As filed with the Securities and Exchange Commission on December 30, 1999
Registration No. 333-77639
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------------
PRE-EFFECTIVE AMENDMENT NO. 3 TO
REGISTRATION STATEMENT ON
FORM S-3
UNDER THE SECURITIES ACT OF 1933
------------------------------------------
ALYN CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 33-0709359
(State or other jurisdiction of (I.R.S. Employer
incorporation ) Identification Number)
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
ALYN CORPORATION
16761 HALE AVENUE
IRVINE, CALIFORNIA 92606
(949) 475-1525
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
------------------------------------------
Copies to:
Gerald A. Eppner
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
(212) 504-6000
------------------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: FROM
TIME TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. |_|
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
<PAGE>
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CALCULATION OF
REGISTRATION FEE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF SHARES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE FEE
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
$0.001 par value per 8,339,525 $2.66 $15,387,302 $6,407.67(2)
share shares(1)
- -------------------------------------------------------------------------------------------
</TABLE>
- -----------------
(1) The total number of shares of common stock to be registered consists of
a total of 8,339,525 shares; 2,554,825 shares of which were registered under our
original Registration Statement filed on May 3, 1999 and an additional 5,784,700
shares added in this Amendment. The total number of shares consist of: (i)
750,000 shares issuable upon the conversion of the Series A preferred stock;
(ii) 626,960 shares issued in October 1999 to Series B stockholders as a result
of their conversion of the Series B preferred stock; (iii) 65,000 shares
issuable upon the exercise of warrants issued in March 1999 to Series B
stockholders; (iv) 150,000 shares issuable upon the exercise of warrants issued
in October 1999 to Series B stockholders; (v) 200,000 shares issued in August
1999 to AMRO International, S.A.; (vi) 50,000 shares issuable upon the exercise
of warrants issued in August 1999 to AMRO International, S.A.; (vii) 1,500,000
shares issuable upon the exchange of the exchangeable note; (viii) 135,000
shares issuable upon the exercise of warrants issued in March 1999 to the
holders of the exchangeable note; (ix) 300,000 shares issuable upon the exercise
of warrants issued in October 1999 to the holders of the exchangeable note; (x)
149,213 shares issued in August 1999 to the holders of the exchangeable note;
(xi) 38,352 shares issued in September 1999 as interest payment to the holders
of the exchangeable note; (xii) 2,500,000 shares issuable upon the conversion of
Series C preferred stock; and (xiii) 1,875,000 shares issuable upon the exercise
of warrants issued in October 1999 to the holders of the Series C preferred
stock.
(2) Calculated based upon the average of the high and low sales price of
the common stock of Alyn Corporation on October 25, 1999 (high price on that day
was $2.75 and the low price and close were $2.563), as reported by the Nasdaq
National Market, pursuant to Rule 457(c) of the Securities Act of 1933, as
amended. Alyn Corporation previously paid $2,130 with original filing on May 3,
1999, covering the registration of 2,554,825 shares. $4,388.26 was paid in
connection with the filing of Amendment No. 1. This amount was calculated using
a Proposed Maximum Offering Price per share of $2.66, which is the applicable
amount for the additional shares being registered with this Amendment. The
Company has withdrawn 120,000 shares from registration in the present filing.
Based on the offering price of $2.66 per share, the registration fee for the
120,000 withdrawn shares totals $88.74, which may be credited to the Company's
account.
<PAGE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUT THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS
(Subject to completion, dated December 30, 1999)
8,339,525 SHARES
ALYN CORPORATION
COMMON STOCK
This prospectus relates to the public offering, which is not being
underwritten, of a total of up to 8,339,525 shares of the common stock of Alyn
Corporation by certain stockholders of Alyn. Those stockholders are offering for
resale and selling under this prospectus (i) up to 1,500,000 shares of Alyn
common stock to be issued upon exchange of our 6% senior exchangeable promissory
note due March 10, 2002, (ii) up to 187,565 shares of our common stock issued to
holders of our exchangeable note, (iii) up to 750,000 shares of our common stock
to be issued upon conversion of our Series A preferred stock, (iv) up to 656,513
shares of our common stock that were recently issued upon conversion of our
Series B preferred stock, (v) up to 200,000 shares of our common stock that were
issued on August 2, 1999, to one of our existing stockholders, (vi) up to
2,500,000 shares of our common stock that may be issued upon conversion of our
Series C preferred stock and (vii) up to 2,560,000 shares of our common stock
that may be issued upon exercise of warrants to purchase our common stock. These
warrants were, or will be, issued to (i) the holders of our exchangeable note in
March, August and October 1999, (ii) the holders of our Series B preferred stock
in March, August and October 1999 and (iii) the holders of our Series C
preferred stock in October 1999.
The prices at which the selling stockholders may sell these shares will be
determined by the prevailing market price for the shares or in negotiated
transactions. We will not receive any of the proceeds from the sale of the
shares.
Our common stock is quoted on the Nasdaq National Market under the symbol
"ALYN." On December 29, 1999, the last reported sale price for the common stock
was $1.781 per share.
---------------------------------------------
YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 3 OF THIS
PROSPECTUS BEFORE PURCHASING ANY OF THE COMMON STOCK BEING OFFERED BY THE
SELLING STOCKHOLDERS.
---------------------------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------------------------------
The date of this prospectus is December 30, 1999.
<PAGE>
RISK FACTORS
An investment in our common stock involves a high degree of risk. You should
carefully consider the risks described below when making an investment decision.
If any of the following risks actually occur, our business, financial condition
or results of operations would likely suffer. In such case, the trading price of
our common stock could decline, and you may lose all or part of your investment.
WE HAVE YET TO GAIN MARKET ACCEPTANCE OF OUR MATERIALS IN COMMERCIAL
QUANTITIES.
If we are not able to demonstrate the advantages of our materials over
existing, more traditional materials, it will be difficult for us to win
substantial contracts in various industries. Our business and results of
operations will suffer dramatically if we are not able to gain market acceptance
of our materials in commercial quantities. Even if we do achieve market
acceptance of our materials in commercial quantities, we may not realize the
benefits of our marketing and development costs, if at all, until periods that
are subsequent to the periods in which those costs were incurred. The sale of
our materials entails long customer order-related sales cycles that can be
affected by lengthy customer product design times and, in nuclear applications,
certification requirements prior to production orders. We have only recently
changed our focus from manufacturing final products, such as golf club heads, to
marketing our advanced materials as raw materials to be used in products
manufactured by others. The principal use of our materials for the nine months
ended September 30, 1999, was for various applications in the nuclear and
automobile industries, but our materials have not yet achieved market acceptance
in these industries on a broad scale. Other materials, such as aluminum, and to
a lesser extent, titanium, magnesium, and beryllium, are presently the standard
materials in the automotive and other target industries for our materials. Boral
and borated stainless steel have been the standard materials in the nuclear
industry. We believe that our ability to achieve commercial acceptance of our
materials will be largely dependent upon our ability to demonstrate the
advantages of our materials over competing materials, to deliver materials in
accordance with strict quality and documentation standards, and to deliver
materials on a timely basis. We must effectively address each of the factors
that affect customer acceptance of our materials in order to win substantial
contracts in various industries and thereby achieve market acceptance in
commercial quantities of Boralyn or our other current or future materials.
WE HAVE A HISTORY OF LOSSES WHICH WE EXPECT WILL CONTINUE, AND WE MAY NOT BE
ABLE TO ACHIEVE PROFITABILITY.
We have a history of losses. The losses that we anticipate to continue in
the immediate future could sufficiently weaken us financially such that they
would prevent us from ever becoming profitable. There is a substantial risk that
we may not be able to generate funds from our operations, as we may be unable to
meet our production quality and delivery goals and we cannot be sure that the
procedures and controls that we have instituted to insure product quality,
timely delivery and a high level of customer service will succeed. We have had a
limited operating history and generated revenues of only $364,000 in 1997, $1.3
million in 1998 and $1.9 million for the nine months ended September 30, 1999.
We incurred net losses of $7.3 million in 1997, $12.1 million in 1998 and $10.7
million during the nine months ended September 30, 1999. We expect to continue
to incur losses in 1999 and 2000 and may never generate sufficient revenues to
achieve profitability in the future. Even if we do achieve profitability, we may
not sustain or increase profitability on a quarterly or annual basis in the
future. Our prior inability to generate significant revenues and expected
continued losses has raised substantial doubt about our ability to continue as a
going concern (See next risk factor).
OUR INDEPENDENT ACCOUNTANTS HAVE MODIFIED THEIR REPORT ON OUR FINANCIAL
STATEMENTS TO INDICATE THAT THERE IS SUBSTANTIAL DOUBT AS TO OUR ABILITY TO
CONTINUE AS A GOING CONCERN. OUR ABILITY TO CONTINUE OUR OPERATIONS IS NOT
ASSURED AND IS SUBJECT TO SUBSTANTIAL RISK. MOREOVER, THE EXISTENCE OF THE GOING
CONCERN MODIFICATION MAY ADVERSELY AFFECT OUR BUSINESS PROSPECTS, FINANCIAL
CONDITION AND RESULTS OF OPERATIONS AND MAY HARM OUR RELATIONSHIPS WITH VENDORS
AND CUSTOMERS AS WELL AS LIMIT OUR ABILITY TO OBTAIN FINANCING.
Doubt as to whether we will be able to continue as a going concern and the
going concern modification in the audit report on our financial statements could
have a significant negative impact on us. If we fail to meet our goals with
regard to improved sales, we may be forced to reduce our current levels of
operations. Such reduction could further jeopardize our ability to continue as a
going concern. Our auditors have included a going concern modification in their
report on our financial statements for the year ended December 31, 1998, because
at the time that the auditors rendered their report, it was evident that we
needed to raise additional capital, as we did not
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<PAGE>
have an amount of funds sufficient to continue operations at then-current levels
for the next twelve months and we lacked a history of operations that would
adequately suggest that our financial plans would succeed. It is likely that our
auditors will include such a modification in future audit reports, if at the
time the auditors issue their reports, we do not have working capital sufficient
to finance our operations for the succeeding twelve months at the then current
levels and we do not have a significant increase in orders for our materials
that would suggest we could readily achieve our growth plans and, thus, generate
the necessary funds. We cannot assure you that steps taken by management will
result in the removal of our auditor's going concern modification from any
future audit reports. Based on our cash expenditures for operations and debt
service during the third quarter of 1999, we estimate that we would require
approximately $9.6 million to fund operations and meet debt service requirements
at the level of the third quarter for a twelve month period. The risk that our
auditors will include a going concern modification in their next audit report is
increased by the likelihood that in order to further implement our business plan
we will need to raise additional funds from debt and equity offerings. Customers
and vendors may choose not to conduct business with us, or may conduct business
with us on terms that are less favorable than those customarily extended by
them, as a result of questions concerning our status as a going concern.
Furthermore, if our revenues do not exceed our costs for an extended period, we
may need to reorganize or reach agreements with our creditors concerning the
conduct of our future business and affairs.
IF WE CANNOT RAISE ADDITIONAL CAPITAL, WE MAY NOT HAVE SUFFICIENT FUNDS TO
FINANCE OUR CURRENT BUSINESS PLANS OVER THE NEXT TWELVE MONTHS.
We had cash on hand of only $248,000 on September 30, 1999. While we
raised approximately $7.8 million, net of expenses, in two private placements
between August 1999 and October 1999, we may require additional funds to finance
our operations for the next twelve months. If we are unable to raise additional
equity, if required, or accounts receivable, inventory working capital and
equipment financing, we may not be able to execute our business plan and
continue operations. We are attempting to pledge as collateral our accounts
receivable, inventory and capital equipment. Our ability to obtain debt
financing will be dependent in part on the quality and amount of our revenues,
trade receivables, inventory and unsecured capital equipment.
