TELECHIPS CORP, S-3/A, 1996-10-24

TELECHIPS CORP
S-3/A, 1996-10-24
TELEPHONE & TELEGRAPH APPARATUS

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As filed with the Securities and Exchange Commission on October 23, 1996
Registration No. 333-14337

================================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

------------------------------

PRE-EFFECTIVE AMENDMENT NO. 1 TO REGISTRATION STATEMENT ON
FORM S-3
UNDER THE SECURITIES ACT OF 1933

TELECHIPS CORPORATION
(Exact name of registrant as specified in its charter)

------------------------------

NEVADA 88-0266392
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

6880 South McCarran Blvd.
Reno, Nevada 89509
(702) 824-5555

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(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)

------------------------------

C.A. BURNS
Chief Executive Officer
Telechips Corporation
6880 South McCarran Blvd.
Reno, Nevada 89509
(702) 824-5555

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(Name, address, including zip code, and telephone number, including area code,
of agent for service)

------------------------------

Copy to:
KEVIN A. COYLE, ESQ.
Graham & James LLP
400 Capitol Mall, Suite 2400
Sacramento, California 95814
(916) 558-6700

Approximate date of commencement of proposed sale to the public: From
time to time 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 on continuous basis pursuant to Rule 415 under the
Securities Act of 1933, 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
<PAGE> 2
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. [ ]

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 THE 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 COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE> 3

PROSPECTUS
1,800,880 Shares

TELECHIPS CORPORATION

Common Stock

This Prospectus relates to 1,800,880 shares (the "Shares") of Common
Stock, par value $0.01 per share (the "Common Stock"), of Telechips Corporation
(the "Company" or "Telechips") of which 778,426 shares (the "Warrant Shares")
are underlying Common Stock Purchase Warrants (the "Warrants") and of which
50,000 shares (the "Option Shares") are underlying Common Stock Purchase
Options (the "Options"). The Company will not receive any of the proceeds from
any sales of the Shares, but will receive the gross proceeds of any of the
Warrants or Options that are exercised to acquire the Warrant Shares or Option
Shares for cash at their respective current exercises prices. The Registration
Statement of which this Prospectus forms a part has been filed pursuant to the
terms of the Warrants and Warrant Agreements, the Options and several
registration rights agreements between the Company and holders of the Warrants,
Options and Shares, respectively. (Holders of Warrants, Options and Shares are
collectively referred to as the "Selling Securityholders.") See "Selling
Securityholders."

The Shares may be offered and sold from time to time by the Selling
Securityholders through ordinary brokerage transactions in the over-the-counter
market, in negotiated transactions or otherwise, at market prices prevailing at
the time of the sale or at negotiated prices (this "Offering"). See "Risk
Factors," "Selling Securityholders" and "Plan of Distribution."

The closing price for the Common Stock on October 22, 1996, as
reported on the National Association of Securities Dealers Automated Quotation
System ("Nasdaq"), was $1.75 per share.

THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND SHOULD BE
CONSIDERED ONLY BY PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE
INVESTMENT. SEE "RISK FACTORS".

----------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

----------------

No underwriting commissions or discounts will be paid by the Company in
connection with this Offering. Estimated expenses payable by the Company in
connection with this Offering are approximately $30,000.

----------------

This date of this Prospectus is , 1996.

<PAGE> 4

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and in accordance therewith files
reports, proxy statements and other information with the Commission. Such
reports, proxy statements and other information filed by the Company may be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at
the following regional offices: New York Regional Office, 7 World Trade Center,
Room 1400, New York, New York 10048 and Chicago Regional Office, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material
may also be obtained from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Common
Stock is quoted on the Nasdaq SmallCap Market and reports and other information
regarding the Company may be inspected at the National Association of
Securities Dealers, Inc. at 1735 K Street, N.W., Washington, D.C. 20006.

Additional information regarding the Company and the securities
offered hereby is contained in the Registration Statement on Form S-3
(Registration No. 333-14337) of which this Prospectus forms a part, and the
exhibits thereto filed with the Commission under the Securities Act of 1933, as
amended (the "Securities Act"). For further information pertaining to the
Company and the securities offered hereby, reference is made to the
Registration Statement and the exhibits thereto, which may be inspected without
charge at, and copies may be obtained at prescribed fees from, the office of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.

The Company furnishes its stockholders with annual reports containing
audited financial statements and other periodic reports as the Company may deem
to be appropriate or as required by law or the rules of the National
Association of Securities Dealers, Inc.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents which have heretofore been filed by the
Company with the Commission pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), are incorporated by reference herein and shall be
deemed to be a part hereof:

(1) The Company's Annual Report on Form 10-KSB for the
year ended December 31, 1995.

(2) The Company's Quarterly Reports on Form 10-QSB for
the quarters ended March 31, 1996 and June 30, 1996.

(3) The Company's Amendment No. 1 to the Company's Annual
Report on Form 10-KSB/A dated May 3, 1996.

(4) The Company's Amendment No. 2 to the Company's Annual
Report on Form 10-KSB/A dated June 2, 1996.

(5) The Company's Current Report on Form 8-K dated
October 16, 1996.

(6) The description of Common Stock contained in the
Company's Registration Statement on Form 8-A filed
with the Commission on September 15, 1995 by which
the Common Stock of the Company was registered under
Section 12 of the Exchange Act, and the description
of the Common Stock incorporated therein by

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reference to the Registration Statement on Form SB-2
(Regis. No. 33-96664-LA) declared effective by the
Commission on October 16, 1995, under the caption
"Description of Securities" therein.

All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to
the termination of this Offering shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing of
such documents. Any statement incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.

The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request, a copy of any or all of
the documents incorporated by reference in this Prospectus (not including
exhibits and other information that is incorporated by reference unless the
exhibits are themselves specifically incorporated by reference). Requests for
such documents should be directed to Telechips Corporation, located at 6880 S.
McCarran Boulevard, Reno, Nevada 89509, Attn: Nelson B. Caldwell, Chief
Financial Officer, telephone (702) 824-5555.

Telechips and Telechips Access are trademarks of the Company.
Windows(R) and DOS(R) are registered trademarks of Microsoft Corporation. All
other trademarks appearing in this Prospectus are the property of their
respective holders. Unless otherwise indicated, all references to Microsoft
Windows(R) are to the 3.1 ROM version of Windows(R).

The Company's address is 6880 S. McCarran Boulevard, Reno, Nevada
89509, and its telephone number is (312) 642-9200.

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PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE
DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS AND IN THE
INFORMATION AND DOCUMENTS INCORPORATED BY REFERENCE HEREIN. THE STATEMENTS THAT
ARE NOT HISTORICAL FACTS OR STATEMENTS OF CURRENT STATUS CONTAINED IN THIS
PROSPECTUS ARE FORWARD-LOOKING STATEMENTS (AS DEFINED IN THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995) THAT INVOLVE RISKS AND UNCERTAINTIES, INCLUDING,
BUT NOT LIMITED TO, THE RISKS SET FORTH IN "RISK FACTORS."

THE COMPANY

Telechips, a development-stage company, designs, develops and markets
interactive computer-telephone equipment, peripheral devices and software
applications. The Company is seeking to develop a family of combination
telephone-computer devices that provide a cost-effective and easy-to-use method
of accessing, managing and transmitting the increasing amount of electronic
information that is available over standard telephone lines. The Company's
Telechips Access(TM) products, combine the power of a personal computer ("PC")
with a complete business telephone system and a touch sensitive display screen.
Telechips Access products provide on-line capability for transmitting,
receiving, and processing information, as well as voice transmission
capabilities, in a compact, familiar, user-friendly device utilizing a
Microsoft Corporation ("Microsoft") Windows(R) operating system. The Company
has completed development of various Telechips Access models, and is shipping
commercial production units of the 3000 Series.

Telechips Access 3000 models have the following standard and optional
features: (i) a gray-scale touchscreen; (ii) fully integrated communications
capabilities which allow a user to access the Internet and World Wide Web,
company "intranets," proprietary on-line services, as well as other computers;
(ii) simplified access to advanced public telephone network services and PBX
features such as messaging, call waiting, caller ID and three-way calling; (iv)
a built-in office application suite, including calendar and organizer
functions; (v) facsimile facilities; (vi) speakerphone technology which is
designed to reduce the voice-clipping prevalent in many speakerphones; and
(vii) proximity detection facilities which allow for automatic activation of
audio and video announcements in public information station applications.
Other uses depend on the development of applications and features, either by
the Company, by a customer, by the Company and a customer working together, or
by non-customer third parties alone or in cooperation with the Company.

Telechips Access 4000 models can be configured with all the features
of the 3000 models except the gray-scale touchscreen is replaced with a larger
full-color touchscreen.

The Company has entered into a license agreement with Microsoft for
the use of its Windows(R) operating system with the Telechips Access Series.
The Telechips Access product line is currently manufactured by Group
Technologies Corporation ("Group") pursuant to an agreement dated December 1,
1995 (the "Group Manufacturing Agreement"). The Company has not yet
manufactured the Telechips Access Model 3000 in commercial quantities and no
assurance can be given that the Company will be able to develop commercial
manufacturing capability, or, once developed, that there will not be additional
delays or setbacks in the commercial manufacturing of the Telechips Access
Model 3000 or any of the Company's products under development.

The Company markets the Telechips Access product line to a variety of
market segments including: (i) information and service providers and users,
including companies supplying data bases such as credit reference information,
stock quote services and other on-line services and companies such as insurance
companies, overnight delivery services, banks and airlines, (ii) original
equipment

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manufacturers in the telecommunications field ("OEMs"), such as telephone
equipment manufacturers, and (iii) local telephone operating companies
("telcos"), including the regional "Baby Bell" operating companies and other
local exchange carriers.

The Company's executive offices are located at 6880 S. McCarran
Boulevard, Reno, Nevada 89509, and its telephone number is (702) 824-5555.

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<PAGE> 8

RECENT DEVELOPMENTS

On April 11, 1995, the Company conducted the final closing of the sale
to private investors of an aggregate of 30 units (the "1994 Units"), each 1994
Unit consisting of (i) 16,087 shares of Series A Common Stock and (ii) 50,000
Shares of Preferred Stock (the "Private Placement"). The purchase price per
1994 Unit was $100,000. The Company received gross proceeds of $3,000,000 with
respect to the sale of the 1994 Units, yielding net proceeds after the payment
of fees and expenses of approximately $2,500,000. The Private Placement
resulted in the Company's issuance of 482,600 shares of Common Stock and
1,500,000 shares of Preferred Stock (convertible into 482,600 shares of Common
Stock). The Company paid to D.H. Blair in connection with the Private
Placement and the 1994 Note Financing an aggregate of $330,000 and issued to
D.H. Blair and its designees warrants to purchase up to an aggregate of
304,038 shares of Common Stock. Howard Phillips, a director of the Company,
was Director of Corporate Finance of D.H. Blair until August 1995.

On September 1, 1995, the Company completed the sale (the "Bridge
Financing") to private investors of 17 units (the "Units"), each Unit
consisting of (i) an unsecured non-negotiable promissory note of the Company in
the principal amount of $100,000, due on the earlier of the consummation of
this offering or July 31, 1996 (a "Bridge Note") and (ii) 20,000 shares of
Common Stock (the "Bridge Shares"). The purchase price per Unit was $100,000.
The Company received gross proceeds of $1,700,000 from the sale of such Units.
After the payment of $170,000 in placement fees to Whale Securities Co. L.P.,
which acted as placement agent for the Company with respect to the sale of such
Units, and other offering expenses of approximately $134,000, the Company
received net proceeds of approximately $1,396,000 in connection with the Bridge
Financing.

The Company's sale of 17 Units resulted in the Company's issuance (in
connection with the Bridge Financing) of a total of $1,700,000 principal amount
of Bridge Notes and 340,000 Bridge Shares. The 340,000 Bridge Shares issued in
the Bridge Financing were included in the Selling Shareholders' Shares and were
registered by the Company in conjunction with the IPO.

Upon consummation of the IPO, the Company received net proceeds of
approximately $6,255,000. The Company used approximately $2,451,000 of the
proceeds from the IPO to repay the outstanding Bridge Notes, $300,000 worth of
notes issued in 1994, $250,000 of indebtedness to National Semiconductor
Corporation ("NSC"), accrued dividends on the Preferred Stock and interest on
all of such indebtedness.

In addition, the Company issued nonredeemable warrants to purchase
150,000 shares of Common Stock at an exercise price of $7.70 per share and
150,000 Underlying Warrants (each exercisable to purchase one share of Common
Stock at a price of $7.70 per share) at an exercise price of $.154 per warrant
to Whale. Further, all outstanding shares of Preferred Stock and Series B
Common Stock, par value $.01 ("Series B Common Stock"), were converted to
Series A Common Stock and the Series A Common Stock was redesignated as Common
Stock. Upon conversion of the Preferred Stock, the Company paid an aggregate
of $111,719 in accrued and unpaid dividends to the holders of Preferred Stock.

