As filed with the Securities and Exchange Commission on August 4, 2000
Registration No. 333-40218
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
Amendment No. 1 to
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
----------
PINNACLE SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
----------
California 94-3003809
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
280 North Bernardo Ave.
Mountain View, California 94043
(650) 526-1600
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
----------
Arthur D. Chadwick
Vice President, Finance and Administration,
Pinnacle Systems, Inc.
280 North Bernardo Avenue
Mountain View, California 94043
(650) 526-1600
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
----------
Copies to:
Chris F. Fennell, Esq.
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304-1050
(650) 493-9300
----------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
==============================================================================================
<S> <C> <C> <C> <C>
Proposed
Proposed Maximum
Title of Each Class Amount Maximum Aggregate Amount of
of Securities to be Offering Price Offering Registration
to be Registered Registered Per Share(1) Price(1) fee (3)
----------------------------------------------------------------------------------------------
Common Stock, no par value(2).... 161,861 shares $23.94 $3,874,952.34 $1,023.00
==============================================================================================
</TABLE>
(1) Estimated solely for the purpose of computing the amount of the registration
fee. The estimate is made pursuant to Rule 457(c) of the Securities Act of 1933,
as amended, based on the average of the high and low prices on June 23, 2000.
(2) Includes Preferred Share Purchase Rights, which, prior to the occurrence of
certain events, will not be exercisable or evidenced separately from the Common
Stock.
(3) Registration fee previously paid.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the SEC, acting pursuant to said Section 8(a), may
determine.
================================================================================
<PAGE>
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO
THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS
NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE IN WHICH THE OFFER
OR SALE IS NOT PERMITTED.
PROSPECTUS (SUBJECT TO COMPLETION)
Dated August 4, 2000
161,861 Shares
PINNACLE SYSTEMS, INC.
COMMON STOCK
----------
These shares may be offered and sold from time to time by certain
shareholders of Pinnacle Systems, Inc. identified in this prospectus. See
"Selling Shareholders." The selling shareholders acquired the shares in
connection with the acquisition by Pinnacle Systems, Inc. of Digital Editing
Services, Inc.
The selling shareholders will receive all of the net proceeds from the sale
of the shares and will pay all underwriting discounts and selling commissions,
if any, applicable to the sale of the shares. Pinnacle Systems will not receive
any of the proceeds from the sale of the shares.
YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 3 OF THIS
PROSPECTUS BEFORE PURCHASING ANY OF THE COMMON STOCK OFFERED HEREBY.
Pinnacle Systems' common stock is traded on the Nasdaq National Market
under the symbol "PCLE." On August 2, 2000, the last sale price of a share of
Pinnacle Systems' common stock was $7.56.
----------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
----------
August __, 2000
<PAGE>
TABLE OF CONTENTS
Page
----
Where to Find Additional Information About Pinnacle Systems................ 2
Information Incorporated by Reference...................................... 2
Forward Looking Information................................................ 3
Summary Business Description of Pinnacle Systems........................... 3
Risk Factors............................................................... 4
Use of Proceeds............................................................ 11
Selling Shareholders....................................................... 11
Plan of Distribution....................................................... 12
Experts.................................................................... 13
Legal Matters.............................................................. 13
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. The selling shareholders are offering to sell, and
seeking offers to buy, shares of Pinnacle Systems common stock only in
jurisdictions where offers and sales are permitted. The information contained in
this prospectus is accurate only as of the date of this prospectus, regardless
of the time of delivery of this prospectus or of any sale of the shares.
In this prospectus, "Pinnacle Systems," "we," "us," and "our" refer to
Pinnacle Systems, Inc. and its subsidiaries.
WHERE TO FIND ADDITIONAL INFORMATION ABOUT PINNACLE SYSTEMS
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission referred to as the SEC.
You may read and copy any document we file at the SEC's public reference
facilities in Room 1034, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the SEC's regional offices at Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite
1300, New York, New York 10048. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. Our SEC filings are also
available to the public at the SEC's web site at http://www.sec.gov.
INFORMATION INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be a 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 under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange
Act of 1934, as amended, until the selling shareholders sell all the shares.
