THRUSTMASTER INC
424A, 1997-11-26
COMPUTER PERIPHERAL EQUIPMENT, NEC
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<PAGE>
                 SUBJECT TO COMPLETION, DATED NOVEMBER 24, 1997
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.
<PAGE>
                                                   FILED PURSUANT TO RULE 424(a)
                                                   REGISTRATION NUMBER 333-40323
 
                                1,500,000 Shares
 
                                     [LOGO]
 
                                  Common Stock
 
    Of the 1,500,000 shares of Common Stock offered hereby, 1,200,000 shares are
being offered by ThrustMaster, Inc. ("ThrustMaster" or the "Company") and
300,000 shares are being offered by a shareholder of the Company (the "Selling
Shareholder"). The Company will not receive any proceeds from the sale of the
shares being sold by the Selling Shareholder. See "Principal and Selling
Shareholders."
 
    The Company's Common Stock is traded on the Nasdaq National Market under the
symbol "TMSR." On November 21, 1997, the last reported sale price of the Common
Stock as reported on the Nasdaq National Market was $15.00 per share. See "Price
Range of Common Stock."
 
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE
            "RISK FACTORS" COMMENCING ON PAGE 6 OF THIS PROSPECTUS.
 
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.
 
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
<S>                             <C>                 <C>                 <C>                 <C>
                                                                                                 PROCEEDS
                                      PRICE            UNDERWRITING        PROCEEDS TO          TO SELLING
                                    TO PUBLIC          DISCOUNTS(1)         COMPANY(2)         SHAREHOLDER
- --------------------------------------------------------------------------------------------------------------
Per Share.....................          $                   $                   $                   $
- -------------------------------------------------------------------------------------------
Total(3)......................  $                   $                   $                   $
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
</TABLE>
 
(1) See "Underwriting" for indemnification arrangements with the several
    Underwriters.
 
(2) Before deducting expenses payable by the Company, estimated at $250,000.
 
(3) The Company has granted the Underwriters a 45-day option to purchase up to
    225,000 additional shares of Common Stock solely to cover over-allotments,
    if any. If such option is exercised in full, the total Price to Public,
    Underwriting Discounts and Proceeds to Company will be $        , $
    and $        , respectively. See "Underwriting."
 
    The shares of Common Stock are offered by the several Underwriters named
herein subject to receipt and acceptance by them and subject to their right to
reject any order in whole or in part. It is expected that delivery of the
certificates representing such shares will be made against payment therefor at
the offices of Van Kasper & Company, in San Francisco, California on or about
December   , 1997.
 
                              VAN KASPER & COMPANY
 
                                December  , 1997
<PAGE>
                                     [LOGO]
 
                             PRODUCT AND PACKAGING
                              DISPLAY PHOTOGRAPHS
                                     Text:
 
                 Innovative Leader in Computer Game Controllers
 
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
 
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY ENGAGE IN PASSIVE MARKET
MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN
ACCORDANCE WITH RULE 103 OF REGULATION M. SEE "UNDERWRITING."
 
                                       2
<PAGE>
                               PROSPECTUS SUMMARY
 
    THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION, INCLUDING "RISK FACTORS" AND THE CONSOLIDATED FINANCIAL STATEMENTS
AND RELATED NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS.
 
                                  THE COMPANY
 
    ThrustMaster designs, develops, manufactures and markets a diversified line
of innovative and technologically advanced game controllers for the home
personal computer ("PC") market. The Company has established
ThrustMaster-Registered Trademark- as a brand name recognized for quality,
value, durability and ease of use. ThrustMaster products enhance the enjoyment
of the PC entertainment experience and appeal to a wide variety of users, from
occasional game players to avid enthusiasts. The Company's products include
racing wheels, joysticks, gamepads and flight simulation controllers.
ThrustMaster products are available in over 5,000 retail outlets in North
America and Europe, including Babbage's, Etc.; Best Buy Co., Inc.; Circuit City
Stores, Inc.; CompUSA, Inc.; Computer City; The Electronic Boutique, Inc. and
Sam's Club.
 
    From 1992 to 1996, the Company's annual revenues increased from $2.7 million
to $30.8 million and annual net income increased from $0.4 million to $2.3
million. For the nine months ended September 30, 1997 compared to the nine
months ended September 30, 1996, revenues increased 52% to $23.9 million and net
income increased 74% to $1.5 million.
 
    Over the last several years, significant technological advances in the home
PC, such as improvements in processor speeds and graphics capabilities, have
enabled software developers to create increasingly sophisticated entertainment
programs with real-time interaction that offer greater realism and excitement.
As a result, the PC has become a viable home entertainment platform. According
to IDC/LINK, an industry research firm, the installed base of home PCs in the
United States will reach 50 million units by the end of 1997, and will increase
to 70 million units by 2001. Annual shipments of new home PCs are projected to
increase from 10.4 million units in 1996 to 18.7 million units in 2001. Unit
shipments of software titles are projected to grow from 48 million in 1996 to
over 126 million in 2001, a compound annual growth rate of approximately 21%.
The Company believes that sales of game controllers are directly correlated with
sales of both PCs and entertainment software titles.
 
    Working with leading software publishers, such as Electronic Arts, Inc.,
Activision, Inc., Sierra On-Line, Inc., GT Interactive Software Corp. and Virgin
Interactive Entertainment, Inc., the Company often bundles its game controllers
with popular software titles. These bundling arrangements enable the Company to
deliver increased value to consumers, and to differentiate its products from
competing products. The Company offers a variety of bundled game controller
packages which allow for differentiation among retailers that carry the
Company's products. The Company also utilizes recognized brand names, such as
NASCAR-Registered Trademark-, TOP GUN-TM- and NASA, to enhance consumer appeal.
 
    The Company's objective is to be a leading provider of controllers to the
interactive electronic entertainment industry. In order to achieve this
objective, the Company's business strategy is to: (i) market high quality
controllers that provide value and durability; (ii) leverage popular game titles
and brands to increase product demand; (iii) foster strategic relationships with
hardware manufacturers; (iv) develop and introduce innovative products; and (v)
pursue strategic acquisitions of complementary products or businesses.
 
    The Company was incorporated in Oregon in 1990. The Company's principal
executive offices are located at 7175 NW Evergreen Parkway, Suite 400,
Hillsboro, Oregon 97124-5839, and its telephone number is (503) 615-3200.
 
                                       3
<PAGE>
                                  THE OFFERING
 
<TABLE>
<S>                                               <C>
Common Stock offered by the Company.............  1,200,000 shares
 
Common Stock offered by the Selling
  Shareholder...................................  300,000 shares
 
Total Common Stock offered......................  1,500,000 shares
 
Common Stock to be outstanding after this
  offering......................................  5,493,588 shares(1)
 
Use of proceeds.................................  For the repayment of indebtedness and for
                                                  working capital and general corporate
                                                  purposes, which may include acquisitions
                                                  or joint ventures.
 
Nasdaq National Market Symbol...................  TMSR
</TABLE>
 
- ------------------------
 
(1) Based on shares outstanding as of November 1, 1997. Excludes (i) 900,868
    shares issuable upon exercise of outstanding stock options under the
    Company's 1994 Stock Option Plan, 1990 Stock Option Plan and Directors'
    Nonqualified Stock Option Plan, with a weighted average exercise price of
    $4.56 per share, (ii) 193,342 shares reserved for future grants under such
    stock options plans, and (iii) 117,150 shares issuable upon the exercise of
    outstanding warrants issued in connection with the Company's initial public
    offering, with an exercise price of $7.57 per share. See "Management--
    Incentive Compensation and Benefit Plans" and "Description of Capital
    Stock--Warrants."
 
                            ------------------------
 
    EXCEPT AS OTHERWISE NOTED, ALL INFORMATION IN THIS PROSPECTUS (I) ASSUMES NO
EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION AND (II) GIVES EFFECT TO A
3% STOCK DIVIDEND ON THE COMMON STOCK DECLARED ON JANUARY 21, 1997, AS IF SUCH
DIVIDEND HAD BEEN DECLARED AND PAID PRIOR TO THE PERIODS COVERED HEREBY. SEE
"UNDERWRITING." UNLESS THE CONTEXT OTHERWISE REQUIRES, REFERENCES IN THIS
PROSPECTUS TO THE "COMPANY" OR "THRUSTMASTER" ARE TO THRUSTMASTER, INC., AND ITS
WHOLLY-OWNED SUBSIDIARY. THE THRUSTMASTER LOGO AND THRUSTMASTER ARE AMONG THE
COMPANY'S TRADEMARKS. THIS PROSPECTUS INCLUDES OTHER TRADEMARKS AND TRADE NAMES
OF THE COMPANY AND OF OTHER COMPANIES.
 
                                       4
<PAGE>
                      SUMMARY CONSOLIDATED FINANCIAL DATA
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                                                 NINE MONTHS ENDED
                                                       YEARS ENDED DECEMBER 31,                    SEPTEMBER 30,
                                         -----------------------------------------------------  --------------------
                                           1992       1993       1994       1995       1996       1996       1997
                                         ---------  ---------  ---------  ---------  ---------  ---------  ---------
                                                                                                    (UNAUDITED)
<S>                                      <C>        <C>        <C>        <C>        <C>        <C>        <C>
INCOME STATEMENT DATA:
Revenues...............................  $   2,655  $   8,214  $  13,582  $  19,415  $  30,821  $  15,745  $  23,930
Cost of goods sold.....................      1,438      4,290      8,007     11,815     19,592      9,727     14,814
                                         ---------  ---------  ---------  ---------  ---------  ---------  ---------
  Gross profit.........................      1,217      3,924      5,575      7,600     11,229      6,018      9,116
Operating expenses.....................        687      2,581      3,804      5,956      8,066      5,032      7,156
                                         ---------  ---------  ---------  ---------  ---------  ---------  ---------
Income from operations.................        530      1,343      1,771      1,644      3,163        986      1,960
Interest income........................     --         --         --            404        466        324        284
                                         ---------  ---------  ---------  ---------  ---------  ---------  ---------
Income before income taxes.............        530      1,343      1,771      2,048      3,629      1,310      2,244
Provision for income taxes(1)..........        169        456        633        687      1,370        472        790
                                         ---------  ---------  ---------  ---------  ---------  ---------  ---------
Net income(1)..........................  $     361  $     887  $   1,138  $   1,361  $   2,259  $     838  $   1,454
                                         ---------  ---------  ---------  ---------  ---------  ---------  ---------
                                         ---------  ---------  ---------  ---------  ---------  ---------  ---------
Net income per share(1)................  $    0.25  $    0.33  $    0.38  $    0.32  $    0.49  $    0.18  $    0.30
                                         ---------  ---------  ---------  ---------  ---------  ---------  ---------
                                         ---------  ---------  ---------  ---------  ---------  ---------  ---------
Weighted average shares outstanding....      1,431      2,686      2,957      4,293      4,647      4,582      4,807
                                         ---------  ---------  ---------  ---------  ---------  ---------  ---------
                                         ---------  ---------  ---------  ---------  ---------  ---------  ---------
</TABLE>
 
<TABLE>
<CAPTION>
                                                                                            SEPTEMBER 30, 1997
                                                                                         -------------------------
                                                                                          ACTUAL    AS ADJUSTED(2)
                                                                                         ---------  --------------
                                                                                                (UNAUDITED)
<S>                                                                                      <C>        <C>
BALANCE SHEET DATA:
Working capital........................................................................  $  15,642    $   32,132
Total assets...........................................................................     22,844        39,334
Total liabilities......................................................................      5,319         5,319
Total shareholders' equity.............................................................     17,525        34,015
</TABLE>
 
- ------------------------
 
(1) The provision for income taxes, net income and net income per share include
    a pro forma income tax adjustment to reflect the Company as a C corporation,
    rather than an S corporation, for federal and state income tax purposes for
    the years ended December 31, 1992, 1993, 1994 and 1995. See Notes 2 and 12
    to Consolidated Financial Statements.
 
(2) As adjusted to reflect the sale by the Company of 1,200,000 shares of Common
    Stock in connection with this offering.
 
                                       5
<PAGE>
                                  RISK FACTORS
 
    IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING RISK
FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING THE COMPANY AND ITS
BUSINESS BEFORE PURCHASING SHARES OF THE COMMON STOCK OFFERED HEREBY. THIS
PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS, WITHIN THE MEANING OF SECTION
27A OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), THAT
INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS
THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES ARE DISCUSSED BELOW.
 
NEW PRODUCTS AND TECHNOLOGICAL CHANGE
 
    The Company believes that its future growth will depend on its ability to
develop and introduce new products that keep pace with technological
developments, maintain and enhance its existing product line, respond to
evolving customer preferences, and achieve market acceptance. The Company
occasionally has experienced, and may in the future experience, delays in the
development and introduction of new products. The success of new products and
product enhancements depends on a variety of factors, including product
selection and specification, timely and efficient completion of product design,
cost-effective implementation of manufacturing and assembly processes, and
effective sales and marketing efforts through the Company's distribution
channels. Any failure by the Company to anticipate or respond adequately to
technological developments or customer preferences, or any significant delays in
product development or introduction, could have a material adverse effect on the
Company's business, financial condition and results of operations.
 
COMPETITION
 
    The markets in which the Company participates are highly competitive, and
the Company expects that it will face increased competition in the future. The
Company's principal competitors include Microsoft Corporation, Advanced Gravis
Computer Technology, Ltd., CH Products, Logitech International S.A. and InterAct
Accessories, many of which have substantially greater financial, technical and
marketing resources than the Company. The Company believes that the principal
competitive factors in the market for PC game controllers include price,
quality, product features, ease of use, durability, reputation and compatibility
with PC games. The Company's competitors could hinder sales and market
acceptance of the Company's products by developing products that are more
appealing than the Company's products or that render the Company's technology
and products obsolete or noncompetitive. Moreover, increased competitive
pressure could lead to intensified price-based competition, which has in the
past created, and could in the future create, margin pressures and which could
have a material adverse effect on the Company's business, financial condition
and results of operations.
 
OFFSHORE MANUFACTURING; DEPENDENCE ON MANUFACTURING CONTRACTORS
 
    Virtually all of the Company's products are manufactured in China and Taiwan
by independent contractors. The Company's use of offshore manufacturing is
subject to the customary risks of doing business abroad, including fluctuations
in the value of currencies, tariffs, export duties, quotas, restrictions on the
transfer of funds, work stoppages and political instability.
 
    For the nine months ended September 30, 1997, approximately 90% of the
Company's products were manufactured through a single vendor utilizing factories
located in Taiwan and the Guangdong province of China. Manufacturing by such
vendor at one factory accounted for more than half of the Company's production.
If any of the manufacturing facilities utilized by the Company become
unavailable, or if the manufacturing operations at these facilities are slowed,
interrupted or terminated, the Company's business, financial condition and
results of operations could be materially and adversely affected. The Company
may not be able to enter into alternative third-party manufacturing arrangements
on terms satisfactory to the Company, in a timely fashion, or at all, if
alternative arrangements are needed. In addition, although the
 
                                       6
<PAGE>
Company seeks to control the quality of its products manufactured offshore,
quality problems have occasionally arisen, and may in the future arise, that are
beyond the Company's direct control. The use of independent manufacturing
contractors to manufacture and assemble products offshore also has required the
Company to increase production lead times and has reduced the Company's ability
to adjust production in response to short-term market conditions.
 
SEASONALITY; VARIABILITY IN PERIODIC OPERATING RESULTS
 
    The Company's business is seasonal, reflecting traditional retail
seasonality patterns. Sales in the retail PC game entertainment industry are
significantly higher in the fourth calendar quarter of each year than in each of
the preceding three quarters. In 1996, nearly 50% of the Company's revenues were
earned in the fourth quarter. In addition to seasonality, the Company is likely
to experience significant fluctuations in future periodic operating results due
to a number of factors, including the size or timing of customer orders, delays
in product enhancements and new product introductions by the Company, quality
control difficulties, market acceptance of new products, product returns,
customer order deferrals in anticipation of new products or enhancements,
reduction in demand for existing products as a result of new product
introductions by the Company or others, and general economic conditions. Any of
these factors could cause quarterly or other periodic operating results to vary
significantly from prior periods. The Company's customers generally order on an
as-needed basis, and the Company typically does not have a significant order
backlog at the beginning of each quarter. Because quarterly revenues are
dependent largely on the volume and timing of orders received during such
quarter, which may be difficult to forecast, and the Company's operating
expenses are based in part on its estimate of future revenues, the Company may
be unable to adjust its spending in a timely manner to compensate for a
shortfall in revenues.
 
POTENTIAL INABILITY TO MANAGE FUTURE ACQUISITIONS
 
    The Company intends to supplement its internal growth through the
acquisition of complementary product lines and businesses. The Company's
management has limited experience in identifying, completing, and integrating
acquisitions. The Company's ability to grow through acquisitions depends on,
among other things, the Company's ability (i) to identify complementary product
lines or businesses, (ii) to acquire them on terms that management considers
attractive, and (iii) to integrate acquired complementary product lines or
businesses into its organization. Any acquisitions would be accompanied by the
risks commonly encountered in such transactions, including difficulties
associated with assimilating the personnel and operations of an acquired
business, the Company's potential inability to achieve expected financial
results or strategic goals for the acquired product line or business, the
potential disruption of the Company's ongoing business, and the diversion of
management and other Company resources. The Company has not identified any
specific acquisition candidate. The Company may not be able to identify
acquisition opportunities or to successfully overcome the risks and challenges
encountered in completing and integrating such acquisitions. The Company's
failure to implement its acquisition strategy could reduce the Company's
financial performance. The Company's failure to execute successfully its
acquisition strategy could have a material adverse effect on the Company's
business, financial condition and results of operations.
 
BROAD DISCRETION OF MANAGEMENT REGARDING USE OF PROCEEDS
 
    Of the net proceeds to the Company from the sale of the Common Stock in this
offering at an assumed public offering price of $15.00 per share, approximately
$12.5 million, or 75.8% (approximately $15.6 million, or 79.6%, if the
Underwriters' over-allotment option is exercised in full), is expected to be
allocated to working capital and general corporate purposes. Accordingly,
management will have broad discretion as to the application of such net
proceeds. Pending any specific application, the Company expects to invest the
net proceeds in short-term, interest-bearing, investment grade securities. The
return
 
                                       7
<PAGE>
on the Company's investment on any portion of the net proceeds that is not
immediately used may be less than that which would be realized were such funds
invested in the Company's business.
 
CUSTOMER CONCENTRATION
 
    The Company anticipates that a significant portion of the Company's revenues
and accounts receivable will continue to be derived from a limited number of key
customers. For the nine months ended September 30, 1997, two customers accounted
for an aggregate of approximately 28% of the Company's revenues. The loss of one
or more of its key customers or any significant reduction in orders by such
customers could have a material adverse effect on the Company's business,
financial condition and results of operations.
 
DEPENDENCE UPON KEY PERSONNEL
 
    The Company's future success depends to a significant extent on the
continued service of its key research and development, manufacturing, management
and marketing and sales personnel. Competition for such employees is intense,
and the Company may be unable to attract, motivate and retain highly qualified
employees. The Company does not have employment or non-competition agreements
with, or maintain key man life insurance for, any of its employees. Any failure
to attract, motivate or retain key Company personnel could have a material
adverse effect on the Company's business, financial condition and results of
operations.
 
INTELLECTUAL PROPERTY RIGHTS
 
    The Company regards certain aspects of its products as proprietary and
relies on a combination of copyright and trademark laws, patents, trade secrets
and confidentiality procedures and agreements to protect its proprietary rights.
Despite the Company's efforts to safeguard its proprietary rights, it may not be
successful in doing so or the Company's competitors may independently develop or
patent technologies that are substantially equivalent or superior to or
otherwise circumvent the Company's proprietary rights. Confidentiality
agreements may not provide meaningful protection for the Company's trade secrets
or other proprietary information in the event of any unauthorized use,
misappropriation or disclosure of such information by the Company's employees,
consultants or business partners. The Company believes that its products,
processes and trademarks do not infringe on the rights of third parties;
however, third parties may assert infringement or other related claims against
the Company in the future. Any infringement claim or related litigation against
the Company, or any challenge to the validity of the Company's own intellectual
property rights, and the expense of defending the same, could materially and
adversely affect the Company's business, financial condition and results of
operations.
 
