As filed with the Securities and Exchange Commission on May 4, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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XYBERNAUT CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 54-1799851
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(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
12701 Fair Lakes Circle
Fairfax, Virginia 22033
(703) 631-6925
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(Address, including zip code, and telephone number,
Including area code, of registrant's principal executive offices)
Edward G. Newman
12701 Fair Lakes Circle
Fairfax, Virginia 22033
(703) 631-6925
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(Name, address, including zip code, and telephone number,
Including area code, of agent for service)
Copy to:
Martin Eric Weisberg, Esq.
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036
(212) 704-6000
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Approximate date of commencement of proposed sale to public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities 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. [ ]
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Maximum Maximum Amount of
Title of Each Class Amount to be Offering Price Aggregate Registration
of Securities to be Registered Registered (1) per Share Offering Price Fee
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Common Stock, $.01 par value per
share................................ 4,089,635 (2) $3.75 (5) $15,336,131.25 $4,263.44
Common Stock, $.01 par value per
share................................ 300,000 (3)(4) $6.09 (6) $1,827,000 $507.91
Common Stock, $.01 par value per
share................................ 100,000 (3) $5.50 (6) $550,000 $152.90
Common Stock, $.01 par value per
share................................ 300,000 (3) $5.25 (6) $1,575,000 $437.85
Common Stock, $.01 par value per
share................................ 100,000 (3) $6.00 (6) $600,000 $166.80
Common Stock, $.01 par value per
share................................ 40,000 (3) $1.76 (6) $70,400 $19.57
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Total Registration Fee.........................................................................................$5,548.47
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(1) Represents the shares of common stock being registered for resale by the
selling stockholders.
(2) Includes 3,649,635 shares of common stock issuable upon conversion of
10,000 shares of series D preferred stock. The number of shares of common
stock indicated to be issuable in connection with such transaction and
offered for resale hereby is an estimate and is, based on a registration
rights agreement among Xybernaut Corporation and the selling stockholders,
150% of the number of shares that would be issuable upon conversion of
10,000 shares of the series D preferred stock at a price of $4.11 per
share, and is subject to adjustment and could be materially less than such
estimated amount depending upon factors that cannot be predicted by
Xybernaut at this time, including, among others, the future market price of
the common stock. If, however, all 10,000 shares of the series D preferred
stock currently outstanding were converted at the closing bid price of the
common stock as reported by NASDAQ on April 23, 1999, the Company would be
obligated to issue a total of 2,689,076 shares of common stock. This
presentation is not intended to constitute a prediction as to the future
market price of the common stock or as to the number of shares of common
stock into which the series D preferred stock will be converted.
(3) Pursuant to Rule 416, the shares of common stock offered hereby also
include such presently indeterminate number of shares of common stock as
shall be issued by Xybernaut to the selling stockholders upon exercise the
warrants. That number of shares is subject to adjustment under
anti-dilution provisions included in the warrants. This presentation is not
intended to constitute a prediction as to the future market price of the
common stock or as to the number of shares of common stock issuable upon
exercise of the warrants. See "Risk Factors -- Dilution"; and "Description
of Securities."
(4) Pursuant to a registration rights agreement among Xybernaut and the selling
stockholders, the number of shares represents 150% of the number of shares
which would be issuable upon exercise of warrants to purchase 200,000
shares of common stock.
(5) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) and (g) of the Securities Act of 1933, as amended
(the "Securities Act"); based on the average ($3.75) of the bid ($3.72) and
asked ($3.78) price on the Nasdaq SmallCap Market on April 23, 1999.
(6) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(g) of the Securities Act, based on the higher of (a)
the exercise price of the warrants or (b) the offering price of securities
of the same class included in this registration statement.
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 this Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
The information in this prospectus is not complete. 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 nor is
it seeking an offer to buy these securities in any state where the offer or sale
is not permitted.
SUBJECT TO COMPLETION, DATED MAY __, 1999
PROSPECTUS
4,929,635 Shares
XYBERNAUT CORPORATION
The stockholders of Xybernaut Corporation listed on page 10 of this
prospectus are offering for sale 4,929,635 shares of common stock of Xybernaut
under this prospectus.
The selling stockholders may offer their shares through public or
private transactions, at prevailing market prices, or at privately negotiated
prices. See "Plan of Distribution."
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|NASDAQ SmallCap Market Symbol: "XYBR"|
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On April 23, 1999, the closing price of one share of our common stock
on the NASDAQ SmallCap Market was $3.75.
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This investment involves a high degree of risk. You should carefully
consider the factors described under the caption "risk factors"
beginning on page 2 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined
if this prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
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The date of this prospectus is _________________, 1999
RISK FACTORS
Before you buy shares of our common stock, you should be aware that
there are various risks associated with that purchase, including those described
below. You should consider carefully these risk factors, together with all of
the other information in this prospectus and the documents we have incorporated
by reference in the section "Where You Can Find More Information About Us",
before you decide to purchase shares of our common stock.
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|Risks Associated with Our History of Losses and Future|
| Need for Capital |
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We have a history and expectation of losses.
