As filed with the Securities and Exchange Commission on September 4, 2001
                                                          Registration 333-60492
--------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    --------
                          AMENDMENT NO. 3 TO FORM SB-2
             REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

                               SIMTEK CORPORATION
             (Exact name of registrant as specified in its charter)

          Colorado                                              84-1057605
 (State or other jurisdiction                                (I.R.S. Employer
 of incorporation or organization)                           Identification No.)


                            4250 Buckingham Dr. #100
                        Colorado Springs, Colorado 80907
                                 (719) 531-9444
               (Address, including zip code, and telephone number,
              including area code, of Principal Executive Offices)
                                   ----------
                               Douglas M. Mitchell
     Chief Executive Officer, President and Chief Financial Officer (acting)
                               Simtek Corporation
                            4250 Buckingham Dr. #100
                           Colorado Springs, CO 80907
                                 (719) 531-9444
                (Name, address, including zip code and telephone
               number, including area code, of agent for service)

                                   Copies to:
                              Garth B. Jensen, Esq.
                            Holme Roberts & Owen LLP
                            1700 Lincoln, Suite 4100
                                Denver, CO 80203
                                 (303) 861-7000

     Approximate Date of Commencement of Proposed Sale to the Public:  From time
to time after the effective date of this Registration Statement.

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

     If this Form is filed to  register  additional  securities  for an offering
pursuant to Rule 462(b) under the  Securities  Act,  check the following box and
list the Securities Act registration  statement number of the earlier  effective
registration statement for the same offering.[ ]

         If this  Form is a  post-effective  amendment  filed  pursuant  to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act  registration   statement  number  of  the  earlier  effective  registration
statement for the same offering. [ ]

     If this Form is a  post-effective  amendment filed pursuant to Rule 462 (d)
under the  Securities  Act,  check the following box and list the Securities Act
registration  statement number of the earlier effective  registration  statement
for the same offering. [ ]








     If delivery of the  prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

     If any of the securities being registered on this form are being offered on
a delayed or continuous  basis  pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]

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

     THE REGISTRANT  HEREBY AMENDS THIS  REGISTRATION  STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER  AMENDMENT  WHICH  SPECIFICALLY  STATES  THAT  THIS  REGISTRATION
STATEMENT SHALL THEREAFTER  BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8 (A) OF
THE  SECURITIES  ACT OF 1933 OR UNTIL THE  REGISTRATION  STATEMENT  SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION,  ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.







The  information  in this  preliminary  prospectus  is not  complete  and may be
changed. We may not sell these securities until the registration statement filed
with the  Securities  and Exchange  Commission  is effective.  This  preliminary
prospectus is not an offer to sell these securities nor does it seek an offer to
buy  these  securities  in any  jurisdiction  where  the  offer  or  sale is not
permitted.


                                  SUBJECT TO COMPLETION, DATED SEPTEMBER 4, 2001

                                   PROSPECTUS
                                1,810,123 Shares

                               SIMTEK CORPORATION

                                  Common stock
                                   ----------

     This  prospectus  is being  used to  register  1,810,123  shares  of Simtek
Corporation's common stock being offered by thirty of our shareholders.


     Our  common  stock is traded on the OTC  Bulletin  Board  under the  symbol
"SRAM." On August  30,  2001,  the  closing  sale price of our common  stock was
$0.345 per share.

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

SEE "RISK FACTORS" BEGINNING ON PAGE 4 TO READ ABOUT FACTORS YOU SHOULD CONSIDER
BEFORE BUYING OUR STOCK.
                                 --------------

     Neither the  Securities and Exchange  Commission  nor any other  regulatory
body has approved or disapproved of these securities or passed upon the adequacy
or accuracy of this prospectus. Any representation to the contrary is a criminal
offense.




                 The date of this Prospectus is ________, 2001.























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

                                TABLE OF CONTENTS

Summary.....................................................................   3
Risk Factors................................................................   4
Use of Proceeds.............................................................   9
Capitalization..............................................................   9
Market for our Common Stock and Related Secondary Holder Matters............  10
Selected Financial Data.....................................................  11
Management's Discussion and Analysis of Financial Condition and Results
  of Operations.............................................................  12
Business....................................................................  21
Management..................................................................  31
Security Ownership..........................................................  34
Selling Shareholders........................................................  36
Specific relationships and Related Transactions.............................  38
Description of Securities...................................................  39
Plan of Distribution........................................................  39
Legal Matters...............................................................  40
Experts  ...................................................................  40
Available Information.......................................................  41
Index of Financial Statements............................................... F-1






                                       2




                                     SUMMARY

     THIS SUMMARY HIGHLIGHTS SELECTED  INFORMATION FROM THIS PROSPECTUS AND DOES
NOT  CONTAIN  ALL OF THE  INFORMATION  THAT  MAY BE  IMPORTANT  TO  YOU.  PLEASE
CAREFULLY  READ  THE  ENTIRE  PROSPECTUS  AND  THE  DOCUMENTS   INCORPORATED  BY
REFERENCE.

INFORMATION ABOUT US AND OUR BUSINESS

     We  develop,   market  and   subcontract   the  production  of  nonvolatile
semiconductor   memories   and   programmed    semiconductor   logic   products.
Nonvolatility  prevents  loss of  programs  and data  when  electrical  power is
removed from the semiconductor. Our memory products feature fast data access and
programming speeds. Our logic products route electronic signals to perform tasks
in electronic  systems that use our  products.  All of our products are targeted
for use in commercial or military  electronic  equipment markets.  These markets
are industrial  control systems,  office  automation,  medical  instrumentation,
telecommunication  systems,  cable  television,  and numerous  military systems,
including communications, radar, sonar and smart weapons.

     Our  principal  executive  office is located at 4250  Buckingham  Dr. #100;
Colorado Springs, Colorado 80907. Our telephone number is 719-531-9444.

THE SHARES

     We are registering  1,810,123  shares of our common stock being offered for
resale by thirty of our shareholders.

     We will not  receive any of the  proceeds  of the shares  being sold by our
shareholders.

SUMMARY FINANCIAL INFORMATION


                                                    Year Ended December 31,         Six Months Ended March 31,
                                               ------------------------------     ------------------------------
                                                    2000              1999             2001             2000
                                                    ----              ----             ----             ----
                                                                                        
Statement of Operations Data:
Net revenues..............................     $ 14,467,814      $ 11,168,624     $  9,064,480      $ 7,678,004
Total expenses............................       17,904,616        11,124,982        9,674,829        6,888,197
Operating income (loss)...................       (3,436,802)           43,642         (610,349)         789,807
Income (loss) before taxes................       (3,540,342)          (90,526)        (561,685)         800,146
Net income (loss).........................     $ (3,540,342)     $   (122,926)    $   (561,685)     $   756,146
Net income (loss) per share:
     Basic................................     $       (.07)     $          *     $       (.01)     $       .02
                                               ================================================================
     Diluted..............................     $          *      $          *     $       (.01)     $       .02
                                               ================================================================
* Less than $.01 per share.

                                                                     Year Ended          Six Months Ended
                                                                  December 31, 2000        June 30, 2001
                                                                  -----------------      -----------------
Balance Sheet Data:
Cash and cash equivalents...................................         $ 2,853,769            $ 1,538,390
Working capital.............................................           4,046,107              3,895,961
Total assets................................................           7,287,985              7,709,141
Shareholders' equity........................................           4,924,205              4,872,405



                                        3




                                  RISK FACTORS

     YOU SHOULD  CONSIDER  CAREFULLY THE FOLLOWING RISK FACTORS,  AS WELL AS THE
OTHER INFORMATION IN THIS PROSPECTUS BEFORE BUYING OUR SHARES. THE SEMICONDUCTOR
INDUSTRY IS CHANGING  RAPIDLY.  THEREFORE,  THE  FORWARD-LOOKING  STATEMENTS AND
STATEMENTS OF EXPECTATIONS, PLANS AND INTENT IN THIS PROSPECTUS ARE SUBJECT TO A
GREATER DEGREE OF RISK THAN SIMILAR STATEMENTS REGARDING SOME OTHER INDUSTRIES.

OUR LIMITED OPERATING CAPITAL AND OUR ABILITY TO RAISE ADDITIONAL MONEY MAY HARM
OUR ABILITY TO DEVELOP AND MARKET OUR PRODUCTS

     To date,  we have  required  significant  capital for product  development,
subcontracted  production  and  marketing.  We have funded this from the sale of
products, the sale of product and technology licenses and from royalties as well
as from the sale of our convertible debt and equity securities.

     We believe that if we are able to increase our product sales  substantially
and  with  continued  positive  gross  margins,  our cash  requirements  for the
development,  subcontracted  production  and  marketing of our existing  product
families will be satisfied. We are not sure, however, whether we will be able to
achieve this increase in product sales and continue our positive  gross margins.
We may  need  more  capital  in the next  year and  after  that to  develop  new
products.  We are not  sure  that we will be  able  to  raise  more  capital  on
reasonable  terms,  if at all. If we cannot,  then we may not be able to develop
and market new products. The development, subcontracted production and marketing
of our existing products may also suffer.

WE MAY EXPERIENCE OPERATING LOSSES IN THE NEXT SEVERAL YEARS

     We began business in 1987. Through June 30, 2001, we had accumulated losses
of  approximately  $33.0 million.  We realized net income for the first time for
the year ended  December 31, 1997 and  continued  to realize net income  through
June 30, 2000. However,  through June 30, 2001, we realized a net loss primarily
as a result of accounting  charges from the purchase of incomplete  research and
development  in September  2000.  We may continue to  experience  net  operating
losses  for the  foreseeable  future.  Continuing  net  operating  losses  could
materially  harm our results of operations  and increase our need for additional
capital in the future.  See  "Management's  Discussion and Analysis of Financial
Condition and Results of Operations."

BECAUSE OUR COMMON STOCK IS LISTED ONLY ON THE OTC ELECTRONIC  BULLETIN BOARD IT
WILL BE MORE DIFFICULT TO SELL OUR COMMON STOCK

     Our common stock is listed on the OTC  Electronic  Bulletin Board under the
symbol "SRAM." Our common stock was listed on the Nasdaq  Small-Cap Market until
July 18, 1995 but because we no longer met  Nasdaq's  listing  requirements,  we
transferred to the OTC Electronic Bulletin Board as mandated by Nasdaq rules. We
may not be able to meet the  requirements  for  relisting  our  common  stock on
Nasdaq in the near future or in the longer term.

     Securities that are not listed on the Nasdaq  Small-Cap  Market are subject
to a Securities and Exchange  Commission rule that imposes special  requirements
on  broker-dealers  who sell  those  securities  to  persons  other  than  their
established customers and accredited investors. The broker-dealer must determine
that the security is suitable for the purchaser and must obtain the  purchaser's
written consent prior to the sale. These requirements may make it more difficult
for our security  holders to sell their securities and may affect our ability to
raise more capital.

SINCE WE DEPEND GREATLY ON SUBCONTRACTORS, THEIR POOR PERFORMANCE COULD HURT OUR
OPERATIONS

     We subcontract the silicon wafer processing,  product assembly, and product
testing portions of our business to independent companies. Our operating results
depend on these  subcontractors'  ability to supply us with silicon  wafers that
meet our  specifications and to assemble and test enough of our products to meet
our customers' needs.

                                        4




     Currently,  we depend on  Chartered  Semiconductor  Manufacturing  Plc.  of
Singapore to  manufacture  all of our silicon  wafers for our 0.8 micron  memory
products  and  0.35  micron  logic  products,  which  account  for  collectively
approximately  86% of our total products.  We depend on United Memories Corp. of
Taiwan  to  manufacture  all of our  silicon  wafers  for our 0.5  micron  logic
products, which account for approximately 5% of our total products. These wafers
are the raw  materials  required  to  manufacture  our  semiconductor  products.
Without  these  wafers,  we would be unable to sell our  products.  If Chartered
Semiconductor  Manufacturing  or  United  Memories  Corp.  is unable to meet our
silicon  wafer  needs on time and at a price that we find  acceptable,  we would
have to find other  wafer  manufacturers.  If we cannot  find  other  suppliers,
manufacturers  or assemblers on acceptable  terms, we may not be profitable.  In
addition,  our subcontractors must be audited and recertified by us on a regular
basis for us to  continue  to  produce  military-qualified  products.  We cannot
assure you that we will be able to complete this recertification successfully or
in a timely manner.

WE DO NOT HAVE A CURRENT  MANUFACTURING  AGREEMENT WITH CHARTERED  SEMICONDUCTOR
MANUFACTURING WHICH MAY LIMIT OUR ABILITY TO PURCHASE RAW MATERIALS

     Our  current   manufacturing   agreement   with   Chartered   Semiconductor
Manufacturing has expired. Under our old agreement, we had the right to purchase
up to 600  six-inch  silicon  wafers  per  month  from  Chartered  Semiconductor
Manufacturing's  facility in Singapore.  If we are unable to renew our agreement
with Chartered  Semiconductor  Manufacturing  or the limit on wafers that we can
purchase  from  it is not  increased,  we  may  be  limited  in  the  number  of
semiconductors  that we can  sell,  unless we are able to  acquire a  sufficient
quantity  from our other  supplier.  About 71% of our product sales for the year
ended  December  31,  2000  were  based  on  wafers   purchased  from  Chartered
Semiconductor Manufacturing.

THE UNCERTAINTY INVOLVED IN MANUFACTURING  SEMICONDUCTORS MAY INCREASE THE COSTS
AND DECREASE THE PRODUCTION OF OUR PRODUCTS

     In order for us to be profitable, we must keep our manufacturing costs down
and secure the  production of sufficient  product.  Semiconductor  manufacturing
depends on many  factors  that are very complex and beyond our control and often
beyond the control of our subcontractors.  These factors include contaminates in
the  manufacturing  environment,  impurities  in  the  raw  materials  used  and
equipment  malfunctions.  Under our arrangements with our  subcontractors,  they
pass  on to us  substantially  all  of  their  costs  that  are  unique  to  the
manufacture of our products.  Accordingly, these factors could increase the cost
of manufacturing our products and decrease our profits. These factors could also
reduce the number of semiconductors  that our subcontractors are able to make in
a production  run. If our  subcontractors  produce  fewer of our  products,  our
revenues may decline.

