As filed with the Securities and Exchange Commission on July 15, 1998
Registration No. 333-57939
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
AMENDMENT NO.1
to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
Alyn Corporation
(Exact name of registrant as specified in its charter)
------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 3460 33-0709359
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
16761 Hale Avenue
Irvine, California 92606
(949) 475-1525
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------
Richard L. Little
Vice President, Finance and Administration;
Chief Financial Officer and Secretary
16761 Hale Avenue
Irvine, California 92606
(949) 475-1525
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copy to:
Gerald A. Eppner, Esq.
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
(212) 504-6000
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
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, check the following box: | |
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: | |
------------------
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------
Proposed Proposed
Amount Maximum Maximum
Title of Each Class of to be Offering Price Aggregate Amount of
Securities to be Registered(1) Registered Per Share(1) Offering Price(1) Registration Fee
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Rights to Purchase Common Stock 1,900,000 Rights $0 $0 $0(2)
- ---------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.001 per share(3) 1,900,000 Rights $5.50(4) $10,450,000 $3,083
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) This Registration Statement relates to the Company's rights (the "Rights")
to purchase shares of common stock, par value $.001 per share (the "Common
Stock"), and the shares of Common Stock issuable upon exercise of those
Rights.
(2) Since both the Rights and the Common Stock underlying the Rights are
being registered for distribution under this Registration Statement,
for purposes of Rule 457(g), there is no separate registration fee for the
Rights.
(3) These shares of Common Stock are issuable upon exercise of the Rights.
(4) The subscription price for purchase of a share of Common Stock upon
exercise of one Right.
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 Section 8(a), may
determine.
<PAGE>
ALYN CORPORATION
CROSS REFERENCE SHEET
Furnished Pursuant to Rule 404(a) and Item 501(b) of Regulation S-K
<TABLE>
<CAPTION>
Registration Statement Item
Number and Caption Location or Caption in Prospectus
<S> <C>
INFORMATION REQUIRED IN PROSPECTUS
1. Forepart of Registration Statement and Outside Front
Cover Page of Prospectus........................... Facing Page of the Registration Statement; and
Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus......................................... Inside Front Cover Page of Prospectus; and
Outside Back Cover Page of Prospectus
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges.......................... Summary; and Risk Factors
4. Use of Proceeds.................................... Use of Proceeds
5. Determination of Subscription Price................ The Rights Offering
6. Dilution........................................... *
7. Selling Security Holders........................... *
8. Plan of Distribution............................... *
9. Description of Securities to be Registered......... The Rights Offering
10. Interests of Named Experts and Counsel............. *
11. Material Changes................................... *
12. Incorporation of Certain Information by Reference..
Incorporation by Reference
13. Disclosure of Commission Position on *
Indem-nification for Securities Act Liabilities....
INFORMATION NOT REQUIRED IN PROSPECTUS
14. Indemnification of Directors and Officers.......... Indemnification of Directors and Officers
15. Other Expenses of Issuance and Distribution........ Other Expenses of Issuance and Distribution
16. Exhibits........................................... Exhibits
17. Undertakings....................................... Undertakings
- ----------------------
</TABLE>
* Item is omitted because not applicable.
<PAGE>
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.
1,900,000 Shares
[ALYN LOGO]
Common Stock
Alyn Corporation ("Alyn" or the "Company") is distributing to the holders
of record of the Company's outstanding common stock, par value $.001 per share
(the "Common Stock"), at the close of business on July 15, 1998 (the "Record
Date") nontransferable rights (the "Rights") to subscribe for and purchase an
aggregate of up to 1,900,000 shares (the "Shares") of the Company's Common Stock
(the "Rights Offering").
Each holder of record of Common Stock on the Record Date will receive
.17674 Rights for each one share of Common Stock (or one Right for every 5.65803
shares of Common Stock) held. Each Right entitles the holder to purchase one
share of Common Stock (the "Basic Subscription Right") at a purchase price of
$5.50 per share (the "Subscription Price"). The Rights will expire at 5:00 p.m.,
Eastern Standard Time, on August 14, 1998, unless extended by the Company, in
its discretion, for up to 10 days (the "Expiration Date"). Any Rights that
remain unexercised at the close of business on the Expiration Date shall expire
and will no longer be exercisable. The number of Rights distributed by Alyn to
each holder of record of Common Stock will be rounded up to the nearest whole
number. No fractional Rights or cash in lieu thereof will be issued or paid by
the Company.
To the extent that Rights are not exercised, the Company will offer any
remaining Shares to stockholders who have indicated a desire to purchase shares
of Common Stock in excess of their Basic Subscription Right. The Company's
outside directors and their affiliates -- Kingdon Capital Management Corp.; Udi
Toledano; and Edelson Technology Partners III-- who hold Basic Subscription
Rights aggregating 629,901 Shares ($3,464,457), have advised the Company that
they intend to exercise Rights for an aggregate of at least 909,091 Shares ($5
million), to the extent available. In order to reduce the dilutive effect of
this Rights Offering, Mr. Robin A. Carden, the Company's founder, has advised
the Company that he will transfer to the Company, without charge, 500,000 shares
of Common Stock. Mr. Carden will not be exercising his Basic Subscription Right
to 538,085 Shares. As a result, if all Rights are exercised, the Company will
receive proceeds from the sale of 1.9 million shares, but its outstanding Common
Stock will increase over the current level by only 1.4 million shares.
The Shares purchasable upon exercise of the Rights are identical to the
shares of Common Stock of Alyn currently traded on the National Market of The
Nasdaq Stock Market, Inc. ("Nasdaq") under the symbol "ALYN." On June 26, 1998,
the date of the first public announcement of the Rights Offering, the closing
price per share of Alyn Common Stock as reported by Nasdaq was $6.13. On July
13, 1998, the closing price per share was $5.88.
See "Risk Factors" beginning on page 6 of this Prospectus for a discussion
of certain factors that should be considered in connection with the Rights and
Common Stock offered hereby.
-----------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Exercise Price Proceeds to Company(1)
- -------------------------------------------------------------------------------
Per Share........... $5.50 $5.39
Total............... $10,450,000 $10,250,000
(1) Before deducting expenses payable by the Company, estimated to be $200,000.
The Shares are being offered and sold directly by the Company, and no
commission or other remuneration will be paid to any person for soliciting
purchase of shares of Common Stock in the Rights Offering.
The Rights may not be exercised by any person, and neither this Prospectus
nor any subscription certificate shall constitute an offer to sell or a
solicitation of an offer to purchase any shares of Common Stock, in any
jurisdiction in which such transaction would be unlawful.
The date of this Prospectus is July 15, 1998
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE RIGHTS OFFERING
Q: What is a Rights Offering?
A: A Rights Offering is an opportunity for stockholders to purchase additional
Shares of Alyn Corporation Common Stock at a fixed price and in an amount
proportional to their existing holding. This has the effect of enabling
stockholders to maintain their current percentage holding in the stock. The
number of Rights issued to any particular stockholder is determined in a fixed
ratio proportionate to the number of original shares owned by such stockholder
on a specific date (the Record Date). A holder of one share of Alyn Corporation
Common Stock will receive .17674 Rights (or one Right for every 5.65803
originally held shares of Alyn Common Stock).
Q: What is a Subscription Right?
A: A Right is exercisable at the sole election of the holder, and gives the
holder the opportunity to purchase one share of Alyn Common Stock at a
predetermined, fixed price. The price for exercising your Right for one share of
Alyn Common Stock is $5.50.
Q: Why is Alyn Corporation engaging in a Rights Offering?
A: The Company is offering the Rights to obtain additional working capital. The
Company believes that, if all the Rights are exercised, the proceeds from the
Rights Offering, together with funds on hand and operating revenues, will be
sufficient to finance its working and other capital requirements for a period of
at least 18 months. Rather than issue new equity to outside parties, the
Company's Board of Directors has chosen to offer existing shareholders the
opportunity to provide the additional capital. The Company has been advised by
its outside Directors, who are among its largest stockholders, that they intend
to exercise at least an aggregate of $5,000,000 in subscription rights, to the
extent available.
Q: How did the Company arrive at the $5.50 Exercise Price?
A: In determining the Exercise Price, the Company took into account current and
historical market prices for its Common Stock. Its Common Stock has generally
traded at or above $7.50 per share until June 11, 1998, a short time before the
release of information to the public concerning this Rights Offering.
Q: How long will the Rights Offering remain open?
A: This Rights Offering will remain open for a limited time only. The Rights
will expire and cease to be exercisable at 5:00 p.m., Eastern Standard Time, on
August 14, 1998.
Q: What happens if I choose not to exercise my Rights?
A. You will retain your shares in the Company regardless of whether you choose
to exercise your Rights or not. A person choosing not to exercise Rights will,
however, diminish his or her proportionate interest in the Company's profits and
losses and such person's voting rights will be proportionately diluted.
Q: How many Rights may I purchase?
A: Pursuant to your Basic Subscription Privilege, you will receive .17674 Rights
for each share of Common Stock that you hold on the Record Date. Each full Right
that you receive entitles, but in no way requires, you to purchase one share of
the Company's Common Stock for the Exercise Price of $5.50.
Pursuant to your Oversubscription Privilege, each Common Stock holder who elects
to exercise his or her Basic Subscription Rights in full may also purchase
additional Shares of Common Stock that remain available as a result of
unexercised Rights, if any. To the extent that there are unexercised Rights, you
may request to purchase as many additional Shares as you wish. In the event more
Shares are subscribed for than are being offered, your opportunity to purchase
these additional Shares will be determined on a pro rata basis in proportion to
the number of Rights you receive and exercise pursuant to your Basic
Subscription Privilege. In certain instances, this may result in your receiving
fewer Shares than you request in your oversubscription.
Q: How do I exercise my Rights?
A: You must properly complete a Subscription Agreement evidencing the Rights and
forward the Agreement to the Subscription Agent on or prior to the Expiration
Date. Your Subscription Agreement must be accompanied by proper payment for each
Share purchased and requested to be purchased pursuant to both your Basic
Subscription Right and your Oversubscription Privilege. If you do not receive
all of the Shares you requested and paid for, your money will be refunded to you
promptly.
Q: Can a shareholder sell his or her Rights?
A: No. The Rights are not transferable.
Q: What are the federal income tax consequences of exercising my Rights?
A: There are no tax consequences.
Q: Who can I talk to if I have more questions?
A: If you have more questions about the Rights Offering, please contact our
Information Agent:
Innisfree M&A Incorporated
501 Madison Avenue, 20th Floor
New York, New York 10022
(888) 750-5834
<PAGE>
Forward-Looking Statements
This Prospectus includes "forward-looking statements." All statements other
than statements of historical facts included in this Prospectus, including,
without limitation, certain statements under the captions "Prospectus Summary,"
"Management's Discussion and Analysis of Financial Condition and Results Of
Operations" and "Business," herein may constitute forward-looking statements. In
addition, forward-looking statements generally can be identified by the use of
forward-looking terminology such as "may," "will," "expect," "intend,"
"estimate," "anticipate," "believe" or "continue" or the negatives thereof or
variations thereon or similar terminology. Although the Company believes that
the expectations reflected in such forward-looking statements are reasonable, it
can give no assurance that such expectations will prove to be correct. Important
factors that could cause actual results to differ materially from the Company's
expectations ("Cautionary Statements") are disclosed in this Prospectus,
including, without limitation, in conjunction with the forward-looking
statements included in this Prospectus and under "Risk Factors." All subsequent
written and oral forward-looking statements attributable to the Company or
persons acting on its behalf are expressly qualified in their entirety by the
Cautionary Statements. Forward-looking statements speak only as of the date of
this Prospectus. The Company expressly disclaims any obligation or undertaking
to disseminate any updates or revisions to any forward-looking statement
contained herein to reflect any change in its expectations with regard thereto
or any change in events, conditions or circumstances on which any such statement
is based.
---------------------------
Boralyn(R)is a registered trademark of Alyn Corporation. All other
trademarks or service marks appearing in this Prospectus are the trademarks or
service marks of the companies that utilize them.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information contained in this Prospectus, including "Risk Factors" and the
Combined Financial Statements and Notes thereto. Except as otherwise noted, all
information in this Prospectus assumes that all Rights will be exercised and an
aggregate of 1,900,000 shares of Common Stock will be issued.
The Company
Alyn Corporation ("Alyn" or the "Company") provides customized metal matrix
composite solutions to meet the specific product needs of its customers in
consumer and industrial markets. Alyn is a vertically-integrated metal matrix
composite company offering advanced metal matrix composites, customer-driven
engineering solutions and strategically developed manufacturing processes. Alyn
engages in joint development projects with many of its customers in selected
large markets where the design and production of metal matrix composite-based
products provide those customers with products that are innovative, reduce a
customer's overall production cost, or provide value-added performance.
The Company has developed technology, for which it obtained its initial
patent in January 1996, for the application of boron carbide in combination with
aluminum in a light-weight metal matrix composite under the Boralyn name. Boron
carbide is an advanced ceramic that is the third hardest material in the world
and the hardest material available at commercially reasonable cost. The Company
believes that no other commercially available material offers a range of
properties comparable to those of Boralyn. Boralyn is lighter and can be more
easily fabricated than titanium. It has a higher specific stiffness than
aluminum and commonly-used titanium or steel alloys. Boralyn is one-third the
density of most steels and has a greater resistance to wear than aluminum,
specialty steel and titanium.
Since its initial public offering in October 1996, the Company has focused
on the strategic design and installation of significant manufacturing assets to
meet anticipated production requirements in its targeted markets. Alyn now has
two production facilities in Irvine, California; a 35,000 square foot precision
pressure casting facility at its Hale Avenue location, and an 84,000 square foot
extrusion and forging facility at its Von Karman location. Alyn now has an
installed manufacturing capability that enables it to produce over 25 million
pounds of Boralyn and hard-alloy aluminum products per year.
The Company has recently begun utilizing project teams to develop products
and bring them to production. The Company has targeted the following markets
which are well-positioned to take advantage of premium-priced Boralyn and the
Company's other metal matrix composites to achieve product breakthroughs or cost
savings: (i) premium-priced golf club heads and shafts; (ii) selected automotive
components; (iii) aerospace components, (iv) disk substrates for computer hard
drives; and (v) nuclear shielding for waste storage casks. Based on initial
production orders, responses received in connection with its currently ongoing
joint development projects and a high level of request for product quotes, the
Company believes these markets provide substantial opportunities for growth. The
Company intends to develop products for other markets, such as bicycle
components and other high-end sporting goods and defense applications, where
metal matrix composite-based products may also provide premium pricing for value
added benefits.
Alyn's objectives are to become a leader in providing engineered solutions
to customers' product needs through metal matrix composite ("MMC") technologies
and associated manufacturing processes, and to establish significant market
share and brand awareness for Boralyn in markets where value-added premiums may
be obtained. The Company intends to achieve these objectives by: (i) focusing on
customer markets with high value-added needs; (ii) partnering with customers to
develop engineered solutions to their specific product needs; (iii) capitalizing
on its existing proprietary technology and patented processes for producing
MMCs; (iv) manufacturing customers' products; (v) ensuring effective execution
through target market teams and individual product teams; and (vi) providing a
high level of customer satisfaction.
