<PAGE> 1
As filed with the Securities and Exchange Commission on July 31, 1996,
Registration No. 333-06643
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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JTS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 77-0364572
(State of Incorporation) (I.R.S. Employer Identification No.)
---------------
166 Baypointe Parkway, San Jose, California 95134
(408) 468-1800
(Address and telephone number of principal executive offices)
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1995 Stock Option Plan
1996 Non-Employee Directors' Stock Option Plan
Atari Corporation Amended 1986 Stock Option Plan
115,000 shares acquired under restricted stock purchase agreements
(Full title of the plans)
---------------
David T. Mitchell
Chief Executive Officer and President
166 Baypointe Parkway, San Jose, California 95134
(408) 468-1800
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------
Copies to:
Andrei M. Manoliu, Esq.
Cooley Godward Castro Huddleson & Tatum
Five Palo Alto Square
3000 El Camino Real
Palo Alto, California 94306-2155
(415) 843-5000
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
==================================================================================================================================
Proposed Maximum Proposed Maximum
Title of Securities to Amount to be Offering Price Per Aggregate Offering Amount of
be Registered Registered Share (1) Price (1) Registration Fee (1)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Stock Options and
Common Stock (par
value $0.001) 10,394,883 $5.375 $30,350,737 $10,466
==================================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(h). The price per share and
offering price are based upon the exercise or purchase price for
granted options and purchased shares, respectively, and to the extent
options have not been granted, the average of the high and low prices
of Atari Corporation's common stock on July 29, 1996 as reported on The
American Stock Exchange.
================================================================================
<PAGE> 2
The chart below details the calculations of the registration fee.
<TABLE>
<CAPTION>
============================================================================================================
NUMBER OF OFFERING PRICE PER AGGREGATE
SECURITIES SHARES SHARE OFFERING PRICE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shares issuable pursuant to
current and future options under
the 1995 Stock Option Plan 8,902,758* $5.375* $22,919,940
- ------------------------------------------------------------------------------------------------------------
Shares issuable pursuant to
the 1996 Non-Employee
Directors' Stock Option Plan 500,000 $5.375 $ 2,687,500
- ------------------------------------------------------------------------------------------------------------
Shares issuable pursuant to
outstanding options under
the Atari Amended 1986
Stock Option Plan 877,125 $5.375 $ 4,714,547
- ------------------------------------------------------------------------------------------------------------
Shares acquired under
restricted stock purchase
agreements 115,000 $0.25 $ 28,750
- ------------------------------------------------------------------------------------------------------------
Proposed Maximum
Offering Price $30,350,737
- ------------------------------------------------------------------------------------------------------------
x .000344827
- ------------------------------------------------------------------------------------------------------------
Registration Fee $ 10,466
============================================================================================================
</TABLE>
* 6,306,432 outstanding options with an average exercise price of $1.4215
and 2,596,326 shares reserved for future grant.
Approximate date of commencement of proposed sale to the public: As
soon as practicable after this Registration Statement becomes effective.
<PAGE> 3
JTS CORPORATION
Cross Reference Sheet showing the location in the Prospectus of
the Items on Form S-3.
<TABLE>
<CAPTION>
FORM S-3 ITEM AND CAPTION LOCATION IN PROSPECTUS
<S> <C>
(a) Forepart of Registration Statement and Outside Cover Page Facing Page of Registration Statement;
of Prospectus................................................... Outside Front Cover Page
(b) Inside Front and Outside Back Cover Pages of Prospectus......... Inside Front and Outside Back Cover
Pages
(c) Summary Information and Risk Factors............................ The Company; Risk Factors
(d) Ratio of Earnings to Fixed Charges.............................. *
(e) Use of Proceeds................................................. Use of Proceeds
(f) Determination of Offering Price................................. *
(g) Dilution........................................................ *
(h) Selling Securityholders......................................... Selling Securityholders
(i) Plan of Distribution............................................ Plan of Distribution
(j) Description of Securities to Be Registered...................... *
(k) Interests of Named Experts and Counsel.......................... Legal Matters; Experts
(l) Material Changes................................................ *
(m) Incorporation of Certain Information by Reference............... Incorporation of Certain Documents by
Reference
(n) Disclosure of Commission Position on Indemnification for
Securities Act Liabilities...................................... *
</TABLE>
* Such item is inapplicable or the answer thereto is in the negative.
1.
<PAGE> 4
REOFFER PROSPECTUS
115,000 SHARES
JTS CORPORATION
COMMON STOCK
(0.001 PAR VALUE)
This Prospectus covers 115,000 shares of common stock, 0.001 par value
(the "Common Stock"), of JTS Corporation (the "Company"), which have been issued
pursuant to restricted stock purchase agreements. The shares offered by this
Prospectus are for the account of the individuals listed in the Selling
Securityholders section below (the "Selling Securityholders").
The Company will not receive any of the proceeds from sales of Common
Stock by the Selling Securityholders.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF
RISK. PROSPECTIVE PURCHASERS SHOULD CAREFULLY REVIEW
THE MATTERS SET FORTH IN "RISK FACTORS" ON PAGE 3.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is July 31, 1996.
<PAGE> 5
AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files annual and quarterly reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information may be inspected and copied at
the Commission's Public Reference Section , 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, as well as at the Commission's Regional Offices at 7
World Trade Center, 13th Floor, New York, New York 10048; and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can be
obtained at prescribed rates from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549. The Company's Common Stock is
quoted on The American Stock Exchange, and such reports, proxy statements and
other information can also be inspected at the offices of The American Stock
Exchange, 86 Trinity Place, New York, New York 10006.
A registration statement on Form S-8 with respect to the Common Stock
offered hereby (the "Registration Statement") has been filed with the Commission
under the Securities Act of 1933, as amended (the "Securities Act"). This
Prospectus does not contain all of the information contained in such
Registration Statement and the exhibits and schedules thereto, certain portions
of which have been omitted pursuant to the rules and regulations of the
Commission. 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 thereto. Statements contained in this Prospectus
regarding the contents of any contract or any other documents are not
necessarily complete and, in each instance, reference is hereby made to the copy
of such contract or document filed as an exhibit to the Registration Statement.
The Registration Statement, including exhibits thereto, may be inspected without
charge at the Securities and Exchange Commission's principal office in
Washington, D.C., and copies of all or any part thereof may be obtained from the
Public Reference Section , Securities and Exchange Commission, Washington, D.C.,
20549, upon payment of the prescribed fees.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated by reference into this Prospectus:
(a) The Company's Joint Proxy Statement/Prospectus on Form S-4 filed
pursuant to the Securities Act, containing audited financial statements for the
Company's latest fiscal year for which such statements have been filed.
(b) All other reports filed pursuant to Sections 13(a) or 15(d) of the
Exchange Act since the end of the fiscal year covered by the annual reports, the
prospectus or the registration statement referred to in (a) above.
(c) The description of the Common Stock which is contained in Form 8-A
filed pursuant to the Exchange Act, including any amendment or report filed for
the purpose of updating such description.
All reports and other documents filed by the Company pursuant to
Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act prior to the filing of a
post-effective amendment that indicates that all securities have been sold or
which deregisters all securities then remaining unsold. Any statement contained
in a document incorporated, or deemed to be incorporated, by reference herein or
contained in this Prospectus shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained herein or
in any other subsequently filed document which also is, or is deemed to be,
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person
to whom a Prospectus is delivered, upon written or oral request of such person,
a copy of any and all of the documents that have been incorporated by reference
in the Registration Statement of which this Prospectus is a part (not including
exhibits to the information
2.