DELAYS IN MANUFACTURING MAY NEGATIVELY IMPACT REVENUE AND NET INCOME

     It  takes   approximately   three   months  for  us  to   manufacture   our
semiconductors.  Any delays in receiving silicon wafers from our  subcontractors
will delay our ability to deliver our  products to  customers.  This would delay
sales  revenue and could cause our  customers to cancel  existing  orders or not
place future orders. In addition,  if we are not able to make all of our planned
semiconductors  in a production  run this could delay  delivery of our products.
These delays could occur at any time and would affect our net income.

WE DEPEND ON INDEPENDENT  SALES  REPRESENTATIVES  AND  DISTRIBUTORS  TO SELL OUR
PRODUCTS AND THE TERMINATION OF ANY OF THESE RELATIONSHIPS MAY HARM OUR REVENUE

     We use  independent  sales  representatives  and  distributors  to sell the
majority of our products.  The agreements with these sales  representatives  and
distributors can be terminated  without cause by either party with only 30 to 90
days written notice. If one or more of our sales representatives or distributors
terminates  our  relationship,  we may not be able  to  find  replacement  sales
representatives  and  distributors  on  acceptable  terms or at all.  This would
affect our  profitability.  In addition,  during 2000,  approximately 47% of our
product sales were to two distributors and one direct customer.  We are not sure
that we will be able to maintain our relationship with these distributors.


                                        5




DELAYS IN OR FAILURE OF PRODUCT QUALIFICATION MAY HARM OUR BUSINESS

     Prior to  selling  a  product,  we must  establish  that it meets  expected
performance and reliability standards. As part of this testing process, known as
product  qualification,  we  subject  representative  samples of  products  to a
variety of tests to ensure  that  performance  in  accordance  with  commercial,
industrial  and  military  specifications.  If we  are  unable  to  successfully
accomplish product  qualification for our future products,  we will be unable to
sell these future products. Even with successful initial product qualifications,
we cannot be assured that we will be able to maintain  product  qualification or
achieve sufficient sales to meet our operating requirements.

SINCE THE  SEMICONDUCTOR  INDUSTRY IS FAST CHANGING,  OUR SUCCESS DEPENDS ON OUR
ABILITY TO INTRODUCE NEW PRODUCTS

     The semiconductor  industry is characterized by rapid changes in technology
and product obsolescence.  Our success in the semiconductor  industry depends in
part upon our ability to expand our existing product families and to develop and
market new  products.  The  technology  we currently use may be made obsolete by
other competing or newly developed memory  technologies.  The development of new
semiconductor designs and technologies  typically requires substantial costs for
research  and  development.  Even if we are able to develop  new  products,  the
success of each new  product  depends on several  factors  including  whether we
selected  the proper  product and our ability to introduce it at the right time,
whether the product is able to achieve acceptable  production yields and whether
the market  accepts the new  product.  We cannot  guarantee  you that we will be
successful in developing new products or whether any products that we do develop
will satisfy the above factors.

THE CYCLICALITY OF THE SEMICONDUCTOR  INDUSTRY MAY PREVENT US FROM MAINTAINING A
CONSISTENT REVENUE STREAM AND MAY HARM OUR STOCK PRICE

     The semiconductor industry has historically  experienced  significant peaks
and valleys in sales  volumes  resulting  in large  variations  of revenues  and
resulting  profits or losses.  We do not have direct  influence on the nature of
the broad  semiconductor  market.  Variations in the revenues and profits within
the semiconductor industry may cause us significant losses in the future. If the
stock prices of many semiconductor  companies decrease, our stock price may also
suffer.  Recently,  the semiconductor  industry has experienced increased losses
and the  stock  prices  of many  semiconductor  companies,  including  us,  have
suffered.

OUR  RECENT  PURCHASE  OF  INCOMPLETE  RESEARCH  AND  DEVELOPMENT  MAY RESULT IN
SIGNIFICANT EXPENDITURES

     In an  effort to expand  our  products,  we  recently  acquired  incomplete
research  and  development  products  from  WebGear,  Inc.  We believe  that the
incomplete  research and  development we acquired  should enable us to enter the
wireless  data  communication  market  being  developed  under  the  "Bluetooth"
trademark.   "Bluetooth"   is  a  new  industry   standard  for  wireless   data
communication  developed by a consortium of electronic  industry  partners.  See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations-Results   of   Operations."  If  this  technology  is  successful  in
establishing  wide spread use it may create sales  opportunities  for  component
suppliers.  We expect to spend approximately  $750,000 to bring products to this
wireless  market.  However,  we cannot  assure you that we will be able, or have
sufficient  operating  capital,  to  enter  this  market.  See "--  Our  Limited
Operating Capital and Our Ability to Raise Money May Harm Our Ability to Develop
and Market Our Products."

THE INTENSE COMPETITION IN THE SEMICONDUCTOR INDUSTRY MAY CAUSE US TO LOSE SALES
REVENUE TO OTHER SUPPLIERS

     There is intense competition in the semiconductor  industry.  We experience
competition from a number of domestic and foreign companies,  most of which have
significantly   greater  financial,   technical,   manufacturing  and  marketing
resources  than  we  have.  Our  competitors  include  major  corporations  with
worldwide silicon wafer fabrication facilities and circuit production facilities
and diverse,  established product lines. We also compete with emerging companies
attempting to obtain a share of the market for our product  families.  If any of
our new products achieve market acceptance, other companies may sell competitive
products  at  prices  below  ours.  This  would  have an  adverse  effect on our
operating  results.  We have sold  product  and  technology  licenses to Zentrum
Mikroelektronik  Dresden.  We have granted this company unlimited rights to much
of  our   technology   through  its   license   agreements   with  us.   Zentrum
Mikroelektronik  Dresden  has  entered  the  market  and may  become  one of our
significant competitors.

                                        6





GIVEN THE SCARCITY OF TRAINED PERSONNEL IN THE SEMICONDUCTOR  INDUSTRY, THE LOSS
OF KEY EMPLOYEES COULD MATERIALLY AFFECT OUR FINANCIAL RESULTS

     Our  success  depends  in large part on our  ability to attract  and retain
qualified  technical  and  management  personnel.  There are  limited  personnel
trained in the semiconductor industry resulting in intense competition for these
personnel.  If we lose any of our key  personnel,  this  could  have a  material
adverse  affect on our  ability to conduct  our  business  and on our  financial
results.

OUR PATENTS MAY NOT PROVIDE US EFFECTIVE INTELLECTUAL PROPERTY PROTECTION;  THIS
COULD HARM OUR BUSINESS

     We have been issued 25 U.S.  patents  relating  to specific  aspects of our
current  products and we have four  applications  pending.  We have also applied
outside the United States for patents on our technology.  We plan to continue to
protect our intellectual  property.  We are not sure that any of the patents for
which we have applied  will be issued or, even if they are issued,  will provide
us with meaningful  protection from competition.  We may also not have the money
required to maintain or enforce our patent rights.  Notwithstanding our patents,
other companies may obtain patents similar or relating to our patents.

     We seek to protect a significant  portion of our  intellectual  property as
trade secrets,  rather than patents.  Unlike patents,  trade secrets must remain
confidential in order to retain protection as proprietary intellectual property.
We cannot assure you that our trade secrets will remain confidential. If we lose
trade secret protection, our business could suffer.

IF OUR  PRODUCTS AND  TECHNOLOGY  INFRINGE ON THIRD PARTY  PATENTS,  OUR PRODUCT
SALES MAY SUFFER

     We have not determined  whether our products are free from  infringement of
others' patents.  If patent  infringement claims are asserted against us and are
upheld,  we will try to modify our products so they are non-  infringing.  If we
are unable to do so, we will have to obtain a license to sell those  products or
stop selling the products for which the claims are asserted.  We may not be able
to obtain the required licenses.  Any successful  infringement claim against us,
our failure to obtain any required license or requirement for us to stop selling
any of our  products,  may force us to  discontinue  production  and shipment of
these products. This may result in reduced product sales and harm our revenues.

     We were notified of possible patent infringement by one company in December
of 1989. After reviewing the related patents we responded in the same month with
a position that our products were still under development, but that the analysis
revealed no infringement.  There was no further  response from this company.  In
January of 1991 a second  company  sent us a package of  nonvolatile  memory and
other memory patents for review to evaluate for any possible infringement and to
seek licenses as appropriate. Our internal evaluation determined that there were
no obvious infringements requiring the pursuit of licenses from this company. In
both  cases we  believe  that there are no  definitive  claims for  infringement
against our products,  so no further actions have been taken, although there has
not been direct recognition of this position by the other parties.  However,  we
cannot  assure you that these  companies  will not  assert  patent  infringement
claims against us in the future.

     In 1998,  we received  notice of a claim for an  unspecified  amount from a
foundation that owns approximately 180 patents and 70 pending applications.  The
foundation  claimed that some of the machines and processes used in the building
of our  semiconductor  devices  infringe on the foundation's  patents.  In April
1999,  we  reached  an  agreement  with  the  foundation  for us to  purchase  a
nonexclusive license of the foundation's patents, based on our product offerings
and sales  forecast at that time.  If our products or actual sales  revenue vary
significantly  from the time of the  agreement,  we may be subject to additional
payments.

FOREIGN CURRENCY  EXCHANGE RATE  FLUCTUATIONS MAY INCREASE OUR COSTS,  LOWER OUR
REVENUES AND CAUSE LOSS OF CUSTOMERS TO OUR COMPETITORS

     We purchase  materials,  including silicon wafers,  from outside the United
States.  In 2000, over 57% of our sales were to customers located outside of the
United  States.  We  operate  using  United  States  dollars  as the  functional



                                        7





currency. Changes in foreign currency exchange rates can reduce our revenues and
increase our costs. For example, our subcontractors may increase the prices they
charge us, on a per  purchase  order  basis,  for  silicon  wafers if the United
States dollar  weakens.  Any large  exchange rate  fluctuation  could affect our
ability to compete with manufacturers who operate using foreign  currencies.  We
do not try to reduce our exposure to these  exchange rate risks by using hedging
transactions.  Although we have not had any material losses due to exchange rate
fluctuations  over the last three years,  we cannot  assure you that we will not
incur significant losses in the future.

BECAUSE  WE DO NOT  INTEND TO PAY  DIVIDENDS  IN THE  FORESEEABLE  FUTURE,  YOUR
INVESTMENT RETURN MAY BE LIMITED

     We have never paid cash dividends on our common stock.  We do not expect to
pay  dividends  in the  foreseeable  future.  We intend to use any  earnings  to
finance  growth.  You should not expect to receive  dividends  on your shares of
common stock.

IF OUR BOARD OF DIRECTORS AUTHORIZES THE ISSUANCE OF PREFERRED STOCK, HOLDERS OF
OUR COMMON STOCK COULD BE DILUTED AND HARMED

     Our board of directors has the authority to issue up to 2,000,000 shares of
preferred  stock in one or more series and to establish  the  preferred  stock's
voting  powers,  preferences  and other  rights and  qualifications  without any
further vote or action by the  shareholders.  The issuance of preferred stock by
our board of  directors  could  dilute and harm the rights of the holders of our
common stock. It could  potentially be used to discourage  attempts by others to
obtain control of us through merger, tender offer, proxy contest or otherwise by
making such  attempts  more  difficult to achieve or more  costly.  Our board of
directors  has no specific  intention to issue shares of  preferred  stock,  but
given our present capital requirements, it is possible that we may need to raise
capital through the sale of preferred stock in the future.

OUR FAILURE TO HOLD ANNUAL  SHAREHOLDERS'  MEETINGS TO RE-ELECT  OFFICERS LIMITS
OUR SHAREHOLDERS' CONTROL OVER MANAGEMENT

     Since 1991, we have held only three annual shareholders'  meetings at which
shareholders elect directors.  We have had some special shareholders meetings at
which  shareholders  have voted on matters other than the election of directors.
Our shareholders  last elected directors on June 30, 1994. We have not held more
meetings to elect  directors  primarily due to the costs  associated with having
the meetings. If we want to hold a meeting to elect directors, we must print and
mail to each  shareholder  prior to the meeting an annual  report.  Based on the
number of our shareholders, the printing and mailing cost would be approximately
$30,000. If you would like to nominate directors for election, you would have to
solicit proxy  materials for an annual meeting we hold or request that we hold a
special  shareholders  meeting.  Under  our  bylaws,  special  meetings  of  our
shareholders  must be called by our  president  at the request of holders of not
less than  one-tenth of all of our  outstanding  shares  entitled to vote at the
meeting.  Since we currently have outstanding 53,688,745 shares of common stock,
holders of at least 5,368,875  shares of our common stock must request a special
meeting in order for such shareholders to effect a meeting. At this time, we are
unsure of when we will hold our next  annual  meeting  to elect  directors.  The
infrequent annual  shareholders'  meetings limits the ability of shareholders to
elect new members to the board of directors and to change our management.


                                 USE OF PROCEEDS

     We will receive no proceeds from the sale of shares by our shareholders.



                                        8





                                 CAPITALIZATION

     The following table shows our capitalization at June 30, 2001.



