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time as described in the Prospectus.
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]
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If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF SHARES TO BE AGGREGATE PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT (2) OFFERING PRICE (2) FEE (2)
---------------- ---------- ------------ ------------------ -------
<S> <C> <C> <C> <C>
Common Stock, ($0.001 par value) 2,470,588(1) $9.23 $22,803,527 $6,727
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</TABLE>
(1) Includes shares issuable upon conversion of outstanding and issuable
shares of Series A Preferred Stock. Pursuant to Rule 416, this
Registration Statement also covers such indeterminable additional shares
as may become issuable upon conversion of Series A Preferred Stock as a
result of any future stock splits, stock dividends or similar
transactions.
(2) Estimated, pursuant to Rule 457(c), solely for the purpose of
calculating the registration fee based on the average of the high and
low prices for the Common Stock, as reported on the Nasdaq SmallCap
Market on April 20, 1998. $6,807 previously paid at the time of the
original filing.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT
THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN
ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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SUBJECT TO COMPLETION, DATED JUNE 19, 1998
PROSPECTUS
2,470,588 SHARES OF COMMON STOCK
YIELDUP INTERNATIONAL CORPORATION
The 2,500,000 shares (the "Shares") of Common Stock of YieldUP
International Corporation, a Delaware corporation (the "Company"), offered by
this Prospectus are issuable upon conversion of outstanding Series A Convertible
Preferred Stock of the Company (the "Series A Shares"). The Shares may be sold
from time to time after conversion by or on behalf of the holders of Series A
Shares (the "Selling Stockholders"). The Series A Shares were issued in
connection with an equity financing pursuant to a Securities Purchase Agreement
(the "Purchase Agreement"). The Series A Shares are convertible into shares of
the Company's Common Stock at a rate which fluctuates depending on the market
price of the Company's Common Stock at the time of conversion. The Company will
not receive any proceeds from sales of the Shares by the Selling Stockholders or
from conversions, if any, of the Series A Shares. The Company has agreed to
register the Shares under the Securities Act of 1933, as amended (the
"Securities Act"). The Company is also obligated to list such shares on the
Nasdaq SmallCap Market and to take certain actions to comply with applicable
state securities laws and regulations. See "Plan of Distribution."
The Company has been advised by the Selling Stockholders that they
intend to sell all or a portion of the Shares from time to time in the Nasdaq
SmallCap Market, in negotiated transactions or otherwise, and on terms and at
prices then obtainable. The Selling Stockholders and any broker-dealers, agents
or underwriters that participate with the Selling Stockholders in the
distribution of any of the Shares may be deemed to be "underwriters" within the
meaning of the Securities Act, and any commission received by them and any
profit on the resale of the Shares purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act. The Company has
agreed to indemnify in certain circumstances the Selling Stockholders against
certain liabilities, including liabilities under the Securities Act. The Selling
Stockholders have agreed to indemnify in certain circumstances the Company
against certain liabilities, including liabilities under the Securities Act. See
"Plan of Distribution."
The Company will bear all out-of-pocket expenses incurred in connection
with the registration of the Shares, including, without limitation, all
registration and filing fees imposed by the Securities and Exchange Commission
(the "Commission"), the National Association of Securities Dealers, Inc. (the
"NASD") and blue sky laws, printing expenses, transfer agents' and registrars'
fees, and the reasonable fees and disbursements of the Company's outside counsel
and independent accountants, but excluding underwriting discounts or
commissions, transfer or other taxes and other costs and expenses incident to
the sales of the Shares.
The Company's Common Stock is quoted on The Nasdaq SmallCap Market under
the symbol "YILD." On June 18, 1998, the last sale price of the Company's
Common Stock as reported on The Nasdaq SmallCap Market was $5.25.
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 4.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
THE DATE OF THIS PROSPECTUS IS __________, 1998.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files periodic reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549
and at the Regional Offices of the Commission at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661; and at 75 Park Place, New
York, New York 10007. In addition, copies of such material can also be obtained
at prescribed rates from the Public Reference Section of the Commission at its
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. The
Company's Common Stock is traded on The Nasdaq SmallCap Market. Reports and
other information concerning the Company can also be inspected at the offices of
the National Association of Securities Dealers, Inc., Market Listing Section,
1735 K Street, N.W., Washington, D.C. 20006. Such reports and other information
may also be inspected without charge at a Web site maintained by the Commission.
The address of the site is http:\\www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Company
(Commission File no. 0-27104), pursuant to the Exchange Act are incorporated
herein by reference:
(1) The Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1997 and all amendments thereto.
(2) Form 8-K filed by the Company on April 8, 1998 and all amendments
thereto.
(3) Form 10-QSB filed by the Company on May 15, 1988 and all amendments
thereto.
(4) The portions of the registration statement on Form 8-A filed by the
Company pursuant to the Exchange Act which contain a description of the Common
Stock.
All documents and reports subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination
of the Registration Statement (the "Registration Statement"), shall be deemed to
be incorporated by reference herein and to be a part hereof from the date of
filing of such documents or reports. Any statement contained in a document
incorporated by reference or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of the Registration
Statement to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of the Registration Statement.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon oral or written request, a copy of any or all of
the foregoing documents incorporated herein by reference (other than exhibits to
such documents unless such exhibits are specifically incorporated by reference
into the information that this Prospectus incorporates). Written or telephone
requests should be directed to Mr. Abhay Bhushan, Chief Financial Officer,
YieldUP International Corporation, 117 Easy Street, Mountain View, California,
94043, telephone number (650) 964-0100.
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RISK FACTORS
In addition to the other information in this Prospectus, the following
risk factors should be considered carefully in evaluating the Company and its
business. This Prospectus contains forward-looking statements that involve risks
and uncertainties. The statements contained in this Prospectus that are not
purely historical are forward-looking statements within the meaning of Section
27A of the Exchange Act, including without limitation statements regarding the
Company's expectations, beliefs, intentions, plans or strategies regarding the
future.