<PAGE> 6
that is incorporated by reference unless such exhibits are specifically
incorporated by reference into such documents). Such requests may be directed to
Margaret Casey, JTS Corporation, 166 Baypointe Parkway, San Jose, California
95134, or telephone at (408) 468-1800.
------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE
IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. THE DELIVERY OF THIS
PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT INFORMATION HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------
THE COMPANY
The Company is a leading designer, manufacturer and marketer of hard
disk drives for the personal computer industry.
The Company was incorporated in Delaware in February 1994. The
Company's principal offices are located at 166 Baypointe Parkway, San Jose,
California 95134, and its telephone number is (408) 468-1800.
RISK FACTORS
LIMITED OPERATING HISTORY; HISTORY OF OPERATING LOSSES; WORKING CAPITAL
DEFICIT; INDEPENDENT ACCOUNTANTS' REPORT WITH EXPLANATORY PARAGRAPH. The Company
(referring to JTS Corporation prior to the Merger with Atari Corporation, and
the combined JTS Corporation from and after the Merger) was incorporated in
February 1994 and did not commence production of hard disk drives until October
1995. The Company experienced operating losses for its fiscal years ended
January 29, 1995 and January 28, 1996 of $5.2 million and $31.6 million,
respectively, which resulted from the substantial costs associated with the
design, development and marketing of new products, the establishment of
manufacturing operations and the development of a supplier base. At January 28,
1996, the Company had a working capital deficit of $15.2 million and a negative
net worth of $38.6 million. The Company has yet to generate significant revenues
and cannot assure that any level of future revenues will be attained or that the
Company will achieve or maintain successful operations in the future. Such
factors have raised substantial doubt about the ability of the Company to
continue its operations without achieving successful future operations or
obtaining financing to meet its working capital needs, neither of which can be
assured. The report of independent public accountants on the Company's financial
statements in the Joint Proxy/Prospectus incorporated herein includes an
explanatory paragraph describing uncertainties concerning the ability of the
Company to continue as a going concern. Furthermore, in connection with the
consummation of the Merger, the Company is expected to incur non-cash
write-offs, primarily associated with in-process research and development,
aggregating approximately $100 million.
On a pro forma combined basis as of March 31, 1996, the Company and
Atari had working capital of $14.8 million and a net worth of $31.7 million. The
Company and Atari had net revenues of $18.8 million and an operating loss of
$22.0 million for the quarter ended March 31, 1996.
3.
<PAGE> 7
NEED FOR ADDITIONAL FINANCING; CURRENT FINANCING PLANS. The hard disk
drive business is extremely capital intensive, and the Company anticipates that
it will need significant additional financing resources in the near term for
facilities expansion, capital expenditures, working capital, research and
development and vendor tooling. In this regard, the Company has held discussions
with investment banking firms regarding the possibility of raising additional
capital through the issuance of debt or equity securities. In June 1996, the
Company retained an investment banking firm to advise the Company with respect
to the private issuance of between $50-100 million of 10-year debt securities
convertible into the Company's Common Stock, although the terms of such
financing have not been established. Recent comparable transactions were priced
to yield between 5.5-6.5% annually and included conversion premiums over the
market prices of the Common Stock of between 20-25%. The terms of the debt
securities and the amount of the securities offered will not be determined until
the closing of the financing, if any. There can be no assurance that the Company
will be able to consummate such financing on terms acceptable to the Company or
at all. As a result, the pro forma financial statements included in the Joint
Proxy Statement/Prospectus incorporated herein do not reflect such transactions.
The issuance of equity or convertible debt securities, upon conversion, would
result in dilution of the voting control of existing stockholders, could result
in dilution to earnings per share and would provide to the holders of
convertible debt securities seniority over the holders of the Company's Common
Stock issued in the Merger. There can be no assurance that additional funding
will be available on terms acceptable to the Company or at all. The failure to
fund its capital requirements with additional financing would have a material
adverse effect on the Company's business, operating results and financial
condition. Furthermore, certain equipment and receivables financing as well as
term loans made to the Company and Moduler Electronics, the Company's
subsidiary, are contingent on the Company's ability to comply with stringent
financial covenants. In this regard, Moduler Electronics did not obtain certain
debt and equity capital required under one of its loan agreements. The Company
has informed the lender that it intends to provide such capital by August 1996.
In addition, certain of Moduler Electronics' loan agreements require the
lender's consent to mergers and similar transactions, which could be interpreted
to require the consent of the lending institution to the acquisition of 90% of
the capital stock of Moduler Electronics by the Company. Such consents were not
obtained, but the lending institution has continued to transact business with
Moduler Electronics and the Company since the Company's share acquisition in
Moduler Electronics. The Company believes that such matters regarding the
Moduler Electronics loan agreements will not have a material adverse effect on
the Company's business, operating results or financial condition. There can be
no assurance that the Company will be able to maintain its current financing
facilities or obtain additional financing as needed on acceptable terms or at
all. If the Company is unable to obtain sufficient capital, it would be required
to curtail its facilities expansion, capital expenditures, working capital,
research and development and vendor tooling expenditures, which would materially
adversely affect the Company's business, operating results and financial
condition.
UNCERTAINTY OF MARKET ACCEPTANCE; LENGTHY SALES CYCLE. Since its
inception in February 1994, the Company has primarily engaged in research and
development of its core technology for hard disk drives. The Company's marketing
strategy depends significantly on its ability to establish distribution,
licensing, product development and other strategic relationships with major
computer Original Equipment Manufacturers ("OEMs") and on the willingness and
ability of these companies to utilize and to promote the Company's hard disk
drive technology and products. The Company's first commercial product line, the
Palladium family of hard disk drives, was introduced in September 1995 and is
targeted at the desktop personal computer market. The Company's second product
line, the Nordic family of hard disk drives, has been designed for notebook
computers. There can be no assurance that any significant market for either
product family will develop. In particular, the Nordic drives use a 3-inch form
factor, which the Company has only recently introduced to the industry. At
present, only a limited number of computer manufacturers are developing or have
plans to develop computers that may accommodate Nordic drives. If additional
computer manufacturers do not modify their existing products or develop new
products to accommodate 3-inch form factor disk drives, sales of Nordic disk
drives and, hence, the Company's business, operating results and financial
condition would be materially adversely affected.
Qualifying hard disk drives for incorporation into a new computer
product requires the Company to work extensively with the customer and the
customer's other suppliers to meet product specifications. Customers often
4.
<PAGE> 8
require a significant number of product presentations and demonstrations, as
well as substantial interaction with the Company's senior management, before
making a purchasing decision. Accordingly, the Company's products typically have
a lengthy sales cycle during which the Company may expend substantial financial
resources and management time and effort with no assurance that a sale will
result.
