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, 2001
[ ] 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 August 10, 2001
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(Common Stock, $.01 par value) 53,684,245
SIMTEK CORPORATION
INDEX
For Quarter Ended June 30, 2001
PART 1. FINANCIAL INFORMATION
ITEM 1 Page
------ ----
Balance Sheets as of June 30, 2001 and
December 31, 2000 3
Statements of Operations for the three months and six
months ended June 30, 2001 and 2000 4
Statements of Cash Flows for the six months ended
June 30, 2001 and 2000 5-6
Notes to Financial Statements 7-9
ITEM 2
Management's Discussion and Analysis of Results of
Operations and Financial Condition 10-12
PART II. OTHER INFORMATION
ITEM 1 Legal Proceedings 13
ITEM 2 Changes in Securities 13
ITEM 3 Defaults upon Senior Securities 13
ITEM 4 Matters Submitted to a Vote of Securities Holders 13
ITEM 5 Other Information 13
ITEM 6 Exhibits and Reports on Form 8-K 13
SIGNATURES 14
2
SIMTEK CORPORATION
BALANCE SHEETS
ASSETS
------
June 30, 2001 December 31, 2000
------------- -----------------
CURRENT ASSETS:
Cash and cash equivalents............................................... $ 1,538,390 $ 2,853,769
Certificate of deposit, restricted...................................... 300,000 300,000
Accounts receivable - trade, net........................................ 2,266,593 1,775,864
Inventory, net ......................................................... 2,343,497 1,130,629
Intercompany receivable................................................. 3,712 -
Prepaid expenses and other.............................................. 132,175 175,955
--------------------------------
Total current assets................................................ 6,584,367 6,236,217
EQUIPMENT AND FURNITURE, net............................................... 968,998 888,296
OTHER ASSETS............................................................... 155,776 163,472
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TOTAL ASSETS............................................................... $ 7,709,141 $ 7,287,985
================================
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable ....................................................... $ 1,858,535 $ 1,085,370
Accrued expenses........................................................ 299,513 532,964
Accrued wages........................................................... 275,446 302,097
Accrued vacation payable................................................ 158,049 103,476
Obligation under capital leases......................................... 49,552 47,344
Short term debt......................................................... 22,311 34,809
Line of Credit.......................................................... - 84,050
Deferred Revenue........................................................ 25,000 -
--------------------------------
Total current liabilities........................................... 2,688,406 2,190,110
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NOTES PAYABLE.............................................................. 20,000 20,000
OBLIGATION UNDER CAPITAL LEASES............................................ 128,330 153,670
--------------------------------
Total liabilities................................................... 2,836,736 2,363,780
SHAREHOLDERS' EQUITY:
Preferred stock, $1.00 par value, 2,000,000 shares
authorized and none issued and outstanding ......................... - -
Prepaid investor relations.............................................. (214,833) (730,433)
Treasury Stock.......................................................... (12,504) -
Common stock, $.01 par value, 80,000,000 shares authorized,
53,684,245 and 53,634,245 shares issued and outstanding
at June 30, 2001 and December 31, 2000, respectively................ 536,842 536,342
Additional paid-in capital.............................................. 37,503,879 37,497,590
Accumulated deficit..................................................... (32,940,979) (32,379,294)
--------------------------------
Shareholder's equity.................................................... 4,872,405 4,924,205
--------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY................................. $ 7,709,141 $ 7,287,985
================================
The accompanying notes are an integral part of these financial statements.
3
SIMTEK CORPORATION
STATEMENTS OF OPERATIONS
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2001 2000 2001 2000
---- ---- ---- ----
NET SALES.................................................. $ 4,732,759 $ 3,851,977 $ 9,064,480 $ 7,678,004
Cost of sales........................................ 3,057,009 2,369,145 6,153,564 4,497,866
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GROSS MARGIN............................................... 1,675,750 1,482,832 2,910,916 3,180,138
OPERATING EXPENSES:
Design, research and development...................... 746,078 568,149 1,406,151 1,156,895
Administrative........................................ 588,506 356,298 1,294,599 569,582
Marketing............................................. 403,663 354,244 820,515 663,854
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Total Operating Expenses.......................... 1,738,247 1,278,691 3,521,265 2,390,331
INCOME (LOSS) FROM OPERATIONS.............................. (62,497) 204,141 (610,349) 789,807
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OTHER INCOME (EXPENSE):
Interest income, net.................................. 15,193 23,750 45,553 16,161
Other income (expense), net........................... 182 (3,894) 3,111 (5,822)
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Total other income (expense)...................... 15,375 19,856 48,664 10,339
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NET INCOME (LOSS) BEFORE TAXES............................. (47,122) 223,997 (561,685) 800,146
Provision for income taxes............................ - 6,000 - 44,000
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NET INCOME (LOSS).......................................... $ (47,122) $ 217,997 $ (561,685) $ 756,146
==================================================================
BASIC AND DILUTED EPS...................................... $ * $ * $ (.01) $ .02
==================================================================
BASIC WEIGHTED AVERAGE SHARES
OUTSTANDING............................................... 53,668,168 44,889,695 53,668,168 44,889,695
EFFECT OF DILUTIVE OPTIONS................................. - 2,441,032 - 5,206,918
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DILUTIVE SHARES OUTSTANDING................................ 53,668,168 47,330,727 53,668,168 50,096,613
==================================================================
* Less Than $.01 per share
The accompanying notes are an integral part of these financial statements.
