Filed
Pursuant to Rule 424(b)(5)
Registration
No. 333-225053
PROSPECTUS
SUPPLEMENT
(To
Prospectus dated May 29, 2018)
YOUNGEVITY
INTERNATIONAL, INC.
245,398
Shares of 9.75% Series D Cumulative Redeemable Perpetual Preferred
Stock
Liquidation
Preference $25.00 per Share
We are offering 245,398 shares of
our 9.75% Series D Cumulative Redeemable Perpetual Preferred Stock,
which we refer to in this prospectus supplement as the
“Series D Preferred Stock" for an offering price to the
public of $22.75 per share.
Dividends on the
Series D Preferred Stock offered hereby are cumulative from the
first day of the calendar month in which they are issued, and will
be payable on the fifteenth day of each calendar month, when, as
and if declared by our Board of Directors. Dividends will be
payable out of amounts legally available therefor at a rate equal
to 9.75% per annum per $25.00 of stated liquidation preference per
share, or $2.4375 per share of Series D Preferred Stock per
year.
Commencing on and
after September 23, 2022 we may redeem, at our option, the Series D
Preferred Stock, in whole or in part, at a cash redemption price of
$25.00 per share, plus all accrued and unpaid dividends to, but not
including, the redemption date. The Series D Preferred Stock has no
stated maturity, is not subject to any sinking fund or other
mandatory redemption, and is not convertible into or exchangeable
for any of our other securities.
Holders of the
Series D Preferred Stock generally have no voting rights except for
limited voting.
We
are restricted in our ability to issue or create any class or
series of capital stock ranking senior to the Series D Preferred
Stock with respect to dividends or distributions, so long as the
Series D Preferred Stock is outstanding, unless holders of at least
66.67% of the then outstanding Series D Preferred Stock consent to
same.
Our
Series D Preferred Stock is traded on The NASDAQ Capital Market
(“NASDAQ”) under the symbol “YGYIP.”
On
December
17,
2019, the last reported sale price of our Series D Preferred Stock
on NASDAQ was $23.25 per share. Our common
stock is traded on NASDAQ under the symbol
“YGYI.”
Investing in our Series D Preferred Stock involves a high degree of risk. See “Risk
Factors” beginning on page S-7 of this prospectus supplement for a discussion
of information that you should consider before investing in our
securities.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
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Public offering
price
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$22.75
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$5,582,805
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Underwriting
discounts and commissions (1)
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$1.82
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$446,624
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Proceeds, before
expenses, to us
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$20.93
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$5,136,181
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(1)
The underwriters will receive compensation in
addition to discounts and commissions. See
“Underwriting” for a description of compensation
payable to the underwriters.
This offering is
being completed on a “firm commitment” basis by the
underwriters.
We
have granted the representative of the underwriters an option to
purchase up to an additional 36,809
shares of Series D Preferred Stock from us at the public offering price (15% of the
shares sold in this offering), less the underwriting discounts and
commissions, within 45 days from the date of this prospectus
supplement to cover over-allotments, if any. If the representative
of the underwriters exercises the option in full the total
underwriting discounts and commissions payable will be $513,617
and the total proceeds to us, after underwriting discounts
and commissions and before expenses, will be $5,906,593.
The underwriters
expect to deliver the Series D Preferred Stock in book-entry form
through The Depository Trust Company on or about December 20,
2019.
Sole Book Running Manager
Benchmark
Company
The date of this
prospectus supplement is December 17,
2019
TABLE
OF CONTENTS
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PROSPECTUS SUPPLEMENT
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Page
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About This Prospectus Supplement
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S-i
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Industry and Market Data
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S-ii
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Prospectus Supplement Summary
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S-1
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The Offering
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S-4
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Risk Factors
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S-7
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Cautionary Statement Regarding Forward-Looking
Statements
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S-12
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Use of Proceeds
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S-13
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Capitalization
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S-14
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Description of the Series D Preferred Stock
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S-15
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Certain U.S. Federal Income Tax Considerations
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S-24
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Underwriting
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S-30
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Legal Matters
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S-33
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Experts
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S-33
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Where You Can Find More Information
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S-33
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Incorporation of Certain Documents By Reference
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S-33
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PROSPECTUS
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Page
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About This Prospectus
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1
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Our Business
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2
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Risk Factors
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8
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Cautionary Statement Regarding Forward-Looking
Statements
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8
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Industry and Market Data
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9
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Use of Proceeds
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10
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The Securities We May Offer
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11
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Description of Capital Stock
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12
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Description of Debt Securities
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16
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Description of Warrants
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23
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Description of Units
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25
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Legal Ownership of Securities
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26
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Plan of Distribution
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29
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Legal Matters
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31
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Experts
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31
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Where You Can Find More Information
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32
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Incorporation of Certain Documents By Reference
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32
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ABOUT
THIS PROSPECTUS SUPPLEMENT
This document is in
two parts. The first part is this prospectus supplement, which
describes the specific terms of this offering including the Series
D Preferred Stock and also adds to and updates information
contained in the accompanying prospectus and the documents
incorporated by reference in this prospectus supplement and the
accompanying prospectus. The second part is the accompanying
prospectus, which gives more general information. Generally, when
we refer to this prospectus, we are referring to both parts of this
document combined. To the extent there is a conflict between the
information contained in the prospectus and this prospectus
supplement, you should rely on the information in this prospectus
supplement; provided that if any statement in one of these
documents is inconsistent with a statement in another document
having a later date—for example, a document incorporated by
reference in the prospectus or this prospectus supplement—the
statement in the document having the later date modifies or
supersedes the earlier statement.
As permitted by the
rules and regulations of the Securities and Exchange Commission
(the “SEC”), the registration statement of which this
prospectus supplement forms a part includes additional information
not contained in this prospectus supplement. You may read the
registration statement and the other reports we file with the SEC
at the SEC’s website or at the SEC’s offices described
below under the heading “Where You Can Find More
Information.”
You should read
this prospectus supplement along with the accompanying prospectus
and the documents incorporated by reference carefully before you
invest. These documents contain important information you should
consider when making your investment decision. This prospectus
supplement contains information about the shares of Series D
Preferred Stock offered in this offering and may add, update or
change information in the accompanying prospectus.
None of Youngevity
International, Inc., the underwriters or any of their respective
representatives is making any representation to you regarding the
legality of an investment in our Series D Preferred Stock by you
under applicable laws. You should consult with your own advisors as
to legal, tax, business, financial and related aspects of an
investment in our Series D Preferred Stock.
Except where we or
the context otherwise indicate, the information in this prospectus
assumes no exercise of the underwriters’ option to purchase
additional shares of Series D Preferred Stock described on the
cover page of this prospectus.
We further note
that the representations, warranties and covenants made by us in
any agreement that is filed as an exhibit to any document that is
incorporated by reference in the accompanying prospectus were made
solely for the benefit of the parties to such agreement, including,
in some cases, for the purpose of allocating risk among the parties
to such agreements, and should not be deemed to be a
representation, warranty or covenant to you. Moreover, such
representations, warranties or covenants were accurate only as of
the date when made. Accordingly, such representations, warranties
and covenants should not be relied on as accurately representing
the current state of our affairs.
No action has been
or will be taken in any jurisdiction by us or The Benchmark
Company, LLC that would permit a public offering of the Series D
Preferred Stock or the possession or distribution of this
prospectus supplement and the accompanying prospectus in any
jurisdiction, other than in the United States. Persons outside the
United States who come into possession of this prospectus
supplement and the accompanying prospectus must inform themselves
about, and observe any restrictions relating to, the offering of
the Series D Preferred Stock and the distribution of this
prospectus supplement and the accompanying prospectus outside the
United States. This prospectus supplement and the accompanying
prospectus do not constitute, and may not be used in connection
with, an offer to sell, or a solicitation of an offer to buy, any
securities offered by this prospectus supplement and the
accompanying prospectus by any person in any jurisdiction in which
it is unlawful for such person to make such an offer or
solicitation.
INDUSTRY
AND MARKET DATA
We obtained the
industry and market data in this prospectus supplement from our own
research as well as from industry and general publications, surveys
and studies conducted by third parties. This data involves a number
of assumptions and limitations, and you are cautioned not to give
undue weight to such estimates. In addition, projections,
assumptions and estimates of our future performance and the future
performance of the industry in which we operate is necessarily
subject to a high degree of uncertainty and risk due to a variety
of factors, including those described in “Risk Factors”
and elsewhere in this prospectus supplement. These and other
factors could cause results to differ materially from those
expressed in the estimates made by the independent parties and by
us. Further, industry and general
publications, studies and surveys generally state that they have
been obtained from sources believed to be reliable, although they
do not guarantee the accuracy or completeness of such information.
While we believe that these publications, studies and surveys are
reliable, we have not independently verified the data contained in
them. In addition, while we believe that the results and estimates
from our internal research are reliable, such results and estimates
have not been verified by any independent
source.
PROSPECTUS
SUPPLEMENT SUMMARY
The items in the following summary are described in more detail
elsewhere in this prospectus supplement and in the documents
incorporated by reference herein. This summary provides an overview
of selected information and does not contain all the information
you should consider before investing in our securities. Therefore,
you should read the entire prospectus supplement and the
accompanying prospectus carefully, including the “Risk
Factors” section and other documents or information included
or incorporated by reference in this prospectus supplement and the
accompanying prospectus before making any investment decision.
Unless the context requires otherwise, references in this
prospectus supplement to “Youngevity,” “the
Company,” “we,” “us” and
“our” refer to Youngevity International,
Inc.
Our
Business
Overview
Youngevity, founded in 1996, operates in three
segments: the direct selling segment where products are offered
through a global distribution network of preferred customers and
distributors, the commercial coffee segment where products are sold
directly to businesses and the commercial hemp segment where we
provide end to end extraction and processing via our proprietary
systems that allow for the conversion of hemp feed stock into hemp
oil and hemp extracts. During the year ended December 31, 2018, we
operated in two business segments, our direct selling segment and
our commercial coffee segment. During the first quarter of
2019, through the acquisition
of the assets of Khrysos Global, Inc., we added commercial hemp as
a third business segment to our operations. Our three segments are
listed below:
●
Our direct selling business is operated through
the following (i) domestic subsidiaries: AL Global Corporation,
2400 Boswell LLC, MK Collaborative LLC, and Youngevity Global LLC
and (ii) foreign subsidiaries: Youngevity Australia Pty. Ltd.,
Youngevity NZ, Ltd., Youngevity Mexico S.A. de CV, Youngevity
Russia, LLC, Youngevity Colombia S.A.S, Youngevity International
Singapore Pte. Ltd., Mialisia Canada, Inc. and Legacy for Life
Limited (Hong Kong). We also operate through the BellaVita Group
LLC, with operations in Taiwan, Hong Kong, Singapore, Indonesia,
Malaysia and Japan. We also
operate subsidiary branches of Youngevity Global LLC in the
Philippines and Taiwan.
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Our commercial coffee business is operated through
our domestic operations of CLR Roasters, LLC (“CLR”) and its wholly-owned
subsidiary, Siles Plantation Family Group S.A.
(“Siles”).
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Our
commercial hemp business is operated through our domestic
operations of Khrysos Industries, Inc., a Delaware corporation.
Khrysos Industries, Inc. (“KII”) acquired the assets of
Khrysos Global Inc., a Florida corporation, in February 2019 and
the wholly-owned subsidiaries of Khrysos Global Inc., INXL
Laboratories, Inc., a Florida corporation and INX Holdings, Inc., a
Florida corporation.
During
the nine months ended September 30, 2019, we derived approximately
66.5% of our revenue from our direct selling segment, approximately
33.1% of our revenue from our commercial coffee segment and
approximately 0.4% from our commercial hemp segment.
We conduct our
operations primarily in the United States. For the nine months
ended September 30, 2019 and 2018 approximately 11% and 14%,
respectively, of our sales were derived from sales outside the
United States.
Direct Selling Segment
In the direct selling segment we sell health and
wellness, beauty product and skin care, scrap booking and story
booking items, packaged food products and other service-based
products, including our Hemp FX™ hemp-derived cannabinoid
product line on a global basis and offer a wide range of
products through an international direct selling network.
Our direct sales are made through our
network, which is a web-based global network of customers and
distributors. Our independent sales
force markets a variety of products to an array of customers,
through friend-to-friend marketing and social networking.
We consider our company to be an
e-commerce company whereby personal interaction is provided to
customers by our independent sales network. Initially, our focus
was solely on the sale of products in the health, beauty and home
care market through our marketing network; however, we have since
expanded our selling efforts to include a variety of other products
in other markets. Our direct selling segment offers more than 5,600
products to support a healthy lifestyle
including:
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Nutritional
supplements
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Gourmet
coffee
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Weight
management
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Skincare and
cosmetics
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Health and
wellness
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Packaged
foods
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Lifestyle products
(spa, bath, home and garden)
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Pet
care
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Digital products
including scrap and memory books
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Telecare health
services
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Apparel and fashion
accessories
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Business
lending
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Hemp-derived cannabinoid
products
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Since
2012 we have expanded our operations through a series of
acquisitions of the assets and equity of 25 direct selling
companies including their product lines and sales forces. We have
also substantially expanded our distributor base by merging the
assets that we have acquired under our web-based independent
distributor network, as well as providing our distributors with
additional new products to add to their product
offerings.
Commercial Coffee Segment
In the commercial
coffee segment, we engage in the commercial sale of roasted coffee
products and distribution of green coffee beans, through CLR, our
wholly-owned subsidiary which was established in 2001.
We own a traditional coffee roasting
business that sells roasted coffee products under its own Café
La Rica brand, Josie’s Java House brand, Javalution brands
and Café Cachita. CLR produces a variety of private labels
through major national sales outlets and to major customers
including cruise lines and office coffee service
operators, as well as through
our direct selling business. CLR produces and markets a unique line
of coffees with health benefits under the JavaFit® brand which
is sold directly to consumers. In January 2019, CLR acquired the
Café Cachita brand of espresso and in February 2019 we
announced the expansion of our Café Cachita brand of espresso
into retail stores throughout Southeastern Grocers. The new
distribution footprint now includes all Winn Dixie, Bi-Lo, Fresco Y
Mas, Save Mart and Harvey stores. In June 2019, we announced
all-store distribution for CLR’s Javalution™ Hemp
Infused Coffee Brand, scheduled to ship in the first quarter of
2020 with the distribution footprint including Winn Dixie stores,
Bi-Lo stores, Fresco Y Mas stores, and Harvey stores.
Our
roasting facility located in Miami, Florida, is 50,000 square feet
and is SQF Level 2 certified, which is a stringent food safety
process that verifies the coffee bean processing plant and
distribution facility is in compliance with Certified HACCP (Hazard
Analysis, Critical Control Points) food safety plans.
In March 2014, we expanded our coffee segment and
started our new green coffee bean distribution business with
CLR’s acquisition of Siles Plantation Family Group, which is a
wholly-owned subsidiary of CLR located in Matagalpa, Nicaragua.
Siles Plantation Family Group includes “La Pita,” a
dry-processing facility on approximately 26 acres of land and
“El Paraiso,” a coffee plantation consisting of
approximately 500 acres of land and thousands of coffee plants
which produces 100 percent Arabica coffee beans that are shade
grown, Organic, Rainforest Alliance Certified™ and Fair Trade
Certified™.
The
plantation and dry-processing facility allows CLR to control the
coffee production process from field to cup. The dry-processing
plant allows CLR to produce and sell green coffee beans to major
coffee suppliers in the United States and around the world. CLR has
engaged a husband and wife team to operate the Siles Plantation
Family Group by way of an operating agreement. The agreement
provides for the sharing of profits and losses generated by the
Siles Plantation Family Group after certain conditions are met. CLR
has made substantial improvements to the land and facilities since
2014.
Commercial Hemp Segment
In the commercial hemp segment, we are engaged in
the CBD hemp extraction technology and equipment business. We
develop, manufacture and sell equipment and related services to
clients which enable them to extract CBD oils from hemp
stock. In addition, through INX Laboratories, Inc., a
wholly-owned subsidiary of KII, we own a laboratory testing
facility that provides us with capabilities in regard to
formulation, quality control, and testing standards with its CBD
products. KII is now producing tinctures, balms, bath bombs,
creams, ointments, in various potencies, as well as
Javalution™ Hemp Infused Coffee Brand CBD coffee for CLR. KII
has also entered into various supply contracts with clients to
provide extraction services and end-to-end processing to produce
water soluble isolate, distillate, and water-soluble distillate
hemp derived products. These supply agreements include a five-year
supply contract with revenues forecasted at $60 million through
2024 (based on current market conditions and, among other things,
our ability to secure buyers for the produced product and the
supplier's ability to supply the biomass for extraction and
processing), and a one-year supply agreement expected to generate
$19 million in revenues (based on current market conditions). KII
also offers clients turnkey manufacturing solutions in extraction
services and end-to-end processing systems.
Recent
Developments
On September 24, 2019, we closed a firm commitment underwritten
public offering of 333,500 shares of our Series D Preferred Stock
(inclusive of 43,500 shares sold upon exercise of the
underwriter’s over-allotment option) (the “September
2019 Offering”). In connection with the September 2019
Offering, we entered into an underwriting agreement with The
Benchmark Company, LLC, as representative of the several
underwriters named therein.
On September 19, 2019, we filed a Certificate of Designations,
Rights and Preferences of 9.75% Series D Cumulative Redeemable
Perpetual Preferred Stock (the “Certificate of
Designations”) with the Secretary of State of the State of
Delaware designating up to 460,000 shares of our authorized
preferred stock as Series D Preferred Stock, with a liquidation
preference of $25.00 per share plus any accrued and unpaid
dividends, and further establishing the voting rights, powers,
preferences and privileges, and the relative, participating,
optional or other rights, and the qualifications, limitations or
restrictions thereof. As a result of the closing of the September
2019 Offering, we had an additional 126,500 shares of Series D
Preferred Stock available for issuance. In connection with this
offering, on December 17, 2019, we filed
a Certificate of Increase to the Certificate of Designations with
the Secretary of State of the State of Delaware to increase the
total number
of shares of preferred stock designated as
Series D Preferred Stock to an aggregate of 650,000 shares.
Our
Corporate History
Youngevity
International, Inc., formerly AL International, Inc., was founded
in 1996.
On July 11, 2011,
AL Global Corporation, a privately held California corporation
(“AL Global”), merged with and into a wholly-owned
subsidiary of Javalution Coffee Company, a publicly traded Florida
corporation (“Javalution”). After the merger,
Javalution reincorporated in Delaware and changed its name to AL
International, Inc. In connection with this merger, CLR, which had
been a wholly-owned subsidiary of Javalution prior to the merger,
continued to be a wholly-owned subsidiary of AL International, Inc.
CLR operates a traditional coffee roasting business, and through
the merger we were provided access to additional distributors, as
well as added the JavaFit® product line to our network of
direct marketers.
Effective July 23,
2013, we changed our name from AL International, Inc. to Youngevity
International, Inc.
On June 7, 2017, an
amendment to our Certificate of Incorporation became effective
which effectuated: (i) a 1-for-20 reverse stock split (the
“Reverse Split”) of the issued and outstanding shares
of common stock; (ii) a decrease in the number of shares of (a)
common stock authorized from 600,000,000 to 50,000,000 and (b)
preferred stock authorized from 100,000,000 to
5,000,000.
Our
Corporate Headquarters
Our corporate
headquarters are located at 2400 Boswell Road, Chula Vista,
California 91914. This is also the location of our operations and
distribution center. The facility consists of a 59,000 square foot
Class A single use building that is comprised 40% of office space
and the balance is used for distribution.
Our telephone
number is (619) 934-3980 and our facsimile number is (619)
934-3205.
Available
Information
Since June 21,
2017, our common stock has been listed on The NASDAQ Capital Market
under the symbol “YGYI.” From June 2013 until June
2017, our common stock was traded on the OTCQX Marketplace operated
by the OTC Markets Group under the symbol
“YGYI.”
Since September 20,
2019, our Series D Preferred Stock has been listed on The NASDAQ
Capital Market under the symbol “YGYIP.”
Additional
information about our company is contained at our website,
www.youngevity.com.
Information contained on our website is not incorporated by
reference into, and does not form any part of, this registration
statement. We have included our website address as a factual
reference and do not intend it to be an active link to our website.
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K and amendments to those reports filed
or furnished pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (the “Exchange Act”) are available
free of charge through the investor relations page of our internet
website as soon as reasonably practicable after those reports are
electronically filed with, or furnish it to, the SEC. The following
Corporate Governance documents are also posted on our website: Code
of Business Conduct and Ethics and the Charters for the Audit
Committee and Compensation Committee.
THE
OFFERING
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Securities offered
by us pursuant to this prospectus supplement
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245,398 shares of
9.75% Series D Cumulative Redeemable Perpetual Preferred Stock (the
“Series D Preferred Stock”), assuming no exercise by
the underwriters of their over-allotment option.
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Series D Preferred
Stock to be outstanding after this offering if the maximum number
of shares are sold
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578,898 shares of
Series D Preferred Stock, assuming no exercise by the underwriters
of their over-allotment option.
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Public
Offering Price
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$22.75
per share of Series D Preferred Stock
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Dividends
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Holders of the
Series D Preferred Stock are entitled to receive
cumulative cash dividends at a rate of 9.75% per annum of the
$25.00 per share liquidation preference (equivalent to $2.4375 per
annum per share) when, as and if declared by our Board of
Directors.
The record date for
the payment of dividends on the Series D Preferred Stock is the
close of business on the last day of the calendar month, whether or
not a business day, immediately preceding the month in which the
applicable dividends will be paid (each, a “dividend record
date”). The shares of Series D Preferred Stock offered hereby
will be credited as having accrued dividends since the first day of
the calendar month in which they are issued.
Dividends will be
payable monthly on the 15th day of each month (each, a
“dividend payment date”), provided that if any dividend
payment date is not a business day, then the dividend that would
otherwise have been payable on that dividend payment date may be
paid on the next succeeding business day without adjustment in the
amount of the dividend.
Any dividend
payable on the Series D Preferred Stock, including dividends
payable for any partial dividend period, will be computed on the
basis of a 360-day year consisting of twelve 30-day
months.
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No Maturity,
Sinking Fund or Mandatory Redemption
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The Series D
Preferred Stock has no stated maturity and is not subject to any
sinking fund or mandatory redemption. Shares of the Series D
Preferred Stock will remain outstanding indefinitely unless we
decide to redeem or otherwise repurchase them. We are not required
to set aside funds to redeem the Series D Preferred
Stock.
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Optional
Redemption
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The Series D
Preferred Stock is not redeemable by us prior to September 23,
2022, except as described below under “Special Optional
Redemption.” On and after such date, we may, at our option,
redeem the Series D Preferred Stock, in whole or in part, at any
time or from time to time, for cash at a redemption price equal to
$25.00 per share, plus any accumulated and unpaid dividends to, but
not including, the redemption date. Please see the section entitled
“Description of the Series D Preferred
Stock—Redemption—Optional
Redemption.”
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Special Optional
Redemption
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Upon the occurrence
of a Change of Control, we may, at our option, redeem the Series D
Preferred Stock, in whole or in part, within 120 days after the
first date on which such Change of Control occurred, for cash at a
redemption price of $25.00 per share, plus any accumulated and
unpaid dividends to, but not including, the redemption
date.
A “Change of
Control” is deemed to occur when the following have occurred
and are continuing:
the acquisition by
any person, including any syndicate or group deemed to be a
“person” under Section 13(d)(3) of the Exchange Act
(other than Stephan Wallach and Michelle Wallach, our chief
executive officer and our chief operating officer, respectively,
and our principal shareholders, any member of their immediate
family, and any “person” or “group” under
Section 13(d)(3) of the Exchange Act, that is controlled by Mr.
Wallach or Mrs. Wallach or any member of their immediate family,
any beneficiary of the estate of Mr. Wallach or Mrs. Wallach, or
any trust, partnership, corporate or other entity controlled by any
of the foregoing), of beneficial ownership, directly or indirectly,
through a purchase, merger or other acquisition transaction or
series of purchases, mergers or other acquisition transactions of
our stock entitling that person to exercise more than 50% of the
total voting power of all our stock entitled to vote generally in
the election of our directors (except that such person will be
deemed to have beneficial ownership of all securities that such
person has the right to acquire, whether such right is currently
exercisable or is exercisable only upon the occurrence of a
subsequent condition); and following the closing of any transaction
referred to above, neither we nor the acquiring or surviving entity
has a class of common securities (or American Depositary Receipts
representing such securities) listed on the NYSE, the NYSE American
or NASDAQ or listed or quoted on an exchange or quotation system
that is a successor to the NYSE, the NYSE American or
NASDAQ.
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Liquidation
Preference
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If we liquidate,
dissolve or wind up, holders of the Series D Preferred Stock will
have the right to receive $25.00 per share, plus any accumulated
and unpaid dividends to, but not including, the date of payment,
before any payment is made to the holders of our common stock.
Please see the section entitled “Description of the Series D
Preferred Stock—Liquidation Preference.”
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Ranking
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The Series D
Preferred Stock will rank, with respect to rights to the payment of
dividends and the distribution of assets upon our liquidation,
dissolution or winding up, (1) senior to all classes or series of
our common stock and to all other equity securities issued by us
other than equity securities referred to in clauses (2) and (3);
(2) on a parity with all equity securities issued by us with terms
specifically providing that those equity securities rank on a
parity with the Series D Preferred Stock with respect to rights to
the payment of dividends and the distribution of assets upon our
liquidation, dissolution or winding up; (3) junior to all equity
securities issued by us with terms specifically providing that
those equity securities rank senior to the Series D Preferred Stock
with respect to rights to the payment of dividends and the
distribution of assets upon our liquidation, dissolution or winding
up; and (4) effectively junior to all of our existing and future
indebtedness (including indebtedness convertible into our common
stock or preferred stock) and to the indebtedness and other
liabilities of (as well as any preferred equity interests held by
others in) our existing subsidiaries and any future subsidiaries.
Please see the section entitled “Description of the Series D
Preferred Stock–Ranking.”
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Limited Voting
Rights
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Holders of Series D
Preferred Stock generally have no voting rights. However, the
affirmative vote of the holders of at least two-thirds of the
outstanding shares of Series D Preferred Stock (voting together as
a class with all other series of parity preferred stock we may
issue upon which like voting rights have been conferred and are
exercisable) is required at any time for us to authorize or issue
any class or series of our capital stock ranking senior to the
Series D Preferred Stock with respect to the payment of dividends
or the distribution of assets on liquidation, dissolution or
winding up, to amend any provision of our certificate of
incorporation or the Series D Preferred Stock Certificate of
Designations so as to materially and adversely affect any rights of
the Series D Preferred Stock or to take certain other actions.
Please see the section entitled “Description of the Series D
Preferred Stock—Voting Rights.”
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Information
Rights
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During any period
in which we are not subject to Section 13 or 15(d) of the Exchange
Act and any shares of Series D Preferred Stock are outstanding, we
will use our best efforts to (i) make available on our website
copies of the Annual Reports on Form 10-K and Quarterly Reports on
Form 10-Q that we would have been required to file with the SEC
pursuant to Section 13 or 15(d) of the Exchange Act if we were
subject thereto (other than any exhibits that would have been
required) and (ii) promptly, upon request, supply copies of such
reports to any holders or prospective holder of Series D Preferred
Stock, subject to certain exceptions described in this prospectus.