This prospectus is part of a Registration Statement we filed with the SEC
(Registration No. 333-40218). The documents we incorporate by reference are:
1. our Annual Report on Form 10-K for the fiscal year ended June 30,
1999;
2. our Quarterly Report on Form 10-Q for the quarter ended September 30,
1999;
-2-
<PAGE>
3. our Quarterly Report on Form 10-Q for the quarter ended December 31,
1999;
4. our Quarterly Report on Form 10-Q for the quarter ended March 31,
2000;
5. our Current Report on Form 8-K as filed on August 13, 1999 as amended
by our current Report on Form 8-K/A filed October 15, 1999 relating to
our acquisition of certain assets from Hewlett-Packard Company;
6. our Current Report on Form 8-K as filed on April 13, 2000 relating to
our acquisitions of Puffin Designs, Inc., Digital Editing Services,
Inc. and Montage Group, Ltd.;
7. Our Current Report on Form 8-K as filed on July 14, 2000 relating to
our aquisition of Avid Sports, Inc.;
8. Our Current Report on Form 8-K as filed July 27, 2000, relating to (i)
our announcement of preliminary sales and earnings for the fourth
quarter of fiscal 2000, (ii) our announcement of a lawsuit against the
Company and (iii) our announcement of financial results for the fourth
quarter of fiscal 2000.
9. the description of the Company's Common Stock contained in its
Registration Statement on Form 8-A as filed with the SEC on September
9, 1994; and
10. the description of the Company's Preferred Share Purchase Rights
contained in its Registration Statement on Form 8-A as filed with the
SEC on December 19, 1996, as amended May 19, 1998.
You may request a copy of these filings, at no cost, by written or oral
request to the following address: Chief Financial Officer, Pinnacle Systems,
Inc., 280 North Bernardo Avenue, Mountain View, California 94043; telephone
number (650) 526-1600.
FORWARD LOOKING INFORMATION
This Prospectus, including the information incorporated by reference
herein, contains forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E
of the Securities Exchange Act of 1934. Actual results could differ materially
from those projected in the forward-looking statements as a result of the risk
factors set forth below. Reference is made in particular to the discussion set
forth under "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in the Annual Report on Form 10-K for the fiscal year
ended June 30, 1999, incorporated herein by reference. In connection with
forward-looking statements that appear in these disclosures, prospective
purchasers of the common stock offered hereby should carefully consider the
factors set forth in this Prospectus under "Risk Factors."
SUMMARY BUSINESS DESCRIPTION OF PINNACLE SYSTEMS
We design, manufacture, market and support video post-production tools for
high quality real time video processing. Our products combine computer based and
specialized video processing technologies which perform a variety of video
post-production functions such as the addition of special effects, graphics and
titles to multiple streams of live or previously recorded video material. We
have sold over 10,000 post-production systems since the company's inception in
1986 to customers in more than 60 countries. Our products address needs in the
broadcast, desktop and consumer video post-production markets.
We were incorporated in California in 1986. We maintain our executive
offices at 280 North Bernardo Avenue, Mountain View, California 94043, and our
telephone number is (650) 526-1600.
-3-
<PAGE>
RISK FACTORS
We have grown rapidly and expect to continue to grow rapidly. If we fail to
effectively manage this growth, our financial results could suffer.
We have experienced rapid growth and anticipate that we will continue to
grow at a rapid pace in the future. For example, net sales in fiscal 2000 were
$237.97 million compared to $159.1 million in fiscal 1999, a 49.6% increase, and
net sales in fiscal 1999 were $159.1 million compared to $105.3 million in
fiscal 1998, a 51% increase. As a result of internal growth and recent
acquisitions, we have increased the number of employees significantly over the
last two fiscal years and many are geographically dispersed, primarily
throughout North America and Europe. This growth places increasing demands on
our management, financial and other resources. We have built resources and
systems to account for such growth, but continued or accelerated growth may
require us to increase our investment in such systems, or to reorganize our
management team. Such changes, should they occur, could cause an interruption or
diversion of focus from our core business activities and have an adverse effect
on financial results.
Any failure to successfully integrate the businesses we have acquired could
negatively impact us.
In June 2000, we acquired Avid Sports, Inc., and in March 2000, we acquired
Digital Editing Services, Inc. and Puffin Designs, Inc. In April 2000, we
acquired Montage Group, Ltd. Also, in 1999, we acquired the Video Communications
Division of the Hewlett-Packard Company and acquired Truevision, Inc. and
Shoreline Studios, Inc. We may in the near- or long-term pursue acquisitions of
complementary businesses, products or technologies. Integrating acquired
operations is a complex, time-consuming and potentially expensive process. All
acquisitions involve risks that could materially and adversely affect our
business and operating results. These risks include:
- Distracting management from the day-to-day operations of our business
- Costs, delays and inefficiencies associated with integrating acquired
operations, products and personnel
- The potential to result in dilutive issuance of our equity securities
- Incurring debt and amortization expenses related to goodwill and other
intangible assets
There are various factors which may cause our net revenues and operating results
to fluctuate.