Our research, development, and general and administrative expenses have
resulted in significant losses and are expected to continue to result in
significant losses for the foreseeable future.
We have incurred the following losses since 1994:
Fiscal year ended:
o March 31, 1994 $47,352
o March 31, 1995 $1,303,892
o December 31, 1996 $5,238,536
o December 31, 1997 $9,479,966
o December 31, 1998 $13,111,488
The "going concern" qualification on the report of our independent accountants
may reduce our ability to raise additional financing.
The report of our independent accountants on our December 31, 1998
consolidated financial statements contains an explanatory paragraph regarding
our ability to continue as a going concern and our ability to meet our ongoing
obligations. Our independent accountants cited our history of operating losses
and our working capital deficit as factors which raised substantial doubt as to
our ability to continue as a going concern. This "going concern" qualification
may reduce our ability to raise additional financing.
If we do not arrange additional financing, we may be unable to commercialize our
products.
The research, development, commercialization, manufacturing and
marketing of our products will likely require financial resources which are
significantly in excess of those presently available to us. If we are not able
to arrange financing or other third party arrangements on acceptable terms, we
may be unable to fully develop and commercialize any of our products.
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| Risks Associated with the Industry in Which We Operate |
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Our future revenues and ability to produce new products depend substantially on
the success of the Mobile Assistant Series(R).
Our Mobile Assistant(R) Series currently consists of one product, the
MA IV. The Mobile Assistant(R) Series is our principal products, and our success
will depend upon its commercial acceptance, which cannot be assured. Additional
product development will result in a significant increase in our research and
development expenses that may be unrecoverable should commercialization of new
products prove unsuccessful. We also could require additional funding if
research and development expenses are greater than we anticipate.
We may have to lower prices or spend more money to effectively compete against
companies with greater resources than us which could result in lower revenues
and/or profits.
The success of our products in the marketplace depends on many factors,
including product performance, price, ease of use, support of industry
standards, and customer support and service. Given these factors we cannot
assure you that we will be able to compete successfully. For example, if our
competitors offer lower prices, we could be forced to lower prices which would
result in reduced margins and a decrease in revenues. If we do not lower prices
we could lose sales and market share. In either case, if we are unable to
compete against our main competitors which include established companies like
Computing Devices International, a division of Ceridian Corporation, ViA Inc.,
Texas Microsystems, Telxon, Norand and Teltronics, Inc., a subsidiary of
Interactive Solutions, Inc., Raytheon and a consortium of Litton and TRW, we
would not be able to generate sufficient revenues to grow the company or reverse
our history of losses.
In addition, we may have to spend more money to effectively compete for
market share, including funds to expand our infrastructure, which is a capital
and time extensive process. Further, if other companies want to aggressively
compete against us, we may have to spend more money on advertising, promotion,
trade shows, product development, marketing and overhead expenses, hiring and
retaining personnel, and developing new technologies. These higher expenses
would hurt our net income and profits.
Currency fluctuations, especially in the Japanese Yen, may significantly
increase our expenses and affect our results of operations.
The exchange rates for some local currencies in countries where we
operate may fluctuate in relation to the U.S. dollar. Such fluctuations may have
an adverse effect on our expenses, earnings or assets when local currencies are
translated into U.S. dollars. We are party to a supplier arrangement with Sony
Digital Products for the production of the MA IV system. The fees we pay Sony
Digital Products are paid in Japanese Yen. Any weakening of the value of the
U.S. dollar against the Japanese Yen could result in an increase in our
production expenses which, if substantial, could have a material adverse effect
on our financial condition and results of operations.
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| Risks Associated with Our Internal Operations and Policies |
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We do not intend to declare dividends in the foreseeable future.
We have never paid any dividends on our securities. Our board of
directors does not intend to declare any dividends in the foreseeable future,
but intends to retain all earnings, if any, for use in our business operations.
The holders of common stock are entitled to receive dividends when, as and if
declared by the board of directors out of funds legally available for dividend
payments. The payment of dividends, if any, in the future is within the
discretion of our board of directors and will depend upon our earnings, capital
requirements and financial condition, and other relevant factors.
Year 2000 Issues.
The Year 2000 Issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of our
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.
Based on a recent assessment, we determined that we will be required to
modify or replace portions of our software so that our computer systems will
properly utilize dates beyond December 31, 1999. We believe that we can mitigate
the Year 2000 Issue with modifications to existing software and conversions to
new software. However, if we fail to make such modifications and conversions, or
if we do not make them on a timely basis, the Year 2000 Issue could have a
material impact on our operations.
We have contacted all of our significant suppliers and large customers
to determine the possible effect on our operations of their inability or failure
to remediate their own Year 2000 Issue. Our estimate of the costs to remediate
our Year 2000 issue is based on presently available information. However, we
cannot guarantee that the systems of other companies on which our systems rely
will be timely converted, or that a failure to convert by another company, or a
conversion that is incompatible with our systems, would not have material
adverse effect on our operations. We have no exposure to contingencies related
to the Year 2000 Issue for the products we have sold.