Pursuant to the terms of an agreement with NSC, dated March 1994, as
restated August 31, 1994 and amended September 20, 1994, $500,000 of debt owed
to NSC was canceled, the Company paid NSC $250,000 plus accrued and unpaid
interest of $38,904, from the proceeds of the IPO, and issued to NSC 229,306
shares of Common Stock and a Warrant to purchase 20,108 shares of Common Stock
at $3.11 per share.

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<PAGE> 9

During November, 1995, the Company obtained a $1,200,000 revolving
line of credit from a commercial bank ("Line of Credit"). The Line of Credit
expires on December 13, 1996. The Line of Credit is collateralized by cash and
cash equivalents valued at 110% of outstanding draws. Interest is payable
monthly at the three-month U.S. Treasury Bill rate plus 3% (8.05% currently).
Principal is due at maturity. As of the date of this Prospectus, the Company
has a zero balance on the Line of Credit.

On August 19, 1996, Mr. Richard E. Salwen resigned from the Company's
Board of Directors and also on August 19, 1996, Mr. Bruce Chatterley was
appointed to the Board. On October 11, 1996, the Company's Board was expanded
to six members and Mr. Frank Vigilante and Mr. Richard Wolf were appointed
directors. Certain information with respect to Messrs. Chatterley, Vigilante
and Wolf follows.

Mr. Chatterley, 34, has been Vice President-Core Services Product
Management for Ameritech since January 1996. He was previously Vice President
of Marketing at Ameritech Payphone Service. From February 1989 to July 1994,
Mr. Chatterley was with US West. From June 1986 to February 1989, Mr.
Chatterley was with General Electric and from September 1984 to August 1986 he
was with IBM.

Mr. Vigilante, 66, was a director with Network Equipment Technologies
from April 1992 to August 1996. He has been a director of the Visiting Nurse
Association of Central Jersey since October 1991. Mr. Vigilante has also been
a director of the Arthritis Foundation of New Jersey since February 1986 and is
currently its Chairman. He was a consultant with Pyramid Technologies
Corporation from April 1987 to February 1995. Mr. Vigilante held various
positions with AT&T and in 1985 he became a Senior Vice President. Mr.
Vigilante retired from AT&T in 1987 after 30 years of service.

Mr. Wolf, 58, has been Executive Vice President of Robert E. La Blanc
Associates, Inc., a telecommunications, information technologies consulting and
investment banking firm specializing in voice, data, and video
telecommunications since March 1982. From July 1972 to March 1982, Mr. Wolf
was a manager with AT&T. From January 1962 to July 1972, Mr. Wolf held various
management positions in the engineering and marketing departments with New York
Telephone.

On October 2, 1996, the Company completed a private placement of 4,188
shares of 4% Convertible Preferred Stock, face value $1,000 per share (the
"Preferred Shares"). The Preferred Shares were issued without registration
under the Securities Act of 1933, as amended (the "Act"), pursuant to
Regulation S promulgated under the Act. The conversion price of the Preferred
Shares is determined by multiplying each Preferred Share by 1,000 and dividing
the result by the lower of $3.00 or the fair market value of the Company's
Common Stock on the date of conversion. The Preferred Shares are convertible
at any time beginning November 11, 1996 until August 31, 1998. The Company
received approximately $2.9 million in net proceeds. In connection with the
financing, the Company also issued to Third World Investments, Ltd. Common
Stock Purchase Warrants to purchase 400,000 shares of Common Stock at an
exercise price of $2.25 per share as adjusted.

On October 3, 1996, the Company entered into a Consulting Agreement
(the "Consulting Agreement") with Coastline Financial Group, Inc.
("Coastline") pursuant to which Coastline has agreed to provide certain
financial consulting, business consulting, investor relations and financial
public relations services to the Company for a period of one year (unless
earlier terminated). The Company has agreed to pay Coastline a cash fee of
$7,500 per month and to issue to Coastline options to purchase up to 50,000
shares of Common Stock at any time from December 31, 1996 through March 31,
1999 at an exercise price of $2.25 per share. In addition, unless the
Consulting Agreement is earlier terminated, the Company has agreed to issue to
Coastline, on each of January 2, 1997, April 2, 1997, and June 30, 1997,
options to purchase up to 50,000 shares of Common Stock at an exercise price of
$2.25 per share

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on or before March 31, 1999. In the event Coastline is solely responsible for
arranging a financing, the Company has agreed to issue to Coastline options to
purchase up to 150,000 shares of Common Stock at an exercise price equal to
110% of the price per share paid by investors in such financing. If Coastline
is directly and solely responsible for arranging a merger or acquisition
transaction during the term of the Consulting Agreement or one thereafter, the
Company has agreed to pay to Coastline a fee based on the value of such a
transaction to the Company or its shareholders of 5% of the first million
dollars in value, 4% of the next million dollars, 3% of the next million
dollars, 2% of the next million dollars and 1% of each additional million
dollars thereafter. The Consulting Agreement may be terminated by either
Coastline or the Company at the end of six months with 30-days notice to the
other party. If no such notice is received by the end of the fifth month, the
Consulting Agreement will continue through the term.

On October 11, 1996, the Board of Directors approved the Company's
1996 Directors Stock Option Plan (the "Directors Plan"), subject to approval of
the Directors Plan by the Company's stockholders. The Directors Plan
authorizes the automatic granting of nonqualified stock options to purchase an
aggregate of up to 200,000 shares of Common Stock to non-employee directors of
the Company or its subsidiaries. No option may be granted after October 10,
2006. The exercise price of the options will be the closing sales price of a
share on the date of grant. The Directors Plan is administered by the Board of
Directors, which has authority to administer the Directors Plan in accordance
with the provisions of Rule 16b-3 promulgated under the Securities Exchange Act
of 1934, as amended. All grants of options under the Directors Plan will be
automatic and non-discretionary.

Under the Directors Plan, each nonemployee director not previously
granted a similar option will automatically be granted an option to purchase
30,000 shares on the date on which such person first becomes a director. Each
nonemployee director will automatically be granted an option to purchase 5,000
shares on each annual anniversary of such nonemployee director's election or
appointment to the Board of Directors. All option grants are subject to
stockholder approval of the Directors Plan. Options granted on the date the
recipient becomes a directors are referred to herein as "Initial Grant
Options." Options issued annually thereafter are referred to herein as "Annual
Grant Options."

Payment of the exercise price for shares purchased upon exercise of an
Initial Grant Option may be made (i) by the delivery of a promissory note (a
"Note Exercise"), provided that the optionee may only utilize a Note Exercise
on the date of grant ("Grant Date"); (ii) by delivery to the Company of cash or
a check to the order of the Company in an amount equal to the purchase price of
such shares; (iii) by delivery to the Company of shares of Common Stock of the
Company then owned by the optionee having a fair market value equal in amount
to the purchase price of such shares; (iv) by any other means which the Board
of Directors determines is consistent with the purpose of the 1996 Directors
Stock Option Plan and with applicable laws and regulations; or (v) by any
combination of such methods of payment. In the event that the optionee elects
to exercise the Initial Grant Option by means of a Note Exercise, the option
vests and becomes exercisable in its entirety on the Grant Date. If the
optionee elects to pay the exercise price in a form other than a Note Exercise,
an Initial Grant Option will vest and become exercisable ratably over a
36-month period from the Grant Date. Shares issued under a Note Exercise will
be held in escrow until the notes have been satisfied. In addition, such
shares are subject to a repurchase option exercisable by the Company if the
optionee voluntarily terminates his or her relationship with the Company (the
"Repurchase Option"). The Repurchase Option decreases ratably over a 36 month
period from the date of exercise. Shares will be released from escrow only
upon lapse of the forfeiture condition and payment of the note.

Annual Grant Options are immediately exercisable on the date of grant
under terms similar to those of the Initial Grant Option.

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Options granted under the Directors Plan will generally terminate on
the fifth anniversary of the date of grant. If an optionee ceases to serve as
a director for any reason, including death or disability, he or she may, but
within ninety (90) days, exercise the options.

On October 11, 1996, Messrs. Chatterley, Wolf and Vigilante each
received 30,000 and Howard Phillips received 15,000 non-plan,
non-qualified options under substantially same terms as described in the
Directors Plan for Initial Grant Options. Each recipient exercised such options
pursuant to a Note Exercise.

THE OFFERING

Securities offered . . . . . . . . . . . 1,800,880 shares of Common
Stock offered by the Selling
Securityholders.

Common Stock outstanding
after the offering (1) . . . . . . . . 4,216,606 shares.

Use of Proceeds . . . . . . . . . . . . The Company will not receive
any proceeds from the sale of
the Common Stock by the
Selling Securityholders.
Proceeds to the Company
pursuant to Warrant and
Option exercises by the
Selling Securityholders,
estimated to be approximately
$2,150,000 if all the Warrant
Shares and Option Shares are
issued pursuant to cash
exercises of the Warrants and
Options, will be used by the
Company for general corporate
purposes, including research
and development, sales and
marketing, manufacturing
equipment and facilities and
working capital.

Nasdaq Common Stock Symbol . . . . . . . TCHP

- ---------------
(1) Includes 933,600 shares of Common Stock held in escrow subject to release
upon the occurrence of certain events. Does not include (i) 2,803,406
shares reserved for issuance upon exercise of outstanding warrants; (ii)
323,596 shares reserved for issuance upon the exercise of outstanding
stock options, (iii) 319,664 shares reserved for issuance upon exercise
of options available for future grant under the Company's employee
benefit plans and Directors Option Plan and (iv) 1,396,000 shares
reserved for issuance on the conversion of the Preferred Shares (based on
an assumed conversion price of $3.00 per share).

RISK FACTORS

The statements that are not historical facts or statements of current
status contained in this Prospectus are forward-looking statements (as defined
in the Private Securities Litigation Reform Act of 1995) that involve risks and
uncertainties, including, but not limited to, the risks set forth in "Risk
Factors." The decision of whether to make an investment in the Common Stock
involves an analysis of certain risks, including but not limited to, the risk
factors set forth in this Prospectus. Each potential investor is urged to
carefully consider the risks inherent in a development-stage company,
commercialization of new products based on innovative technology, the Company's
significant and continuing operating losses, the volatility of the Company's
stock price, and the competitive nature of the industry in which the Company
operates. See "Risk Factors."

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RISK FACTORS

The securities offered hereby involve a high degree of risk,
including, but not necessarily limited to, the risk factors described below.
Each prospective investor should carefully consider the following risk factors
inherent in and affecting the business of the Company and this Offering before
making an investment decision. The statements that are not historical facts or
statements of current status contained in this Prospectus are forward-looking
statements that involve risks and uncertainties including, but not limited to,
the factors set forth below.

1. Development Stage Company; Limited Revenues From Product Sales;
Limited Relevant Operating History; Significant and Continuing Operating
Losses; Accumulated Deficit. Since its inception in 1991, the Company has been
engaged primarily in research and development and has had limited revenues from
sales of products. Accordingly, the Company has a limited relevant operating
history upon which an evaluation of its prospects can be made. Such prospects
must be considered in light of the risks, expenses and difficulties frequently
encountered in the establishment of a new business in the computer-telephony
industry, which is a continually evolving industry characterized by an
increasing number of market entrants and intense competition, as well as the
risks, expenses and difficulties encountered in the commercialization of new
products based on innovative technology. The Company has incurred operating
losses in each quarter since December 31, 1993 and, at June 30, 1996, the
Company had an accumulated deficit of approximately $6,960,000. Since such
date, losses have increased and are continuing through the date of this
Prospectus. While not the Company's principal business, research and
development revenues from National Semiconductor Corporation ("NSC"), the
Company's only significant source of revenue as of the date of this Prospectus,
ceased during 1994 when the NSC contract was terminated by mutual agreement of
the parties. In addition, the Company's operating expenses have increased and
can be expected to continue to increase in the future in connection with the
Company's efforts to increase its marketing program and continue to develop new
products. Accordingly, it is anticipated that the Company will continue to
incur significant losses at least until it is able to sell its products with an
adequate margin and in sufficient quantities to support operations. There can
be no assurance that the Company will be successful in generating product sales
at a sufficient quantity or margin or that the Company will ever achieve
profitable operations.