OUR LIMITED MANUFACTURING HISTORY AND THE SIGNIFICANT MANUFACTURING RISKS
ASSOCIATED WITH OUR PRODUCTION OF MATERIALS MAY MAKE IT DIFFICULT FOR US TO
ESTABLISH OR MAINTAIN PROFITABLE MANUFACTURING OPERATIONS.
If we fail to effectively manage and maintain our manufacturing
capabilities, our business will suffer and we may never generate significant
revenues or achieve profitability. We have limited experience in manufacturing
our materials in commercial quantities. Our manufacturing processes are
technically complex and we initially experienced problems establishing standard
and repeatable manufacturing procedures, resulting in delays and increased
costs. Additionally, our manufacturing operations currently use equipment that,
if damaged, inoperable or unavailable, could disrupt our manufacturing
operations and may not be able to be repaired or replaced on a timely basis or
at reasonable costs. Our manufacturing facilities are located in Southern
California where earthquakes characteristic of Southern California could result
in the interruption of our manufacturing activities. We currently do not
maintain earthquake insurance.
IF WE DO NOT INCREASE OUR PRODUCT SALES, WE MAY NOT BE ABLE TO OFFSET OUR FIXED
OPERATING COSTS, WHICH COULD LEAD TO CONTINUED LOSSES.
Unless and until we achieve significantly higher levels of sales of our
materials, we will continue to have substantial production over-capacity. At
current production levels, we are operating only one manufacturing shift or a
portion thereof. Consequently, we will experience under-absorbed costs that will
continue to cause us to incur operating losses of approximately $1,000,000 per
month. Because we have only recently commenced our manufacturing operations and
because it is difficult at our early stage to predict our product mix, it is too
early for us to accurately quantify the volume of sales that must be generated
for us to break-even. The level of sales that we would need to reach break-even
depends on the type of material ordered, the applications for which our
materials are used, the basic costs of producing our materials, the efficiency
with which we produce our materials, the amount of outside processing required
for specific products and the rate of our growth, if any. In order to establish
manufacturing capacity, we entered into long-term leases for our two facilities
located in Irvine, California. The lease for our headquarters in Irvine,
California, expires in 2008 and requires monthly lease payments of approximately
$27,000. We also have a ten-year lease expiring in 2008 for our second Irvine
facility, with monthly lease payments of $45,000. Through September 30, 1999, we
have invested more than $20 million to equip and
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implement our manufacturing operations in these facilities. If we fail to
generate significant revenues from these manufacturing facilities, we will not
be able to offset the costs of those facilities and our business and operating
results will suffer.
WE MAY BE REQUIRED TO ISSUE A LARGE NUMBER OF ADDITIONAL SHARES OF COMMON STOCK
UPON CONVERSION OF OUR PREFERRED STOCK, EXCHANGE OF OUR EXCHANGEABLE NOTE, AND
UPON EXERCISE OF OUTSTANDING WARRANTS THAT WILL BE IMMEDIATELY AVAILABLE FOR
RESALE. THESE SALES COULD CAUSE THE MARKET PRICE OF OUR COMMON STOCK TO DECLINE
SIGNIFICANTLY, EVEN IF OUR BUSINESS IS DOING WELL.
Our Series C preferred stock, exchangeable note and outstanding warrants are
currently convertible and exchangeable for a large number of shares of our
common stock. Beginning in January 2000, our Series A preferred stock will also
be convertible into shares of our common stock. The holders of these securities
have registration rights. Sales by these holders of a significant amount of
common stock could also encourage short selling, which could cause our stock
price to decline further. Furthermore, any negative impact on our stock price
caused by these securities could impair our ability to raise additional equity
capital, if required. Our Series A preferred stock, Series C preferred stock and
exchangeable note are subject to price protection provisions that require us to
reduce the conversion price for the securities and ultimately to issue
additional shares of common stock to these holders without additional
consideration if the Company issues additional shares of common stock at a price
below their fixed conversion prices. In addition, we have also granted piggyback
registration rights to register up to 211,000 shares of common stock issuable
upon exercise of an outstanding warrant relating to our initial public offering
in October 1996. Furthermore, 6,381,955 shares of our common stock outstanding
at October 25, 1999, are immediately available for resale in the public market
under Rule 144 or Rule 701 of the Securities Act of 1933, as amended.
The following table sets forth the number of shares of our common stock that
we have issued and the maximum number of shares of our common stock that we
would be required to issue assuming that all of the following securities are
immediately exchanged, converted or exercised for common stock:
Number of Shares
of Common Stock
Conversion/ Issued and Percent of
Exchange or Issuable Upon Outstanding
Type of Security Issue Price Full Conversion Common Stock
- ------------------------ ----------- ----------------- ------------
Series A preferred stock $2.00 750,000 3.8%
Common stock issued in $2.3925 626,960 3.2%
October 1999 to Series
B stockholders as a
result of conversion of
the Series B preferred
stock
Warrants issued in $3.82 65,000 0.3%
March 1999 to Series B
stockholders
Warrants issued in $3.25 150,000 0.8%
October 1999 to Series
B stockholders
Common stock issued in $3.00 200,000 1.0%
August 1999 to AMRO
International, S.A.
Warrants issued in $3.50 50,000 0.3%
August 1999 to AMRO
International, S.A.
Exchangeable note $2.00 1,500,000 7.7%
Related warrants $3.0375 135,000 0.7%
issued in March 1999
Related warrants $3.00 300,000 1.5%
issued in
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<PAGE>
Number of Shares
of Common Stock
Conversion/ Issued and Percent of
Exchange or Issuable Upon Outstanding
Type of Security Issue Price Full Conversion Common Stock
- ------------------------ ----------- ----------------- ------------
October 1999
Common stock issued N/A 149,213 0.8%
in August 1999
Common stock issued $2.3467 38,352 0.2%
in September 1999 as
interest payment
Series C preferred stock $3.00 2,500,000 12.8%
Related warrants $3.00 1,875,000 9.6%
issued in October 1999
Total 8,339,525 42.7%
Because we cannot determine the exact conversion price of the Series A
preferred stock, the Series C preferred stock, the warrants and the exchangeable
note due to the price protection provisions, we have made the following
assumptions in computing the calculations in this table:
. Because the conversion price for the Series A preferred stock and the
exchangeable note cannot be less than $2.00 per share, the foregoing
table reflects the maximum number of shares of common stock that we
would be required to issue to these holders. We may, however, be
required to issue additional shares of common stock to the holder of
our exchangeable note in the event we do not pay the accrued interest
or penalty, if any, on this note in cash.
. Calculation of the number of shares of common stock issuable upon
conversion of the Series C preferred stock (2,500,000) was based on
its fixed conversion price of $3.00 per share. The actual number of
shares may increase in the event of the occurrence of certain dilutive
events relating to the issuance of common stock at prices lower than
the Series C preferred stock's fixed conversion price.
. The percentage calculation has been derived using the total number of
shares of our common stock outstanding as of October 25, 1999, plus
the shares underlying the exchangeable, exercisable or convertible
securities included in the above table (19,567,403 shares, of which
12,122,403 shares were issued and outstanding. Of the 12,122,403,
11,107,878 shares were issued and outstanding as of June 30, 1999,
626,960 shares were issued as a result of the conversion of the Series
B preferred stock in October 1999 and 387,565 shares were issued in
August and September 1999 in connection with the sale of shares to
AMRO International and the issuance of shares to the exchangeable
noteholders.)
WE EXPECT FLUCTUATIONS IN OUR OPERATING RESULTS TO CONTINUE, WHICH COULD CAUSE
OUR STOCK PRICE TO DECLINE.
Fluctuations caused by variations in quarterly operating results or our
failure to meet market analysts' projections or public expectations could cause
the market price of our common stock to decline, perhaps significantly. Our
operating results may vary considerably from quarter to quarter, in part because
of the costs associated with changes in our materials, personnel and the size
and actual delivery dates of orders of our materials. It is the nature of our
business to incur long customer order-related sales cycle times. We are also
affected by market trends that significantly limit our ability to accurately
forecast our production schedules and the short-term results of operations. We
face lengthy customer design processes for new production introductions. As a
result, our operating results for any particular quarter should not be
considered indicative of any future results and period-to-period comparisons of
our operating results will not necessarily be meaningful.
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<PAGE>
IF WE LOSE ANY OF OUR KEY MANAGERS, OUR BUSINESS COULD BE SERIOUSLY HARMED.
Our key managers do not have long-term employment agreements with Alyn, and
accordingly they may terminate their association with little or no notice. We
rely on a relatively new management team and need additional personnel to expand
our business. Our future success and profitability is substantially dependent
upon the personal efforts and abilities of our key executives, Arne van Roon
(our President and Chief Executive Officer who joined Alyn in April 1999), Robin
A. Carden (our founder) and Richard L. Little (our Chief Financial Officer and
Secretary). We do not maintain key man life insurance on Messrs. van Roon or
Little. If Messrs. van Roon or Little, or any other key employees were to leave
Alyn Corporation, their departure could significantly diminish our level of
management, technical, marketing and sales expertise, and we would have the
difficult task of finding and hiring replacements who have these skills.
Furthermore, the departure of any of our manufacturing personnel may interrupt
our manufacturing operations and lengthen the time necessary to deliver products
to market.
We believe that our future growth will be dependent in large part on our
ability to attract and retain additional qualified management, technical,
manufacturing, administrative and other personnel. Due to our location in
Irvine, California and the nature of our business, we believe that we will
experience significant competition for qualified personnel.
BECAUSE WE DEPEND ON A FEW SIGNIFICANT CUSTOMERS FOR A SUBSTANTIAL PORTION OF
OUR REVENUES, THE LOSS OF A KEY CUSTOMER COULD SERIOUSLY HARM OUR OPERATING
RESULTS.
Since inception, we have derived a substantial portion of our revenues
from sales to a relatively small number of customers. As a result, the loss of
any significant customer could materially and adversely affect our financial
condition and results of operations. Sales to our largest three customers for
the nine months ended September 30, 1999 and their respective percentage of our
net sales were as follows: Transnuclear (35%), Marvin Engineering (18%) and
Quantum Technologies (6%). Sales to our largest three customers for the year
ended December 31, 1998 and their respective percentage of net sales for that
period were as follows: General Motors (22%), Taylor Made Golf (15%) and
MacGregor Golf (12%). Sales to our largest three customers for the year ended
December 31, 1997 and their respective percentage of net sales for that period
were as follows: Taylor Made Golf (47%), Defense Logistics Company (14%) and
Mersey (12%). It is possible that one or more key customers could suffer
business or financial setbacks resulting in the reduction or cancellation of
product orders or our being unable to obtain payment from such customers at any
time or from time to time. We expect that our key customers will continue to
account for a substantial portion of our revenues for 1999 and in the future.
Accordingly, our future operating results will continue to depend on the success
of our largest customers and on our ability to sell products to these customers
in significant quantities.
WE DEPEND ON TWO SUPPLIERS FOR ONE OF OUR PRINCIPAL RAW MATERIALS. ANY FAILURE
TO OBTAIN THESE RAW MATERIALS COULD RESULT IN SIGNIFICANT DELAYS IN OUR ABILITY
TO SHIP PRODUCT AND COULD ADVERSELY AFFECT OUR REVENUES AND OUR RELATIONSHIPS
WITH OUR CUSTOMERS.
We presently purchase one of our principal raw materials, boron carbide,
primarily from two suppliers, ESK Engineered Ceramics Division of Wacker
Chemicals (USA), Inc. and P&W International Tech. We currently do not have any
long-term supply agreements with either of these suppliers. Our business would
be materially and adversely affected if we were unable to continue to purchase
our required quantities of boron carbide at prices and on terms comparable to
those presently available from our principal suppliers.
