<PAGE>
As filed with the Securities and Exchange Commission on August 30, 1999
Registration No. 333- _____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
FORM S-3
REGISTRATION STATEMENT
Under The Securities Act of 1933
_________________
THERMATRIX INC.
(Exact name of Registrant as specified in its charter)
Delaware 94-2958515
(State of incorporation) (I.R.S. Employer Identification No.
2025 Gateway Place, Suite 132
San Jose, California 95110-1005
(408) 453-0490
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Daniel S. Tedone
Executive Vice President and Chief Financial Officer
Thermatrix Inc.
2025 Gateway Place, Suite 132
San Jose, California 95110-1005
(408) 453-0490
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
_________________
Copies to:
Michael J. Danaher, Esq.
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, CA 94304-1050
(415) 493-9300
_________________
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 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. [_] ___
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===================================================================================================================
Proposed Maximum Proposed Maximum
Title of Each Class of Amount to be Offering Price Per Aggregate Offering Amount of
Securities to be Registered Registered Share(1) Price(1) Registration Fee
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $0.001
per share....... 5,230,000 $3.16 $16,526,800 $4,595
===================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of computer the registration fee required
by Section 6(b) of the Securities Act and computed pursuant to Rule 457(c)
under the Securities Act based upon the average of the bid and ask prices of
the Common Stock on August 25, 1998, as reported on the Nasdaq National
Market.
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 said Section 8(a),
may determine.
================================================================================
<PAGE>
PROSPECTUS
(Subject to completion, dated August 30, 1999)
5,230,000 SHARES
THERMATRIX INC.
Common Stock
______________
This Prospectus relates to the public offering, which is not being
underwritten, of up to 5,230,000 shares of Common Stock, par value $0.001 per
share (the "Shares"), of Thermatrix Inc. ("Thermatrix" or the "Company"), which
may be offered from time to time by certain stockholders of the Company or by
pledgees, donees, transferees or other successors in interest that receive such
shares as a gift, partnership distribution or other non-sale related transfer
(the "Selling Stockholders"). The Company will receive no part of the proceeds
of such sales. All of the Shares were originally issued by the Company or will
be issued by the Company consisting of: (1) up to 270,000 Shares issued or
issuable upon the exercise by certain of the Selling Stockholders of warrants
(the "Warrants") of Thermatrix, which warrants were issued in connection with
the sale of the Series E 8% Preferred Stock, (2) up to 4,960,000 shares of
Common Stock to be issued from time to time to Selling Stockholders upon
conversion of the Company's outstanding Series E 8% Convertible Preferred Stock
(the "Series E Preferred Stock") at the election of the registered holders of
such Series E Preferred Stock, or (3) in accordance with Rule 416 under the
Securities Act of 1933, as amended (the "Securities Act"), such presently
indeterminate number of additional Shares as may be issuable upon payment of
share dividends on the Series E Preferred Stock or upon conversion of
outstanding Series E Preferred Stock based on fluctuations in the conversion
price of the Common Stock. The Shares were issued or will be issued upon
conversion of the Series E Preferred Stock and exercise of the Warrants in
private placements pursuant to an exemption from the registration requirements
of the Securities Act, provided by Section 4(2) thereof. The Shares are being
registered by the Company pursuant to registration rights granted to the Selling
Stockholders and a holder of the Warrants.
The Selling Stockholders have not advised the Company of any specific plans
for the distribution of the Shares covered by this Prospectus. It is
anticipated, however, that the Shares may be offered by the Selling Stockholders
from time to time in one or more transactions on the Nasdaq National Market, in
privately negotiated transactions at such prices as may be agreed upon, or in a
combination of such methods of sale. The Selling Stockholders may effect such
transactions by selling the Shares to or through broker-dealers and such broker-
dealers may receive compensation in the form of discounts, concessions or
commissions from the Selling Stockholders or the purchasers of the Shares for
whom such broker-dealers may act as agent or to whom they sell as principal or
both (which compensation to a particular broker-dealer might be in excess of
customary commissions). See "Plan of Distribution." The price at which any of
the Shares may be sold, and the commissions, if any, paid in connection with any
such sale, are unknown and may vary from transaction to transaction. The Company
will pay all expenses incident to the offering and sale of the Shares to the
public other than any commissions and discounts of underwriters, dealers or
agents and any transfer taxes. See "Selling Stockholders" and "Plan of
Distribution."
The Company's Common Stock is listed on the Nasdaq National Market under
the symbol "TMXI." On August 25, 1999 the last sale price of the Company's
Common Stock was $3.125 per share.
______________
This offering involves a high degree of risk. See "Risk Factors" on page 3
for information that should be considered by prospective investors.
______________
The Securities and Exchange Commission (the "Commission") may take the view
that, under certain circumstances, the Selling Stockholders and any broker-
dealers or agents that participate with the Selling Stockholders in the
distribution of the Shares may be deemed to be "underwriters" within the meaning
of the Securities Act. Commissions, discounts or concessions received by any
such broker-dealer or agent may be deemed to be underwriting commissions under
the Securities Act. The Company and the Selling Stockholders have agreed to
certain indemnification arrangements. See "Plan of Distribution."
______________
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.
The date of this Prospectus is , 1999
<PAGE>
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 Room 1024, Judiciary Plaza, 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, Suite 1300, New
York, New York 10048 and Chicago Regional Office, Northwest Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material may be obtained by mail at prescribed rates from the Public Reference
Section of the Commission at Judiciary Plaza, 450 Fifth Street, NW, Washington,
D.C. 20549. The Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The address of the site is
http://www.sec.gov. The Common Stock of the Company is listed on the Nasdaq
National Market, and such reports, proxy and information statements and other
information concerning the Company may be inspected at the offices of Nasdaq
Operations, 1735 K Street, NW, Washington, D.C. 20006.
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 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. The Registration
Statement may be inspected at the public reference facilities maintained by the
Commission at the addresses set forth in the preceding paragraph. Statements
contained herein concerning any document filed as an exhibit are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Statement. Each such statement is
qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Company (File No. 0-
20819) pursuant to the Exchange Act are hereby incorporated by reference in this
Prospectus:
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998;
(2) The Company's Quarterly Report on Form 10-Q for the quarters ended
March 31, 1999 and June 30, 1999; and
(3) All other reports filed by the Company pursuant to Sections 13(a) or
15(d) of the Exchange Act since December 31, 1998.
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 into this Prospectus, to the extent required, and to
be a part of this Prospectus from the date of filing of such reports and
documents.
<PAGE>
Any statement contained in a document incorporated by reference into this
Prospectus 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 that 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 by reference into this Prospectus (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 Investor Relations, Thermatrix Inc., 2025
Gateway Place, Suite 132, San Jose, CA 95110, or by telephone at (408) 453-0490.
THE COMPANY
Thermatrix Inc., a Delaware Corporation formed in 1992, (the "Company") is a
global industrial technology company engaged in the development, manufacture and
sale of industrial process equipment for the destruction of volatile organic
compounds and hazardous air pollutants (collectively, "VOCs"). The core
component of the Company's technology is its proprietary flameless thermal
oxidizer ("FTO"), which is capable of treating virtually all VOCs while
achieving destruction removal efficiency ("DRE") of 99.99% or higher with de
minimis formation of hazardous by-products such as oxides of nitrogen
("NO\\x\\"), carbon monoxide ("CO") and products of incomplete combustion
("PICs"). The Company sells its flameless thermal oxidizer as a stand-alone unit
or as an integrated system. In addition, the Company's product line also
includes PADRE(R), a proprietary technology used to capture and recover very low
concentration VOCs from low-to-medium vapor streams.
