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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 7, 1997
REGISTRATION NO.
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
ESS TECHNOLOGY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C>
CALIFORNIA 94-2928582
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
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48401 FREMONT BLVD.
FREMONT, CALIFORNIA 94538
(510) 492-1088
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
JOHN H. BARNET
VICE PRESIDENT, FINANCE AND CHIEF FINANCIAL OFFICER
ESS TECHNOLOGY, INC.
48401 FREMONT BLVD.
FREMONT, CALIFORNIA 94538
(510) 492-1088
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
Copies to:
TAE HEA NAHM
VENTURE LAW GROUP
A PROFESSIONAL CORPORATION
2800 SAND HILL ROAD
MENLO PARK, CALIFORNIA 94025
(415) 854-4488
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the only securities being registered on this Form are to be offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
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Common Stock, no par
value....................... 145,653 shares $34.0625 $4,961,305 $1,711
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(1) Estimated solely for the purpose of computing the amount of the registration
fee, based on the average of the high and low prices for the Company's
Common Stock as reported on The Nasdaq National Market on February 4, 1997
in accordance with Rule 457 under the Securities Act of 1933.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
PROSPECTUS
SUBJECT TO COMPLETION
145,653 SHARES
ESS TECHNOLOGY, INC.
COMMON STOCK
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This Prospectus covers 145,653 shares of Common Stock, no par value (the
"Common Stock" or the "Shares"), of ESS Technology, Inc., a California
corporation ("ESS" or the "Company"), which may be offered from time to time by
one or all of the selling shareholders named herein (the "Selling
Shareholders"). The Company will receive no part of the proceeds of such sales.
The Shares were issued to the Selling Shareholders in connection with the
acquisition of VideoCore Technology, Inc., a California corporation
("VideoCore"), by the Company on January 3, 1996 (the "Acquisition"). For
additional information concerning the Acquisition, see "Issuance of Common Stock
to Selling Shareholders." The Selling Shareholders intend to sell the shares
offered hereby from time to time in the over-the-counter market at prices
prevailing therein, in regular brokerage transactions, in transactions directly
with market makers or individually negotiated transactions at such prices as may
be agreed upon, or in combination of such methods of sale, during a fourteen-day
period immediately following the effective date of this Prospectus. The Company
will bear all expenses with respect to the offering of the Common Stock,
(estimated to be approximately $20,899 except any underwriting discounts,
selling commissions, stock transfer taxes, and fees and disbursements of counsel
for the Selling Shareholders. To the extent required, the specific shares of
Common Stock to be sold, the names of the Selling Shareholders. See "Selling
Shareholders" and "Plan of Distribution." Each Selling Shareholder has advised
the Company that no sale or distribution other than as disclosed herein will be
effected until after this Prospectus shall have been appropriately amended or
supplemented, if required, to set forth the terms thereof.
The Company's Common Stock is traded on The Nasdaq National Market under
the symbol ESST. The last reported sales price of the Common Stock on The Nasdaq
National Market on February 4, 1997 was $34.2158 per share.
------------------------
SEE "RISK FACTORS," BEGINNING ON PAGE 5,
FOR INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------
The Selling Shareholders and any broker executing selling orders on behalf
of the Selling Shareholders may be deemed to be an "underwriter" (within the
meaning of the Securities Act of 1933, as amended (the "Securities Act").
Commissions received by any such broker may be deemed to be underwriting
commissions under the Securities Act. See "Plan of Distribution" for information
relating to indemnification of the Selling Shareholders.
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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.
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UNDERWRITING
DISCOUNTS AND PROCEEDS TO
PRICE TO PUBLIC COMMISSION SELLING STOCKHOLDERS
<S> <C> <C> <C>
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Per Share......................
Total.......................... See Text Above See Text Above See Text Above
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THE DATE OF THIS PROSPECTUS IS FEBRUARY 7, 1997
<PAGE> 3
No person is authorized in connection with any offering made hereby to give
any information or to make any representation not contained in this Prospectus,
and, if given or made, such information or representation must not be relied
upon as having been authorized by the Company or the Selling Shareholders. This
Prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any security other than the shares of Common Stock offered hereby, nor does
it constitute an offer to sell or a solicitation of an offer to buy any of the
shares offered hereby to any person in any jurisdiction in which it is unlawful
to make such an offer or solicitation. Neither the delivery of this Prospectus
nor any sale made hereunder shall under any circumstances create any implication
that the information contained herein is correct as of any time subsequent to
the date hereof.
ADDITIONAL INFORMATION
This Prospectus constitutes a part of a Registration Statement on Form S-3
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") filed by the Company with the Securities and Exchange
Commission (the "Commission") under the Securities Act. This Prospectus does not
contain all of the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the shares
of Common Stock offered hereby, reference is hereby made to the Registration
Statement. Statements contained herein concerning the provisions of any document
are not necessarily complete, and each such statement is qualified in its
entirety by reference to the copy of such document filed with the Commission.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy and information statements and other information
with the Commission. Such reports, proxy and information statements and other
information may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, NW, Washington, D.C. 20549,
and at the following Regional Offices of the Commission: New York Regional
Office, Seven World Trade Center, New York, New York 10048, and Chicago Regional
Office, Northwest Atrium Center, 500 West Madison Street, Chicago, Illinois
60661. Copies of such material can be obtained from the Public Reference Section
of the Commission, 450 Fifth Street, NW, Washington, D.C. 20549 upon payment of
the prescribed fees. The Company is also required to file electronic versions of
these documents with the Commission through the Commission's Electronic Data
Gathering, Analysis and Retrieval System (EDGAR). The Common Stock of the
Company is quoted on The Nasdaq National Market. Reports, proxy and information
statements and other information concerning the Company may be inspected at The
Nasdaq Stock Market at 1735 K Street, NW, Washington, D.C. 20006. In addition,
the Commission maintains a World Wide Web site (http://www.sec.gov) that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are hereby
incorporated by reference in this Prospectus:
(1) The Company's Annual Report on Form 10-K for the year ended
December 31, 1995;
(2) The Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1996, June 30, 1996 and September 30, 1996;
(3) The Company's Current Reports on Form 8-K dated January 17, 1996
as amended March 16, 1996 (Form 8-K/A); and
(4) The description of the Company's capital stock contained in its
Registration Statement on Form 8-A as filed with the Commission on October
5, 1995 including any amendment thereto or report filed for the purpose of
updating such description.