4
SIMTEK CORPORATION
STATEMENTS OF CASH FLOWS
Six Months Ended June 30,
--------------------------
2001 2000
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................................... $ (561,685) $ 756,147
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Depreciation and amortization................................. 222,480 214,797
Contributed services.......................................... - 35,000
Increase (decrease) in net change of reserve accounts......... 11,642 366,491
Deferred financing fees....................................... - 1,865
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable....................................... (659,541) (635,612)
Inventory................................................. (1,209,591) (146,584)
Prepaid expenses and other ............................... 548,846 (19,971)
Increase (decrease) in:
Accounts payable.......................................... 773,165 89,673
Accrued expenses.......................................... (53,634) 140,251
Customer deposits......................................... 2,000 (24,750)
Taxes payable............................................. - 29,800
---------------------------------
Net cash provided by (used in) operating activities.............. (926,318) 807,107
---------------------------------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of equipment and furniture ................................ (290,683) (238,275)
Decrease to investment from related party........................... 5,730 13,036
Payments on capital lease obligation................................ (23,132) (18,542)
Decrease (increase) in restricted cash.............................. - 100,000
---------------------------------
Net cash used in investing activities............................... (308,085) (143,781)
CASH FLOWS USED IN FINANCING ACTIVITIES:
Exercise of stock options........................................... 6,790 281,084
Payments on notes payable........................................... (12,498) (123,640)
Purchase of stock from market....................................... (12,504) -
Receipts from deferred revenue...................................... 25,000 -
Cash infusion Simtek to QDI......................................... (3,714) -
Payments on line of credit.......................................... (84,050) (168,769)
Distributions to stockholders....................................... - (8,730)
Stock issued for directors compensation............................. - 63
---------------------------------
Net cash used in by financing activities......................... (80,976) (19,992)
---------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................................................ (1,315,379) 643,334
---------------------------------
CASH AND CASH EQUIVALENTS, beginning of period........................... 2,853,769 2,243,925
---------------------------------
CASH AND CASH EQUIVALENTS, end of period................................. $ 1,538,390 $ 2,887,259
=================================
The accompanying notes are an integral part of these financial statements.
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SIMTEK CORPORATION
STATEMENTS OF CASH FLOWS
(Cont.)
SUPPLEMENTAL CASH FLOW INFORMATION:
Conversion of debenture into shares of common stock, net
of deferred financing costs related to the debenture............. $ - $ 1,441,249
Equity investment in WebGear, Inc................................... $ - $ 1,640,625
Conversion of payable to ZMD into shares of common stock............ $ - $ 130,153
The accompanying notes are an integral part of these financial statements.
6
SIMTEK CORPORATION
NOTES TO 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 23, 2001 for fiscal year 2000.
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.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS - On June 30, 2001, the FASB
approved the issuance of 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 the
company elects to adopt SFAS No. 142.
2. LINE OF CREDIT:
In April 2001, Simtek Corporation ("Simtek" or the "Company") renewed its
revolving line of credit for another year in the amount of $250,000.
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SIMTEK CORPORATION
3. GEOGRAPHIC CONCENTRATION:
Sales by location for the three months ended June 30, 2001 and 2000 were as
follows (as a percentage of sales):
2001 2000
United States 49% 40%
Europe 11% 19%
Far East 29% 34%
All others 11% 7%
--- ----
100% 100%
4. POOLING OF INTEREST:
On March 13, 2001, Simtek acquired 100% of the common stock of Q-DOT Group
("Q-DOT'). Q-DOT specializes in advanced technology, research, and development
for data acquisition, signal processing, imaging and data communications.
Shareholders of Q-DOT exchanged their shares in Q-DOT for shares in Simtek in a
business combination that has been accounted for as a pooling of interests. The
consolidated financial statements and the accompanying notes reflect Simtek's
financial position and the results of operations as if Q-DOT was a wholly-owned
subsidiary of Simtek since inception.
