<PAGE>
As filed with the Securities and Exchange Commission on June 1, 2000
Registration No. 333-______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
________________________________________
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
________________________________________
TranSwitch Corporation
(Exact name of Registrant as specified in its charter)
_____________________________
Delaware 06-1236189
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
Three Enterprise Drive
Shelton, Connecticut 06484
(203) 929-8810
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
________________________________________
Dr. Santanu Das
President and Chief Executive Officer
TranSwitch Corporation
Three Enterprise Drive
Shelton, Connecticut 06484
(203) 929-8810
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
________________________________________
Copies of all communications, including all communications sent to the agent for
service, should be sent to:
Timothy C. Maguire, Esq.
Testa, Hurwitz & Thibeault, LLP
125 High Street
Boston, Massachusetts 02110
(617) 248-7000
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, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following. [_]
________________________________________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
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 (1)
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.001 par value per share 252,691 $53.5625 $13,534,761 $3,574.00
==============================================================================================================================
</TABLE>
(1) Estimated pursuant to Rule 457(c) under the Securities Act of 1933, as
amended, solely for purposes of calculating the registration fee, based upon
the average of the high and low prices per share as reported on the Nasdaq
National Market on May 30, 2000.
________________________
TranSwitch hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until TranSwitch shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
================================================================================
<PAGE>
PROSPECTUS
----------
SUBJECT TO COMPLETION, DATED JUNE 1, 2000
TRANSWITCH CORPORATION
252,691 Shares
Common Stock
This prospectus relates to the public offering, which is not being
underwritten, of 252,691 shares of our common stock that are held by some of our
current stockholders.
Our common stock is traded on the Nasdaq National Market under the symbol
"TXCC." The last reported sales price of the common stock on the Nasdaq
National Market on May 30, 2000 was $61.813 per share.
___________________________
Investing in our common stock involves risks.
See "Risk Factors" beginning on page 4.
___________________________
The Securities and Exchange Commission and state securities regulators
have not approved or disapproved these securities, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is ___________________, 2000.
<PAGE>
You should rely only on the information contained in this prospectus. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of our common stock. In this prospectus, references
to the "Company," "TranSwitch," "we," "us" and "our" refer to TranSwitch
Corporation, a Delaware corporation, and its subsidiaries.
________________________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Our Company.................................................. 4
Special Note Regarding Forward-Looking Statements............ 4
Risk Factors................................................. 4
Use of Proceeds.............................................. 16
Selling Stockholders......................................... 16
Plan of Distribution......................................... 17
Legal Matters................................................ 19
Experts...................................................... 19
Where You Can Find More Information.......................... 19
</TABLE>
________________________
We own or have rights to trademarks or tradenames that we use in conjunction
with the sale of our products. TranSwitch is a registered trademark owned by
us.
3
<PAGE>
OUR COMPANY
TranSwitch was incorporated in Delaware on May 26, 1988. Our executive
office is located at 3 Enterprise Drive, Shelton, Connecticut, and our telephone
number is (203) 929-8810.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference contain
forward-looking statements including, without limitation, statements concerning
the future of the industry, product development, business strategy (including
the possibility of future acquisitions), continued acceptance and growth of our
products and dependence on significant customers. These statements can be
identified by the use of forward-looking terminology such as "may," "will,"
"expect," "anticipate," "estimate," "continue" or other similar words. These
statements discuss future expectations, contain projections of results of
operations or of financial condition or state other forward-looking information.
When considering forward-looking statements, you should keep in mind the risk
factors and other cautionary statements in this prospectus. The risk factors
noted below and other factors noted through this prospectus could cause our
actual results to differ significantly from those contained in any forward-
looking statement.
RISK FACTORS
You should carefully consider the following risks before making an
investment decision. Our business, operating results and financial condition
could be adversely affected by any of the following risks. The risks described
below are not the only ones that we face. Additional risks that are not yet
identified or that we currently think are immaterial may also impair our
business operations. The trading price of our common stock could decline due to
any of these risks, and you could lose all or part of your investment. You
should also refer to the other information set forth in this prospectus,
including our consolidated financial statements and the related notes.
RISKS RELATED TO OUR BUSINESS
WE EXPERIENCE FLUCTUATIONS IN OUR OPERATING RESULTS DUE TO A NUMBER OF
FREQUENTLY CHANGING BUSINESS CONDITIONS, WHICH MAY CAUSE OUR STOCK PRICE TO
DECLINE
Our quarterly and annual operating revenues, expenses and operating results
may fluctuate due to a number of factors including:
. the timing and cancellation of customer . our ability to introduce new
orders products and technologies on
a timely basis
. market acceptance of our and our customers' . introduction of products and
products technologies by our
competitors
. the level of orders received which can be . the timing of our
shipped in a quarter investments in research and
development, including
. the timing and provisions of pricing tooling expenses
protections and returns from our associated with product
distributors development and pre-
production
. availability of foundry capacity and raw . whether our customers buy
from a distributor
4
<PAGE>
materials or directly from us
. fluctuations in manufacturing yields . competitive pressures on
selling prices
. changes in product mix . general economic conditions
Sudden shortages of raw materials or production capacity constraints can
lead producers to allocate available supplies or capacity to larger customers
than us, which could interrupt our ability to meet our production obligations.