2. Significant Capital Requirements; Need for Additional Capital;
Explanatory Paragraph in Accountant's Report. The Company's capital
requirements have been and will continue to be significant. The Company has
been dependent primarily on the Company's initial public offering (the "IPO")
of its Common Stock and certain warrants (the "Public Warrants"), private
placements of equity securities, indebtedness and, prior to February 1994, on
contract revenues from NSC to fund its capital requirements. Over the next 12
months, the Company intends to focus on increasing its marketing efforts and
research and development for new proposed products. The Company anticipates,
based on its current proposed growth plans and assumptions relating to its
growth and operations, that the proceeds from the IPO and private placements,
borrowings and planned revenues will not be sufficient to satisfy the Company's
contemplated cash requirements for the next 12 months and that the Company will
be required to raise additional funds within the next 12 months. In addition,
in the event that the Company's plans change or its assumptions prove to be
inaccurate (due to unanticipated expenses, delays, problems, or otherwise), the
Company would be required to seek additional funding sooner than anticipated.
Any such additional funding could be in the form of additional equity capital.
Further, in the event that the Company receives a larger than anticipated
number of purchase orders for Telechips Access products, it may require
resources substantially greater than those that are currently available to the
Company. In

10
<PAGE> 13

such event the Company may be required to raise additional capital or to engage
third parties (as to which there can be no assurance) to assist the Company in
meeting such orders. The Company is currently pursuing several potential
funding opportunities; however, the Company has no current commitments for
additional funding. There can be no assurance that any of such opportunities
will result in actual funding or that additional financing will be available to
the Company when needed, on commercially reasonable terms, or at all. If the
Company is unable to obtain additional financing if needed, it will likely be
required to curtail its marketing and manufacturing plans and possibly cease
its operations. Any additional equity financing may involve substantial
dilution to the Company's then-existing shareholders. The Company's
independent accountants have included an explanatory paragraph in their report
on the Company's financial statements for the year ended December 31, 1995,
stating that the Company's has not, to date, recognized significant revenues
from product sales nor produced units in quantities which will yield a gross
margin adequate to cover product and operations costs and that these factors
raise substantial doubt about the Company's ability to continue as a going
concern.

3. New Concept and Emerging Markets; Uncertainty of Market Acceptance
and Commercialization Strategy. The use of combination telephone-computer
products for commercial and consumer applications represents a relatively new
business activity characterized by emerging markets and an increasing number of
market entrants who have introduced or are developing an array of new
telecommunications products and services, some of which will compete against
Telechips Access products and any other products which may be developed by the
Company. Achieving market acceptance for Telechips Access products will
require substantial marketing efforts and expenditure of funds to create
awareness and demand by potential customers. There can be no assurance that
Telechips Access products will ever gain such acceptance. The Company sold
initial production units of the Telechips Access Series 3000 at an introductory
price substantially lower than the proposed sale price for its commercial
units, and at a cost basis substantially higher than anticipated cost for
volume commercial units, which resulted in a negative gross margin.
Additionally, the remaining initial production units (approximately 620 units),
even if sold at the commercial sales price as planned, will likely be sold at a
cost resulting in a negative gross margin. Even though, based on quotes from
manufacturers, the Company anticipates that it will be able to produce
commercial units (beyond the remaining 620 initial production units) at a cost
that will yield an adequate gross margin, there can be no assurance that such
margin will be achieved or that the Company will be able to purchase goods at
such quotes. In addition, the Company is currently developing, testing and
evaluating and anticipates that it will continue to develop, evaluate and test
various product commercialization strategies, such as using Telechips Access
products in a public payphone environment, placing the Telechips Access
products in hotel lobbies and rooms and marketing Telechips Access products for
residential use. In order to develop such new products or services, the
Company will be required to devote substantial resources, financial and
otherwise to such products. The failure of any of these projects could result
in substantial losses to the Company. The inability to successfully complete
development of a product or application or a determination by the Company, for
financial, technical or other reasons, not to complete development of any
product or application, particularly in instances in which the Company has made
significant capital expenditures, could have a material adverse affect on the
Company.

4. Lack of Intellectual Property Protection; Right of NSC to Certain
Telechips Access Technology. The Company does not possess any patent or
registered intellectual property rights with respect to any of its technology
and has not filed any patent applications. The Company has filed an
application for registration of the marks "Telechips" and "Telechips Access."
However, there can be no assurance that the Company will obtain registration of
these marks. In addition, some of the technology embodied in the Telechips
Access products, such as the touch-sensitive display, is generally available to

11
<PAGE> 14

other manufacturers. Intellectual property embodied in certain portions of the
mechanical design of the Access Series 3000 and 4000 products is licensed by
the Company on a world-wide, perpetual, royalty-free basis from NSC. Although
NSC has agreed not to manufacture or sell products incorporating such
technology prior to March 31, 1997, NSC has substantially greater financial,
marketing and other resources than the Company and if it chooses to make use of
such technology, or to license it to other companies, products similar to the
Telechips Access line could be introduced to the market; although such products
incorporating such mechanical design would not be permitted to contain any
technology proprietary to Telechips without the Company's consent.

The Company depends in part upon certain technology and know-how to
differentiate its products from those of its competitors, and relies on a
combination of trade secret laws and nondisclosure and confidentiality
agreements with its employees, consultants, distributors, researchers and
advisors to protect its technology. In addition, others may obtain access to
or independently develop technologies or know-how similar to the Company's.
The telecommunications industry is characterized by the existence of a large
number of patents and frequent litigation based on allegations of patent
infringement. Although the Company believes that its products and technologies
do not infringe on the proprietary rights of others and has not received any
notice of claimed infringement, it is possible that an infringement of
proprietary rights may occur. In such event, the Company may be required to
modify its products or obtain a license. There can be no assurance that the
Company will be able to do so in a timely manner, upon acceptable terms and
conditions, or at all, or that the Company will have the financial or other
resources necessary to successfully defend a claim of violation of proprietary
rights. Failure to do any of the foregoing could have a material adverse
effect on the Company. Furthermore, if the Company's products or technologies
are deemed to infringe patents or proprietary rights of others, the Company
could, under certain circumstances, become liable for damages, which would have
a material adverse effect on the Company.

5. Technological Advances and Evolving Industry Standards. The
computer marketplace and, in particular, the computer-telephone marketplace, is
characterized by technological developments, changes in customer requirements,
evolving industry standards and frequent new product introductions. In the
future, the Company may be required to enhance its existing system and to
develop and introduce new products that take advantage of technological
advances and respond promptly to new customer requirements and evolving
industry standards. There can be no assurance that the Company will be able to
keep pace with the rapid evolution of the computer telephony industry.

6. Dependence on Contract Manufacturing; Unanticipated and Costly
Delays in Manufacturing. For the foreseeable future, the Company intends to
assemble and test Telechips Access products using contract manufacturers.
Until recently, the Company's products were assembled by Lucent Technologies,
Inc. ("Lucent"). The Company recently experienced considerable and costly
delays due to the inability of Lucent to ship product which met the Company's
quality standards. As a result, the Company has been required to perform
additional quality assurance work on Telechips Access products received by
Telechips from Lucent. Henceforth, Group Technologies Corporation is expected
to be the Company's primary manufacturer. The initial term of the Group
Manufacturing Agreement terminates on February 26, 1997, and is automatically
renewed for an additional 12-month period unless terminated by the Company upon
30 days' written notice before expiration of the initial term. In the event
Group technologies is unable to deliver quality products in a timely manner,
the Company could continue to face substantial delays. Such delays could have
a material adverse effect and harm the Company's reputation, financial
condition and marketing capability. To somewhat offset such an advent, the
Company has supplemented its support capabilities with the ability to assemble
and test modest quantities of product

12
<PAGE> 15

in-house while a transition could be made to other contract manufacturer which
the Company has pre-qualified. However, the Company competes with numerous
other companies for the capacity of these contract manufacturers, and no
assurance can be given that the Company will be able to obtain desired
quantities of products on a timely basis.

7. Dependence on License from Microsoft. The Telechips Access product
line is designed to operate utilizing the Microsoft Windows operating system.
The Company would be materially and adversely affected if that portion of
Microsoft DOS(R) necessary to operate Windows or Windows itself became
unavailable to the Company for use with its products. The Company entered into
an agreement with Microsoft, dated as of February 1, 1995, and amended as of
February 1, 1996, pursuant to which the Company has been granted a
non-exclusive, worldwide license to the Windows operating systems (the
"Microsoft License"). The Microsoft License expires on September 30, 1997, and
there are no automatic renewal terms. There can be no assurance that, after
such date, Microsoft will renew such license or that it will do so on terms as
favorable to the Company as those of the current license. In the event that
the license was terminated and not renewed, the Company would no longer be
authorized to manufacture or sell any of its products as currently configured
and the Company would be required to license or develop a new operating system
and there can be no assurance that such a license could be obtained or such a
system developed. Failure to obtain a license or develop a new system would
have a material adverse effect on the Company. In addition, such new operating
system would likely not have the same level of acceptance or software
compatibility as the Windows system, limiting its utility to the Company and to
users.

8. Competition; Technological Change and Obsolescence. The Company
operates in a highly competitive telephone-computer industry which has been
characterized in recent periods by pricing pressures and business
consolidations. The Company potentially competes, depending on their
introduction of similar products, with a large number of companies, such as
Northern Telecom (NorTel), Matsushita (Panasonic), AT&T and Phillips in the
telecommunications business; IBM, Compaq and Apple in the computer business;
and Matsushita (Panasonic), Apple-Sharp and Casio-Tandy in the consumer
electronics business. In addition, the recent deregulation of the telephony
industry may increase the number of companies competing in the
telecommunications device market. Most of the Company's competitors and
potential competitors are significantly larger and have significantly greater
financial and management resources than the Company. The Company expects that
competition will continue to be intense in the markets to be addressed by the
Company, and there can be no assurance that the Company will compete
successfully.

The Company is also aware of several companies, such as Phillips,
Cidco, Colonial Data and others that have introduced or test-marketed products
that offer a combination of graphical screen technology and communications
capability. In addition, a consortium of technology companies, led by Oracle
Corporation, has announced an Internet PC that is expected to sell for as
little as $500 and uses a conventional television for its display (not included
in the $500 price.) This computer telephony device may allow users to access
the Internet and perform basic on-line computing functions. Such devices have
significant limitations as compared to Telechips Access products, however,
there can be no assurance that such companies or other companies will not
introduce products that are substantially similar to Telechips Access products.
Further, since product development in high technology markets such as computers
and telecommunications is usually done in secret, there can be no assurance
that another company will not introduce a product similar to Telechips Access
products.

13
<PAGE> 16

The telecommunications and computer industries are also subject to
rapid and significant technological change and the ability of the Company to
compete is dependent in significant part on its ability to continually enhance
and improve its products and technologies. In order to do so, the Company must
effectively utilize and expand its research and development capabilities and,
once developed, expeditiously convert new technology into products and
processes which can be commercialized. There can be no assurance that the
Company will be able to identify, develop, manufacture and offer products
necessary to remain competitive. Moreover, the Company may from time to time
maintain a significant investment in its product inventory and, in such event,
would be subject to the risk of inventory obsolescence. If a significant
amount of inventory is rendered obsolete, the Company's business and operating
results would be materially and adversely affected.

9. Dependence on Limited Sources of Supply. Many of the key
components used in the manufacture of the Company's products are currently
being purchased from single sources, including Microsoft, which is the sole
source of the Telechips Access product operating system. If the Company's
relationship with Microsoft were terminated, the Company would no longer be
authorized to manufacture and sell any of its products as currently configured
and the Company would be materially adversely affected. Other than the
contract with Microsoft, the Company has no supply contracts. While the
Company believes that it can obtain supplies from other parties, should any of
its suppliers terminate their relationship with the Company, such terminations
may cause delays in obtaining necessary supplies, which could in turn result in
delays or reductions in product shipments and loss of sales and consequently
have a material adverse effect on the Company's business, operating results and
financial condition.

10. Possible Dependence on a Few Large Customers. The Company's
current marketing efforts have focused primarily on a few large telephone
operating companies as well as a few other similarly large companies. It is
therefore likely that, particularly in the early stages of commercialization,
the Company will depend primarily on one or a few large customers. If the
Company were to lose such a customer it would likely have a material adverse
effect on the Company's business and prospects. There can be no assurance that
the Company will be able to diversify its customer base.

11. Dependence on Key Personnel. The Company believes that its
continued success will depend to a significant extent upon its present
management, in particular, C. A. Burns, the Company's current Chief Executive
Officer. Mr. Burns suffers from diabetes, for which he has taken insulin for
more than 20 years. While the Company has secured a $2,000,000 "key man" life
insurance policy on the life of Mr. Burns, should the Company be deprived of
the services of Mr. Burns for any period of time, its business and prospects
would be adversely affected. In addition, the loss of the services of any
other personnel could materially and adversely affect the Company. Further, in
order to successfully implement and manage its business plan, the Company will
be dependent upon, among other things, successfully recruiting qualified
managerial and sales personnel having experience in business activities such as
those contemplated by the Company. Competition for the type of qualified
individuals sought by the Company is intense. There can be no assurance that
the Company will be able to retain existing employees or that it will be able
to find, attract and retain qualified personnel on acceptable terms.

12. Significant Management Holdings. Management currently owns
approximately 29% of the issued and outstanding shares of Common Stock.
Management thus exerts significant influence over the affairs of the Company.
See "Principal Shareholders."