For the three months ended June 30, 2001 and 2000 Q-DOT had revenue of
$436,856 and $530,070, respectively and net income of $2,816 and a net loss of
$98,677, respectively. The acquisition did not have a material impact on
earnings (loss) per share for either of the interim periods.
5. 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.
Description Three Months Ended June 30, Six Months Ended June 30,
2001 2000 2001 2000
---- ---- ---- ----
Net Sales:
Semiconductor Devices $ 4,295,903 $ 3,321,907 $ 8,271,007 $ 6,224,302
Government Contracts 436,856 530,070 793,473 1,453,702
------------ ------------ ------------ -----------
Total $ 4,732,759 $ 3,851,977 $ 9,064,480 $ 7,678,004
Net Income (loss):
Semiconductor Devices $ (49,938) $ 316,674 $ (370,736) $ 717,888
Government Contracts 2,816 (98,677) (190,949) 38,258
------------ ----------- ----------- -----------
Total $ (47,122) $ 217,997 $ (561,685) $ 756,146
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SIMTEK CORPORATION
June 30, 2001 June 30, 2000
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Total Assets:
Semiconductor Devices $ 7,182,848 $ 8,546,289
Government Contracts 526,293 696,636
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Total $ 7,709,141 $ 9,242,925
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SIMTEK CORPORATION
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
--------------------------------------------------------------------------------
RESULTS OF OPERATIONS:
Simtek Corporation ("Simtek" or the "Company") recorded net product sales
of $4,732,759 for the second quarter of 2001 and $9,064,480 for the six months
ended June 30, 2001 up from $3,851,977 recorded for the second quarter 2000 and
$7,678,004 recorded for the six months ended June 30, 2000. Product sales from
the Company's 4 kilobit, 16 kilobit, 64 kilobit and 256 kilobit nonvolatile
semiconductor memory products were $4,068,373 and $2,970,028 for the three
months ended June 30, 2001 and 2000, respectively and $7,770,629 and $5,483,421
for the six months ended June 30, 2001 and 2000, respectively. The increase in
sales was due primarily to an increase in large customers placing production
orders of our products, worldwide, along with an increase in product
availability which allowed us to fill delinquent orders to the Company's
customers. Sales of the Company's high end industrial and military products
decreased by approximately $231,000 in the three months ended June 30,2001 as
compared to the three months ended June 30, 2000. This decrease was due to a
continued decrease in defense contracts. One distributor of the Company's
nonvolatile semiconductor memory products and two direct customers accounted for
approximately 47% of the Company's net product sales for the three months ended
June 30, 2001. Products sold to distributors are re-sold to various end
customers. The revenue generated from the sale of the Company's logic products
was $227,530 and $351,879 for the three months ended June 30, 2001 and 2000,
respectively and $500,378 and $740,881 for the six months ended June 30, 2001
and 2000, respectively. This decrease was due to the completion of production
contracts in 2000 and the internal activities focusing on integration of the
logic business into the Company's operations. The revenue generated from
research and development contracts acquired in the Q-DOT merger was $436,856 and
$530,070 for the three months ended June 30, 2001 and 2000, respectively and
$793,473 and $1,453,702 for the six months ended June 2001 and 2000,
respectively. This decrease was primarily due to reduced billing rates against
government contract due to employee attrition.
The Company saw a decrease of approximately 3% in our gross margin
percentages for the three months ended June 30, 2001 as compared to the three
months ended June 30, 2000 and an approximate 9% decrease in our gross margin
percentages for the six months ended June 30, 2001 as compared to the six months
ended June 30, 2000. These decreases were due primarily to an increase in the
cost of the silicon wafers required to produce our products. In March 2001, the
Company was able to negotiate better pricing from this supplier and the Company
negotiated better pricing from our test subcontractor. Management believes that
these cost reduction measures should have an impact on the gross margins
beginning in the third quarter of 2001.
During the second quarter 2001, 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 saw an increase of approximately $460,000 in
the three months ended June 30, 2001 as compared to the three months ended June
30, 2000. Research and Development saw an increase of approximately $178,000
primarily due to an approximate $192,000 increase in payroll and payroll
overhead costs, a decrease of approximately $31,000 in legal fees and an
approximate $17,000 increase in contract services. Administration saw an
approximate $233,000 increase, primarily due to an approximate increase of
$258,000 which was related to the amortization of the shares of stock issued in
September 2000, to two investment banker firms in return for services, and an
increase of approximately $80,000 in legal and audit fees related to the
acquisition of Q-DOT and securities work. These increases were offset by a
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SIMTEK CORPORATION
decrease of approximately $105,000 in payroll and payroll overhead costs that
occurred at Q-DOT. Sales and Marketing saw an increase of approximately $49,000,
primarily due to an increase in sales commissions of approximately $61,000 paid
to independent sales representatives as a direct result of our increased revenue
which was offset by a decrease of approximately $12,000 in payroll and payroll
overhead costs from Q-DOT.