DEPENDENCE UPON SOLE OR LIMITED SUPPLIERS
 
    The Company is dependent on suppliers for components, and certain key
components used in the Company's products are obtained from a sole or limited
group of suppliers. The Company's reliance on these suppliers involves several
risks, including a potential inability to obtain an adequate supply of required
components and reduced control over pricing and timely delivery of components
and finished products. Any reduction or interruption of or delay in supply could
materially and adversely affect the Company. The Company has in the past
encountered, and may in the future encounter, shortages of supplies and delays
in deliveries of necessary components. Substantially all components used in the
Company's products are purchased from sources located outside the United States.
Trading policies adopted by the United States or foreign governments could
restrict the availability of components or increase the cost of obtaining them.
Any significant increase in component prices or decrease in component
availability could materially and adversely affect the Company's business,
financial condition and results of operations.
 
                                       8
<PAGE>
INTERNATIONAL SALES
 
    The Company expects to focus an increasing amount of its sales efforts in
international markets. The Company expects that any international sales will be
subject to the normal risks of foreign sales, such as protective tariffs, export
and import controls, transportation delays and interruptions, and changes in
demand resulting from fluctuating exchange rates. Although most of the Company's
international revenues currently are earned in U.S. dollars, a growing portion
is earned in other currencies, primarily German marks and British pounds
sterling. To the extent revenues are earned in currencies other than U.S.
dollars, net income may fluctuate due to changes in the value of the U.S. dollar
relative to such other currencies. The Company has not entered into any forward
exchange contracts or other hedging activities in anticipation of foreign
currency fluctuations, but may do so in the future.
 
VOLATILITY OF STOCK PRICE
 
    The Common Stock is traded on the Nasdaq National Market, which has
experienced, and is likely to continue to experience, significant price and
volume fluctuations that could adversely affect the market price of the Common
Stock regardless of the Company's operating performance. The Company believes
that factors such as operating results, announcements of technological
innovations or new product introductions by the Company or its competitors,
changes in or actual results varying from estimates by securities analysts, the
operating and stock price performance of other companies that investors may deem
comparable to the Company, announcements by software manufacturers and other
events or factors could contribute to the volatility of the price of the Common
Stock and cause it to fluctuate significantly. Market prices for high technology
companies in particular have experienced extreme volatility, often unrelated to
the operating performance of such companies. These factors, as well as general
economic conditions such as recessions or high interest rates, may adversely
affect the market price of the Common Stock.
 
SHARES ELIGIBLE FOR FUTURE SALE
 
    Sales of substantial amounts of Common Stock in the public market by
existing shareholders or further issuances of capital stock by the Company
following this offering (or the perception that such sales or issuances might
occur) could adversely affect the price of the Common Stock. All of the
approximately 5,493,588 shares of Common Stock that will be outstanding
immediately following completion of this offering (assuming no exercise of
options or warrants after November 1, 1997) will be freely tradable under
federal securities laws to the extent that they are not held by affiliates of
the Company. The Company and certain of its directors, officers and shareholders
have agreed with the Underwriters that, for a period of 80 days after the date
of this Prospectus, they will not offer, sell, contract to sell or grant any
option to purchase or otherwise dispose of any of the 1,330,832 shares of Common
Stock owned by them, without the prior written consent of Van Kasper & Company,
which will not be unreasonably withheld, other than shares of Common Stock
offered hereby, grants of options by the Company in the ordinary course pursuant
to its stock option plans, and sales of up to 40,000 shares of Common Stock
commencing 60 days after completion of this offering. Additionally, as of
November 1, 1997, 1,018,018 shares were issuable upon the exercise of
outstanding options and warrants, and 193,342 shares were reserved for future
grants under the Company's stock option plans. See "Description of Capital
Stock--Warrants," "Shares Eligible for Future Sale," "Management--Incentive
Compensation and Benefit Plans" and "Underwriting."
 
POTENTIAL ADVERSE IMPACT OF ISSUANCE OF PREFERRED STOCK; ANTITAKEOVER EFFECT OF
  OREGON LAW AND THE COMPANY'S AMENDED AND RESTATED BYLAWS
 
    The Company's Board of Directors has the authority to issue up to 5,000,000
shares of Preferred Stock and to fix the rights, preferences, privileges and
restrictions of such shares without any further vote or action by the Company's
shareholders. The potential issuance of Preferred Stock may have the effect of
delaying, deferring or preventing a change in control of the Company, may
discourage bids for the Common Stock at a premium over the market price of the
Common Stock, and may adversely affect the
 
                                       9
<PAGE>
market price of, and the voting and other rights of the holders of, Common
Stock. Moreover, certain "business combination" provisions of Oregon law could
make it more difficult to consummate a merger or tender offer involving the
Company, even if such event could be beneficial, in the short term, to the
interests of the shareholders. Such provisions may discourage acquisition bids
for the Company or could limit the price that certain investors might be willing
to pay in the future for shares of the Company's Common Stock. In addition, the
Company's Amended and Restated Bylaws provide for a classified Board of
Directors serving staggered three-year terms. A classified Board may have the
effect of deferring or discouraging a change of control of the Company. See
"Description of Capital Stock."
 
                                       10
<PAGE>
                                USE OF PROCEEDS
 
    The net proceeds to the Company from the sale of the Common Stock in this
offering at an assumed public offering price of $15.00 per share, after
deducting underwriting discounts and estimated offering expenses payable by the
Company, are estimated to be approximately $16.5 million (approximately $19.6
million if the Underwriters' over-allotment option is exercised in full). The
Company will not receive any proceeds from the Common Stock being sold by the
Selling Shareholder.
 
    Of the estimated net proceeds, the Company expects to use (i) a portion,
anticipated to be approximately $4.0 million, to repay amounts to be borrowed by
the Company under a line of credit, prior to completion of this offering, in
order to meet peak working capital needs during the fourth quarter of 1997 and
(ii) the remaining balance for working capital and general corporate purposes,
which may include acquisitions or joint ventures. The Company currently has no
agreements or understandings, nor is the Company engaged in active negotiations,
to make any acquisitions or enter into any joint ventures. Borrowings under the
Company's line of credit bear interest at a fluctuating rate equal to the prime
rate (8.5% at November 1, 1997) or a rate based on LIBOR. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
 
    Except for the expenditures identified above, the Company has not yet
identified other specific uses of proceeds and, pending such uses, the Company
expects to invest the net proceeds in short-term, interest-bearing, investment
grade securities. See "Risk Factors--Broad Discretion of Management Regarding
Use of Proceeds."
 
                                       11
<PAGE>
                          PRICE RANGE OF COMMON STOCK
 
    The Company's Common Stock is traded on the Nasdaq National Market under the
symbol "TMSR." The Company's initial public offering was completed March 3,
1995, at a price to the public of $6.31 per share. The following table sets
forth the high and low closing sales prices for the Common Stock for each
quarter as reported on the Nasdaq National Market for the quarters indicated.
 
<TABLE>
<CAPTION>
                                                      HIGH        LOW
                                                    ---------  ---------
<S>                                                 <C>        <C>
1995
  First quarter...................................  $    9.95  $    7.52
  Second quarter..................................       9.22       6.31
  Third quarter...................................       8.98       6.80
  Fourth quarter..................................       8.25       5.70
1996
  First quarter...................................  $    7.41  $    3.52
  Second quarter..................................       6.92       4.00
  Third quarter...................................       5.58       3.64
  Fourth quarter..................................       8.86       5.34
1997
  First quarter...................................  $    8.98  $    7.00
  Second quarter..................................      12.13       7.13
  Third quarter...................................      18.00      11.00
  Fourth quarter (through Nov. 13)................      17.63      13.00
</TABLE>
 
    The closing sale price per share of the Common Stock on November 13, 1997,
as reported on the Nasdaq National Market, was $15.875. As of November 1, 1997,
there were 4,293,588 shares of Common Stock outstanding held by approximately
100 holders of record.
 
                                DIVIDEND POLICY
 
    The Company has not paid cash dividends on its Common Stock, other than for
the payment of its shareholders' income tax liabilities which arose under its S
Corporation status, which terminated December 31, 1994. On January 21, 1997, the
Company declared a 3% stock dividend on the Common Stock to holders of record as
of February 14, 1997. The Company currently intends to retain any future
earnings to finance the expansion and development of its business and does not
anticipate paying cash dividends to the holders of Common Stock. The payment of
future cash dividends will be at the sole discretion of the Company's Board of
Directors and will depend on, among other things, future earnings, capital
requirements, the financial condition of the Company and general business
conditions. No financing agreements to which the Company is a party or by which
it is bound currently restrict the payment of dividends on the Common Stock.
 
                                       12
<PAGE>
                                 CAPITALIZATION
 
    The following table sets forth the capitalization of the Company as of
September 30, 1997 and as adjusted to reflect the sale by the Company of
1,200,000 shares of Common Stock offered hereby and the receipt by the Company
of approximately $16.5 million of net proceeds therefrom, at an assumed public
offering price of $15.00 per share, after deducting the underwriting discounts
and estimated offering expenses payable by the Company. The information set
forth below should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations," the Company's
consolidated financial statements and related notes thereto and other financial
information included elsewhere in this Prospectus.
 
<TABLE>
<CAPTION>
                                                                                             AS OF SEPTEMBER 30,
                                                                                                     1997
                                                                                            ----------------------
                                                                                             ACTUAL    AS ADJUSTED
                                                                                            ---------  -----------
                                                                                                (IN THOUSANDS)
<S>                                                                                         <C>        <C>
Long-term debt............................................................................  $  --       $  --
Shareholders' equity:
  Preferred Stock, no par value; 5,000,000 shares authorized; none issued or
    outstanding...........................................................................     --          --
  Common Stock, no par value; actual: 25,000,000 shares authorized, 4,293,588 shares
    issued and outstanding; as adjusted: 25,000,000 shares authorized, 5,493,588 shares
    issued and outstanding (1)............................................................     13,474      29,964
  Retained earnings.......................................................................      4,051       4,051
                                                                                            ---------  -----------
    Total shareholders' equity............................................................     17,525      34,015
                                                                                            ---------  -----------
Total capitalization......................................................................  $  17,525   $  34,015
                                                                                            ---------  -----------
                                                                                            ---------  -----------
</TABLE>
 
- ------------------------
 
(1) As of November 1, 1997. Excludes (i) 900,868 shares issuable upon exercise
    of outstanding stock options under the Company's 1994 Stock Option Plan,
    1990 Stock Option Plan and Directors' Nonqualified Stock Option Plan, with a
    weighted average exercise price of $4.56 per share, (ii) 193,342 shares
    reserved for future grants under such stock option plans and (iii) 117,150
    shares issuable upon the exercise of outstanding warrants issued in
    connection with the Company's initial public offering, with an exercise
    price of $7.57 per share. See "Management--Incentive Compensation and
    Benefit Plans" and "Description of Capital Stock--Warrants."
 
                                       13
<PAGE>
                      SELECTED CONSOLIDATED FINANCIAL DATA
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
    The following selected consolidated financial data relating to the Company
should be read in conjunction with the Company's consolidated financial
statements and the related notes thereto, "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the other financial
information included elsewhere in this Prospectus. The selected financial data
for each of the five years ended December 31, 1996 was derived from the
Company's consolidated financial statements, audited by Coopers & Lybrand
L.L.P., independent accountants. The selected financial data for the nine months
ended September 30, 1996 and 1997 was derived from unaudited interim financial
statements for those periods prepared on the same basis as the audited financial
statements and, in the opinion of management of the Company, include all
adjustments necessary (consisting only of normal recurring adjustments) for a
fair presentation of such financial data. The selected financial data for the
nine months ended September 30, 1997 is not necessarily indicative of the
results that may be expected for the year ending December 31, 1997.
 
<TABLE>
<CAPTION>
                                                                                                 NINE MONTHS ENDED
                                                       YEARS ENDED DECEMBER 31,                    SEPTEMBER 30,
                                         -----------------------------------------------------  --------------------
                                           1992       1993       1994       1995       1996       1996       1997
                                         ---------  ---------  ---------  ---------  ---------  ---------  ---------
<S>                                      <C>        <C>        <C>        <C>        <C>        <C>        <C>
INCOME STATEMENT DATA:
Revenues...............................  $   2,655  $   8,214  $  13,582  $  19,415  $  30,821  $  15,745  $  23,930
Cost of goods sold.....................      1,438      4,290      8,007     11,815     19,592      9,727     14,814
                                         ---------  ---------  ---------  ---------  ---------  ---------  ---------
  Gross profit.........................      1,217      3,924      5,575      7,600     11,229      6,018      9,116
Operating expenses:
  Research and engineering.............        234      1,022      1,115      1,845      2,105      1,352      1,807
  Selling, general and
    administrative.....................        453      1,559      2,689      4,111      5,961      3,680      5,349
                                         ---------  ---------  ---------  ---------  ---------  ---------  ---------
      Total operating expenses.........        687      2,581      3,804      5,956      8,066      5,032      7,156
                                         ---------  ---------  ---------  ---------  ---------  ---------  ---------
Income from operations.................        530      1,343      1,771      1,644      3,163        986      1,960
Interest income........................     --         --         --            404        466        324        284
                                         ---------  ---------  ---------  ---------  ---------  ---------  ---------
Income before income taxes.............        530      1,343      1,771      2,048      3,629      1,310      2,244
Provision for income taxes(1)..........        169        456        633        687      1,370        472        790
                                         ---------  ---------  ---------  ---------  ---------  ---------  ---------
Net income(1)..........................  $     361  $     887  $   1,138  $   1,361  $   2,259  $     838  $   1,454
                                         ---------  ---------  ---------  ---------  ---------  ---------  ---------
                                         ---------  ---------  ---------  ---------  ---------  ---------  ---------
Net income per share(1)................  $    0.25  $    0.33  $    0.38  $    0.32  $    0.49  $    0.18  $    0.30
                                         ---------  ---------  ---------  ---------  ---------  ---------  ---------
                                         ---------  ---------  ---------  ---------  ---------  ---------  ---------
Weighted average shares outstanding....      1,431      2,686      2,957      4,293      4,647      4,582      4,807
                                         ---------  ---------  ---------  ---------  ---------  ---------  ---------
                                         ---------  ---------  ---------  ---------  ---------  ---------  ---------
</TABLE>
 
<TABLE>
<CAPTION>
                                                                                            SEPTEMBER 30, 1997
                                                                                         -------------------------
                                                                                          ACTUAL    AS ADJUSTED(2)
                                                                                         ---------  --------------
<S>                                                                                      <C>        <C>
BALANCE SHEET DATA:
Working capital........................................................................  $  15,642    $   32,132
Total assets...........................................................................     22,844        39,334
Total liabilities......................................................................      5,319         5,319
Total shareholders' equity.............................................................     17,525        34,015
</TABLE>
 
- ------------------------
 
(1) The provision for income taxes, net income and net income per share include
    a pro forma income tax adjustment to reflect the Company as a C corporation,
    rather than an S corporation, for federal and state income tax purposes for
    the years ended December 31, 1992, 1993, 1994 and 1995. See Notes 2 and 12
    to Consolidated Financial Statements.
 
(2) As adjusted to reflect the sale by the Company of 1,200,000 shares of Common
    Stock in connection with this offering.
 
                                       14
<PAGE>
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
    THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH
"SELECTED CONSOLIDATED FINANCIAL DATA," THE COMPANY'S CONSOLIDATED FINANCIAL
STATEMENTS AND RELATED NOTES THERETO AND OTHER FINANCIAL INFORMATION INCLUDED
ELSEWHERE IN THIS PROSPECTUS. THE COMPANY BELIEVES THAT PERIOD-TO-PERIOD
COMPARISONS OF ITS FINANCIAL RESULTS SHOULD NOT BE RELIED ON AS AN ACCURATE
INDICATION OF FUTURE PERFORMANCE. THIS PROSPECTUS CONTAINS, IN ADDITION TO
HISTORICAL INFORMATION, FORWARD-LOOKING STATEMENTS, WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT, THAT INVOLVE RISKS AND UNCERTAINTIES. THE
COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THE RESULTS DISCUSSED IN
THE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH
DIFFERENCES INCLUDE THOSE DISCUSSED UNDER "RISK FACTORS," AS WELL AS THOSE
DISCUSSED ELSEWHERE IN THIS PROSPECTUS.
 
OVERVIEW
 
    ThrustMaster designs, develops, manufactures and markets a diversified line
of innovative and technologically advanced game controllers for the home PC
market. The Company has established ThrustMaster-Registered Trademark- as a
brand name recognized for quality, value, durability and ease of use.
ThrustMaster products enhance the enjoyment of the PC entertainment experience
and appeal to a wide variety of users, from occasional game players to avid
enthusiasts. The Company's products include racing wheels, joysticks, gamepads
and flight simulation controllers. ThrustMaster products are available in over
5,000 retail outlets in North America and Europe, including Babbage's, Etc.;
Best Buy Co., Inc.; Circuit City Stores, Inc.; CompUSA, Inc.; Computer City; The
Electronic Boutique, Inc. and Sam's Club.
 
    From 1992 to 1996, the Company's annual revenues increased from $2.7 million
to $30.8 million and annual net income increased from $0.4 million to $2.3
million. For the nine months ended September 30, 1997, compared to the nine
months ended September 30, 1996, revenues increased 52% to $23.9 million and net
income increased 74% to $1.5 million.
 
    From its inception in 1990 through the third quarter of 1994, the Company
derived a majority of its revenues from sales of flight simulation controllers
to serious PC game enthusiasts. In the fourth quarter of 1994, the Company
expanded its product line to include racing wheels. While the Company continues
to offer a wide variety of game controllers, racing wheels now account for a
majority of the Company's revenues. The Company believes that it is the leading
producer of racing wheels for the PC entertainment market.
 
    In mid-1996, the Company increased its foreign presence by contracting with
a distributor in the United Kingdom and with an independent sales representative
to market its products to major retailers in Germany. In 1997, the Company
opened its own distribution facility in the United Kingdom and has hired sales
and administrative staff to support its future growth in Europe. Sales outside
North America accounted for approximately 39% of the Company's revenues in 1996
and approximately 30% of revenues for the nine months ended September 30, 1997.
The Company intends to continue to expand its presence in foreign markets,
primarily in Europe, by entering into relationships with additional distributors
and sales representatives. See Note 3 to Consolidated Financial Statements.
 
    Over the past three years, ThrustMaster moved virtually all manufacturing
operations offshore on a contract basis in an effort to obtain manufacturing
cost efficiencies. The Company has continued to gain experience and confidence
in offshore manufacturing. For the nine months ended September 30, 1997,
approximately 90% of the Company's products were manufactured through a single
vendor utilizing factories in Taiwan and the Guangdong province of China.
Manufacturing by such vendor at one factory accounted for more than half of the
Company's production. See "Risk Factors--Offshore Manufacturing; Dependence on
Manufacturing Contractors."
 
                                       15
<PAGE>
    The Company typically ships its products within 30 days of receipt of
customer orders. Substantially all of the Company's revenues in any quarter
result from orders received in that quarter. Accordingly, the Company generally
does not have significant backlog and believes that its backlog at any given
time is not a reliable indicator of future revenues or earnings.
 
    The Company's business is seasonal, reflecting traditional retail
seasonality patterns. Sales in the retail PC game entertainment industry are
significantly higher in the fourth calendar quarter of each year than in the
preceding three quarters. In 1996, nearly 50% of the Company's revenues were
earned in the fourth quarter.
 
RESULTS OF OPERATIONS
 
    The following table sets forth, for the periods indicated, the percentage of
revenues represented by certain items included in the Company's consolidated
statements of income included elsewhere in this Prospectus:
 
<TABLE>
<CAPTION>
                                                                                                           NINE MONTHS ENDED
                                                                            YEARS ENDED DECEMBER 31,
                                                                                                             SEPTEMBER 30,
                                                                         -------------------------------  --------------------
                                                                           1994       1995       1996       1996       1997
                                                                         ---------  ---------  ---------  ---------  ---------
<S>                                                                      <C>        <C>        <C>        <C>        <C>
Revenues...............................................................      100.0%     100.0%     100.0%     100.0%     100.0%
Cost of goods sold.....................................................       59.0       60.9       63.6       61.8       61.9
                                                                         ---------  ---------  ---------  ---------  ---------
Gross profit...........................................................       41.0       39.1       36.4       38.2       38.1
                                                                         ---------  ---------  ---------  ---------  ---------
Operating expenses:....................................................
  Research and engineering.............................................        8.2        9.5        6.8        8.6        7.5
  Selling, general and administrative..................................       19.8       21.1       19.3       23.3       22.4
                                                                         ---------  ---------  ---------  ---------  ---------
Total operating expenses...............................................       28.0       30.6       26.1       31.9       29.9
                                                                         ---------  ---------  ---------  ---------  ---------
Income from operations.................................................       13.0        8.5       10.3        6.3        8.2
Interest income........................................................     --            2.0        1.5        2.0        1.2
                                                                         ---------  ---------  ---------  ---------  ---------
Income before income taxes.............................................       13.0       10.5       11.8        8.3        9.4
Provision for income taxes(1)..........................................        4.6        3.5        4.5        3.0        3.3
                                                                         ---------  ---------  ---------  ---------  ---------
Net income(1)..........................................................        8.4%       7.0%       7.3%       5.3%       6.1%
                                                                         ---------  ---------  ---------  ---------  ---------
                                                                         ---------  ---------  ---------  ---------  ---------
</TABLE>
 
- ------------------------
 
(1) The provision for income taxes and net income include a pro forma income tax
    adjustment to reflect the Company as a C corporation, rather than an S
    corporation, for federal and state income tax purposes for the years ended
    December 31, 1994 and 1995. See Notes 2 and 12 to Consolidated Financial
    Statements.
 
  COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
 
    REVENUES.  Revenues for the nine months ended September 30, 1997 were
$23,930,000, an increase of $8,185,000, or 52.0%, compared to $15,745,000 for
the nine months ended September 30, 1996. Revenues grew primarily due to
increased demand for the Company's core products and additional sales into the
warehouse-club distribution channel.
 
    GROSS PROFIT.  Gross profit for the nine months ended September 30, 1997 was
$9,116,000, an increase of $3,098,000, or 51.5%, compared to $6,018,000 for the
nine months ended September 30, 1996. As a percentage of revenues, the gross
profit margin percentage was nearly identical for the nine months ended
September 30, 1997 and 1996.
 
    RESEARCH AND ENGINEERING EXPENSES.  Research and engineering expenses were
$1,807,000 for the nine months ended September 30, 1997, an increase of
$455,000, or 33.7%, compared to $1,352,000 for the nine
 
                                       16
<PAGE>
months ended September 30, 1996. The increase resulted primarily from additional
expenses incurred in development of the Company's new products. As a percentage
of revenues, research and engineering expenses were 7.5% for the nine months
ended September 30, 1997, compared to 8.6% for the nine months ended September
30, 1996. The Company intends to hire additional research and engineering
personnel to the extent reasonably permitted by any increased revenues.
 
    SELLING, GENERAL AND ADMINISTRATION EXPENSES.  Selling, general and
administrative expenses were $5,349,000 for the nine months ended September 30,
1997, an increase of $1,669,000, or 45.4%, compared to $3,680,000 for the nine
months ended September 30, 1996. The increase was primarily due to higher
amounts of selling expenses associated with higher revenues, increases in other
merchandising and marketing expenses, and the funding of the Company's further
expansion into Europe. As a percentage of revenues, selling, general and
administrative expenses decreased to 22.4% for the nine months ended September
30, 1997, compared to 23.3% for the nine months ended September 30, 1996.
 
    INTEREST INCOME.  Interest income of $284,000 and $324,000 for the nine
months ended September 30, 1997 and 1996, respectively, was derived from the
investment of the cash balances of the Company.
 
    INCOME TAXES.  The provision for income taxes for the nine months ended
September 30, 1997, reflects an effective tax rate of 35.2%. This compares to a
tax rate of 36.0% for the nine months ended September 30, 1996. The effective
tax rate was lower in the quarter ended September 30, 1997 as a result of a
one-time state tax credit in 1997.
 
  COMPARISON OF YEARS ENDED DECEMBER 31, 1996 AND 1995
 
    REVENUES.  Revenues for 1996 were $30,821,000, an increase of $11,406,000,
or 58.7%, compared to $19,415,000 for 1995. Revenues increased primarily due to
significantly increased sales of the Company's existing products in Europe,
higher sales in the United States and the introduction of new products.
 
    GROSS PROFIT.  Gross profit for 1996 was $11,229,000, an increase of
$3,629,000, or 47.8%, compared to $7,600,000 for 1995. As a percentage of
revenues, the gross profit margin percentage was 36.4% for 1996, compared to
39.1% for 1995. The gross profit margin percentage declined primarily because
the Company's more recent product offerings generally have a lower gross margin
percentage than the Company's other products, and the Company incurred higher
than normal amounts of air freight in expediting delivery of certain products to
meet additional, unanticipated fourth quarter demand.
 
    RESEARCH AND ENGINEERING EXPENSES.  Research and engineering expenses were
$2,105,000 for 1996, an increase of $260,000, or 14.1%, compared to $1,845,000
in 1995. The increase resulted primarily from additional expenses incurred in
development of the Company's new products. As a percentage of revenues, research
and engineering expenses decreased to 6.8% in 1996, compared to 9.5% in 1995.
 
    SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.  Selling, general and
administrative expenses were $5,961,000 for 1996, an increase of $1,850,000, or
45.0%, compared to $4,111,000 for 1995. The increase resulted primarily from
higher sales and marketing expenses. Sales and marketing expenses increased due
to higher amounts of selling expenses associated with greater revenues, and
increases in other merchandising and marketing expenses. As a percentage of
revenues, selling, general and administrative expenses decreased to 19.3% of
revenues in 1996, compared to 21.1% in 1995.
 
    INTEREST INCOME.  Interest income of $466,000 for 1996 and $404,000 for 1995
was derived from the investment of the cash balances of the Company.
 
    INCOME TAXES.  The provision for income taxes for 1996 reflects an effective
tax rate of 37.8%. This compares to a pro forma tax rate of 33.5% for 1995. The
increase in the effective tax rate was due primarily to a higher effective state
tax rate for the Company in 1996 which resulted from a one-time state tax credit
in 1995. See Notes 2 and 12 of Notes to Consolidated Financial Statements.
 
                                       17
<PAGE>
  COMPARISON OF YEARS ENDED DECEMBER 31, 1995 AND 1994
 
    REVENUES.  Revenues for 1995 were $19,415,000, an increase of $5,833,000, or
42.9%, compared to $13,582,000 in 1994. Revenues increased primarily due to
greater retail sales of the Company's existing products and the introduction of
new products.
 
    GROSS PROFIT.  Gross profit for 1995 was $7,600,000, an increase of
$2,025,000, or 36.3%, compared to $5,575,000 in 1994. As a percentage of
revenues, gross profit was 39.1% in 1995, and 41.0% for 1994. The gross profit
margin percentage declined primarily because the Company's later product
offerings, which comprise an increasing percentage of total revenues, generally
had a lower gross margin percentage than the Company's earlier products.
 
    RESEARCH AND ENGINEERING EXPENSES.  Research and engineering expenses for
1995 were $1,845,000, an increase of $730,000, or 65.5%, compared to $1,115,000
in 1994. The increase resulted primarily from additional expenses incurred in
developing new products and enhancements to existing products as well as the
hiring of additional personnel. Research and engineering expenses were 9.5 % of
revenues in 1995, compared to 8.2 % in 1994.
 
    SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.  Selling, general and
administrative expenses for 1995 were $4,111,000, an increase of $1,422,000, or
52.9%, compared to $2,689,000 in 1994. As a percentage of revenues, selling,
general and administrative expenses were 21.1% in 1995, compared to 19.8% in
1995. For 1995, selling, general and administrative expenses increased primarily
due to additional advertising and merchandising programs with certain major
retail customers. The Company also increased its marketing and sales personnel,
in order to support the Company's growth, and its reliance on commission-based
independent sales representatives. Additionally, certain selling, general and
administrative expenses increased for 1995 as a result of becoming a public
company.
 
    INTEREST INCOME.  Interest income for 1995 was derived from the investment
of the remaining proceeds of the public offering which closed March 3, 1995.
 
    INCOME TAXES.  The pro forma provision for income taxes for 1995 reflects an
effective tax rate of 33.5%. This compares to a pro forma tax rate of 35.7% for
1994. The decrease resulted from a reduction in the state income tax rate
applicable to the Company due to a one-time state tax credit. See Notes 2 and 12
of Notes to Consolidated Financial Statements.
 
                                       18
<PAGE>
QUARTERLY OPERATING RESULTS; SEASONALITY
 
    The following table sets forth selected consolidated unaudited quarterly
financial data for the most recent seven quarters. The quarterly consolidated
financial data was derived from unaudited interim financial statements for those
periods prepared on the same basis as the audited financial statements and, in
the opinion of management of the Company, include all adjustments necessary
(consisting only of normal recurring adjustments) for a fair presentation of
such financial data. Results of any one or more quarters are not necessarily
indicative of results for an entire year or of results to be expected for any
future period. See "Risk Factors."
 
<TABLE>
<CAPTION>
                                                                          THREE MONTHS ENDED
                                          -----------------------------------------------------------------------------------
                                           MAR. 31,     JUNE 30,    SEPT. 30,  DEC. 31,    MAR. 31,     JUNE 30,    SEPT. 30,
                                             1996         1996        1996       1996        1997         1997        1997
                                          -----------  -----------  ---------  ---------  -----------  -----------  ---------
<S>                                       <C>          <C>          <C>        <C>        <C>          <C>          <C>
Revenues................................   $   4,564    $   4,250   $   6,931  $  15,076   $   6,272    $   7,149   $  10,509
Cost of goods sold......................       2,970        2,615       4,142      9,865       3,786        4,480       6,548
                                          -----------  -----------  ---------  ---------  -----------  -----------  ---------
  Gross profit..........................       1,594        1,635       2,789      5,211       2,486        2,669       3,961
Operating expenses......................       1,538        1,564       1,930      3,034       2,108        2,244       2,804
                                          -----------  -----------  ---------  ---------  -----------  -----------  ---------
Income from operations..................          56           71         859      2,177         378          425       1,157
Interest income.........................         106          107         111        142          80           99         105
                                          -----------  -----------  ---------  ---------  -----------  -----------  ---------
Income before income taxes..............         162          178         970      2,319         458          524       1,262
Provision for income taxes..............          61           67         344        898         169          195         426
                                          -----------  -----------  ---------  ---------  -----------  -----------  ---------
Net income..............................   $     101    $     111   $     626  $   1,421   $     289    $     329   $     836
                                          -----------  -----------  ---------  ---------  -----------  -----------  ---------
                                          -----------  -----------  ---------  ---------  -----------  -----------  ---------
Net income per share....................   $    0.02    $    0.02   $    0.14  $    0.30   $    0.06    $    0.07   $    0.17
                                          -----------  -----------  ---------  ---------  -----------  -----------  ---------
                                          -----------  -----------  ---------  ---------  -----------  -----------  ---------
Weighted average shares outstanding.....       4,545        4,555       4,589      4,698       4,727        4,762       4,807
                                          -----------  -----------  ---------  ---------  -----------  -----------  ---------
                                          -----------  -----------  ---------  ---------  -----------  -----------  ---------
</TABLE>
 
AS A PERCENTAGE OF REVENUES:
 
<TABLE>
<CAPTION>
                                                                           THREE MONTHS ENDED
                                        -----------------------------------------------------------------------------------------
                                         MAR. 31,     JUNE 30,     SEPT. 30,    DEC. 31,     MAR. 31,     JUNE 30,     SEPT. 30,
                                           1996         1996         1996         1996         1997         1997         1997
                                        -----------  -----------  -----------  -----------  -----------  -----------  -----------
<S>                                     <C>          <C>          <C>          <C>          <C>          <C>          <C>
Revenues..............................      100.0%       100.0%       100.0%       100.0%       100.0%       100.0%       100.0%
Cost of goods sold....................       65.1         61.5         59.8         65.4         60.4         62.7         62.3
                                            -----        -----        -----        -----        -----        -----        -----
  Gross profit........................       34.9         38.5         40.2         34.6         39.6         37.3         37.7
Operating expenses....................       33.7         36.8         27.8         20.1         33.6         31.4         26.7
                                            -----        -----        -----        -----        -----        -----        -----
Income from operations................        1.2          1.7         12.4         14.5          6.0          5.9         11.0
Interest income.......................        2.3          2.5          1.6          0.9          1.3          1.4          1.0
                                            -----        -----        -----        -----        -----        -----        -----
Income before income taxes............        3.5          4.2         14.0         15.4          7.3          7.3         12.0
Provision for income taxes............        1.3          1.6          5.0          6.0          2.7          2.7          4.0
                                            -----        -----        -----        -----        -----        -----        -----
Net income............................        2.2%         2.6%         9.0%         9.4%         4.6%         4.6%         8.0%
                                            -----        -----        -----        -----        -----        -----        -----
                                            -----        -----        -----        -----        -----        -----        -----
</TABLE>
 
    The Company may experience significant fluctuations in future operating
results as a result of a number of factors, including, among others, seasonality
in product sales, the size or timing of customer orders, delays in product
enhancements and new product introductions by the Company, quality control
difficulties, market acceptance of new products, product returns, customer order
deferrals in anticipation of new products or enhancements, reduction in demand
for existing products as a result of new product introductions by the Company or
others, and general economic conditions. Any of these factors could cause
quarterly or other periodic results to vary significantly from prior periods.
The Company's customers generally order on an as-needed basis, and the Company
typically does not have a significant order backlog
 
                                       19
<PAGE>
at the beginning of each quarter. Because quarterly revenues are dependent
largely on the volume and timing of orders received during such quarter, which
may be difficult to forecast, and the Company's operating expenses are based in
part on its estimate of future revenues, the Company may be unable to adjust its
spending in a timely manner to compensate for a shortfall in revenues.
 
    The Company's business is seasonal, reflecting traditional retail
seasonality patterns. Such seasonality may be difficult to discern during any
periods of rapid revenue growth; however, the Company believes that sales of its
products will, in general, track sales in the retail PC entertainment industry
in general, which are significantly higher in the fourth calendar quarter of
each year than in the preceding three quarters. Accordingly, management believes
that seasonality will likely continue to contribute to fluctuations in the
Company's quarterly results from year to year. See "Risk Factors--Seasonality;
Variability in Periodic Operating Results."
 
LIQUIDITY AND CAPITAL RESOURCES
 
    The Company has financed its activities to date with a combination of cash
flow from operations, borrowed funds and proceeds from the sale of equity
securities.
 
    The Company has a line of credit pursuant to which it may borrow up to the
lesser of $1.0 million or 75% of eligible receivables. Borrowings are payable on
demand and bear interest at a fluctuating rate equal to the prime rate (8.5% at
November 1, 1997) or a rate based on LIBOR. The Company's bank has increased the
line of credit to the lesser of $5.0 million or 60% of eligible receivables
through January 31, 1998 to meet the Company's seasonal working capital needs
during the fourth quarter of 1997. The line of credit is scheduled for review in
July 1998 and is secured by substantially all the Company's assets. The line of
credit requires the Company to maintain certain working capital and
debt-to-equity ratios. At November 1, 1997, there were no borrowings outstanding
under the facility and the Company was in compliance with all loan covenants.
The Company expects to borrow approximately $4.0 million under the line of
credit by the end of 1997. Any outstanding amounts will be repaid with proceeds
of this offering.
 
    Net cash provided by operating activities was $106,000 for the nine months
ended September 30, 1997, resulting primarily from net income of $1,454,000, an
increase in inventories of $1,740,000, and depreciation of $403,000. Cash used
in operations was $941,000 in 1996. Cash provided from operations was $59,000 in
1995 and $1,235,000 in 1994. For the year ended December 31, 1996, increases in
accounts receivable of $6,923,000, inventories of $1,034,000, payables and
accruals of $3,857,000, and a decrease in prepaids and other assets of $286,000
were the primary components of changes in working capital. For the year ended
December 31, 1995, increases in accounts receivable of $784,000, inventories of
$1,572,000, payables and accruals of $325,000, and a decrease in prepaids and
other assets of $346,000 were the primary components of changes in working
capital. For the year ended December 31, 1994, increases in accounts receivable
of $507,000, inventories of $52,000, and prepaids and other assets of $66,000,
and a decrease in accounts payable and accruals of $109,000 were the primary
components of changes in working capital.
 
    At September 30, 1997, the Company had cash and cash equivalents of
$5,376,000 and working capital of $15,642,000.
 
    Capital expenditures for the nine months ended September 30, 1997 and for
the years ended December 31, 1996, 1995 and 1994 were $1,200,000, $789,000,
$753,000 and $493,000, respectively. Capital expenditures for the nine months
ended September 30, 1997 and for the year ended December 31, 1996 were primarily
for new product tooling, manufacturing equipment and computer equipment.
 
    The Company does not intend to pay cash dividends to the holders of Common
Stock and intends to retain future earnings to finance the expansion and
development of its business.
 
    Although no current understandings or negotiations exist with respect
thereto, the Company may make acquisitions or enter into joint ventures, and may
require additional funds in connection therewith.
 
                                       20
<PAGE>
    The Company is reviewing its computer systems in order to evaluate necessary
modifications for the year 2000. The Company does not anticipate that it will
incur material expenditures to complete any such modifications.
 
    The Company believes that available funds and expected cash flow to be
generated from operations, together with the proceeds from this offering and any
borrowings under its line of credit will be adequate to meet the Company's
anticipated cash needs through the end of 1998. If the cash flow from such
sources is insufficient, if the Company makes acquisitions or enters into joint
ventures, or if working capital requirements are greater than anticipated, the
Company could be required to raise additional funds. If the Company has
insufficient funds for its needs, the Company may not be able to raise
additional funds on favorable terms, if at all, or may not be able to do so on a
timely basis.
 
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
 
    During 1997, the Financial Accounting Standards Board has issued SFAS 128,
"Earnings per Share", SFAS 129, "Disclosure of Information about Capital
Structure", SFAS 130, "Reporting Comprehensive Income", and SFAS 131,
"Disclosures About Segments of an Enterprise and Related Information." These
Standards will become effective for the Company's 1998 fiscal year. SFAS 128
requires a revised presentation and calculation of Earnings per Share and that
prior periods be restated to conform to that revised presentation and
calculation. SFAS 129 requires disclosure about an entity's capital structure
and contains no change in disclosure requirements for entities that were subject
to the previously existing requirements. SFAS 130 establishes standards for
reporting and display of comprehensive income and its components in a full set
of general-purpose financial statements. SFAS 131 changes current practice under
SFAS 14 by establishing a new framework on which to base segment reporting
(referred to as the "management" approach) and also requires interim reporting
of segment information. Management is currently assessing the impact of the
implementation of these Standards on the consolidated financial statements of
the Company.
 
                                       21
<PAGE>
                                    BUSINESS
 
GENERAL
 
    ThrustMaster designs, develops, manufactures and markets a diversified line
of innovative and technologically advanced game controllers for the home PC
market. The Company has established ThrustMaster-Registered Trademark- as a
brand name recognized for quality, value, durability and ease of use.
ThrustMaster products enhance the enjoyment of the PC entertainment experience
and appeal to a wide variety of users, from occasional game players to avid
enthusiasts. The Company's products include racing wheels, joysticks, gamepads
and flight simulation controllers. ThrustMaster products are available in over
5,000 retail outlets in North America and Europe, including Babbage's, Etc.;
Best Buy Co., Inc.; Circuit City Stores, Inc.; CompUSA, Inc.; Computer City; The
Electronic Boutique, Inc. and Sam's Club.
 
    From 1992 to 1996, the Company's annual revenues increased from $2.7 million
to $30.8 million and annual net income increased from $0.4 million to $2.3
million. For the nine months ended September 30, 1997 compared to the nine
months ended September 30, 1996, revenues increased 52% to $23.9 million and net
income increased 74% to $1.5 million.
 
    Working with leading software publishers, such as Electronic Arts, Inc.,
Activision, Inc., Sierra On-Line, Inc., GT Interactive Software Corp. and Virgin
Interactive Entertainment, Inc., the Company often bundles its game controllers
with popular software titles. These bundling arrangements enable the Company to
deliver increased value to consumers, and to differentiate its products from
competing products. The Company offers a variety of bundled game controller
packages which allow for differentiation among retailers that carry the
Company's products. The Company also utilizes recognized brand names, such as
NASCAR-Registered Trademark-, TOP GUN-TM- and NASA, to enhance consumer appeal.
 