Our quarterly and annual operating results have varied significantly in the
past and may continue to fluctuate because of a number of factors, many of which
are outside our control. These factors include:
- Timing of significant orders from and shipments to major OEM customers
- Timing and market acceptance of new products
- Success in developing, introducing and shipping new products
- Dependence on distribution channels through which our products are
sold
- Increased competition and pricing pressure
- Accuracy of our and our resellers' forecasts of end-user demand
- Accuracy of inventory forecasts
- Ability to obtain sufficient supplies from our subcontractors
- Timing and level of consumer product returns
- Foreign currency fluctuations
- Costs of integrating acquired operations
- General domestic and international economic conditions, such as the
recent economic downturns in Asia and Latin America.
-4-
<PAGE>
We also experience significant fluctuations in orders and sales due to
seasonal fluctuations, the timing of major trade shows and the sale of consumer
products in anticipation of the holiday season. Sales usually slow down during
the summer months of July and August, especially in Europe. Also, we attend a
number of annual trade shows which can influence the order pattern of products,
including CEBIT in March, the NAB convention held in April and the IBC
convention held in September. Our operating expense levels are based, in part,
on our expectations of future revenue and, as a result, net income would be
disproportionately affected by a shortfall in net sales. Due to these factors,
we believe that quarter-to-quarter comparisons of our results of operations are
not necessarily meaningful and should not be relied upon as indicators of future
performance.
Our stock price may be volatile.
The trading price of our common stock has in the past and could in the
future fluctuate significantly. The fluctuations have been or could be in
response to numerous factors including:
- Quarterly variations in results of operations
- Announcements of technological innovations or new products by us, our
customers or competitors
- Changes in securities analysts' recommendations
- Announcements of acquisitions
- Changes in earnings estimates made by independent analysts
- General fluctuations in the stock market
Our revenues and results of operations may be below the expectations of
public market securities analysts or investors. This could result in a sharp
decline in the market price of our common stock. In July 2000, we announced that
financial results for the fourth quarter of fiscal 2000, which ended July 30,
2000, would be lower than the then current analyst consensus estimates regarding
our quarterly results. In the day following this announcements our share price
lost more than 59 percent of its value and our shares continue to trade in a
price range significantly lower than the range held by our shares before this
announcement.
With the advent of the Internet, new avenues have been created for the
dissemination of information. Pinnacle has no control over the information that
is distributed and discussed on electronic bulletin boards and investment chat
rooms. The motives of the people or organizations that distribute such
information may not be in the best interest of Pinnacle and its shareholders.
This, in addition to other forms of investment information including newsletters
and research publications, could result in a sharp decline in the market price
of our common stock.
In addition, stock markets have from time to time experienced extreme price
and volume fluctuations. The market prices for high technology companies have
been particularly affected by these market fluctuations and such effects have
often been unrelated to the operating performance of such companies. These broad
market fluctuations may cause a decline in the market price of our common stock.
In the past, following periods of volatility in the market price of a
company's stock, securities class action litigation has been brought against the
issuing company. On July 18, 2000, a lawsuit entitled Jiminez v. Pinnacle
Systems, Inc. et al., No.00-CV-2596 was filed in the United States District
Court for the Northern District of California against the Company and certain
officer and director defendants. The action is a putative class action and
alleges that defendants violated the federal securities laws by making false and
misleading statements concerning the Company's business prospects during an
alleged class period of April 18, 2000 through July 10, 2000. This complaint
does not specify damages. We have publicly announced that we intend to defend
the case vigorously. It is possible that similar additional litigation could be
brought against us in the near future. The securities class action lawsuit
described above and any similar litigation which may be brought against the
Company could result in substantial costs and would likely divert management's
attention and resources. Any adverse determination in such litigation could also
subject us to significant liabilities.
We are dependent on contract manufacturers and single or limited source
suppliers for our components. If these manufacturers and suppliers do not meet
our demand either in volume or quality, then we could be materially harmed.
-5-
<PAGE>
We rely on subcontractors to manufacture our desktop and consumer products
and the major subassemblies of our broadcast products. We and our manufacturing
subcontractors are dependent upon single or limited source suppliers for a
number of components and parts used in our products, including certain key
integrated circuits. Our strategy to rely on subcontractors and single or
limited source suppliers involves a number of significant risks, including:
- Loss of control over the manufacturing process
- Potential absence of adequate capacity
- Potential delays in lead times
- Unavailability of certain process technologies
- Reduced control over delivery schedules, manufacturing yields, quality
and costs
- Unexpected increases in component costs
If any significant subcontractor or single or limited source supplier
becomes unable or unwilling to continue to manufacture these subassemblies or
provide critical components in required volumes, we will have to identify and
qualify acceptable replacements or redesign our products with different
components. Additional sources may not be available and product redesign may not
be feasible on a timely basis. This could materially harm our business. Any
extended interruption in the supply of or increase in the cost of the products,
subassemblies or components manufactured by third party subcontractors or
suppliers could materially harm our business.