The Company was incorporated in Delaware in July 1996, and is the successor
by merger, effective May 2, 1996, to Alyn Corporation, a California corporation
organized in January 1990 ("Old Alyn"). Unless the context otherwise requires,
the term "Alyn" or the "Company" as used in this Prospectus, includes the
Company and its predecessor, Old Alyn. The Company's principal executive office
is located at 16761 Hale Avenue, Irvine, California 92606. The Company's
web-site address is http://www.alyn.com (U.S.) or http://www.alyn.co.uk
(Europe).
The Rights Offering
The Rights Offering.........Alyn is distributing to holders of record of its
outstanding shares of Common Stock, par value $.001
per share (the "Common Stock"), on the Record Date
rights (the "Rights") to subscribe for and purchase
additional shares of Common Stock of Alyn. Each
holder of shares of Common Stock will receive .17674
Rights for each share of Common Stock (or one Right
for every 5.65803 shares of Common Stock) held on
the Record Date, rounded up to the nearest whole
Right. Up to an aggregate maximum of 1,900,000
Rights will be distributed in the Rights Offering.
Each Right will be exercisable for one share of
Common Stock. An aggregate of 1,900,000 shares of
Alyn Common Stock have been reserved for issuance
upon exercise of the Rights. See "The Rights
Offering."
Record Date.................July 15, 1998. See "The Rights Offering-- Record
Date."
Expiration Date.............The Rights will expire at 5:00 p.m., Eastern
Standard Time, on August 14, 1998, unless
extended by the Company, in its discretion, for up
to 10 days (the "Expiration Date"). Any Rights that
remain unexercised at the close of business on the
Expiration Date shall expire and will no longer be
exercisable. See "The Rights Offering-- Expiration
Date."
Subscription Price..........The purchase price for all Shares purchased upon
exercise of the Rights, whether pursuant to the
Basic Subscription Right or the Oversubscription
Privilege, is $5.50 per share (the "Subscription
Price"). See "The Rights Offering-- Subscription
Price."
Basic Subscription Right....Rights holders are entitled to purchase one share of
Alyn Common Stock for each one Right held (the
"Basic Subscription Right"). See "The Rights
Offering-- Basic Subscription Right." The Company's
outside directors and their affiliates -- Kingdon
Capital Management Corp.; Udi Toledano; and Edelson
Technology Partners III (the "Exercising Principal
Stockholders") -- who hold Basic Subscription Rights
aggregating 629,901 Shares ($3,464,457), have
advised the Company that they intend to exercise
Rights for an aggregate of at least 909,091 Shares
($5 million), to the extent available. See "The
Rights Offering-- Principal Stockholders." If only
the Exercising Principal Stockholders exercise
subscription rights and no other holders of Rights
exercise their Basic Subscription Rights, the net
proceeds to the Company of the Rights Offering will
be $4.8 million. In order to reduce the dilutive
effect of this Rights Offering, Mr.Robin A. Carden,
the Company's founder, has advised the Company that
he will transfer to the Company, without charge,
500,000 shares of Common Stock. Mr. Carden will not
be exercising his Basic Subscription Right to
538,085 Shares. As a result, if all Rights are
exercised, the Company will receive proceeds from
the sale of 1.9 million shares, but its outstanding
Common Stock will increase over the current level by
only 1.4 million shares. See "The Rights Offering--
Principal Stockholders."
Oversubscription Privilege..Each holder of Rights who elects to exercise its
Basic Subscription Right in full may also subscribe,
at the Subscription Price, for Rights to acquire
additional shares of Common Stock as a result of
unexercised Rights, if any (the "Oversubscription
Privilege"). If the number of Shares available is
not sufficient to satisfy the exercise of all
Oversubscription Privileges, the available Shares
will be allocated pro rata (subject to elimination
of fractional Shares) among the holders of Rights
who exercise their Oversubscription Privilege in
proportion to the number of Shares each holder of
Rights purchased pursuant to its Basic Subscription
Right; provided, however, that if such pro rata
allocation results in any holder of Rights being
allocated a greater number of Shares of Common Stock
than such holder subscribed for pursuant to its
Oversubscription Privilege, then such holder will
only be allocated such number of Shares as such
holder subscribed for and the remaining Shares will
be allocated among all other holders exercising
their Oversubscription Privilege. See "The Rights
Offering-- Oversubscription Privilege."
No Minimum..................The Rights Offering is not conditioned upon the
exercise of any minimum number of Rights.
Non-Transferability
of Rights...................The Rights are not transferable, except by operation
of law in the event of death or dissolution of the
record holder.
Procedure for Exercising
Rights......................Basic Subscription Rights and Oversubscription
Privileges may be exercised by properly completing a
subscription agreement evidencing the Rights (a
"Subscription Agreement") and forwarding the
Subscription Agreement, together with payment of the
Subscription Price for each Share subscribed for
pursuant to the Basic Subscription Right and
Oversubscription privilege, to the Subscription
Agent on or prior to the Expiration Date. If the
mail is used to forward Subscription Certificates,
it is recommended that insured, registered mail be
used. Alternatively, the Guaranteed Delivery
Procedures as described in "The Rights Offering--
Exercise of Rights" may be used. Once a holder of
Rights has exercised its Basic Subscription Right or
Oversubscription Privilege, that exercise may not be
revoked.
Subscription Agent..........Continental Stock Transfer and Trust Company
Issuance of Stock
Certificates................Certificates representing shares of Alyn Common
Stock purchased pursuant to the Rights Offering will
be delivered to subscribers as soon as practicable
after the Expiration Date. See "The Rights Offering
-- Exercise of Rights."
Use of Proceeds.............The Company intends to use the proceeds of the
Rights Offering for additional working capital. See
"Use of Proceeds."
Common Stock Outstanding
After Rights Offering.......12,150,000 shares, excluding shares issuable upon
exercise of stock options and warrants outstanding
as of the Record Date, assuming all Rights are
exercised and all Shares offered hereby are sold. If
only the Exercising Principal Stockholders exercise
subscription rights and no other holders of Rights
exercise their Basic Subscription Right, the Company
will have 11,159,091 shares of Common Stock
outstanding, excluding shares issuable upon exercise
of stock options and warrants outstanding as of the
Record Date.
Risk Factors................An investment in the Common Stock offered hereby
involves a high degree of risk. See "Risk Factors."
Certain Federal Income
Tax Consequences............The receipt or exercise of Rights by a holder of
shares of Common Stock should not be treated as a
taxable event for United States federal income tax
purposes, but may have certain tax effects. See "The
Rights Offering-- Federal Income Tax Consequences."
Information Agent..........The Company has retained Innisfree M&A Incorporated
as information agent. See "The Rights Offering --
Information Agent."
<PAGE>
Summary Financial Data
(In thousands, except per share data)
<TABLE>
<CAPTION>
Alyn Old Alyn
-------------------------------------------- --------------------------------------
Period Period
from May from
Three months Year 2, 1996 January
Ended ended to 1, 1996
March 31 December 31 December 31 to May 1 Years ended December 31,
-------- ----------- ----------- -------- ------------------------
1998 1997 1997 1996 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ---- ----
Statements of Operations
Data:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total net revenue $28 $42 $364 $90 $104 $319 $309 $540
--- --- ---- --- ---- ---- ---- ----
Costs and expenses:
Cost of goods sold......... 634 23 323 80 34 203 92 265
Establishment of
manufacturing facilities 225 1,809 262
General and administrative
expenses
Selling and marketing...... 327 370 1,371 587 23 52 143 114
Research and development... 1,202 225 2,338 283 7 79 180 24
----- --- ----- --- - -- --- --
Total costs and expenses... 2,707 1,273 8,474 2,469 117 553 767 662
----- ----- ----- ----- --- --- --- ---
Operating loss............. (2,679) (1,231) (8,110) (2,379) (13) (234) (458) (122)
Other income (expense), net (36) 289 806 141 (2) (10) (11) (3)
--- --- --- --- -- --- --- --
Loss before provision for
income taxes............ (2,715) (942) (7,304) (2,238) (15) (244) (469) (125)
Provision for income taxes. 1 1 12 1 1 1 1 1
------ ---- ------- ------- ----- ----- ----- ----
Net loss................... ($2,716) ($943) ($7,316) ($2,239) ($16) ($245) ($470) ($126)
======= ===== ======= ======= ==== ===== ===== =====
Per Share Data:
Basic and diluted net loss
per share(1)............ ($0.25) ($0.09) ($0.68) ($0.25)
== ====== ====== ====== ======
Common shares used in
computing basic and
diluted net loss per 10,750 10,750 10,750 8,800
====== ====== ====== =====
share(1)................
Three months ended
March 31, Years ended December 31, Years ended December 31,
--------- ------------------------ ------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
Balance Sheet Data:
Working capital (deficit).. $ 6,635 $19,489 $11,717 $23,494 ($382) ($133) $ 18
Total assets............... 28,922 30,973 31,127 32,203 128 193 219
Long-term obligations...... 5,231 0 5,501 0 128 128 128
Total stockholders' equity
(deficit)............... 21,034 30,123 23,750 31,066 (490) (245) (99)
</TABLE>
- ----------
(1) Under Financial Accounting Standards Board Statement Number 128,
Earnings per Share, any discount from the market price at the date of issue must
be treated as a stock dividend for purposes of computing earnings per share.
Therefore, the issuance of the Shares in this Rights Offering may result in a
decrease in the loss per share as previously reported. Such change, if any, is
not expected to be significant. The Shares in this Rights Offering are being
offered at a discount to current market that is less than 10% and is therefore
not significant.
<PAGE>
RISK FACTORS
In addition to historical information, this Prospectus includes
forward-looking statements that involve known and unknown risks and
uncertainties that may cause the Company's actual results or outcomes to be
materially different from those anticipated and discussed herein. In evaluating
forward-looking statements and the Company's performance, readers are urged to
read carefully the following Risk Factors, as well as other cautionary
statements contained in this Prospectus.
Limited Revenues and Prior Losses. The Company has had extremely limited
revenues to date. The Company reported total net revenues of $28,000 and a net
loss of $2,716,000 for the quarter ended March 31, 1998, and total net revenues
of $42,000 and a net loss of $943,000 for the comparable quarter of 1997. The
Company reported total net revenues of $364,000 and a net loss of $7,316,000 for
the year ended December 31, 1997, and total net revenues of $194,000 and a net
loss of $2,255,000 for the year ended December 31, 1996. The Company anticipates
incurring operating losses for the current fiscal year, and may continue to
incur losses thereafter. There can be no assurance that the Company will ever
achieve profitability or maintain profitability, if achieved, on a consistent
basis. Moreover, the Company has entered into a five-year lease for its main
facility in Irvine, California, and a ten-year lease for its additional
facility, also in Irvine, and the Company has committed substantial capital to
equip both facilities with significant production capability. Unless and until
the Company achieves a significant level of sales, the Company will continue to
have substantial production overcapacity and underabsorbed costs that would
cause the Company to incur substantial additional operating losses.
Limited Manufacturing History; Manufacturing Risk. The Company has only
limited experience in manufacturing its products in commercial quantities. There
can be no assurance that the Company will be able to fully utilize its plants'
capacity or that these facilities will be adequate for all of the Company's
future fabrication requirements. The manufacturing processes for Boralyn utilize
high temperature and high pressure and may be subject to volatile chemical
reactions. A mechanical or human failure or unforeseen condition, including
natural disasters such as earthquakes, characteristic of Southern California,
could result in interruption of the Company's manufacturing capacity. Moreover,
the Company's manufacturing operations will use certain equipment that, if
damaged or otherwise rendered inoperable or unavailable, could result in the
disruption of the Company's manufacturing operations. Although the Company has
obtained business interruption insurance with coverage for lost profits and
out-of-pocket expenses up to $8 million per occurrence, and presently maintains,
and intends to continue to maintain, other property and casualty coverage, an
extended interruption of operations at the Company's manufacturing facilities
would have a material adverse effect on the business of the Company.
No Assurance of Market Acceptance in Commercial Quantities. Market
acceptance of the Company's products in commercial quantities will depend upon
the pricing of those products and the Company's ability to manufacture and
deliver them on a timely basis, as well as the ability of the Company to
demonstrate the advantages of its products over competing material methodologies
and products. The Company has experienced, and will likely continue to
experience, long sales cycles and lengthy customer product design times prior to
production orders. There can be no assurance that the Company can achieve
customer acceptance in commercial quantities of Boralyn or the Company's other
current or future products. The costs of the Company's marketing efforts will be
substantial and will be recorded as expenses as they are incurred,
notwithstanding that the benefits, if any, from those marketing efforts (in the
form of revenues) may not be reflected, if at all, until subsequent periods.
Need for Future Capital. The Company believes the net proceeds of this
Rights Offering, assuming all Rights are exercised, together with cash flows
from operations will be adequate to meet its working capital needs for at least
the next 18 months. If less than all Rights are exercised, resulting in lower
net proceeds to the Company than anticipated, or if the Company fails to reach
sufficient revenue levels during that period, the Company will require
additional capital, debt or equity, the availability and terms of which cannot
be assured.
Revenue Timing; Quarterly Fluctuations in Operating Results. The Company
has experienced, and will likely continue to experience, long sales cycle times,
lengthy customer design processes for new product introductions, and market
trends that may significantly limit management's ability to forecast accurately
time-to-market schedules or short-term results of operations. The Company's
operating results may vary significantly from quarter to quarter, in part
because of the costs associated with changes in the Company's products and
personnel and the size and actual delivery dates of orders. The Company's
operating results for any particular quarter are not necessarily indicative of
any future results. Fluctuations caused by variations in quarterly operating
results or the Company's failure to meet analysts' projections or public
expectations as to operating results may adversely affect the market price of
the Company's Common Stock.
Rapid Technological Change and New Product Development. The Company
operates in a rapidly evolving field - advanced materials - that is likely to be
affected by future technological developments. The Company's ability to
anticipate changes in technologies, markets and industry trends, and to develop
and introduce new and enhanced products on a timely basis will be critical
factors in its ability to grow and remain competitive. There can be no assurance
that new products will be completed or that any new products can be marketed
successfully. In addition, development schedules for new or improved products
are inherently difficult to predict and are subject to change as a result of
shifting priorities in response to customers' requirements and competitors' new
product introductions. Moreover, the Company expects that it will devote
substantial resources to research and development efforts. For accounting
purposes, the costs of those efforts will be recorded as expenses as they are
incurred, notwithstanding that the benefits, if any, from the Company's research
and development efforts (in the form of increased revenues or decreased product
costs) may not be reflected, if at all, until subsequent periods.
Possible Dependence on Significant Customers. In view of the early stage
nature of the Company's business, currently it has only a limited number of
customers, several of whom may be material to the Company's near term results of
operations. Even after the Company matures, however, certain customers may be
material to the business, operations and future prospects of the Company. There
can be no assurance that one or more principal customers will not suffer
business or financial setbacks resulting in reduction or cancellation of product
orders or the Company being unable to obtain payment from such customers at any
time or from time to time. The loss of sales to one or more significant
customers could have a material adverse effect on the business and operations of
the Company.