INDUSTRY BACKGROUND
 
    Over the last several years, significant technological advances in home PCs,
such as improvements in processor speeds and graphics capabilities, have enabled
software developers to create increasingly sophisticated entertainment programs
with real-time interaction that offer greater realism and excitement. Today's
PCs generally include hardware enhancements such as CD-ROM, 3-D graphics and
high-definition sound capabilities. As high-performance PCs have become more
affordable, the installed base of home PCs has steadily increased, and as a
result, the home PC has become a viable entertainment platform. According to a
study by COMPUTER RETAIL WEEK, 77% of home PCs are used to play computer games.
Industry analysts expect significant growth in sales of both home PCs and
entertainment software titles. The Company believes that sales of game
controllers are directly correlated with sales of both PCs and entertainment
software titles.
 
                                       22
<PAGE>
    According to IDC/LINK, an industry research firm, the installed base of home
PCs in the United States will reach 50 million units by the end of 1997, and
will further increase to 70 million units by 2001. Annual shipments of new home
PCs are projected to increase from 10.4 million units in 1996 to 18.7 million
units in 2001, a five-year compound annual growth rate of approximately 12%, as
illustrated below.
 
                                    [LOGO]
 
    The home PC entertainment software industry is also expected to continue its
strong growth trends. Sales of entertainment software titles in the United
States are projected to increase to more than $2.0 billion in 1997, a 23.1%
increase from 1996, and will exceed $3.5 billion by 2001. Unit shipments of
software titles are projected to grow from 48 million in 1996 to over 126
million in 2001, a five-year compound annual growth rate of approximately 21%,
as illustrated below.
 
                                    [LOGO]
 
BUSINESS STRATEGY
 
    The Company's objective is to be a leading provider of controllers to the
interactive electronic entertainment industry. In order to achieve this
objective, the Company's business strategy is to:
 
    - MARKET HIGH QUALITY CONTROLLERS THAT PROVIDE VALUE AND DURABILITY. The
      Company offers products that enhance the PC entertainment experience.
      These products are designed to be easy to install, intuitive to use,
      ergonomically comfortable and aesthetically pleasing. ThrustMaster
      products are competitively priced and designed for heavy use.
 
    - LEVERAGE POPULAR GAME TITLES AND BRANDS TO INCREASE PRODUCT DEMAND. The
      Company establishes cooperative working relationships with leading
      software publishers. These relationships create
 
                                       23
<PAGE>
      demand for the Company's products through cross promotions and the
      bundling of game software. The Company also utilizes recognized brand
      names such as NASCAR, TOP GUN and NASA to differentiate its products in
      the retail channel and to enhance consumer appeal.
 
    - FOSTER STRATEGIC RELATIONSHIPS WITH HARDWARE MANUFACTURERS. The Company
      works closely with hardware manufacturers to gain early access to
      technology to improve its products and competitive position. These
      relationships also help the Company to create retail, VAR and OEM
      opportunities.
 
    - DEVELOP AND INTRODUCE INNOVATIVE PRODUCTS. In order to maintain its
      position as an industry leader, the Company invests in an aggressive
      product development program. The Company's research and engineering group
      focuses on incorporating emerging technologies and reusable solutions into
      its products.
 
    - PURSUE STRATEGIC ACQUISITIONS OF COMPLEMENTARY PRODUCTS OR BUSINESSES. The
      Company regularly assesses, and will continue to assess, strategic
      acquisition opportunities that will (i) provide the Company with expertise
      in new technologies; (ii) expand the Company's brands, products and
      product lines; and (iii) leverage the Company's ability to manage
      manufacturing and distribution.
 
PRODUCTS
 
    The Company's products include racing wheels, joysticks, gamepads and flight
simulation controllers. The Company closely monitors trends and consumer
preferences in the PC entertainment software market, and offers a broad line of
competitively priced products at various price points. The Company has
positioned ThrustMaster as a brand name recognized for quality, value,
durability and ease of use.
 
                                   [GRAPHIC]
 
    RACING WHEELS.
 
    The Company's introduction in 1994 of its Formula T1 driving control,
consisting of a racing wheel, console, and brake and accelerator pedals, helped
create the PC racing wheel market. The Company later introduced the Formula T2
(suggested retail price of $99.95) and the Grand Prix 1 Racing Wheel (suggested
retail price of $59.95). The Company currently dominates the racing wheel
market. As software developers continue to introduce new software titles devoted
to racing, driving and touring, the Company continues to pursue new
opportunities in this market segment.
 
    After signing a licensing agreement with NASCAR, the foremost sanctioning
body of stock car racing in North America, the Company introduced the NASCAR Pro
Racing Wheel (suggested retail price of
 
                                       24
<PAGE>
$139.95) in mid-1997. NASCAR racing is currently one of the fastest growing
spectator sports in the United States, attracting 10.5 million visitors and 150
million television viewers each year, according to NASCAR. In Europe, a version
of this product is marketed as the Formula 1 Racing Wheel. The Company holds a
license from Formula One Administration Limited, a leader in European motor
sports, to use the "Formula 1" name and logo for its racing wheels.
 
                                   [GRAPHIC]
 
    JOYSTICKS.
 
    The Company offers a line of joysticks priced to appeal to different
consumers in the PC entertainment market. The Company's joysticks offer a rich
set of features that enhance the combat experience found in today's action and
adventure games. These products include the TOP GUN joystick (suggested retail
price of $39.95), the X-Fighter joystick (suggested retail price of $44.95),
which offers a larger size and a heavier base, and the Millennium 3D Inceptor
(suggested retail price of $69.95), introduced during the third quarter of 1997.
The Millennium 3D Inceptor is modeled after the hand controller found in the
NASA Space Shuttle. This unique product provides a complete 3D game control
system, with throttle, programmable buttons and three axes of movement.
 
                                   [GRAPHIC]
 
    GAMEPADS.
 
    In October 1997, the Company began shipping the RAGE 3D gamepad (suggested
retail price of $39.95) to address demand created by the popularity of action
and multi-player PC software titles. The RAGE 3D gamepad combines ergonomic
design, sophisticated technology and a variety of programmable buttons and
triggers to offer users maximum control in action, adventure and sports PC
games. The Company believes that the gamepad market presents significant growth
opportunities.
 
                                       25
<PAGE>
                                   [GRAPHIC]
 
    FLIGHT SIMULATION CONTROLLERS.
 
    The Company manufacturers a broad line of award-winning flight products
designed to simulate the equipment found in high-performance aircraft, including
flight sticks, throttle controls and rudder pedals. These products, the
Company's initial offerings, established the ThrustMaster name for realism and
quality and offer flight simulation enthusiasts a realistic PC interactive
flight control system. Although these products historically have been sold
separately in the high-end market, the Company is in the process of introducing
a complete, lower-priced flight system targeted to reach the mass market.
 
PRODUCT DEVELOPMENT
 
    The Company currently employs 24 full-time engineers, and supplements its
product development capabilities by contracting with a leading industrial design
firm. The Company devotes significant resources to product enhancements and new
product development. During 1994, 1995, 1996 and the nine months ended September
30, 1997, the Company's research and engineering expenses were $1,115,000,
$1,845,000, $2,105,000 and $1,807,000, respectively.
 
    In 1997, the Company began shipping products incorporating its proprietary
"DirectConnect" technology. This technology broadens communications bandwidth
and enables multi-player use without degradation of performance. In addition,
the Company's Windows 95 software interface simplifies the connection and
configuration of controllers, creating a more intuitive environment.
 
    During 1997, PC manufacturers began shipping computers equipped with the
Universal Serial Bus ("USB") technology, a "plug-and-play" capability. USB
provides over 10 times the throughput of a standard serial port. The 1998 update
of Microsoft's Windows operating system is expected to provide general access to
the benefits of USB technology. ThrustMaster initially began shipping
USB-enabled controllers to hardware developers in 1996 and shipped a small
volume of such controllers to its OEM customers in 1997.
 
    The Company is also exploring the use of wireless technologies for use with
its controllers. ThrustMaster, in joint development with Philips Electronics
N.V., has been actively developing the protocol necessary to permit the
simultaneous wireless use of multiple devices with a PC.
 
    ThrustMaster plans to incorporate force-feedback technology in certain of
its future products. Force-feedback technology combines software and hardware
elements to create a greater sense of realism during game play. For example, a
steering wheel could become less reactive when a player's car drives over ice,
or vibrate when crossing rough terrain. The Company believes that this
technology will significantly enhance the PC gaming experience.
 
MANUFACTURING
 
    Over the past three years, ThrustMaster has moved virtually all
manufacturing operations offshore on a contract basis in an effort to obtain
manufacturing cost efficiencies. The Company has continued to gain experience
and confidence in offshore manufacturing. For the nine months ended September
30, 1997,
 
                                       26
<PAGE>
approximately 90% of the Company's products were manufactured through a single
vendor utilizing factories located in Taiwan and the Guangdong province of
China. Manufacturing by such vendor at one factory accounted for more than half
of the Company's production. The Company plans to continue to manufacture its
products offshore and plans to expand its relationships with other
manufacturers. The Company actively seeks to control the quality of its products
manufactured offshore and has dedicated resources to manage offshore traffic,
technology transfers and communications. The Company believes that the
manufacturing resources available to it are adequate to meet current and
foreseeable demand for its products. See "Risk Factors--Offshore Manufacturing;
Dependence on Manufacturing Contractors."
 
SALES, DISTRIBUTION AND MARKETING
 
    The Company's products are principally sold directly through retail outlets
that purchase the products directly from the Company or through third-party
distributors. ThrustMaster products are available in over 5,000 retail outlets
in North America and Europe. Major customers in North America include:
 
<TABLE>
<CAPTION>
Babbage's, Etc.                    Costco Wholesale
<S>                                <C>
Best Buy Co., Inc.                 Electronic Boutique, Inc.
Circuit City Stores, Inc.          Future Shop, Inc.
CompUSA, Inc.                      Sam's Club
Computer City
</TABLE>
 
    ThrustMaster products are distributed in over 50 countries through
international distributors and through the Company's direct sales efforts in the
United States, the United Kingdom and Germany. The Company maintains its
European office in the United Kingdom. The European operation is directed by a
general manager who oversees marketing, customer support, sales, warehousing and
distribution.
 
    In addition to retail outlets, the Company has recently begun to actively
pursue business through OEM arrangements. The Company has sold its products on
an OEM basis to Compaq Computer Corp., NEC, Micron Electronics, Inc. and Sierra
On-Line, Inc. Although OEM sales currently account for a relatively minor
portion of the Company's revenues, management believes that these sales will
account for an increasing percentage of its revenues in the future.
 
    Working with leading software publishers, such as Electronic Arts, Inc.,
Activision, Inc., Sierra On-Line, Inc., GT Interactive Software Corp. and Virgin
Interactive Entertainment, Inc., the Company often bundles its game controllers
with popular software titles. These bundling arrangements enable the Company to
deliver increased value to consumers and to differentiate its products from
competing products. The Company offers a variety of bundled game controller
packages which allow for differentiation among retailers that carry the
Company's products. The Company also utilizes recognized brand names, such as
NASCAR, TOP GUN and NASA, to enhance consumer appeal.
 
    The Company anticipates that a significant portion of its revenues will
continue to be derived from a limited number of key customers. For the nine
months ended September 1997, Sam's Club and Best Buy Co., Inc. accounted for an
aggregate of approximately 28% of the Company's revenue. See "Risk Factors--
Customer Concentration."
 
CUSTOMER SERVICE
 
    Management believes that its commitment to provide high-quality customer
service is a key factor in its success and has increased the brand loyalty of
its customers. The Company provides free technical support to the end users of
its products by telephone, the Internet and through bulletin boards on many of
the major computer on-line network services. The Company uses customer feedback
as a source of ideas for product improvements and enhancements. ThrustMaster
products are covered by a one-year warranty against defects.
 
                                       27
<PAGE>
COMPETITION
 
    The markets in which the Company participates are highly competitive, and
the Company expects that it will face increased competition in the future. The
Company's principal competitors include Microsoft Corporation, Advanced Gravis
Computer Technology Ltd., CH Products, Logitech International S.A. and InterAct
Accessories, many of which have substantially greater financial, technical and
marketing resources than the Company.
 
    The Company believes that the principal competitive factors in the market
for PC game controllers include price, quality, product features, ease of use,
durability, reputation and compatibility with PC games. Increased competition
has in the past created, and may in the future create, margin pressures. The
Company believes that its future growth will depend principally on its ability
to develop and introduce competitively priced new products with features that
are attractive to PC games users. See "Risk Factors-- Competition."
 
INTELLECTUAL PROPERTY
 
    The Company regards certain aspects of its products as proprietary and
relies on a combination of copyright and trademark laws, patents, trade secrets,
confidentiality procedures and contractual provisions to protect its proprietary
rights. The Company holds utility patents and design patents and has filed
additional patent applications covering certain aspects of the Company's
proprietary technology. The issued patents expire during the period from October
2006 to September 2015. There can be no assurance that any patent applications
will result in issued patents, or that any patents now or hereafter issued will
not be challenged, invalidated or circumvented by others. There can be no
assurance that these patents will not be found to be invalid, or non-infringed
in judicial or administrative proceedings, should a dispute arise. Although the
Company believes that its products, processes and trademarks do not infringe on
the rights of others, third parties may assert infringement or other related
claims against the Company in the future. Any infringement claim or related
litigation against the Company, or any challenge to the validity of the
Company's own intellectual property rights, and the expense and effort of
defending the same, could materially and adversely affect the Company's
business, financial conditions and results of operations. See "Risk
Factors--Intellectual Property Rights."
 
    The Company believes that obtaining patent protection may provide some
benefits to the Company, but that product development and marketing capabilities
are of greater importance to the Company's business than patent protection. The
Company does not believe that its business is dependent on obtaining patent
protection or successfully defending any patents that may be obtained against
infringement by others.
 
    The continuing development of the Company's technology is dependent, in
part, on the knowledge and skills of its employees. To protect its rights to its
proprietary information, the Company requires key employees, consultants and
collaborators to enter into confidentiality agreements which prohibit the
disclosure of confidential information to persons unaffiliated with the Company.
These agreements may not provide meaningful protection for the Company's
technology or other confidential information in the event of any unauthorized
use, misappropriation or disclosure.
 
    The Company has obtained several trademark registrations, including
"ThrustMaster," "Thrustware," "X-Fighter," "FLCS" and "FORMULA T1." Trademark
applications are pending in the United States with respect to other trade names
used by the Company, however, such applications may not result in trademark
registrations.
 
GOVERNMENT REGULATION
 
    The Federal Communications Commission (the "FCC") regulates the emission of
radio frequency energy by various devices, including computers and computer
peripherals, under Part 15 of its rules promulgated pursuant to the Federal
Communications Act of 1934, as amended. Certain of the
 
                                       28
<PAGE>
Company's products emit radio frequency energy and are subject to authorization
and assignment of an identifier by the FCC prior to the sale of the devices.
Government agencies in certain foreign countries have also established rules
which regulate the electronic emissions of the Company's products. The Company
believes that it has complied with the requirements of the FCC and foreign
governmental regulations in countries where its products are sold in respect of
its current products and has instituted procedures to monitor compliance with
respect to future products.
 
EMPLOYEES
 
    As of November 1, 1997, the Company had a total of 115 full-time employees.
At times the Company supplements its workforce with temporary contract workers.
None of the Company's employees are represented by a labor union. The Company
has not experienced any work stoppages and considers its relations with its
employees to be good.
 
FACILITIES
 
    The Company is headquartered in Hillsboro, Oregon, in approximately 60,000
square feet of leased space under two leases expiring in September 2003. The
Company's sales and distribution facility in Surrey, England, occupies
approximately 16,000 square feet of space under a lease expiring in September
2007. The Company believes that these facilities are adequate for its
immediately foreseeable needs and that suitable additional or alternative space
will be available on commercially reasonable terms if needed.
 
LEGAL PROCEEDINGS
 
    From time to time the Company has been, and expects to continue to be,
subject to legal proceedings and claims in the ordinary course of its business.
Such claims, even if lacking merit, could result in the expenditure of
significant financial and managerial resources. The Company is not currently a
party to, nor is it aware of, any legal proceeding or claims that it believes
will have, individually or in the aggregate, a material adverse effect on the
Company or on its financial condition or results of operations.
 
                                       29
<PAGE>
                                   MANAGEMENT
 
EXECUTIVE OFFICERS AND DIRECTORS
 
    Information with respect to the Company's executive officers and directors
is set forth below.
 
<TABLE>
<CAPTION>
NAME                                           AGE                                POSITION
- ------------------------------------------  ---------  ---------------------------------------------------------------
<S>                                         <C>        <C>
 
Stephen A. Aanderud(1)....................     48      President, Chief Executive Officer and Director
 
David K. Bergeson.........................     38      Vice President, Sales
 
Frank M. Bouton...........................     53      Vice President, New Technologies
 
G. Edward Brightman.......................     40      Vice President, Operations
 
Kent E. Koski.............................     53      Vice President, Finance and Administration, Chief Financial
                                                         Officer and Secretary
 
Robert D. Martin..........................     59      Vice President, Development
 
Ronald J. Resnick.........................     49      Vice President, Marketing
 
C. Norman Winningstad(1)..................     72      Chairman of the Board
 
Robert L. Carter(2).......................     55      Director
 
Graham E. Dorland(3)......................     55      Director
 
General Merrill A. McPeak(1)..............     61      Director
 
G. Gerald Pratt(2)........................     69      Director
 
Milton R. Smith(2)........................     62      Director
 
Frederick M. Stevens(3)...................     61      Director
</TABLE>
 
- ------------------------
 
(1) Term on Board expires in 1999.
 
(2) Term on Board expires in 1998.
 
(3) Term on Board expires in 2000.
 
    STEPHEN A. AANDERUD became a member of the Board of Directors in August
1994. He has been employed by the Company since January 1993, serving as
President and Chief Executive Officer since May 1994 and as Vice President of
Finance and Administration prior to that time. From October 1991 to December
1992, he was the Director of Finance of Cray Research Superservers, Inc., a
wholly-owned subsidiary of Cray Research. He is a Certified Public Accountant
and received a B.S. degree in business from Portland State University.
 
    DAVID K. BERGESON has been employed by the Company since May of 1997 as Vice
President, Sales. Prior to joining the Company, he was National Sales Manager at
Creative Labs from August 1995 to April 1997. Mr. Bergeson has held senior sales
positions in the retail computer industry over the past 12 years. Mr. Bergeson
started in the computer industry with Epson America. He later joined NEC
Technologies as a Regional Director from October 1989 through October 1991. Mr.
Bergeson co-founded Personal Computer Solutions in 1991, where he served as Vice
President of Sales and Marketing until June 1994.
 
    FRANK M. BOUTON joined the Company in June 1992, having previously consulted
with Robert L. Carter on the development of the Company's original products. He
has been Vice President, New Technologies, since January 1996. From October 1992
to January 1996, he was Vice President, Engineering. From January 1987 to June
1992, Mr. Bouton was the president and owner of THECO Logic, Inc., a designer
and manufacturer of hardware and software products for the medical field.
 
                                       30
<PAGE>
    G. EDWARD BRIGHTMAN has been employed by the Company since August 1992 and
became Vice President, Operations, in October 1992. He has 14 years of
experience in manufacturing and operation management. From October 1983 to
August 1992, Mr. Brightman worked for Toyota Motor Sales, Toyota Motor
Manufacturing and Vehicle Processors Inc. in management positions at several
assembly plants and import facilities.
 
    KENT E. KOSKI has been employed by the Company since May 1995 as Vice
President, Finance and Administration, Chief Financial Officer, and Secretary.
For the five years prior to joining the Company, he was the Vice President of
Finance for Avia Group International, Inc., an athletic footwear and apparel
design and distribution company. Mr. Koski is a Certified Public Accountant and
received B.S. and M.B.A. degrees from the University of Utah.
 
    ROBERT D. MARTIN has been employed by the Company since November 1994 and
became Vice President, Strategic Planning, in January 1996, and Vice President,
Development, in May 1997. Immediately prior to joining the Company he was a
private consultant and in that capacity assisted the Company with the
procurement of government contracts. Mr. Martin was a regional and line of
business manager for National System & Research Company from May 1990 until
December 1992. He has over 20 years of experience in senior management with
medical electronics, systems integration and software development companies.
 
    RONALD J. RESNICK has been employed by the Company since May 1996 as Vice
President, Marketing. Prior to joining the Company, he was a marketing
consultant from August 1995 until April 1996. From April 1994 through July 1995,
Mr. Resnick was the Vice President and Publisher at Infotainment World, Inc., a
book and magazine publishing company. He was Vice President, Business
Development at Prima Publishing, a book publishing company, from March 1992
until March 1994, and Product Marketing Manager at Software Toolworks, Inc., an
entertainment software publishing company, from July 1990 to December 1991. Mr.
Resnick has a B.S. degree in electrical engineering from Rutgers University.
 