HIGHLY COMPETITIVE MARKET. The hard disk drive industry is intensely
competitive and dominated by a small number of large companies, including
Quantum Corporation ("Quantum"), Seagate Technology, Inc. ("Seagate"), Western
Digital Corporation ("Western Digital") and Maxtor Corporation ("Maxtor"). In
addition, a number of computer companies, such as International Business
Machines, Inc. ("IBM") and Toshiba Corporation ("Toshiba"), have in-house or
"captive" disk drive manufacturing operations that produce disk drives for
incorporation into their own computers as well as for sale to other OEMs. Many
of the Company's competitors have broader product lines than the Company, and
all have significantly greater financial, technical and marketing resources.
Furthermore, the Company has licensed key 3-inch form factor technology to
Western Digital, a potential competitor in the personal computer disk drive
market that could become a significant supplier of 3-inch form factor disk
drives to OEMs. There can be no assurance that the Company will develop and
manufacture products on a timely basis with the quality and features necessary
to compete effectively. Generally, OEM customers for hard disk drives rely on a
limited number of suppliers. As a result, it may be necessary for the Company to
displace competitors in many circumstances to increase its net sales. In
addition, the Company faces competition from the manufacturing operations of its
current and potential OEM customers, which could initiate or increase internal
production of hard disk drives and reduce or cease purchasing from independent
hard disk drive suppliers such as the Company. Moreover, the hard disk drive
industry is characterized by price erosion and resulting pressure on gross
margins. The Company expects that hard disk drive prices will continue to
decline in the future and that competitors will offer products which meet or
exceed the performance capabilities of the Company products. Due to such pricing
pressures, the Company's future gross margins will be substantially dependent
upon its ability to control manufacturing costs, improve manufacturing yields
and introduce new products on a timely basis. Any increase in price competition
would have a material adverse effect on the Company's business, operating
results and financial condition. The Company may also experience competition
from other forms of data storage, including optical storage, flash memory and
holographic storage. If the Company's current and prospective customers and end
users were to adopt such data storage products as an alternative to the
Company's products, the Company's business, operating results and financial
condition would be adversely affected.
RAPID TECHNOLOGICAL CHANGE; SHORT PRODUCT LIFE CYCLES; PRICE EROSION.
The hard disk drive industry is characterized by rapid technological change,
short product life cycles and price erosion. As a result, the Company must
continually anticipate change and adapt its products to meet demand for
increased storage capacities. Although the Company intends to engage in a
continuous process of developing new products and production techniques, there
can be no assurance that the Company will anticipate advances in hard disk drive
technology and develop products incorporating such advances in a timely manner
to compete effectively against its competitors' new products. Due to the rapid
technological change and frequent development of new hard disk drive products,
it is common in the industry for the relative mix of customers and products to
change rapidly, even from quarter to quarter. For example, in the first half of
calendar 1996, the demand for 1 gigabyte 3.5-inch form factor hard disk drives
decreased dramatically due to increased availability of and demand for larger
capacity disk drives. As a result, pricing pressure on such disk drives,
including those marketed by the Company, increased and gross margins decreased.
Generally, new products have higher average selling prices than more mature
products. Therefore, the Company's ability to introduce new products in a timely
fashion is an important factor in achieving growth and profitability. In
addition, the Company anticipates continued changes in the requirements of its
customers in the computer industry. There can be no assurance that the Company
will be able to develop, manufacture and sell products that respond adequately
to such changes or that future technological innovations will not reduce demand
for hard disk drives. The Company's business, operating results and financial
condition would be materially adversely affected if its development efforts are
not successful, if the technologies that the Company has chosen not to develop
prove to be competitive alternatives or by trends toward technology that would
replace hard disk drives as a storage medium, such as optical storage, flash
memory and holographic storage. As the Company increases its production and
shipment of hard disk drives and expands its product line, the Company's
inventory levels will increase. Due to the rapid rate of change in the Company's
business,
5.
<PAGE> 9
a large inventory poses the risk of inventory obsolescence which could
have an adverse effect on the Company's business, operating results and
financial condition. In this regard, the Company anticipates incurring future
inventory allowances, the level of which will depend upon a number of factors,
including manufacturing yields, new product introductions, maturity or
obsolescence of product designs, inventory levels and competitive pressures.
RECENT SIGNIFICANT APPRECIATION IN PRICE OF ATARI COMMON STOCK. The
closing price per share of Atari Common Stock was $1.875 at February 12, 1996,
the last day of trading before announcement of the agreement between the Company
and Atari to merge the two companies. The price of Atari Common Stock has
appreciated significantly since then, notwithstanding the absence of any
significant publicly available information regarding the financial results or
business operations of the Company, either separately or as combined with Atari,
and the absence of any material positive developments in the financial results
or business operations of Atari. There can be no assurance that the recent price
appreciation of Atari Common Stock is indicative of the price that will prevail
for the Company's Common Stock following completion of the Merger.
AVAILABILITY OF COMPONENTS AND MATERIALS; DEPENDENCE ON SUPPLIERS. The
Company relies on a limited number of suppliers for many components and
materials used in its manufacturing processes, including recording disks, head
stack components and integrated circuits. At present, the Company does not have
multiple suppliers for all of its materials and component requirements, and
there can be no assurance that the Company will secure more than one source for
all of its requirements in the future or that its suppliers will be able to meet
its requirements on a timely basis or on acceptable terms. Furthermore, the
Company does not have contractual arrangements with any of its sole source
suppliers. In particular, the Company presently relies on sole source suppliers
for controller application specific integrated circuits ("ASICs"), spindle
motors, certain head stack components and disk media. Delays in the receipt of
certain components and materials have occurred in the past, and there can be no
assurance that delays will not occur in the future or that suppliers will not
extend lead times. Moreover, changing suppliers for certain materials, such as
spindle motors, could require requalification of the Company's products with
some or all of its customers. Requalification could prevent early design-in wins
or could prevent or delay continued participation in hard disk drive programs
for which the Company's products have been qualified. In addition, long lead
times are required to obtain many materials, such as integrated circuits
utilized in the Company's printed circuit board assemblies ("PCBAs"). Regardless
of whether these materials are available from established or new sources of
supply, these lead times could impede the Company's ability to quickly respond
to changes in demand and product requirements. Any limitations on, or delays in,
the supply of materials could disrupt the Company's production volume and could
have a material adverse effect on the Company's business, operating results and
financial condition. In this regard, in the fourth quarter of fiscal 1996, the
Company experienced delays in obtaining certain integrated circuits required in
the assembly of PCBAs due to the supplier's production problems, which resulted
in a significant reduction in production volume during such period. Such
production problems were corrected, but there can be no assurance that
production problems of this type or otherwise will not occur again in the
future. Furthermore, a significant increase in the price of one or more of these
components or materials could adversely affect the Company's business, operating
results and financial condition. In addition, there are only a limited number of
providers of hard disk drive manufacturing equipment, such as servo-writers,
burn-in equipment and final test equipment, and ordering additional equipment
for replacement or expansion involves long lead times, which limit the rate and
flexibility of capacity expansion. Failure to obtain such manufacturing
equipment on a timely basis could limit the Company's production of hard disk
drives and adversely affect the Company's business, operating results and
financial condition.
CYCLICAL NATURE OF HARD DISK DRIVE AND COMPUTER INDUSTRIES. The
Company's operating results are dependent on the demand for hard disk drives,
which in turn depends on the demand for notebook and desktop personal computers.