We will utilize both internal and external resources to reprogram, or
replace, and test the software for Year 2000 modifications. We plan to complete
the Year 2000 project within the next three months and estimate the total
remaining cost of the Year 2000 project at $6,000. Approximately $1,700 of the
total project cost is attributable to the purchase of new software which will be
capitalized. The remaining $4,300, which will be expensed as incurred over the
next six months, is not expected to have a material effect on our results of
operations. To date, we have incurred and expensed approximately $1,000 related
to our Year 2000 project.
Our estimates of the date of completion and cost of our Year 2000
project are based on our best estimates, which we derived utilizing numerous
assumptions of future events including the continued availability of certain
resources, third party modification plans and other factors. The costs
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and completion date of our Year 2000 project could differ materially from our
estimates due to the lack of availability and cost of personnel trained in this
area, our ability to locate and correct all relevant computer codes, and similar
uncertainties.
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| Risks Which May Dilute the Value of Your Xybernaut Shares or |
| Limit the Effect of Their Voting Power |
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The price of our common stock is highly volatile.
The price of our common stock is highly volatile. During the period
from January 1, 1998 to April 23, 1999 the closing price of our common stock has
ranged from a high of $8.44 to a low of $1.38. Following periods of volatility
in the market price of a company's securities, securities class action
litigation has often been instituted against such a company. If similar
litigation were instituted against us, it could result in substantial costs and
a diversion of our management's attention and resources, which could have an
adverse effect on our business. The volatile fluctuations of the market price
are based on (1) the number of shares in the market at the time as well as the
number of shares we may be required to issue in the future, compared to the
market demand for our shares; (2) our performance and meeting expectations of
our performance, including the development and commercialization of our products
and proposed products; and (3) general economic and market conditions.
The cancellation of shares held in escrow may result in a non-cash
future charge which could reduce or eliminate earnings per share.
As a condition to our initial public offering, certain of our
stockholders, primarily officers and directors, deposited an aggregate of
1,800,000 shares of common stock into an escrow account. The escrowed shares are
subject to release or cancellation on the satisfaction of specific performance
guidelines. See "Effects of Possible Non-Cash Future Charge."
The difference between the initial offering price and the market value
(at the time of release) of any escrowed shares released will be deemed to be an
additional compensation expense. Such expense, depending on the price per share,
may have the effect of reducing or eliminating any earnings per share and could
have a negative effect on the market price for our common stock.
Our executive officers, directors and principal stockholders, together,
can exercise control over all matters submitted to a vote of stockholders.
As March 31, 1999, our executive officers, directors and principal
stockholders beneficially owned, in the aggregate, approximately 26.9% of our
outstanding shares of common stock. These stockholders, if acting together, will
be able to effectively control most matters requiring approval by our
stockholders. The voting power of these stockholders under certain circumstances
could have the effect of delaying or preventing a change in control of
Xybernaut.
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We have 9,252,110 shares reserved for future issuances
which can substantially dilute the value of your Xybernaut common stock.
The issuance of reserved shares would dilute the equity interest of
existing stockholders and could have a significant adverse effect on the market
price of our common stock. As of April 23, 1999, we had 9,252,110 shares of
common stock reserved for possible future issuances upon conversion of
outstanding options and warrants. Certain options and warrants are convertible
into common stock at discounts from future market prices of the common stock.
Such discounts could result in substantial dilution to existing holders of
common stock. The sale of such common stock acquired at a discount could have a
negative impact on the trading price of the common stock and could increase the
volatility in the trading price of the common stock. See "Dilution."
In addition, we intend to seek additional financing which may result in
the issuance of additional shares of our capital stock and/or rights to acquire
additional shares of our capital stock. Those additional issuances of capital
would result in a reduction of your percentage interest in Xybernaut.
Anti-takeover measures in our certificate of incorporation could adversely
affect the voting power of the holders of the common stock.
Our Certificate of Incorporation authorizes anti-takeover measures like
the authority to issue "blank check" preferred stock and the staggered Board of
Directors. Those measures could have the effect of delaying, deterring or
preventing a change in control without any action by the shareholders. In
addition, issuance of preferred stock, without shareholder approval, on such
terms as the board of directors may determine, could adversely affect the voting
power of the holders of the common stock, including the loss of voting control
to others. See "Description of Securities."
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains certain forward-looking statements which
involve substantial risks and uncertainties. These forward-looking statements
can generally be identified because the context of the statement includes words
such as "may," "will," "except," "anticipate," "intend," "estimate," "continue,"
"believe," or other similar words. Similarly, statements that describe our
future plans, objectives and goals are also forward-looking statements. Our
factual results, performance or achievements could differ materially from those
expressed or implied in these forward-looking statements as a result of certain
factors, including those listed in "Risk Factors" and elsewhere in this
Prospectus.
WHERE YOU CAN FIND MORE INFORMATION ABOUT US
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 rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC- 0330 for further
information on the public reference rooms. Our SEC filings are also available to
the public over the Internet at the SEC's Website at "http://www.sec.gov."