Treasury stock, 10,000 shares                                      $    (12,504)

Preferred stock, $1.00 par value, 2,000,000 shares
Authorized, none issued and outstanding                                       0

Common stock, $0.01 par value, 80,000,000 shares
authorized, 53,684,245 issued and outstanding                           536,842

Additional paid in capital                                           37,503,879

Accumulated deficit as of June 30, 2001                             (32,940,979)

Shareholders' equity                                               $  4,872,405




                                        9






         MARKET FOR OUR COMMON STOCK AND RELATED SECURITY HOLDER MATTERS

     Our common stock is listed on the OTC  Electronic  Bulletin Board under the
symbol  "SRAM".  Securities  not  included  in the Nasdaq  Small-CAP  Market are
covered  by  the  Commission  rule  that  imposes   additional   sales  practice
requirements  on  broker-dealers  who sell such securities to persons other than
established  customers and accredited  investors  (generally  institutions  with
assets  in  excess  of  $5,000,000  or  individuals  with net worth in excess of
$1,000,000 or annual income  exceeding  $200,000 or $300,000  jointly with their
spouse).  For transactions  covered by the rule, the  broker-dealer  must make a
special suitability  determination for the purchaser and receive the purchaser's
written agreement to the transaction prior to the sale.  Consequently,  the rule
may affect the ability of broker-dealers to sell our securities, which will have
an  adverse  effect  on the  ability  of our  security  holders  to  sell  their
securities and the possibility of our ability to raise additional capital.

     Shown below is the  closing  high bid and the closing low offer as reported
by the OTC Electronic Bulletin Board on the last day of the quarter.

                                                                 Common Stock
                                                                 ------------
                                                            High Bid     Low Bid
                                                            --------     -------

     1998
First Quarter..........................................       .4062        .3594
Second Quarter.........................................       .3594        .3125
Third Quarter..........................................       .2344        .2188
Fourth Quarter.........................................       .1562        .1406

     1999
First Quarter..........................................       .1875        .1875
Second Quarter.........................................       .2188        .2031
Third Quarter..........................................       .1562        .1562
Fourth Quarter.........................................       .2812        .2656

     2000
First Quarter..........................................       2.875         2.25
Second Quarter.........................................      1.5313        1.375
Third Quarter..........................................       .9688        .8438
Fourth Quarter.........................................       .3594        .2969

     2001
First Quarter..........................................       .7344        .6562
Second Quarter.........................................         .55          .49
Third Quarter (through July 30, 2001)..................         .46          .44


     The quotations  listed above reflect  inter-dealer  prices,  without retail
mark-up, mark-down or commission and may not represent actual transactions.

     As of  December  31,  2000,  there were 379  shareholders  of  record,  not
including  shareholders  who  beneficially  own common  stock held in nominee or
"street name."

     We have not paid any  dividends on our common stock since  inception and we
do not intend to pay any in the foreseeable future.


                                       10





                             SELECTED FINANCIAL DATA

     The statements of operations for the years ended December 31, 2000 and 1999
and the balance  sheet data as of December  31, 2000 have been  derived from the
financial  statements  that  have  been  audited  by  Hein  +  Associates,  LLP,
independent  auditors.  The balance sheet as of June 30, 2001 and the statements
of operations for the six months ended June 30, 2001 and 2000 are unaudited.  In
our opinion,  these financial  statements include all adjustments  necessary for
the  fair  presentation  of the  financial  position  as of June  30,  2001  and
statements  of operations  for the six months ended June 30, 2001 and 2000.  The
balance sheet as of June 30, 2001 and the  statements of operations  for the six
months ended June 30, 2001 and 2000 were prepared on a consistent basis with our
year end  financial  information.  The balance sheet as of December 31, 2000 has
been audited by Hein + Associates,  LLP. This  financial  data should be read in
conjunction  with  our  financial  statements  and the  notes  thereto  included
elsewhere  in this  prospectus  and  "Management's  Discussion  and  Analysis of
Results of Operations and Financial Condition."


                                                    For the Years Ended December 31,          Six months Ended June 30,
                                                    --------------------------------        -----------------------------
Statement of Operations Data:                             2000             1999                  2001              2000
                                                          ----             ----                  ----              ----
                                                                                                 
Net Sales.......................................     $ 14,467,814      $ 11,168,624         $  9,064,480     $  7,678,004
Cost of Sales...................................        8,423,529         6,172,643            6,153,564        4,497,866
                                                     ------------------------------         -----------------------------
Gross Margin....................................        6,044,285         4,995,981            2,910,916        3,180,138
Operating Expenses:
     Design, research and development...........        6,158,189         2,240,273            1,406,151        1,156,895
     Administrative.............................        2,152,593         1,793,424            1,294,599          569,582
     Marketing..................................        1,170,305           918,642              820,515          663,854
                                                     -------------------------------        -----------------------------
         Total Operating Expenses...............        9,481,087         4,952,339            3,521,265        2,390,331
Other income (expense), net.....................           91,122           (81,654)              48,664           10,339
Equity in losses of QDA and write off of
   related advances.............................        (194,662)           (52,514)                   -                -
                                                     -------------------------------        -----------------------------
Net income (loss) before taxes..................      (3,540,342)           (90,526)        $   (561,685)    $    800,146
     Provision for income taxes.................               -             32,400                    -           44,000
                                                     -------------------------------        -----------------------------
Net income (loss)...............................     $(3,540,342)      $   (122,926)        $   (561,685)    $    756,146
                                                     ===============================        =============================
Net income (loss) per common share:
     Diluted....................................     $      (.07)      $          *         $       (.01)    $        .02
     Basic......................................     $         *       $          *         $       (.01)    $        .02
Weighted average common shares outstanding:....
     Basic.....................................       48,337,167         38,345,697           53,668,168       44,889,695
                                                    =====================================================================
     Diluted...................................       48,337,167         38,345,697           53,668,168       50,096,613
                                                    =====================================================================

* Less than $.01 per share.


                                                                  Year Ended                 Six Months Ended
                                                               December 31, 2000               June 30, 2001
                                                               -----------------             -----------------
Balance Sheet Data:
Working capital.............................................     $ 4,046,107                    $ 3,895,961
Total assets................................................       7,287,985                      7,709,141
Shareholders' equity........................................     $ 4,924,205                      4,872,405




                                       11




                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW OF ACQUISITIONS AND OTHER TRANSACTIONS

     During 2000 and the first quarter of 2001, we made several  acquisitions of
high technology  companies,  some of which we have accounted for as a pooling of
interests.

     On May 9, 2000,  we  acquired  Integrated  Logic  Systems,  Inc.  We issued
3,000,000  shares of our common stock in exchange for all outstanding  shares of
all classes of Integrated Logic Systems stock.  Integrated Logic Systems designs
and sells programmed  semiconductor logic products.  We purchased  approximately
$30,000 of product  from  Integrated  Logic  Systems in the year  preceding  the
acquisition. The acquisition was accounted for as a pooling of interest, and the
results of Integrated Logic Systems have been consolidated with our results,  as
if we have been merged throughout the periods presented.

     On June 16,  2000,  we  acquired  1,875,000  shares of the common  stock of
WebGear in return for  1,250,000  shares of our common  stock.  On September 29,
2000, we purchased  incomplete research and development,  patents and trademarks
from WebGear and entered into an agreement to purchase at preferential rates new
products  developed  from the  patents and related  technology.  This  agreement
provided for WebGear to pay us  approximately  $600,000 over a 12-month  period.
The original contract price for the incomplete  research and development totaled
1,875,000  shares of WebGear stock plus 3,400,000  shares of our common stock of
which 500,000 were held in escrow based on WebGear  fulfilling  all  obligations
under  the  contract.  In  December  2000,  WebGear  defaulted  on  its  payment
obligations under the preferential rate purchase agreement, thus forcing them to
relinquish  the 500,000  escrow  shares of our common  stock  which  reduced the
shares issued to 2,900,000 of our common stock.

     On July 31, 2000, we acquired Macrotech Semiconductor.  We issued 1,250,000
shares of our common stock in exchange for all outstanding shares of all classes
of Macrotech  Semiconductor  stock.  Macrotech  Semiconductor  designs and sells
programmed   semiconductor  logic  products,  which  are  an  extension  of  the
programmed   semiconductor   logic  products  that   Integrated   Logic  Systems
manufactures.  The acquisition  was accounted for as a pooling of interest,  and
the results of Macrotech  Semiconductor  have been consolidated with ours, as if
we have been merged throughout the periods presented.

     On  September  14,  2000,  we  entered  into a one-year  contract  with two
investment  bankers,  E.B.M.  Associates,  Inc. and World Trade  Partners.  Each
company has received  500,000  shares of our common stock.  Both  companies will
assist us in  broadening  our financial  market  presence and  establishing  new
relationships within the industry,  investment community and financial media, by
arranging meetings for our management with industry analysts, presenting company
profiles to analysts and brokerage  firms,  mailings and personal  communication
with investors.  E.B.M. Associates supports these activities primarily in retail
investment  markets,  while  World  Trade  Partners  supports  these  activities
primarily in institutional markets.  E.B.M.  Associates and World Trade Partners
cooperate to coordinate  their  activities.  On September 14, 2000,  the closing
share  price  for our  common  stock  was $ 1.0312  per  share  and  accordingly
$1,031,000 has been assigned to prepaid investor relations.  The cost associated
with  this  transaction  is  being  amortized  over  the  life of the  contract.
Approximately  $301,000 was expensed in 2000.  The balance will be expensed over
the term of the contract, ending in the third quarter of 2001.

     On September 29, 2000, we purchased  incomplete  research and  development,
patents and trademarks  from WebGear.  The incomplete  research and  development
consists of hardware and software  developed for wireless  data  communications,
that needs to be modified for use with the Bluetooth  technology  standard.  See
"Risk  Factors-Our  Recent  Purchase of Incomplete  Research and Development May
Result in Significant  Expenditures."  We originally  issued 3,400,000 shares of
our common  stock  which was  amended in  December  2000 to  2,900,000.  We also
returned  to  WebGear  the  1,875,000  shares of  WebGear  common  stock that we
acquired from WebGear on June 16, 2000. On September 29, 2000, the closing price
of our common stock was $0.8438 per share. We have valued the purchased  patents
and  trademarks at $125,000,  which was  capitalized  and recorded as intangible
assets.  We have valued the incomplete  research and  development  acquired from
WebGear at $3,962,646, which was expensed immediately.


                                       12




     On December 6, 2000,  we signed a letter of intent to acquire  Q-DOT Group,
Inc.  The merger was  completed on March 14,  2001.  We acquired  Q-DOT Group in
exchange  for  approximately  5,171,731  shares of our common  stock,  valued at
$4,000,000  based on a twenty day average share  closing price of  approximately
$0.77. One of the Q-DOT Group  subsidiaries,  specializes in advanced technology
research and development for data acquisition,  signal  processing,  imaging and
data   communications.   Q-DOT   Group's   projects   have  been   supported  by
"conventional"  government  and  commercial  contracts in addition to government
contacts   sponsored  by  the  Small  Business   Innovation   Research  program.
Independent government agencies,  such as the Department of the Army, Department
of the Navy and  Department of the Air Force may award  contracts  directly,  or
"conventionally,"  or may award contracts through the Small Business  Innovation
Research program. The Small Business Innovation Research program is a Department
of Defense program that funds early-stage  research projects at small technology
companies.  We  operate  our Q-DOT  Group's  government  contract  research  and
development  operations as a wholly owned  subsidiary of us. The acquisition was
accounted  for as a pooling of  interest,  and the  results  of Q-DOT  Group are
consolidated  with ours in our  financials as if we have been merged  throughout
the periods. Q-DOT Group held a 1% membership interest in QD Acoustics,  LLC. QD
Acoustics specializes in high performance  semiconductor  applications for sonar
and medical imaging products such as ultrasound equipment. We do not expect that
our ownership interest in QD Acoustics will be material to our business.

RESULTS OF OPERATIONS

     GENERAL. We have designed and developed nonvolatile  semiconductor products
since we commenced business  operations in May 1987. We have concentrated on the
design and development of our nonvolatile  semiconductor memory product families
and  technologies,  marketing,  distribution  channels,  and  sources of supply,
including production at subcontractors. With the acquisition of Integrated Logic
Systems and  Macrotech  Semiconductor,  we have added the  capability to design,
develop and produce gate array integrated circuits, or our logic products.

     Our  business  was  founded  on a  specialized  technology  that  supported
development  of  nonvolatile  semiconductor  memories.  We developed our current
memory  products out of this  technology.  This single  product  family does not
allow  growth into a broad  range of  applications.  Therefore,  in an effort to
expand  our  products,   we  acquired  from  WebGear  incomplete   research  and
development of technology that we intend to apply within the emerging  Bluetooth
market  segment.  "Bluetooth"  is an industry  standard,  short  range  wireless
communications  technology  designed to allow a variety of  electronic  devices,
such as wireless  telephones,  Personal Digital Assistants,  notebook computers,
desktop computers, peripheral input-output devices, television set-top boxes and
Internet  appliances to exchange data without the use of physical  cabling.  See
"Risk  Factors-Our  Recent  Purchase of Incomplete  Research and Development May
Result in Significant Expenditures."

     We anticipate  that our  acquisition of Q-DOT Group will enable us to enter
the high speed data  communications  market,  addressing both wired and wireless
applications,  based on advanced "Silicon Germanium" process technology. Silicon
Germanium is rapidly  becoming the  technology of choice for many analog,  mixed
signal and high speed digital circuits.

     In  September  1991,  we began the sale of our  commercially  qualified  64
kilobit nonvolatile  semiconductor memory products based on a 1.2 micron process
technology. The 1 micron process technology is manufactured with spacing between
design elements of approximately one millionth of one meter. Generally speaking,
the  smaller  the  spacing  between  design  elements,  the less  expensive  the
production cost of our memory products.  Accordingly, we generally try to design
with lower micron technology.  Kilobits are a measure of the amount of data that
can be stored. More kilobits imply more storage.

