As filed with the Securities and Exchange Commission on August 9, 2000.
Registration No. 333-42486
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
AMENDMENT NO. 1 to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
CYANOTECH CORPORATION
(Exact name of registrant as specified in its charter)
Nevada 91-1206026
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
73-4460 Queen Kaahumanu Highway, Suite 102, Kailua-Kona, Hawaii 96740 (808)
326-1353 (Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
------------------
RONALD P. SCOTT
Executive Vice President & Chief Financial Officer
Cyanotech Corporation
73-4460 Queen Kaahumanu Highway, Suite 102, Kailua-Kona, Hawaii 96740 (808)
326-1353 (Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------
Copies to:
E. LAURENCE GAY, ESQ.
Goodsill Anderson Quinn & Stifel
1099 Alakea Street
Honolulu, HI 96813
(808) 547-5600
------------------
Approximate date of commencement of proposed sale to public: From time
to time after the effective date of this Registration Statement, as determined
by the selling stockholders.
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 earliest
effective registration statement for the same offering. |_| ____________
If this Form is a post-effective amendment filed pursuant to Rule
462(b) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_| ____________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
(Calculation of Registration Fee on following page)
<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
--------------------------------------------------------------------------------------------------------------------------
Proposed Maximum Proposed Maximum
Amount to be Offering Price Aggregate Offering Amount of
Title of each Class of Registered(1) Per Share(2) Price(2) Registration
Securities to be Registered Fee(2)
----------------------------------------- ------------------- ------------------- --------------------- ------------------
<S> <C> <C> <C> <C>
Common Stock $916,667 sh. $1.77 $1,622,501 $429.00
========================================= =================== =================== ===================== ==================
</TABLE>
(1) Shares of Common Stock which may be offered pursuant to this Registration
Statement are issuable upon conversion of $1,250,000 principal amount of 6%
Convertible Subordinated Debentures due April 30, 2002, that are
convertible into 833,333 Shares of Common Stock, and 83,334 Shares of
Common Stock are issuable on exercise of Warrants issued to the Placement
Agent for the Debentures. In addition to the shares set forth in the table,
the amount to be registered includes in accordance with Rule 416 an
indeterminate number of shares issuable upon conversion of the Debentures
and upon the exercise of Warrants, as such number may be adjusted as a
result of stock splits, stock dividends and similar transactions.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) on the basis of the average of the high and low
prices of the Common Stock as quoted on the NASDAQ National Market on July
24, 2000.
<PAGE>
PROSPECTUS
CYANOTECH CORPORATION
916,667 SHARES OF COMMON STOCK
-----------
This prospectus is being used in connection with offerings from time to
time by some of our stockholders. You should read this prospectus and any
prospectus supplements carefully before you decide to invest.
The selling stockholders collectively own the following stock being
registered here:
833,333 shares of common stock issuable on conversion of 6%
Convertible Subordinated Debentures due April 30, 2002 currently
held by the selling stockholders.
83,334 shares of common stock issuable on exercise of
outstanding warrants.
All of the Common Stock sold under this prospectus will be sold for the
account of stockholders. We will receive no proceeds from the sale.
Our common stock is quoted on the NASDAQ National Market under the
symbol "CYAN." The last reported sale price of the common stock on the NASDAQ
National Market on August 9, 2000 was $1.625 per share.
INVESTING IN THE COMMON STOCK INVOLVES RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 3 BEFORE BUYING OUR COMMON STOCK.
The selling stockholders from time to time may offer and sell the
shares they hold on the NASDAQ National Market through broker-dealers, or
directly to one or more purchasers, at market prices prevailing at the time of
sale or at prices otherwise negotiated. The selling stockholders reserve the
sole right to accept or reject, in whole or in part, any proposed purchase of
the shares made directly or through agents. More information on the selling
stockholders and how they will sell their shares is provided in the section
entitled "Plan of Distribution."
Each selling stockholder may be deemed to be an underwriter under the
Securities Act of 1933, as amended.
The mailing address of our principal executive office is 73-4460 Queen
Kaahumanu Highway, Suite 102, Kailua-Kona, Hawaii 96740, and the telephone
number is (808) 326-1353. We are a Nevada corporation. We may be referred to in
this prospectus as Cyanotech, the Company, we, us or our.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined that
this prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is August 9, 2000.
WE HAVE NOT AUTHORIZED ANYONE TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ABOUT THE COMPANY THAT IS DIFFERENT FROM, OR IN ADDITION TO, THAT
CONTAINED IN THIS PROSPECTUS. THEREFORE, IF ANYONE DOES GIVE YOU INFORMATION OF
THIS SORT, YOU SHOULD NOT RELY ON IT. IF YOU ARE IN A STATE WHERE AN OFFER TO
SELL, OR THE SOLICITATION OF AN OFFER TO BUY, ANY OF THE SECURITIES OFFERED BY
THIS PROSPECTUS IS UNLAWFUL, OR IF YOU ARE A PERSON TO WHOM IT IS UNLAWFUL TO
DIRECT THESE KINDS OF OFFERS, THE OFFER PRESENTED IN THIS PROSPECTUS DOES NOT
EXTEND TO YOU. THIS PROSPECTUS SPEAKS ONLY AS OF THE DATE OF THIS PROSPECTUS
UNLESS THE INFORMATION SPECIFICALLY INDICATES THAT ANOTHER DATE APPLIES.