On January 13, 1999 the Company acquired all of the outstanding common shares of
Wahlco Environmental Systems, Inc. ("Wahlco"), a Delaware corporation formerly
traded on the NASDAQ bulletin board. Wahlco designs, manufactures, and sells
combined cycle gas turbine products, metallic and fabric bellows, air pollution
control equipment, and related products and services to electric utilities,
independent power producers, co-generation plants, and industrial manufacturers
worldwide. Wahlco also provides mechanical plant installation services and rents
associated equipment to users in the U.K. Management believes that the business
and market synergies between the Company and Wahlco in the air pollution control
industry are excellent and the combination of the two firms will provide a more
balanced business with global presence and performance.
The principal executive offices of the Company are located at 2025 Gateway
Place, Suite 132, San Jose, CA 95110, (408) 453-0490.
-2-
<PAGE>
RISK FACTORS
THIS PROSPECTUS AND THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE CONTAIN
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE STATEMENTS
CONTAINED IN THIS PROSPECTUS THAT ARE NOT PURELY HISTORICAL ARE FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION
21E OF THE EXCHANGE ACT, INCLUDING WITHOUT LIMITATION, STATEMENTS REGARDING THE
COMPANY'S EXPECTATIONS, BELIEFS, ESTIMATES, INTENTIONS AND STRATEGIES ABOUT THE
FUTURE. WORDS SUCH AS "ANTICIPATES," "EXPECTS," "INTENDS," "PLANS," "BELIEVES,"
"SEEKS," "ESTIMATES," VARIATIONS OF SUCH WORDS AND SIMILAR EXPRESSIONS ARE
INTENDED TO IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. THESE STATEMENTS ARE NOT
GUARANTEES OF FUTURE PERFORMANCE AND ARE SUBJECT TO CERTAIN RISKS, UNCERTAINTIES
AND ASSUMPTIONS THAT ARE DIFFICULT TO PREDICT; THEREFORE, ACTUAL RESULTS MAY
DIFFER MATERIALLY FROM THOSE EXPRESSED OR FORECASTED IN ANY SUCH FORWARD-LOOKING
STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET FORTH IN THE
FOLLOWING RISK FACTORS, ELSEWHERE IN THIS PROSPECTUS AND IN THE DOCUMENTS
INCORPORATED HEREIN BY REFERENCE. THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE
PUBLICLY ANY FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION,
FUTURE EVENTS OR OTHERWISE. POTENTIAL INVESTORS SHOULD CONSIDER CAREFULLY THE
FOLLOWING FACTORS, AS WELL AS THE MORE DETAILED INFORMATION CONTAINED ELSEWHERE
IN THIS PROSPECTUS AND IN THE DOCUMENTS INCORPORATED BY REFERENCE, BEFORE MAKING
A DECISION TO INVEST IN THE SHARES OFFERED HEREBY.
Shares Eligible for Future Sale; Dilution. Substantially all of the
Company's shares are eligible for sale in the public market. The issuance of
Common Stock upon conversion of the Series E Preferred Stock and upon exercise
of the Warrants, as well as future sales of such Common Stock or of shares of
Common Stock by existing stockholders, or the perception that such sales could
occur, could adversely affect the market price of the Common Stock. Conversion
of the Series E Preferred Stock and exercise of the Warrants for shares of
Common Stock could adversely affect the market price of the Common Stock. In
addition, investors could experience substantial dilution upon conversion of the
Series E Preferred Stock into Common Stock as a result of either (i) an event
triggering the antidilution rights of any outstanding shares of Series E
Preferred Stock, or (ii) a decline in the market price of the Company's Common
Stock immediately prior to conversion. Specifically, the shares of the Series E
Preferred Stock are convertible into shares of Common Stock of the Company based
on a conversion price of $5.00 per share or, if lower, 85% of the average of
certain specified trading prices during the 30 trading days preceding such date
of conversion (the "Floating Conversion Price"). The market prices for
securities of environmental and industrial waste companies (including
Thermatrix) have historically been highly volatile, and the market has from time
to time experienced significant price and volume limitations that are unrelated
to the operating performance of particular companies. See "Volatility of Stock
Price."
Operating Losses and Accumulated Deficit; Uncertainty of Future Profitability.
The Company had a net loss of approximately $7.9 million in 1998 and an
accumulated deficit of approximately $44.6 million at December 31, 1998. Since
the Company restructured its operations in 1992, it has financed its operations
primarily through private placements of equity securities totaling approximately
$20.3 million and an initial public offering of its common stock with net
proceeds totaling approximately $22.1 million. The Company does not expect to be
profitable unless and until sales of its systems generate sufficient revenues
with an appropriate gross margin to fund its operations. There can be no
assurance that the Company will achieve such revenues or margins.
-3-
<PAGE>
Ability to Compete Against Lower Cost Technologies. To date, FTO systems have
been installed in an increasing number of industries. There can be no assurance
that the Company's FTO technology will receive broad market acceptance as an
economically and environmentally acceptable means of destroying VOCs. The
Company's ability to compete will depend upon the Company's ability to persuade
potential customers to adopt its FTO technology in place of certain, more
established, competing technologies, including flame-based destruction and
carbon adsorption systems. The failure of the Company to persuade a significant
number of potential customers to adopt its FTO technology would have a material
adverse effect on the growth of the Company's business, results of operations
and financial condition.
Sensitivity to Major Projects. In 1998, three projects for two customers
accounted for 62% of the Company's revenues. In 1997, two projects accounted for
38% of the Company's revenues and in 1996, three projects accounted for 38% of
the Company's revenues. Although the Company is expanding the number of its
customers and installations, the average size and dollar volume of each
installation has been increasing. The Company anticipates the size of turnkey
projects in 1999 will continue to range from $1 million to $4 million. As a
result, the Company's results of operations are likely to continue to be
dependent on major projects. Such a reliance on major orders is likely to lead
to fluctuations in, and to reduce the predictability of, quarterly results.
Larger projects also pose other challenges. The sales cycle for larger projects
tends to be longer than for smaller projects, and, when orders are received,
projects may be delayed by factors outside the Company's control, including
customer budget decisions, design changes and delays in obtaining permits.
Orders for large systems often have tight delivery schedules and the customer
will often attempt to negotiate penalties for late delivery and/or the ability
to assess liquidated damages for lost production if the delivery schedule is not
met. Also, because the dollar volumes are larger, the costs of providing
warranty services could increase. The Company's business, results of operations
and financial condition could be materially adversely affected if the Company
were to fail to obtain major project orders, if such orders were delayed, if
installations of such systems were delayed, or if such installations encountered
operating, warranty or other problems.