The hard disk drive industry is cyclical and has experienced periods of
oversupply, resulting in significantly reduced demand for hard disk drives, as
well as pricing pressures and reduced production levels. The effect of these
cycles has been magnified by computer manufacturers' practice of ordering
components, including hard disk drives, in excess of their needs during periods
of rapid growth. In recent years, the disk drive industry has experienced
significant growth, and the Company intends to expand its capacity based on
current and anticipated demand. There can be no assurance that such growth will
continue or that the level of demand will not decline. A decline in demand for
hard disk drives would have a material adverse effect on the Company's business,
operating
6.
<PAGE> 10
results and financial condition. Additionally, in the past some computer
manufacturers have experienced substantial financial difficulties due to the
cyclical nature of the computer industry and other factors. In this regard,
certain personal computer manufacturers have recently announced reductions in
anticipated revenue growth. Any increased price pressure in the personal
computer industry could be passed through to personal computer component
suppliers, including manufacturers of hard disk drives. To date, the Company has
not incurred significant bad debt expense. However, there can be no assurance
that the Company will not face difficulty in collecting receivables or be
required to offer more liberal payment terms in the future, particularly in a
period of reduced demand. Any failure to collect or delay in collecting
receivables could have a material adverse effect on the Company's business,
operating results and financial condition.
DEPENDENCE ON COMPAQ COMPUTER RELATIONSHIP; CUSTOMER CONCENTRATION. The
Company's strategy to commercialize its products and achieve market acceptance
has focused in large part on the development of distribution, licensing, product
development and other strategic relationships with leading computer companies,
other manufacturers of computer peripherals and recognized distribution
organizations. Through these relationships, the Company seeks to establish its
products and technologies as industry standards. In this regard, the Company has
entered into a Development Agreement with Compaq Computer Corporation ("Compaq")
pursuant to which Compaq has agreed to design the Company's Nordic disk drives
into at least one of Compaq's products and to purchase a minimum number of hard
disk drives from the Company within two years following Compaq's acceptance of
the first of such products. In return, the Company has granted to Compaq certain
pricing preferences and agreed to pay royalties to Compaq on the sales of Nordic
disk drives to third parties during the term of the agreement. Compaq has also
been granted a license to use the Nordic designs to manufacture Nordic drives on
a royalty-free basis in the event that the Company fails to meet the agreed upon
production schedule. The Development Agreement also restricts the Company's
ability to sublicense Nordic technology. The Development Agreement has a
five-year term, which will automatically be renewed under certain circumstances
and may be terminated by either party only with cause. In order to provide a
second source of the Company's products, the Company has entered into a
Technology Transfer and License Agreement with Western Digital pursuant to which
Western Digital has the right to manufacture and sell Nordic disk drives to
Compaq. If either of these agreements were to terminate prematurely, the
Company's efforts to establish market acceptance of its products and,
consequently its business, operating results and financial condition would be
adversely affected. In the first half of calendar 1996, Compaq delayed
introduction of a notebook product line that is expected to incorporate the
Company's hard disk drives, which resulted in shipment delays by the Company to
Compaq. The Company may experience similar delays in the future. In fiscal 1996,
Olidata S.p.A, Connexe Peripherals, Ltd., Liuski International, Inc. and Aashima
Technology, B.V. accounted for 34%, 12%, 11% and 10%, respectively, of the
Company's total revenue. In the quarter ended April 28, 1996, Peacock Systems
GmbH and FutureTech accounted for 43% and 32%, respectively, of the Company's
total revenues. The Company expects that sales to a relatively small number of
OEMs will account for a substantial portion of its net revenues for the
foreseeable future, although the companies that comprise the Company's largest
customers may change from period to period. The loss of, or decline in orders
from, one or more of the Company's key customers would have a material adverse
effect on the Company's business, operating results and financial condition.
RELIANCE ON LICENSED TECHNOLOGY. The Company currently owns no patents
(other than those acquired in the Merger) and has obtained licenses to a
substantial portion of the technology used in its hard disk drives pursuant to
license agreements with Pont Peripherals Corporation (formerly DZU Corporation),
TEAC Corporation and Western Digital. If such license agreements were
prematurely terminated or if the Company were enjoined from relying upon such
licenses due to the Company's alleged or actual breach of such agreements, the
Company would be prevented from manufacturing hard disk drives incorporating
technology subject to such licenses. As a result, the Company's business,
operating results and financial condition would be materially adversely
affected.
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS. Although the Company
attempts to protect its intellectual property rights through patents,
copyrights, trade secrets and other measures, there can be no assurance that the
Company will be able to protect its technology adequately or that competitors
will not be able to develop similar technology independently. There can be no
assurance that patents will be issued with respect to the Company's pending
patent applications or that any future patents will be sufficiently broad to
protect the Company's technology.
7.
<PAGE> 11
There can be no assurance that any future patent issued to the Company will not
be challenged, invalidated or circumvented or that the rights granted thereunder
will provide adequate protection to the Company's products. Furthermore, there
can be no assurance that others will not independently develop similar products,
duplicate the Company's products or design around any possible patents issued to
the Company in the future. In addition, the laws of certain foreign countries
may not protect the Company's intellectual property rights to the same extent as
do the laws of the United States.
In recent years, the hard disk drive industry has experienced an
increase in litigation to enforce intellectual property rights. Thus, litigation
may be necessary to enforce any future the Company patents, copyrights or other
intellectual property rights, to protect the Company's trade secrets, to
determine the validity and scope of the proprietary rights of others, or to
defend against claims of infringement or claims for indemnification resulting
from infringement claims. Such litigation, even if successful, could result in
substantial costs and diversion of resources and could have a material adverse
effect on the Company's business, operating results and financial condition.
Alternatively, if any claims are asserted against the Company, the Company may
seek to obtain a license under the third party's intellectual property rights or
to seek to design around such claims. There can be no assurance, however, that a
license will be available on reasonable terms or at all, and it could be
expensive and time consuming or prove impossible for the Company to design
around such claims. Any of such alternatives could materially and adversely
affect the Company's business, results of operations and financial condition.
Pursuant to the Merger, the Company has exclusive use of the "Atari"
name and "Fuji" logo in all areas other than coin-operated arcade video game
use. The Company also has a portfolio of other intellectual properties of Atari
including patents, trademarks, and copyrights associated with its video game and
computer businesses. The Company believes these patents, trademarks and other
intellectual property are important assets. As of December 31, 1995, Atari held
over 150 patents in the United States and other jurisdictions which expire from
1996 to 2010 and had applications pending for three additional patents. There
can be no assurance that any of these patent rights will be upheld in the future
or that the Company will be able to preserve any of these intellectual property
rights. Atari has in the past received communications from third parties
asserting rights to certain of its intellectual property. Atari has also been
involved in several major lawsuits regarding its intellectual property,
including a suit with Nintendo of America, Inc. and its affiliates ("Nintendo")
which was settled in March 1994 and a suit with Sega which was settled in
September 1994. Litigation, which has in the past resulted and could in the
future result in substantial costs and diversion of resources, may also be
necessary to enforce the Atari patents or other intellectual property rights or
to defend against third party infringement claims. The occurrence of litigation
relating to patent enforcement, patent infringement or other intellectual
property matters, regardless of the outcome, could have a material adverse
effect on the Company's business, financial condition and results of operations.
EXPANSION OF MANUFACTURING CAPACITY. The Company's competitive position
will depend substantially on its ability to expand its manufacturing capacity.