We may fail to sell products in the consumer market.
We entered the consumer market with the acquisition of the VideoDirector
product line from Gold Disk in June 1996. We aim to continue to invest resources
to develop, market and sell products into the consumer market. In this endeavor,
we need to continue to develop and maintain the following capabilities:
- Marketing and selling products through the consumer distribution
channels.
- Establishing relationships with distributors and retailers
- A fully developed infrastructure to support electronic retail stores
and telephone and Internet orders.
Additionally, factors beyond our control could hurt consumer product sales
and consequently our financial condition. These factors include:
- Potential compatibility problems with other manufacturers' electronic
components
- The risk of obsolete inventory and inventory returns
- Difficulty in predicting the growth of the consumer video market
If our products do not keep pace with the technological developments in the
rapidly changing video post-production equipment industry, then we may be
adversely affected.
The video post-production equipment industry is characterized by rapidly
changing technology, evolving industry standards and frequent new product
introductions. The introduction of products embodying new technologies or the
emergence of new industry standards can render existing products obsolete or
unmarketable. Delays in the introduction or shipment of new or enhanced
products, our inability to timely develop and introduce such new products, the
failure of such products to gain significant market acceptance or problems
associated with new product transitions could materially harm our business,
particularly on a quarterly basis.
-6-
<PAGE>
We are critically dependent on the successful introduction, market
acceptance, manufacture and sale of new products that offer our customers
additional features and enhanced performance at competitive prices. Once a new
product is developed, we must rapidly commence volume production. This process
requires accurate forecasting of customer requirements and attainment of
acceptable manufacturing costs. The introduction of new or enhanced products
also requires us to manage the transition from older, displaced products in
order to minimize disruption in customer ordering patterns, avoid excessive
levels of older product inventories and ensure that adequate supplies of new
products can be delivered to meet customer demand. In addition, as is typical
with any new product introduction, quality and reliability problems may arise.
Any such problems could result in reduced bookings, manufacturing rework costs,
delays in collecting accounts receivable, additional service warranty costs and
a limitation on market acceptance of the product.
If we do not effectively compete, our business will be harmed.
The market for our products is highly competitive. We compete in the
broadcast, desktop and consumer video production markets. We anticipate
increased competition in each of the broadcast, desktop and consumer video
production markets, particularly since the industry is undergoing a period of
technological change and consolidation. Competition for our broadcast, consumer
and video products is generally based on:
- Product performance
- Breadth of product line
- Quality of service and support
- Market presence
- Price
- Ability of competitors to develop new, higher performance, lower cost
consumer video products
Certain competitors in the broadcast, desktop and consumer video markets
have larger financial, technical, marketing, sales and customer support
resources, greater name recognition and larger installed customer bases than we
do. In addition, some competitors have established relationships with current
and potential customers of ours and offer a wide variety of video equipment that
can be bundled in certain large system sales.
Principal competitors in the broadcast market include:
Accom, Inc.
Chyron Corporation
Leitch Technology Corporation
Matsushita Electric Industrial Co. Ltd.
Quantel Ltd. (a division of Carlton Communications Plc)
SeaChange Corporation
Sony Corporation
Tektronix, Inc.
Principal competitors in the desktop and consumer markets are:
Accom, Inc.
Adobe Systems, Inc.
Avid Technology, Inc.
Digitel Processing Systems, Inc.
-7-
<PAGE>
Fast Multimedia
Hauppauge Digital, Inc.
Matrox Electronics Systems, Ltd.
Media 100, Inc.
Quantel Ltd. (a division of Carlton Communications Plc)
Sony Corporation
These lists are not all-inclusive.
The consumer market in which certain of our products compete is an emerging
market and the sources of competition are not yet well defined. There are
several established video companies that are currently offering products or
solutions that compete directly or indirectly with our consumer products by
providing some or all of the same features and video editing capabilities. In
addition, we expect that existing manufacturers and new market entrants will
develop new, higher performance, lower cost consumer video products that may
compete directly with our consumer products. We expect that potential
competition in this market is likely to come from existing video editing
companies, software application companies, or new entrants into the market, many
of which have the financial resources, marketing and technical ability to
develop products for the consumer video market. Increased competition in any of
these markets could result in price reductions, reduced margins and loss of
market share. Any of these effects could materially harm our business.
