UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2002
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
SIMTEK CORPORATION
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(Exact name small business issuer as specified in its charter)
Colorado 84-1057605
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4250 Buckingham Dr. #100; Colorado Springs, CO 80907
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(Address of principal executive offices)
(719) 531-9444
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(issuer's telephone number)
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
Class Outstanding at May 9, 2002
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(Common Stock, $.01 par value) 54,160,273
SIMTEK CORPORATION
INDEX
For Quarter Ended March 31, 2002
PART 1. FINANCIAL INFORMATION
ITEM 1 Page
----
Consolidated Balance Sheets as of March 31, 2002 and
December 31, 2001 3
Consolidated Statements of Operations for the three
months ended March 31, 2002 and 2001 4
Consolidated Statements of Cash Flows for the three
months ended March 31, 2002 and 2001 5
Notes to Consolidated Financial Statements 6-7
ITEM 2
Management's Discussion and Analysis of Results of
Operations and Financial Condition 8-11
PART II. OTHER INFORMATION
ITEM 1 Legal Proceedings 12
ITEM 2 Changes in Securities 12
ITEM 3 Defaults upon Senior Securities 12
ITEM 4 Matters Submitted to a Vote of Securities Holders 12
ITEM 5 Other Information 12
ITEM 6 Exhibits and Reports on Form 8-K 12
SIGNATURES 13
2
SIMTEK CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, 2002 December 31, 2001
-------------- ------------------
CURRENT ASSETS:
Cash and cash equivalents............................................... $ 1,380,284 $ 2,075,704
Certificate of deposit, restricted...................................... 300,000 300,000
Accounts receivable - trade, net........................................ 2,100,936 1,687,329
Inventory, net ......................................................... 1,920,276 1,827,082
Prepaid expenses and other.............................................. 125,485 104,071
------------------------------------
Total current assets................................................ 5,826,981 5,994,186
EQUIPMENT AND FURNITURE, net............................................... 899,759 902,213
OTHER ASSETS............................................................... 113,489 119,714
------------------------------------
TOTAL ASSETS............................................................... $ 6,840,229 $ 7,016,113
====================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable........................................................ $ 1,514,406 $ 1,416,794
Accrued expenses........................................................ 301,216 344,817
Accrued wages........................................................... 144,117 155,243
Accrued vacation payable................................................ 170,830 138,022
Line of credit payable.................................................. 100,168 100,163
Deferred Revenue........................................................ 28,000 15,000
Obligations under capital lease......................................... 81,062 78,805
------------------------------------
Total current liabilities........................................... 2,339,799 2,248,844
NOTES PAYABLE.............................................................. 18,564 24,813
OBLIGATIONS UNDER CAPITAL LEASES........................................... 145,165 166,752
------------------------------------
Total liabilities................................................... 2,503,528 2,440,409
SHAREHOLDERS' EQUITY:
Preferred stock, $1.00 par value, 2,000,000 shares
authorized and none issued and outstanding ......................... - -
Common stock, $.01 par value, 80,000,000 shares authorized,
54,151,273 and 54,026,273 shares issued and outstanding at
March 31, 2002 and December 31, 2001, respectively.................. 541,512 540,262
Additional paid-in capital.............................................. 37,562,965 37,547,590
Treasury Stock.......................................................... (12,504) (12,504)
Accumulated deficit..................................................... (33,755,272) (33,499,644)
------------------------------------
Shareholder's equity.................................................... 4,336,701 4,575,704
------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY................................. $ 6,840,229 $ 7,016,113
====================================
The accompanying notes are an integral part of these financial statements.