We have filed with the SEC a registration statement on Form S-3 to
register the shares being offered. This prospectus is part of that registration
statement and, as permitted by the SEC's rules, does
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not contain all the information included in the registration statement. For
further information with respect to us and our common stock, you should refer to
the registration statement and to the exhibits and schedules filed as part of
the registration statement, as well as the documents discussed below.
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
an important part of this prospectus, and information that we file later with
the SEC will automatically update or supersede this information.
This prospectus may contain summaries of contracts or other documents.
Because they are summaries, they will not contain all of the information that
may be important to you. If you would like complete information about a contract
or other document, you should read the copy filed as an exhibit to the
registration statement or incorporated in the registration statement by
reference.
We incorporate by reference the documents listed below and any future
filings we will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934 (File No.
0-19041) until all of the shares are sold:
o Annual Report on Form 10-KSB for the fiscal year ended December
31, 1998; and
o The description of our common stock contained in the registration
statement on Form 8-A filed on July 15, 1996 under the Exchange
Act (File No. 0-15086), including all amendments or reports filed
for the purpose of updating that description.
You may request a copy of these filings, at no cost, by writing to us
at 12701 Fair Lakes Circle, Fairfax, Virginia 22033, (703) 631-6925. Attention:
W. Jeff Pagano.
You can review and copy the registration statement, its exhibits and
schedules, as well as the documents listed below, at the public reference
facilities maintained by the SEC as described above. The registration statement,
including its exhibits and schedules, are also available on the SEC's web site.
USE OF PROCEEDS
The selling stockholders are selling all of the shares covered by this
prospectus for their own account. Accordingly, we will not receive any proceeds
from the resale of the shares.
We will receive proceeds from the exercise, if any, of the warrants. We
will use those proceeds, if any, for working capital and general corporate
purposes.
We will bear the expenses relating to this registration, other than
discounts and commissions, which will be paid by the selling stockholders.
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DILUTION
As of April 23, 1999, we had issued and outstanding 22,229,747 shares
of common stock. At that date, there were an additional 9,252,110 shares of
common stock reserved for possible future issuances as follows:
o options to purchase 1,942,300 shares at an exercise price between
$1.37 and $7.31 per share. The shares underlying these options
have not been registered under the Securities Act and will be
deemed "restricted securities" when issued;
o warrants to purchase 1,127,750 shares at an price between $1.76
and $18.00 per share. We have registered a total of 797,500
shares issuable upon exercise of these warrants. The balance of
330,000 will be deemed to be "restricted securities" when issued;
o warrants to purchase 5,762,060 shares at an effective exercise
price of $6.01 per share. All of the shares issuable upon
exercise of these warrants have been registered under the
Securities Act; and
o 420,000 shares issuable upon conversion of 210,000 units. Each
unit consists of one share of common stock and one redeemable
warrant to purchase one share of common stock, at a price of
$9.075 per unit. The unit is exercisable during a period of four
years commencing July 18, 1996. The redeemable warrants included
in the units are exercisable at $12.60 per share. We have
registered the shares issuable upon exercise of the units under
the Securities Act.
During the terms of the outstanding options, redeemable warrants and
the unit purchase option, we must give the holders the opportunity to profit
from a rise in the market price of the common stock. The existence of the
options, the redeemable warrants and the unit purchase option may adversely
affect the terms on which we may obtain additional equity financing. Moreover,
the holders are likely to exercise their rights to acquire common stock at a
time when we would otherwise be able to obtain capital with more favorable terms
than we could obtain through the exercise of such securities.
The shares which will be deemed "restricted securities" may be sold
under Rule 144. Rule 144 permits sales of "restricted securities" by any person,
whether or not an affiliate of the issuer, after one year. At that time, sales
can be made subject to the Rule's volume and other limitations and after two
years by non-affiliates without adhering to Rule 144's volume or other
limitations. In general, an "affiliate" is a person with the power to manage and
direct our policies. The SEC has stated that, generally, executive officers and
directors of an entity are deemed affiliates of the issuing entity.
Following this offering, assuming the selling stockholders exercise or
convert all of their warrants and convertible securities, we will have
26,719,382 shares of common stock outstanding. Of those shares, approximately
25,700,942 will be freely transferable without restriction under the Securities
Act.
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EFFECT OF POSSIBLE NON-CASH FUTURE CHARGE
As a condition to our initial public offering, certain of our
stockholders, primarily officers and directors, deposited an aggregate of
1,800,000 shares of common stock into an escrow account. The Escrowed Shares are
subject to the following terms and conditions:
o The Escrowed Shares will be released incrementally over a
three-year period only in the event our gross revenues and
earnings (loss) per share for the 12-month periods ending
September 30, 1997, 1998 and 1999 equal or exceed certain gross
revenue and earnings (loss) per share targets.
o If such per share targets are not met in any of the relevant
12-month periods and the price of the common stock does not meet
or exceed agreed upon price levels, certain amounts of the
Escrowed Shares will be returned to us for each period and
canceled.
o All the Escrowed Shares will be released to the stockholders if
the closing price of the common stock as reported on The Nasdaq
SmallCap Market following this offering equals or exceeds $11.00
for 25 consecutive trading days or 30 out of 35 consecutive
trading days during the period ending September 30, 1999.