    C. NORMAN WINNINGSTAD has served as Chairman of the Board since February
1994. He has served as a director of the Company since its inception. From 1970
to October 1991, Mr. Winningstad held at various times the positions of Chairman
of the Board, Vice-Chairman, President and Chief Executive Officer of Floating
Point Systems, Inc., a manufacturer of scientific computers. Mr. Winningstad has
a B.S. in Electrical Engineering from the University of California at Berkeley,
an M.B.A. degree from Portland State University, and an Honorary Doctorate of
Law degree from Pacific University.
 
    ROBERT L. CARTER has been a director of the Company since 1990, and is a
former Chairman, President and Chief Executive Officer of the Company. Mr.
Carter was the Company's first full-time employee and played a key role in the
early design and development of certain ThrustMaster products. He has been the
President and Chief Executive Officer of Military Simulations, Inc., a publisher
of entertainment software, since December, 1993. He received a B.S.M.E. degree
from the University of Missouri.
 
    GRAHAM E. DORLAND became a member of the Board of Directors in November
1993. Mr. Dorland is President of Dorland and Associates, a consulting group,
and President and Chief Executive Officer of Nautamatic Marine Systems, Inc., a
manufacturer of marine autopilots located in Newport, Oregon. From June 1993 to
January 1995, he was Managing Partner of Snobird Aircraft Partners, a developer
of experimental aircraft. From May 1982 to December 1992, Mr. Dorland was
Chairman and President of ABX Air Inc., the wholly-owned airline subsidiary of
Airborne Freight Corporation, doing business as Airborne Express.
 
    GENERAL MERRILL A. MCPEAK became a member of the Board of Directors in March
1996. He has been the President of McPeak and Associates, an international
aerospace consulting firm, since January 1995. General McPeak spent 37 years in
the United States Air Force, rising to become Chief of Staff from October 1990
to October 1994, when he retired. He also is a member of the Boards of Directors
of Tektronix, Inc., Praegitzer Industries, Inc., TWA, Inc. and ECC International
Corp., where he serves as
 
                                       31
<PAGE>
Chairman of the Board. He holds a B.A. degree in economics from San Diego State
University and an M.S. degree in international relations from George Washington
University.
 
    G. GERALD PRATT has been a director of the Company since its inception.
Since 1980, Mr. Pratt has been a private venture capitalist. Mr. Pratt has been
a trustee of the Meyer Memorial Trust, a charitable trust, since 1978.
 
    MILTON R. SMITH has been a director of the Company since its inception. Mr.
Smith served as the Company's President from October 1992 until May 1994 and as
the Company's Secretary from July 1990 until April 1993 and again from December
1994 until May 1995. Since April 1997, Mr. Smith has been a member of the Board
of Directors of Integrated Measurement Systems, Inc., a manufacturer of high
performance engineering test stations. Mr. Smith was the President and Chief
Executive Officer of Zeelan Technology, Inc., a software engineering company,
from October 1994 until April 1995. Since May 1995, Mr. Smith has been a private
venture capitalist. He recently completed terms as a member of the national
Board of Directors and as Chairman of the Oregon Council of the American
Electronics Association. He received a B.S. degree in physics from Portland
State University, an M.S.E.E. degree from Oregon State University, and a J.D.
degree from Lewis and Clark College.
 
    FREDERICK M. STEVENS became a member of the Board of Directors in December
1993. From April 1988 until his retirement in January 1991, Mr. Stevens was the
Chairman of the Board and Chief Executive Officer of Fred Meyer, Inc., a
regional retailer in the Northwest.
 
    There are no arrangements or understandings pursuant to which any person has
been elected as a director or appointed as an executive officer of the Company.
The Company has no employment contracts with any of its executive officers.
 
NUMBER, TERM AND ELECTION OF DIRECTORS
 
    The Company's Amended and Restated Bylaws currently provide for a Board of
Directors consisting of eight directors. The Board is divided into three
classes. At each annual meeting of the Company's shareholders, directors are
elected to succeed the directors in the class whose terms are then expiring.
Directors hold office until the third annual shareholders meeting after their
election and until their successors are elected and qualified. Officers are
appointed by the Board of Directors and serve at its discretion.
 
BOARD COMMITTEES
 
    The Board of Directors has two standing committees, an Audit Committee and a
Compensation Committee. The Audit Committee, which currently consists of Messrs.
Dorland, Pratt and Smith, meets with the Company's Chief Executive Officer,
Chief Financial Officer and the Company's independent public accountants to
review the scope and findings of the annual audit.
 
    The Compensation Committee currently consists of Messrs. Carter, McPeak,
Stevens and Winningstad. The Compensation Committee considers and acts upon
management's recommendations to the Board of Directors regarding salaries,
bonuses, stock options and other forms of compensation for the Company's
executive officers. The Committee makes recommendations to the Board of
Directors. Executive officers who are also directors of the Company do not
participate in decisions affecting their own compensation.
 
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
 
    Mr. Carter, a member of the Compensation Committee, is a former Chairman,
President and Chief Executive Officer of the Company. From December 1993 until
February 1996, the Company made certain payments pursuant to a consulting
agreement with BOCAR, Inc., a company of which Mr. Carter is the President and
its sole shareholder. See "Certain Transactions."
 
                                       32
<PAGE>
DIRECTOR COMPENSATION
 
    Each non-employee director receives an annual fee of $3,000 and $250 for
each Board meeting and committee meeting attended, unless the committee meeting
is held on the same day as the Board meeting. Non-employee directors are also
eligible to receive stock options under the Directors' Nonqualified Stock Option
Plan. Upon becoming a director, each non-employee director received options to
purchase 16,480 shares of Common Stock under such plan. In 1996 and 1997, each
non-employee director who had been a director for more than one year received
options to purchase 4,120 shares of Common Stock at a price equal to the fair
market value on the date of grant. No employee director receives additional
compensation for his service as a director. See "--Incentive Compensation and
Benefit Plans."
 
LIMITATION OF LIABILITY; INDEMNIFICATION
 
    The Company's Articles of Incorporation, as amended, limit the liability of
the Company's directors to the Company and its shareholders for monetary damages
for certain conduct as directors. The Company's Amended and Restated Bylaws
provide that the Company shall indemnify its directors and officers, to the
fullest extent permissible under Oregon law, against any damages arising out of
their actions as directors or officers of the Company. Additionally, the Company
has obtained director and officer liability insurance with respect to
liabilities arising out of certain matters, including matters arising under the
Securities Act. At present, there is no pending litigation or proceeding
involving any director or officer where indemnification will be required or
permitted. The Company is not aware of any threatened litigation or proceeding
which may result in a claim for such indemnification.
 
                                       33
<PAGE>
EXECUTIVE COMPENSATION
 
    The following table sets forth the compensation paid by the Company for the
last three fiscal years to the Company's Chief Executive Officer and the other
four most highly compensated executive officers of the Company for 1996
(collectively, the "Named Executive Officers").
 
                           SUMMARY COMPENSATION TABLE
 
<TABLE>
<CAPTION>
                                                                                      LONG-TERM
                                                                                 COMPENSATION AWARDS
                                                          ANNUAL COMPENSATION    -------------------
NAME AND                                                -----------------------      SECURITIES           ALL OTHER
PRINCIPAL POSITION                             YEAR       SALARY     BONUS (1)   UNDERLYING OPTIONS   COMPENSATION (2)
- -------------------------------------------  ---------  ----------  -----------  -------------------  -----------------
<S>                                          <C>        <C>         <C>          <C>                  <C>
Stephen A. Aanderud........................       1996  $  135,000   $  65,299           25,750(3)        $   2,250
  PRESIDENT AND CEO                               1995     120,000      20,160           10,300               1,650
                                                  1994      81,747      19,130           16,480              --
 
Robert D. Martin (4).......................       1996      90,000      38,591           48,925(3)            1,209
  VICE PRESIDENT,                                 1995      55,208       2,650            3,605                 448
  DEVELOPMENT                                     1994       6,442         481           --                  --
 
G. Edward Brightman........................       1996      90,000      32,445           18,540(3)              988
  VICE PRESIDENT,                                 1995      80,000       9,600           10,300               1,100
  OPERATIONS                                      1994      66,000      15,444           --
 
Frank M. Bouton............................       1996      85,000      36,770           16,480(3)              970
  VICE PRESIDENT,                                 1995      80,000      11,520            6,180               1,100
  NEW TECHNOLOGIES                                1994      66,000      15,444           --                  --
 
Kent E. Koski (5)..........................       1996      90,000      25,956           49,440(3)            1,424
  VICE PRESIDENT, FINANCE                         1995      51,846       4,977           41,200              --
  AND ADMINISTRATION,
  CFO, SECRETARY
</TABLE>
 
- ------------------------
 
(1) Cash bonuses are paid to executive officers of the Company based upon their
    individual contributions to the Company and the Company's overall
    performance. Bonuses for a given year are paid in the first quarter of the
    following year. See "--Incentive Compensation and Benefit Plans."
 
(2) Consists of the Company's matching contributions under its 401(k) plan. See
    "--Incentive Compensation and Benefit Plans."
 
(3) Includes replacement options granted upon surrender of options granted in
    1995. See "--Repricing of Options."
 
(4) Mr. Martin joined the Company in November 1994.
 
(5) Mr. Koski joined the Company in May 1995.
 
                                       34
<PAGE>
                                 OPTION GRANTS
 
    The following table sets forth information with respect to grants of stock
options to the Named Executive Officers during 1996.
 
<TABLE>
<CAPTION>
                                                                                                 POTENTIAL REALIZABLE
                                                                                                   VALUE AT ASSUMED
                                                                                                        ANNUAL
                                                                                                 RATES OF STOCK PRICE
                                         NUMBER OF     PERCENT OF                                  APPRECIATION FOR
                                          SHARES      TOTAL OPTIONS                                     OPTION
                                        UNDERLYING     GRANTED TO      EXERCISE                        TERM (3)
                                          OPTIONS     EMPLOYEES IN     PRICE PER   EXPIRATION   ----------------------
NAME                                    GRANTED (1)       YEAR         SHARE (2)      DATE          5%         10%
- --------------------------------------  -----------  ---------------  -----------  -----------  ----------  ----------
<S>                                     <C>          <C>              <C>          <C>          <C>         <C>
Stephen A. Aanderud...................      10,300(4)          3.5%    $   4.733      2/13/06   $   30,659  $   77,695
                                            15,450            5.2          5.340      5/21/06       51,884     131,484
 
Robert D. Martin......................       3,605(4)          1.2         4.733      2/13/06       10,731      27,193
                                            41,200           13.8          5.097      4/25/06      132,068     334,686
                                             4,120            1.4          5.340      5/21/06       13,836      35,062
 
G. Edward Brightman...................      10,300(4)          3.5         4.733      2/13/06       30,659      77,695
                                             8,240            2.8          5.340      5/21/06       27,671      70,125
 
Frank M. Bouton.......................       6,180(4)          2.1         4.733      2/13/06       18,395      46,617
                                            10,300            3.5          5.340      5/21/06       34,589      87,656
 
Kent E. Koski.........................      41,200(4)         13.8         4.733      2/13/06      122,634     310,780
                                             8,240            2.8          5.340      5/21/06       27,671      70,125
</TABLE>
 
- ------------------------
 
(1) Options may terminate before their expiration dates if the optionee's status
    as an employee or director is terminated. One-fourth of the shares of Common
    Stock covered by each option grant vests and becomes exercisable on each of
    the first four anniversaries of the grant date.
 
(2) Based on the closing prices of the Common Stock as reported on the Nasdaq
    National Market on the respective grant dates.
 
(3) This column shows the hypothetical gains or option spreads of the options
    granted based on assumed annual compound stock appreciation rates of 5% and
    10% over the full 10-year term of the options. The assumed rates of
    appreciation are mandated by the rules of the Securities and Exchange
    Commission and do not represent the Company's estimate or projection of
    future Common Stock prices.
 
(4) Replacement options granted upon cancellation of options granted in 1995.
    See "--Repricing of Options."
 
                                       35
<PAGE>
             AGGREGATE OPTION EXERCISES AND YEAR-END OPTION VALUES
 
    The following table sets forth certain information regarding the year-end
value of options held by the Named Executive Officers. No options were exercised
by the Named Executive Officers during 1996.
 
<TABLE>
<CAPTION>
                                                             NUMBER OF SHARES SUBJECT      VALUE OF UNEXERCISED
                                                            TO UNEXERCISED OPTIONS AT    IN-THE- MONEY OPTIONS AT
                                                                DECEMBER 31, 1996         DECEMBER 31, 1996 (1)
                                                            --------------------------  --------------------------
NAME                                                        EXERCISABLE  UNEXERCISABLE  EXERCISABLE  UNEXERCISABLE
- ----------------------------------------------------------  -----------  -------------  -----------  -------------
<S>                                                         <C>          <C>            <C>          <C>
Stephen A. Aanderud.......................................      98,880        25,750     $ 661,500    $    59,375
 
Robert D. Martin..........................................      --            48,925        --            113,125
 
G. Edward Brightman.......................................      57,680        18,540       404,250         44,500
 
Frank M. Bouton...........................................      --            16,480        --             37,750
 
Kent E. Koski.............................................      --            49,440        --            127,000
</TABLE>
 
- ------------------------
 
(1) Calculated based on the difference between the option exercise price and the
    closing price of the Common Stock on December 31, 1996 ($7.625 per share).
    The potential values have not been, and may never be, realized. The
    underlying options have not been, and may never be, exercised. Actual gains,
    if any, on exercise will depend on the value of the Common Stock on the date
    of exercise.
 
                              REPRICING OF OPTIONS
 
    On February 13, 1996, the Board of Directors canceled certain options issued
in 1995 and granted replacement options. The following table sets forth
information with respect to cancellations and replacement grants of stock
options to all executive officers since the Company's inception.
 
<TABLE>
<CAPTION>
                                                                                                             LENGTH OF
                                                       NUMBER OF     MARKET                                  ORIGINAL
                                                      SECURITIES    PRICE OF     EXERCISE                   OPTION TERM
                                                      UNDERLYING    STOCK AT     PRICE AT        NEW       REMAINING AT
                                                        OPTIONS      TIME OF      TIME OF     EXERCISE        DATE OF
NAME                                         DATE      REPRICED     REPRICING    REPRICING      PRICE        REPRICING
- -----------------------------------------  ---------  -----------  -----------  -----------  -----------  ---------------
<S>                                        <C>        <C>          <C>          <C>          <C>          <C>
Stephen A. Aanderud......................    2/13/96      10,300    $   4.733    $   8.616    $   4.733   9 yrs., 3 mos.
 
Robert D. Martin.........................    2/13/96       3,605        4.733        8.495        4.733   9 yrs., 1 mo.
 
G. Edward Brightman......................    2/13/96      10,300        4.733        8.616        4.733   9 yrs., 3 mos.
 
Frank M. Bouton..........................    2/13/96       6,180        4.733        8.616        4.733   9 yrs., 3 mos.
 
Kent E. Koski............................    2/13/96      41,200        4.733        8.616        4.733   9 yrs., 3 mos.
</TABLE>
 
                                       36
<PAGE>
INCENTIVE COMPENSATION AND BENEFIT PLANS
 
    STOCK OPTION PLANS
 
    The Company's 1994 Stock Option Plan (the "1994 Plan") and the Directors'
Nonqualified Stock Option Plan (the "Directors' Plan") were originally adopted
by the Board of Directors and the Company's Shareholders in July 1994. Prior to
the adoption of the 1994 Plan and the Directors' Plan, the Company granted stock
options to certain employees and directors under the Company's 1990 Stock Option
Plan (the "1990 Plan"). Upon adoption of the 1994 Plan, shares reserved for
issuance of then ungranted options under the 1990 Plan were transferred to the
1994 Plan.
 
    The 1994 Plan provides for the award of incentive stock options and of
nonqualified stock options to selected employees of the Company. Of the
aggregate 1,600,000 shares authorized to be issued under the 1994 Plan and the
1990 Plan, options to purchase 831,828 shares were outstanding as of November 1,
1997, 103,382 shares were reserved for issuance under the 1994 Plan pursuant to
future option grants, and the remaining shares had been issued upon exercise of
options. The exercise prices for outstanding options under the 1994 Plan and the
1990 Plan range from $0.24 to $15.75 per share. The 1994 Plan is currently
administered by the Board of Directors, which has the authority, subject to the
terms of the 1994 Plan, to determine the persons to whom options may be granted,
the exercise price and number of shares subject to each option, the character of
the grant, the time or times at which all or a portion of each option may be
exercised and certain other provisions. Options are exercisable over a period of
time in accordance with the terms of option agreements entered into on the date
of grant. Options granted under the 1994 Plan and the 1990 Plan are exercisable
for a period of 10 years from the date of grant, except that incentive stock
options granted under the 1994 Plan to persons who own more than 10% of the
Common Stock terminate after five years. Generally, options become exercisable
over a four-year period. Options granted under the 1994 Plan are generally
nontransferable by the optionee and, unless otherwise determined by the Board of
Directors, generally must be exercised by the optionee during the period of the
optionee's employment or service with the Company or within a specified period
following termination of employment or service.
 
    The Directors' Plan provides for the award of nonqualified stock options to
non-employee directors of the Company. Upon becoming a director, each
non-employee director is granted options to purchase 16,480 shares of Common
Stock. In 1996 and 1997, each non-employee director who had been a director for
more than one year received options to purchase 4,120 shares of Common Stock. Of
the 159,000 shares that are authorized to be issued under the Directors Plan,
options to purchase 69,040 shares were outstanding as of November 1, 1997, and
the remaining 89,960 shares were reserved for issuance pursuant to future option
grants. The exercise prices for outstanding options range from $4.13 to $8.62
per share. The exercise price for options granted under the Directors' Plan is
the fair market value on the date of grant, and the exercise period is 10 years
from such date. Options terminate 90 days after a holder's termination as a
director of the Company for any reason other than death or disability, and one
year after termination by death or disability.
 
    The weighted average exercise price of options outstanding as of November 1,
1997 under the 1994 Plan, the 1990 Plan and the Directors' Plan was $4.56.
 
    BONUS PLAN
 
    The Board has adopted a 1997 bonus program under which employees can receive
bonuses based upon the Company's attainment of certain revenue growth, pretax
profits and other performance goals. All employees are eligible to participate
in the program, but must remain employed at December 31, 1997 to receive a
bonus. If target revenue growth, pretax profits and other performance goals
established by the Board of Directors are met, the current seven executive
officers as a group would earn awards under the bonus plan in an aggregate
amount of $225,000, representing, individually, from 20 percent to 35 percent of
their respective 1997 annual base salaries. The maximum aggregate amount of
bonuses that may be paid
 
                                       37
<PAGE>
under the plan to such executive officers is $393,000, representing,
individually, from 35 percent to 61 percent of their respective 1997 annual base
salaries.
 
    401(K) PLAN
 
    The Company has adopted a 401(k) plan pursuant to which eligible employees
are able to elect to defer, in the form of salary reduction contributions, a
percentage of the compensation that would otherwise be paid to the employee.
Under the 401(k) plan, the Company, in its discretion, may make matching
contributions (not to exceed 1.5% of the salary of the participating individual
employee) for the benefit of eligible employees. For 1996, the Company made an
aggregate of $35,000 in matching contributions under the plan. The Company pays
all costs of administering the 401(k) plan.
 
                              CERTAIN TRANSACTIONS
 
    In December 1993, the Company entered into a consulting agreement with
BOCAR, Inc. ("BOCAR"), pursuant to which BOCAR provided consulting services to
the Company with respect to product concepts, mechanical design, mold and metal
working design and mechanical engineering. Robert L. Carter, a director,
principal shareholder and the former Chairman, President and Chief Executive
Officer of the Company, is the President and sole shareholder of BOCAR. Payments
by the Company to BOCAR under the consulting agreement were $188,334, $203,334
and $54,584, respectively, for the three successive years commencing December
10, 1993. The consulting agreement terminated in February 1996.
 
                                       38
<PAGE>
                       PRINCIPAL AND SELLING SHAREHOLDERS
 
    The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of November 1, 1997, and as adjusted
to reflect the sale of the shares of the Common Stock offered hereby, by (i)
each shareholder known by the Company to own beneficially 5% or more of the
Company's Common Stock, (ii) each of the Company's directors, (iii) each of the
Named Executive Officers, (iv) the Selling Shareholder and (v) all directors and
officers as a group. Except as otherwise indicated, the Company believes that
the beneficial owners of the Common Stock listed below, based on information
furnished by such owners, have sole investment and voting power with respect to
such shares.
 