2
<PAGE>
TABLE OF CONTENTS
FORWARD-LOOKING STATEMENTS............................................. 3
THE COMPANY............................................................ 3
RISK FACTORS........................................................... 3
USE OF PROCEEDS........................................................ 8
SELLING STOCKHOLDERS................................................... 8
PLAN OF DISTRIBUTION................................................... 10
LEGAL MATTERS.......................................................... 11
EXPERTS .............................................................. 11
WHERE YOU CAN FIND MORE INFORMATION.................................... 12
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................ 12
2
<PAGE>
FORWARD-LOOKING STATEMENTS
Some statements under "Summary," "Risk Factors," and elsewhere in this
prospectus and in documents referred to are forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). These statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results to be
materially different from any future results, expressed or implied by such
forward-looking statements. We caution you that such forward-looking statements
are not guarantees of future performance. Our actual results could differ
materially from those anticipated by such forward-looking statements due to a
number of factors, some of which are beyond our control. All such
forward-looking statements are current only as of the date on which such
statements were made. We do not assume any obligation to update any
forward-looking statement to reflect events or circumstances after the date on
which any such statement is made or to reflect the occurrence of unanticipated
events. We particularly urge readers to consider the factors described under the
heading Risk Factors. Those risks and the other economic, competitive and other
factors noted elsewhere in this prospectus and in our recent filings with the
Securities and Exchange Commission, including our Form 10-K, constitute
cautionary statements that identify risks and uncertainties that could cause
actual results to differ materially from those contained in the forward-looking
statements.
THE COMPANY
We develop and commercialize natural products from microalgae for the
nutritional supplement, animal pigmentation, and immunological diagnostics
markets. Microalgae are microscopic plants which have a wide range of
physiological and biochemical characteristics and contain high levels of natural
nutrients. Microalgae grow much faster than land-based plants. Cyanotech uses
proprietary production and harvesting systems which eliminate many of the
stability and contamination problems frequently encountered in the production of
microalgae.
Our principal revenues are sales of microalgae-based "Spirulina"
products for the vitamin and supplement market, which for the United States
alone is estimated at $14.9 billion. Spirulina Pacifica(R) is our unique strain
of Spirulina. It is a vegetable-based, highly absorbable source of natural beta
carotene, mixed carotenoids and other phytonutrients, B vitamins, gamma
linolenic acid, protein and essential amino acids. We market our products in the
United States and 37 other countries through retail, wholesale, and private
label channels.
We also produce astaxanthin from microalgae for use as animal
pigmentation. Astaxanthin is a red pigment used primarily to impart a pink color
to the flesh of pen-raised fish and shrimp. Our astaxanthin product,
NatuRose(R), competes against synthetic astaxanthin. Sales of NatuRose have been
limited, we believe, by the reluctance of the aquaculture industry to switch
from Hoffmann-LaRoche, the major supplier of this key ingredient.
The Company believes that natural astaxanthin may offer certain health
benefits for humans. We obtained market clearance from the U.S. Food and Drug
Administration ("FDA") in August 1999 to sell the product as a dietary
supplement. The Company has developed and launched a natural astaxanthin dietary
supplement, called BioAstin(TM), which we believe can retard and ameliorate
fever blisters and canker sores, as well as carpal tunnel syndrome; provide
protection from sunburn by ultraviolet light; and relieve muscle soreness after
strenuous exercise.
Cyanotech also produces phycobiliproteins from microalgae for the
medical and biotechnology research industry. Phycobiliproteins are highly
fluorescent pigments used as tags or markers in many kinds of biological assays.
Sales of phycobiliproteins accounted for about 3% of our sales for the year
ended March 31, 2000.
RISK FACTORS
In addition to the other information we provide in this prospectus, you
should carefully consider before deciding to invest in our common stock the
following risks and the risks outlined in the documents incorporated by
reference. These are, however, not the only risks we face. Some risks are not
yet known to us and there are others we do not currently believe are material
but could later turn out to be so. All of these could hurt our business. The
trading price of our common stock could decline because of general market
conditions or because any or all of these risks come to pass.
WE HAVE A HISTORY OF LOSSES FROM OPERATIONS AND FLUCTUATIONS IN OPERATING
RESULTS.
We have reported losses from operations in each of the past three
fiscal years and had an accumulated deficit of $7,803,000 at March 31, 2000. If
losses from operations continue, the market price for the common stock and our
ability to maintain existing financing and obtain new financing could be
adversely affected. We may not be able to achieve consistent profitability in
the future. We have experienced quarterly fluctuations in operating results and
3
<PAGE>
anticipate that these fluctuations may continue in future periods. A significant
portion of our expense levels are fixed and, if sales are below expectations,
the adverse impact may be magnified by the inability to adjust spending quickly
enough.
WE MAY NEED ADDITIONAL CAPITAL AND OUR ABILITY TO OBTAIN ADDITIONAL CAPITAL IS
CURRENTLY RESTRICTED.
We believe that borrowings available under our secured term loan
facility, together with the proceeds from our recently issued $1,250,000
principal amount of 6% Convertible Subordinated Debentures together with
internally generated funds will be sufficient to fund our requirements for
working capital and capital expenditures through the end of fiscal 2001.