Dependence on Patents. The Company has been granted one United States
patent that it believes provides protection for its proprietary Boralyn
technology and contains claims that cover the use of Boralyn. The Company has
been granted additional patents, including divisional (extension) patents and
continuation-in-part patents, that stem from the Company's original patent
application. The Company has applied for additional patents. There can be no
assurance that the Company's existing patents or any other patents that may be
granted, will be valid and enforceable or provide the Company with meaningful
protection from competitors. Further, there can be no assurance that any pending
patent application will issue or that any claim thereof will provide protection
against infringement. If the Company's present or future patent rights are
ineffective in protecting the Company against infringement, the Company's
marketing efforts and future revenues could be materially and adversely
affected. Moreover, if a competitor were to infringe any patent issued to the
Company, the costs of enforcing the Company's patent rights may be substantial
or even prohibitive. There can be no assurance that the Company's future
products will not infringe the patent rights of others or that the Company will
not be forced to expend substantial funds to defend against infringement claims
of, or to obtain licenses from, third parties. The Company currently has only
limited patent protection for its technology outside the Untied States, and may
be unable to obtain even limited protection for its proprietary technology in
certain foreign countries.
Competition. The materials industry is highly competitive. The Company
competes in its chosen markets against several larger domestic and
multi-national companies, all of which are well established in their respective
markets and have substantially greater financial and other resources than the
Company. Competitive market conditions could adversely affect the Company's
results of operations if it were required to reduce product prices to remain
competitive or were unable to achieve significant sales of its products.
Product Liability Risks. The Company faces an inherent business risk of
exposure to product liability claims in the event that any of its products are
alleged to be defective or cause harmful effects. The cost of defending or
settling product liability claims may be substantial. The Company currently
maintains, and intends to continue to maintain, product liability insurance
coverage. There can be no assurance that the Company will be able to obtain such
insurance on acceptable terms in the future or that such insurance will
adequately cover any claims.
Dependence on Principal Suppliers. The Company presently purchases its
principal ceramic raw material, boron carbide, from a limited number of
suppliers, including one supplier that provides approximately 50% of the
Company's present requirements. The Company's business would be materially and
adversely affected if it were unable to continue to purchase boron carbide at
prices and on terms comparable to those presently available from its principal
suppliers. Although the Company believes that boron carbide is available from
other suppliers, there can be no assurance that the Company will be able to
continue to obtain desired quantities of boron carbide on a timely basis or at
prices and on terms deemed reasonable by the Company.
Dependence on Management. The Company's future success and profitability is
substantially dependent upon the performance of its senior executives,
particularly Steven S. Price, the Company's President and Chief Executive
Officer. Each of the Company's senior executives has an employment agreement
with the Company and has a substantial equity interest in the Company through
ownership of shares of Common Stock or the grant of options to purchase shares
of Common Stock. The loss of services from any of the Company's senior
executives could have a material adverse effect on the Company. The Company does
maintain key-man life insurance policies of $2.5 million on each of the lives of
Mr. Price and Mr. Carden. The Company does not maintain key-man life insurance
on Mr. Menetrey or Mr. Little. The Company's future growth will be dependent
upon its ability to attract and retain additional qualified management,
technical, scientific, administrative and other personnel. By reason both of its
location and the nature of its business, the Company believes it will experience
significant competition for qualified management, supervisory, engineering and
other personnel. There can be no assurance that the Company will be successful
in hiring or retaining the personnel it requires for continued growth.
Year 2000 Compliance. Many currently installed computer systems are not
capable of distinguishing 21st century dates from 20th century dates. As a
result, in less than two years, the computer systems and software used by many
companies may need to be updated to comply with such "Year 2000" requirements.
The Company believes its accounting and management information systems are Year
2000 compliant. The ability of third parties with whom the Company transacts
business to address adequately their Year 2000 compliance is beyond the
Company's control. The failure of such third parties to address adequately Year
2000 compliance could have a material adverse effect on the Company's business,
results of operations and financial condition.
Dependence on Trademarks for Current and Future Markets. The market for the
Company's products is and will remain dependent in part upon the goodwill
engendered by its trademarks and trade names. Trademark protection is therefore
material to the Company's business. Although Boralyn is registered in the United
States, there can be no assurance that the Company will be successful in
asserting trademark or trade name protection for its significant marks and names
in the United States or other markets, and the costs to the Company of such
efforts could be substantial.
Control by Certain Stockholders; Anti-takeover Provisions. Certain of the
Company's present stockholders own a substantial majority of the outstanding
shares of Common Stock. Consequently, those stockholders have the ability to
elect all the Company's directors and to control the outcome of all other issues
submitted to the Company's stockholders. Additionally, the Company's Board of
Directors has the authority to issue up to 5,000,000 shares of Preferred Stock
and to determine the price, rights, preferences and privileges of those shares
without any further vote of, or action by, the Company's stockholders. The
rights of holders of Common Stock will be subject to, and may be adversely
affected by, the rights of holders of any Preferred Stock that may be issued in
the future. Although the Company has no present intention to issue shares of
Preferred Stock, any issuance of Preferred Stock, while potentially providing
desirable flexibility in connection with possible acquisitions and other
corporate purposes, could have an effect of making it more difficult for a third
party to acquire a majority of the outstanding voting stock of the Company.
Certain provisions of Delaware law applicable to the Company may also discourage
third-party attempts to acquire control.
Shares Eligible for Future Sale. Future sales of shares of Common Stock by
existing stockholders pursuant to Rule 144 promulgated under the Securities Act
of 1933, as amended, or otherwise, could have an adverse effect on the price of
the shares of Common Stock. In addition, the Company has contractually granted
certain of its existing stockholders, including, among others, Robin A. Carden
(the Company's founder and a director); Walter R. Menetrey (the Company's
Executive Vice President and a director); M. Kingdon Offshore NV; Kingdon
Associates, L.P.; and Kingdon Partners, L.P. (of each of which Michael
Markbreiter, a director of the Company, is an affiliate); Udi Toledano (the
Chairman of the Company's Board of Directors) and Edelson Technology Partners
III (of which Harry Edelson, a director of the Company, is an affiliate),
certain registration rights. No prediction can be made as to the effect that
future sales of Common Stock, or the availability of shares of Common Stock for
future sales, will have on the market price of the Common Stock prevailing from
time to time. Sales of substantial amounts of Common Stock, or the perception
that such sales could occur, could adversely affect prevailing market prices for
the Common Stock.
Possible Volatility of Stock Price. Trading volume and prices for the
Common Stock could be subject to wide fluctuations in response to quarterly
variations in operations, results, announcements with respect to sales and
earnings, as well as technological innovations, and new product developments and
other events or factors, which cannot be foreseen or predicted by the Company,
including the sale or attempted sale of a large amount of securities in the
public market, the registration for resale of any shares of Common Stock, and
the effect on the Company's earnings of existing or future equity-based
compensation awards to management. The market price of the Company's Common
Stock could also be influenced by developments or matters not related to the
Company.
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Shares issuable in the
Rights Offering, assuming all Rights are exercised, are estimated to be
approximately $10.25 million, after deducting the estimated offering expenses.
The Company believes that such net proceeds, together with cash flow from
operations, will be sufficient to finance its working and other capital
requirements for a period of at least the next 18 months. If less than all
Rights are exercised, resulting in lower net proceeds to the Company or if the
Company fails to reach sufficient revenue levels, the Company will require
additional capital, which may be in the form of debt or equity, the availability
and terms of which cannot be assured.
The Company intends to use the net proceeds from the Rights Offering for
working capital purposes. The Company intends to invest the net proceeds from
the Rights Offering in short-term, investment-grade, interest-bearing
instruments.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is listed for quotation under the symbol "ALYN"
on the National Market of The Nasdaq Stock Market, Inc. The following table sets
forth the high and low per share bid prices for the Company's Common Stock for
each quarterly period since the completion of the Company's initial public
offering on October 22, 1996.
<TABLE>
<CAPTION>
Calendar Year High Low
------------- ---- ---
<S> <C> <C>
1996
Fourth Quarter $16.00 $10.00
1997
First Quarter 13.50 8.25
Second Quarter 12.62 8.38
Third Quarter 17.62 6.88
Fourth Quarter 16.62 9.50
1998
First Quarter 10.62 6.62
Second Quarter 9.12 5.50
Third Quarter through July 13, 1998 6.00 4.38
</TABLE>
As of June 5, 1998, there were 42 holders of record of the Company's Common
Stock. The Company believes, based on the number of proxy materials distributed
in connection with its 1998 Annual Meeting of Stockholders, that the number of
beneficial owners as of that date exceeds 1,750.
DIVIDEND POLICY
The Company does not anticipate paying any dividends on its common stock in
the foreseeable future. The Company presently intends to retain its earnings, if
any, to finance the development of its business. The payment of any dividends in
the future will depend on the evaluation by the Company's Board of Directors of
such factors as it deems relevant at the time. Currently, the Board of Directors
believes that all of the Company's earnings, if any, should be retained for the
development of the Company's business. In addition, under the terms of the
Company's loan agreements, there are certain restrictions on the Company's
ability to declare and pay dividends. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
CAPITALIZATION
The following table sets forth the capitalization of the Company at March
31, 1998, and as adjusted to reflect the sale of the Shares offered by the
Company in the Rights Offering and the application of the estimated net proceeds
therefrom as described under "Use of Proceeds." This table should be read in
conjunction with the Company's Combined Financial Statements and Notes thereto
incorporated by reference into this Prospectus. See "Use of Proceeds" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
<TABLE>
<CAPTION>
As of March 31, 1998
Actual As Adjusted(1)
------ --------------
(In thousands, except share
data)
<S> <C> <C>
Current Liabilities............................................................. $ 2,657 $ 2,657
Long-term debt.................................................................. $ 5,231 $ 5,231
Stockholders' equity:
Preferred stock, par value $0.001 per share; 5,000,000 shares authorized; no
shares issued or outstanding
Common stock, par value $0.001 per share; 20,000,000 shares authorized;
10,750,000 shares issued and outstanding actual; 12,150,000 shares issued
and outstanding as adjusted(2)............................................. 11 12
Additional paid-in capital................................................... 33,294 43,542
Accumulated deficit.......................................................... (12,271) (12,271)
Total stockholders' equity 21,034 31,283
------- ------
Total capitalization..................................................... $ 28,922 $ 39,171
</TABLE>
(1) As adjusted to reflect the sale of the 1,400,000 shares of Common Stock
offered hereby and the application of the net proceeds therefrom as
described under "Use of Proceeds."
(2) Excludes (i) 962,000 shares issuable upon exercise of presently outstanding
stock options, (ii) 211,000 shares issuable upon exercise of warrants
issued to Furman Selz LLC, the underwriter of the Company's initial public
offering, and (iii) 38,000 shares available for issuance under the
Company's 1996 Stock Incentive Plan.
<PAGE>
THE RIGHTS OFFERING
The Rights
Alyn is distributing to the holders of its outstanding shares of Common
Stock on the Record Date, at no cost to such holders, nontransferable Rights.
Alyn will distribute .17674 Rights for each share of Common Stock (or one Right
for every 5.65803 shares of Common Stock) held on the Record Date. One Right
will entitle the holder to purchase one share of Common Stock at the
Subscription Price. The number of Rights distributed by Alyn to each holder of
record of Common Stock will be rounded up to the nearest whole number. No
fractional Rights or cash in lieu thereof will be issued or paid by the Company.
Basic Subscription Right
Each Right will entitle the holder thereof to receive, upon payment of the
Subscription Price, one share of Common Stock. Certificates representing shares
of Common Stock purchased pursuant to the Basic Subscription Right will be
delivered to subscribers as soon as practicable after the Expiration Date,
irrespective of whether the Rights are exercised immediately prior to the
Expiration Date or earlier.
Oversubscription Privilege
Subject to the allocation described below, each Right also grants the
holder the right to subscribe for additional Rights to acquire, at the
Subscription Price, additional shares of Common Stock not subscribed for through
the exercise of the Basic Subscription Rights by other Rights holders (the
"Oversubscription Privilege"). Only Rights holders who exercise their Basic
Subscription Right in full will be entitled to exercise the Oversubscription
Privilege.
If the number of Shares is not sufficient to satisfy all Oversubscription
Privileges, the available Shares will be allocated pro rata (subject to
elimination of fractional shares) among the holders of Rights who exercise their
Oversubscription Privilege, in proportion, not to the number of Shares requested
pursuant to the Oversubscription Privilege, but to the number of Shares each
Rights holder has purchased pursuant to its Basic Subscription Right; provided,
however, that if such pro rata allocation would result in any holder being
allocated a greater number of shares than such holder subscribed for pursuant to
the exercise of such holder's Oversubscription Privilege, then such holder will
be allocated only such number of Shares as such holder subscribed for pursuant
to the Oversubscription Privilege and the remaining Shares will be allocated
among all other holders exercising the Oversubscription Privilege.
Holders desiring to exercise their Oversubscription Privilege should
indicate in the space provided on their Subscription Certificate the number of
additional Shares they would like to subscribe for. As soon as practicable
following the Expiration Date, Alyn will determine the number of shares of
Common Stock that may be purchased by each Rights holder pursuant to the
Oversubscription Privilege. Holders must tender with their Subscription
Certificate the full amount due on exercise of their Oversubscription Privilege
for that number of Shares they have so subscribed for (in addition to the
payment due in connection with their Basic Subscription Right).
Certificates representing Shares purchased pursuant to the Oversubscription
Privilege will be delivered to subscribers as soon as practicable after the
Expiration Date and after all prorations and adjustments contemplated by the
terms of the Rights Offering have been effected. The amount overpaid, if any, by
holders of Rights exercising their Oversubscription Privilege will be repaid by
Alyn, without interest, after the amount due by each such holder has been
determined.
Banks, brokers and other nominee holders of Rights who exercise the Basic
Subscription Right and the Oversubscription Privilege on behalf of beneficial
owners of Rights will be required to certify to the Subscription Agent and Alyn,
in connection with the exercise of the Oversubscription Privilege, as to the
aggregate number of Rights that have been exercised and the number of shares of
Common Stock that are being subscribed for pursuant to the Oversubscription
Privilege by each beneficial owner of Rights on whose behalf such nominee holder
is acting.
Principal Stockholders
The Company's outside directors and their affiliates -- Kingdon Capital
Management Corp.; Udi Toledano; and Edelson Technology Partners III (the
"Exercising Principal Stockholders") -- who hold Basic Subscription Rights
aggregating 629,901 Shares ($3,464,457), have advised the Company that they
intend to exercise Rights for an aggregate of at least 909,091 Shares ($5
million), to the extent available. See "The Rights Offering-- Principal
Stockholders." If only the Exercising Principal Stockholders exercise
subscription rights and no other holders of Rights exercise their Basic
Subscription Rights, the net proceeds to the Company of the Rights Offering will
be $4.8 million. In order to reduce the dilutive effect of this Rights Offering,
Mr. Robin A. Carden, the Company's founder, has advised the Company that he will
transfer to the Company, without charge, 500,000 shares of Common Stock. Mr.