Accordingly, the Company is continuing to make significant investments to expand
such capacity, particularly through the acquisition of capital equipment,
facilities expansion and the hiring and training of new personnel. The Company
currently plans to add new production lines at its existing manufacturing
facility in Madras, India during fiscal 1997 that will utilize all available
floor space at this facility. There can be no assurance that the Company will be
able to expand such capacity in a timely manner, that the cost of such expansion
will not exceed management's current estimates, that such capacity will not
exceed the demand for the Company products or that such additional capacity will
achieve satisfactory levels of manufacturing efficiency in a timely manner or at
all. In addition, the expansion of manufacturing capacity will significantly
increase the Company's fixed costs. The Company's profitability will depend on
its ability to utilize its manufacturing capacity in an effective manner, and
the Company's inability to fully utilize its capacity would have a material
adverse effect on the Company's business, operating results and financial
condition.
DEPENDENCE ON SINGLE MANUFACTURING FACILITY. In fiscal 1996,
substantially all of the Company's manufacturing operations took place at
Moduler Electronics in Madras, India. Because the Company does not currently
operate multiple facilities in different geographic areas, a disruption of the
Company's manufacturing operations resulting from various factors, including
sustained process abnormalities, human error, government
8.
<PAGE> 12
interventions or a natural disaster such as fire or flood, could cause the
Company to cease or limit its manufacturing operations and consequently would
have a material adverse effect on the Company's business, operating results and
financial condition.
RISKS OF INTERNATIONAL SALES AND MANUFACTURING. In fiscal 1996 and the
three months ended April 30, 1996, substantially all of the Company's net sales
consisted of products sold to customers in Europe, Asia and Latin America, and
the Company anticipates that a substantial percentage of its products will be
sold to customers outside of the United States for the foreseeable future.
Furthermore, the Company expects to conduct substantially all of its
manufacturing operations in India, although the Company may evaluate alternative
or additional locations from time to time. Accordingly, the Company's operating
results are subject to the risks of doing business in a foreign country,
including compliance with, or changes in, the law and regulatory requirements of
a foreign country, political instability, local content rules, taxes, tariffs or
other barriers, and transportation delays and other interruptions. For example,
the Indian government has granted the Company a partial five-year "tax holiday,"
and its subsidiary, Moduler Electronics, is located in the Madras Export
Processing Zone where it currently enjoys a partial exemption from Indian taxes
on export profits, resulting in effective tax rates of 10-15%, although to date
the Company has obtained only minimal benefits from such exemption. Such
exemption may be terminated at any time for political or economic reasons, in
which event the Company may become subject to significantly greater taxes on
sales of disk drives outside of India at rates currently of up to 46%.
Furthermore, the Company does not have a long-term lease agreement, but rather
occupies the Madras facility pursuant to allotment letters from the Development
Commissioner of the Madras Export Processing Zone. Other benefits associated
with conducting business in India, which historically has experienced
considerable political instability, are subject to the vagaries of the Indian
government and may be withdrawn at any time. Although all of the Company's sales
presently are made in U.S. dollars, there can be no assurance that future
international sales will not be denominated in foreign currencies. Regardless of
whether the Company's sales are denominated in foreign currencies, the Company
is, and will continue to be, subject to risks related to foreign currency
fluctuations.
PRODUCTION YIELDS; PRODUCT QUALITY. The hard disk drive manufacturing
process is complex, and low production yields may result from a variety of
factors, including the introduction of new products, increased complexity in
product specifications, human error, the introduction of contaminants in the
manufacturing environment, equipment malfunction, use of defective materials and
components and inadequate testing. From time to time, the Company has
experienced lower than anticipated production yields as a result of such
factors. Furthermore, while the Company has implemented procedures to monitor
the quality of the materials received from its suppliers, there can be no
assurance that materials will meet the Company's specifications or that
substandard materials will not adversely impact production yields or cause other
production problems. The Company's failure to maintain high quality production
standards or acceptable production yields would result in loss of customers,
delays in shipments, increased costs, cancellation of orders and product returns
for rework, any of which could have a material adverse effect on the Company's
business, operating results and financial condition. For example, the Company's
cost of sales for fiscal 1996 included a $4.3 million provision for inventory
allowances principally due to the costs for return of defective products,
scrapped material associated with unrepairable damage caused during the assembly
process and estimates of physical loss of inventory associated with high volume
manufacturing activities.
VARIABILITY OF OPERATING RESULTS. The Company's operating results are
expected to be subject to significant quarterly and annual fluctuations based
upon a variety of factors including market acceptance of the Company's products,
timing of significant orders, changes in pricing by the Company or its
competitors, the timing of product announcements by the Company, its customers
or its competitors, changes in product mix, manufacturing yields, order
cancellations, modifications and quantity adjustments and shipment
reschedulings, the level of utilization of the Company's production capacity,
increases in production and engineering costs associated with initial
manufacture of new products, changes in the cost of or limitations on
availability of components and materials and customer returns. The impact of
these and other factors on the Company's revenues and operating results in any
future period cannot be predicted with certainty. The Company's expense levels
are based, in large part, on its expectations as to future revenues. Substantial
advance planning and commitment of financial and other resources is necessary
for expansion of manufacturing capacity, while the Company's sales are generally
made pursuant to purchase orders that are subject
9.
<PAGE> 13
to cancellation, modification, quantity reductions or rescheduling without
significant penalties. Furthermore, because the hard disk drive industry is
capital intensive and requires a high level of fixed costs, operating results
are extremely sensitive to changes in volume. Accordingly, if revenue levels do
not meet expectations, operating results and net income, if any, are likely to
be adversely affected.
MANAGEMENT OF GROWTH. The Company has recently experienced and may
continue to experience substantial growth in the number of its employees and the
scope of its operations. Such growth would further strain the Company's
managerial, financial, manufacturing and other resources. In addition, in order
to manage its growth effectively, the Company must implement additional
operating, financial and management information systems and hire and train
additional personnel. In particular, the Company must hire and train a
significant number of additional personnel to operate the highly complex capital
equipment required by its manufacturing operations. There can be no assurance
that the Company will successfully implement additional systems in a timely or
efficient manner, to hire and properly train a sufficient number of qualified
personnel or to effectively manage such growth, and the Company's failure to do
so could have a material adverse effect on its business, operating results and
financial condition.
DEPENDENCE ON KEY MANAGEMENT PERSONNEL. The Company's operating results
will depend in significant part upon the continued contributions of its key
management and technical personnel, including Sirjang L. Tandon, its Chairman
and Corporate Technical Strategist, David T. Mitchell, its President and Chief
Executive Officer, Kenneth D. Wing, its Executive Vice President, Research and
Development Quality/Reliability, W. Virginia Walker, its Executive Vice
President, Finance and Administration, Chief Financial Officer and Secretary,
and Steven L. Kaczeus, its Chief Technical Officer, each of whom would be
difficult to replace. The Company does not have an employment agreement with any
of these individuals, except for Mr. Wing. The loss of any of these key
personnel could have a material adverse effect on the business, operating
results and financial condition of the Company. In addition, the Company's
future operating results depend in part upon its ability to attract, train,
retain and motivate other qualified management, technical, manufacturing, sales
and support personnel for its operations. Competition for such personnel is
intense, and there can be no assurance that the Company will be successful in
attracting or retaining such personnel. The loss of the services of existing
personnel as well as the failure to recruit additional personnel could
materially adversely affect the Company's business, operating results and
financial condition.