     After  initial  qualification  of our  first  product  in  1991,  we  began
expanding the 64 kilobit nonvolatile semiconductor memory product family. By the
end of 1993,  we had  qualified  the  complete  product  family for  commercial,
industrial and military markets and had commenced sales of these products.  When
we say we "qualify" a product,  we mean that our internal  quality  organization
confirms the  product's  performance  to the  product's  data sheet and accepted
industry  standards.  Commercial  products  operate from 0 degrees to 70 degrees
Centigrade,  industrial  products from -40 degrees to 85 degrees  Centigrade and


                                       13





military products from -55 degrees to 125 degrees Centigrade. Specific customers
require different temperatures for their applications. During 1995, we developed
our 64 kilobit nonvolatile  semiconductor  memory products based on a 0.8 micron
process technology. Qualification of this product occurred in 1996. In late 1996
and into 1997, we, along with assistance from Zentrum  Mikroelektronik  Dresden,
completed  the  design,  installation  and  qualification  of  our  256  kilobit
nonvolatile  semiconductor memory product based on 0.8 micron process technology
into Zentrum  Mikroelektronik  Dresden's silicon wafer fabrication  facility. In
1997,  we installed the 256 kilobit  nonvolatile  semiconductor  memory  product
built   on  0.8   micron   process   technology   in   Chartered   Semiconductor
Manufacturing's  silicon  wafer  fabrication  facility.  Qualification  of  this
product for use in the  commercial and  industrial  market  occurred in 1997 and
qualification  for use in the military  market occurred in the second quarter of
1998.  In the fourth  quarter  1997,  we  qualified  the 64 kilobit  nonvolatile
semiconductor  memory product built on 0.8 micron process technology for sale in
the  commercial  and  industrial  market.  Our  programmed  semiconductor  logic
products  are  supported  with  silicon  wafers,  built  on 0.5  micron  process
technology,  purchased from United  Memories and silicon  wafers  purchased from
Chartered Semiconductor Manufacturing built on a 0.35 micron process technology.
Products manufactured with smaller spacing generally support lower product costs
by  reducing  the amount of raw  material  required  for the  product.  Sales of
products built on wafers  purchased from Chartered  Semiconductor  Manufacturing
and United Memories accounted for all of our semiconductor product sales revenue
for 2000.

     SIX MONTHS  JUNE 30,  2001 AND 2000.  During the six months  ended June 30,
2001, we purchased our silicon wafers from Chartered Semiconductor Manufacturing
to support the sales of our nonvolatile  semiconductor memory products. Sales of
our  programmed  semiconductor  logic  products were supported by silicon wafers
purchased from United Memories.

     We had net sales of  $9,064,480  for the six months  ended June 30, 2001 up
from $7,678,004  recorded for the six months ended June 30, 2000.  Product sales
from  our 4  kilobit,  16  kilobit,  64  kilobit  and  256  kilobit  nonvolatile
semiconductor  memory products were $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 our  customers.  Sales of our high end
industrial and military products decreased by approximately  $561,573 in the six
months  ended June  30,2001 as compared to the six months  ended June 30,  2000.
This  decrease  was  due to a  continued  decrease  in  defense  contracts.  Two
distributors  of our  nonvolatile  semiconductor  memory products and two direct
customers  accounted for  approximately  64% of our net sales for the six months
ended June 30, 2001.  Products sold to  distributors  are re-sold to various end
customers.  The  revenue  generated  from the  sale of our  logic  products  was
$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 our  operations.  The revenue  generated from research and  development
contracts acquired in the Q-DOT Group merger was $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.

     We  saw a  decrease  of  approximately  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, we
were able to negotiate  better pricing from this supplier and we also negotiated
better pricing from our test subcontractor. We believe that these cost reduction
measures  should  have an  impact on the gross  margins  beginning  in the third
quarter of 2001.


                                       14






     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 Group 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.

     We recorded 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.

     REVIEW  OF  2000  OPERATIONS.   Total  sales  for  2000  were  $14,467,814.
$12,150,750 was directly related to the sale of our  semiconductor  memories and
$2,317,064 was related to revenue  generated  from our research and  development
contracts.  Our product  sales could have been  greater if not for a shortage in
the  second  half of 2000 of the wafers  required  to  produce  our  nonvolatile
semiconductor  memory  products.  During  2000,  total  market  demand  exceeded
Chartered Semiconductor Manufacturing's ability to supply silicon wafers to many
of its  customers.  This  condition  persisted  through  2000  limiting  our raw
materials  supplies,  but has  improved  in  2001 as  total  market  demand  has
decreased.  We  believe  that the lack of a long term  contract  with  Chartered
Semiconductor  Manufacturing  may have  impacted our ability to receive  silicon
wafers because a long term contract could have obligated Chartered Semiconductor
Manufacturing  to provide us with  silicon  wafers.  We did see an  increase  in
volume production orders in 2000, which caused an increase in unit shipments and
a slightly overall lower average selling price as compared to 1999. Sales of our
4 kilobit and 16 kilobit  products  decreased in 2000 by  approximately  9% over
1999.  This  decrease was due to customers  using higher  density parts in their
applications. Sales, based on dollar revenues, of our 64 kilobit and 256 kilobit
commercial  products  saw an  increase  in 2000 by  approximately  63% and 145%,
respectively.  These increases were due to larger  production  volume orders, or
orders of high volume  manufacturing of systems,  targeted at competitive growth
markets  being  placed  in 2000 as  compared  to 1999.  Sales of our 64  kilobit
high-end  industrial  and military  market saw a slight  increase of 3% in 2000,
while our 256 kilobit high-end  industrial and military market saw a decrease in
2000 of  approximately  65% as  compared  to 1999.  This  decrease  was due to a
decrease in defense  contracts in 2000  resulting  from federal  policies  which
reduced production of defense systems using our products. We believe that future
defense  spending will increase to historic levels as a result of policy changes
within the new  administration,  but it remains  unclear  when this will  occur.
Sales of our logic  products  saw an  increase of  approximately  79% in 2000 as
compared to 1999.  This increase was due primarily to increased  product  demand
generated by our increased sales activities. The revenue generated from research
and  development   contracts  acquired  in  the  Q-DOT  Group  merger  decreased
approximately  35%. This  decrease was  primarily  due to reduced  billing rates
against government contracts which was a direct result of employee attrition.

     With  the  return  of  production   volume  orders  being  placed  for  our
nonvolatile   semiconductor  commercial  memory  products  and  an  increase  in
competition, we saw a decrease in our overall average selling prices as compared
to 1999.  These orders reflect high volume  manufacturing of systems targeted at


                                       15





competitive growth markets.  However,  with this decrease, we saw an increase in
unit shipments for 2000 as compared to 1999 of  approximately  6%, 56%, 178% and
76% for our 16 kilobit, 64 kilobit,  256 kilobit, and logic commercial products,
respectively.  Our 256 kilobit high-end  industrial and military  products saw a
decrease of approximately 55% in unit shipments.

     Due to the decrease in high-end  industrial and military  sales,  we had an
approximate 3% decrease in our gross margins for 2000 as compared to 1999.

     YEARS  ENDED  DECEMBER  31, 2000 AND 1999.  Our net sales for 2000  totaled
$14,467,814 compared to $11,168,624 in 1999. $12,150,750 was directly related to
the sale of our  semiconductor  memories and  $2,317,064  was related to revenue
generated  from our  research  and  development  contracts.  The increase in net
product  sales  for the  year  ended  December  31,  2000 was due  primarily  to
increased  volume  production  orders in the Far East and North America.  During
2000, sales of our 64 kilobit and 256 kilobit nonvolatile  semiconductor  memory
military products accounted for approximately 12% of our sales, while 64 kilobit
and 256 kilobit  commercial  and  industrial  nonvolatile  semiconductor  memory
products  accounted  for  approximately  34% and 25% of sales in 2000 and  1999,
respectively.  Sales of our programmed  semiconductor logic products account for
approximately 9% of our sales.  Revenue from research and development  contracts
accounted  for  approximately  15% of our sales.  Sales of our 4 kilobit  and 16
kilobit nonvolatile  semiconductor  memory products accounted for the balance of
the sales in 2000. Two  distributors  and one direct customer of our nonvolatile
semiconductor memory products accounted for approximately 42% of our net product
sales for the year ended December 31, 2000.  Products sold to  distributors  are
resold to a larger number of system manufacturers.

     The  increase  in net loss in 2000 is  primarily  the  result of  expensing
approximately  $3,963,000 of purchased  incomplete research and development from
WebGear.  We realized a positive  gross margin of $6,044,285 in 2000 compared to
$4,995,981 in 1999 for percentages of 42% and 45%, respectively.

     Operating  expenses were  approximately  $4,500,000 more for the year ended
December 31, 2000 than for the year ended December 31, 1999. The largest part of
this increase,  was related to research and development which had an approximate
$3,900,000  increase.  Of the  approximate  $3,900,000  increase,  approximately
$3,963,000 was due to the issuance of stock to WebGear for the purchase of their
Bluetooth technology, an approximate $100,000 decrease in indirect costs related
to our  research  and  development  contracts  which was  related  to a decrease
headcount,   an  approximate  $100,000  increase  in  headcount  additions,   an
approximate  $18,000  increase in  depreciation  and an approximate  decrease of
$55,000,  $14,000 and  $12,000  related to product  development,  legal fees and
repairs and maintenance,  respectively. The increase in headcount was due to the
addition of engineers  required to develop the  programmed  semiconductor  logic
products,  the  decrease  in  product  development  was  due to a  reduction  in
development  costs assigned to processing  silicon  wafers for  development of a
higher density version of our nonvolatile  semiconductor  memory  products.  The
next   largest   increase  of   approximately   $360,000   was  in  general  and
administration. Of the approximate $360,000 increase, approximately $301,000 was
related to the  amortization of the issuance of 1,000,000 shares of stock to two
investment  banker  firms  in  September  2000  for  services  performed  by us.
Approximately  $157,000 was related to increased legal and approximately $80,000
was related to audit fees incurred  with the  acquisitions  of Integrated  Logic
Systems,  Macrotech Semiconductor and Q-DOT Group, and the purchase of Bluetooth
technology from WebGear.  The remaining  decrease of $178,000 was the net effect
of  a  $300,000   decrease  in  payroll  and  benefits   costs  related  to  the
administration of our government  contracts and increase in payroll and benefits
costs  resulting from the addition of one employee,  pay rate raises and bonuses
for the  administration of our semiconductor  products.  The decrease in payroll
and benefits for our  government  contract  business was due to the reduction in
the amount of administrative  employees.  Sales and marketing saw an approximate
$250,000  increase,  primarily  due to  approximately  $186,000  paid  in  sales
commission to our independent  sales  representatives  as a direct result of our
increased  revenue and an approximately  $64,000 increase due to the addition of
one employee.

Other expense for the year ended  December 31, 2000  decreased by  approximately
$30,000 as compared to December 31, 1999.  This decrease was primarily due to an
approximate  $142,000  increase in funding to QD Acoustics,  LLC which is offset
with an  approximate  $95,000  decrease in interest  expense and an  approximate
increase of $69,000 in interest income. Prior to March 14, 2001, Q-DOT Group had
effective  control  over  QD  Acoustics  pursuant  to  QD  Acoustics'  operating
agreement.  We ceased  funding QD Acoustics  and have no  obligation  to fund QD
Acoustics.


                                       16





     We had a net  loss of  $3,540,342  for the year  ended  December  31,  2000
compared to a net loss of $122,926 for the year ended December 31, 1999.

FUTURE RESULTS OF OPERATIONS

     Our ability to maintain  profitability will depend primarily on our ability
to continue reducing our manufacturing costs and increasing net product sales by
improving the  availability  of existing  products,  by the  introduction of new
products and by expanding our customer base.

     As of June 30,  2001,  we had a backlog  of  unshipped  customer  orders of
approximately  $4,100,000 expected to be filled by December 31, 2001. 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.

     We  believe  that our  earnings  will  increase  in 2001  due to  increased
shipment volumes of our  semiconductor  products which we believe will result in
lower  costs  based  on  volume  purchasing  of raw  materials  and  subcontract
services.  We believe our shipment  volumes  will  increase due to the growth in
demand for our products that we have noticed over the last 18 months. During the
first quarter of 2001, we had approximately 48% more revenue measured in dollars
than in the previous quarter.  During the second quarter of 2001, such growth in
demand has decreased  somewhat.  We cannot assure you that the growth in demand,
or  demand  for  our  products  will  not  decline  in  the  future.  See  "Risk
Factors-Since the semiconductor  industry is fast changing,  our success depends
on our ability to introduce new products." Our increased  shipping  volumes have
led to  reduced  product  costs.  We have  received  reduced  pricing  from  our
packaging  supplier that went into affect in the second quarter of 2001, and our
silicon wafer subcontractor  reduced prices that went into affect with June 2001
deliveries.  We have also implemented test time reduction  programs that started
in May 2001 which will reduce test costs.  We believe  that the  combination  of
these factors should result in improved  earnings,  provided that our customers'
end markets remain robust.

     In 2000 and the first six months of 2001,  we purchased  all of our silicon
wafers for our nonvolatile semiconductor memory products from a single supplier,
Chartered Semiconductor  Manufacturing.  Approximately 89% of our sales for 2000
and 86% of sales  for the first six  months  of 2001  were from  finished  units
produced  from  these  silicon  wafers.  We  had  an  agreement  with  Chartered
Semiconductor  Manufacturing to provide wafers through September 1998.  Although
Chartered  Semiconductor  Manufacturing continues to provide us wafers under the
terms defined in this  contract we do not have a current  agreement  signed.  We
are, however,  negotiating with Chartered  Semiconductor  Manufacturing to renew
the contract.  In 2000,  we purchased  all of our silicon  wafers built on a 0.5
micron process  technology and our silicon wafers built on a 0.35 micron process
technology for our programmed  semiconductor logic products from United Memories
and Chartered Semiconductor Manufacturing, respectively. Approximately 9% of our
sales for 2000 were from finished units  produced from these wafers.  Currently,
we do not have a current  agreement  signed  for  either of these  companies  to
furnish us wafers,  however,  we have seen no  disruption in their supply to us.
Any disruptions in our relationship with Chartered  Semiconductor  Manufacturing
could have an adverse impact on our operating results.