Carden will not be exercising his Basic Subscription Right to 538,085 Shares. As
a result, if all Rights are exercised, the Company will receive proceeds from
the sale of 1.9 million shares, but its outstanding Common Stock will increase
over the current level by only 1.4 million shares.
Expiration Date
The Rights will expire at 5:00 p.m., Eastern Standard Time, on August 14,
1998, unless extended by Alyn, in its discretion, for up to 10 days. After the
Expiration Date, unexercised Rights will be null and void. The Company will not
be obligated to honor any purported exercise of Rights received by the
Subscription Agent after the Expiration Date, regardless of when the documents
relating to such exercise were sent, except if sent in compliance with the
Guaranteed Delivery Procedures described below.
Determination of Subscription Price
The Subscription Price was determined by the Company and its Board of
Directors. The Subscription Price was determined after considering such factors
as the historic and current market price of the Company's Common Stock and the
Company's need for capital. The Subscription Price should not be considered an
indication of the actual value of Alyn or its Common Stock. There can be no
assurance that the market price of the Common Stock will not decline during the
subscription period or that, following the issuance of the Rights and of the
Common Stock upon exercise of the Rights, a subscribing Rights holder will be
able to sell shares of Common Stock purchased in the Rights Offering at a price
equal to or greater than the Subscription Price. At the time the Subscription
Price for the Shares being sold in the Rights Offering was determined (July 13,
1998), such price represented a 9.36% discount to the market price for the
Company's Common Stock.
Exercise of Rights
Rights may be exercised by delivery to the Subscription Agent, on or prior
to the Expiration Date, of a properly completed and duly executed Subscription
Certificate evidencing such Rights (together with any required signature
guarantees), accompanied by payment in full of the Subscription Price for each
share of Common Stock subscribed for pursuant to the Basic Subscription Right
and the Oversubscription Privilege (except as permitted pursuant to clause (iii)
of the next sentence). Such payment in full must be made by: (i) check or bank
draft drawn upon a United States bank or a postal, telegraphic or express money
order payable to "Continental Stock & Transfer, as Subscription Agent"; (ii)
wire transfer of funds to the account maintained by the Subscription Agent for
such purpose at Chase Manhattan Bank 777010690 Acct # 021 000 021 ABA; or (iii)
in such other manner as Alyn may approve in writing in the case of persons
acquiring an aggregate number of shares of Common Stock totaling $500,000 or
more, provided that in such case the full amount of such Subscription Price is
received by the Subscription Agent in currently available funds within one OTC
trading day prior to the Expiration Date (the payment method under (iii) being
an "Approved Payment Method"). Payment of the Subscription Price will be deemed
to have been received by the Subscription Agent only upon: (i) clearance of any
uncertified check; (ii) receipt by the Subscription Agent of any certified check
or bank draft drawn upon U.S. bank or of any postal, telegraphic or express
money order; or (iii) receipt of funds by the Subscription Agent through an
Approved Payment Method. PLEASE NOTE THAT FUNDS PAID BY UNCERTIFIED PERSONAL
CHECK MAY TAKE AT LEAST FIVE BUSINESS DAYS TO CLEAR. ACCORDINGLY, HOLDERS WHO
WISH TO PAY THE SUBSCRIPTION PRICE BY MEANS OF UNCERTIFIED PERSONAL CHECK ARE
URGED TO MAKE PAYMENT SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE TO ENSURE
THAT SUCH PAYMENT IS RECEIVED AND CLEARS BY SUCH DATE, AND ARE URGED TO CONSIDER
PAYMENT BY MEANS OF CERTIFIED OR CASHIER'S CHECK, MONEY ORDER OR WIRE TRANSFER
OF FUNDS.
Subscription Certificates and payment of the Subscription Price should be
delivered to the address set forth below under "-- Subscription Agent."
If a Rights holder wishes to exercise Rights, but time will not permit such
holder to cause the Subscription Certificate(s) evidencing such Rights to reach
the Subscription Agent on or prior to the Expiration Date, such Rights may
nevertheless be exercised if all of the following conditions (the "Guaranteed
Delivery Procedures") are met:
(i) such holder has caused payment in full of the Subscription Price
for each share of Common Stock being subscribed for pursuant to the Basic
Subscription Right and the Oversubscription Privilege to be received (in
the manner set forth above) by the Subscription Agent on or prior to the
Expiration Date;
(ii) the Subscription Agent receives, on or prior to the Expiration
Date, a notice of guaranteed delivery (a "Notice of Guaranteed Delivery"),
substantially in the form provided with the Instructions distributed with
the Subscription Certificates, from a member firm of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States, stating the name of the exercising
Rights holder, the number of Rights represented by the Subscription
Certificate(s) held by such exercising holder, the number of shares of
Common Stock being subscribed for pursuant to the Basic Subscription Right
and the number of shares, if any, being subscribed for pursuant to the
Oversubscription Privilege, and guaranteeing the delivery to the
Subscription Agent of any Subscription Certificate(s) evidencing such
Rights within three OTC trading days following the date of the Notice of
Guaranteed Delivery; and
(iii) the properly completed and duly executed Subscription
Certificate(s), including any required signature guarantees, evidencing the
Rights being exercised is received by the Subscription Agent within three
OTC trading days following the date of the Notice of Guaranteed Delivery
relating thereto. The Notice of Guaranteed Delivery may be delivered to the
Subscription Agent in the same manner as Subscription Certificates at the
addresses set forth below, or may be transmitted to the Subscription Agent
by facsimile transmission, facsimile no. (212) 509-5150. Additional copies
of the form of Notice of Guaranteed Delivery are available upon request
from the Subscription Agent at the address set forth below under "--
Subscription Agent."
Unless a Subscription Certificate: (i) provides that the shares of Common
Stock to be issued pursuant to the exercise of Rights represented thereby are to
be delivered to the record holder of such Rights or (ii) is submitted for the
account of a member firm of a registered national securities exchange or a
member of the National Association of Securities Dealers, Inc., or a commercial
bank or trust company having an office or correspondent in the United States,
signatures on such Subscription Certificate must be guaranteed by an eligible
guarantor institution ("Eligible Guarantor Institution") as defined in Rule
17Ad-15 of the Exchange Act, subject to the standards and procedures adopted by
the Subscription Agent.
Funds received in payment of the Subscription Price in connection with a
holder's exercise of its Oversubscription Privilege will be held in a segregated
account pending issuance of such Excess Shares. If a Rights holder exercising
the Oversubscription Privilege is allocated less than all of the Shares that
such holder wished to subscribe for pursuant to the Oversubscription Privilege,
the excess funds paid by such holder in respect of the Subscription Price for
shares not issued will be returned by mail, without interest or deduction, as
soon as practicable after the Expiration Date.
A holder who holds shares of Common Stock for the account of others, such
as a broker, a trustee or a depository for securities, should notify the
respective beneficial owners of such shares as soon as possible to ascertain
such beneficial owners' intentions and to obtain instructions with respect to
the Rights beneficially owned by them.
Beneficial owners of Common Stock or Rights held through such a holder of
record should contact the holder and request the holder to effect transactions
in accordance with the beneficial owner's instructions.
If either the number of Rights being exercised is not specified on a
Subscription Certificate, or the payment delivered is not sufficient to pay the
full aggregate Subscription Price of all shares of Common Stock stated to be
subscribed for, the Rights holder will be deemed to have exercised the maximum
number of Rights that could be exercised for the amount of the payment delivered
by such Rights holder. If the payment delivered by the Rights holder exceeds the
aggregate Subscription Price for the number of Rights evidenced by the
Subscription Certificate(s) delivered by such Rights holder, the payment will be
applied, until depleted, to subscribe for shares of Common Stock in the
following order: (i) to subscribe for the number of shares, if any, of Common
Stock indicated on the Subscription Certificate(s) pursuant to the Basic
Subscription Right; (ii) to subscribe for shares of Common Stock until the Basic
Subscription Right has been fully exercised with respect to all of the Rights
represented by the Subscription Certificate; and (iii) to subscribe for
additional shares of Common Stock pursuant to the Oversubscription Privilege
(subject to any applicable proration). Any excess payment remaining after the
foregoing allocation will be returned to the Rights holder as soon as
practicable by mail, without interest or deduction.
The instructions accompanying the Subscription Certificates should be read
carefully and followed in detail. DO NOT SEND SUBSCRIPTION CERTIFICATES TO THE
COMPANY.
THE METHOD OF DELIVERY OF SUBSCRIPTION CERTIFICATES AND PAYMENT FOR THE
SUBSCRIPTION PRICE TO THE SUBSCRIPTION AGENT WILL BE AT THE ELECTION AND RISK OF
THE RIGHTS HOLDERS, BUT IF SENT BY MAIL IT IS RECOMMENDED THAT SUCH CERTIFICATES
AND PAYMENTS BE SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT
REQUESTED, AND THAT A SUFFICIENT NUMBER OF DAYS BE ALLOWED TO ENSURE DELIVERY TO
THE SUBSCRIPTION AGENT AND CLEARANCE OF PAYMENT PRIOR TO THE EXPIRATION DATE.
BECAUSE UNCERTIFIED PERSONAL CHECKS MAY TAKE AT LEAST FIVE BUSINESS DAYS TO
CLEAR, RIGHTS HOLDERS ARE STRONGLY URGED TO PAY, OR ARRANGE FOR PAYMENT, BY
MEANS OF CERTIFIED OR CASHIER'S CHECK, MONEY ORDER OR WIRE TRANSFER OF FUNDS.
All questions concerning the timeliness, validity, form and eligibility of
any exercise of Rights will be determined by Alyn, whose determinations will be
final and binding. The Company, in its sole discretion, may waive any defect or
irregularity, or permit a defect or irregularity to be corrected within such
time as it may determine, or reject the purported exercise of any Right by
reason of any defect or irregularity in such exercise. Subscriptions will not be
deemed to have been received or accepted until all irregularities have been
waived or cured within such time as the Company determines in its sole
discretion. Neither the Company nor the Subscription Agent will be under any
duty to give notification of any defect or irregularity in connection with the
submission of Subscription Certificates or incur any liability for failure to
give such notification.
Any questions or requests for assistance concerning the procedure for
exercising Rights or requests for additional copies of this Prospectus, the
Instructions or the Notice for guaranteed Delivery should be directed to:
Innisfree M&A Incorporated
501 Madison Avenue
New York, NY 10022
(212) 750-5833
No Revocation
AFTER A RIGHTS HOLDER HAS EXERCISED ITS BASIC SUBSCRIPTION RIGHT OR
OVERSUBSCRIPTION PRIVILEGE, SUCH EXERCISE MAY NOT BE REVOKED BY SUCH HOLDER.
Except for the fees charged by the Subscription Agent (which will be paid
by the Company as described herein), all commissions, fees and other expenses
(including any applicable taxes and commissions) incurred in connection with the
exercise of Rights will be for the account of the holder of the Rights, and none
of such commissions, fees or expenses will be paid by the Company or the
Subscription Agent.
Subscription Agent
Alyn has appointed Continental Stock Transfer & Trust Company as
Subscription Agent for the Rights Offering. The Subscription Agent's address,
which is the address to which the Subscription Certificates and payment of the
Subscription Price should be delivered, as well as the address to which Notice
of Guaranteed Delivery must be delivered, is:
Continental Stock Transfer & Trust Company
Reorganization Department
2 Broadway, 19th Floor
New York, NY 10004
The Subscription Agent's telephone number is (212) 509-4000, ext. 535, and
its facsimile number is (212) 509-5150.
The Company will pay the fees and expenses of the Subscription Agent (which
are estimated will aggregate $15,000) and has also agreed to indemnify the
Subscription Agent from any liability which it may incur in connection with the
Rights Offering.
Financial Advisor
The Company has engaged Furman Selz LLC as its financial advisor in
connection with the Rights Offering.
<PAGE>
Information Agent
The Company has retained Innisfree M&A Incorporated ("Innisfree") as
information agent. Innisfree will answer questions from Rights holders and
others about the Rights Offering and exercise procedures. Innisfree is located
at 501 Madison Avenue, New York, NY 10022. Innisfree's telephone number is (212)
750-5833.
<PAGE>
SELECTED FINANCIAL DATA
(In thousands, except per share data)
<TABLE>
<CAPTION>
Alyn Old Alyn
------------------------------------------ --------------------------------------
Period Period
from May from
Three months ended Year 2, 1996 January
March 31, ended to 1, 1996 Years ended December 31,
December December to
31, 31, May 1
1998 1997 1997 1996 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ---- ----
Statements of Operations
Data:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total net revenue $28 $42 $364 $90 $104 $319 $309 $540
--- --- ---- --- ---- ---- ---- ----
Costs and expenses:
Cost of goods sold......... 634 23 323 80 34 203 92 265
Establishment of
manufacturing facilities 225 1,809 262
General and administrative
expenses............... 544 430 2,633 1,257 53 219 352 259
Selling and marketing...... 327 370 1,371 587 23 52 143 114
Research and development... 1,202 225 2,338 283 7 79 180 24
----- --- ----- --- - -- --- --
Total costs and expenses... 2,707 1,273 8,474 2,469 117 553 767 662
----- ----- ----- ----- --- --- --- ---
Operating loss............. (2,679) (1,231) (8,110) (2,379) (13) (234) (458) (122)
Other income (expense), net (36) 289 806 141 (2) (10) (11) (3)
--- --- --- --- -- --- --- --
Loss before provision for
income taxes............ (2,715) (942) (7,304) (2,238) (15) (244) (469) (125)
Provision for income taxes. 1 1 12 1 1 1 1 1
- - -- - - - - -
Net loss................... ($2,716) ($943) ($7,316) ($2,239) ($16) ($245) ($470) ($126)
======= ===== ======= ======= ==== ===== ===== =====
Per Share Data:
Basic and diluted net loss
per share (1)........... ($0.25) ($0.09) ($0.68) ($0.25)
====== ====== ====== ======
Common shares used in
computing basic and
diluted net loss per 10,750 10,750 10,750 8,800
share (1)............... ====== ====== ====== =====
Three months ended
March 31, Years ended December 31 Years ended December 31,
--------- ----------------------- ------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
Balance Sheet Data:
Working capital (deficit).. $ 6,635 $19,489 $11,717 $23,494 ($382) ($133) $ 18
Total assets............... 28,922 30,973 31,127 32,203 128 193 219
Long-term obligations...... 5,231 0 5,501 0 128 128 128
Total stockholders' equity
(deficit)............... 21,034 30,123 23,750 31,066 (490) (245) (99)
</TABLE>
(1) Under Financial Accounting Standards Board Statement Number 128, Earnings
per Share, any discount from the market price at the date of issue must be
treated as a stock dividend for purposes of computing earnings per share.