The Company's operations are subject to numerous risks, including
unforeseeable expenses as well as specific risks of the semiconductor equipment
industry. There can be no assurance that the Company will achieve profitable
operations.
HISTORY OF OPERATING LOSSES; NEED FOR ADDITIONAL FINANCING; LIMITED OPERATING
HISTORY
The Company has experienced significant operating losses since its
inception in June 1993 and only commenced significant shipments in the fourth
quarter of 1995. The Company experienced net losses of $3,374,035, $3,993,642
and $572,870 in 1996, 1997 and the quarter ended March 31, 1998, respectively.
Accordingly, the Company has a limited operating history on which to base the
evaluation of its business, and its prior operating results are not indicative
of the results which may be achieved in the future. As of March 31, 1998, the
Company's accumulated deficit was $10,160,884. The Company's operating losses
have been and will continue to be principally the result of the various costs
associated with the Company's product development, manufacturing and sales and
marketing activities. The Company believes that its existing capital resources
will enable it to fund its operations through 1998. The Company may obtain
additional capital to fund its operations beyond that time, which may result in
dilution to the current stockholders. The existence of Class B Warrants may also
complicate future capital raising activities because of their potentially
dilutive effect on the purchasers of the Company's equity securities and the
anti-dilution provisions of the Class B Warrants. These anti-dilution provisions
could reduce the exercise price of the Class B Warrants. If the Company is
unable to obtain the necessary capital, it will be required to significantly
curtail its operations. On February 19, 1997 the Company issued 5,149 shares of
Common Stock upon the net exercise of a warrant held by Silicon Valley Bank. On
March 30, 1998, the Company completed a private placement of 600 Series A
Shares. The Company raised gross proceeds of $6 million from the sale of the
Series A Shares which the Company intends to use for general working capital
purposes.
DEPENDENCY ON PROPRIETARY TECHNOLOGY; EXPENSE AND RISK OF PATENT LITIGATION
The Company relies on patent, trade secret and copyright protection for
its products and technology. The Company has obtained five United States patents
since 1996 relating to its cleaning, rinsing and drying products and
technologies and has filed additional U.S. and foreign patent applications. The
process of obtaining patents can be expensive and there can be no assurance that
the patent applications will result in the issuance of patents, that any issued
patents will provide the Company with meaningful competitive advantages, or that
challenges will not be issued against the validity and enforceability of any
patent issued to the Company.
The Company also relies on trade secrets and proprietary technology
that it seeks to protect, in part, through confidentiality agreements with
employees, consultants and other parties. There can be no assurance that these
agreements will not be breached, that the Company will have adequate remedies
for any breach, or that the Company's trade secrets will not otherwise become
known to or independently developed by others.
In the absence of significant patent or other proprietary protection,
competitors may be able to copy the Company's technology or design approaches,
replicate its processes or gain access to its trade secrets. Moreover, there
can be no assurance that competitors will not be able to develop technologies
similar to or more advanced than the Company's products or technology. No
assurance can be given that the Company's current or future products will not
infringe on the patents of others.
There has been substantial litigation regarding patent and other
intellectual property rights in semiconductor-related industries. Increased
sales of the Company's products could provoke additional claims of infringement
from third parties. In the future, litigation may be necessary to enforce
patents issued to the Company, if any, to protect trade secrets or know-how
owned by the Company or to defend the Company against claimed infringement of
the rights of others and to determine the scope and validity of the
proprietary rights of others. Any such litigation would likely result in
substantial cost and diversion of effort by the Company, which by itself could
have a material adverse effect on the Company's business, financial condition
and operating results. Further, adverse determinations in such litigation could
result in the Company's loss of proprietary rights, subject the Company to
significant liabilities to third parties, require the Company to seek licenses
from third parties or prevent the Company from manufacturing or selling its
products, any of which could have a material adverse effect on the Company's
business, financial condition and results of operations.
COMPETITION
There is intense competition in the market for the Company's products.
The Company's relatively smaller resources makes it vulnerable to competition
from larger companies, many of which have significantly greater financial,
employee, product development and marketing resources. Leading competitors have
a larger installed base of products which can provide them a significant
advantage over the Company, because the Company's technology has not been widely
deployed and therefore presents potential customers with uncertainty not
associated with existing equipment. In addition, many manufacturers are
reluctant to choose small companies as key suppliers due to concerns about long
term viability and product support. There can be no assurance that the Company
will overcome these disadvantages.
Competition for the Company's products currently comes from makers of
traditional and new cleaning, rinsing, and drying equipment. Competitors
include manufacturers of Spin-Rinse Dryers such as Vorteq and Semitool,
IsoPropyl Alcohol dryer manufacturers such as S&K and integrated wet processing
system manufacturers such as Santa Clara Plastics, SubMicron Systems, Steag,
FSI, CFM Technologies, and Dal Nippon Screen. There can be no assurance that
these competitors will not develop new products or improve their existing
products which, when combined with their existing market presence, would make
the Company's products obsolete or unmarketable. Additional competition for the
Company's products comes from a large number of small companies making
cleaning, rinsing, and drying equipment which is less expensive than the
Company's products. Because the Company's products sell for significantly
higher prices than such products, the Company may not be able to compete
effectively against them without lowering its prices.
The Company also expects that competition may arise from new
competitors and from new technological approaches adopted by existing
competitors. Because of the increasing focus on yield management in the
semiconductor manufacturing industry, equipment manufacturers are likely to put
an increased emphasis on contaminent reduction. Thus competitive technologies
or manufacturing techniques may be developed which could make the Company's
products obsolete, thereby materially adversely affecting the Company.
RELIANCE ON SINGLE PRODUCT FAMILY
The Company anticipates that the substantial majority of its future
revenues will come from the sale of its cleaning, rinsing and drying systems.
