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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 9, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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THRUSTMASTER, INC.
(Exact name of registrant as specified in its charter)
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OREGON 93-1040330
(State or other jurisdiction (I.R.S. Employer
of Identification Number)
incorporation or organization)
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SUITE 400, 7175 N.W. EVERGREEN PARKWAY
HILLSBORO, OREGON 97124
(503) 615-3200
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
FRANK G. HAUSMANN, JR.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
THRUSTMASTER, INC.
SUITE 400, 7175 N.W. EVERGREEN PARKWAY
HILLSBORO, OREGON 97124
(503) 615-3200
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
COPIES TO:
PATRICK J. SIMPSON
DAVID S. MATHESON
PERKINS COIE LLP
SUITE 1500, 1211 S.W. FIFTH AVENUE
PORTLAND, OREGON 97204-3715
(503) 727-2000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED SHARE(1) PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, no par value.................. 500,000 $15.8125 $7,906,250 $2,198
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933, based on the high
and low sales prices of the Common Stock on September 1, 1999.
--------------------------
THE REGISTRANT HEREBY UNDERTAKES TO AMEND THIS REGISTRATION STATEMENT ON
SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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SUBJECT TO COMPLETION, DATED SEPTEMBER 9, 1999
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING SHAREHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OF SALE IS NOT
PERMITTED.
<PAGE>
500,000 SHARES
THRUSTMASTER, INC.
COMMON STOCK
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The following shareholders of ThrustMaster or their successors may offer for
sale up to 500,000 shares of common stock at various times: Bay Harbor
Investments Inc. and Strong River Investments, Inc.
ThrustMaster will not receive any proceeds from the sale of the shares by
the selling shareholders.
Our common stock trades on the Nasdaq National Market under the symbol
"TMSR."
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 2.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this prospectus is , 1999.
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TABLE OF CONTENTS
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ThrustMaster, Inc...................................................................... 2
Risk Factors........................................................................... 2
Following the Sale of Our Hardware Business Assets, Our Revenues Will Decline
Substantially and Initially Depend Primarily Upon the Sale of Two Products......... 2
The Purchase Price for the Sale of Our Hardware Business Assets is Subject to Several
Adjustments Which, if Triggered, Could Result in Reduced Proceeds to Us............ 2
Because Period-to-Period Fluctuations in Our Revenue Are Difficult to Predict, You
Should Not Rely on Revenue For a Given Period as an Indicator of Revenue For Future
Periods............................................................................ 3
Although We Do Not have Firm Sales Forecasts, We Must Plan Our Expenditures Far In
Advance, Which May Magnify the Effect of Revenue Shortfalls in Any Given Period.... 3
Seasonal Fluctuations in Our Operating Results May Result in Volatility in the Market
Price of Our Stock................................................................. 3
Our Products Have Short Life Cycles, and We May Not be Able to Successfully Introduce
New Products Before Existing Cycles End............................................ 3
Shorter Than Expected Product Life Cycles May Result in Depressed Revenues and Gross
Margins in Affected Periods........................................................ 4
The Intense Competition in Our Markets May Lead to Reduced Sales of Our Products and
Reduced Profits.................................................................... 4
We May Not be Able to Develop Acceptable New Products or Enhancements to Our Existing
Products at the Rate Required by Our Rapidly Changing Markets, Which Could
Adversely Affect Us................................................................ 4
Prices for Products in Our Markets are Declining, Which May Reduce Our Revenue and
Gross Margins...................................................................... 5
Our Dependence Upon Offshore Manufacturing Contractors and Lack of Direct Control
Over Production Could Result in Product Delays and Quality Control Problems for Our
Hardware Products.................................................................. 5
Because We Depend on a Single Offshore Vendor and Its Production Facilities, Any
Disruption of That Vendor's Ability to Produce Our Hardware Products Would
Adversely Affect Us................................................................ 5
The Loss of Any Key Customer Could Result in a Significant Loss of Revenue in a Given
Period............................................................................. 5
The Loss of Key Personnel Could Adversely Affect Our Business and Decrease the Value
of Your Investment................................................................. 5
Our Failure to Attract and Retain Additional Personnel Could Adversely Affect Our
Business and Decrease the Value of Your Investment................................. 5
The Strain that Changes in Our Growth Rate Place Upon Our Systems and Management
Resources May Adversely Affect Our Business and Decrease the Value of Your
Investment......................................................................... 6
We May Need to Access Additional Funds to Finance Ongoing Operations, Which May
Require Us to Commit Significant Amounts of Capital to Debt Service and Could
Result in Dilution to Our Shareholders............................................. 6
Our International Sales of Our Hardware Products are Significant and Could Decrease
for Reasons Additional to Those Affecting Domestic Sales........................... 6
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(i)
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We May be Unable to Protect Our Intellectual Property, Which Could Result in
Competitors Obtaining Access to Proprietary Information............................ 7
Others May Bring Intellectual Property Infringement Claims Against Us, Which Could
Require Significant Resources to Defend and Could Lead to Restrictions on Our
Current Operations................................................................. 7
Product Defects Could Lead to Losses of Customers.................................... 7
We Depend on a Small Group of Suppliers for Critical Components for Our Hardware
Products, and an Increase in Price or an Interruption or Delay in the Supply of
these Components Could Adversely Affect Us......................................... 8
Changes in our Distribution Network Could Adversely Affect Us........................ 8
Slow Demand for and Abundant Supplies of Our Hardware Products May Lead to
Significant Price Reductions, Which Could Reduce Our Revenue and Gross Margins..... 8
We May Be Required to Issue Additional Shares to the Selling Shareholders for No or
Nominal Additional Payment, Which Could Result in Dilution to Our Shareholders..... 9
Sales of Our Common Stock May Reduce the Market Price of Our Stock................... 9
The Market Price for Our Common Stock, Like Other Technology Stocks, May be
Volatile........................................................................... 10
Some of Our Products May Not be Year 2000 Compliant, Which Could Result in Customer
Dissatisfaction, Claims Against Us or Business Interruptions....................... 10
Forward-Looking Information............................................................ 10
How To Obtain More Information......................................................... 11
Selling Shareholders................................................................... 12
Plan of Distribution................................................................... 13
Validity of Common Stock............................................................... 15
Experts................................................................................ 15
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(ii)
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THRUSTMASTER, INC.
We develop and market realistic, high quality game controllers and software
solutions for the home personal computer and video console markets. The
ThrustMaster-Registered Trademark- brand name is recognized for quality, value,
durability and ease of use. Our products enhance the enjoyment of the personal
computer, video game, and Internet entertainment experience and appeal to a wide
variety of users, from occasional game players to avid enthusiasts. Our hardware
products include racing wheels, joysticks, game pads and flight simulation
controllers. These products are available in over 5,000 retail outlets in North
America and Europe. Our software products are marketed under the brand name
WeCanTalk.com and include Talk n' Play and iConference. Talk n' Play, first
shipped in early 1999, is an Internet communications solution that allows up to
four people in separate locations to conduct a four-way voice conference over
the Internet while they play on-line games. iConference, first shipped in June
1999, provides the same four-way Internet voice conferencing capability as Talk
n' Play and permits the users to transfer or share files or share a white board
while engaged in their voice conference.