All reports and other documents subsequently filed by the Company pursuant
to Section 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 herein, to the extent required, and to be a part
hereof from the date of filing of such reports and documents. Any statement
incorporated 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 hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, upon written or oral request of such person, a copy of any or all of
the foregoing documents incorporated herein by reference (other than exhibits to
such documents, unless such exhibits are specifically incorporated by reference
into such documents). Requests for such documents should be submitted in writing
to Stock Administrator, ESS Technology, Inc., 48401 Fremont Blvd., Fremont,
California 94538 or by telephone at (510) 492-1088.
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THE COMPANY
ESS Technology, Inc. ("ESS" or the "Company"), a California corporation,
designs, markets and supports highly integrated mixed signal semiconductor and
software solutions for multimedia applications in the personal computer ("PC")
and consumer marketplaces. The Company offers comprehensive solutions for audio,
video, and fax/modem applications. ESS has established itself as a leading
supplier of mixed signal PC audio solutions that integrate all essential audio
components on a single chip. During 1996, ESS introduced a family of integrated
circuits that incorporate advanced compression technology for digital video
products and began marketing a line of highly integrated V.34bis modem
solutions.
ESS leverages a leadership position in PC audio, video and fax/modem
technology, a diverse customer base, recognized quality, and dependable on-time
delivery to provide high quality, cost effective, and highly integrated
multimedia solutions for the personal computer and consumer markets. The Company
has three major families of products: the AudioDrive family addressing its PC
digital audio device market; the VideoDrive family targeting MPEG1 and MPEG2
decompression-based consumer products, such as Video Compact Disk ("VCD") player
and Digital Video Disk ("DVD") player and set-top box, and the TeleDrive family
focusing on the integrated audio-fax/modem applications, including full duplex
speakerphone, digital simultaneous voice and data ("DVSD") and
videoconferencing.
ESS was incorporated in 1984 under the laws of California. The Company's
principal executive offices are located at 48401 Fremont Blvd., Fremont,
California 94538 and its telephone number is (510) 492-1088. As used in this
Prospectus, the "Company" and "ESS" refer to ESS Technology, Inc., a California
corporation, and its wholly-owned subsidiaries.
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RISK FACTORS
This Prospectus (including the documents incorporated by reference herein)
contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934,
including, without limitation, statements regarding the Company's expectations,
beliefs, intentions or future strategies. All forward looking statements
included in this document are based on information available to the Company on
the date hereof, and the Company assumes no obligation to update any such
forward looking statements. Actual results could differ materially from those
projected in the forward-looking statements as a result of the risk factors set
forth below and in the documents incorporated by reference herein. In evaluating
the Company's business, prospective investors should carefully consider the
following risk factors in addition to the other information set forth herein or
incorporated herein by reference.
Potential Fluctuations in Operating Results. The Company's operating
results are subject to quarterly and other fluctuations due to a variety of
factors, including the gain or loss of significant customers, increased
competitive pressures, changes in pricing policies by the Company, its
competitors or its suppliers, including decreases in unit average selling price
("ASPs") of the Company's products, the timing of new product announcements and
introductions by the Company or its competitors and market acceptance of new or
enhanced versions of the Company's and its customers' products. Other factors
include the availability of foundry capacity, fluctuations in manufacturing
yields, availability and cost of raw materials, changes in the mix of products
sold, the cyclical nature of both the semiconductor industry and the market for
PCs, seasonal customer demand, the timing of significant orders and significant
increases in expenses associated with the expansion of operations. The Company's
operating results could also be adversely affected by economic conditions
generally in various geographic areas where the Company or its customers do
business, or order cancellations or rescheduling. These factors are difficult to
forecast, and these or other factors could materially affect the Company's
quarterly or annual operating results. There can be no assurance as to the level
of sales or earnings that may be attained by the Company in any given period in
the future.
Competition; Pricing Pressures. The markets in which the Company competes
are intensely competitive and are characterized by rapid technological change,
price declines and rapid product obsolescence. The Company currently competes
with add-in card suppliers and semiconductor manufacturers. The Company expects
competition to increase in the future from existing competitors and from other
companies that may enter the Company's existing or future markets with products
that may be less costly or provide higher levels of integration, higher
performance or additional features. The Company is unable to predict the timing
and nature of any such competitive product offerings. The announcement and
commercial shipment of competitive products could adversely affect sales of the
Company's products and may result in increased price competition that would
adversely affect the ASPs and margins of the Company's products. In general,
product prices in the semiconductor industry have decreased over the life of a
particular product. The markets for most of the applications for the Company's
products, particularly the PC market, are characterized by intense price
competition. The willingness of prospective customers to design the Company's
products into their products depends to a significant extent upon the ability of
the Company to sell its products at a price that is cost-effective for such
customers. As the markets for the Company's products mature and competition
increases, the Company anticipates that prices for its products will continue to
decline. If the Company is unable to reduce its costs sufficiently to offset
declines in product prices or is unable to introduce more advanced products with
higher product prices, the Company's business, financial condition and results
of operations would be materially adversely affected.