Should the demand for, or pricing of, the Company's products decline due to
increased competitive pressure, the introduction of superior systems or
processes by competitors, or changes in the semiconductor, magnetic disk, flat
panel display or photo-mask industries, the Company's business, financial
condition and results of operations would be materially adversely affected. The
ability of the Company to diversify its operations through the introduction and
sale of new products is dependent on the success of the Company's continuing
research and development activities as well as its marketing efforts. No
assurance can be given that the Company will be able to develop, acquire,
introduce or market new products in a timely or cost-effective manner.
Accordingly, the Company may be dependent on the overall market acceptance of
its existing products.
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The Company expects to derive a substantial portion of its revenues from
the sale of a relatively small number of systems, which typically range in
purchase price from $95,000 to $550,000. As a result, a small reduction in
number of systems shipped in a quarter due to changing demand, rescheduling or
cancellation of an order, or supplier delays would have a material adverse
effect on the Company's revenues and results of operations for that quarter.
In addition, the Company's need for continued investment in research and
development and sales, marketing and service will limit the Company's ability to
reduce expenses in response to any such decrease in sales. If the Company's
anticipated level of revenues is not achieved for a particular period, the
Company's operating results could be adversely affected by its inability to
reduce costs. Because the Company builds certain sub-assemblies according to
forecast, a reduction in customer orders could also result in excessive
inventories which
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could adversely affect the Company's results of operations and liquidity. The
impact of these and other factors on the Company's operating results in any
future period cannot be accurately forecast.
DEPENDENCE ON KEY SUPPLIERS
The Company has no written contracts with any of its key suppliers, and
such suppliers may terminate their relationships with the Company at any time
without notice. Any such termination would materially impair the Company's
ability to satisfy any orders for its products and would materially adversely
affect the Company's results of operations. If any of the Company's outside
suppliers terminate their relationship with the Company, the Company will be
required to replace such suppliers. In such an event, there could be no
assurance that the Company would find replacement suppliers or that such
replacement suppliers would not be more expensive than the Company's current
suppliers, thereby materially adversely affecting the Company's results of
operations.
LENGTHY SALES CYCLE
Sales of the Company's products have been, and are expected to continue
to be, characterized by a relatively long sales cycle, generally six to nine
months, due to such factors as the substantial time required by potential
customers for technical evaluation of the Company's products prior to purchase,
and the high cost and the critical role the Company's products will play in the
manufacturing process. The Company believes that the sales cycle will continue
to be lengthy as certain of its anticipated customers centralize purchasing
decisions, which is expected to intensify the evaluation process and require
additional sales and marketing expenditures by the Company.
NEED TO DEVELOP NEW PRODUCTS AND TECHNOLOGIES
Semiconductor, magnetic disk, flat-panel display and photo-mask
manufacturing equipment and processes are subject to rapid technological changes
and product obsolescence. The Company believes that its future success will
depend in part upon its ability to develop and enhance its current products and
develop new products, processes and technologies to meet such anticipated
changes. If the Company does not successfully introduce new products in a timely
manner, any competitive position the Company may develop could be lost, and the
Company's sales reduced. There can be no assurance that the Company will be able
to develop and introduce new products which satisfy customer needs and achieve
market acceptance. Any failure of the Company to manage its research and
development efforts would have a material adverse effect upon its business and
prospects.
CONCENTRATION OF CUSTOMERS; LIMITED CONCURRENT SELLING OPPORTUNITIES
Historically, the Company has sold a significant proportion of its
systems in each period to a limited number of customers. For example, Applied
Materials accounted for 19.8% and 37% of total revenues in 1997 and in the
quarter ended March 31, 1998, respectively. Opportunities for new systems sales
are episodic, because each customer has historically purchased at most one or
two cleaning, rinsing and drying systems for limited implementations. As a
particular customer starts a new or expands a facility or production line, sales
to that customer may increase sharply; conversely, as a customer completes a
facility, sales to that customer may decrease sharply. The failure to replace
such sales with sales to other customers in succeeding periods would have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company expects that sales to relatively few
customers will continue to account for a high percentage of the Company's
revenues in any accounting period in the foreseeable future. A reduction in
orders from any customer or the cancellation of any significant order could have
a material adverse effect on the Company's business, financial condition and
results of operations. None of the Company's customers has entered into a
long-term agreement requiring it to purchase the Company's products.
DEPENDENCE ON OEM CUSTOMERS
An increasing percentage of the Company's revenues is derived from sales
to OEM customers. The timing and amount of sales to these customers ultimately
depends on sales levels and shipping schedules for the OEM products into which
the Company's products are incorporated. The Company has no control over the
shipping dates or volumes of products shipped by its OEM customers, and there is
no assurance that any OEM will continue to ship products that incorporate the
Company's products at current levels or at all. Many of the markets in which the
Company's customers operate have experienced cyclical declines and advances.
Cyclical downturns have been characterized by reduced product demand and price
erosion. Further, such downturns may adversely affect the ability of the
Company's OEM customers to make payments for the Company's products in a timely
manner, or at all, which could materially adversely affect the Company's
business, financial condition and operating results. Generally, the Company's
OEM customers may terminate orders at any time without penalty. Failure of these
OEMs to achieve significant sales of products incorporating the Company's
products and fluctuations in the timing and volume of such sales could have a
material adverse effect on the Company's business, financial condition and
results of operations.
The loss of, or any reduction in, orders by a significant customer could
have a material adverse effect on the Company's business, financial condition
and results of operations. There is no assurance that the Company will be able
to maintain or continue to increase the level of its sales in the future or that
the Company will be able to retain existing OEM customers or attract new ones.
INTERNATIONAL SALES
Export sales to the Company's international customers outside North
America, primarily to Japan and Europe, comprised approximately 5%, 33% and 32%
of the net revenues for the years ended December 31, 1995, 1996 and 1997,
respectively. Sales to customers outside the United States are subject to
risks, including exposure to currency fluctuations, the imposition of
governmental controls, the need to comply with a wide variety of foreign and
U.S. export laws, political and economic instability, trade restrictions,
changes in tariffs and taxes, longer payment cycles typically associated with
foreign sales, the greater difficulty of administering business overseas and
general economic conditions. In addition, the laws of certain foreign countries
may not protect the Company's intellectual property to the same extent as do
the laws of the United States. Although to date the Company's results of
operations have not been adversely affected by currency exchange rate
fluctuations because the Company has invoiced all of its international sales in
United States dollars, there can be no assurance that the Company's results of
operations will not be adversely affected by currency fluctuations in the
future.