IN THE EVENT WE ARE NOT ABLE TO ENFORCE OUR PATENTS, OUR COMPETITORS COULD
INTRODUCE SIMILAR MATERIALS OR TECHNOLOGIES, WHICH COULD SERIOUSLY HARM OUR
BUSINESS.
If our present or future patent rights are ineffective in protecting us
against infringement, our marketing efforts and future revenues could be
materially and adversely affected. Moreover, if a competitor were to infringe
any of our patents, the costs of enforcing our patent rights may be substantial
or even prohibitive. Our United States patent that contains claims covering the
manufacture of our Boralyn material is critical to our success and our ability
to prevent competitors from introducing similar materials. We have been granted
additional patents and have other patent applications pending, including
divisional (extension) patents and continuation-in-part patents, many of which
stem from our originally issued patent. We cannot be sure that any additional
patents will be granted or that
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our existing or future patents will be valid and enforceable, or will provide us
with meaningful protection from our competitors. We also cannot be sure that our
future materials will not infringe the patent rights of others or that we will
not be forced to expend substantial funds to defend against infringement claims
of, or to obtain licenses from, third parties. We currently have only limited
patent protection for our technology outside the United States, and we may be
unable to obtain even limited protection for our proprietary technology in
certain foreign countries.
WE MAY NOT BE ABLE TO ADEQUATELY PROTECT OR ENFORCE OUR TRADEMARKS OR TRADE
NAMES, WHICH COULD HARM OUR GOODWILL AND DILUTE OUR BRAND RECOGNITION.
Although Boralyn is a registered trademark in the United States, we cannot
be certain that we can successfully assert trademark or trade name protection
for our significant marks and names in the United States or other markets, and
the costs of such efforts could be substantial. The market for our products is
and will remain dependent in part upon the goodwill engendered by our trademarks
and trade names. Trademark protection is material to our business.
WE FACE INTENSE COMPETITION IN THE ADVANCED MATERIALS MARKET FROM LESS EXPENSIVE
MATERIALS AND FROM COMPETITORS WHO HAVE GREATER RESOURCES AND MANUFACTURING
EXPERIENCE THAN WE HAVE.
Competitive pressures in the advanced materials market could require us to
reduce our product prices to remain competitive, and accordingly, could
adversely affect our results of operations. The advanced materials industry is
highly competitive, and other materials such as specialized aluminum alloys,
borated stainless steel for nuclear shielding applications, and to a much lesser
extent, titanium, magnesium and beryllium, are readily available for similar
applications generally at comparable or lower prices than our materials.
We compete in our target markets with several larger domestic and
multinational companies, all of which are well established in their respective
markets and have substantially more manufacturing experience and substantially
greater financial and other resources than us. We compete 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 nuclear
containment, current storage containers often use Boral(R), a boron carbide and
aluminum material supplied by AAR Brook & Perkins and borated aluminum supplied
by Eagle Pitcher. Certain of our competitors who provide competing materials for
the nuclear industry have already obtained quality certification (similar to ISO
certification) from the Nuclear Regulatory Commission, which can enable them to
qualify for certain nuclear projects much quicker and cheaper than we can. We
are in the process of applying for the quality certification, but we cannot be
sure that we will ever be able to obtain this certification.
THE PRINCIPAL APPLICATIONS FOR OUR MATERIALS COULD SUBJECT US TO SIGNIFICANT
PRODUCT LIABILITY ACTIONS, IN EXCESS OF OUR INSURANCE COVERAGE LIMITS.
The principal uses of our materials currently include automotive
applications, including engines and structural members, as well as application
for use in products used to store nuclear waste. Both the automotive and nuclear
industries involve significant risks of personal injury and have historically
been the subject of many product liability actions. We cannot be sure that our
liability insurance will be sufficient to adequately cover any potential claims,
or that this insurance will continue to be available on acceptable terms in the
future.
IF OUR COMMON STOCK FAILS TO MAINTAIN NASDAQ'S REQUIRED MINIMUM MARKET PRICE OR
WE FAIL TO MEET OTHER NASDAQ REQUIREMENTS, OUR COMMON STOCK COULD BE DELISTED
FROM THE NASDAQ NATIONAL MARKET, BECOME LESS EASILY TRADABLE AND DECLINE IN
VALUE.
If our stock price declines or if we continue to experience losses from our
operations, we may not be able to maintain the standards required for continued
listing on the Nasdaq National Market. Delisting would eliminate the substantial
benefit currently enjoyed by holders of our common stock of being able to easily
buy or sell our common stock because our common stock is listed on the Nasdaq
National Market. For continued listing of our common stock on the Nasdaq
National Market, we must, among other things, maintain a minimum bid price of at
least $1.00 per share. In February 1998, our stock price declined to $1.50 per
share. As of December 29, 1999, our stock
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price was $1.781 per share. In the event our common stock is removed from the
Nasdaq National Market, any trading in our common stock might then be conducted
on the Nasdaq SmallCap Market, which is a significantly less active market than
the Nasdaq National Market. As a result, a shareholder could find it more
difficult to dispose of our common stock.
Furthermore, if we did not qualify for listing on the Nasdaq SmallCap
Market or if our common stock was subsequently delisted from the Nasdaq SmallCap
Market, our common stock could be subject to the rules and regulations under the
Securities Exchange Act of 1934 relating to "penny stocks," which impose
additional requirements on broker-dealers who sell such securities to persons
other than established customers and certain institutional investors. For
transactions covered by the penny stock rules, a broker-dealer must, among other
things, make a special suitability determination for the purchaser and have
received the purchaser's written consent to the transaction prior to sale.
Brokers effecting transactions in a penny stock are also subject to customer
disclosure and record keeping obligations. Consequently, if we fail to qualify
for listing on, or if we were removed from, the Nasdaq SmallCap Market, the
ability or willingness of broker-dealers to sell or make a market in our common
stock could decline.
IF WE FAIL TO OBTAIN SHAREHOLDER APPROVAL WHEN REQUIRED, OR, IF NASDAQ
DETERMINES RETROACTIVELY THAT WE FAILED TO OBTAIN NECESSARY SHAREHOLDER
APPROVAL, OUR COMMON STOCK COULD BE DELISTED FROM THE NASDAQ NATIONAL MARKET,
BECOME LESS EASILY TRADABLE AND DECLINE IN VALUE.
If we fail to obtain shareholder approval when required, or if Nasdaq
determines retroactively that we failed to obtain required shareholder approval
prior to the issuance of our exchangeable note and our Series B preferred, our
common stock could be delisted, resulting in the adverse consequences discussed
in the preceding risk factor. Nasdaq rules require that shareholder approval be
gained prior to the issuance of securities by a company equal to 20% or more of
the company's common stock if the securities are being issued for less than the
greater of book or market value of the stock. When we initially issued our
Series B preferred and our exchangeable note in March of 1999, they could have
become convertible or exchangeable into shares of common stock exceeding 19.9%
of our outstanding shares of common stock. At that time, we determined that we
did not require shareholder approval prior to the issuance of the Series B
preferred or the exchangeable note. If Nasdaq retroactively rejects our
determination, our common stock could be delisted from the Nasdaq National
Market.
Furthermore, our common stock may be delisted from the Nasdaq National
Market if adjustments made under the anti-dilution provisions of the
exchangeable note require us to issue upon exchange of the exchangeable note
shares of common stock exceeding 19.9% of our outstanding shares of common stock
and we fail to obtain shareholder approval of the issuance. In October 1999, we
amended the provisions of the exchangeable note to provide, among other things,
that the minimum exchange price cannot be less than $2.00 per share, (subject to
reduction for dilutive events). Therefore, we will not be required to issue more
than 19.9% of our common stock upon the exchange of the exchangeable note unless
the anti-dilution provisions of our exchangeable note require us to issue more
shares. As consideration for this amendment, we issued to the holder of the
exchangeable note an additional five-year warrant to purchase 300,000 shares of
our common stock at an exercise price of $3.00 per share. See "Description of
Certain Provisions of our 6% Senior Exchangeable Promissory Note Due March 10,
2002".
In addition, as a part of amendments made to the Series B preferred stock,
all of the Series B preferred stock was exchanged for 626,960 shares of common
stock, the issuance of which did not and will not require shareholder approval.
These amendments to the Series B preferred were also made in October 1999, and
as consideration for the amendments to the Series B preferred stock, we issued
warrants to the holders of our Series B preferred stock to purchase an aggregate
of 150,000 shares of our common stock at an exercise price of $3.25 per share.
See "Description of Certain Provisions of our Series B Preferred Stock".
With regard to the foregoing issuances, we will continue to consider this
matter on an ongoing basis and will take the appropriate course of action
required by a change in facts relating to the foregoing, including, if
necessary, submitting the issuance of additional shares or any related matter to
a vote of our stockholders. See the next risk factor for additional possible
adverse consequences of delisting.
IF OUR STOCK IS DELISTED FROM NASDAQ, WE COULD BE IN DEFAULT OF PROVISIONS OF
OUR PREFERRED STOCK AND EXCHANGEABLE NOTE AND COULD BE SUBJECT TO CLAIMS BY THE
HOLDERS OF THESE SECURITIES REQUIRING US TO REPURCHASE OR REPAY THEM FOR CASH.
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The delisting of our common stock from Nasdaq could further adversely
affect us by rendering us in breach of our contractual obligations. The
provisions of our exchangeable note require that we maintain the listing of our
common stock on the American Stock Exchange, the New York Stock Exchange, the
Nasdaq National Market, or the Nasdaq Small-Cap Market. Accordingly, if our
common stock is delisted, we could be deemed in default of these provisions.
Under the terms of our exchangeable note, if our common stock is delisted or
ineligible to trade on the Nasdaq National Market or Small Caps for a period of
ten (10) consecutive trading days, then the holder of the exchangeable note may
declare the note, which is in the principal amount of $3,000,000, immediately
due and payable and may seek other legal relief available by law. In addition,
the terms of our agreement with the purchasers of the Series C preferred stock
prohibit us from taking or consenting to any action causing a delisting of our
common stock from the Nasdaq National Market or another national securities
exchange on which any shares of our common stock are listed. In the event our
common stock is so delisted, the holders of our Series C preferred stock may, at
their option, obligate us to repurchase all or part of the Series C preferred
stock for approximately $7,500,000.
IF OUR INTERNAL SYSTEMS AND THE SYSTEMS OF THE THIRD PARTIES WITH WHOM WE
INTERACT ARE NOT YEAR 2000 COMPLIANT, WE MAY SUFFER BUSINESS INTERRUPTIONS AND
OUR BUSINESS COULD BE SERIOUSLY HARMED.
We believe that our greatest Year 2000 risk relates to the readiness of our
third party suppliers, customers, and other third parties to resolve their own
Year 2000 issues in a timely manner. There could be a material disruption of our
business and a decline in sales due to our customers' inability to order or
purchase products and our inability to interact with our suppliers and other
third party providers. We have also evaluated our internal systems, both in
terms of the compliance of information systems and the compliance of
applications that monitor all aspects of our business. We cannot be sure of the
effect of the Year 2000 issue until the Year 2000 arrives. We are in the process
of testing and evaluating the computerized elements of our manufacturing
equipment and expect to complete this evaluation in sufficient time to make
necessary upgrades, but we may not be able to complete these upgrades in a
timely manner or at reasonable costs. We also cannot be sure that our present
estimates of the cost to remedy the Year 2000 problem are not understated.
OUR PRINCIPAL STOCKHOLDERS CONTROL ALYN CORPORATION AND COULD PREVENT A CHANGE
IN CONTROL OR FINANCING THAT MIGHT OTHERWISE BE IN THE BEST INTERESTS OF THE
STOCKHOLDERS.