3
SIMTEK CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
For the quarters ended March 31,
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2002 2001
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NET SALES.................................................................. $ 3,973,300 $ 4,331,721
Cost of sales........................................................ 2,554,718 3,129,031
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GROSS MARGIN............................................................... 1,418,582 1,202,690
OPERATING EXPENSES:
Design, research and development...................................... 993,374 627,598
Administrative........................................................ 208,220 448,291
Marketing............................................................. 470,934 416,852
Investor relations.................................................... - 257,800
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Total Operating expenses.......................................... 1,672,528 1,750,541
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LOSS FROM OPERATIONS....................................................... (253,946) (547,851)
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OTHER INCOME (EXPENSE):
Interest income (expense), net........................................ (1,222) 30,359
Other expense, net.................................................... (460) 2,929
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Total other income (expense)...................................... (1,682) 33,288
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NET LOSS BEFORE TAXES...................................................... (255,628) (514,563)
Provision for income taxes............................................ - -
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NET LOSS................................................................... $ (255,628) $ (514,563)
==================================
NET LOSS PER COMMON SHARE:
Basic and diluted EPS................................................. $ (.00) $ (.01)
==================================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic and diluted..................................................... 54,069,329 53,651,912
==================================
The accompanying notes are an integral part of these financial statements.
4
SIMTEK CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31,
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2002 2001
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ....................................................... $ (255,628) $ (514,563)
Adjustments to reconcile net loss to net cash from
operating activities:
Depreciation and amortization.............................. 109,777 111,272
Common stock issued for investor relations expense......... - 257,800
Net change in allowance accounts........................... (32,588) (10,862)
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable.................................... (393,766) (347,825)
Inventory.............................................. (84,448) (750,648)
Prepaid expenses and other ............................ (21,439) 47,808
Increase (decrease) in:
Accounts payable....................................... 97,612 1,356,691
Accrued expenses....................................... (17,918) (86,970)
Deferred Revenue....................................... 13,000 -
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Net cash provided by (used in) operating activities........... (585,398) 62,703
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment and furniture.............................. (101,073) (177,334)
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Net cash used in investing activities......................... (101,073) (177,334)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable & lines of credit...................... (6,243) (90,299)
Payments on capital lease obligation............................. (19,330) (11,435)
Cash to Q-DOT Acoustics.......................................... - (16,065)
Exercise of stock options........................................ 16,624 6,790
Purchase of Simtek Common Stock.................................. - (12,504)
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Net cash used in financing activities......................... (8,949) (123,513)
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NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS................................................... (695,420) (238,144)
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CASH AND CASH EQUIVALENTS, beginning of period........................ 2,075,704 2,853,769
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CASH AND CASH EQUIVALENTS, end of period.............................. $1,380,284 $2,615,625
==================================
The accompanying notes are an integral part of these financial statements.
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SIMTEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES:
The financial statements included herein are presented in accordance with
the requirements of Form 10-QSB and consequently do not include all of the
disclosures normally made in the registrant's annual Form 10-KSB filing. These
financial statements should be read in conjunction with the financial statements
and notes thereto included in Simtek Corporation's Annual Report and Form 10-KSB
filed on March 22, 2002 for fiscal year 2001.
In the opinion of management, the unaudited financial statements reflect
all adjustments of a normal recurring nature necessary to present a fair
statement of the results of operations for the respective interim periods. The
year-end balance sheet data was derived from audited financial statements, but
does not include all disclosures required by generally accepted accounting
principles. Results of operations for the interim periods are not necessarily
indicative of the results of operations for the full fiscal year.
2. LINE OF CREDIT:
In April 2002, Simtek Corporation ("Simtek" or the "Company") renewed its
revolving line of credit in the amount of $250,000.
3. GEOGRAPHIC CONCENTRATION:
Sales of our semiconductor products by location for the three months ended
March 31, 2002 and 2001 were as follows (as a percentage of semiconductor
product sales only):
2002 2001
United States 51% 31%
Europe 9% 22%
Far East 27% 46%
All others 13% 1%
---- ----
100% 100%
4. BUSINESS SEGMENTS:
The Company has two reportable segments. One segment designs and produces
semiconductor devices for sale into the semiconductor market. The second segment
specializes in advanced technology research and development for data
acquisition, signal processing, imaging and data communications that is
supported by government and commercial contracts. Although both segments are
managed as part of an integrated enterprise, they are reported herein in a
manner consistent with the internal reports prepared for management.
Transactions between reportable segments are recorded at cost.
Substantially all operating expenses are identified per each segment.
Substantially all of the Company's assets are located in the United States of
America.