DEPENDENCE ON KEY PERSONNEL
The Company's success will, to a large extent, depend upon the continued
services of its executive officers including in particular Raj Mohindra,
President and Chief Executive Officer. The loss of services of these executive
officers could materially adversely affect the Company. The Company does not
have employment agreements with any of its key personnel, but it is the
beneficiary of key man life insurance in the amount of $2 million on Mr.
Mohindra.
The success of the Company will also depend, in part, upon its ability
to retain the personnel who have assisted in the development of the Company's
products, and to attract and retain additional qualified operating, marketing,
technical and financial personnel. The competition in the semiconductor
equipment industry for such qualified personnel is often intense and there can
be no assurance that the Company will be able to hire or retain necessary
personnel.
POTENTIAL DILUTIVE EFFECTS OF CONVERSION OF SERIES A PREFERRED STOCK AND
EXERCISE OF CLASS B WARRANTS.
The number of shares of Common Stock which may be issued upon conversion
of the Series A Shares is dependent upon the trading price of the Company's
Common Stock at the time of conversion. To the extent that the trading price of
the Common Stock is lower than $10.8625 per share at the time of any conversion
of the currently outstanding Series A Shares, the number of shares of Common
Stock issuable upon such conversion will increase with resulting dilution to the
holders of the Company's Common Stock. There is no minimum conversion price and
thus no maximum number of shares of Common Stock into which the Series A Shares
may be converted. The Series A Shares also have a cumulative annual dividend of
5% payable in shares of Common Stock upon conversion. The Purchase Agreement
also provides for the issuance of additional Series A Shares, subject to certain
conditions. Issuance of such additional Series A Shares will result in
additional dilution to the holders of the Common Stock. In addition, the Company
has approximately 4,155,000 Class B Warrants outstanding. Each Class B Warrant
entitles the holder to acquire one share of Common Stock upon payment of the
exercise price of $11.00, which price is subject to reduction in the event that
the Company issues shares of Common Stock at a price less than the fair market
value on the date of issuance. Because the holders of Class B Warrants will
likely only exercise their purchase right at a time when the price of the Common
Stock is higher than $11.00 per share, holders of Common Stock at the time of
exercise will suffer dilution.
CONCENTRATION OF SHARE OWNERSHIP AND VOTING POWER
Holders of the Company's Class A Common Stock are entitled to five votes
for each share owned by them on all matters submitted to a vote of the
stockholders, while holders of Common Stock are entitled to one vote per share.
The directors and officers of the Company control approximately 91% of the
voting power and are able to elect all of the Company's directors and, hence,
are able to control the affairs of the Company. In addition, the directors and
officers of the Company, subject to certain limitations imposed by applicable
law, are able to, among other things, amend the Company's Certificate of
Incorporation and By-laws and effect or preclude fundamental corporate
transactions involving the Company, including the acceptance or rejection of any
proposals relating to a merger of the Company or an acquisition of the Company
by another entity, in each case without the approval of any of the Company's
other stockholders.
POTENTIAL ADVERSE EFFECT OF AUTHORIZED BUT UNISSUED PREFERRED STOCK ON HOLDERS
OF COMMON STOCK; ANTI-TAKEOVER EFFECTS
The Board of Directors has authority to issue up to 4,997,600 shares of
Preferred Stock and to fix the rights, preference, privileges and restrictions,
including voting rights, of those shares without any further vote or action by
the stockholders. The rights of the holders of the Common Stock will be subject
to, and may be adversely affected by, the rights of the holders of the Preferred
Stock that may be issued in the future. The issuance of Preferred Stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult for
a third party to acquire a majority of the outstanding
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voting stock of the Company, thereby delaying, deferring or preventing a change
in control of the Company. Furthermore, such Preferred Stock may have other
rights, including economic rights senior to the Common Stock, and, as a result,
the issuance thereof could have a material adverse effect on the market value of
the Common Stock.
POSSIBLE DELISTING FROM NASDAQ SMALLCAP MARKET AND MARKET ILLIQUIDITY
While the Company's Common Stock, and Class B Warrants meet the current
Nasdaq SmallCap Market requirements there can be no assurance that such
securities will meet the continued listing requirements. Under current criteria
for continued inclusion on the Nasdaq SmallCap Market, (i) the Company will have
to maintain at least $2 million in total net tangible assets or a market
capitalization of $35 million or have $500,000 in net income, (ii) the minimum
bid price of the Common Stock will have to be at least $1.00 per share, (iii)
there must be at least 500,000 shares in the public float valued at $1 million
or more, (iv) the Common Stock must have at least two active market makers, and
(v) the Common Stock must be held by at least 300 holders.
If the Company is unable to satisfy the Nasdaq SmallCap Market's
maintenance requirements, its securities may be delisted from the Nasdaq
SmallCap Market. In such event, trading, if any, in the Common Stock and Class B
Warrants would thereafter be conducted in the over-the-counter market in the
so-called "pink sheets" or the NASD's "Electronic Bulletin Board." Consequently,
the liquidity of the Company's securities could be impaired, not only in the
number of securities which could be bought and sold, but also through delays in
the timing of transactions, reduction in security analysts' and the news media's
coverage of the Company, and lower prices for the Company's securities than
might otherwise be obtained.
The Company's securities have not been qualified or registered in all
states and will not be eligible for trading unless an exemption from the
qualification or registration requirements is available. There can be no
assurance that any such exemption will become available in any jurisdiction.