The Company's existing and potential competitors consist principally of
large domestic and international companies that have substantially greater
financial, manufacturing, technical, marketing, distribution and other
resources, greater intellectual property rights, broader product lines and
longer-standing relationships with customers than the Company. The Company's
competitors also include a number of smaller and emerging companies. The
Company's principal audio competitors include Cirrus Logic, Creative Technology,
OPTi and Yamaha. The Company's principal video competitors include C-Cube,
Hyundai, LSI Logic and SGS Thompson. The Company's principal fax/modem
competitors are Cirrus Logic, Lucent, Rockwell and Texas Instruments. Certain of
the Company's current and potential competitors maintain their own
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semiconductor foundries and may therefore benefit from certain capacity, cost
and technical advantages. The Company believes that its ability to compete
successfully depends on a number of factors, both within and outside of its
control, including the price, quality and performance of the Company's and its
competitors' products, the timing and success of new product introductions by
the Company, its customers and its competitors, the emergence of new multimedia
standards, the development of technical innovations, the ability to obtain
adequate foundry capacity and sources of raw materials, the efficiency of
production, the rate at which the Company's customers design the Company's
products into their products, the number and nature of the Company's competitors
in a given market, the assertion of intellectual property rights and general
market and economic conditions. There can be no assurance that the Company will
be able to compete successfully in the future.
Each successive generation of microprocessors has provided increased
performance, which could in the future result in a microprocessor capable of
performing audio functions. In this regard, Intel Corporation has developed
Native Signal Processing ("NSP") capability and an extended multimedia system
architecture ("MMX") for use in conjunction with its Pentium microprocessor, and
is promoting the processing power of the Pentium for data and signal intensive
functions such as graphics acceleration and other multimedia functions. There
can be no assurance that the increased capabilities of microprocessors will not
adversely affect demand for the Company's products.
Dependence on Single Product Line and PC Industry. In 1995 and 1996, sales
of PC audio semiconductors accounted for approximately 98% and 92%,
respectively, of the Company's net revenues, and the Company expects that sales
of audio semiconductors will continue to account for a majority of its net
revenues for the foreseeable future. Any reduction in demand for the Company's
audio semiconductors, whether because of a reduction in demand for PCs in
general or PC audio, increased competition or otherwise, would have a material
adverse effect on the Company's business, financial condition and results of
operations.
The Company is currently engaged in the development and introduction of new
PC audio products as well as new multimedia products for the PC and consumer
markets that provide capabilities such as video and fax/modem/voice
applications. There can be no assurance that the Company will be able to
identify market trends or new product opportunities, develop and market new
products, achieve design wins or respond effectively to new technological
changes or product announcements by others. A failure in any of these areas
would have a material adverse effect on the Company's business, financial
condition and results of operations.
Most of the Company's products are sold for incorporation into multimedia
desktop and notebook computers. ESS audio semiconductors are incorporated into
motherboards by multimedia PC original equipment manufacturers ("OEMs") or in
add-in sound cards. Therefore, the Company is heavily dependent on the continued
growth of the markets for multimedia desktop and notebook computers and
multimedia applications utilizing high quality audio. There can be no assurance
that these markets will be able to sustain continued growth. A decline in demand
in the PC industry could result in a corresponding decline in demand for the
Company's products, which would have a material adverse effect on the Company's
business, financial condition and results of operations.
Importance of New Products and Technological Change. The markets for the
Company's products are characterized by evolving industry standards, rapid
technological change and product obsolescence. The Company's success is highly
dependent upon the successful development and timely introduction of new
products at competitive price and performance levels. The success of new
products depends on a number of factors, including timely completion of product
development, market acceptance of the Company's and its customers' new products,
securing sufficient foundry capacity for volume manufacturing of wafers,
achievement of acceptable wafer fabrication yields by the Company's independent
foundries and the Company's ability to offer new products at competitive prices.
In order to succeed in having the Company's products incorporated into new
products being designed by desktop and notebook computer manufacturers, the
Company must anticipate market trends and performance and functionality
requirements of such manufacturers and must successfully develop and manufacture
products that meet these requirements. In addition, the Company must meet the
timing and price requirements of such manufacturers and must make such products
available in sufficient quantities. Accordingly, in selling to OEMs, the Company
can often incur significant
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expenditures prior to volume sales of new products, if any. In order to help
accomplish these goals, the Company has in the past and will continue to
consider in the future the acquisition of other companies or the products and
technologies of other companies. Such acquisitions carry additional risks such
as a lack of integration with existing products and corporate culture, the
potential for large write-offs and the diversion of management attention. The
Company is currently engaged in the development of new PC audio products as well
as new multimedia products that provide fax/modem capabilities and graphics and
video applications. There can be no assurance that the Company will be able to
identify market trends or new product opportunities, develop and market new
products, achieve design wins or respond effectively to new technological
changes or product announcements by others. A failure in any of these areas
would have a material adverse effect on the Company's business, financial
condition and results of operations.
Dependence on TSMC and Other Third Parties. The Company relies on
independent foundries to manufacture all of its products. A substantial majority
of the Company's products are currently manufactured by Taiwan Semiconductor
Manufacturing Company, Ltd. ("TSMC"), which has manufactured certain of the
Company's products since 1989. The Company also has foundry arrangements with
Sharp Corporation ("Sharp"), IC Works, Inc. ("ICW"), and United Microelectronics
Corporation ("UMC"), which have been manufacturing certain of the Company's
products since 1986, 1991 and 1995, respectively. TSMC, in particular, provides
the Company with access to advanced process technology necessary for the
manufacture of the Company's products. These foundries fabricate products for
other companies and, with the exception of TSMC, manufacture products of their
own design. In November 1995, the Company entered into long-term agreements with
TSMC and UMC in which the Company has secured access to additional capacity and
to leading edge technology. In addition, the Company is obligated to pay
approximately $16 million over the next six months to TSMC in exchange for
certain wafer capacity commitments and will invest approximately $20 million in
2 installments over the next six months in exchange for an equity ownership in a
joint venture with UMC to build a new foundry and for certain wafer capacity
commitments. If the Company is not able to use, assign, or sell the additional
wafer quantities, a portion of the deposits may be forfeited.