Therefore, the issuance of the Shares in this Rights Offering may result in
a decrease in the loss per share as previously reported. Such change, if
any, is not expected to be significant. The Shares in this Rights Offering
are being offered at a discount to current market that is less than 10% and
is therefore not significant.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the "Selected Financial Data" which is included elsewhere in this Prospectus and
the Company's Financial Statements and Notes thereto, which are included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997 and
the Quarterly Report on Form 10-Q for the three months ended March 31, 1998
which are incorporated by reference in this Prospectus. The following discussion
contains forward-looking statements. Actual results could differ materially. See
"Risk Factors."
Overview
Since its inception in 1990, the Company has been engaged in research,
development and testing of its advanced metal matrix composite materials.
Following its initial public offering in October 1996, the Company has focused
on the establishment of manufacturing facilities and prototype production of
metal matrix composite products. In 1997 and the first quarter of 1998, the
Company's sales were primarily the result of prototype orders. The Company is in
transition from establishing manufacturing facilities and prototype development
to production. An initial production order for metalwood golf club heads was
received from Taylor Made Golf Company in June 1998 and the Company has received
prototype development orders from two other major golf club manufacturers.
Boralyn-based golf club shaft prototypes are in True Temper Sports' testing
program for evaluation. Shipments have begun for aerospace applications
utilizing both Boralyn and hard-alloy aluminum. Development work continues in
the Company's disk substrate program. Production of the engine cradle for
General Motors began in June 1998, with the first shipments scheduled for July
1998. While the Company expects to achieve sales of Boralyn-based products in
1998, there can be no assurance that any significant sales will be achieved. The
Company was unprofitable through March 31, 1998 and incurred a loss for the full
year 1997 as a result of start-up expenses in anticipation of production orders,
and will incur additional losses thereafter.
Results of Operations
Three Months Ended March 31, 1998 and 1997.
Total revenues for the first quarter of 1998 decreased 33% to $28,000 from
$42,000 in the first quarter of 1997. The change is insignificant.
Cost of Goods Sold for the first quarter of 1998 increased 2,657% to
$634,000 from $23,000 in the first quarter of 1997. All labor, material and
overhead not attributable to R & D were classified as Cost of Goods Sold in the
first quarter of 1998. In 1997, prior to completion of the Company's first
manufacturing facility, only labor, material and overhead associated with sales
went to Cost of Goods Sold, with the remainder charged to Establishment of
Manufacturing Facilities, as the Company's workforce was employed in this
effort.
There were no expenses for the Establishment of Manufacturing Facilities
during the first quarter of 1998, as there were no costs incurred in this
effort. In the first quarter of 1997, $225,000 of expenses incurred for the
startup and testing of production equipment was charged to Establishment of
Manufacturing Facilities.
General and Administrative expenses for the first quarter of 1998 increased
27% to $544,000 from $430,000 in the first quarter of 1997. The increase
represents the costs incurred as a result of increasing the Company's
administrative employee base. These expenses are expected to increase as the
Company begins production.
Selling and Marketing expenses for the first quarter of 1998 decreased by
12% to $327,000 from $370,000 in the first quarter of 1997. As the Company
begins production, Selling and Marketing expenses are expected to increase.
Research and Development expenses for the first quarter of 1998 increased
434% to $1,202,000 from $225,000 in the first quarter of 1997. This increase was
attributable to an increase in the development of products the Company
anticipates producing. The Company expects to continue investing in Research and
Development of new applications of Boralyn and other metal matrix composites.
Costs and expenses for the first quarter of 1998 include $525,000 of
depreciation and amortization compared to $63,000 for the same period in 1997.
Years Ended December 31, 1997, 1996 and 1995.
For purposes of comparison with the results of operations for the year
ended December 31, 1997, the results of operations for the period January 1,
1996 through May 1, 1996 and the period from May 2, 1996 through December 31,
1996 have been aggregated.
Total revenues for 1997 increased 88% to $364,000 from $194,000 in 1996.
The increase was the result of additional prototype sales of Boralyn-based
products and revenue on custom-built tooling. In 1996, total revenue decreased
39% to $194,000 from $319,000 in 1995. The decrease was the result of
management's decision to focus its efforts on sales of Boralyn-based products
and to reduce its efforts to sell boron carbide powders and ceramic products.
Cost of goods sold increased 183% to $323,000 in 1997 from $114,000 in
1996. Cost of goods sold for 1997 increased as a percentage of total revenue to
89% from 59% in 1996. The increase was primarily attributable to the lower
margin on sales of custom-built tooling and prototype sales. Certain customers
have renegotiated tooling contracts where future tooling payments are to be
treated as a reimbursement of tooling expenses as opposed to being recorded as
revenue. In 1996 cost of goods sold decreased 44% to $114,000 from $203,000 in
1995, reflecting primarily the reduction in revenues. Cost of goods sold as a
percentage of total revenue decreased in 1996 to 59% from 64% in 1995. The
decrease reflected the change in product mix which included a greater proportion
of higher margin Boralyn-based products in 1995.
Expenses incurred in 1997 for the establishment of manufacturing facilities
increased 591% to $1,809,000 from $262,000 in 1996. The increase was primarily
attributable to the additional manufacturing management and related
pre-operating costs incurred by the Company in building up its infrastructure
and installing machinery and equipment to produce Boralyn-based products. The
increase in 1997 was the result of occupying the building for the entire year as
compared to only the fourth quarter in 1996. The Company expects to begin
production in 1998 and anticipates reaching normal production levels by the end
of 1998. There were no expenses incurred during 1995 for establishment of
manufacturing facilities.
General and administrative expenses for 1997 increased 101% to $2,633,000
from $1,310,000 in 1996. The increase was primarily the result of doubling the
Company's staff in preparation for production, including professional services
and other administrative costs. In 1996, general and administrative expenses
increased 498% to $1,310,000 from $219,000 in 1995. The increase was the result
of additional staff and administrative costs associated with the transition of
the Company to fully commercialize Boralyn.
Selling and marketing expenses in 1997 increased 125% to $1,371,000 from
$610,000 in 1996. The increase was the result of an increase in marketing
expenses incurred in the expanding marketing efforts for Boralyn-based products.
These expenses will continue to increase to support anticipated Company growth.
Selling and marketing expenses increased 1,073% to $610,000 in 1996 from $52,000
in 1995. This increase was the result of increased sales staff, including
specialists in sporting goods, computers, and transportation industries,
marketing staff and an increase in marketing expenses incurred in the start-up
marketing efforts for Boralyn-based products.
Research and development expenses in 1997 increased 706% to $2,338,000 from
$290,000 in 1996. This increase was attributable to an increase in ongoing
development programs, including establishment of the research facility in
Fremont, California, which focuses solely on the computer hard-disk substrate
market. Research and development expenses are expected to increase as the
Company expands programs to support the development of Boralyn-based products.
In 1996, research and development expenses increased 267% to $290,000 from
$79,000 in 1995. The increase was attributed to an increase in research staff
and ongoing development programs associated with the Company's transition for
Boralyn commercialization.
The Company's customer sales contracts are quoted in U.S. Dollars, such
that there is no current foreign exchange exposure. However, there can be no
assurance that market conditions will allow continued pricing in U.S. Dollars
and may require pricing in local currencies. The company's agreements for the
purchase of raw materials and tooling which are obtained from sources outside
the United States are also quoted in U.S. Dollars, although current purchase
agreements do not exceed one year. Raw material and tooling prices may be
affected materially and adversely by currency value fluctuations.
Liquidity and Capital Resources
At March 31, 1998, the Company had cash of $8,696,000 and working capital
of $6,635,000. The Company has funded its operations from the proceeds of its
initial public offering in October 1996 of $33.3 million, net of expenses, and
through debt financing of $6.5 million completed in December 1997. The Company
intends to utilize an additional $4 million of debt financing under an existing
credit facility in the second quarter of 1998. Cash balances in excess of those
required to fund operations are invested in interest-bearing high-quality
short-term investment grade corporate securities and government securities in
accordance with investment guidelines approved by the Company's Board of
Directors.
The net proceeds to the Company from the sale of the Shares issuable in the
Rights Offering, assuming all Rights are exercised, are estimated to be
approximately $10.25 million, after deducting the estimated offering expenses.
The Company believes that such net proceeds, together with cash flow from
operations, will be sufficient to finance its working and other capital
requirements for a period of at least the next 18 months. If less than all
Rights are exercised, resulting in lower net proceeds to the Company or if the
Company fails to reach sufficient revenue levels, the Company will require
additional capital, which may be in the form of debt or equity, the availability
and terms of which can not be assured. Other factors that may effect the
Company's future liquidity and capital funding requirements include the results
of marketing its metal matrix composite capabilities, their acceptance in the
market, the timing of production orders and their delivery and the costs and
timing of growth in sales, marketing and manufacturing activities.
Year 2000 Compliance
Many currently installed computer systems are not capable of distinguishing
21st century dates from 20th century dates. As a result, in less than two years,
the computer systems and software used by many companies may need to be updated
to comply with such "Year 2000" requirements. The Company believes its
accounting and management information systems are Year 2000 compliant. The
ability of third parties with whom the Company transacts business to address
adequately their Year 2000 compliance is beyond the Company's control. The
failure of such third parties to address adequately Year 2000 compliance could
have a material adverse effect on the Company's business, results of operations
and financial condition.
<PAGE>
BUSINESS
Unless otherwise indicated, all information in this Prospectus gives effect
to the merger, effective May 2, 1996, of Alyn Corporation, a California
corporation ("Old Alyn"), with and into Alyn Corporation, a Delaware corporation
formerly named AC Acquisition Corp. ("Alyn" or the "Company"). Unless the
context otherwise requires, the terms "Alyn" or the "Company", as used in this
Prospectus, includes the Company and its predecessor, Old Alyn.
Alyn provides customized metal matrix solutions to meet the specific
product needs of its customers in consumer and industrial markets. Alyn is a
vertically-integrated metal matrix composite company that offers advanced metal
matrix composites, customer-driven engineering solutions and strategically
developed manufacturing processes. Alyn engages in joint development projects
with many of its customers in selected large markets where the design and
production of metal matrix composite-based products provide those customers with
products that are innovative, reduce a customer's overall production cost, or
provide value-added performance.
The Company has developed technology, for which it obtained its initial
patent in January 1996, for the application of boron carbide in combination with
aluminum in a light-weight metal matrix composite under the Boralyn name. Boron
carbide is an advanced ceramic that is the third hardest material in the world
and the hardest material available at commercially reasonable cost. The Company
believes that no other commercially available material offers a range of
properties comparable to those of Boralyn. Boralyn is lighter and can be more
easily fabricated than titanium. It has a higher specific stiffness than
aluminum and commonly used titanium or steel alloys. Boralyn is one-third the
density of most steels and has a greater resistance to wear than aluminum,
specialty steel and titanium.
Since its initial public offering in October 1996, the Company has focused
on the strategic design and installation of significant manufacturing assets to
meet anticipated production requirements in its targeted markets. Alyn now has
two production facilities in Irvine, California: a 35,000 square foot precision
pressure casting facility at its Hale Avenue location and an 84,000 square foot
extrusion and forging facility at its Von Karman location. Alyn now has an
installed manufacturing capability that enables it to produce over 25 million
pounds of Boralyn and hard-alloy aluminum products per year.
The Company recently began utilizing project teams to develop products and
bring them to production. The Company has targeted the following markets which
are well-positioned to take advantage of premium-priced Boralyn and the
Company's other metal matrix composites to achieve product breakthroughs or
cost savings: (i) premium-priced golf club heads and shafts; (ii) selected
automotive components; (iii) aerospace components; (iv) disk substrates for
computer hard drives; and (v) nuclear shielding for waste storage casks. Based
on initial production orders, responses received in connection with its
currently ongoing joint development projects and a high level of request for
product quotes, the Company believes these markets provide substantial
opportunities for growth. The Company intends to develop products for other
markets, such as bicycle components and other high-end sporting goods and
defense applications, where metal matrix composite-based products may also
provide premium pricing for value added benefits.
Company Strategy
Alyn's objectives are to become a leader in providing engineered solutions
to customers' product needs through metal matrix composite technologies and
associated manufacturing processes, and to establish significant market share
and brand awareness for Boralyn in markets where value-added premiums may be
obtained. The Company intends to achieve these objectives by: (i) focusing on
customer markets with high value-added needs; (ii) partnering with customers to
develop engineered solutions to their specific product needs; (iii) capitalizing
on its existing proprietary technology and patented processes for producing
MMCs; (iv) manufacturing customers' products; (v) ensuring effective execution
through target market teams and individual product teams; and (vi) providing a
high level of customer satisfaction.
Focusing on High Value-added Markets. The Company is initially focusing its
sales and development efforts on five markets which have significant needs in
areas where the Company's materials and processes offer great value. These
markets are golf, automotive, aerospace, computer hard drives and nuclear
shielding. The significance of the needs in each of these markets allows
premium-pricing for the Company's products, while still providing value-added
product innovation and/or cost savings for the customer.
Partnering with Customers. This element of the Company's strategy is
central to the overall objective of "Providing Engineered Solutions Through
Metal Matrix Technologies." The Company maintains a staff of highly qualified
product design engineers, with state-of-the-art software, to work with its
customers' marketing, design and engineering and production personnel in
addressing their specific product needs. Such needs include product innovation
and fundamental technology advances, weight reduction, enhanced structural
properties, improved quality and fabrication improvements to reduce cost.
Capitalizing on Metal Matrix Technologies. The Company has developed
patented and proprietary technology for the making of metal matrix composite
materials utilizing aluminum, titanium or magnesium as the base metal and boron
carbide, silicon carbide or aluminum oxide as the ceramic component. The Company
has also developed proprietary processes for the manufacture of products. By
mixing different materials in varying percentages and adjusting the processes
used for MMC production, the Company is able to "dial-in" material properties to
fit specific customer needs.
Manufacturing Customer Products. The Company's metal matrix composite
materials can be fabricated into products by extrusion, forging and casting.
Proprietary processes have been developed for fabrication of the Company's
products, providing a competitive advantage in production capabilities,
independent of the use of the MMCs themselves. In addition, significant
proprietary "know-how" has been developed for the manufacture of products from
MMCs. The Company has strategically invested in developing significant
manufacturing capacity to be able to offer a fully integrated service to its
customers requiring both limited and large production quantities.
Managing Through Teams. The Company's integration of engineering design,
development of material properties to address specific customer needs and the
production and delivery of the finished product, requires the active
participation and coordination of all functions within the Company. In order to
effectively manage this process and deliver customer satisfaction, the Company
utilizes project teams with responsibility and accountability for delivering
"on-time and on-spec," with a single point of reference and communication for
each customer. The Company believes that this methodology is essential to
delivering the highest levels of customer satisfaction.
Providing Customer Satisfaction. The Company believes that by providing
superior customer satisfaction, it can maintain a preferred position in
developing long term relationships with its customers, which can be expanded
into broader roles within their respective companies and industries.
Characteristics of Boralyn
Boralyn is the Company's initial commercially available metal matrix
composite material, composed principally of aluminum alloy and boron carbide.