The difference between the initial offering price and the market value
(at the time of release) of any Escrowed Shares released will be deemed to be an
additional compensation expense. Such expense, depending on the price per share,
may have the effect of reducing or eliminating any earnings per share and could
have a negative effect on the market price for our common stock.
We did not meet the targets for escrow release for September 30, 1997
and September 30, 1998. As a result, 300,000 and 750,000 shares, respectively,
were canceled from the escrow pool resulting in a reduction of 2.1% and 3.6% of
our outstanding shares of common stock.
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SELLING STOCKHOLDERS
The following table lists certain information regarding the selling
stockholders' ownership of shares of our common stock as of April 23, 1999, and
as adjusted to reflect the sale of the shares. Information concerning the
selling stockholders, their pledgees, donees and other non-sale transferees who
may become selling stockholders, may change from time to time. To the extent the
selling stockholders or any of their representatives advises us of such changes,
we will report those changes in a prospectus supplement to the extent required.
See "Plan of Distribution."
Shares of Common Stock
Owned
after Offering
--------------------------------
Shares of Shares of
Common Stock Common
Owned Prior to Stock to be
Offering (1) Sold Number Percent
------------------ -------------- --------------- -----------
Austost Anstalt Schaan 260,000(1) 260,000(1) 0 *
Balmore Funds S.A. 260,000(1) 260,000(1) 0 *
Bulk Trade Inc. (BVI) 1,579,854(2) 1,579,854(2) 0 *
Crystalite Investments Ltd. 2,369,781(3) 2,369,781(3) 0 *
Hong Kong Bank of Canada 440,000 440,000 0 *
Settondown Capital International Ltd. 20,000(4) 20,000(4) 0 *
Total 4,929,635 4,929,635 0
========= ========= =
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* Less than 1%
(1) Assumes exercise of warrants to purchase (a) 200,000 shares of common
stock at an exercise price of $5.25 per share; and (b) 50,000 shares of
common stock at an exercise price of $6.00 per share.
(2) Under the terms of a registration statement between Xybernaut and the
selling stockholder, the number of shares registered for resale by the
selling stockholder includes 150% of (a) 973,236 shares of common stock
issuable upon conversion of convertible securities; and (b) warrants to
purchase 80,000 shares of common stock.
(3) Under the terms of a registration statement between Xybernaut and the
selling stockholder, the number of shares registered for resale by the
selling stockholder includes 150% of (a) 2,189,781 shares of common
stock issuable upon conversion of convertible securities; and (b)
warrants to purchase 120,000 shares of common stock.
(4) Assumes exercise of warrants to purchase 20,000 shares of common stock
at an exercise price of $1.76.
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On April 13, 1998, we entered into a financing agreement with Austost
Anstalt Schaan and Balmore Funds S.A. for the sale of $1,000,000 worth of common
stock. Under the terms of that agreement, we had the right, but not the
obligation, to obtain up to an additional $10,000,000 in a series of equity
drawdowns based on terms and conditions specified in the agreement. From April
1998 to January 1999, we exercised equity drawdowns in the amount of $6,360,000
and issued a total of 2,270,938 shares of common stock. The agreement has been
terminated. Settondown Capital International Ltd. acted as placement agent for
those transactions. Wayne Coleson, a director of Settondown Capital
International, Ltd., is a member of our advisory board.
Other than as indicated above, the selling stockholders are not
affiliated with us.
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DESCRIPTION OF SECURITIES
General
Our authorized capital stock consists of 40,000,000 shares of common
stock, par value $.01 per share, and 6,000,000 shares of preferred stock, par
value $.01 per share. As of the date of this prospectus, we have 22,229,747
shares of common stock, 94 shares of series C preferred stock and 10,000 shares
of series D preferred stock issued and outstanding. We have reserved 9,252,110
shares of common stock for issuance pursuant to outstanding options and
warrants.
Common Stock
Voting
The holders of our common stock are entitled to one vote for each share
held of record on all matters submitted to a vote of stockholders. Our
Certificate of Incorporation and By-Laws do not provide for cumulative voting
rights in the election of directors. Accordingly, holders of a majority of the
shares of common stock entitled to vote in any election of directors may elect
all of the directors standing for election.
Dividends
Holders of common stock are entitled to receive ratably such dividends
as may be declared by the Board of Directors out of funds legally available for
that purpose.
Rights on Liquidation
In the event of our liquidation, dissolution or winding up, holders of
common stock are entitled to share ratably in the assets remaining after payment
of liabilities.
Pre-emptive or Redemption Rights
Holders of common stock have no preemptive, conversion or redemption
rights. All of the outstanding shares of common stock are fully-paid and
nonassessable.