     Zentrum Mikroelektronik  Dresden,  through their license agreement with us,
has the  worldwide  right  to sell  nonvolatile  semiconductor  memory  products
developed jointly by us and Zentrum Mikroelektronik  Dresden. As it has recently
established volume production, Zentrum Mikroelektronik Dresden has begun selling
such nonvolatile semiconductor memory products. In the past year, we did not see
increased  competition with Zentrum  Mikroelektronik  Dresden as compared to the
previous year. However, due to Zentrum Mikroelektronik Dresden creating a second
source for  nonvolatile  semiconductor  memory  products,  we  believe  that its
presence may have a positive impact because many large manufacturers require two
sources from which to purchase  product.  We will not be  receiving  any further
license payments from our contract with Zentrum Mikroelektronik Dresden.
     We  intend  to  continue  designing,   developing  and  subcontracting  the
production  of our  memory  products.  We also  propose to  continue  to sell to
existing and new customers  through our normal sales and marketing  efforts.  We
also  intend  to  extend  our  logic  product  offerings.  We  will  also  begin
development of high  performance data  communications  products based on Silicon
Germanium  process  expertise  gained through our acquisition of Q-DOT Group. We
believe  that the  additional  logic  and data  communication  products  offered
through these acquisitions will allow us to expand our product offering into new


                                       17





applications and additional  customers.  We anticipate that this will reduce our
dependence on any single product line and provide  additional  potential sources
of revenue.

LIQUIDITY AND CAPITAL RESOURCES

     From inception  through  December 31, 2000, we have received  approximately
$32,100,000  of gross  proceeds  from the sale of  convertible  debt and  equity
securities. From inception through December 31, 2000, we generated approximately
$10,085,000 of gross revenue from the sale of product and  technology  licenses,
approximately  $45,215,000 from net product sales and approximately  $600,000 in
royalty income.

     Under the Cooperation  Agreement entered into with Zentrum  Mikroelektronik
Dresden in  September  1995,  Zentrum  Mikroelektronik  Dresden had the right to
convert all  financing  into shares of our common stock at a price of $0.175 per
share for all monies paid in 1995 and at the average  share price of the quarter
the monies were paid for all monies paid in 1996. In 1996, we received  $378,551
under this agreement of which  $248,398 was converted  into 1,353,374  shares of
our common stock at a price of $.1548 and 165,000  shares of our common stock at
a price of $.2358.  Zentrum  Mikroelektronik  Dresden  converted  the  remaining
$130,153  into  551,964  shares  of  our  common  stock.  During  2000,  Zentrum
Mikroelektronik Dresden began selling their shares of our common stock.

     In 1998,  we closed a $1,500,000  financing  transaction  with  Renaissance
Capital.  This offering involved  convertible  debentures with a seven year term
bearing  interest  at 9  percent  per  annum.  In the  first  quarter  of  2000,
Renaissance  converted  all  $1,500,000 of the  debentures  into an aggregate of
7,692,308  shares of our  common  stock.  At the time of the  conversion  of the
debentures,  we were able to cease making  interest  payments and the underlying
note was paid in full.

     During 2000 and the first quarter of 2001, we acquired  three  companies in
exchange for a total of approximately 9,420,000 shares of our common stock. Each
of these  acquisitions  were handled as a pooling of interest and  therefore the
financial  activities  were integrated  retroactively  through 1999. We were not
required to pay any cash as part of the purchase price in these transactions.

     During 2000,  we issued a total of 3,900,000  shares of our common stock to
three  separate  companies.  We issued  2,900,000  in  exchange  for  incomplete
research and development that we acquired from WebGear and 500,000 shares of our
common  stock to each of two  separate  investment  banker  firms,  World  Trade
Partners and E.B.M. Associates, for their services.

     For the six months  ended  June 30,  2000,  cash  flows  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  was  primarily  due to the purchase of
equipment  required to test our  products of $290,683  and payments on 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.

     For the six months  ended June 30, 2000,  cash flows  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 our employees.

     For the year ended December 31, 2000,  cash flow provided by operations was
$962,818, which is primarily due to a net loss of $3,540,342, which is offset by


                                       18





the WebGear asset  purchase of  $3,962,645,  depreciation  and  amortization  of
$430,962,  stock issuance for services of $22,932,  a change in reserve accounts
of $196,407,  an increase of accounts  receivable  of  $152,364,  an increase of
inventory of $85,270, a decrease in prepaid and other of $174,311 and a decrease
in accounts payable of $39,689, an increase in accrued expenses of $44,371 and a
decrease in customer  deposits of $53,010.  The increase in depreciation was due
primarily  to the addition of  computers  and  software  required to develop our
programmed  semiconductor  logic products and the addition of equipment required
to test our products nonvolatile semiconductor memory products.  $300,767 of the
stock issuance for services was related to the  amortization of the stock issued
to E.B.M.  Associates and World Trade  Partners,  the balance was related to the
issuance of stock for services  performed by our board of directors.  The change
in reserve  accounts,  accounts  receivable,  and inventory was due to increased
product  sales.  The  increase  in prepaid  and other was due  primarily  by our
requirement  to prepay  for our  silicon  wafer  deliveries  if we are above our
credit limit.  The decrease in customer  deposits was primarily due to customers
prepaid  orders at the end of 1999 and the  product  did not ship to them  until
2000.

     The use of cash  flows in  investing  activities  was due to  purchases  of
equipment  related to the purchase of test fixtures and printed  circuit  boards
used to  electrically  exercise our  nonvolatile  semiconductor  memory products
manufactured  at  Chartered  Semiconductor  Manufacturing  and the  purchase  of
computers and software required for development of our programmed  semiconductor
logic products.

     The cash flows  provided  by  financing  were  primarily  the result of the
exercise of stock options of $297,067,  borrowings from a line of credit and the
issuance of a note of $908,231  which was offset by the  payments on the line of
credit of $1,133,000 and a notes payable of $136,135.

     For the year ended December 31, 1999,  cash flow provided by operations was
$354,236,  which was primarily due to depreciation and amortization of $391,718,
a change in reserve accounts of $90,936,  an increase of accounts  receivable of
$174,429, and an increase in accounts payable of $342,754, a decrease in accrued
expenses of  $179,291  and an  increase  in  customer  deposits of $51,850.  The
increase in accounts  receivable  was due to a large  revenue  month in December
1999,  from which the cash was not received until the first quarter of 2000. The
increase in accounts  payable was due primarily to an increase in product demand
which  requires us to maintain a larger  wafer and  work-in-progress  inventory,
which is payable to our  subcontractors  on 30 day terms and to the  purchase of
software that is being paid for on a five year capital lease.

     The use of cash flows in investing  activities  for the year ended December
31,  1999,  was due to  purchases  of  equipment  related to the  testing of our
nonvolatile  semiconductor  memory products and manufacturing and test equipment
for our  programmed  semiconductor  logic  products  and from the  purchase of a
restricted  certificate  of deposit.  Of the  $317,625 of  equipment  purchased,
$179,310  related  primarily of test fixtures and printed circuit boards used to
electrically  exercise our  products  manufactured  at  Chartered  Semiconductor
Manufacturing and wafer processing hardware used to support manufacturing of our
programmed  semiconductor  logic  products  at United  Memories.  The balance of
$138,315  was  related to  computers  and  software  purchased  for use with our
research  and  development  contracts.  A $300,000  certificate  of deposit  was
established  as collateral  for a $300,000  letter of credit that is required by
one of our suppliers in the event that we default on payments.

     The cash flows provided by financing  activities  were primarily the result
of proceeds  from notes payable and capital  contributions.  We are not aware of
any material commitments for capital expenditures,  or any known trends, events,
uncertainties  that have had or expected to have a material impact on our sales,
revenues or income, other than what we discussed above. We are also not aware of
any seasonal  aspects that had a material  effect on our financial  condition or
results of operations.

SHORT-TERM LIQUIDITY.

     Our cash balance at June 30, 2001 was $1,538,390.

     Our future  liquidity  will depend on our revenue growth and our ability to
sell our  products  at  positive  gross  margins  and  control of our  operating


                                       19




expenses. Over the coming year, we expect to spend approximately $10,000,000 for
operating  expenses.  We expect to meet these capital needs from sales  revenues
and, to the extent we do not have  sufficient  revenues,  from our existing cash
reserves.

LONG-TERM LIQUIDITY.

     We will continue to evaluate our long term  liquidity.  We currently do not
have any material  plan of  financing  for the medium or long term or out of the
ordinary  demands of our cash.  We expect to continue to meet our capital  needs
from sales revenues.

ACCOUNTING STATEMENTS

     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.   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.

     In 1998,  Statement of Financial  Accounting  Standards 133, Accounting for
Derivative  Instruments  and  Hedging  Activities  was  issued.   Statement  133
establishes  accounting and reporting  standards for derivative  instruments and
for hedging activities.  It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial  position and measure
those  instruments as fair value.  This statement is effective for the Company's
financial  statements  for the year ended  December 31, 2001 and the adoption of
this  standard  is not  expected  to have a  material  effect  on the  Company's
financial statements.

INFLATION

     The impact of inflation on our business has not been material.



                                       20





                                    BUSINESS

GENERAL

     We  provide  integrated  circuits  to the  electronics  market for use in a
variety of systems, such as computers,  copiers,  factory controllers,  electric
meters and military  systems.  We design,  market and sell our products,  but we
subcontract the majority of our manufacturing requirements. We have designed and
developed nonvolatile  semiconductor products since we began business operations
in May 1987. We have concentrated on the design and development of the 4, 16, 64
and  256  kilobit   nonvolatile   semiconductor   memory  product  families  and
technologies, distribution channels, and sources of supply, including production
at  subcontractors.  Kilobits  are a measure  of the  amount of data that can be
stored,  more kilobits imply more storage.  With our  acquisitions of Integrated
Logic  Systems and  Macrotech  Semiconductor,  we have added the  capability  to
design, develop and produce programmed semiconductor logic products.

     In September  2000,  we  purchased  incomplete  research  and  development,
patents and  trademarks  from  WebGear.  Simtek has  established a core business
within the nonvolatile  memory  application  segment,  and is now expanding into
other technology  areas including logic and data  communication  markets.  These
additional  product  families  are  intended to allow more rapid  total  revenue
growth and to reduce the risk inherent in our historic dependence on one product
family.

     As of  June  30,  2001,  our  backlog  for  released  purchase  orders  was
approximately  $4,100,000,  all of which we expect to ship by December 31, 2001.
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.

     We are in  production of our first four  families of memory  products,  256
kilobit,  64  kilobit,  16  kilobit  and  4  kilobit  nonvolatile  semiconductor
memories. Our 256 kilobit nonvolatile semiconductor memory product was qualified
by  our  internal  quality  organization  to the  product's  data  sheet  and in
accordance  with  accepted  industry  standard  practices in 1997 for sales into
commercial  and  industrial  markets and in 1998 for shipment  into the military
market.  Our 64 kilobit  nonvolatile  semiconductor  memories meet or exceed the
requirements for sales into commercial,  industrial and military markets. Our 16
kilobit and 4 kilobit nonvolatile semiconductor memories have been qualified for
sales into  commercial and industrial  markets.  Our  nonvolatile  semiconductor
memories are physically  smaller and require less maintenance than Static Random
Access  Memory  devices that achieve  nonvolatility  through the use of internal
batteries  and are more  convenient  to use than  Static  Random  Access  Memory
devices that achieve nonvolatility by being combined with additional chips.

     Our   programmed   semiconductor   logic   products  are  used  to  replace
programmable  logic  devices when a customer has completed his system design and
requires  cost-reduced  integrated  circuits  for  volume  manufacturing.   Each
programmed  semiconductor  logic  product  is  configured  using the  individual
customer's design files and is built to his specific requirements.

     We  reduce  capital  requirements  by  subcontracting  all  phases  of  the
manufacturing  process.  Chartered  Semiconductor  Manufacturing began providing
silicon wafers for our  nonvolatile  semiconductor  memory products in September
1993 and  continues to provide  wafers based on our product  technology.  United
Memories and Chartered  Semiconductor  Manufacturing  provide silicon wafers for
our programmed  semiconductor logic products based on 0.5 micron and 0.35 micron
product  technology,  respectively.  Amkor  Technology  and Amkor Test  Services
provide  assembly and final test  services,  respectively,  for our  nonvolatile
semiconductor  memory  products  built from the wafers  purchased from Chartered
Semiconductor Manufacturing. Advanced Semiconductor Engineering and IPAC provide
assembly services for our programmed  semiconductor  logic products.  Testing of
our  programmed  semiconductor  logic  products is done either  internally or by
Multitech Design and Test.

     During   2000,   all  of  the  wafers  used  to  produce  our   nonvolatile
semiconductor    memories   were   purchased   from   Chartered    Semiconductor
Manufacturing.  Sales of these products  accounted for  approximately 75% of our
revenue  for 2000.  Wafers  were  purchased  from both  Chartered  Semiconductor
Manufacturing   and  United   Memories  in  2000  to  support   our   programmed



                                       21





semiconductor   logic   products.   Sales  of  these   products   accounted  for
approximately  9% of our revenue for 2000.  The remaining 16% of our revenue was
from research and development contracts.

     We currently  have three sales and marketing  offices,  located in Colorado
Springs,  Colorado,  Bristol,  England and Atlanta,  Georgia. We have engaged 17
independent   representative   organizations   with  40  sales  offices  and  31
distributor  organizations  with 105 sales  offices.  These  organizations  have
multiple  sales  offices  and sales  personnel  covering  specific  territories.
Through these  organizations and their sales offices we are capable of serving a
worldwide market.

     In the last 12 months,  we have made three  acquisitions  and issued  stock
instead  of  paying  cash to three  companies  for the  purchase  of  goods  and
services.