Historically, average selling prices in the semiconductor industry have
decreased over the life of a product, and as a result, the average selling
prices of our products may decrease in the future. Decreases in the price of our
products would adversely affect our operating results. Our business is
characterized by short-term orders and shipment schedules, and customer orders
typically can be canceled or rescheduled without significant penalty to our
customer. Because we do not have substantial noncancellable backlog, we
typically plan our production and inventory levels based on internal forecasts
of customer demand, which are highly unpredictable and can fluctuate
substantially. Because we are continuing to increase our operating expenses for
personnel and new product development and for inventory in anticipation of
increasing sales levels, we must continue to generate increased sales to offset
these increased expenses. In addition, we are limited in our ability to reduce
costs quickly in response to any revenue shortfalls. In response to anticipated
long lead times to obtain inventory and materials from our foundries, we may
order in advance of anticipated customer demand, which might result in excess
inventory levels if the expected orders fail to materialize. As a result, we
cannot predict the timing and amount of sales to our customers, and any
significant downturn in customer demand for our products would reduce our
quarterly and our annual operating results.
OUR RAPID GROWTH HAS STRAINED OUR RESOURCES, AND WE MAY NOT BE ABLE TO MANAGE
FUTURE GROWTH
Due to the level of technical and marketing expertise necessary to support
our existing and new customers, we must attract highly qualified and well-
trained personnel. There may be only a limited number of persons with the
requisite skills to serve in these positions and it may become increasingly
difficult for us to hire such personnel. As we expand, we may also
significantly strain our management, manufacturing, financial, systems and other
resources. We cannot be certain that our systems, procedures, controls and
existing space will be adequate to support our operations.
WE RELY ON OUTSIDE FABRICATION FACILITIES AND OUR BUSINESS COULD BE HURT IF OUR
RELATIONSHIPS WITH OUR FOUNDRY SUPPLIERS ARE DAMAGED
We do not own or operate a Very Large Scale Integrated (VLSI) Circuit
fabrication facility. Three foundries currently supply us with most of our
semiconductor device requirements. While we have had good relations with these
foundries, we cannot be certain that we will be able to renew or maintain
contracts with them or negotiate new contracts to replace ones that expire. In
addition, we cannot be certain that renewed or new contracts will obtain terms
as favorable as our current terms. There are other significant risks associated
with our reliance on outside foundries, including the following:
5
<PAGE>
. the lack of assured semiconductor wafer supply and control over delivery
schedules
. the unavailability of, or delays in obtaining access to, key process
technologies and
. limited control over quality assurance, manufacturing yields and
production costs.
In addition, manufacturing integrated circuits is a highly complex and
technology-demanding process. Although we try to diversify our sources of
semiconductor device supply and work closely with our foundries to minimize the
likelihood of reduced manufacturing yields, our foundries occasionally
experience lower than anticipated manufacturing yields, particularly in
connection with the introduction of new products and the installation and start-
up of new process technologies. Such reduced manufacturing yields have at times
reduced our operating results. A manufacturing disruption at one or more of our
outside foundries, including as a result of natural occurrences, could impact
the production of certain of our products for an extended period of time.
OUR DEPENDENCE ON A SMALL NUMBER OF FABRICATION FACILITIES EXPOSES US TO RISKS
OF INTERRUPTIONS IN DELIVERIES OF SEMICONDUCTOR DEVICES
We purchase semiconductor devices from outside foundries pursuant to
purchase orders, and we do not have a guaranteed level of production capacity at
any of our foundries. We provide the foundries with rolling forecasts of our
production requirements; however, the ability of each foundry to provide wafers
to us is limited by the foundry's available capacity. Therefore, our foundry
suppliers could choose to prioritize capacity for other customers or reduce or
eliminate deliveries to us on short notice. Accordingly, we cannot be certain
that our foundries will allocate sufficient capacity to satisfy our
requirements.
We have been, and expect in the future to be, particularly dependent upon a
limited number of foundries for our VLSI device requirements. In particular, as
of the date of this prospectus, a single foundry supplier manufactures all of
our BiCMOS devices. As a result, we expect that we could experience a
substantial delay or interruption in the shipment of our products due to the
following:
. sudden demand for an increased amount of semiconductor devices or sudden
reduction or elimination of any existing source or sources of
semiconductor devices
. time required to qualify alternative manufacturing sources for existing
or new products could be substantial or
. failure to find alternative manufacturing sources to produce VLSI
devices with acceptable manufacturing yields.
OUR SUCCESS DEPENDS ON THE TIMELY DEVELOPMENT OF NEW PRODUCTS AND WE FACE RISKS
OF PRODUCT DEVELOPMENT DELAYS
Our success depends upon our ability to do the following:
. develop new VLSI devices and software for existing and new markets
6
<PAGE>
. introduce such products in a timely manner and
. have such products selected for design into new products of leading
systems manufacturers.
The development of these new devices and software is highly complex, and
from time to time we have experienced delays in completing the development of
new products. Successful product development and introduction depends on a
number of factors, including the following:
. accurate new product definition
. timely completion and introduction of new product designs
. availability of foundry capacity
. achievement of manufacturing yields and
. market acceptance of our products and our customers' products.
Our success also depends upon our ability to do the following:
. build products to applicable standards
. develop products that meet customer requirements
. adjust to changing market conditions as quickly and cost-effectively as
necessary to compete successfully
. introduce new products that achieve market acceptance
. develop reliable software to meet our customers' application needs in a
timely fashion and
. introduce new products in a timely and cost-effective manner and in
sufficient quantities to meet customer demand.