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SIMTEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Description Three Months Ended
March 31,
2002 2001
---- ----
Net Sales:
Semiconductor Devices $ 3,492,541 $ 3,975,104
Government Contracts 480,759 356,617
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Total $ 3,973,300 $ 4,331,721
Net Loss:
Semiconductor Devices $ (283,154) $ (320,798)
Government Contracts 27,526 (193,765)
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Total $ (255,628) $ (514,563)
March 31, 2002 March 31, 2001
-------------- --------------
Total Assets:
Semiconductor Devices $ 6,405,435 $ 8,079,142
Government Contracts 434,794 557,126
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Total $ 6,840,229 8,636,268
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SIMTEK CORPORATION
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
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OF OPERATIONS
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RESULTS OF OPERATIONS:
SEMICONDUCTOR DEVICES. Simtek Corporation recorded net product sales of its
semiconductor devices of approximately $3,493,000 and $3,975,000 for the three
months ended March 31, 2002 and 2001, respectively. Sales of its 16 kilobit and
64 kilobit nonvolatile semiconductor memory products saw a decrease of
$1,580,000 while sales of its 256 kilobit, high end industrial and military
nonvolatile semiconductor memory products and logic products saw an approximate
increase of $1,097,000. The decrease of the Company's 16 kilobit and 64 kilobit
nonvolatile semiconductor memory products was due to a decrease in product
demand for this density of product, the increase of $874,000 for the Company's
256 kilobit nonvolatile semiconductor memory products was due to increased
product demand due primarily to large customers, worldwide, placing production
orders of our products. The increase of $144,000 for the Company's high end
industrial and military nonvolatile semiconductor memory products was due to an
increase in defense contracts. The increase of $79,000 for the Company's logic
products was due primarily to increased demand for pre-existing production
programs. Two distributors and one direct customer accounted for approximately
51% of the Company's semiconductor devices products sales for the first three
months ended March 31, 2002. Products sold to distributors are re-sold to
various end customers.
The Company saw an approximate 6% increase in its gross margin percentages
for the first quarter 2002 as compared to the first quarter 2001. This increase
was due to better pricing the Company received in March 2001 from its supplier
who produces its silicon wafers and from its test subcontractor.
During the first quarter 2002, the Company purchased wafers built on 0.8
micron technology from Chartered Semiconductor Manufacturing Plc. of Singapore
("Chartered") to support sales of its nonvolatile semiconductor memory products.
Sales of the Company's logic products were supported with 0.5 micron wafers
purchased from United Microelectronics Corp. ("UMC") of Taiwan and 0.35 micron
wafers purchased from Chartered.
Total other operating expenses related to the semiconductor portion of the
Company's business saw an increase of approximately $21,000 in the three months
ended March 31, 2002 as compared to the three months ended March 31, 2001.
Research and development saw the largest increase of $351,000 which was related
to an increase in payroll and related payroll costs of $171,000, an increase in
subcontract engineering of $101,000, an increase in new product development
costs of $44,000 and an increase of $35,000 in depreciation and maintenance
contracts related to software required to develop the Company's products. The
increase in payroll, related payroll costs and subcontract engineering was due
to the costs in the first quarter of 2002 for additional employees who are
working on the design and development of a 1 megabit, 3.0 volt nonvolatile
semiconductor memory to be built by Amkor Technology ("Amkor") on their 0.25
micron digital complementary metal-oxide semiconductor or "CMOS" fabrication
line. Sales and marketing saw an increase of $28,000 which was related to
increased payroll and payroll related costs due to an additional employee in the
first quarter of 2002 as compared to first quarter of 2001. Administration saw a
decrease of $100,000, this decrease was related to a decrease in legal fees
incurred in the first quarter of 2001 that were related to the acquisition of
Q-DOT that did not occur in the first quarter of 2002. Investor relations
expense saw a decrease of $258,000 in the first quarter of 2002 as compared to
the first quarter of 2001. This decrease was due to the amortization of the
expense related to the issuance of 1,000,000 shares of stock to two investment
banker firms which was completed in September 2001.
The Company recorded a net loss from the semiconductor portion of its
business of $283,000 and $321,000 for the first quarter of 2002 and 2001,
respectively. The decrease in net loss was due primarily to an increase in gross
margins.