     Memory Industry and Product Background

     The semiconductor  memory market is large and highly  differentiated.  This
market covers a wide range of product  densities,  speeds,  features and prices.
The ideal memory would have:

o    high bit  density per chip to  minimize  the number of chips  required in a
     system;
o    fast data  read and write  speeds  to allow a  system's  microprocessor  to
     access data without having to wait;
o    the ability to read and modify data an unlimited number of times;
o    the ability to retain its data indefinitely when power is interrupted (i.e.
     nonvolatility);
o    availability in a variety of package types for modern assembly  techniques;
     and
o    the  ability  to be tested  completely  by the  manufacturer  to ensure the
     highest quality and reliability.

Although  customers  would  like to have  memory  components  with  all of these
attributes  it  currently is not  technically  feasible.  Therefore,  the memory
market is segmented with different products  combining  different mixes of these
attributes.

     Semiconductor  memories can be divided into two main  categories,  volatile
and nonvolatile.  Volatile memories generally offer high densities and fast data
access  and  programming   speeds,  but  lose  data  when  electrical  power  is
interrupted.  Nonvolatile  memories  retain  data in the  absence of  electrical
power,  but typically  have been subject to speed and testing  limitations  they
also wear out if they are modified too many times.  There are a number of common
volatile and nonvolatile product types, as set forth below. The list of products
under  "Combinations"  is  limited  to  single  packages  and does  not  include
combinations of the listed memories in separate packages,  such as Static Random
Access Memories in combination with Electrically Erasable Programmable Read Only
Memories and Erasable Programmable Read Only Memories.


            Volatile                              Nonvolatile                          Combinations
            --------                              -----------                          ------------
                                                                          
Static Random Access Memories           Electrically Erasable Programmable      Nonvolatile Static Random Access
                                        Read Only Memory                        Memory

Dynamic Random Access Memory            Flash Memory                            Nonvolatile Random Access
                                                                                Memory
                                        Erasable Programmable Read Only         Static Random Access Memory
                                        Memory                                  plus lithium battery
                                        Programmable Read Only Memory
                                        Read Only Memory


s5


                                       22





     VOLATILE MEMORIES.  Rewritable semiconductor memories store varying amounts
of  electronic  charge  within  individual  memory  cells to perform  the memory
function.  In a Dynamic  Random  Access  Memory the charge must be  electrically
refreshed many times per second or data are lost even when power is continuously
applied. In a Static Random Access Memory the charge need not be refreshed,  but
data can be retained only if power is not interrupted.

     NONVOLATILE MEMORIES. A Read Only Memory is programmed, or written, once in
the later stages of the manufacturing  process and cannot be reprogrammed by the
user.  Programmable  Read Only Memory can be programmed once by the user,  while
Erasable Programmable Read Only Memory may be reprogrammed by the user a limited
number of times if the  Erasable  Programmable  Read Only Memory is removed from
the circuit board in the equipment.  Both Flash memory and Electrically Erasable
Programmable  Read Only  Memory  may be  reprogrammed  electrically  by the user
without removing the memory from the equipment.  However, the reprogramming time
on both Electrically  Erasable Programmable Read Only Memory and Flash memory is
excessively  long  compared  to the read  time  such  that in most  systems  the
microprocessor must stop for a relatively long time to rewrite the memory.

     COMBINATIONS.  Many customers use a combination of volatile and nonvolatile
memory  functions  to  achieve  the  desired  performance  for their  electronic
systems.  By using Static Random Access  Memories in  combination  with Erasable
Programmable Read Only Memory and Electrically  Erasable  Programmable Read Only
Memory  chips,  customers can achieve  nonvolatility  in their systems and still
retain the high data read and write speeds  associated with Static Random Access
Memory. This approach, however, is not desirable in many applications because of
the size and cost  disadvantages  associated  with  using  two or more  chips to
provide a single memory  function.  Also,  it may take up to several  seconds to
transfer  the data from the  Static  Random  Access  Memory to the  Electrically
Erasable  Programmable  Read Only Memory;  an excessive time at power loss. As a
result,  attempts  have been made to combine  nonvolatile  and  volatile  memory
features in a single  package or silicon chip.  One approach  combines an Static
Random Access Memory with lithium batteries in a single package.

     Nonvolatile  Random Access Memories combine volatile and nonvolatile memory
cells on a single chip and do not require a battery.  We believe our nonvolatile
semiconductor  memory  represents a significant  advance over existing  products
that combine  volatility and  nonvolatility on a single silicon chip. We combine
an Static Random Access Memory cell with an Electrically  Erasable  Programmable
Read Only Memory cell to create a small nonvolatile  semiconductor  memory cell.
Our unique and patented memory cell design enables the nonvolatile semiconductor
memory to be  produced at  densities  higher than  existing  Nonvolatile  Random
Access  Memories  and at a lower cost per bit. In  addition to high  density and
nonvolatility,  the  nonvolatile  semiconductor  memory has fast data access and
program  speeds and the Static Random Access Memory portion of the memory can be
modified an unlimited number of times without wearing out.

     MEMORY TECHNOLOGY

     We use an advanced  implementation  of  silicon-nitride-oxide-semiconductor
technology.  Silicon-nitride-  oxide-semiconductor  technology stores electrical
charge within an insulator,  silicon nitride, and uses a thin tunnel oxide layer
to separate the silicon  nitride layer from the  underlying  silicon  substrate.
Silicon-nitride-oxide- semiconductor technology prevents tunnel oxide rupture in
the memory cell from causing an immediate loss of data. Oxide rupture has been a
major cause of failures in Flash and  Electrically  Erasable  Programmable  Read
Only  Memories  using  floating  gate  technology,  where  charge is stored on a
polysilicon  conductor  surrounded  by  insulators.  To  protect  against  these
failures,  many  floating  gate  Electrically  Erasable  Programmable  Read Only
Memories have required error  correction  circuitry and redundant  memory cells.
This increases product cost by requiring more silicon area. Error correction and
redundancy  are not required for our  products to protect  against  tunnel oxide
rupture.  In addition,  our product  designs  incorporate a special test feature
which can predict data retention time for every individual  memory cell based on
measuring the rate of charge loss out of the silicon nitride.

     The   Silicon-nitride-oxide-semiconductor   technology   coupled  with  our
nonvolatile semiconductor memory cell allows high performance nonvolatile Static
Random  Access  Memory  to  be  manufactured  using  complementary  metal  oxide
semiconductor  technology.  The  Silicon-nitride-oxide-semiconductor  technology
that we use has proven to be highly  reliable,  as  demonstrated  by our product
qualification results to date.

                                       23





     OUR MEMORY PRODUCTS

     Nonvolatile Static Random Access Memories.  Our 256 kilobit, 64 kilobit, 16
kilobit and 4 kilobit nonvolatile  semiconductor memory product families consist
of  nonvolatile  memories  that combine  fast Static  Random  Access  Memory and
nonvolatile  Electrically Erasable Programmable Read Only Memory characteristics
within each memory cell on a single chip of silicon.  The Static  Random  Access
Memory portion of the nonvolatile semiconductor memories is operated in the same
manner as most existing Static Random Access Memory products.  The Static Random
Access Memory can be written to and read from an unlimited  number of times. The
Electrically Erasable Programmable Read Only Memory can be programmed, depending
upon device type, by user control or  automatically  by transferring  the Static
Random Access Memory contents into the Electrically  Erasable  Programmable Read
Only Memory. The Electrically Erasable Programmable Read Only Memory data can be
transferred  back into the Static  Random  Access  Memory by user control or the
data can be transferred automatically.

     Our nonvolatile  semiconductor memories have fast data access speeds of 20,
25, 35 and 45 nanoseconds.  These data access speeds correspond to those of fast
Static Random Access Memory and meet the requirements of much of the fast Static
Random Access Memory market.  The high speed  characteristics of our nonvolatile
semiconductor  memories allow them to be used in applications  with various high
performance   microprocessors  and  digital  signal  processors  such  as  those
manufactured by Intel Corp.,  Texas  Instruments  and Motorola.  Our nonvolatile
semiconductor memories can be used to replace Static Random Access Memories with
lithium  batteries  and multiple  chip  solutions  such as Static  Random Access
Memory plus Electrically Erasable Programmable Read Only Memory or Flash Memory.

     The  various  combinations  of  density  and speed  allow  our  nonvolatile
semiconductor memory products to meet the design and performance requirements of
many different types of systems.

     We finalized commercial and industrial qualification of two versions of our
initial  64  kilobit  nonvolatile   semiconductor  memory  product  offering  in
September 1991 and April 1992, respectively. We completed military qualification
of our initial  nonvolatile  semiconductor  memories in May 1992. We began sales
into the commercial market of our initial 16 kilobit  nonvolatile  semiconductor
memory  product  family in 1992. The  nonvolatile  semiconductor  memory product
family also includes the 4 kilobit  version.  We completed the  development  and
product  qualification of the 64 kilobit AutoStoreTM  nonvolatile  semiconductor
memory in 1993. The  AutoStoreTM  version  automatically  detects power loss and
transfers  the  data  from  the  Static  Random  Access  Memory  cells  into the
Electrically  Erasable Programmable Read Only Memory cells. This device does not
require instructions or intervention from the system microprocessor to notify it
of the power loss.  Commercial and industrial  qualification  of our 256 kilobit
nonvolatile  semiconductor memory occurred in 1997 and military qualification of
our 256 kilobit  nonvolatile  semiconductor  memory was  completed in the second
quarter of 1998.

     PROGRAMMABLE LOGIC DEVICE INDUSTRY

     The electronics industry uses logic integrated circuits to route electrical
signals  to  perform  tasks  unique  to that  system.  These  unique  operations
differentiate one system capability from another. Field Programmable Gate Arrays
and Complex Programmable Logic Devices have become popular for this purpose, and
are supplied by a number of major  suppliers,  such as Xilinx and Altera.  These
products  provide  high  performance,  flexible  solutions,  but the  technology
required to allow these products to be  programmable  is expensive when compared
to non- programmable, fixed function, application specific products.

     PROGRAMMED SEMICONDUCTOR TECHNOLOGY

     We  subcontract  the  production  of our  semiconductor  logic  products to
various fabrication  facilities.  We provide the fabrication facilities with the
design of our  programmed  semiconductor  logic  products  and these  facilities
install our designs on the chips through standard wafer processing. We currently
contract with United  Memories for 0.5 micron  technology and with Chartered for
0.35 micron  technology,  in each case through purchase orders on a case-by-case
basis.  We plan to migrate the technology to a 0.25 micron process as the market
develops. Lower micron processes allow us to provide our customers with the same
functionality in our products but at a lower cost.


                                       24




     OUR PROGRAMMED SEMICONDUCTOR LOGIC PRODUCTS

     Programmed  semiconductor  logic  products  are  built  to  order  based on
customer designs that are electronically transferred to our design workstations.
Our  engineers  then  verify  the  design and  implement  it in the  appropriate
technology  to  provide  the most  cost  effective  solution  available  for the
customer.

     Our customers often ask that we provide them with programmed  semiconductor
logic  products  at a lower price than their  existing  logic  products  without
sacrificing the products' functionality. Our software conversion tools translate
our  clients'  design  files of their logic  products  generally  allowing us to
provide our clients with a logic product that has the same  functionality but at
a lower  cost than their  existing  logic  products.  We have also  developed  a
testability  feature that allows us to test our programmed  semiconductor  logic
products without dedicating a portion of the chip area to such testing.

PRODUCT WARRANTIES

     We presently provide a one-year limited warranty on our products.

RESEARCH AND DEVELOPMENT

     Our research and development  activities are centered around developing new
products and reducing the cost of our nonvolatile  semiconductor memory products
as  well  as  the  development  and  design  of  customer  specific   programmed
semiconductor   logic  products.   We  have  reduced  our  production  costs  by
introducing our 0.8 micron process technology.  This technology reduced the size
of the 64  kilobit  nonvolatile  semiconductor  memory  chip and  enabled  us to
develop a cost effective 256 kilobit  nonvolatile  semiconductor  memory. We are
continuing our efforts to improve yield on the 0.8 micron  technology.  In order
to further  reduce  costs,  since  late 1997 we have used  outside  experts  for
testing  of our  products.  We have a test  floor  used  for  evaluation  of our
technologies,  product designs and product quality.  The test floor is also used
for production testing of silicon wafers.

     In an effort to expand our products, we acquired, from WebGear,  incomplete
research  and  development  of  technology  that we intend to apply  within  the
emerging Bluetooth market segment.  "Bluetooth" is an industry  standard,  short
range  wireless  communications  technology  designed  to  allow  a  variety  of
electronic  devices,  such as wireless  telephone,  Personal Digital Assistants,
notebook  computers,   desktop  computers,   peripheral   input-output  devices,
television  set-top  boxes and Internet  appliances to exchange data without the
use of physical cabling. We plan to spend  approximately  $750,000 over the next
year  in  order  to  develop  and  manufacture  integrated  circuits  using  the
technology in Bluetooth applications.

     We anticipate  that our  acquisition of Q-DOT Group will enable us to enter
the high speed data  communications  market,  addressing both wired and wireless
applications,  based on advanced Silicon Germanium process  technology.  Silicon
Germanium is rapidly  becoming the  technology of choice for many analog,  mixed
signal and high speed digital circuits. We plan to spend approximately  $350,000
over the next year in order to develop and manufacture integrated circuits using
the Silicon Germanium process technology.

     Our research and development  expenditures for the years ended December 31,
2000 and 1999 were  $6,158,189 and $2,240,273,  respectively.  Of the $6,158,189
expenditure incurred in 2000,  $3,962,646 was related to the incomplete research
and  development  we purchased  from  WebGear with stock.  We intend to continue
expenditures on research and  development;  however,  the percentage of research
and development  expenditures  is expected to decrease  relative to expenditures
relating to the commercial production of our existing products.

MANUFACTURING AND QUALITY CONTROL

     Our  manufacturing  strategy  is to  use  subcontractors  whose  production
capabilities meet the requirements of our product designs and technologies.