<TABLE>
<CAPTION>
                                                                                    SHARES TO
                                                            SHARES BENEFICIALLY    BE SOLD IN    PERCENT BENEFICIALLY
                                                               OWNED BEFORE           THIS            OWNED AFTER
                                                              OFFERING(2)(3)        OFFERING       OFFERING(2)(3)(4)
                                                          -----------------------  -----------  -----------------------
NAME AND ADDRESS OF BENEFICIAL OWNER(1)                     NUMBER      PERCENT                   NUMBER      PERCENT
- --------------------------------------------------------  ----------  -----------               ----------  -----------
<S>                                                       <C>         <C>          <C>          <C>         <C>
C. Norman Winningstad(5)................................     482,910        11.2      300,000      182,910         3.2
G. Gerald Pratt(7)......................................     443,168        10.3       --          443,168         7.6
Milton R. Smith(6)......................................     394,080         9.0       --          394,080         6.7
Robert L. Carter(8).....................................     367,030         8.5       --          367,030         6.3
                                                             336,590         7.8       --          336,590         5.5
Robert A. Simms, Sr.  ..................................
 55 Railroad Avenue
 Greenwich, Connecticut 06830
Stephen A. Aanderud(9)..................................      94,180         2.1       --           94,180         1.7
Frank M. Bouton(10).....................................      56,892         1.3       --           56,892         1.0
G. Edward Brightman(11).................................      63,417         1.5       --           63,417         1.1
Graham E. Dorland(12)...................................      35,020       *           --           35,020       *
Frederick M. Stevens(13)................................      23,278       *           --           23,278       *
Kent E. Koski(14).......................................      17,253       *           --           17,253       *
Robert D. Martin(15)....................................      12,663       *           --           12,663       *
General Merrill A. McPeak(16)...........................       5,150       *           --            5,150       *
All Executive Officers and Directors as a group (14
 persons)(17)...........................................   2,006,939        43.2                 1,706,939        27.8
</TABLE>
 
- ------------------------
 
  * Less than 1%.
 
 (1) Unless otherwise indicated, the address of each beneficial owner identified
     is ThrustMaster, Inc., 7175 NW Evergreen Parkway, Suite 400, Hillsboro,
     Oregon 97124-5839.
 
 (2) Beneficial ownership is determined in accordance with the rules of the
     Securities and Exchange Commission. For purposes of this table, a person is
     deemed to be the beneficial owner of securities that (i) can be acquired by
     such person within 60 days upon the exercise of options or warrants and
     (ii) are held by such person's spouse or other immediate family member
     sharing such person's household. Each beneficial owner's percentage
     ownership set forth below is determined by assuming that options and
     warrants that are held by such person (but not those held by any other
     person) and that are exercisable or convertible within 60 days after
     November 1, 1997 have been exercised or converted.
 
 (3) Percentages of outstanding Common Stock are based upon 4,293,588 shares of
     Common Stock outstanding as of November 1, 1997 and 5,493,588 shares of
     Common Stock deemed to be outstanding upon completion of this offering.
 
 (4) Assumes no exercise of the Underwriters' over-allotment option.
 
 (5) Includes 64,010 shares beneficially owned with spouse and 18,540 shares
     subject to options exercisable within 60 days after November 1, 1997.
     Excludes 6,180 shares subject to options exercisable more than 60 days
     after November 1, 1997.
 
                                       39
<PAGE>
 (6) Includes 67,980 shares subject to options exercisable within 60 days after
     November 1, 1997. Excludes 6,180 shares subject to options exercisable more
     than 60 days after November 1, 1997.
 
 (7) Includes 18,540 shares subject to options exercisable within 60 days after
     November 1, 1997. Excludes 6,180 shares subject to options exercisable more
     than 60 days after November 1, 1997.
 
 (8) Includes 1,030 shares subject to options exercisable within 60 days after
     November 1, 1997. Excludes 7,210 shares subject to options exercisable more
     than 60 days after November 1, 1997.
 
 (9) Includes 94,180 shares subject to options exercisable within 60 days after
     November 1, 1997. Excludes 60,900 shares subject to options exercisable
     more than 60 days after November 1, 1997.
 
(10) Includes 6,438 shares beneficially owned with spouse and 6,438 shares
     subject to options exercisable within 60 days after November 1, 1997.
     Excludes 19,312 shares subject to options exercisable more than 60 days
     after November 1, 1997.
 
(11) Includes 59,633 shares subject to options exercisable within 60 days after
     November 1, 1997. Excludes 20,857 shares subject to options exercisable
     more than 60 days after November 1, 1997.
 
(12) Includes 16,480 shares beneficially owned with spouse and 18,540 shares
     subject to options exercisable within 60 days after November 1, 1997.
     Excludes 6,180 shares subject to options exercisable more than 60 days
     after November 1, 1997.
 
(13) Includes 4,738 shares beneficially owned with spouse and 18,540 shares
     subject to options exercisable within 60 days after November 1, 1997.
     Excludes 6,180 shares subject to options exercisable more than 60 days
     after November 1, 1997.
 
(14) Includes 2,575 shares beneficially owned with spouse and 14,678 shares
     subject to options exercisable within 60 days after November 1, 1997.
     Excludes 44,032 shares subject to options exercisable more than 60 days
     after November 1, 1997.
 
(15) Includes 12,648 shares subject to options exercisable within 60 days after
     November 1, 1997. Excludes 43,647 shares subject to options exercisable
     more than 60 days after November 1, 1997.
 
(16) Includes 5,150 shares subject to options exercisable within 60 days after
     November 1, 1997. Excludes 15,450 shares subject to options exercisable
     more than 60 days after November 1, 1997.
 
(17) Includes 348,515 shares subject to options exercisable within 60 days after
     November 1, 1997. Excludes 320,160 shares subject to options exercisable
     more than 60 days after November 1, 1997.
 
                                       40
<PAGE>
                          DESCRIPTION OF CAPITAL STOCK
 
    The authorized capital stock of the Company consists of 25,000,000 shares of
Common Stock, no par value, and 5,000,000 shares of Preferred Stock, no par
value.
 
    The following summary describes certain provisions of the Company's Articles
of Incorporation, as amended, and Amended and Restated Bylaws and of applicable
law relating to the Common Stock and Preferred Stock. The summary does not
purport to be complete and is subject, and qualified in its entirety by, the
complete provisions of the Company's Articles of Incorporation, as amended, and
Amended and Restated Bylaws, which are included as exhibits to the Registration
Statement of which this Prospectus is a part, and by the provisions of
applicable law.
 
COMMON STOCK
 
    As of November 1, 1997, there were 4,293,588 shares of Common Stock
outstanding held of record by approximately 100 shareholders. The holders of
Common Stock are entitled to receive dividends as may from time to time be
declared by the Board of Directors out of funds legally available therefor and
to one vote per share on all matters on which the holders of Common Stock are
entitled to vote. See "Dividend Policy." Such holders do not have any cumulative
voting rights or preemptive, conversion, redemption or sinking fund rights. In
the event of a liquidation, dissolution or winding up of the Company, holders of
Common Stock are entitled to share equally and ratably in the Company's assets,
if any, remaining after the payment of all liabilities of the Company and the
liquidation preference of any outstanding class or series of Preferred Stock.
The outstanding shares of Common Stock are, and the shares of Common Stock
offered hereby will be, fully paid and nonassessable. The rights, preferences
and privileges of holders of Common Stock are subject to those of any series of
Preferred Stock that the Company's Board of Directors may issue in the future,
as described below. The Common Stock is traded on the Nasdaq National Market
under the trading symbol "TMSR."
 
PREFERRED STOCK
 
    The Company is authorized to issue up to 5,000,000 shares of Preferred Stock
in one or more series and to fix the number of shares constituting any such
series and the preferences, limitations and relative rights, including dividend
rights, dividend rate, voting rights, terms of redemption, redemption price or
prices, conversion rights, preemption rights and liquidation preferences of the
shares constituting any series, without any further vote or action by the
Company's shareholders. The issuance of Preferred Stock by the Board of
Directors could adversely affect the rights of holders of Common Stock. The
potential issuance of Preferred Stock may have the effect of delaying, deferring
or preventing a change in control of the Company, may discourage bids for the
Common Stock at a premium over the market price of the Common Stock, and may
adversely affect the market price of, and the voting and other rights of the
holders of, the Common Stock. The Company has no present plan to issue Preferred
Stock. See "Risk Factors--Potential Adverse Impact of Issuance of Preferred
Stock; Antitakeover Effect of Oregon Law and the Company's Amended and Restated
Bylaws."
 
WARRANTS
 
    Warrants to purchase 117,150 shares of Common Stock at a price of $7.57 per
share were outstanding as of November 1, 1997. The warrants expire March 3,
1999. Until such date, subject to certain limitations, the warrantholders are
entitled to one demand registration right and unlimited piggyback registration
rights.
 
                                       41
<PAGE>
ANTI-TAKEOVER EFFECTS OF OREGON LAW AND THE COMPANY'S AMENDED AND RESTATED
  BYLAWS
 
    OREGON CONTROL SHARE ACT
 
    The Company is subject to certain provisions of the Oregon Business
Corporation Act (the "Act") that in certain circumstances restrict the ability
of significant shareholders from exercising voting rights (the "Control Share
Act"). The Control Share Act generally provides that a person (the "Acquiring
Person") who acquires voting stock of an Oregon corporation in a transaction
that results in the Acquiring Person's holding more than 20%, 33- 1/3% or 50% of
the total voting power of the corporation (a "Control Share Acquisition") cannot
vote the shares the Acquiring Person acquires in the Control Share Acquisition
("control shares") unless voting rights are accorded to the control shares by
(i) a majority of each voting group entitled to vote and (ii) the holders of a
majority of the outstanding voting shares, excluding the control shares held by
the Acquiring Person and shares held by the corporation's officers and inside
directors. The term "Acquiring Person" is broadly defined to include persons
acting as a group.
 
    The Acquiring Person may, but is not required to, submit to the corporation
a statement setting forth certain information about the Acquiring Person and its
plans with respect to the corporation. The statement may also request that the
corporation call a special meeting of shareholders to determine whether voting
rights will be accorded to the control shares. If the Acquiring Person does not
request a special meeting of shareholders, the issue of the control shares'
voting rights will be considered at the next annual or special meeting of
shareholders. If the Acquiring Person's control shares are accorded voting
rights and represent a majority of all voting power, shareholders who do not
vote in favor of voting rights for the control shares will have the right to
receive the appraised "fair value" of their shares, which may not be less than
the highest price paid per share by the Acquiring Person for the control shares.
 
    OREGON BUSINESS COMBINATION STATUTES
 
    The Company is also subject to certain provisions of the Act that govern
business combinations between corporations and interested shareholders, which
generally provide that if a person or entity acquires 15% or more of the voting
stock of an Oregon corporation (an "Interested Shareholder"), the corporation
and the Interested Shareholder, or any affiliated entity of the Interested
Shareholder, may not engage in certain business combination transactions for
three years following the date the person or entity became an Interested
Shareholder. Business combination transactions for this purpose include (a) a
merger or plan of share exchange, (b) any sale, lease, mortgage or other
disposition of 10% or more of the assets of the corporation and (c) certain
transactions that result in the issuance of capital stock of the corporation to
the Interested Shareholder. These restrictions do not apply if (i) the
Interested Shareholder, as a result of the transaction in which such person
became an Interested Shareholder, owns at least 85% of the outstanding voting
stock of the corporation (disregarding shares owned by directors who are also
officers and by certain employee benefit plans), (ii) the board of directors
approves the share acquisition or business combination before the Interested
Shareholder acquired 15% or more of the corporation's outstanding voting stock
or (iii) the board of directors and the holders of at least 66- 2/3% of the
outstanding voting stock of the corporation (disregarding shares owned by the
Interested Shareholder) approve the transaction after the Interested Shareholder
acquires 15% or more of the corporation's voting stock.
 
    CLASSIFIED BOARD OF DIRECTORS
 
    The Company's Amended and Restated Bylaws provide for the Company's Board of
Directors to be divided into three classes of directors serving staggered
three-year terms. At each annual meeting of the Company's shareholders,
directors are elected to succeed the directors in the class whose terms are then
expiring. Classification of the Board of Directors is intended to decrease the
likelihood of precipitous changes in the composition of the Board of Directors
and its powers, and thereby to moderate changes in the Company's policies and
direction that the Board of Directors does not deem to be in the best interests
 
                                       42
<PAGE>
of the shareholders. Classification may also have the effect of delaying,
deferring or preventing a change of control of the Company without further
action by the shareholders, may discourage bids for the Common Stock at a
premium over the market price of the Common Stock, may adversely affect the
market price of the Common Stock and could have the effect of discouraging
certain attempts to acquire the Company or remove incumbent management,
including incumbent members of the Company's Board of Directors, even if some or
a majority of the Company's shareholders deemed such actions to be in their best
interests. See "Risk Factors--Potential Adverse Impact of Issuance of Preferred
Stock; Antitakeover Effect of Oregon Law and the Company's Amended and Restated
Bylaws."
 
TRANSFER AGENT AND REGISTRAR
 
    The Transfer Agent and Registrar for the Common Stock is ChaseMellon
Shareholder Services, Seattle, Washington.
 
                                       43
<PAGE>
                        SHARES ELIGIBLE FOR FUTURE SALE
 
    Upon completion of this offering, the Company will have 5,493,588 shares of
Common Stock outstanding (assuming no exercise of options or warrants after
November 1, 1997), all of which will be freely tradable without restriction
under the Securities Act, other than shares held by "affiliates" of the Company,
as defined in Rule 144 under the Securities Act, which shares will be subject to
certain resale limitations of Rule 144. Approximately 1,330,832 shares will be
subject to an 80-day lock-up period, as described below. The Company, the
Selling Shareholder and the Company's directors, executive officers and
shareholders owning in excess of one percent of the outstanding shares of Common
Stock prior to this offering have agreed that, until 80 days following the close
of this offering, they will not, without the prior written consent of Van Kasper
& Company, which will not be unreasonably withheld, offer, sell or otherwise
dispose of any of the 1,330,832 shares of Common Stock owned by them or any
securities convertible into or exercisable or exchangeable for any shares of
Common Stock, except that the Company, without such consent, may grant options
or issue stock upon exercise of options granted pursuant to the Company's stock
option plans and except that the Representative shall allow such persons to sell
an aggregate amount of up to 40,000 shares of Common Stock on or after 60 days
following the close of this offering.
 
    In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned restricted shares for at
least one year (and, with respect to nonaffiliates of the Company, a person who
has beneficially owned restricted securities less than two years), will be
entitled to sell in any three-month period a number of shares that does not
exceed the greater of (i) 1% of the then outstanding shares of the Company's
Common Stock or (ii) the average weekly trading volume of the Company's Common
Stock on the Nasdaq National Market during the four calendar weeks immediately
preceding the date on which notice of the sale is filed with the Securities and
Exchange Commission. Such sales pursuant to Rule 144 are subject to certain
requirements relating to manner of sale, notice and availability of current
public information about the Company. A person (or persons whose shares are
aggregated) who is not deemed to have been an affiliate of the Company at any
time during the 90 days immediately preceding the sale and who has beneficially
owned restricted shares for at least two years is entitled to sell such shares
pursuant to Rule 144(k) without regard to the limitations described above.
 
    At November 1, 1997, options to purchase an aggregate of 900,868 shares of
Common Stock were outstanding under the 1994 Stock Option Plan, the 1990 Stock
Option Plan and the Directors' Nonqualified Stock Option Plan, of which options
to purchase 448,329 shares were fully vested. All of the shares of Common Stock
issuable upon exercise of such options have been registered under the Securities
Act, and unless held by affiliates of the Company, would be free from the
restrictions of Rule 144. An additional 193,342 shares are reserved for future
grants under such stock option plans. As of November 1, 1997, warrants to
purchase up to 117,150 shares of Common Stock at the price of $7.57 per share
were outstanding and will become available for sale in the public market, if
exercised pursuant to cashless exercise provisions, or one year following the
date of exercise of the warrants if exercised for cash.
 
    Sales of substantial amounts of Common Stock in the public market, or the
perception that such sales could occur, could adversely affect prevailing market
prices of the Common Stock and could impair the Company's future ability to
raise capital through an offering of its equity securities. See "Risk Factors--
Volatility of Stock Price."
 
                                       44
<PAGE>
                                  UNDERWRITING
 
    The underwriters named below (the "Underwriters"), acting through their
Representative, Van Kasper & Company, have severally agreed, subject to the
terms and conditions contained in the Underwriting Agreement (the "Underwriting
Agreement") by and among the Company, the Selling Shareholder and the
Underwriters, to purchase from the Company and the Selling Shareholder the
number of shares of Common Stock set forth opposite their respective names:
 
<TABLE>
<CAPTION>
                                                                                   NUMBER OF
NAME                                                                                 SHARES
- ---------------------------------------------------------------------------------  ----------
<S>                                                                                <C>
Van Kasper & Company.............................................................
 
                                                                                   ----------
    Total........................................................................   1,500,000
                                                                                   ----------
                                                                                   ----------
</TABLE>
 
    The shares of Common Stock are being offered by the Underwriters named
herein, subject to receipt and acceptance by them, subject to their right to
reject any order in whole or in part, and to certain other conditions. The
Underwriters are committed to purchase all of the above shares of Common Stock
if any are purchased.
 
    The Representative has advised the Company and the Selling Shareholder that
the Underwriters propose to offer the shares of Common Stock to the public
initially at the price to public set forth on the cover page of this Prospectus
and to certain dealers at that price less a concession not in excess of $
per share. The Underwriters may allow, and these dealers may reallow, to certain
dealers, including any Underwriters, a discount not in excess of $    per share.
After the public offering of the shares of Common Stock, the offering price and
other selling terms may be changed by the Representative as a result of market
conditions or other factors.
 
    The Company has granted to the Underwriters an option, exercisable no later
than 45 days after the date of this Prospectus, to purchase up to 225,000
additional shares of Common Stock at the price to public set forth on the cover
page of this Prospectus, less the underwriting discount set forth on the cover
page of this Prospectus, solely to cover over-allotments. To the extent that the
Underwriters exercise this option, each of the Underwriters will have a firm
commitment, subject to certain conditions, to purchase such additional shares in
approximately the same proportion as set forth in the above table, and the
Company will be obligated, pursuant to the option, to sell such shares of Common
Stock to the Underwriters.
 
    The Underwriting Agreement contains covenants of indemnity between the
Underwriters and the Company and the Selling Shareholder against certain civil
liabilities, including liabilities under the Securities Act.
 
    The Company, the Selling Shareholder and the Company's directors and
executive officers owning in excess of one percent of the outstanding shares of
Common Stock prior to this offering have agreed that, until 80 days following
the close of this offering, they will not, without the prior written consent of
the Representative, which will not be unreasonably withheld, offer, sell or
otherwise dispose of any shares of Common Stock or any securities convertible
into or exercisable or exchangeable for any shares of Common Stock, except that
the Company, without such consent, may grant options or issue stock upon
exercise of
 
                                       45
<PAGE>
options granted pursuant to the Company's stock option plans and except that the
Representative shall allow such persons to sell an aggregate amount of up to
40,000 shares of Common Stock on or after 60 days following the close of this
offering.
 
    Until the distribution of the Common Stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the Underwriters and
certain selling group members to bid for and purchase the Common Stock. As an
exception to these rules, the Underwriters are permitted to engage in certain
transactions that stabilize the price of the Common Stock. Such transactions
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of the Common Stock. If the Underwriters create a short position in
the Common Stock in connection with the offering, I.E., if they sell more shares
of Common Stock than are set forth on the cover page of this Prospectus, the
Underwriters may reduce that short position by purchasing Common Stock in the
open market. The Underwriters may also elect to reduce any short position by
exercising all or part of the over-allotment option described above.
 
    In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. Neither the Company nor any of the
Underwriters makes any representation or predictions as to the direction or
magnitude of any effect that the transactions described above may have on the
price of the Common Stock. In addition, neither the Company nor any of the
Underwriters makes any representation that the Underwriters will engage in such
transactions or that such transactions, once commenced, will not be discontinued
without notice.
 