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SIMTEK CORPORATION
GOVERNMENT CONTRACTS. The Company recorded revenues from its government
contracts portion of its business of $481,000 and $357,000 for the three months
ended March 31, 2002 and 2001, respectively. The Company also saw an increase of
approximately 16% in its gross margin percentages. The increase in revenues and
gross margin percentages was primarily due to increased billings against
government contracts which was a result of additional employees working directly
on the contracts.. Revenue against government contracts is realized as labor is
applied to the contract.
Operating expenses from the government contracts portion of the Company's
business saw a decrease of $100,000. Administration saw a decrease of $140,000
which was primarily due to increased labor costs incurred in the first quarter
of 2001 which were related to the merger with Simtek. The decrease in
administration costs were offset by an increase in research and development
costs of $15,000 and an increase in Sales and Marketing costs of $25,000. Both
of these increases were due to resources being allocated to internal research
and development and bid and proposal activity.
The Company recorded a net income of $28,000 for the three months ended
March 31, 2002 and a net loss of $194,000 for the three months ended March 31,
2001 for its government contract portion of its business. The increase was due
to increased gross margins and a decrease in operating spending.
FUTURE RESULTS OF OPERATIONS
The Company's ability to be profitable will depend primarily on its ability
to continue reducing manufacturing costs and increasing net product sales by
increasing the availability of existing products, by the introduction of new
products and by expanding its customer base.
The Company is continuing its co-development program with Amkor to develop
a semiconductor process module that combines the Company's nonvolatile
technology with Amkor's advanced 0.25 micron digital CMOS fabrication line. The
module will incorporate silicon oxide nitride oxide silicon ("SONOS")
technology, which will be used to manufacture both high density SONOS flash and
nonvolatile static RAM memories, for stand alone and embedded products. The
Company's current schedule is to have qualified samples of a 1 megabit 3.0 volt
nonvolatile semiconductor memory available by the first quarter of 2003.
As of March 31, 2002, the Company had a backlog of unshipped customer
orders of approximately $2,132,000 expected to be filled by September 30, 2002.
Orders are cancelable without penalty at the option of the purchaser prior to 30
days before scheduled shipment and therefore are not necessarily a measure of
future product revenue.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2002, the Company had net working capital of $3,487,182 as
compared to a net working capital of $4,166,926 as of March 31, 2001. The
Company may require additional capital to fund production and marketing of any
new products it may develop. The Company does not have any commitments for such
additional capital as of the date of this report.
The change in cash flows for the three months ended March 31, 2002 used in
operating activities was primarily a result of a net loss of $255,628, which is
offset by $109,777 in depreciation and amortization, a decrease of $21,439 in
prepaid expenses and other, a decrease in accrued expenses of $17,918 and an
increase in deferred revenue of $13,000. Increases in inventory of $84,448 and
accounts payable of $97,612, were related to increased inventory levels, and the
$393,766 increase in accounts receivable and $32,588 change in allowance
accounts was due to increased sales in March 2002. The change in cash flows used
in investing activities of $101,073 were primarily due to the purchase of
9
SIMTEK CORPORATION
equipment required to manufacture our semiconductor devices at Chartered and UMC
and hardware and software required for research and development activities. The
cash flows provided by financing activities were due primarily to payments on
notes payable and a capital lease obligation and the exercise of stock options
by employees of the Company.
The change in cash flows for the three months ended March 31, 2001 provided
by operating activities was $62,704, which is primarily due to a net loss of
$514,563, which is offset by depreciation and amortization of $111,272, $257,800
in investor relations expense, a decrease of prepaid expenses and other of
$47,808, and a decrease in accrued expenses of $86,970. Increases in accounts
receivable, inventory and accounts payable of $347,824, $750,648 and $1,356,691,
respectively were related to increased product demand. The change in cash flows
from investing activities of $177,334 was primarily due to the purchases of
equipment and furniture related to the testing of our 64 kilobit and 256 kilobit
products built on 0.8 micron technology and the purchase of computer and
software required for research and development. The change in cash flows from
financing activities of $123,513 was due primarily to the payments on a line of
credit, notes payable, the buyback of Simtek common stock and cash required to
fund a subsidiary of Q-DOT.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
SFAS No. 141, Business Combinations and SFAS No. 142, Goodwill and other
Intangible Assets. SFAS 141 states that all business combinations should be
accounted for using the purchase method of accounting; use of
pooling-of-interest method is prohibited. Accounting for the excess of the fair
value of net assets of cost (negative goodwill), will be allocated to certain
assets first with any remaining excess recognized as an extraordinary gain. SFAS
No. 141 is effective for business combination completed afer June 30, 2001.