We rely heavily on dealers and OEMs to market, sell and distribute our
products. In turn, we depend heavily on the success of these resellers. If these
resellers do not succeed in effectively distributing our products, then our
financial performance will be negatively affected.
These resellers may not effectively promote or market our products or they
may experience financial difficulties and even close operations. Our dealers and
retailers are not contractually obligated to sell our products. Therefore, they
may, at any time:
- Refuse to promote or pay for our products
- Discontinue our products in favor of a competitor's product
Also, with these distribution channels standing between us and the actual
market, we may not be able to accurately gauge current demand for products and
anticipate demand for newly introduced products. For example, dealers may place
large initial orders for a new product just to keep their stores stocked with
the newest products and not because there is a significant demand for them.
As to consumer products offerings, we have expanded our distribution
network to include several consumer channels, including large distributors of
products to computer software and hardware retailers, which in turn sell
products to end users. We also sell our consumer products directly to certain
retailers. Rapid change and financial difficulties of distributors have
characterized distribution channels for consumer retail products. These
arrangements have exposed us to the following risks, some of which are out of
our control:
- We are obliged to provide price protection to such retailers and
distributors and, while the agreements limit the conditions under
which product can be returned to us, we may be faced with product
returns or price protection obligations.
- The distributors or retailers may not continue to stock and sell our
consumer products.
- Retailers and retail distributors often carry competing products.
-8-
<PAGE>
Any of the foregoing events could materially harm our business.
If certain of our key employees leave or are no longer able to perform services
for us, it could have a material adverse effect on our business. We may not be
able to attract and retain a sufficient number of managerial personnel and
technical employees to compete successfully.
We believe that the efforts and abilities of our senior management and key
technical personnel are very important to our continued success. Only one has an
employment agreement and none are the subject of key man life insurance. Our
success is dependent upon our ability to attract and retain qualified technical
and managerial personnel. There are not enough engineers, technical support,
software services and managers available to meet the current demands of the
computer industry. We may not be able to retain our key technical and managerial
employees or attract, assimilate and retain such other highly qualified
technical and managerial personnel as required in the future. Also, employees
may leave our employ and subsequently compete against us, or contractors may
perform services for competitors of ours. If we are unable to retain key
personnel, our business could be materially harmed.
We may be unable to protect our proprietary information and procedures
effectively.
We must protect our proprietary technology and operate without infringing
the intellectual property rights of others. We rely on a combination of patent,
copyright, trademark and trade secret laws and other intellectual property
protection methods to protect our proprietary technology. In addition, we
generally enter into confidentiality and nondisclosure agreements with our
employees and OEM customers and limit access to and distribution of our
proprietary technology. These steps may not protect our proprietary information
nor give us any competitive advantage. Others may independently develop
substantially equivalent intellectual property or otherwise gain access to our
trade secrets or intellectual property, or disclose such intellectual property
or trade secrets. If we are unable to protect our intellectual property, our
business could be materially harmed.
We may be adversely affected if we are sued by a third party or if we decide to
sue a third party.
There has been substantial litigation regarding patent, trademark and other
intellectual property rights involving technology companies. In the future,
litigation may be necessary to enforce any patents issued to us, to protect our
trade secrets, trademarks and other intellectual property rights owned by us, or
to defend us against claimed infringement. We are also exposed to litigation
arising from disputes in the ordinary course of business. This litigation may:
- Divert management's attention away from the operation of our business
- Result in the loss of our proprietary rights
- Subject us to significant liabilities
- Force us to seek licenses from third parties
- Prevent us from manufacturing or selling products.
Any of these results could materially harm our business.
In the course of business, we have in the past received communications
asserting that our products infringe patents or other intellectual property
rights of third parties. We investigated the factual basis of such
communications and negotiated licenses where appropriate. It is likely that in
the course of our business, we will receive similar communications in the
future. While it may be necessary or desirable in the
-9-
<PAGE>
future to obtain licenses relating to one or more of our products, or relating
to current or future technologies, we may not be able to do so on commercially
reasonable terms or at all. These disputes may not be settled on commercially
reasonable terms and may result in long and costly litigation.
Because we sell products internationally, we are subject to additional risks.