Management of Growth. Although it relies on subcontractors to fabricate
subassemblies and to assemble and install completed systems, the Company uses
its own employees to design, test and commission systems. The Company seeks to
maintain engineering and design staffing levels adequate for current and near-
term demand. During periods of rapid growth, such as that experienced by the
Company during 1998, the Company's engineering and design personnel generally
operate at full capacity. As a result, future growth, if any, is limited by the
Company's ability to recruit and train additional engineering, design and
project management personnel and by the ability and performance of the
individual employees in managing more and larger projects. Furthermore, any
failure to maintain quality or to meet customer installation schedules could
damage relationships with important customers, damage the Company's reputation
generally and result in contractual liabilities. There can be no assurance that
the Company will be able to effectively manage an expansion of its operations or
that the Company's systems or controls will be adequate to support the Company's
operations if expansion occurs. In such event, any failure to manage growth
effectively could have a material adverse effect on the Company's business,
results of operations and financial condition.
Risks Associated with International Operations and Sales. In 1998, sales to
international customers in Europe and Asia increased to 60%, up from 35% in
1997. The Company plans to increase its revenues, in part, through an expansion
of its overseas operations. Expansion internationally encompasses the need to
provide an infrastructure for operations, sales and administration. The
Company's overseas growth has placed, and could continue to place, a significant
strain on its managerial, operational and financial resources. There can be no
assurance that the Company will be able to attract, hire and train personnel or
to continue to develop the infrastructure needed on a timely basis which may
have an adverse impact on the Company's business, results of operations and
-4-
<PAGE>
financial condition. Additionally, the Company's business, results of operations
and financial condition may be materially adversely affected by fluctuations in
currency exchange rates and duty rates, and therefore its ability to maintain or
increase prices due to competition. The Company denominates international sales
either in United States dollars or local currencies. Sales in Europe have been
primarily denominated in pounds sterling. Since some expenses in connection with
international contracts are often incurred in United States dollars, there can
be a short-term exchange risk created. If the Company has significant
international sales in the future denominated in foreign currencies, the Company
may purchase hedging instruments to mitigate the exchange risk on these
contracts.
Risks Associated with Fixed Price Contracts. A majority of the Company's
contracts are performed using "fixed-price" rather than "cost-plus" terms. Under
fixed-price terms, the Company quotes firm prices to its customers and bears the
full risk of cost overruns caused by estimates that differ from actual costs
incurred or manufacturing delays during the course of the contract. Some costs,
including component costs, are beyond the Company's control and may be difficult
to predict. If manufacturing or installation costs for a particular project
exceed anticipated levels, gross margins would be materially adversely affected,
and the Company could experience losses. In addition, the manufacturing process
may be subject to significant change orders. However, in some cases the cost of
these change orders may not be negotiated until after the system is installed.
The failure of the Company to recover the full cost of these change orders could
materially adversely affect gross margins and also cause the Company to
experience losses.
Dependence on Key Personnel. The Company's success depends to a significant
extent upon its executive officers and key engineering, sales, marketing,
financial and technical personnel, both in the United States and overseas.
Employees may voluntarily terminate their employment with the Company at any
time, and none of the Company's employees are subject to an employment contract.
The Company has limited personnel resources available to address the different
activities in its business. The loss of the services of one or more of the
Company's key employees could have a material adverse effect on the Company's
business, results of operations and financial condition. The Company also
believes that its future success will depend in large part upon its ability to
attract and retain additional highly skilled personnel, particularly design and
process engineers. Because of the technical sophistication of the Company's
systems and the sophisticated engineering software utilized by the Company,
design and process engineers who join the Company generally are required to have
advanced technical knowledge and significant training to perform efficiently and
productively. The availability of such personnel is limited, and the Company has
at times experienced difficulty in locating new employees with the requisite
level of expertise and experience. In addition, the Company believes its ability
to manage customer orders for the Company's products in Europe will depend in a
large part on its success in attracting and retaining skilled engineers or
project managers in Europe. There can be no assurance that the Company will be
successful in retaining its existing key personnel or in attracting and
retaining the personnel it requires in the future. The Company maintains key
employee life insurance on the life of its Chairman, President and Chief
Executive Officer, John T. Schofield, in the amount of $2,000,000. There can be
no assurance that such amount will be sufficient to compensate the Company for
the unexpected loss of the services of Mr. Schofield.
Dependence on the Reliability and Performance of Subcontractors. The Company
relies on subcontractors to build system components and to assemble and install
systems, both in the United States and overseas. The Company's ability to
deliver high quality systems on time will depend upon the reliability and
performance of its subcontractors. The failure of a subcontractor to meet
delivery schedules could cause the Company to default on its obligations to its
customers, which could materially adversely affect the Company's reputation,
business, results of operations and financial condition. In addition, the
Company's reliance on subcontractors for manufacturing, assembly and
installation places a significant part of the Company's quality control
responsibilities on these subcontractors. There can be no assurance that the
Company will be able to continue to contract for the level of quality control
required by the Company's customers. The failure to provide such quality control
could result in manufacturing and installation delays, which could have a
material adverse effect on the Company's business, results of operations and
financial condition. The materials used in the
-5-
<PAGE>
production of the Company's product lines are generally available through a
number of sources, and the Company does not anticipate difficulty in obtaining
the materials and components used in its operations.
Dependence on Customer Information. The Company is highly dependent upon
information provided by its customers concerning the type, volume and flow rate
of VOC emissions to be treated by the Company's systems. If the customer's
information is inaccurate or the customer operates the facility outside its
design parameters, a malfunction in the Company's FTO system could occur,
resulting in damage to the customer's facilities or personal injury. In
addition, incorrect information could cause delays in the design, manufacture
and installation of the customer's system. The Company might then be held liable
for damages resulting from such malfunction or delay beyond its control. Any of
these factors could have a material adverse effect on the Company's business,
results of operations and financial condition.
Fluctuations in Quarterly Operating Results. The Company's quarterly revenues
and operating results have varied significantly in the past and may fluctuate
significantly in the future as a result of a variety of factors, many of which
are outside the Company's control. Such factors include the size and timing of
individual orders, the timing and amount of project change orders, customer
delays, order cancellations, general economic and industry conditions, the
amount of first-time engineering needed, the introduction of new products or
services by the Company or its competitors or the introduction of the Company's
products to new markets, changes in the levels of operating expenses, including
development costs, and the amount and timing of other costs relating to the
expansion of the Company's operations. Furthermore, the purchase of the
Company's products, particularly for major projects, may involve a significant
commitment of capital, with the attendant delays frequently associated with
large capital expenditures and authorization procedures within its customers'
organization. For these and other reasons, the sales cycle for the Company's
products can be lengthy (up to two years) and subject to a number of significant
risks over which the Company has little or no control, including customer
budgetary constraints. The Company historically has operated with little backlog
because most customer orders are placed with relatively short lead times,
usually from four to thirty weeks. Variations in the timing of recognition of
specific revenues due to changes in project scope and timing may adversely and
disproportionately affect the Company's operating results for a quarter because
the Company establishes its expenditure levels on the basis of expected future
revenues, and a significant portion of the Company's expenses do not vary with
current revenues.
Uncertain Regulatory Environment. The Company's customers are required to comply
with environmental laws and regulations in the United States and elsewhere which
limit the emission of VOCs and other chemicals. The level of enforcement
activities by environmental protection agencies and changes in laws and
regulations will affect demand for the Company's systems. To the extent that the
burden of complying with such environmental laws and regulations may be eased,
the demand for the Company's systems could be materially adversely affected.