On July 26, 1999, we entered into an agreement pursuant to which we have
agreed to sell substantially all of our hardware business assets and our sales
and return warranty reserves to Guillemot Corporation, a French company, for
approximately $15 million in cash, subject to adjustments in specified
circumstances. The transaction is subject to customary closing conditions,
including approval by our shareholders. Prior to the closing of the transaction,
we will operate the hardware business for the benefit of Guillemot Corporation,
which will be responsible for related expenses. We expect the transaction to
close in September 1999.
We believe that there are significant opportunities for us related to
Internet community, collaboration and communications, such as those available as
a result of our WeCanTalk.com products. The sale of our hardware business will
allow us to focus our efforts on the development of additional software products
to take advantage of these opportunities.
We were incorporated in Oregon in 1990. Our principal executive offices are
located at Suite 400, 7175 N.W. Evergreen Parkway, Hillsboro, Oregon 97124. Our
main telephone number is (503) 615-3200.
RISK FACTORS
Before investing in our common stock, you should consider carefully the
following factors, as well as the information contained in the rest of this
prospectus and in the documents we incorporate by reference.
FOLLOWING THE SALE OF OUR HARDWARE BUSINESS ASSETS, OUR REVENUES WILL DECLINE
SUBSTANTIALLY AND INITIALLY DEPEND PRIMARILY UPON THE SALE OF TWO PRODUCTS
We have historically derived nearly all of our revenues from the sale of our
hardware products. After the sale of our hardware business assets to Guillemot
Corporation, our product offerings will be limited to our Talk n' Play and
iConference software products and any additional products we may develop prior
to the closing of the transaction, which we anticipate to occur in September
1999. Revenues from sales of our Talk n' Play and iConference products, first
shipped in January and June 1999, respectively, were minor for the first six
months of 1999. As a result, our revenues will decrease substantially after the
sale of the hardware business assets and depend primarily upon the sale of our
two software products and any additional products we may develop in the future.
Sales of these products may not be substantial.
THE PURCHASE PRICE FOR THE SALE OF OUR HARDWARE BUSINESS ASSETS IS SUBJECT TO
SEVERAL ADJUSTMENTS, WHICH, IF TRIGGERED, COULD RESULT IN REDUCED PROCEEDS TO
US
The purchase price for our hardware business assets to be sold to Guillemot
Corporation is subject to several adjustments. These adjustments could result in
reduced proceeds to us from the sale of the assets. Any significant decrease in
sale proceeds could adversely affect our ability to implement our further
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expansion into software products markets. The purchase price for the assets will
be adjusted downward if Guillemot experiences high levels of inventory return
costs, price protection costs, or uncollectible accounts receivable. The
purchase price is also subject to adjustment if our inventory and accounts
receivable levels at the end of July 1999 differ in the aggregate by more than
$160,000 from May 31, 1999 levels. An additional downward adjustment to the
purchase price of up to $500,000 will occur if the National Association for
Stock Car Auto Racing, Inc. does not modify and extend or renew our existing
license agreement to allow Guillemot to sell our NASCAR-branded products.
BECAUSE PERIOD-TO-PERIOD FLUCTUATIONS IN OUR REVENUE ARE DIFFICULT TO PREDICT,
YOU SHOULD NOT RELY ON REVENUE FOR A GIVEN PERIOD AS AN INDICATOR OF REVENUE
FOR FUTURE PERIODS
Our revenue has fluctuated, and likely will continue to fluctuate,
significantly from period to period. Because these fluctuations are difficult to
predict, you should not rely on our revenue for a given period as an indicator
of revenue for future periods. The factors listed below determine our revenue
for a given period and make forecasting future revenue difficult. The first five
factors also relate to other risks discussed elsewhere in this Risk Factors
section.
- The volume and timing of orders received during the period, with customers
generally ordering on an as-needed basis;
- The timing of new product introductions by us and our competitors;
- Product line maturation;
- The impact of price competition on our average selling prices;
- The availability of components for our products;
- Changes in product or distribution channel mix;
- The level of inventory carried by our distribution and retail channel
customers; and
- Product returns and price protection charges from customers.
As a result of these factors and our historically small backlog,
fluctuations in revenue may not be identifiable until at or near the end of a
period.
ALTHOUGH WE DO NOT HAVE FIRM SALES FORECASTS, WE MUST PLAN OUR EXPENDITURES FAR
IN ADVANCE, WHICH MAY MAGNIFY THE EFFECT OF REVENUE SHORTFALLS IN ANY GIVEN
PERIOD
Notwithstanding the difficulty in forecasting future sales and the
relatively small level of backlog at any given time, we generally must plan
production, order components and undertake our development, sales and marketing
activities and other commitments months in advance. Accordingly, the effect of
shortfalls in revenue may be magnified due to our inability to adjust expenses
or inventory levels during the quarter to match the level of revenue for the
quarter. Conversely, in our efforts to adjust inventory levels to a slower order
rate, we may overcorrect our component purchases and inventory levels, resulting
in periodic shortages of inventory and delivery delays that could negatively
affect our revenue, market share and customer satisfaction levels in the current
quarter or in future quarters.
SEASONAL FLUCTUATIONS IN OUR OPERATING RESULTS MAY RESULT IN VOLATILITY IN THE
MARKET PRICE OF OUR STOCK.
We generally experience seasonality in our operating results. Our revenues
typically are substantially higher in the fourth quarter of the year, reflecting
traditional retail seasonality patterns. This seasonality may result in quarter
to quarter volatility in the market price of our stock.
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OUR PRODUCTS HAVE SHORT LIFE CYCLES, AND WE MAY NOT BE ABLE TO SUCCESSFULLY
INTRODUCE NEW PRODUCTS BEFORE EXISTING CYCLES END
The markets for our products are characterized by frequent new product
introductions and product obsolescence. These factors typically result in short
product life cycles, frequently ranging from 12 to 18 months. If we do not
successfully introduce new products within a given product cycle, our sales will
be adversely affected for that cycle and possibly for subsequent cycles. Failure
to timely introduce these products could also impair our brand name and ability
to command retail shelf space in future periods. In addition, each new product
cycle presents new opportunities for competitors to gain a product advantage or
increase their market share.
SHORTER THAN EXPECTED PRODUCT LIFE CYCLES MAY RESULT IN DEPRESSED REVENUES AND
GROSS MARGINS IN AFFECTED PERIODS
If a product's life is shorter than expected, unexpected distribution
channel inventory returns and end-of-life and obsolete inventory and, with
respect to our hardware products, tooling charges could result, which would
depress our revenue and gross margin in the affected periods. Our gross margins
are affected by all of the following:
- The mix of products sold;
- The mix of distribution channels used;
- Competitive price pressures;
- The availability and cost of components from our suppliers;
- Component price inflation or deflation; and
- End-of-life inventory write downs.
Any adverse change in these factors could adversely affect our business,
results of operations, and financial condition. Individual product lines
generally provide higher margins at the beginning of the typical 12-to-18-month
product life cycle, and lower margins as the product line matures.