Preferred Stock
The Board of Directors has the authority to issue up to 6,000,000
shares of preferred stock. The Board may issue the preferred stock from time to
time in one or more series. The Board has the authority to establish the number
of shares to be included in each series, and to fix the designations, powers,
preferences and rights of the shares of each series and the applicable
qualifications, limitations or restrictions. The issuance of preferred stock may
have the effect of delaying or preventing a change in control. The issuance of
preferred stock could decrease the amount of earnings and assets available for
distribution to the holders of common stock, if any, or could adversely affect
the rights and powers, including voting rights, of the holders of the common
stock. In certain circumstances, such issuances could have the effect of
decreasing the market price of the common stock.
- 12 -
As of the date of this prospectus, we have not designated any shares of
preferred stock other than the series A preferred stock, series B preferred
Stock, series C preferred stock and series D preferred stock. There are no other
shares of preferred stock outstanding, and we have no plans to issue any other
shares of preferred stock.
Warrants
Of the total 4,929,635 shares of common stock registered for sale by
the selling stockholders, 840,000 shares are issuable upon exercise of currently
exercisable warrants. The warrants were issued to the selling stockholders in
connection with various private placements. The exercise prices and term of the
warrants are as follows:
Warrants Exercise Price Expiration Date
-------- -------------- ---------------
300,000 $ 6.09 March 10, 2002
100,000 $5.50 January 31, 2001
300,000 $5.25 July 2, 2001
100,000 $6.00 January 31, 2001
40,000 $1.76 October 15, 2003
The exercise price and the number of shares for which each warrant is
exercisable is subject to adjustment under anti-dilution provisions pertaining
to the declaration of stock dividends and the merger, consolidation or
liquidation of the Company.
Anti-takeover Considerations.
Our Certificate of Incorporation authorizes the issuance of up to
6,000,000 shares of $.01 par value preferred stock. The issuance of preferred
stock with such rights could have the effect of limiting stockholder
participation in certain transactions such as mergers or tender offers and could
discourage or prevent a change in our management. We have no present intention
to issue any additional preferred stock.
We have a classified or staggered Board of Directors which limits an
outsider's ability to effect a rapid change of control of the Board. In
addition, at the 1998 Annual Meeting of Stockholders held on September 24, 1998,
our shareholders approved measures to amend our Certificate of Incorporation and
By-laws, where applicable, to:
o implement an advance notice procedure for the submission of
director nominations and other business to be considered at
annual meetings of stockholders;
o permit only the President, the Vice Chairmen of the Board, the
Secretary or the Board of Directors to call special meetings of
stockholders and to limit the business permitted to be conducted
at such meetings to be brought before the meetings by or at the
direction of the Board of Directors;
- 13 -
o provide that a member of the Board of Directors may only be
removed for cause by an affirmative vote of holders of at
least 66 2/3% of the voting power of the then outstanding
shares entitled to vote generally in the election of directors
voting together as a single class;
o fix the size of the Board of Directors at a maximum of twelve
directors, with the authorized number of directors set at ten,
and the Board of Directors having the sole power and authority
to increase or decrease the number of directors acting by an
affirmative vote of at least a majority of the total number of
authorized directors most recently fixed by the Board of
Directors;
o provide that any vacancy on the Board may be filled for the
unexpired term (or for a new term in the case of an increase
in the size of the board) only by an affirmative vote of at
least a majority of the remaining directors then in office
even if less than a quorum, or by the sole remaining director;
o eliminate stockholder action by written consent;
o require the approval of holders of 80% of the then outstanding
voting stock and/or the approval of 66 2/3% of the directors
for certain corporate transactions; and
o require an affirmative vote of 66 2/3% of the voting stock in
order to amend or repeal any adopted amendments to the
Certificate of Incorporation and Bylaws adopted at the
meeting.
Those measures, combined with the ability of the Board of Directors to
issue "blank check" preferred stock and the staggered Board of Directors, could
have the effect of delaying, deterring or preventing a change in control without
any further action by the shareholders. In addition, the issuance of preferred
stock, without shareholder approval, on such terms as the Board of Directors may
determine, could adversely affect the voting power of the holders of the common
stock, including the loss of voting control to others.
Transfer Agent and Registrar
Continental Stock Transfer & Trust Company is our Transfer Agent and
Registrar for our common stock and the redeemable warrants.
PLAN OF DISTRIBUTION
The selling stockholders and their pledgees, donees, transferees and
other subsequent owners, may offer their shares at various times in one or more
of the following transactions:
o in the over-the-counter market; or
o in privately negotiated transactions
- 14 -
at prevailing market prices at the time of sale, at prices related to those
prevailing market prices, at negotiated prices or at fixed prices.
The selling stockholders may also sell the shares under Rule 144
instead of under this prospectus, if Rule 144 is available for those sales.
The transactions in the shares covered by this prospectus may be
effected by one or more of the following methods:
o ordinary brokerage transactions and transactions in which the
broker solicits purchasers;
o purchases by a broker or dealer as principal, and the resale
by that broker or dealer for its account under this
prospectus, including resale to another broker or dealer;
o block trades in which the broker or dealer will attempt to
sell the shares as agent but may position and resell a portion
of the block as principal in order to facilitate the
transaction; or
o negotiated transactions between selling stockholders and
purchasers without a broker or dealer.
