<PAGE>   1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 23, 2000
                                                 REGISTRATION NO. 333-__________
--------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                             ----------------------

                                    FORM S-8

             REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

                             ----------------------

                               BSQUARE CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                 WASHINGTON                                    91-1650880

        (State or other jurisdiction                        (I.R.S. Employer
      of incorporation or organization)                    Identification No.)

3150 139TH PLACE S.E.  SUITE 500, BELLEVUE, WASHINGTON                98005
  (Address of Principal Executive Offices)                          (Zip Code)

                                    MAINBRACE
                             1998 STOCK OPTION PLAN
                            (Full title of the Plan)

                                WILLIAM T. BAXTER
          CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER
                        3150 139TH PLACE S.E., SUITE 500
                           BELLEVUE, WASHINGTON 98005
                     (Name and address of agent for service)

                                 (425) 519-5900
          (Telephone number, including area code, of agent for service)

                                   COPIES TO:

                               MARK F. WORTHINGTON
                                 LAURA A. BERTIN
                           SUMMIT LAW GROUP, P.L.L.C.
                       1505 WESTLAKE AVENUE N., SUITE 300
                            SEATTLE, WASHINGTON 98109

<TABLE>
<CAPTION>
                         CALCULATION OF REGISTRATION FEE
====================================================================================================
                                                      PROPOSED       PROPOSED
                                                      MAXIMUM        MAXIMUM
                                                      OFFERING      AGGREGATE         AMOUNT OF
 TITLE OF SECURITIES TO BE         AMOUNT TO BE        PRICE         OFFERING     REGISTRATION FEE
        REGISTERED                REGISTERED (1)     PER SHARE        PRICE              (1)
====================================================================================================
<S>                               <C>                <C>           <C>            <C>
   COMMON STOCK, NO PAR              258,274         $ 0.07(2)     $   18,079.18      $   4.77
     VALUE, SUBJECT TO                75,346         $ 0.14(2)     $   10,548.44      $   2.78
 OUTSTANDING OPTIONS WITH             33,425         $ 1.36(2)     $   45,458.00      $  12.00
  FIXED PRICES UNDER THE              74,016         $ 2.71(2)     $  200,583.36      $  52.95
      MAINBRACE 1998                 114,495         $ 3.11(2)     $  356,079.45      $  94.00
     STOCK OPTION PLAN                70,637         $15.88(2)     $1,121,715.56      $ 296.13
                                       8,273         $27.75(2)     $  229,575.75      $  60.61
====================================================================================================
</TABLE>

<PAGE>   2

(1)     Based on shares subject to outstanding options pursuant to the Mainbrace
        1998 Stock Option Plan as of August 22, 2000. In addition, pursuant to
        Rule 416(c) under the Securities Act of 1933, this registration
        statement also covers an indeterminate number of additional shares which
        may be necessary to adjust the number of shares reserved for issuance
        pursuant to the Mainbrace 1998 Stock Option Plan as the result of any
        future stock split, stock dividend or similar adjustment of the
        registrant's outstanding Common Stock.

(2)     Computed pursuant to Rule 457(h) under the Securities Act of 1933, based
        upon the exercise prices of options granted as of the filing date of
        this Registration Statement.

<PAGE>   3

                                     PART I
                               BSQUARE CORPORATION
         FORM S-8 CROSS-REFERENCE SHEET SHOWING LOCATION OF INFORMATION
                         REQUIRED BY PART I OF FORM S-3

<TABLE>
<CAPTION>
  FORM S-3 ITEM NUMBER                                                LOCATION/HEADING IN PROSPECTUS
------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>
  1.     Forepart of the Registration Statement and Outside           Outside Front Cover Page
         Front Cover Page of Prospectus

  2.     Inside Front and Outside Back Cover Page of                  Available Information; Documents
         Prospectus                                                   Incorporated by Reference

  3.     Summary Information, Risk Factors and Ratio of               BSQUARE Corporation; Risk Factors
         Earnings to Fixed Charges

  4.     Use of Proceeds                                              Use of Proceeds

  5.     Determination of Offering Price                              Not applicable

  6.     Dilution                                                     Not applicable

  7.     Selling Security Holders                                     Registered Shareholders

  8.     Plan of Distribution                                         Plan of Distribution

  9.     Description of Securities to be Registered                   Not Applicable

 10.     Interests of Named Experts and Counsel                       Interests of Named Experts and Counsel

 11.     Material Changes                                             Not Applicable

 12.     Incorporation of Certain Information by Reference            Documents Incorporated by Reference;
                                                                      Available Information

 13.     Disclosure of Commission Position on Indemnification         Indemnification
         for Securities Act Liabilities
</TABLE>

<PAGE>   4

                               REOFFER PROSPECTUS

                             SHARES OF COMMON STOCK

                               BSQUARE CORPORATION


                              --------------------


        This Reoffer Prospectus relates to 392,241 shares of the common stock,
no par value, of BSQUARE Corporation, which may be offered from time to time by
certain employees and consultants named herein (collectively, the "Registered
Shareholders"). It is anticipated that the Registered Shareholders will offer
shares for sale at prevailing prices on the Nasdaq National Market System on the
date of sale. We will receive no part of the proceeds of any sales made
hereunder. All expenses of registration incurred in connection with this
offering are being borne by us, but all selling and other expenses incurred by
each of the Registered Shareholders will be borne by each such Registered
Shareholder.

        The common stock is traded on the Nasdaq National Market System under
the symbol "BSQR."

        The Registered Shareholders and any broker executing selling orders on
behalf of the Registered Shareholders may be deemed to be "underwriters" within
the meaning of the Securities Act, in which event commissions received by such
broker may be deemed to be underwriting commissions under the Securities Act.

THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SHOULD BE CONSIDERED ONLY BY
PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS"
BEGINNING 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.


                              --------------------


        NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION
WITH THE OFFERING DESCRIBED HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR ANY REGISTERED SHAREHOLDER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH
PERSON TO MAKE SUCH OFFER, SOLICITATION OR SALE. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.

                              --------------------


                THE DATE OF THIS PROSPECTUS IS AUGUST 23, 2000.

<PAGE>   5

                              AVAILABLE INFORMATION

       We are subject to the informational reporting requirements of the
Securities Exchange Act of 1934 and in accordance therewith file reports, proxy
statements and other information with the Securities and Exchange Commission.
Such reports, proxy statements and other information can be inspected and copied
at the Public Reference Room of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Commission's regional of flees at 219 South
Dearborn Street, Chicago, IL 60604; 26 Federal Plaza, New York, NY 10007; and
5757 Wilshire Boulevard, Los Angeles, CA 90036, at prescribed rates. Our common
stock is quoted on the Nasdaq National Market System. Reports, proxy statements,
informational statements and other information concerning us can be inspected at
the offices of the National Association of Securities Dealers, Inc. at 1735 K
Street, N.W., Washington, D.C. 20006. The Commission also maintains a website
(http://www.sec.gov) that contains reports, proxy statements and other
information regarding registrants that file electronically with the Commission.

        We intend to furnish our shareholders with annual reports containing
additional financial statements and a report thereon by independent certified
public accountants.

        A copy of any document incorporated by reference in this registration
statement (not including exhibits to the information that is incorporated by
reference unless such exhibits are specifically incorporated by reference into
the information that the registration statement incorporates) of which this
Reoffer Prospectus forms a part but which is not delivered with this Reoffer
Prospectus will be provided by us without charge to any person (including any
beneficial owner) to whom this Reoffer Prospectus has been delivered upon the
oral or written request of such person. Such requests should be directed to
BSQUARE Corporation, Attn: Asst. Secretary, 3150 139th Avenue S.E., Suite 500,
Bellevue, WA 98005-4081.

                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                 PAGE
                                                                 ----
<S>                                                              <C>
BSQUARE CORPORATION                                                 2
RISK FACTORS                                                        3
USE OF PROCEEDS                                                    11
REGISTERED SHAREHOLDERS                                            11
PLAN OF DISTRIBUTION                                               12
INTERESTS OF NAMED EXPERTS AND COUNSEL                             13
DOCUMENTS INCORPORATED BY REFERENCE                                13
INDEMNIFICATION                                                    13
</TABLE>



                                       1
<PAGE>   6

                               BSQUARE CORPORATION

        We provide a broad range of software products and services that both
facilitate the integration of Microsoft Windows operating systems into a variety
of devices we call intelligent computing devices (ICDs) and enhance the
functionality of those devices. Original equipment manufacturers, semiconductor
vendors and software developers use our products and services to help bring
customized intelligent computing devices and intelligent computing device
applications to market in a timely fashion. We have been providing Windows
CE-based software services since before the commercial release of Windows CE in
September 1996, and therefore we believe that we offer a greater breadth and
depth of Windows CE expertise than any of our current competitors. In addition,
in late 1999, we began offering Windows NT Embedded integration services, thus
expanding the breadth of our service offerings, and in January 2000, the
acquisition of Blue Water Systems broadened our product line for developers of
ICDs based on additional Windows operating systems including Windows 98, Windows
2000, Windows NT and Windows NT Embedded.

        Intelligent computing devices are an emerging class of products with
sophisticated processing power that are designed for specific computing and
communications applications. Examples of intelligent computing devices include
television "set-top boxes," which sit on top of television sets and provide
users with interactive cable TV services, sophisticated video gaming features
and Internet access; handheld and palm-size PCs; gaming systems; handheld
industrial data collectors; consumer "Internet appliances" such as kiosk
terminals and navigational devices used in cars and trucks; and Windows-based
terminals. Compared to traditional computers, intelligent computing devices are
often less expensive and more adaptable in terms of their size, weight and
shape, while still providing sophisticated computing and communications
capabilities, including Internet connectivity. Increasingly, intelligent
computing devices are able to connect directly to the Internet, either through
wired or wireless telecommunications systems. As businesses and consumers
increasingly use the Internet to transact business and as demand for smaller and
more mobile devices grows, original equipment manufacturers are developing new
intelligent computing devices to better meet the needs of end users. Because of
space constraints and other design and resource limitations inherent in the
intelligent computing device environment, original equipment manufacturers
require a computer operating system that is both scaleable and highly
customizable, with lower system requirements than traditional PC operating
systems. There are several different operating systems that can be used in
intelligent computing devices. Windows CE, a versatile and highly adaptable
operating system modeled after Microsoft Windows, is gaining market acceptance
among original equipment manufacturers as an operating system that meets these
requirements. As increased use of the Internet by consumers and businesses helps
fuel the growth of the intelligent computing device market, we believe that the
market for Windows CE will in turn benefit. In addition, the Windows NT Embedded
(NTE) operating system is used for "computerizing" larger, more complex devices
with a need for real time functionality. Examples of devices for which NTE is
targeted include Windows-based terminals, office machine equipment such as
printers, and telecommunications equipment.

        We develop products and provide services that facilitate the development
of Windows-based intelligent computing devices. We generate revenue in three
distinct ways. First, we provide software code-writing and related engineering
services to Microsoft and semiconductor vendors to adapt Windows CE to different
microprocessors and to enhance Windows CE's user-specific features and
functions. Second, we offer a comprehensive set of software products and
services that help enable original equipment manufacturers to cost-effectively
integrate Windows CE, NTE and other Windows operating systems into their
intelligent computing devices. These offerings include original equipment
manufacturer adaptation kits, software development products, test programs and
Microsoft Windows CE licensing, along with engineering, quality assurance
services and training. Our service and product offerings are designed to ensure
that Windows works properly with the original equipment manufacturer's computer
boards, which are the internal hardware constituting the core of their
intelligent computing devices. We also offer software engineering services for
the integration of Window NT Embedded into ICDs, and for other Windows-based
operating systems we offer the BlueWater Systems software development products.
Third, we license a wide range of Windows CE-based software applications to both
original equipment manufacturers and intelligent computing device consumers to
provide additional functions to Windows CE-based intelligent computing devices,
such as printing and faxing capabilities.

        We were incorporated in the State of Washington in July 1994. Our
principal executive officers are located at 3150 139th Avenue S.E., Suite 500,
Bellevue, WA 98005-4081. and our telephone number is (425) 519-5900. Our World
Wide Web address is www.bsquare.com. Information on our website does not
constitute a part of this prospectus.



                                       2
<PAGE>   7

                                  RISK FACTORS

        You should carefully consider the following risk factors and all other
information contained in this prospectus before purchasing our common stock.
Investing in our common stock involves a high degree of risk. Any of the
following risks could materially adversely affect our business, operating
results and financial condition and could result in a complete loss of your
investment.

UNANTICIPATED FLUCTUATIONS IN OUR QUARTERLY OPERATING RESULTS DUE TO FACTORS
SUCH AS ADVERSE CHANGES IN OUR RELATIONSHIP WITH MICROSOFT OR A DECLINE IN THE
MARKET FOR WINDOWS-BASED INTELLIGENT COMPUTING DEVICES COULD CAUSE OUR STOCK
PRICE TO DECLINE SIGNIFICANTLY.