The concentration of ownership and our contractual consent rights may
discourage a potential acquirer from making an offer to buy Alyn Corporation or
may prohibit us from completing a major corporate transaction or raising
additional capital, which might otherwise be in the best interest of our
stockholders. As of October 25, 1999, Kingdon Capital Management Corp. and its
affiliates, Robin A. Carden and Harry Edelson beneficially owned an aggregate of
52.6% of our outstanding common stock. In addition, in October 1999, Fleming
U.S. Discovery Fund III, L.P. and Fleming U.S. Discovery Offshore Fund III, L.P.
purchased the Series C Convertible Preferred Stock, which is convertible into
2,500,000 shares of common stock. Under the terms of the related purchase
agreements, they have the right to vote the 2,500,000 shares as if they were
issued and outstanding at the time of such stockholder vote. At such time, our
principal stockholders would vote 60.7% of the shares then available to vote.
Accordingly, these stockholders have the ability to elect a majority of our
directors and to control the outcome of all other issues submitted to our
stockholders. The holders of the Series C preferred stock have significant
influence on key decisions of the company and have exercised their rights under
the Series C purchase agreements to appoint two members to our Board of
Directors. In October 1999, Mr. Robert Burr and Mr. David Edwards were appointed
to the Board of Directors, and Mr. Burr was subsequently elected its chairman.
The terms of our Series A preferred stock and Series C preferred stock also
prohibit us from amending our charter documents, liquidating, merging, selling
substantially all of our assets, or issuing additional securities without the
consent of these stockholders.
In addition, the following provisions of our exchangeable note could also
discourage some potential purchasers from acquiring Alyn Corporation or make an
asset sale more difficult and expensive:
. the requirement that upon a change of control, we must offer to
buy the exchangeable note at the greater of 135% of the principal
plus accrued and unpaid interest and penalties or the product of
the number of shares into which the exchangeable note can be
exchanged and the market price on the applicable date; and
. the prohibition against selling or transferring all or
substantially all of our assets unless we have their approval.
We have also agreed to grant the holders of our Series A preferred stock a
right of first refusal and our Series C preferred stock, and the exchangeable
note a right of first offer with respect to certain issuances of equity or debt
securities, and we are prohibited from obtaining additional senior indebtedness
for borrowed money beyond defined limits without the written consent of the
holder of the exchangeable note, unless the indebtedness junior to the
exchangeable note or that the borrowed money is for equipment financing or
customary working capital lines of credit.
OUR STOCK PRICE HAS BEEN, AND MAY CONTINUE TO BE VOLATILE.
Trading volume and prices for our common stock could be subject to wide
fluctuations in response to quarterly variations in our operations and 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 us. Since January 1, 1998, the price of our
common stock has declined from a high of $10 in February 1998 to $1.50 in
February 1999 and was $1.781 on December 29, 1999. The factors causing these
variations include the low average daily trading volume of our common stock, the
sale or attempted sale of a relatively large amount of securities in the public
market, the registration for resale of any shares of common stock, the
antidilution provisions in our preferred stock, exchangeable note and warrants,
manufacturing and product development delays and our earnings to date. The
market price of our common stock could also be influenced by developments or
matters not related to our performance, such as the general volatility of the
stock market.
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OUR CHARTER DOCUMENTS AND DELAWARE LAW COULD ADVERSELY AFFECT THE RIGHTS OF
COMMON STOCK AND COULD PROHIBIT CERTAIN CHANGES IN CONTROL THAT MAY OTHERWISE BE
BENEFICIAL TO OUR STOCKHOLDERS.
Under our certificate of incorporation, our Board of Directors has the
authority to issue shares of preferred stock and to determine the price, rights,
preferences and privileges of those shares without any further vote of, or
action by, our 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 has been issued or may be issued in the future. 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 our
outstanding voting stock. Certain provisions of Delaware law applicable to us
may also discourage third-party attempts to acquire control.
RECENT DEVELOPMENTS
In May 1999, we announced the completion of our management restructuring
following the appointment of Arne van Roon as our President and Chief Executive
Officer in April 1999. Mr. van Roon was appointed by our Board of Directors to
replace Steven Price, who had served as our president and chief executive
officer since April 1998. Also in April, we entered into an agreement with James
L. Hesburgh, Alyn's then chairman of the board, to provide us additional
assistance. Other personnel changes included the replacement of the former vice
president of manufacturing and the departure of several other managers, the
promotion of a number of key managers to assume broader managerial roles, and
the hiring of some new key staff reporting directly to Mr. van Roon. Robin
Carden, our founder, is taking a more active role in business development and
marketing. In October 1999, the Board of Directors elected Mr. Robert Burr to
serve as chairman of the board.
Our management plans to address the factors that contributed to our prior
record of unsatisfactory performance. We completed our manufacturing facility by
the end of 1998 in order that we could supply new products in response to
customer orders. Following the appointment of Arne van Roon as president and CEO
in April 1999, we made an important change in our business strategy. This new
strategy defines our business as a high-tech producer of engineered metal matrix
composite materials. We have eliminated activities associated with the
large-scale production of finished products. This allows us to focus on our core
activity - the development and large-scale production of advanced material for
both high-tech and general production applications in a wide array of
industries, including nuclear, automotive, aerospace, electronics, computers,
sporting goods and other consumer products. Even under our new business plan,
however, we are still susceptible to the unpredictability of rapid technological
change and the need to constantly update our manufacturing and marketing
strategies.
We will install in senior management positions persons with backgrounds and
experience more consistent with our changed business model.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference room. Our SEC filings are also available to the public at the SEC's
web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this prospectus, and information that we file later with the SEC
will automatically update and supersede this information. We incorporate by
reference the documents listed below and any future filings made with the SEC
under Section 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934,
as amended, until our offering is completed.
(a) Our Annual Report on Form 10-K for the fiscal year ended December
31, 1998;
(b) Our Annual Report on Form 10-K/A for the fiscal year ended
December 31, 1998;
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(c) Our Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 1999;
(d) Our Quarterly Report on Form 10-Q for the fiscal quarter ended
June 30, 1999;
(e) Our Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1999;
(f) Our Quarterly Report on Form 10-Q/A for the fiscal quarter ended
September 30, 1999.
(g) Our Current Report on Form 8-K filed on April 28, 1999;
(h) Our Current Report on Form 8-K filed on October 4, 1999;
(i) Our Current Report on Form 8-K filed on December 16, 1999;
(j) Proxy statement dated October 29, 1999 for our 1999 annual
meeting; and
(k) The description of our common stock contained in our registration
statement on Form 8-A filed October 21, 1996, including any
amendments or reports filed for the purpose of updating such
description.
You may request a copy of any or all of the documents incorporated by
reference by writing or telephoning us, and we will provide the documents you
requested at no cost. However, we will not send exhibits to such documents,
unless such exhibits are specifically incorporated by reference in such
documents. You should direct all requests for such copies to the following
address:
Richard L. Little
Vice President, Finance and Administration,
Chief Financial Officer and Secretary
Alyn Corporation
16761 Hale Avenue
Irvine, California 92606
(949) 475-1525
You should rely only on the information incorporated by reference or provided
in this prospectus or the prospectus supplement. We have authorized no one to
provide you with different information. We are not making an offer of these
securities in any state where the offer is not permitted. You should not assume
that the information in this prospectus or the prospectus supplement is accurate
as of any date other than the date on the front of the document.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares of our common
stock being offered by the selling stockholders under this prospectus.
RECENTLY ISSUED SECURITIES
We recently completed a series of private placement transactions some of
which helped obtain the financing necessary to implement our revised business
plan (See "Recent Developments"). In January 1999, we issued Series A preferred
stock and related warrants. In March 1999, we issued the exchangeable note and
related warrants. Also in March 1999, we issued our Series B preferred stock and
related warrants. In August 1999, we issued common stock and warrants to AMRO
International, S.A. As a result, we were required to issue common stock to the
holders of the exchangeable note as an anti-dilution payment, in lieu of a
change in the note's exchange price. In October 1999, we issued our Series C
preferred stock and related warrants. As part of the issuance of the Series C
preferred stock, we entered into amendment and consent agreements with our
previous preferred stock and exchangeable note holders pursuant to which in
October 1999 we issued warrants to the holders of our exchangeable note and
Series B preferred stock. In September 1999 we also issued common stock to our
exchangeable note holder as interest on their note, in lieu of a cash payment.
Certain provisions of these private placements are individually described below.
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The August sale of common stock to AMRO International, S.A. provided us with
additional equity capital that allowed us to continue implementing our revised
business plan until we were able to complete the sale of our Series C
convertible preferred stock, a transaction under negotiation at that time, to
raise more substantial capital.
The shares registered under this prospectus are shares of our common stock
issued pursuant to the above private placements or which are issuable upon
conversion or exchange of the securities or exercise of the warrants issued
pursuant to the above private placements. We are contractually obligated to
register the shares of common stock registered under this prospectus.
The following is a description of shares we have issued since December 31,
1998. To the extent applicable, the following description reflects the
amendments, waivers and consents obtained by Alyn from the holders of our
exchangeable note, Series A preferred stock and our Series B preferred stock in
connection with the issuance of our Series C preferred stock.
DESCRIPTION OF CERTAIN PROVISIONS OF OUR 6% SENIOR EXCHANGEABLE PROMISSORY
NOTE DUE MARCH 10, 2002
On March 10, 1999, we issued the exchangeable note in the original principal
amount of $3.0 million and related warrants to purchase 135,000 shares of common
stock at an exercise price of $3.0375 per share. In October 1999, we amended the
provisions of the exchangeable note to provide, among other things, that the
minimum exchange price cannot be less than $2.00 per share. In connection with
this amendment, we issued to the holder of the exchangeable note an additional
five year warrant to purchase 300,000 shares of our common stock at an exercise
price of $3.00 per share.
Certain provisions and rights of the exchangeable note are summarized as
follows:
Interest Rate. Interest on the outstanding principal amount of the
exchangeable note is payable at the rate of 6% per annum, payable semiannually.
Such interest may be paid, at the option of the noteholder, either in cash
within five days of September 15 and March 15 of each year or by issuing
additional promissory notes. Upon an event of default, the interest on unpaid
principal and accrued and unpaid interest will accrue at 6% plus an additional
14% per annum until the default is cured by us or waived by the noteholder.
Events of default include: (i) a failure to pay principal, interest, or other
required payments which is not cured within ten calendar days after notice of
such failure; (ii) a failure to perform or comply with material covenants or
agreements which is not cured within ten calendar days after notice; or (iii)
the delisting or ineligibility of our common stock for trading on Nasdaq for ten
trading days.
Exchange Price. The outstanding principal amount of the exchangeable note is
$3.0 million and any portion of that amount is exchangeable at the election of
the noteholder into shares of our common stock. The actual number of shares of
common stock issuable upon exchange of the exchangeable note will be determined
by the following formula:
(the principal amount of the exchangeable note tendered for exchange plus any
accrued but unpaid interest being exchanged plus any unpaid liquidated damages
and penalties)
divided by
(the applicable exchange price at the time of exchange).
The exchange price is subject to adjustment. The exchange price of the
exchangeable note is equal to either of the following at the sole option of the
noteholder: (i) $3.645 per share or (ii) the average of any three closing bid
prices as reported by Bloomberg L.P. for 22 trading days immediately preceding
the applicable exchange date discounted by up to 15%. The actual discount is 8%
through September 6, 1999; 12% through December 5, 1999; and 15% after December
5, 1999. In no case will the exchange price be less than $2.00 per share.