The selling stockholders and any broker-dealers or other persons acting
on the behalf of parties that participate in the distribution of the shares may
be deemed to be underwriters. Any commissions or profits they receive on the
resale of the shares may be deemed to be underwriting discounts and commissions
under the Securities Act.
As of the date of this prospectus, we are not aware of any agreement,
arrangement or understanding between any broker or dealer and any of the selling
stockholders with respect to the offer or sale of the shares under this
prospectus.
We have advised the selling stockholders that during the time each is
engaged in distributing shares covered by this prospectus, each must comply with
the requirements of the Securities Act and Rule 10b-5 and Regulation M under the
Exchange Act. Under those rules and regulations, they:
o may not engage in any stabilization activity in connection
with our securities; o must furnish each broker which offers
common stock covered by this prospectus with the number of
copies of this prospectus which are required by each broker;
and
o may not bid for or purchase any of our securities or attempt
to induce any person to purchase any of our securities other
than as permitted under the Exchange Act.
In the purchase agreements and warrants we executed in connection with
the transactions with the selling stockholders we agreed to indemnify and hold
harmless each selling stockholder against liabilities under the Securities Act,
which may be based upon, among other things, any untrue statement or alleged
untrue statement of a material fact or any omission or alleged omission of a
material fact, unless made or omitted in reliance upon written information
provided to us by that selling stockholder. We have agreed to bear the expenses
incident to the registration of the shares, other than selling discounts and
commissions.
- 15 -
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Section 145 of the Delaware General Corporation Law allows companies to
indemnify their directors and officers against expenses, judgments, fines and
amounts paid in settlement under the conditions and limitations described in the
law. Our certificate of incorporation authorizes us to indemnify our officers,
directors and other agent to the fullest extent permitted under Delaware law.
Our certificate of incorporation provides that a director is not
personally liable for monetary damages to us or our stockholders for breach of
his or her fiduciary duties as a director. A director will be held liable for a
breach of his or her duty of loyalty to us or our stockholders, his or her
intentional misconduct or willful violation of law, actions or in actions not in
good faith, an unlawful stock purchase or payment of a dividend under Delaware
law, or transactions from which the director derives an improper personal
benefit. This limitation of liability does not affect the availability of
equitable remedies against the director including injunctive relief or
rescission.
We have purchased a directors and officers liability and reimbursement
policy that covers liabilities of our directors and officers arising out of
claims based upon acts or omissions in their capacities as directors and
officers.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers and controlling persons 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.
- 16 -
LEGAL MATTERS
Parker Chapin Flattau & Klimpl, LLP, New York, New York will pass upon
the validity of the securities offered hereby. Martin Eric Weisberg, Esq., a
member of the firm, is our Secretary and one of our Directors.
EXPERTS
The consolidated financial statements incorporated in this Prospectus by
reference to the Annual Report on Form 10-KSB 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 1 to the consolidated financial statements) of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
- 17 -
===================================== ======================================
We have not authorized any dealer,
salesperson or any other person to give any 4,929,635
information or to represent anything not SHARES OF COMMON STOCK
contained in this prospectus. You must not
rely on any unauthorized information. This
prospectus does not offer to sell or buy any
shares in any jurisdiction where it is
unlawful. The information in this
prospectus is current as of
_________________, 1999.
-----------------
TABLE OF CONTENTS
Page
Risk Factors............................2
Where You Can Find More ----------
Information About Us............6 PROSPECTUS
Use of Proceeds.........................7 ----------
Dilution................................8
Effects of Possible Non-Cash
Future Charge...................9
Selling Stockholders ..................10
Description of Securities..............12
Plan of Distribution ..................14 _________________________, 1999
Indemnification for Securities
Act Liabilities................16
Legal Matters..........................17
Experts ...............................17
===================================== ======================================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses which will be paid
by Xybernaut in connection with the issuance and distribution of the securities
being registered on this Registration Statement. The selling stockholders will
not incur any of the expenses set forth below. All amounts shown are estimates.
Filing fee for registration statement..................... $5,554.31
Legal fees and expenses................................... $35,000.00
Accounting expenses....................................... $3,500.00
---------
Total................................................ $44,054.31
==========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware
(the "DGCL") provides, in general, that a corporation incorporated under the
laws of the State of Delaware, such as the registrant, may indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding (other than a derivative action
by or in the right of the corporation) by reason of the fact that such person is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding if such person
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe such person's
conduct was unlawful. In the case of a derivative action, a Delaware corporation
may indemnify any such person against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection with the defense
or settlement of such action or suit if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery of the State of Delaware or any other court in which such
action was brought determines such person is fairly and reasonably entitled to
indemnity for such expenses.
Xybernaut's Certificate of Incorporation provides that directors shall
not be personally liable for monetary damages to Xybernaut or its stockholders
for breach of fiduciary duty as a director, except for liability resulting from
a breach of the director's duty of loyalty to Xybernaut or its stockholders,
intentional misconduct or wilful violation of law, actions or inactions not in
good faith, an unlawful stock purchase or payment of a dividend under Delaware
law, or transactions from which the director derives improper personal benefit.