PURCHASE ORDERS SUBJECT TO CANCELLATION, MODIFICATION AND RESCHEDULING.
The Company's sales are generally made pursuant to purchase orders that are
subject to cancellation, modification, quantity reductions or rescheduling
without significant penalties. Changes in forecasts, cancellations, rescheduling
and quantity reductions may result in excess inventory costs, inventory losses
and under-utilization of production capacity and could have a material adverse
effect on the Company's business, operating results and financial condition. As
a result of the foregoing, the Company's backlog as of any particular date may
not be representative of actual sales for any succeeding period.
RISK OF ADDITIONAL WRITE-DOWNS OF ATARI INVENTORY. From the
introduction of Jaguar in late 1993 through May 1996, Atari sold approximately
135,000 units of Jaguar. Due to disappointing sales of Jaguar and increased
competition from products introduced by Sega and Sony, Atari reduced the
suggested retail price of Jaguar to $99.99 and recorded an inventory write-down
of $12.6 million in 1995. As of December 31, 1995, Atari had approximately
100,000 units of Jaguar in inventory and the value of Jaguar inventory and
related software was approximately $9.9 million. Despite the introduction of
four additional game titles in the first quarter of 1996, sales of Jaguar and
related software have remained disappointing due to uncertainty about Atari's
commitment to the Jaguar platform, increased price competition and pending
competitive product introductions. As a result of continued disappointing sales,
Atari management revised estimates and wrote-down inventory by an additional
$5.0 million in the first quarter of 1996. As of the end of May 1996, Atari has
approximately 90,000 units of Jaguar in inventory.
Volume sales of Jaguar and related software in 1996 have consisted
primarily of a large order from a new European customer. Atari is also pursuing
wholesale channels in the U.S. as well as licensing opportunities. There can be
no assurance that Atari's substantial unsold inventory of Jaguar and related
software can be sold at current or
10.
<PAGE> 14
reduced prices, if at all. In addition, any further decrease in the value of
such inventory could result in additional inventory write-downs by Atari.
RISK OF POTENTIAL LIABILITIES RELATED TO ATARI'S BUSINESS. In
connection with the restructuring of Atari's business in 1992 and 1993 and
Atari's decision in late 1995 to significantly downsize its Jaguar operations,
Atari has terminated and the Company plans to terminate numerous contracts and
business relationships, including several related to software development
activities. Although the Company does not regard any of such contracts or
business relationships as material, the termination of contracts and
relationships has, from time to time, resulted in litigation, diverting
management and financial resources. There can be no assurance that the parties
to such contracts will not commence or threaten to commence litigation related
to such contracts. Any such litigation or threatened litigation would further
divert management and financial resources and could have a material adverse
effect on the Company's business, operating results and financial condition. In
addition, the Company holds several properties for sale, some of which are
currently being leased, which the Company acquired from Atari in the Merger. The
ownership and use of such properties subjects the Company to numerous risks,
including risks of environmental and personal injury liabilities. Although the
Company is attempting to sell certain of such properties, such sales are not
expected to eliminate all the risks associated with the Company's ownership of
such properties, including potential environmental liabilities and ongoing
indemnification and other contractual obligations. At present, the Company has
no such indemnification obligations and is not aware of any such environmental
liability.
UTILIZATION OF NET OPERATING LOSSES. As of December 31, 1995, Atari had
federal net operating losses ("NOLs") and tax credit carryforwards in the amount
of approximately $166.8 million, and as of January 28, 1996, the Company had
federal NOLs of approximately $27.0 million. Under the Internal Revenue Code of
1986, as amended (the "Code"), certain changes in the ownership or business of a
corporation that has NOLs or tax credit carryforwards will result in the
inability to use or the imposition of significant restrictions on the use of
such NOLs or tax credit carryforwards to offset future income and tax liability
of such corporation, its subsidiaries or its successors. The Merger constituted
a change in ownership with respect to the Company, and the Merger or subsequent
events may constitute an event with respect to Atari which results in the
imposition of restrictions on the ability of the Company to utilize NOLs and tax
credit carryforwards of Atari or the Company. There can be no assurance that the
Company will be able to utilize all or any NOLs or tax credit carryforwards of
Atari or the Company. The ability of the Company after the Merger to utilize
Atari's accumulated NOLs and tax carryforwards was a factor considered by the
boards of directors of Atari and the Company in concluding to approve the Merger
and the Merger Agreement and to recommend that the stockholders of Atari and the
Company approve the Merger and the Merger Agreement.
CONTROL BY AFFILIATES; ANTI-TAKEOVER EFFECTS. Directors, officers and
holders of 10% or more of the outstanding Common Stock own approximately 35% of
the outstanding shares of Common Stock (assuming no exercise of options or
warrants after June 28, 1996). As a result, these affiliates of the Company,
acting together, have the ability to exert significant influence over the
election of directors and other corporate actions affecting the Company. Certain
provisions of the Certificate of Incorporation and Bylaws of the Company and
certain provisions of Delaware General Corporation Law, including Section 203
thereof, may also discourage certain transactions involving a change in control
of the Company. In addition to the foregoing, the ability of the Board of
Directors of the Company to issue additional "blank check" preferred stock
without further stockholder approval could have the effect of delaying,
deferring or preventing a change in control of the Company.
SHARES ELIGIBLE FOR FUTURE SALE. Sales of substantial amounts of Common
Stock in the public market could adversely affect prevailing market prices. All
of the 63,854,718 shares of Common Stock issued to the former stockholders of
Atari in the Merger are eligible for sale in the public market. Of such shares,
approximately 23,935,000 shares held by affiliates of Atari are subject to
volume and other restrictions under Rule 145 of the Securities Act. In addition,
on October 29, 1996 (90 days following the consummation of the Merger),
approximately 5,600,000 shares of Common Stock will become eligible for sale in
the public market pursuant to Rule 701 under the Securities Act, subject to
vesting requirements applicable to these shares. In addition, in February and
August 1997, approximately 16,200,000 shares and 12,500,000 shares
11.
<PAGE> 15
of Common Stock, respectively, will become eligible for sale in the public
market pursuant to Rule 144 of the Securities Act upon expiration of the
two-year holding periods from the dates such shares were issued.
In addition, the holders of approximately 57,200,000 shares of Common
Stock are entitled to certain rights with respect to registration of such shares
under the Securities Act. Pursuant to the Form S-8 Registration Statement under
the Securities Act filed in conjunction with this Form S-3 Reoffer Prospectus,
an aggregate of approximately 8,902,758 shares of Common Stock reserved for
issuance under the Company's Amended and Restated 1995 Stock Option Plan,
500,000 shares of Common Stock reserved for issuance under the Company's 1996
Non-Employee Directors' Stock Option Plan, and 867,125 shares of Common Stock
reserved for issuance pursuant to the exercise of options granted under Atari's
Amended 1986 Stock Option Plan which were assumed by the Company in the Merger.
Substantial sales of the Company's Common Stock after the Merger could have a
negative impact on the market price and liquidity of the Common Stock.