Sales of our products outside of North America represented approximately
55% of net sales in the nine-month period ended March 31, 2000 and 61% of net
sales in the year ended June 30, 1999. We expect that international sales will
continue to represent a significant portion of our net sales. We make foreign
currency denominated sales in many, primarily European, countries. This exposes
us to risks associated with currency exchange fluctuations. Although the dollar
amount of such foreign currency denominated sales was nominal during fiscal
1997, it increased substantially during fiscal 1998 and 1999, especially for
sales of consumer and desktop products into Europe. In fiscal 2000 and beyond,
we expect that a majority of our European sales will be denominated in local
foreign currency, including the Euro. The Company has developed natural hedges
for some of this risk in that most of the European selling expenses are also
denominated in local currency. In addition to foreign currency risks,
international sales and operations may also be subject to the following risks:
- Unexpected changes in regulatory requirements
- Export license requirements
- Restrictions on the export of critical technology
- Political instability
- Trade restrictions
- Changes in tariffs
- Difficulties in staffing and managing international operations
- Potential insolvency of international dealers and difficulty in
collecting accounts
We are also subject to the risks of generally poor economic conditions in
certain areas of the world, most notably Asia. These risks may harm our future
international sales and, consequently, our business.
Future Y2K problems could hurt our business
As of the date of this filing, we have not incurred any business
disruptions or any significant product issues as a result of Year 2000 issues.
However, while no such occurrence has developed as of the date of this filing to
our knowledge, Year 2000 issues may not be apparent as of this date and
therefore there is no assurance that we will not be affected by future
disruptions. The Company will continue to monitor the issue vigilantly and work
to remedy any issues that arise. It is uncertain to what extent we will be
affected by the Year 2000 problem, however, if we or our customers or if third
parties or suppliers experience Year 2000 problems, our business may be
materially harmed.
-10-
<PAGE>
USE OF PROCEEDS
Pinnacle Systems will not receive any proceeds from the sale of the shares
by the selling shareholders. All proceeds from the sale of the Pinnacle Systems
Common Stock will go to the shareholders who offer and sell their shares.
SELLING SHAREHOLDERS
The following table sets forth information with respect to the number of
shares of common stock owned by the selling shareholders named below and as
adjusted to give effect to the sale of the shares offered hereby. The
information in the table below is current as of the date of this prospectus. The
shares are being registered to permit public secondary trading of the shares,
and the selling shareholders may offer the shares for resale from time to time.
The shares being offered by the selling shareholders were acquired in
connection with our acquisition of Digital Editing Systems, Inc. In the
acquisition, the shares of common stock were issued pursuant to an exemption
from the registration requirements of the Securities Act. In connection with the
acquisition, we agreed to register certain shares of Pinnacle Systems common
stock received by the former shareholders of Digital Editing Systems on the
registration statement of which this prospectus is part.
Shares of common stock subject to options are treated as outstanding and to
be beneficially owned by the person holding the options for the purpose of
computing the percentage ownership of the person and are listed below under the
"Number of Shares Underlying Options" column below, but these options are not
treated as outstanding for the purpose of computing the percentage ownership of
any other person. None of the selling shareholders owns more than 1% of the
outstanding common stock of Pinnacle Systems.
The shares offered by this prospectus may be offered from time to time by
the selling shareholders named below:
<TABLE>
<CAPTION>
Number of Number of
Shares Shares
Beneficially Number of Shares Number of Beneficially
Owned Prior to Underlying Shares Being Owned After the
Name of Selling Shareholder the Offering Options Offered Offering
--------------------------- ------------ ------- ------- --------
<S> <C> <C> <C> <C>
David Engelke 273,364 -- 153,768 119,596
Bryan Engelke 14,388 -- 8,093 6,295
</TABLE>
-11-
<PAGE>
Pursuant to the terms of the Registration Rights Agreement dated as of
March 29, 2000 (the "Registration Rights Agreement"), between Pinnacle Systems
and the selling shareholders, Pinnacle Systems undertook to use commercially
reasonable efforts to register certain of the shares held by the selling
shareholders within 90 days of the date of issuance of shares in connection with
the closing of the acquisition. The Registration Rights Agreement also includes
certain indemnification arrangements with the selling shareholders.
PLAN OF DISTRIBUTION
The shares may be sold from time to time by the selling shareholders or by
pledgees, donees, transferees or other successors in interest. Such sales may be
made in any one or more transactions (which may involve block transactions) on
the Nasdaq National Market, or any exchange on which the common stock of
Pinnacle Systems may then be listed, in the over-the-counter market or otherwise
in negotiated transactions or a combination of such methods of sale, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices. The selling shareholders may effect such
transactions by selling shares to or through broker-dealers, and such
broker-dealers may sell the shares as agent or may purchase such shares as
principal and resell them for their own account pursuant to this prospectus.