Such limitation of liability does not affect the availability of equitable
remedies such as injunctive relief or rescission. Xybernaut's Certificate of
Incorporation also authorizes Xybernaut to indemnify its officers, directors and
other agents, by bylaws, agreements or otherwise, to the fullest extent
permitted under Delaware law. Xybernaut has entered into an
II-1
Indemnification Agreement (the "Indemnification Agreement") with each of its
directors and officers which may, in some cases, be broader than the specific
indemnification provisions contained in Xybernaut's Certificate of Incorporation
or as otherwise permitted under Delaware law. Each Indemnification Agreement may
require Xybernaut, among other things, to indemnify such officers and directors
against certain liabilities that may arise by reason of their status or service
as a director or officer, against liabilities arising from willful misconduct of
a culpable nature, and to obtain directors' and officers' liability insurance if
available on reasonable terms.
Xybernaut maintains a directors and officers liability policy with
Genesis Insurance Company that contains a limit of liability of $3,000,000 per
policy year.
ITEM 16. EXHIBITS.
NUMBER DESCRIPTION OF EXHIBIT
3.1 Certificate of Designation of the Series D Preferred Stock.
4.1 Form of Securities Purchase Agreement used in the March 8, 1999 private
placement.
4.2 Form of Warrant used in the March 8, 1999 private placement.
4.3 Form of Warrant.
5 Opinion of Parker Chapin Flattau & Klimpl, LLP.
10.1 Form of Registration Rights Agreement used in the March 8, 1999 private
placement.
10.2 Form of Escrow Agreement used in the March 8, 1999 private placement.
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Parker Chapin Flattau & Klimpl, LLP (included in their
opinion filed as Exhibit 5.1).
24.1 Power of Attorney (included on page II-4).
- --------------
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;
(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 and of the estimated
maximum offering
II-2
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 percent 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;
(2) 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.
(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.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer or controlling person of the small business issuer
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 small business issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of the issue.
The undersigned small business issuer 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 Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-3
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 the City of Fairfax, Commonwealth of Virginia on April 29, 1999.
XYBERNAUT CORPORATION
By: /s/ Edward G. Newman
----------------------------
Edward G. Newman
Chairman of the Board, President
and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes Edward G. Newman and Steven A. Newman, each acting
alone, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this registration statement and to file the same with exhibits
thereto, and all documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement on Form S-3 has been signed below by the following
persons in the capacities and on the date indicated.
SIGNATURE TITLE DATE
--------- ----- ----
Chairman of the Board,
President and Chief Executive April 29, 1999
/s/ Edward G. Newman Officer
- -----------------------
Edward G. Newman
/s/ Kaz Toyosato Executive Vice President - April 29, 1999
- ----------------------- Asian Operations and Director
Kaz Toyosato
II-4
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Maarten R. Heybroek Chief Operating Officer and April 29, 1999
- -------------------------- Chief Financial Officer
Maarten R. Heybroek
/s/ Martin Eric Weisberg April 29, 1999
- --------------------------
Martin Eric Weisberg Secretary and Director
/s/ Harry E. Soyster Director April 29, 1999
- --------------------------
Lt. Gen. Harry E. Soyster
/s/ James J. Ralabate Director April 29, 1999
- --------------------------
James J. Ralabate
/s/ Keith P. Hicks Director April 29, 1999
- --------------------------
Keith P. Hicks
/s/ Steven A. Newman Vice Chairman and April 29, 1999
- -------------------------- Director
Steven A. Newman
/s/ Phillip E. Pearce Director April 29, 1999
- --------------------------
Phillip E. Pearce
Director April 29, 1999
/s/ Eugene J. Amobi
- --------------------------
Eugene J. Amobi
/s/ Edwin Vogt Director April 29, 1999
- --------------------------
Edwin Vogt
II-5
SECURITIES AND
EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549
-------------
EXHIBITS TO FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------
XYBERNAUT CORPORATION
(EXACT NAME OF ISSUER AS SPECIFIED
IN ITS CHARTER)
MAY 4, 1999
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF DOCUMENT
- ---------- -----------------------
3.1 Certificate of Designation of the Series D Preferred Stock.
4.1 Securities Purchase Agreement used in the March 8, 1999 private
placement.
4.2 Form of Warrant used in the March 8, 1999 private placement.
4.3 Form of Warrant.
5.1 Opinion of Parker Chapin Flattau & Klimpl, LLP.
10.1 Form of Registration Rights Agreement used in the March 8,
1999 private placement.
10.2 Form of Escrow Agreement used in the March 8, 1999 private
placement.
23.1 Consent of PricewaterhouseCoopers L.L.P.
23.2 Consent of Parker Chapin Flattau & Klimpl, LLP (included
in their opinion filed as Exhibit 5.1).
24.1 Power of Attorney (see page II-4 to the Registration Statement)
E-2