NO DIVIDENDS ANTICIPATED
The Company has never paid any cash dividends on its Common Stock or
Class A Common Stock. The Company anticipates that in the future, earnings, if
any, will be retained for use in the business or for other corporate purposes,
and it is not anticipated that cash dividends in respect of the Common Stock or
Class A Common Stock will be paid.
6
<PAGE> 9
THE COMPANY
YieldUP International Corporation develops, manufactures, and markets
cleaning, rinsing, and drying equipment used during several steps in the
manufacturing process for semiconductors and other defect sensitive substrates.
Based on the results obtained by customers using its products, the Company
believes its technology allows more thorough and efficient cleaning, rinsing and
drying than conventional approaches, and that the products based on its
technology may enable manufacturers to obtain improvements in the percentage of
good product produced, or yield. The Company's cleaning, rinsing and drying
products also reduce the usage of certain environmentally hazardous materials,
and occupy less floor space when compared to conventional equipment. The Company
currently has approximately 70 cleaning, rinsing and drying systems installed at
approximately 50 customer sites in the semiconductor, semiconductor equipment,
magnetic disk, flat-panel display, and photo-mask industries.
Disc-shaped wafers composed of silicon are the foundation on which
integrated circuits ("ICs") are manufactured in semiconductor fabrication
facilities. During the typical four to six week process of fabricating IC's on
these wafers, semiconductor manufacturers typically clean, rinse and dry the
wafers several times to prepare the wafer for the next IC fabrication step. For
example, before and after many steps such as etching and disposition of
materials, the manufacturer must thoroughly clean, rinse and dry the wafers to
remove any contaminants or moisture. The likelihood of completing these steps
successfully and producing good ICs depends significantly upon the cleanliness
of the wafers throughout of all the processing steps. The Company's products are
designed to reduce wafer particle contamination, stains, surface roughness, and
other defects that reduce IC yields, offering a cost-effective, integrated
cleaning, rinsing and drying system using patented filtration, rinsing and
drying technology with no mechanical motion and greatly reduced use of
environmentally hazardous materials.
The Company is marketing its products for application at several points
in the IC fabrication process, and for use in the manufacturing processes of
magnetic disks, photo-masks and flat-panel displays. The Company believes that
there are numerous sites within typical high technology manufacturing facilities
where manufacturers could improve processes and reduce defects by replacing or
retrofitting existing equipment with the Company's products.
The Company's products include the CleanPoint de-ionized water
filtration system, the Omega 1000 Rinsing and Drying System designed to replace
the conventional Spin-Rinse Dryers, the Omega 2000 Cleaning, Rinsing
and Drying system designed to handle large substrates including 12 inch (300 mm)
wafers and flat panels, and the Omega 4000 Cleaning Rinsing and Drying system
that provides integrated hydrofluoric acid cleaning capability.
During the years ended December 31, 1997 and 1996, the Company's
revenues were $7,465,447 and $2,204,590, respectively. The 239% increase in
revenue in 1997 was due to an increase in shipments of the Company's cleaning,
rinsing, and drying systems. The Company continues to modify and improve its
products generally based on feedback from its customers. The Company has also
increased significantly the resources it is allocating to its sales and
marketing departments. The Company believes these factors, along with
an increased market acceptance of the Company's products, has lead to the
increase in sales for the Company's products.
The Company's cost of sales was $5,964,228 for the year ended December
31, 1997, and $2,630,970 for the year ended December 31, 1996. The Company
generated a gross profit of $1,501,219 or 20.1% for the year ended December 31,
1997, and a negative gross margin of $(426,380) or (19.3%) for the year ended
December 31, 1996. The improvement in gross margin was due to more efficient
production, design simplifications, and increased revenues. The Company's cost
of sales remained high during 1997 due to manufacturing expenses being allocated
over relatively few units. The Company expects that its gross margin will
improve in the future to the extent revenue and unit shipments increase and to
the extent the Company is able to transition to increased shipments of
standardized products and lower unit material costs.
The Company's principal executive offices are located at 117 Easy
Street, Mountain View, California 94943. The telephone number is (650) 964-0100.
7
<PAGE> 10
PLAN OF DISTRIBUTION
On March 30, 1998, the Company completed the initial closing (the
"Initial Closing") of a privately placed equity financing of the Series A Shares
pursuant to the Purchase Agreement with seven (7) investors (the "Investors").
At the Initial Closing, the Company raised gross proceeds of $6 million through
the sale of 600 Series A Shares. After the satisfaction of certain holding
periods, each Series A Share is convertible, at the option of its holder, into
shares of Common Stock of the Company based upon a conversion price equal to the
lower of (i) 110% the lowest closing market price of the Company's Common Stock
on the date the Series A Shares were issued ($10.8625 for the Series A Shares
issued at the Initial Closing) or (ii) the lowest closing market price of the
Company's Common Stock during the 20 consecutive trading days immediately
preceding the date of conversion.
Subject to various additional conditions, including, but not limited to,
approval of the Company's stockholders, the Company has the option ("Company Put
Option") to require the Investors to purchase additional Series A Shares, and
the Investors have the right to require that the Company sell to them additional
Series A Shares ("Investor Call Option"). The maximum number of additional
Series A Shares which the Company may require the Investors to purchase is 600
Series A Shares, for an additional purchase price of $6 million. Subject to
certain conditions, the Investors may require that the Company sell to them
pursuant to the Investor Call Option a maximum of 600 additional Series A Shares
(1,200 if the Company exercises its right to sell the maximum number of shares
pursuant to the Company Put Option) for a purchase price of $10,000 per share.
The Series A Shares issued upon exercise of the Company Put Option or the
Investor Call Option will have the same terms and rights as the Series A Shares
issued at the Initial Closing.
Notwithstanding the above, in order to comply with the rules of the
Nasdaq Stock Market which require stockholder approval for issuances of 20% or
more of the Company's outstanding stock, the number of shares of the Company's
Common Stock issuable pursuant to this financing cannot exceed 20% of the
Company's outstanding Common Stock unless the Company obtains the approval of
the Company's stockholders.