        Our operating results have fluctuated in the past, and we expect that
they will continue to do so. We believe that period-to-period comparisons of our
operating results are not meaningful, and you should not rely on such
comparisons to predict our future performance. If our operating results fall
below the expectations of stock analysts and investors, the price of our common
stock may fall. Factors that may cause our quarterly operating results to
fluctuate include:

    -   the failure or perceived failure of Windows CE, the operating system
        upon which demand for the majority of our products and services is
        dependent, to achieve widespread market acceptance;

    -   the failure of the intelligent computing device market to develop;

    -   adverse changes in our relationship with Microsoft, from whom a
        substantial portion of our revenue is generated and on whom we rely to
        continue to develop and promote Windows CE;

    -   our inability to develop and market new and enhanced products and
        services on a timely basis;

    -   unanticipated delays, or announcement of delays, by Microsoft of Windows
        product releases, which could cause us to delay our product
        introductions and adversely affect our customer relationships;

    -   changes in demand for our products and services;

    -   increased competition and changes in our pricing as a result of
        increased competitive pressure;

    -   our ability to control our expenses, a large portion of which are
        relatively fixed and which are budgeted based on anticipated revenue
        trends, in the event that customer projects, particularly Microsoft
        projects, are delayed, curtailed or discontinued;

    -   changes in the mix of our services and product revenue, which have
        different gross margins;

    -   underestimates by us of the costs to be incurred in significant
        fixed-fee service projects; and

    -   varying customer-buying patterns which are often influenced by year-end
        budgetary pressures.

        In addition, our stock price may fluctuate due to conditions unrelated
to our operating performance, including general economic conditions in the
software industry and the market for technology stocks.

THE MAJORITY OF OUR REVENUE, INCLUDING 68% OF OUR TOTAL REVENUE FOR THE SIX
MONTHS ENDED JUNE 30, 2000, IS GENERATED FROM OUR RELATIONSHIP WITH MICROSOFT,
WHICH CAN BE MODIFIED OR TERMINATED BY MICROSOFT AT ANY TIME.

        For the year ended December 31, 1999 and for the six months ended June
30, 2000, approximately 84% and 68% of our revenue, respectively, was generated
under our master development and license agreement with Microsoft. The master
agreement, the current renewable term of which concludes in July 2000, includes
a number of project-specific work plans. We bill Microsoft on a
time-and-materials basis, although each project has a maximum dollar cap. We
expect the revenue generated from work plans with Microsoft will continue to
comprise the majority of our revenue for the next several years. We presently
have dedicated approximately 160 of our 370 engineers to



                                       3
<PAGE>   8

these projects. However, the master agreement and each of the individual work
plans may be terminated or modified by Microsoft at any time. In addition, there
is no guarantee that Microsoft will continue to enter into additional work plans
with us. In the past, Microsoft has modified the timing and scope of certain
projects, requesting that our engineers be moved from one project to another.
For example, in late 1997 Microsoft decided to contract with us to provide
Windows CE support services to semiconductor vendors with whom we had previously
contracted directly. As a result, from late 1997 through late 1998 our revenue
shifted from being generated by a variety of semiconductor vendors to being
generated primarily by Microsoft. We do not believe that we could replace the
Microsoft revenue in the short- or medium-term if existing work plans were
canceled or curtailed, and such cancellations or curtailments would
substantially reduce our revenue. Microsoft is a publicly traded company that
files financial reports and information with the Securities and Exchange
Commission. These reports are publicly available under Microsoft's Exchange Act
filing number, 000-14278.

IF THE MARKET FOR THE WINDOWS CE OPERATING SYSTEM FAILS TO DEVELOP FULLY OR
DEVELOPS MORE SLOWLY THAN WE EXPECT, OUR BUSINESS AND OPERATING RESULTS WILL BE
MATERIALLY HARMED.

        Windows CE is one of many operating systems developed for the
intelligent computing device market and the extent of its future acceptance is
uncertain. Because all of our revenue through 1999 has been generated by
software products and services dependent on the Windows CE operating system, if
the market for Windows CE fails to develop fully or develops more slowly than we
expect, our business and operating results will be significantly harmed. Market
acceptance of Windows CE will depend on many factors, including:

    -   Microsoft's development and support of the Windows CE market. As the
        developer and primary promoter of Windows CE, if Microsoft were to
        decide to discontinue or lessen its support of the Windows CE operating
        system, potential customers could select competing operating systems,
        which would reduce the demand for our Windows CE-based software products
        and services. In addition, Microsoft has developed a version of its
        Windows NT operating system for intelligent computing devices and could
        decide to shift its support to this operating system to the detriment of
        Windows CE;

    -   the ability of the Windows CE operating system to compete against
        existing and emerging operating systems for the intelligent computing
        device market including: VxWorks from WindRiver Systems Inc., pSOS from
        Integrated Systems, Inc., VRTX from Mentor Graphics Corporation, JavaOS
        from Sun Microsystems, Inc. and LINUX. In particular, in the market for
        palm-size devices, Windows CE faces intense competition from PalmOS used
        on 3Com Corporation's Palm devices and to date has had limited success
        in this market. In the market for cellular phones, Windows CE faces
        intense competition from the EPOC operating system from Symbian, a joint
        venture between several of the largest manufacturers of cellular phones,
        which recently announced it has agreed to discuss cross-licensing its
        technology with the Palm Computing unit of 3Com. Windows CE may be
        unsuccessful in capturing a significant share of these two segments of
        the intelligent computing device market, or in maintaining its market
        share in those other segments of the intelligent computing device market
        on which our business currently focuses, including the markets for
        Internet-enabled television set-top boxes, handheld industrial devices,
        consumer Internet appliances such as kiosk terminals and vehicle
        navigational devices, and Windows-based terminals;

    -   the acceptance by original equipment manufacturers and consumers of the
        mix of features and functions offered by Windows CE; and

    -   the willingness of software developers to continue to develop and expand
        the applications that run on Windows CE. To the extent that software
        developers write applications for competing operating systems that are
        more attractive to intelligent computing device end users than those
        available on Windows CE, potential purchasers could select competing
        operating systems over Windows CE.

IF THE MARKET FOR INTELLIGENT COMPUTING DEVICES FAILS TO DEVELOP FULLY OR
DEVELOPS MORE SLOWLY THAN WE EXPECT, OUR REVENUE WILL NOT GROW AS FAST AS
ANTICIPATED, IF AT ALL.

        The market for intelligent computing devices is emerging and the
potential size of this market and the timing of its development are not known.
As a result, our profit potential is uncertain and our revenue may not grow as
fast as we anticipate, if at all. We are dependent upon the broad acceptance by
businesses and consumers of a wide variety of Windows CE-based intelligent
computing devices, which will depend on many factors, including:



                                       4
<PAGE>   9

    -   the development of content and applications for intelligent computing
        devices;

    -   the willingness of large numbers of businesses and consumers to use
        devices such as handheld and palm-size PCs and handheld industrial data
        collectors to perform functions currently carried out manually or by
        traditional PCs, including inputting and sharing data, communicating
        among users and connecting to the Internet; and

    -   the evolution of industry standards that facilitate the distribution of
        content over the Internet to these devices via wired and wireless
        telecommunications systems, satellite or cable.

IF MICROSOFT ADDS FEATURES TO ITS WINDOWS OPERATING SYSTEM THAT DIRECTLY COMPETE
WITH SOFTWARE PRODUCTS AND SERVICES WE PROVIDE, OUR REVENUE COULD BE REDUCED AND
OUR PROFIT MARGINS COULD SUFFER.

        As the developer of Windows, Microsoft could add features to its
operating system that directly compete with the software products and services
we provide to our customers. Such features could include, for example, faxing,
hardware-support packages and quality-assurance tools. The ability of our
customers or potential customers to obtain software products and services
directly from Microsoft that compete with our software products and services
could harm our business. Even if the standard features of future Microsoft
operating system software were more limited than our offerings, a significant
number of our customers and potential customers might elect to accept more
limited functionality in lieu of purchasing additional software. Moreover, the
resulting competitive pressures could lead to price reductions for our products
and reduce our profit margins.

IF WE DO NOT MAINTAIN OUR FAVORABLE RELATIONSHIP WITH MICROSOFT, WE WILL HAVE
DIFFICULTY MARKETING OUR SOFTWARE PRODUCTS AND SERVICES AND MAY NOT RECEIVE
DEVELOPER RELEASES OF WINDOWS CE, AND OUR REVENUE AND OPERATING MARGINS WILL
SUFFER.

        In the event that our relationship with Microsoft were to deteriorate,
then our efforts to market and sell our software products and services to
original equipment manufacturers could be adversely affected and our business
would be harmed. Microsoft has great influence over the development plans and
buying decisions of original equipment manufacturers utilizing Windows CE for
intelligent computing devices. Microsoft refers many of our original equipment
manufacturer customers to us. Moreover, Microsoft controls the marketing
campaigns related to its operating systems, including Windows CE. Microsoft's
marketing activities, including trade shows, direct mail campaigns and print
advertising, are important to the continued promotion and market acceptance of
Windows CE and, consequently, of our Windows CE-based software products and
services. We must maintain mutually successful relationships with Microsoft so
that we may continue to participate in joint marketing activities with
Microsoft, including participating in "partner pavilions" at trade shows and
listing our services on Microsoft's website, and to receive referrals from
Microsoft. In the event that we are unable to continue our joint marketing
efforts with Microsoft or fail to receive referrals from Microsoft, we would be
required to devote significant additional resources and incur additional
expenses to market our software products and services directly to potential
customers. In addition, we depend on receiving from Microsoft developer releases
of new versions of and upgrades to Windows CE and related Microsoft software in
order to timely develop and ship our products and provide services. If we are
unable to receive these developer releases, our revenue and operating margins
would suffer.

UNANTICIPATED DELAYS, OR ANNOUNCEMENT OF DELAYS, BY MICROSOFT OF WINDOWS CE
PRODUCT RELEASES COULD ADVERSELY AFFECT OUR SALES.

        Unanticipated delays, or announcement of delays, in Microsoft's delivery
schedule for new versions of its Windows CE operating system could cause us to
delay our product introductions and impede our ability to complete customer
projects on a timely basis. These delays or announcements by Microsoft could
also cause our customers to delay or cancel their project development activities
or product introductions. Any resulting delays in, or cancellations of, our
planned product introductions or in our ability to commence or complete customer
projects may adversely affect our revenue and could cause our quarterly
operating results to fluctuate. For example, in 1998 Microsoft delayed the
release of a version of its Windows CE Platform Builder, which delayed our
introduction of a complementary product for an original equipment manufacturer
customer.



                                       5
<PAGE>   10

OUR MARKET IS BECOMING INCREASINGLY COMPETITIVE, WHICH MAY RESULT IN PRICE
REDUCTIONS, LOWER GROSS MARGINS AND LOSS OF MARKET SHARE.

        The market for Windows CE-based software products and services is
becoming increasingly competitive. In addition, competition is intense for the
business of the limited number of original equipment manufacturer customers that
are capable of building and shipping large quantities of intelligent computing
devices. Increased competition may result in price reductions, lower gross
margins and loss of market share, which would harm our business. We face
competition from:

    -   our current and potential customers' internal research and development
        departments that may seek to develop their own proprietary solutions;

    -   large professional engineering services firms;

    -   established intelligent computing device software and tools;

    -   small- and medium-size engineering services; and

    -   software and component distributors.

        As we develop new products, particularly products focused on specific
industries, we may begin competing with companies with whom we have not
previously competed. It is also possible that new competitors will enter the
market or that our competitors will form alliances, including alliances with
Microsoft, that may enable them to rapidly increase their market share.
Microsoft has not agreed to any exclusive arrangement with us nor has it agreed
not to compete with us. The barrier to entering the market as a provider of
Windows-based intelligent computing device software and services is low. In
addition, Microsoft has created a marketing program to encourage systems
integrators to work on Windows. These systems integrators are given the same
access by Microsoft to the Windows technology as we are, with respect to system
integration. New competitors may have lower overhead than us and may therefore
be able to offer advantageous pricing. We expect that competition will increase
as other established and emerging companies enter the Windows based intelligent
computing device market and as new products and technologies are introduced.

IF WE FAIL TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY RIGHTS, COMPETITORS
MAY BE ABLE TO USE OUR TECHNOLOGY OR TRADEMARKS, WHICH COULD WEAKEN OUR
COMPETITIVE POSITION, REDUCE OUR REVENUE AND INCREASE OUR COSTS.

        If we fail to adequately protect our intellectual property, our
competitive position could be weakened and our revenue adversely affected. We
rely primarily on a combination of patent, copyright, trade secret and trademark
laws, confidentiality procedures and contractual provisions to protect our
intellectual property. These laws and procedures provide only limited
protection. We have applied for three patents relating to our engineering work.
These patents, if issued, may not provide sufficiently broad protection or they
may not prove to be enforceable against alleged infringers. There can be no
assurance that any of our pending patents will be granted. Even if granted,
patents may be circumvented or challenged and, if challenged, may be
invalidated. Any patents obtained may provide limited or no competitive
advantage to us. It is also possible that another party could obtain patents
that block our use of some, or all, of our products and services. If that
occurred, we would need to obtain a license from the patent holder or design
around their patent. The patent holder may or may not choose to make a license
available to us at all or on acceptable terms. Similarly, it may not be possible
to design around such a blocking patent.

        In general, there can be no assurance that our efforts to protect our
intellectual property rights through patent, copyright, trade secret and
trademark laws will be effective to prevent misappropriation of our technology,
or to prevent the development and design by others of products or technologies
similar to or competitive with those developed by us. We frequently license the
source code of our products and the source code results of our services to
customers. There can be no assurance that customers with access to our source
code will comply with the license terms or that we will discover any violations
of the license terms or, in the event of discovery of violations, that we will
be able to successfully enforce the license terms and/or recover the economic
value lost from such violations. To license many of our software products, we
rely in part on "shrinkwrap" and "clickwrap" licenses that are not signed by the
end user and, therefore, may be unenforceable under the laws of certain
jurisdictions. As with other



                                       6
<PAGE>   11

software products, our products are susceptible to unauthorized copying and uses
that may go undetected, and policing such unauthorized use is difficult.

        A significant portion of our marks include the word "BSQUARE" or the
preface "b." Other companies use forms of "BSQUARE" or the preface "b" in their
marks alone or in combination with other words, and we cannot prevent all such
third-party uses. We license certain trademark rights to third parties. Such
licensees may not abide by compliance and quality control guidelines with
respect to such trademark rights and may take actions that would harm our
business.