However, we may need to raise additional funds to finance expansion programs,
and we cannot ensure that our financial performance will generate sufficient
funds. Also, on April 30, 2002, we will require funds to repay the debentures if
they have not been converted prior to that date by the holders.
Our existing secured term loan facility has a limit of $3,500,000, of
which $1,857,000 was applied on April 21, 2000 to repay prior debt and closing
costs, and of which $500,000 is being held by the lender in a maintenance
reserve account. Capital expenditures are limited each year to $500,000.
Covenants in this term loan require us to maintain certain levels of eligible
receivables and inventory and also require us to maintain financial covenants
for tangible balance sheet equity, debt to net worth ratio, current ratio and
debt service coverage, and restrict us from incurring additional secured
indebtedness from third parties. Substantially all of our assets are pledged as
collateral for repayment of the term loan. Our collateral pledge may make it
more difficult for us to obtain additional financing on advantageous terms, if
at all.
WE ARE IN PATENT LITIGATION WITH A COMPETITOR.
The Company is a party to a suit involving patent rights and trade
secrets with an astaxanthin competitor, Aquasearch, Inc. We alleged
misappropriation of trade secrets and other claims. Aquasearch alleged patent
infringement, misappropriation of trade secrets, and other claims against us. In
December 1999, the U.S. District Court for the District of Hawaii denied our
motion for partial summary judgment on non-infringement and invalidity of the
Aquasearch patent, and granted Aquasearch's motion for partial summary judgment
that we infringe such patent. The Court also granted Aquasearch's motion that we
misappropriated their trade secrets and committed a breach of contract. The
Company continues to press its claims against Aquasearch and believes that the
outcome will not have a material adverse effect on it. However, the outcome of
this suit is difficult to predict, and if Aquasearch should predominantly
prevail, there could be a material adverse effect on the Company's financial
condition and operations.
WE RELY PRINCIPALLY ON A SINGLE PRODUCT.
Spirulina Pacifica, our principal product, accounted for 87% and 91% of
net sales for the years ended March 31, 2000 and 1999. We anticipate that sales
of our Spirulina products will continue to constitute a substantial portion of
net sales during fiscal 2001. Any material decrease in the overall level of
sales of, or the prices for, our Spirulina products, whether as a result of
competition, change in consumer demand, increased worldwide supply of Spirulina
or any other factors, would have a material adverse effect on our business,
financial condition and results of operations. Moreover, we have suspended new
product development, such as a bio-engineered mosquitocide and our aldolase
catalytic antibody, in line with our goal of returning to profitability as
quickly as possible. There can be no assurance that new commercial products will
be developed even if development resumes in the future. Our inability to
successfully develop or commercialize additional products could have a material
adverse effect on our business, financial condition and results of operations.
WE DEPEND ON A SINGLE CUSTOMER FOR OVER 10% OF OUR SALES.
Approximately 23% of our net sales for fiscal 2000 were to a single
customer, Spirulina International B.V., a Spirulina marketing and distribution
company based in Europe. Sales to this customer were 11% of net sales for the
prior fiscal year. Loss of this business could have a material adverse effect on
the Company.
WE FACE STRONG COMPETITION IN OUR MARKETS.
Our Spirulina products compete with a variety of vitamins, dietary
supplements, other algal products and similar nutritional products available to
consumers. The nutritional products market is highly competitive. It includes
international, national, regional and local producers and distributors, many of
whom have greater resources than Cyanotech, and many of whom offer a greater
variety of products. Our direct competition in the Spirulina market currently is
from Dainippon Ink and Chemical Company's Earthrise facility in California and
several large farms in China. To a lesser extent, we compete with numerous
smaller farms. Packaged consumer products marketed under our Nutrex brand also
compete with products marketed by health food manufacturing customers of
Cyanotech who purchase bulk Spirulina from us and package it for retail sales. A
decision by another company to focus on Cyanotech's existing or target markets
or a substantial increase in the overall supply of Spirulina could have a
4
<PAGE>
material adverse effect on our business, financial condition and results of
operations. There can be no assurance that we will not experience competitive
pressure, particularly with respect to pricing, that could materially and
adversely affect us.
Our natural astaxanthin product, NatuRose, competes directly with the
synthetic astaxanthin product produced and marketed for the commercial feed and
aquaculture industry worldwide by Hoffmann-LaRoche. In addition, several other
companies have announced plans to produce commercial quantities of natural
astaxanthin from microalgae and Phaffia yeast. We are unaware of any studies
indicating that natural astaxanthin for such use has any benefits not provided
by synthetic astaxanthin. There can be no assurance that our NatuRose product
can compete with synthetic astaxanthin, which could materially and adversely
affect our business.
Our human use astaxanthin product, BioAstin, was the first commercially
available microalgae-based astaxanthin product in the United States.
AstaCarotene AB ("AstaCarotene") of Sweden produces and sells a microalgae-based
human use astaxanthin product in Europe. Aquasearch Inc. ("Aquasearch"), a
development-stage company based in Hawaii, claims to be producing natural
astaxanthin from microalgae for such use, but has not yet generated significant
sales revenue.
WE ARE SUBJECT TO THE UNCERTAINTIES OF GOVERNMENT REGULATION.