TERMS OF THE SERIES A SHARES
The following is a summary of the rights, preferences and privileges of
the Series A Shares and the rights granted pursuant to the Purchase Agreement,
the Certificate of Designations, Preferences and Rights of Series A Convertible
Preferred Stock of YieldUP International Corporation (the "Certificate of
Designation") and the Registration Rights Agreement for the Series A Shares
(the "Registration Rights Agreement").
Conversion. The Series A Shares are convertible into shares of Common
Stock at the election of the holder of such Series A Shares, at a price (the
"Conversion Rate") equal to the lower of 110% of the market price at the
original date of issuance of such share (the "Fixed Conversion Price") or the
lowest market price during the 20 consecutive days immediately preceding the
date a holder of Series A Shares delivers notice of his election to convert such
shares. The Series B Shares have a 5% annual cumulative dividend payable in
Common Stock, which is reflected in the conversion formula. "Market price" is
generally determined by the closing price for the Company's Common Stock on the
applicable date.
As an example, using the Fixed Conversion Price, and assuming that the
Series A Shares had been held for one year such that the holder was entitled to
a 5% dividend payable in shares of Common Stock upon conversion, the formula
for conversion would be:
(.05)(365/365)(10,000) + 10,000
------------------------------- = 967
10.8625
Therefore, one Series A Share would convert to 967 shares of the
Company's Common Stock.
The Investor(s) may convert, in aggregate, only up to a maximum of a
specified percentage of the Series A Shares according to the following schedule:
<TABLE>
<CAPTION>
Days from % of Shares
Closing Convertible
--------- -----------
<S> <C>
1 through 90 0
91 through 135 20
136 through 180 40
181 through 225 60
226 through 270 80
271 through term 100
</TABLE>
Notwithstanding the foregoing, the conversion restrictions set forth
above shall not apply (x) if there shall have occurred a Material Adverse
Change (as defined below), (y) with respect to any conversion of Series A
Shares at a Conversion Price which is not less than the Fixed Conversion Price
then in effect, or (z) if there is an announcement of a pending Major
Transaction (as defined below). "Material Adverse Change" means any change,
event, result or happening involving, directly on indirectly, the Company or
any of its subsidiaries resulting in a material adverse effect on the business,
prospects, financial condition or results of operations of the Company and its
subsidiaries, taken as a whole, including, without limitation, an event
constituting a Major Transaction or a Triggering Event (as defined below) shall
have occurred or the Company shall have been notified by the exchange or
automated quotation system on which the Company Stock trades that it is
beginning or has begun proceedings or steps to delist or suspend the Common
Stock from trading on such market.
"Major Transaction" shall be deemed to have occurred at such time as
any of the following events:
(i) the consolidation, merger or other business combination
of the Company with or into another Person (other than (A) a consolidation,
merger or other business combination in which holders of the Company's voting
power immediately prior to the transaction continue after the transaction to
hold, directly or indirectly, the voting power of the surviving entity or
entities necessary to elect a majority of the members of the board of directors
(or their equivalent if other than a corporation) of such entity or entities or
(B) pursuant to a migratory merger effected solely for the purpose of changing
the jurisdiction of incorporation of the Company) (a "Change of Control
Transaction");
(ii) the sale or transfer of all or substantially all of the
Company's assets; or
(iii) a purchase, tender or exchange offer made to and
accepted by the holders of more than 50% of the outstanding shares of Common
Stock.
A "Triggering Event" shall be deemed to have occurred at such time as
any of the following events:
(i) the failure of the Registration Statement required to be
filed by the Company pursuant to the Registration Rights Agreement to be
declared effective by the Commission on or prior to the date that is 180 days
after the Initial Issuance Date;
(ii) while the Registration Statement is required to be
maintained effective pursuant to the terms of the Registration Rights
Agreement, the effectiveness of the Registration Statement lapses for any
reason (including, without limitation, the issuance of a stop order) or is
unavailable to the holder of the Series A Shares for sale in accordance with
the terms of the Registration Rights Agreement, and such lapse or
unavailability continues for a period of ten consecutive trading days, provided
that the cause of such lapse or unavailability is not due to factors
solely within the control of such holder of Series A Shares;
(iii) suspension from listing or delisting of the Common Stock
from the Nasdaq SmallCap Market, The Nasdaq National Market or The New York
Stock Exchange, Inc. for a period of five consecutive days;
(iv) the Company's notice to any holder of Series A Shares,
including by way of public announcement, at any time, of its intention not to
comply with proper requests for conversion of any Series A Shares into shares
of Common Stock, or the Company's failure to deliver the Common Stock within
fifteen days of the conversion date; or
(v) the Company breaches any representation, warranty or
covenant of the Purchase Agreement, the Registration Rights Agreement, the
Certificate of Designation or the Irrevocable Transfer Agent Instructions (as
defined in the Purchase Agreement), except to the extent that such breach would
not have a material adverse effect and except, in the case of a breach of a
covenant which is curable, only if such breach continues for a period of at
least ten days.
Any Series A Shares outstanding three years after the date such shares
were initially issued (the "Mandatory Conversion Date") will automatically
convert into shares of the Company's Common Stock at the then applicable
Conversion Rate.
Notwithstanding the foregoing, if the Common Stock is not designated
for quotation on the Nasdaq SmallCap Market, the Nasdaq National Market or
listed on The New York Stock Exchange, Inc. or The American Stock Exchange,
Inc. but such events do not constitute a Triggering Event, then the Mandatory
Conversion Date shall be extended until the Common Stock is so designated or
listed.
8
<PAGE> 11
Adjustments to Conversion Rate. The Conversion Rate is subject to
proportional adjustment upon any stock split, stock dividend or other similar
change to the capital stock of the Company as well other adjustments upon the
issuance, or deemed issuance, of other shares of Common Stock at a price below
the then effective Fixed Conversion Price.