The Company believes that in target markets Boralyn compares favorably to other
materials with which it will compete with respect to weight (density), specific
strength, specific stiffness, resistance to wear, fatigue and corrosion
resistance, vibration and resonance and neutron absorption.
Specific Strength/Specific Stiffness. The specific strength range
(dependent somewhat on the grade) of Boralyn is substantially higher than that
of aluminum and somewhat higher than that of many specialty steels and titanium.
Boralyn has greater specific stiffness compared to titanium alloy, aluminum
alloy and specialty steel. For many applications, less Boralyn is required to
provide necessary strength and stiffness. Conversely, for the same weight,
Boralyn provides significantly more strength and stiffness than other competing
materials.
Resistance to Wear. Boralyn provides greater wear resistance than aluminum
or steel due to the extreme hardness of boron carbide.
Fatigue and Corrosion Resistance. Boralyn, in a 5% salt moist environment,
endures a higher number of stress cycles than aluminum alloy. This property
makes Boralyn superior to aluminum alloy for applications in which many stress
cycles are encountered, particularly in certain corrosive environments. Any
structural support where stress is applied repeatedly needs high fatigue
characteristics.
Vibration and Resonance. Boralyn, due in part to its high stiffness, has
lower vibration and resonance characteristics than glass and aluminum computer
hard-disk substrates over rotational speeds ranging from 1,000 to 12,000
revolutions per minute.
Neutron Absorption. Boron carbide contains a naturally occurring isotope of
boron which absorbs (attenuates) neutron radiation, the hazardous radiation
element of nuclear energy generation and various military applications. Neutron
absorption in boron carbide-based materials such as Boralyn is primarily a
function of the density (referred to as areal density) and degree of uniformity
of distribution (i.e., homogeneity) of boron carbide particles within the
material. The predictable homogeneity of Boralyn allows for the design of
structures specific to a customer's requirements, without incorporating
additional material.
Broad Range of Available Grades. Boralyn is available in various grades
depending principally on the aluminum alloy of choice and the percent of boron
carbide that is included. A specific grade can be matched to a specific
application where a specific property or properties are to be highlighted. For
example, in aerospace applications, where thermal expansion is a problem due to
the extremes of the environment, the percentage of boron carbide can be
increased to lower the thermal expansion. As another example, for better
wearability, the percentage of boron carbide can be increased to create harder
surfaces.
Variety of Fabrication Methods. In addition to the properties described
above, Boralyn can be readily extruded and forged, can be used in a variety of
casting processes, and has excellent brazing and welding capabilities. The
Company has developed what it believes to be superior manufacturing processes
that are tailored to the production of Boralyn. Among these processes is the
Company's soluble core technology which allows for forming complex, hollow
chambers and passages, often within a one-piece structure, thereby eliminating
the need for welding or other secondary manufacturing processes. In many
instances, this results in a cost savings to the Company's customers.
Markets and Products
The growth of interest in metal matrix composites is a result of the
engineering properties of these composites. Metal matrix composites compare
favorably to other materials with respect to weight, stiffness and strength, and
can be relatively easily fabricated. Engineering analyses demonstrate that these
materials can provide significant savings in weight and greater stiffness,
compared to traditional metallic alloys, while still retaining key structural
and design properties. They also compare favorably with certain other composite
materials, namely polymer-matrix materials, that have temperature and strength
limitations, are sensitive to moisture and, in some cases, also release gases or
moisture.
The Company is focusing its initial marketing efforts on the use of Boralyn
in applications where its unique combination of properties, combined with its
manufacturing capabilities, justify an appropriate price premium. These
applications include the following:
Golf Club Heads and Shafts. The market for golf equipment continues to grow
within the U.S. and internationally. The U.S. wholesale market for golf
equipment in 1997 is estimated by industry sources to be approximately $2.4
billion. Wholesale golf club sales in the U.S. increased from 1992 to 1997 at a
compounded growth rate of approximately 13%. This is primarily the result of
three factors: (i) the increasing number of new golf courses available to the
general public; (ii) increasing interest from non-traditional golfers; and (iii)
favorable population trends, including the aging of Baby Boomers. The Company
believes that the higher specific stiffness, higher specific strength and other
properties of Boralyn allow golf club heads to be designed and manufactured with
a larger "sweet spot" and better mass distribution (such as a lower center of
gravity), compared with titanium and other heads. The effect is to produce what
golfers term a "more forgiving" golf club. The recent U.S. Golf Association
announcement limiting the movement of the face plates of metalwood club heads
and the ball velocity upon leaving the club head are not expected to negatively
impact the Company's golf market opportunity. The higher specific stiffness of
Boralyn enables the production of a club shaft with the "feel" of steel (i.e.
greater control), but with a lighter weight.
In September 1996, the Company and Taylor Made entered into an agreement
providing for the development, production and purchase of Boralyn-based
metalwood golf club heads. While this agreement has expired, the development
activity conducted by both companies since September 1996 has led to an initial
production order for metalwood club heads in June 1998. The Company is also
developing prototype metalwoods, irons and putters with several well-known golf
club companies. Initial orders for prototype products have been received, with
scheduled deliveries by September 1998. It is the Company's expectation that
these prototype products will result in additional production orders later this
year.
In May 1997, the Company reached agreement with True Temper Sports to
market golf club shafts using Boralyn. Related designs and tooling for the
shafts have been completed and a prototype order has been shipped to True Temper
for production and field testing by its customers.
Computer Hard-disks. The worldwide wholesale market for personal computer
hard-disk drives is estimated by industry sources to be approximately 150
million units in 1998. Each drive, on average, has approximately three disks,
yielding a total market for disk substrates of approximately 450 million units
in 1998. The Company believes that disks for high-speed, high-capacity drives,
which the Company is targeting in its product development and marketing efforts,
represent between 5% and 10% of the total market currently. New technologies in
the industry typically migrate from the high-end to the mass market within two
years. Boralyn disks exhibit minimal vibration over the entire range of
rotational speeds experienced by current and planned hard-disk drives. The lower
vibration and resonance allows for closer head-to-disk distance at higher
rotational speeds, characteristics that allow for greater storage capabilities
and faster data transfer rates.
The Company has been working since 1996 to develop hard-disk substrates
using Boralyn. Several surface quality issues remain, relating to the industry
requirement for a "pit-free" surface. The Company believes it has recently
developed solutions to these issues and is producing new disks for evaluation to
determine the effectiveness of the solutions. The Company expects to produce
plated industry standard disks in the fourth quarter of 1998, which will be
delivered to Seagate Technologies and to other manufacturers of hard-disk
drives. While the Company has directed its disk substrate development efforts
toward Seagate, it has no exclusivity arrangement with them. Significant disk
production is not expected until the second half of 1999.
Aerospace/Defense. Product areas that offer near-term opportunities for
Boralyn include structural support for overhead luggage compartments, galley
components and flooring, housings, high wear resistant components, components
requiring vibration dampening and other parts not related to safety-of-flight.
Areas of future opportunity for Boralyn are believed by the Company to include
aircraft structural members, nacelle components, low vibration rotating parts,
actuators, bearings and armor for the military. Due to the significant increase
in demand for commercial aircraft, substantial demand for hard-alloy aluminum
has been created. Lead times from industry suppliers have increased for a large
number of components. Because of the Company's significant production capacity
for both large and small components, it is targeting both prime and
sub-contractors to the industry for production orders of hard-alloy components.
By producing these hard-alloy components, the Company will leverage its
available manufacturing capacity to generate revenue and margin contributions.
Importantly, this strategy also serves as a vehicle for the introduction of
Boralyn as an already approved supplier to the industry.
In September 1997, the Company received its first aerospace production
order for Boralyn aircraft components from Cessna Aircraft Company. Initial
deliveries under this order are expected to be shipped in August 1998. The
Company continues to produce Boralyn samples and prototypes for other companies
for a variety of aerospace and defense applications. The Company has been
qualified as an approved vendor by several major prime contractors to the
industry and has received a number of production orders for hard-alloy aluminum
components. Shipments began in May 1998.
Automotive. The automotive market is an extraordinarily large market where
the properties of Boralyn and the Company's proprietary manufacturing processes
can be used to deliver value-added benefits in many component applications. The
industry is particularly focused on fuel economy (weight and design),
performance (weight, strength and stiffness) and cost savings (manufacturing
processes).
In October 1997, the Company received a production order for engine cradles
for General Motors' EV-1 electric vehicle, which represented the Company's first
order from the automotive industry. Production of the cradle began in June 1998,
with initial shipments scheduled to begin in July 1998. Vehicle components such
as the engine cradle benefit from decreased weight, improved material properties
and the Company's precision manufacturing capabilities. Other components
currently being marketed include frame and suspension parts, brake calipers and
discs, wheels, drive shafts and engine components such as cylinder liners,
pistons, connecting rods and cylinder heads. The Company believes that
acceptance of the Boralyn engine cradle by General Motors will demonstrate the
Company's capability within the industry and expects this to lead to additional
production orders from General Motors, other manufacturers and their suppliers.
Neutron Shielding. Materials traditionally used for neutron absorption in
nuclear reactors and disposal containers for radioactive products and waste
require a separate neutron-absorbing material, such as boron carbide, encased in
layers of metallic alloy, such as aluminum, supported by steel, in order to
provide stiffness and structural integrity. The Company believes competing
materials require additional material to compensate for irregular distribution
of neutron-absorbing particles (i.e., relative lack of homogeneity) to achieve
adequate levels of uniform absorption. Accordingly, Boralyn can produce the same
neutron-absorbing results as competing materials, but with less Boralyn, thereby
reducing the weight and cost of the structure. The initial opportunity in this
market is for shielding material to use in conjunction with current spent fuel
casks. The potential market for the Company's products is substantial and is
expected to increase due to the growing volume of spent nuclear fuel requiring
storage.
The Company received its first prototype/production order for neutron
shielding for spent fuel cask components in April 1998 from Transnuclear, a
leader in this field. The prototype order was shipped in June 1998. Initiation
of production is subject to acceptance of the prototypes. The Company is also
working with other major participants in the industry to develop prototype
orders leading to production.
Consumer and Other. In 1997, the Company concluded its first production
agreements for personal accessories. The agreements include production of watch
bezels and cases for Mersey Manufacturers Limited and sunglass and safety glass
frames for Bolle Inc. Prototype samples have been shipped to both companies for
evaluation and testing. The Company's capability to tailor Boralyn's properties
to meet specialized product design requirements, the breadth of its
manufacturing capabilities, and the marketing opportunity for customers to
market their products using the Boralyn name provide the basis for the Company's
marketing efforts in this general product category. The Company believes that
the areas of specific opportunity include those where weight, high
strength-to-weight ratios and wear or impact resistance are important product
requirements.
There can be no assurance with respect to whether or when the Company's
products will achieve meaningful market acceptance or whether or when the
Company will obtain material revenues or become profitable, if at all.
Marketing and Customer Support
The Company intends to achieve market penetration in selected markets
through a multi-step process with targeted customers usually consisting of: (i)
initial discussions of the product application and prospective customer's needs,
highlighting the advantages of Boralyn to address those needs; (ii) an
engineering and marketing evaluation by the prospective customer of sample
material and demonstration products; (iii) Alyn's application engineers team
with the customer's design and production staffs to design or modify designs to
fully utilize the Company's MMCs and manufacturing capabilities; (iv)
negotiation and receipt of a purchase order for the prototype program, including
production pricing; (v) evaluation of the prototypes by the customer; and (vi)
development of a production program, including provisions for tooling, equipment
and quality control tests necessary to fulfill the customer's requirements. The
Company intends to sell primarily to OEM customers, with distribution from the
Company manufacturing sites to customer facilities. The Company's policy is to
have its customers absorb a significant portion of design and
development-related direct costs and pay for the development and fabrication of
production tooling.
The Company has in place limited exclusivity arrangements with True Temper
Sports (with respect to golf club shafts and certain bicycle frames) and Bolle
(with respect to sunglass and safety-glass frames). The exclusive periods range
from three years to five years, and each arrangement imposes certain conditions
on each party that affect, among other things, the commencement and maintenance
of exclusivity. Neither arrangement is considered material to the Company's
anticipated revenues.
The Company's sales and marketing activities are expected to include
development of appropriate sales materials (such as specification sheets and
corporate brochures) and promotion through participation at selected trade shows
and selective advertising in journals and the trade press. These activities,
even if successful, may not result in proportional or any revenue increases in
the same period in which those activities occur. The Company's marketing
activities have initially focused on prospective customers in the United States,
with international sales activities being conducted on a narrowly focused basis
primarily in the sports and neutron shielding markets. It is anticipated that
broadly based international sales efforts will develop over the next 24 months.
Manufacturing and Engineering
The Company has developed what it believes to be superior manufacturing
processes that leverage the characteristics of Boralyn. Boralyn is produced
primarily by two methods. The first utilizes powder technology. By this method,
the various powdered elements are blended dry and mixed uniformly to avoid
stratification and settling. After the particulates have sufficiently mixed,
they are directed into a die and compressed at elevated temperatures in a vacuum
environment to remove unwanted gases and to compress the material into a solid
billet. These Boralyn billets are used to extrude forms such as plate, finished
shapes, rods and tubes for use in various consumer and other end uses.
The second method of manufacturing utilizes a molten process by which boron
carbide powder is added into the molten base alloy and then formed and cooled to
create ingots for casting. These ingots are subsequently remelted and cast under
high pressure into finished shapes. This proprietary process is called Precision
Pressure Casting because of the fine detail that can be achieved by this process
and because of the high pressure required to inject the material into the dies.
The Company also uses a proprietary process for forming complex, hollow chambers
and passages, often within a one-piece structure, thereby eliminating the need
for welding together of separate components or other secondary manufacturing
processes. This process is called AlynCore. Applications include golf,
automotive and various consumer products.
The Company occupies an 84,000 square foot facility in Irvine, California
which is dedicated to extrusion and the forging of extruded material, where
required. This facility houses the Company's new 4,000-ton extrusion press and
previously installed and working 725-ton extrusion press. The Company's
principal executive offices building houses the Precision Pressure Casting
operations. This 48,000 square foot facility has approximately 16,000 square
feet dedicated to casting, with approximately 10,000 square feet remaining
available for near term expansion. Included in this facility is the Company's
recently installed 900-ton pressure casting machine which is used for large
parts, such as the General Motors engine cradle.
The Company maintains a strict internal quality control system to monitor
the quality of production at its facilities. Alyn's quality control laboratory
is capable of conducting both physical and chemical testing. The Company is in
the process of preparing for ISO 9002 and QS 9000 certification. Certification
is expected in the fourth quarter of 1998. The Company also monitors the quality
of processes that are completed by subcontractors through frequent tests and
material certification. The Company maintains product liability insurance at
levels it believes to be adequate.
Raw materials used by Alyn are principally aluminum and boron carbide. The
Company is not dependent on the availability of supplies from any single source.
The Company presently purchases boron carbide from a limited number of
suppliers, including one supplier who provides approximately 50% of the
Company's current requirements. Although the Company believes that boron carbide
is available from other suppliers, there can be no assurance that the Company
will be able to continue to obtain desired quantities of boron carbide on a
timely basis or at prices and terms deemed reasonable by the Company. Alyn's
other principal raw material, aluminum, is available from several domestic
suppliers.