Although the Company believes that its FTO technology does not come under the
U.S. EPA's current definitions of incineration, there can be no assurance that
the U.S. EPA will not classify the Company's FTO technology as an incineration
technology in the future. Classification as an incineration technology could
significantly increase the length of time and cost of the permitting process for
customers because of the requirement for a public hearing, especially where
community sentiment is opposed to incineration technology. A lengthier
permitting process could reduce the competitive advantages of the Company's
technology and materially adversely affect the Company's business, results of
operations and financial condition. The Company has applied for certification of
its FTO technology under the California Department of Toxic Substances Control.
This certification is not available to incineration-based technologies. The
Department's decision will be published in mid-April 1999.
Proprietary Technology and Unpredictability of Patent Protection. The Company
relies on patents, trade secrets and proprietary know-how, which it seeks to
protect, in part, through appropriate confidentiality and proprietary
information agreements with its strategic partners, employees and consultants.
There can be no assurance that the proprietary information or confidentiality
agreements will not be breached, that the
-6-
<PAGE>
Company will have adequate remedies for any breach, or that the Company's trade
secrets and proprietary know-how will not otherwise become known to or be
independently developed by others.
Possible Product Liability. The Company's FTO systems are designed to destroy
VOCs, which are highly toxic and flammable. If the Company's systems are
improperly designed or operated outside of design parameters and operating
instructions provided by the Company, there is a risk of system failure or
release of VOCs, which could require the Company to defend itself against a
product liability or personal injury claim. Although the Company has product
liability and commercial general liability insurance in scope and amount that it
believes to be sufficient for the conduct of its business, there can be no
assurance that such insurance will cover or be adequate to cover such claims. In
addition, the Company's general liability insurance is subject to coverage
limits and excludes coverage for losses or liabilities relating to environmental
damage or pollution. Accordingly, the Company's efforts to defend itself against
such claims could have a material adverse effect on the Company's business,
results of operations and financial condition.
Potential Environmental Liability. Although the Company does not believe that
its activities would directly expose it to liabilities under local, state or
federal environmental laws and regulations, if the Company were to improperly
design, manufacture or test its systems or fail to properly train its customer's
employees in the operation of the systems, it could be exposed to possible
liability for investigation and clean-up costs under such environmental laws.
Under some environmental laws and various theories of tort and contract law, it
is also possible that the Company could be liable for damages to its customers
and third parties resulting from the actions of its customers or arising from
the failure or malfunction, or the design, construction or operation of, the
Company's FTO systems or products, even if the Company were not directly at
fault. The Company's general liability insurance is subject to coverage limits
and generally excludes coverage for losses or liabilities relating to or arising
out of environmental damage or pollution. The Company's business, results of
operations and financial condition could be materially adversely affected by an
uninsured or partially insured claim.
Risks Associated With the Diesel Engine Emission Control Development Program.
The engineering challenges involved in treating diesel emissions are different
in a number of respects from the conditions in which the Company's system has
been used in the past, and there can be no assurance that the Company's
technology will prove successful in this development area. Moreover, the
Company's extensive database of test results that it uses to design systems for
industrial installations may not be relevant to diesel engine emission control.
Although pilot test results to date have been positive, the Company will need to
engage in extensive and costly applications development and engineering in order
to commercialize its system for such use, and there can be no assurance as to
the success of any such effort.
Additional Risks Associated With the Acquisition of Wahlco
Debt. As a result of the acquisition of Wahlco, the Company agreed to become the
co-obligor for the outstanding obligations of Wahlco. This debt is payable to
Wexford Management LLC ("Wexford") and several lenders affiliated with Wexford.
As of August 13, 1999, the debt amounted to slightly more than $5.7 million and
bears interest at the rate of 13% per annum, payable monthly. The debt became
due August 24, 1999 and, with the payment of an additional fee of $100,000, was
extended until November 22, 1999. A comprehensive security interest in all of
the Company's existing and future assets (to include the assets of its
significant direct and indirect subsidiaries in the US and UK) was granted in
connection with this Agreement. Failure to repay the debt or to secure
alternative financing would permit Wexford to assert its rights to the
underlying assets. There can be no assurance that the Company will be successful
in generating sufficient resources to repay the debt when it becomes due, or
that it will be successful in finding long-term replacement financing.
-7-
<PAGE>
Ability to Integrate the Two Businesses. The Company believes that effective
integration of Wahlco's business with the Company's can yield significant
synergies. Failure to realize the full potential of integration, or an
unanticipated delay in the integration could have a significant adverse impact
on the business, the results of operations and financial condition of the
Company. There can be no guarantee that the potential will be fully or partially
realized or that it will be realized in a timely manner.
Liquidity. As a result of the net losses incurred by the Company, the
acquisition of Wahlco and the significant cash demands required to meet ongoing
operational obligations (including certain restructuring events to be incurred
related to obtaining synergies from the Wahlco acquisition), the Company
continues to experience negative cash flow. The Company anticipates it will
continue to experience negative cashflows from operations and will need to issue
additional equity or debt to provide funds for operations and to repay debt
obligations that will become due and payable in 1999. There can be no guarantee
that sufficient funds will be generated to cover the negative cash flow
position. Failure to correct the situation will directly impact the ability to
secure new orders, the ability to attract and retain quality staff and the
ability to meet all existing obligations, all of which will have serious
negative consequences for the Company's business, results of operations and
financial condition.
Performance Bonds. Wahlco has experienced operating losses for each of the past
six years, and losses have continued in 1998. For 1998, unaudited losses totaled
approximately $6.4 million. In 1996 and 1997, the independent public accountants
of Wahlco qualified their report on the company's financial statements
expressing the substantial doubt as to the company's ability to continue as a
going concern. One result of these continued operating losses and the going
concern opinion is that customers have required letters of credit or performance
bonds prior to placing orders. There can be no guarantee that the Company will
be able to secure such credit instruments sufficient to meet customer
requirements and this can have a serious impact on winning new orders.
Potential Puerto Rican Tax Liability. The Company has determined that there may
be a tax liability associated with Wahlco's past repatriation of capital from
the Commonwealth of Puerto Rico. Wahlco has recorded a reserve of $1.1 million
for this potential liability. The Company is attempting to resolve this
potential tax liability and believes it will be able to settle this matter
without additional commitment above what is currently reserved by Wahlco.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the Shares.
All proceeds from the sale of the Shares will be for the account of the Selling
Stockholders, as described below. See "Selling Stockholders" and "Plan of
Distribution" described below.
-8-
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth as of the date of this Prospectus, the name of
each of the Selling Stockholders, the number of shares of Common Stock that each
such Selling Stockholder beneficially owns as of August 13, 1999, the number of
shares of Common Stock beneficially owned by each Selling Stockholder that may
be offered for sale from time to time by this Prospectus, and the number of
shares of Common Stock to be held by each such Selling Stockholder assuming the
sale of all the Common Stock offered hereby.
The Company has agreed to initially register 5,230,000 Shares for resale by the
Selling Stockholders holding Series E Preferred Stock. The number of Shares
shown in the following table as being offered by the Selling Stockholders
holding Series E Preferred Stock does not include such presently indeterminate
number of shares of Common Stock as may be issuable upon conversion of the
Series E Preferred Stock pursuant to the provisions thereof regarding
determination of the applicable conversion price which may fluctuate and certain
antidilution provisions which shares of Common Stock are, in accordance with
Rule 416 under the Securities Act, included in the Registration Statement on
Form S-3 of which this Prospectus forms a part. Such number also does not
include such presently indeterminate number of shares of Common Stock as may be
issued to the Selling Stockholders holding Series E Preferred Stock in
connection with the payment of share dividends.
