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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 22, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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)
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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) 2,500,000(1) $9.23 $23,075,000 $6,807
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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.
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 APRIL 22, 1998
PROSPECTUS
2,500,000 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 issued and issuable shares of
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 issued and
issuable are convertible into up to approximately 2,500,000 shares of the
Company's Common Stock. 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 April 20, 1998, the last sale price of the Company's
Common Stock as reported on The Nasdaq SmallCap Market was $9.44.
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.
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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.
(2) Form 8-K filed by the Company on April 8, 1998.
(3) 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 after the date of the
Registration Statement ("Registration Statement"), filed concurrently with this
Prospectus with the Commission, and prior to the effective date of 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. All forward looking statements included in this document are based on
information available to the Company on the date thereof, and the Company
assumes no obligation to update any such forward-looking statements.
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. 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
December 31, 1997, the Company's accumulated deficit was $9,588,014. 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 continue 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. If the
Company is unable to obtain the necessary capital, it will be required to
significantly curtail its operations.
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.
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 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.
POTENTIAL DILUTIVE EFFECT OF CONVERSION OF SERIES A PREFERRED STOCK.
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 9.75 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. 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.
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 57.2% 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.
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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. 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.
The Company's principal executive offices are located at 117 Easy
Street, Mountain View, California 94943. The telephone number is (650) 964-0100.
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PLAN OF DISTRIBUTION
On March 31, 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 ($10.8675 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.
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 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. "Market
price" is generally determined by the closing price for the Company's Common
Stock on the applicable date.
Except upon the occurrence of certain events, 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
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<S> <C> <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>
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Subject to certain exceptions, any Series A Shares outstanding three
years after the date such shares were initially issued will automatically
convert into shares of the Company's Common Stock at the then applicable
Conversion Rate.
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. Under certain circumstances after the Company
publicly discloses a Change of Control Transaction, as defined in the
Certificate of Designation, the Company shall have the right to require that all
of the outstanding Series A Shares be converted to Common Stock.
Redemption. The holders of Series A Shares have a right to require the
Company to redeem the Series A Shares upon the occurrence of certain events,
including a Major Transaction, or a Triggering Event, as each is defined in the
Certificate of Designation.
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.
CLOSING AND OPTIONS
The Initial Closing of the sale of Series A Shares took place on March
31, 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 a number
of conditions, including, among others: (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. Subject to certain conditions, 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 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.
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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 Series A Shares that could be acquired pursuant to a Company
Put Option, (d) the maximum number of Series A shares that could be acquired
pursuant to an Investor Call Option and (e) the maximum number of shares of
Common Stock that could be acquired upon conversion of the Series A Shares. The
Conversion Rate is based on the Fixed Conversion Price.
<TABLE>
<CAPTION>
Common Stock
Company Put Investor Call Issuable Upon
Selling Stockholder Series A Shares Option Shares Option Shares Conversion (1)
- ------------------- --------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Themis Partners L.P. 125 125 250 473,540
Heracles Fund 175 175 350 662,956
Leonardo, L.P. 200 200 400 757,664
Raphael, L.P. 30 30 60 113,650
Ramius Fund, Ltd. 50 50 100 189,416
GAM Arbitrage 10 10 20 37,884
Investments, Inc.
AG Super Fund 10 10 20 37,884
International Partners, L.P.
Total 600 600 1,200 2,272,994
</TABLE>
(1) Assuming for purposes of this calculation, that the conversion price
is equal to the Fixed Conversion Price, that the date of conversion is 210 days
from the Initial Closing and that any and all other conditions are met such that
the Selling Stockholders have the Investor Call Option and the Company has the
Company Put Option.
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.
INDEMNIFICATION
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 Company's Certificate of
Incorporation and Bylaws provide that the Company 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 Company has entered
into separate indemnification agreements with its directors and officers which
would require the Company, 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 Company and its officers and directors may be
sufficiently broad to permit indemnification of the Company's officers and
directors for liabilities (including reimbursement of expenses incurred) arising
under the Securities Act.