While the Company has entered into long-term agreements with two of its
foundries, the Company's reliance on these and other independent foundries
involves a number of risks, including the absence of adequate capacity, the
unavailability of, or interruption in access to, certain process technologies
and reduced control over delivery schedules, manufacturing yields and costs, and
the international risks more fully described below. The Company expects to rely
upon TSMC and UMC to manufacture a substantial majority of the Company's
products for the foreseeable future. In the event that TSMC and UMC are unable
to continue to manufacture the Company's key products in required volumes, the
Company will have to identify and secure additional foundry capacity. In such an
event, the Company may be unable to identify or secure additional foundry
capacity from another manufacturer, particularly at the levels that the Company
currently expects TSMC and UMC to provide. Even if such capacity is available
from another manufacturer, the qualification process could take six months or
longer. The loss of any of its foundries as a supplier, the inability of the
Company to acquire additional capacity at its current suppliers or qualify other
wafer manufacturers for additional foundry capacity should additional capacity
be necessary, or any other circumstances causing a significant interruption in
the supply of semiconductors to the Company would have a material adverse effect
on the Company's business, financial condition and results of operations.
To address potential foundry capacity constraints in the future, ESS will
continue to consider and may be required to enter into additional arrangements,
including equity investments in or loans to independent wafer manufacturers in
exchange for guaranteed production capacity, joint ventures to own and operate
foundries, or "take or pay" contracts that commit the Company to purchase
specified quantities of wafers over extended periods. Any such arrangements
could require the Company to commit substantial capital and grant licenses to
its technology. The need to commit substantial capital may require the Company
to obtain additional debt or equity financing, which could result in dilution to
the Company's shareholders. There can be no assurance that such additional
financing, if required, will be available when needed or, if available, will be
obtained on terms acceptable to the Company.
All of the Company's semiconductor products are assembled and tested by
third-party vendors, primarily Amkor ANAM in Korea, Advanced Semiconductor
Engineering in Taiwan, Astra Microtronics in Indonesia
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<PAGE> 9
and OSE in Taiwan. The Company has internally designed and developed its own
test software and certain test equipment, which is provided to the Company's
test vendors. Shortages of raw materials or disruptions in the provision of
services by the Company's assembly vendors could lead to supply constraints or
delays in the delivery of the Company's products. Such constraints or delays
might result in the loss of customers, limitations or reductions in the
Company's revenues or other material adverse effects on the Company's business,
financial condition and results of operations. The Company's reliance on
third-party assembly and testing vendors involves a number of other risks,
including reduced control over delivery schedules, quality assurance and costs.
The inability of such third parties to deliver products of acceptable quality
and in a timely manner could have a material adverse effect on the Company's
business, financial condition and results of operations.
Customer Concentration. A limited number of customers have accounted for a
substantial portion of the Company's net revenues. In 1994, 1995 and 1996, sales
to the Company's top five customers, including sales to the Company's
international distributor, accounted for approximately 51%, 48% and 40%
respectively, of the Company's net revenues. In 1994, two customers, Compaq and
Western Publishing, accounted for approximately 20% and 14%, respectively, of
the Company's net revenues. In 1995, Compaq and Universe Electron Corporation,
the Company's Japanese distributor, each accounted for approximately 17% of the
Company's net revenues. The decline in the percentage of sales attributable to
Western Publishing reflects the Company's shift in product mix from toy and
other consumer products to PC audio products. In 1996, Compaq and Universe
Electron Corporation each accounted for approximately 12% and 13%, respectively,
of the Company's net revenues. Sales to the distributor are generally subject to
agreements allowing limited rights of return and price protection with respect
to unsold products. While the Company has not experienced returns and allowances
in excess of the Company's reserves, returns and allowances in excess of
reserves could have a material adverse impact on the Company's business,
financial condition and results of operation. The Company expects that sales to
a limited number of customers will continue to account for a substantial portion
of its net revenues for the foreseeable future. The Company has experienced
changes from year to year in the composition of its major customer base and
believes this pattern may continue. For example, Compaq has only been a
significant customer of the Company since 1994. The Company does not have
long-term purchase agreements with any of its customers. The reduction, delay or
cancellation of orders from one or more major customers for any reason or the
loss of one or more of such major customers could materially and adversely
affect the Company's business, financial condition and results of operations. In
addition, since the Company's products are often sole sourced to its customers,
the Company's operating results could be materially and adversely affected if
one or more of its major customers were to develop other sources of supply.
There can be no assurance that the Company's current customers will continue to
place orders with the Company, that orders by existing customers will not be
canceled or will continue at the levels of previous periods or that the Company
will be able to obtain orders from new customers. The Company currently places
noncancelable orders to purchase its products from independent foundries on an
approximately three month rolling basis, while its customers generally place
purchase orders with the Company less than four weeks prior to delivery that may
be canceled without significant penalty. Consequently, if anticipated sales and
shipments in any quarter are canceled or do not occur as quickly as expected,
expense and inventory levels could be disproportionately high and the Company's
business, financial condition and results of operations could be materially
adversely affected.
Management of Growth. The Company has recently experienced significant
growth in revenues and the addition of multiple product lines that require
additional management systems and processes. The Company has hired several new
executive officers since the beginning of 1996, including its Chief Financial
Officer, President and Chief Operating Officer and Vice President of Marketing.
To manage its future operations and growth effectively, the Company will need to
continue to improve its operational, financial and management information
systems, implement additional systems and controls, and hire, train, motivate,
manage and retain its employees. There can be no assurance that the Company will
be able to manage such growth effectively, and the failure to do so could have a
material adverse effect on the Company's business, financial condition and
results of operations.