We will use our best efforts to mail (or otherwise provide) the
information to the holders of the Series D Preferred Stock within
15 days after the respective dates by which a periodic report on
Form 10-K or Form 10-Q, as the case may be, in respect of such
information would have been required to be filed with the SEC, if
we were subject to Section 13 or 15(d) of the Exchange Act, in each
case, based on the dates on which we would be required to file such
periodic reports if we were a “non-accelerated filer”
within the meaning of the Exchange Act.
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Listing
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Our Series D
Preferred Stock is listed on The NASDAQ Capital Market under the
symbol “YGYIP.”
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Use of
Proceeds
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We plan to use the
net proceeds from this offering for working capital and other
general corporate purposes. See
“Use of Proceeds.”
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Risk
Factors
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Please read the
section entitled “Risk Factors” beginning on page S-7
for a discussion of some of the factors you should carefully
consider before deciding to invest in our Series D Preferred
Stock.
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Transfer
Agent
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The registrar,
transfer agent and dividend and redemption price disbursing agent
in respect of the Series D Preferred Stock is Pacific
Stock Transfer Company.
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Certain U.S.
Federal Income Tax Considerations
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For a discussion of
the federal income tax consequences of purchasing, owning and
disposing of the Series D Preferred Stock, please see the section
entitled “Certain U.S. Federal Income Tax
Considerations.” You should consult your tax advisor with
respect to the U.S. federal income tax consequences of owning the
Series D Preferred Stock in light of your own particular situation
and with respect to any tax consequences arising under the laws of
any state, local, foreign or other taxing
jurisdiction.
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Book Entry and
Form
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The Series D
Preferred Stock will be represented by one or more global
certificates in definitive, fully registered form deposited with a
custodian for, and registered in the name of, a nominee of The
Depository Trust Company (“DTC”).
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RISK
FACTORS
You should consider carefully the risks discussed under the section
captioned “Risk Factors” contained in our Annual Report
on Form 10-K for the year ended December 31, 2018 and in our
subsequent Quarterly Reports on Form 10-Q, as updated by our
subsequent filings under Exchange Act, each of which is
incorporated by reference in this prospectus in its entirety,
together with other information in this prospectus, and the
information and documents incorporated by reference in this
prospectus and any prospectus supplement that we have authorized
for use in connection with this offering before you make a decision
to invest in our securities. If any of these events actually occur,
our business, operating results, prospects or financial condition
could be materially and adversely affected. This could cause the
trading price of our common stock to decline and you may lose all
or part of your investment.
Risks
Related to the Series D Preferred Stock and this
Offering
Our management team may invest or spend the proceeds of this
offering in ways with which you may not agree or in ways which may
not yield a significant return.
Our management will
have broad discretion over the use of proceeds from this offering.
The net proceeds from this offering will be used primarily for
working capital and general corporate purposes. Our management will
have considerable discretion in the application of the net
proceeds, and you will not have the opportunity, as part of your
investment decision, to assess whether the proceeds are being used
appropriately. The net proceeds may be used for corporate purposes
that do not increase our operating results or enhance the value of
our preferred stock. The failure of our management to use these
funds effectively could have a material adverse effect on our
business, cause the market price of our preferred stock to decline
and potentially impair the operation and expansion of our business.
Pending their use, we may invest the net proceeds from this
offering in short-term, investment-grade, interest-bearing
instruments and U.S. government securities. These investments may
not yield a favorable return to our stockholders.
Our Series D Preferred Stock is subordinate to our existing and
future debt, and your interests could be diluted by the issuance of
additional preferred shares and by other transactions.
The Series D Preferred Stock will rank
junior to all of our existing and future debt and to other
non-equity claims on us and our assets available to satisfy claims
against us, including claims in bankruptcy, liquidation or similar
proceedings. Our future debt may include restrictions on our
ability to pay distributions to preferred stockholders. Our charter
currently authorizes the issuance of up to 5,000,000 shares of
preferred stock in one or more classes or series. As of the date of
this prospectus supplement, there are 161,135 shares of Series A
Preferred Stock designated all of which are outstanding, 1,052,631
shares of Series B Preferred Stock designated of which 129,332
shares of Series B Preferred Stock are outstanding, 700,000
shares of Series C Preferred Stock designated of which no shares of
Series C Preferred Stock are outstanding and 650,000
shares of Series D Preferred Stock designated of which
578,898 shares of Series D Preferred Stock will
be outstanding after the closing of this offering
(assuming no exercise by the underwriters of their over-allotment
option). Subject to limitations prescribed by Delaware law
and our charter, our Board of Directors is authorized to issue,
from our authorized but unissued shares of capital stock, preferred
stock in such classes or series as our Board of Directors may
determine and to establish from time to time the number of shares
of preferred stock to be included in any such class or series. The
issuance of additional shares of Series D Preferred Stock or
additional shares of Series A Preferred Stock, Series B Preferred
Stock or Series C Preferred Stock or another series of preferred
stock designated as ranking on parity with the Series D Preferred
Stock would dilute the interests of the holders of shares of the
Series D Preferred Stock, and the issuance of shares of any class
or series of our capital stock expressly designated as ranking
senior to the Series D Preferred Stock or the incurrence of
additional indebtedness could affect our ability to pay
distributions on, redeem or pay the liquidation preference on the
Series D Preferred Stock. The Series D Preferred Stock do not
contain any terms relating to or limiting our indebtedness or
affording the holders of shares of the Series D Preferred Stock
protection in the event of a highly leveraged or other transaction,
including a merger or the sale, lease or conveyance of all or
substantially all our assets, that might adversely affect the
holders of shares of the Series D Preferred Stock, so long as the
rights, preferences, privileges or voting power of the Series D
Preferred Stock or the holders thereof are not materially and
adversely affected.
The Series D Preferred Stock has not been rated.
Our Series D
Preferred Stock has not been rated by any nationally recognized
statistical rating organization, which may negatively affect their
market value and your ability to sell such shares. No assurance can
be given, however, that one or more rating agencies might not
independently determine to issue such a rating or that such a
rating, if issued, would not adversely affect the market price of
our Series D Preferred Stock. In addition, we may elect in the
future to obtain a rating of our Series D Preferred Stock, which
could adversely impact the market price of our Series D Preferred
Stock. Ratings only reflect the views of the rating agency or
agencies issuing the ratings and such ratings could be revised
downward or withdrawn entirely at the discretion of the issuing
rating agency if, in its judgment, circumstances so warrant. Any
such downward revision or withdrawal of a rating could have an
adverse effect on the market price of our Series D Preferred
Stock.
As a holder of shares of the Series D Preferred Stock, you have
extremely limited voting rights.
Your voting rights
as a holder of shares of the Series D Preferred Stock will be
limited. Our shares of common stock are the only class of our
securities carrying full voting rights. Voting rights for holders
of shares of the Series D Preferred Stock exist primarily with
respect to adverse changes in the terms of the Series D Preferred
Stock and the creation of additional classes or series of preferred
shares that are senior to the Series D Preferred Stock. Other than
these limited voting rights described in this prospectus
supplement, holders of shares of the Series D Preferred Stock do
not have any voting rights. See “Description of the Series D
Preferred Stock—Voting Rights” in this prospectus
supplement.
Our cash available for distributions may not be sufficient to pay
distributions on the Series D Preferred Stock at expected levels,
and we cannot assure you of our ability to pay distributions in the
future. We may use borrowed funds or funds from other sources to
pay distributions, which may adversely impact our
operations.
We intend to pay
regular monthly distributions to holders of our Series D Preferred
Stock. Distributions declared by us will be authorized by our Board
of Directors in its sole discretion out of assets legally available
for distribution and will depend upon a number of factors,
including our earnings, our financial condition, restrictions under
applicable law, our need to comply with the terms of our existing
financing arrangements, the capital requirements of our company and
other factors as our Board of Directors may deem relevant from time
to time. We may be required to fund distributions from working
capital, proceeds of this offering or a sale of assets to the
extent distributions exceed earnings or cash flows from operations.
Funding distributions from working capital would restrict our
operations. If we are required to sell assets to fund
distributions, such asset sales may occur at a time or in a manner
that is not consistent with our disposition strategy. If we borrow
to fund distributions, our leverage ratios and future interest
costs would increase, thereby reducing our earnings and cash
available for distribution from what they otherwise would have
been. We may not be able to pay distributions in the future. In
addition, some of our distributions may be considered a return of
capital for income tax purposes. If we decide to make distributions
in excess of our current and accumulated earnings and profits, such
distributions would generally be considered a return of capital for
federal income tax purposes to the extent of the holder’s
adjusted tax basis in its shares. A return of capital is not
taxable, but it has the effect of reducing the holder’s
adjusted tax basis in its investment. If distributions exceed the
adjusted tax basis of a holder’s shares, they will be treated
as gain from the sale or exchange of such stock.
We could be prevented from paying cash dividends on the Series D
Preferred Stock due to prescribed legal requirements.
Holders of shares
of Series D Preferred Stock do not have a right to dividends on
such shares unless declared or set aside for payment by our Board
of Directors. Under Delaware law, cash dividends on capital stock
may only be paid from “surplus” or, if there is no
“surplus,” from the corporation’s net profits for
the then-current or the preceding fiscal year. Unless we operate
profitably, our ability to pay cash dividends on the Series D
Preferred Stock would require the availability of adequate
“surplus,” which is defined as the excess, if any, of
net assets (total assets less total liabilities) over capital. Our
business may not generate sufficient cash flow from operations to
enable us to pay dividends on the Series D Preferred Stock when
payable. Further, even if adequate surplus is available to pay cash
dividends on the Series D Preferred Stock, we may not have
sufficient cash to pay dividends on the Series D Preferred
Stock.
Furthermore, no
dividends on Series D Preferred Stock shall be authorized by our
Board of Directors or paid, declared or set aside for payment by us
at any time when the authorization, payment, declaration or setting
aside for payment would be unlawful under Delaware law or any other
applicable law. See “Description of the Series D Preferred
Stock — Dividends.”
We may redeem the Series D Preferred Stock and you may not receive
dividends that you anticipate if we do redeem the Series
D.
On or after
September 23, 2022 we may, at our option, redeem the Series D
Preferred Stock, in whole or in part, at any time or from time to
time. Also, upon the occurrence of a Change of Control, we may, at
our option, redeem the Series D Preferred Stock, in whole or in
part, within 120 days after the first date on which such Change of
Control occurred. We may have an incentive to redeem the Series D
Preferred Stock voluntarily if market conditions allow us to issue
other preferred stock or debt securities at a rate that is lower
than the dividend rate on the Series D Preferred Stock. If we
redeem the Series D Preferred Stock, then from and after the
redemption date, dividends will cease to accrue on shares of Series
D Preferred Stock, the shares of Series D Preferred Stock shall no
longer be deemed outstanding and all rights as a holder of those
shares will terminate, except the right to receive the redemption
price plus accumulated and unpaid dividends, if any, payable upon
redemption.
Holders of shares of the Series D Preferred Stock should not expect
us to redeem the Series D Preferred Stock on or after the date they
become redeemable at our option.
The Series D
Preferred Stock will be a perpetual equity security. This means
that it will have no maturity or mandatory redemption date and will
not be redeemable at the option of the holders. The Series D
Preferred Stock may be redeemed by us at our option either in whole
or in part, from time to time, at any time on or after September
23, 2022, or upon the occurrence of a Change of Control. Any
decision we may make at any time to propose a redemption of the
Series D Preferred Stock will depend upon, among other things, our
evaluation of our capital position, the composition of our
stockholders’ equity and general market conditions at that
time.
The Series D Preferred Stock is not convertible, and investors will
not realize a corresponding upside if the price of the common stock
increases.
The Series D
Preferred Stock is not convertible into shares of our common stock
and earns dividends at a fixed rate. Accordingly, an increase in
market price of our common stock will not necessarily result in an
increase in the market price of our Series D Preferred Stock. The
market value of the Series D Preferred Stock may depend more on
dividend and interest rates for other preferred stock, commercial
paper and other investment alternatives and our actual and
perceived ability to pay dividends on, and in the event of
dissolution satisfy the liquidation preference with respect to, the
Series D Preferred Stock.
The Change of Control right may make it more difficult for a party
to acquire us or discourage a party from acquiring us.
The Change of
Control right (as defined under “Description of the Series D
Preferred Stock — Special Optional Redemption”) may
have the effect of discouraging a third party from making an
acquisition proposal for us or of delaying, deferring or preventing
certain of our change of control transactions under circumstances
that otherwise could provide the holders of our Series D Preferred
Stock with the opportunity to realize a premium over the
then-current market price of such equity securities or that
stockholders may otherwise believe is in their best
interests.
The market for the Series D Preferred Stock may not provide
investors with adequate liquidity.
Liquidity of the
market for the Series D Preferred Stock may be influenced by many
factors, including paying distributions on the Series D Preferred
Stock, variations in our financial results, the market for similar
securities, investors’ perception of us, our issuance of
additional preferred equity or indebtedness and general economic,
industry, interest rate and market conditions. Because the Series D
Preferred Stock carries a fixed distribution rate, its value in the
secondary market will be influenced by changes in interest rates
and will tend to move inversely to such changes. In particular, an
increase in market interest rates may result in higher yields on
other financial instruments and may lead purchasers of Series D
Preferred Stock to demand a higher yield on the price paid for the
Series D Preferred Stock, which could adversely affect the market
price of the Series D Preferred Stock. If an active trading market
for the Series D Preferred Stock is not maintained, investors may
have difficulty selling shares of the Series D Preferred Stock
offered hereby. Even if an active public market does develop, we
cannot guarantee you that the market price for the Series D
Preferred Stock will equal or exceed the price you pay for your
Series D Preferred Stock.
If the Series D Preferred Stock is delisted, the ability to
transfer or sell shares of the Series D Preferred Stock may be
limited and the market value of the Series D Preferred Stock will
likely be materially adversely affected.
The Series D
Preferred Stock does not contain provisions that are intended to
protect investors if the Series D Preferred Stock is delisted from
the NASDAQ. If the Series D Preferred Stock is delisted from the
NASDAQ, investors’ ability to transfer or sell shares of the
Series D Preferred Stock will be limited and the market value of
the Series D Preferred Stock will likely be materially adversely
affected. Moreover, since the Series D Preferred Stock has no
stated maturity date, investors may be forced to hold shares of the
Series D Preferred Stock indefinitely while receiving stated
dividends thereon when, as and if authorized by our Board of
Directors and paid by us with no assurance as to ever receiving the
liquidation value thereof.
Market interest rates may have an effect on the value of the Series
D Preferred Stock.
One of the factors
that will influence the price of the Series D Preferred Stock will
be the distribution yield on the Series D Preferred Stock (as a
percentage of the market price of the Series D Preferred Stock)
relative to market interest rates. An increase in market interest
rates, which are currently at low levels relative to historical
rates, may lead prospective purchasers of the Series D Preferred
Stock to expect a higher distribution yield (and higher interest
rates would likely increase our borrowing costs and potentially
decrease funds available for distribution payments). Thus, higher
market interest rates could cause the market price of the Series D
Preferred Stock to decrease and reduce the amount of funds that are
available and may be used to make distribution
payments.
In the event of a liquidation, you may not receive the full amount
of your liquidation preference.
In the event of our
liquidation of the Company, the proceeds will be used first to
repay indebtedness and then to pay holders of shares of the Series
D Preferred Stock and any other class or series of our capital
stock ranking senior to or on parity with the Series D Preferred
Stock as to liquidation the amount of each holder’s
liquidation preference and accrued and unpaid distributions through
the date of payment. In the event we have insufficient funds to
make payments in full to holders of the shares of the Series D
Preferred Stock and any other class or series of our capital stock
ranking senior to or on parity with the Series D Preferred Stock as
to liquidation, such funds will be distributed ratably among such
holders and such holders may not realize the full amount of their
liquidation preference.
We are generally restricted from issuing shares of other series of
preferred stock that rank senior the Series D Preferred Stock as to
dividend rights, rights upon liquidation or voting rights, but may
do so with the requisite consent of the holders of the Series D
Preferred Stock; and, further, no such consent is required for an
increase in the number of shares of Series D Preferred Stock or the
issuance of additional shares of Series D Preferred Stock or series
of preferred stock ranking pari passu with the Series D Preferred
Stock so long as such increase in the number of shares of Series D
Preferred Stock or issuance of such new series of preferred stock
does not provide for, in the aggregate (taken together with any
previously issued shares of Series D Preferred Stock), the payment
of annual dividends on (in the case of additional shares of Series
D Preferred Stock), or on parity with (in the case of any other
series of preferred stock) in excess of $2,437,500.
We are allowed to
issue shares of other series of preferred stock that rank above the
Series D Preferred Stock as to dividend payments and rights upon
our liquidation, dissolution or winding up of our affairs, only
with the approval of the holders of at least two-thirds of the
outstanding Series D Preferred Stock; however, we are allowed to
increase the number of shares of Series D Preferred Stock and/or
additional series of preferred stock that would rank equally to the
Series D Preferred Stock as to dividend payments and rights upon
our liquidation or winding up of our affairs without first
obtaining the approval of the holders of our Series D Preferred
Stock, so long as such increase in the number of shares of Series D
Preferred Stock or issuance of such new series of preferred stock
does not provide for, in the aggregate (taken together with any
previously issued shares of Series D Preferred Stock), the payment
of annual dividends on (in the case of additional shares of Series
D Preferred Stock), or on parity with (in the case of any other
series of preferred stock) in excess of $2,437,500. The issuance of
additional shares of Series D Preferred Stock and/or additional
series of preferred stock could have the effect of reducing the
amounts available to the Series D Preferred Stock upon our
liquidation or dissolution or the winding up of our affairs. It
also may reduce dividend payments on the Series D Preferred Stock
if we do not have sufficient funds to pay dividends on all Series D
Preferred Stock outstanding and other classes or series of stock
with equal or senior priority with respect to dividends. Future
issuances and sales of senior or pari passu preferred stock, or the
perception that such issuances and sales could occur, may cause
prevailing market prices for the Series D Preferred Stock and our
common stock to decline and may adversely affect our ability to
raise additional capital in the financial markets at times and
prices favorable to us.
The market price of the Series D Preferred Stock could be
substantially affected by various factors.
The market price of
the Series D Preferred Stock could be subject to wide fluctuations
in response to numerous factors. The price of the Series D
Preferred Stock that will prevail in the market after this offering
may be higher or lower than the offering price depending on many
factors, some of which are beyond our control and may not be
directly related to our operating performance.
These factors
include, but are not limited to, the following:
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prevailing interest
rates, increases in which may have an adverse effect on the market
price of the Series D Preferred Stock;
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trading prices of
similar securities;
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our history of
timely dividend payments;
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the annual yield
from dividends on the Series D Preferred Stock as compared to
yields on other financial instruments;
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general economic
and financial market conditions;
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government action
or regulation;
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the financial
condition, performance and prospects of us and our
competitors;
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changes in
financial estimates or recommendations by securities analysts with
respect to us or our competitors in our
industry;
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our issuance of
additional preferred equity or debt securities;
and
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actual or
anticipated variations in quarterly operating results of us and our
competitors.
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As
a result of these and other factors, investors who purchase the
Series D Preferred Stock in this offering may experience a
decrease, which could be substantial and rapid, in the market price
of the Series D Preferred Stock, including decreases unrelated to
our operating performance or prospects.
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This prospectus
supplement and the documents incorporated by reference herein
contain forward-looking statements that are based on current
management expectations. Statements other than statements of
historical fact included in this prospectus supplement, including
statements about us and the future growth and anticipated operating
results and cash expenditures, 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
Exchange Act. When used in this prospectus supplement the words
“anticipate,” “objective,”
“may,” “might,” “should,”
“could,” “can,” “intend,”
“expect,” “believe,”
“estimate,” “predict,”
“potential,” “plan” or the negative of
these and similar expressions identify forward-looking statements.
These statements reflect our current views with respect to
uncertain future events and are based on imprecise estimates and
assumptions and subject to risk and uncertainties. Given these
uncertainties, you should not place undue reliance on these
forward-looking statements. While we believe our plans, intentions
and expectations reflected in those forward-looking statements are
reasonable, these plans, intentions or expectations may not be
achieved. Our actual results, performance or achievements could
differ materially from those contemplated, expressed or implied by
the forward-looking statements contained in, or incorporated by
reference into, this prospectus supplement for a variety of
reasons.
We urge investors
to review carefully risks contained in the section of this
prospectus entitled “Risk Factors” above as well as
other risks and factors identified from time to time in our SEC
filings in evaluating the forward-looking statements contained in
this prospectus supplement. We caution investors not to place
significant reliance on forward-looking statements contained in
this document; such statements need to be evaluated in light of all
the information contained herein.
All forward-looking
statements attributable to us or persons acting on our behalf are
expressly qualified in their entirety by the risk factors and other
cautionary statements set forth, or incorporated by reference, in
this prospectus supplement. Other than as required by applicable
securities laws, we are under no obligation, and we do not intend,
to update any forward-looking statement, whether as result of new
information, future events or otherwise.
USE
OF PROCEEDS
We estimate that
the net proceeds from the sale of the Series D Preferred Stock in
this offering after deducting the underwriting discount and
estimated offering costs and expenses payable by us, will be
approximately $4.9 million (or
$5.7 million if the underwriters fully exercise their
option to purchase additional shares). We intend to use the net
proceeds, if any, from this offering for working capital and other
general corporate purposes.
We have not
allocated any specific portion of the net proceeds to any
particular purpose, and our management will have the discretion to
allocate the proceeds as it determines. Furthermore, the amount and
timing of our actual expenditures will depend on numerous factors,
including the cash used in or generated by our operations, the pace
of the integration of acquired businesses, the level of our sales
and marketing activities and the attractiveness of any additional
acquisitions or investments. See “Risk Factors – Our
management team may invest or spend the proceeds of this offering
in ways with which you may not agree or in ways which may not yield
a significant return.”
Pending our use of
the net proceeds from this offering, we intend to invest the net
proceeds in a variety of capital preservation investments,
including short-term, investment grade, interest bearing
instruments and U.S. government securities.
CAPITALIZATION
The table below
sets forth our cash and cash equivalents and capitalization as of
September 30, 2019 on:
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an actual basis;
and
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on as adjusted
basis to reflect the issuance of 245,398 shares of Series D
Preferred Stock in this offering (assuming no exercise by the
underwriters of their over-allotment option).
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You should consider
this table in conjunction with “Use of Proceeds,”
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and our financial
statements and related notes incorporated by reference into this
prospectus supplement and the other financial information included
elsewhere in this prospectus supplement or incorporated by
reference in this prospectus supplement and the accompanying
prospectus.
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(in
thousands, except share data)
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Cash and cash
equivalents
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$7,270
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$12,166
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Total long-term
liabilities
|
26,193
|
26,193
|
|
|
|
|
|
Stockholders’
equity
|
|
|
|
Preferred
Stock, $0.001 par value: 5,000,000 shares authorized
|
|
|
|
Convertible
Preferred Stock, Series A – 161,135 shares issued and
outstanding at September 30, 2019 and December 31,
2018
|
—
|
—
|
|
Convertible
Preferred Stock, Series B – 129,332 and 129,437 shares issued
and outstanding at September 30, 2019 and December 31, 2018,
respectfully
|
—
|
—
|
|
Preferred
Stock, Series D – 333,500 shares issued and outstanding,
actual, 578,898 shares outstanding, as adjusted
|
—
|
—
|
|
Common Stock,
$0.001 par value: 50,000,000 shares authorized; 30,270,360 and
25,760,708 shares issued and outstanding at September 30, 2019
actual and December 31, 2018, respectively;
|
30
|
30
|
|
Additional
paid-in capital
|
260,083
|
264,979
|
|
Accumulated
deficit
|
(203,944)
|
(203,944)
|
|
Accumulated other
comprehensive loss
|
4
|
4
|
|
Total
stockholders’ equity
|
56,173
|
61,069
|
|
Total
capitalization
|
$82,366
|
$87,262
|
Based on 30,270,360
shares of our common stock outstanding as of September 30, 2019,
and excludes as of that date:
●
3,571
shares of our common stock that are issuable upon conversion of the
notes in the principal amount of $25,000 that we issued in 2014
with a conversion price of $7.00 per share;
●
309,000
shares of our common stock that are issuable upon conversion of the
notes in the principal amount of $3,090,000 that we issued in 2019
with a conversion price of $10.00 per share;
●
6,238,182
shares of our common stock that are issuable upon exercise of
outstanding warrants with a weighted average exercise price of
$5.65 per share;
●
4,672,997
shares of our common stock that are issuable upon exercise of
outstanding options, with a weighted average exercise price of
$5.62 which were issued under our equity incentive
plan;
●
456,111
shares of our common stock that are issuable upon the vesting of
restricted stock units which were issued under our equity incentive
plan;
●
3,718,375
shares of our common stock which are reserved for equity awards
that may be granted under our equity incentive
plan;
●
36,809 shares of
Series D Preferred Stock subject to the option granted to the
representative of the underwriters, and
●
an
aggregate of 275,600 shares of our common stock
issuable upon conversion of our outstanding shares of preferred
stock (258,664 shares of our common stock that are issuable upon
conversion of 129,332 outstanding shares of Series B Convertible
Preferred Stock and 16,936 shares of our common stock
issuable upon conversion of 161,135 outstanding shares of Series A
Convertible Preferred Stock).
DESCRIPTION
OF THE SERIES D PREFERRED STOCK
The description of
certain terms of the 9.75% Series D Cumulative Redeemable Perpetual
Preferred Stock (“Series D Preferred Stock”) in this
prospectus and the accompanying prospectus does not purport to be
complete and is in all respects subject to, and qualified in its
entirety by references to the relevant provisions of our
certificate of incorporation, as amended, the certificate of
designations, as amended, establishing the terms of our Series D
Preferred Stock, our bylaws and Delaware corporate law. Copies of
our certificate of incorporation, certificate of designations,
bylaws and all amendments thereto, are available from us upon
request.
General
In connection
with this offering, on December 17, 2019, we filed a Certificate
of Increase to the Certificate of Designations of our Series D
Preferred Stock with the Secretary of State of the State of
Delaware to increase the number of shares of preferred stock
designated as Series D Preferred Stock to an aggregate of
650,000
shares.
After all of the 245,398 shares of Series
D Preferred Stock offered hereunder are issued (excluding the
overallotment option), we will have outstanding 578,898 shares of
Series D Preferred Stock (and 71,102 shares of Series D
Preferred Stock remaining for issuance) and an additional
2,436,234
shares authorized, but undesignated
shares, of preferred stock. The Series D Preferred
Stock offered hereby, when issued, delivered and paid for in
accordance with the terms of the underwriting agreement, will be
fully paid and nonassessable. Our Board of Directors may, without
the approval of holders of the Series D Preferred Stock or our
common stock, subject to certain limitations, designate additional
series of authorized preferred stock ranking junior to or on parity
with the Series D Preferred Stock or designate additional shares of
the Series D Preferred Stock and authorize the issuance of such
shares. Designation of preferred stock ranking senior to the Series
D Preferred Stock will require approval of the holders of Series D
Preferred Stock, as described below in “Voting
Rights.”
The registrar,
transfer agent and dividend and redemption price disbursing agent
in respect of the Series D Preferred Stock is Pacific Stock Transfer Company. The
principal business address for Pacific
Stock Transfer Company is 6725 Via Austi Parkway, Suite 300, Las
Vegas Nevada 89119.