Mandatory Conversion. After the Company publicly discloses a Change of
Control Transaction, the Company shall have the right to require that all of the
outstanding Series A Shares be converted to Common Stock. To exercise this right
the Company must substantially meet the following conditions: (i) the
Registration Statement shall be effective and available for the sale of the
number of shares of Common Stock then issuable upon the conversion of all
outstanding Series A Shares; (ii) the Common Stock is designated for quotation
on The Nasdaq National Market or the Nasdaq SmallCap Market or listed on The New
York Stock Exchange, Inc. and is not suspended from trading; (iii) the Company
shall have delivered shares of Common Stock upon conversion of the Series A
Shares to the holders on a timely basis; and (iv) the Company otherwise has
satisfied its obligations in all material respects and is not in default in any
material respect under the Certificate of Designation, the Purchase Agreement or
the Registration Rights Agreement.
Redemption. The holders of Series A Shares have a right to require the
Company to redeem the Series A Shares upon the occurrence of a Major
Transaction, or a Triggering Event.
Registration Rights. The Company is obligated to promptly (and in any
event prior to April 30, 1998) file a registration statement (the "Registration
Statement") with the Commission to cover the resale of the Company's Common
Stock issuable upon the conversion of the Series A Shares. The Company is
obligated to use its reasonable best efforts to have the Registration Statement
declared effective by the Commission and remain effective until the Company's
Common Stock subject to the Registration Statement may otherwise be freely
traded without registration. The Company is also obligated to list such shares
on the Nasdaq SmallCap Market and to take certain actions to comply with
applicable state securities laws and regulations.
Liquidation Preference. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Company, the holders of the
Series A Shares shall be entitled to receive in cash out of the assets of the
Company, whether from capital or from earnings available for distribution to its
stockholders, before any amount shall be paid to the holders of any of the
capital stock of the Company of any class junior in rank to the Series A Shares
in respect of the preferences as to the distributions and payments on the
liquidation, dissolution and winding up of the Company, an amount per Series A
Share equal to the sum of (i) $12,000 and (ii) an amount equal to the product
of (.05)(N/365)($12,000). "N" equals the number of days the Series A Shares
have been held by the holder.
CLOSING AND OPTIONS
The Initial Closing of the sale of Series A Shares took place on March
30, 1998. At the Initial Closing, 600 Series A Shares were issued for aggregate
gross proceeds of $6 million.
Company Put Option. Beginning 180 days after the earlier of (x) the
effective date of the Registration Statement; or (y) 120 days after the Initial
Closing, the Company may require that the Investors purchase up to 600
additional Series A Shares, for a purchase price of $6 million, (pro rata per
Investor) under the same terms and conditions as the initial issuance of Series
A Shares. The Company's ability to exercise such option is subject to the terms
and conditions of the Purchase Agreement which requires, among other things,
(i) the Company has obtained stockholder approval for the issuance of additional
securities, (ii) the Registration Statement has been effective for at least 60
consecutive calendar days; (iii) the Company's Common Stock has not been
delisted from the Nasdaq SmallCap Market and/or suspended from trading; (iv)
there has been neither a Major Transaction nor a Triggering Event; (v) certain
tests are met regarding minimum average daily trading price in the Company's
Common Stock; (vi) the Company has performed its obligations under the
Certificate of Designation; and (vii) a put closing date has not occurred
previously.
Investor Call Option. At any date which is 210 days from the Initial
Closing through the Mandatory Conversion Date, as defined in the Certificate of
Designation, each Investor has a right, subject to the terms and conditions of
the Purchase Agreement and payment for the additional Series A Shares, to
require the Company to issue and sell to each such Investor up to two times as
many Series A Shares as the Investor had initially purchased. Any Investor may
only exercise this right twice.
9
<PAGE> 12
SALES BY STOCKHOLDERS
The table below sets forth (a) the names of the Selling Stockholders,
(b) the number of Series A Shares acquired at the Initial Closing, (c) the
maximum number of shares of Common Stock that could be acquired upon conversion
of the Series A Shares using a Conversion Rate of $5.00, (d) the maximum number
of shares of Common Stock that could be acquired upon conversion of the Series A
Shares using the Fixed Conversion Price ($10.8625 for the Series A Shares issued
at the Initial Closing), and (e) the percentage of Common Stock upon conversion.
<TABLE>
<CAPTION>
Number of Common Stock Percentage Common Stock Percentage
Series A Issuable Upon of Common Issuable Upon of Common
Selling Stockholder Shares Conversion(1) Stock(3) Conversion(2) Stock(3)
- ------------------- --------- ------------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Themis Partners L.P. 125 250,000 4.34% 115,125 2.0%
Heracles Fund 175 350,000 6.08% 161,175 2.8%
Leonardo, L.P. 200 400,000 6.95% 184,200 3.2%
Raphael, L.P. 30 60,000 1.04% 27,630 *
Ramius Fund, Ltd. 50 100,000 1.74% 46,050 *
GAM Arbitrage 10 20,000 * 9,210 *
Investments, Inc.
AG Super Fund 10 20,000 * 9,210 *
International Partners, L.P.
Total 1,200,000 20.85% 552,600 9.6%
</TABLE>
* less that 1 percent
- ------------------
(1) Assumes a Conversion Rate of $5.00.
(2) Assumes a Conversion using the Fixed Conversion Price.
(3) Based on 1,413,653 shares of Class A Common Stock issued and outstanding
and 4,341,711 shares of Common Stock issued and outstanding each as of
December 31, 1997.
10
<PAGE> 13
USE OF PROCEEDS
The Company will not receive any proceeds from sales of the Shares or
from conversions of the Series A Shares, if any.
LEGAL MATTERS
The legality of the Shares is being passed upon by Gray Cary Ware &
Freidenrich, LLP, San Diego, California.
EXPERTS
The financial statements of the Company as of December 31, 1997, and
for each of the years in the two-year period ended December 31, 1997, have been
incorporated by reference herein and in the Registration Statement in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon authority of said firm
as experts in accounting and auditing.