        The computer software market is characterized by frequent and
substantial intellectual property litigation, which is often complex and
expensive, and involves a significant diversion of resources and uncertainty of
outcome. Litigation may be necessary in the future to enforce our intellectual
property or to defend against a claim of infringement or invalidity. Litigation
could result in substantial costs and the diversion of resources and could harm
our business and operating results.

THIRD PARTIES COULD ASSERT THAT OUR SOFTWARE PRODUCTS AND SERVICES INFRINGE
THEIR INTELLECTUAL PROPERTY RIGHTS, WHICH COULD EXPOSE US TO ADDITIONAL COSTS
AND LITIGATION.

        Third parties may claim that our current or future software products and
services infringe their proprietary rights, and these claims, regardless of
their merit, could increase our costs and harm our business. We have not
conducted patent searches to determine whether the technology used in our
products infringes patents held by third parties. In addition, it is difficult
to determine whether our software products and services infringe third-party
intellectual property rights, particularly in a rapidly evolving technological
environment in which there may be numerous patent applications pending, many of
which are confidential when filed, with regard to similar technologies. If we
were to discover that one of our software products violated a third party's
proprietary rights, we may not be able to obtain a license on commercially
reasonable terms, or at all, to continue offering that software product.
Moreover, any indemnification we obtain against claims that the technology we
license from third parties infringes the proprietary rights of others may not
always be available or may be limited in scope or amount. Even if we receive
broad third-party indemnification, these indemnitors may not have the financial
capability to indemnify us in the event of infringement. In addition, in some
circumstances we could be required to indemnify our customers for claims made
against them that are based on our solutions.

        There can be no assurance that infringement or invalidity claims related
to the software products and services we provide or arising from the
incorporation by us of third-party technology, and claims for indemnification
from our customers resulting from such claims, will not be asserted or
prosecuted against us. We expect that software product developers will be
increasingly subject to infringement claims, as the number of products and
competitors in the software industry grows and the functionality of products in
different industry segments overlaps. Such claims, even if not meritorious,
could result in the expenditure of significant financial and managerial
resources in addition to potential product redevelopment costs and delays.

IF WE DO NOT RESPOND ON A TIMELY BASIS TO TECHNOLOGICAL ADVANCES AND EVOLVING
INDUSTRY STANDARDS, OUR FUTURE PRODUCT SALES COULD BE NEGATIVELY IMPACTED.

        The market for Windows-based software products and services is new and
evolving. As a result, the life cycles of our products are difficult to
estimate. To be successful, we must continue to enhance our current product line
and develop new products. We have experienced delays in enhancements and new
product release dates in the past and may be unable to introduce enhancements or
new products successfully or in a timely manner in the future. Our business may
be harmed if we must delay releases of our products and product enhancements or
if these products and product enhancements fail to achieve market acceptance
when released. In addition, our customers may defer or forego purchases of our
products if we, Microsoft, our competitors or major hardware, systems or
software vendors introduce or announce new products or product enhancements.
Such deferrals or failures to purchase would decrease our revenue.

OUR SIX-YEAR OPERATING HISTORY MAKES IT DIFFICULT TO EVALUATE OUR FUTURE
PROSPECTS, AND WE CANNOT ASSURE YOU THAT OUR REVENUE GROWTH RATE WILL NOT
DECLINE OR THAT WE WILL BE ABLE TO SUSTAIN OR INCREASE OUR PROFITABILITY.

        We were founded in July 1994, generated our first revenue in October
1994 and shipped our first product in November 1996. Accordingly, we have a
limited operating history and you should not rely on our past results to



                                       7
<PAGE>   12

predict our future performance. The rate of growth of our revenue over the prior
year was 245% from 1996 to 1997, 71% from 1997 to 1998, and 62% from 1998 to
1999. The rate of growth of our revenue over prior periods may continue to
decline. We anticipate that our expenses will increase substantially in the
foreseeable future as we continue to develop our technology and expand our
product and service offerings. These efforts may prove more expensive than we
currently anticipate, and we may not succeed in increasing our revenue
sufficiently to offset these higher expenses. If we fail to increase our revenue
to keep pace with our expenses, we may experience losses.

IF WE ARE UNABLE TO MANAGE OUR GROWTH OUR BUSINESS WILL SUFFER.

        Our rapid growth has placed, and is expected to continue to place, a
significant strain on our managerial, technical, operational and financial
resources. From August 1996 to June 2000, we grew from 21 employees to 459
employees, and we expect rapid growth to continue for the foreseeable future. To
manage our growth, we must implement additional management information systems,
further develop our operational, administrative and financial systems and
expand, train and manage our work force. We will also need to manage an
increasing number of complex relationships with customers, marketing partners
and other third parties. We cannot guarantee that our systems, procedures or
controls will be adequate to support our current or future operations or that
our management will be able to effectively manage our expansion. Our failure to
do so could seriously harm our ability to deliver products and services in a
timely fashion, fulfill existing customer commitments and attract and retain new
customers.

OUR INTERNATIONAL OPERATIONS EXPOSE US TO GREATER INTELLECTUAL PROPERTY,
MANAGEMENT, COLLECTIONS, REGULATORY AND OTHER RISKS.

        In late 1998 we opened offices in Munich, Germany and Tokyo, Japan. For
the year ended December 31, 1999 and for the six months ended June 30, 2000,
less than 1% of our total revenue was generated by our international offices.
Our international operations expose us to a number of risks, including the
following:

    -   greater difficulty in protecting intellectual property due to less
        stringent foreign intellectual property laws and enforcement policies;

    -   greater difficulty in managing foreign operations due to the lack of
        proximity between our home office and our foreign operations;

    -   longer collection cycles in Japan than we typically experience in the
        U.S.;

    -   unfavorable changes in regulatory practices and tariffs;

    -   adverse changes in tax laws;

    -   seasonal European sales declines in the summer months;

    -   the impact of fluctuating exchange rates between the U.S. dollar and
        foreign currencies; and

    -   general economic and political conditions in Asian and European markets.

        These risks could have a material adverse effect on the financial and
managerial resources required to operate our foreign offices, as well as on our
future international revenue, which could harm our business.

IF WE CONDUCT FUTURE ACQUISITIONS, THEY COULD PROVE DIFFICULT TO INTEGRATE,
DISRUPT OUR BUSINESS, DILUTE SHAREHOLDER VALUE AND ADVERSELY AFFECT OUR
OPERATING RESULTS.

        We may make investments in complementary companies, services and
technologies in the future. If we fail to properly evaluate and execute
acquisitions and investments, they may seriously harm our business and
prospects. To successfully complete an acquisition, we must properly evaluate
the technology, accurately forecast the financial impact of the transaction,
including accounting charges and transaction expenses, integrate and retain
personnel, combine potentially different corporate cultures and effectively
integrate products and research and development, sales, marketing and support
operations. If we fail to do any of these, we may suffer losses or our
management may



                                       8
<PAGE>   13

be distracted from our day-to-day operations. In addition, if we conduct
acquisitions using debt or equity securities, existing shareholders may be
diluted, which could affect the market price of our stock.

IF WE ARE UNABLE TO LICENSE KEY SOFTWARE FROM THIRD PARTIES OUR BUSINESS COULD
BE HARMED.

        We often integrate third-party software with our internally developed
software to provide software products and services for our original equipment
manufacturer customers. If our relationships with our third-party vendors were
to deteriorate, we might be unable to obtain licenses on commercially reasonable
terms, if at all, for newer versions of their software required to maintain
compatibility. In the event that we are unable to obtain additional licenses, we
would be required to develop this technology internally, which could delay or
limit our ability to introduce enhancements or new products or to continue to
sell existing products.

OUR SOFTWARE PRODUCTS OR THE THIRD-PARTY HARDWARE OR SOFTWARE INTEGRATED WITH
OUR SOFTWARE PRODUCTS AND SERVICES MAY SUFFER FROM DEFECTS OR ERRORS THAT COULD
IMPAIR OUR ABILITY TO SELL OUR SOFTWARE PRODUCTS AND SERVICES.

        Software and hardware components as complex as those needed for
intelligent computing devices frequently contain errors or defects, especially
when first introduced or when new versions are released. We have had to delay
commercial release of certain versions of our software products until software
problems were corrected, and in some cases have provided product enhancements to
correct errors in released products. Some of our contracts require us to repair
or replace products that fail to work. To the extent that we repair or replace
products our expenses may increase, resulting in a decline in our gross margins.
In addition, it is possible that by the time defects are fixed the market
opportunity may have been missed which may result in lost revenue. Moreover,
errors that are discovered after commercial release could result in loss of
revenue or delay in market acceptance, diversion of development resources,
damage to our reputation or increased service and warranty costs, all of which
could harm our business.

WE MAY BE SUBJECT TO PRODUCT LIABILITY CLAIMS THAT COULD RESULT IN SIGNIFICANT
COSTS.

        Our license agreements with our customers typically contain provisions
designed to limit our exposure to potential product liability claims. It is
possible, however, that these provisions may be ineffective under the laws of
certain jurisdictions. Although we have not experienced any product liability
claims to date, the sale and support of our software products and services
entail the risk of such claims and we may be subject to such claims in the
future. A product liability claim brought against us, whether successful or not,
could harm our business and operating results.

THE LENGTHY SALES CYCLE OF OUR PRODUCTS AND SERVICES MAKES OUR REVENUE
SUSCEPTIBLE TO FLUCTUATIONS.

        Our sales cycle is typically three to six months because the expense and
complexity of our products and services generally require a lengthy customer
approval process, and may be subject to a number of significant risks over which
we have little or no control, including:

    -   customers' budgetary constraints and internal acceptance review
        procedures;

    -   the timing of budget cycles; and

    -   the timing of customers' competitive evaluation processes.

        In addition, to successfully sell our products and services, we
frequently must educate our potential customers about the full benefits of our
products and services, which can require significant time. If our sales cycle
lengthens unexpectedly, it could adversely affect the timing of our revenue
which could cause our quarterly results to fluctuate.

A SMALL NUMBER OF OUR EXISTING SHAREHOLDERS CAN EXERT CONTROL OVER US.

        Our executive officers, directors and principal shareholders holding
more than 5% of our common stock together control a majority of our outstanding
common stock. As a result, these shareholders, if they act together, could
control our management and affairs of the company and all matters requiring
shareholder approval, including



                                       9
<PAGE>   14

the election of directors and approval of significant corporate transactions.
This concentration of ownership may have the effect of delaying or preventing a
change in control of us and might affect the market price of our common stock.

IT MIGHT BE DIFFICULT FOR A THIRD PARTY TO ACQUIRE US EVEN IF DOING SO WOULD BE
BENEFICIAL TO OUR SHAREHOLDERS.

        Certain provisions of our amended and restated articles of
incorporation, bylaws and Washington law may discourage, delay or prevent a
change in the control of us or a change in our management even if doing so would
be beneficial to our shareholders. Our board of directors has the authority
under our amended and restated articles of incorporation to issue preferred
stock with rights superior to the rights of the holders of common stock. As a
result, preferred stock could be issued quickly and easily with terms calculated
to delay or prevent a change in control of our company or make removal of our
management more difficult. In addition, as of this year's annual meeting of
shareholders, our board of directors was divided into three classes. The
directors in each class will serve for three-year terms, one class being elected
each year by our shareholders. This system of electing and removing directors
may tend to discourage a third party from making a tender offer or otherwise
attempting to obtain control of our company because it generally makes it more
difficult for shareholders to replace a majority of our directors.

        In addition, Chapter 19 of the Washington Business Corporation Act
generally prohibits a "target corporation" from engaging in certain significant
business transactions with a defined "acquiring person" for a period of five
years after the acquisition, unless the transaction or acquisition of shares is
approved by a majority of the members of the target corporation's board of
directors prior to the time of acquisition. This provision may have the effect
of delaying, deterring or preventing a change in control of our company. The
existence of these antitakeover provisions could limit the price that investors
might be willing to pay in the future for shares of our common stock.

IMPACT OF THE YEAR 2000

        We have not experienced any adverse impacts from the transition to the
year 2000. We are also not aware of any material year 2000 problems with our
vendors, service providers, customers or distribution partners. Accordingly, we
do not anticipate incurring material expenses or experiencing any material
operational disruptions as a result of any year 2000 issues that may arise.



                                       10
<PAGE>   15


                                 USE OF PROCEEDS

        We will not receive any of the proceeds from the offering hereunder. We
will derive proceeds from the exercise of options and issuance of shares of
Common Stock upon such exercises, which shares are being registered with the
Commission simultaneously with the registration of the shares being resold
pursuant to this prospectus. Such proceeds will be available to us for working
capital and general corporate purposes. No assurances can be given as to when or
if any or all of the options will be exercised and when or if such proceeds will
become available for our use. All expenses of registration incurred in
connection with this offering are being borne by us, but all selling and other
expenses incurred by the individual Registered Shareholders will be borne by
such Registered Shareholders.

                             REGISTERED SHAREHOLDERS

        The Reoffer Prospectus relates to 392,241 shares of common stock which
have been acquired by the following non-affiliate employees of one of our
subsidiaries pursuant to the exercise of options granted under the Mainbrace
1998 Stock Option Plan: Darin Acquistapace; Luis Dib; Brian M. Ebisui; Paul M.
Herbst; Matthew Hershenson; Mark T. Hoy; Mark A. Kieling, Michael A. Krause;
Richard W. Mincher; Jeffrey L. Mullins; Roupen Nahabedian; Carlos A. Ribas;
Milton Ribeiro; Marinus E. Sloot; and Sarrir Yacoub. These Registered
Shareholders may resell all, a portion or none of such shares of common stock
from time to time.