Listing
Our Series D
Preferred Stock is listed on The NASDAQ Capital Market
under the symbol “YGYIP.”
No
Maturity, Sinking Fund or Mandatory Redemption
The Series D
Preferred Stock has no stated maturity and is not subject to any
sinking fund or mandatory redemption. Shares of the Series D
Preferred Stock will remain outstanding indefinitely unless we
decide to redeem or otherwise repurchase them. We are not required
to set aside funds to redeem the Series D Preferred
Stock.
Ranking
The Series D
Preferred Stock ranks, with respect to rights to the payment of
dividends and the distribution of assets upon our liquidation,
dissolution or winding up:
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|
(1)
|
senior to all classes or series of our common
stock and to all other equity securities issued by us including our
outstanding Series A Preferred Stock and Series B Preferred and any
shares of Series C Stock that may be issued (none of which
Series C Preferred Stock are currently outstanding as of the date
of this prospectus supplement) other
than equity securities referred to in clauses (2) and (3)
below;
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|
(2)
|
on
a parity with all equity securities issued by us with terms
specifically providing that those equity securities rank on a
parity with the Series D Preferred Stock with respect to rights to
the payment of dividends and the distribution of assets upon our
liquidation, dissolution or winding up;
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|
|
|
|
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(3)
|
junior
to all equity securities issued by us with terms specifically
providing that those equity securities rank senior to the Series D
Preferred Stock with respect to rights to the payment of dividends
and the distribution of assets upon our liquidation, dissolution or
winding up (please see the section entitled “—Voting
Rights” below); and
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|
|
|
|
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(4)
|
effectively
junior to all of our existing and future indebtedness (including
indebtedness convertible to our common stock or preferred stock)
and to any indebtedness and other liabilities of (as well as any
preferred equity interests held by others in) our
subsidiaries.
|
Dividends
Holders of shares
of the Series D Preferred Stock are entitled to receive, when, as
and if declared by the Board of Directors, out of our funds legally
available for the payment of dividends, cumulative cash dividends
at the rate of 9.75% per annum on the $25.00 per share liquidation
preference of the Series D Preferred Stock (equivalent to $2.4375
per annum per share). Dividends on the Series D Preferred Stock
accrue daily and shall be cumulative from, and including, the
applicable issue date and are payable monthly in arrears on the
15th day of each month; provided that if any dividend payment date
is not a business day, as defined in the certificate of
designations, then the dividend that would otherwise have been
payable on that dividend payment date may be paid on the next
succeeding business day and no interest, additional dividends or
other sums will accrue on the amount so payable for the period from
and after that dividend payment date to that next succeeding
business day. Any dividend payable on the Series D Preferred Stock,
including dividends payable for any partial dividend period, are
computed on the basis of a 360-day year consisting of twelve 30-day
months; however, the shares of Series D Preferred Stock offered
hereby will be credited as having accrued dividends since the first
day of the calendar month in which they are issued. Dividends will
be payable to holders of record as they appear in our stock records
for the Series D Preferred Stock at the close of business on the
applicable record date, which is the last day of the calendar
month, whether or not a business day, immediately preceding the
month in which the applicable dividend payment date falls. As a
result, holders of shares of Series D Preferred Stock will not be
entitled to receive dividends on a dividend payment date if such
shares were not issued and outstanding on the applicable dividend
record date.
No dividends on
shares of Series D Preferred Stock shall be authorized by our Board
of Directors or paid or set apart for payment by us at any time
when the terms and provisions of any agreement of ours, including
any agreement relating to our indebtedness, prohibit the
authorization, payment or setting apart for payment thereof or
provide that the authorization, payment or setting apart for
payment thereof would constitute a breach of the agreement or a
default under the agreement, or if the authorization, payment or
setting apart for payment shall be restricted or prohibited by law.
You should review the information appearing above under “Risk
Factors— We could be prevented from paying cash dividends on
the Series D Preferred Stock due to prescribed legal
requirements” and “Risk Factors—Our cash
available for distributions may not be sufficient to pay
distributions on the Series D Preferred Stock at expected levels,
and we cannot assure you of our ability to pay distributions in the
future. We may use borrowed funds or funds from other sources to
pay distributions, which may adversely impact our
operations,” for information as to, among other things, other
circumstances under which we may be unable to pay dividends on the
Series D Preferred Stock.
Notwithstanding the
foregoing, dividends on the Series D Preferred Stock will
accumulate whether or not we have earnings, whether or not there
are funds legally available for the payment of those dividends and
whether or not those dividends are declared by our Board of
Directors. No interest, or sum in lieu of interest, will be payable
in respect of any dividend payment or payments on the Series D
Preferred Stock that may be in arrears, and holders of the Series D
Preferred Stock will not be entitled to any dividends in excess of
full cumulative dividends described above. Any dividend payment
made on the Series D Preferred Stock shall first be credited
against the earliest accumulated but unpaid dividend due with
respect to those shares.
Future
distributions on our common stock and preferred stock, including
the Series D Preferred Stock will be at the discretion of our Board
of Directors and will depend on, among other things, our results of
operations, cash flow from operations, financial condition and
capital requirements, any debt service requirements and any other
factors our Board of Directors deems relevant. Accordingly, we
cannot guarantee that we will be able to make cash distributions on
our preferred stock or what the actual distributions will be for
any future period.
Except as provided
in the next paragraph, unless full cumulative dividends on all
shares of Series D Preferred Stock have been or contemporaneously
are declared and paid or declared and a sum sufficient for the
payment thereof has been or contemporaneously is set apart for
payment for all past dividend periods, no dividends (other than in
shares of common stock or in shares of any series of preferred
stock that we may issue ranking junior to the Series D Preferred
Stock as to the payment of dividends and the distribution of assets
upon liquidation, dissolution or winding up) shall be declared or
paid or set aside for payment upon shares of our common stock or
preferred stock that we may issue ranking junior to, or on a parity
with, the Series D Preferred Stock as to the payment of dividends
or the distribution of assets upon liquidation, dissolution or
winding up. Nor shall any other distribution be declared or made
upon shares of our common stock or preferred stock that we may
issue ranking junior to, or on a parity with, the Series D
Preferred Stock as to the payment of dividends or the distribution
of assets upon liquidation, dissolution or winding up. Also, any
shares of our common stock or preferred stock that we may issue
ranking junior to or on a parity with the Series D Preferred Stock
as to the payment of dividends or the distribution of assets upon
liquidation, dissolution or winding up, shall not be redeemed,
purchased or otherwise acquired for any consideration (or any
moneys paid to or made available for a sinking fund for the
redemption of any such shares) by us (except by conversion into or
exchange for our other capital stock that we may issue ranking
junior to the Series D Preferred Stock as to the payment of
dividends and the distribution of assets upon liquidation,
dissolution or winding up); provided, however, that the foregoing
shall not prevent the purchase or acquisition by us of shares of
Series D Preferred Stock pursuant to a purchase or exchange offer
made on the same terms to holders of all outstanding shares of
Series D Preferred Stock.
When dividends are
not paid in full (or a sum sufficient for such full payment is not
so set apart) upon the Series D Preferred Stock and the shares of
any other series of preferred stock that we may issue ranking on a
parity as to the payment of dividends with the Series D Preferred
Stock, all dividends declared upon the Series D Preferred Stock and
any other series of preferred stock that we may issue ranking on a
parity as to the payment of dividends with the Series D Preferred
Stock shall be declared pro rata so that the amount of dividends
declared per share of Series D Preferred Stock and such other
series of preferred stock that we may issue shall in all cases bear
to each other the same ratio that accrued dividends per share on
the Series D Preferred Stock and such other series of preferred
stock that we may issue (which shall not include any accrual in
respect of unpaid dividends for prior dividend periods if such
preferred stock does not have a cumulative dividend) bear to each
other. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on the
Series D Preferred Stock that may be in arrears.
Liquidation
Preference
In the event of our
voluntary or involuntary liquidation, dissolution or winding up,
the holders of shares of Series D Preferred Stock will be entitled
to be paid out of the assets we have legally available for
distribution to our shareholders, subject to the preferential
rights of the holders of any class or series of our capital stock
we may issue ranking senior to the Series D Preferred Stock with
respect to the distribution of assets upon liquidation, dissolution
or winding up, a liquidation preference of $25.00 per share, plus
an amount equal to any accumulated and unpaid dividends to, but not
including, the date of payment, before any distribution of assets
is made to holders of our common stock or any other class or series
of our capital stock we may issue that ranks junior to the Series D
Preferred Stock as to liquidation rights.
In the event that,
upon any such voluntary or involuntary liquidation, dissolution or
winding up, our available assets are insufficient to pay the amount
of the liquidating distributions on all outstanding shares of
Series D Preferred Stock and the corresponding amounts payable on
all shares of other classes or series of our capital stock that we
may issue ranking on a parity with the Series D Preferred Stock in
the distribution of assets, then the holders of the Series D
Preferred Stock and all other such classes or series of capital
stock shall share ratably in any such distribution of assets in
proportion to the full liquidating distributions to which they
would otherwise be respectively entitled.
We will use
commercially reasonable efforts to provide written notice of
any such liquidation, dissolution or winding up no fewer than 10
days prior to the payment date. After payment of the full amount of
the liquidating distributions to which they are entitled, the
holders of Series D Preferred Stock will have no right or claim to
any of our remaining assets. The consolidation or merger of us with
or into any other corporation, trust or entity or of any other
entity with or into us, or the sale, lease, transfer or conveyance
of all or substantially all of our property or business, shall not
be deemed a liquidation, dissolution or winding up of us (although
such events may give rise to the special optional redemption to the
extent described below).
Redemption
The Series D
Preferred Stock is not redeemable by us prior to September 23,
2022, except as described below under “—Special
Optional Redemption.”
Optional Redemption. On and after
September 23, 2022, we may, at our option, upon not less than 30
nor more than 60 days’ written notice, redeem the Series D
Preferred Stock, in whole or in part, at any time or from time to
time, for cash at a redemption price of $25.00 per share, plus any
accumulated and unpaid dividends thereon to, but not including, the
date fixed for redemption. If we elect to redeem any shares of
Series D Preferred Stock as described in this “Optional
Redemption” section, we may use any available cash to pay the
redemption price, and we will not be required to pay the redemption
price only out of the proceeds from the issuance of other equity
securities or any other specific source.
Special
Optional Redemption
Upon the occurrence
of a Change of Control (as defined herein), we may, at our option,
upon not less than 30 nor more than 60 days’ written notice,
redeem the Series D Preferred Stock, in whole or in part, within
120 days after the first date on which such Change of Control
occurred, for cash at a redemption price of $25.00 per share, plus
any accumulated and unpaid dividends thereon to, but not including,
the redemption date. If we elect to redeem any shares of Series D
Preferred Stock as described in this “Special Optional
redemption” section, we may use any available cash to pay the
redemption price, and we will not be required to pay the redemption
price only out of the proceeds from the issuance of other equity
securities or any other specific source.
A “Change of
Control” is deemed to occur when the following have occurred
and are continuing:
●
the acquisition by
any person, including any syndicate or group deemed to be a
“person” under Section 13(d)(3) of the Exchange Act
(other than Stephan Wallach and Michelle Wallach, our chief
executive officer and our chief operating officer, respectively,
and our principal shareholders, any member of their immediate
family, and any “person” or “group” under
Section 13(d)(3) of the Exchange Act, that is controlled by Mr.
Wallach or Mrs. Wallach or any member of their immediate family,
any beneficiary of the estate of Mr. Wallach or Mrs. Wallach, or
any trust, partnership, corporate or other entity controlled by any
of the foregoing), of beneficial ownership, directly or indirectly,
through a purchase, merger or other acquisition transaction or
series of purchases, mergers or other acquisition transactions of
our stock entitling that person to exercise more than 50% of the
total voting power of all our stock entitled to vote generally in
the election of our directors (except that such person will be
deemed to have beneficial ownership of all securities that such
person has the right to acquire, whether such right is currently
exercisable or is exercisable only upon the occurrence of a
subsequent condition); and
●
following the
closing of any transaction referred to above, neither we nor the
acquiring or surviving entity has a class of common securities (or
American Depositary Receipts representing such securities) listed
on the NYSE, the NYSE American or Nasdaq, or listed or quoted on an
exchange or quotation system that is a successor to the NYSE, the
NYSE American or Nasdaq.
Redemption Procedures. In the event we
elect to redeem Series D Preferred Stock, the notice of redemption
will be mailed by us postage prepaid to each holder of record of
Series D Preferred Stock called for redemption at such
holder’s address as it appear on our stock transfer records,
not less than 30 nor more than 60 days prior to the redemption
date, and will state the following:
●
the number of
shares of Series D Preferred Stock to be redeemed;
●
the place or places
where certificates (if any) for the Series D Preferred Stock are to
be surrendered for payment of the redemption price;
●
that dividends on
the shares to be redeemed will cease to accumulate on the
redemption date;
●
whether such
redemption is being made pursuant to the provisions described above
under “—Optional Redemption” or
“—Special Optional Redemption”; and
●
if applicable, that
such redemption is being made in connection with a Change of
Control and, in that case, a brief description of the transaction
or transactions constituting such Change of Control.
If less than all of
the Series D Preferred Stock held by any holder are to be redeemed,
the notice mailed to such holder shall also specify the number of
shares of Series D Preferred Stock held by such holder to be
redeemed. No failure to give such notice or any defect thereto or
in the mailing thereof shall affect the validity of the proceedings
for the redemption of any shares of Series D Preferred Stock except
as to the holder to whom notice was defective or not
given.
Holders of Series D
Preferred Stock to be redeemed shall surrender the Series D
Preferred Stock at the place designated in the notice of redemption
and shall be entitled to the redemption price and any accumulated
and unpaid dividends payable upon the redemption following the
surrender. If notice of redemption of any shares of Series D
Preferred Stock has been given and if we have irrevocably set aside
the funds necessary for redemption in trust for the benefit of the
holders of the shares of Series D Preferred Stock so called for
redemption, then from and after the redemption date (unless default
shall be made by us in providing for the payment of the redemption
price plus accumulated and unpaid dividends, if any), dividends
will cease to accumulate on those shares of Series D Preferred
Stock, those shares of Series D Preferred Stock shall no longer be
deemed outstanding and all rights of the holders of those shares
will terminate, except the right to receive the redemption price
plus accumulated and unpaid dividends, if any, payable upon
redemption. If any redemption date is not a business day, then the
redemption price and accumulated and unpaid dividends, if any,
payable upon redemption may be paid on the next business day and no
interest, additional dividends or other sums will accumulate on the
amount payable for the period from and after that redemption date
to that next business day. If less than all of the outstanding
Series D Preferred Stock is to be redeemed, the Series D Preferred
Stock to be redeemed shall be selected pro rata (as nearly as may
be practicable without creating fractional shares) or by any other
equitable method we determine.
In connection with
any redemption of Series D Preferred Stock, we shall pay, in cash,
any accumulated and unpaid dividends to, but not including, the
redemption date, unless a redemption date falls after a dividend
record date and prior to the corresponding dividend payment date,
in which case each holder of Series D Preferred Stock at the close
of business on such dividend record date shall be entitled to the
dividend payable on such shares on the corresponding dividend
payment date notwithstanding the redemption of such shares before
such dividend payment date. Except as provided in this paragraph,
we will make no payment or allowance for unpaid dividends, whether
or not in arrears, on shares of the Series D Preferred Stock to be
redeemed.
Unless full
cumulative dividends on all shares of Series D Preferred Stock have
been or contemporaneously are declared and paid or declared and a
sum sufficient for the payment thereof has been or
contemporaneously is set apart for payment for all past dividend
periods, no shares of Series D Preferred Stock shall be redeemed
unless all outstanding shares of Series D Preferred Stock are
simultaneously redeemed and we shall not purchase or otherwise
acquire directly or indirectly any shares of Series D Preferred
Stock (except by exchanging it for our capital stock ranking junior
to the Series D Preferred Stock as to the payment of dividends and
distribution of assets upon liquidation, dissolution or winding
up); provided, however, that the foregoing shall not prevent the
purchase or acquisition by us of shares of Series D Preferred Stock
pursuant to a purchase or exchange offer made on the same terms to
holders of all outstanding shares of Series D Preferred
Stock.
Subject to
applicable law, we may purchase shares of Series D Preferred Stock
in the open market, by tender or by private agreement. Any shares
of Series D Preferred Stock that we acquire may be retired and
reclassified as authorized but unissued shares of preferred stock,
without designation as to class or series, and may thereafter be
reissued as any class or series of preferred stock.
Voting
Rights
Holders of the
Series D Preferred Stock do not have any voting rights, except as
set forth below or as otherwise required by law.
On each matter on
which holders of Series D Preferred Stock are entitled to vote,
each share of Series D Preferred Stock will be entitled to one
vote. In instances described below where holders of Series D
Preferred Stock vote with holders of any other class or series of
our preferred stock as a single class on any matter, the Series D
Preferred Stock and the shares of each such other class or series
will have one vote for each $25.00 of liquidation preference
(excluding accumulated dividends) represented by their respective
shares.
So long as any
shares of Series D Preferred Stock remain outstanding, we will not,
without the affirmative vote or consent of the holders of at least
two-thirds of the shares of the Series D Preferred Stock
outstanding at the time, given in person or by proxy, either in
writing or at a meeting (voting together as a class with all other
series of parity preferred stock that we may issue upon which like
voting rights have been conferred and are exercisable), (a)
authorize or create, or increase the authorized or issued amount
of, any class or series of capital stock ranking senior to the
Series D Preferred Stock with respect to payment of dividends or
the distribution of assets upon liquidation, dissolution or winding
up or reclassify any of our authorized capital stock into such
shares, or create, authorize or issue any obligation or security
convertible into or evidencing the right to purchase any such
shares; or (b) unless redeeming all Series D Preferred Stock in
connection with such action, amend, alter, repeal or replace our
certificate of incorporation or the certificate of designations
designating the Series D Preferred Stock, including by way of a
merger, consolidation or otherwise in which we may or may not be
the surviving entity, so as to materially and adversely affect and
deprive holders of Series D Preferred Stock of any right,
preference, privilege or voting power of the Series D Preferred
Stock (each, an “Event”). An increase in the amount of
the authorized preferred stock, including the Series D Preferred
Stock, or the creation or issuance of any other series of preferred
stock that we may issue, or any increase in the amount of
authorized shares of such series, in each case ranking on a parity
with or junior to the Series D Preferred Stock with respect to
payment of dividends or the distribution of assets upon
liquidation, dissolution or winding up, shall not be deemed an
Event and will not require us to obtain two-thirds of the votes
entitled to be cast by the holders of the Series D Preferred Stock
and all such other similarly affected series, outstanding at the
time (voting together as a class), so long as such increase in the
number of shares of Series D Preferred Stock or issuance of such
new series of preferred stock does not (i) provide for, in the
aggregate, taken together with any previously issued shares of
Series D Preferred Stock), the payment of annual dividends on (in
the case of additional shares of Series D Preferred Stock), or on
parity with (in the case of any other series of preferred stock),
the Series D Preferred Stock in excess of $2,437,500 and (ii) any
such new series of preferred stock that may be created is on parity
or junior with the Series D Preferred Stock with respect to the
distribution of assets upon our liquidation, dissolution or winding
up.
Notwithstanding the
foregoing, if an Event set forth in the preceding paragraph
materially and adversely affects the right, preference, privilege
or voting power of the Series D Preferred Stock but not all series
of parity preferred stock that we may issue upon which voting
rights have been conferred and are exercisable, the affirmative
vote or consent of the holders of at least two-thirds of the shares
of Series D Preferred Stock and all other similarly affected series
outstanding at the time (voting together as a class) given in
person or proxy, either in writing or at a meeting, shall be
required in lieu of the vote or consent that would otherwise be
required by the preceding paragraph.
The foregoing
voting provisions will not apply if, at or prior to the time when
the act with respect to which such vote would otherwise be required
shall be effected, all outstanding shares of Series D Preferred
Stock shall have been redeemed or called for redemption upon proper
notice and sufficient funds shall have been deposited in trust to
effect such redemption.
Except as expressly
stated in the certificate of designations or as may be required by
applicable law, the Series D Preferred Stock do not have any
relative, participating, optional or other special voting rights or
powers and the consent of the holders thereof shall not be required
for the taking of any corporate action.
Information
Rights
During any period
in which we are not subject to Section 13 or 15(d) of the Exchange
Act and any shares of Series D Preferred Stock are outstanding, we
will use our best efforts to (i) make available on our website
copies of the Annual Reports on Form 10-K and Quarterly Reports on
Form 10-Q that we would have been required to file with the SEC
pursuant to Section 13 or 15(d) of the Exchange Act if we were
subject thereto (other than any exhibits that would have been
required) and (ii) promptly, upon request, supply copies of such
reports to any holders or prospective holder of Series D Preferred
Stock. We will use our best effort to mail (or otherwise provide)
the information to the holders of the Series D Preferred Stock
within 15 days after the respective dates by which a periodic
report on Form 10-K or Form 10-Q, as the case may be, in respect of
such information would have been required to be filed with the SEC,
if we were subject to Section 13 or 15(d) of the Exchange Act, in
each case, based on the dates on which we would be required to file
such periodic reports if we were a “non-accelerated
filer” within the meaning of the Exchange Act.
No
Conversion Rights
The Series D
Preferred Stock is not convertible into our common stock or any
other security.
No
Preemptive Rights
Holders of Series D
Preferred Stock do not have any preemptive rights to purchase or
subscribe for our common stock or any other security by virtue of
their ownership thereof.
Change
of Control
Provisions in our
certificate of incorporation, as amended, including the certificate
of designations establishing the terms of the Series D Preferred
Stock, as amended, and bylaws may make it difficult and expensive
for a third party to pursue a tender offer, change in control or
takeover attempt, which is opposed by management and the Board of
Directors.
Book-Entry
Procedures
DTC acts as
securities depository for our outstanding Series D Preferred Stock.
With respect to the Series D Preferred Stock offered hereunder, we
will issue one or more fully registered global securities
certificates in the name of DTC’s nominee, Cede &
Co. These certificates will represent the total aggregate number of
shares of Series D Preferred Stock. We will deposit these
certificates with DTC or a custodian appointed by DTC. We will not
issue certificates to you for the shares of Series D Preferred
Stock that you purchase, unless DTC’s services are
discontinued as described below.
Title to book-entry
interests in the Series D Preferred Stock will pass by book-entry
registration of the transfer within the records of DTC in
accordance with its procedures. Book-entry interests in the
securities may be transferred within DTC in accordance with
procedures established for these purposes by DTC. Each person
owning a beneficial interest in shares of the Series D Preferred
Stock must rely on the procedures of DTC and the participant
through which such person owns its interest to exercise its rights
as a holder of the Series D Preferred Stock.
DTC has advised us
that it is a limited-purpose trust company organized under the New
York Banking Law, a member of the Federal Reserve System, a
“clearing corporation” within the meaning of the New
York Uniform Commercial Code and a “clearing agency”
registered under the provisions of Section 17A of the Exchange Act.
DTC holds securities that its participants (“Direct
Participants”) deposit with DTC. DTC also facilitates the
settlement among Direct Participants of securities transactions,
such as transfers and pledges in deposited securities through
electronic computerized book-entry changes in Direct
Participants’ accounts, thereby eliminating the need for
physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies,
clearing corporations, and certain other organizations. Access to
the DTC system is also available to others such as securities
brokers and dealers, including the placement agents, banks and
trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or
indirectly (“Indirect Participants”). The rules
applicable to DTC and its Direct and Indirect Participants are on
file with the SEC.
When you purchase
shares of Series D Preferred Stock within the DTC system, the
purchase must be by or through a Direct Participant. The Direct
Participant will receive a credit for the Series D Preferred Stock
on DTC’s records. You will be considered to be the
“beneficial owner” of the Series D Preferred Stock.
Your beneficial ownership interest will be recorded on the Direct
and Indirect Participants’ records, but DTC will have no
knowledge of your individual ownership. DTC’s records reflect
only the identity of the Direct Participants to whose accounts
shares of Series D Preferred Stock are credited.
You will not
receive written confirmation from DTC of your purchase. The Direct
or Indirect Participants through whom you purchased the Series D
Preferred Stock should send you written confirmations providing
details of your transactions, as well as periodic statements of
your holdings. The Direct and Indirect Participants are responsible
for keeping an accurate account of the holdings of their customers
like you.
Transfers of
ownership interests held through Direct and Indirect Participants
will be accomplished by entries on the books of Direct and Indirect
Participants acting on behalf of the beneficial
owners.
Conveyance of
notices and other communications by DTC to Direct Participants, by
Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to beneficial owners will be
governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to
time.
We understand that,
under DTC’s existing practices, in the event that we request
any action of the holders, or an owner of a beneficial interest in
a global security, such as you, desires to take any action that a
holder is entitled to take under our certificate of incorporation
(including the certificate of designations designating the Series D
Preferred Stock), DTC would authorize the Direct Participants
holding the relevant shares to take such action, and those Direct
Participants and any Indirect Participants would authorize
beneficial owners owning through those Direct and Indirect
Participants to take such action or would otherwise act upon the
instructions of beneficial owners owning through them.
Any redemption
notices with respect to the Series D Preferred Stock will be sent
to Cede & Co. If less than all of the outstanding shares of
Series D Preferred Stock are being redeemed, DTC will reduce each
Direct Participant’s holdings of shares of Series D Preferred
Stock in accordance with its procedures.
In those instances
where a vote is required, neither DTC nor Cede & Co. itself
will consent or vote with respect to the shares of Series D
Preferred Stock. Under its usual procedures, DTC would mail an
omnibus proxy to us as soon as possible after the record date. The
omnibus proxy assigns Cede & Co.’s consenting or voting
rights to those Direct Participants whose accounts the shares of
Series D Preferred Stock are credited to on the record date, which
are identified in a listing attached to the omnibus
proxy.
Dividends on the
Series D Preferred Stock are made directly to DTC’s nominee
(or its successor, if applicable). DTC’s practice is to
credit participants’ accounts on the relevant payment date in
accordance with their respective holdings shown on DTC’s
records unless DTC has reason to believe that it will not receive
payment on that payment date.
Payments by Direct
and Indirect Participants to beneficial owners will be governed by
standing instructions and customary practices, as is the case with
securities held for the accounts of customers in bearer form or
registered in “street name.” These payments will be the
responsibility of the participant and not of DTC, us or any agent
of ours.
DTC may discontinue
providing its services as securities depositary with respect to the
Series D Preferred Stock at any time by giving reasonable notice to
us. Additionally, we may decide to discontinue the book-entry only
system of transfers with respect to the Series D Preferred Stock.
In that event, we will print and deliver certificates in fully
registered form for the Series D Preferred Stock. If DTC notifies
us that it is unwilling to continue as securities depositary, or it
is unable to continue or ceases to be a clearing agency registered
under the Exchange Act and a successor depositary is not appointed
by us within 90 days after receiving such notice or becoming aware
that DTC is no longer so registered, we will issue the Series D
Preferred Stock in definitive form, at our expense, upon
registration of transfer of, or in exchange for, such global
security.
According to DTC,
the foregoing information with respect to DTC has been provided to
the financial community for informational purposes only and is not
intended to serve as a representation, warranty or contract
modification of any kind.