The following table sets forth the number of shares of common stock issuable
upon exchange of the exchangeable note. It assumes the market price of our
common stock is 50%, 75%, 100%, 125%, 150% and 175% of the closing price of the
common stock on August 31, 1999, which was $2.8438 per share. It further assumes
that all accrued interest, liquidated damages and penalties have been paid and
that the exchange occurs after December 5,
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1999 at the required exchange price
of 85% of the closing price, except where 85% of the closing price is at or
above $3.645, in which case the exchange price is $3.645.
PERCENT OF EXCHANGE
MARKET PRICE PRICE NUMBER OF
MARKET PRICE AS AS (85% OF SHARES
OF AUGUST 31, OF AUGUST ASSUMED ASSUMED ISSUABLE UPON
1999 31, 1999 MARKET PRICE MARKET PRICE) EXCHANGE
- --------------- ------------- ------------ ------------- -------------
$2.8438 50% $1.4219 $2.0000 1,500,000
$2.8438 75% $2.1329 $2.0000 1,500,000
$2.8438 100% $2.8438 $2.4172 1,241,106
$2.8438 125% $3.5548 $3.0216 992,852
$2.8438 150% $4.2657 $3.6258 827,404
$2.8438 175% $4.9767 $3.6450 823,046
In addition, the exchange price of the exchangeable note is subject to
adjustment upon the occurrence of the following events: (i) capital
reorganizations of Alyn Corporation; (ii) reclassification, exchange, or
substitution of the common stock; (iii) declaration or payment of dividends or
distributions on the common stock; and (iv) subdivision or combination of the
common stock. The terms of the exchangeable note require that we deliver to the
exchangeable note holder shares of common stock into which the exchangeable note
is exchangeable within seven days after their request for the exchange. We must
pay a penalty of $10,000 per day for each day we are late in delivering the
common shares to the holders of the exchangeable note.
Anti-dilution Protection. Until September 15, 2000, if we sell common stock
at a price lower than any applicable exchange price for the six months
immediately preceding such issuance or sale, then we are required to issue to
the noteholder a number of shares of common stock as determined by (i)
subtracting the issuance or sale price from the lowest exchange price in effect
as described above, such sum multiplied by (ii) the number shares that would
have been received had the entire exchangeable note been tendered on the day
immediately preceding such sale or issuance, such product divided by (iii) the
exchange price in effect on the day immediately preceding such sale or issuance.
Pursuant to this provision, we issued an additional 149,213 shares of our common
stock in August 1999 to the holder of the exchangeable note in connection with
our private placement of 200,000 shares of our common stock at a purchase price
of $3.00.
Registration. While we are required under the terms of the exchangeable note
agreements to register and keep registered at least 125% of the aggregate number
of shares of common stock into which the exchangeable note is exchangeable and
for which the note warrants are exercisable, the amendment agreement reached in
October 1999, placing a $2.00 floor on the exchange price, places a ceiling on
the number of shares requiring registration equal to the number of shares of
common stock that may be issuable upon exchange of the exchangeable note using
the $2.00 floor exchange price. We may be required to register additional shares
in the event that we fail to pay accrued interest and penalties on the
exchangeable note or if we issue securities at a price below the then current
exchange price. If this Registration Statement has not been declared effective
on or before December 31, 1999, we must pay to the holder of our exchangeable
note $90,000 per month, prorated for partial months.
Limitation on Shares Issuable: Notwithstanding the registration of such
number of shares we are subject to the NASD Rule 4460(i) that limits us from
issuing securities equal to or in excess of 20% of our outstanding securities on
the date immediately prior to the issuance of the exchangeable note and the note
warrants unless and until the stockholders approve such an issuance. The terms
of the exchangeable note also provide that the number of shares issuable upon
exchange of the exchangeable note cannot exceed 19.9% of our outstanding
securities as of March 10, 1999 until stockholder approval is received. No such
stockholder approval is required.
Cash Payments. We may be required to make significant cash payments to the
holders of the exchangeable note if we fail to issue stock certificates within
seven business days of the exchange date of all or any portion of the
exchangeable note. We must also pay liquidated damages of $10,000 per day for
every day that that the certificates are delayed beyond the seven business days
allowed for delivery of the stock certificates. The exchangeable note also
requires us to pay liquidated damages to the holder of the exchangeable note in
the event this registration statement has not been declared effective by
December 31, 1999.
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Prepayment and Redemption at Our Option. On or after March 10, 2000, we may
prepay all or any portion of the exchangeable note upon giving at least 20
trading days prior notice to the noteholder. Such notice is irrevocable and we
must pay, within 2 business days of the date fixed for prepayment 135% of the
amount of the prepayment on all or a portion of the exchangeable note so called
for prepayment. However, up and until five business days prior to the date fixed
for prepayment, the noteholder may, at its sole option, submit a notice of
exchange in an exchange amount equal to all or any portion of the designated
amount to be prepaid and receive the number of shares of common stock issuable
for such exchange amount.
Change of Control. Upon a change of control, we must offer to buy the
exchangeable note 135% of the principal plus accrued and unpaid interest and
penalties. A change of control includes: (i) a purchase of a majority of our
common stock; (ii) a merger of Alyn Corporation with another entity in which our
stockholders own less than a majority of the surviving entity; and (iii) the
sale of all or substantially all of our assets to another entity.
Right of First Offer. Until March 15, 2001, the noteholder has a right of
first offer on certain issuances by us of debt securities convertible into
equity. Under the right of first offer, we must deliver written notice to the
noteholder providing at least 10 trading days following receipt of such notice
to agree to purchase up to the full amount of such securities on the terms
specified in the notice. In the event the noteholder elects not to purchase all
or a portion of the securities in the proposed offering, for a period of 180
days following the expiration of the ten-day option period, we may offer and
sell all or a portion of the securities not purchased by the noteholder to other
parties on the same terms. The right of first offer does not apply to certain
issuances by us, including: (i) shares issued to employees upon exercise of
options; (ii) shares issuable or issued under certain warrants; (iii) shares
issuable or issued in an underwritten public offering; (iv) shares issuable in
connection with a debt financing to refinance existing term loans; (v) shares
issuable in an equipment financing; and (vi) shares issued in a joint venture or
other strategic investment.
Preemptive Rights. Except (i) for issuances of pro rata dividends to all
holders of common stock, (ii) stock issued to employees, officers or directors
in connection with management options or incentive plans approved by the Board
of Directors, (iii) stock issued in connection with any merger, acquisition or
business combination or (iv) stock issued for consideration amounting to less
than $500,000 in any single transaction where the purchase price is not less
than the then applicable conversion price of our exchangeable note, provided
that the aggregate amount of all such transactions shall not exceed $1,000,000,
the holder of our exchangeable note, in order to enable it to maintain its fully
diluted percentage ownership of Alyn, shall have preemptive rights to purchase
any capital stock, including any warrants or securities convertible into capital
stock, of the Company issued by the Company so that the holder of the
exchangeable note shall be entitled to acquire a percentage of capital stock
which is equal to the same percentage of the issued and outstanding common stock
of Alyn as held by the holder of the exchangeable note immediately prior to the
date on which the capital stock is issued.
Warrants. We have issued two warrants to the holder of the exchangeable note.
The first warrant was issued in March 1999, in conjunction with the issuance of
the exchangeable note, for the purchase of 135,000 shares of our common stock at
an exercise price of $3.0375 per share. This warrant expires at 5:00 p.m., New
York time, on March 10, 2004. In connection with the amendment of the
exchangeable note in October 1999, we issued an additional warrant to the holder
of the exchangeable note for the purchase of 300,000 shares of our common stock
at an exercise price per share of $3.00. This warrant expires at 5:00 p.m., New
York time, on October 8, 2004. The number of shares that may be purchased and
the exercise price at which shares can be purchased under both warrants are
subject to adjustment upon certain events, including the payment of dividends or
distributions on and the subdivision, combination or reclassification of the
common stock underlying the warrants.
At our option, we can redeem these warrants at any time for $0.10 per share
of common stock purchasable if the closing price of our common stock, as
reported by Bloomberg L.P. on the applicable market, exceeded $12.00 per share
for a period of 20 consecutive trading days and notice of redemption is given to
the warrantholder within five trading days after such 20 trading day period and
no less than 30 days before the date fixed for redemption. However, our right of
redemption is subject to the right of the warrantholder to exercise the warrants
prior to the redemption date.
15
<PAGE>
DESCRIPTION OF CERTAIN PROVISIONS OF OUR SERIES A PREFERRED STOCK
On January 8, 1999 we sold 375,000 shares of our Series A preferred stock
at a price per share of $4.00 (see "Anti-dilution Protection" below for
reduction in conversion price to $3.00 per share) and agreed to issue warrants
to purchase up to 120,000 shares of common stock, based upon a formula using the
average closing price of our common stock for the 25 trading days immediately
prior to January 8, 2000. If the average closing price is at or above $5.80, no
warrants will be issued. The exercise price of the warrants, if any are issued,
is the average closing price of the common stock for the 25 trading days, as
described above. The warrants will be exercisable on January 8, 2000 and will
expire on January 8, 2005.
Conversion. The holder of our Series A preferred stock has the right at
its option, after January 7, 2000, to convert shares of the Series A preferred
stock into such number of fully paid and non-assessable shares of common stock
as is obtained by (i) multiplying the number of shares of Series A preferred
stock to be converted by $4.00, plus a premium on the $4.00 at a rate equal to
six percent (6%) per annum (the "Original Purchase Price Premium"), and (ii)
dividing the result by the conversion price in effect at the date of conversion,
which gives effect to all adjustments of such price that have taken place
pursuant to the anti-dilutions provisions, prior thereto. Notwithstanding the
foregoing, the rights of the holders of the Series A preferred stock to receive
the Original Purchase Price Premium shall cease in the event the average of the
closing prices of the common stock on the Nasdaq National Market as reported by
the Nasdaq National Market for any consecutive 25-trading day period following
January 8, 2000 is at least $5.80.
Anti-dilution Protection. Whenever we issue or sell any shares of our
common stock for consideration per share less than the applicable Series A
conversion price, we have to reduce the Series A conversion price to a price
determined by dividing (i) the total consideration received upon the issuance or
sale by (ii) the total number of shares issued at the issuance or sale; however,
in no event shall the conversion price be less than $2.00 per share. Pursuant to
this provision, in August 1999 the conversion price was reduced to $3.00 per
share as a result of the issuance of common stock to AMRO International, Inc. at
$3.00 per share
Registration. We are required to register 500,000 shares of our common
stock which is the current number of common shares into which the Series A
preferred stock can be converted as of January 8, 2000. We are required to keep
these shares registered until January 8, 2002. In the event warrants are issued,
we need to register shares of common stock into which the warrants are
exercisable by March 16, 2000. We face a penalty of having to pay 4% per month,
compounded monthly on $1,500,000, to the holders of the Series A preferred stock
if we fail to register the common stock issuable to the holders of the Series A
preferred stock on a timely basis.
Limitation on Shares Issuable. Notwithstanding the registration of such
number of shares, we are subject to the NASD Rule 4460(i) that limits us from
issuing securities equal to or in excess of 20% of our outstanding securities on
the date immediately prior to the issuance of the exchangeable note and the note
warrants unless and until the stockholders approve such an issuance. The terms
of the Series A preferred stock also provide that the number of shares issuable
upon exchange of the exchangeable note cannot exceed 19.9% of our outstanding
securities as of January 8, 1999 until stockholder approval is received.
Inasmuch as the 19.9% limit was not exceeded, no such stockholder approval is
required.
Right of First Refusal. For so long as any shares of the Series A
preferred stock are outstanding, the holders of the Series A preferred stock
have a right of first refusal on our issuance or sale of common stock,
convertible stock or options.