                                       11
<PAGE>   16

                              PLAN OF DISTRIBUTION

        The shares of common stock covered by this Reoffer Prospectus are being
registered by us for the account of the Registered Shareholders. We understand
that none of such shares will be offered through underwriters.

        The Registered Shareholders may sell the shares in one or more
transactions (which may involve one or more block transactions) on the Nasdaq
National Market, in sales occurring in the public market of such system, in
privately negotiated transactions or in a combination of such transactions. Each
such sale may be made either at market prices prevailing at the time of such
sale or at negotiated prices. The Registered Shareholders may sell some or all
of the shares in transactions involving broker-dealers, who may act as agent or
acquire the shares as principal. Any broker-dealer participating in such
transactions as agent may receive commissions from the Registered Shareholder(s)
(and, if they act as agent for the purchaser of such shares, from such
purchaser). The Registered Shareholders will pay usual and customary brokerage
fees. Broker-dealers may agree with the Registered Shareholders to sell a
specified number of shares at a stipulated price per share and, to the extent
such a broker-dealer is unable to do so acting as agent for the Registered
Shareholders, to purchase as principals any unsold shares at the price required
to fulfill the respective broker-dealer's commitment to the Registered
Shareholders. Broker-dealers who acquire shares as principals may thereafter
resell such shares from time to time in transactions (which may involve cross
and block transactions and which may involve sales to and through other
broker-dealers, including transactions of the nature described above) in the
over-the-counter market negotiated transactions or otherwise, at market prices
prevailing at the time of sale or at negotiated prices, and in connection with
such resales may pay to or receive from the purchasers of such shares
commissions. To our knowledge, there is currently no agreement with any broker
or dealer respecting the sale of the shares offered hereby. Upon the sale of any
such shares, the Registered Shareholders or anyone effecting sales on behalf of
the Registered Shareholders may be deemed an underwriter, as that term is
defined under the Securities Act. We will pay all expenses of preparing and
reproducing this Reoffer Prospectus, but will not receive the proceeds from
sales by the Registered Shareholders. Sales will be made at prices prevailing at
the time of such sales.

        We have advised the Registered Shareholders that the anti-manipulation
rules under Regulation M of the Exchange Act may apply to sales of the shares in
the market. We have also informed the Registered Shareholders of the possible
need for delivery of copies of this prospectus to prospective purchasers.
Registered Shareholders may indemnify any broker-dealer that participates in
transactions involving the sale of the Shares against certain liabilities,
including liabilities arising under the Securities Act. Any commissions paid or
discounts or concessions allowed to any such broker-dealers, and, if any such
broker-dealers purchase shares as principal in a transaction, any profits
received on the resale of such shares, may be deemed to be underwriting
discounts and commissions under the Securities Act. Shares being sold pursuant
to this prospectus must be sold by the Registered Shareholders in compliance
with Rule 144(e) of the Securities Act, which limits the amount of securities
that can be sold by any one person (and others whose stock would be aggregated
with the stock owned by such person) in any three-month period to the greater
of:

        -- 1% of the shares of our outstanding Common Stock as shown by our most
           recently filed report or statement we have filed with the SEC; or

        -- the average weekly reported volume of trading in our Common Stock as
           reported on Nasdaq during the four calendar weeks immediately
           preceding the date of receipt of the order to execute the transaction
           by the broker or the date of execution of the transaction directly
           with a market maker.

        In addition, any Shares covered by this prospectus that qualify for sale
pursuant to Rule 144 may be sold under that Rule rather than pursuant to this
prospectus.

        We are bearing all costs relating to the registration of the shares. Any
commissions or other fees payable to broker-dealers in connection with any sale
of the shares will be borne by the Registered Shareholders or other party
selling such shares. In order to comply with certain states' securities laws, if
applicable, the shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In certain states the shares may not
be sold unless the shares have been registered or qualified for sale in such
state, or unless an exemption form registration or qualification is available
and is obtained.



                                       12
<PAGE>   17

                     INTERESTS OF NAMED EXPERTS AND COUNSEL

        The validity of the common stock being registered hereby will be passed
upon for us by Summit Law Group, P.L.L.C., Seattle, Washington. As of the date
of this registration statement, Summit Law Group beneficially owns 34,722 shares
of our common stock.

                       DOCUMENTS INCORPORATED BY REFERENCE

        We hereby incorporate by reference into this registration statement the
following documents previously filed with the Commission:

        (a) Our Annual Report on Form 10-K for the fiscal year ended December
31, 1999, filed with the Commission on March 2, 2000 pursuant to Section 13(a)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act").

        (b) Our Quarterly Report on Form 10-Q for the quarter ended March 31,
2000, filed with the Commission on May 5, 2000 pursuant to Section 13(a) of the
Exchange Act.

        (c) Our Quarterly Report on Form 10-Q for the quarter ended June 30,
2000, filed with the Commission on August 7, 2000 pursuant to Section 13(a) of
the Exchange Act.

        (d) The description of our Common Stock contained in the registration
statement on Form 8-A filed with the Commission on October 15, 1999 pursuant to
Section 12(g) of the Exchange Act, including any amendments or reports for the
purpose of updating such description.

        All documents filed by us pursuant to Sections 13(a), 13(c), 14 and
15(d) of the Exchange Act after the date hereof and prior to the filing of a
post-effective amendment which indicates that the securities offered hereby have
been sold or which deregisters the securities covered hereby then remaining
unsold, shall also be deemed to be incorporated by reference into this
registration statement and to be a part hereof commencing on the respective
dates on which such documents are filed.

                                 INDEMNIFICATION

        Sections 23B.08.500 through 23B.08.600 of the Washington Business
Corporation Act (the "WBCA") authorize a court to award, or a corporation's
board of directors to grant, indemnification to directors and officers on terms
sufficiently broad to permit indemnification under certain circumstances for
liabilities arising under the Securities Act, provided they acted in good faith
and in a manner reasonably believed to be in or not opposed to the best
interests of the corporation. Our amended and restated articles of incorporation
and bylaws require us to indemnify our officers and directors to the fullest
extent permitted by Washington law. Our directors and officers of also may be
indemnified against liability they may incur for serving in that capacity
pursuant to a liability insurance policy maintained by us for such purpose. We
have entered into certain indemnification agreements with its officers and
directors. The indemnification agreements provide our officers and directors
with indemnification to the maximum extent permitted by the WBCA.

        Section 23B.08.320 of the WBCA authorizes a corporation to limit a
director's liability to the corporation or its shareholders for monetary damages
for acts or omissions as a director, except in certain circumstances involving
intentional misconduct, knowing violations of law or illegal corporate loans or
distributions, or any transaction from which the director personally receives a
benefit in money, property or services to which the director is not legally
entitled. Our amended and restated articles of incorporation contain provisions
implementing, to the fullest extent permitted by Washington law, such
limitations on a director's liability to us and our shareholders.



                                       13
<PAGE>   18

                                     PART II

                 INFORMATION REQUIRED IN REGISTRATION STATEMENT

ITEM 3.   INCORPORATION OF DOCUMENTS BY REFERENCE.

        The following documents filed with the Securities and Exchange
Commission (the "Commission") are hereby incorporated by reference in this
registration statement:

        (a) The registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1999, filed with the Commission on March 2, 2000 pursuant to
Section 13(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act").

        (b) The registrant's Quarterly Report on Form 10-Q for the quarter ended
March 31, 2000, filed with the Commission on May 5, 2000 pursuant to Section
13(a) of the Exchange Act.

        (c) The registrant's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2000, filed with the Commission on August 7, 2000 pursuant to Section
13(a) of the Exchange Act.

        (d) The description of the registrant's Common Stock contained in the
registration statement on Form 8-A filed with the Commission on October 15, 1999
pursuant to Section 12(g) of the Exchange Act, including any amendments or
reports for the purpose of updating such description.

All documents filed by the registrant pursuant to Sections 13(a), 13(c), 14 and
15(d) of the Exchange Act after the date hereof and prior to the filing of a
post-effective amendment which indicates that the securities offered hereby have
been sold or which deregisters the securities covered hereby then remaining
unsold, shall also be deemed to be incorporated by reference into this
registration statement and to be a part hereof commencing on the respective
dates on which such documents are filed.

ITEM 4.   DESCRIPTION OF SECURITIES.

Not applicable.

ITEM 5.   INTERESTS OF NAMED EXPERTS AND COUNSEL.

        The validity of the common stock being registered hereby will be passed
upon for the registrant by Summit Law Group, P.L.L.C., Seattle, Washington. As
of the date of this registration statement, Summit Law Group beneficially owns
34,722 shares of the registrant's common stock.

ITEM 6.   INDEMNIFICATION OF DIRECTORS AND OFFICERS.

        Sections 23B.08.500 through 23B.08.600 of the Washington Business
Corporation Act (the "WBCA") authorize a court to award, or a corporation's
board of directors to grant, indemnification to directors and officers on terms
sufficiently broad to permit indemnification under certain circumstances for
liabilities arising under the Securities Act of 1933, as amended (the
"Securities Act"), provided they acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the corporation. The
registrant's amended and restated articles of incorporation and bylaws require
the registrant to indemnify its officers and directors to the fullest extent
permitted by Washington law. The directors and officers of the registrant also
may be indemnified against liability they may incur for serving in that capacity
pursuant to a liability insurance policy maintained by the registrant for such
purpose.

        Section 23B.08.320 of the WBCA authorizes a corporation to limit a
director's liability to the corporation or its shareholders for monetary damages
for acts or omissions as a director, except in certain circumstances involving
intentional misconduct, knowing violations of law or illegal corporate loans or
distributions, or any transaction from which the director personally receives a
benefit in money, property or services to which the director is not legally
entitled. The registrant's amended and restated articles of incorporation
contain provisions implementing, to the fullest extent permitted by Washington
law, such limitations on a director's liability to the registrant and its
shareholders.

        The registrant has entered into certain indemnification agreements with
its officers and directors. The indemnification agreements provide the
registrant's officers and directors with indemnification to the maximum extent
permitted by the WBCA.



                                      II-1
<PAGE>   19

ITEM 7.   EXEMPTION FROM REGISTRATION CLAIMED.

          The Registered Shareholders acquired their shares of Common Stock
offered by the Reoffer Prospectus contained herein pursuant to the exercise of
stock options granted under the registrant's stock option plan. These issuances
were exempt from registration pursuant to Rule 701 of the Securities Act.

ITEM 8.   EXHIBITS.

<TABLE>
<CAPTION>
Exhibit
Number               Exhibit
------               -------
<S>                  <C>
5.1                  Opinion of Summit Law Group, P.L.L.C.

23.1                 Consent of Arthur Andersen LLP, Independent Public
                     Accountants

23.2                 Consent of Summit Law Group, P.L.L.C. (included in opinion
                     filed as Exhibit 5.1)

24.1                 Power of Attorney (see signature page)

99.1                 1998 Mainbrace Stock Option Plan
</TABLE>

ITEM 9.   UNDERTAKINGS.

        (a)    The undersigned registrant hereby undertakes:

               (1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:

                      (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 this 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 this
registration statement; and

                      (iii) To include any material information with respect to
the plan of distribution not previously disclosed in this registration statement
or any material change to such information in this registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) above do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference in this registration statement.

               (2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

               (3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.

        (b) 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 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 this registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

        (h) 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



                                      II-2
<PAGE>   20

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

        Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Bellevue, State of Washington, on the 23rd day of
August, 2000.

                                        BSQUARE CORPORATION


                                        By: /s/ BRIAN V. TURNER

                                        Brian V. Turner
                                        Senior Vice President, Chief Financial
                                        Officer and Secretary

                                POWER OF ATTORNEY

        Each person whose signature appears below constitutes and appoints
William T. Baxter and Brian V. Turner, or either of them, his true and lawful
attorney-in-fact and agent, with the power of substitution and resubstitution,
for him in his name, place and stead, in any and all capacities, to sign any or
all amendments to this registration statement, and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact and his agent or his substitutes, may lawfully do or cause
to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated above.

<TABLE>
<CAPTION>
SIGNATURE                                    TITLE
<S>                                          <C>

/s/ WILLIAM T. BAXTER                        Chairman of the Board, Chief Executive
-------------------------------              Officer and President
William T. Baxter                            (Principal Executive Officer)

/s/ BRIAN V. TURNER                          Senior Vice President of Operations, Chief
-------------------------------              Financial Officer and Secretary
Brian V. Turner                              (Principal Financial and Accounting
                                             Officer)

/s/ ALBERT T. DOSSER                         Director
-------------------------------
Albert T. Dosser

/s/ JEFFREY T. CHAMBERS                      Director
-------------------------------
Jeffrey T. Chambers

/s/ SCOT E. LAND                             Director
-------------------------------
Scot E. Land

/s/ WILLIAM LARSON                           Director
-------------------------------
William Larson

/s/ DAVID M. MOORE                           Director
-------------------------------
David M. Moore
</TABLE>



                                      II-4
<PAGE>   22

                                  EXHIBIT INDEX


<TABLE>
<CAPTION>
Exhibit                                                                           Sequential
Number        Exhibit                                                              Page No.
-------       -------                                                             ----------
<S>           <C>                                                                 <C>
5.1           Opinion of Summit Law Group, P.L.L.C.                               II-6

23.1          Consent of Arthur Andersen LLP, Independent Public Accountants      II-7

23.2          Consent of Summit Law Group, P.L.L.C. (included in opinion
              filed as Exhibit 5.1)

24.1          Power of Attorney (see signature page)

99.1          1998 Mainbrace Stock Option Plan                                    II-8
</TABLE>



                                      II-5
[{"type": "S-8", "sequence": "1", "filename": "s-8.txt", "description": "FORM S-8", "secsgml_size_bytes": 75738}]
{"company-data": {"conformed-name": "BSQUARE CORP /WA", "cik": "0001054721", "assigned-sic": "7389", "irs-number": "911650880", "state-of-incorporation": "WA", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "S-8", "act": "33", "file-number": "333-44306", "film-number": "708193"}, "business-address": {"street1": "3150 139TH AVE SE SUITE 500", "city": "BELLEVUE", "state": "WA", "zip": "98005", "phone": "4255195900"}, "mail-address": {"street1": "3150 139TH AVE SE SUITE 500", "city": "BELLEVUE", "state": "WA", "zip": "98005"}}
1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 23, 2000
                                                 REGISTRATION NO. 333-__________
--------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                             ----------------------

                                    FORM S-8

             REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

                             ----------------------

                               BSQUARE CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                 WASHINGTON                                    91-1650880

        (State or other jurisdiction                        (I.R.S. Employer
      of incorporation or organization)                    Identification No.)