Such broker-dealers may receive compensation in the form of underwriting
discounts, concessions or commissions from the selling shareholders and/or
purchasers the shares, for whom they may act as agent (which compensation may be
in excess of customary commissions).
The aggregate proceeds to the selling shareholders from the sale of the
shares will be the purchase price of the common stock sold less the aggregate
agents' commissions if any, and other expenses of issuance and distribution not
borne by Pinnacle Systems. The selling shareholders and any dealers or agents
that participate in the distribution of the shares may be deemed to be
"underwriters" within the meaning of the Securities Act, and any profit on the
sale of the shares by them and any commissions received by any such dealers or
agents might be deemed to be underwriting discounts and commissions under the
Securities Act.
To the extent required, the specific shares of common stock to be sold, the
names of the selling shareholders, purchase price, public offering price, the
names of any such agent, dealer or underwriter, and any applicable commission or
discount with respect to a particular offering will be set forth in an
accompanying prospectus supplement.
We have agreed to bear certain expenses of registration of the common stock
under the federal and state securities laws and of any offering and sale
hereunder not including certain expenses, such as commissions of dealers or
agents, and fees attributable to the sale of the shares.
The Registration Rights Agreement provides that we will indemnify the
selling shareholders against certain liabilities, including liabilities under
the Securities Act.
We may suspend the use of this prospectus for a discrete period of time,
not exceeding 30 days, if, in the good faith determination of our board of
directors, a development has occurred or condition exists as a result of which
the Registration Statement or this prospectus contains or incorporates by
reference a material misstatement or omission, the correction of which would
require the premature disclosure of confidential information that would, in the
good faith determination of the board of directors, materially and adversely
affect the Company. We may not exercise this delay right more than twice in any
twelve-month period. We are obligated in the event of such suspension to use our
reasonable efforts to ensure that the use of the prospectus
-12-
<PAGE>
may be resumed as soon as practicable. This offering will terminate on the
earliest of (a) the first anniversary of the effective date of the acquistion of
Digital Editing Systems by Pinnacle Systems or (b) the date on which all shares
offered hereby have been sold by the selling shareholders.
Any securities covered by this prospectus which qualify for sale pursuant
to Rule 144 under the Securities Act may be sold under that Rule rather than
pursuant to this prospectus.
There can be no assurance that the selling shareholders will sell any or
all of the shares of Pinnacle Systems common stock offered by them hereunder.
EXPERTS
The consolidated financial statements and schedule of the Company as of
June 30, 1999 and 1998 and for each of the years in the three-year period ended
June 30, 1999 have been incorporated by reference in this prospectus and in the
Registration Statement, in reliance upon the reports of KPMG LLP, independent
certified public accountants, incorporated by reference herein and upon the
authority of said firm as experts in accounting and auditing.
LEGAL MATTERS
The validity of the shares of common stock offered hereby has been passed
upon for Pinnacle Systems by Wilson Sonsini Goodrich & Rosati, Professional
Corporation, Palo Alto, California.
-13-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, payable by the
Company in connection with the sale of Common Stock being registered. All
amounts are estimates except the SEC registration fee and Nasdaq National Market
listing fee.
Amount to
be Paid
---------
SEC registration fee................................................. $ 1,023
Nasdaq National market listing fee................................... 2,000
Printing expenses.................................................... 10,000
Legal fees and expenses.............................................. 25,000
Accounting fees and expenses......................................... 10,000
Miscellaneous expenses............................................... 3,977
-------
Total........................................................... $52,000
=======
Item 15. Indemnification of Directors and Officers
As permitted by Section 204(a) of the California General Corporation Law,
the Registrant's Articles of Incorporation eliminate a director's personal
liability for monetary damages to the Registrant and its shareholders arising
from a breach or alleged breach of the director's fiduciary duty, except for
liability arising under Sections 310 and 316 of the California General
Corporation Law or liability for (i) acts or omissions that involve intentional
misconduct or knowing and culpable violation of law, (ii) acts or omissions that
a director believes to be contrary to the best interests of the Registrant or
its shareholders or that involve the absence of good faith on the part of the
director, (iii) any transaction from which a director derived an improper
personal benefit, (iv) acts or omissions that show a reckless disregard for the
director's duty to the Registrant or its shareholders in circumstances in which
the director was aware, or should have been aware, in the ordinary course of
performing a director's duties, of a risk of serious injury to the Registrant or
its shareholders, (v) acts or omissions that constitute an unexcused pattern of
inattention that amounts to an abdication of the director's duty to the
Registrant or its shareholders, (vi) interested transactions between the
corporation and a director in which a director has a material financial
interest, and (vii) liability for improper distributions, loans or guarantees.