Total other operating expenses saw an increase of approximately $1,131,000
in the six months ended June 30, 2001 as compared to the six months ended June
30, 2000. Research and Development saw an approximate increase of $249,000,
which was related to an approximate $301,000 increase in payroll and payroll
overhead costs and a decrease of approximately $22,000 in product development
costs and an approximate $30,000 decrease in repair and maintenance.
Administration saw an approximate increase of $725,000, which was primarily
related to an approximate increase of $516,000 which was related to the
amortization of the shares of stock issued in September 2000, to two investment
banker firms in return for services and an approximate $209,000 increase in
legal and audit fees related to the acquisition of Q-DOT and securities work.
Sales and Marketing saw an approximate $157,000 increase due primarily in an
approximate increase in payroll and payroll overhead costs of $32,000 from
Simtek, an approximate increase of $125,000 related to sales commissions to
independent sales representatives as a direct result of revenue.
The Company recorded a net loss of $47,122 and a net income of $217,997 for
the three months ended June 30, 2001 and 2000, respectively, and a net loss of
$561,685 and a net income of $756,146 for the six months ended June 30,2001 and
2000, respectively. The increase in net losses was due primarily to decreased
gross margin percentages and the increase in administration costs.
FUTURE RESULTS OF OPERATIONS
The Company's ability to remain profitable will depend primarily on its
ability to continue reducing manufacturing costs and to increase net product
sales by increasing the availability of existing products, by the introduction
of new products and by expanding its customer base. Additionally, market
conditions may make it more difficult to receive enough raw materials, processed
silicon wafers and support services to satisfy customer demand. The Company is
currently deciding which new or derivative product it will develop next.
As of June 30, 2001, the Company had received purchase orders during the
second quarter expected to be filled within the next six months of approximately
$4,100,000. Orders are cancelable prior to 30 days before the scheduled shipping
date and, therefore, should not be used as a measure of future product sales.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2001, the Company had net working capital of $3,895,961 as
compared to a net working capital of $3,995,092 as of June 30, 2000.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 six months ended June 30, 2001 used in
operating activities was primarily a result of a net loss of $561,685 which is
offset by $222,480 in depreciation and amortization, an increase in reserves of
$11,642, customer deposits of $2,000 and a decrease in prepaid expenses and
other expenses of $548,846 and a decrease of $53,634 in accrued expenses.
Increases in accounts receivable, inventory and accounts payable of $659,541,
$1,209,591 and $773,165, respectively were related to increased product demand.
The change in cash flows used in investing activities were primarily due to the
purchase of equipment required to test our products of $290,683 and payments on
11
SIMTEK CORPORATION
a capital lease obligation of $23,132. The change in cash flows used in
financing activities of $80,976 was due primarily to payments on a line of
credit and notes payable and the buyback of Simtek common stock and receipts
from deferred revenue.
The change in cash flows for the six months ended June 30, 2000 provided by
operating activities was primarily due to a net income of $756,147, depreciation
of $214,797, contributed services of $35,000, an increase in reserve accounts of
$366,491 and a decrease of $24,750 in customer deposits. Increases in accounts
receivable, inventory, accounts payable and accrued expenses of $635,612,
$146,584, $89,673, $140,251, respectively, were related to increased product
sales. Cash flows used in investing activities were due primarily to the
purchase of equipment required to test our products of $238,275 and payments on
a capital lease obligation of $18,542 both of which were offset by a decrease of
$100,000 in restricted cash. Cash flows used in financing activities of $19,992
were due primarily to payments on notes payable and on a line of credit that was
offset by the purchase of stock options by the Company's employees.
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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
(b) Reports on Form 8-K
Form 8-K filed April 6, 2001 - "Simtek Announces Financial Results for
2000"
Form 8-K filed May 7, 2001 - "Simtek Reports Record Revenues, Strong
Backlog, Despite Industry Slowdown"
Form 8-K/A filed May 22, 2001 - Item 7: "Simtek has determined that it
is not required to file financial statements of pro forma financial
statements regarding the Q-DOT acquisition.
13
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)
August 13, 2001 By /s/ Douglas Mitchell
---------------------------------------
DOUGLAS MITCHELL
Chief Executive Officer, President
and Chief Financial Officer (acting)
14