Our products, potential products, manufacturing and research activities
are subject to regulation by a number of government authorities in the United
States and in other countries, including the Food and Drug Administration
("FDA"), pursuant to the Federal Food, Drug and Cosmetic Act. The FDA regulates,
to varying degrees and in different ways, dietary supplements, other food
products, diagnostic medical devices and pharmaceutical products, including
their manufacture, testing, exportation, labeling, and, in some cases,
advertising.
We are also subject to regulation with respect to labeling of products,
importation of organisms, and occupational safety, among others. Such
regulations and policies are subject to change and depend heavily on
administrative policies and interpretations. We work with foreign distributors
to ensure our compliance with foreign laws, regulations and policies. There can
be no assurance, however, that changes with respect to federal, state and
foreign laws, regulations and policies, and, particularly with respect to the
FDA or other such regulatory bodies, with possible retroactive effect, will not
have a material adverse effect on our business, financial condition and results
of operations.
The Federal Dietary Supplement Health and Education Act ("DSHEA")
regulates the use and marketing of dietary supplements, including vitamin
products. DSHEA also establishes Good Manufacturing Practices ("cGMP")
requirements for dietary supplements. It also regulates the labeling of dietary
supplements. We believe, though there can be no assurance, that Spirulina,
marketed as a dietary supplement, is exempt from FDA regulation as a food
additive.
Our Spirulina manufacturing processes and our contract bottlers are
required to adhere to cGMP as prescribed by the FDA. We believe that we are
currently in compliance with all applicable cGMP and other food regulations but
there can be no assurance that Cyanotech can continue to meet applicable FDA
manufacturing requirements. The use of Spirulina as a food additive for
seasoning on salads or pasta or for other food uses has not been cleared by the
FDA. We currently market our product for these food uses on the basis of our
belief that its use in these food applications is generally recognized as safe
and therefore is not subject to FDA pre-market clearances as a food additive.
Our natural astaxanthin product, NatuRose, has received clearance for
use as a feed and food color additive in Japan and Canada and has received
organic registration for use in feed in New Zealand but will need clearance for
use as a feed color additive in the United States. We are actively pursuing
clearance for such use with the FDA and anticipate final approval by the summer
of 2000. The process of obtaining clearances for a new color additive is
expensive and time consuming. No assurances can be given that any of our
proposed products intended for use as a feed additive will be approved for use
in the United States on a timely basis, if at all.
Sales of our astaxanthin product, BioAstin, are regulated in the United
States by the FDA and the DSHEA rules. Our BioAstin products received FDA market
clearance in August 1999.
WE ARE IN A BUSINESS WITH UNIQUE RISKS.
Many unique compounds have been identified in microalgae. However, the
efficient and cost effective commercial production of microalgae is elusive.
Many microalgae culture systems over the last 20 years have failed. Microalgae
produced for food supplements are typically cultivated and harvested outdoors.
Production is significantly affected by climate, weather conditions and the
chemical composition of the culture media. Without consistent sunlight, warm
temperature, low rainfall and proper chemical balance, microalgae will not grow
quickly. Longer harvesting cycles mean decreased pond utilization and increased
cost. Furthermore, microalgal growth requires a nutrient rich environment. High
5
<PAGE>
nutrient levels in the ponds promote the growth of unwanted organisms, or
"weeds," if the chemical composition of the ponds changes from its required
balance. If contamination occurs, a pond must be emptied, cleaned and refilled,
a process that decreases pond utilization and increases production costs.
OUR INTELLECTUAL PROPERTY IS DIFFICULT TO PROTECT.
We rely on a combination of trade secrets, contracts, and patent,
copyright and trademark law protection to establish and protect the intellectual
property rights that are so critical to our success. There can be no assurance
that we will be able to protect our technology adequately or that competitors
will not be able to develop similar technology independently. In addition, the
laws of certain foreign countries may not protect the Company's intellectual
property rights to the same extent as the laws of the United States. Litigation
in the United States or abroad may be necessary to enforce our patent or other
intellectual property rights, to protect our trade secrets, to determine the
validity and scope of the proprietary rights of others or to defend against
claims of infringement. Such litigation, even if successful, could result in
substantial costs and diversion of resources and could have a material adverse
effect on our business, results of operations and financial condition.
Additionally, if any such claims are asserted against us, we may seek to obtain
a license under the third party's intellectual property rights. There can be no
assurance, however, that a license would be available on terms acceptable or
favorable to us, if at all.
OFFICERS AND DIRECTORS HOLD A SUBSTANTIAL STOCK INTEREST.
As of June 30, 2000, executive officers and directors of the Company
(seven persons) beneficially owned approximately 15% of the Company's Common
Stock, assuming conversion of all outstanding shares of the Company's Preferred
Stock. Thus, our management is in a position to influence to a significant
degree the direction and policies of the Company, the election of our Board of
Directors and the outcome of other matters requiring stockholder approval.
OUR SUCCESS IS DEPENDENT ON THE CONTINUED SERVICE OF OUR KEY PERSONNEL.
The Company is and will continue to be dependent upon the efforts and
abilities of a number of current key personnel. None of the current officers has
an employment agreement with the Company. Inability to attract and retain our
management and associates could have a material adverse effect on the business,
financial condition and results of operations of the Company.
SALES TO DISTRIBUTORS AND MANUFACTURERS AND INTERNATIONAL SALES ACCOUNT FOR A
SUBSTANTIAL PORTION OF OUR REVENUES.