Dividends. In the event that we declare, order, pay or make a dividend or
other distribution on our common stock, the holders of shares of the Series A
preferred stock are entitled to receive from us, with respect to each share of
Series A preferred stock held, the same dividend or distribution that would be
received by a holder of the number of shares of common stock into which such
share of Series A preferred stock is then convertible.
Liquidation, Dissolution and Winding-Up. Upon any liquidation, dissolution
or winding up of Alyn, whether voluntary or involuntary, the holders of our
Series A preferred stock shall be paid $4.00 per share (subject to adjustments
made to the conversion price) plus any dividends accrued but unpaid. The sale or
transfer by Alyn of substantially all its assets, the sale or transfer by Alyn
of more than 50% in voting power or
16
<PAGE>
the consolidation or merger of Alyn into or with any other entity which results
in thfe exchange of outstanding shares of Alyn for securities or other
consideration, shall be deemed to be a liquidation, dissolution or winding up of
Alyn.
Restrictions. At any time when at least 25% of the Series A preferred
stock remain outstanding, we need to secure the consent of the holders of the
Series A preferred stock if we intend to (i) amend Alyn's certificate of
incorporation or by-laws in a way that amends or alters the rights of the Series
A preferred stock; (ii) create additional class or series of shares unless the
shares to be created rank equal to or lower than the Series A preferred stock;
or (iii) in any way change the designations or powers of the Series A preferred
stockholders. Alyn needs to obtain the consent of the holders of our Series A
preferred stock if we want to (i) liquidate, dissolve or wind-up our business or
(ii) if we want to dispose of all or substantially all our properties or assets.
Warrants. In the event that on January 8, 2000, the average of the closing
prices of the common stock on the Nasdaq National Market as reported by the
Nasdaq Stock Market on the 25 consecutive trading days immediately preceding
January 8, 2000 (the "Anniversary Price") is less than $5.80, we shall grant to
the holder of the Series A preferred stock five-year warrants to purchase, at an
exercise price equal to the Anniversary Price, that number of shares of common
stock as is determined in accordance with the following formula:
W= (I/CP) x 50% x ((1.45 x CP) - AP)
------------------
0.45 x CP
where:
W= the number of warrants issuable.
I= $1,500,000.00
CP= $4.00
AP= the Anniversary Price.
However, the number of shares of common stock into which the warrants may
be exercised shall not exceed 120,000.
DESCRIPTION OF CERTAIN PROVISIONS OF OUR SERIES B PREFERRED STOCK
On March 15, 1999, we sold 1,500 shares of Series B preferred stock at a
price per share of $1,000 and issued warrants to purchase 65,000 shares of our
common stock at an exercise price of $3.82 per share (subject to adjustment).
These warrants became exercisable on September 15, 1999 and expire on September
15, 2002. In October 1999, the holders of our Series B preferred stock converted
all of the outstanding shares of Series B preferred stock into an aggregate of
626,960 shares of our common stock, in accordance with the provisions of an
amendment to the original Series B purchase agreements executed in connection
with our sale of the Series C preferred stock . Under the terms of the
amendment, we issued warrants to the holders of our Series B preferred stock to
purchase an aggregate of 150,000 shares of our common stock at an exercise price
of $3.25 per share. These warrants expire on September 15, 2004. The number of
shares of common stock that may be purchased and the exercise price at which
shares can be purchased under all of the warrants issued to the Series B holders
are subject to adjustment upon the payment of dividends or distributions on and
the subdivision, combination or reclassification of the common stock underlying
the warrants.
We are required to register and keep registered all of the shares of our
common stock which were issued upon conversion of the Series B preferred stock
and all of the shares of our common stock issuable upon exercise of the
warrants.
DESCRIPTION OF CERTAIN PROVISIONS OF OUR SERIES C PREFERRED STOCK
On October 8, 1999, we sold 75,000 shares of Series C preferred stock, par
value $.01 per share, at a price per share of $100, convertible into shares of
our common stock at $3.00 per share, and issued warrants to purchase up to
1,875,000 of our common stock at an exercise price of $3.00. The number of
shares issued upon conversion of the
17
<PAGE>
preferred stock and the number of shares issuable upon exercise of the warrants,
and the exercise price of the warrants (See "Warrants" below), are subject to
adjustment upon the payment of dividends or distributions on and the
subdivision, combination or reclassification of our common stock.
Fleming US Discovery Fund III, LP and Fleming US Discovery Offshore Fund III,
LP, the purchasers of the Series C preferred stock and related warrants, have
informed us that such purchase occurred in the ordinary course of the business
of Fleming US Discovery Fund III, LP and Fleming US Discovery Offshore Fund III,
LP. Fleming US Discovery Fund III, LP and Fleming US Discovery Offshore Fund
III, LP have also informed us that at the time of the purchase of the Series C
preferred stock, Fleming US Discovery Fund III, LP and Fleming US Discovery
Offshore Fund III, LP had not entered into any agreements or understandings,
directly or indirectly, with any person to publicly offer or sell or otherwise
distribute the Series C preferred stock.
Certain provisions and rights of our Series C preferred stock are summarized
as follows:
Conversion. The holders of shares of Series C preferred stock have the
right to convert all or a portion of such shares into fully paid and
nonassessable shares of our common stock. Our registration of 2,500,000 shares
of our common stock to provide for stock issuable upon conversion of our Series
C preferred stock is based upon a fixed conversion price of $3.00 per share.
However, the actual number of shares issuable upon conversion can increase in
the event certain dilutive events occur (described in the following subsection
entitled "Anti-Dilution Protection"). (See the Risk Factor entitled "The shares
of common stock recently issued and issuable upon the conversion. . ." )
Anti-Dilution Protection. If we issue or sell (i) any shares of our common
stock and the aggregate amount of consideration we receive in the sale exceeds
$500,000, (ii) warrants or other rights to subscribe to our common stock, or
(iii) certain convertible securities, and the consideration per share that we
receive is less than the Series C conversion price, we are required to adjust
the conversion price to equal the consideration paid per additional share of
stock or other security (as described in (i) (ii) or (iii)). We must also adjust
the conversion price in certain instances, including (i) adjustment of the
conversion or exercise price of other convertible securities or warrants or
options to purchase shares of common stock , where the adjustment reduces their
conversion or exercise price to below the conversion price of the Series C
preferred stock, (ii) stock splits and business combinations, (iii) the issuance
of certain convertible securities, and (iv) specified reorganizations,
reclassifications, mergers or consolidations.
Registration. We are required to register 2,500,000 shares of our common
stock, which is the number of common shares into which the Series C preferred
stock can be converted, based upon the conversion price of $3.00 per share. We
are also required to register an additional 1,875,000 shares of common stock
which is the maximum number of shares of common stock which can be purchased
upon exercise of the warrants issued in connection with the Series C preferred
stock (See Warrants below).
Mandatory Redemption. We are required to redeem all of the then
outstanding shares of the Series C preferred stock on September 30, 2004, at a
price equal to $100 per share plus all declared but unpaid dividends. At our
option we can redeem the Series C preferred stock in cash or in common stock. If
we choose to redeem using common stock, the number of common shares to be issued
in redemption is determined by valuing each such share of common stock at a
value of 10% less than the market price at that time.
If any one of certain fundamental changes occurs, each of the holders
of the Series C preferred stock shall have the right, at the holder's option, to
require us to repurchase all of such holder's Series C preferred stock, or any
portion thereof. Fundamental changes that trigger holders' options to require us
to redeem the Series C preferred stock include: (i) the sale of all or
substantially all of our assets; (ii) certain events that cause registration of
our common stock under the Securities Exchange Act to no longer be required and
other events that eliminate the public market for our common stock; (iii)
certain consolidations and mergers; and (iv) the commencement of a voluntary
bankruptcy case under federal bankruptcy laws by Alyn or our consent to an order
for relief under an involuntary bankruptcy case.
When holders require us to redeem shares of our Series C preferred stock
upon the occurrence of a fundamental change, we must pay a redemption price per
share equal to the greater of (i) $100 plus all declared but unpaid dividends,
(ii) ratable distributions determined with respect to the holders of Series C
preferred stock and
18
<PAGE>
common stock on the basis of the number of shares of common stock into which
such Series C preferred stock could be converted immediately prior to the
fundamental change and (iii) such amount received by the holders as
consideration for the redemption or sale of the Series C preferred stock as is
necessary to cause the net present value to equal zero as of any date of all
cash inflows and all cash outflows (each as defined) with respect to the Series
C preferred stock being repurchased when calculated with an annual interest rate
(compounded annually) equal to twelve percent (12%), on a per share basis.
Call at our Option (Optional Redemption). Subject to the terms of the
Series C preferred stock, on any date beginning October 8, 2001, we have the
right to purchase any or all outstanding shares of Series C preferred stock,
provided, however, that (i) the market price of a share of common stock must be
equal to, or greater than, an amount equal to 300% of the then applicable
conversion price and (ii) the common stock must have traded on the principal
market for the common stock with an average daily volume in excess of 50,000
shares for a period of 30 consecutive days ending on the day preceding the day
of exercise of a call. If we choose to exercise our right to redeem the Series C
preferred stock, we must pay a price equal to $100 plus all declared but unpaid
dividends.
Dividends. In the event that we declare, order, pay or make a dividend or
other distribution on our common stock, the holders of shares of the Series C
preferred stock are entitled to receive from us, with respect to each share
of Series C preferred stock held, the same dividend or distribution that would
be received by a holder of the number of shares of common stock into which such
share of Series C preferred stock is then convertible. However, in the case of
the payment of a stock dividend in shares of its common stock, a holder of
shares of Series C preferred stock may elect to have the conversion price of its
shares adjusted for stock splits and combinations pursuant to the terms of the
Series C preferred stock.
Limitation on Dividends. Except for dividends or distributions payable in
shares of the class or series upon which they are declared or paid, we are
prohibited from paying dividends or distributions to the holders of any classes
of our stock other than our Series C preferred stock unless we first pay, or,
declare and set aside money for payment of, certain dividends and distributions
to which the holders of our Series C preferred stock are entitled.
In the event that full dividends are not paid or made available to the
holders of all outstanding shares of Series C preferred stock (and of any
securities with respect to which holders of the Series C preferred stock have
consented to ranking on the same level of preference as the Series C preferred
stock) and funds available for payment of dividends are insufficient to permit
payment in full to holders of all such stock of the full preferential amounts to
which they are then entitled, then we are required to distribute the entire
amount available for payment of dividends ratably among all such holders of
Series C preferred stock (and of any securities ranked equally as described) in
proportion to the full amount to which they would otherwise be respectively
entitled.
Preference on Liquidation. In the event we liquidate, dissolve or wind up,
whether voluntarily or involuntarily, we will make no distribution to the
holders of shares of any classes of our stock other than our Series C preferred
stock (and no monies shall be set apart for such purpose) unless the holders of
shares of Series C preferred stock have previously received certain payments to
which they are entitled under the terms of the Series C preferred stock.
Voting. In addition to any voting rights provided in our certificate of
incorporation or by law, holders of the Series C preferred stock vote together
with the holders of the common stock as a single class on all actions to be
voted on by our stockholders. The holder of each share of the Series C preferred
stock is entitled to the number of votes per share that the holder would have if
the holder converted the Series C preferred stock into shares of common stock at
the time of the vote.
Special Voting Rights. Holders of shares of the Series C preferred stock
may be entitled to additional voting rights, including rights with respect to
preventing an increase in the size of our Board of Directors. So long as Fleming
US Discovery Fund III, L.P. and Fleming US Discovery Offshore Fund III, L.P., or
subsequent purchasers of their Series C preferred stock, if any, own at least
50% of the Series C preferred stock initially acquired, the holders of Series C
preferred stock, consenting or voting (as the case may be) as a separate class,
are entitled, but not required, to elect up to two (2) directors of our Board of
Directors. So long as Fleming US Discovery Fund III, L.P. and Fleming US
Discovery Offshore Fund III, L.P. or certain transferees own at least 25% of the
Series C preferred stock initially acquired, the holders of Series C preferred
19
<PAGE>
stock, consenting or voting (as the case may be) as a separate class, are
entitled, but not required, to elect one (1) of our directors.