Adoption of SFAS No. 141 is not expected to have a material impact on the
accounting for business acquisitions prior to July 1, 2001. SFAS No. 142
addresses the accounting for all purchased intangible assets but not the
accounting for internally developed intangible assets. Goodwill will no longer
be amortized and will be reviewed for impairment in accordance with SFAS No.
142. Goodwill will be tested annually and on an interim basis if an event or
circumstance occurs between the annual tests that might reduce the fair value of
the reporting unit below its carrying value. SFAS No. 142 is effective for
fiscal years beginning after December 31, 2001, with early adoption permitted
under certain circumstances. Goodwill and intangible assets acquired in a
transaction completed after June 30, 2001 but before SFAS No. 142 is initially
applied will be accounted for in accordance with SFAS No. 142. Therefore
amortization of goodwill acquired prior to July 1, 2001 will cease when we elect
to adopt SFAS No. 142.
In June 2001, the FASB also approved for issuance SFAS 143 "Asset
Retirement Obligations." SFAS 143 establishes accounting requirements for
retirement obligations associated with tangible long-lived assets, including (1)
the timing of the liability recognition, (2) initial measurement of the
liability, (3) allocation of asset retirement cost to expense, (4) subsequent
measurement of the liability and (5) financial statement disclosures. SFAS 143
requires that an asset retirement cost should be capitalized as part of the cost
of the related long-lived asset and subsequently allocated to expense using a
systematic and rational method. We will adopt the statement effective no later
than January 1, 2003, as required. The transition adjustment resulting from the
adoption of SFAS 143 will be reported as a cumulative effect of a change in
accounting principle. We do not believe the adoption of this standard will have
a material effect on our financial statements.
In October 2001, the FASB also approved SFAS 144, Accounting for the
Impairment or Disposal of Long- Lived Assets. SFAS 144 replaces SFAS 121,
Accounting for the Impairment of Long-Lived Assets and for Long- Lived Assets to
Be Disposed Of. The new accounting model for long-lived assets to be disposed of
by sale applies to all long-lived assets, including discontinued operations, and
replaces the provisions of APB Opinion No. 30, Reporting Results of
Operations-Reporting the Effects of Disposal of a Segment of a Business, for the
disposal of segments of a business. Statement 144 requires that those long-lived
assets be measured at the lower of carrying amount or fair value less cost to
sell, whether reported in continuing operations or in discontinued operations.
Therefore, discontinued operations will no longer be measured at net realizable
10
SIMTEK CORPORATION
value or include amounts for operating losses that have not yet occurred.
Statement 144 also broadens the reporting of discontinued operations to include
all components of an entity with operations that can be distinguished from the
rest of the entity and that will be eliminated from the ongoing operations of
the entity in a disposal transaction. The provisions of Statement 144 are
effective for financial statements issued for fiscal years beginning after
December 15, 2001 and, generally, are to be applied prospectively. At this time,
we do not believe adoption of this standard will have a material effect on our
financial statements.
11
SIMTEK CORPORATION
PART II. OTHER INFORMATION
Item 1. Legal Proceedings -None
Item 2. Changes in Securities - None
Item 3. Defaults upon Senior Securities - None
Item 4. Matters Submitted to a Vote of Securities Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) Reports on Form 8-K - None
12
SIMTEK CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SIMTEK CORPORATION
(Registrant)
May 13, 2002 By /s/ Douglas Mitchell
--------------------------------------
DOUGLAS MITCHELL
Chief Executive Officer, President
And Chief Financial Officer (acting)
13