The majority of our bulk Spirulina sales are to companies with their
own Spirulina product lines. Some of these companies identify and promote
Cyanotech's Hawaiian Spirulina in their products, others do not. We also sell
directly to health food manufacturers. Consumer products are sold through
distributors and brokers. Thus we are largely dependent on the efforts of third
parties to reach the ultimate consumers of our products.
In the years ended March 31, 2000 and 1999, international sales
accounted for approximately 46% and 40%, respectively, of our net sales. Our
business, financial condition and results of operations may be materially and
adversely affected by any difficulties associated with managing accounts
receivable from international customers, tariff regulations, imposition of
governmental controls, political and economic instability or other trade
restrictions. Although our international sales are currently denominated in
United States dollars, fluctuations in currency exchange rates could cause our
products to become relatively more expensive to customers in the affected
country, leading to a reduction in sales in that country.
THE DIVIDEND ARREARAGE ON OUR PREFERRED STOCK IS SUBSTANTIAL.
The Company had outstanding on June 30, 2000, 371,031 shares
($1,855,155 - liquidation preference plus unpaid cumulative dividends) of Series
C Preferred Stock, convertible into 1,855,155 shares of Common Stock on or
before February 23, 2002. These shares are entitled to an 8% annual dividend
that has not been paid and until it is paid no dividends may be declared or paid
on the Common Stock. There was on June 30, 2000 a $1,635,000 dividend arrearage.
The cumulative but unpaid dividends are foregone upon conversion, but must be
paid on liquidation of the Company. The consent of the holders of the Preferred
Stock is required to modify their present rights or to sell all or substantially
all of the Company's assets.
WE PAY NO DIVIDENDS ON OUR COMMON STOCK.
The Company has never paid any cash dividends on its Common Stock and
does not anticipate paying cash dividends on the Common Stock in the foreseeable
future. The payment of dividends on the Common Stock by the Company
6
<PAGE>
will depend on its earnings, its financial condition, the payment of the Series
C Preferred Stock dividend arrearages, and other business and economic factors
affecting the Company as the Board of Directors considers relevant.
"PENNY STOCK" RULES.
The Company's Common Stock is presently traded on the National
Association of Securities Dealers Automated Quotation ("NASDAQ") National Market
System, which requires that we have a minimum bid price of $1.00 for our common
stock to qualify for continued listing. The low bid price for common stock in
fiscal 2000 for each of the quarters ended June 30, September 30, December 31
and March 31 was $.59, $.72, $.50 and $1.00, respectively, and the last traded
price on August 9, 2000 was $1.625. If the common stock is delisted, then
brokers engaged in transactions in the stock would be required to provide
customers with a risk disclosure document and the amount of the compensation of
the broker/dealer in the transaction and monthly account statements showing the
market values of the amount of the stock held in the customer's accounts. If
brokers become subject to these "penny stock" rules, they would be less willing
to engage in transaction involving our stock, thereby making it more difficult
for investors to dispose of their shares.
WE ARE SUBJECT TO PRODUCT LIABILITY RISKS.
Use of our products in human consumption may expose the Company to
liability claims, although the Company has not been subject to any such claims
to date. The Company conducts regular quality assurance tests, but there can be
no assurance that the Company's products will not suffer contamination at the
Company's facilities or in the distribution channel, which could in turn cause
injury to consumers. The Company does not believe that natural beta carotene
increases health risks. There has been one study released in January 1996,
however, that indicated that among smokers and persons who worked with asbestos,
users of synthetic beta carotene had a higher incidence of death from lung
cancer and heart disease. The Company maintains product liability insurance in
limited amounts for products involving human consumption. There can be no
assurance that the Company's insurance will be adequate or will remain available
to cover any liabilities arising from use of its products. A contamination
problem, product liability claim or recall of products could have a material
adverse effect on the Company's business, financial condition and results of
operations.
7
<PAGE>
USE OF PROCEEDS
We will not receive any proceeds from the sale of shares of our common
stock by the selling stockholders but have agreed to bear all expenses of
registration of the selling stockholders' shares under federal and state
securities laws. See "Plan of Distribution."
SELLING STOCKHOLDERS
The following table sets forth information, received through July 25,
2000, with respect to the number of shares of common stock that would have been
owned beneficially by the selling stockholders prior to this offering if all
their Debentures had been converted and they had exercised all of their
Warrants. These are the shares to be registered and sold under this prospectus.
The information is based on information provided by or on behalf of the selling
stockholders. The selling stockholders and holders listed in any supplement to
this prospectus, and any transferors, pledgees, donees or successors to these
persons, may from time to time offer and sell, pursuant to this prospectus and
any subsequent prospectus supplement, any and all of these shares. Any
supplement to this prospectus may contain additional or varied information about
the selling stockholders or such other holders, and the shares beneficially
owned by each such person.
The selling stockholders may offer all, some or none of the common
stock listed below. Therefore, no estimate can be given as to the amount or
percentage of the common stock that will be held by the selling stockholders
upon termination of any of the sales. Also, the selling stockholders identified
below may have sold, transferred or otherwise disposed of all or a portion of
their Debentures, Warrants or underlying common stock since the date on which
they provided the information to us.