THE INTENSE COMPETITION IN OUR MARKETS MAY LEAD TO REDUCED SALES OF OUR PRODUCTS
AND REDUCED PROFITS
Competition from competitors often results in pricing pressures, reduced
sales, reduced margins, or the failure of products to achieve or maintain market
acceptance. Any of these factors could have a material adverse effect on our
business, results of operations, and financial condition. Many of our
competitors have greater name recognition, access to larger customer bases, and
substantially greater financial, technical, marketing, distribution, service,
support, and other resources than we have. Consequently, these competitors may
be able to respond more quickly than we can to new or changing opportunities,
technologies, standards, or customer requirements.
WE MAY NOT BE ABLE TO DEVELOP ACCEPTABLE NEW PRODUCTS OR ENHANCEMENTS TO OUR
EXISTING PRODUCTS AT THE RATE REQUIRED BY OUR RAPIDLY CHANGING MARKETS, WHICH
COULD ADVERSELY AFFECT US
Our future success depends upon our ability to address the rapidly changing
needs of our customers by developing and introducing high quality products,
product enhancements, and services on a timely basis and by keeping pace with
technological developments and emerging industry standards. The markets for our
products are rapidly evolving. Failure to develop and release enhanced or new
products, or delays or quality problems in doing so, could have a material
adverse effect on our business, results of operations, and financial condition.
As is common in rapidly evolving markets, demand and market acceptance for
recently introduced products are subject to high levels of uncertainty and risk.
New products can also
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quickly render obsolete products that were only recently in high demand or
otherwise impair the orders for or the prices of our existing products. The
markets for our existing products may not be sustainable at their current
levels. The markets for recently introduced and planned products may not expand
or develop.
PRICES FOR PRODUCTS IN OUR MARKETS ARE DECLINING, WHICH MAY REDUCE OUR REVENUE
AND GROSS MARGINS
Our markets are characterized by intense ongoing competition coupled with
declining average selling prices. Accordingly, our average selling prices,
measured over a given period of time, may decline from the levels experienced to
date. A decline could cause our revenue and gross margins to decline relative to
prior periods.
OUR DEPENDENCE UPON OFFSHORE MANUFACTURING CONTRACTORS AND LACK OF DIRECT
CONTROL OVER PRODUCTION COULD RESULT IN PRODUCT DELAYS AND QUALITY CONTROL
PROBLEMS FOR OUR HARDWARE PRODUCTS
Virtually all ThrustMaster hardware products are manufactured and assembled
in China and Taiwan by independent contractors. In addition to customary risks
of doing business abroad, the use of independent manufacturing contractors to
manufacture and assemble products offshore has required us to increase
production lead times and has reduced our ability to adjust production in
response to short-term market conditions. As a result, our failure to adequately
forecast demand of products manufactured offshore could materially and adversely
affect our sales and results of operations. In addition, although we seek to
control the quality of our hardware products manufactured and assembled
offshore, quality problems have occasionally arisen, and may in the future
arise, that are beyond our direct control.
BECAUSE WE DEPEND ON A SINGLE OFFSHORE VENDOR AND ITS PRODUCTION FACILITIES, ANY
DISRUPTION OF THAT VENDOR'S ABILITY TO PRODUCE OUR HARDWARE PRODUCTS WOULD
ADVERSELY AFFECT US
For the year ended December 31, 1998, approximately 92% of our hardware
products were manufactured and assembled through a single vendor utilizing
factories located in Taiwan and the Guangdong province of China. Manufacturing
at one factory accounted for more than half of our production. If this or any of
the other manufacturing facilities utilized by us become unavailable, or if the
manufacturing operations at these facilities are slowed, interrupted or
terminated, our business, results of operation, and financial condition could be
materially and adversely affected.
THE LOSS OF KEY PERSONNEL COULD ADVERSELY AFFECT OUR BUSINESS AND DECREASE THE
VALUE OF YOUR INVESTMENT
Our success depends largely upon the continued services of our executive
officers and other key management and development personnel. We will
significantly reduce our workforce in connection with the sale of substantially
all of our hardware business assets. The loss of the services of one or more of
our executive officers, engineering personnel, or other key employees,
particularly of any such individuals providing services to our software
business, could have a material adverse effect on our business, results of
operations, and financial condition. Our employees are employed on an "at will"
basis and could terminate their employment with us at any time. We do not
maintain key person life insurance policies on any of our employees.
OUR FAILURE TO ATTRACT AND RETAIN ADDITIONAL PERSONNEL COULD ADVERSELY AFFECT
OUR BUSINESS AND DECREASE THE VALUE OF YOUR INVESTMENT
Our future success also depends on our ability to attract and retain highly
qualified personnel. We may not be successful in attracting or retaining
qualified personnel, which could have a material adverse effect on our business,
results of operations, and financial condition. The competition for qualified
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personnel in the computer software and game markets is intense, and we may be
unable to attract, assimilate, or retain additional highly qualified personnel
in the future. We attempt to hire engineers with high levels of experience in
designing and developing software and personal computer-related products in
time-pressured environments. There is a limited number of qualified engineers in
our geographic location, resulting in intense competition for their services.
THE STRAIN THAT CHANGES IN OUR GROWTH RATE PLACE UPON OUR SYSTEMS AND MANAGEMENT
RESOURCES MAY ADVERSELY AFFECT OUR BUSINESS AND DECREASE THE VALUE OF YOUR
INVESTMENT
Any failure to properly manage our growth could have a material adverse
effect on our business, results of operations, and financial condition. The
growth and contractions that we have experienced place significant challenges on
our management, administrative, and operational resources. To properly manage
our business, we must, among other things, implement and improve additional and
existing administrative, financial, and operational systems, procedures, and
controls on a timely basis. We may not be able to complete the necessary
improvements to our systems, procedures, and controls necessary to support our
future operations in a timely manner. Management may not be able to hire, train,
retain, motivate, and manage required personnel and may not be able to
successfully identify, manage, and exploit existing and potential market
opportunities.
WE MAY NEED TO ACCESS ADDITIONAL FUNDS TO FINANCE ONGOING OPERATIONS, WHICH MAY
REQUIRE US TO COMMIT SIGNIFICANT AMOUNTS OF CAPITAL TO DEBT SERVICE AND COULD
RESULT IN DILUTION TO OUR SHAREHOLDERS
As of August 31, 1999, we believe that available funds together with
additional investments will be adequate to meet our anticipated cash needs
during the next 12 months. However, additional capital beyond the amounts
currently forecast by us may be required and may not be available on reasonable
terms, if at all. Additional financing may involve public or private offerings
of debt or equity securities, and may include bank debt. Debt financing may
increase our leveraged position, require us to devote significant cash to
service debt and limit funds available for working capital, capital
expenditures, and general corporate purposes. Any of these results could
increase our vulnerability to adverse economic and industry conditions and
competitive pressures. Equity financing may cause additional dilution to
purchasers of our common stock.
WE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY, WHICH COULD RESULT IN
COMPETITORS OBTAINING ACCESS TO PROPRIETARY INFORMATION
We regard substantial elements of our products as proprietary and attempt to
protect them by relying on patent, trademark, service mark, trade dress,
copyright, and trade secret laws and restrictions, as well as confidentiality
procedures and contractual provisions. Any steps we take to protect our
intellectual property may be inadequate, time consuming, and expensive. In
addition, despite our efforts, we may be unable to prevent third-parties from
infringing upon or misappropriating our intellectual property. Any infringement
or misappropriation could have a material adverse effect on our business,
results of operations, and financial condition. Currently issued patents or any
new patent applications may not provide us with any competitive advantages, or
may be challenged by third parties. Effective trademark, copyright, and trade
secret protection may not be available in every country in which our products
are distributed. In addition, our competitors may independently develop similar
technology that substantially limits the value of our intellectual property.