In addition, we cannot ensure that the electronic systems manufactured by
our customers will be introduced in a timely manner or that such systems will
achieve market acceptance.
We generally incorporate our new products into our customers' products or
systems at the design stage. However, customer decisions to use our products
(design wins), which can often require significant expenditures by us without
any assurance of success, often precede the generation of volume sales, if any,
by a year or more. Moreover, the value of any design win largely will depend
upon the commercial success of the customer's product and on the extent to which
the design of the customer's electronic system accommodates components
manufactured by our competitors. We cannot ensure that we will continue to
achieve design wins.
OUR REVENUES AND PROFITS MAY DECREASE IF WE LOSE ANY OF OUR SIGNIFICANT
CUSTOMERS
Historically, a relatively small number of customers have accounted for a
significant portion of our total revenues in any particular period. We have no
long-term volume purchase commitments from any of our significant customers.
The following table sets forth, for the periods indicated, the percentage of our
total revenues derived from our significant distributors and customers listed
below:
7
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
Year Ended December 31, March 31,
--------------------------------- --------------------
Distributors 1997 1998 1999 2000
------------ ---- ---- ---- ----
<S> <C> <C> <C> <C>
Insight Electronics, Inc.(1)............ 41% 20% 34% 15%
Arrow Electronics, Inc. (2)............. * 17% 19% 22%
Columbia Technology (1)................. * 15% * *%
<CAPTION>
Three Months Ended
Year Ended December 31, March 31,
----------------------------------- ----------------------
Customers 1997 1998 1999 2000
--------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Lucent Technologies, Inc.(3)............ * * 16% 16%
Ericsson Telecom AB..................... * * * 14%
Tellabs Operations, Inc. (2)............ 16% 21% 13% 14%
Nortel Networks, Inc. (4)............... * * 13% 10%
</TABLE>
___________________________
* Below 10% of our total revenues.
(1) Columbia Technology and Insight Electronics are distributors of our
products to various end-users, none of which comprised more than 10%
of our total revenues during 1997 and 1998. In 1999, a portion of the
Lucent Technologies products were shipped through Insight Electronics.
(2) Our sales to Tellabs Operations during 1999 were made through Arrow
Electronics, which also shipped products to Nortel Networks. Sales to
Tellabs Operations through Arrow Electronics during 1998 represented
17% of our total revenues. During 1998, sales to Tellabs were made
through Reptron Electronics and Arrow Electronics, both Tellabs
Operations' designated distributors. Our sales to Tellabs Operations
during 1997 were made through Reptron Electronics, Tellabs Operations'
designated distributor.
(3) Includes sales to Ascend Communications, Inc. which was acquired by
Lucent Technologies during 1999. This percentage represents total
shipments, including those made directly and those made through
distributors.
(4) This represents total shipments, including those made directly and
those made through distributors.
We anticipate that sales of our products to relatively few customers will
continue to account for a significant portion of our total revenues. Due to
these factors, some of the following may reduce our operating results:
. reduction, delay or cancellation of orders from one or more of our
significant customers
. development by one or more of our significant customers of other sources
of supply
. selection by one or more of our significant customers of devices
manufactured by one of our competitors for inclusion in future product
generations
. loss of one or more of our current customers or a disruption in our sales
and distribution channels or
. failure of one of our significant customers to make timely payment of our
invoices.
8
<PAGE>
We cannot be certain that our current customers will continue to place
orders with us, that orders by existing customers will continue at the levels of
previous periods or that we will be able to obtain orders from new customers.
OUR FAILURE TO PROTECT OUR PROPRIETARY RIGHTS, OR THE COSTS OF PROTECTING THESE
RIGHTS, MAY HARM OUR ABILITY TO COMPETE
Our success depends in part on our ability to obtain patents and licenses
and to preserve other intellectual property rights covering our products and
development and testing tools. To that end, we have obtained certain domestic
and foreign patents and intend to continue to seek patents on our inventions
when appropriate. The process of seeking patent protection can be time consuming
and expensive. We cannot ensure the following:
. that patents will issue from currently pending or future applications
. that our existing patents or any new patents will be sufficient in scope
or strength to provide meaningful protection or any commercial advantage
to us
. that foreign intellectual property laws will protect our intellectual
property rights or
. that others will not independently develop similar products, duplicate
our products or design around any patents issued to us.
Intellectual property rights are uncertain and involve complex legal and
factual questions. We may be unknowingly infringing on the proprietary rights of
others and may be liable for that infringement, which could result in
significant liability for us. For example, we are not aware of any third party
intellectual property rights that would prevent our use and sale of our
products, although we have received correspondence from others alleging
infringement. If we do infringe the proprietary rights of others, we could be
forced to either seek a license to intellectual property rights of others or
alter our products so that they no longer infringe the proprietary rights of
others. A license could be very expensive to obtain or may not be available at
all. Similarly, changing our products or processes to avoid infringing the
rights of others may be costly or impractical.
We are responsible for any patent litigation costs. If we were to become
involved in a dispute regarding intellectual property, whether ours or that of
another company, we may have to participate in legal proceedings to determine
who had the claimed rights first. These types of proceedings may be costly and
time consuming for us, even if we eventually prevail. If we do not prevail, we
might be forced to pay significant damages, obtain a license or stop making a
certain product.