The shares offered by this prospectus may be offered from time to time
by the selling stockholders named below:
NUMBER OF SHARES OF
COMMON STOCK
SELLING STOCKHOLDER (1) INCLUDED IN OFFERING
-------------------- --------------------
Beneficial Owners of Debentures:
-------------------------------
A. Raymond ABT Grantor Trust 13,333
Robert W. Allen 33,333
Alvin R. Bonnette Rev Trust 16,667
E.H. Arnold 50,000
Gary P. Arnold 66,667
Keith Becker 33,333
John Bertsch 20,000
Leonard C. Blade 6,667
Charles Brand 16,667
John C. Clifford 20,000
Delaware Charter Guarantee &
Trust Trustee FBO: Edward Brody 6,667
Francis and Guerino Deluca 26,667
Steven J. Dennis 6,667
Lloyd B. Embry 10,000
8
<PAGE>
Harry M. Farnham III and Cynthia G. Farnham 16,667
Dennis Fortin 33,333
Anthony J. Hegler 6,667
Jeffrey G. and Mary A. Hipp 10,000
Ronald Johnson 10,000
Howard Kalka 20,000
Marla and Larry Kaplan 6,667
Randall S. Knox 6,667
Gustave and Lydia Levonson 33,333
Donald B. and Jacqueline M. McCulloch 6,667
Louis G. Miller 20,000
Fred Ostad 6,667
Robert G. Paul 20,000
Sanford R. Penn 13,333
Louis Porga 6,667
Le Randle, Jr. 6,667
David Random 6,667
Shadow Capital LLC 33,333
Howard Smith 6,667
William C. Smith, Jr. 6,667
William C. Steele 6,667
Arthur D. and Marie E. Sterling 33,333
Taglich Brothers, Inc. FBO: Michael N. Taglich
401(k) Plan (2) 26,666
Taglich Brothers, Inc. FBO: Robert F. Taglich
401(k) Plan (2) 26,666
Susan E. Thorstenn 6,667
Richard A. Unverferth 13,333
U. S. Bank N. A., Trustee, Dorsey and Whitney
Master Trust 6,667
Wafgal Limited 6,667
9
<PAGE>
Thomas J. Waggoner 20,000
Richard C. Oh (2) 667
Vincent Palmieri (2) 667
Robert C. Schroeder (2) 4,000
Douglas E. Hailey (2) 8,000
Michael N. Taglich (2) 23,333
Taglich Brothers, Inc. (2) 46,663
--------
Total .............................................. 833,333
Beneficial Owners of Warrants: (1)(2)
-----------------------------
Richard C. Oh 3,000
Vincent Palmieri 3,000
Gina Sciannameo 500
Tere D'Silva 500
Laura A. Conroy 2,000
Luis Martins 1,000
Michael C. Roesler 1,000
William G. Ryon 1,500
Francisco J. Clough 1,000
Douglas E. Hailey 20,800
Robert C. Schroeder 7,000
Michael N. Taglich 21,017
Robert F. Taglich 21,017
-------
Total ............................................... 83,334
(1) None of the selling stockholders beneficially owned any other shares of our
Common Stock prior to this offering.
(2) None of the selling stockholders has had a material relationship with the
Company within the past three years, except for these holders who are all
affiliates of Taglich Brothers, Inc., the broker-dealer which acted as
Placement Agent for the Debentures and which received the Warrants as part
of its compensation for such services.
PLAN OF DISTRIBUTION
This prospectus relates to the offer and sale from time to time by the
selling stockholders of up to 916,667 shares of our common stock. The selling
stockholders will act independently of Cyanotech Corporation in deciding to sell
their shares. We will not receive any proceeds when the selling stockholders
sell their shares.
10
<PAGE>
Shares of our common stock covered by this prospectus and any
prospectus supplement may be offered and sold from time to time by the selling
stockholders in one or more transactions. The selling stockholders, including
their transferees, pledgees or donees or their successors, may sell or dispose
of the shares being offered here in various ways:
- on the NASDAQ National Market through broker-dealers;
- in negotiated private transactions or otherwise, including
an underwritten offering;
- by pledge or by grant of a security interest in the shares to
secure debts and other obligations;
- through the distribution of the shares by a selling stockholder
to its partners, members or stockholders; or
- in a combination of any of the above transactions.
In connection with the sale of the common stock or otherwise, the
selling stockholders may enter into hedging transactions with broker-dealers or
other financial institutions. These broker-dealers or other financial
institutions may in turn engage in short sales of the common stock and deliver
these securities to close out these short positions. They also may lend or
pledge the common stock to broker-dealers that in turn may sell these
securities.
The selling stockholders may sell their shares by block trade or
otherwise, at market prices prevailing at the time of sale, at prices related to
the prevailing market prices, at negotiated prices or at fixed prices. Each of
the selling stockholders reserves the right to accept and, together with their
agents from time to time, to reject, in whole or in part, any proposed purchase
of the common stock to be made directly or through agents.
The selling stockholders may sell their shares directly to purchasers
or may use underwriters, broker-dealers or agents to sell their shares.
Underwriters, broker-dealers or agents who sell the shares may receive
compensation in the form of discounts, concessions, or commissions from the
selling stockholders or they may receive compensation from purchasers of the
shares for whom they acted as agents or to whom they sold the shares as
principal, or both. The selling stockholders and any underwriters,
broker-dealers or agents that participate in the sale of their common stock may
be deemed to be "underwriters" within the meaning of the Securities Act. Any
discounts, commissions, concessions or profits received by these underwriters,
broker-dealers or agents or agents on any resale of the shares may be
underwriting discounts and commissions under the Securities Act. Selling
stockholders who are "underwriters" within the meaning of the Securities Act,
will be subject to the prospectus delivery requirements of the Securities Act.