OTHERS MAY BRING INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS AGAINST US, WHICH
COULD REQUIRE SIGNIFICANT RESOURCES TO DEFEND AND COULD LEAD TO RESTRICTIONS
ON OUR CURRENT OPERATIONS
In addition to the technology we have developed internally, we also have
acquired or licensed technologies from other companies. Our internally developed
technology or the technology we acquired or
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licensed may infringe on a third party's intellectual property rights and third
parties may bring claims against us alleging infringement of their intellectual
property rights. Any infringement or claim of infringement could have a material
adverse affect on our business, result of operations, and financial condition.
In recent years, there has been significant litigation in the United States
involving patents and other intellectual property rights. We are not currently
involved in any intellectual property litigation. We may, however, be a party to
litigation in the future to protect our intellectual property or as a result of
an alleged infringement of others' intellectual property. These potential claims
and any resulting litigation could subject us to significant liability for
damages and invalidation of our proprietary rights. Any litigation involving
intellectual property, regardless of its success, likely would be time-consuming
and expensive to defend and would divert management time and attention. Any
potential intellectual property litigation could also force us to do one or more
of the following:
- Cease selling, incorporating, or using products or services that
incorporate the challenged intellectual property;
- Obtain from the holder of the infringed intellectual property right a
license to sell or use the relevant technology, which license may not be
available on reasonable terms, or at all; and
- Redesign those products or services that incorporate the technology at
issue.
Any of these results could have a material adverse effect on our business,
results of operations, and financial condition.
PRODUCT DEFECTS COULD LEAD TO LOSSES OF CUSTOMERS
Our products may contain undetected errors or "bugs" when first introduced
or as new versions or enhancements are released. Despite our internal testing,
these errors may be discovered only after our products have been installed and
used by customers. These undetected errors may relate to components supplied to
us. Our products are complex as a result of factors including:
- Advanced functionality;
- The diverse operating environments in which the products may be deployed;
- The need for interoperability; and
- The multiple versions of our products that must be supported for diverse
operating platforms and standards.
The complexity of our products increases the likelihood that they may
contain errors when introduced. Problems encountered by customers or product
recalls could materially adversely affect our business, financial condition and
results of operations.
WE DEPEND ON A SMALL GROUP OF SUPPLIERS FOR CRITICAL COMPONENTS FOR OUR HARDWARE
PRODUCTS, AND AN INCREASE IN PRICE OR AN INTERRUPTION OR DELAY IN THE SUPPLY
OF THESE COMPONENTS COULD ADVERSELY AFFECT US
A number of important components used in our hardware products are often
obtained from one or a limited group of suppliers. Any reduction, interruption
of or delay in supply could materially and adversely affect our business,
results of operations or financial condition. We have had and may in the future
have, shortages of supplies and delays in deliveries of necessary components. To
date, we have not experienced any material shortages or delays in deliveries of
necessary components, and no shortage or delay has had a material adverse effect
on our business, results of operations or financial condition. Substantially all
components used in our hardware 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
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components or increase the cost of obtaining them. Any significant increase in
component prices or decrease in component availability could materially and
adversely affect our business, results of operations and financial condition.
CHANGES IN OUR DISTRIBUTION NETWORK COULD ADVERSELY AFFECT US
We sell our products through a network of domestic and international
distributors, and directly to major retailers and mass merchants. Personal
computer distribution and retail channels historically have been characterized
by rapid change, including periods of widespread financial difficulties and
consolidation and the emergence of alternative sales channels. These alternative
channels include direct mail order sales, telephone sales by PC manufacturers
and electronic commerce on the Internet. Changes in distribution channel
patterns, such as increased commerce on the Internet, increased use of
mail-order catalogs, increased use of consumer-electronics channels for personal
computer sales, or increased personalized configuration of PC systems by PC
manufacturers to fit customers' requirements could affect us in unforeseen ways.
In addition, changes in the types of products we sell or additions to our
products, such as our Talk n' Play and iConference Internet conferencing
products or the introduction of other software products, may require specialized
channel partnerships. We may not be able to establish partnerships or maintain
them after they are established. Failure to maintain our current distribution
channels, to adjust to changes in distribution patterns or to establish or
maintain channel partnerships may have a material adverse effect on our
business, results from operations or financial condition.
SLOW DEMAND FOR AND ABUNDANT SUPPLIES OF OUR HARDWARE PRODUCTS MAY LEAD TO
SIGNIFICANT PRICE REDUCTIONS, WHICH COULD REDUCE OUR REVENUE AND GROSS MARGINS
We believe that we are currently operating in a period of slow demand and
low sales of our hardware products and a market characterized by abundant
hardware products. In this environment, price declines are more likely to occur
and, should they occur, are more likely to be severe. High distribution channel
inventory levels may also result and lead to substantial price protection
charges. Declining prices and sales and increased price protection charges will
adversely affect our business, results of operations, and financial condition.
Periods characterized by slow demand, low sales and abundant products generally
lead to existing distribution channel inventory levels of older product that are
higher than desirable. The distribution channels used by ThrustMaster generally
maintain inventory levels of our hardware products in a range of one to three
months of customer demand. These channel inventory levels tend toward the low
end of the months-of-supply range when demand is stronger, sales are higher and
products are in short supply. Conversely, when demand is slower, sales are lower
and products are abundant, these channel inventory levels tend toward the high
end of the months-of-supply range. In these situations, we frequently attempt to
ensure that distributors and retailers devote their working capital, sales and
logistics resources to ThrustMaster hardware products to a greater degree than
to those of competitors. Similarly, our competitors attempt to ensure that their
own products are receiving a disproportionately higher share of the
distributors' working capital and logistics resources.
THE CONVERSION PRICE OF OUR CONVERTIBLE DEBENTURES MAY FLUCTUATE, WHICH COULD
REQUIRE US TO ISSUE A GREATER NUMBER OF SHARES UPON CONVERSION AND RESULT IN
DILUTION TO OUR SHAREHOLDERS.
On June 9, 1999, we sold to the selling shareholders $6 million aggregate
principal amount of our zero coupon convertible debentures due June 9, 2002. The
conversion price of the debentures depends upon the relevant average closing bid
price of our common stock for a given period. In essence, the conversion price
of the debentures after September 6, 1999 ensures that the selling shareholders
will receive at least a 12.5% return on their investment. Fluctuations in the
conversion price of the debentures could require us to issue a significantly
greater number of shares of our common stock upon conversion of the debentures.
The issuance of these shares could have a substantial dilutive effect on our
common stock. See "Selling Shareholders."
8
<PAGE>
The following table sets forth the maximum number of shares that we would be
required to issue to the selling shareholders upon full exercise of the
convertible debentures if the relevant average closing bid price was at
different levels for the applicable period, including if the relevant average
closing bid price was $15.875 per share, the closing sale price of our common
stock on September 1, 1999.