    The Underwriters have advised the Company that the Underwriters and dealers
may engage in passive market making transactions in the Common Stock in
accordance with rules promulgated by the Commission. In general, a passive
market maker may not bid for or purchase the Common Stock at a price that
exceeds the highest independent bid. In addition, the net daily purchases made
by any passive market maker generally may not exceed 30% of its average daily
trading volume in the Common Stock during a specified two-month prior period or
200 shares, whichever is greater. A passive market maker must identify passive
market making bids as such on the Nasdaq electronic inter-dealer reporting
system. Passive market making may have the effect of stabilizing or maintaining
the market price of the Common Stock at a level above that which might otherwise
prevail in the open market. Underwriters and dealers are not required to engage
in passive market making and may discontinue such activities at any time.
 
                                 LEGAL MATTERS
 
    The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company and for the Selling Shareholder by Perkins
Coie, Portland, Oregon. Certain legal matters in connection with this offering
will be passed upon for the Underwriters by Van Valkenberg Furber Law Group
P.L.L.C., Seattle, Washington.
 
                                    EXPERTS
 
    The consolidated balance sheets as of December 31, 1995 and 1996, and the
related consolidated statements of income, cash flows and changes in
shareholders' equity for each of the three years in the period ended December
31, 1996 included in this prospectus have been included herein in reliance on
the report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of that firm as experts in accounting and auditing.
 
                                       46
<PAGE>
                             ADDITIONAL INFORMATION
 
    The Company has filed with the Securities and Exchange Commission (the
"Commission"), a Registration Statement on Form S-1 (the "Registration
Statement," which term shall include all amendments thereto) under the
Securities Act with respect to the Common Stock offered hereby. This Prospectus,
which constitutes a part of the Registration Statement, omits certain
information contained in the Registration Statement and the exhibits and
schedules thereto on file with the Commission, in accordance with the Securities
Act and the rules and regulations of the Commission thereunder. For further
information with respect to the Company and the Common Stock offered hereby,
reference is made to the Registration Statement and the exhibits and schedules
filed therewith. Statements contained in this Prospectus concerning the
provisions of such documents are necessarily summaries of such documents and
each such statement is qualified in its entirety by reference to the copy of the
applicable document filed with the Commission as an exhibit to the Registration
Statement. The Registration Statement and the exhibits thereto may be inspected,
without charge, at the public reference facilities of the Commission at the
principal office of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the Commission's regional offices located at Seven World Trade
Center, 13th Floor, New York, New York 10048, and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661, and copies of all or any
part thereof may be obtained from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549, and its public reference
facilities in New York, New York, and Chicago, Illinois, at prescribed rates. In
addition, the Registration Statement and such exhibits and schedules may be
accessed electronically at the Commission's web site on the Internet at
www.sec.gov.
 
    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 periodic reports and other information with the Commission.
Such reports and other information (including proxy or information statements)
can be inspected and copied at the addresses, and may be accessed electronically
at the web site, set forth above. Such reports and other information (including
proxy or information statements) can also be inspected at the offices of the
National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.
 
                                       47
<PAGE>
                         INDEX TO FINANCIAL STATEMENTS
 
<TABLE>
<CAPTION>
                                                                                                               PAGE
                                                                                                             ---------
<S>                                                                                                          <C>
Report of Independent Accountants..........................................................................        F-2
 
Consolidated Balance Sheets as of December 31, 1995 and 1996 (audited) and as of September 30, 1997
  (unaudited)..............................................................................................        F-3
 
Consolidated Statements of Income for the years ended December 31, 1994, 1995 and 1996 (audited) and for
  the nine months ended September 30, 1996 and 1997 (unaudited)............................................        F-4
 
Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996 (audited) and
  for the nine months ended September 30, 1996 and 1997 (unaudited)........................................        F-5
 
Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 1994, 1995 and
  1996 (audited) and for the nine months ended September 30, 1997 (unaudited)..............................        F-6
 
Notes to Consolidated Financial Statements.................................................................        F-7
 
Financial Statement Schedule:
 
  Schedule II--Valuation and Qualifying Accounts--For each of the three years in the period ended December
    31, 1996...............................................................................................       F-17
</TABLE>
 
                                      F-1
<PAGE>
                       REPORT OF INDEPENDENT ACCOUNTANTS
 
To the Board of Directors
ThrustMaster, Inc.
 
    We have audited the accompany consolidated balance sheets of ThrustMaster,
Inc. and Subsidiary as of December 31, 1995 and 1996, and the related
consolidated statements of income, cash flow and changes in shareholders' equity
and financial statement schedule for each of the three years in the period ended
December 31, 1996. These financial statements and financial statement schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and financial statement
schedule based on our audits.
 
    We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
    In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of ThrustMaster,
Inc. and Subsidiary as of December 31, 1995 and 1996 and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles. In addition, in our opinion, the financial statement
schedule referred to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects, the
information required to be included therein.
 
                                          COOPERS & LYBRAND L.L.P.
 
Portland, Oregon
January 24, 1997
 
                                      F-2
<PAGE>
                               THRUSTMASTER, INC.
 
                          CONSOLIDATED BALANCE SHEETS
                             (DOLLARS IN THOUSANDS)
 
                                     ASSETS
 
<TABLE>
<CAPTION>
                                                                    DECEMBER 31,
                                                                --------------------   SEPTEMBER
                                                                  1995       1996      30, 1997
                                                                ---------  ---------  -----------
                                                                                      (UNAUDITED)
<S>                                                             <C>        <C>        <C>
Current assets:
  Cash and cash equivalents...................................  $   8,090  $   6,420   $   5,376
  Accounts receivable, net....................................      2,897      9,820       9,635
  Inventories.................................................      2,526      3,560       5,300
  Prepaid expenses and other..................................        402        109         355
  Deferred income taxes.......................................        104        239         269
                                                                ---------  ---------  -----------
    Total current assets......................................     14,019     20,148      20,935
Plant and equipment, net......................................      1,058      1,081       1,878
Other.........................................................         25         32          31
                                                                ---------  ---------  -----------
    Total assets..............................................  $  15,102  $  21,261   $  22,844
                                                                ---------  ---------  -----------
                                                                ---------  ---------  -----------
</TABLE>
 
                      LIABILITIES AND SHAREHOLDERS' EQUITY
 
<TABLE>
<CAPTION>
<S>                                                                            <C>        <C>        <C>
Current liabilities:
  Accounts payable...........................................................  $   1,203  $   3,021    $   4,143
  Accrued liabilities........................................................        529      2,311        1,149
  Current portion--long-term debt............................................         11         10            1
                                                                               ---------  ---------  -------------
    Total current liabilities................................................      1,743      5,342        5,293
                                                                               ---------  ---------  -------------
Long-term debt...............................................................         10     --           --
  Deferred income taxes......................................................         38         21           26
                                                                               ---------  ---------  -------------
    Total liabilities........................................................      1,791      5,363        5,319
                                                                               ---------  ---------  -------------
Commitments (Notes 9 and 11)
Shareholders' equity:
  Preferred stock, no par value, 5,000,000 shares authorized; none
    issued or outstanding....................................................     --         --           --
  Common stock, no par value, 25,000,000 shares authorized;
    3,952,796, 4,240,403 and 4,280,777 shares issued and outstanding.........     11,877     13,301       13,474
  Retained earnings..........................................................      1,434      2,597        4,051
                                                                               ---------  ---------  -------------
    Total shareholders' equity...............................................     13,311     15,898       17,525
                                                                               ---------  ---------  -------------
    Total liabilities and shareholders' equity...............................  $  15,102  $  21,261    $  22,844
                                                                               ---------  ---------  -------------
                                                                               ---------  ---------  -------------
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                      F-3
<PAGE>
                               THRUSTMASTER, INC.
 
                       CONSOLIDATED STATEMENTS OF INCOME
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                                                               NINE MONTHS ENDED
                                                                YEARS ENDED DECEMBER 31,         SEPTEMBER 30,
                                                             -------------------------------  --------------------
                                                               1994       1995       1996       1996       1997
                                                             ---------  ---------  ---------  ---------  ---------
                                                                                                  (UNAUDITED)
<S>                                                          <C>        <C>        <C>        <C>        <C>
Revenues...................................................  $  13,582  $  19,415  $  30,821  $  15,745  $  23,930
Cost of goods sold.........................................      8,007     11,815     19,592      9,727     14,814
                                                             ---------  ---------  ---------  ---------  ---------
Gross profit...............................................      5,575      7,600     11,229      6,018      9,116
                                                             ---------  ---------  ---------  ---------  ---------
Operating expenses:
  Research and engineering.................................      1,115      1,845      2,105      1,352      1,807
  Selling, general and administrative......................      2,689      4,111      5,961      3,680      5,349
                                                             ---------  ---------  ---------  ---------  ---------
    Total operating expenses...............................      3,804      5,956      8,066      5,032      7,156
                                                             ---------  ---------  ---------  ---------  ---------
Income from operations.....................................      1,771      1,644      3,163        986      1,960
Interest income............................................     --            404        466        324        284
                                                             ---------  ---------  ---------  ---------  ---------
Income before income taxes.................................      1,771      2,048      3,629      1,310      2,244
Provision for income taxes.................................     --            614      1,370        472        790
                                                             ---------  ---------  ---------  ---------  ---------
Net income.................................................  $   1,771  $   1,434  $   2,259  $     838  $   1,454
                                                             ---------  ---------  ---------  ---------  ---------
                                                             ---------  ---------  ---------  ---------  ---------
</TABLE>
 
<TABLE>
<S>                                              <C>        <C>        <C>        <C>        <C>
Pro forma data (Note 2):
Income before income taxes.....................  $   1,771  $   2,048  $   3,629  $   1,310  $   2,244
Provision for income taxes (pro forma through
  1995)........................................        633        687      1,370        472        790
                                                 ---------  ---------  ---------  ---------  ---------
Net income (pro forma through 1995)............  $   1,138  $   1,361  $   2,259  $     838  $   1,454
                                                 ---------  ---------  ---------  ---------  ---------
                                                 ---------  ---------  ---------  ---------  ---------
Net income per share (pro forma through 1995)
  (Note 2).....................................  $    0.38  $    0.32  $    0.49  $    0.18  $    0.30
                                                 ---------  ---------  ---------  ---------  ---------
                                                 ---------  ---------  ---------  ---------  ---------
Weighted average shares outstanding (Note 2)...      2,957      4,293      4,647      4,582      4,807
                                                 ---------  ---------  ---------  ---------  ---------
                                                 ---------  ---------  ---------  ---------  ---------
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                      F-4
<PAGE>
                               THRUSTMASTER, INC.
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                                 NINE MONTHS ENDED
                                                                  YEARS ENDED DECEMBER 31,         SEPTEMBER 30,
                                                               -------------------------------  --------------------
                                                                 1994       1995       1996       1996       1997
                                                               ---------  ---------  ---------  ---------  ---------
                                                                                                    (UNAUDITED)
<S>                                                            <C>        <C>        <C>        <C>        <C>
Cash flows from operations:
  Net income.................................................  $   1,771  $   1,434  $   2,259  $     838  $   1,454
  Adjustments to reconcile net income to net cash provided by
    (used in) operating activities:
    Depreciation.............................................        198        376        766        411        403
    Deferred income taxes....................................     --            (66)      (152)       (24)       (25)
    Changes in assets and liabilities:
    Accounts receivable......................................       (507)      (784)    (6,923)    (1,741)       185
    Inventories..............................................        (52)    (1,572)    (1,034)       529     (1,740)
    Prepaid expenses and other assets........................        (66)       346        286         71       (245)
    Payables and accrued liabilities.........................       (109)       325      3,857        885         74
                                                               ---------  ---------  ---------  ---------  ---------
      Net cash provided by (used in) operating activities....      1,235         59       (941)       969        106
                                                               ---------  ---------  ---------  ---------  ---------
Cash flows from investing activities:
  Purchases of plant and equipment...........................       (493)      (753)      (789)      (687)    (1,200)
                                                               ---------  ---------  ---------  ---------  ---------
Cash flows from financing activities:
  Payments on long-term debt.................................        (20)       (56)       (11)        (9)        (9)
  Proceeds from issuance of common stock.....................        510      8,851         71         70         59
  Deferred offering costs....................................       (167)    --         --         --         --
  Cash dividends.............................................       (521)      (556)    --         --         --
                                                               ---------  ---------  ---------  ---------  ---------
      Net cash provided by (used in) financing activities....       (198)     8,239         60         61         50
                                                               ---------  ---------  ---------  ---------  ---------
      Net increase (decrease) in cash and cash equivalents...        544      7,545     (1,670)       343     (1,044)
Cash and cash equivalents, beginning of period...............          1        545      8,090      8,090      6,420
                                                               ---------  ---------  ---------  ---------  ---------
Cash and cash equivalents, end of period.....................  $     545  $   8,090  $   6,420  $   8,433  $   5,376
                                                               ---------  ---------  ---------  ---------  ---------
                                                               ---------  ---------  ---------  ---------  ---------
 
Supplemental cash flow information:
 
Cash paid during the year for:
 
Interest.....................................................  $      39  $       3  $       1  $       1  $  --
Income taxes.................................................     --            376         47          8      1,247
Cost of equipment acquired in exchange for notes.............         38     --         --         --         --
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                      F-5
<PAGE>
                               THRUSTMASTER, INC.
 
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                           COMMON STOCK
                                                                                      ----------------------   RETAINED
                                                                                        SHARES      AMOUNT     EARNINGS
                                                                                      -----------  ---------  -----------
<S>                                                                                   <C>          <C>        <C>
Balance, January 1, 1994............................................................       2,016   $     365   $     966
  Proceeds from issuance of common stock............................................         176         510      --
  Dividends.........................................................................      --          --            (922)
  Net income........................................................................      --          --           1,771
                                                                                           -----   ---------  -----------
Balance, December 31, 1994..........................................................       2,192         875       1,815
  Reclassification of S corporation earnings........................................      --           1,660      (1,660)
  Proceeds from issuance of common stock............................................       1,761       8,851      --
  Tax benefits from stock options exercised.........................................      --             491      --
  Dividends.........................................................................      --          --            (155)
  Net income........................................................................      --          --           1,434
                                                                                           -----   ---------  -----------
Balance, December 31, 1995..........................................................       3,953      11,877       1,434
  Proceeds from issuance of common stock............................................         164          71      --
  Tax benefits from stock options exercised.........................................      --             257      --
  Stock dividend declared (Note 2)..................................................         123       1,096      (1,096)
  Net income........................................................................      --          --           2,259
                                                                                           -----   ---------  -----------
Balance, December 31, 1996..........................................................       4,240      13,301       2,597
  Stock options exercised (unaudited)...............................................          41          59      --
  Tax benefits from stock options exercised (unaudited).............................      --             114      --
  Net Income (unaudited)............................................................      --          --           1,454
                                                                                           -----   ---------  -----------
Balance, September 30, 1997 (unaudited).............................................       4,281   $  13,474   $   4,051
                                                                                           -----   ---------  -----------
                                                                                           -----   ---------  -----------
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                      F-6
<PAGE>
                               THRUSTMASTER, INC.
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
NOTE 1--THE COMPANY
 
    The consolidated financial statements include the accounts of ThrustMaster,
Inc., (the "Company"), an Oregon corporation, and its wholly-owned subsidiary,
ThrustMaster Foreign Sales Corporation. The Company was incorporated on July 31,
1990. The Company designs, develops, manufactures and markets a variety of game
controllers, primarily for personal computers, and related equipment.
Information presented as of September 30, 1997 and for the nine months ended
September 30, 1997 and 1996 is unaudited.
 
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
 
    REVENUE RECOGNITION.  Revenue is recognized at the time of product shipment.
All products have a warranty for one year from date of sale covering product
defects. Certain sales agreements provide the right to return unsold
merchandise. The Company provides for estimated costs of warranty and returns
when products are shipped.
 
    CASH AND CASH EQUIVALENTS.  Cash equivalents consist of highly liquid debt
instruments purchased with an original maturity of three months or less. The
Company's cash equivalents are invested in high quality securities placed with
institutions with high credit ratings. This investment policy limits the
Company's exposure to concentrations of credit risk.
 
    INVENTORIES.  Inventories are stated at the lower of cost or market on a
first-in, first-out basis. Finished goods are costed using standard cost, which
approximates the first-in, first-out method of accounting.
 
    PLANT AND EQUIPMENT.  Plant and equipment are stated at cost and are
depreciated using the straight-line method over the estimated useful lives
(three to seven years). Replacements and improvements which extend the useful
life are capitalized. Maintenance and repairs and routine replacements are
expensed as incurred. Upon disposal, costs and related accumulated depreciation
of the assets are removed from the accounts and resulting gains and losses are
reflected in operations.
 
    INCOME TAXES.  Prior to January 1, 1991, the Company was treated for federal
and state income tax purposes as a C corporation. From January 1, 1991 through
December 31, 1994, the Company was treated for federal income tax purposes as an
S corporation under Subchapter S of the Internal Revenue Code of 1986, as
amended, and was treated as an S corporation for state income tax purposes under
comparable state tax laws. As a result, the Company's earnings from January 1,
1991 through December 31, 1994 have been, for federal and certain state income
tax purposes, taxed directly to the Company's shareholders, at their individual
federal and state income tax rates, rather than to the Company. Effective
January 1, 1995 (the "Termination Date"), the Company's S corporation status was
terminated. Subsequent to the Termination Date, the Company is no longer treated
as an S corporation and, accordingly, is subject to federal and state income
taxes on its earnings.
 
    Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial reporting and tax
bases of assets and liabilities and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period of change. Valuation allowances are established when necessary, to reduce
deferred tax assets to the amounts expected to be realized.
 
                                      F-7
<PAGE>
                               THRUSTMASTER, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    RESEARCH AND ENGINEERING EXPENSE.  Research and engineering costs are
charged to operations as incurred.
 
    PER SHARE DATA.  Net income per share is computed using the weighted average
number of shares of common stock and common stock equivalents outstanding during
the periods presented. Common stock equivalents include common stock to be
issued upon the exercise of the common stock options and warrants discussed in
Note 10. On January 21, 1997, the Company's board of directors declared a 3%
stock dividend payable to shareholders of record on February 14, 1997. Share,
per share, common stock, stock option and warrant amounts have been restated to
reflect the effect of this stock dividend.
 
    UNAUDITED PRO FORMA FINANCIAL INFORMATION AND INCOME TAXES.  As previously
described, the Company was treated as a Small Business Corporation (S
corporation) for income tax purposes from January 1, 1991 through December 31,
1994. The unaudited pro forma financial information on the income statement for
1994 and 1995 reflects an estimate of the income taxes that would have been
reported had the Company been a C corporation in those periods.
 
    RECLASSIFICATIONS.  Certain operating expense categories for the years ended
December 31, 1994 and 1995 on the Consolidated Statements of Income have been
reclassified in order to conform to the 1996 presentation. These changes had no
impact on previously reported results of operations or shareholders' equity.
 
    USE OF ESTIMATES.  The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
 
    INTERIM FINANCIAL DATA.  The consolidated financial statements as of
September 30, 1997 and for the nine months ended September 30, 1996 and 1997 are
unaudited; however, these financial statements have been prepared on a basis
consistent with the audited financial statements and, in the opinion of
management, include all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of the financial position, results of
operations and cash flows in accordance with generally accepted accounting
principles. Results of the interim periods are not necessarily indicative of
results for the entire year.
 
    IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS.  During 1997, the Financial
Accounting Standards Board has issued SFAS 128, "Earnings per Share", SFAS 129,
"Disclosure of Information about Capital Structure", SFAS 130, "Reporting
Comprehensive Income", and SFAS 131, "Disclosures About Segments of an
Enterprise and Related Information." These Standards will become effective for
the Company's 1998 fiscal year. SFAS 128 requires a revised presentation and
calculation of Earnings per Share and that prior periods be restated to conform
to that revised presentation and calculation. SFAS 129 requires disclosure about
an entity's capital structure and contains no change in disclosure requirements
for entities that were subject to the previously existing requirements. SFAS 130
establishes standards for reporting and display of comprehensive income and its
components in a full set of general-purpose financial statements. SFAS 131
changes current practice under SFAS 14 by establishing a new framework on which
to base segment reporting (referred to as the "management" approach) and also
requires interim reporting of segment
 
                                      F-8
<PAGE>
                               THRUSTMASTER, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
information. Management is currently assessing the impact of the implementation
of these Standards on the consolidated financial statements of the Company.
 
NOTE 3--CONCENTRATION OF CREDIT RISK, FOREIGN OPERATIONS, AND MAJOR CUSTOMER
INFORMATION
 
    Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash and cash equivalents
and accounts receivable.
 