13. Government Regulation. Telecommunication companies are subject to
regulation by state public utility commissions, the Federal Communications
Commission (the "FCC") and other regulatory

14
<PAGE> 17

authorities. The sale of telecommunications equipment, such as the Telechips
Access, is regulated in the United States and in many countries, primarily to
ensure compliance with federal technical standards for interconnection,
radiation emissions and non-interference (i.e. type acceptance of a particular
product). In addition, any terminal equipment, such as the Telechips Access,
connected to a public telephone network is required to be registered with the
FCC. The Company may also be subject to further federal and state regulation in
the future, as well as court challenges. The Company has obtained a Part 15
Class B Certificate and Part 68 Certificate from an FCC-certified laboratory
that the Telechips Access Series 3000 meets certain radiation emission
standards and that the Telechips Access Series 3000 is compatible with existing
connection protocols. However, federal and state regulations of
telecommunications companies and equipment are subject to future change. The
Company cannot predict what impact, if any, such changes might have on its
business. Introduction of the Company's products into foreign markets will
likely require compliance with federal export regulations and may require
compliance with foreign laws and regulations.

14. Elimination of Liability of Directors and Officers. The Company's
Articles of Incorporation eliminates the liability of a director or officer of
the Company for monetary damages for breach of fiduciary duty as a director,
subject to certain exceptions. The foregoing provision may reduce the
likelihood of derivative litigation against directors and may discourage or
deter shareholders or management from suing directors for breaches of their
duty of care, even though such an action, if successful, might otherwise
benefit the Company and its shareholders.

15. Possible Volatility of Market Price. The market price of the
Common Stock may be highly volatile as has been the case with the securities of
other small capitalization companies. Factors such as the Company's financial
results, new product introductions and the technological advances and various
factors affecting the telephony industry generally, may have a significant
impact on the market price of the Company's securities. Additionally, in recent
years, the securities markets have experienced a high level of price and volume
volatility and the market prices of securities for many companies, particularly
small capitalization companies, have experienced wide fluctuations which have
not necessarily been related to the operating performances or underlying asset
values of such companies.

16. Possible Delisting of Securities from Nasdaq System; Disclosure
Relating to Low-Priced Stocks. The Company's Common Stock is quoted on the
Nasdaq SmallCap Market. However, in order to continue to be included in
Nasdaq, a company must maintain $2,000,000 in total assets, a $200,000 market
value of the public float and $1,000,000 in total capital and surplus. In
addition, continued inclusion requires two market makers and a minimum bid
price of $1.00 per share; provided, however, that if a company falls below such
minimum bid price, it will remain eligible for continued inclusion in Nasdaq if
the market value of the public float is at least $1,000,000 and the Company has
$2,000,000 in capital and surplus. Failure to meet these maintenance criteria
in the future may result in the delisting of the Company's securities from
Nasdaq and trading, in the Company's securities would thereafter be conducted
in the non-Nasdaq over-the-counter market. As a result of such delisting, an
investor may find it more difficult to dispose of, or to obtain accurate
quotations as to the market value of, the Company's securities. In addition,
if the Common Stock or Public Warrants were delisted from trading on Nasdaq and
the trading price of the Common Stock was less than $5.00 per share, trading in
the Common Stock and Public Warrants would also be subject to certain rules
promulgated under the Exchange Act, which require additional disclosure by
broker-dealers in connection with any trades involving a stock defined as a
penny stock (generally, any non-Nasdaq equity security that has a market price
of less than $5.00 per share, subject to certain exceptions). Such rules
require the delivery, prior to any penny stock transaction, of a disclosure
schedule explaining the penny stock market and the risks associated therewith,
and impose various sales practice requirements on broker-dealers who sell penny
stock to persons other

15
<PAGE> 18

than established customers and accredited investors (generally institutions).
For these types of transactions, the broker-dealer must make a special
suitability determination for the purchaser and have received the purchaser's
written consent to the transactions prior to sale. The additional burdens
imposed upon broker-dealers by such requirements may discourage broker-dealers
from effecting transactions in the Common Stock and Public Warrants, which
could severely limit the market liquidity of the Common Stock and Warrants and
the ability of purchasers in this Offering to sell the Common Stock in the
secondary market.

17. Release of Escrow Shares Will Result in Charges to Earnings.
Based on generally accepted accounting principles, the release of 241,300
shares of Common Stock currently held in escrow will likely be deemed
compensatory and, accordingly, will result in substantial charges to earnings
equal to the fair market value of the escrowed shares as of the date on which
they are released. Such charges could substantially increase the loss or
reduce or eliminate the Company's net income, if any, for financial reporting
purposes for the periods in which the escrowed shares are released or are
probable of being released. Such shares are subject to release on the Company
meeting the following conditions:

(i) If the Company's net income in any one of the fiscal years ending
December 31, 1996, December 31, 1997 or December 31, 1998, after
provision for income taxes and exclusive of any extraordinary
earnings or charges to income resulting from the release of the Escrow
Shares (as derived from the Company's financial statements audited by
the Company's independent certified public accountants) amounts to at
least $2,500,000 for the fiscal year ending December 31, 1996;
$3,500,000 for the fiscal year ending December 31, 1997 or $4,500,000
for the fiscal year ending December 31, 1998;

(ii) If the Company is sold in a private sale at a price which, after
giving effect to the release of such shares, results in the payment on
the Common Stock of at least $18 per share in 1996 or 1997, or $24 per
share in 1998 (the "Minimum Price"), then so much of the Common Stock
held in escrow as is required to provide for the sale of all shares of
Common Stock at a price at least equal to the Minimum Price per share
shall be released prior to the sale and sold; or

(iii) If, for any period of thirty (30) consecutive trading days, the
average bid price of the Common Stock on Nasdaq equals or exceeds (i)
$10 during the period beginning with the effective date of this
Prospectus and ending December 31, 1996, (ii) $15 during the Company's
fiscal year ending December 31, 1997 or (iii) $20 during the Company's
fiscal year ending December 31, 1998.

18. Options and Warrants. As of the date of this Offering, the
Company had 323,596 shares of Common Stock reserved for issuance upon the
exercise of outstanding options and 2,803,406 shares of Common Stock reserved
for issuance upon exercise of outstanding warrants. To the extent that such
stock options and warrants are exercised, dilution to the interests of the
Company's shareholders may occur. Moreover, the terms upon which the Company
will be able to obtain additional equity capital may be adversely affected
since the holders of the options can be expected to exercise them at a time
when the Company would, in all likelihood, be able to obtain any needed capital
on terms more favorable to the Company than those provided in the options. In
addition, the holders of the outstanding options and warrants have certain
registration rights relating to the shares of Common Stock issuable upon the
exercise thereof, the exercise of which may involve substantial expense to the
Company.

16
<PAGE> 19

19. Shares Eligible for Future Sale. The Company has 4,216,606 shares
of Common Stock outstanding (including 241,300 shares held in escrow). In
addition to the 1,800,880 Shares registered hereby (including 828,426 Shares
issuable upon exercise of Warrants and Options), 1,840,000 shares of Common
Stock are freely tradeable without restriction or further registration under the
Securities Act. All of the remaining 1,404,152 shares of Common Stock
outstanding are "restricted securities," as that term is defined in Rule 144
promulgated under the Securities Act, and in the future may only be sold
pursuant to a registration statement under the Securities Act, in compliance
with the exemption provisions of Rule 144 or pursuant to another exemption under
the Securities Act. Of the 1,404,152 restricted shares, an aggregate of 265,430
shares are currently eligible for sale, without registration, under Rule 144
(subject in certain cases to the volume limitations prescribed by such rule).
An additional 24,130 shares held in escrow would be available for sale under
Rule 144 if released from escrow. The balance of such restricted shares will
become so eligible at various times hereafter upon termination of the lock-up
agreements referred to below, subject to restrictions imposed by Rule 144,
restrictions on sales by affiliates and transfer restrictions of certain shares
held in escrow. All of the Company's officers, directors and employees and
certain investors have agreed not to sell or otherwise dispose of any securities
of the Company (except for any securities purchased by such persons in the
public market) without the consent of Whale for a period of 18 months from
October 16, 1995, provided that beginning 12 months from October 16, 1995, such
persons may sell or otherwise dispose of up to one-half of the securities owned
by such persons without the consent of Whale consistent with the volume and
other sales limitations imposed upon unregistered and "restricted" securities by
Rule 144 without regard to the two-year holding period referred to in Rule 144.
NSC has agreed not to sell or otherwise dispose of any securities of the Company
(except for any securities purchased by NSC in the public market) without the
consent of Whale for a period of 13 months from October 16, 1995, and thereafter
may not sell more than 10,054 shares of Common Stock per quarter without the
consent of Whale.

In addition, the Company has reserved for issuance 2,803,406 shares
for issuance upon exercise of outstanding warrants; (ii) 323,596 shares for
issuance upon the exercise of outstanding stock options, and (iii) 1,396,000
shares reserved for issuance on the conversion of the Preferred Shares (based
on an assumed conversion price of $3.00 per share). Of such shares, all of the
shares issuable on the exercise of warrants and 50,000 shares issuable on
exercise of options are being registered hereby or have been registered for
resale under the Securities Act and may be freely traded into the market if
issued. The shares issuable on conversion of the Preferred Shares will be
issued under Regulation S and may be traded in the public market subject to
compliance with Regulation S.

No prediction can be made as to the effect, if any, that sales of
Common Stock or the availability of such shares for sale will have on the
market prices prevailing from time to time. Nevertheless, the possibility that
substantial amounts of Common Stock may be sold in the public market may
adversely affect prevailing market prices for the Common Stock and the Public
Warrants and could impair the Company's ability to raise capital through the
sale of its equity securities.

17
<PAGE> 20
USE OF PROCEEDS

The Company will not receive any proceeds from the sale of the Shares
of Common Stock by the Selling Securityholders. If the holders exercise the
Warrants or Options for cash to acquire all the Warrant Shares and Options
Shares, the Company will receive aggregate gross proceeds of approximately
$2,150,000 at the respective current exercise prices which will be used as
unallocated working capital. Certain of the Warrants have cashless exercise
features which, if utilized, will result in no proceeds to the Company upon
exercise of such Warrants. The Company has agreed to pay certain expenses in
connection with this Offering, currently estimated to be approximately $30,000.

18
<PAGE> 21

PRICE RANGE OF COMMON STOCK

The Company's Common Stock is traded on the Nasdaq SmallCap Market
under the symbol "TCHP." The table below sets forth the range of high and low
closing prices for the Common Stock as reported by Nasdaq in each completed
quarter during the Company's two most recently completed fiscal years, each
completed quarter during the current fiscal year and a portion of the current
quarter.

COMMON STOCK
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
1995
Fourth Quarter (from October 16) . . . . . . . . . . . . . $6 7/8 $4 3/8

1996
First Quarter . . . . . . . . . . . . . . . . . . . . . . 7 3/8 5
Second Quarter . . . . . . . . . . . . . . . . . . . . . . 6 1/4 4 9/16
Third Quarter . . . . . . . . . . . . . . . . . . . . . . 4 5/8 1 5/8
Fourth Quarter (through October 11) . . . . . . . . . . . 2 3/8 1 7/8
</TABLE>

On October 22, 1996 the closing price of the Common Stock as reported by
Nasdaq was $1.75 per share. At October 11, 1996, the Company had
approximately 121 shareholders of record and estimates that it had
approximately 978 beneficial owners.

SELLING SECURITYHOLDERS

The following table sets forth information as of October 11, 1996 (the
"Reference Date") with respect to the beneficial ownership of shares of Common
Stock by each of the Selling Securityholders. At the Reference Date there were
4,216,606 shares of Common Stock outstanding.