Global
Clearance and Settlement Procedures
Initial settlement
for the Series D Preferred Stock will be made in immediately
available funds. Secondary market trading among DTC’s
participants occurs in the ordinary way in accordance with
DTC’s rules and will be settled in immediately available
funds using DTC’s Same-Day Funds Settlement
System.
CERTAIN
U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following
discussion summarizes certain U.S. federal income tax
considerations that may be applicable to “U.S. holders”
and “non-U.S. holders” (each as defined below) with
respect to the purchase, ownership and disposition of the Series D
Preferred Stock offered by this prospectus. This discussion only
applies to purchasers who purchase and hold the Series D Preferred
Stock as a capital asset within the meaning of Section 1221 of the
Internal Revenue Code of 1986, as amended (the “Code”)
(generally property held for investment). This discussion does not
describe all of the tax consequences that may be relevant to each
purchaser or holder of the Series D Preferred Stock in light of
his, her or its particular circumstances. We have not sought a
ruling from the Internal Revenue Service or an opinion of counsel
with respect to the statements made and conclusions reached in this
summary, and there can be no assurance that the Internal Revenue
Service or a court will agree with these statements and
conclusions.
This discussion is
based upon provisions of the Code, the Treasury regulations
thereunder, rulings and judicial decisions all as of the date
hereof. These authorities may change, perhaps retroactively, which
could result in U.S. federal income tax consequences different from
those summarized below. This discussion does not address all
aspects of U.S. federal income taxation (such as the alternative
minimum tax) and does not describe any foreign, state, local or
other tax considerations that may be relevant to a purchaser or
holder of the Series D Preferred Stock in light of their particular
circumstances. In addition, this discussion does not describe the
U.S. federal income tax consequences applicable to a purchaser or a
holder of the Series D Preferred Stock who is subject to special
treatment under U.S. federal income tax laws (including, a
corporation that accumulates earnings to avoid U.S. federal income
tax, a pass-through entity or an investor in a pass-through entity,
a tax-exempt entity, pension or other employee benefit plans,
financial institutions or broker-dealers, persons holding the
Series D Preferred Stock as part of a hedging or conversion
transaction or straddle, a person subject to the alternative
minimum tax, an insurance company, former U.S. citizens or former
long-term U.S. residents). We cannot assure you that a change in
law will not significantly alter the tax considerations that we
describe in this discussion.
If a partnership
(or any other entity treated as a partnership for U.S. federal
income tax purposes) holds the Series D Preferred Stock, the U.S.
federal income tax treatment of a partner of that partnership
generally will depend upon the status of the partner and the
activities of the partnership. If you are a partnership or a
partner of a partnership holding the Series D Preferred Stock, you
should consult your own tax advisors as to the particular U.S.
federal income tax consequences of acquiring, holding and disposing
of the Series D Preferred Stock.
Tax reform
legislation informally known as the Tax Cuts and Jobs Act (the
“Tax Act”) was enacted in the United States on December
22, 2017. The Tax Act makes major changes to the Code, including a
number of provisions that may affect the taxation of holders. The
individual and collective impact of these changes is uncertain, and
may not become evidence for some period of time. Legislative,
regulatory, or administrative changes could be enacted or
promulgated at any time, either prospectively or with retroactive
effect, and may adversely affect the Fund the Company and/or its
shareholders. Prospective
investors should
consult their own tax advisors concerning the U.S. federal income
tax consequences to you of acquiring, owning, and disposing of
these securities including the implications of the Tax Act on their
investment, as well as any tax consequences arising under the laws
of any state, local, foreign, or other tax jurisdiction and the
possible effects of changes in U.S. federal or other tax
laws.
U.S.
Holders
Subject to the
qualifications set forth above, the following discussion summarizes
certain U.S. federal income tax considerations that may relate to
the purchase, ownership and disposition of the Series D Preferred
Stock by “U.S. holders.” You are a “U.S.
holder” if you are a beneficial owner of Series D Preferred
Stock and you are for U.S. federal income tax
purposes;
●
an individual
citizen or resident of the United States;
●
a corporation (or
other entity treated as a corporation for U.S. federal income tax
purposes) created or organized in or under the laws of the United
States, any state thereof or the District of Columbia;
●
an estate the
income of which is subject to U.S. federal income taxation
regardless of its source; or
●
a trust if it (i)
is subject to the primary supervision of a court within the United
States and one or more United States persons have the authority to
control all substantial decisions of the trust or (ii) has a valid
election in effect under applicable United States Treasury
regulations to be treated as a United States person.
Distributions in
General. If distributions are made with respect to the
Series D Preferred Stock, such distributions will be treated as
dividends to the extent of our current or accumulated earnings and
profits as determined under the Code. Any portion of a distribution
that exceeds such earnings and profits will first be applied to
reduce a U.S. holder’s tax basis in the Series D Preferred
Stock on a share-by-share basis, and the excess will be treated as
gain from the disposition of the Series D Preferred Stock, the tax
treatment of which is discussed below under “Certain U.S.
Federal Income Tax Considerations - U.S. Holders: Disposition of
Series D Preferred Stock, Including
Redemptions.”
Under current law,
dividends received by individual holders of the Series D Preferred
Stock will be subject to a reduced maximum tax rate of 20% if such
dividends are treated as “qualified dividend income”
for U.S. federal income tax purposes. The rate reduction does not
apply to dividends received to the extent that the individual
shareholder elects to treat the dividends as “investment
income,” which may be offset against investment expenses.
Furthermore, the rate reduction does not apply to dividends that
are paid to individual shareholders with respect to Series D
Preferred Stock that is held for 60 days or less during the 121 day
period beginning on the date which is 60 days before the date on
which the Series D Preferred Stock becomes ex-dividend (or where
the dividend is attributable to a period or periods in excess of
366 days, Series D Preferred Stock that is held for 90 days or less
during the 181 day period beginning on the date which is 90 days
before the date on which the Series D Preferred Stock becomes
ex-dividend). Also, if a dividend received by an individual
shareholder that qualifies for the rate reduction is an
“extraordinary dividend” within the meaning of Section
1059 of the Code, any loss recognized by such individual
shareholder on a subsequent disposition of the stock will be
treated as long-term capital loss to the extent of such
“extraordinary dividend,” irrespective of such
shareholder’s holding period for the stock. In addition,
dividends recognized by U.S. holders that are individuals could be
subject to the 3.8% tax on net investment income. Individual
shareholders should consult their own tax advisors regarding the
implications of these rules in light of their particular
circumstances.
Dividends received
by corporate shareholders generally will be eligible for the
dividends-received deduction. Generally, this deduction is allowed
if the underlying stock is held for at least 46 days during the 91
day period beginning on the date 45 days before the ex-dividend
date of the stock, and for cumulative preferred stock with an
arrearage of dividends attributable to a period in excess of 366
days, the holding period is at least 91 days during the 181 day
period beginning on the date 90 days before the ex-dividend date of
the stock. Corporate shareholders of the Series D Preferred Stock
should also consider the effect of Section 246A of the Code, which
reduces the dividends-received deduction allowed to a corporate
shareholder that has incurred indebtedness that is “directly
attributable” to an investment in portfolio stock such as
preferred stock. If a corporate shareholder receives a dividend on
the Series D Preferred Stock that is an “extraordinary
dividend” within the meaning of Section 1059 of the Code, the
shareholder in certain instances must reduce its basis in the
Series D Preferred Stock by the amount of the “nontaxed
portion” of such “extraordinary dividend” that
results from the application of the dividends-received deduction.
If the “nontaxed portion” of such “extraordinary
dividend” exceeds such corporate shareholder’s basis,
any excess will be taxed as gain as if such shareholder had
disposed of its shares in the year the “extraordinary
dividend” is paid. Each domestic corporate holder of the
Series D Preferred Stock is urged to consult with its own tax
advisors with respect to the eligibility for and the amount of any
dividends received deduction and the application of Code Section
1059 to any dividends it may receive on the Series D Preferred
Stock.
Constructive Distributions
on Series D Preferred Stock. A distribution by a corporation
of its stock made with respect to its preferred stock is treated as
a distribution of property to which Section 301 of the Code
applies. If a corporation issues preferred stock that may be
redeemed at a price higher than its issue price, the excess (a
“redemption premium”) is treated under certain
circumstances as a constructive distribution (or series of
constructive distributions) of additional preferred stock. The
constructive distribution of property equal to the redemption
premium would accrue without regard to the holder’s method of
accounting for U.S. federal income tax purposes at a constant yield
determined under principles similar to the determination of
original issue discount (“OID”) pursuant to Treasury
regulations under Sections 1271 through 1275 of the Code (the
“OID Rules”). The constructive distributions of
property would be treated for U.S. federal income tax purposes as
actual distributions of the Series D Preferred Stock that would
constitute a dividend, return of capital or capital gain to the
holder of the stock in the same manner as cash distributions
described under “Certain U.S. Federal Income Tax
Considerations - U.S. Holders: Distributions in General.” The
application of principles similar to those applicable to debt
instruments with OID to a redemption premium for the Series D
Preferred Stock is uncertain.
We have the right
to call the Series D Preferred Stock for redemption on or after
September 23, 2022 (the “call option”), and have the
option to redeem the Series D Preferred Stock upon any Change of
Control (the “contingent call option”). The stated
redemption price of the Series D Preferred Stock upon any
redemption pursuant to our call option or contingent call option is
equal to the liquidation preference of the Series D Preferred Stock
(i.e., $25.00, plus accrued and unpaid dividends) and is payable in
cash.
If the redemption
price of the Series D Preferred Stock exceeds the issue price of
the Series D Preferred Stock upon any redemption pursuant to our
call option or contingent call option, the excess will be treated
as a redemption premium that may result in certain circumstances in
a constructive distribution or series of constructive distributions
to U.S. holders of additional Series D Preferred Stock. The
redemption price for the Series D Preferred Stock should be the
liquidation preference of the Series D Preferred Stock. Assuming
that the issue price of the Series D Preferred Stock is determined
under principles similar to the OID Rules, the issue price for the
Series D Preferred Stock should be the initial offering price to
the public (excluding bond houses and brokers) at which a
substantial amount of the Series D Preferred Stock is
sold.
A redemption
premium for the Series D Preferred Stock should not result in
constructive distributions to U.S. holders of the Series D
Preferred Stock if the redemption premium is less than a de-minimis
amount as determined under principles similar to the OID Rules. A
redemption premium for the Series D Preferred Stock should be
considered de-minimis if such premium is less than .0025 of the
Series D Preferred Stock’s liquidation value of $25.00 at
maturity, multiplied by the number of complete years to maturity.
Because the determination under the OID Rules of a maturity date
for the Series D Preferred Stock is unclear, the remainder of this
discussion assumes that the Series D Preferred Stock is issued with
a redemption premium greater than a de-minimis amount.
Each of the call
option and contingent call option should not require constructive
distributions of the redemption premium, if based on all of the
facts and circumstances as of the issue date, a redemption pursuant
to the call option or contingent call option is not more likely
than not to occur. The Treasury regulations provide that an
issuer’s right to redeem will not be treated as more likely
than not to occur if: (i) the issuer and the holder of the stock
are not related within the meaning of Section 267(b) or Section
707(b) of the Code (substituting “20%” for the phrase
“50%); (ii) there are no plans, arrangements, or agreements
that effectively require or are intended to compel the issuer to
redeem the stock; and (iii) exercise of the right to redeem would
not reduce the yield on the stock determined using principles
applicable to the determination of OID under the OID Rules. The
fact that a redemption right is not within the safe harbor
described in the preceding sentence does not mean that an
issuer’s right to redeem is more likely than not to occur and
the issuer’s right to redeem must still be tested under all
the facts and circumstances to determine if it is more likely than
not to occur. We do not believe that a redemption pursuant to the
call option or contingent call option should be treated as more
likely than not to occur under the foregoing test. Accordingly, no
U.S. holder of the Series D Preferred Stock should be required to
recognize constructive distributions of the redemption premium
because of our call option or the contingent call
option.
Disposition of Series D
Preferred Stock, Including Redemptions. Upon any sale,
exchange, redemption (except as discussed below) or other
disposition of the Series D Preferred Stock, a U.S. holder will
recognize capital gain or loss equal to the difference between the
amount realized by the U.S. holder and the U.S. holder’s
adjusted tax basis in the Series D Preferred Stock. Such capital
gain or loss will be long-term capital gain or loss if the U.S.
holder’s holding period for the Series D Preferred Stock is
longer than one year. A U.S. holder should consult its own tax
advisors with respect to applicable tax rates and netting rules for
capital gains and losses. Certain limitations exist on the
deduction of capital losses by both corporate and non-corporate
taxpayers. In addition, gains recognized by U.S. holders that are
individuals could be subject to the 3.8% tax on net investment
income.
A payment made in
redemption of Series D Preferred Stock may be treated as a
dividend, rather than as payment in exchange for the Series D
Preferred Stock, unless the redemption:
●
is “not
essentially equivalent to a dividend” with respect to a U.S.
holder under Section 302(b)(1) of the Code;
●
is a
“substantially disproportionate” redemption with
respect to a U.S. holder under Section 302(b)(2) of the
Code;
●
results in a
“complete redemption” of a U.S. holder’s stock
interest in the company under Section 302(b)(3) of the Code;
or
●
is a redemption of
stock held by a non-corporate shareholder, which results in a
partial liquidation of the company under Section 302(b)(4) of the
Code.
In determining
whether any of these tests has been met, a U.S. holder must take
into account not only shares of the Series D Preferred Stock and
the common stock that the U.S. Holder directly and indirectly owns,
but also shares of stock that the U.S. holder constructively owns
within the meaning of Section 318 of the Code.
A redemption
payment will be treated as “not essentially equivalent to a
dividend” if it results in a “meaningful
reduction” in a U.S. holder’s aggregate stock interest
in the company, which will depend on the U.S. holder’s
particular facts and circumstances at such time.
Satisfaction of the
“complete redemption” and “substantially
disproportionate” exceptions is dependent upon compliance
with the objective tests set forth in Section 302(b)(3) and Section
302(b)(2) of the Code, respectively. A redemption will result in a
“complete redemption” if either all of the shares of
our stock actually and constructively owned by a U.S. holder are
exchanged in the redemption or all of the shares of our stock
actually owned by the U.S. holder are exchanged in the redemption
and the U.S. holder is eligible to waive, and the U.S. holder
effectively waives, the attribution of shares of our stock
constructively owned by the U.S. holder in accordance with the
procedures described in Section 302(c)(2) of Code. A redemption
does not qualify for the “substantially
disproportionate” exception if the stock redeemed is only
non-voting stock, and for this purpose, stock which does not have
voting rights until the occurrence of an event is not voting stock
until the occurrence of the specified event. Accordingly, any
redemption of the Series D Preferred Stock generally will not
qualify for this exception because the voting rights are limited as
provided in the “Description of Series D Preferred
Stock-Voting Rights.”
For purposes of the
“redemption from non-corporate shareholders in a partial
liquidation” test, a distribution will be treated as in
partial liquidation of a corporation if the distribution is not
essentially equivalent to a dividend (determined at the corporate
level rather than the shareholder level) and the distribution is
pursuant to a plan and occurs within the taxable year in which the
plan was adopted or within the succeeding taxable year. For these
purposes, a distribution is generally not essentially equivalent to
a dividend if the distribution results in a corporate contraction.
The determination of what constitutes a corporate contraction is
factual in nature, and has been interpreted under case law to
include the termination of a business or line of
business.
If the redemption
payment is treated as a dividend, the rules discussed above in
“Certain U.S. Federal Income Tax Considerations - U.S.
Holders: Distributions in General” apply. Under proposed
Treasury regulations, if any amount received by a U.S. holder in
redemption of Series D Preferred Stock is treated as a distribution
with respect to such holder’s Series D Preferred Stock, but
not as a dividend, such amount will be allocated to all shares of
the Series D Preferred Stock held by such holder immediately before
the redemption on a pro rata basis. The amount applied to each
share will reduce such holder’s adjusted tax basis in that
share and any excess after the basis is reduced to zero will result
in taxable gain. If such holder has different bases in shares of
the Series D Preferred Stock, then the amount allocated could
reduce a portion of the basis in certain shares while reducing all
of the basis, and giving rise to taxable gain, in other shares.
Thus, such holder could have gain even if such holder’s
aggregate adjusted tax basis in all shares of the Series D
Preferred Stock held exceeds the aggregate amount of such
distribution.
The proposed
Treasury regulations permit the transfer of basis in the redeemed
shares of the Series D Preferred Stock to the holder’s
remaining, unredeemed Series D Preferred Stock (if any), but not to
any other class of stock held, directly or indirectly, by the
holder. Any unrecovered basis in the Series D Preferred Stock would
be treated as a deferred loss to be recognized when certain
conditions are satisfied. The proposed Treasury regulations would
be effective for transactions that occur after the date the
regulations are published as final Treasury regulations. There can,
however, be no assurance as to whether, when and in what particular
form such proposed Treasury regulations are ultimately
finalized.
Information Reporting and
Backup Withholding. Information reporting and backup
withholding may apply with respect to payments of dividends on the
Series D Preferred Stock and to certain payments of proceeds on the
sale or other disposition of the Series D Preferred Stock. Certain
non-corporate U.S. holders may be subject to U.S. backup
withholding (currently at a rate of 24%) on payments of dividends
on the Series D Preferred Stock and certain payments of proceeds on
the sale or other disposition of the Series D Preferred Stock
unless the beneficial owner thereof furnishes the payor or its
agent with a taxpayer identification number, certified under
penalties of perjury, and certain other information, or otherwise
establishes, in the manner prescribed by law, an exemption from
backup withholding. U.S. backup withholding tax is not an
additional tax. Any amounts withheld under the backup withholding
rules may be allowed as a refund or a credit against a U.S.
holder’s U.S. federal income tax liability, which may entitle
the U.S. holder to a refund, provided the U.S. holder timely
furnishes the required information to the Internal Revenue
Service.
Non-U.S. Holders.
Subject to the qualifications set forth above under the caption
“Certain U.S. Federal Income Tax Considerations,” the
following discussion summarizes certain U.S. federal income tax
consequences of the purchase, ownership and disposition of the
Series D Preferred Stock by certain “Non-U.S. holders.”
You are a “Non-U.S. holder” if you are a beneficial
owner of the Series D Preferred Stock and you are not a “U.S.
holder.”
Distributions on the Series
D Preferred Stock. If distributions are made with respect to
the Series D Preferred Stock, such distributions will be treated as
dividends to the extent of our current and accumulated earnings and
profits as determined under the Code and may be subject to
withholding as discussed below. Any portion of a distribution that
exceeds our current and accumulated earnings and profits will first
be applied to reduce the Non-U.S. holder’s basis in the
Series D Preferred Stock and, to the extent such portion exceeds
the Non-U.S. holder’s basis, the excess will be treated as
gain from the disposition of the Series D Preferred Stock, the tax
treatment of which is discussed below under “Certain U.S.
Federal Income Tax Considerations - Non-U.S. Holders: Disposition
of Series D Preferred Stock, Including Redemptions.” In
addition, if we are a U.S. real property holding corporation, i.e.
a “USRPHC,” and any distribution exceeds our current
and accumulated earnings and profits, we will need to choose to
satisfy our withholding requirements either by treating the entire
distribution as a dividend, subject to the withholding rules in the
following paragraph (and withhold at a minimum rate of 30% or such
lower rate as may be specified by an applicable income tax treaty
for distributions from a USRPHC), or by treating only the amount of
the distribution equal to our reasonable estimate of our current
and accumulated earnings and profits as a dividend, subject to the
withholding rules in the following paragraph, with the excess
portion of the distribution subject to withholding at a rate of 15%
or such lower rate as may be specified by an applicable income tax
treaty as if such excess were the result of a sale of shares in a
USRPHC (discussed below under “Certain U.S. Federal Income
Tax Considerations - Non-U.S. Holders: Disposition of Series D
Preferred Stock, Including Redemptions”), with a credit
generally allowed against the Non-U.S. holder’s U.S. federal
income tax liability in an amount equal to the amount withheld from
such excess.
Dividends paid to a
Non-U.S. holder of the Series D Preferred Stock will be subject to
withholding of U.S. federal income tax at a 30% rate or such lower
rate as may be specified by an applicable income tax treaty.
However, dividends that are effectively connected with the conduct
of a trade or business by the Non-U.S. holder within the United
States (and, where a tax treaty applies, are attributable to a
permanent establishment maintained by the Non-U.S. holder in the
United States) are not subject to the withholding tax, provided
that certain certification and disclosure requirements are
satisfied including completing Internal Revenue Service Form W-8ECI
(or other applicable form). Instead, such dividends are subject to
U.S. federal income tax on a net income basis in the same manner as
if the Non-U.S. holder were a United States person as defined under
the Code, unless an applicable income tax treaty provides
otherwise. Any such effectively connected dividends received by a
foreign corporation may be subject to an additional “branch
profits tax” at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty. A Non-U.S. holder of
the Series D Preferred Stock who wishes to claim the benefit of an
applicable treaty rate and avoid backup withholding, as discussed
below, for dividends will be required to (i) complete Internal
Revenue Service Form W-8BEN or Form W-8BEN-E (or other applicable
form) and certify under penalty of perjury that such holder is not
a United States person as defined under the Code and is eligible
for treaty benefits, or (ii) if the Series D Preferred Stock is
held through certain foreign intermediaries, satisfy the relevant
certification requirements of applicable Treasury regulations. A
Non-U.S. holder of the Series D Preferred Stock eligible for a
reduced rate of U.S. withholding tax pursuant to an income tax
treaty may obtain a refund of any excess amounts withheld by timely
filing an appropriate claim for refund with the Internal Revenue
Service.
Disposition of Series D
Preferred Stock, Including Redemptions. Any gain realized by
a Non-U.S. holder on the disposition of the Series D Preferred
Stock will not be subject to U.S. federal income or withholding tax
unless:
●
the gain is
effectively connected with a trade or business of the Non-U.S.
holder in the United States (and, if required by an applicable
income tax treaty, is attributable to a permanent establishment
maintained by the Non-U.S. holder in the United
States);
●
the Non-U.S. holder
is an individual who is present in the United States for 183 days
or more in the taxable year of disposition, and certain other
conditions are met; or
●
we are or have been
a USRPHC for U.S. federal income tax purposes, as such term is
defined in Section 897(c) of the Code, and such Non-U.S. holder
owned directly or pursuant to attribution rules at any time during
the five year period ending on the date of disposition more than 5%
of the Series D Preferred Stock. This assumes that the Series D
Preferred Stock is regularly traded on an established securities
market, within the meaning of Section 897(c)(3) of the
Code.
A Non-U.S. holder
described in the first bullet point immediately above will
generally be subject to tax on the net gain derived from the sale
under regular graduated U.S. federal income tax rates in the same
manner as if the Non-U.S. holder were a United States person as
defined under the Code, and if it is a corporation, may also be
subject to the branch profits tax equal to 30% of its effectively
connected earnings and profits or at such lower rate as may be
specified by an applicable income tax treaty.
An individual
Non-U.S. holder described in the second bullet point immediately
above will be subject to a flat 30% tax (or at such reduced rate as
may be provided by an applicable treaty) on the gain derived from
the sale, which may be offset by U.S. source capital losses, even
though the individual is not considered a resident of the United
States. A Non-U.S. holder described in the third bullet point above
will be subject to U.S. federal income tax under regular graduated
U.S. federal income tax rates with respect to the gain recognized
in the same manner as if the Non-U.S. holder were a United States
person as defined under the Code. If a Non-U.S. holder is subject
to U.S. federal income tax on any sale, exchange, redemption
(except as discussed below), or other disposition of the Series D
Preferred Stock, such a Non-U.S. holder will recognize capital gain
or loss equal to the difference between the amount realized by the
Non-U.S. holder and the Non-U.S. holder’s adjusted tax basis
in the Series D Preferred Stock. Such capital gain or loss will be
long-term capital gain or loss if the Non-U.S. holder’s
holding period for the Series D Preferred Stock is longer than one
year. A Non-U.S. holder should consult its own tax advisors with
respect to applicable tax rates and netting rules for capital gains
and losses. Certain limitations exist on the deduction of capital
losses by both corporate and Non-corporate taxpayers. If a Non-U.S.
holder is subject to U.S. federal income tax on any disposition of
the Series D Preferred Stock, a redemption of shares of the Series
D Preferred Stock will be a taxable event. If the redemption is
treated as a sale or exchange, instead of a dividend, a Non-U.S.
holder generally will recognize long-term capital gain or loss, if
the Non-U.S. holder’s holding period for such Series D
Preferred Stock exceeds one year, equal to the difference between
the amount of cash received and fair market value of property
received and the Non-U.S. holder’s adjusted tax basis in the
Series D Preferred Stock redeemed, except that to the extent that
any cash received is attributable to any accrued but unpaid
dividends on the Series D Preferred Stock, which generally will be
subject to the rules discussed above in “Certain U.S. Federal
Income Tax Considerations - Non-U.S. Holders: Distributions on the
Series D Preferred Stock.” A payment made in redemption of
the Series D Preferred Stock may be treated as a dividend, rather
than as payment in exchange for the Series D Preferred Stock, in
the same circumstances discussed above under “Certain U.S.
Federal Income Tax Considerations–U.S. Holders: Disposition
of Series D Preferred Stock, Including Redemptions.” Each
Non-U.S. holder of the Series D Preferred Stock should consult its
own tax advisors to determine whether a payment made in redemption
of the Series D Preferred Stock will be treated as a dividend or as
payment in exchange for the Series D Preferred Stock.
Information reporting and
backup withholding. We must report annually to the Internal
Revenue Service and to each Non-U.S. holder the amount of dividends
paid to such Non-U.S. holder and the tax withheld with respect to
such dividends, regardless of whether withholding was required.
Copies of the information returns reporting such dividends and
withholding may also be made available to the tax authorities in
the country in which the Non-U.S. holder resides under the
provisions of an applicable income tax treaty. A Non-U.S. holder
will not be subject to backup withholding on dividends paid to such
Non-U.S. holder as long as such Non-U.S. holder certifies under
penalty of perjury that it is a Non-U.S. holder (and the payor does
not have actual knowledge or reason to know that such Non-U.S.
holder is a United States person as defined under the Code), or
such Non-U.S. holder otherwise establishes an exemption. Depending
on the circumstances, information reporting and backup withholding
may apply to the proceeds received from a sale or other disposition
of the Series D Preferred Stock unless the beneficial owner
certifies under penalty of perjury that it is a Non-U.S. holder
(and the payor does not have actual knowledge or reason to know
that the beneficial owner is a United States person as defined
under the Code), or such owner otherwise establishes an exemption.
U.S. backup withholding tax is not an additional tax. Any amounts
withheld under the backup withholding rules may be allowed as a
refund or a credit against a Non-U.S. holder’s U.S. federal
income tax liability provided the required information is timely
furnished to the Internal Revenue Service.
Foreign Account Tax
Compliance Act. Sections 1471 through 1474 of the Code
(provisions which are commonly referred to as “FATCA”),
generally impose a 30% withholding tax on dividends on Series D
Preferred Stock paid on or after July 1, 2014 and the gross
proceeds of a sale or other disposition of Series D Preferred Stock
paid on or after January 1, 2019 to: (i) a foreign financial
institution (as that term is defined in Section 1471(d)(4) of the
Code) unless that foreign financial institution enters into an
agreement with the U.S. Treasury Department to collect and disclose
information regarding U.S. account holders of that foreign
financial institution (including certain account holders that are
foreign entities that have U.S. owners) and satisfies other
requirements; and (ii) specified other foreign entities unless such
an entity certifies that it does not have any substantial U.S.
owners or provides the name, address and taxpayer identification
number of each substantial U.S. owner and such entity satisfies
other specified requirements. Non-U.S. holders should consult their
own tax advisors regarding the application of FATCA to them and
whether it may be relevant to their purchase, ownership and
disposition of Series D Preferred Stock.