    The Company's accounts receivable are primarily from a small number of
computer wholesale distributors and software specialty stores located in the
United States, Canada, and western Europe. Management believes that any risk of
loss is significantly reduced by ongoing credit evaluations of its customer's
financial condition.
 
    In 1995 and for the nine months ended September 30, 1997, product sales to
two customers accounted for more than 10% of revenues. In 1994 and 1996, no
customer individually accounted for more than 10% of revenues.
 
    The Company operates in a single industry segment comprising interactive
control devices for use with personal computer entertainment software. Certain
of the Company's products are manufactured and assembled in Taiwan and China by
an independent contractor. Products manufactured and assembled by this vendor
approximated 38%, 74%, and 88% of total production in 1995, 1996, and for the
nine months ended September 30, 1997, respectively.
 
    Revenues by geographic region and as a percentage of total revenues for each
region outside the United States that constituted more than 10% of the Company's
total revenues is as follows:
 
<TABLE>
<CAPTION>
                                                                                                    NINE MONTHS ENDED
                                                                     YEARS ENDED DECEMBER 31,         SEPTEMBER 30,
                                                                  -------------------------------  --------------------
                                                                    1994       1995       1996       1996       1997
                                                                  ---------  ---------  ---------  ---------  ---------
                                                                                                       (UNAUDITED)
<S>                                                               <C>        <C>        <C>        <C>        <C>
Revenues by geographic region:
  Europe........................................................  $   1,361  $   2,489  $  10,225  $   4,156  $   5,343
  Asia..........................................................      1,435      1,580      1,634      1,031      1,482
Revenues as a percentage of total revenues:
  Europe........................................................       10.0%      12.8%      33.2%      26.4%      22.7%
  Asia..........................................................       10.6        8.1        5.3        6.6        6.3
</TABLE>
 
                                      F-9
<PAGE>
                               THRUSTMASTER, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
NOTE 4--INVENTORIES
 
    Inventories are as follows:
 
<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                             --------------------
                                                               1995       1996
                                                             ---------  ---------  SEPTEMBER 30,
                                                                                       1997
                                                                                   -------------
                                                                                    (UNAUDITED)
<S>                                                          <C>        <C>        <C>
Raw materials..............................................  $   1,493  $     762    $   1,260
Work-in-progress...........................................        244         90           87
Finished goods.............................................        789      2,708        3,953
                                                             ---------  ---------       ------
                                                             $   2,526  $   3,560    $   5,300
                                                             ---------  ---------       ------
                                                             ---------  ---------       ------
</TABLE>
 
NOTE 5--PROPERTY AND EQUIPMENT
 
    Property and equipment consists of the following:
 
<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                                            --------------------
                                                              1995       1996
                                                            ---------  ---------  SEPTEMBER 30,
                                                                                      1997
                                                                                  -------------
                                                                                   (UNAUDITED)
<S>                                                         <C>        <C>        <C>
Computers and other equipment.............................  $     752  $   1,075    $   1,540
Tooling...................................................        858      1,209        1,849
Furniture and fixtures....................................        115        230          325
                                                            ---------  ---------  -------------
                                                                1,725      2,514        3,714
Accumulated depreciation..................................       (667)    (1,433)      (1,836)
                                                            ---------  ---------  -------------
                                                            $   1,058  $   1,081    $   1,878
                                                            ---------  ---------  -------------
                                                            ---------  ---------  -------------
</TABLE>
 
NOTE 6--BANK LINE OF CREDIT
 
    At December 31, 1996, the Company had a revolving line of credit with a bank
which provides for borrowings up to the lesser of one million dollars or 75% of
eligible receivables. The Company also may borrow up to two hundred thousand
dollars to finance up to 80% of the cost of certain equipment. Interest is at
the bank's prime lending rate which was 8.25% at December 31, 1996. Borrowings
under the agreement are collateralized by substantially all of the Company's
assets. Loan covenants under the agreement include maintaining a defined level
of working capital and maximum debt to tangible net worth ratio. At December 31,
1996, the Company had no borrowings outstanding.
 
                                      F-10
<PAGE>
                               THRUSTMASTER, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
NOTE 7--ACCRUED LIABILITIES
 
    Accrued liabilities consist of the following:
 
<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                               --------------------
                                                                 1995       1996
                                                               ---------  ---------  SEPTEMBER 30,
                                                                                         1997
                                                                                     -------------
                                                                                      (UNAUDITED)
<S>                                                            <C>        <C>        <C>
Accrued payroll and payroll liabilities......................  $     103  $     132    $     142
Accrued bonuses..............................................        129        460           66
Warranty reserve.............................................        192        365          269
Federal and state income taxes...............................         --        977          411
Other liabilities............................................        105        377          261
                                                               ---------  ---------       ------
                                                               $     529  $   2,311    $   1,149
                                                               ---------  ---------       ------
                                                               ---------  ---------       ------
</TABLE>
 
    A portion of the compensation paid by the Company to certain officers is
determined based upon the Company's revenues and net income for the year. The
Company recorded expense of $99 in 1994, $118 in 1995, and $251 in 1996 related
to such amounts.
 
NOTE 8--LONG-TERM DEBT
 
    Long-term debt is comprised of a note payable to an equipment manufacturer
payable in monthly installments of $1 with interest at 9%. The note is
collateralized by the related equipment and matures in November 1997.
 
NOTE 9--COMMITMENTS
 
The Company leases facilities under non-cancelable operating leases with
escalation clauses. The Company also leases equipment under operating leases.
The following is a schedule by years, through expiration of the lease, of future
minimum lease payments required under these leases as of December 31, 1996:
 
<TABLE>
<CAPTION>
<S>                                                                   <C>        <C>
1997................................................................  $     366
1998................................................................        368
1999................................................................        348
2000................................................................        345
2001................................................................        352
</TABLE>
 
Under the agreements for the lease of its office, production, and distribution
facilities, the Company is obligated to the lessor for its share of certain
expenses related to the use, operation, maintenance and insurance of the
property. These expenses, payable monthly in addition to the base rent, are not
included in the amounts shown above. Rental expense totaled $148, $239, and $236
for the years ended December 31, 1994, 1995, and 1996. For the nine months ended
September 30, 1996 and 1997, rental expense totaled $184 and $373, respectively.
 
                                      F-11
<PAGE>
                               THRUSTMASTER, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
NOTE 10--COMMON AND PREFERRED STOCK
 
    INITIAL PUBLIC OFFERING.  In March, 1995, the Company completed an initial
public offering of 1,552,500 shares of Common Stock which generated net proceeds
of $8,739.
 
    STOCK DIVIDEND.  In January, 1997, the Company declared a 3% stock dividend.
See Note 2.
 
    STOCK OPTION PLANS.  In July 1994, the Company adopted a new stock option
plan for employees (the "1994 Stock Option Plan") and a separate option plan for
directors (the "Directors' Stock Option Plan"). The Company reserved 400,000
shares for the 1994 Stock Option Plan and 160,000 shares for the Director's
Stock Option Plan. The 1994 Stock Option Plan provides for incentive stock
option and nonqualified options to be granted. The Company had previously made
grants under a nonqualified plan adopted in 1990 in which 1,200,000 shares had
been reserved. In July 1994, any ungranted options and any future forfeitures
under the 1990 option plan were transferred to the 1994 Stock Option Plan.
 
    The stock option plans generally require the price of options to be at the
estimated fair market value of the stock at the date of grant. Options have a
maximum duration of ten years (five years under certain circumstances) and may
be exercised in varying amounts over the vesting periods.
 
    The following table summarizes stock option transactions:
 
<TABLE>
<CAPTION>
                                                                        NUMBER OF SHARES
                                                                   ---------------------------
                                                                                   AVAILABLE
                                                                   UNDER OPTION    FOR GRANT
                                                                   -------------  ------------
<S>                                                                <C>            <C>
Balance, December 31, 1993.......................................       768,000       180,000
Authorization of additional shares...............................       --            560,000
Granted ($3.00 per share)........................................        32,000       (32,000)
Exercised ($0.25 to $0.28 per share).............................          (896)       --
Canceled.........................................................       (31,904)       31,904
                                                                   -------------  ------------
Balance, December 31, 1994.......................................       767,200       739,904
Granted ($8.75 to $8.875)........................................       126,500      (126,500)
Exercised ($0.25 to $2.50 per share).............................      (207,400)       --
Canceled.........................................................        (6,100)        6,100
                                                                   -------------  ------------
Balance, December 31, 1995.......................................       680,200       619,504
Granted ($4.125 to $7.625).......................................       331,000      (331,000)
Exercised ($0.25 to $0.75 per share).............................      (164,100)       --
Canceled.........................................................      (134,500)      134,500
Effect of 3% stock dividend declared (See Note 2)................        21,378       (21,378)
                                                                   -------------  ------------
Balance, December 31, 1996.......................................       733,978       401,626
Granted ($8.617 to $8.875) (unaudited)                                  203,470      (203,470)
Exercised ($0.243 to $5.340 per share) (unaudited)...............       (40,394)
Canceled (unaudited).............................................       (35,186)       35,186
                                                                   -------------  ------------
Balance, September 30, 1997 (unaudited)..........................       861,868       233,342
                                                                   -------------  ------------
                                                                   -------------  ------------
</TABLE>
 
    The exercise price of the outstanding options at December 31, 1996 ranged
between $0.24 and $8.62 per share. The weighted average exercise price of
outstanding options was $2.69 at December 31, 1996.
 
                                      F-12
<PAGE>
                               THRUSTMASTER, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
NOTE 10--COMMON AND PREFERRED STOCK (CONTINUED)
    During 1995, warrants to purchase 139,050 shares were granted at a price of
$7.57 per share after giving effect to the stock dividend discussed in Note 2.
 
    The Company adopted the disclosure-only provisions of Statement of Financial
Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation." Accordingly, no compensation cost has been recognized for grants
of options under the stock option plans. Had compensation cost for the Company's
two stock option plans been determined based on the fair value at the grant date
for awards in 1995 and 1996 consistent with the provisions of SFAS No. 123, the
Company's net income and net income per share would have been reduced to the pro
forma amounts indicated below:
 
<TABLE>
<CAPTION>
                                                                             YEARS ENDED DECEMBER
                                                                                     31,
                                                                             --------------------
                                                                               1995       1996
                                                                             ---------  ---------
<S>                                                                          <C>        <C>
Net income-as reported.....................................................  $   1,361  $   2,259
Net income-pro forma.......................................................      1,304      2,173
Net income per share-as reported...........................................       0.32       0.49
Net income per share-pro forma.............................................       0.30       0.47
</TABLE>
 
NOTE 11--CONSULTING AGREEMENT
 
    In December 1993, the Company entered into a consulting agreement with a
company owned entirely by a shareholder and former chief executive officer. The
agreement terminated in February 1996. Under the agreement, services included
providing product concepts and consulting and assistance on product design.
Payments of $189, $205, and $36 were made pursuant to the agreement in 1994,
1995 and 1996, respectively.
 
NOTE 12--INCOME TAXES
 
    Effective January 1, 1995, the Company was required to provide for deferred
taxes, arising from the cumulative temporary differences between financial
reporting and tax reporting, by recording a benefit for income taxes for such
deferred taxes in its statement of income in the period in which the Termination
Date occurred. The amount of this benefit during the year ended December 31,
1995 was $73.
 
    The Company's sales outside of the United States are primarily made through
ThrustMaster Foreign Sales Corporation ("FSC"). Taxable profits generated from
sales through FSC are taxed in the United States and are not subject to foreign
income taxes.
 
                                      F-13
<PAGE>
                               THRUSTMASTER, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
NOTE 12--INCOME TAXES (CONTINUED)
    The provision for income taxes is as follows:
 
<TABLE>
<CAPTION>
                                                                                                             NINE MONTHS ENDED
                                                                              YEARS ENDED DECEMBER 31,
                                                                                                               SEPTEMBER 30,
                                                                           -------------------------------  --------------------
                                                                             1994       1995       1996       1996       1997
                                                                           ---------  ---------  ---------  ---------  ---------
                                                                                (UNAUDITED                      (UNAUDITED)
                                                                                PRO FORMA
                                                                               INFORMATION)
<S>                                                                        <C>        <C>        <C>        <C>        <C>
Current:
  Federal................................................................  $     533  $     613  $   1,256  $     430  $     722
  State..................................................................        121         67        266         96         89
                                                                           ---------  ---------  ---------  ---------  ---------
  Total current..........................................................        654        680      1,522        526        811
                                                                           ---------  ---------  ---------  ---------  ---------
Deferred:
  Federal................................................................        (17)         6       (126)       (45)       (18)
  State..................................................................         (4)         1        (26)        (9)        (3)
                                                                           ---------  ---------  ---------  ---------  ---------
  Total deferred.........................................................        (21)         7       (152)       (54)       (21)
                                                                           ---------  ---------  ---------  ---------  ---------
    Total................................................................  $     633  $     687  $   1,370  $     472  $     790
                                                                           ---------  ---------  ---------  ---------  ---------
                                                                           ---------  ---------  ---------  ---------  ---------
</TABLE>
 
    A reconciliation of the statutory federal income tax rate to the Company's
pro forma effective income tax rate is as follows:
 
<TABLE>
<CAPTION>
                                                                                                           NINE MONTHS ENDED
                                                                            YEARS ENDED DECEMBER 31,
                                                                                                             SEPTEMBER 30,
                                                                         -------------------------------  --------------------
                                                                           1994       1995       1996       1996       1997
                                                                         ---------  ---------  ---------  ---------  ---------
                                                                              (UNAUDITED                      (UNAUDITED)
                                                                              PRO FORMA
                                                                             INFORMATION)
<S>                                                                      <C>        <C>        <C>        <C>        <C>
Federal statutory rate.................................................       34.0%      34.0%      34.0%      34.0%      34.0%
State income taxes, net of federal income tax benefit..................        4.4        2.2        4.4        4.4        2.6
Effect of research and development tax credit and other................       (2.7)      (2.7)       (.6)      (2.4)      (1.4)
                                                                         ---------  ---------  ---------  ---------  ---------
Effective income tax rate..............................................       35.7%      33.5%      37.8%      36.0%      35.2%
                                                                         ---------  ---------  ---------  ---------  ---------
                                                                         ---------  ---------  ---------  ---------  ---------
</TABLE>
 
    The pro forma provision for income taxes for the year ended December 31,
1995 is presented to reflect the provision as if the deferred tax asset of $73
at January 1, 1995 had been recognized in prior periods.
 
                                      F-14
<PAGE>
                               THRUSTMASTER, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
NOTE 12--INCOME TAXES (CONTINUED)
    Deferred income taxes result from items of income or expense being reported
for income tax purposes in different periods than they are reported for
financial reporting purposes. The primary temporary differences that give rise
to significant portions of the deferred tax assets and liabilities are as
follows:
 
<TABLE>
<CAPTION>
                                                                                     YEARS ENDED
                                                                                     DECEMBER 31,
                                                                                 --------------------
                                                                                   1995       1996
                                                                                 ---------  ---------   NINE MONTHS
                                                                                                           ENDED
                                                                                                       SEPTEMBER 30,
                                                                                                           1997
                                                                                                       -------------
                                                                                                        (UNAUDITED)
<S>                                                                              <C>        <C>        <C>
Deferred tax asset:
  Warranty reserve, inventory reserve, and other accrued liabilities...........  $    (274) $    (624)   $    (797)
Deferred tax liability:
  Excess tax over book depreciation and amortization...........................        100         28           30
</TABLE>
 
NOTE 13--401(K) PLAN
 
    The Company has a 401(k) Plan (the "Plan") covering substantially all
employees meeting minimum service requirements. The Plan allows the Company to
make discretionary matching contributions beginning in 1995. The Company
provided discretionary contributions of $23 and $35 for the years ended December
31, 1995 and 1996, respectively.
 
                                      F-15
<PAGE>
                               THRUSTMASTER, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
NOTE 14--QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
 
    Selected unaudited and pro forma financial information for each of the
quarters is as follows. Pro forma net income per share and net income per share
data has been adjusted to reflect the stock dividend discussed in Note 2.
 
<TABLE>
<CAPTION>
                                                                                 THREE MONTHS ENDED
                                                                -----------------------------------------------------
                                                                 MARCH 31,    JUNE 30,    SEPTEMBER 30,  DECEMBER 31,
                                                                -----------  -----------  -------------  ------------
                                                                      (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                                             <C>          <C>          <C>            <C>
1994
  Revenues....................................................   $   2,570    $   2,608     $   3,327     $    5,077
  Cost of goods sold..........................................       1,544        1,522         1,854          3,087
  Operating expenses..........................................         822          828           939          1,215
  Net income..................................................         204          258           534            775
  Pro forma net income........................................         129          163           335            511
  Pro forma net income per share..............................   $    0.05    $    0.06     $    0.12     $     0.17
1995
  Revenues....................................................   $   3,701    $   4,277     $   5,033     $    6,404
  Cost of goods sold..........................................       2,222        2,499         2,943          4,151
  Operating expenses..........................................       1,254        1,418         1,512          1,772
  Pro forma net income........................................         173          307           475            406
  Pro forma net income per share..............................   $    0.05    $    0.07     $    0.10     $     0.09
1996
  Revenues....................................................   $   4,564    $   4,250     $   6,931     $   15,076
  Cost of goods sold..........................................       2,970        2,615         4,142          9,865
  Operating expenses..........................................       1,538        1,564         1,930          3,034
  Net income..................................................         101          111           626          1,421
  Net income per share........................................   $    0.02    $    0.02     $    0.14     $     0.30
1997
  Revenues....................................................   $   6,272    $   7,149     $  10,509
  Cost of goods sold..........................................       3,786        4,480         6,548
  Operating expenses..........................................       2,108        2,244         2,804
  Net income..................................................         289          329           836
  Net income per share........................................   $    0.06    $    0.07     $    0.17
</TABLE>
 
NOTE 15--SUBSEQUENT EVENT (UNAUDITED)
 
    The Company's bank has increased its line of credit to the lesser of $5.0
million or 60% of eligible receivables through January 31, 1998 to meet the
Company's seasonal working capital needs during the fourth quarter of 1997. The
line of credit is scheduled for review in July 1998. At September 30, 1997,
there were no borrowings outstanding and the Company was in compliance with all
bank loan covenants.
 
                                      F-16
<PAGE>
                                                                     SCHEDULE II
 
                               THRUSTMASTER, INC.
 
                       VALUATION AND QUALIFYING ACCOUNTS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                          BEGINNING    CHARGES TO    DEDUCTIONS     ENDING
                                                                YEAR       BALANCE       EXPENSE     WRITE-OFFS     BALANCE
                                                              ---------  -----------  -------------  -----------  -----------
<S>                                                           <C>        <C>          <C>            <C>          <C>
Allowance for doubtful accounts:
                                                                   1996   $       7     $     129     $    (122)   $      14
                                                                   1995      --                 8            (1)           7
                                                                   1994      --                11           (11)      --
Reserve for warranty expense and sales returns:
                                                                   1996   $     192     $     173     $  --        $     365
                                                                   1995         229        --               (37)         192
                                                                   1994         166            63        --              229
</TABLE>
 
                                      F-17
<PAGE>
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- --------------------------------------------------------------------------------
 
NO DEALER, SALESMAN OR ANY PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR
TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF ANY OFFER TO
BUY ANY SECURITY OTHER THAN THE SECURITIES OFFERED BY THIS PROSPECTUS OR AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY
JURISDICTION OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. 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.
 
                            ------------------------
 
                               TABLE OF CONTENTS
 
<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
Prospectus Summary........................................................    3
Risk Factors..............................................................    6
Use of Proceeds...........................................................   11
Price Range of Common Stock...............................................   12
Dividend Policy...........................................................   12
Capitalization............................................................   13
Selected Consolidated Financial Data......................................   14
Management's Discussion and Analysis
  of Financial Condition and Results of
  Operations..............................................................   15
Business..................................................................   22
Management................................................................   30
Certain Transactions......................................................   38
Principal and Selling Shareholders........................................   39
Description of Capital Stock..............................................   41
Shares Eligible for Future Sale...........................................   44
Underwriting..............................................................   45
Legal Matters.............................................................   46
Experts...................................................................   46
Additional Information....................................................   47
Index to Financial Statements.............................................  F-1
</TABLE>
 
                                1,500,000 Shares
 
                                     [LOGO]
                                  Common Stock
 
                               ------------------
 
                                   PROSPECTUS
 
                               ------------------
 
                              VAN KASPER & COMPANY
 
                               DECEMBER   , 1997
 
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