3150 139TH PLACE S.E.  SUITE 500, BELLEVUE, WASHINGTON                98005
  (Address of Principal Executive Offices)                          (Zip Code)

                                    MAINBRACE
                             1998 STOCK OPTION PLAN
                            (Full title of the Plan)

                                WILLIAM T. BAXTER
          CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER
                        3150 139TH PLACE S.E., SUITE 500
                           BELLEVUE, WASHINGTON 98005
                     (Name and address of agent for service)

                                 (425) 519-5900
          (Telephone number, including area code, of agent for service)

                                   COPIES TO:

                               MARK F. WORTHINGTON
                                 LAURA A. BERTIN
                           SUMMIT LAW GROUP, P.L.L.C.
                       1505 WESTLAKE AVENUE N., SUITE 300
                            SEATTLE, WASHINGTON 98109
CALCULATION OF REGISTRATION FEE
====================================================================================================
                                                      PROPOSED       PROPOSED
                                                      MAXIMUM        MAXIMUM
                                                      OFFERING      AGGREGATE         AMOUNT OF
 TITLE OF SECURITIES TO BE         AMOUNT TO BE        PRICE         OFFERING     REGISTRATION FEE
        REGISTERED                REGISTERED (1)     PER SHARE        PRICE              (1)
====================================================================================================
COMMON STOCK, NO PAR              258,274         $ 0.07(2)     $   18,079.18      $   4.77
     VALUE, SUBJECT TO                75,346         $ 0.14(2)     $   10,548.44      $   2.78
 OUTSTANDING OPTIONS WITH             33,425         $ 1.36(2)     $   45,458.00      $  12.00
  FIXED PRICES UNDER THE              74,016         $ 2.71(2)     $  200,583.36      $  52.95
      MAINBRACE 1998                 114,495         $ 3.11(2)     $  356,079.45      $  94.00
     STOCK OPTION PLAN                70,637         $15.88(2)     $1,121,715.56      $ 296.13
                                       8,273         $27.75(2)     $  229,575.75      $  60.61
====================================================================================================
2

(1)     Based on shares subject to outstanding options pursuant to the Mainbrace
        1998 Stock Option Plan as of August 22, 2000. In addition, pursuant to
        Rule 416(c) under the Securities Act of 1933, this registration
        statement also covers an indeterminate number of additional shares which
        may be necessary to adjust the number of shares reserved for issuance
        pursuant to the Mainbrace 1998 Stock Option Plan as the result of any
        future stock split, stock dividend or similar adjustment of the
        registrant's outstanding Common Stock.

(2)     Computed pursuant to Rule 457(h) under the Securities Act of 1933, based
        upon the exercise prices of options granted as of the filing date of
        this Registration Statement.
3

                                     PART I
                               BSQUARE CORPORATION
         FORM S-8 CROSS-REFERENCE SHEET SHOWING LOCATION OF INFORMATION
                         REQUIRED BY PART I OF FORM S-3
FORM S-3 ITEM NUMBER                                                LOCATION/HEADING IN PROSPECTUS
------------------------------------------------------------------------------------------------------------
1.     Forepart of the Registration Statement and Outside           Outside Front Cover Page
         Front Cover Page of Prospectus

  2.     Inside Front and Outside Back Cover Page of                  Available Information; Documents
         Prospectus                                                   Incorporated by Reference

  3.     Summary Information, Risk Factors and Ratio of               BSQUARE Corporation; Risk Factors
         Earnings to Fixed Charges

  4.     Use of Proceeds                                              Use of Proceeds

  5.     Determination of Offering Price                              Not applicable

  6.     Dilution                                                     Not applicable

  7.     Selling Security Holders                                     Registered Shareholders

  8.     Plan of Distribution                                         Plan of Distribution

  9.     Description of Securities to be Registered                   Not Applicable

 10.     Interests of Named Experts and Counsel                       Interests of Named Experts and Counsel

 11.     Material Changes                                             Not Applicable

 12.     Incorporation of Certain Information by Reference            Documents Incorporated by Reference;
                                                                      Available Information

 13.     Disclosure of Commission Position on Indemnification         Indemnification
         for Securities Act Liabilities
4

                               REOFFER PROSPECTUS

                             SHARES OF COMMON STOCK

                               BSQUARE CORPORATION

                              --------------------

        This Reoffer Prospectus relates to 392,241 shares of the common stock,
no par value, of BSQUARE Corporation, which may be offered from time to time by
certain employees and consultants named herein (collectively, the "Registered
Shareholders"). It is anticipated that the Registered Shareholders will offer
shares for sale at prevailing prices on the Nasdaq National Market System on the
date of sale. We will receive no part of the proceeds of any sales made
hereunder. All expenses of registration incurred in connection with this
offering are being borne by us, but all selling and other expenses incurred by
each of the Registered Shareholders will be borne by each such Registered
Shareholder.

        The common stock is traded on the Nasdaq National Market System under
the symbol "BSQR."

        The Registered Shareholders and any broker executing selling orders on
behalf of the Registered Shareholders may be deemed to be "underwriters" within
the meaning of the Securities Act, in which event commissions received by such
broker may be deemed to be underwriting commissions under the Securities Act.

THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SHOULD BE CONSIDERED ONLY BY
PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS"
BEGINNING 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.

                              --------------------

        NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION
WITH THE OFFERING DESCRIBED HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR ANY REGISTERED SHAREHOLDER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH
PERSON TO MAKE SUCH OFFER, SOLICITATION OR SALE. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.

                              --------------------

                THE DATE OF THIS PROSPECTUS IS AUGUST 23, 2000.
5

                              AVAILABLE INFORMATION

       We are subject to the informational reporting requirements of the
Securities Exchange Act of 1934 and in accordance therewith file reports, proxy
statements and other information with the Securities and Exchange Commission.
Such reports, proxy statements and other information can be inspected and copied
at the Public Reference Room of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Commission's regional of flees at 219 South
Dearborn Street, Chicago, IL 60604; 26 Federal Plaza, New York, NY 10007; and
5757 Wilshire Boulevard, Los Angeles, CA 90036, at prescribed rates. Our common
stock is quoted on the Nasdaq National Market System. Reports, proxy statements,
informational statements and other information concerning us can be inspected at
the offices of the National Association of Securities Dealers, Inc. at 1735 K
Street, N.W., Washington, D.C. 20006. The Commission also maintains a website
(http://www.sec.gov) that contains reports, proxy statements and other
information regarding registrants that file electronically with the Commission.

        We intend to furnish our shareholders with annual reports containing
additional financial statements and a report thereon by independent certified
public accountants.

        A copy of any document incorporated by reference in this registration
statement (not including exhibits to the information that is incorporated by
reference unless such exhibits are specifically incorporated by reference into
the information that the registration statement incorporates) of which this
Reoffer Prospectus forms a part but which is not delivered with this Reoffer
Prospectus will be provided by us without charge to any person (including any
beneficial owner) to whom this Reoffer Prospectus has been delivered upon the
oral or written request of such person. Such requests should be directed to
BSQUARE Corporation, Attn: Asst. Secretary, 3150 139th Avenue S.E., Suite 500,
Bellevue, WA 98005-4081.

                                TABLE OF CONTENTS
PAGE
                                                                 ----
BSQUARE CORPORATION                                                 2
RISK FACTORS                                                        3
USE OF PROCEEDS                                                    11
REGISTERED SHAREHOLDERS                                            11
PLAN OF DISTRIBUTION                                               12
INTERESTS OF NAMED EXPERTS AND COUNSEL                             13
DOCUMENTS INCORPORATED BY REFERENCE                                13
INDEMNIFICATION                                                    13
1
6

                               BSQUARE CORPORATION

        We provide a broad range of software products and services that both
facilitate the integration of Microsoft Windows operating systems into a variety
of devices we call intelligent computing devices (ICDs) and enhance the
functionality of those devices. Original equipment manufacturers, semiconductor
vendors and software developers use our products and services to help bring
customized intelligent computing devices and intelligent computing device
applications to market in a timely fashion. We have been providing Windows
CE-based software services since before the commercial release of Windows CE in
September 1996, and therefore we believe that we offer a greater breadth and
depth of Windows CE expertise than any of our current competitors. In addition,
in late 1999, we began offering Windows NT Embedded integration services, thus
expanding the breadth of our service offerings, and in January 2000, the
acquisition of Blue Water Systems broadened our product line for developers of
ICDs based on additional Windows operating systems including Windows 98, Windows
2000, Windows NT and Windows NT Embedded.

        Intelligent computing devices are an emerging class of products with
sophisticated processing power that are designed for specific computing and
communications applications. Examples of intelligent computing devices include
television "set-top boxes," which sit on top of television sets and provide
users with interactive cable TV services, sophisticated video gaming features
and Internet access; handheld and palm-size PCs; gaming systems; handheld
industrial data collectors; consumer "Internet appliances" such as kiosk
terminals and navigational devices used in cars and trucks; and Windows-based
terminals. Compared to traditional computers, intelligent computing devices are
often less expensive and more adaptable in terms of their size, weight and
shape, while still providing sophisticated computing and communications
capabilities, including Internet connectivity. Increasingly, intelligent
computing devices are able to connect directly to the Internet, either through
wired or wireless telecommunications systems. As businesses and consumers
increasingly use the Internet to transact business and as demand for smaller and
more mobile devices grows, original equipment manufacturers are developing new
intelligent computing devices to better meet the needs of end users. Because of
space constraints and other design and resource limitations inherent in the
intelligent computing device environment, original equipment manufacturers
require a computer operating system that is both scaleable and highly
customizable, with lower system requirements than traditional PC operating
systems. There are several different operating systems that can be used in
intelligent computing devices. Windows CE, a versatile and highly adaptable
operating system modeled after Microsoft Windows, is gaining market acceptance
among original equipment manufacturers as an operating system that meets these
requirements. As increased use of the Internet by consumers and businesses helps
fuel the growth of the intelligent computing device market, we believe that the
market for Windows CE will in turn benefit. In addition, the Windows NT Embedded
(NTE) operating system is used for "computerizing" larger, more complex devices
with a need for real time functionality. Examples of devices for which NTE is
targeted include Windows-based terminals, office machine equipment such as
printers, and telecommunications equipment.

        We develop products and provide services that facilitate the development
of Windows-based intelligent computing devices. We generate revenue in three
distinct ways. First, we provide software code-writing and related engineering
services to Microsoft and semiconductor vendors to adapt Windows CE to different
microprocessors and to enhance Windows CE's user-specific features and
functions. Second, we offer a comprehensive set of software products and
services that help enable original equipment manufacturers to cost-effectively
integrate Windows CE, NTE and other Windows operating systems into their
intelligent computing devices. These offerings include original equipment
manufacturer adaptation kits, software development products, test programs and
Microsoft Windows CE licensing, along with engineering, quality assurance
services and training. Our service and product offerings are designed to ensure
that Windows works properly with the original equipment manufacturer's computer
boards, which are the internal hardware constituting the core of their
intelligent computing devices. We also offer software engineering services for
the integration of Window NT Embedded into ICDs, and for other Windows-based
operating systems we offer the BlueWater Systems software development products.
Third, we license a wide range of Windows CE-based software applications to both
original equipment manufacturers and intelligent computing device consumers to
provide additional functions to Windows CE-based intelligent computing devices,
such as printing and faxing capabilities.

        We were incorporated in the State of Washington in July 1994. Our
principal executive officers are located at 3150 139th Avenue S.E., Suite 500,
Bellevue, WA 98005-4081. and our telephone number is (425) 519-5900. Our World
Wide Web address is www.bsquare.com. Information on our website does not
constitute a part of this prospectus.

                                       2
7

                                  RISK FACTORS

        You should carefully consider the following risk factors and all other
information contained in this prospectus before purchasing our common stock.
Investing in our common stock involves a high degree of risk. Any of the
following risks could materially adversely affect our business, operating
results and financial condition and could result in a complete loss of your
investment.

UNANTICIPATED FLUCTUATIONS IN OUR QUARTERLY OPERATING RESULTS DUE TO FACTORS
SUCH AS ADVERSE CHANGES IN OUR RELATIONSHIP WITH MICROSOFT OR A DECLINE IN THE
MARKET FOR WINDOWS-BASED INTELLIGENT COMPUTING DEVICES COULD CAUSE OUR STOCK
PRICE TO DECLINE SIGNIFICANTLY.