8
<PAGE> 10
International Operations. During 1994, 1995 and 1996, international sales,
accounted for approximately 72%, 73% and 92% of the Company's net revenues,
respectively. Substantially all of the Company's international sales were to
customers in Taiwan, Japan, Hong Kong and Singapore. The Company expects that
international sales will continue to represent a significant portion of its net
revenues for the foreseeable future. In addition, substantially all of the
Company's products are manufactured, assembled and tested by independent third
parties in Asia. Due to its reliance on international sales and foreign
third-party manufacturing, assembly and testing operations, the Company is
subject to the risks of conducting business outside of the United States. These
risks include unexpected changes in, or impositions of legislative or regulatory
requirements, delays resulting from difficulty in obtaining export licenses for
certain technology, tariffs, quotas and other trade barriers and restrictions,
longer payment cycles, greater difficulty in accounts receivable collection,
potentially adverse taxes, the burdens of complying with a variety of foreign
laws and other factors beyond the Company's control. The Company is also subject
to general geopolitical risks in connection with its international trade
relationships. Although the Company has not to date experienced any material
adverse effect on its business, financial condition or results of operations as
a result of such regulatory, geopolitical and other factors, there can be no
assurance that such factors will not have a material adverse effect on the
Company's business, financial condition and results of operations in the future
or require the Company to modify its current business practices.
In addition, the laws of certain foreign countries in which the Company's
products are or may be manufactured or sold, including various countries in
Asia, may not protect the Company's products or intellectual property rights to
the same extent as do the laws of the United States and thus make the
possibility of piracy of the Company's technology and products more likely.
Currently, all of the Company's product sales and all of its arrangements with
foundries and assembly and test vendors, other than its foundry arrangement with
Sharp Corporation, provide for pricing and payment in U.S. dollars. To date,
although the effect of currency fluctuations have been insignificant, there can
be no assurance that fluctuations in currency exchange rates will not have a
material adverse effect on the Company's business, financial condition and
results of operations. In addition, to date the Company has not engaged in any
currency hedging activities, although the Company may do so in the future.
Further, there can be no assurance that one or more of the foregoing factors
will not have a material adverse effect on the Company's business, financial
condition and results of operations or require the Company to modify its current
business practices.
Semiconductor Industry. The semiconductor industry has historically been
characterized by rapid technological change, cyclical market patterns,
significant price erosion, periods of over-capacity and production shortages,
variations in manufacturing costs and yields and significant expenditures for
capital equipment and product development. In addition, the industry has
experienced significant economic downturns at various times, characterized by
diminished product demand and accelerated erosion of product prices. The Company
may experience substantial period-to-period fluctuations in operating results
due to general semiconductor industry conditions.
Patents and Proprietary Rights. The Company relies on a combination of
patents, trademarks, copyrights, trade secret laws and confidentiality
procedures to protect its intellectual property rights. As of December 31, 1996,
the Company had 10 patents granted in the United States, which expire over time,
commencing in 1997 and ending in 2011, and 9 corresponding foreign patents. In
addition, the Company intends to seek further United States and international
patents on its technology. There can be no assurance that patents will be issued
from any of the Company's pending applications or applications in preparation or
that any claims allowed from pending applications or applications in preparation
will be of sufficient scope or strength, or be issued in all countries where the
Company's products can be sold, to provide meaningful protection or any
commercial advantage to the Company. Also, competitors of the Company may be
able to design around the Company's patents. The laws of certain foreign
countries in which the Company's products are or may be manufactured or sold,
including various countries in Asia, may not protect the Company's products or
intellectual property rights to the same extent as do the laws of the United
States and thus make the possibility of piracy of the Company's technology and
products more likely. Although the Company is not aware of the development,
distribution or sales of any illegal copies of the Company's hardware or
software, any infringements of its patents, copyrights or trademarks, or any
violation of its trade secrets, confidentiality
9
<PAGE> 11
procedures or licensing agreements to date, there can be no assurance that the
steps taken by the Company to protect its proprietary information will be
adequate to prevent misappropriation of its technology or that the Company's
competitors will not independently develop technologies that are substantially
equivalent or superior to the Company's technology.
The semiconductor industry is characterized by vigorous protection and
pursuit of intellectual property rights or positions, which have resulted in
significant and often protracted and expensive litigation. There is no pending
intellectual property litigation against the Company. However, the Company or
its foundries may from time to time receive notice of claims that the Company
has infringed patents or other intellectual property rights owned by others. The
Company may seek licenses under such patents or other intellectual property
rights. However, there can be no assurance that licenses will be offered or that
the terms of any offered licenses will be acceptable to the Company. The failure
to obtain a license from a third party for technology used by the Company could
cause the Company to incur substantial liabilities and to suspend the
manufacture of products or the use by the Company's foundries of processes
requiring the technology. Furthermore, the Company may initiate claims or
litigation against third parties for infringement of the Company's proprietary
rights or to establish the validity of the Company's proprietary rights.
Litigation by or against the Company could result in significant expense to the
Company and divert the efforts of the Company's technical and management
personnel, whether or not such litigation results in a favorable determination
for the Company. In the event of an adverse result in any such litigation, the
Company could be required to pay substantial damages, cease the manufacture, use
and sale of infringing products, expend significant resources to develop
non-infringing technology, discontinue the use of certain processes or obtain
licenses for the infringing technology. There can be no assurance that the
Company would be successful in such development or that such licenses would be
available on reasonable terms, or at all, and any such development or license
could require expenditures by the Company of substantial time and other
resources. Although patent disputes in the semiconductor industry have often
been settled through cross-licensing arrangements, there can be no assurance
that, in the event that any third party makes a successful claim against the
Company or its customers, a cross-licensing arrangement could be reached. If a
license is not made available to the Company on commercially reasonable terms,
the Company's business, financial condition and results of operations could be
materially adversely affected.
The Company licenses certain of the technology utilized by the Company in
its products, and expects to continue to do so in the future. The Company has no
current plans to grant licenses with respect to its products or technology;
however, it may become necessary for the Company to enter into product licenses
in the future in order, among other things, to secure foundry capacity. Although
the Company has in the past granted licenses to certain of its technology, some
of which have expired, such licenses have been limited and the Company has not
derived material revenues from such licenses in recent periods.