<TABLE>
<CAPTION>
AVERAGE CLOSING BID AVERAGE CLOSING BID PRICE TOTAL SHARES ISSUED UPON
PRICE AS A PERCENTAGE OF CONVERSION OF THE
PER SHARE 9/1/99 CLOSING PRICE DEBENTURES
- ----------------------- --------------------------- ---------------------------
<S> <C> <C>
$ 15.875 100% 425,192
$ 11.91 75% 566,922
$ 7.94 50% 850,383
$ 3.97 25% 1,700,766
</TABLE>
SALES OF OUR COMMON STOCK MAY REDUCE THE MARKET PRICE OF OUR STOCK
Sales of substantial amounts of our common stock in the public market by
existing shareholders or further issuances of capital stock by us could
adversely affect the price of our common stock. Any decline in the market price
of our common stock could encourage short sales of our common stock, material
amounts of which could place further downward pressure on the price of our
stock. As of September 1, 1999, substantially all of the outstanding shares of
our common stock, other than the shares offered by this prospectus, were freely
tradable under federal securities laws to the extent that they are not held by
our affiliates.
THE MARKET PRICE FOR OUR COMMON STOCK, LIKE OTHER TECHNOLOGY STOCKS, MAY BE
VOLATILE
The value of your investment in ThrustMaster could decline due to the impact
of any of the following factors upon the market price of our common stock:
- Variations in our actual and anticipated operating results;
- Changes in our earnings estimates by analysts;
- Our failure to meet analysts' performance expectations; and
- Lack of liquidity.
The stock markets have recently experienced stock price and volume
volatility that has affected companies' stock prices. The stock markets may
continue to experience volatility that may adversely affect the market price of
our common stock. Stock prices for many companies in the technology sector have
experienced wide fluctuations that have often been unrelated to their operating
performance. Fluctuations such as these may affect the market price of our
common stock.
SOME OF OUR PRODUCTS MAY NOT BE YEAR 2000 COMPLIANT, WHICH COULD RESULT IN
CUSTOMER DISSATISFACTION, CLAIMS AGAINST US OR BUSINESS INTERRUPTIONS
We are currently reviewing our products, internal systems and infrastructure
in order to identify and modify those products and systems that are not year
2000 compliant. We expect any required modification to be made on a timely basis
and do not believe that the cost of any modification will have a material
adverse effect on our operating results. However, increased costs associated
with implementation of any modifications and the inability to implement these
modifications could have a material adverse effect on our business, results of
operations, and financial condition. In addition, if our suppliers, vendors,
major distributors, or partners fail to correct their year 2000 problems, their
failure could result in an interruption in, or a failure of, our normal business
activities or operations. These failures could have a material adverse effect on
our business, results of operations, and financial condition.
9
<PAGE>
FORWARD-LOOKING INFORMATION
This prospectus and the documents we incorporate by reference contain
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. The Act provides a "safe harbor" for
forward-looking statements to encourage companies to provide prospective
information about themselves so long as they identify these statement as
forward-looking and provide meaningful cautionary statements identifying
important factors that could cause actual results to differ from the projected
results. All statements other than statements of historical fact we make in this
prospectus or in any document incorporated by reference are forward-looking. In
particular, statements regarding industry prospects and our future results of
operations or financial position, particularly after the sale of our hardware
business assets, are forward-looking statements. Words such as "anticipates,"
"expects," "intends," "plans," "believes," "seeks," estimates," and similar
expressions identify forward-looking statements. But the absence of these words
does not mean the statement is not forward-looking. We cannot guarantee any of
the forward-looking statements, which are subject to risks, uncertainties and
assumptions that are difficult to predict. Actual results may differ materially
from those we forecast in forward-looking statements due to a variety of
factors, including those set forth in the section entitled "Risk Factors,"
elsewhere in this prospectus and in the documents we have incorporated by
reference. We do not intend to update any forward-looking statements due to new
information, future events or otherwise.
HOW TO OBTAIN MORE INFORMATION
We file reports, proxy statements and other information with the Securities
and Exchange Commission. You may read any document we file at the SEC's public
reference rooms in Washington, D.C., Chicago, Illinois and New York, New York.
Please call the SEC toll free at 1-800-732-0330 for information about its public
reference rooms. You may also read our filings at the SEC's web site at
http://www.sec.gov.
We have filed with the SEC a registration statement on Form S-3 under the
Securities Act of 1933. This prospectus does not contain all of the information
in the registration statement. We have omitted parts of the registration
statement, as permitted by the rules and regulations of the SEC. You may inspect
and copy the registration statement, including exhibits, at the SEC's public
reference rooms or from its web site. Our statements in this prospectus about
the contents of any contract or other document are not necessarily complete. You
should refer to the copy of each contract or other document we have filed as an
exhibit to the registration statement for complete information.
The SEC allows us to "incorporate by reference" into this prospectus
information we file with it. This means that we can disclose important
information to you by referring you to those documents. The information we
incorporate by reference is considered a part of this prospectus, and later
information we file with the SEC will automatically update and supersede this
information. We incorporate by reference the documents listed below and any
future filings we make with the SEC under Sections 13(a), 13(c), 14 and 15(d) of
the Securities Exchange Act of 1934 until this offering is completed:
1. ThrustMaster's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1999 and June 30, 1999, as amended;
2. ThrustMaster's Annual Report on Form 10-K for the year ended December
31, 1998, as amended;
3. The description of our common stock in ThrustMaster's Registration
Statement on Form 8-A filed on February 8, 1995, including any amendment
or report filed to update the description;
4. The consolidated financial statements and related notes and the
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" section included in ThrustMaster's Preliminary Proxy
Statement filed with the SEC on September 1, 1999; and,
10
<PAGE>
5. All other documents filed by ThrustMaster pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this prospectus
and prior to the termination of this offering.
You may obtain copies of these documents, other than exhibits, free of
charge by contacting ThrustMaster's corporate secretary at our principal
offices, which are located at Suite 400, 7175 N.W. Evergreen Parkway, Hillsboro,
Oregon 97124, telephone number (503) 615-3200.
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone to provide you with different information. The selling shareholders are
not making an offer of these securities in any state where the offer is not
permitted. You should not assume that the information in this prospectus or any
prospectus supplement is accurate as of any date other than the date on the
front of the document.
11
<PAGE>
SELLING SHAREHOLDERS
The following table presents information regarding the selling shareholders
and the number of shares of our common stock they may offer by this prospectus
as of September 1, 1999. The information under the column entitled "Number of
Shares of Common Stock Beneficially Owned After the Offering" assumes that all
shares of common stock offered by this prospectus and by the prospectus dated
June 7, 1999, which was included in the registration statement on Form S-3 filed
by us on March 4, 1999, have been sold.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK SHARES OF COMMON STOCK BENEFICIALLY OWNED
BENEFICIALLY OWNED NUMBER OF SHARES OF AFTER THE OFFERING
PRIOR TO THE COMMON STOCK ----------------------------------------------
SELLING SHAREHOLDER OFFERING OFFERED HEREBY NUMBER OF SHARES PERCENTAGE OF CLASS
- --------------------------------------- ------------------- ------------------- --------------------- -----------------------
<S> <C> <C> <C> <C>
Strong River Investments, Inc.......... 374,834 250,000 0 *
Bay Harbor Investments Inc............. 250,000 250,000 0 *
------- ------- ---
Totals............................... 624,834 500,000 0 *
------- ------- ---
------- ------- ---
</TABLE>
- ------------------------
* Represents less than one percent of our common stock outstanding.