UNDERWRITING
The Benchmark
Company, LLC (“Benchmark”) is acting as representative
of the underwriters named below. Subject to the terms and
conditions stated in the underwriting agreement, dated December
17, 2019, each underwriter named below has severally,
and not jointly, agreed to purchase from us, and we have agreed to
sell to that underwriter, the number of shares of Series D
Preferred Stock set forth opposite that underwriter’s name in
the table below.
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Underwriters
|
|
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The Benchmark
Company, LLC
|
245,398
|
|
|
|
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Total
|
245,398
|
The underwriting
agreement provides that the underwriters must buy all of the shares
of our Series D Preferred Stock offered hereby if they buy any of
them. Our shares of Series D Preferred Stock, however, are offered
subject to a number of conditions, including:
●
receipt and
acceptance of our shares by the underwriters; and
●
the
underwriters’ right to reject orders in whole or in
part.
In connection with
this offering, the underwriters or securities dealers may
distribute prospectuses electronically.
We expect that delivery of the Series D
Preferred Stock will be made against payment therefor on or about
December
20, 2019, which will be the second business day
following the trade date of the Series D Preferred Stock (such
settlement cycle being herein referred to as “T + 2”).
Under Rule 15c6-1 under the Exchange Act, trades in the secondary
market generally are required to settle in two business days,
unless the parties to any such trade expressly agree otherwise.
Accordingly, purchasers who wish to trade Series D Preferred Stock
on the date of pricing or the next business day will be required,
by virtue of the fact that the Series D Preferred Stock initially
will settle T + 2, to specify an alternate settlement cycle at the
time of any such trade to prevent a failed settlement. Purchasers
of the Series D Preferred Stock who wish to trade the Series D
Preferred Stock on the date of pricing of the Series D Preferred
Stock or the next business day should consult their own
advisor.
Underwriting
Discounts and Commissions
The representative
has advised us that the underwriters propose initially to offer the
shares of Series D Preferred Stock to the public at the public
offering price set forth on the cover page of this prospectus
supplement and to certain dealers at the public offering price
minus a concession not in excess of $1.1375 per share.
Sales of shares made outside of
the United States may be made by affiliates of the underwriters. If
all the shares are not sold at the public offering price, the
representatives may change the offering price and the other selling
terms. Upon execution of the underwriting agreement, the
underwriters will be obligated to purchase the shares at the prices
and upon the terms stated therein. The following table shows
the public offering price, underwriting discount and proceeds,
before expenses, that we will pay to the underwriters in connection
with this offering. The information assumes either no exercise or
full exercise by the underwriters of their option to purchase
additional shares of Series D Preferred Stock to cover
over-allotments, if any.
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Underwriters
|
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Public Offering
Price
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$ 22.75
|
$ 5,582,805
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$ 6,420,210
|
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Underwriting
Discount (8.0%)
|
$ 1.82
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$ 446,624
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$ 513,617
|
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Proceeds to Us,
before expenses
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$ 20.93
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$ 5,136,181
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$ 5,906,593
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Certain expenses
associated with this offering, exclusive of the underwriting
discount and the expenses set forth in the next sentence, are
estimated to be approximately $170,000 and will be
payable by us. In addition to the underwriting discount, we will
reimburse the underwriters for their reasonable out-of-pocket
expenses incurred in connection with their engagement as
underwriters, including, without limitation, all marketing,
syndication and travel, lodging and other “road show”
expenses and legal fees and any actual documented out-of-pocket
expenses up to a maximum aggregate amount of $70,000 if this
offering is consummated.
Over-Allotment
Option
We have granted to the underwriters an
option, exercisable for 45 days from the date of this prospectus
supplement, to purchase up to 36,809 additional
shares of Series D Preferred Stock at the public offering price
listed on the cover page of this prospectus supplement, less
underwriting discounts and commissions. To the extent the option is
exercised, each underwriter will become obligated, subject to
certain conditions, to purchase about the same percentage of the
additional Series D Preferred Stock as the number listed next to
the underwriter’s name in the preceding table bears to the
total number of Series D Preferred Stock listed next to the names
of all underwriters in the preceding table.
No
Sales of Similar Securities
We have agreed
that, for a period of 90 days from the date of this prospectus
supplement, we will not, without the prior written consent of the
representative on behalf of the underwriters, issue, offer, pledge,
sell, contract to sell, or otherwise dispose of any shares of
Series D Preferred Stock or any shares of preferred stock ranking
on parity with or senior to the Series D Preferred Shares or any
securities convertible into or exercisable or exchangeable for
shares of Series D Preferred Stock or shares of preferred stock
ranking on parity with or senior to the Series D Preferred Stock;
enter into any swap or other arrangement that transfers any of the
economic consequences of ownership of the Series D Preferred Stock
or such parity or senior preferred stock; file any registration
statement relating to the offering of any shares of Series D
Preferred Stock or any shares of preferred stock ranking on parity
with or senior to the Series D Preferred Stock; or publicly
announce an intention to effect any such transaction.
Right
of First Refusal
Subject to the
closing of this offering on or before December 31, 2019 with
proceeds of at least $5,500,000 and certain conditions set forth in
the underwriting agreement, until six months from the closing date
of this offering, Benchmark shall have a right of first refusal to
act as lead or joint investment banker, lead or joint book-runner
and/or lead or joint placement agent, for each and every future
issuance of shares of Series D Preferred Stock, for us, or any of
our successors or subsidiaries, on terms customary to Benchmark
during such six month period following the earlier of the
consummation of this offering, termination of the engagement
agreement between us and Benchmark or the underwriting
agreement.
Indemnification
We have agreed to
indemnify the underwriters against certain liabilities, including
liabilities under the Securities Act or to contribute to payments
the underwriters may be required to make in respect of any of those
liabilities.
Price
Stabilization; Short Positions and Penalty Bids
In order to facilitate the offering of the Series D Preferred
Stock, the underwriters may engage in transactions that stabilize,
maintain or otherwise affect the price of the Series D Preferred
Stock. Specifically, the underwriters may sell more shares than
they are obligated to purchase under the underwriting agreement,
creating a short position. A short sale is covered if the short
position is no greater than the number of shares available for
purchase by the underwriters under the over-allotment option to
purchase additional shares. The underwriters can close out a
covered short sale by exercising the over-allotment option or
purchasing shares in the open market. In determining the source of
shares to close out a covered short sale, the underwriters will
consider, among other things, the open market price of shares
compared to the price available under the option. The underwriters
may also sell shares in excess of the option, creating a naked
short position. The underwriters must close out any naked short
position by purchasing shares in the open market. A naked short
position is more likely to be created if the underwriters are
concerned that there may be downward pressure on the price of the
Series D Preferred Stock in the open market after pricing that
could adversely affect investors who purchase in this offering. The
underwriters may also impose a penalty bid. This occurs when a
particular underwriter repays to the representative a portion of
the underwriting discount received by it because the representative
has repurchased shares sold by or for the account of that
underwriter in stabilizing or short covering transactions. These
stabilizing transactions, short sales, purchases to cover positions
created by short sales, the imposition of penalty bids and
syndicate covering transactions may have the effect of raising or
maintaining the market price of our Series D Preferred Stock or
preventing or retarding a decline in the price of our Series D
Preferred Stock. As a result of these activities, the price thereof
may be higher than otherwise might exist in the open market.
Neither we nor the underwriters make any representation that the
underwriters will engage in these transactions, or make any
representation with respect to the effect of any such transactions.
As an additional means of facilitating this offering, the
underwriters may bid for, and purchase, Series D Preferred Stock in
the open market to stabilize the price of the Series D Preferred
Stock. These activities may raise or maintain the market price of
the Series D Preferred Stock above independent market levels or
prevent or retard a decline in the market price of the Series D
Preferred Stock. The underwriters are not required to engage in
these activities and may end any of these activities at any
time.
Electronic
Distribution
A prospectus
supplement and accompanying base prospectus in electronic format
may be made available on the Internet sites or through other online
services maintained by the underwriters participating in this
offering, or by their affiliates. In those cases, prospective
investors may view offering terms online and, depending upon the
particular underwriter, prospective investors may be allowed to
place orders online. The underwriters may agree with us to allocate
a specific number of shares of Series D Preferred Stock for sale to
online brokerage account holders. Any such allocation for online
distributions will be made by the underwriters on the same basis as
other allocations. Other than the prospectus supplement and
accompanying base prospectus in electronic format, the information
on any underwriter’s website and any information contained in
any other website maintained by an underwriter is not part of the
prospectus or the registration statement of which this prospectus
forms a part, has not been approved and/or endorsed by us or any
underwriter in its capacity as underwriter and should not be relied
upon by investors.
Conflicts
of Interest
From time to time, the underwriters and/or their
affiliates have provided, and may in the future provide, various
investment banking and other financial services for us for which
services it has received and, may in the future receive, customary
fees. Except for the services provided in connection with this
offering and other than as described below, the underwriters have
not provided any investment banking or other financial services
during the 180-day period preceding the date of this
prospectus.
On January
7, 2019, we entered into an At-the-Market Offering Agreement
(the “ATM Agreement”) with Benchmark, as sales agent,
pursuant to which we may sell from time to time, at our option,
shares of our common stock through Benchmark, as sales agent, for
the sale of up to $60,000,000 of shares of our common stock. We are
not obligated to make any sales of common stock under the ATM
Agreement and the Company cannot provide any assurances that it
will issue any shares pursuant to the ATM Agreement. During the
nine months ended September 30, 2019, we sold 17,524, shares of
common stock under the ATM Agreement and received net proceeds of
approximately $102,000. We paid the Sales Agent 3.0% commission of
the gross sales proceeds.
On September 24, 2019, we closed the September 2019 Offering, a
firm commitment underwritten public offering of 333,500 shares of
our Series D Preferred Stock (inclusive of 43,500 shares sold upon
exercise of the underwriter’s over-allotment option). In the
September 2019 Offering, we entered into an underwriting agreement
with Benchmark, as representative of the several underwriters named
therein, pursuant to which we paid Benchmark $667,000 in
underwriting discounts and reimbursed Benchmark for out of their
pocket expenses in an amount equal to $90,000.
Listing
Our Series D
Preferred Stock is listed on The NASDAQ Capital Market
under the symbol “YGYIP.”
Transfer
Agent
The
transfer agent for our Series D Preferred Stock to be issued in
this offering is Pacific Stock Transfer Company, located at 6725
Via Austi Parkway, Suite 300, Las Vegas Nevada 89119.
LEGAL
MATTERS
The validity of the
issuance of the shares of our Series D Preferred Stock offered
hereby will be passed upon for us by Gracin & Marlow, LLP, New
York, New York. Sheppard, Mullin, Richter & Hampton LLP, New
York, New York, is acting as counsel
to the underwriters in this offering.
EXPERTS
The financial
statements of Youngevity International, Inc. as of December 31,
2018 and 2017 and for each of the two years in the period ended
December 31, 2018 incorporated by reference in this prospectus
supplement have been so incorporated in reliance on the reports of
Mayer Hoffman McCann P.C., an independent registered accounting
firm, given on authority of said firm as experts in auditing and
accounting.
WHERE
YOU CAN FIND MORE INFORMATION
We file annual,
quarterly and special reports, proxy statements and other
information with the SEC. These filings are available to the public
at the SEC’s website at www.sec.gov.
This prospectus
supplement is part of a registration statement on Form S-3 that we
have filed with the SEC under the Securities Act. This prospectus
supplement does not contain all of the information in the
registration statement. We have omitted certain parts of the
registration statement, as permitted by the rules and regulations
of the SEC. You may view and print copies of the registration
statement, including exhibits, at the SEC’s website at
www.sec.gov.
INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us
to “incorporate by reference” the information we file
with it which means that we can disclose important information to
you by referring you to those documents instead of having to repeat
the information in this prospectus supplement. The information
incorporated by reference is considered to be part of this
prospectus supplement, and later information that we file with the
SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future
filings made with the SEC (other than any portions of any such
documents that are not deemed “filed” under the
Exchange Act in accordance with the Exchange Act and applicable SEC
rules) under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
(Commission File Number 001-38116) including those made after the
date of this prospectus supplement and before the completion of the
offering of the shares of our common stock included in this
prospectus supplement:
●
Our annual report
on Form 10-K for the fiscal year ended December 31, 2018 filed with
the SEC on April 15, 2019;
●
Our quarterly
report on Form 10-Q for the quarterly period ended March 31, 2019
filed with the SEC on May 20, 2019, our quarterly report on Form
10-Q for quarterly period ended June 30, 2019 filed with the SEC on
August 14, 2019 and our quarterly report on Form 10-Q for quarterly
period ended September 30, 2019 filed with the SEC on November 18,
2019;
●
Our current reports
on Form 8-K filed with the SEC on January 7, 2019, January 11, 2019
(Item 5.02), January 11, 2019 (Item 5.07), January 11, 2019 (Item
1.01), January 18, 2019, February 12, 2019, February 15, 2019, June
27, 2019, August 5, 2019, September 24, 2019, October 1, 2019,
October 21, 2019 and November 20, 2019;
●
Our definitive
proxy statement on Schedule 14A relating to our 2019 annual meeting
of stockholders filed with the SEC on May 31, 2019;
●
Our definitive
information statement on Schedule 14C relating to approval of an
amendment to our Amended and Restated 2012 Stock Incentive Plan
filed with the SEC on January 16, 2019;
●
The description of
our common stock set forth in our registration statement on Form
8-A12B, filed with the SEC on June 15, 2017;
●
The description of
our preferred stock set forth in our registration statement on Form
8-A12G, filed with the SEC on February 12, 2018; and
●
The description of
Series D Preferred Stock set forth in our registration statement on
Form 8-A12B, filed with the SEC on September 17, 2019.
You may obtain,
free of charge, a copy of any of these documents (other than
exhibits to these documents unless the exhibits are specifically
incorporated by reference into these documents or referred to in
this prospectus) by writing or calling us at the following address
and telephone number: Youngevity International, Inc., 2400 Boswell
Road, Chula Vista, California 91914, (619) 934-3980.
PROSPECTUS
YOUNGEVITY INTERNATIONAL, INC.
$75,000,000
Common Stock
Preferred Stock
Debt Securities
Warrants
Units
We
may offer and sell, from time to time in one or more offerings, any
combination of common stock, preferred stock, debt securities,
warrants to purchase common stock, preferred stock or debt
securities, or any combination of the foregoing, either
individually or as units comprised of one or more of the other
securities, having an aggregate initial offering price not
exceeding $75,000,000.
This prospectus
provides a general description of the securities we may
offer. Each time we sell a
particular class or series of securities, we will provide specific
terms of the securities offered in a supplement to this prospectus.
The
prospectus supplement and any related free writing prospectus may
also add, update or change information contained in this
prospectus. We may also authorize one or more free writing
prospectuses to be provided to you in connection with these
offerings. You should read carefully this prospectus, the
applicable prospectus supplement and any related free writing
prospectus, as well as any documents incorporated by reference
herein or therein before you invest in any of our
securities.
This prospectus may not be used to offer or sell our securities
unless accompanied by a prospectus supplement relating to the
offered securities.
Our common stock is
listed on the NASDAQ Capital Market under the symbol
“YGYI.” On May 15, 2018, the last reported sale price
of our common stock on the NASDAQ Capital Market was $3.90 per
share. The
applicable prospectus supplement will contain information, where
applicable, as to any other listing on the NASDAQ Capital Market or
any securities market or other exchange of the securities, if any,
covered by the prospectus supplement.
As
of May 15, 2018, the aggregate market value of our outstanding
common stock held by non-affiliates was $30,935,753, based on
21,536,069 shares of outstanding common stock, of which 14,630,767
shares are held by affiliates, and a per share price of $4.48 based
on the closing sale price of our common stock on March 21, 2018. We
have not offered or sold any securities during the past twelve
months pursuant to General Instruction I.B.6 to Form
S-3.
These
securities may be sold directly by us, through dealers or agents
designated from time to time, to or through underwriters, dealers
or through a combination of these methods on a continuous or
delayed basis. See “Plan of Distribution” in this
prospectus. We may also describe the plan of distribution for any
particular offering of our securities in a prospectus supplement.
If any agents, underwriters or dealers are involved in the sale of
any securities in respect of which this prospectus is being
delivered, we will disclose their names and the nature of our
arrangements with them in a prospectus supplement. The price to the
public of such securities and the net proceeds we expect to receive
from any such sale will also be included in a prospectus
supplement.
We are an
“emerging growth company” as that term is used in the
Jumpstart Our Business Startups Act of 2012 (the “JOBS
Act”), and, as such, elect to comply with certain reduced
public company reporting requirements for future
filings.
Investing in our securities involves various risks. See “Risk
Factors” contained herein for more information on these
risks. Additional risks will be described in the related prospectus
supplements under the heading “Risk Factors.” You
should review that section of the related prospectus supplements
for a discussion of matters that investors in our securities should
consider.
Neither
the Securities and Exchange Commission, or SEC, nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
The date of this
prospectus is May 29, 2018
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You should rely only on the information we have provided or
incorporated by reference in this prospectus or in any prospectus
supplement. We have not authorized anyone to provide you with
information different from that contained or incorporated by
reference in this prospectus or in any prospectus supplement. This
prospectus and any prospectus supplement is an offer to sell only
the securities offered hereby, but only under circumstances and in
jurisdictions where it is lawful to do so. You should assume that
the information contained in this prospectus and in any prospectus,
supplement is accurate only as of their respective dates and that
any information we have incorporated by reference is accurate only
as of the date of the document incorporated by reference,
regardless of the time of delivery of this prospectus or any
prospective supplement or any sale of securities. The registration
statement, including the exhibits and the documents incorporated
herein by reference, can be read on the Securities and Exchange
Commission website or at the Securities and Exchange Commission
offices mentioned under the heading “Where You Can Find More
Information.”
This
prospectus is part of a registration statement that we filed with
the Securities and Exchange Commission (the “SEC”)
under the Securities Act of 1933, as amended (the “Securities
Act”), using a “shelf” registration process.
Under this shelf registration process, we may from time to time
sell common stock, preferred stock, debt securities or warrants to
purchase common stock, preferred stock or debt securities, or any
combination of the foregoing, either individually or as units
comprised of one or more of the other securities, in one or more
offerings up to a total dollar amount of $75,000,000. We have
provided to you in this prospectus a general description of the
securities we may offer. Each time we sell securities under this
shelf registration, we will, to the extent required by law, provide
a prospectus supplement that will contain specific information
about the terms of that offering. We may also authorize one or more
free writing prospectuses to be provided to you that may contain
material information relating to these offerings. The prospectus
supplement and any related free writing prospectus that we may
authorize to be provided to you may also add, update or change
information contained in this prospectus or in any documents that
we have incorporated by reference into this prospectus. To the
extent there is a conflict between the information contained in
this prospectus and the prospectus supplement or any related free
writing prospectus, you should rely on the information in the
prospectus supplement or the related free writing prospectus;
provided that if any statement in one of these documents is
inconsistent with a statement in another document having a later
date — for example, a document incorporated by reference in
this prospectus or any prospectus supplement or any related free
writing prospectus — the statement in the document having the
later date modifies or supersedes the earlier
statement.
We
have not authorized any dealer, agent or other person to give any
information or to make any representation other than those
contained or incorporated by reference in this prospectus, any
accompanying prospectus supplement or any related free writing
prospectus that we may authorize to be provided to you. You must
not rely upon any information or representation not contained or
incorporated by reference in this prospectus or an accompanying
prospectus supplement, or any related free writing prospectus that
we may authorize to be provided to you. This prospectus, any
accompanying prospectus supplement and any related free writing
prospectus, if any, do not constitute an offer to sell or the
solicitation of an offer to buy any securities other than the
registered securities to which they relate, nor do this prospectus,
any accompanying prospectus supplement or any related free writing
prospectus, if any, constitute an offer to sell or the solicitation
of an offer to buy securities in any jurisdiction to any person to
whom it is unlawful to make such offer or solicitation in such
jurisdiction. You should not assume that the information contained
in this prospectus, any applicable prospectus supplement or any
related free writing prospectus is accurate on any date subsequent
to the date set forth on the front of the document or that any
information we have incorporated by reference is correct on any
date subsequent to the date of the document incorporated by
reference (as our business, financial condition, results of
operations and prospects may have changed since that date), even
though this prospectus, any applicable prospectus supplement or any
related free writing prospectus is delivered or securities are sold
on a later date.
As
permitted by the rules and regulations of the SEC, the registration
statement, of which this prospectus forms a part, includes
additional information not contained in this prospectus. You may
read the registration statement and the other reports we file with
the SEC at the SEC’s web site or at the SEC’s offices
described below under the heading “Where You Can Find More
Information.”
Company References
In
this prospectus, “Youngevity,” “the
Company,” “we,” “us,” and
“our” refer to Youngevity International, Inc., a
Delaware corporation, unless the context otherwise
requires.
Overview
We
are a leading omni-direct lifestyle company offering a hybrid of
the direct selling business model that also offers e-commerce and
the power of social selling. Assembling a virtual main street of
products and services under one corporate entity, we offer products
from the six top selling retail categories: health/nutrition,
home/family, food/beverage (including coffee), spa/beauty,
apparel/jewelry, as well as innovative services.
We
operate in two segments: the direct selling segment where products
are offered through a global distribution network of preferred
customers and distributors and the commercial coffee segment where
products are sold directly to businesses. During the three months
ended March 31, 2018 and 2017, we derived approximately 82% and
86%, respectively, of our revenue from our direct selling sales and
approximately 18% and 14%, respectively, of our revenue from our
commercial coffee sales and during the years ended December 31,
2017 and 2016, we derived approximately 86% and 89%, respectively,
of our revenue from our direct selling sales and approximately 14%
and 11%, respectively, of our revenue from our commercial coffee
sales.
Direct
Selling Segment - In the direct
selling segment we sell health and wellness, beauty product and
skin care, scrap booking and story booking items, packaged food
products and other service-based products on a global basis and
offer a wide range of products through an international direct
selling network. Our direct sales are made through our network,
which is a web-based global network of customers and distributors.
Our independent sales force markets a variety of products to an
array of customers, through friend-to-friend marketing and social
networking. We consider our company to be an e-commerce company
whereby personal interaction is provided to customers by our
independent sales network. Initially, our focus was solely on the
sale of products in the health, beauty and home care market through
our marketing network; however, we have since expanded our selling
efforts to include a variety of other products in other markets.
Our direct selling segment offers more than 5,500 products to
support a healthy lifestyle.
Since
2010 we have expanded our operations through a series of
acquisitions of the assets of other direct selling companies
including their product lines and sales forces. We have also
substantially expanded our distributor base by merging the assets
that we have acquired under our web-based independent distributor
network, as well as providing our distributors with additional new
products to add to their product offerings.
Set
forth below is information regarding each of our acquisitions since
2012.
|
Business
|
|
Date
of
Acquisition
|
|
|
Product
Categories
|
|
|
|
|
|
|
|
|
ViaViente
|
|
March 1,
2018
|
|
|
Nutritional
Supplements
|
|
Nature
Direct
|
|
February 12,
2018
|
|
|
A manufacturer and
distributor of essential-oil based nontoxic cleaning and care
products for personal, home and professional use
|
|
BeautiControl,
Inc.
|
|
December 13,
2017
|
|
|
Cosmetic and Skin
Care Products
|
|
Future Global
Vision, Inc.
|
|
November 6,
2017
|
|
|
Nutritional
Supplements and Automotive Fuel Additive
Products
|
|
Sorvana
International, LLC (FreeLife International, Inc.)
|
|
July 1,
2017
|
|
|
Health and wellness
products
|
|
Ricolife,
LLC
|
|
March 1,
2017
|
|
|
Teas
|
|
Bellavita Group,
LLC
|
|
March 1,
2017
|
|
|
Health and Beauty
Products
|
|
Legacy for Life,
LLC
|
|
September 1,
2016
|
|
|
Nutritional
Supplements
|
|
Nature’s
Pearl Corporation
|
|
September 1,
2016
|
|
|
Nutritional
Supplements and Skin Care Products
|
|
Renew Interest, LLC
(SOZO Global, Inc.)
|
|
July 29,
2016
|
|
|
Nutritional
Supplements and Skin Care Products
|
|
South Hill Designs
Inc.
|
|
January 20,
2016
|
|
|
Jewelry
|
|
PAWS Group,
LLC
|
|
July 1,
2015
|
|
|
Pet
treats
|
|
Mialisia & Co.,
LLC
|
|
June 1,
2015
|
|
|
Jewelry
|
|
JD Premium
LLC
|
|
March 4,
2015
|
|
|
Dietary Supplement
Company
|
|
Sta-Natural,
LLC
|
|
February 23,
2015
|
|
|
Vitamins, Minerals
and Supplements for families and their pets
|
|
Restart Your Life,
LLC
|
|
October 1,
2014
|
|
|
Dietary
Supplements
|
|
Beyond Organics,
LLC
|
|
May 1,
2014
|
|
|
Organic Food and
Beverages
|
|
Good Herbs,
Inc.
|
|
April 28,
2014
|
|
|
Herbal
Supplements
|
|
Biometics
International, Inc.
|
|
November 19,
2013
|
|
|
Liquid
Supplements
|
|
GoFoods Global,
LLC
|
|
October 1,
2013
|
|
|
Packaged
Foods
|
|
Heritage Markers,
LLC
|
|
August 14,
2013
|
|
|
Digital
Products
|
|
Livinity,
Inc.
|
|
July 10,
2012
|
|
|
Nutritional
Products
|
|
GLIE, LLC (DBA
True2Life)
|
|
March 20,
2012
|
|
|
Nutritional
Supplements
|
Coffee
Segment - We engage in the
commercial sale of one of our products, our coffee through our
subsidiary CLR Roasters, LLC (“CLR”). We own a
traditional coffee roasting business that produces coffee under its
own Café La Rica brand, Josie’s Java House Brand and
Javalution brands. CLR produces a variety of private labels through
major national sales outlets and to major customers including
cruise lines and office coffee service operators, as well as
through our distributor network. CLR was established in 2001 and is
our wholly-owned subsidiary. CLR produces and markets a unique line
of coffees with health benefits under the JavaFit® brand which
is sold directly to consumers. In April 2017, CLR reached an
agreement with Major League Baseball's Miami Marlins to feature
CLR’s Café La Rica Gourmet Espresso coffee as the
“Official Cafecito of the Miami Marlins” at Marlins
Park in Miami, Florida.
Our
roasting facility is located in Miami, Florida, is 50,000 square
foot and is SQF Level 2 certified, which is a stringent food safety
process that verifies the coffee bean processing plant and
distribution facility is in compliance with Certified HACCP (Hazard
Analysis, Critical Control Points) food safety plans.