Dependence on Key Personnel. The Company's success depends to a
significant degree upon the continued contributions of Fred S.L. Chan, the
Company's Chief Executive Officer and Chairman of the Board of Directors. As of
January 31, 1997, Mr. Chan, together with his spouse, Annie M.H. Chan, a
director of the Company and certain trusts for the benefit of the Chan's
children and certain charities beneficially own, in the aggregate, approximately
41% of the Company's Common Stock. The future success of the Company depends on
its ability to continue to attract, retain and motivate qualified senior
management, sales and technical personnel, particularly highly skilled
semiconductor design personnel and software engineers, for whom competition is
intense. Recently, the Company has hired a number of key executives and
management personnel. The loss of Mr. Chan, other key executive officers, key
design personnel or software engineers or the inability to hire and retain
sufficient qualified personnel could have a material adverse effect on the
Company's business, financial condition and results of operations. There can be
no assurance that the Company will be able to retain these employees. The
Company currently does not maintain any key man life insurance on the life of
any of its key employees.
Control by Existing Shareholders. As of January 31, 1997, Fred S.L. Chan,
the Company's Chief Executive Officer and Chairman of the Board of Directors,
together with his spouse, Annie M. H. Chan, a director of the Company, and
certain other shareholders related to Mr. and Mrs. Chan owned, in the aggregate,
41% of the Company's outstanding Common Stock. As a result, these shareholders,
acting together,
10
<PAGE> 12
possess significant voting power over the Company, giving them the ability among
other things to influence significantly the election of the Company's Board of
Directors and the approval of significant corporate transactions. Such control
could delay, defer or prevent a change in control of the Company, impede a
merger, consolidation, takeover or other business combination involving the
Company, or discourage a potential acquiror from making a tender offer or
otherwise attempting to obtain control of the Company.
Shares Eligible for Future Sale. As of January 31, 1997, the Company had
approximately 38,307,036 shares of Common Stock outstanding. Of such shares,
22,406,639 shares are freely tradable and the remaining 15,900,397 shares are
restricted shares ("Restricted Shares") under the Securities Act of 1933, as
amended (the "Securities Act") and are eligible for sale in the public market,
subject to certain volume and resale restrictions pursuant to Rule 144.
Possible Volatility of Stock Price. The price of the Company's Common
Stock has in the past and may continue in the future to fluctuate widely. Future
announcements concerning the Company, its competitors or its principal
customers, including quarterly operating results, changes in earnings estimates
by analysts, technological innovations, new product introductions, governmental
regulations or litigation may cause the market price of the Common Stock to
continue to fluctuate substantially. Further, in recent years the stock market
has experienced extreme price and volume fluctuations that have particularly
affected the market prices of equity securities of many high technology
companies and that often have been unrelated or disproportionate to the
operating performance of such companies. These fluctuations, as well as general
economic, political and market conditions such as recessions or international
currency fluctuations, may materially adversely affect the market price of the
Common Stock.
11
<PAGE> 13
SELLING SHAREHOLDERS
The following table sets forth certain information known to the Company
with respect to beneficial ownership of the Company's Common Stock as of January
31, 1997 by each Selling Shareholder. Chi Shin Wang has been Chief Technical
Officer of the Company since 1995. Jan Fandrianto has been Vice President of the
Company's VideoCore subsidiary since January 1996 and was formerly president of
VideoCore Technology, Inc. ("VideoCore"), which the Company acquired in January
1996. Chorng-Yeong Chu is currently employed by the Company.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
PRIOR TO THE OFFERING AFTER TO THE OFFERING(1)
-------------------------- SHARES --------------------------
SELLING SHAREHOLDERS SHARES PERCENT(2) OFFERED SHARES PERCENT(2)
- --------------------------------- ------- ---------- ------- ------- ----------
<S> <C> <C> <C> <C> <C>
Jan Fandrianto(3)................ 204,825 * 54,308 150,517 *
Chi-Shin Wang(4)................. 189,700 * 41,175 148,525 *
Chorng-Yeong Chu(5).............. 37,750 * 8,575 29,175 *
Massfund Investments, Ltd........ 24,850 * 24,850 -- --
Additional Selling Shareholders
(8 persons), each holding less
than 0.1% of the Common Stock
outstanding prior to the
Offering(6).................... 73,525 * 16,745 56,780 *
Total.................. 530,650 1.4 145,653 384,997 *
</TABLE>
- ---------------
* Less than one percent of the Company's outstanding Common Stock.
(1) Assumes that each Selling Shareholder will sell all of the Shares set forth
above under "Shares Offered." There can be no assurance that the Selling
Shareholders will sell all or any of the Shares offered hereunder.
(2) Based on 38,307,036 shares outstanding at January 31, 1997.
(3) Includes 13,728 shares held by Jan Fandrianto as Custodian for each of Alex
Fandrianto, Andrew Fandrianto and Anthony Fandrianto (a total of 41,184
shares) and 4,004 shares to be sold by Jan Fandrianto as custodian for each
of Alex Fandrianto, Andrew Fandrianto and Anthony Fandrianto (a total of
12,012 shares). Includes 18,625 shares issuable upon exercise of options
exercisable within 60 days of January 31, 1997.
(4) Includes 25,000 shares issuable upon exercise of options exercisable within
60 days of January 31, 1997.
(5) Includes 3,450 shares issuable upon exercise of options exercisable within
60 days of January 31, 1997.
(6) Includes 6,825 shares issuable upon exercise of options exercisable within
60 days of January 31, 1997.
ISSUANCE OF COMMON STOCK TO SELLING SHAREHOLDERS
On January 3, 1996, the Company acquired VideoCore pursuant to an Agreement
and Plan of Reorganization dated December 12, 1995 (the "Reorganization
Agreement") among the Company, VideoCore and a wholly owned subsidiary of the
Company (the "Sub"). Pursuant to the Reorganization Agreement, the Sub merged
with and into VideoCore, certain shares of VideoCore capital stock were
purchased by the Company for cash, and all remaining outstanding shares of
VideoCore capital stock and options to purchase VideoCore capital stock were
converted into shares of the Company's Common Stock (the "Merger Shares") and
options to purchase the Company's Common Stock, respectively. A total of 524,650
Merger Shares were issued pursuant to the terms of the Reorganization Agreement.