We will pay all fees and expenses incurred in connection with preparing
and filing this prospectus and any prospectus supplement and the registration
statement and any amendments to those documents. The selling stockholders will
pay any brokerage commissions and similar selling expenses.
We have agreed to keep the registration statement, of which this
prospectus and any subsequent prospectus supplements constitute a part,
effective for three years from its effective date or until all of the common
stock covered by this registration statement has been sold, whichever occurs
first. We cannot assure that the selling stockholders will sell all or any of
the shares of common stock offered here.
Under the registration rights agreement with the selling stockholders,
we have agreed to indemnify the selling stockholders, and the selling
stockholders have agreed to indemnify us, and each of us has agreed to indemnify
other persons named or described in the registration rights agreement, in each
case against various liabilities, including some liabilities arising under the
Securities Act of 1933, as amended, in connection with the offer and sale of the
common stock sold hereunder by the selling stockholders. These indemnification
obligations of ours and the selling stockholders generally include obligations
to indemnify any underwriter that participates in the offering or sale of the
common stock by the selling stockholders and any person who controls each
underwriter.
Under the securities laws of certain states, the securities may be sold
in such states only through registered or licensed brokers or dealers.
LEGAL MATTERS
The validity of the common stock offered under this prospectus will be
passed upon by Woodburn and Wedge, Reno, Nevada.
EXPERTS
The consolidated financial statements and schedule of Cyanotech
Corporation and subsidiaries as of March 31, 2000 and 1999, and for each of the
years in the three years ended March 31, 2000, have been incorporated by
reference in this registration statement in reliance upon the report of KPMG
LLP, independent certified public accountants, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing.
11
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement on Form S-3 that we
filed with the Commission. Some information in the registration statement has
been omitted from this prospectus in accordance with the rules of the
Commission. We are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended ("Exchange Act"), and accordingly, file
reports, proxy and information statements and other information with the
Securities and Exchange Commission. You may read and copy all or any portion of
the registration statement as well as the reports, proxy and information
statements and other information that we have filed with the Commission at the
Commission's public reference rooms maintained at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of
the Commission: Seven World Trade Center, 13th Floor, New York, New York 10048,
and Northwest Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. You can request copies of these documents upon payment of a
duplicating fee, by writing to the Commission. Please call the Commission at
1-800-SEC-0330 for further information on the operation of the public reference
rooms. Our filings with the Commission are also available to you on the
Commission's Internet side (http://www.sec.gov). Our common stock is quoted on
The Nasdaq National Market under the symbol "CYAN". Reports, proxy and
information statements and other information concerning the Company may also be
inspected at The Nasdaq Stock Market at 1735 K Street, NW, Washington, D.C.
20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Commission allows us to incorporate by reference certain of our
publicly-filed documents into this prospectus, and such information is
considered part of this prospectus. Information that we file with the Commission
after the date of this prospectus will automatically update and supersede this
information. We incorporate by reference the documents listed below and any
future filings made with the Commission under Sections 13(a), 13(c), 14 (except
for any reports of our Compensation and Stock Option Committee included therein)
or 15(d) of the Exchange Act until the selling stockholders have sold all the
shares of common stock described in this prospectus or until we have
de-registered any remaining unsold shares.
The following documents filed with the Commission (File No. 0-146-02)
are incorporated by reference in this prospectus:
(1) Our Annual Report on Form 10-K for the year ended March 31, 2000;
(2) Our Proxy Statement, filed with the Commission on July 10, 2000
(except for the Compensation and Stock Option Committee Report
included therein); and
(3) The description of our common stock set forth in our Registration
Statement on Form 8-A, including any subsequent amendment or
report filed for the purpose of updating that description.
We will furnish to you, without charge, on your written or oral
request, a copy of any or all of the documents incorporated by reference herein,
other than exhibits to such documents. You should direct any requests for
documents to Secretary, Cyanotech Corporation, 73-4460 Queen Kaahumanu Highway,
Suite 102, Kailua-Kona, Hawaii 96740, telephone: (808) 326-1353.
12
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14: Other Expenses of Issuance and Distribution
The following table sets forth the cost and expenses payable by the
registrant in connection with the sale of the securities being registered. The
registrant will bear no expenses in connection with any sale or other
distribution by the selling stockholders of the shares being registered other
than the expenses of preparation and distribution of this registration statement
and the prospectus included in this registration statement. Such expenses are
set forth in the following table. All of the amounts shown are estimates except
the SEC registration fee and the Nasdaq National Market Listing Fee.