We also rely on trade secrets, proprietary know-how and confidentiality
provisions in agreements with employees and consultants to protect our
intellectual property. Other parties may not comply with the terms of their
agreements with us and we may not be able to adequately enforce our rights
against these people.
OUR BUSINESS COULD BE HARMED IF WE FAIL TO ADEQUATELY INTEGRATE THE OPERATIONS
OF EASICS, N.V.
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Our management must devote substantial time and resources to the
integration of the operations of Easics, N.V., with which we closed a share-for-
share exchange agreement in May 2000. If we fail to accomplish this integration
efficiently, we may not realize the anticipated benefits of the transaction. The
process of integrating research and development initiatives, computer and
accounting systems and other aspects of the operation of Easics presents a
significant challenge to our management. This is compounded by the challenge of
simultaneously managing a larger entity. In addition, the operations and
personnel of Easics are located in Europe. The transaction with Easics presents
a number of additional difficulties of integration, including:
. difficulties in integrating personnel with disparate business
backgrounds and cultures
. difficulties in defining and executing a comprehensive product strategy
. difficulties in managing geographically remote units and
. difficulties in minimizing the loss of key employees of
Easics.
If we delay integrating or fail to integrate the Easics operations or
experience other unforeseen difficulties, the integration process may require a
disproportionate amount of our management's attention and financial and other
resources. Our failure to adequately address these difficulties could harm our
business or financial results.
WE MAY ENGAGE IN ACQUISITIONS THAT MAY HARM OUR OPERATING RESULTS, DILUTE OUR
STOCKHOLDERS AND CAUSE US TO INCUR DEBT OR ASSUME CONTINGENT LIABILITIES
We may pursue acquisitions that could provide new technologies, products or
service offerings. Future acquisitions by us may involve the following:
. use of significant amounts of cash
. potentially dilutive issuances of equity securities or
. incurrence of debt or amortization expenses related to goodwill and other
intangible assets.
In addition, acquisitions involve numerous risks, including:
. difficulties in the assimilation of the operations, technologies, product
and personnel of the acquired company
. the diversion of management's attention from other business concerns
. risks of entering markets in which we have no or limited prior experience
and
. the potential loss of key employees of the acquired company.
From time to time, we have engaged in discussions with third parties
concerning potential acquisitions of product lines, technologies and businesses.
However, we currently have no commitments or agreements with respect to any such
acquisition. In the event that such an acquisition does occur, we cannot be
certain that our business, operating results and financial condition will not be
materially adversely affected.
10
<PAGE>
WE FACE INTENSE COMPETITION IN THE SEMICONDUCTOR MARKET
The semiconductor industry is intensely competitive and is characterized
by the following:
. price erosion
. rapid technological change
. shortage in fabrication capacity
. heightened international competition in many markets and
. unforeseen manufacturing yield problems.
These factors are likely to result in pricing pressures on our products,
potentially affecting our margins.
Our ability to compete successfully in the rapidly evolving area of high
performance integrated circuit technology depends on factors both within and
outside our control, including:
. success in designing and subcontracting the manufacture of new
products that implement new technologies
. protection of our products by effective utilization of intellectual
property laws
. product quality
. reliability
. price
. efficiency of production
. the pace at which customers incorporate our integrated circuits into
their products
. success of competitors' products and
. general economic conditions.
The communications and data communications industries, which are our
primary target markets, have become intensely competitive because of
deregulation and heightened international competition.
Our competition consists of suppliers of similar products from the United
States as well as other countries, including internal competition from
semiconductor divisions of vertically integrated companies such as IBM
Corporation, Lucent Technologies, NEC Corporation and Siemens AG. New entrants
are also likely to attempt to obtain a share of the market for our current and
future products.
Our principal competitors in the asynchronous/PDH (Plesiochronous Digital
Hierarchy) and SONET (Synchronous Optical Network)/SDH (Synchronous Digital
Hierarchy) areas are Applied Micro Circuits Corporation, Conexant Systems Inc.,
Crystal Semiconductor Corporation, Dallas Semiconductor Corporation, EXAR
Corporation, Lucent Technologies Inc., National Semiconductor Corporation, PMC-
Sierra Inc., Texas Instruments Incorporated, TriQuint Semiconductor Corporation,
Vitesse Semiconductor Corporation and VLSI Technology, Inc. In addition, there
are a number of ASIC vendors, including AMI Industries, Inc., LSI Logic Corp.,
and STM Microelectronics Group, who compete with us by supplying customer-
specific products to OEMs. In the ATM
11
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(Asynchronous Transfer Mode)/IP (Internet Protocol) area, our principal
competitors include all the vendors mentioned above and, in addition, Advanced
Micro Devices, Inc., Integrated Device Technology, Inc. and MMC Networks, Inc.
Numerous other domestic and international vendors have announced plans for
entering this market.
Certain of our competitors are more established, benefit from greater
market recognition and have substantially greater financial, development,
manufacturing, and marketing resources than us.
We must successfully transition to new process technologies to remain
competitive
Our future success depends upon our ability to do the following:
. to develop products that utilize new process technologies
. to introduce new process technologies to the marketplace ahead of
competitors and
. to have new process technologies selected to be designed into products
of leading systems manufacturers.
