Yazam, which specializes in seed- stage funding and business development services to emerging Internet and technology start-ups, announced today that it has entered a nonbinding letter of intent to be acquired by U.S. Technologies Inc. (OTC Bulletin Board: USXX), a company that funds and manages emerging growth technology companies. The deal is for U.S. Technologies' securities and cash in return for acquire all of the issued and outstanding shares of Yazam.com capital stock.
The boards of both companies have approved the letter of intent. The consummation of the transaction is subject to the negotiation and execution of definitive agreements acceptable to the parties and Yazam's stockholders and customary other conditions.
The aggregate purchase price for Yazam will be approximately $22,000,000 in cash plus shares of a new series of convertible preferred stock of USXX, which would be convertible into approximately 27,000,000 shares of common stock of USXX. USXX also would issue to Yazam stockholders warrants to purchase an aggregate of approximately 8,000,000 shares of USXX common stock, which would be exercisable at an exercise price equal to the average closing price of USXX common stock for the twenty trading days immediately prior to the closing of the acquisition of Yazam (but not less than $0.25 per share). The issuance of shares of USXX common stock upon the exercise of such warrants or the conversion of the new series of convertible preferred stock would require the prior amendment of the Company’s charter, as previously disclosed. Holders of such new USXX preferred stock series and warrants would be entitled to certain demand and piggyback registration rights.
Yazam stockholders that receive shares of USXX preferred stock at closing would be entitled to vote their shares together with the holders of USXX common stock and USXX existing preferred stock. Holders of shares of such new USXX preferred stock also would have the right to appoint one director to the Board of Directors of USXX that is acceptable to USXX. The new series of USXX preferred stock also would be entitled to a liquidation preference of up to $6,000,000 prior to any distributions made to existing USXX common and preferred stockholders.
USXX’ Board of Directors has authorized the sale through a private placement offering of up to $10,000,000 of a new series of mandatorily convertible preferred stock, which will be marketed only to existing USXX preferred stockholders and a limited number of other accredited investors. Such preferred stock will be convertible into common stock at a conversion rate equal to the quotient obtained by dividing the stated value of the preferred stock by the average of the closing prices of USXX common stock for the next three trading days, less a 25% discount. USXX expects to use the proceeds from such offering for working capital, to pay for costs associated with the acquisition of Yazam and to make additional investments, including investments in two of USXX’ associated companies, Portris, Inc. and Promisemark.
U.S. Technologies and Yazam both have developed unique but similar strategies to accelerate the growth of their associated companies and enhance value to their shareholders. U.S. Technologies not only funds and manages early-stage and emerging growth companies, but also integrates the technologies developed by its associated companies with the established operations of traditional businesses.
The merger will create a company with interests in 30 USXX and Yazam technology companies. Combining these two companies will create a far- reaching, strategic network of financing resources and management expertise that will benefit emerging growth companies. Additionally, because of Yazam's Israeli contacts and presence in Jerusalem, U.S. Technologies will gain a stronghold into the Israeli high technology sector, Israel's main engine for growth and one of the fastest growing areas for technology investments.
``We see this pairing as the next evolution not only for Yazam, but also for the new economy,'' said Bernie Siegel, CEO of Yazam. ``The ability to match emerging technologies with established businesses is the new destiny for start-up companies seeking to optimize their value.''
The proposed merger will involve several internal and strategic changes for the combined company. U.S. Technologies' business strategy will continue to concentrate on investing in the United States but the company will also pursue investments in Israel. In addition to expanding its geographic focus, U.S. Technologies will increase the size of its investments. The company's strategic plan will continue to focus on developing and managing its associated companies with its newly combined team of seasoned financial and technology advisors.
There can be no assurances that such conditions will be met or that the acquisition will be completed even if a definitive agreement is executed. The agreed upon exclusivity period for the definitive agreement expires February 28. It is the intent of both parties to consummate the merger as soon as practical.
Yazam, a Delaware company with headquarters in New York and offices in Jerusalem, provides seed-stage funding and business development services to emerging Internet and technology start-ups. Since its inception in July 1999, Yazam has raised approximately $75 million from various investment institutions and individuals. Yazam takes equity stakes in start-ups and lines them up with marketing, consulting, legal and technology assistance.
Published by Israel's Business Arena on February 14, 2001.