In
March 2014, we expanded our coffee segment and started our new
green coffee business with CLR’s acquisition of Siles
Plantation Family Group, which is a wholly-owned subsidiary of CLR
located in Matagalpa, Nicaragua. Siles Plantation Family Group
includes “La Pita,” a dry-processing facility on
approximately 26 acres of land and “El Paraiso,” a
coffee plantation consisting of approximately 500 acres of land and
thousands of coffee plants which produces 100 percent Arabica
coffee beans that are shade grown, Organic, Rainforest Alliance
Certified™ and Fair Trade Certified™.
The
plantation and dry-processing facility allows CLR to control the
coffee production process from field to cup. The dry-processing
plant allows CLR to produce and sell green coffee to major coffee
suppliers in the United States and around the world. CLR has
engaged a husband and wife team to operate the Siles Plantation
Family Group by way of an operating agreement. The agreement
provides for the sharing of profits and losses generated by the
Siles Plantation Family Group after certain conditions are met. CLR
has made substantial improvements to the land and facilities since
2014. The 2018 harvest season started in November 2017 and will
continue through the end of May 2018.
Industry Overview
We
are engaged in two industries, the direct selling industry and the
coffee industry.
Direct Selling Industry
Direct
selling is a business distribution model that allows a company to
market its products directly to consumers by means of independent
contractors and relationship referrals. Independent, unsalaried
salespeople, referred to as distributors, represent us and are
awarded a commission based upon the volume of product sold through
each of their independent business operations.
The
Direct Selling Association (“DSA”) reported in its
“2016 An Overview” that the fastest growing product was
Wellness followed by Services & Other, the two categories alone
representing approximately $20 billion in sales in 2016. Top
product categories that continue to gain market share: home and
family care/durables, personal care, jewelry, clothing,
leisure/educations. Wellness products include weight-loss products
and dietary supplements. In the United States, as reported by the
DSA, a record 20.5 million people were involved in direct selling
in 2016, an increase of 1.5% compared to 2015. Estimated direct
retail sales for 2016 was reported by the 2017 Growth & Outlook
Report to be $35.54 billion compared to $36.12 billion in
2015.
Coffee Industry
Our
coffee segment includes coffee bean roasting and the sales of green
coffee beans. Our roasting facility, located in Miami, Florida,
procures coffee primarily from Central America. Our green coffee
business procures coffee from Nicaragua by way of growing our own
coffee beans and purchasing green coffee beans directly from other
farmers. CLR sells coffee to domestic and international customers,
both green and roasted coffee.
The
United States Department of Agriculture (“USDA”)
reported in its June 2017 “Coffee: World Markets and
Trade” report for the 2017/18 Forecast Overview that world
coffee production is forecasted at 159 million bags (60 kilograms
or approximately 132 pounds), which is unchanged from the previous
year. World exports of green coffee are expected to remain steady
totaling 111 million bags in 2018, with global consumption
forecasted at a record 158 million bags. For 2018, Central America
and Mexico are forecasted to contribute 18.1 million bags of coffee
beans and approximately 40 percent of the exports are destined to
the United States and 35 percent to the European Union.
The
The Securities We May Offer
We
may offer shares of our common stock and preferred stock, various
series of debt securities and warrants to purchase any of such
securities, either individually or in units, with a total value of
up to $75,000,000 from time to time under this prospectus, together
with any applicable prospectus supplement and related free writing
prospectus, at prices and on terms to be determined by market
conditions at the time of offering. If we issue any debt securities
at a discount from their original stated principal amount, then,
for purposes of calculating the total dollar amount of all
securities issued under this prospectus, we will treat the initial
offering price of the debt securities as the total original
principal amount of the debt securities. Each time we offer
securities under this prospectus, we will provide offerees with a
prospectus supplement that will describe the specific amounts,
prices and other important terms of the securities being offered,
including, to the extent applicable:
●
designation or
classification;
●
aggregate principal
amount or aggregate offering price;
●
maturity, if
applicable;
●
original issue
discount, if any;
●
rates
and times of payment of interest or dividends, if any;
●
redemption,
conversion, exchange or sinking fund terms, if any;
●
conversion or
exchange prices or rates, if any, and, if applicable, any
provisions for changes to or adjustments in the conversion or
exchange prices or rates and in the securities or other property
receivable upon conversion or exchange;
●
restrictive
covenants, if any;
●
voting
or other rights, if any; and
●
important United
States federal income tax considerations.
A
prospectus supplement and any related free writing prospectus that
we may authorize to be provided to you may also add, update or
change information contained in this prospectus or in documents we
have incorporated by reference. However, no prospectus supplement
or free writing prospectus will offer a security that is not
registered and described in this prospectus at the time of the
effectiveness of the registration statement of which this
prospectus is a part.
We
may sell the securities to or through underwriters, dealers or
agents or directly to purchasers. We, as well as any agents acting
on our behalf, reserve the sole right to accept and to reject in
whole or in part any proposed purchase of securities. Each
prospectus supplement will set forth the names of any underwriters,
dealers or agents involved in the sale of securities described in
that prospectus supplement and any applicable fee, commission or
discount arrangements with them, details regarding any
over-allotment option granted to them, and net proceeds to us. The
following is a summary of the securities we may offer with this
prospectus.
Authorized Capital
Our authorized
capital consists of 50 million shares of common stock, par value
$0.001 per share, and 5 million shares of preferred stock, par
value $0.001 per share. As of May 15, 2018, 21,536,069 shares of
common stock were issued and outstanding and 542,308 shares of
preferred stock were issued and outstanding.
Common Stock
We may issue shares
of our common stock from time to time. Holders of shares of common
stock have the right to cast one vote for each share of common
stock in their name on our books, whether represented in person or
by proxy, on all matters submitted to a vote of holders of common
stock, including election of directors. There is no right to
cumulative voting in election of directors. Except where a greater
requirement is provided by statute, by our certificate of
incorporation, or by our bylaws, the presence, in person or by
proxy duly authorized, of the one or more holders of a majority of
the outstanding shares of our common stock constitutes a quorum for
the transaction of business. The vote by the holders of a majority
of outstanding shares is required to effect certain fundamental
corporate changes such as liquidation, merger, or amendment of our
certificate of incorporation. Upon our liquidation, dissolution or
winding up, holders of our common stock are entitled to share
ratably in all assets remaining after payment of liabilities and
the liquidation preferences of any outstanding shares of preferred
stock.
There are no
restrictions in our certificate of incorporation or bylaws that
prevent us from declaring dividends. We have not declared any cash
dividends on our common stock, and we do not plan to declare any
cash dividends on our common stock in the foreseeable
future.
Holders of shares
of our common stock are not entitled to preemptive or subscription
or conversion rights, and no redemption or sinking fund provisions
are applicable to our common stock. All outstanding shares of
common stock are, and the shares of common stock sold in the
offering when issued will be fully paid and
non-assessable.
Preferred Stock
Our Board of
Directors has the authority, without action by our stockholders, to
designate and issue up to 5 million shares of preferred stock in
one or more series or classes and to designate the rights,
preferences and privileges of each series or class, which may be
greater than the rights of our common stock. Of the 5 million
shares of preferred stock, 161,135 have been designated as Series A
Convertible Preferred Stock (“Series A Preferred”) and
1,052,631 have been designated
as Series B Convertible Preferred Stock (“Series B
Preferred”). It is not possible to state the actual effect of
the issuance of any shares of preferred stock upon the rights of
holders of our common stock until our Board of Directors determines
the specific rights of the holders of the preferred stock. However,
the effects might include:
●
restricting
dividends on our common stock;
●
diluting the voting
power of our common stock;
●
impairing
liquidation rights of our common stock; or
●
delaying or
preventing a change in control of us without further action by our
stockholders.
The Board of
Directors’ authority to issue preferred stock without
stockholder approval could make it more difficult for a third-party
to acquire control of our company and could discourage such
attempt. We have no present plans to issue any shares of preferred
stock.
Series A Preferred
As of May 15, 2018,
we have 161,135 shares of Series A Preferred issued and
outstanding. The holders of the Series
A Preferred are entitled to receive a cumulative dividend at a rate
of 8.0% per year, payable annually either in cash or shares of our
Company's common stock at our election. Each share of
Series A Preferred is initially convertible into one-tenth of a
share of common stock, subject to adjustment. The holders of Series
A Preferred are entitled to receive payments upon our liquidation,
dissolution or winding up before any amount is paid to the holders
of common stock. The holders of Series A Preferred have no voting
rights, except as required by law.
Series B Preferred
As of May 15, 2018,
we have 381,173 shares of Series B Preferred issued and
outstanding. The shares of Series B Preferred have a stated value
of $.001 per share and are initially convertible at any time,
in whole or in part, at the option of the holders, at an initial
conversion price of $4.75 per share, into two shares of our common
stock, have no voting rights, and is entitled to cumulative
dividends from the date of original issue at a rate of 5.0%
per annum and a liquidation preference, ranking senior to our
outstanding Series A Preferred and the common
stock.
Debt Securities
We
may offer general debt obligations, which may be secured or
unsecured, senior or subordinated and convertible into shares of
our common stock. In this prospectus, we refer to the senior debt
securities and the subordinated debt securities together as the
“debt securities.” We may issue debt securities under a
note purchase agreement or under an indenture to be entered between
us and a trustee; forms of the senior and subordinated indentures
are included as an exhibit to the registration statement of which
this prospectus is a part. The indentures do not limit the amount
of securities that may be issued under them and provide that debt
securities may be issued in one or more series. The senior debt
securities will have the same rank as all of our other indebtedness
that is not subordinated. The subordinated debt securities will be
subordinated to our senior debt on terms set forth in the
applicable prospectus supplement. In addition, the subordinated
debt securities will be effectively subordinated to creditors and
preferred stockholders of our subsidiaries. Our Board of Directors
will determine the terms of each series of debt securities
being offered. This prospectus contains only general terms and
provisions of the debt securities. The applicable prospectus
supplement will describe the particular terms of the debt
securities offered thereby. You should read any prospectus
supplement and any free writing prospectus that we may authorize to
be provided to you related to the series of debt securities being
offered, as well as the complete note agreements and/or indentures
that contain the terms of the debt securities. Forms of indentures
have been filed as exhibits to the registration statement of which
this prospectus is a part, and supplemental indentures and forms of
debt securities containing the terms of debt securities being
offered will be incorporated by reference into the registration
statement of which this prospectus is a part from reports we file
with the SEC.
Warrants
We
may offer warrants for the purchase of shares of our common stock
or preferred stock or of debt securities. We may issue the warrants
by themselves or together with common stock, preferred stock or
debt securities, and the warrants may be attached to or separate
from any offered securities. Each series of warrants will be issued
under a separate warrant agreement to be entered into between us
and the investors or a warrant agent. Our Board of Directors will
determine the terms of the warrants. This prospectus contains only
general terms and provisions of the warrants. The applicable
prospectus supplement will describe the particular terms of the
warrants being offered thereby. You should read any prospectus
supplement and any free writing prospectus that we may authorize to
be provided to you related to the series of warrants being offered,
as well as the complete warrant agreements that contain the terms
of the warrants. Specific warrant agreements will contain
additional important terms and provisions and will be incorporated
by reference into the registration statement of which this
prospectus is a part from reports we file with the
SEC.
Units
We
may offer units consisting of our common stock or preferred stock,
debt securities and/or warrants to purchase any of these securities
in one or more series. We may evidence each series of units by unit
certificates that we will issue under a separate agreement. We may
enter into unit agreements with a unit agent. Each unit agent will
be a bank or trust company that we select. We will indicate the
name and address of the unit agent in the applicable prospectus
supplement relating to a particular series of units. This
prospectus contains only a summary of certain general features of
the units. The applicable prospectus supplement will describe the
particular features of the units being offered thereby. You should
read any prospectus supplement and any free writing prospectus that
we may authorize to be provided to you related to the series of
units being offered, as well as the complete unit agreements that
contain the terms of the units. Specific unit agreements will
contain additional important terms and provisions and will be
incorporated by reference into the registration statement of which
this prospectus is a part from reports we file with
Emerging Growth Company
We
are an emerging growth company under the JOBS ACT, which was
enacted in April 2012. We shall continue to be deemed an emerging
growth company until the earliest of:
(a)
the
last day of the fiscal year in which we have total annual gross
revenues of $1.07 billion or more;
(b)
the
last day of the fiscal year of the issuer following the fifth
anniversary of the date of the first sale of common equity
securities of the issuer pursuant to an effective registration
statement;
(c)
the
date on which we have issued more than $1.0 billion in
non-convertible debt, during the previous 3-year period, issued;
or.
(d)
the
date on which we are deemed to be a large accelerated
filer.
As
an emerging growth company we are subject to reduced public company
reporting requirements and are exempt from Section 404(b) of
Sarbanes Oxley. Section 404(a) requires issuers to publish
information in their annual reports concerning the scope and
adequacy of the internal control structure and procedures for
financial reporting. Section 404(b) requires that the registered
accounting firm shall, in the same report, attest to and report on
the assessment on the effectiveness of the internal control
structure and procedures for financial reporting.
As
an emerging growth company we are also exempt from Section 14A (a)
and (b) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), which requires the shareholder
approval, on an advisory basis, of executive compensation and
golden parachutes.
We
have elected to use the extended transition period for complying
with new or revised accounting standards under Section 102(b)(2) of
the Jobs Act, that allows us to delay the adoption of new or
revised accounting standards that have different effective dates
for public and private companies until those standards apply to
private companies. As a result of this election, our financial
statements may not be comparable to companies that comply with
public company effective dates.
Our Corporate History
Youngevity International, Inc., formerly AL
International, Inc., founded in 1996, operates through two segments
including the following wholly-owned domestic subsidiaries: AL
Global Corporation, which operates our direct selling networks, CLR
Roasters, LLC (“CLR”), our commercial coffee business,
2400 Boswell LLC, MK Collaborative LLC, Youngevity Global LLC and
the wholly-owned foreign subsidiaries: Youngevity Australia Pty.
Ltd., Youngevity NZ, Ltd., Siles Plantation Family Group S.A.
(“Siles”), located in Nicaragua, Youngevity Mexico S.A.
de CV, Youngevity Israel, Ltd., Youngevity Russia, LLC, Youngevity
Colombia S.A.S, Youngevity International Singapore Pte. Ltd.,
Mialisia Canada, Inc. and Legacy for Life Limited (Hong Kong). We
also operate through the BellaVita Group LLC, with operations in
Taiwan, Hong Kong, Singapore, Indonesia, Malaysia and Japan.
We also operate subsidiary branches of
Youngevity Global LLC in the Philippines and
Taiwan.
On
July 11, 2011, AL Global Corporation, a privately held California
corporation (“AL Global”), merged with and into a
wholly-owned subsidiary of Javalution Coffee Company, a publicly
traded Florida corporation (“Javalution”). After the
merger, Javalution reincorporated in Delaware and changed its name
to AL International, Inc. In connection with this merger, CLR,
which had been a wholly-owned subsidiary of Javalution prior to the
merger, continued to be a wholly-owned subsidiary of AL
International, Inc. CLR operates a traditional coffee roasting
business, and through the merger we were provided access to
additional distributors, as well as added the JavaFit® product
line to our network of direct marketers.
Effective
July 23, 2013, we changed our name from AL International, Inc. to
Youngevity International, Inc.
On
June 7, 2017, an amendment to our Certificate of Incorporation
became effective which effectuated: (i) a 1-for-20 reverse stock
split (the “Reverse Split”) of the issued and
outstanding shares of common stock; (ii) a decrease in the number
of shares of (a) common stock authorized from 600,000,000 to
50,000,000 and (b) preferred stock authorized from 100,000,000 to
5,000,000.
Our Corporate Headquarters
Our corporate headquarters are located at 2400
Boswell Road, Chula Vista, California 91914. This is also the
location of our operations and distribution
center. The facility consists of a 59,000 square foot
Class A single use building that is comprised 40% of office space
and the balance is used for distribution.
Our
telephone number is (619) 934-3980 and our facsimile number is
(619) 934-3205.
Available Information
Since
June 21, 2017, our common stock has been listed on the NASDAQ
Capital Market under the symbol “YGYI.” From June 2013
until June 2017, the common stock has been traded on the OTCQX
Marketplace operated by the OTC Markets Group under the symbol
“YGYI.”
Additional
information about our company is contained at our website,
http://www.youngevity.com. Information contained on our website is
not incorporated by reference into, and does not form any part of,
this registration statement. We have included our website address
as a factual reference and do not intend it to be an active link to
our website. Our Annual Reports on Form 10-K, Quarterly Reports on
Form 10-Q and Current Reports on Form 8-K and amendments to those
reports filed or furnished pursuant to Section 13(a) or 15(d) of
the Exchange Act are available free of charge through the investor
relations page of our internet website as soon as reasonably
practicable after those reports are electronically filed with, or
furnish it to, the SEC. The following Corporate Governance
documents are also posted on our website: Code of Business Conduct
and Ethics and the Charters for the Audit Committee and
Compensation Committee. Our phone number is (619) 934-3980 and our
facsimile number is (619) 934-3205.
You should consider carefully the risks discussed under the section
captioned “Risk Factors” contained in our annual report
on Form 10-K for the year ended December 31, 2017 and in our
subsequent quarterly reports on Form 10-Q, as updated by our
subsequent filings under Exchange Act, each of which is
incorporated by reference in this prospectus in its entirety,
together with other information in this prospectus, and the
information and documents incorporated by reference in this
prospectus, any prospectus supplement and any free writing
prospectus that we have authorized for use in connection with this
offering before you make a decision to invest in our securities. If
any of these events actually occur, our business, operating
results, prospects or financial condition could be materially and
adversely affected. This could cause the trading price of our
common stock to decline and you may lose all or part of your
investment.
CAUTIONARY
STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS
This prospectus and
the documents incorporated by reference herein contain
forward-looking statements that are based on current management
expectations. Statements other than statements of historical fact
included in this prospectus, including statements about us and the
future growth and anticipated operating results and cash
expenditures, are forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange
Act. When used in this prospectus the words
“anticipate,” “objective,”
“may,” “might,” “should,”
“could,” “can,” “intend,”
“expect,” “believe,”
“estimate,” “predict,”
“potential,” “plan” or the negative of
these and similar expressions identify forward-looking statements.
These statements reflect our current views with respect to
uncertain future events and are based on imprecise estimates and
assumptions and subject to risk and uncertainties. Given these
uncertainties, you should not place undue reliance on these
forward-looking statements. While we believe our plans, intentions
and expectations reflected in those forward-looking statements are
reasonable, these plans, intentions or expectations may not be
achieved. Our actual results, performance or achievements could
differ materially from those contemplated, expressed or implied by
the forward-looking statements contained in, or incorporated by
reference into, this prospectus for a variety of
reasons.
We urge investors
to review carefully risks contained in the section of this
prospectus entitled “Risk Factors” above as well as
other risks and factors identified from time to time in our SEC
filings in evaluating the forward-looking statements contained in
this prospectus. We caution investors not to place significant
reliance on forward-looking statements contained in this document;
such statements need to be evaluated in light of all the
information contained herein.
All forward-looking
statements attributable to us or persons acting on our behalf are
expressly qualified in their entirety by the risk factors and other
cautionary statements set forth, or incorporated by reference, in
this prospectus. Other than as required by applicable securities
laws, we are under no obligation, and we do not intend, to update
any forward-looking statement, whether as result of new
information, future events or otherwise.
This prospectus
contains estimates and other statistical data made by independent
parties and by us relating to market size and growth and other data
about our industry. We obtained the industry and market data in
this prospectus from our own research as well as from industry and
general publications, surveys and studies conducted by third
parties. This data involves a number of assumptions and limitations
and contains projections and estimates of the future performance of
the industries in which we operate that are subject to a high
degree of uncertainty. We caution you not to give undue weight to
such projections, assumptions and estimates. Further, industry and
general publications, studies and surveys generally state that they
have been obtained from sources believed to be reliable, although
they do not guarantee the accuracy or completeness of such
information. In addition, while we believe that the results and
estimates from our internal research are reliable, such results and
estimates have not been verified by any independent
source.
Except
as described in any prospectus supplement and any free writing
prospectus in connection with a specific offering, we currently
intend to use the net proceeds from the sale of the securities
offered under this prospectus for working capital purposes. Our
management will have broad discretion in the allocation of the net
proceeds and investors will be relying on the judgment of our
management regarding the application of the proceeds of any sale of
the securities. Pending use of the net proceeds, we intend to
invest the proceeds in short-term, investment-grade,
interest-bearing instruments.
Each
time we offer securities under this prospectus, we will describe
the intended use of the net proceeds from that offering in the
applicable prospectus supplement. The actual amount of net proceeds
we spend on a particular use will depend on many factors,
including, our future capital expenditures, the amount of cash
required by our operations, and our future revenue growth, if any.
Therefore, we will retain broad discretion in the use of the net
proceeds.
THE SECURITIES WE
MAY OFFER
We may offer shares of common stock, shares of preferred stock,
debt securities or warrants to purchase common stock, preferred
stock or debt securities, or any combination of the foregoing,
either individually or as units comprised of one or more of the
other securities. We may offer up to $75,000,000 of securities
under this prospectus. If securities are offered as units, we will
describe the terms of the units in a prospectus
supplement.
DESCRIPTION OF
CAPITAL STOCK
Authorized Capital
Our authorized
capital consists of 50 million shares of common stock, par value
$0.001 per share, and 5 million shares of preferred stock, par
value $0.001 per share. As of May 15, 2018, 21,536,069 shares of
common stock were issued and outstanding and 542,308 shares of
preferred stock were issued and outstanding, of which 161,135 are
shares of Series A Convertible Preferred Stock (“Series A
Preferred”) and 381,173 are shares of Series B Convertible
Preferred Stock (“Series B Preferred”).
Common Stock
We may issue shares
of our common stock from time to time. Holders of shares of common
stock have the right to cast one vote for each share of common
stock in their name on our books, whether represented in person or
by proxy, on all matters submitted to a vote of holders of common
stock, including election of directors. There is no right to
cumulative voting in election of directors. Except where a greater
requirement is provided by statute, by our certificate of
incorporation, or by our bylaws, the presence, in person or by
proxy duly authorized, of the one or more holders of a majority of
the outstanding shares of our common stock constitutes a quorum for
the transaction of business. The vote by the holders of a majority
of outstanding shares is required to effect certain fundamental
corporate changes such as liquidation, merger, or amendment of our
certificate of incorporation. Upon our liquidation, dissolution or
winding up, holders of our common stock are entitled to share
ratably in all assets remaining after payment of liabilities and
the liquidation preferences of any outstanding shares of preferred
stock.
There are no
restrictions in our certificate of incorporation or bylaws that
prevent us from declaring dividends. We have not declared any
dividends on our common stock, and we do not plan to declare any
dividends on our common stock in the foreseeable
future.
Holders of shares
of our common stock are not entitled to preemptive or subscription
or conversion rights, and no redemption or sinking fund provisions
are applicable to our common stock. All outstanding shares of
common stock are, and the shares of common stock sold in the
offering when issued will be fully paid and
non-assessable.
Preferred Stock
Our Board of
Directors has the authority, without action by our stockholders, to
designate and issue up to 5 million shares of preferred stock in
one or more series or classes and to designate the rights,
preferences and privileges of each series or class, which may be
greater than the rights of our common stock. Of the 5 million
shares of preferred stock, 161,135 have been designated as Series A
Preferred and 1,052,631 have been designated as Series B Preferred,
of which 381,173 shares of Series B Preferred are issued. It is not
possible to state the actual effect of the issuance of any shares
of preferred stock upon the rights of holders of our common stock
until our Board of Directors determines the specific rights of the
holders of the preferred stock. However, the effects might
include:
●
restricting
dividends on our common stock;
●
diluting the voting
power of our common stock;
●
impairing
liquidation rights of our common stock; or
●
delaying or
preventing a change in control of us without further action by our
stockholders.
The Board of
Directors’ authority to issue preferred stock without
stockholder approval could make it more difficult for a third-party
to acquire control of our company and could discourage such
attempt. We have no present plans to issue any shares of preferred
stock.
Series A Preferred
Stock
As of May 15, 2018,
we have 161,135 shares of Series A Preferred issued and
outstanding. The holders of the Series
A Preferred Stock are entitled to receive a cumulative dividend at
a rate of 8.0% per year, payable annually either in cash or shares
of our common stock at our election. Each share of
Series A Preferred is initially convertible into one-tenth of a
share of common stock, subject to adjustment. The holders of Series
A Preferred are entitled to receive payments upon our liquidation,
dissolution or winding up before any amount is paid to the holders
of common stock. The holders of Series A Preferred have no voting
rights, except as required by law.
Series B Preferred Stock
As of May 15, 2018,
we had 381,173 shares of Series B Preferred issued and outstanding.
The holders of the Series B Preferred are entitled to receive a
cumulative dividend at a rate of 5%
per annum payable in cash
quarterly in arrears on or about the last day of March, June,
September and December of each year beginning June 30, 2018.
Each share of Series B Preferred is initially convertible, at the
option of the holders, at an initial conversion price of $4.75 per
share, into two shares of our common stock and automatically
converts into two shares of our common stock on its two-year
anniversary of issuance. The holders of Series B Preferred are
entitled to receive dividends and payments upon liquidation,
dissolution or winding up before any amount is paid to holders of
the Series A Preferred and of our common stock. The holders of
Series B Preferred have no voting rights, except as required by
law.
As of May 15, 2018,
we had issued and outstanding warrants to purchase 2,748,183 shares
of common stock at prices ranging from $2.00 to $10.00. All
warrants are currently exercisable and expire at various dates
through February 2023.
Included in the
warrants are (i) warrants to purchase 1,149,712 shares of our
common stock that were issued in our 2017 Private Placement and
have an exercise price of $5.56 per share of common stock and
expire three years after issuance; (ii) warrants to purchase
247,916 shares of our common stock that were issued in our 2015
Private Placement and have an exercise price of $9.00 per share of
common stock and expire five years after issuance; (iii) warrants
to purchase 102,678 shares of our common stock that were issued in
our 2015 Private Placement and have an exercise price of $7.00 per
share of common stock and expire three years after issuance; (iv)
warrants to purchase 67,857 shares of our common stock that were
issued in our 2014 Private Placement and have an exercise price of
$7.00 per share of common stock and expire five years after
issuance; (v) warrants to purchase 1,022,279 shares of our common
stock that were issued in our 2014 Private Placement and have an
exercise price of $4.60 per share of common stock and expire five
years after issuance; (vi) warrants to purchase 44,624 shares of
our common stock issuable upon exercise and have an exercise price
of $10.00 per share of common stock and expire in December 2018;
(viii) warrants to purchase 75,000 shares of our common stock
issuable upon exercise and have an exercise price of $2.00 per
share of common stock and expire in May 2020; and (ix) warrants to
purchase 38,117 shares of our common stock that were issued to the
underwriter’s in our 2018 preferred stock offering and have
an exercise price of $5.70 per share of common stock and expire in
February 2023.
The Warrants
contain cashless exercise provisions in the event a registration
statement registering the common stock underlying the Warrants is
not effective at the time of exercise and customary anti-dilution
protection and registration rights.
As of May 15, 2018,
we had issued and outstanding options to purchase 1,458,342 shares
of common stock with a weighted average exercise price of $4.29.
There are currently 862,522 options available for exercise at
various dates through 2027.
Restricted Stock Units
As of May 15, 2018,
we had issued and outstanding restricted stock units of 487,500
shares of common stock that are issuable upon being vested which
were issued under our 2012 Equity Incentive Plan.