The Shares being offered by the Selling Stockholders were acquired from the
Company (i) following conversion of the Series E Preferred Stock acquired from
the Company in a private placement transaction pursuant to the Securities
Purchase Agreement dated June 30, 1999 (the "Securities Purchase Agreement"),
and (ii) upon exercise of the Warrants, which warrants were issued by Thermatrix
in connection with the sale of the Series E Preferred Stock. For a description
of such securities, see "Description of Capital Stock." Each Selling Stockholder
that purchased the Series E Preferred Stock pursuant to the Securities Purchase
Agreement represented to the Company that it would acquire the Shares for
investment and with no present intention of distributing any such Shares except
pursuant to this Prospectus. Pursuant to its obligation under the Registration
Rights Agreement, the Company filed with the Commission, under the Securities
Act, a Registration Statement on Form S-3, of which this Prospectus forms a
part, with respect to the resale of the Shares from time to time on the Nasdaq
National Market or in privately-negotiated transactions and has agreed to use
its best efforts to keep such Registration Statement effective until the earlier
of (i) the date all holders may sell all of the Shares freely pursuant to Rule
144 without compliance with the registration requirement of the Securities Act,
or (ii) the date all of the Shares have been sold and no shares of Series E
Preferred Stock are outstanding.
Except as indicated, none of the Selling Stockholders has held any position or
office or had a material relationship with the Company or any of its affiliates
within the past three years other than as a result of the ownership of the
Company's Common Stock. The Company may amend or supplement this Prospectus from
time to time to update the disclosure set forth herein.
-9-
<PAGE>
<TABLE>
Shares of Common Stock
Beneficially Owned After
Shares Offering(1)(2)(4)
---------------------------
Shares of Beneficially Shares Being
Preferred Owned Prior to Offered(2)
Selling Stockholder Stock Owned Offering(1) (3)(4)(5) NUMBER PERCENT
------------------- ----------- ----------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Series E Preferred Holders
- --------------------------
The Shaar Fund Ltd................ 3,000 0 105,000 2,105,000 21.25
Technology Funding Venture
Partners III, L.P. (7).......... 1,000 1,171,817 35,000 1,873,484 19.37
CIBC WMV Inc. (8)................. 2,000 761,906 70,000 1,333,333 14.60
Subtotal 6,000 1,933,723 210,000 5,311,817 40.51
Warrant Holders
- ---------------
J. P. Turner...................... 0 0 60,000 60,000 *
Subtotal...................... 0 0 60,000 60,000 *
Total (9)....................... 6000 1,933,723 270,000 5,371,817 40.79
</TABLE>
___________________
* Less than one percent.
(1) Based upon 7,797,985 shares of Common Stock outstanding as of August 13,
1999. Except as otherwise noted herein, the number and percentage of shares
beneficially owned is determined in accordance with Rule 13d-3 of the
Exchange Act, and the information is not necessarily indicative of
beneficial ownership for any other purpose. Under such rule, beneficial
ownership includes any shares as to which the individual has sole or shared
voting power or investment power and also any shares which the individual
has the right to acquire within 60 days of the date of this Prospectus
through the exercise of any stock option or other right. Unless otherwise
indicated in the footnotes, each person has sole voting and investment
power (or shares such powers with his or her spouse) with respect to the
shares shown as beneficially owned.
(2) The number of Shares shown as being offered to the Selling Stockholders
represents shares of Common Stock issuable to the Selling Stockholders
assuming conversion, as of August 27, 1999, of all shares of Series E
Preferred Stock calculated using an assumed conversion price of $1.50. As
described in footnote 6 below, the actual number of shares of Common Stock
issuable upon conversion of the Series E Preferred Stock depends, subject
to certain limitations, upon the lower of (i) $5.00 and (ii) the arithmetic
mean of the 15 lowest closing bid prices during the 30 trading days
immediately prior to conversion and may be less than or greater than the
number of shares shown covered by this Prospectus. Accordingly, this
Prospectus covers the resale of such presently indeterminate number of
additional shares as may be issuable upon conversion of the Series E
Preferred Stock based upon fluctuations in the conversion price of the
Series E Preferred Stock and certain antidilution provisions.
(3) The number of shares of Common Stock offered hereby on behalf of the
Selling Stockholders holding Series E Preferred Stock have been determined
by agreement between the Company and such Selling Stockholders. Because the
number of shares that will ultimately be issued upon conversion of the
Series E Preferred Stock is dependent, subject to certain limitations, upon
the average of certain closing bid prices of the Common Stock prior to
conversion as described in footnote 6 below, such number of shares (and
therefore the number of Shares offered hereby) cannot be determined at this
time.
(4) Pursuant to the terms of the Registration Rights Agreement dated June 30,
1999 (the "Registration Rights Agreement"), the Company is required to
register for resale that number of shares of Common Stock which are equal
to the number of shares of Common Stock issuable upon conversion of the
outstanding number of shares of Series E Preferred Stock (the "Minimum
Registrable Shares") based on an assumed conversion price of $1.50.
(5) Shares offered pursuant to this registration statement also include shares
of Thermatrix Common Stock issued or issuable upon exercise of outstanding
Warrants.
(6) Each share of Series E Preferred Stock is convertible into that number of
shares of Common Stock equal to (i) the share's stated value of $1,000,
plus a premium in the amount of 8% per annum accruing from the date of
issuance through the date of conversion, divided by (ii) the conversion
price equal to the lesser of (i) $5.00, or if lower, (ii) a floating
conversion price equal to 85% (subject to downward adjustment upon certain
events, including if the
-10-
<PAGE>
Common Stock is not quoted on certain markets) of the arithmetic mean of
the 15 lowest closing bid prices for the Common Stock over 30 trading days
preceding the conversion date.
In accordance with the rights and restrictions of the Series E Preferred
Stock, unless waived by the Selling Stockholder, no Selling Stockholder may
convert the Series E Preferred Stock to the extent that the shares to be
received by such holder upon such conversion would cause such holder to own
more than 4.99% of the outstanding shares of Common Stock.
(7) Mr. Kokesh is a director of the Company and a managing general partner of
Technology Funding L.P. and, therefore, may be deemed to beneficially own
the shares held by Technology Funding Venture Partners III, L.P.
(8) Mr. Blumenstein is a director of the Company and is a director and officer
of CIBC WMV Inc. and, therefore, may be deemed to beneficially own the
shares held by CIBC WMV Inc. Mr. Blumenstein disclaims beneficial ownership
of such shares.
(9) Shares offered pursuant to this registration statement consist entirely of:
(i) shares issuable upon conversion of the Series E Preferred Stock, based
on the number of shares of Common Stock issuable upon conversion using an
assumed conversion price of $1.50 and (ii) shares issuable upon exercise of
the Warrants to purchase an aggregate of 270,000 shares of Common Stock.