        Our operating results have fluctuated in the past, and we expect that
they will continue to do so. We believe that period-to-period comparisons of our
operating results are not meaningful, and you should not rely on such
comparisons to predict our future performance. If our operating results fall
below the expectations of stock analysts and investors, the price of our common
stock may fall. Factors that may cause our quarterly operating results to
fluctuate include:

    -   the failure or perceived failure of Windows CE, the operating system
        upon which demand for the majority of our products and services is
        dependent, to achieve widespread market acceptance;

    -   the failure of the intelligent computing device market to develop;

    -   adverse changes in our relationship with Microsoft, from whom a
        substantial portion of our revenue is generated and on whom we rely to
        continue to develop and promote Windows CE;

    -   our inability to develop and market new and enhanced products and
        services on a timely basis;

    -   unanticipated delays, or announcement of delays, by Microsoft of Windows
        product releases, which could cause us to delay our product
        introductions and adversely affect our customer relationships;

    -   changes in demand for our products and services;

    -   increased competition and changes in our pricing as a result of
        increased competitive pressure;

    -   our ability to control our expenses, a large portion of which are
        relatively fixed and which are budgeted based on anticipated revenue
        trends, in the event that customer projects, particularly Microsoft
        projects, are delayed, curtailed or discontinued;

    -   changes in the mix of our services and product revenue, which have
        different gross margins;

    -   underestimates by us of the costs to be incurred in significant
        fixed-fee service projects; and

    -   varying customer-buying patterns which are often influenced by year-end
        budgetary pressures.

        In addition, our stock price may fluctuate due to conditions unrelated
to our operating performance, including general economic conditions in the
software industry and the market for technology stocks.

THE MAJORITY OF OUR REVENUE, INCLUDING 68% OF OUR TOTAL REVENUE FOR THE SIX
MONTHS ENDED JUNE 30, 2000, IS GENERATED FROM OUR RELATIONSHIP WITH MICROSOFT,
WHICH CAN BE MODIFIED OR TERMINATED BY MICROSOFT AT ANY TIME.

        For the year ended December 31, 1999 and for the six months ended June
30, 2000, approximately 84% and 68% of our revenue, respectively, was generated
under our master development and license agreement with Microsoft. The master
agreement, the current renewable term of which concludes in July 2000, includes
a number of project-specific work plans. We bill Microsoft on a
time-and-materials basis, although each project has a maximum dollar cap. We
expect the revenue generated from work plans with Microsoft will continue to
comprise the majority of our revenue for the next several years. We presently
have dedicated approximately 160 of our 370 engineers to

                                       3
8

these projects. However, the master agreement and each of the individual work
plans may be terminated or modified by Microsoft at any time. In addition, there
is no guarantee that Microsoft will continue to enter into additional work plans
with us. In the past, Microsoft has modified the timing and scope of certain
projects, requesting that our engineers be moved from one project to another.
For example, in late 1997 Microsoft decided to contract with us to provide
Windows CE support services to semiconductor vendors with whom we had previously
contracted directly. As a result, from late 1997 through late 1998 our revenue
shifted from being generated by a variety of semiconductor vendors to being
generated primarily by Microsoft. We do not believe that we could replace the
Microsoft revenue in the short- or medium-term if existing work plans were
canceled or curtailed, and such cancellations or curtailments would
substantially reduce our revenue. Microsoft is a publicly traded company that
files financial reports and information with the Securities and Exchange
Commission. These reports are publicly available under Microsoft's Exchange Act
filing number, 000-14278.

IF THE MARKET FOR THE WINDOWS CE OPERATING SYSTEM FAILS TO DEVELOP FULLY OR
DEVELOPS MORE SLOWLY THAN WE EXPECT, OUR BUSINESS AND OPERATING RESULTS WILL BE
MATERIALLY HARMED.

        Windows CE is one of many operating systems developed for the
intelligent computing device market and the extent of its future acceptance is
uncertain. Because all of our revenue through 1999 has been generated by
software products and services dependent on the Windows CE operating system, if
the market for Windows CE fails to develop fully or develops more slowly than we
expect, our business and operating results will be significantly harmed. Market
acceptance of Windows CE will depend on many factors, including:

    -   Microsoft's development and support of the Windows CE market. As the
        developer and primary promoter of Windows CE, if Microsoft were to
        decide to discontinue or lessen its support of the Windows CE operating
        system, potential customers could select competing operating systems,
        which would reduce the demand for our Windows CE-based software products
        and services. In addition, Microsoft has developed a version of its
        Windows NT operating system for intelligent computing devices and could
        decide to shift its support to this operating system to the detriment of
        Windows CE;

    -   the ability of the Windows CE operating system to compete against
        existing and emerging operating systems for the intelligent computing
        device market including: VxWorks from WindRiver Systems Inc., pSOS from
        Integrated Systems, Inc., VRTX from Mentor Graphics Corporation, JavaOS
        from Sun Microsystems, Inc. and LINUX. In particular, in the market for
        palm-size devices, Windows CE faces intense competition from PalmOS used
        on 3Com Corporation's Palm devices and to date has had limited success
        in this market. In the market for cellular phones, Windows CE faces
        intense competition from the EPOC operating system from Symbian, a joint
        venture between several of the largest manufacturers of cellular phones,
        which recently announced it has agreed to discuss cross-licensing its
        technology with the Palm Computing unit of 3Com. Windows CE may be
        unsuccessful in capturing a significant share of these two segments of
        the intelligent computing device market, or in maintaining its market
        share in those other segments of the intelligent computing device market
        on which our business currently focuses, including the markets for
        Internet-enabled television set-top boxes, handheld industrial devices,
        consumer Internet appliances such as kiosk terminals and vehicle
        navigational devices, and Windows-based terminals;

    -   the acceptance by original equipment manufacturers and consumers of the
        mix of features and functions offered by Windows CE; and

    -   the willingness of software developers to continue to develop and expand
        the applications that run on Windows CE. To the extent that software
        developers write applications for competing operating systems that are
        more attractive to intelligent computing device end users than those
        available on Windows CE, potential purchasers could select competing
        operating systems over Windows CE.

IF THE MARKET FOR INTELLIGENT COMPUTING DEVICES FAILS TO DEVELOP FULLY OR
DEVELOPS MORE SLOWLY THAN WE EXPECT, OUR REVENUE WILL NOT GROW AS FAST AS
ANTICIPATED, IF AT ALL.

        The market for intelligent computing devices is emerging and the
potential size of this market and the timing of its development are not known.
As a result, our profit potential is uncertain and our revenue may not grow as
fast as we anticipate, if at all. We are dependent upon the broad acceptance by
businesses and consumers of a wide variety of Windows CE-based intelligent
computing devices, which will depend on many factors, including:

                                       4
9

    -   the development of content and applications for intelligent computing
        devices;

    -   the willingness of large numbers of businesses and consumers to use
        devices such as handheld and palm-size PCs and handheld industrial data
        collectors to perform functions currently carried out manually or by
        traditional PCs, including inputting and sharing data, communicating
        among users and connecting to the Internet; and

    -   the evolution of industry standards that facilitate the distribution of
        content over the Internet to these devices via wired and wireless
        telecommunications systems, satellite or cable.

IF MICROSOFT ADDS FEATURES TO ITS WINDOWS OPERATING SYSTEM THAT DIRECTLY COMPETE
WITH SOFTWARE PRODUCTS AND SERVICES WE PROVIDE, OUR REVENUE COULD BE REDUCED AND
OUR PROFIT MARGINS COULD SUFFER.

        As the developer of Windows, Microsoft could add features to its
operating system that directly compete with the software products and services
we provide to our customers. Such features could include, for example, faxing,
hardware-support packages and quality-assurance tools. The ability of our
customers or potential customers to obtain software products and services
directly from Microsoft that compete with our software products and services
could harm our business. Even if the standard features of future Microsoft
operating system software were more limited than our offerings, a significant
number of our customers and potential customers might elect to accept more
limited functionality in lieu of purchasing additional software. Moreover, the
resulting competitive pressures could lead to price reductions for our products
and reduce our profit margins.

IF WE DO NOT MAINTAIN OUR FAVORABLE RELATIONSHIP WITH MICROSOFT, WE WILL HAVE
DIFFICULTY MARKETING OUR SOFTWARE PRODUCTS AND SERVICES AND MAY NOT RECEIVE
DEVELOPER RELEASES OF WINDOWS CE, AND OUR REVENUE AND OPERATING MARGINS WILL
SUFFER.

        In the event that our relationship with Microsoft were to deteriorate,
then our efforts to market and sell our software products and services to
original equipment manufacturers could be adversely affected and our business
would be harmed. Microsoft has great influence over the development plans and
buying decisions of original equipment manufacturers utilizing Windows CE for
intelligent computing devices. Microsoft refers many of our original equipment
manufacturer customers to us. Moreover, Microsoft controls the marketing
campaigns related to its operating systems, including Windows CE. Microsoft's
marketing activities, including trade shows, direct mail campaigns and print
advertising, are important to the continued promotion and market acceptance of
Windows CE and, consequently, of our Windows CE-based software products and
services. We must maintain mutually successful relationships with Microsoft so
that we may continue to participate in joint marketing activities with
Microsoft, including participating in "partner pavilions" at trade shows and
listing our services on Microsoft's website, and to receive referrals from
Microsoft. In the event that we are unable to continue our joint marketing
efforts with Microsoft or fail to receive referrals from Microsoft, we would be
required to devote significant additional resources and incur additional
expenses to market our software products and services directly to potential
customers. In addition, we depend on receiving from Microsoft developer releases
of new versions of and upgrades to Windows CE and related Microsoft software in
order to timely develop and ship our products and provide services. If we are
unable to receive these developer releases, our revenue and operating margins
would suffer.

UNANTICIPATED DELAYS, OR ANNOUNCEMENT OF DELAYS, BY MICROSOFT OF WINDOWS CE
PRODUCT RELEASES COULD ADVERSELY AFFECT OUR SALES.

        Unanticipated delays, or announcement of delays, in Microsoft's delivery
schedule for new versions of its Windows CE operating system could cause us to
delay our product introductions and impede our ability to complete customer
projects on a timely basis. These delays or announcements by Microsoft could
also cause our customers to delay or cancel their project development activities
or product introductions. Any resulting delays in, or cancellations of, our
planned product introductions or in our ability to commence or complete customer
projects may adversely affect our revenue and could cause our quarterly
operating results to fluctuate. For example, in 1998 Microsoft delayed the
release of a version of its Windows CE Platform Builder, which delayed our
introduction of a complementary product for an original equipment manufacturer
customer.

                                       5
10

OUR MARKET IS BECOMING INCREASINGLY COMPETITIVE, WHICH MAY RESULT IN PRICE
REDUCTIONS, LOWER GROSS MARGINS AND LOSS OF MARKET SHARE.

        The market for Windows CE-based software products and services is
becoming increasingly competitive. In addition, competition is intense for the
business of the limited number of original equipment manufacturer customers that
are capable of building and shipping large quantities of intelligent computing
devices. Increased competition may result in price reductions, lower gross
margins and loss of market share, which would harm our business. We face
competition from:

    -   our current and potential customers' internal research and development
        departments that may seek to develop their own proprietary solutions;

    -   large professional engineering services firms;

    -   established intelligent computing device software and tools;

    -   small- and medium-size engineering services; and

    -   software and component distributors.

        As we develop new products, particularly products focused on specific
industries, we may begin competing with companies with whom we have not
previously competed. It is also possible that new competitors will enter the
market or that our competitors will form alliances, including alliances with
Microsoft, that may enable them to rapidly increase their market share.
Microsoft has not agreed to any exclusive arrangement with us nor has it agreed
not to compete with us. The barrier to entering the market as a provider of
Windows-based intelligent computing device software and services is low. In
addition, Microsoft has created a marketing program to encourage systems
integrators to work on Windows. These systems integrators are given the same
access by Microsoft to the Windows technology as we are, with respect to system
integration. New competitors may have lower overhead than us and may therefore
be able to offer advantageous pricing. We expect that competition will increase
as other established and emerging companies enter the Windows based intelligent
computing device market and as new products and technologies are introduced.

IF WE FAIL TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY RIGHTS, COMPETITORS
MAY BE ABLE TO USE OUR TECHNOLOGY OR TRADEMARKS, WHICH COULD WEAKEN OUR
COMPETITIVE POSITION, REDUCE OUR REVENUE AND INCREASE OUR COSTS.

        If we fail to adequately protect our intellectual property, our
competitive position could be weakened and our revenue adversely affected. We
rely primarily on a combination of patent, copyright, trade secret and trademark
laws, confidentiality procedures and contractual provisions to protect our
intellectual property. These laws and procedures provide only limited
protection. We have applied for three patents relating to our engineering work.
These patents, if issued, may not provide sufficiently broad protection or they
may not prove to be enforceable against alleged infringers. There can be no
assurance that any of our pending patents will be granted. Even if granted,
patents may be circumvented or challenged and, if challenged, may be
invalidated. Any patents obtained may provide limited or no competitive
advantage to us. It is also possible that another party could obtain patents
that block our use of some, or all, of our products and services. If that
occurred, we would need to obtain a license from the patent holder or design
around their patent. The patent holder may or may not choose to make a license
available to us at all or on acceptable terms. Similarly, it may not be possible
to design around such a blocking patent.

        In general, there can be no assurance that our efforts to protect our
intellectual property rights through patent, copyright, trade secret and
trademark laws will be effective to prevent misappropriation of our technology,
or to prevent the development and design by others of products or technologies
similar to or competitive with those developed by us. We frequently license the
source code of our products and the source code results of our services to
customers. There can be no assurance that customers with access to our source
code will comply with the license terms or that we will discover any violations
of the license terms or, in the event of discovery of violations, that we will
be able to successfully enforce the license terms and/or recover the economic
value lost from such violations. To license many of our software products, we
rely in part on "shrinkwrap" and "clickwrap" licenses that are not signed by the
end user and, therefore, may be unenforceable under the laws of certain
jurisdictions. As with other

                                       6
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software products, our products are susceptible to unauthorized copying and uses
that may go undetected, and policing such unauthorized use is difficult.