Convertible Notes
In August 2014, we
completed the 2014 Private Placement and issued notes (the
“2014 Notes”) in the aggregate principal amount of
$4,750,000 together with warrants to purchase 929,346 shares of
common stock at an exercise price of $4.60 per share. The 2014
Notes are currently convertible into 678,568 shares of our common
stock at a conversion price of $7.00 per share. The 2014 Notes bear
interest at a rate of 8% per annum. We have the right to prepay the
2014 Notes at any time after the one-year anniversary date of the
issuance of the 2014 Notes at a rate equal to 110% of the then
outstanding principal balance and accrued interest. The 2014 Notes
rank senior to all of our debt other than certain senior debt. CLR,
our wholly-owned subsidiary, has provided collateral to secure the
repayment of the Notes and has pledged its assets (which lien is
junior to CLR’s equipment leases but senior to all of its
other obligations), all subject to the terms and conditions of a
security agreement among us, CLR and the investors. Stephan
Wallach, our Chief Executive Officer, has also personally
guaranteed the repayment of the 2014 Notes, subject to the terms of
a Guaranty executed by him with the investors. In addition, Mr.
Wallach has agreed not to sell, transfer or pledge 1.5 million
shares of the common stock that he owns so long as his personal
guaranty is in effect. As of the date hereof, notes in the
principal amount of $4,750,000 remain outstanding.
In November 2015,
we completed the 2015 Private Placement and entered into Note
Purchase Agreements with three (3) accredited investors pursuant to
which we sold senior secured convertible notes (the “2015
Notes”) in the aggregate principal amount of $7,187,500
(which includes $4,000,000 owed on a prior debt that was applied to
the purchase of units in this offering), that are convertible into
1,026,784 shares of common stock at a conversion price of $7.00 per
share and warrants exercisable to purchase an aggregate of 479,166
shares of common stock from us at a price per share of $9.00. The
2015 Notes are due in October 2018 if the option to convert has not
been exercised. The 2015 Notes bear interest at a rate of eight
percent (8%) per annum. We have the right to prepay the 2015 Notes
at any time after the one-year anniversary date of the issuance of
the 2015 Notes at a rate equal to 110% of the then outstanding
principal balance and accrued interest. The 2015 Notes rank senior
to all of our debt other than certain debt owed to Crestmark Bank,
the investors in our prior private placements, a mortgage on
property, and any refinancing’s thereof. We and CLR, have
provided collateral to secure the repayment of the 2015 Notes and
have pledged our assets (which liens are junior to CLR’s
equipment leases and junior to the rights of note holders in our
prior financings but senior to all of their other obligations), all
subject to the terms and conditions of a security agreement among
us, CLR and the investors. Stephan Wallach, our Chief Executive
Officer, has also personally guaranteed the repayment of the 2015
Notes, subject to the terms of a Guaranty executed by him with the
investors. In addition, Mr. Wallach has agreed not to sell,
transfer or pledge the 1.5 million shares of the common stock that
are currently pledged as collateral to a previous financing so long
as his personal guaranty is in effect. As of the date hereof, the
2015 Notes in the principal amount of $3,000,000 remain
outstanding.
Registration Rights
In connection with
our 2017 Private Placement, we also entered into the
“Registration Rights Agreement” with the investors in
the 2017 Private Placement. The Registration Rights Agreement
requires that we file a registration statement (the “Initial
Registration Statement”) with the SEC within 90 days of the
final closing date of the 2017 Private Placement for the resale by
the investors of all of the shares common stock underlying the
senior convertible notes and warrants and all shares of common
stock issuable upon any stock split, dividend or other
distribution, recapitalization or similar event with respect
thereto (the “Registrable Securities”) and that the
Initial Registration Statement be declared effective by the SEC
within 180 days of the final closing date of the 2017 Private
Placement or if the registration statement is reviewed by the SEC
210 days after the final closing date or the 2017 Private
Placement. Upon the occurrence of certain events (each an
“Event”), we will be required to pay to the investors
liquidated damages of 1.0% of their respective aggregate purchase
price upon the date of the Event and then monthly thereafter until
the Event is cured. In no event may the aggregate amount of
liquidated damages payable to each of the investors exceed in the
aggregate 10% of the aggregate purchase price paid by such investor
for the Registrable Securities. The registration statement was
declared effective by the SEC on September 27, 2017.
Potential
Anti-Takeover Effects
Certain provisions
set forth in our Certificate of Incorporation, as amended, in our
bylaws and in Delaware law, which are summarized below, may be
deemed to have an anti-takeover effect and may delay, deter or
prevent a tender offer or takeover attempt that a stockholder might
consider to be in its best interests, including attempts that might
result in a premium being paid over the market price for the shares
held by stockholders.
Our Certificate of
Incorporation contains a provision that permits us to issue,
without any further vote or action by the stockholders, up to five
million shares of preferred stock in one or more series and, with
respect to each such series, to fix the number of shares
constituting the series and the designation of the series, the
voting powers, if any, of the shares of the series, and the
preferences and relative, participating, optional and other special
rights, if any, and any qualifications, limitations or
restrictions, of the shares of such series.
In particular our
bylaws and Delaware General Corporate Law, as applicable, among
other things:
●
Provide
the board of directors with the ability to alter the bylaws without
stockholder approval; and
●
Provide
that vacancies on the board of directors may be filled by a
majority of directors in the office, although less than a
quorum.
While the foregoing
provision of our certificate of incorporation, and provisions of
Delaware law may have an anti-takeover effect, these provisions are
intended to enhance the likelihood of continuity and stability in
the composition of the Board of Directors and in the policies
formulated by the Board of Directors and to discourage certain
types of transactions that may involve an actual or threatened
change of control. In that regard, these provisions are designed to
reduce our vulnerability to an unsolicited acquisition proposal.
The provisions also are intended to discourage certain tactics that
may be used in proxy fights. However, such provisions could have
the effect of discouraging others from making tender offers for our
shares and, as a consequence, they also may inhibit fluctuations in
the market price of our common stock that could result from actual
or rumored takeover attempts. Such provisions also may have the
effect of preventing changes in our management.
Delaware
Takeover Statute
In general, Section
203 of the Delaware General Corporation Law prohibits a Delaware
corporation that is a public company from engaging in any
“business combination” (as defined below) with any
“interested stockholder” (defined generally as an
entity or person beneficially owning 15% or more of the outstanding
voting stock of the corporation and any entity or person affiliated
with such entity or person) for a period of three years following
the date that such stockholder became an interested stockholder,
unless: (1) prior to such date, the board of directors of the
corporation approved either the business combination or the
transaction that resulted in the stockholder becoming an interested
stockholder; (2) on consummation of the transaction that resulted
in the stockholder becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of
the corporation outstanding at the time the transaction commenced,
excluding for purposes of determining the number of shares
outstanding those shares owned (x) by persons who are directors and
also officers and (y) by employee stock plans in which employee
participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a
tender or exchange offer; or (3) on or subsequent to such date, the
business combination is approved by the board of directors and
authorized at an annual or special meeting of stockholders, and not
by written consent, by the affirmative vote of at least two-thirds
of the outstanding voting stock that is not owned by the interested
stockholder.
Section 203 of the
Delaware General Corporation Law defines “business
combination” to include: (1) any merger or consolidation
involving the corporation and the interested stockholder; (2) any
sale, transfer, pledge or other disposition of ten percent or more
of the assets of the corporation involving the interested
stockholder; (3) subject to certain exceptions, any transaction
that results in the issuance or transfer by the corporation of any
stock of the corporation to the interested stockholder; (4) any
transaction involving the corporation that has the effect of
increasing the proportionate share of the stock of any class or
series of the corporation beneficially owned by the interested
stockholder; or (5) the receipt by the interested stockholder of
the benefit of any loans, advances, guarantees, pledges or other
financial benefits provided by or through the
corporation.
Listing of Common Stock
Our common stock is
currently listed on the NASDAQ Capital Market under the trading
symbol “YGYI.”
DESCRIPTION OF DEBT SECURITIES
The
following description, together with the additional information we
include in any applicable prospectus supplements or free writing
prospectuses, summarizes the material terms and provisions of the
debt securities that we may offer under this prospectus. We may
issue debt securities, in one or more series, as either senior or
subordinated debt or as senior or subordinated convertible debt.
While the terms we have summarized below will apply generally to
any future debt securities we may offer under this prospectus, we
will describe the particular terms of any debt securities that we
may offer in more detail in the applicable prospectus supplement or
free writing prospectus. The terms of any debt securities we offer
under a prospectus supplement may differ from the terms we describe
below. However, no prospectus supplement shall fundamentally change
the terms that are set forth in this prospectus or offer a security
that is not registered and
described in this prospectus at the time of its effectiveness. As
of the date of this prospectus, we have no outstanding registered
debt securities. Unless the context requires otherwise, whenever we
refer to the “indentures,” we also are referring to any
supplemental indentures that specify the terms of a particular
series of debt securities.
We
will issue any senior debt securities under the senior indenture
that we will enter into with the trustee named in the senior
indenture. We will issue any subordinated debt securities under the
subordinated indenture and any supplemental indentures that we will
enter into with the trustee named in the subordinated indenture. We
have filed forms of these documents as exhibits to the registration
statement, of which this prospectus is a part, and supplemental
indentures and forms of debt securities containing the terms of the
debt securities being offered will be filed as exhibits to the
registration statement of which this prospectus is a part or will
be incorporated by reference from reports that we file with the
SEC.
The
indentures will be qualified under the Trust Indenture Act of 1939,
as amended (the “Trust Indenture Act”). We use the term
“trustee” to refer to either the trustee under the
senior indenture or the trustee under the subordinated indenture,
as applicable.
The
following summaries of material provisions of the senior debt
securities, the subordinated debt securities and the indentures are
subject to, and qualified in their entirety by reference to, all of
the provisions of the indenture and any supplemental indentures
applicable to a particular series of debt securities. We urge you
to read the applicable prospectus supplements and any related free
writing prospectuses related to the debt securities that we may
offer under this prospectus, as well as the complete indentures
that contains the terms of the debt securities. Except as we may
otherwise indicate, the terms of the senior indenture and the
subordinated indenture are identical.
General
The
terms of each series of debt securities will be established by or
pursuant to a resolution of our Board of Directors and set forth or
determined in the manner provided in an officers’ certificate
or by a supplemental indenture. Debt securities may be issued in
separate series without limitation as to aggregate principal
amount. We may specify a maximum aggregate principal amount for the
debt securities of any series. We will describe in the applicable
prospectus supplement the terms of the series of debt securities
being offered, including:
●
the
principal amount being offered, and if a series, the total amount
authorized and the total amount outstanding;
●
any
limit on the amount that may be issued;
●
whether
or not we will issue the series of debt securities in global form,
and, if so, the terms and who the depositary will be;
●
whether
and under what circumstances, if any, we will pay additional
amounts on any debt securities held by a person who is not a United
States person for tax purposes, and whether we can redeem the debt
securities if we have to pay such additional amounts;
●
the
annual interest rate, which may be fixed or variable, or the method
for determining the rate and the date interest will begin to
accrue, the dates interest will be payable and the regular record
dates for interest payment dates or the method for determining such
dates;
●
whether
or not the debt securities will be secured or unsecured, and the
terms of any secured debt;
●
the
terms of the subordination of any series of subordinated
debt;
●
the
place where payments will be made;
●
restrictions
on transfer, sale or other assignment, if any;
●
our
right, if any, to defer payment of interest and the maximum length
of any such deferral period;
●
the
date, if any, after which, and the price at which, we may, at our
option, redeem the series of debt securities pursuant to any
optional or provisional redemption provisions and the terms of
those redemption provisions;
●
provisions
for a sinking fund purchase or other analogous fund, if any,
including the date, if any, on which, and the price at which we are
obligated, pursuant thereto or otherwise, to redeem, or at the
holder’s option, to purchase, the series of debt securities
and the currency or currency unit in which the debt securities are
payable;
●
whether
the indenture will restrict our ability or the ability of our
subsidiaries to:
o
incur
additional indebtedness;
o
issue
additional securities;
o
pay
dividends or make distributions in respect of our capital stock or
the capital stock of our subsidiaries;
o
place
restrictions on our subsidiaries’ ability to pay dividends,
make distributions or transfer assets;
o
make
investments or other restricted payments;
o
sell
or otherwise dispose of assets;
o
enter
into sale-leaseback transactions;
o
engage
in transactions with stockholders or affiliates;
o
issue
or sell stock of our subsidiaries; or
o
effect
a consolidation or merger;
●
whether
the indenture will require us to maintain any interest coverage,
fixed charge, cash flow-based, asset-based or other financial
ratios;
●
a
discussion of certain material or special United States federal
income tax considerations applicable to the debt
securities;
●
information
describing any book-entry features;
●
the
applicability of the provisions in the indenture on
discharge;
●
whether
the debt securities are to be offered at a price such that they
will be deemed to be offered at an “original issue
discount” as defined in paragraph (a) of Section 1273 of the
Internal Revenue Code of 1986, as amended;
●
the
denominations in which we will issue the series of debt securities,
if other than denominations of $1,000 and any integral multiple
thereof;
●
the
currency of payment of debt securities if other than U.S. dollars
and the manner of determining the equivalent amount in U.S.
dollars; and
●
any
other specific terms, preferences, rights or limitations of, or
restrictions on, the debt securities, including any additional
events of default or covenants provided with respect to the debt
securities, and any terms that may be required by us or advisable
under applicable laws or regulations.
Conversion or Exchange Rights
We
will set forth in the applicable prospectus supplement the terms
under which a series of debt securities may be convertible into or
exchangeable for our common stock, our preferred stock or other
securities (including securities of a third party). We will include
provisions as to whether conversion or exchange is mandatory, at
the option of the holder or at our option. We may include
provisions pursuant to which the number of shares of our common
stock, our preferred stock or other securities (including
securities of a third party) that the holders of the series of debt
securities receive would be subject to adjustment.
Consolidation, Merger or Sale
Unless
we provide otherwise in the prospectus supplement applicable to a
particular series of debt securities, the indentures will not
contain any covenant that restricts our ability to merge or
consolidate, or sell, convey, transfer or otherwise dispose of all
or substantially all of our assets. However, any successor to or
acquirer of such assets must assume all of our obligations under
the indentures or the debt securities, as appropriate. If the debt
securities are convertible into or exchangeable for our other
securities or securities of other entities, the person with whom we
consolidate or merge or to whom we sell all of our property must
make provisions for the conversion of the debt securities into
securities that the holders of the debt securities would have
received if they had converted the debt securities before the
consolidation, merger or sale.
Events of Default under the Indenture
Unless
we provide otherwise in the prospectus supplement applicable to a
particular series of debt securities, the following are events of
default under the indentures with respect to any series of debt
securities that we may issue:
●
if
we fail to pay interest when due and payable and our failure
continues for 90 days and the time for payment has not been
extended;
●
if
we fail to pay the principal, premium or sinking fund payment, if
any, when due and payable at maturity, upon redemption or
repurchase or otherwise, and the time for payment has not been
extended;
●
if
we fail to observe or perform any other covenant contained in the
debt securities or the indentures, other than a covenant
specifically relating to another series of debt securities, and our
failure continues for 90 days after we receive notice from the
trustee or we and the trustee receive notice from the holders of at
least 25% in aggregate principal amount of the outstanding debt
securities of the applicable series; and
●
if
specified events of bankruptcy, insolvency or reorganization
occur.
We
will describe in each applicable prospectus supplement any
additional events of default relating to the relevant series of
debt securities.
If
an event of default with respect to debt securities of any series
occurs and is continuing, other than an event of default specified
in the last bullet point above, the trustee or the holders of at
least 25% in aggregate principal amount of the outstanding debt
securities of that series, by notice to us in writing, and to the
trustee if notice is given by such holders, may declare the unpaid
principal, premium, if any, and accrued interest, if any, due and
payable immediately. If an event of default arises due to the
occurrence of certain specified bankruptcy, insolvency or
reorganization events, the unpaid principal, premium, if any, and
accrued interest, if any, of each issue of debt securities then
outstanding shall be due and payable without any notice or other
action on the part of the trustee or any holder.
The
holders of a majority in principal amount of the outstanding debt
securities of an affected series may waive any default or event of
default with respect to the series and its consequences, except
defaults or events of default regarding payment of principal,
premium, if any, or interest, unless we have cured the default or
event of default in accordance with the indenture. Any waiver shall
cure the default or event of default.
Subject
to the terms of the indentures, if an event of default under an
indenture shall occur and be continuing, the trustee will be under
no obligation to exercise any of its rights or powers under such
indenture at the request or direction of any of the holders of the
applicable series of debt securities, unless such holders have
offered the trustee reasonable indemnity or security satisfactory
to it against any loss, liability or expense. The holders of a
majority in principal amount of the outstanding debt securities of
any series will have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the
trustee, or exercising any trust or power conferred on the trustee,
with respect to the debt securities of that series, provided
that:
●
the
direction so given by the holder is not in conflict with any law or
the applicable indenture; and
●
subject
to its duties under the Trust Indenture Act, the trustee need not
take any action that might involve it in personal liability or
might be unduly prejudicial to the holders not involved in the
proceeding.
The
indentures provide that if an event of default has occurred and is
continuing, the trustee will be required in the exercise of its
powers to use the degree of care that a prudent person would use in
the conduct of its own affairs. The trustee, however, may refuse to
follow any direction that conflicts with law or the indenture, or
that the trustee determines is unduly prejudicial to the rights of
any other holder of the relevant series of debt securities, or that
would involve the trustee in personal liability. Prior to taking
any action under the indentures, the trustee will be entitled to
indemnification against all costs, expenses and liabilities that
would be incurred by taking or not taking such action.
A
holder of the debt securities of any series will have the right to
institute a proceeding under the indentures or to appoint a
receiver or trustee, or to seek other remedies only
if:
●
the
holder has given written notice to the trustee of a continuing
event of default with respect to that series;
●
the
holders of at least 25% in aggregate principal amount of the
outstanding debt securities of that series have made a written
request and such holders have offered reasonable indemnity to the
trustee or security satisfactory to it against any loss, liability
or expense or to be incurred in compliance with instituting the
proceeding as trustee; and
●
the
trustee does not institute the proceeding and does not receive from
the holders of a majority in aggregate principal amount of the
outstanding debt securities of that series other conflicting
directions within 90 days after the notice, request and
offer.
These
limitations do not apply to a suit instituted by a holder of debt
securities if we default in the payment of the principal, premium,
if any, or interest on, the debt securities, or other defaults that
may be specified in the applicable prospectus
supplement.
We
will periodically file statements with the trustee regarding our
compliance with specified covenants in the indentures.
The
indentures provide that if a default occurs and is continuing and
is actually known to a responsible officer of the trustee, the
trustee must mail to each holder notice of the default within the
earlier of 90 days after it occurs and 30 days after it is known by
a responsible officer of the trustee or written notice of it is
received by the trustee, unless such default has been cured or
waived. Except in the case of a default in the payment of principal
or premium of, or interest on, any debt security or certain other
defaults specified in an indenture, the trustee shall be protected
in withholding such notice if and so long as the Board of
Directors, the executive committee or a trust committee of
directors, or responsible officers of the trustee, in good faith
determine that withholding notice is in the best interests of
holders of the relevant series of debt securities.
Modification of Indenture; Waiver
Subject
to the terms of the indenture for any series of debt securities
that we may issue, we and the trustee may change an indenture
without the consent of any holders with respect to the following
specific matters:
●
to
fix any ambiguity, defect or inconsistency in the
indenture;
●
to
comply with the provisions described above under “Description
of Debt Securities — Consolidation, Merger or
Sale;”
●
to
comply with any requirements of the SEC in connection with the
qualification of any indenture under the Trust Indenture
Act;
●
to
add to, delete from or revise the conditions, limitations and
restrictions on the authorized amount, terms or purposes of issue,
authentication and delivery of debt securities, as set forth in the
indenture;
●
to
provide for the issuance of, and establish the form and terms and
conditions of, the debt securities of any series as provided under
“Description of Debt Securities — General,” to
establish the form of any certifications required to be furnished
pursuant to the terms of the indenture or any series of debt
securities, or to add to the rights of the holders of any series of
debt securities;
●
to
evidence and provide for the acceptance of appointment hereunder by
a successor trustee;
●
to
provide for uncertificated debt securities and to make all
appropriate changes for such purpose;
●
to
add such new covenants, restrictions, conditions or provisions for
the benefit of the holders, to make the occurrence, or the
occurrence and the continuance, of a default in any such additional
covenants, restrictions, conditions or provisions an event of
default or to surrender any right or power conferred to us in the
indenture; or
●
to
change anything that does not adversely affect the interests of any
holder of debt securities of any series in any material
respect.
In
addition, under the indentures, the rights of holders of a series
of debt securities may be changed by us and the trustee with the
written consent of the holders of at least a majority in aggregate
principal amount of the outstanding debt securities of each series
that is affected. However, subject to the terms of the indenture
for any series of debt securities that we may issue or otherwise
provided in the prospectus supplement applicable to a particular
series of debt securities, we and the trustee may only make the
following changes with the consent of each holder of any
outstanding debt securities affected:
●
extending
the stated maturity of the series of debt securities;
●
reducing
the principal amount, reducing the rate of or extending the time of
payment of interest, or reducing any premium payable upon the
redemption or repurchase of any debt securities; or
●
reducing
the percentage of debt securities, the holders of which are
required to consent to any amendment, supplement, modification or
waiver.
Discharge
Each
indenture provides that, subject to the terms of the indenture and
any limitation otherwise provided in the prospectus supplement
applicable to a particular series of debt securities, we may elect
to be discharged from our obligations with respect to one or more
series of debt securities, except for specified obligations,
including obligations to:
●
register
the transfer or exchange of debt securities of the
series;
●
replace
stolen, lost or mutilated debt securities of the
series;
●
maintain
paying agencies;
●
hold
monies for payment in trust;
●
recover
excess money held by the trustee;
●
compensate
and indemnify the trustee; and
●
appoint
any successor trustee.
In
order to exercise our rights to be discharged, we must deposit with
the trustee money or government obligations sufficient to pay all
the principal of, and any premium and interest on, the debt
securities of the series on the dates payments are
due.
Form, Exchange and Transfer
We
will issue the debt securities of each series only in fully
registered form without coupons and, unless we otherwise specify in
the applicable prospectus supplement, in denominations of $1,000
and any integral multiple thereof. The indentures provide that we
may issue debt securities of a series in temporary or permanent
global form and as book-entry securities that will be deposited
with, or on behalf of, The Depository Trust Company or another
depositary named by us and identified in a prospectus supplement
with respect to that series. See “Legal Ownership of
Securities” below for a further description of the terms
relating to any book-entry securities.
At
the option of the holder, subject to the terms of the indentures
and the limitations applicable to global securities described in
the applicable prospectus supplement, the holder of the debt
securities of any series can exchange the debt securities for other
debt securities of the same series, in any authorized denomination
and of like tenor and aggregate principal amount.
Subject
to the terms of the indentures and the limitations applicable to
global securities set forth in the applicable prospectus
supplement, holders of the debt securities may present the debt
securities for exchange or for registration of transfer, duly
endorsed or with the form of transfer endorsed thereon duly
executed if so required by us or the security registrar, at the
office of the security registrar or at the office of any transfer
agent designated by us for this purpose. Unless otherwise provided
in the debt securities that the holder presents for transfer or
exchange, we will make no service charge for any registration of
transfer or exchange, but we may require payment of any taxes or
other governmental charges.
We
will name in the applicable prospectus supplement the security
registrar, and any transfer agent in addition to the security
registrar, that we initially designate for any debt securities. We
may at any time designate additional transfer agents or rescind the
designation of any transfer agent or approve a change in the office
through which any transfer agent acts, except that we will be
required to maintain a transfer agent in each place of payment for
the debt securities of each series.
If
we elect to redeem the debt securities of any series, we will not
be required to:
●
issue,
register the transfer of, or exchange any debt securities of that
series during a period beginning at the opening of business 15 days
before the day of mailing of a notice of redemption of any debt
securities that may be selected for redemption and ending at the
close of business on the day of the mailing; or
●
register
the transfer of or exchange any debt securities so selected for
redemption, in whole or in part, except the unredeemed portion of
any debt securities we are redeeming in part.
Information Concerning the Trustee
The
trustee, other than during the occurrence and continuance of an
event of default under an indenture, undertakes to perform only
those duties as are specifically set forth in the applicable
indenture and is under no obligation to exercise any of the powers
given it by the indentures at the request of any holder of debt
securities unless it is offered reasonable security and indemnity
against the costs, expenses and liabilities that it might incur.
However, upon an event of default under an indenture, the trustee
must use the same degree of care as a prudent person would exercise
or use in the conduct of his or her own affairs
Payment and Paying Agents
Unless
we otherwise indicate in the applicable prospectus supplement, we
will make payment of the interest on any debt securities on any
interest payment date to the person in whose name the debt
securities, or one or more predecessor securities, are registered
at the close of business on the regular record date for the
interest payment.
We
will pay principal of and any premium and interest on the debt
securities of a particular series at the office of the paying
agents designated by us, except that unless we otherwise indicate
in the applicable prospectus supplement, we will make interest
payments by check that we will mail to the holder or by wire
transfer to certain holders. Unless we otherwise indicate in the
applicable prospectus supplement, we will designate the corporate
trust office of the trustee as our sole paying agent for payments
with respect to debt securities of each series. We will name in the
applicable prospectus supplement any other paying agents that we
initially designate for the debt securities of a particular series.
We will maintain a paying agent in each place of payment for the
debt securities of a particular series.
All
money we pay to a paying agent or the trustee for the payment of
the principal of or any premium or interest on any debt securities
that remains unclaimed at the end of two years after such
principal, premium or interest has become due and payable will be
repaid to us, and the holder of the debt security thereafter may
look only to us for payment thereof.
Governing Law
The
indentures and the debt securities will be governed by and
construed in accordance with the laws of the State of New York,
except to the extent that the Trust Indenture Act is
applicable.
Ranking Debt Securities
The
subordinated debt securities will be unsecured and will be
subordinate and junior in priority of payment to certain other
indebtedness to the extent described in a prospectus supplement.
The subordinated indenture does not limit the amount of
subordinated debt securities that we may issue. It also does not
limit us from issuing any other secured or unsecured debt. The
senior debt securities will be unsecured and will rank equally in
right of payment to all our other senior unsecured debt. The senior
indenture does not limit the amount of senior debt securities that
we may issue. It also does not limit us from issuing any other
secured or unsecured debt.
The
following description, together with the additional information we
may include in any applicable prospectus supplements and free
writing prospectuses, summarizes the material terms and provisions
of the warrants that we may offer under this prospectus, which may
consist of warrants to purchase common stock, preferred stock or
debt securities and may be issued in one or more series. Warrants
may be offered independently or together with common stock,
preferred stock or debt securities offered by any prospectus
supplement and may be attached to or separate from those
securities. While the terms we have summarized below will apply
generally to any warrants that we may offer under this prospectus,
we will describe the particular terms of any series of warrants
that we may offer in more detail in the applicable prospectus
supplement and any applicable free writing prospectus. The terms of
any warrants offered under a prospectus supplement may differ from
the terms described below. However, no prospectus supplement will
fundamentally change the terms that are set forth in this
prospectus or offer a security that is not registered and described
in this prospectus at the time of its effectiveness.