The Company intends to maintain a sufficient inventory of raw materials and
Boralyn billets and ingots on site to meet its production requirements. Finished
goods are expected to be shipped at the time of production to the Company's
customers by commercial carriers and not remain at the Company's plant for any
significant period of time.
Research and Development
The Company continuously engages in the development of new products and
improvements to its existing formulations and maintains laboratory facilities
for these purposes in Irvine, California, as well as uses a network of outside
independent test laboratories. The Company also has a facility in Fremont,
California, for the purpose of research and development efforts in the computer
hard-disk market. The research and development department employed twelve people
on June 1, 1998, including six employees at the Fremont facility. The Company's
research and development efforts focus on various applications for cast, forged
and extruded Boralyn products, the tooling and methods for production, and the
formulation of other metal matrix composites using magnesium and titanium.
It is expected that formulations and techniques will continue to be
developed and refined by the Company through empirical tests and prototype
development. The Company expects that it will continue to devote substantial
resources to research and development efforts. The costs of those efforts will
be recorded, for accounting purposes, as expenses as they are incurred,
notwithstanding that the benefits, if any, from the Company's research and
development efforts (in the form of increased revenues or decreased product
costs) may not be reflected in the Company's operating results, if at all, until
subsequent periods.
Patents
The Company believes that protection of its proprietary technology and
know-how is important to the development of its business. It seeks to protect
its interests through a combination of patent protection and confidentiality
agreements with all employees, as well as by limiting the availability of
certain critical information to a small number of key employees.
The Company intends to pursue a vigorous patent application program in the
United States and abroad. The Company has been issued six United States patents
to date. The Company believes the initial patent issued, (United States Patent
No. 5,486,223, originally issued to Robin A. Carden in January 1996, expiring in
January 2014), provides protection for its proprietary Boralyn technology and
contains claims that cover the use of Boralyn in a wide range of markets
targeted by the Company.
The following table summarizes the patents issued to the Company to date:
Patents Issued to Alyn Corporation
<TABLE>
<CAPTION>
Title Patent No. Issue Date Description
----- ---------- ---------- -----------
<S> <C> <C> <C>
1. Metal Matrix Composite and 5,486,223 1/23/96 Methods and processes for making
Method of Manufacture thereof Boralyn
2. Improved Metal Matrix 5,613,189 3/18/97 Divisional (extension) 5,486,223
Manufacture Thereof
3. Metal Matrix Composites and 5,669,059 9/16/97 Divisional (extension) of 5,486,223
Methods of Manufacture Thereof
4. Metal Matrix Compositions for 5,700,962 12/23/97 Use of boron carbide metal matrix
Nuclear Shielding Applications composites for neutron shielding
5. Metal Matrix Composition for 5,712,014 1/27/98 Use of boron carbide metal
Substrates Used to make Magnetic
Disks for Hard Drives
6. Fabrication Methods for Metal 5,722,033 2/24/98 Extrusion and casting composite techniques for
boron carbide metal matrix composites
</TABLE>
The Company has filed other patent applications, which are pending. The
Company is not aware of any reason why its pending applications should not be
granted with claims that will provide adequate coverage and protection for its
anticipated business activities, although there can be no assurance in that
regard.
Competition
The materials industry in which the Company operates is highly competitive.
The Company competes in its chosen markets against several larger domestic and
multi-national companies, all of which are well established in those markets and
have substantially greater financial and other resources than those of the
Company. Competitive market conditions could adversely affect the Company's
results of operations if it were required to reduce product prices to remain
competitive or were unable to achieve significant sales of its products.
The Company competes at two levels. First, the Company competes with
material producers, i.e. companies that produce and market a choice of materials
for specific applications. In this area, the Company competes with: (i)
titanium, supplied by companies such as RMI Titanium Company, Tremont
Industries, Inc., and Titanium Metals Corporation of America (Timet); (ii)
aluminum alloys, supplied by companies such as the Aluminum Corporation of
America (Alcoa), Reynolds Metals Co., and Oregon Metallurgical Corporation; and
(iii) other metal matrix composites, such as those supplied by Duralcan Inc. For
neutron shielding, current disposal containers typically use Boral(R), a boron
and aluminum material supplied by AAR Brook & Perkins.
At the second level, the Company competes with product fabricators. In the
golf club market, companies fabricating clubs from titanium metal include
Coastcast Corp. and Sturm, Ruger & Co., Inc. In the computer disk drive market,
the aluminum disks are being made by Alcoa and Kobe Steel Company. In the
automotive industry, companies such as Teledyne Cast Products, Kelsey-Hayes Co.,
Die Cast Products, Inc. and many others are competitors.
Government Regulations
The Company's manufacturing operations are subject to a wide range of
federal, state and local regulations, including those covering the discharge,
handling and disposal of hazardous waste regulations contained in the
environmental laws. Plant and laboratory safety requirements of various
occupational safety and health laws are also applicable to all the Company's
facilities and operations.
The Company believes it complies in all material respects with regard to
governmental regulations applicable to it. To date, those regulations have not
materially restricted or impeded the Company's operations.
Management Information Systems
The Company installed a software system designed for manufacturing
enterprises in April 1997. The Company believes its current management
information systems are Year 2000 compliant. All future systems purchased will
likewise include requirements for compliance.
Personnel
The Company employed 73 persons as of June 1, 1998, including three Company
executive officers, twelve research and development personnel, 31 manufacturing
personnel and seven persons engaged in sales and marketing activities. In April
1998, the Company hired a new president and chief executive officer. The
Company's Founder and former president and chief executive officer remains with
the Company focusing primarily on sales and research and development. None of
the Company's employees is a member of a labor union. The Company considers its
relationship with its employees to be good.
Properties
The Company leases its principal executive office facility in Irvine,
California, under a five-year lease entered into in June 1996, with a five-year
renewal option. The Company recently completed negotiations for an approximately
six and one-half year extension to the base lease to make it co-terminus with
its second facility discussed below. The lease extension is expected to be
executed in July 1998. The current monthly lease cost is approximately $23,000,
with periodic escalations to a maximum of approximately $27,000 per month. The
48,000 square foot, primarily single-story facility, is located on a three-acre
site at 16761 Hale Avenue in Irvine in an industrial park with close proximity
to truck, rail and air (John Wayne Airport, a major regional airport in Orange
County) connections and a highly trained labor pool.
The Company leases an additional 84,000 square foot building located at
17021 Von Karman Avenue, Irvine, California, under a ten-year lease commencing
on February 1, 1998, with a five-year renewal option. The monthly lease cost for
this facility is approximately $48,000 with annual escalations based upon the
consumer price index, subject to a 3% minimum. This additional facility is
located approximately one half mile from the Company's main facility and is
dedicated to extrusion and forging.
These facilities are designed for expansion of capacity to match future
needs over the next several years, with additional warehousing to be leased at a
nearby location if required. There can be no assurance that these facilities
will be adequate for the Company's entire future fabrication requirement or,
alternatively, that the Company will be able to fully utilize the capacity of
its facilities. The Company believes its current and additional facility will be
adequate for its contemplated needs.
A research and development facility dedicated to the development of
computer disk substrates used in hard-disk drives was established in February
1997 at 4576 Enterprise Street, Fremont, California, approximately 400 miles
from the Company's Irvine facilities. The three-year lease commenced on February
1, 1997 and will expire on January 31, 2000. The facility originally occupied
3,900 square feet of industrial space and was expanded to 7,800 square feet in
October 1997.
<PAGE>
MANAGEMENT
Executive Officers and Directors
Each of the Company's directors serves a one-year term expiring at the 1999
Annual Meeting of Stockholders. Executive officers of the Company serve at the
discretion of the Board. There are no family relationships between or among any
of the Company's directors or executive officers. The executive officers and
directors of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Steven S. Price 43 President, Chief Executive Officer and a Director
Robin A. Carden 40 Director
Walter R. Menetrey 64 Executive Vice President and a Director
Harry Edelson 61 Director
Michael Markbreiter 36 Director
Udi Toledano 47 Chairman of the Board
Richard L. Little 53 Vice President, Finance & Administration, CFO
</TABLE>
Steven S. Price, 43, has been President and Chief Executive Officer since
April 20, 1998, and a Director since April 14, 1998. Mr. Price is Chairman of
the Company's Executive Committee and a member of the Compensation Committee.
From 1995 to April 1998, he was President of AlliedSignal Automotive
Aftermarket, a division of AlliedSignal, Inc., which supplies automotive parts
and products to retail, wholesale and installer sales channels. From 1993 to
1995, he was General Manager of the Residential Division of NIBCO Incorporated,
a privately held manufacturer of plumbing fittings and valves. From 1989 to
1993, he was Vice President, Marketing for Black and Decker Corporation's
subsidiary Kwikset Corporation and from 1987 to 1989, he was a Director, Sales
and Marketing for Black and Decker's Power Tool Group. From 1977 to 1987, he was
with The Procter and Gamble Company in various brand management and marketing
positions. Mr. Price has a Bachelor of Arts degree in Economics from Brown
University.
Robin A. Carden, 40, is the founder of the Company and has been a Director
since the Company's formation in 1990. Mr. Carden is a member of the Company's
Executive Committee. From the Company's formation until April 1998, he was
President and Chief Executive Officer. Prior to 1990, Mr. Carden was employed by
Ceradyne Inc., a company engaged in the development and production of advanced
ceramics products, as Senior Sales Engineer, and was engaged in developing
civilian applications for advanced ceramics products originally developed for
military use. Mr. Carden graduated from Long Beach State University with a
Bachelor of Science degree. A number of United States patents have been issued
to Mr. Carden.
Walter R. Menetrey, 64, has been the Executive Vice President and a
Director of the Company since May 1996. From August 1992 to April 1996, Mr.
Menetrey worked as an independent management consultant to numerous companies
engaged in, among other things, the security and software industries. Prior to
July 1992, Mr. Menetrey was Chief Executive Officer of Meret, Inc., a company
engaged in the manufacture and sale of fiber optics communication equipment. Mr.
Menetrey received a Bachelor of Science degree in Physics and a Master of
Science degree in Electrical Engineering from the California Institute of
Technology.
Harry Edelson, 61, has been a Director of the Company since May 1996. Mr.
Edelson is Chairman of the Company's Audit Committee. Since 1984, Mr. Edelson
has been the Managing Partner of Edelson Technology Partners, a series of four
venture capital funds with ten large corporations as the limited partners. The
focus of the funds is to provide the corporate partners with access to high
technology products and services. One of the funds, Edelson Technology Partners
III, is a principal stockholder of the Company. Edelson Technology Partners,
through its related funds, has invested in approximately 80 companies involved
in a wide range of technologies, including telecommunications, computers,
semiconductors, specialty chemicals, environmental and publishing. Prior to
founding Edelson Technology Partners, Mr. Edelson was a transmission engineer at
AT&T, a senior computer engineer for UNISYS and a technology analyst for three
leading investment banking firms, Merrill Lynch, Drexel Burnham Lambert and
First Boston. Mr. Edelson has a Bachelor of Science degree in Physics from
Brooklyn College and a Masters of Business Administration from New York
University.
Michael Markbreiter, 36, has been a Director of the Company since May 1996.
Mr. Markbreiter is a member of the Company's Executive, Audit and Compensation
Committees. Since August 1995, Mr. Markbreiter has been a portfolio manager for
private equity investments for Kingdon Capital Management Corp., a manager of
investment funds. In April 1994, he co-founded Ram Investment Corp., a venture
capital company. From March 1993 to January 1994, he served as a portfolio
manager for Kingdon Capital Management Corp. Prior to February 1993, he worked
as an analyst at Alliance Capital Management Corp. Since December 1997, Mr.
Markbreiter has been a Director of Global Pharmaceutical Corporation, a publicly
traded generic pharmaceutical manufacturing company. Mr. Markbreiter graduated
from Cambridge University with a degree in Engineering.
Udi Toledano, 47, has been a Director of the Company since May 1996 and
Chairman of the Board since January 1997. Mr. Toledano is Chairman of the
Company's Compensation Committee, and a member of the Company's Executive and
Audit Committees. Mr. Toledano has been the President of Andromeda Enterprises,
Inc., a private investment company, since December 1993. Prior to that he was
the President of CR Capital Inc., a private investment company, for more than
five years. Since May 1996, Mr. Toledano has been a Director of HumaScan Inc., a
publicly traded medical device company, and since April 1995, he has been a
Director of Global Pharmaceutical Corporation, a publicly traded generic
pharmaceutical manufacturing company. Since July 1994, Mr. Toledano has been a
Director of Universal Stainless & Alloy Products, Inc., a publicly traded
specialty steel producing company. Mr. Toledano has a Bachelor of Science degree
in Physics and a Masters of Business Administration from the Hebrew University
of Jerusalem.
Richard L. Little, 53, has been the Vice President, Finance and
Administration and Chief Financial Officer of the Company since May 1997. Mr.
Little was Executive Vice President of d'Essence Designer Fragrances, a marketer
of fine perfumes and related products from 1995 to 1997 and President of
d'Essence International from 1996 to 1997. From 1994 to 1995, he was Chief
Operating Officer and Chief Financial Officer of Graphix Zone, a publicly traded
producer of CD-ROMS. In 1989, Mr. Little co-founded Bainbridge International
Holdings, a merchant bank specializing in acquiring middle market companies.
From 1986 to 1989, Mr. Little was Chief Financial Officer, Vice President
Finance, Treasurer and Secretary of Teradata Corporation, a publicly traded
manufacturer and marketer of supercomputers for managing very large data bases.
Prior to joining Teradata, Mr. Little was Chief Financial Officer of Quotron
Systems, a publicly traded provider of on-line financial information services.
Mr. Little has a Bachelor of Science degree in Engineering and a Masters of
Business Administration in Finance from the University of California, Los
Angeles. He is also a CPA.
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth the number of shares of Common Stock
beneficially owned, as of June 5, 1998, by: (i) each stockholder known to the
Company to be a beneficial owner of more than 5% of the Common Stock, (ii) each
director and executive officer, and (iii) the directors and officers of the
Company as a group. Unless otherwise noted, all shares are owned directly with
sole voting and dispositive powers.
<TABLE>
<CAPTION>
Name(1) No. of Shares % of Total
- ------- ------------- ----------
Before After Before After
Rights Rights Rights Rights
Offering Offering Offering Offering
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Robin A. Carden 3,044,500 2,544,500 28.32% **
Kingdon Capital Management Corp.(2) 2,488,000 ** 23.14% **
Udi Toledano(3) 577,667 ** 5.36% **
Herbert V. Turk(4) 560,000 ** 5.21% **
Harry Edelson(5) 541,667 ** 5.03% **
Walter R. Menetrey(6) 242,650 ** 2.25% **
Steven S. Price(7) 80,000 80,000 * *
Richard Little(8) 20,000 20,000 * *
Michael Markbreiter(9) 21,667 21,667 * *
All executive officers and directors as a 3,960,151 ** 36.23% **
group (seven persons)(10)
</TABLE>
* Less than 1%.