Semiconductor design and process methodologies are subject to rapid
technological change, and require large expenditures for research and
development. We currently manufacture our products using 0.8, 0.5, 0.35 or 0.25
micron CMOS processes or a 1.0 micron BiCMOS process. We continuously evaluate
the benefits, on a product-by-product basis, of migrating to smaller geometry
process technologies and anticipate that we will need to migrate to 0.18 micron
and below CMOS processes. Other companies in the industry have experienced
difficulty in transitioning to new manufacturing processes and, consequently,
have suffered reduced yields or delays in product deliveries. We believe that
transitioning our products to a smaller geometry will be important for us to
remain competitive and we cannot be certain that we can successfully make such a
transition, if at all, without delay or inefficiencies.
THE LOSS OF KEY MANAGEMENT COULD AFFECT OUR ABILITY TO RUN OUR BUSINESS
Our success depends largely upon the continued service of our executive
officers, including Dr. Santanu Das, President, Chief Executive Officer and
Chairman of the Board of Directors, and other key management and technical
personnel and on our ability to continue to attract, retain and motivate other
qualified personnel. The competition for such employees is intense.
OUR INTERNATIONAL BUSINESS OPERATIONS EXPOSE US TO A VARIETY OF BUSINESS RISKS
Foreign sales are a significant part of our total revenues. The table below
sets forth, for the periods indicated, the dollar amount in millions of our
total revenues derived from our primary geographic markets.
12
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<TABLE>
<CAPTION> Three Month Ended
Year Ended December 31, March 31,
------------------------------- -----------------
Country 1997 1998 1999 2000
------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
United States............... $18.1 $23.7 $49.8 $14.8
Israel...................... .5 5.8 2.9 1.3
China....................... 1.8 7.2 2.4 1.9
Other Countries............. 6.7 7.5 16.3 8.7
----- ----- ----- -----
Total Revenues.......... $27.1 $44.2 $71.4 $26.7
===== ===== ===== =====
</TABLE>
We expect foreign sales to continue to account for a significant
percentage of our total revenues. A significant portion of our total revenues
will therefore be subject to risks associated with foreign sales, including the
following:
. unexpected changes in legal and regulatory requirements and policy
changes affecting the telecommunications and data communications
markets
. changes in tariffs
. exchange rates and other barriers
. political and economic instability
. difficulties in accounts receivable collection
. difficulties in managing distributors or representatives
. difficulties in staffing and managing foreign operations
. difficulties in protecting our intellectual property overseas
. seasonality of sales and
. potentially adverse tax consequences.
Although our sales to date have been denominated in United States dollars,
the value of the United States dollar in relation to foreign currencies may also
reduce our sales to foreign customers. To the extent that we expand our
international operations or change our pricing practices to denominate prices in
foreign currencies, we will expose our margins to increased risks of currency
fluctuations.
RISKS RELATED TO OUR INDUSTRY
OUR SUCCESS DEPENDS ON THE CONTINUED GROWTH OF THE GLOBAL COMMUNICATIONS
INFRASTRUCTURE, INCLUDING THE INTERNET
We derive virtually all of our product revenues from sales of products for
telecommunications, Internet and data communications applications. These
markets are characterized by the following:
. intense competition
. rapid technological change and
. short product life cycles, especially in the data communications market.
13
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In addition, although the telecommunications, Internet and data
communications equipment markets have grown rapidly in the last few years, we
cannot be certain that these markets will continue to grow or that a significant
slowdown in these markets will not occur.
Products for telecommunications, Internet and data communications
applications are based on industry standards, which are continually evolving.
Our future success will depend, in part, upon our ability to successfully
develop and introduce new products based on emerging industry standards, which
could render our existing products unmarketable or obsolete. If the
telecommunications, Internet or data communications markets evolve to new
standards, we cannot be certain that we will be able to successfully design and
manufacture new products that address the needs of our customers or that such
new products will meet with substantial market acceptance
THE CYCLICALITY OF THE SEMICONDUCTOR INDUSTRY AFFECTS OUR BUSINESS
We provide semiconductor devices to the telecommunications and data
communications markets and Internet market. The semiconductor industry is
highly cyclical and has been subject to significant economic downturns at
various times, characterized by:
. diminished product demand
. accelerated erosion of average selling prices and
. production over-capacity.
We may experience substantial fluctuations in future operating results due
to general semiconductor industry conditions, overall economic conditions or
other factors.
RISKS RELATED TO THIS OFFERING
OUR STOCK PRICE MAY BE VOLATILE, AND YOU MAY NOT BE ABLE TO RESELL YOUR SHARES
AT OR ABOVE THE TODAY'S PRICE
The market for securities of high technology companies, including our
Company, has been highly volatile. The market sale price of our common stock
has fluctuated between $1.61 and $134.50 from June 19, 1995 to May 30, 2000 and
the last sale price was $61.813 on May 30, 2000. It is likely that the price of
the common stock will continue to fluctuate widely in the future. Factors
affecting the trading price of our common stock include:
. responses to quarter-to-quarter variations in operating results
. announcements of technological innovations or new products by us or our
competitors
. general conditions in the telecommunications and data communications
equipment markets and
. changes in earnings estimates by analysts.
14
<PAGE>
We could be subject to class action litigation due to stock price volatility,
which if it occurs, will distract our management and could result in substantial
costs or large judgments against us
In the past, securities and class action litigation has often been brought
against companies following periods of volatility in the market prices of their
securities. We may be the target of similar litigation in the future.
Securities litigation could result in substantial costs and divert our
management's attention and resources, which could cause serious harm to our
business, operating results and financial condition or dilution to our
stockholders.