We
will issue the warrants under a warrant agreement that we will
enter into with a warrant agent to be selected by us. The warrant
agent will act solely as an agent of ours in connection with the
warrants and will not act as an agent for the holders or beneficial
owners of the warrants. We will file as exhibits to the
registration statement of which this prospectus is a part, or will
incorporate by reference from a current report on Form 8-K that we
file with the SEC, the form of warrant agreement, including a form
of warrant certificate, that describes the terms of the particular
series of warrants we are offering before the issuance of the
related series of warrants. The following summaries of material
provisions of the warrants and the warrant agreements are subject
to, and qualified in their entirety by reference to, all the
provisions of the warrant agreement and warrant certificate
applicable to a particular series of warrants. We urge you to read
the applicable prospectus supplement and any applicable free
writing prospectus related to the particular series of warrants
that we sell under this prospectus, as well as the complete warrant
agreements and warrant certificates that contain the terms of the
warrants
General
We
will describe in the applicable prospectus supplement the terms
relating to a series of warrants, including:
●
the
offering price and aggregate number of warrants
offered;
●
the
currency for which the warrants may be purchased;
●
if
applicable, the designation and terms of the securities with which
the warrants are issued and the number of warrants issued with each
such security or each principal amount of such
security;
●
if
applicable, the date on and after which the warrants and the
related securities will be separately transferable;
●
in
the case of warrants to purchase debt securities, the principal
amount of debt securities purchasable upon exercise of one warrant
and the price at, and currency in which, this principal amount of
debt securities may be purchased upon such exercise;
●
in
the case of warrants to purchase common stock or preferred stock,
the number of shares of common stock or preferred stock, as the
case may be, purchasable upon the exercise of one warrant and the
price at which these shares may be purchased upon such
exercise;
●
the
effect of any merger, consolidation, sale or other disposition of
our business on the warrant agreements and the
warrants;
●
the
terms of any rights to redeem or call the warrants;
●
any
provisions for changes to or adjustments in the exercise price or
number of securities issuable upon exercise of the
warrants;
●
the
dates on which the right to exercise the warrants will commence and
expire;
●
the
manner in which the warrant agreements and warrants may be
modified;
●
United
States federal income tax consequences of holding or exercising the
warrants;
●
the
terms of the securities issuable upon exercise of the warrants;
and
●
any
other specific terms, preferences, rights or limitations of or
restrictions on the warrants.
Before
exercising their warrants, holders of warrants will not have any of
the rights of holders of the securities purchasable upon such
exercise, including:
●
in
the case of warrants to purchase debt securities, the right to
receive payments of principal of, or premium, if any, or interest
on, the debt securities purchasable upon exercise or to enforce
covenants in the applicable indenture; or
●
in
the case of warrants to purchase common stock or preferred stock,
the right to receive dividends, if any, or, payments upon our
liquidation, dissolution or winding up or to exercise voting
rights, if any.
Exercise of Warrants
Each
warrant will entitle the holder to purchase the securities that we
specify in the applicable prospectus supplement at the exercise
price that we describe in the applicable prospectus supplement.
Unless we otherwise specify in the applicable prospectus
supplement, holders of the warrants may exercise the warrants at
any time up to the specified time on the expiration date that we
set forth in the applicable prospectus supplement. After the close
of business on the expiration date, unexercised warrants will
become void.
Holders
of the warrants may exercise the warrants by delivering the warrant
certificate representing the warrants to be exercised together with
specified information, and paying the required amount to the
warrant agent in immediately available funds, as provided in the
applicable prospectus supplement. We will set forth on the reverse
side of the warrant certificate and in the applicable prospectus
supplement the information that the holder of the warrant will be
required to deliver to the warrant agent.
Upon
receipt of the required payment and the warrant certificate
properly completed and duly executed at the corporate trust office
of the warrant agent or any other office indicated in the
applicable prospectus supplement, we will issue and deliver the
securities purchasable upon such exercise. If fewer than all of the
warrants represented by the warrant certificate are exercised, then
we will issue a new warrant certificate for the remaining amount of
warrants. If we so indicate in the applicable prospectus
supplement, holders of the warrants may surrender securities as all
or part of the exercise price for warrants.
Enforceability of Rights by Holders of Warrants
Each
warrant agent will act solely as our agent under the applicable
warrant agreement and will not assume any obligation or
relationship of agency or trust with any holder of any warrant. A
single bank or trust company may act as warrant agent for more than
one issue of warrants. A warrant agent will have no duty or
responsibility in case of any default by us under the applicable
warrant agreement or warrant, including any duty or responsibility
to initiate any proceedings at law or otherwise, or to make any
demand upon us. Any holder of a warrant may, without the consent of
the related warrant agent or the holder of any other warrant,
enforce by appropriate legal action its right to exercise, and
receive the securities purchasable upon exercise of, its
warrants.
The
following description, together with the additional information we
may include in any applicable prospectus supplements and free
writing prospectuses, summarizes the material terms and provisions
of the units that we may offer under this prospectus. While the
terms we have summarized below will apply generally to any units
that we may offer under this prospectus, we will describe the
particular terms of any series of units in more detail in the
applicable prospectus supplement. The terms of any units offered
under a prospectus supplement may differ from the terms described
below. However, no prospectus supplement will fundamentally change
the terms that are set forth in this prospectus or offer a security
that is not registered and described in this prospectus at the time
of its effectiveness.
We
will file as exhibits to the registration statement of which this
prospectus is a part, or will incorporate by reference from a
current report on Form 8-K that we file with the SEC, the form of
unit agreement that describes the terms of the series of units we
are offering, and any supplemental agreements, before the issuance
of the related series of units. The following summaries of material
terms and provisions of the units are subject to, and qualified in
their entirety by reference to, all the provisions of the unit
agreement and any supplemental agreements applicable to a
particular series of units. We urge you to read the applicable
prospectus supplements related to the particular series of units
that we sell under this prospectus, as well as the complete unit
agreement and any supplemental agreements that contain the terms of
the units.
General
We
may issue units comprised of one or more debt securities, shares of
common stock, shares of preferred stock and warrants in any
combination. Each unit will be issued so that the holder of the
unit is also the holder of each security included in the unit.
Thus, the holder of a unit will have the rights and obligations of
a holder of each included security. The unit agreement under which
a unit is issued may provide that the securities included in the
unit may not be held or transferred separately, at any time or at
any time before a specified date.
We
will describe in the applicable prospectus supplement the terms of
the series of units, including:
●
the
designation and terms of the units and of the securities comprising
the units, including whether and under what circumstances those
securities may be held or transferred separately;
●
any
provisions of the governing unit agreement that differ from those
described below; and
●
any
provisions for the issuance, payment, settlement, transfer or
exchange of the units or of the securities comprising the
units.
The
provisions described in this section, as well as those described
under “Description of Capital Stock,”
“Description of Debt Securities” and “Description
of Warrants” will apply to each unit and to any common stock,
preferred stock, debt security or warrant included in each unit,
respectively.
Issuance in Series
We
may issue units in such amounts and in numerous distinct series as
we determine.
Enforceability of Rights by Holders of Units
Each
unit agent will act solely as our agent under the applicable unit
agreement and will not assume any obligation or relationship of
agency or trust with any holder of any unit. A single bank or trust
company may act as unit agent for more than one series of units. A
unit agent will have no duty or responsibility in case of any
default by us under the applicable unit agreement or unit,
including any duty or responsibility to initiate any proceedings at
law or otherwise, or to make any demand upon us. Any holder of a
unit may, without the consent of the related unit agent or the
holder of any other unit, enforce by appropriate legal action its
rights as holder under any security included in the
unit.
We,
the unit agents and any of their agents may treat the registered
holder of any unit certificate as an absolute owner of the units
evidenced by that certificate for any purpose and as the person
entitled to exercise the rights attaching to the units so
requested, despite any notice to the contrary. See “Legal
Ownership of Securities.”
LEGAL OWNERSHIP OF
SECURITIES
We
can issue securities in registered form or in the form of one or
more global securities. We describe global securities in greater
detail below. We refer to those persons who have securities
registered in their own names on the books that we or any
applicable trustee or depositary or warrant agent maintain for this
purpose as the “holders” of those securities. These
persons are the legal holders of the securities. We refer to those
persons who, indirectly through others, own beneficial interests in
securities that are not registered in their own names, as
“indirect holders” of those securities. As we discuss
below, indirect holders are not legal holders, and investors in
securities issued in book-entry form or in street name will be
indirect holders.
Book-Entry Holders
We
may issue securities in book-entry form only, as we will specify in
the applicable prospectus supplement. This means securities may be
represented by one or more global securities registered in the name
of a financial institution that holds them as depositary on behalf
of other financial institutions that participate in the
depositary’s book-entry system. These participating
institutions, which are referred to as participants, in turn, hold
beneficial interests in the securities on behalf of themselves or
their customers.
Only
the person in whose name a security is registered is recognized as
the holder of that security. Global securities will be registered
in the name of the depositary or its participants. Consequently,
for global securities, we will recognize only the depositary as the
holder of the securities, and we will make all payments on the
securities to the depositary. The depositary passes along the
payments it receives to its participants, which in turn pass the
payments along to their customers who are the beneficial owners.
The depositary and its participants do so under agreements they
have made with one another or with their customers; they are not
obligated to do so under the terms of the securities.
As
a result, investors in a global security will not own securities
directly. Instead, they will own beneficial interests in a global
security, through a bank, broker or other financial institution
that participates in the depositary’s book-entry system or
holds an interest through a participant. As long as the securities
are issued in global form, investors will be indirect holders, and
not legal holders, of the securities.
Street Name Holders
We
may terminate a global security or issue securities that are not
issued in global form. In these cases, investors may choose to hold
their securities in their own names or in “street
name.” Securities held by an investor in street name would be
registered in the name of a bank, broker or other financial
institution that the investor chooses, and the investor would hold
only a beneficial interest in those securities through an account
he or she maintains at that institution.
For
securities held in street name, we or any applicable trustee or
depositary will recognize only the intermediary banks, brokers and
other financial institutions in whose names the securities are
registered as the holders of those securities, and we or any such
trustee or depositary will make all payments on those securities to
them. These institutions pass along the payments they receive to
their customers who are the beneficial owners, but only because
they agree to do so in their customer agreements or because they
are legally required to do so. Investors who hold securities in
street name will be indirect holders, not legal holders, of those
securities.
Legal Holders
Our
obligations, as well as the obligations of any applicable trustee
or third party employed by us or a trustee, run only to the legal
holders of the securities. We do not have obligations to investors
who hold beneficial interests in global securities, in street name
or by any other indirect means. This will be the case whether an
investor chooses to be an indirect holder of a security or has no
choice because we are issuing the securities only in global
form.
For
example, once we make a payment or give a notice to the holder, we
have no further responsibility for the payment or notice even if
that holder is required, under agreements with its participants or
customers or by law, to pass it along to the indirect holders but
does not do so. Similarly, we may want to obtain the approval of
the holders to amend an indenture, to relieve us of the
consequences of a default or of our obligation to comply with a
particular provision of an indenture, or for other purposes. In
such an event, we would seek approval only from the legal holders,
and not the indirect holders, of the securities. Whether and how
the legal holders contact the indirect holders is up to the legal
holders.
Special Considerations for Indirect Holders
If
you hold securities through a bank, broker or other financial
institution, either in book-entry form because the securities are
represented by one or more global securities or in street name, you
should check with your own institution to find out:
●
how
it handles securities payments and notices;
●
whether
it imposes fees or charges;
●
how
it would handle a request for the holders’ consent, if ever
required;
●
whether
and how you can instruct it to send you securities registered in
your own name so you can be a legal holder, if that is permitted in
the future;
●
how
it would exercise rights under the securities if there were a
default or other event triggering the need for holders to act to
protect their interests; and
●
if
the securities are in book-entry form, how the depositary’s
rules and procedures will affect these matters.
Global Securities
A
global security is a security that represents one or any other
number of individual securities held by a depositary. Generally,
all securities represented by the same global securities will have
the same terms.
Each
security issued in book-entry form will typically be represented by
a global security that we issue to, deposit with and register in
the name of a financial institution or its nominee that we select.
The financial institution that we select for this purpose is called
the depositary. Unless we specify otherwise in the applicable
prospectus supplement, The Depository Trust Company, New York, New
York, known as DTC, will be the depositary for all securities
issued in book-entry form.
A
global security may not be transferred to or registered in the name
of anyone other than the depositary, its nominee or a successor
depositary, unless special termination situations arise. We
describe those situations below under “— Special
Situations When A Global Security Will Be Terminated.” As a
result of these arrangements, the depositary, or its nominee, will
be the sole registered owner and legal holder of all securities
represented by a global security, and investors will be permitted
to own only beneficial interests in a global security. Beneficial
interests must be held by means of an account with a broker, bank
or other financial institution that in turn has an account with the
depositary or with another institution that does. Thus, an investor
whose security is represented by a global security will not be a
legal holder of the security, but only an indirect holder of a
beneficial interest in the global security.
If
the prospectus supplement for a particular security indicates that
the security will be issued as a global security, then the security
will be represented by a global security at all times unless and
until the global security is terminated. If termination occurs, we
may issue the securities through another book-entry clearing system
or decide that the securities may no longer be held through any
book-entry clearing system.
Special Considerations For Global Securities
As
an indirect holder, an investor’s rights relating to a global
security will be governed by the account rules of the
investor’s financial institution and of the depositary, as
well as general laws relating to securities transfers. We do not
recognize an indirect holder as a holder of securities and instead
deal only with the depositary that holds the global
security.
If
securities are issued only as global securities, an investor should
be aware of the following:
●
an
investor cannot cause the securities to be registered in his or her
name, and cannot obtain non-global certificates for his or her
interest in the securities, except in the special situations we
describe below;
●
an
investor will be an indirect holder and must look to his or her own
bank or broker for payments on the securities and protection of his
or her legal rights relating to the securities, as we describe
above;
●
an
investor may not be able to sell interests in the securities to
some insurance companies and to other institutions that are
required by law to own their securities in non-book-entry
form;
●
an
investor may not be able to pledge his or her interest in the
global security in circumstances where certificates representing
the securities must be delivered to the lender or other beneficiary
of the pledge in order for the pledge to be effective;
●
the
depositary’s policies, which may change from time to time,
will govern payments, transfers, exchanges and other matters
relating to an investor’s interest in the global security. We
and any applicable trustee have no responsibility for any aspect of
the depositary’s actions or for its records of ownership
interests in the global security. We and the trustee also do not
supervise the depositary in any way;
●
the
depositary may, and we understand that DTC will, require that those
who purchase and sell interests in the global security within its
book-entry system use immediately available funds, and your broker
or bank may require you to do so as well; and
●
financial
institutions that participate in the depositary’s book-entry
system, and through which an investor holds its interest in the
global security, may also have their own policies affecting
payments, notices and other matters relating to the securities.
There may be more than one financial intermediary in the chain of
ownership for an investor. We do not monitor and are not
responsible for the actions of any of those
intermediaries
Special Situations When A Global Security Will Be
Terminated
In
a few special situations described below, a global security will
terminate and interests in it will be exchanged for physical
certificates representing those interests. After that exchange, the
choice of whether to hold securities directly or in street name
will be up to the investor. Investors must consult their own banks
or brokers to find out how to have their interests in securities
transferred to their own names, so that they will be direct
holders. We have described the rights of holders and street name
investors above.
A
global security will terminate when the following special
situations occur:
●
if
the depositary notifies us that it is unwilling, unable or no
longer qualified to continue as depositary for that global security
and we do not appoint another institution to act as depositary
within 90 days;
●
if
we notify any applicable trustee that we wish to terminate that
global security; or
●
if
an event of default has occurred with regard to securities
represented by that global security and has not been cured or
waived.
The
applicable prospectus supplement may also list additional
situations for terminating a global security that would apply only
to the particular series of securities covered by the prospectus
supplement. When a global security terminates, the depositary, and
neither we, nor any applicable trustee, is responsible for deciding
the names of the institutions that will be the initial direct
holders.
We
may sell the securities being offered hereby in one or more of the
following ways from time to time:
●
through
agents to the public or to investors;
●
to
underwriters for resale to the public or to investors;
●
in
negotiated transactions;
●
directly
to investors; or
●
through
a combination of any of these methods of sale.
As
set forth in more detail below, the securities may be distributed
from time to time in one or more transactions:
●
at a fixed
price or prices, which may be changed;
●
at market prices prevailing at the time of
sale;
●
at prices related to such prevailing market prices;
or
We
will set forth in a prospectus supplement the terms of that
particular offering of securities, including:
●
the
name or names of any agents or underwriters;
●
the
purchase price of the securities being offered and the proceeds we
will receive from the sale;
●
any
over-allotment options under which underwriters may purchase
additional securities from us;
●
any
agency fees or underwriting discounts and other items constituting
agents’ or underwriters’ compensation;
●
any
public offering price;
●
any
discounts or concessions allowed or re-allowed or paid to dealers;
and
●
any
securities exchanges or markets on which such securities may be
listed.
Only
underwriters named in the prospectus supplement are underwriters of
the securities offered by the prospectus supplement.
If
underwriters are used in an offering, we will execute an
underwriting agreement with such underwriters and will specify the
name of each underwriter and the terms of the transaction
(including any underwriting discounts and other terms constituting
compensation of the underwriters and any dealers) in a prospectus
supplement. The securities may be offered to the public either
through underwriting syndicates represented by managing
underwriters or directly by one or more investment banking firms or
others, as designated. If an underwriting syndicate is used, the
managing underwriter(s) will be specified on the cover of the
prospectus supplement. If underwriters are used in the sale, the
offered securities will be acquired by the underwriters for their
own accounts and may be resold from time to time in one or more
transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale.
Any public offering price and any discounts or concessions allowed
or re-allowed or paid to dealers may be changed from time to time.
Unless otherwise set forth in the prospectus supplement, the
obligations of the underwriters to purchase the offered securities
will be subject to conditions precedent and the underwriters will
be obligated to purchase all of the offered securities if any are
purchased.
We
may grant to the underwriters options to purchase additional
securities to cover over-allotments, if any, at the public offering
price, with additional underwriting commissions or discounts, as
may be set forth in a related prospectus supplement. The terms of
any over-allotment option will be set forth in the prospectus
supplement for those securities.
If
we use a dealer in the sale of the securities being offered
pursuant to this prospectus or any prospectus supplement, we will
sell the securities to the dealer, as principal. The dealer may
then resell the securities to the public at varying prices to be
determined by the dealer at the time of resale. The names of the
dealers and the terms of the transaction will be specified in a
prospectus supplement.
We
may sell the securities directly or through agents we designate
from time to time. We will name any agent involved in the offering
and sale of securities and we will describe any commissions we will
pay the agent in the prospectus supplement. Unless the prospectus
supplement states otherwise, any agent will act on a best-efforts
basis for the period of its appointment.
We
may authorize agents or underwriters to solicit offers by
institutional investors to purchase securities from us at the
public offering price set forth in the prospectus supplement
pursuant to delayed delivery contracts providing for payment and
delivery on a specified date in the future. We will describe the
conditions to these contracts and the commissions we must pay for
solicitation of these contracts in the prospectus
supplement.
In
connection with the sale of the securities, underwriters, dealers
or agents may receive compensation from us or from purchasers of
the common stock for whom they act as agents in the form of
discounts, concessions or commissions. Underwriters may sell the
securities to or through dealers, and those dealers may receive
compensation in the form of discounts, concessions or commissions
from the underwriters or commissions from the purchasers for whom
they may act as agents. Underwriters, dealers and agents that
participate in the distribution of the securities, and any
institutional investors or others that purchase common stock
directly and then resell the securities, may be deemed to be
underwriters, and any discounts or commissions received by them
from us and any profit on the resale of the common stock by them
may be deemed to be underwriting discounts and commissions under
the Securities Act.
We
may provide agents and underwriters with indemnification against
particular civil liabilities, including liabilities under the
Securities Act, or contribution with respect to payments that the
agents or underwriters may make with respect to such liabilities.
Agents and underwriters may engage in transactions with, or perform
services for, us in the ordinary course of business.
We
may engage in at the market offerings into an existing trading
market in accordance with Rule 415 under the Securities Act. In
addition, we may enter into derivative transactions with third
parties (including the writing of options), or sell securities not
covered by this prospectus to third parties in privately negotiated
transactions. If the applicable prospectus supplement indicates, in
connection with such a transaction, the third parties may, pursuant
to this prospectus and the applicable prospectus supplement, sell
securities covered by this prospectus and the applicable prospectus
supplement. If so, the third party may use securities borrowed from
us or others to settle such sales and may use securities received
from us to close out any related short positions. We may also loan
or pledge securities covered by this prospectus and the applicable
prospectus supplement to third parties, who may sell the loaned
securities or, in an event of default in the case of a pledge, sell
the pledged securities pursuant to this prospectus and the
applicable prospectus supplement. The third party in such sale
transactions will be an underwriter and will be identified in the
applicable prospectus supplement or in a post-effective
amendment.
To
facilitate an offering of a series of securities, persons
participating in the offering may engage in transactions that
stabilize, maintain, or otherwise affect the market price of the
securities. This may include over-allotments or short sales of the
securities, which involves the sale by persons participating in the
offering of more securities than have been sold to them by us. In
those circumstances, such persons would cover such over-allotments
or short positions by purchasing in the open market or by
exercising the over-allotment option granted to those persons. In
addition, those persons may stabilize or maintain the price of the
securities by bidding for or purchasing securities in the open
market or by imposing penalty bids, whereby selling concessions
allowed to underwriters or dealers participating in any such
offering may be reclaimed if securities sold by them are
repurchased in connection with stabilization transactions. The
effect of these transactions may be to stabilize or maintain the
market price of the securities at a level above that which might
otherwise prevail in the open market. Such transactions, if
commenced, may be discontinued at any time. We make no
representation or prediction as to the direction or magnitude of
any effect that the transactions described above, if implemented,
may have on the price of our securities.
Unless
otherwise specified in the applicable prospectus supplement, each
class or series of securities will be a new issue with no
established trading market, other than our common stock, which is
listed on the NASDAQ Capital Market. We may elect to list any other
class or series of securities on any exchange or market, but we are
not obligated to do so. It is possible that one or more
underwriters may make a market in a class or series of securities,
but the underwriters will not be obligated to do so and may
discontinue any market making at any time without notice. We cannot
give any assurance as to the liquidity of the trading market for
any of the securities.
In
order to comply with the securities laws of some states, if
applicable, the securities offered pursuant to this prospectus will
be sold in those states only through registered or licensed brokers
or dealers. In addition, in some states securities may not be sold
unless they have been registered or qualified for sale in the
applicable state or an exemption from the registration or
qualification requirement is available and complied
with.
Any
underwriter may engage in overallotment, stabilizing transactions,
short covering transactions and penalty bids in accordance with
Regulation M under the Exchange Act. Overallotment involves sales
in excess of the offering size, which create a short position.
Stabilizing transactions permit bids to purchase the underlying
security so long as the stabilizing bids do not exceed a specified
maximum. Short covering transactions involve purchases of the
securities in the open market after the distribution is completed
to cover short positions. Penalty bids permit the underwriters to
reclaim a selling concession from a dealer when the securities
originally sold by the dealer are purchased in a covering
transaction to cover short positions. Those activities may cause
the price of the securities to be higher than it would otherwise
be. If commenced, the underwriters may discontinue any of these
activities at any time.
Any
underwriters who are qualified market makers on the NASDAQ Capital
Market may engage in passive market making transactions in the
securities on the NASDAQ Capital Market in accordance with Rule 103
of Regulation M, during the business day prior to the pricing of
the offering, before the commencement of offers or sales of the
securities. Passive market makers must comply with applicable
volume and price limitations and must be identified as passive
market makers. In general, a passive market maker must display its
bid at a price not in excess of the highest independent bid for
such security. If all independent bids are lowered below the
passive market maker’s bid, however, the passive market
maker’s bid must then be lowered when certain purchase limits
are exceeded.
The
specific terms of any lock-up provisions in respect of any given
offering will be described in the applicable prospectus
supplement.
The
underwriters, dealers and agents may engage in transactions with
us, or perform services for us, in the ordinary course of business
for which they receive compensation.
The
validity of the issuance of the securities offered hereby will be
passed upon for us by Gracin & Marlow, LLP, New York, New York.
Additional legal matters may be passed upon for us or any
underwriters, dealers or agents, by counsel that we will name in
the applicable prospectus supplement.
The financial
statements of Youngevity International, Inc. as of December 31,
2017 and 2016 and for each of the two years in the period ended
December 31, 2017 incorporated by reference in this prospectus have
been so incorporated in reliance on the reports of Mayer Hoffman
McCann P.C., an independent registered accounting firm, given on
authority of said firm as experts in auditing and
accounting.
WHERE
YOU CAN FIND MORE
INFORMATION
We file annual,
quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we
file at the SEC’s public reference room located at 100 F
Street N.E., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the
public reference room. Our public filings are also available to the
public at the SEC’s web site at
http://www.sec.gov.
This prospectus is
part of a registration statement on Form S-3 that we have filed
with the SEC under the Securities Act. This prospectus does not
contain all of the information in the registration statement. We
have omitted certain parts of the registration statement, as
permitted by the rules and regulations of the SEC. You may inspect
and copy the registration statement, including exhibits, at the
SEC’s public reference room or Internet site.
INCORPORATION
OF CERTAIN DOCUMENTS
BY REFERENCE
The SEC allows us
to “incorporate by reference” the information we file
with it which means that we can disclose important information to
you by referring you to those documents instead of having to repeat
the information in this prospectus. The information incorporated by
reference is considered to be part of this prospectus, and later
information that we file with the SEC will automatically update and
supersede this information. We incorporate by reference the
documents listed below and any future filings made with the SEC
(other than any portions of any such documents that are not deemed
“filed” under the Exchange Act in accordance with the
Exchange Act and applicable SEC rules) under Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act including those made after (i) the
date of the initial filing of the registration statement of which
this prospectus is a part and prior to the termination of this
offering and (ii) the date of this prospectus and before the
completion of the offerings of the shares of our common stock
included in this prospectus:
●
Our
annual report on Form 10-K for the fiscal year ended December 31,
2017 filed with the SEC on March 30, 2017 (File No.
001-38116);
●
Our
quarterly report on Form 10-Q for the three months ended March 31,
2018 filed with the SEC on May 14, 2018 (File No.
001-38116);
●
Our
current reports on Form 8-K filed with the SEC on January 23, 2018,
February 14, 2018, March 8, 2018, March 16, 2018 and April 2, 2018
(File No. 001-38116);
●
The
description of our common stock set forth in our registration
statement on Form 8-A12B, filed with the SEC on June 15, 2017 (File
No. 001-38116); and
●
The
description of our preferred stock set forth in our registration
statement on Form 8-A12G, filed with the SEC on February 12, 2018
(File No. 000-54900).
You may obtain,
free of charge, a copy of any of these documents (other than
exhibits to these documents unless the exhibits are specifically
incorporated by reference into these documents or referred to in
this prospectus) by writing or calling us at the following address
and telephone number: Youngevity International, Inc., 2400 Boswell
Road, Chula Vista, California 91914, (619)
934-3980.
YOUNGEVITY
INTERNATIONAL, INC.
245,398
Shares of 9.75% Series D Cumulative Redeemable Perpetual Preferred
Stock
Liquidation
Preference $25.00 per Share
___________________________________
Prospectus Supplement
___________________________________
Benchmark
Company
December
17, 2019
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