19
<PAGE> 22

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING(1) SHARES TO BE OFFERING(1)
------------------- SOLD -------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT(2) IN OFFERING NUMBER PERCENT(2)
------------------------ ---------- ------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
J. Morton Davis . . . . . . . . . . . . . . . 34,385(10) * 34,385 - *
D.H. Blair Investment Banking Corp. . . . . . 17,192(11) * 17,192 - *
Edwin J. Cross, Jr. . . . . . . . . . . . . . 16,088 * 16,088 - *
Colon H. Smith . . . . . . . . . . . . . . . 16,088 * 16,088 - *
Lawrence Krulik . . . . . . . . . . . . . . . 16,088 * 16,088 - *
Montparnasse 56 S.A. . . . . . . . . . . . . 16,088 * 16,088 - *
Alan J. Rubin . . . . . . . . . . . . . . . . 16,088 * 16,088 - *
Russell Penn Truitt . . . . . . . . . . . . . 16,088 * 16,088 - *
Lawrence H. Hyde . . . . . . . . . . . . . . 16,088 * 16,088 - *
Terry Sports, Inc. . . . . . . . . . . . . . 16,088 * 16,088 - *
Sidney W. Davidson, Jr . . . . . . . . . . . 16,088 * 16,088 - *
Tim Kenison . . . . . . . . . . . . . . . . . 16,088 * 16,088 - *
Douglas Horn and Ralph Horn . . . . . . . . . 16,088(12) * 16,088 - *
Andre V. Duggin . . . . . . . . . . . . . . . 16,088 * 16,088 - *
Joel D. Fedder . . . . . . . . . . . . . . . 16,088 * 16,088 - *
Edgar G. Rios . . . . . . . . . . . . . . . . 16,088 * 16,088 - *
Anthony Welters . . . . . . . . . . . . . . . 16,088 * 16,088 - *
Stanley Hoffman Profit Share Plan . . . . . . 16,087 * 16,087 - *
Daniel Mulhaney . . . . . . . . . . . . . . . 16,087 * 16,087 - *
Joan Brout . . . . . . . . . . . . . . . . . 16,087(3) * 16,087 - *
Turania Establishment . . . . . . . . . . . . 16,087(3) * 16,087 - *
Jeff Berns . . . . . . . . . . . . . . . . . 15,773(8) * 15,773 - *
Martin A. Bell . . . . . . . . . . . . . . . 14,840(13) * 14,840 - *
MWW/Strategic Communications, Inc. . . . . . 13,200(14) * 13,200 - *
Gulf Stream Asset Management Corp. Ret. Trust 13,044 * 8,044 5,000 *
Marque of Distinction, Inc. Ret. Trust . . . 13,044 * 8,044 5,000 *
Alan S. Abrams . . . . . . . . . . . . . . . 8,044 * 8,044 - *
Bruce W. Bennett . . . . . . . . . . . . . . 8,044 * 8,044 - *
Diana Knowles Cashen . . . . . . . . . . . . 8,044 * 8,044 - *
Gordon B. Hall, Jr. . . . . . . . . . . . . . 8,044 * 8,044 - *
Diana James . . . . . . . . . . . . . . . . . 8,044 * 8,044 - *
Melvin Paradise . . . . . . . . . . . . . . . 8,044 * 8,044 - *
John F. Walsh . . . . . . . . . . . . . . . . 8,044 * 8,044 - *
Lamar O. Wells . . . . . . . . . . . . . . . 8,044 * 8,044 - *
William A. Zarrella . . . . . . . . . . . . . 8,044 * 8,044 - *
Alan G. Chynoweth . . . . . . . . . . . . . . 8,044 * 8,044 - *
Dr. Richard H. Kaldor . . . . . . . . . . . . 8,044 * 8,044 - *
Anne M. Charron . . . . . . . . . . . . . . . 8,044 * 8,044 - *
Stuart Gruber . . . . . . . . . . . . . . . 8,044 * 8,044 - *
Perry M. Berke . . . . . . . . . . . . . . . 8,044 * 8,044 - *
Burton I. Weinstein . . . . . . . . . . . . . 8,044 * 8,044 - *
Edward J. Farrell . . . . . . . . . . . . . . 8,044 * 8,044 - *
Michael Silver and Lori Silver . . . . . . . 8,044(12) * 8,044 - *
Fred Winston . . . . . . . . . . . . . . . . 8,044 * 8,044 - *
Gerald M. Farley and Lisa L. Farley . . . . . 8,044(12) * 8,044 - *
Daniel J. Loconti . . . . . . . . . . . . . . 8,044 * 8,044 - *
Thomas A. Masci, Jr . . . . . . . . . . . . . 18,044 * 8,044 10,000
</TABLE>

20
<PAGE> 23

- ---------------
* Represents less than 1%.

(1) Unless otherwise noted, the Company believes that all persons named in
the table have sole voting and investment power with respect to all
shares of Common Stock beneficially owned by them. A person is deemed
to be the beneficial holder of securities that can be acquired by such
person currently or within 60 days Reference Date upon the exercise of
warrants or options. Each beneficial owner's percentage ownership is
determined by assuming that options or warrants that are held by such
person (but not those held by any other person) and which are
exercisable currently or within 60 days following the Reference Date
have been exercised.

(2) The percentages owned are based on a total of 4,216,606 shares of
Common Stock outstanding on the Reference Date and assumes no exercise
of Warrants or Options. Shares owned prior to the Offering are the
number of shares owned upon commencement of the Offering. Shares owned
after the Offering include shares acquired subsequent to commencement
of the Offering.

21
<PAGE> 24

(3) Consists of shares underlying Warrants that are exercisable currently
or within 60 days following the Reference Date.

(4) Consists of shares underlying Warrants that are exercisable currently
or within 60 days following the Reference Date. Third World
Investments, Ltd., acted as a placement agent in connection with the
sale of the Preferred Shares. See "Certain Relationships and
Related Transactions."

(5) Includes 20,108 shares underlying Warrants that are exercisable
currently within 60 days from the Reference Date.

(6) Includes 16,087 shares held by the Stanley D. Hoffman Profit Sharing
Plan of which Mr. Hoffman is a Trustee.

(7) Includes (i) 44,981 shares underlying Warrants that are exercisable
currently or within 60 days following the Reference Date which were
transferred to Mr. Phillies from D. H. Blair Investment Banking Corp.
("D. H. Blair") and (ii) 30,000 shares of Common Stock held in escrow.
Howard W. Phillips is a director of the Company. See "Certain
Relationships and Transactions."

(8) Consists of shares underlying Warrants that are exercisable currently
or within 60 days following the Reference Date which were transferred
to the person listed by D. H. Blair. See "Certain Relationships and
Transactions."

(9) Consists of shares underlying Options that are exercisable currently or
within 60 days following the Reference Date.

(10) Consists of 17,193 shares underlying Warrants that are exercisable
currently or within 60 days following the Reference Date which were
transferred to Mr. Davis from D. H. Blair and 17,192 shares underlying
Warrants beneficially owned by D. H. Blair, as shown in the Selling
Securityholder Table above, of which Company Mr. Davis is Chairman of
the Board and sole shareholder. Not included are 14,840 shares
underlying currently exercisable Warrants beneficially owned by
Martin A. Bell, an employee of D. H. Blair and 44,981 shares
underlying currently exercisable Warrants beneficially owned by
Howard W. Phillips, a former employee of D. H. Blair and a director
of the Company. J. Morton Davis and D. H. Blair disclaim beneficial
ownership of any shares owned by Martin A. Bell or Howard W. Phillips.
See "Certain Relationships and Transactions."

(11) D. H. Blair has acted as placement agent with respect
to certain private placements of the Company's securities. See
"Certain Relationships and Transactions."

(12) Shares held jointly by the persons listed.

(13) Consists of shares underlying Warrants that are exercisable currently
or within 60 days following the Reference Date which were transferred
to Mr. Bell from D. H. Blair. Mr. Bell is Vice Chairman of D. H.
Blair. Mr. Bell disclaims beneficial ownership of any shares held by
D. H. Blair or J. Morton Davis. See "Certain Relationships and
Transactions."

(14) Includes 6,000 shares underlying stock options that are exercisable
currently or within 60 days following the Reference Date and held of
record by Michael Kempner.

CERTAIN RELATIONSHIPS AND TRANSACTIONS

Set forth below is certain information regarding certain relationships
and transactions between the Selling Securityholders and the Company.

On October 11, 1996, the Company granted to Bruce Chatterley, Howard
Phillips, Richard Wolf and Frank Vigilante, each a nonemployee Director of the
Company, options to purchase an aggregate of 105,000 shares of Common Stock at
$2.1875 per share (the "New Directors Options"). The New Directors Options
were exercised by the optionees effective October 11, 1996, by delivery to the
Company of the optionees 10-year non-recourse promissory notes secured by the
shares issued.

On May 4, 1995, the Company granted to C.A. Burns, Hans Junker, Calvin
DeCoursey and Randall Pinato, each an executive officer of the Company, options
to purchase an aggregate of 557,300 shares of Common Stock at $5.10 per share
(the "Founders Options"). The Founders Options were exercised by the optionees
effective as of October 16, 1995, by delivery to the Company of the optionee's
10-year non-recourse promissory note secured by the shares issued. Options to
purchase an aggregate of 30,000 shares on such terms were granted to and
exercised by Howard W. Phillips, a non-employee director of the Company, and
Richard E. Salwen, a former non-employee director of the Company, on July 17,
1995 (the "Directors Options"). The Directors Options were exercised by the
optionees as of October 16, 1995, by delivery to the Company of the optionee's
10-year non-recourse promissory note secured by the shares issued.

22
<PAGE> 25

The Company paid to D.H. Blair in connection with the Private
Placement and a 1994 note financing an aggregate of $330,000 and issued to D.H.
Blair and its designees warrants to purchase up to an aggregate of 304,038
shares of Common Stock. Howard Phillips, a director of the Company, was
Director of Corporate Finance of D.H. Blair until August 1995.

Initial development work on the Telechips Access began in 1991 and was
the result of a research and development agreement between the Company and
National Semiconductor Corporation ("NSC"). From May 1991 through July 1992,
C.A. Burns, the Company's founder and principal stockholder, performed all
contract obligations, paid all costs and received an aggregate of $697,000 as a
consultant to the Company. From August 1992 through February 1994, the Company
performed all obligations and paid all costs and received $1,956,000 in
contract revenue from NSC and debt financing of $750,000. The contract with
NSC terminated in February 1994. Pursuant to an agreement dated March 1994, as
restated August 31, 1994 and amended September 20, 1994, the Company obtained
from NSC a worldwide, perpetual, fully-paid, royalty-free and non-exclusive
license to NSC's portion of the intellectual property incorporated in the
Telechips Access hardware. In exchange for the license and NSC's agreement to
cancel $500,000 of such debt, the Company issued to NSC warrants (the "NSC
Warrants") to purchase up to 20,108 shares of Common Stock and agreed to issue
to NSC 229,306 shares of the Company's Common Stock. Of the $750,000
indebtedness, $500,000 was canceled upon the issuance of the NSC Shares and
$250,000 was paid from the proceeds of the IPO. NSC has agreed not to
manufacture or sell products incorporating such technology through March 31,
1997.

D.H. Blair acted as placement agent for both the 1994 Note financing
and the Private Placement. In connection with the sale of 4,188 Preferred
Shares, the Company issued to Third World Investments, Ltd., as Placement Agent,
Common Stock Purchase Warrants to purchase 400,000 shares of Common Stock at an
exercise price of $2.25 per share, as adjusted.

With respect to each transaction between the Company and an affiliate
of the Company or a Selling Securityholder, the Company believes that such
transactions were on terms at least as favorable to the Company as they would
have been had they been consummated with

23
<PAGE> 26

unrelated third parties. The Board of Directors has adopted a policy that, in
the future, prior to entering into any transaction with a related party, a
similar determination must be made with respect to such transaction by a
majority of the Company's disinterested directors or shareholders.

PLAN OF DISTRIBUTION

The Shares may be offered and sold from time to time as market
conditions permit in the over-the-counter market, or otherwise, at prices and
terms then prevailing or at prices related to the then-current market price, or
in negotiated transactions. The Shares may be sold by one or more of the
following methods, without limitation: (a) a block trade in which a broker or
dealer so engaged will attempt to sell the shares as agent but may position and
resell a portion of the block as principal to facilitate the transaction; (b)
purchases by a broker or dealer as principal and resale by such broker or
dealer for its account pursuant to this Prospectus; (c) ordinary brokerage
transactions and transactions in which the broker solicits purchases; and (d)
face-to-face transactions between sellers and purchaser without a broker or
dealer. In effecting sales, brokers or dealers engaged by the Selling
Shareholders may arrange for other brokers or dealers to participate. Such
brokers or dealers may receive commissions or discounts from Selling
Securityholders in amounts to be negotiated. Such brokers, dealers and any
other participating brokers or dealers may be deemed to be "underwriters"
within the meaning of the Securities Act, in connection with such sales. From
time to time, one or more of the Selling Securityholders named herein may
pledge, hypothecate or grant a security interest in some or all of the Selling
Securityholders' Shares owned by them, and the pledgees, secured parties or
persons to whom such securities have been hypothecated shall, upon foreclosure
in the event of default, be deemed to be Selling Securityholders for purposes
hereof. In addition, any securities covered by this Prospectus that qualify
for sale pursuant to Rule 144 under the Securities Act might be sold under Rule
144 rather than pursuant to this Prospectus.

LEGAL MATTERS

The legality of the securities offered by this Prospectus will be
passed upon for the Company by Graham & James LLP, Sacramento, California.
Certain partners of Graham & James LLP own an aggregate of 1,300 shares of
Common Stock and 1,300 Public Warrants.

EXPERTS

The balance sheets of the Company as of December 31, 1995 and December
31, 1994 and the statements of operations, shareholders' equity (deficit) and
cash flows for the years then ended and for the period from inception (January
7, 1991) to December 31, 1995, incorporated by reference in this Prospectus,
have been incorporated herein in reliance on the report, which includes an
explanatory paragraph related to the Company's ability to continue as a going
concern, of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of said firm as experts in auditing and accounting.

24
<PAGE> 27

No dealer, salesperson or any other person has been authorized to give
any information or to make any representations other than those contained in
this Prospectus and, if given or made, such information or representations must
not be relied upon as having been authorized by the Company or any Selling
Securityholder. This Prospectus does not constitute an offer to sell or the
solicitation of any offer to buy any security other than the shares of Common
Stock offered by this Prospectus, nor does it constitute an offer to sell or a
solicitation of any offer to buy the shares of Common Stock by anyone in any
jurisdiction in which such offer or solicitation is not authorized, or in which
the person making such offer or solicitation is not qualified to do so, or to
any person to whom it is unlawful to make such offer or solicitation. Neither
the delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that information contained herein is
correct as of any time subsequent to the date hereof.