        A significant portion of our marks include the word "BSQUARE" or the
preface "b." Other companies use forms of "BSQUARE" or the preface "b" in their
marks alone or in combination with other words, and we cannot prevent all such
third-party uses. We license certain trademark rights to third parties. Such
licensees may not abide by compliance and quality control guidelines with
respect to such trademark rights and may take actions that would harm our
business.

        The computer software market is characterized by frequent and
substantial intellectual property litigation, which is often complex and
expensive, and involves a significant diversion of resources and uncertainty of
outcome. Litigation may be necessary in the future to enforce our intellectual
property or to defend against a claim of infringement or invalidity. Litigation
could result in substantial costs and the diversion of resources and could harm
our business and operating results.

THIRD PARTIES COULD ASSERT THAT OUR SOFTWARE PRODUCTS AND SERVICES INFRINGE
THEIR INTELLECTUAL PROPERTY RIGHTS, WHICH COULD EXPOSE US TO ADDITIONAL COSTS
AND LITIGATION.

        Third parties may claim that our current or future software products and
services infringe their proprietary rights, and these claims, regardless of
their merit, could increase our costs and harm our business. We have not
conducted patent searches to determine whether the technology used in our
products infringes patents held by third parties. In addition, it is difficult
to determine whether our software products and services infringe third-party
intellectual property rights, particularly in a rapidly evolving technological
environment in which there may be numerous patent applications pending, many of
which are confidential when filed, with regard to similar technologies. If we
were to discover that one of our software products violated a third party's
proprietary rights, we may not be able to obtain a license on commercially
reasonable terms, or at all, to continue offering that software product.
Moreover, any indemnification we obtain against claims that the technology we
license from third parties infringes the proprietary rights of others may not
always be available or may be limited in scope or amount. Even if we receive
broad third-party indemnification, these indemnitors may not have the financial
capability to indemnify us in the event of infringement. In addition, in some
circumstances we could be required to indemnify our customers for claims made
against them that are based on our solutions.

        There can be no assurance that infringement or invalidity claims related
to the software products and services we provide or arising from the
incorporation by us of third-party technology, and claims for indemnification
from our customers resulting from such claims, will not be asserted or
prosecuted against us. We expect that software product developers will be
increasingly subject to infringement claims, as the number of products and
competitors in the software industry grows and the functionality of products in
different industry segments overlaps. Such claims, even if not meritorious,
could result in the expenditure of significant financial and managerial
resources in addition to potential product redevelopment costs and delays.

IF WE DO NOT RESPOND ON A TIMELY BASIS TO TECHNOLOGICAL ADVANCES AND EVOLVING
INDUSTRY STANDARDS, OUR FUTURE PRODUCT SALES COULD BE NEGATIVELY IMPACTED.

        The market for Windows-based software products and services is new and
evolving. As a result, the life cycles of our products are difficult to
estimate. To be successful, we must continue to enhance our current product line
and develop new products. We have experienced delays in enhancements and new
product release dates in the past and may be unable to introduce enhancements or
new products successfully or in a timely manner in the future. Our business may
be harmed if we must delay releases of our products and product enhancements or
if these products and product enhancements fail to achieve market acceptance
when released. In addition, our customers may defer or forego purchases of our
products if we, Microsoft, our competitors or major hardware, systems or
software vendors introduce or announce new products or product enhancements.
Such deferrals or failures to purchase would decrease our revenue.

OUR SIX-YEAR OPERATING HISTORY MAKES IT DIFFICULT TO EVALUATE OUR FUTURE
PROSPECTS, AND WE CANNOT ASSURE YOU THAT OUR REVENUE GROWTH RATE WILL NOT
DECLINE OR THAT WE WILL BE ABLE TO SUSTAIN OR INCREASE OUR PROFITABILITY.

        We were founded in July 1994, generated our first revenue in October
1994 and shipped our first product in November 1996. Accordingly, we have a
limited operating history and you should not rely on our past results to

                                       7
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predict our future performance. The rate of growth of our revenue over the prior
year was 245% from 1996 to 1997, 71% from 1997 to 1998, and 62% from 1998 to
1999. The rate of growth of our revenue over prior periods may continue to
decline. We anticipate that our expenses will increase substantially in the
foreseeable future as we continue to develop our technology and expand our
product and service offerings. These efforts may prove more expensive than we
currently anticipate, and we may not succeed in increasing our revenue
sufficiently to offset these higher expenses. If we fail to increase our revenue
to keep pace with our expenses, we may experience losses.

IF WE ARE UNABLE TO MANAGE OUR GROWTH OUR BUSINESS WILL SUFFER.

        Our rapid growth has placed, and is expected to continue to place, a
significant strain on our managerial, technical, operational and financial
resources. From August 1996 to June 2000, we grew from 21 employees to 459
employees, and we expect rapid growth to continue for the foreseeable future. To
manage our growth, we must implement additional management information systems,
further develop our operational, administrative and financial systems and
expand, train and manage our work force. We will also need to manage an
increasing number of complex relationships with customers, marketing partners
and other third parties. We cannot guarantee that our systems, procedures or
controls will be adequate to support our current or future operations or that
our management will be able to effectively manage our expansion. Our failure to
do so could seriously harm our ability to deliver products and services in a
timely fashion, fulfill existing customer commitments and attract and retain new
customers.

OUR INTERNATIONAL OPERATIONS EXPOSE US TO GREATER INTELLECTUAL PROPERTY,
MANAGEMENT, COLLECTIONS, REGULATORY AND OTHER RISKS.

        In late 1998 we opened offices in Munich, Germany and Tokyo, Japan. For
the year ended December 31, 1999 and for the six months ended June 30, 2000,
less than 1% of our total revenue was generated by our international offices.
Our international operations expose us to a number of risks, including the
following:

    -   greater difficulty in protecting intellectual property due to less
        stringent foreign intellectual property laws and enforcement policies;

    -   greater difficulty in managing foreign operations due to the lack of
        proximity between our home office and our foreign operations;

    -   longer collection cycles in Japan than we typically experience in the
        U.S.;

    -   unfavorable changes in regulatory practices and tariffs;

    -   adverse changes in tax laws;

    -   seasonal European sales declines in the summer months;

    -   the impact of fluctuating exchange rates between the U.S. dollar and
        foreign currencies; and

    -   general economic and political conditions in Asian and European markets.

        These risks could have a material adverse effect on the financial and
managerial resources required to operate our foreign offices, as well as on our
future international revenue, which could harm our business.

IF WE CONDUCT FUTURE ACQUISITIONS, THEY COULD PROVE DIFFICULT TO INTEGRATE,
DISRUPT OUR BUSINESS, DILUTE SHAREHOLDER VALUE AND ADVERSELY AFFECT OUR
OPERATING RESULTS.

        We may make investments in complementary companies, services and
technologies in the future. If we fail to properly evaluate and execute
acquisitions and investments, they may seriously harm our business and
prospects. To successfully complete an acquisition, we must properly evaluate
the technology, accurately forecast the financial impact of the transaction,
including accounting charges and transaction expenses, integrate and retain
personnel, combine potentially different corporate cultures and effectively
integrate products and research and development, sales, marketing and support
operations. If we fail to do any of these, we may suffer losses or our
management may

                                       8
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be distracted from our day-to-day operations. In addition, if we conduct
acquisitions using debt or equity securities, existing shareholders may be
diluted, which could affect the market price of our stock.

IF WE ARE UNABLE TO LICENSE KEY SOFTWARE FROM THIRD PARTIES OUR BUSINESS COULD
BE HARMED.

        We often integrate third-party software with our internally developed
software to provide software products and services for our original equipment
manufacturer customers. If our relationships with our third-party vendors were
to deteriorate, we might be unable to obtain licenses on commercially reasonable
terms, if at all, for newer versions of their software required to maintain
compatibility. In the event that we are unable to obtain additional licenses, we
would be required to develop this technology internally, which could delay or
limit our ability to introduce enhancements or new products or to continue to
sell existing products.

OUR SOFTWARE PRODUCTS OR THE THIRD-PARTY HARDWARE OR SOFTWARE INTEGRATED WITH
OUR SOFTWARE PRODUCTS AND SERVICES MAY SUFFER FROM DEFECTS OR ERRORS THAT COULD
IMPAIR OUR ABILITY TO SELL OUR SOFTWARE PRODUCTS AND SERVICES.

        Software and hardware components as complex as those needed for
intelligent computing devices frequently contain errors or defects, especially
when first introduced or when new versions are released. We have had to delay
commercial release of certain versions of our software products until software
problems were corrected, and in some cases have provided product enhancements to
correct errors in released products. Some of our contracts require us to repair
or replace products that fail to work. To the extent that we repair or replace
products our expenses may increase, resulting in a decline in our gross margins.
In addition, it is possible that by the time defects are fixed the market
opportunity may have been missed which may result in lost revenue. Moreover,
errors that are discovered after commercial release could result in loss of
revenue or delay in market acceptance, diversion of development resources,
damage to our reputation or increased service and warranty costs, all of which
could harm our business.

WE MAY BE SUBJECT TO PRODUCT LIABILITY CLAIMS THAT COULD RESULT IN SIGNIFICANT
COSTS.

        Our license agreements with our customers typically contain provisions
designed to limit our exposure to potential product liability claims. It is
possible, however, that these provisions may be ineffective under the laws of
certain jurisdictions. Although we have not experienced any product liability
claims to date, the sale and support of our software products and services
entail the risk of such claims and we may be subject to such claims in the
future. A product liability claim brought against us, whether successful or not,
could harm our business and operating results.

THE LENGTHY SALES CYCLE OF OUR PRODUCTS AND SERVICES MAKES OUR REVENUE
SUSCEPTIBLE TO FLUCTUATIONS.

        Our sales cycle is typically three to six months because the expense and
complexity of our products and services generally require a lengthy customer
approval process, and may be subject to a number of significant risks over which
we have little or no control, including:

    -   customers' budgetary constraints and internal acceptance review
        procedures;

    -   the timing of budget cycles; and

    -   the timing of customers' competitive evaluation processes.

        In addition, to successfully sell our products and services, we
frequently must educate our potential customers about the full benefits of our
products and services, which can require significant time. If our sales cycle
lengthens unexpectedly, it could adversely affect the timing of our revenue
which could cause our quarterly results to fluctuate.

A SMALL NUMBER OF OUR EXISTING SHAREHOLDERS CAN EXERT CONTROL OVER US.

        Our executive officers, directors and principal shareholders holding
more than 5% of our common stock together control a majority of our outstanding
common stock. As a result, these shareholders, if they act together, could
control our management and affairs of the company and all matters requiring
shareholder approval, including

                                       9
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the election of directors and approval of significant corporate transactions.
This concentration of ownership may have the effect of delaying or preventing a
change in control of us and might affect the market price of our common stock.

IT MIGHT BE DIFFICULT FOR A THIRD PARTY TO ACQUIRE US EVEN IF DOING SO WOULD BE
BENEFICIAL TO OUR SHAREHOLDERS.

        Certain provisions of our amended and restated articles of
incorporation, bylaws and Washington law may discourage, delay or prevent a
change in the control of us or a change in our management even if doing so would
be beneficial to our shareholders. Our board of directors has the authority
under our amended and restated articles of incorporation to issue preferred
stock with rights superior to the rights of the holders of common stock. As a
result, preferred stock could be issued quickly and easily with terms calculated
to delay or prevent a change in control of our company or make removal of our
management more difficult. In addition, as of this year's annual meeting of
shareholders, our board of directors was divided into three classes. The
directors in each class will serve for three-year terms, one class being elected
each year by our shareholders. This system of electing and removing directors
may tend to discourage a third party from making a tender offer or otherwise
attempting to obtain control of our company because it generally makes it more
difficult for shareholders to replace a majority of our directors.

        In addition, Chapter 19 of the Washington Business Corporation Act
generally prohibits a "target corporation" from engaging in certain significant
business transactions with a defined "acquiring person" for a period of five
years after the acquisition, unless the transaction or acquisition of shares is
approved by a majority of the members of the target corporation's board of
directors prior to the time of acquisition. This provision may have the effect
of delaying, deterring or preventing a change in control of our company. The
existence of these antitakeover provisions could limit the price that investors
might be willing to pay in the future for shares of our common stock.

IMPACT OF THE YEAR 2000

        We have not experienced any adverse impacts from the transition to the
year 2000. We are also not aware of any material year 2000 problems with our
vendors, service providers, customers or distribution partners. Accordingly, we
do not anticipate incurring material expenses or experiencing any material
operational disruptions as a result of any year 2000 issues that may arise.

                                       10
15

                                 USE OF PROCEEDS

        We will not receive any of the proceeds from the offering hereunder. We
will derive proceeds from the exercise of options and issuance of shares of
Common Stock upon such exercises, which shares are being registered with the
Commission simultaneously with the registration of the shares being resold
pursuant to this prospectus. Such proceeds will be available to us for working
capital and general corporate purposes. No assurances can be given as to when or
if any or all of the options will be exercised and when or if such proceeds will
become available for our use. All expenses of registration incurred in
connection with this offering are being borne by us, but all selling and other
expenses incurred by the individual Registered Shareholders will be borne by
such Registered Shareholders.