Under the terms of the Reorganization Agreement, the holders of the Merger
Shares are entitled to requests that the Company file a Registration Statement
on Form S-3 covering the Merger Shares. Such request was made January 15, 1997
and this Prospectus covers an aggregate of 145,653 Merger Shares for which such
request was made.
12
<PAGE> 14
PLAN OF DISTRIBUTION
Shares of Common Stock covered hereby may be offered and sold from time to
time by the Selling Shareholders. The Selling Shareholders will act
independently of the Company in making decisions with respect to the timing,
manner and size of each sale. The Selling Shareholders may sell the Shares being
offered hereby: (i) on the Nasdaq National Market, or otherwise at prices and at
terms then prevailing or at prices related to the then current market price; or
(ii) in private sales at negotiated prices directly or through a broker or
brokers, who may act as agent or as principal or by a combination of such
methods of sale. The Selling Shareholders and any underwriter, dealer or agent
who participate in the distribution of such shares may be deemed to be
"underwriters" under the Securities Act, and any discount, commission or
concession received by such persons might be deemed to be an underwriting
discount or commission under the Securities Act. The Company has agreed to
indemnify the Selling Shareholders against certain liabilities arising under the
Securities Act.
Any broker-dealer participating in such transactions as agent may receive
commissions from the Selling Shareholders (and, if acting as agent for the
purchaser of such shares, from such purchaser). Usual and customary brokerage
fees will be paid by the Selling Shareholders. Broker-dealers may agree with the
Selling Shareholders to sell a specified number of shares at a stipulated price
per share, and, to the extent such a broker-dealer is unable to do so acting as
agent for the Selling Shareholders, to purchase as principal any unsold shares
at the price required to fulfill the broker-dealer commitment to the Selling
Shareholders. Broker-dealers who acquire shares as principal may thereafter
resell such shares from time to time in transactions (which may involve crosses
and block transactions and which may involve sales to and through other
broker-dealers, including transactions of the nature described above) in the
over-thecounter market, in negotiated transactions or by a combination of such
methods of sale or otherwise at market prices prevailing at the time of sale or
at negotiated prices, and in connection with such resales may pay to or receive
from the purchasers of such shares commissions computed as described above.
The Company has advised the Selling Shareholders that the anti-manipulation
Rules 10b-6 and 10b-7 under the Exchange Act may apply to sales of Shares in the
market and to the activities of the Selling Shareholders and their affiliates.
The Selling Shareholders have advised the Company that during such time as the
Selling Shareholders may be engaged in the attempt to sell shares registered
hereunder, they will: (i) not engage in any stabilization activity in connection
with any of the Company's securities; (ii) cause to be furnished to each person
to whom Shares included herein may be offered, and to each broker-dealer, if
any, through whom Shares are offered, such copies of this Prospectus, as
supplemented or amended, as may be required by such person; (iii) not bid for or
purchase any of the Company's securities or any rights to acquire the Company's
securities, or attempt to induce any person to purchase any of the Company's
securities or rights to acquire the Company's securities other than as permitted
under the Exchange Act; and (iv) not effect any sale or distribution of the
Shares until after the Prospectus shall have been appropriately amended or
supplemented, if required, to set forth the terms thereof; and
The Selling Shareholders may indemnify any broker-dealer that participates
in transactions involving the sale of the shares against certain liabilities,
including liabilities arising under the Securities Act. Any commissions paid or
any discounts or concessions allowed to any such broker-dealers, and any profits
received on the resale of such shares, may be deemed to be underwriting
discounts and commissions under the Securities Act if any such broker-dealers
purchase shares as principal.
In order to comply with the securities laws of certain states, if
applicable, the Common Stock will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states, the
Common Stock may not be sold unless such shares have been registered or
qualified for sale in the applicable state or an exemption from the registration
or qualification requirement is available and is complied with.
The Company has agreed to maintain the effectiveness of this Registration
Statement until the earlier of the sale of all of the shares of Common Stock
offered hereunder or fourteen (14) days from the date of this Prospectus. No
sales may be made pursuant to this Prospectus after such data unless the Company
amends or supplements this Prospectus to indicate that it has agreed to extend
such period of effectiveness. There can be
13
<PAGE> 15
no assurance that the Selling Shareholders will sell all or any of the shares of
Common Stock offered hereunder.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon by Venture Law Group, A Professional Corporation, Menlo Park, California,
counsel to the Company.
EXPERTS
The consolidated financial statements and schedule of the Company appearing
in the Company's Annual Report (Form 10-K) for the year ended December 31, 1995,
have been audited by Price Waterhouse LLP, independent auditors, as set forth in
their report thereon included therein and incorporated herein by reference. The
consolidated financial statements of VideoCore for the year ended June 30, 1995
appearing in the Company's Current Report on Form 8-K dated January 17, 1996, as
amended March 15, 1996, have been audited by Price Waterhouse LLP, independent
auditors, as set forth in their report thereon included therein and incorporated
herein by reference. Such consolidated financial statements and schedule are
incorporated herein by reference in reliance upon such reports given upon the
authority of such firms as experts in accounting and auditing.
14
<PAGE> 16
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The Registrant will bear no expenses in connection with any sale or other
distribution by the Selling Shareholders of the shares being registered other
than the expenses of preparation and distribution of this Registration Statement
and the Prospectus included in this Registration Statement. Such expenses are
set forth in the following table. All of the amounts shown are estimates except
the Securities and Exchange Commission ("SEC") registration fee.
<TABLE>
<S> <C>
SEC registration fee............................................... $ 1,711
Legal fees and expenses............................................ 10,000
Accounting fees and expenses....................................... 7,000
Miscellaneous expenses............................................. 2,188
-------
Total.................................................... $20,899
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 317 of the California Corporations Code allows for the
indemnification of officers, directors, and other corporate agents in terms
sufficiently broad to indemnify such persons under certain circumstances for
liabilities (including reimbursement for expenses incurred) arising under the
Securities Act of 1933, as amended (the "Securities Act"). Article III of the
Registrant's Articles of Incorporation and Article VI of the Registrant's Bylaws
provides for indemnification of the Registrant's directors, officers, employees
and other agents to the extent and under the circumstances permitted by the
California Corporations Code. The Registrant has also entered into agreements
with its directors and officers that will require the Registrant, among other
things, to indemnify them against certain liabilities that may arise by reason
of their status or service as directors to the fullest extent not prohibited by
law.