PROVISIONS OF OUR CERTIFICATE OF INCORPORATION, BY-LAWS AND DELAWARE LAW MAY
DISCOURAGE TAKEOVER OFFERS AND MAY LIMIT THE PRICE INVESTORS WOULD BE WILLING TO
PAY FOR OUR COMMON STOCK
Delaware corporate law contains, and our certificate of incorporation and
by-laws contain, certain provisions that could have the effect of delaying,
deferring or preventing a change in control of our Company. These provisions
could limit the price that certain investors might be willing to pay in the
future for shares of our common stock. Certain of these provisions:
. authorize the issuance of "blank check" preferred stock (preferred stock
which our board of directors can create and issue without prior
stockholder approval) with rights senior to those of common stock
. prohibit stockholder action by written consent and
. establish advance notice requirements for submitting nominations for
election to the board of directors and for proposing matters that can be
acted upon by stockholders at a meeting.
15
<PAGE>
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of our common stock
by the selling stockholders. The principal purpose of this offering is to effect
an orderly disposition of the selling stockholders' shares.
SELLING STOCKHOLDERS
The following table sets forth the number of shares beneficially owned by
each of the selling stockholders as of May 30, 2000 and the number of shares
that may be offered by the selling stockholders pursuant to this prospectus. We
have assumed, when calculating the numbers in the table, that all of the shares
owned by each selling stockholder and offered pursuant to this prospectus will
be sold.
As of May 31, 2000, there were 46,198,670 shares of common stock
outstanding. An asterisk means that the number is less than 1% of the total
shares outstanding.
<TABLE>
<CAPTION>
Shares Offered
Shares Owned Pursuant Shares Owned
Before the Offering to this Prospectus After the Offering
-------------------- ------------------- --------------------
Selling Stockholders Number Percent Number Percent Number Percent
-------------------- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
K.U. Leuven 54,824 * 54,824 * 0 *
Dirk Callaerts 37,494 * 37,494 * 0 *
Jan Decaluwe 37,494 * 37,494 * 0 *
Ivo Vandeweerd 37,494 * 37,494 * 0 *
Jan Zegers 37,494 * 37,494 * 0 *
Vlaamse 25,206 * 25,206 * 0 *
Investeringsvennootschap N.V.
Jos Verjans 22,685 * 22,685 * 0 *
------- ----------- ------- ---------- --- ----------
Total 252,691 * 252,691 * 0 *
-----
</TABLE>
The selling stockholders acquired their shares in connection with our
transaction with Easics, N.V., a Belgian company, through a share-for-share
exchange agreement dated as of May 9, 2000. The transaction was accounted for
using the pooling-of-interests method of accounting. In connection with the
transaction, we entered into a registration rights agreement with the Easics
stockholders pursuant to which we agreed to register the shares issued to them
in connection with the transaction.
The above table includes an aggregate of 25,266 shares of common stock
beneficially owned by the selling stockholders that have been deposited in an
escrow account pursuant to an escrow agreement dated as of May 9, 2000. The
escrowed shares will be used to indemnify TranSwitch against losses, if any,
resulting from breaches of the representations and warranties made by the
selling stockholders in the exchange agreement. Escrowed shares that are not
needed to cover outstanding claims made by TranSwitch will be released on the
earlier of (1) May 8, 2001 or (2) the date on
16
<PAGE>
which TranSwitch's independent auditors deliver to TranSwitch the audited
consolidated financial statements of TranSwitch for the year ending December 31,
2000.
Prior to our transaction with Easics, we had an ongoing business
relationship with Easics through which Easics provided outside design services
to complement in-house design done by TranSwitch. Each of the selling
stockholders who was employed by Easics is currently employed by us.
PLAN OF DISTRIBUTION
The shares offered in this prospectus may be offered and sold from time to
time for the accounts of the selling stockholders, including donees,
transferees, pledgees, distributees or other successors in interest that receive
such shares as a gift or through another non-sale related transfer from the
selling stockholders.
The selling stockholders will act independently of TranSwitch in making
decisions with respect to the timing, manner and size of any sale. The selling
stockholders may sell the shares:
. at then-prevailing prices and terms
. at prices related to the then-current market price or
. at negotiated prices.
The sales may be made in the over-the-counter market, on the Nasdaq
National Market, or on any exchange on which the shares are listed. The selling
stockholders may sell the shares in one or more of the following types of
transactions:
. one or more block trades in which the broker or dealer will attempt to
sell as agent or principal all or a portion of the shares held by the
selling stockholder
. purchases by a broker or dealer as principal and resale by such broker
or dealer for its account pursuant to this prospectus
. ordinary brokerage transactions and transactions in which a broker
solicits purchasers
. in negotiated transactions or
. through other means.
Subject to the restrictions imposed on them related to their employment by
us, the selling stockholders may enter into hedging transactions when selling
the shares. For example, the selling stockholders may:
. sell shares short and redeliver such shares to close out their short
positions
. enter into transactions involving short sales by the brokers or dealers
. enter into option or other types of transactions that require the
selling stockholder to deliver shares to a broker or dealer, who then
resells or transfer the shares under this prospectus or
. loan or pledge the shares to a broker or dealer, who may sell the loaned
shares or, in the event of default, sell the pledged shares.
The selling stockholders may effect sales through brokers, dealers or
agents, who in turn may arrange for other brokers or dealers to participate.