PLAN OF DISTRIBUTION
The Shares covered by this Prospectus may be offered and sold from time to time
by the Selling Stockholders. The Selling Stockholders will act independently of
the Company in making decisions with respect to the timing, manner and size of
each sale. The Selling Stockholders may sell the Shares being offered hereby on
the Nasdaq National Market, or otherwise, at prices and under terms then
prevailing or at prices related to the then current market price or at
negotiated prices. The Shares may be sold by one or more of the following means
of distribution: (a) a block trade in which the broker-dealer so engaged will
attempt to sell Shares as agent, but may position and resell a portion of the
block as principal to facilitate the transaction; (b) purchases by a broker-
dealer as principal and resale by such broker-dealer for its own account
pursuant to this Prospectus; (c) an over-the-counter distribution in accordance
with the rules of the Nasdaq National Market; (d) ordinary brokerage
transactions and transactions in which the broker solicits purchasers; and (e)
in privately negotiated transactions. To the extent required, this Prospectus
may be amended and supplemented from time to time to describe a specific plan of
distribution. In connection with distributions of the Shares or otherwise, the
Selling Stockholders may enter into hedging transactions with broker-dealers or
other financial institutions. In connection with such transactions, broker-
dealers or other financial institutions may engage in short sales of the
Company's Common Stock in the course of hedging the positions they assume with
Selling Stockholders. The Selling Stockholders may also sell the Company's
Common Stock short and redeliver the shares to close out such short positions.
The Selling Stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions which require the delivery to
such broker-dealer or other financial institution of Shares offered hereby,
which Shares such broker-dealer or other financial institution may resell
pursuant to this Prospectus (as supplemented or amended to reflect such
transaction). The Selling Stockholders may also pledge Shares to a broker-dealer
or other financial institution, and, upon a default, such broker-dealer or other
financial institution, may effect sales of the pledged Shares pursuant to this
Prospectus (as supplemented or amended to reflect such transaction). In
addition, any Shares that qualify for sale pursuant to Rule 144 may be sold
under Rule 144 rather than pursuant to this Prospectus.
In effecting sales, brokers, dealers or agents engaged by the Selling
Stockholders may arrange for other brokers or dealers to participate. Brokers,
dealers or agents may receive commissions, discounts or concessions from the
Selling Stockholders in amounts to be negotiated prior to the sale. Such brokers
or 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, and any such commissions, discounts or concessions may be deemed to be
underwriting discounts or commissions under the Securities Act. The Company will
pay all
-11-
<PAGE>
expenses incident to the offering and sale of the Shares to the public other
than any commissions and discounts of underwriters, dealers or agents and any
transfer taxes.
In order to comply with the securities laws of certain states, if applicable,
the Shares must be sold in such jurisdictions only through registered or
licensed brokers or dealers. In addition, in certain states the Shares may not
be sold unless they have been registered or qualified for sale in the applicable
state or an exemption from the registration or qualification requirement is
available and there has been compliance thereof. The Company has advised the
Selling Stockholders that the anti-manipulation rules of Regulation M under the
Exchange Act may apply to sales of Shares in the market and to the activities of
the Selling Stockholders and their affiliates. In addition, the Company will
make copies of this Prospectus available to the Selling Stockholders and has
informed them of the need for delivery of copies of this Prospectus to
purchasers at or prior to the time of any sale of the Shares offered hereby. The
Selling Stockholders 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.
At the time a particular offer of Shares is made, if required, a Prospectus
Supplement will be distributed that will set forth the number of Shares being
offered and the terms of the offering, including the name of any underwriter,
dealer or agent, the purchase price paid by any underwriter, any discount,
commission and other item constituting compensation, any discount, commission or
concession allowed or reallowed or paid to any dealer, and the proposed selling
price to the public.
The sale of Shares by the Selling Stockholders is subject to compliance by the
Selling Stockholders with certain contractual restrictions with the Company.
There can be no assurance that the Selling Stockholders will sell all or any of
the Shares.
The Company has agreed to indemnify the Selling Stockholders and any person
controlling a Selling Stockholder against certain liabilities, including
liabilities under the Securities Act. The Selling Stockholders have agreed to
indemnify the Company and certain related persons against certain liabilities,
including liabilities under the Securities Act.
The Company has agreed with the Selling Stockholders to keep the Registration
Statement of which this Prospectus constitutes a part effective until all the
Shares are sold by the Selling Stockholders or all unsold Shares are freely
tradable subject to compliance with Rule 144 of the Securities Act.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 25,000,000 shares of
Common Stock and 5,000,000 shares of Preferred Stock. As of August 13, 1999,
there were 7,797,985 shares of Common Stock outstanding held of record by
approximately 1710 holders and 6,000 shares of Preferred Stock outstanding held
of record by 3 holders.
Common Stock
The holders of Common Stock are entitled to one vote per share on all matters to
be voted upon by the stockholders, except that, in the election of directors,
the holders are entitled to cumulative voting. Subject to preferences of
outstanding Preferred Stock, the holders of Common Stock are entitled to receive
ratably such dividends, if any, as may be declared from time to time by the
board of directors out of funds legally available for that purpose. In the event
of a liquidation, dissolution or winding up of the Company, the holders of
Common Stock are entitled to share ratably in all assets remaining after payment
of liabilities, subject to prior distribution rights of Preferred Stock, if any,
then outstanding. The Common Stock has no preemptive or
-12-
<PAGE>
conversion rights or other subscription rights. There are no redemption or
sinking fund provisions applicable to the Common Stock. All outstanding shares
of Common Stock are fully paid and non-assessable, and the shares of Common
Stock offered hereby will be fully paid and non-assessable.
Preferred Stock
The Board of Directors has the authority, without further action by the
stockholders, to issue the undesignated Preferred Stock in one or more series,
to fix the rights, preferences, privileges and restrictions granted to or
imposed upon any wholly unissued shares of undesignated Preferred Stock and to
fix the number of shares constituting any series and the designation of such
series. The purpose of authorizing the board of directors of Thermatrix to
determine such rights and preferences is to eliminate delays associated with a
stockholder vote on specific issuances. The issuance of Preferred Stock, while
providing flexibility in connection with possible acquisitions and other
corporate purposes, could, among other things, adversely affect the voting power
of holders of Thermatrix Common Stock and, under certain circumstances, make it
more difficult for a third party to gain control of Thermatrix.
The Company is authorized to issue 5,000,000 shares of undesignated Preferred
Stock, of which 12,000 shares have been designated Series E 8% Convertible
Preferred Stock (the "Series E Preferred Stock"), of which 6,000 shares are
issued and outstanding. The holders of Series E Preferred Stock are entitled to
receive dividends in kind in preference to the Common Stock at a rate of $80 per
share per annum, [and such amounts are included in the balance of Series E
Preferred Stock subject to conversion into Common Stock.] In the event of a
liquidation, dissolution or winding up of the Company, the holders of Series E
Preferred Stock are entitled to receive in cash out of the assets of the Company
in preference to any other series of Preferred Stock ranking junior to the
Series E Preferred Stock and to the holders of Common Stock in an amount equal
to $1,000 per share plus the aggregate amount of accumulated dividends in kind
per share. Payment must be made in full to holders of the Series E Preferred
Stock, and thereafter, any remaining assets may be distributed ratably among the
holders of Common Stock.