1,800,880
Shares

TELECHIPS CORPORATION

Common Stock

______________

PROSPECTUS
______________
<PAGE> 28

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14. Other Expenses of Issuance and Distribution

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the issuance and distribution of the securities being registered
hereunder. All of the amounts shown are estimates (except for the SEC
registration fee).

<TABLE>
<S> <C>
SEC registration fee . . . . . . . . . . . . 1,418
Printing fees and expenses . . . . . . . . . 5,000
Legal fees and expenses . . . . . . . . . . . 15,000
Blue Sky fees and expenses . . . . . . . . . 5,000
Miscellaneous . . . . . . . . . . . . . . . . 3,582
----------------------------------------------------
TOTAL . . . . . . . . . . . . . . . . . . . . 30,000
</TABLE>

None of these expenses will be paid by the Selling Securityholders
pursuant to the terms of the agreements under which the shares of Common Stock
to be sold hereby were issued.

Item 15. Indemnification of Directors and Officers

The Articles of the Company provide that a director or officer
of the Company shall not be personally liable to the Company or its
stockholders for damages for any breach of fiduciary duty as a director of
officer, except for liability for (i) acts or omissions which involve
intentional misconduct, fraud or a knowing violation of law, or (ii) the
payment of distributions in violation of NRS 78.300. In addition, NRS 78.757
and Article VI of the Bylaws of the Company, under certain circumstances,
provide for the indemnification of officers, directors and former officers and
directors, or any person who may have served at the request of the Board of
Directors as a director of another corporation in which the Company owns shares
or of which the Company is a creditor of the Company ("Indemnitees") against
expenses which they may incur in such capacities in connection with the defense
of any action, suit or proceeding in which they or any of them, are made
parties, or a party; except, in relation to matters as to which any Indemnitee
in such action, suit or proceeding is found to be liable for negligence or
misconduct, in the performance of the Indemnitees duty. Such indemnification
under the Bylaws is not deemed exclusive of any other rights to which those
indemnified thereby.

II-1
<PAGE> 29

Item 16. Exhibits

The following exhibits are filed herewith:

<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
4.1 Articles of Incorporation of the Registrant as amended
on October 20, 1994; March 30, 1994, April 7, 1994,
August 21, 1995 and October 17, 1996 (incorporated by
reference to the Registrant's quarterly report filed
on Form 10-QSB for quarterly period ending September
30, 1995, filed with the Commission on December 1, 1995).

4.2 Bylaws of the Registrant, as amended.(1)

4.3 Form of specimen certificate of Common Stock
(incorporated by reference to the Registrant's
Registration Statement on Form SB-2 (Registration No.
33-9664-LA) filed with the Commission on September 6,
1996 (the "Registration Statement")).

4.4 Form of Stock Purchase Warrant issued to certain
Selling Securityholders.(1)

4.5 Form of Redeemable Warrant to Purchase Common Stock
of Telechips Corporation issued to certain Selling
Securityholders.(1)

4.6 Form of Subscription and Stock Purchase Agreement
between the Registrant and certain Selling Securityholders.(1)

4.7 Form of Stock Purchase Warrant to Purchase Series A
Common Stock of Telechips Corporation between the
Registrant and certain Selling Securityholders.(1)

4.8 Form of Warrant for the Purchase of Shares of Series A
10% Convertible Redeemable Preferred Stock between the
Registrant and certain Selling Securityholders.(1)

4.9 Warrant to Purchase Series A Common Stock of Telechips
Corporation issued to National Semiconductor
Corporation, dated August 31, 1996 (incorporated by
reference to the Registration Statement).

4.10 Registration Rights Agreement between the Registrant
and MWW/Strategic Communication, Inc. dated October
15, 1996.(1)

4.11 Warrant for the Purchase of Shares of Common Stock
issued to Third World Investments, Ltd., dated August
27, 1996.(1)

4.12 Option to Purchase Common Stock issued to Coastline
Financial Group, Inc.
</TABLE>

II-2
<PAGE> 30

<TABLE>
<S> <C>
5.1 Opinion of Graham & James LLP, counsel to the
Registrant, regarding the legality of the securities
offered hereby.

10.1 Consulting Agreement between the Registrant and
Coastline Financial Group, Inc., dated October 3,
1996.

23.1 Consent of Graham & James LLP (Contained in Exhibit
5.1.)

23.2 Consent of Coopers & Lybrand L.L.P.

24.1 Powers of Attorney included on Signature Page of the
Registration Statement previously filed with the
Commission, with respect to all signatures except Howard W.
Phillips.
</TABLE>

- ----------------

(1) Previously filed with the Registration Statement on October 17, 1996.

Item 17. Undertakings

The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement to include any
additional or changed material information with respect to the plan of
distribution.

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.

Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the Act") may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer or controlling person of
the Company 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 Company 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 Act and will be governed by the final
adjudication of such issue.

II-3
<PAGE> 31
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Pre-effective Amendment No. 1 to the
Registration Statement on Form S-3 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Reno, State of Nevada on
October 24, 1996.

TELECHIPS CORPORATION

By: /S/ C.A. BURNS
----------------------------------
C.A. Burns,
Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this
Pre-effective Amendment No. 1 to the Registration Statement on Form S-3 has been
signed by the following persons in the capacities and on the dates indicated.

<TABLE>
<S> <C>
Dated: October 24, 1996 /S/ C.A. BURNS
--------------------------------------
C.A. Burns, President and Chief
Executive Officer and Chairman
of the Board of Directors
(Principal Executive Officer)

Dated: October 24, 1996 /S/ RANDALL PINATO*
--------------------------------------
Randall Pinato, Director and
Vice President -- Marketing and Sales

Dated: October 24, 1996 /S/ BRUCE CHATTERLEY*
--------------------------------------
Bruce Chatterley, Director

Dated: October 24, 1996 /S/ HOWARD W. PHILLIPS
--------------------------------------
Howard W. Phillips, Director

Dated: October 24, 1996 /S/ FRANK S. VIGILANTE*
--------------------------------------
Frank S. Vigilante, Director

Dated: October 24, 1996 /s/ RICHARD M. WOLF*
--------------------------------------
Richard M. Wolf, Director

Dated: October 24, 1996 /S/ NELSON B. CALDWELL
--------------------------------------
Nelson B. Caldwell, Vice President --
Finance and Secretary (Principal
Financial Officer; Principal Accounting Officer)
</TABLE>

/s/ NELSON B. CALDWELL
- -----------------------------------------
Nelson B. Caldwell, as Attorney-in-fact

<PAGE> 32

INDEX TO EXHIBITS

Exhibit Description of Exhibit
Number

The following exhibits are filed herewith:

<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
4.1 Articles of Incorporation of the Registrant as amended
on October 20, 1994; March 30, 1994, April 7, 1994,
August 21, 1995 and October 17, 1996 (incorporated by
reference to Exhibit 3.(1) of the Registrant's quarterly
report filed on Form 10-QSB for quarterly period
ending September 30, 1995, filed with the Commission
on December 1, 1995).

4.2 Bylaws of the Registrant, as amended.(1)

4.3 Form of specimen certificate of Common Stock
(incorporated by reference to the Registrant's
Registration Statement on Form SB-2 (Registration No.
33-9664-LA) Filed with the Commission on September 6,
1996 (the "Registration Statement").

4.4 Form of Stock Purchase Warrant issued to certain
Selling Securityholders.(1)

4.5 Form of Redeemable Warrant to Purchase Common Stock of
Telechips Corporation issued to certain Selling
Securityholders.(1)

4.6 Form of Subscription and Stock Purchase Agreement
between the Registrant and certain Selling
Securityholders.(1)

4.7 Form of Stock Purchase Warrant to Purchase Series A
Common Stock of Telechips Corporation issued to
certain Selling Securityholders.(1)

4.8 Form of Warrant for the Purchase of Shares of Series A
10% Convertible Redeemable Preferred Stock issued to
certain Selling Securityholders.(1)

4.9 Warrant to Purchase Series A Common Stock of Telechips
Corporation issued to National Semiconductor
Corporation, dated August 31, 1996 (incorporated by
reference to the Registration Statement).

4.10 Registration Rights Agreement between the Registrant
and MWW/Strategic Communication, Inc., dated October
15, 1996.(1)

4.11 Warrant for the Purchase of Shares of Common Stock
issued to Third World Investments, Ltd., dated August
27, 1996.(1)

4.12 Option to Purchase Common Stock issued to Coastline
Financial Group, Inc.

5.1 Opinion of Graham & James LLP, counsel to the
Registrant, regarding the legality of the securities
offered hereby.

10.1 Consulting Agreement between the Registrant and
Coastline Financial Group, Inc., dated October 3,
1996.

23.1 Consent of Graham & James LLP (Contained in Exhibit
5.1.)
</TABLE>

<PAGE> 33

<TABLE>
<S> <C>
23.2 Consent of Coopers & Lybrand L.L.P.

24.1 Powers of Attorney included on Signature Page of the
Registration Statement previously filed with the
Commission, with respect to all signatures except Howard W.
Phillips.
</TABLE>
- -----------
(1) Previously filed with the Registration Statement on October 17, 1996.

<PAGE> 1
EXHIBIT 4.12

THIS OPTION HAS BEEN ISSUED PURSUANT TO EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND THE
QUALIFICATION REQUIREMENTS OF APPLICABLE STATE SECURITIES LAWS (THE "LAWS").
IT IS UNLAWFUL TO EXERCISE, SELL, PLEDGE OR OTHERWISE DISPOSE OF THIS OPTION,
OR ANY INTEREST THEREIN, OR RECEIVE ANY CONSIDERATION THEREFOR, IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND QUALIFICATION UNDER
THE LAWS, UNLESS EXEMPTIONS FROM SUCH REGISTRATION AND QUALIFICATION
REQUIREMENTS ARE AVAILABLE.

THIS OPTION MAY BE EXERCISED ONLY IN ACCORDANCE WITH THE TERMS OF THIS STOCK
OPTION AGREEMENT.

TELECHIPS CORPORATION

COMMON STOCK OPTION AGREEMENT

Telechips Corporation, a Nevada corporation (the "Company"), as
of October 11, 1996, grants to Coastline Financial Group, Inc., a Florida
corporation (the "Optionee"), an option (the "Option") to purchase up to Fifty
Thousand (50,000) shares ("Shares") of Common Stock of the Company (the "Common
Stock") at an exercise price (the "Exercise Price") equal to $2.25 per share, in
all respects subject to the terms, definitions and provisions of this Common
Stock Option Agreement (the "Agreement").

1. Nature of the Option. The Option is intended to be a
nonstatutory option and not an incentive stock option within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").

2. Payment of Exercise Price.

(a) Method of Payment. Payment of the Exercise
Price for shares purchased upon exercise of the Option shall be made by
delivery to the Company of cash or a check to the order of the Company in an
amount equal to the purchase price of such shares.

3. Exercise of Option. The Option shall vest and become
exercisable during its term, subject to the provisions of Section 5 below, as
follows:

-1-

<PAGE> 2
(a) Vesting and Right to Exercise. The Option
shall vest and become exercisable in its entirety on January 1, 1996. The
Option may be exercised in whole or in part but may not be exercised as to
fractional shares.

(b) Method of Exercise. In order to exercise any
portion of the Option on the Exercise Date, the Optionee shall execute and
deliver to the Chief Financial Officer of the Company the Notice of Exercise of
Stock Option in the form attached hereto as Exhibit A. The Notice of Exercise
and Purchase Agreement must be accompanied by payment in full of the aggregate
purchase price for the Shares to be purchased in the type of consideration set
forth in Section 2. The Notice of Exercise may be delivered to the Company at
any time. The certificate(s) for the Shares as to which the Option has been
exercised shall be registered in the name of Optionee or its designee.

(c) Restrictions on Exercise. The Option may not
be exercised if the issuance of the Shares upon such exercise or the method of
payment of consideration for such Shares would constitute a violation of any
applicable Federal or state securities law or any other law or regulation. As
a condition to the exercise of the Option, the Company may require the Optionee
to make any representation or warranty to the Company at the time of exercise
of the Option as in the opinion of legal counsel for the Company may be
required by any applicable law or regulation, including the execution and
delivery of an appropriate representation statement. The stock certificate(s)
for the Shares issued upon exercise of the Option may bear appropriate legends
restricting transfer.

(d) Delivery of Certificates. The Company shall
deliver the certificate(s) for the Shares issued upon exercise of the Option to
the Optionee Instructions), as soon as is practicable; provided, however, that
if any law or regulation requires the Company to take any action with respect
to such shares before the issuance thereof, including, without limitation,
actions taken pursuant to Section 6 below, then the date of delivery of such
Shares shall be extended for a period necessary to take such action.