Shares Reserved for Conversion. We are required at all times to reserve
and keep available out of our authorized and unissued stock, solely for the
purpose of effecting the conversion of the Series C preferred stock, a number of
shares of common stock sufficient to effect the conversion of all of the Series
C preferred stock from time to time outstanding. We are required from time to
time, in accordance with the laws of the State of Delaware, to increase the
authorized number of shares of common stock, if at any time the number of shares
of authorized but unissued common stock shall be insufficient to permit the
conversion in full of the Series C preferred stock.
Preemptive Rights. Except (i) for issuances of pro rata dividends to all
holders of common stock, (ii) stock issued to employees, officers or directors
in connection with management options or incentive plans approved by our Board
of Directors, (iii) stock issued in connection with any merger, acquisition or
business combination or (iv) stock issued for consideration amounting to less
than $500,000 in any single transaction where the purchase price is not less
than the then applicable conversion price, provided that the aggregate amount of
all such transactions shall not exceed $1,000,000, in order to enable the
holders of the Series C preferred stock to maintain the fully diluted percentage
ownership of Alyn to which the terms of the Series C preferred stock entitle
them, such holders have preemptive rights to purchase any of our capital stock,
including any warrants or securities convertible into capital stock, issued by
us so that a holder of the Series C preferred stock shall be entitled to acquire
a percentage of capital stock which is issued equal to the same percentage of
our issued and outstanding common stock as is held (directly or obtainable upon
conversion of the Series C preferred stock) by such holder of Series C preferred
stock immediately prior to the date on which the capital stock is to be issued.
Warrants. We issued warrants to purchase an aggregate of up to 1,875,000
shares of our common stock at an exercise price of $3.00 per share. These
warrants become exercisable based upon our failing to meet financial performance
objectives for revenue and earnings before interest, taxes, depreciation and
amortization (EBITDA) during the 2000 fiscal year. The financial objectives
include several levels of performance, such that on the one hand if all
objectives are met, no warrants become exercisable, and on the other hand if
financial performance falls below certain levels, all of the warrants become
exercisable. The level of financial performance is determined by an audited
financial report (pursuant to the terms of the warrant certificate) delivered to
holders of warrants, the delivery of which shall occur on or prior to March 31,
2001. The exercisable warrants, if any, expire on September 30, 2004. The number
of shares that may be purchased and the exercise price at which shares can be
purchased under the warrants issued to the Series C holders are subject to
adjustment upon the payment of dividends or distributions on and the
subdivision, combination or reclassification of the common stock underlying the
warrants.
During the entire period within which holders can exercise the warrants
issued in connection with the issue of the Series C preferred stock, we are
required to reserve and keep available out of our authorized and unissued common
stock solely for purposes of effecting the issuance and delivery upon exercise
of such warrants, the number of shares that can be purchased upon the exercise
of the warrants.
SELLING STOCKHOLDERS
The selling stockholders acquired or will acquire the shares of common
stock offered by this prospectus: (i) upon exchange of our exchangeable note and
exercise of related warrants; (ii) upon receipt of common stock issued to the
holder of our exchangeable note in August and September 1999; (iii) upon
conversion of our Series A preferred stock; (iv) upon conversion of our Series B
preferred stock and the common stock issuable upon the exercise of warrants
issued to the Series B stockholders in March and October 1999; (v) upon receipt
by AMRO International, S.A. of common stock, and upon exercise of warrants sold
to AMRO International, S.A.; and (vi) upon conversion of our Series C preferred
stock and upon the exercise of related warrants, if any. We have agreed to file
a registration statement, of which this prospectus is a part, to register the
shares of the selling stockholders detailed above in order to permit the selling
stockholders to sell these shares from time to time in the public market or in
privately-negotiated transactions. We cannot determine the actual number of
shares of our common stock that we will issue, because of the variables
discussed herein. It is possible that we may be required to register additional
shares of our common stock if we sell or issue stock at prices below the then
current conversion price of our exchangeable note, Series A preferred stock or
Series C preferred stock. We plan to file prospectus supplements, as necessary,
to set forth the exact number of shares that the selling stockholders are
actually issued upon conversion,
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<PAGE>
exchange or exercise of the related securities. See "Risk Factors -- We may be
required to issue a large number of additional shares of common stock upon
conversion of . . . . ;" "Description of Certain Provisions of Our 6% Senior
Exchangeable Promissory Note Due March 10, 2002 -- Exchange Price;" "Description
of Certain Provisions of our Series A Preferred Stock -- Conversions;" and
"Description of Certain Provisions of Our Series C Preferred Stock --
Conversions."
The following table sets forth for each selling stockholder, and for all
selling stockholders in the aggregate, the number of shares issued or issuable
pursuant to our exchangeable note, Series A preferred stock, Series B preferred
stock and Series C preferred stock and pursuant to the August 1999 sale to AMRO
International, S.A. The percent of outstanding shares is based upon the
underlying common stock as a percentage of our common stock outstanding as of
October 25, 1999, plus the shares of the common stock covered by this
registration statement that were not already outstanding at October 25, 1999.
Generally, the rules of the SEC define beneficial ownership to include
securities with respect to which the investor has voting or investment power.
The rules also provide that beneficial ownership includes shares of common stock
underlying options, warrants and convertible securities that can be exercised or
converted within 60 days. To that extent, the number of shares of our common
stock underlying the exchangeable note presented in the table may not present
the actual beneficial ownership from time to time of the selling stockholders in
accordance with these rules because of the floating-rate conversion features of
our exchangeable note. In that regard, please see "Description of Certain
Provisions of Our 6% Senior Exchangeable Note Due March 10, 2002" for a more
detailed description of these factors. Likewise, the number of shares of our
common stock underlying the warrants, if any, issued or to be issued in
connection with the Series A and Series C preferred stock sales, may not present
the actual beneficial ownership of the selling stockholders in accordance with
these rules because of the future determination of the actual number of such
warrants to be issued and exercisable.
The registration statement of which this prospectus is a part also covers any
additional shares of common stock which become issuable in connection with the
shares being registered by reason of any stock dividend, stock split,
recapitalization or other similar transaction effected without the receipt of
consideration which results in an increase in the number of our outstanding
shares of common stock to the extent permitted under Rule 416 of the Securities
Act.
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<PAGE>
<TABLE>
<CAPTION>
6% SENIOR
EXCHANGEABLE
PROMISSORY NOTE,
SERIES A CONVERTIBLE
PREFERRED STOCK,
COMMON STOCK SOLD
TO AMRO
INTERNATIONAL, S.A.,
SERIES B
EXCHANGEABLE
PREFERRED STOCK, AND TOTAL NUMBER
SERIES C CONVERTIBLE TOTAL NUMBER OF SHARES OF SHARES
PREFERRED STOCK WARRANTS BENEFICIALLY OWNED BEING OFFERED
-------------------- ---------- ------------------------------------ --------------
SHARES OF
COMMON STOCK PERCENT OF
ISSUED OR OUTSTANDING
ISSUABLE SHARES OF SHARES
UNDERLYING COMMON SHARES OF OF CLASS
NAME OF SELLING THESE STOCK COMMON STOCK AFTER THE
STOCKHOLDER SECURITIES UNDERLYING UNDERLYING OFFERING
- ------------------ -------------------- ----------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
Talisman Capital
Opportunity
Fund Ltd....... 1,687,565 435,000 2,122,565 10.9% 2,122,565
Seaside
Partners, L.P.. 750,000 750,000 3.8% 750,000
AMRO
International,
S.A............ 513,480 157,500 670,980 3.4% 670,980
Esquire Trade &
Finance Inc ... 156,740 53,750 210,490 1.1% 210,490
Austinvest
Anstalt Balzers 156,740 53,750 210,490 1.1% 210,490
Fleming U.S.
Discovery Fund
III, L.P. and 2,154,667 1,616,000 3,770,667 19.3%
Fleming U.S.
Discovery
Offshore Fund
III, L.P....... 345,333 259,000 604,333 3.1% 4,375,000
Total....... 5,764,525 42.7% 8,339,525
===============
</TABLE>
Prior to the offering, the selling stockholders owned 1,014,525 shares of
our common stock. We are not able to estimate the amount of shares that will
be held by the selling stockholders after completion of this offering,
because the selling stockholders may offer all or some of the shares and
because there currently are no agreements, arrangements or understandings
with respect to the sale of any of the shares, once such shares have been
acquired upon the conversion, exchange or exercise of the related
securities. The preceding table assumes that all of the shares being
registered will be sold. The selling stockholders are not making any
representation that any shares covered by the prospectus will or will not be
offered for sale. The selling stockholders reserve the right to accept or
reject, in whole or in part, any proposed sale of shares. The shares offered
by this prospectus may be offered from time to time by the selling stockholders
named above.
We are not aware of any material relationship between Alyn Corporation and
any selling stockholder within the past three years other than as a result of
the ownership of the stockholder's shares.
PLAN OF DISTRIBUTION
We will not receive any proceeds from the sale of the shares of our common
stock offered hereby.
The shares offered by this prospectus may be sold by the selling
stockholders or their respective pledgees, donees, transferees or successors
in interest, in one or more of the following transactions (which may involve
one or more block transactions):
. on the Nasdaq National Market;
. in sales occurring in the public market off such exchange;
. in privately negotiated transactions; or
. in a combination of such transactions.
Each sale may be made either at market prices prevailing at the time of such
sale or at negotiated prices or such other price as the selling stockholders
agree to from time to time. Some or all of the shares offered by this
22
<PAGE>
prospectus may be sold directly to market makers acting as principals or through
brokers acting on behalf of the selling stockholders or as agents for themselves
or their customers or to dealers for resale by such dealers. In connection with
such sales, such brokers and dealers may receive compensation in the form of
discounts, commissions or concessions from the selling stockholders and may
receive commissions from the purchasers of shares offered by this prospectus for
whom they act as broker or agent (which discounts and commissions are not
anticipated to exceed those customary in the types of transactions involved).
The selling stockholders have sole discretion not to accept any purchase
offer or make any sale of shares offered by this prospectus if they deem the
purchase price to be unsatisfactory. Broker-dealers or agents may also receive
compensation from the purchasers of the shares for whom they act as agents or to
whom they sell as principals, or both. Compensation as to a particular
broker-dealer might be in excess of that customarily paid to broker-dealers or
the selling stockholders may be deemed to be "underwriters" within the meaning
of Section 2(11) of the Securities Act of 1933, as amended, in connection with
sales of the shares. Accordingly, any such commission, discount or concession
received by them and any profit on the resale of the shares purchased by them
may be deemed to be underwriting discounts or commissions under the Securities
Act. Because selling stockholders may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act, the selling stockholders will be
subject to the prospectus delivery requirements of the Securities Act. In
addition, any securities covered by this prospectus which qualify for sale under
Rule 144 promulgated under the Securities Act may be sold under Rule 144 rather
than under this prospectus. The selling stockholders have advised us that they
have not entered into any agreements, understandings or arrangements with any
underwriters or broker-dealers regarding the sale of their securities. There is
no underwriter or coordinating broker acting in connection with the proposed
sale of shares by selling stockholders.