The shares of Series E Preferred Stock are convertible into shares of Common
Stock of the Company based on a conversion price of $5.00 per share or, if
lower, 85% of the arithmetic mean of the 15 lowest closing bid prices in the 30
days prior to the date of conversion; provided that, a holder will not be
permitted at anytime to convert an amount of Series E Preferred Stock which
would result in the holder owning more than 4.9% of the then outstanding capital
stock of the Company absent express waiver by such holder and provided, further
that fifty percent of the outstanding Series E Preferred Stock may only be
converted after November 27, 1999 and the remaining number may not be converted
until after January 26, 2000. In addition, the Company is not obligated to issue
more shares of Common Stock upon conversion in excess of the Share Limit absent
Approval or Exemption for Excess Share Limit Issuances. Subject to certain
conditions, the Company may elect to redeem in cash the Series E Preferred Stock
in whole or in part at 130% of the original purchase price, together with all
accrued and unpaid dividends if the last reported bid price of the Company's
Common Stock is less than $4.25 per share on the day of such election. Any
outstanding balance of Series E Preferred Stock is subject to mandatory
conversion three years from the date of issuance, subject to extension of such
conversion date upon certain events.
The holders of the Series E Preferred Stock are entitled to certain rights,
subject to certain limitations, including (i) a right of first refusal for two
years from the date of issuance to purchase a pro rata portion of any issuance
of equity or convertible securities of the Company and (ii) certain price-based
antidilution rights triggered upon certain events which would require the
Company to issue additional shares of Common Stock upon conversion of the Series
E Preferred Stock. The holders of the Series E Preferred Stock are also entitled
to a right to require the Company to (i) redeem all of the outstanding shares of
Series E Preferred Stock upon certain events including a change of control or
sale of all or substantially all of the Company's assets, a failure by the
Company to maintain the effectiveness of a registration statement for the sale
of the shares of Common
-13-
<PAGE>
Stock issuable upon conversion of the Series E Preferred Stock, a delisting of
the Company's Common Stock, or the notice to any holder by the Company of an
intention not to comply with a proper request for conversion of Series E
Preferred Stock into Common Stock, and (ii) redeem such number of shares of
Series E Preferred Stock for which the Company is unable to issue Common Stock
registered for resale under a registration statement pursuant to a request for
conversion because the Company does not have a sufficient number of shares of
authorized Common Stock, is prohibited under the rules of the Nasdaq Stock
Market from issuing shares in excess of the Share Limit, or fails to have a
sufficient number of shares of Common Stock registered for resale under an
effective registration statement. The redemption price for each share of Series
E Preferred Stock is 130% of $1,000 per share of Series E Preferred Stock plus
all accrued and unpaid dividends to the date of redemption. In the event the
Company does not obtain Approval or Exemption for Excess Share Limit Issuances,
the Company would be obligated to redeem that number of shares of Preferred
Stock for which holders requested conversion of shares of Common Stock in excess
of the Share Limit in cash at a price equal to 130% of $1,000 per share of
Series E Preferred Stock plus all accrued and unpaid dividends. A failure to
timely register and maintain an effective registration statement would also
result in certain monetary payments to the Selling Stockholders as liquidated
damages. The holders of the Series E Preferred Stock have no voting rights,
except as otherwise required under Delaware law or as expressly provided to
approve certain subsequent issuances of Series E Preferred Stock or to change
the rights, preferences or privileges of the Series E Preferred Stock. The
Shares issuable upon conversion of the Series E Preferred Stock are registered
on a Registration Statement on Form S-3 of which this Prospectus forms a part
pursuant to certain registration rights granted to holders of the Series E
Preferred Stock under the Registration Rights Agreement.
Warrants
In connection with the sale and issuance of Series E Preferred Stock to the
Selling Stockholders, the Company also issued Warrants to purchase 35,000 shares
of its common stock per each $1,000,000 invested, for an aggregate of 210,000
shares. The purchase price for each share of common stock is $5.31 per share.
The warrants have an expiration date of June 30, 2002. Additionally a finders
fee Warrant exercisable for 60,000 shares of its common stock at $5.03 per share
was also issued. The Shares issuable upon exercise of the Warrants listed in the
table under "Selling Stockholders" above are being registered on a Registration
Statement on Form S-3 of which this Prospectus forms a part pursuant to certain
registration rights granted to the holders of such Warrants. The Warrants are
subject to a net exercise provision by which the holder may exercise the Warrant
by surrendering Shares in lieu of paying the cash exercise price.
LEGAL MATTERS
The validity of the Shares offered hereby will be passed upon by Wilson Sonsini
Goodrich & Rosati, Professional Corporation, Palo Alto, California, counsel to
the Company.
EXPERTS
The consolidated financial statements of Thermatrix appearing in its Annual
Report on Form 10-K/A, as amended, for the year ended December 31, 1998, have
been audited by Arthur Andersen LLP, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
-14-
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No person is authorized in connection with any offering made by this
Prospectus to give any information or to make any representations not 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, any Selling
Stockholder or by any other person. This Prospectus does not constitute an offer
to sell or a solicitation of an offer to buy any security other than the Shares
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 of or offer to sell the Shares made
hereunder shall under any circumstances create any implication that there has
been no change in the affairs of the Company since the date hereof or that the
information contained herein is correct as of any time subsequent to the date
hereof.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information...................................................... 1
Incorporation Of Certain Documents By Reference............................ 1
The Company................................................................ 2
Risk Factors............................................................... 3
Use Of Proceeds............................................................ 8
Selling Stockholders....................................................... 9
Plan Of Distribution....................................................... 11
Description Of Capital Stock............................................... 12
Legal Matters.............................................................. 14
Experts.................................................................... 14
</TABLE>
THERMATRIX INC.
5,230,000 Shares
of
Common Stock
___________________________
PROSPECTUS
___________________________
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The Company will pay all expenses incident to the offering and sale to the
public of the shares being registered other than any commissions and discounts
of underwriters, dealers or agents and any transfer taxes. 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 and the Nasdaq
National Market listing fee.
SEC registration fee............................................ $ 4,595
NASDAQ National Market listing fee.............................. $ 17,500
Legal fees and expenses......................................... $ 25,000
Accounting fees and expenses.................................... $ 10,000
Miscellaneous expenses.......................................... $ 2,905
Total $ 60,000
========
Item 15. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of the State of Delaware provides
that a corporation has the power to indemnify a director, officer, employee or
agent of the corporation and certain other persons serving at the request of the
corporation in related capacities against amounts paid and expenses incurred in
connection with an action or proceeding to which he or she is or is threatened
to be made a party by reason of such position, if such person has acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interests of the corporation, and, in any criminal proceeding, if such
person had no reasonable cause to believe his or her conduct was unlawful;
provided that, in the case of actions brought by or in the right of the
corporation, no indemnification may be made with respect to any matter as to
which such person has been adjudged to be liable to the corporation unless and
only to the extent that the adjudicating court determines that such
indemnification is proper under the circumstances.
The Registrant's Certificate of Incorporation provides that no director will be
personally liable to the Registrant or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability (i) for any breach
of the director's duty of loyalty to the Registrant or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) for authorizing the payment of a dividend
or repurchase of stock or (iv) for any transaction in which the director derived
an improper personal benefit.