The brokers, dealers or agents may receive discounts, concessions, commissions
or fees from the selling stockholders and/or purchasers of the
17
<PAGE>
shares in amounts to be determined prior to the sale. Under the federal
securities laws, these brokers or dealers and any other participating brokers or
dealers may be deemed to be "underwriters" and any discounts, concessions or
commissions received by them may be deemed to be "underwriting compensation"
under the Securities Act of 1933, as amended. Because the selling stockholders
may be deemed to be "underwriters" within the meaning of the Securities Act, the
selling stockholders will be subject to the prospectus delivery requirements of
the Securities Act.
In addition to selling the shares, the selling stockholders may:
. sell their shares under Rule 144 of the Securities Act, if the
transaction meets the requirements of Rule 144
. transfer the shares by gift, distribution or other transfer not
involving market makers or established trading markets
. agree to indemnify any broker, dealer or agent that participates in
transactions involving the sale of the shares against certain
liabilities, including liabilities arising under the Securities Act.
The selling stockholders are not subject to any underwriting agreement.
The selling stockholders, or any parties who receive the shares from the selling
stockholders by way of a gift, donation, distribution or other transfer, may
sell the shares covered by this prospectus.
TranSwitch will pay all expenses incident to the offering and sale of the
shares to the public other than any discounts, concessions, commissions or fees
of underwriters, brokers, dealers or agents.
Some states require that any shares sold in that state only be sold through
registered or licensed brokers or dealers. In addition, some states require
that the shares have been registered or qualified for sale in that state, or
that there exists an exemption from the registration or qualification
requirements and that the exemption has been complied with.
We intend to maintain the effectiveness of this prospectus until May 8,
2001 or such period as is required to satisfy our obligations under the
registration rights agreement among the selling stockholders and us. We may
suspend the selling stockholders' rights to resell shares under this prospectus.
We shall inform the selling stockholders that the anti-manipulation rules
of Regulation M under the Securities Exchange Act of 1934, as amended, may apply
to sales of shares in the market and to the activities of the selling
stockholders and their respective affiliates. In addition, we will make copies
of this prospectus available to each of the selling stockholders and shall
inform them of the need to deliver copies of this prospectus to purchasers at or
prior to the time of any sale of the shares.
We will not receive any proceeds from this offering. The selling
stockholders will pay or assume brokerage commissions or other charges and
expenses incurred in the resale of the shares.
18
<PAGE>
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for TranSwitch by Testa, Hurwitz & Thibeault, LLP, Boston, Massachusetts.
Richard J. Testa and Timothy C. Maguire, partners of the firm, beneficially own
6,338 and 900 shares of common stock of TranSwitch, respectively.
EXPERTS
The consolidated financial statements of TranSwitch as of December 31,
1999 and 1998, and for each of the years in the three-year period ended December
31, 1999, incorporated by reference in this prospectus and registration
statement, have been audited by KPMG LLP, independent certified public
accountants, as set forth in their reports incorporated by reference herein and
are included in reliance upon such reports given upon the authority of said firm
as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy of any document we file at the
SEC's public reference rooms located at:
Judiciary Plaza Citicorp Center Seven World Trade Center
Room 1024 5000 West Madison Street 13th Floor
450 Fifth Street, N.W. Suite 1400 New York, NY 10048
Washington, DC 20549 Chicago, IL 60661
You can request copies of these documents by writing to the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Washington, DC 20549 or
by calling the SEC at 1-800-SEC-0330. Our SEC filings are also available at the
SEC's web site at http://www.sec.gov. This web site address is included in this
document as an inactive textual reference only.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and information that we file later
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings we
will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange
Act (File No. 0-25996):
. Annual report on Form 10-K for the year ended December 31, 1999
. TranSwitch's proxy statement, filed on April 13, 2000, for the 2000
Annual Meeting of Shareholders
. Quarterly report on Form 10-Q for the quarter ended March 31, 2000
. Current report on Form 8-K dated May 9, 2000 and
. The "Description of Capital Stock" contained in TranSwitch's
registration statement No. 00025996 on Form 8-A, dated May 28, 1995.
19
<PAGE>
You may request a copy of these filings, at no cost, by writing or
telephoning our Chief Financial Officer at the following address:
TranSwitch Corporation
3 Enterprise Drive
Shelton, Connecticut 06484
(203) 929-8810
This information is part of a registration statement we filed with the SEC.
You should rely only on the information or representations provided in this
prospectus. We have authorized no one to provide you with different
information. We have authorized no one to provide you with different
information. We 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 is accurate as of any date other than the date on the front of the
document.
20
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth an estimate of the expenses we expect to
incur and pay in connection with the issuance and distribution of the securities
being registered:
<TABLE>
<S> <C>
Registration Fee -- Securities and Exchange Commission.............. $ 3,574
Accounting Fees and Expenses........................................ 5,000
Legal Fees and Expenses............................................. 5,000
Transfer Agent Fees and Expenses.................................... 2,000
------
TOTAL............................................................. $15,574
</TABLE>
Item 15. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law (DGCL) permits us to
indemnify our directors, officers, employees and agents against actual and
reasonable expenses (including attorneys' fees) incurred by them in connection
with any action, suit or proceeding brought against them by reason of their
status or service as a director, officer, employee or agent by or on our behalf
and against expenses (including attorneys' fees), judgments, fines and
settlements actually and reasonably incurred by him or her in connection with
any such action, suit or proceeding, if:
. he or she acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of TranSwitch and
. in the case of a criminal proceeding, he or she had no reasonable cause
to believe his or her conduct was unlawful.