The shares listed in the table as beneficially owned by Strong River
Investments, Inc. and offered by this prospectus include 250,000 shares as an
estimate of the shares issuable upon the conversion of debentures issued at the
closing of the June 9, 1999 transaction described below. The shares listed as
beneficially owned by Strong River Investments, Inc. also include 98,300 shares
issued to Strong River Investments, Inc. at the closing of the January 28, 1999
transaction described below and 26,534 shares issuable upon exercise of warrants
issued to Strong River Investments, Inc. in the January transaction. The shares
indicated in the table as beneficially owned by Bay Harbor Investments Inc. and
offered by this prospectus represent an estimate of the shares of our common
stock issuable upon conversion of debentures issued to it at the closing of the
June 9, 1999 transaction described below.
On June 9, 1999, we entered into a debenture purchase agreement with two
investors, Strong River Investments, Inc. and Bay Harbor Investments Inc.,
pursuant to which they purchased $6 million aggregate principal amount of our
zero coupon convertible debentures due June 9, 2002. The debentures may be
converted into shares of our common stock at any time before June 9, 2002. The
number of shares into which each debenture is convertible is equal to the
outstanding principal amount of the debenture divided by the conversion price.
If the conversion price was $24.00 on the date the debentures were converted, we
would be required to issue 250,000 shares of our common stock upon conversion of
the debentures.
The conversion price of the debentures until September 6, 1999 is $24.00.
During the period commencing on September 7, 1999 and ending on April 4, 2000,
the conversion price will be the lesser of (a) $24.00 and (b) 88.89% of the
average of the lowest 10 closing bid prices per share of common stock during the
25 trading days preceding the conversion date. After April 4, 2000, the
conversion price will remain equal to the conversion price in effect on April 4,
2000. In essence, the conversion price formula after September 6, 1999 ensures
that the investors will receive at least a 12.5% return on their investment.
The following table indicates the number of shares we would be required to
issue to the selling shareholders upon conversion of the debentures if the
relevant average closing bid prices were at different levels, including $24.00,
the closing bid price of our common stock on June 8, 1999, and the conversion
took place after September 6, 1999.
<TABLE>
<CAPTION>
AVERAGE CLOSING BID PRICE
PER SHARE AS A PERCENTAGE OF
AVERAGE CLOSING BID PRICE THE TOTAL SHARES
PER SHARE 6/8/99 CLOSING BID PRICE ISSUABLE UPON
FOR APPLICABLE PERIOD ($24.00) CONVERSION
- ------------------------- ----------------------------- -------------
<S> <C> <C>
$ 27.00 112.5% 250,000
$ 24.00 100.0% 281,246
$ 18.00 75.0% 374,995
$ 12.00 50.0% 562,293
$ 6.00 25.0% 1,124,986
</TABLE>
12
<PAGE>
On January 28, 1999, we entered into a securities purchase agreement with
three investors, including Strong River Investments, Inc., pursuant to which the
investors agreed to invest up to $16 million in us by means of up to three
tranches of investment. Each tranche of investment would be made solely at our
election, subject to specified closing conditions, including the market price of
the common stock. The securities purchase agreement requires us to issue to the
investors common stock and warrants to purchase common stock at closings under
the agreement. The agreement also provides an adjustment mechanism for each
tranche of investment that could result in the issuance to the investors of
additional shares of common stock at no additional cost. On January 28, 1999,
the investors invested $4 million pursuant to the securities purchase agreement.
On the closing date under the debenture purchase agreement, we issued to
Strong River Investments, Inc. a warrant to purchase shares of our common stock
in exchange for Strong River's waiver of its right to receive any additional
shares in connection with the first tranche of investment pursuant to the
operation of the adjustment mechanism in the securities purchase agreement. In
addition, we waived our right to require Strong River Investments, Inc. to make
a tranche two investment under the securities purchase agreement.
Due to recent closing prices of our common stock, we will not be required to
issue any shares of our common stock in connection with the first tranche of
investment pursuant to the adjustment mechanism or under the warrant issued to
Strong River in June 1999.
The initial sale of the debentures was not registered under the Securities
Act of 1933. The selling shareholders have represented to us that they will
purchase or acquire the shares issuable upon conversion of the debentures for
their own account, for investment only and not with a view towards selling or
distributing them, except pursuant to sales registered under the Securities Act
or applicable exemptions. We have agreed with the selling shareholders to file
the registration statement to register the resale of the shares issuable upon
conversion of the debentures. We have also agreed to prepare and file all
necessary amendments and supplements to the registration statement to keep it
effective until the earlier of (1) the third anniversary of the effective date
of the registration statement related to this prospectus and (2) the date on
which the selling shareholders have sold all the shares.
This prospectus covers the shares of our common stock issuable upon
conversion of the debentures issued at the closing of the debenture purchase
agreement and held by Strong River Investments, Inc. and Bay Harbor Investments
Inc. as of the date of this prospectus. This prospectus does not cover any other
shares.
PLAN OF DISTRIBUTION
We are registering the shares on behalf of the selling shareholders and
their successors, including donees and pledgees who may sell shares they receive
from the selling shareholders after the date of this prospectus. We will not
receive any proceeds from the sale of shares by the selling shareholders or
their successors. The selling shareholders or their successors may sell all of
the shares from time to time in transactions in the over-the-counter market
through Nasdaq, on one or more other securities markets and exchanges, or in
privately negotiated transactions. They may sell the shares at fixed prices, at
market prices prevailing at the time of sale, or at negotiated prices. The
selling shareholders may use any one or more of the following methods when
selling shares:
- ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
- block trades in which the broker-dealer will attempt to sell the shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction;
- purchases by a broker-dealer as principal and resale by the broker-dealer
for its account;
- an exchange distribution in accordance with the rules of the applicable
exchange;
13
<PAGE>
- privately negotiated transactions;
- short sales;
- broker-dealers may agree with the selling shareholders to sell a specified
number of the shares at a stipulated price per share;
- a combination of any such methods of sale; and
- any other method permitted pursuant to applicable law.
The selling shareholders may also sell shares under SEC Rule 144, if
available, rather than under this prospectus.
The selling shareholders may effect short sales against the box, puts and
calls and other transactions in our securities or derivatives of our securities.
The selling shareholders may sell or deliver the shares in connection with these
trades. The selling shareholders may pledge the shares to their brokers under
the margin provisions of customer agreements. If a selling shareholder defaults
on a margin loan, the broker may offer and sell the pledged shares from time to
time.
The selling shareholders have advised us that they have not entered into any
agreements, understandings or arrangements for the sale of the shares with any
underwriters or broker-dealers. They have also advised us that no underwriter or
coordinating broker is now acting in connection with the proposed sale of
shares.