Insofar as indemnification by the Company for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Company pursuant to the provisions referenced above or otherwise,
the Company has been advised that in the opinion of the 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 Company of expenses
incurred or paid by a director, officer, or controlling person of the Company 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 hereunder, the Company may, 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.
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
Indemnification....................... 11
</TABLE>
================================================================================
================================================================================
2,500,000 SHARES
COMMON STOCK
PROSPECTUS
April ___, 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 .......... $ 6,807
Printing and engraving
expenses...................... $ 1,000
Legal fees and expenses ....... $10,000
Accounting Fees and expenses .. $10,000
Miscellaneous ................. $ 7,193
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.
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 April 22,
1998.
YIELDUP INTERNATIONAL CORPORATION
By: /s/ RAJ MOHINDRA
-------------------------------
Raj Mohindra
Chief Executive Officer
(Principal Executive Officer)
POWER OF ATTORNEY
We, the undersigned officers and directors of YieldUP International
Corporation, hereby severally constitute Raj Mohindra and Abhay Bhushan our true
and lawful attorneys with full power to sign for us and in our names, in the
capacities indicated below, the registration statement filed herewith and any
and all amendments to said registration statement, and generally to do all such
things in our names and behalf in our capacities as officers and directors to
enable YieldUP International Corporation to comply with the provisions of the
Securities Act of 1933, and all requirements of the Securities and Exchange
Commission, hereby ratifying and confirming our signatures as they may be signed
by our said attorney to said registration statement and any and all amendments
thereto.
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 April 22, 1998
- ---------------------------
Raj Mohindra Officer and Director
(Principal Executive Officer)
/s/ ABHAY BHUSHAN Chief Financial Officer and April 22, 1998
- ---------------------------
Abhay Bhushan Director (Principal
Financial and Accounting
Officer)
/s/ WERNER KERN Director April 22, 1998
- ---------------------------
Werner Kern
/s/ RAM PAUL GUPTA Director April 22, 1998
- ---------------------------
Ram Paul Gupta
/s/ SURAJ PURI Director April 22, 1998
- ---------------------------
Suraj Puri
</TABLE>
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.
17
<PAGE> 1
Exhibit 5.1
April 17, 1998
YieldUP International Corporation
117 Easy Street
Mountain View, CA 94043
RE: REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
We are rendering this opinion in connection with the registration
under the Securities Act of 1933, as amended, of 2,500,000 shares of Common
Stock (the "Shares") of YieldUP International Corporation, a Delaware
corporation (the "Company"), which are issuable upon the conversion of the
Company's Series A Convertible Preferred Stock (the "Preferred Shares") which is
held by the Selling Stockholders named in such registration statement.
We have examined all instruments, documents and records which we
deemed relevant and necessary for the basis of our opinion hereinafter
expressed. In such examination, we have assumed the genuineness of all
signatures and the authenticity of all documents submitted to us as originals
and the conformity to the originals of all documents submitted to us as copies.
We have also assumed that the Shares issuable upon conversion of the Preferred
Shares will be evidenced by appropriate certificates, duly executed and
delivered.
We are admitted to practice only in the State of California and
we express no opinion concerning any law other than the law of the State of
California, the corporation laws of the State of Delaware and the federal law of
the United States.
As to matters of Delaware corporation law, we have based our
opinion solely upon our examination of such laws and the rules and regulations
of the authorities administering such laws, all as reported in standard,
unofficial compilations. We have not obtained opinions of counsel licensed to
practice in jurisdictions other than the State of California.
Based on such examination, we are of the opinion that the Shares,
when sold pursuant to the registration statement to which this opinion is an
exhibit will be validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to
the registration statement referred to above and the use of our name wherever it
appears in said registration statement.
Respectfully submitted,
/s/ Gray Cary Ware & Fredenrich llp
GRAY CARY WARE & FREIDENRICH LLP
18
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
YieldUP International Corporation:
We consent to incorporation by reference in the 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
April 22, 1998