Under applicable rules and regulations under the Securities Exchange Act of
1934, as amended, any person engaged in the distribution of the shares may not
simultaneously engage in market making activities with respect to our common
stock for a period of two business days prior to the commencement of such
distribution. In addition, each selling stockholder will be subject to
applicable provisions of the Securities Exchange Act and the associated rules
and regulations under the Exchange Act, including Regulation M, which provisions
may limit the timing of purchase and sales of shares of our common stock by the
selling stockholders. We will make copies of this prospectus available to the
selling stockholders and have informed them of the need for delivery of copies
of this prospectus to purchasers at or prior to the time of any sale of the
shares.
The selling stockholders are prohibited from engaging in any short sales with
respect to the exchangeable note, the preferred stock and the related warrants.
To comply with certain states' securities laws, if applicable, the shares
offered by this prospectus will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In certain states, the shares offered
by this prospectus may not be sold unless (1) the shares offered by this
prospectus have been registered or qualified for sale in such state or an
exemption from registration exists or (2) qualification is available and is
complied with.
We will pay all expenses of the offering of the shares offered by this
prospectus, except that the selling stockholders will pay any applicable
underwriting commission, discount and transfer taxes, as well as the fees and
disbursements of counsel to and experts for the selling stockholders.
Pursuant to the terms of registration rights agreements with the selling
stockholders, we have agreed to indemnify and hold harmless such selling
stockholders from, among other things, certain liabilities under the Securities
Act.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for Alyn
Corporation by Cadwalader, Wickersham & Taft.
23
<PAGE>
EXPERTS
The financial statements incorporated in this Prospectus by reference to the
Annual Report on Form 10-K/A for the year ended December 31, 1998, have been so
incorporated in reliance on the report (which contains an explanatory paragraph
relating to the Company's ability to continue as a going concern as described in
Note 9 to the financial statements) of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
24
<PAGE>
================================================================================
We have not authorized any person to make a statement that differs from what is
in this prospectus. If any person does make a statement that differs from what
is in this prospectus, you should not rely on it. This prospectus is not an
offer to sell, nor is it seeking an offer to buy, these securities in any state
in which the offer or sale is not permitted. The information in this prospectus
is complete and accurate as of its date, but the information may change after
that date.
-------------
TABLE OF CONTENTS
Page
RISK FACTORS..........................3
RECENT DEVELOPMENTS..................11
WHERE YOU CAN FIND MORE INFORMATION..12
USE OF PROCEEDS......................13
RECENTLY ISSUED SECURITIES...........13
SELLING STOCKHOLDERS.................21
PLAN OF DISTRIBUTION.................22
LEGAL MATTERS........................23
EXPERTS..............................24
ALYN
CORPORATION
8,339,525 SHARES
OF COMMON STOCK
----------------------------------
PROSPECTUS
----------------------------------
December 30, 1999
================================================================================
25
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION`
The following table sets forth the various costs and expenses to be paid by
us with respect to the sale and distribution of the securities being registered.
All of the amounts shown are estimates except for the Securities and Exchange
Commission registration fee and the Nasdaq National Market listing fee.
SEC Registration Fee............................... $6,518.26
Nasdaq National Market additional listing fee...... 21,500
Printing Expenses ................................. _______*
Legal Fees and Expenses............................ _______*
Accounting Fees and Expenses....................... _______*
Miscellaneous...................................... _______*
---------
Total............................................ $_______*
=========
* The exact amounts to be supplied in an amendment to the S-3.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 145 of the Delaware General Corporation Law, we can indemnify
our directors and officers against liabilities they may incur in such
capacities, including liabilities under the Securities Act. Our bylaws provide
that we will indemnify our directors and officers to the fullest extent
permitted by law and require us to advance litigation expenses upon receipt by
us of an undertaking by the director or officer to repay such advances if it is
ultimately determined that the director or officer is not entitled to
indemnification. The bylaws also provide that rights conferred under such bylaws
do not exclude any other right such persons may have or acquire under any bylaw,
agreement, vote of stockholders or disinterested directors or otherwise.
Furthermore, under our bylaws, we may purchase and maintain insurance to
indemnify directors and officers in instances in which they may not otherwise be
indemnified by us.
Our certificate of incorporation provides that, under Delaware law, our
directors shall not be liable for monetary damages for breach of the directors'
fiduciary duty of care to us and our stockholders. This provision in the
certificate of incorporation does not eliminate the duty of care, and in
appropriate circumstances equitable remedies such as injunctive or other forms
of non-monetary relief will remain available under Delaware law. In addition,
each director will continue to be subject to liability for breach of the
director's duty of loyalty to us or our stockholders, for acts or omissions not
in good faith or involving intentional misconduct or knowing violations of law,
for actions leading to improper personal benefit to the director, and for
payment of dividends or approval of stock repurchases or redemptions that are
unlawful under Delaware law. The provision also does not affect a director's
responsibilities under any other law, such as the federal securities laws or
state or federal environmental laws.
26
<PAGE>
ITEM 16. EXHIBITS**
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
4.1* Certificate of Designation of Series A Convertible Preferred Stock
filed on January 8, 1999.
4.2* Warrant to Purchase Shares of Common Stock of Alyn Corporation dated
January 8, 1999 by and between Alyn and Seaside Partners, L.P.
4.3* 6% Senior Exchangeable Promissory Note due March 10, 2002 issued by
Alyn to Talisman Capital Opportunity Fund Ltd.
4.4* Registration Rights Agreement dated March 10, 1999 by and between
Alyn and Talisman Capital Opportunity Fund Ltd.
4.5* Warrant Agreement dated March 10, 1999 by and between Alyn and
Talisman Capital Opportunity Fund Ltd.
4.6* Certificate of Designations, Preferences and Rights of Series B
Exchangeable Preferred Stock filed March 18, 1999.
4.7* Registration Rights Agreement dated March 15, 1999 by and between
Alyn and each of the Series B Investors listed therein.
4.8* Form of Stock Purchase Warrant dated March 15, 1999 issued by Alyn
to each of the Series B Investors.
4.9 Stock and Warrant Purchase Agreement dated September 29, 1999 by and
between Alyn and Fleming US Discovery Fund III, L.P.
4.10 Stock and Warrant Purchase Agreement dated September 29, 1999 by and
between Alyn and Fleming US Discovery Offshore Fund III, L.P.
4.11 Certificate of Designations of Series C Convertible Preferred Stock
filed on October 4, 1999.
4.12 Registration Rights Agreement dated October 5, 1999 between Alyn and
Fleming US Discovery Fund III, L.P. and Fleming US Discovery
Offshore Fund III, L.P.
4.13 Warrant to Purchase Common Stock of Alyn Corporation dated October
8, 1999 by and between Alyn Corporation and Fleming U.S. Discovery
Fund III, L.P.
4.14 Warrant to Purchase Common Stock of Alyn Corporation dated October
8, 1999 by and between Alyn Corporation and Fleming US Discovery
Offshore Fund III, L.P.
5.1 Opinion of Cadwalader, Wickersham & Taft.
10.1* Series A Convertible Preferred Stock Purchase Agreement dated January
8, 1999 by and between Alyn and Seaside Partners, L.P.
10.2* Loan Agreement dated March 10, 1999 by and between Alyn and Talisman
Capital Opportunity Fund Ltd.
10.3* Series B Exchangeable Preferred Stock and Warrant Purchase Agreement
dated March 15, 1999 by and between Alyn and each of the Investors
listed therein.
23.1 Consent of Independent Accountants.
23.2 Consent of Cadwalader, Wickersham & Taft (included in Exhibit 5.1).
24.1 Power of Attorney (included on signature page of Registration
Statement).
* Incorporated by reference to the exhibit with the same number to our
Current Report on Form 8-K filed April 28, 1999.
** All exhibits have been previously included in our Pre-Effective
Amendment No. 1 to Registration Statement on Form S-3 filed October 29,
1999.
27
<PAGE>
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended;
To reflect in the prospectus any facts or events arising after the
effective date of this registration statement (or the most recent
post-effective amendment hereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering price may be reflected in the form of
prospectus filed with the Commission under Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20
percent change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
registration statement; and
To include any material information with respect to the plan of
distribution not previously disclosed in this registration statement
or any material change to such information in this registration
statement.
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by us pursuant to Section 13
or Section 15(d) of the Securities Exchange Act of 1934, as amended, that are
incorporated by reference in this registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered herein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of Alyn's Annual
Report under Section 13(a) or Section 15(d) of the Exchange Act that is
incorporated by reference into this registration statement shall be deemed to be
a new registration statement relating to the securities offered herein, 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 Alyn
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by Alyn of expenses incurred or paid by a
director, officer or controlling person of Alyn 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, we will,
unless in the opinion of our counsel the question has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by us is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
28
<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 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 the 30th day of
December, 1999.
ALYN CORPORATION
By /s/ ARNE VAN ROON
------------------------------
Arne van Roon,
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons in the capacities and
on the dates indicated.
Signature Title Date
/S/ ARNE VAN ROON Director, President and
- --------------------------- Chief Executive Officer December 30, 1999
Arne van Roon (Principal Executive Officer)
Vice President, Finance and
/S/ RICHARD L. LITTLE Administration and Chief
- --------------------------- Financial Officer (Principal December 30, 1999
Richard L. Little Financial and Accounting
Officer) and Secretary
*
- --------------------------- Director and Chairman December 30, 1999
Robert L. Burr
*
- --------------------------- Director December 30, 1999
Robin A. Carden
*
- --------------------------- Director December 30, 1999
Harry Edelson
*
- --------------------------- Director December 30, 1999
David J. Edwards
*
- --------------------------- Director December 30, 1999
Michael Markbreiter
* By: /S/ ARNE VAN ROON
- --------------------------- Director December 30, 1999
Arne van Roon,
Attorney-in-fact
29
December 30, 1999
Alyn Corporation
16761 Hale Avenue
Irvine, California 92606
Re. Alyn Corporation Registration Statement on Form S-3
for 8,339,525 Shares of Common Stock
Ladies and Gentlemen:
We have acted as counsel to Alyn Corporation, a Delaware corporation (the
"Company"), in connection with the proposed issuance and sale by the Company of
up to 8,339,525 shares of the Company's Common Stock (the "Shares") pursuant to
the Company's Registration Statement on Form S-3 (the "Registration Statement")
filed with the Securities and Exchange Commission under the Securities Act of
1933, as amended (the "Act").
This opinion is being furnished in accordance with the requirements of Item
16 of Form S-3 and Item 601(b)(5)(i) of Regulation S-K.
We have reviewed the Company's charter documents and the corporate
proceedings taken by the Company in connection with the issuance and sale of the
Shares. Based on such review, we are of the opinion that the Shares have been
duly authorized, and if, as and when issued in accordance with the Registration
Statement and the related prospectus (as amended and supplemented through the
date of issuance), will be legally issued, fully paid and nonassessable.
We consent to the filing of this opinion as Exhibit 5.1 to the Registration
Statement and to the reference to this firm under the caption "Legal Matters" in
the prospectus which is part of the Registration Statement. In giving this
consent, we do not thereby admit that we are within the category of persons
whose consent is required under Section 7 of the Act, the rules and regulations
of the Securities and Exchange Commission promulgated thereunder, or Item 509 of
Regulation S-K.
This opinion letter is rendered as of the date first written above and we
disclaim any obligation to advise you of facts, circumstances, events or
developments which hereafter may be brought to our attention and which may
alter, affect or modify the opinion expressed herein. Our opinion is expressly
limited to the matters set forth above and we render no opinion, whether by
implication or otherwise, as to any other matters relating to the Company or the
Shares.
Very truly yours,
CADWALADER, WICKERSHAM & TAFT
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated January 28, 1999, except as to Notes 9
and 10, which are as of March 23, 1999, relating to the financial statements,
which appear in Alyn Corporation's Annual Report on Form 10-K for the year ended
December 31, 1998. We also consent to the reference to us under the heading
"Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
Costa Mesa, California
December 10, 1999