SEC registration fee $ 429
NASDAQ National Market Listing fee $ 9,167
Legal Fees and Expenses $15,000
Accounting Fees and Expenses $ 7,000
Miscellaneous expenses $ 5,000
-------
Total $36,596
Item 15. Indemnification of Directors and Officers
The Nevada Private Corporation Law ("NPCL") provides that a corporation
may indemnify any person who was or is a party or is threatened to be made a
party, by reason of the fact that such person was an officer or director of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, to (x) any action or suit by or in the right
of the corporation against expenses, including amounts paid in settlement and
attorneys' fees, actually and reasonably incurred, in connection with the
defense or settlement believed to be in, or not opposed to, the best interests
of the corporation, except that indemnification may not be made for any claim,
issue or matter as to which such a person has been adjudged by a court of
competent jurisdiction to be liable to the corporation or for amounts paid in
settlement to the corporation and (y) any other action or suit or proceeding
against expenses, including attorneys' fees, judgments, fines and amounts paid
in settlement, actually and reasonably incurred, if he or she acted in good
faith and in a manner which he or she reasonably believed to be in, or not
opposed to, reasonable cause to believe his or her conduct was unlawful. To the
extent that a director, officer, employee or agent has been "successful on the
merits or otherwise" the corporation must indemnify such person. The articles of
incorporation or bylaws may provide that the expenses of officers and directors
incurred in defending any such action must be paid as incurred and in advance of
the final disposition of such action. The NPCL also permits the Registrant to
purchase and maintain insurance on behalf of the Registrant's directors and
officers against any liability arising out of their status as such, whether or
not Registrant would have the power to indemnify him against such liability.
These provisions may be sufficiently broad to indemnify such persons for
liabilities arising under the Securities Act.
The Company's Bylaws provide that the Company shall, to the fullest
extent permitted by applicable law, indemnify any director or officer of the
Company in connection with certain actions, suits or proceedings, against,
expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred. The Company is also required to pay
any expenses incurred by a director or officer in defending such an action, in
advance of the final disposition of such action. The Company's Bylaws further
provide that, by resolution of the Board of Directors, such benefits may be
extended to employees, agents or other representatives of the Company.
The NPCL provides that a corporation's articles of incorporation may
contain a provision which eliminates or limits the personal liability of a
director or officer to the corporation or its stockholders for damages for
breach of fiduciary duty as a director or officer, provided that such a
provision must not eliminate or limit the liability of a director or officer
for: (a) acts or omissions which involve intentional misconduct, fraud or a
knowing violation of law; or (b) the payment of illegal distributions. The
Company's Restated Articles of Incorporation include a provision eliminating the
personal liability of directors for breach of fiduciary duty except that such
provision will not eliminate or limit any liability which may not be so
eliminated or limited under applicable law.
Under the terms of the registration rights agreement with the selling
stockholders, they and registrant have agreed to indemnify each other under
certain circumstances.
II-1
<PAGE>
Item 16. Exhibits.
<TABLE>
<CAPTION>
Exhibit Number Exhibit
-------------- -------
<S> <C> <C>
*5.1 Opinion of Woodburn and Wedge
*23.1 Consent of KPMG LLP, Independent Certified Public Accountants
23.2 Consent of Woodburn and Wedge (see Exhibit 5.1)
24.1 Powers of Attorney (included on page II-4)
*Previously filed
</TABLE>
Item 17. Undertakings
1. Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers, and
controlling persons of the Registrant pursuant to the provisions described
in Item 15 above, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person of
the Registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection
with the securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such issue.
2. The undersigned Registrant hereby undertakes:
(a) To file, during the period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than 20 per cent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that subparagraphs (a)(i) and (a)(ii) do not apply
if the information required to be included in a post-effective
amendment to those paragraphs is contained in periodic reports filed
by the Registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in
the registration statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) 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.
3. The undersigned Registrant hereby undertakes that for purposes of
determining any liability under the Securities Act of 1933, each filing of
the Registrant's annual report pursuant to section 13(a) or section 15(d)
of the Securities Exchange
II-2
<PAGE>
Act of 1934 that is incorporated by reference in the Registration Statement
shall be deemed to be a new Registration Statement relating to the
securities offering therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
4. The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is
sent or given, the latest annual report to security holders that is
incorporated by reference in the prospectus and furnished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities
Exchange Act of 1934; and, where interim financial information required to
be presented by Article 3 of Regulation S-X are not set forth in the
prospectus, to deliver, or cause to be delivered to each person to whom the
prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the prospectus to provide such
interim financial information.
5. Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will
be governed by the final adjudication of such issue.
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 Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in Kailua-Kona, Hawaii, on August 9, 2000.
CYANOTECH CORPORATION
By:/s/ Gerald R. Cysewski
------------------------------
Gerald R. Cysewski
Chief Executive Officer,
President and Chairman of the Board
II-3
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints each of Ronald P. Scott and Gerald R. Cysewski,
with the power of substitution, his attorney-in-fact, to sign any documents
relating to this Registration Statement, including all amendments to this
Registration Statement (including post-effective amendments), and to file same,
with exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or their substitutes, may do or cause to be done by
virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
--------- -------- ----
<S> <C> <C>
/s/ Gerald R. Cysewski Chairman of the Board, August 9, 2000
---------------------- President and Chief Executive Officer
Gerald R. Cysewski Director
/s/ Ronald P. Scott Executive Vice President, Finance and August 9, 2000
---------------------- Administration, Chief Financial Officer and Chief
Ronald P. Scott Accounting Officer, Director
/s/ Eric H. Reichl Director August 9, 2000
----------------------
Eric H. Reichl
/s/ John T. Waldron Director August 9, 2000
----------------------
John T. Waldron
/s/ Paul C. Yuen Director August 9, 2000
----------------------
Paul C. Yuen
</TABLE>