4. Exchange, Transfer, Assignment or Loss of Option.
This Option is exchangeable, without expense, at the option of the Optionee,
upon presentation and surrender hereof to the Company or at the office of its
stock transfer agent, if any, for other options of different denominations
entitling the Optionee, or any subsequent holder ("Holder") of this Option, to
purchase in the aggregate the same number of shares of Common Stock purchasable
hereunder. Upon surrender of this Option to the Company at its principal
office or at the office of its stock transfer agent, if any, with an Assignment
Form in the form attached as Exhibit B hereto duly executed and funds
sufficient to pay any transfer tax, the Company shall, without charge, execute
and deliver a new Option in the name of the assignee named in such Assignment
Form and this Option shall promptly be canceled. This Option may be divided or
combined with other Options which carry the same rights upon presentation
hereof at the principal office of the Company or at the office of its stock
transfer agent, if any, together with a written notice specifying the names and
denominations in which new Options are to be issued and signed by the Holder
hereof. The term "Option" as used herein includes any Option into which this
Option

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<PAGE> 3
may be divided or exchanged. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Option, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Option, if mutilated, the Company will execute and deliver a new Option of like
tenor and date. Any such new Option executed and delivered shall constitute an
additional contractual obligation on the part of the Company, whether or not
this Option so lost, stolen, destroyed, or mutilated shall be at any time
enforceable by anyone.

5. Term of the Option. Except as otherwise provided in
this Agreement, to the extent not previously exercised, the right to exercise
the Option shall terminate at 5:30 p.m. New York City time on March 31, 1999.

6. Adjustments Upon Changes in Capitalization; Other
Adjustments. Subject to any required action by the shareholders of the
Company, the number of Shares and the Exercise Price shall be proportionately
adjusted for any increase or decrease in the number of issued shares of common
stock resulting from a stock split, reverse stock split, combination,
reclassification, the payment of a stock dividend on the common stock or any
other increase or decrease in the number of shares of Common Stock of the
Company effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Company's Board of Directors (the "Board"),
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issue by the Company of shares of stock
of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect
to, the number of Shares subject to, or the Exercise Price of, this Option.

The Board may, if it so determines in the exercise of
its sole discretion, also make provision for adjusting the number of Shares, as
well as the Exercise Price, in the event that the Company effects one or more
reorganizations, recapitalizations, rights offerings, or other increases or
reductions of shares of its outstanding common stock, and in the event of the
Company being consolidated with or merged into any other corporation.

The Board may, if it so determines in the exercise of
its sole discretion, also make provision for changing, modifying, amending or
adjusting any of the terms of this Option solely in order for the Company to
perfect a significant financing.

7. Rights of Shareholder. Optionee shall have no rights
as a shareholder with respect to the Shares until the date of the issuance or
the transfer to the Optionee of the certificate(s) for such Shares and only
after the Exercise Price for such Shares has been paid in full.

8. Amendment. Except as set forth in Section 6, this
Agreement may not be amended without the written consent of the Optionee.

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<PAGE> 4
9. Income Tax Withholding. The Optionee authorizes the
Company to withhold, in accordance with applicable law from any compensation
payable to him or her, any taxes required to be withheld by Federal, state or
local laws as a result of the exercise of this Option. Furthermore, in the
event of any determination that the Company has failed to withhold a sum
sufficient to pay all withholding taxes due in connection with the exercise of
this Option, the Optionee agrees to pay the Company the amount of such
deficiency in cash within five (5) days after receiving a written demand from
the Company.

10. Investment Representations; Legends.

(a) Representations. The Optionee represents,
warrants and covenants that:

(i) Any shares purchased upon exercise
of this Option shall be acquired for the Optionee's account for investment
only, and not with a view to, or for sale in connection with, any distribution
of the shares in violation of the Securities Act of 1933 (the "Securities
Act"), or any rule or regulation under the Securities Act.

(ii) The Optionee has had such
opportunity as it has deemed adequate to obtain from representatives of the
Company such information as is necessary to permit the Optionee to evaluate the
merits and risks of its investment in the Company.

(iii) The Optionee is able to bear the
economic risk of holding such shares acquired pursuant to the exercise of this
Option for an indefinite period.

(iv) The Optionee understands that the
Shares acquired pursuant to the exercise of this Option are not registered
under the Securities Act and are "restricted securities" within the meaning of
Rule 144 under the Securities Act and may not be transferred, sold or otherwise
disposed of in the absence of an effective registration statement with respect
to the Shares filed and made effective under the Securities Act of 1933, or an
opinion of counsel satisfactory to the Company to the effect that registration
under such Act is not required.

By making payment upon exercise of this Option, the Optionee shall be deemed to
have reaffirmed, as of the date of such payment, the representations made in
this Section 10.

(b) Legends of Stock Certificate. All stock
certificates representing shares of Common Stock issued to the Optionee upon
exercise of this Option shall have affixed thereto legend(s) substantially in
the following forms, in addition to any other legends required by applicable
state law:

THE SHARES OF STOCK REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 AND MAY NOT BE
TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF
IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION

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<PAGE> 5
STATEMENT WITH RESPECT TO THE SHARES
EVIDENCED BY THIS CERTIFICATE, FILED AND
MADE EFFECTIVE UNDER THE SECURITIES ACT OF
1933, OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY TO THE EFFECT
THAT REGISTRATION UNDER SUCH ACT IS NOT
REQUIRED.

11. Registration Rights under the Securities Act of 1933.

(a) The Option and the Shares have not been
registered for purposes of public distribution under the Securities Act of
1933, as amended (the "Act").

(b) As used herein the term "Registrable Security"
means the Shares and any shares of Common Stock issued upon any stock split,
dividend or stock dividend in respect of the Shares; provided, however, that
with respect to any particular Registrable Security, such security shall cease
to be a Registrable Security when, as of the date of determination, (i) it has
been effectively registered under the Act and disposed of pursuant thereto,
(ii) registration under the Act is no longer required for subsequent public
distribution of such security, or (iii) it has ceased to be outstanding. The
term "Registrable Securities" means any and/or all of the securities falling
within the foregoing definition of a "Registrable Security." In the event of
any merger, reorganization, consolidation, recapitalization or other change in
corporate structure affecting the Common Stock, such adjustment shall be made
in the definition of "Registrable Security" as is appropriate in order to
prevent any dilution or enlargement of the rights granted pursuant to this
Section 11.

(c) If, at any time during the term of this Option
the Company proposes to prepare and file any new registration statement or
post-effective amendments thereto covering equity or debt securities of the
Company, or any such securities of the Company held by its shareholders (in any
such case, other than in connection with a merger, acquisition or pursuant to
Form S-8 or successor form) (for purposes of this Section 11 collectively, a
"Company Registration Statement"), it will give written notice (the "Notice")
of its intention to do so by registered mail, at least thirty (30) business
days prior to the filing of each such Company Registration Statement, to all
holders of the Registrable Securities. Upon the written request of such a
holder (a "Requesting Holder"), made within twenty (20) business days after
receipt of the Notice, that the Company include any of the Requesting Holder's
Registrable Securities in the proposed Company Registration Statement, the
Company shall, as to each such Requesting Holder, use its best efforts to
effect the registration under the Securities Act of the Registrable Securities
which it has been so requested to register ("Piggyback Registration"), at the
Company's sole cost and expense and at no cost or expense to the Requesting
Holders (except as to underwriting discounts and commissions and costs of
individual Requesting Holders' counsel and professional advisors). In the event
such Company Registration Statement is filed with respect to an underwritten
offering, inclusion of any Registrable Securities shall be subject to full
cutback or exclusion by the underwriter in light of market conditions, in such
underwriter's sole discretion. Notwithstanding the provisions of this Section
11, the Company shall have the right at any time after it shall have given
written notice pursuant to this Section 11 (irrespective of whether any written
request for inclusion of such securities shall have already

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<PAGE> 6
been made) to elect not to file any such proposed Company Registration
Statement, or to withdraw the same after the filing but prior to the effective
date thereof. All of the Registrable Securities shall be, without any further
action required on behalf of the Optionee, subject to a market standoff
restriction of a period no shorter than the period imposed on shares held by
members of the Company's management.

12. Covenants of the Company with respect to
Registration. The Company covenants and agrees as follows:

(a) The Company shall pay all costs, fees and
expenses in connection with all Registration Statements filed pursuant to
Section 11 hereof including, without limitation, the Company's legal and
accounting fees, printing expenses, and blue sky fees and expenses, except for
any underwriting discounts or commissions with respect to the Registrable
Securities and except for fees of counsel and other professional advisors of a
holder or group of holders.

(b) The Company will take all necessary action which
may be required in qualifying or registering the Registrable Securities
included in a Registration Statement for offering and sale under the securities
or blue sky laws of such states as are requested by the holders of such
securities, provided that the Company shall not be obligated to so qualify or
register the Registrable Securities in any state that would require the Company
to execute or file any general consent to service of process or to qualify as a
foreign corporation to do business under the laws of any such jurisdiction.

(c) The Company shall indemnify any holder of the
Registrable Securities to be sold pursuant to any Registration Statement and
any underwriter or person deemed to be an underwriter under the Act and each
person, if any, who controls such holder or underwriter or person deemed to be
an underwriter within the meaning of Section 15 of the Act or Section 20(a) of
the Securities Exchange Act of 1934, as amended ("Exchange Act"), against all
loss, claim, damage, expense or liability (including all expenses reasonably
incurred in investigating, preparing or defending against any claim whatsoever)
to which any of them may become subject under the Act, the Exchange Act or
otherwise, arising from any untrue statement of a material fact contained in a
Registration Statement, any other registration statement filed by the Company
under the Act, any post-effective amendment to such registration statements, or
any prospectus included therein required to be filed or furnished by reason of
this Section 11 or caused by any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any such untrue statement or alleged
untrue statement or omission or alleged omission based upon information
furnished or required to be furnished in writing to the Company by the holder
of the Registrable Securities or underwriter expressly for use therein; which
indemnification shall include each person, if any, who controls any such
underwriter within the meaning of the Act and each officer, director, employee
and agent of such underwriter; provided, however, that the Company shall not be
obligated to so indemnify such holder or any such underwriter or other person
referred to above unless such holder or underwriter or other person, as the
case may be, shall at the same time indemnify the Company

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<PAGE> 7
to the extent required herein. Each person who may be entitled to
indemnification pursuant to the preceding sentence shall indemnify the Company,
its directors, each officer signing the registration statement and each person,
if any, who controls the Company within the meaning of the Act, from and
against any and all losses, claims, damages and liabilities caused by any
untrue statement or alleged untrue statement of a material fact contained in a
Registration Statement, any registration statement or any prospectus required
to be filed or furnished by reason of this Section 11 or caused by any omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, insofar as such losses, claims,
damages or liabilities are caused by any untrue statement or alleged untrue
statement or omission based upon information furnished in writing to the
Company by the Holder or underwriter expressly for use therein.

(d) If for any reason the indemnification provided
for in the preceding subparagraph is held by a court of competent jurisdiction
to be unavailable to an indemnified party with respect to any loss, claim,
damage, liability or expense referred to therein, then the indemnifying party,
in lieu of indemnifying such indemnified party thereunder, shall contribute to
the amount paid or payable by the indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect not
only the relative benefits received by the indemnified party and the
indemnifying party, but also the relative fault of the indemnified party and
the indemnifying party, as well as any other relevant equitable considerations.

(e) Nothing contained in this Agreement shall be
construed as requiring any holder to exercise the Option prior to the initial
filing of any registration statement or the effectiveness thereof.

DATE OF GRANT: ________________, 1996

TELECHIPS CORPORATION

By:_________________________
[corporate seal] C. A. Burns, President

By:_________________________
Nelson Caldwell, Secretary

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<PAGE> 8
The Optionee acknowledges receipt of the Common Stock Option
Agreement attached hereto and represents that it is familiar with the terms and
provisions thereof, and hereby accepts the Option subject to all of the terms
and provisions thereof. The Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Board of Directors
of Telechips Corporation upon any questions arising under such Agreement.

Dated:

OPTIONEE:

_____________________________

-8-
<PAGE> 9
EXHIBIT A

NOTICE OF EXERCISE OF STOCK OPTION

Dated _________, 19__

The undersigned hereby irrevocably elects to exercise the
Option to the extent of purchasing ___________ shares of Common Stock and
hereby makes payment of ____________________ in payment of the actual exercise
price thereof.

_______

INSTRUCTIONS FOR REGISTRATION OF STOCK

Name_________________________________________
(Please typewrite or print in block letters)

Address______________________________________

Signature____________________________________

-9-
<PAGE> 10
EXHIBIT B

ASSIGNMENT FORM

FOR VALUE RECEIVED, ____________________________ hereby sells,
assigns and transfers unto

Name_________________________________________ (the "Assignee")
(Please typewrite or print in block letters)

Address______________________________________

the right to purchase Common Stock represented by this Option to the extent of
_______ shares as to which such right is exercisable and does hereby
irrevocably constitute and appoint ________________ Attorney, to transfer the
same on the books of the Company with full power of substitution in the
premises.

Date_____________, 19__

Signature____________________________________

The Assignee hereby accepts and agrees to all the terms and conditions of this
Option.