The Registrant's by-laws provide that the Registrant must indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending, or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
Registrant) by reason of the fact that he or she is or was a director or officer
of the Registrant, or that such director or officer is or was serving at the
request of the Registrant as a director, officer, employee or agent of another
corporation, partnership, joint venture trust or other enterprise (collectively
"Agent"), against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement (if such settlement is approved in advance by the
Registrant, which approval may not be unreasonably withheld) actually and
reasonably
II-1
<PAGE>
incurred by him or her in connection with such action, suit or proceeding if he
or she acted in good faith and in a manner he or she reasonably believed to be
in or not opposed to the best interests of the Registrant, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, will not, of itself, create a presumption that the person did
not act in good faith and in a manner which he or she reasonably believed to be
in or not opposed to the best interests of the Registrant, and with respect to
any criminal action or proceeding, had reasonable cause to believe that his or
her conduct was unlawful.
The Registrant's by-laws provide further that the Registrant must indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Registrant to procure a judgment in its favor by reason of the fact that he or
she is or was an Agent against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection with the defense or settlement
of such action or suit if he or she acted in good faith and in a manner he or
she reasonably believed to be in or not opposed to the best interests of the
Registrant, provided that no indemnification may be made in respect of any
claim, issue or matter as to which such person has been adjudged to be liable to
the Registrant unless and only to the extent that the Delaware Court of Chancery
or the court in which such action or suit was brought determines upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Delaware Court of Chancery or such other
court deems proper.
Pursuant to its by-laws, the Registrant has the power to purchase and maintain a
directors and officers liability policy to insure its officers and directors
against certain liabilities.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, the registrant has been
informed 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.
Item 16. Exhibits.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
10.1(1) Securities Purchase Agreement dated as of June 30, 1999, by
and between Thermatrix Inc., and each of The Shaar Fund
Ltd., Technology Funding Venture Partners III, L.P. and
CIBC WBV Inc.
10.2(1) Registration Rights Agreement dated as of June 30, 1999, by
and between Thermatrix Inc., and each of The Shaar Fund
Ltd., Technology Funding Venture Partners III, L.P. and
CIBC WBV Inc.
10.3(1) Certificate of Designations, Preferences and Rights of
Series E 8% Convertible Preferred Stock of Thermatrix Inc.,
filed with the Office of the Secretary of State of the
State of Delaware on July 1, 1999.
10.4(1) Common Stock Purchase Warrant issued to each of the Shaar
Fund Ltd., Technology Funding Venture Partners III , and
CIBC WMV Inc.
23.1(2) Consent of Independent Accountants.
23.2 Consent of Counsel (included in Exhibit 5.1).
24.1 Power of Attorney (included on page II-5).
II-2
<PAGE>
(1) Incorporated by reference to the Company's Report on Form
8-K filed with the Commission on August 27, 1999.
(2) To be supplied by amendment.
Item 17. Undertakings.
A. Undertaking Pursuant to Rule 415
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:
(i) to include any prospectus required by Section
10(a)(3) Securities Act of 1933 (the "Securities Act");
(ii) to reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change in
the information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from
the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the SEC pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee"
table in the effective Registration Statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
provided, however, that paragraphs A(l)(i) and A(l)(ii) do not apply
if the Registration Statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of
1934 (the "Exchange Act") that are incorporated by reference in the
Registration Statement;
(2) That, for the purpose of determining any liability
under the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof;
(3) To remove from registration by means of a post-
effective amendment any of the securities being registered which remain
unsold at the termination of this offering.
B. Undertaking Regarding Filings Incorporating Subsequent Exchange Act
Documents by Reference.
The undersigned Registrant hereby undertakes 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
II-3
<PAGE>
the Exchange Act (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. Undertaking in Respect of Indemnification.
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-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Palo Alto, California, on this 27th day of August
1999.
THERMATRIX INC.
By: /s/ JOHN T. SCHOFIELD
---------------------
John T. Schofield,
Chairman of the Board
President and CEO
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints John T.
Schofield and Daniel S. Tedone, jointly and severally, as attorneys-in-fact,
each with the power of substitution, for him or her in any and all capacities,
to sign any amendment to this Registration Statement and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting to said attorneys-in-fact, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact or any of them, or their or his
or her substitute or substitutes, may lawfully do or cause to be done by virtue
hereof. Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ JOHN T. SCHOFIELD Chairman of the Board, President and Chief August 27, 1999
----------------------
John T. Schofield Executive Officer (Principal Executive Officer)
/s/ DANIEL S. TEDONE Executive Vice President and Chief Financial August 27, 1999
- -----------------------
Daniel S. Tedone Officer (Principal Financial and Accounting Officer)
/s/ ROBI BLUMENSTEIN Director August 27, 1999
- -----------------------
Robi Blumenstein
/s/ CHARLES R. KOKESH Director August 2 7, 1999
- -----------------------
Charles R. Kokesh
/s/ FRANK R. POPE Director August 27, 1999
- -----------------------
Frank R. Pope
/s/ JAMES M. STROCK Director August 27, 1999
- -----------------------
James M. Strock
/s/ JOSEPH W. SUTTON Director August 27, 1999
- -----------------------
</TABLE>
II-5
<PAGE>
<TABLE>
<S> <C> <C>
Joseph W. Sutton
/s/ JOHN M. TOUPS Director August 27, 1999
- -----------------------
John M. Toups
</TABLE>
II-6
<PAGE>
INDEX TO EXHIBITS
-----------------
Exhibit
Number Description
- --------------------------------------------------------------------------------
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
10.1(1) Securities Purchase Agreement dated as of June 30, 1999, by and
between Thermatrix Inc. and each of the Shaar Fund Ltd., Technology
Funding Venture Partners III, L.P. and CIBC WMV Inc.
10.2(1) Registration Rights Agreement dated as of June 30, 1999, by and
between Thermatrix Inc. and each of the Shaar Fund Ltd., Technology
Funding Venture Partners III, L.P. and CIBC WMV Inc.
10.3(1) Certificate of Designations, Preferences and Rights of Series E 8%
Convertible Preferred Stock of Thermatrix Inc., filed with the Office
of the Secretary of State of the State of Delaware on July 1, 1999.
10.4(1) Common Stock Purchase Warrant issued to each of the Shaar Fund Ltd.,
Technology Funding Venture Partners III, L.P. and CIBC WBV Inc.
23.1(2) Consent of Independent Accountants.
23.2 Consent of Counsel (included in Exhibit 5.1).
24.1 Power of Attorney (included on page II-5).
_______________________
(1) Incorporated by reference to the Company's Report on Form 8-K filed with the
Commission on August 27, 1999.
(2) To be supplied by amendment.
II-7
<PAGE>
Exhibit 5.1
-----------
August 27, 1999
Thermatrix Inc.
2025 Gateway Place, Suite 132
San Jose, California 95110
Re: Registration Statement on Form S-3
----------------------------------
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-3 to be filed by you with
the Securities and Exchange Commission on or about the date hereof (the
"Registration Statement") in connection with the registration under the
Securities Act of 1933, as amended, of up to 5,230,000 shares of your Common
Stock (the "Shares"). All of the Shares are issued and outstanding and may be
offered for sale for the benefit of the selling stockholders named in the
Registration Statement. We understand that the Shares are to be sold from time
to time in the over-the-counter-market at prevailing prices or as otherwise
described in the Registration Statement. As your legal counsel, we have also
examined the proceedings taken by you in connection with the issuance of the
Shares.
It is our opinion that the Shares are 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 any amendments thereto.
Very truly yours,
/s/ WILSON SONSINI GOODRICH & ROSATI
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