If a selling shareholder notifies us that any material arrangement has been
entered into with a broker-dealer for the sale of shares through a block trade,
special offering, exchange distribution or secondary distribution or a purchase
by a broker or dealer, we will file a supplement to this prospectus if required
pursuant to Rule 424(b) under the Securities Act. The supplement will disclose:
- the name of each such selling shareholder and of the participating
broker-dealer;
- the number of shares involved;
- the price at which the shares were sold;,
- any applicable commissions paid or discounts or concessions allowed to
such broker-dealer;
- that such broker-dealer did not conduct any investigation to verify the
information set forth or incorporated by reference in this prospectus; and
- other facts material to the transaction.
In addition, if a selling shareholder notifies us that a donee or pledgee
intends to sell more than 500 shares, a supplement to this prospectus will be
filed. To the extent required, we will also set forth in a supplement to this
prospectus or, if appropriate, a post-effective amendment to the related
registration statement:
- the number of the shares to be sold;
- purchase prices and public offering prices;
- the names of any agents, dealers or underwriters; and
- any applicable commissions, discounts or concessions with respect to the
offer.
Broker-dealers engaged by the selling shareholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions,
concessions or discounts from the selling shareholders and the purchasers. The
selling shareholders do not expect these commissions, concessions and discounts
to exceed what is customary in the types of transactions involved.
14
<PAGE>
The selling shareholders and any broker-dealers or agents that are involved
in selling the shares may be deemed to be "underwriters" within the meaning of
the Securities Act. In such event, any commissions received by them and any
profit on the resale of the shares may be deemed to be underwriting commissions
or discounts under the Securities Act. Selling shareholders who are
"underwriters" within the meaning of Section 2(11) of the Securities Act will be
subject to the prospectus delivery requirements of the Securities Act. We have
informed the selling shareholders that the anti-manipulation provisions of
Regulation M of the Securities Exchange Act may restrict their sales in the
market.
We will pay all expenses of the registration and sale of the shares, other
than selling commissions and fees and stock transfer taxes. We have also agreed
to indemnify the selling shareholders and broker-dealers who assist in the sale
of the shares against liabilities based upon any untrue or alleged untrue
statements of material fact in this prospectus or the related registration
statement or upon any omission or alleged omission of a material fact required
to be included in this prospectus or the registration statement or necessary to
make the statements herein and therein not misleading. We will not be required
to provide indemnification to the extent any untrue or alleged untrue statement
was included, or an omission or alleged omission was made, as a result of
information furnished by the selling shareholders.
We cannot guarantee that the selling shareholders will sell any or all of
the shares.
VALIDITY OF COMMON STOCK
Perkins Coie LLP, Portland, Oregon, has provided us with an opinion as to
the due authorization and valid issuance of the shares of common stock offered
by this prospectus and as to the fully paid and nonassessable nature of such
shares.
EXPERTS
The audited financial statements of ThrustMaster, Inc. and its subsidiaries
incorporated in this prospectus by reference to the Preliminary Proxy Statement
dated on September 1, 1999 for the year ended December 31, 1998 have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
15
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WE HAVE NOT AUTHORIZED ANY PERSON TO GIVE YOU ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. YOU SHOULD NOT
RELY ON ANY INFORMATION OR REPRESENTATIONS OTHER THAN THIS PROSPECTUS. THIS
PROSPECTUS IS NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN OUR COMMON STOCK. IT IS NOT AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY SECURITIES IF THE OFFER OR SOLICITATION WOULD BE
UNLAWFUL. THE AFFAIRS OF THRUSTMASTER MAY HAVE CHANGED SINCE THE DATE OF THIS
PROSPECTUS. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS IS
CORRECT AT ANY TIME SUBSEQUENT TO ITS DATE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
500,000 SHARES
THRUSTMASTER, INC.
COMMON STOCK
---------------------
PROSPECTUS
---------------------
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses payable by the
Registrant in connection with the sale of Common Stock being registered. All
amounts are estimates except the SEC registration fee and the Nasdaq National
Market additional listing fee. The selling shareholders will pay all selling
commissions and fees and stock transfer taxes.
<TABLE>
<S> <C>
SEC registration fee............................................ $ 2,198
Nasdaq National Market listing fee.............................. $ 10,000
Legal fees and expenses......................................... $ 7,500
Accounting fees and expenses.................................... $ 1,500
Miscellaneous fees and expenses................................. $ 802
---------
Total......................................................... $ 22,000
---------
---------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As an Oregon corporation, the Registrant is subject to the Oregon Business
Corporation Act. Pursuant to Section 60.047(2)(d) of the Oregon Business
Corporation Act, Article X of the Registrant's Articles of Incorporation
(Exhibit 4.1 hereto) eliminates the liability of the Registrant's directors to
the Registrant or its shareholders, except for any liability related to (1) any
breach of the duty of loyalty to the Registrant or its shareholders; (2) acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law; (3) any distribution that is unlawful under the Oregon
Business Corporation Act; or (4) any transaction from which the director derived
an improper personal benefit.
Sections 60.391 and 60.407(2) of the Oregon Business Corporation Act allow
corporations to indemnify their directors and officers, respectively, against
liability where the director or officer has acted in good faith and with a
reasonable belief that actions taken were in the best interests of the
corporation or at least not opposed to the corporation's best interests and, if
in a criminal proceeding, the individual had no reasonable cause to believe the
conduct in question was unlawful. Under the Oregon Business Corporation Act,
corporations may not indemnify against liability in connection with a claim by
or in the right of the corporation or for any improper personal benefit in which
the director or officer was adjudged liable to the corporation. Sections 60.394
and 60.407(1) of the Oregon Business Corporation Act mandate indemnification of
directors and officers, respectively, for all reasonable expenses incurred in
the successful defense of any claim made or threatened, whether or not such
claim was by or in the right of the corporation. Finally, pursuant to the
Sections 60.401 and 60.407(1) of the Oregon Business Corporation Act, a court
may order indemnification in view of all the relevant circumstances, whether or
not the director or officer met the good-faith and reasonable belief standards
of conduct set out in Section 60.391 of the Oregon Business Corporation Act or
was adjudged liable to the corporation.
Section 60.414 of the Oregon Business Corporation Act also provides that the
statutory indemnification provisions are not deemed exclusive of any other
rights to which directors or officers may be entitled under a corporation's
articles of incorporation or bylaws, any agreement, general or specific action
of the board of directors, vote of shareholders or otherwise.
The Registrant's Amended and Restated Bylaws require indemnification of
directors and officers of the Registrant to the fullest extent not prohibited by
law. The Registration Rights Agreement (Exhibit 4.7 hereto) provides that the
selling shareholders will indemnify each director of the Registrant, each
officer of the Registrant and each person who controls the Registrant for
certain liabilities, including liabilities under the Securities Act.
II-1
<PAGE>
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------ --------------------------------------------------------------------------
<C> <S>
*4.1 Description of Capital Stock contained in the Articles of Incorporation,
as amended
(@)4.2 Description of Rights of Security Holders contained in the Amended and
Restated Bylaws
($)4.3 Form of Certificate for Shares of Common Stock
(&)4.4 Convertible Debenture Purchase Agreement dated as of June 9, 1999 among
ThrustMaster, Inc., Strong River Investments, Inc. and Bay Harbor
Investments, Inc.
(&)4.5 Form of Convertible Debenture
(&)4.6 Form of Registration Rights Agreement dated as of June 9, 1999 among
ThrustMaster, Inc., Strong River Investments, Inc. and Bay Harbor
Investments Inc.