     In  1992,  we  entered  into  a  manufacturing   agreement  with  Chartered
Semiconductor  Manufacturing to provide us with silicon wafers for our products.
Under the manufacturing  agreement with this  subcontractor,  it has installed a
manufacturing process for versions of our current and future memory products.


                                       25





     Finished   wafer   procurement   reverted   to   Chartered    Semiconductor
Manufacturing  during 1998 as we ceased  purchasing  finished units from Zentrum
Mikroelektronik  Dresden.  We used United Memories for wafer  procurement of our
0.5 micron Programmed  semiconductor logic products and Chartered  Semiconductor
Manufacturing for wafer procurement of our 0.35 micron Programmed  semiconductor
logic  products.  During  2000,  all of our product  revenue was based on wafers
purchased from Chartered Semiconductor Manufacturing and United Memories.

     Device packaging of our nonvolatile semiconductor memory products continued
at the Amkor  facilities in the Philippines and South Korea.  Final test for our
nonvolatile  semiconductor  memory  products  was  established  successfully  at
Integra  Technologies,  now Amkor Test  Services,  in  Wichita,  Kansas.  Device
packaging of our programmed  semiconductor  logic products continued at Advanced
Semiconductor Eng., Inc. in Taiwan.  Final test of our programmed  semiconductor
logic products was completed in our Colorado  Springs  facility and at Multitech
Design and Test in San Jose, California.

     Our  subcontractors  provide  quality  control for the  manufacture  of our
products. We maintain our own quality assurance personnel and testing capability
to assist the subcontractors with their quality programs and to perform periodic
audits of the subcontractors' facilities and finished products to ensure product
integrity.

     Our quality and reliability programs were audited by several commercial and
military  customers  during  2000  as  part of  routine  supplier  certification
procedures. All such audits were completed satisfactorily.

MARKETS

     Our memory products are targeted at fast  nonvolatile  Static Random Access
Memory  markets,   Static  Random  Access  Memory  plus  Electrically   Erasable
Programmable  Read Only Memory  markets and other  nonvolatile  memory  products
broadly used in commercial, industrial and military electronic systems.

     Our  programmed   semiconductor   logic  products  are  built  to  customer
requirements in many application areas.  Therefore, we believe that our products
will address very broad markets including these applications:

     Airborne and Space Computers *           Lighting *
     Automotive Control & Monitoring          Medical Instruments *
     Portable Telephone Modems                Control Systems *
     Portable Computers                       Currency Changers
     Postal Meters                            Data Monitoring Equipment *
     Printers *                               Disk Drives *
     Process Control Equipment *              Facsimile Machines *
     Radar and Sonar Systems *                Gaming *
     Telecommunications Systems *             GPS Navigational Systems
     Terminals *                              Guidance and Targeting Systems *
     Test Equipment *                         High Performance Workstations
     Utility Meters *                         Laser Printers *
     Vending Machines                         Mainframe Computers
     Weapon Control Systems *                 CD Writers
     Security Systems *                       Copiers *
     Broadcast Equipment *                    Cable TV Set Top Converter Boxes *
     Studio Recording Equipment *

The applications  marked with an asterisk currently use our products.  The other
applications use similar products, but may use our products in newer designs.

We are  increasing  marketing and sales emphasis on office  automation  products
such as copiers and mass storage  systems as well as beginning new sales efforts
in data communication applications.


                                       26




SALES AND DISTRIBUTION

     Our  strategy is to generate  sales  through the use of  independent  sales
representative agencies and distributors.  We believe this strategy provides the
fastest and most cost effective way to assemble a large and  professional  sales
force.

     We currently  have three sales and marketing  offices,  located in Colorado
Springs,  Colorado,  Bristol,  England and Atlanta,  Georgia. We have engaged 17
independent   representative   organizations   with  40  sales  offices  and  31
distributor  organizations  with 105  sales  offices.  Both  organizations  have
multiple  sales  offices  and sales  personnel  covering  specific  territories.
Through these  organizations and their sales offices we are capable of serving a
worldwide market.

     Independent  sales  representatives  typically  sell a  limited  number  of
noncompeting  products to semiconductor users in particular  geographic assigned
territories.  Distributors  inventory  and sell products from a larger number of
product  lines  to  a  broader   customer   base.   These  sales   channels  are
complementary,  as  representatives  and  distributors  often work  together  to
consummate a sale,  with the  representative  receiving a commission from us and
the  distributor  earning a markup on the sale of the products.  We supply sales
materials to the sales representatives and distributors.

     For our marketing  activities,  we evaluate external  marketing surveys and
forecasts  and  perform  internal  studies  based,  in part,  on inputs from our
independent sales representative agencies. We prepare brochures, data sheets and
application notes on our products.

CUSTOMERS AND BACKLOG

     We have shipped  qualified  nonvolatile  semiconductor  memory  products to
customers directly and through  distributors since the September 1991 commercial
product qualification;  the majority of our customers are Fortune 500 companies.
Approximately  40% of our net product sales during 2000 were to customers in the
Pacific Rim and  approximately  17% were to customers in Europe.  The  remaining
product sales were to customers in North America.

     As of June 30,  2001,  we had a backlog  of  unshipped  customer  orders of
approximately  $4,100,000,  which is expected to be filled by December 31, 2001.
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.

     During  2000,  we  continued to receive  initial and  scheduled  production
orders  on our 64  kilobit  and 256  kilobit  nonvolatile  semiconductor  memory
product. We believe that we will continue to receive volume production orders on
these products.

LICENSES

     ZENTRUM  MIKROELEKTRONIK  DRESDEN.  In  June of  1994,  we  signed  a joint
development  agreement with Zentrum  Mikroelektronik  Dresden to install the 1.2
micron  products  for  manufacture  at Zentrum  Mikroelektronik  Dresden  and to
jointly   develop  the  0.8  micron   technology   at  Chartered   Semiconductor
Manufacturing.  The  agreement  was  modified  in  August of 1994 by a Letter of
Intent between us to bypass the  installation of our  nonvolatile  semiconductor
memory   products  based  on  a  1.2  micron   process   technology  at  Zentrum
Mikroelektronik  Dresden and instead modify the 0.8 micron  technology to run in
the Zentrum Mikroelektronik Dresden factory. Zentrum Mikroelektronik Dresden has
paid us all  the  monetary  requirements  under  this  agreement  including  any
royalties we may receive from sales of these jointly developed products.

     FUTURE LICENSE SALES. We intend to sell product and technology  licenses on
a  selective  basis.  We  will  continue  to  seek  licensing  partners  who can
contribute to the development of the nonvolatile semiconductor memory market and
provide a meaningful  level of revenue to us while not posing an undue threat in
the marketplace.


                                       27




COMPETITION

     Our products compete on the basis of several factors, including data access
and programming speeds, density, data retention, reliability, testability, space
savings, manufacturability, ease of use and price.

     Products that compete with our family of nonvolatile semiconductor memories
fall into three categories. The first category of products that compete with our
nonvolatile  semiconductor  memories are volatile and nonvolatile  chips used in
combination,  such as fast Static  Random  Access  Memories  used with  Erasable
Programmable Read Only Memories,  Electrically  Erasable  Programmable Read Only
Memories,  or Flash  memory.  We  believe  that we have  advantages  over  these
applications  because the  nonvolatile  semiconductor  memory  allows data to be
stored in  milliseconds  as  compared  to seconds  for chips used in pairs.  Our
single chip  solution  provides a space  savings and easier  manufacturing.  Our
single chip solution generally  provides  increased  reliability versus multiple
chips.  We  believe  it will be able to compete  with many  solutions  requiring
density  up to 256  kilobits;  however,  in those  instances  where the  density
requirement is beyond 256 kilobits the nonvolatile semiconductor memory does not
compete.  New systems designs tend to use larger memory  densities  greater than
256  kilobits,  reducing the market  available to us. We estimate that less than
10% of the  market  uses 256  kilobit or smaller  memories.  Competitors  in the
multiple  chip  category  include  Cypress   Semiconductor   Corp.,   Integrated
Technology,  Inc.,  Toshiba,  Fujitsu,  Advanced Micro Devices,  Inc., Atmel and
National  Semiconductor  Corp. We currently  hold less than 1% market share this
market category.

     The  second   category  of  products  that  compete  with  our  nonvolatile
semiconductor  memories are products that combine Static Random Access  Memories
with lithium batteries in specially adapted packages.  These products  generally
are slower in access speeds than our nonvolatile  semiconductor  memories due in
part to  limitations  caused by life of the lithium  battery when coupled with a
faster Static Random Access Memory. Our nonvolatile  semiconductor  memories are
offered in  standard,  smaller,  less  expensive  packages,  and do not have the
limitation  on  lifetime  imposed on the  Static  Random  Access  Memory/battery
solutions by the lithium  battery.  Our nonvolatile  semiconductor  memories can
also be used for wave soldered automatic  insertion circuit board assembly since
they do not have the  temperature  limitations  of lithium  batteries.  However,
lithium  battery-backed  Static Random  Access Memory  products are available in
densities of 1 megabit and greater per package.  Companies  currently  supplying
products  with  lithium  batteries  include  Dallas   Semiconductor   Corp.,  ST
Microelectronics  and Texas Instruments.  We currently hold approximately 10% of
this market category.

     The third  category  consists of  Nonvolatile  random access  memories that
combine Static Random Access Memory cells and Electrically Erasable Programmable
Read Only Memory  memory  cells on a  monolithic  chip of  silicon.  Our current
product offerings are of higher density,  faster access times and we believe can
be manufactured at lower costs per bit than Nonvolatile  random access memories.
We believe that traditional  manufactures of Nonvolatile  random access memories
have discontinued manufacturing their products.

     Zentrum Mikroelektronik  Dresden,  through their license agreement with us,
has the worldwide right to sell under the Zentrum  Mikroelektronik Dresden label
nonvolatile  semiconductor memories developed jointly by Zentrum Mikroelektronik
Dresden and us. With volume  production  established at Zentrum  Mikroelektronik
Dresden,   Zentrum   Mikroelektronik   Dresden  is  selling   such   nonvolatile
semiconductor  memories.  This has had a positive  impact  for us by  creating a
second source,  which is required by many larger companies,  for our nonvolatile
semiconductor  memory  products.  However,  in 2000,  we were required to reduce
prices  to  specific  markets  due to the  increased  competition  from  Zentrum
Mikroelektronik   Dresden.   We  believe  that  the  competition   from  Zentrum
Mikroelektronik  Dresden has increased the number of companies using nonvolatile
semiconductor  memories,  but may have put downward  pressure on average selling
prices.

      We are aware of other  semiconductor  technologies for nonvolatile  memory
products. These technologies include ferroelectric memory and thin film magnetic
memory.  Each of these requires a newly developed  process  technology which has
processing  risk, but may deliver  performance  characteristics  superior to our
technology if perfected.  Each of these processes  integrates materials into the
silicon  processing steps which are not commonly used for  semiconductor  memory
products today.  If successful,  these products could perform the same functions
in a system that our products  currently  perform,  but may be  manufactured  in
higher density or lower cost products.  Ramtron, Raytheon,  Symetrix, and others
are developing  ferroelectric products.  Honeywell,  Inc. is developing magnetic
film products.


                                       28





     Programmed    semiconductor   logic-type   solutions   are   supported   by
semiconductor  companies  such  as  AMI  Semiconductor,  NEC  and  Temic.  These
competitors  provide a wide variety of solutions using  semiconductor  processes
ranging from 0.8 micron process  technology to 0.25 micron  process  technology.
The  business  of  converting   customers'   programmable   logic   products  to
non-programmable  logic products is highly  dependent on the customers'  designs
and system performance  requirements.  Each competitor's  process technology and
software tools will affect its ability to support any particular requirement.

PATENTS AND INTELLECTUAL PROPERTY

     We  undertake  to protect our product  designs and  technologies  under the
relevant  intellectual property laws as well as by utilizing internal disclosure
safeguards.  Under our licensing  programs,  we exercise control over the use of
our  protected  intellectual  property and have not  permitted  our licensees to
sublicense our nonvolatile semiconductor memory products or technology.

     It is  common  in  the  semiconductor  industry  for  companies  to  obtain
copyright,  trademark,  trade secret and patent protection of their intellectual
property.  We believe that patents are  significant in our industry,  and we are
seeking to build a patent portfolio.  We expect to enter into patent license and
cross-license  agreements with other companies.  We have been issued twenty five
patents in the United States on our  nonvolatile  semiconductor  memory cell and
other circuit designs.  These patents relate to circuit  implementations used to
design our nonvolatile  memory  products.  The use of these patents allows us to
design circuits with lower power  consumption and faster store timing than would
be possible otherwise giving us a competitive advantage over other technologies.
These  patents have terms that expire  through 2008 to 2013.  We have also taken
steps to obtain  European  patents in the large  European  countries,  including
Germany, France, the United Kingdom and Sweden on the nonvolatile memory patents
that  would  have  potential  value  in  international  markets.  We  have  four
applications that have been allowed and intend to prepare patent applications on
additional circuit designs we have developed. However, as with many companies in
the semiconductor  industry,  it may become necessary or desirable in the future
for us to obtain licenses from others relating to our products.

     Many of our product  designs are not  protected by patents.  We do not have
patents on our logic product  technology  but rather  protect such logic product
technology as trade secrets.  Our logic products  accounted for approximately 9%
of our sales for the year ended  December 31, 2000.  We also protect  aspects of
our  technology  that  relate  to our  semiconductor  memory  products  as trade
secrets.  There are disadvantages to protecting  intellectual  property as trade
secrets  rather than  patents.  See "Our  Patents  May Not Provide Us  Effective
Intellectual Property Protection; This Could Harm Our Business."

     We have received federal registration of the term "Novcel" a term we use to
describe our  technology.  We have not sought federal  registration of any other
trademarks, including "Simtek" and "QuantumTrapTM" or our logo.

EMPLOYEES

     As of the date of this prospectus, we had 45 full-time employees.