DIVERSION OF MANAGEMENT ATTENTION. Following the Merger, Atari will
operate as separate divisions of the Company and the current management of the
Company will serve as the management of the Company. The Company's management is
expected to devote substantially all of its time to the affairs of the disk
drive business following the Merger. If the management of the Company were
unable to effectively manage the separate businesses, the operating results and
financial condition of the Company could be materially adversely affected.
LIQUIDITY; STOCK PRICE VOLATILITY. The trading price of the Common
Stock could be subject to wide fluctuations in response to quarter-to-quarter
variations in operating results, announcements of technological innovations or
new products by the Company or its competitors, general conditions in the hard
disk drive, computer or video game industries, changes in earnings estimates or
recommendations by analysts, or other events or factors. In addition, the public
stock markets have experienced extreme price and trading volume volatility in
recent months. This volatility has significantly affected the market prices of
securities of many technology companies for reasons frequently unrelated to the
operating performance of the specific companies. These broad market fluctuations
may adversely affect the market price of the Common Stock.
SELLING SECURITYHOLDERS
The following is a list of the selling securityholders and the amount
of shares which are to be sold:
<TABLE>
<CAPTION>
Selling Securityholders Number of Shares
- ----------------------- ----------------
<S> <C>
Kenneth D. Wing 75,000
W. Virginia Walker 40,000
</TABLE>
12.
<PAGE> 16
PLAN OF DISTRIBUTION
The shares of Common Stock covered by the Prospectus may be offered or
sold from time to time on The American Stock Exchange by the Selling
Securityholders, or by pledgees, donees, transferees or other successors in
interest. The shares will be offered on a delayed or continuous basis pursuant
to Rule 415 under the Securities Act. Such sales may be made in the "Pink
Sheets," in block trades, pursuant to purchases by a broker or a dealer as
principal, in private transactions, in negotiated transactions or otherwise, at
prices and at terms then prevailing or at negotiated prices. The Company will
not receive any of the proceeds from sales by the Selling Securityholders.
Any broker or dealer involved in the offer or sale of the shares
included herein may receive brokerage commissions or discounts. To the knowledge
of the Company, there is currently no agreement with any broker or dealer
respecting such transactions. Upon sale of such shares, the Selling
Securityholders or anyone effecting sales on behalf of the Selling
Securityholders may be deemed an underwriter, as that term is defined in the
Securities Act. Each Selling Securityholder does not believe that he or she is
an underwriter within the meaning of the Securities Act. All expenses of the
registration of the Common Stock covered by this Prospectus are to be borne by
the Company.
LEGAL MATTERS; EXPERTS
The validity of the Company's Common Stock will be passed upon for
the Company by Cooley Godward Castro Huddleson & Tatum.
The consolidated financial statements of Atari Corporation as of
December 31, 1995 and 1994 and for each of the three years in the period ended
December 31, 1995, incorporated in this Reoffer Prospectus by reference from
the Company's Joint Proxy Statement/Prospectus on Form S-4 have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report, which
is incorporated herein by reference, and has been so incorporated in reliance
upon the report of such firm given upon their authority as experts in
accounting and auditing.
The consolidated financial statements of JTS Corporation incorporated
by reference in this Reoffer Prospectus have been audited by Arthur Andersen
LLP, independent public accountants, and are included in reliance upon their
authority as experts in accounting and auditing.
13.
<PAGE> 17
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION
WHERE SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. 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
Page
----
Available Information......................................... 2
Incorporation of Certain Documents by Reference............... 2
The Company................................................... 3
Risk Factors.................................................. 3
Selling Securityholders....................................... 12
Plan of Distribution.......................................... 13
Legal Matters; Experts........................................ 13
--------------------
115,000 SHARES
JTS CORPORATION
COMMON STOCK
------------------------
REOFFER PROSPECTUS
------------------------
JULY 31, 1996
<PAGE> 18
PART II
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by either JTS Corporation (the
"Registrant") or Atari Corporation ("Atari"), a predecessor interest to
Registrant, with the Securities and Exchange Commission (the "Commission") are
incorporated by reference into this Registration Statement:
(a) The Atari Proxy Statement relating to the Annual Meeting of
Stockholders held on May 16, 1989.
(b) The Atari annual report on Form 10-K, with amendments thereto, for
the fiscal year ended December 31, 1995.
(c) The Atari quarterly report on Form 10-Q, with amendments thereto,
for the fiscal quarter ended March 31, 1996.
(d) The Registrant's Joint Proxy Statement/Prospectus on Form S-4 filed
pursuant to the Securities Act of 1933, as amended (the "Securities Act"),
containing audited financial statements for the Registrant's latest fiscal year
for which such statements have been filed.
(e) All other reports filed pursuant to Sections 13(a) or 15(d) of
Securities Exchange Act of 1934, as amended (the "Exchange Act"), since the end
of the fiscal year covered by the annual reports, the prospectus or the
registration statement referred to in (d) above.
(f) The description of the Registrant's common stock ("Common Stock")
contained in Form 8-A filed pursuant to the Exchange Act, including any
amendment or report filed for the purpose of updating such description.
All reports and other documents subsequently filed by the Registrant
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act prior to the
filing of a post-effective amendment, which indicates that all securities
offered have been sold or which deregisters all securities then remaining
unsold, shall be deemed to be incorporated by reference herein and to be a part
of this Registration Statement from the date of the filing of such reports and
documents.
DESCRIPTION OF SECURITIES
Not Applicable.
INTERESTS OF NAMED EXPERTS AND COUNSEL
Not Applicable.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 145 of the Delaware General Corporation Law ("Delaware
Law"), the Registrant has broad powers to indemnify its directors and officers
against liabilities they may incur in such capacities, including liabilities
under the Securities Act. The Registrant's Bylaws provide that the Registrant
will indemnify its directors and executive officers and may indemnify other
officers to the fullest extent permitted by Delaware Law. Under its Bylaws,
indemnified parties will be entitles for indemnification for negligence, gross
negligence and otherwise to the fullest extent permitted by Delaware Law. The
Bylaws also require the Registrant to advance litigation expenses for
stockholder derivative actions or other actions against an undertaking by the
indemnifies party to repay such advances if it is ultimately determined that the
indemnifies party is not entitled to indemnification.
In addition, the Registrant's Certificate of Incorporation provides
that, to the fullest extent permitted by Delaware Law, its directors will not be
liable for monetary damages for breach of the directors' fiduciary duty of care
to the Registrant and its stockholders. This provision in the Certificate of
Incorporation does not eliminate the duty
II-1
<PAGE> 19
of care, and in appropriate circumstances equitable remedies, such as injunctive
or other forms of non-monetary relief, will remain available under Delaware Law.
Each director will continue to be subject to liability for breach of director's
duty of loyalty to the Registrant, for acts or omissions not in good faith or
involving intentional misconduct, for knowing violation of the law, for actions
leading to improper personal benefit to the director, and for payment of
dividends or approval of stock repurchases or redemptions that are unlawful
under Delaware Law. This provision also does not affect a director's
responsibilities under any other laws, such as federal securities laws or state
and federal environmental laws.
The Registrant has entered into indemnification contracts with its
directors and executive officers. Such indemnity agreements contain provisions
that are in some respects broader than the specific indemnification provisions
contained under Delaware Law.
EXEMPTION FROM REGISTRATION CLAIMED
Not Applicable.