                             REGISTERED SHAREHOLDERS

        The Reoffer Prospectus relates to 392,241 shares of common stock which
have been acquired by the following non-affiliate employees of one of our
subsidiaries pursuant to the exercise of options granted under the Mainbrace
1998 Stock Option Plan: Darin Acquistapace; Luis Dib; Brian M. Ebisui; Paul M.
Herbst; Matthew Hershenson; Mark T. Hoy; Mark A. Kieling, Michael A. Krause;
Richard W. Mincher; Jeffrey L. Mullins; Roupen Nahabedian; Carlos A. Ribas;
Milton Ribeiro; Marinus E. Sloot; and Sarrir Yacoub. These Registered
Shareholders may resell all, a portion or none of such shares of common stock
from time to time.

                                       11
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                              PLAN OF DISTRIBUTION

        The shares of common stock covered by this Reoffer Prospectus are being
registered by us for the account of the Registered Shareholders. We understand
that none of such shares will be offered through underwriters.

        The Registered Shareholders may sell the shares in one or more
transactions (which may involve one or more block transactions) on the Nasdaq
National Market, in sales occurring in the public market of such system, in
privately negotiated transactions or in a combination of such transactions. Each
such sale may be made either at market prices prevailing at the time of such
sale or at negotiated prices. The Registered Shareholders may sell some or all
of the shares in transactions involving broker-dealers, who may act as agent or
acquire the shares as principal. Any broker-dealer participating in such
transactions as agent may receive commissions from the Registered Shareholder(s)
(and, if they act as agent for the purchaser of such shares, from such
purchaser). The Registered Shareholders will pay usual and customary brokerage
fees. Broker-dealers may agree with the Registered Shareholders to sell a
specified number of shares at a stipulated price per share and, to the extent
such a broker-dealer is unable to do so acting as agent for the Registered
Shareholders, to purchase as principals any unsold shares at the price required
to fulfill the respective broker-dealer's commitment to the Registered
Shareholders. Broker-dealers who acquire shares as principals may thereafter
resell such shares from time to time in transactions (which may involve cross
and block transactions and which may involve sales to and through other
broker-dealers, including transactions of the nature described above) in the
over-the-counter market negotiated transactions or otherwise, at market prices
prevailing at the time of sale or at negotiated prices, and in connection with
such resales may pay to or receive from the purchasers of such shares
commissions. To our knowledge, there is currently no agreement with any broker
or dealer respecting the sale of the shares offered hereby. Upon the sale of any
such shares, the Registered Shareholders or anyone effecting sales on behalf of
the Registered Shareholders may be deemed an underwriter, as that term is
defined under the Securities Act. We will pay all expenses of preparing and
reproducing this Reoffer Prospectus, but will not receive the proceeds from
sales by the Registered Shareholders. Sales will be made at prices prevailing at
the time of such sales.

        We have advised the Registered Shareholders that the anti-manipulation
rules under Regulation M of the Exchange Act may apply to sales of the shares in
the market. We have also informed the Registered Shareholders of the possible
need for delivery of copies of this prospectus to prospective purchasers.
Registered Shareholders may indemnify any broker-dealer that participates in
transactions involving the sale of the Shares against certain liabilities,
including liabilities arising under the Securities Act. Any commissions paid or
discounts or concessions allowed to any such broker-dealers, and, if any such
broker-dealers purchase shares as principal in a transaction, any profits
received on the resale of such shares, may be deemed to be underwriting
discounts and commissions under the Securities Act. Shares being sold pursuant
to this prospectus must be sold by the Registered Shareholders in compliance
with Rule 144(e) of the Securities Act, which limits the amount of securities
that can be sold by any one person (and others whose stock would be aggregated
with the stock owned by such person) in any three-month period to the greater
of:

        -- 1% of the shares of our outstanding Common Stock as shown by our most
           recently filed report or statement we have filed with the SEC; or

        -- the average weekly reported volume of trading in our Common Stock as
           reported on Nasdaq during the four calendar weeks immediately
           preceding the date of receipt of the order to execute the transaction
           by the broker or the date of execution of the transaction directly
           with a market maker.

        In addition, any Shares covered by this prospectus that qualify for sale
pursuant to Rule 144 may be sold under that Rule rather than pursuant to this
prospectus.

        We are bearing all costs relating to the registration of the shares. Any
commissions or other fees payable to broker-dealers in connection with any sale
of the shares will be borne by the Registered Shareholders or other party
selling such shares. In order to comply with certain states' securities laws, if
applicable, the shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In certain states the shares may not
be sold unless the shares have been registered or qualified for sale in such
state, or unless an exemption form registration or qualification is available
and is obtained.

                                       12
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                     INTERESTS OF NAMED EXPERTS AND COUNSEL

        The validity of the common stock being registered hereby will be passed
upon for us by Summit Law Group, P.L.L.C., Seattle, Washington. As of the date
of this registration statement, Summit Law Group beneficially owns 34,722 shares
of our common stock.

                       DOCUMENTS INCORPORATED BY REFERENCE

        We hereby incorporate by reference into this registration statement the
following documents previously filed with the Commission:

        (a) Our Annual Report on Form 10-K for the fiscal year ended December
31, 1999, filed with the Commission on March 2, 2000 pursuant to Section 13(a)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act").

        (b) Our Quarterly Report on Form 10-Q for the quarter ended March 31,
2000, filed with the Commission on May 5, 2000 pursuant to Section 13(a) of the
Exchange Act.

        (c) Our Quarterly Report on Form 10-Q for the quarter ended June 30,
2000, filed with the Commission on August 7, 2000 pursuant to Section 13(a) of
the Exchange Act.

        (d) The description of our Common Stock contained in the registration
statement on Form 8-A filed with the Commission on October 15, 1999 pursuant to
Section 12(g) of the Exchange Act, including any amendments or reports for the
purpose of updating such description.

        All documents filed by us pursuant to Sections 13(a), 13(c), 14 and
15(d) of the Exchange Act after the date hereof and prior to the filing of a
post-effective amendment which indicates that the securities offered hereby have
been sold or which deregisters the securities covered hereby then remaining
unsold, shall also be deemed to be incorporated by reference into this
registration statement and to be a part hereof commencing on the respective
dates on which such documents are filed.

                                 INDEMNIFICATION

        Sections 23B.08.500 through 23B.08.600 of the Washington Business
Corporation Act (the "WBCA") authorize a court to award, or a corporation's
board of directors to grant, indemnification to directors and officers on terms
sufficiently broad to permit indemnification under certain circumstances for
liabilities arising under the Securities Act, provided they acted in good faith
and in a manner reasonably believed to be in or not opposed to the best
interests of the corporation. Our amended and restated articles of incorporation
and bylaws require us to indemnify our officers and directors to the fullest
extent permitted by Washington law. Our directors and officers of also may be
indemnified against liability they may incur for serving in that capacity
pursuant to a liability insurance policy maintained by us for such purpose. We
have entered into certain indemnification agreements with its officers and
directors. The indemnification agreements provide our officers and directors
with indemnification to the maximum extent permitted by the WBCA.

        Section 23B.08.320 of the WBCA authorizes a corporation to limit a
director's liability to the corporation or its shareholders for monetary damages
for acts or omissions as a director, except in certain circumstances involving
intentional misconduct, knowing violations of law or illegal corporate loans or
distributions, or any transaction from which the director personally receives a
benefit in money, property or services to which the director is not legally
entitled. Our amended and restated articles of incorporation contain provisions
implementing, to the fullest extent permitted by Washington law, such
limitations on a director's liability to us and our shareholders.

                                       13
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                                     PART II

                 INFORMATION REQUIRED IN REGISTRATION STATEMENT

ITEM 3.   INCORPORATION OF DOCUMENTS BY REFERENCE.

        The following documents filed with the Securities and Exchange
Commission (the "Commission") are hereby incorporated by reference in this
registration statement:

        (a) The registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1999, filed with the Commission on March 2, 2000 pursuant to
Section 13(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act").

        (b) The registrant's Quarterly Report on Form 10-Q for the quarter ended
March 31, 2000, filed with the Commission on May 5, 2000 pursuant to Section
13(a) of the Exchange Act.

        (c) The registrant's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2000, filed with the Commission on August 7, 2000 pursuant to Section
13(a) of the Exchange Act.

        (d) The description of the registrant's Common Stock contained in the
registration statement on Form 8-A filed with the Commission on October 15, 1999
pursuant to Section 12(g) of the Exchange Act, including any amendments or
reports for the purpose of updating such description.

All documents filed by the registrant pursuant to Sections 13(a), 13(c), 14 and
15(d) of the Exchange Act after the date hereof and prior to the filing of a
post-effective amendment which indicates that the securities offered hereby have
been sold or which deregisters the securities covered hereby then remaining
unsold, shall also be deemed to be incorporated by reference into this
registration statement and to be a part hereof commencing on the respective
dates on which such documents are filed.

ITEM 4.   DESCRIPTION OF SECURITIES.

Not applicable.

ITEM 5.   INTERESTS OF NAMED EXPERTS AND COUNSEL.

        The validity of the common stock being registered hereby will be passed
upon for the registrant by Summit Law Group, P.L.L.C., Seattle, Washington. As
of the date of this registration statement, Summit Law Group beneficially owns
34,722 shares of the registrant's common stock.

ITEM 6.   INDEMNIFICATION OF DIRECTORS AND OFFICERS.

        Sections 23B.08.500 through 23B.08.600 of the Washington Business
Corporation Act (the "WBCA") authorize a court to award, or a corporation's
board of directors to grant, indemnification to directors and officers on terms
sufficiently broad to permit indemnification under certain circumstances for
liabilities arising under the Securities Act of 1933, as amended (the
"Securities Act"), provided they acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the corporation. The
registrant's amended and restated articles of incorporation and bylaws require
the registrant to indemnify its officers and directors to the fullest extent
permitted by Washington law. The directors and officers of the registrant also
may be indemnified against liability they may incur for serving in that capacity
pursuant to a liability insurance policy maintained by the registrant for such
purpose.

        Section 23B.08.320 of the WBCA authorizes a corporation to limit a
director's liability to the corporation or its shareholders for monetary damages
for acts or omissions as a director, except in certain circumstances involving
intentional misconduct, knowing violations of law or illegal corporate loans or
distributions, or any transaction from which the director personally receives a
benefit in money, property or services to which the director is not legally
entitled. The registrant's amended and restated articles of incorporation
contain provisions implementing, to the fullest extent permitted by Washington
law, such limitations on a director's liability to the registrant and its
shareholders.

        The registrant has entered into certain indemnification agreements with
its officers and directors. The indemnification agreements provide the
registrant's officers and directors with indemnification to the maximum extent
permitted by the WBCA.

                                      II-1
19

ITEM 7.   EXEMPTION FROM REGISTRATION CLAIMED.

          The Registered Shareholders acquired their shares of Common Stock
offered by the Reoffer Prospectus contained herein pursuant to the exercise of
stock options granted under the registrant's stock option plan. These issuances
were exempt from registration pursuant to Rule 701 of the Securities Act.

ITEM 8.   EXHIBITS.
Exhibit
Number               Exhibit
------               -------
5.1                  Opinion of Summit Law Group, P.L.L.C.

23.1                 Consent of Arthur Andersen LLP, Independent Public
                     Accountants

23.2                 Consent of Summit Law Group, P.L.L.C. (included in opinion
                     filed as Exhibit 5.1)

24.1                 Power of Attorney (see signature page)

99.1                 1998 Mainbrace Stock Option Plan
ITEM 9.   UNDERTAKINGS.

        (a)    The undersigned registrant hereby undertakes:

               (1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:

                      (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 this 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 this
registration statement; and

                      (iii) To include any material information with respect to
the plan of distribution not previously disclosed in this registration statement
or any material change to such information in this registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) above do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference in this registration statement.

               (2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

               (3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.

        (b) 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 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 this registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

        (h) 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

                                      II-2
20

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
21

                                   SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Bellevue, State of Washington, on the 23rd day of
August, 2000.

                                        BSQUARE CORPORATION

                                        By: /s/ BRIAN V. TURNER

                                        Brian V. Turner
                                        Senior Vice President, Chief Financial
                                        Officer and Secretary

                                POWER OF ATTORNEY

        Each person whose signature appears below constitutes and appoints
William T. Baxter and Brian V. Turner, or either of them, his true and lawful
attorney-in-fact and agent, with the power of substitution and resubstitution,
for him in his name, place and stead, in any and all capacities, to sign any or
all amendments to this registration statement, and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact and his agent or his substitutes, may lawfully do or cause
to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated above.
SIGNATURE                                    TITLE
/s/ WILLIAM T. BAXTER                        Chairman of the Board, Chief Executive
-------------------------------              Officer and President
William T. Baxter                            (Principal Executive Officer)

/s/ BRIAN V. TURNER                          Senior Vice President of Operations, Chief
-------------------------------              Financial Officer and Secretary
Brian V. Turner                              (Principal Financial and Accounting
                                             Officer)

/s/ ALBERT T. DOSSER                         Director
-------------------------------
Albert T. Dosser

/s/ JEFFREY T. CHAMBERS                      Director
-------------------------------
Jeffrey T. Chambers

/s/ SCOT E. LAND                             Director
-------------------------------
Scot E. Land

/s/ WILLIAM LARSON                           Director
-------------------------------
William Larson

/s/ DAVID M. MOORE                           Director
-------------------------------
David M. Moore
II-4
22

                                  EXHIBIT INDEX
Exhibit                                                                           Sequential
Number        Exhibit                                                              Page No.
-------       -------                                                             ----------
5.1           Opinion of Summit Law Group, P.L.L.C.                               II-6

23.1          Consent of Arthur Andersen LLP, Independent Public Accountants      II-7

23.2          Consent of Summit Law Group, P.L.L.C. (included in opinion
              filed as Exhibit 5.1)

24.1          Power of Attorney (see signature page)

99.1          1998 Mainbrace Stock Option Plan                                    II-8
II-5