** Currently undeterminable.
(1) The address for each of the persons in the table is c/o Alyn Corporation,
16761 Hale Avenue, Irvine, California 92606.
(2) Includes shares of Common Stock held by M. Kingdon Offshore NV, Kingdon
Associates, L.P. and Kingdon Partners, L.P. Does not include shares of
Common Stock underlying immediately exercisable options that appear in the
table opposite the name of Michael Markbreiter, a Director of the Company
and an employee of Kingdon Capital Management Corp. Mr. Mark Kingdon is the
sole shareholder, director and executive officer of Kingdon Capital
Management Corp.
(3) Includes options immediately exercisable for 21,667 shares of Common Stock.
Also includes 276,000 shares of Common Stock held by Mr. Toledano's wife
and 80,000 shares of Common Stock held by a certain trust for the benefit
of their minor children. Also includes an aggregate of 48,000 shares of
Common Stock owned by certain other members of Mr. Toledano's family, with
respect to which Mr. Toledano disclaims beneficial ownership.
(4) Includes 344,000 shares of Common Stock held by Mr. Turk jointly with his
wife. Also includes 216,000 shares of Common Stock held by Mr. Turk's two
adult daughters, with respect to which Mr. Turk disclaims beneficial
ownership.
(5) Includes options immediately exercisable for 21,667 shares of Common Stock
held by Mr. Edelson. Also includes 520,000 shares of Common Stock held by
Edelson Technology Partners III, with respect to which Mr. Edelson
disclaims beneficial ownership.
(6) Includes options immediately exercisable for 16,650 shares of Common Stock.
(7) Includes options immediately exercisable for 80,000 shares of Common Stock.
(8) Includes options immediately exercisable for 20,000 shares of Common Stock.
(9) Represents options immediately exercisable for 21,667 shares of Common
Stock. Does not include 420,800 shares of Common Stock held by Kingdon
Partners, L.P., 420,800 shares of Common Stock held by Kingdon Associates,
L.P., and 1,246,400 shares of Common Stock M. Kingdon Offshore NV, with
respect to which Mr. Markbreiter disclaims beneficial ownership.
(10) Includes options immediately exercisable for 181,651 shares of Common
Stock. Does not include (i) 520,000 shares of Common Stock held by Edelson
Technology Partners III, with respect to which Mr. Edelson, a Director,
disclaims beneficial ownership, (ii) shares of Common Stock held by Kingdon
Partners, L.P., Kingdon Associates, L.P. and M. Kingdon Offshore NV, with
respect to which Mr. Markbreiter, a Director, disclaims beneficial
ownership and (iii) 48,000 shares of Common Stock owned by certain members
of Mr. Toledano's family, with respect to which Mr. Toledano, a Director,
disclaims beneficial ownership.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby
and certain other matters will be passed upon for the Company by Cadwalader,
Wickersham & Taft, New York, New York.
EXPERTS
The financial statements of Alyn Corporation as of December 31, 1996 and
1997 and for the year ended December 31, 1997 and for the period from May 2,
1996 through December 31, 1996, and the financial statements of Old Alyn for the
period from January 1, 1996 through May 1, 1996 and the year ended December 31,
1995 are hereby incorporated in this Prospectus by reference to the Annual
Report on Form 10-K for the year ended December 31, 1997 and have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (together with all
amendments, exhibits, schedules and supplements thereto, the "Registration
Statement") under the Securities Act with respect to the Common Stock offered
hereby. This Prospectus, which forms a part of the Registration Statement, does
not contain all the information set forth in the Registration Statement. certain
parts of which have been omitted in accordance with the rules and regulations of
the Commission. For further information with respect to the Company and the
Common Stock offered hereby, reference is made to the Registration Statement.
Statements contained in this Prospectus as to the contents of certain documents
filed as exhibits to the Registration Statement are not necessarily complete
and, in each case, are qualified by reference to the copy of the document so
filed. The Registration Statement can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices
at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World
Trade Center, 13th Floor, New York, New York 10048. Copies of such material may
be obtained form the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. Such material also
can be reviewed through the Commission's Electronic Data Gathering, Analysis,
and Retrieval System, which is publicly available through the Commission's web
site (http://www.sec.gov.).
The Company intends to furnish to its stockholders annual reports
containing audited financial statements and quarterly reports containing
unaudited financial information for the first three quarters of each fiscal
year. The Company also will furnish to its stockholders such other reports as
may be required by applicable law.
INCORPORATION BY REFERENCE
This Prospectus incorporates certain documents by reference that are not
presented herein or delivered herewith. These documents are available, without
charge, upon request from Richard Little, Chief Financial Officer and Corporate
Secretary, 16761 Hale Avenue, Irvine, CA 92606, telephone 949-475-1525. In order
to ensure timely delivery of these documents, any request should be made by July
31, 1998.
Alyn hereby undertakes to provide (without charge) to each person,
including any beneficial owner of Alyn Common Stock to whom a copy of this
Prospectus has been delivered, upon the written or oral request of any such
person, a copy of any and all of the documents referred to below which have been
or may be incorporated herein by reference, other than exhibits to such
documents, unless such exhibits are specifically incorporated herein by
reference. Requests for such documents should be directed to the person
indicated in the immediately preceding paragraph.
The following documents, which have been filed by Alyn with the SEC
pursuant to the Exchange Act, are hereby incorporated by reference herein:
(i) Alyn's Annual Report on Form 10-K, as amended, for the year ended
December 31, 1997;
(ii) Alyn's Quarterly Report on Form 10-Q for the period ended March 31,
1998; and
(iii)The description of the Alyn Common Stock contained in the Company's
Registration Statement on Form 8-A, as filed with the Commission on
October 21, 1996, and as declared effective on October 22, 1996;
All documents filed by Alyn pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act after the date hereof and prior to the Expiration Date shall
be deemed to be incorporated herein by reference and to be a part hereof from
the date of filing of such documents. All information appearing in this
Prospectus or in any document incorporated herein by reference is not
necessarily complete and is qualified in its entirety by the information and
financial statements (including notes thereto) appearing in the documents
incorporated by reference herein and should be read together with such
information and documents.
Any statement contained in a document incorporated or deemed to be
incorporated herein by reference shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document that is deemed to be incorporated
herein by reference modifies or supersedes such statements. Any such statement
so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
No dealer, sales representative or any other
person has been authorized to give any information 1,900,000 Shares
or to make any representations in connection with
this offering other than those contained in this [Alyn LOGO](R)
Prospectus, and, if given or made, such information
or representations must not be relied upon as Common Stock
having been authorized by Alyn Corporation. This
Prospectus does not constitute an offer to sell or
a solicitation of any offer to buy any securities
other than the shares of Common Stock to which it
relates or an offer to, or a solicitation of, any
person in any jurisdiction where such an offer or
solicitation would be unlawful. Neither the PROSPECTUS
delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create
any implication that there has been no change in
the affairs of the Company or that the information
contained herein is correct as of any time
subsequent to the date hereof.
TABLE OF CONTENTS
Page
Q&A................................................__
Prospectus Summary.................................__
Risk Factors.......................................__
Use of Proceeds....................................__
Price Range of Common Stock........................__
Dividend Policy....................................__ July 15, 1998
Capitalization.....................................__
The Rights Offering ...............................__
Selected Financial Data............................__
Management's Discussion and Analysis of
Financial Condition and Results of
Operations....................................__
Business...........................................__
Management.........................................__
Principal Stockholders.............................__
Legal Matters......................................__
Experts............................................__
Additional Information.............................__
Incorporation by Reference.........................__
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the expenses in connection with this
Registration Statement. The Company will pay all expenses of the offering. All
of such expenses are estimates, other than the filing fees payable to the
Securities and Exchange Commission and the Nasdaq National Market.
Securities and Exchange Commission Filing Fee...$ 3,083
Nasdaq National Market Listing Fee.............. 17,500
Printing Fees and Expenses...................... 4,875
Legal Fees and Expenses......................... 40,000
Financial Advisory Fee.......................... 100,000
Accounting Fees and Expenses.................... 9,000
Blue Sky Fees and Expenses...................... 2,000
Subscription Agent Fee.......................... 13,000
Miscellaneous................................... 10,542
------
Total...................................... $200,000
========
Item 15. Indemnification of Directors and Officers
Subsection (a) of Section 145 of the General Corporation Law of Delaware
(the "DGCL") empowers a corporation to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or complete
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, employee or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation and, with respect to any criminal action
or proceeding, had no cause to believe his conduct was unlawful.
Subsection (b) of Section 145 of the DGCL empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and except that no indemnification may be made
in respect to any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine that despite the adjudication of liability such person is fairly and
reasonably entitled to indemnity for such expenses which the court shall deem
proper.
Section 145 of the DGCL further provides that to the extent a director,
officer, employee or agent of a corporation has been successful in the defense
of any action, suit or proceeding referred to in subsections (a) and (b) or in
the defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection therewith; that indemnification or advancement of expenses
provided for by Section 145 shall not be deemed exclusive of any other rights to
which the indemnified party may be entitled; and empowers the corporation to
purchase and maintain insurance on behalf of a director, officer, employee or
agent of the corporation against any liability asserted against him or incurred
by him in any such capacity or arising out of his status as such whether or not
the corporation would have the power to indemnify him against such liabilities
under Section 145.
The Certificate of Incorporation of the Registrant provides that a director
of the Registrant shall not be personally liable to the Registrant or its
stockholders for monetary damages for breach of fiduciary duty as a director
except for liability (i) for any breach of the director's duty of loyalty to the
Registrant or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL or (iv) for any transaction from which the director
derives an improper personal benefit.
The Bylaws of the Registrant provide, in effect, that the Registrant shall
indemnify every person who was or is a party, or is or was threatened to be made
a party, to any action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, by reason of the fact that he or she is or was
a director, officer, employee, or agent of the Registrant, or is or was serving
at the request of the Registrant as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, employee benefit plan,
or other enterprise, against expenses (including attorneys' fees), judgments,
fines, and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit, or proceedings, to the fullest extent
permitted by applicable law. Such indemnifications may, in the discretion of the
board of directors, include advances of the person's expenses in advance of
final disposition of such action, suit, or proceeding, subject to the provisions
of any applicable statute. The Registrant is empowered to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee,
or agent of the Registrant, or is or was serving at the request of the
Registrant as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise, against any liability
incurred by such person in such capacity, or arising out of such person's
capacity.
The Registrant has obtained and paid all premiums current due on insurance
on behalf of its directors and officers against liabilities incurred by them in
those capacities, or arising out of such person's capacity.
Item 16. Exhibits
Exhibit
No. Description
4.1* Specimen Copy of Stock Certificate for shares of common stock.
4.2* Stockholder Agreement, dated as of May 1, 1996, by and among the Company
and certain stockholders of the Registrant.
5.1 Opinion of Cadwalader, Wickersham & Taft.
23.1 Consent of Cadwalader, Wickersham & Taft (included in and incorporated by
reference to Exhibit 5.1 hereto).
23.2 Consent of PricewaterhouseCoopers LLP
27.1** Financial Data Schedule for the year ended December 31, 1997.
99.1* U.S. Patent Number 5,486,223, dated January 23, 1996.
* Incorporated by reference to the Registrant's Registration Statement on
Form S-1 (File no. 333-09143) and any amendments thereto.
** Incorporated by reference to the Exhibits to Form 10-K for the fiscal year
ended December 31, 1997 (File no. 000-21153).
Item 17. Undertakings
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to Item 15, or otherwise, the registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as party
of this registration statement in reliance on Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it is declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be the initial bona fide offering thereof.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Irvine, State of California, on July
14, 1998.
ALYN CORPORATION
BY: /s/ Steven S. Price
-------------------
Steven S. Price
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on July 14, 1998
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Steven S. Price President, Chief Executive Officer and a Director
Steven S. Price (Principal Executive Officer)
/s/ Richard L. Little Chief Financial Officer (Principal Financial and
Richard L. Little Accounting Officer)
* Director
Robin A. Carden
* Director
Harry Edelson
* Director
Michael Markbreiter
* Director
Walter R. Menetrey
* Director
Udi Toledano
*By: /s/ Steven S. Price
Authorized signatory
pursuant to power of
attorney previously filed
</TABLE>
July 14, 1998
Alyn Corporation
16761 Hale Avenue
Irvine, CA 92606
Re: Rights Offering for 1,900,000 Shares of Common Stock
----------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Alyn Corporation, a Delaware corporation (the
"Company"), in connection with the preparation and filing of a registration
statement on Form S-3 (the "Registration Statement"), pursuant to which the
Company proposes to distribute rights (the "Rights") to subscribe for and
purchase an aggregate of up to 1,900,000 shares of its Common Stock, $0.001 par
value per share (the "Shares"). Capitalized terms used but not defined herein
shall have the respective meanings given or ascribed thereto in the Registration
Statement.
For purposes of this letter, we have examined originals or copies of the
following:
1. The Registration Statement, as amended to date, in the form filed with
the Securities and Exchange Commission (the "Commission");
2. Restated Certificate of Incorporation of the Company, as filed as an
exhibit to the Company's prior filings with the Commission;
3. By-Laws of the Company, as filed as an exhibit to the Company's prior
filings with the Commission;
4. Form of Stock Certificate representing shares of Common Stock of the
Company, as filed as an exhibit to the Company's prior filings with the
Commission;
5. Resolutions of the Board of Directors of the Company, as certified by an
officer of the Company; and
6. Such other documents and records as we have considered necessary for
purposes of this opinion.
We have assumed the genuineness of the signatures on and the authenticity
of all documents, instruments and certificates submitted to us as originals and
the conformity to original documents, instruments and certificates submitted to
us as copies and the legal capacity to sign of all individuals executing
documents. We have relied on Company records and have assumed the accuracy and
completeness thereof. We have relied upon representations of the Company as to
certain matters of fact relevant hereto.
We are not admitted to the practice of law in any jurisdiction but the
State of New York, and we express no opinion as to the laws of any jurisdiction
other than those of the State of New York, the federal law of the United States
of America, and the General Corporation Law of the State of Delaware. No opinion
is expressed as to the effect that the law of any other jurisdiction may have
upon the subject matter of the opinion expressed herein under conflicts of law
principles, rules and regulations or otherwise.
Based on the foregoing, it is our opinion that:
1. The Rights have been duly and validly authorized and, when issued and
delivered in accordance with the Registration Statement, will be validly issued.
2. The Shares have been duly and validly authorized and, when paid for,
issued and delivered in accordance with a Subscription Agreement, 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 and to the references to this firm under the caption
"Legal Matters" in the Prospectus.
Very truly yours,
----------------------------
Cadwalader, Wickersham & Taft
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report dated
January 16, 1998 appearing on page F-2 of Alyn Corporation's Annual Report on
Form 10-K for the year ended December 31, 1997. We also consent to the reference
to us under the heading "Experts" in such Prospectus.
PRICEWATERHOUSECOOPERS LLP
Costa Mesa, California
July 13, 1998