EXHIBITS
EXHIBIT NO.
5.1 Opinion of Cooley Godward Castro Huddleson & Tatum
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Deloitte and Touche LLP
23.3 Consent of Cooley Godward Castro Huddleson & Tatum is contained in
Exhibit 5 to this Registration Statement
24 Power of Attorney is contained on the signature pages
99.1* 1995 Stock Option Plan
99.2* Form of Nonstatutory Stock Option
99.3* Form of Incentive Stock Option
99.4** 1996 Non-Employee Directors' Stock Option Plan
99.5** Form of Nonstatutory Stock Option for Non-Employee Directors' Stock
Option Plan grants
99.6*** Atari Corporation Amended 1986 Stock Option Plan
99.7**** Restricted Stock Purchase Agreement for Kenneth D. Wing
99.8**** Restricted Stock Purchase Agreement for W. Virginia Walker
* Incorporated by reference to Registrant's Form S-4, Exhibit 10.1.
** Incorporated by reference to Registrant's Form S-4, Exhibit 10.2.
*** Incorporated by reference to the Atari Proxy Statement relating to the
May 16, 1989 Annual Meeting of Stockholders
**** Incorporated by reference to Registrant's Form S-4, Exhibit 10.10.
**** Incorporated by reference to Registrant's Form S-4, Exhibit 10.11.
II-2
<PAGE> 20
UNDERTAKINGS
1. The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the Registration
Statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) (Section 230.424(b) of this
chapter) if, in the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective Registration Statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;
Provided, however, that paragraphs (1)(a)(i) and (1)(a)(ii) do not apply if the
Registration Statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
Registrant pursuant to Section 13 or 15(d) of the Exchange Act that are
incorporated by reference in the Registration Statement.
(b) That, for the purpose of determining any liability under the
Securities Act, each such post- effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) 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.
2. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new Registration Statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
3. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the 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 whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE> 21
SIGNATURES
THE REGISTRANT. Pursuant to the requirements of the Securities Act, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Jose, State of California, on July 31, 1996.
JTS CORPORATION
By: /s/ W. Virginia Walker
-----------------------------
W. Virginia Walker
Executive Vice President, Finance and
Administration and Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints David T. Mitchell and W. Virginia Walker,
and each or any one of them, his true and lawful attorney-in-fact and agent,
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) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his substitutes or substitute, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ David T. Mitchell Chief Executive Officer, July 31, 1996
- ------------------------- President and Director
David T. Mitchell (Principal Executive Officer)
/s/ W. Virginia Walker Executive Vice President, Finance July 31, 1996
- ------------------------- and Administration and Chief
W. Virginia Walker Financial Officer (Principal
Financial and Accounting Officer)
</TABLE>
II-4
<PAGE> 22
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Sirjang Lal Tandon Chairman of the Board of Directors July 31, 1996
- --------------------------
Sirjang Lal Tandon
Director , 1996
- --------------------------
Jean D. Deleage
/s/ Roger W. Johnson Director July 31, 1996
- --------------------------
Roger W. Johnson
/s/ Michael Rosenberg Director July 31, 1996
- --------------------------
Michael Rosenberg
Director , 1996
- --------------------------
Lip-Bu Tan
/s/ Jack Tramiel Director July 31, 1996
- --------------------------
Jack Tramiel
</TABLE>
II-5
<PAGE> 23
EXHIBIT INDEX
EXHIBIT
NUMBER
5.1 Opinion of Cooley Godward Castro Huddleson & Tatum
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Deloitte and Touche LLP
23.3 Consent of Cooley Godward Castro Huddleson & Tatum is contained in
Exhibit 5 to this Registration Statement
24 Power of Attorney is contained on the signature pages
99.1* 1995 Stock Option Plan
99.2* Form of Nonstatutory Stock Option
99.3* Form of Incentive Stock Option
99.4** 1996 Non-Employee Directors' Stock Option Plan
99.5** Form of Nonstatutory Stock Option for Non-Employee Directors'
Stock Option Plan grants
99.6*** Atari Corporation Amended 1986 Stock Option Plan
99.7**** Restricted Stock Purchase Agreement for Kenneth D. Wing
99.8**** Restricted Stock Purchase Agreement for W. Virginia Walker
* Incorporated by reference to Registrant's Form S-4, Exhibit 10.1.
** Incorporated by reference to Registrant's Form S-4, Exhibit 10.2.
*** Incorporated by reference to the Atari Proxy Statement relating to
the May 16, 1989 Annual Meeting of Stockholders
**** Incorporated by reference to Registrant's Form S-4, Exhibit 10.10.
**** Incorporated by reference to Registrant's Form S-4, Exhibit 10.11.
II-6
<PAGE> 1
[COOLEY GODWARD CASTRO HUDDLESON & TATUM LETTERHEAD]
July 29, 1996
JTS CORPORATION
166 BAYPOINTE PARKWAY
SAN JOSE, CALIFORNIA 95134
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the filing by JTS Corporation (the "Registrant") of a registration
statement on Form S-8 (the "Registration Statement") with the Securities and
Exchange Commission covering the offering of up to (a) 10,279,883 shares of the
Registrant's common stock, $0.001 par value, (the "Shares") pursuant to (i) the
Company's 1995 Stock Option Plan, (ii) the Company's 1996 Non-Employee
Directors' Stock Option Plan and (iii) the Atari Corporation Amended 1986 Stock
Option Plan, assumed by the Company in connection with the Merger of the Company
and Atari Corporation (collectively, the "Plans") and (b) 115,000 shares on a
Reoffer Prospectus prepared in accordance with the requirements of Part I of
Form S-3 (the "Reoffer Shares").
In connection with this opinion, we have examined the Registration Statement and
related Prospectuses, the Company's Certificate of Incorporation and Bylaws, as
amended, and such other documents, records, certificates, memoranda and other
instruments as we deem necessary as a basis for this opinion. We have assumed
the genuineness and authenticity of all documents submitted to us as originals,
the conformity to originals of all documents submitted to us as copies thereof,
and the due execution and delivery of all documents where due execution and
delivery are a prerequisite to the effectiveness thereof.
On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the Reoffer Shares are validly issued, fully paid and nonassessable, and
that the Shares, when sold and issued in accordance with the Plans, the
Registration Statement and related Prospectuses, will be validly issued, fully
paid, and nonassessable (except as to Shares issued pursuant to certain deferred
payment arrangements, which will be fully paid and nonassessable when such
deferred payments are made in full).
We consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
COOLEY GODWARD CASTRO
HUDDLESON & TATUM
By: /s/ Timothy G. Patterson
------------------------
Timothy G. Patterson
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
and all references to our Firm included in or made a part of this registration
statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
San Jose, California
July 31, 1996
<PAGE> 1
EXHIBIT 23.2
CONSENT OF DELOITTE & TOUCHE LLP
We consent to the incorporation by reference in this Registration
Statement of JTS Corporation on Form S-3/S-8 of our report dated March 1, 1996
(April 8, 1996 as to Note 16) on the consolidated financial statements of
Atari Corporation, appearing in Amendment No. 2 to Registration Statement
No. 333-06443 of JTS Corporation on Form S-4 and to the reference to us under
the heading "Experts" in this Registration Statement.
DELOITTE & TOUCHE LLP
San Jose, California
July 31, 1996