Date______________, 19__

Signature____________________________________

-10-

<PAGE> 1
EXHIBIT 5.1

October 21, 1996

Telechips Corporation
6880 S. McCarran Boulevard
Reno, NV 89509

Gentlemen:

You have requested our opinion as counsel for Telechips Corporation, a Nevada
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended (the "Act"), and the Rules and Regulations
promulgated thereunder, and the public offering by the Company of 1,800,880
shares of Common Stock, par value $0.01 per share (the "Shares"), of the
Company of which 778,426 shares are underlying Common Stock Purchase Warrants
and of which 50,000 shares are underlying Common Stock Purchase Options
pursuant to a Registration Statement on Form S-3 (the "Registration
Statement").

This opinion is rendered pursuant to Item 601(b)(5)(i) of Regulation S-B
promulgated under the Act.

For purposes of this opinion, we have examined the Registration Statement filed
with the Securities and Exchange Commission on the date hereof, including the
prospectus which is a part thereof (the "Prospectus") and the exhibits thereto.
We have also been furnished with and have examined originals or copies,
certified or otherwise identified to our satisfaction, of all such records of
the Company, agreements and other instruments, certificates of officers and
representatives of the Company, certificates of public officials and other
documents as we have deemed it necessary to require as a basis for the opinions
hereafter expressed. As to questions of fact material to such opinions, we
have, where relevant facts were not independently established, relied upon
certificates by principal officers of the Company. We have made such further
legal and factual examination and investigation as we deem necessary for
purposes of rendering the following opinions.

In our examination we have assumed the genuineness of all signatures, the legal
capacity of natural persons, the correctness of facts set forth in
certificates, the authenticity of all documents submitted to us as originals,
the conformity to original documents of all documents submitted to us as
certificated or photostatic copies,

<PAGE> 2
Telechips Corporation
October 21, 1996
Page 2

and the authenticity of the originals of such copies. We have also assumed
that such documents have each been duly authorized, properly executed and
delivered by each of the parties thereto other than the Company.

We are members of the bar of the State of California. Our opinions below are
limited to the laws of the State of California and the federal law of the
United States. With respect to issues relating to Nevada State law, we have
relied upon an opinion from Nevada Counsel.

Based on the foregoing, it is our opinion that all of the Shares, when sold in
the manner described in the final Prospectus will be legally issued, fully paid
and nonassessable.

We consent to the filing of this opinion as an exhibit to the Registration
Statement and consent to the use of our name under the caption "Legal Matters"
in the Prospectus.

Very truly yours,

/s/ GRAHAM & JAMES LLP
- ------------------------
GRAHAM & JAMES LLP

<PAGE> 1
EXHIBIT 10.1

CONSULTING AGREEMENT

THIS CONTRACT, made as of this 3rd day of October, 1996, by and between
TELECHIPS CORPORATION ("TELECHIPS" or the "Company"), a Nevada corporation, and
COASTLINE FINANCIAL GROUP, INC. ("Coastline"), a Florida corporation, having
offices at 2424 North Federal Highway, Suite 356, Boca Raton, Florida 33431.

WHEREAS, TELECHIPS desires to secure the services of Coastline as a
consultant and Coastline desires to provide such services to TELECHIPS;

NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties hereto agree as follows:

1. Engagement of Consultant. TELECHIPS hereby engages Coastline to
perform, and Coastline hereby agrees that it will render, the financial
consulting, business consulting, investor relations and financial public
relations services described in paragraph 3 below during the Term of this
Contract. If TELECHIPS should merge into or be acquired by any other
corporation, this contract shall be assumed by such successor corporation and
the term "TELECHIPS" when used herein includes any such successor corporation,
and its successors.

2. Term of Contract. The Term of this Contract shall be effective
as of October 1, 1996, and shall continue until September 30, 1997, subject to
the Early Termination conditions of Paragraph 11.

3. Services of Consultant. During the term of this contract,
Coastline will provide the following services pursuant to the directions
received from TELECHIPS's Board of Directors:

(a) Coastline will assist TELECHIPS management in developing
a business plan summary stating strategic business goals and specific strategies
to achieve those goals, including but not limited to the financing of TELECHIPS'
present mix of products and services to emphasize and enhance TELECHIPS'
existing operations, add additional revenue sources, and promote the Company's
image with the investor community.

(b) Coastline will assist TELECHIPS' senior management in
developing a corporate financing plan to satisfy the capital requirements
contemplated by its business plan.

(c) Coastline will act as liaison between TELECHIPS and the
financial community. In particular, Coastline will assist TELECHIPS in
approaching and negotiating with investment bankers and other intermediaries,
fund managers, venture capitalists, institutional lenders and other potential
funding sources. Coastline will advise TELECHIPS management and assist it in
evaluating equity financing proposals, including the valuations upon which such
proposals are based.

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<PAGE> 2
(d) In connection with any financing transaction and if
requested by TELECHIPS, Coastline will assist TELECHIPS management in
coordinating the activities of TELECHIPS personnel and professionals engaged by
TELECHIPS related to the financing, as well as in the selection of
professionals.

(e) Coastline will advise and assist TELECHIPS in
maintaining satisfactory relations with its investors, and promoting the good
name and business of TELECHIPS through preparation, development and distribution
of press releases and press kits, meetings and conferences with investor groups
and members of the financial community, and other and sundry investor and
financial public relations services.

Coastline will consult with TELECHIPS senior management
on business issues related to actions required to meet interim objectives and to
properly position TELECHIPS to successfully pursue its business plan, including
the structure and implementation of an anticipated program of growth through
acquisition and/or the formation of "strategic" alliances with other
participants in the computer services industry.

Coastline will sub-contract with S/S Small Cap Network
for additional institutional coverage on the buy-side of stock placement and
interest.

4. Compensation for Services.

In consideration of the services to be rendered and performed by
Coastline during the term of the Agreement, TELECHIPS will pay Coastline a fee
of $7,500 per month during the term hereof.

Coastline shall also be reimbursed for all travel and
travel-related out-of-pocket expenses incurred in the performance of its duties,
upon presentation of monthly statements, provided that TELECHIPS has requested
or approved such travel.

5. Grant of Stock Options.

(a) Upon execution of this Contract and subject to paragraph
13 below, TELECHIPS will issue to Coastline options to purchase 50,000 shares
of TELECHIPS Common Stock ("Shares") exercisable no sooner than 90 days
following the last closing of the recent $2.9 million Regulation S offering and
no later than 5:30 p.m. New York City time on March 31, 1999 at $2.25 per share.
On each of the 91st day, the 181st day and the 271st day following the execution
of this Agreement, TELECHIPS will issue to Coastline options to purchase an
additional 50,000 Shares at the same price no later than 5:30 p.m. New York City
time on March 31, 1999, respectively, so long as neither party shall have
notified the other that this Agreement shall be terminated on or prior to such
date.

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<PAGE> 3
(b) Subject to the rights of J.P. Carey and Whale
Securities in their respective agreements with TELECHIPS concerning rights of
first refusal to conduct offerings of securities on behalf of TELECHIPS, upon
the closing of any financing transaction by TELECHIPS that shall have been
arranged solely through the efforts of Coastline (a "Financing"), TELECHIPS
will issue to Coastline options to purchase 150,000 Shares exercisable no
sooner than 90 days following the last closing of the recent $2.9 million
Regulation S offering and no later than 5:30 p.m. New York City time on March
31, 1999 at 110% of the price paid by the investors in the Financing.

(c) All Shares acquired by Coastline upon exercise of
options granted under this Agreement will be entitled to piggyback registration
rights subject to cutback at the sole discretion of the underwriters of the
TELECHIPS offering and will be subject to market standoff restrictions of a
period no shorter than the period imposed on shares held by members of the
TELECHIPS management.

(d) The number of shares subject to the Option will be
adjusted to reflect any stock splits, stock dividends, recapitalizations, etc.
affecting TELECHIPS common.

6. Compensation of M & A Services. In the event Coastline is
directly and solely responsible for arranging a merger or acquisition
transaction during the term of this Agreement and one thereafter, at the
closing of such transaction, TELECHIPS will compensate Coastline at the rate
of 5% of the first million dollars of the fair market value of the transaction
(the "Value"), plus 4% of the next million of Value, plus 3% on the next
million of Value, plus 2% on the next million of Value and 1% on every million
dollars of Value thereafter. Value will be the total amount of cash paid
and/or securities issued (as determined by the closing price of such securities
on the day of the closing of such transaction) (the "Consideration") by
TELECHIPS in any transaction in which TELECHIPS is the survivor or the
Consideration received by the TELECHIPS shareholders if TELECHIPS is not the
survivor. If TELECHIPS pays any investment banking or similar fees to any
other person in connection with the transaction, the fee paid to Coastline will
be reduced by that amount.

7. Obligations to TELECHIPS. Coastline agrees to use its best
efforts to perform the services set forth in this Agreement for the benefit of
TELECHIPS and represents that it has no obligations or commitments that
conflict with its full and faithful discharge of its duties under this
Agreement.

8. Confidentiality of Information. Coastline agrees that neither
it nor its employees or agents will, during the term of this Contract, or at
any time thereafter, disclose or divulge or use, directly or indirectly, for
its own benefit, any confidential information, data, trade secrets, etc.,
relation to the business of TELECHIPS learned in connection with its work for
TELECHIPS. The provisions of this paragraph shall survive the termination of
the Contract, and shall continue until such information, data, trade secrets,
etc., becomes public knowledge through no fault of Coastline or any of its
employees or agents.

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<PAGE> 4
9. Reliance on Information Furnished: Indemnification by
TELECHIPS. As a consultant for TELECHIPS, Coastline must at all times rely
upon the information supplied to Coastline by TELECHIPS' authorized officers,
directors, agents and employees as to accuracy and completeness. Therefor,
TELECHIPS agrees to indemnify, hold harmless and defend Coastline, its
directors, officers, employees and agents from and against any and all claims,
actions, proceeds, losses, liabilities, costs and expenses (including, without
limitation, reasonable attorney's fees) incurred by any of them in connection
with or as a result of any material inaccuracy, incompleteness or omission of
information given to Coastline by such authorized personnel of TELECHIPS.

10. Indemnification by Coastline. Coastline agrees to indemnify,
hold harmless and defend TELECHIPS, its directors, officers, employees and
agents from and against any and all claims, actions, proceeds, losses,
liabilities, costs and expenses (including, without limitation, reasonable
attorney's fees) incurred by any of them in connection with or as a result of
any material inaccuracy, incomplete statement (or omission) made by Coastline or
its officers, employees or agents, except if such statement or omission is the
result of any inaccuracy, incompleteness or omission of information provided to
Coastline by authorized personnel of TELECHIPS.

11. Early Termination. This Contract is being entered into by
Coastline and TELECHIPS in the expectation that TELECHIPS and Coastline will
each achieve certain benchmarks of performance and, therefore, this Contract
may be terminated by either party at the end of six (6) months with thirty (30)
days notice to the other party. If no such notice is received by the end of
the fifth month this Contract shall continue through the term.

12. Notices. All notices, requests, payments or other
communication hereunder shall be in writing and shall be deemed to have been
given when delivered personally or three days after being sent by registered or
certified mail, postage prepaid, to the following address or addresses or such
other address or addresses as the parties may designate in writing in
accordance with this paragraph:

If to TELECHIPS: TELECHIPS Corporation
6880 S. McCarran Blvd.
Reno, NV 89509
Attn: C. A. Burns
Chairman

If to Coastline: Coastline Financial Group, Inc.
2424 North Federal Highway, Ste. 456
Boca Raton, FL 33431
Attn: Richard Adrey
President

13. Approval of Board of Directors and Shareholders. This
Agreement will be effective when approved by the Board of Directors of
TELECHIPS and may be revoked by TELECHIPS in the event the shareholders of
TELECHIPS fail to approve an amendment to the Articles of Incorporation of
TELECHIPS Corporation to increase in authorized shares by the shareholders of
TELECHIPS in a number sufficient to permit the issuance of all Shares
contemplated by this Agreement.

- 4 -

<PAGE> 5
14. Miscellaneous. This Contract may not be assigned without the
consent of the parties hereto and shall be interpreted under the laws of the
State of Florida.

IN WITNESS WHEREOF, the parties hereto have executed this Contract on
the day above written.

COASTLINE FINANCIAL GROUP, INC. TELECHIPS CORPORATION

By: By:
---------------------------- ----------------------------------
President Chairman & Chief Executive Officer

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<PAGE> 1

EXHIBIT 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in this pre-effective amendment
No. 1 to Form S-3 (to be filed on or about October 22, 1996) of our report
dated March 19, 1996, which includes an explanatory paragraph related to the
Company's ability to continue as a going concern, on our audits of the
financial statements of Telechips Corporation (Company) as of December 31, 1995
and 1994 and for the years then ended and for the period from inception
(January 7, 1991) to December 31, 1995. We also consent to the reference to our
firm under the caption "Experts."

/s/ Coopers & Lybrand L.L.P.

Sacramento, CA
October 22, 1996