5.1 Opinion of Perkins Coie LLP, counsel to the Registrant, regarding the
legality of the Common Stock
23.1 Consent of PricewaterhouseCoopers LLP, independent auditors
23.2 Consent of Perkins Coie LLP (contained in Exhibit 5.1)
24.1 Power of Attorney (included on signature pages hereof)
</TABLE>
- ------------------------
* Incorporated by reference to Exhibit 3.1 to the Registration Statement on
Form SB-2 filed on January 5, 1995, as amended on February 7, 1995, and
February 24, 1995 (File No. 33-88252-LA).
(@) Incorporated by reference to Exhibit 3.2 to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1996.
($) Incorporated by reference to the same exhibit number from the Registrant's
Registration Statement on Form SB-2 filed on January 5, 1995, as amended on
February 7, 1995, and February 24, 1995 (File No. 33-88252-LA).
(&) Incorporated by reference to the Registrant's Current Report on Form 8-K
filed on June 14, 1999.
ITEM 17. UNDERTAKINGS
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement to include any
material information with respect to the plan of distribution not previously
disclosed in this Registration Statement or any material change to such
information in this Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof; and
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration
II-2
<PAGE>
statement shall be deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
C. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
D. The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Hillsboro, State of Oregon, on September 9, 1999.
<TABLE>
<S> <C> <C>
THRUSTMASTER, INC.
By: /s/ FRANK G. HAUSMANN, JR.
-----------------------------------------
Frank G. Hausmann, Jr.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints C. Norman
Winningstad and Frank G. Hausmann, Jr., either of whom may act without the
joinder of the other, as his true and lawful attorneys-in-fact and agents with
full power of substitution and resubstitution, for him, and in his name, place
and stead, in any and all capacities to sign any and all amendments (including
post-effective amendments) and supplements to this Registration Statement and
any registration statement for the same offering that is to be effective upon
filing pursuant to Rule 462(b) under the Securities Act of 1933, and to file the
same, with all exhibits thereto, and all other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents or their substitute or substitutes
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on September 9, 1999.
<TABLE>
<C> <S>
/s/ C. NORMAN WINNINGSTAD
- ------------------------------ Chairman of the Board
C. Norman Winningstad
Director, President, Chief
/s/ FRANK G. HAUSMANN, JR. Executive Officer and
- ------------------------------ Chief Financial Officer
Frank G. Hausmann, Jr. (principal executive and
financial officer)
/s/ ALLEN ROBISON
- ------------------------------ Controller (principal
Allen Robison accounting officer)
/s/ ROBERT L. CARTER
- ------------------------------ Director
Robert L. Carter
/s/ GRAHAM E. DORLAND
- ------------------------------ Director
Graham E. Dorland
/s/ MERRILL A. MCPEAK
- ------------------------------ Director
Merrill A. McPeak
/s/ G. GERALD PRATT
- ------------------------------ Director
G. Gerald Pratt
/s/ FREDERICK M. STEVENS
- ------------------------------ Director
Frederick M. Stevens
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------ --------------------------------------------------------------------------
<C> <S>
*4.1 Description of Capital Stock contained in the Articles of Incorporation,
as amended
(@)4.2 Description of Rights of Security Holders contained in the Amended and
Restated Bylaws
($)4.3 Form of Certificate for Shares of Common Stock
(&)4.4 Convertible Debenture Purchase Agreement dated as of June 9, 1999 among
ThrustMaster, Inc., Strong River Investments, Inc. and Bay Harbor
Investments, Inc.
(&)4.5 Form of Convertible Debenture
(&)4.6 Form of Registration Rights Agreement dated as of June 9, 1999 among
ThrustMaster, Inc., Strong River Investments, Inc. and Bay Harbor
Investments Inc.
5.1 Opinion of Perkins Coie LLP, counsel to the Registrant, regarding the
legality of the Common Stock
23.1 Consent of PricewaterhouseCoopers LLP, independent auditors
23.2 Consent of Perkins Coie LLP (contained in Exhibit 5.1)
24.1 Power of Attorney (included on signature pages hereof)
</TABLE>
- ------------------------
* Incorporated by reference to Exhibit 3.1 to the Registration Statement on
Form SB-2 filed on January 5, 1995, as amended on February 7, 1995, and
February 24, 1995 (File No. 33-88252-LA).
(@) Incorporated by reference to Exhibit 3.2 to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1996.
($) Incorporated by reference to the same exhibit number from the Registrant's
Registration Statement on Form SB-2 filed on January 5, 1995, as amended on
February 7, 1995, and February 24, 1995 (File No. 33-88252-LA).
(&) Incorporated by reference to the Registrant's Current Report on Form 8-K
filed on June 14, 1999.
II-5
<PAGE>
EXHIBIT 5.1
PERKINS COIE LLP
1211 SOUTHWEST FIFTH AVENUE, SUITE 1500 PORTLAND, OREGON 97204-3715
TELEPHONE: 503 727-2000 FACSIMILE: 503 727-2222
September 9, 1999
ThrustMaster, Inc.
Suite 400
7175 N.W. Evergreen Parkway
Hillsboro, OR 97124
Ladies and Gentlemen:
We have acted as counsel to ThrustMaster, Inc. (the "Company") in
connection with (a) the issuance by the Company of $6.0 million aggregate
principal amount of the Company's zero coupon convertible debentures due 2002
(the "Debentures"), which are convertible into shares of the Company's common
stock, without par value (the "Conversion Shares"), and (b) the preparation
and filing of a registration statement on Form S-3 (as amended, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with the Securities and Exchange Commission with respect
to the resale of up to 500,000 of the Conversion Shares. The Debentures were
issued under the Convertible Debenture Purchase Agreement dated as of June 9,
1999 between the Company and the Purchasers party thereto (the "Purchase
Agreement").
We have examined the Registration Statement, the Purchase Agreement and
such documents and records of the Company and other documents as we have
deemed necessary for the purpose of this opinion. Based on and subject to the
foregoing, we are of the opinion that the Conversion Shares have been duly
authorized and, upon issuance in accordance with the terms of the Debentures,
will be validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and any amendment thereto, including any and all
post-effective amendments and any registration statement relating to the same
offering that is to be
<PAGE>
September 9, 1999
Page 2
effective upon filing pursuant to Rule 462(b) under the Securities Act, and
to the reference to our firm in the Prospectus of the Registration Statement
under the heading "Validity of Common Stock." In giving such consent, we do
not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act.
Very truly yours,
/s/ Perkins Coie LLP
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANT
We consent to the incorporation by reference in this registration statement of
ThrustMaster, Inc. and its subsidiaries on Form S-3 of our report dated
January 25, 1999, except as to Note 14, which is as of January 28, 1999, and
except as to Notes 1 and 3, which are as of July 26, 1999, on our audits of
the consolidated financial statements of ThrustMaster, Inc. and its
subsidiaries as of December 31, 1998 and 1997 and for each of the three years
in the period ended December 31, 1998, which report is included in the
Preliminary Proxy Statement dated September 1, 1999.
/s/ PRICEWATERHOUSECOOPERS LLP
Portland, Oregon
September 9, 1999