Except as ordered by a court, no indemnification shall be made in
connection with any proceeding brought by or in the right of the corporation
where the person involved is adjudged to be liable to us.
II-1
<PAGE>
Article Ten of our amended and restated certificate of incorporation, as
amended, contains provisions that eliminate a director's personal liability for
monetary damages resulting from a breach of fiduciary duty, except in certain
circumstances involving certain wrongful acts, such as the breach of a
director's duty of loyalty or acts or omissions which involve intentional
misconduct or a knowing violation of law. These provisions do not limit or
eliminate our rights or those of any stockholder to seek non-monetary relief,
such as an injunction or rescission, in the event of a breach of a director's
fiduciary duty. These provisions will not alter a director's liability under
federal securities laws. Our certificate of incorporation also contains
provisions indemnifying our directors and officers to the fullest extent
permitted by the DGCL.
We maintain directors and officers liability insurance for the benefit of
our directors and certain of our officers.
Our amended and restated by-laws contain no provisions relating to the
indemnification of officers and directors.
Item 16. Exhibits.
The following exhibits, required by Item 601 of Regulation S-K, are filed
as a part of this Registration Statement. Exhibit numbers, where applicable, in
the left column correspond to those of Item 601 of Regulation S-K.
<TABLE>
<CAPTION>
Exhibit No. Item and Reference
----------- ------------------
<S> <C>
2.1 -- Share for Share Exchange Agreement, dated May 9, 2000, by and among TranSwitch
and the Easics Stockholders (filed herewith)
2.2 -- Escrow Agreement, dated May 9, 2000, by and among TranSwitch, the Easics Stockholders
and the other parties thereto (filed herewith)
4.1 -- Registration Rights Agreement, dated May 9, 2000, by and among TranSwitch and
the Easics Stockholders (filed herewith)
5.1 -- Legal Opinion of Testa, Hurwitz & Thibeault, LLP (filed herewith)
23.1 -- Consent of KPMG LLP (filed herewith)
24.1 -- Power of Attorney (contained on signature page)
</TABLE>
Item 17. Undertakings.
We hereby undertake:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
II-2
<PAGE>
(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) if,
in the aggregate, the changes in volume and price represent no
more than 20 percent 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 pervasively disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) that, for the purpose of determining liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to the
initial bona fide offering thereof.
(3) to remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
(4) that, for purposes of determining any liability under the Securities
Act, each filing of our annual report pursuant to Section 13(a) or
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
the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(5) for purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as a part of
this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by us 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.
(6) for the purpose of determining any liability under the Securities Act,
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
thereto.
II-3
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of TranSwitch
pursuant to the foregoing provisions, or otherwise, TranSwitch has been advised
that in the opinion of the SEC such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, TranSwitch will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, we certify that
we have reasonable grounds to believe that we meet all of the requirements for
filing on Form S-3 and have duly caused this registration statement to be signed
on our behalf by the undersigned, thereunto duly authorized in the City of
Shelton, State of Connecticut on June 1, 2000.
TranSwitch Corporation
By: /s/ Michael F. Stauff
---------------------
Senior Vice President, Chief Financial
Officer & Treasurer
Power of Attorney
Each person whose signature appears below on this registration
statement hereby constitutes and appoints Dr. Santanu Das and Michael F. Stauff
and each of them, with full power to act without the other, 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 (until
revoked in writing) to sign any and all amendments (including post-effective
amendments and amendments thereto) to this registration statement of TranSwitch
Corporation, 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 fully to all intents and purposes as he might or could do in person
thereby ratifying and confirming all that said attorneys-in-fact and agents or
any of them, or their or his substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Capacity Date
---- -------- ----
<S> <C> <C>
/s/ Santanu Das President, Chief Executive June 1, 2000
----------------------- Officer and Chairman of the
Dr. Santanu Das Board of Directors
/s/ Michael F. Stauff Senior Vice President, Chief June 1, 2000
----------------------- Financial Officer and Treasurer
Michael F. Stauff
</TABLE>
II-5
<PAGE>
/s/ Alfred R. Boschulte Director June 1, 2000
-----------------------
Alfred R. Boschulte
/s/ Ljubomir Micic Director June 1, 2000
------------------
Dr. Ljubomir Micic
/s/ Gerald F. Montry Director June 1, 2000
--------------------
Gerald F. Montry
/s/ James M. Pagos Director June 1, 2000
------------------
James M. Pagos
/s/ Albert E. Paladino Director June 1, 2000
----------------------
Dr. Albert E. Paladino
/s/ Erik H. van der Kaay Director June 1, 2000
------------------------
Erik H. van der Kaay
II-6
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibit
------ ----------------------
2.1 -- Share for Share Exchange Agreement, dated May 9, 2000, by and among
TranSwitch and the Easics Stockholders (filed herewith)
2.2 -- Escrow Agreement, dated May 9, 2000, by and among TranSwitch, the
Easics Stockholders and the other parties thereto (filed herewith)
4.1 -- Registration Rights Agreement, dated May 9, 2000, by and among
TranSwitch and the Easics Stockholders (filed herewith)
5.1 -- Legal Opinion of Testa, Hurwitz & Thibeault, LLP (filed herewith)
23.1 -- Consent of KPMG LLP (filed herewith)
24.1 -- Power of Attorney (contained on Signature Page)