This provision does not eliminate the directors' duty of care, and in
appropriate circumstances equitable remedies such as an injunction or other
forms of non-monetary relief would remain available under California law.
Sections 204(a) and 317 of the California General Corporation Law authorize
a corporation to indemnify its directors, officers, employees and other agents
in terms sufficiently broad to permit indemnification (including reimbursement
for expenses) under certain circumstances for liabilities arising under the
Securities Act. The Registrant's Articles of Incorporation and Bylaws contain
provisions covering indemnification to the maximum extent permitted by the
California General Corporation Law of corporate directors, officers and other
agents against certain liabilities and expenses incurred as a result of
proceedings involving such persons in their capacities as directors, officers
employees or agents, including proceedings under the Securities Act or the
Securities Exchange Act of 1934. The Company has entered into Indemnification
Agreements with its directors and executive officers.
The Registration Rights Agreement entered into between Pinnacle Systems and
the selling shareholders in connection with the acquisition of Digital Editing
Systems by Pinnacle Systems provides that Pinnacle Systems will indemnify the
selling shareholders against certain liabilities, including liabilities under
the Securities Act.
II-1
<PAGE>
On July 18, 2000, a lawsuit entitled Jiminez v. Pinnacle Systems, Inc. et
al., No.00-CV-2596 was filed in the United States District Court for the
Northern District of California against the Company and certain officer and
director defendants. The action is a putative class action and alleges that
defendants violated the federal securities laws by making false and misleading
statements concerning the Company's business prospects during an alleged class
period of April 18, 2000 through July 10, 2000. This complaint does not specify
damages. We have publicly announced that we intend to defend the case
vigorously. It is possible that the officer and director defendants named in
this lawsuit may seek indemnification from Pinnacle with respect to this claim
and any additional similar claims which may be filed against Pinnacle.
Item 16. Exhibits
Exhibit No. Description
----------- -----------
4.1* Declaration of Registration Rights dated March 29, 2000 made by
the Registrant.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
23.1* Consent of KPMG LLP, independent certified public accountants.
23.2* Consent of Counsel (included in Exhibit 5.1).
24.1* Power of Attorney (See II-5).
-----------
* Previously Filed
Item 17. Undertakings
The Registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(a) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(b) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the Registration Statement;
(c) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement; provided,
however, that paragraphs (a) and (b) above do not apply if the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the Company pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") that are incorporated by reference in the Registration Statement.
2. That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
3. To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned registrant hereby undertakes that, for the purpose of
determining any liability under the Securities Act of 1933, as amended, each
filing of the Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Exchange Act, (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that
is incorporated by reference in the Registration Statement shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the
II-2
<PAGE>
Registrant has been advised that in the opinion of the SEC such indemnification
is against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Mountain View, State of California, on the 4th day of
August, 2000.
PINNACLE SYSTEMS, INC.
By: /s/ MARK L. SANDERS
-------------------------------------
Mark L. Sanders
President and Chief Executive Officer
II-4
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
MARK L. SANDERS* President, Chief Executive Officer August 4, 2000
------------------------ and Director (Principal Executive
Mark L. Sanders Officer)
/s/ ARTHUR D. CHADWICK Vice President, Finance and August 4, 2000
------------------------ Administration and Chief Financial
Arthur D. Chadwick Officer (Principal Financial and
Accounting Officer)
/s/ AJAY CHOPRA Chairman of the Board, Vice August 4, 2000
------------------------ President, Desktop Products
Ajay Chopra
JOHN LEWIS* Director August 4, 2000
------------------------
John Lewis
CHARLES J. VAUGHAN* Director August 4, 2000
------------------------
Charles J. Vaughan
GLENN E. PENISTEN* Director August 4, 2000
------------------------
Glenn E. Penisten
Director
------------------------
L. Gregory Ballard
L. WILLIAM KRAUSE* Director August 4, 2000
------------------------
L. William Krause
-------------
*By: /s/ Arthur C. Chadwick
---------------------------
Attorney in Fact
II-5
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
4.1* Declaration of Registration Rights dated March 29, 2000 made by
the Registrant.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
23.1* Consent of KPMG LLP, independent certified public accountants.
23.2* Consent of Counsel (included in Exhibit 5.1).
24.1* Power of Attorney (See II-5).
-----------
* Previously Filed
II-6