In addition, the Registrant carries director and officer liability
insurance in the amount of $10 million.
In connection with this offering, the Selling Shareholders have agreed to
indemnify the Registrant, its directors and officers and each such person who
controls the Registrant, against any and all liability arising from inaccurate
information provided to the Registrant by the Selling Shareholders and contained
herein.
ITEM 16. EXHIBITS.
Exhibits.
<TABLE>
<C> <S>
2.1(1) Agreement and Plan of Reorganization dated December 12, 1995 among Registrant, ESS
Acquisition Corporation and VideoCore Technology, Inc.
2.2(1) Agreement of Merger dated as of January 3, 1996 among Registrant, ESS Acquisition
Corporation and VideoCore Technology, Inc. as filed with the California Secretary of
State on January 3, 1996.
4.1(2) Declaration of Registration Rights, Exhibit G to the Agreement and Plan of
Reorganization dated December 12, 1995 among Registrant, ESS Acquisition Corporation
and VideoCore Technology, Inc.
5.1 Opinion of Venture Law Group, A Professional Corporation
23.1 Consent of Price Waterhouse LLP, Independent Auditors
24.1 Power of Attorney (see page II-3)
</TABLE>
- ---------------
(1) Incorporated by reference to the identically numbered exhibit filed with the
Registrant's Form 8-K, filed on January 17, 1996.
(2) Incorporated by reference to Exhibit G of Exhibit 2.1 filed with the
Registrant's Form 8-K, filed on January 17, 1996.
II-1
<PAGE> 17
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 material information with respect to the plan of distribution not
previously disclosed in the Registration Statement or any material change
to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each 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 this offering.
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act that is incorporated by
reference in the Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-2
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, ESS Technology,
Inc. certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Fremont, State of California, on February 6, 1997.
ESS TECHNOLOGY, INC.
By: /s/ JOHN H. BARNET
--------------------------------------
John H. Barnet
Vice President, Finance and Chief
Financial Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Fred S.L. Chan and John H. Barnet,
jointly and severally, his or her true and lawful attorneys-in-fact, each with
full power of substitution, for him or her in any and all capacities, to sign
any and all amendments (including post-effective amendments) to this
Registration Statement, and to file the same, with all exhibits thereto and all
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact or any
of them, or his or their substitute or substitutes, may lawfully do or cause to
be done or by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------------------------- -----------------
<S> <C> <C>
/s/ FRED S.L. CHAN Chief Executive Officer and Chairman of the February 6, 1997
- ------------------------------ Board of Directors (Principal Executive
Fred S.L. Chan Officer)
/s/ HERBERT J. MARTIN President and Chief Operating Officer and February 6, 1997
Director
- ------------------------------
Herbert J. Martin
/s/ JOHN H. BARNET Vice President, Finance and Chief Financial February 6, 1997
- ------------------------------ Officer (Principal Financial Officer and
John H. Barnet Principal Accounting Officer)
/s/ ANNIE M.H. CHAN Director February 6, 1997
- ------------------------------
Annie M.H. Chan
/s/ MICHAEL A. AYMAR Director February 6, 1997
- ------------------------------
Michael A. Aymar
/s/ ILBOK LEE Director February 6, 1997
- ------------------------------
Ilbok Lee
/s/ PETER T. MOK Director February 6, 1997
- ------------------------------
Peter T. Mok
</TABLE>
II-3
<PAGE> 19
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- ------------------------------------------------------------------------------------
<C> <S>
5.1 Opinion of Venture Law Group, A Professional Corporation
23.1 Consent of Price Waterhouse LLP, Independent Auditors
24.1 Power of Attorney (see page II-3)
</TABLE>
<PAGE> 1
EXHIBIT 5.1
February 6, 1997
ESS Technology, Inc.
48401 Fremont Blvd.
Fremont, CA 94025
REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-3 (the
"Registration Statement") to be filed by you with the Securities and Exchange
Commission (the "Commission") in connection with the registration under the
Securities Act of 1933, as amended, of a total of 145,653 shares of your Common
Stock (the "Shares") to be sold by selling shareholders of the Company. As your
counsel in connection with this transaction we have examined the proceedings
taken and are familiar with the proceedings proposed to be taken by you in
connection with the sale and issuance of the Shares.
It is our opinion that, upon conclusion of the proceedings being taken
or contemplated by us, as your counsel, to be taken prior to the issuance of
the Shares, and upon completion of the proceedings being taken in order to
permit such transactions to be carried out in accordance with the securities
laws of the various states where required, the Shares, when issued and sold in
the manner described in the Registration Statement, will be legally and validly
issued, fully paid and non-assessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever appearing in the
Registration Statement, including the Prospectus constituting a part thereof,
and in any amendment thereto.
Very truly yours,
VENTURE LAW GROUP,
A Professional Corporation
THN
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement of ESS Technology, Inc. on
Form S-3 of:
a) our report on the financial statements of ESS Technology, Inc.
dated January 19, 1996 (except for Note 10, which is as of March
29, 1996) incorporated by reference in the Annual Report on Form
10-K of ESS Technology, Inc. for the year ended December 31,
1995 and
b) our report of the financial statements of VideoCore Technology,
Inc. included in the Report on Form 8-K of ESS Technology, Inc.,
dated January 18, 1996, as amended March 15, 1996.
We also consent to the reference to us under the heading "Experts" in
the Prospectus, which is part of this Registration Statement.
/s/ Price Waterhouse LLP
- -------------------------
PRICE WATERHOUSE LLP
San Jose, California
February 5, 1997