11
<PAGE> 14
================================================================================
No dealer, salesman or other person has been authorized to give any information
or to make any representations other than those contained or incorporated by
reference in this prospectus in connection with the offering described herein,
and, if given or made, such information or representation must not be relied
upon as having been authorized by the company. This prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, any
securities other than the registered securities to which it relates, or an offer
to sell, or a solicitation of an offer to buy, in any jurisdiction in which it
is unlawful to make such offer or solicitation. Neither the delivery of this
prospectus nor any sale made hereunder shall, under any circumstances, create an
implication that there has been no change in the affairs of the company since
the date hereof or that the information contained herein is correct as of any
time subsequent to the date hereof.
SUMMARY TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information................. 3
Incorporation of Certain
Documents by Reference............ 3
Risk Factors.......................... 4
The Company........................... 7
Plan of Distribution.................. 8
Use of Proceeds....................... 11
Legal Matters......................... 11
Experts............................... 11
</TABLE>
================================================================================
================================================================================
2,470,588 SHARES
COMMON STOCK
PROSPECTUS
June ___, 1998
================================================================================
12
<PAGE> 15
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Other expenses in connection with the registration of the Common Stock
hereunder will be substantially as follows:
<TABLE>
<CAPTION>
Item Company Expense
<S> <C>
SEC Registration Fee .......... $ 6,727
Printing and engraving
expenses...................... $ 1,000
Legal fees and expenses ....... $10,000
Accounting Fees and expenses .. $10,000
Miscellaneous ................. $ 7,273
Total ............ $35,000
</TABLE>
* Estimated for purposes of this filing.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law permits
indemnification of officers, directors, and other corporate agents under certain
circumstances and subject to certain limitations. The Registrant's Certificate
of Incorporation and Bylaws provide that the Registrant shall indemnify its
directors, officers, employees and agents to the full extent permitted by
Delaware General Corporation Law, including in circumstances in which
indemnification is otherwise discretionary under Delaware law. In addition, the
Registrant has entered into separate indemnification agreements with its
directors and officers which would require the Registrant, among other things,
to indemnify them against certain liabilities which may arise by reason of their
status or service (other than liabilities arising from willful misconduct of a
culpable nature) and to maintain directors' and officers' liability insurance,
if available on reasonable terms.
These indemnification provisions and the indemnification agreement
entered into between the Registrant and its officers and directors may be
sufficiently broad to permit indemnification of the Registrant's officers and
directors for liabilities (including reimbursement of expenses incurred) arising
under the Securities Act.
13
<PAGE> 16
ITEM 16 EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ -----------------------
<S> <C>
3.1* Form of Certificate of Designation for Series A Preferred Stock
10.1* Form of Securities Purchase Agreement for Series A Preferred Stock
10.2* Form of Registration Rights Agreement for Series A Preferred Stock
5.1** Opinion of Gray Cary Ware & Freidenrich, LLP
23.1 Consent of KPMG Peat Marwick LLP, independent auditors
23.4** Consent of Gray Cary Ware & Freidenrich, LLP (included in Exhibit 5.1)
24.1** Power of Attorney (included in the Signature Page contained in Part II of
the Registration Statement)
</TABLE>
- -----------
* Filed as an exhibit to the Company's Report on Form 8-K filed on April
8, 1998 and incorporated herein by reference.
** Filed previously.
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3)
of the Securities Act of 1933 (the "Securities Act");
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the most
recent post- effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20% change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed
14
<PAGE> 17
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 deliver or cause to
be delivered with the prospectus, to each person to whom the prospectus is sent
or given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
D. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
E. The undersigned Registrant hereby undertakes that:
(1) For the purposes of determining any liability under the
Securities Act, 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 the
registration statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the
Securities Act, 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.
15
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements of 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 Mountain View, State of California, on June 19,
1998.
YIELDUP INTERNATIONAL CORPORATION
By: /s/ RAJ MOHINDRA
-------------------------------
Raj Mohindra
Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ RAJ MOHINDRA Chairman, Chief Executive June 19, 1998
- ---------------------------
Raj Mohindra Officer and Director
(Principal Executive Officer)
ABHAY BHUSHAN* Chief Financial Officer and June 19, 1998
- ---------------------------
Abhay Bhushan Director (Principal
Financial and Accounting
Officer)
WERNER KERN* Director June 19, 1998
- ---------------------------
Werner Kern
RAM PAUL GUPTA* Director June 19, 1998
- ---------------------------
Ram Paul Gupta
SURAJ PURI* Director June 19, 1998
- ---------------------------
Suraj Puri
</TABLE>
*By: /s/ RAJ MOHINDRA
------------------------
Raj Mohindra,
Attorney of Fact
16
<PAGE> 19
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ -----------------------
<S> <C>
3.1* Form of Certificate of Designation for Series A Preferred Stock
10.1* Form of Securities Purchase Agreement for Series A Preferred Stock
10.2* Form of Registration Rights Agreement for Series A Preferred Stock
5.1** Opinion of Gray Cary Ware & Freidenrich, LLP
23.1 Consent of KPMG Peat Marwick LLP, independent auditors
23.4** Consent of Gray Cary Ware & Freidenrich, LLP (included in Exhibit 5.1)
24.1** Power of Attorney (included in the Signature Page contained in Part II of
the Registration Statement)
</TABLE>
- ----------
* Filed as an exhibit to the Company's Report on Form 8-K filed on April
8, 1998 and incorporated herein by reference.
** Previously filed.
17
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
YieldUP International Corporation:
We consent to incorporation by reference in the Amendment No. 1
to registration statement on Form S-3 of YieldUP International Corporation of
our report dated February 13, 1998, except as to Note 8, which is as of March
30, 1998, relating to the balance sheet of YieldUP International Corporation as
of December 31, 1997, and the related statements of operations, stockholders'
equity, and cash flows for each of the years in the two-year period ended
December 31, 1997, which report appears in the December 31, 1997, annual report
on Form 10-KSB of YieldUP International Corporation.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Mountain View, California
June 19, 1998