FACILITIES

     We lease  approximately  12,000  square feet of space in Colorado  Springs,
Colorado.  This space includes a product engineering test floor of approximately
2,350 square feet.  The lease  expires on December  31,  2001.  During 2000,  we
signed  a  lease  for  a  new  location  in  Colorado   Springs,   Colorado  for
approximately  16,000 square feet of space that  includes a product  engineering
test floor of approximately  3,000 square feet. The new lease agreement requires
the new  landlord to begin  paying all costs  related to the old location at the
time we take occupancy at the new location. In March 2001, we moved into the new
facility, located at 4250 Buckingham Drive #100, Colorado Springs, CO 80907.

LEGAL PROCEEDINGS

     There  were  no  legal  proceedings  against  us as of  the  date  of  this
prospectus.

                                       29





MATTERS SUBMITTED TO A VOTE OF SECURITY HOLDERS

     On November 16, 2000, we had a special  meeting of  shareholders  to ratify
the  selection of Hein +  Associates  as our  independent  auditors for the year
ending  December 31, 2000. The proposal was passed with the voting of 32,532,148
For, 97,355 Against, and 138,458 Abstained.






                                       30





                                   MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

     Our directors and executive officers are as follows:



Name                                                 Age                      Position
----                                                 ---                      --------
                                                        
Douglas M. Mitchell..............................    51       Director, Chief Executive Officer and President,
                                                              Chief Financial Officer (acting)

Klaus C. Wiemer..................................    63       Director

Robert H. Keeley.................................    59       Director

John Heightley    ...............................    64       Director


     DOUGLAS M.  MITCHELL,  served as our Chief  Operating  Officer from July 1,
1997  until  January 1, 1998 at which time he became  Chief  Executive  Officer,
President  and a director.  Mr.  Mitchell has over 20 years of experience in the
semiconductor  and electronics  systems industry  holding various  marketing and
sales  management  positions.  Prior to joining us, he was  President  and Chief
Executive Officer of a wireless communications  company,  Momentum Microsystems.
Prior to this Mr.  Mitchell was Vice  President  of Marketing  with SGS- Thomson
Microelectronics,  responsible  for marketing and  applications  engineering  of
Digital Signal Processing, transputer,  microcontroller and graphics products in
North America. SGS-Thomson had acquired Inmos Corporation where Mr. Mitchell had
been Manager, US Marketing and Sales. Mr. Mitchell has held management positions
at Texas  Instruments and Motorola and has been  responsible for various product
definition and product  development.  Mr.  Mitchell holds a Bachelors  degree in
electrical  engineering  from the  University of Texas and a Masters of Business
Administration degree from National University.

     KLAUS C. WIEMER, has served as a director since May 1993. He also serves on
the boards of  Neomagic  Corp (NMGC) of Santa  Clara,  CA and  InterFET  Corp of
Garland,  TX. From July 1993 to May 1994,  Dr.  Wiemer  served as President  and
Chief Executive  Officer of our company.  Since May 1994, Dr. Wiemer has been an
independent consultant.  From April 1991 to April 1993, Dr. Wiemer was President
and Chief Executive Officer of Chartered Semiconductor  Manufacturing , and from
July 1987 to March 1991, Dr. Wiemer was President and Chief Operating Officer of
Taiwan  Semiconductor  Manufacturing  Company.  Prior to 1987,  Dr. Wiemer was a
consultant for the Thomas Group  specializing in the area of integrated  circuit
manufacturing  and previously  worked for fifteen years with Texas  Instruments.
Dr.  Wiemer holds a Bachelors  degree in physics from Texas Western  College,  a
Masters  degree in physics from the  University  of Texas and a Ph.D. in physics
from Virginia Polytechnic Institute.

     ROBERT H. KEELEY,  has served as a director since May 1993. He is currently
the El Pomar  Professor  of Business  Finance at the  University  of Colorado at
Colorado  Springs.  From 1986 until he joined the faculty at the  University  of
Colorado  at  Colorado  Springs  in 1992,  Dr.  Keeley  was a  professor  in the
Department  of Industrial  Engineering  and  Engineering  Management at Stanford
University.  Prior to  joining  Stanford,  he was a general  partner of Hill and
Carmen  (formerly  Hill,  Keeley and Kirby),  a venture capital firm. Dr. Keeley
holds a Bachelors degree in electrical engineering from Stanford University,  an
M.B.A.  from Harvard  University  and a Ph.D.  in business  administration  from
Stanford University.  Dr. Keeley is also a director of Analytical Surveys,  Inc.
and a number of private companies.

     JOHN  HEIGHTLEY,  was  appointed  as a  director  in  September  1998.  Mr.
Heightley is currently executive vice president and chief technology officer for
United  Memories of  Colorado  Springs.  From 1990 to 1996,  Mr.  Heightley  was
president and chief executive  officer of Adaptive  Solutions,  Inc. In 1986 and
1987, he held the position of president and chief  executive  officer of Gigabit
Logic,  Inc.;  in 1987 he was  appointed  chairman  of  Gigabit  along  with his
responsibilities  as president and chief executive  officer.  Mr. Heightley held
these positions until 1990. Prior to Gigabit,  Mr. Heightley served as president


                                       31




and chief executive  officer of Ramtron  Corporation  from 1985 to 1986 and from
1978 to 1985 he served as a member of the board of directors,  president,  chief
operating officer and vice president of memory products for Inmos International,
plc. Mr.  Heightley was granted a B.S.  degree in Engineering  Science from Penn
State University and earned a M.S. degree in Electrical Engineering from M.I.T.

     Mr. Harold Blomquist resigned as a member of our board of directors on June
28, 2001. We will fill the vacancy on our board in accordance with our bylaws.

     Subject to the requirement  that the board of directors be classified if it
consists of six or more persons,  directors  serve until the next annual meeting
or until their successors are elected and have qualified.  Officers serve at the
discretion  of the board of  directors.  Vacancies on the board of directors are
filled by the existing directors.

     In  1994  we  entered  into  a  Product  License  Development  and  Support
Agreement, with Zentrum Mikroelektronik Dresden. This agreement,  modified later
in 1994 and again in 1995, provides Zentrum Mikroelektronik Dresden the right to
appoint two members to our board of directors  which  members must be acceptable
to, and approved by, our board of  directors.  Although  this  agreement and its
modifications  do  not  have a set  termination  date,  Zentrum  Mikroelektronik
Dresden's  two  nominees  to our board of  directors  resigned in April 1998 and
Zentrum  Mikroelektronik  Dresden has not  attempted  to nominate  anyone to our
board since then. Zentrum  Mikroelektronik Dresden currently holds a competitive
position  to  us  in  the  marketplace.   Furthermore,  Zentrum  Mikroelektronik
Dresden's  right to appoint two members to our board of directors was subject to
Zentrum  Mikroelektronik  Dresden's  compliance  with the  terms of the  Product
License  Development and Support Agreement and its amendments.  We cannot assure
you that Zentrum Mikroelektronik Dresden will not claim that it has the right to
appoint two members to our board of directors in the future, again acceptable to
and approved by our board of directors,  or that Zentrum Mikroelektronik Dresden
will not  succeed in securing  such  appointment.  See  "Business  --  Licenses,
Zentrum Mikroelektronik Dresden."


SPECIAL PROVISIONS IN ARTICLES OF INCORPORATION

     Our articles of incorporation contain a provision limiting the liability of
directors  to  the  fullest  extent   permitted  under  the  Colorado   Business
Corporation Act. The Colorado  Business  Corporation Act allows a corporation to
limit  the  personal   liability  of  a  director  to  the  corporation  or  its
shareholders  for monetary  damages for breaches of fiduciary duty as a director
except:

o    breaches of the  director's  duty of loyalty to the  corporation  or to its
     shareholders;

o    acts or omissions not in good faith or which involve intentional misconduct
     or a knowing violation of the law;

o    other acts specified in the Colorado Business Corporation Act, such as acts
     involving  voting for or assenting to a  distribution  made in violation of
     the Colorado Business Corporation Act or our articles of incorporation;

o    transactions from which the director derived an improper personal benefit.

     The  provisions  of the Act will not impair our ability to seek  injunctive
relief for breaches of fiduciary duty. Such relief,  however,  may not always be
available as a practical matter.

     Our articles of incorporation  also contain a provision that requires us to
indemnify, to the fullest extent permitted under the Act, directors and officers
against  all costs and  expenses  reasonably  incurred  in  connection  with the
defense of any claim,  action,  suit or  proceeding,  whether  civil,  criminal,
administrative,  investigative or other, in which such person may be involved by
virtue of being or having been a director, officer or employee.

     Insofar as indemnification for liabilities arising under the Securities Act
of 1933,  as amended,  may be permitted to directors,  officers and  controlling
persons of Simtek pursuant to the foregoing provisions, or otherwise, Simtek has
been advised that in the opinion of the Securities and Exchange  Commission such
indemnification  is  against  public  policy  as  expressed  in the  Act and is,
therefore, unenforceable.

                                       32





EXECUTIVE COMPENSATION

     The  following  table  sets  forth  information  for each of our last three
fiscal years with respect to the annual and long-term  compensation  of the only
individual  acting as the Chief  Executive  Officer during the fiscal year ended
December  31,  2000.  No other  executive  officers as of December  31, 2000 had
combined  annual  salary and bonus for the fiscal year ended  December  31, 1998
that exceeded $100,000.


                                                       Summary Compensation Table

                                                                                 Long Term Compensation
                                                                             ------------------------------
                                    Annual Compensation                       Awards             Payouts
                                ---------------------------------------------------------------------------
Name                                                    Other                Restricted
and                                                     Annual               Stock               LTIP    All Other
Principal                                               Compen-              Award(s)  Options/ Payouts  Compen-
Position                    Year  Salary($)  Bonus($)   sation($)              ($)     SARs(#)   ($)     sation($)
---------                   -------------------------------------------------------------------------------------
                                                                                   

Douglas M. Mitchell(1)      2000  $150,000   $62,500    --                      --      40,000    --       --
Chief Executive Officer     1999  $120,000        --    --                      --      30,000    --       --
and President               1998  $120,000        --    --                      --     250,000    --       --


(1)  Mr. Mitchell became our Chief Executive Officer and President on January 1,
     1998.


OPTION GRANT TABLE

     The following table sets forth  information with respect to options granted
by us during the fiscal year ended December 31, 2000 to the individual  named in
the summary compensation table above.



                                             Shares                                                   Potential
                                           subject to                   Market                    Realizable Value
                                         Options/SAR's                  Price                        at Assumed
                            Shares         Granted to    Exercise        per                       Annual Rate of
                          subject to       Employees       Price       Share on                      Stock Price
                        Options/SAR's      in Fiscal        Per        Date of     Expiration     Appreciation for
Name                       Granted         % of Total      Share        Grant         Date           Option Term
----------------------------------------------------------------------------------------------------------------------
                                                                                                   5%         10%
                                                                                               -----------------------
                                                                                        
Douglas M. Mitchell       40,000(1)           4.1%         $0.25        $0.25       1/14/2007    $4,071      $9,487


(1)  40,000  options  were  granted to Mr.  Mitchell  in his  capacity  as Chief
     Executive  Officer and  President,  these  options vest at 1/36th per month
     over 3 years.



                                       33





YEAR-END OPTION TABLE

     The following table sets forth as of December 31, 2000 the number of shares
subject to  unexercised  options  held by the  individual  named in the  summary
compensation table above. 550,000 options had an exercise price greater than the
last sale price of our common  stock  underlying  the options as reported by the
OTC  Electronic  Bulletin Board on the last trading day of the fiscal year ended
December 31, 2000.


                           Aggregated Option/SAR Exercises in Last Fiscal Year
                                  and Fiscal Year-End Option/SAR Values


                                                                                             Value of Unexercised
                                                           Number of Unexercised                 in-the-money
                                                          Options/SARs at Fiscal                 Options/SARs
                             Shares          Value               Year-End                     at Fiscal Year-End
                           Acquired on     Realized     Exercisable    Unexercisable    Exercisable      Unexercisable
Name                      Exercise (#)        ($)           (#)             (#)             ($)               ($)
-----------------------------------------------------------------------------------------------------------------------
                                                                                          
Douglas M. Mitchell          100,000       $198,952       541,389         78,611          $10,111           $14,389




EMPLOYMENT AGREEMENTS

     Mr. Mitchell is employed as President and Chief Executive  Officer pursuant
to an employment agreement with us. Under the terms of the employment agreement,
Mr. Mitchell receives and annual salary of $150,000 and such additional benefits
that are generally provided other employees. Mr. Mitchell's employment agreement
expires June 1, 2001 but is automatically  renewed for successive one-year terms
unless we or Mr. Mitchell elects not to renew. If we terminate the employment of
Mr. Mitchell without cause, Mr. Mitchell is entitled to continuation of his base
salary  and  benefits,  mitigated  by income  Mr.  Mitchell  may  earn,  for the
remainder  of  the  term  of  the  agreement.  Mr.  Mitchell  is  subject  to  a
noncompetition covenant for a period of one year from the date of termination.

CONFIDENTIALITY AND NONDISCLOSURE AGREEMENTS

     We  generally  require  our  employees  to  execute   confidentiality   and
nondisclosure  agreements  upon the  commencement  of  employment  with us.  The
agreements  generally provide that all inventions or discoveries by the employee
related to our business and all confidential information developed or made known
to the employee during the term of employment shall be the exclusive property of
us and shall not be disclosed to third parties without the prior approval of us.

DIRECTORS' COMPENSATION

     Each director who is not also an employee  receives $1,000 for each meeting
of the Board,  attended in person,  and $500 for each  meeting of a committee of
the Board.  Directors are also  reimbursed  for their  reasonable  out-of-pocket
expenses  incurred in connection with their duties to us. During the fiscal year
ended December 31, 2000, 15,000 stock options were granted,  at the market price
on date of grant,  each to Dr.  Klaus Wiemer , Dr.  Robert  Keeley,  Mr.  Harold
Blomquist and Mr. John Heightley.

                               SECURITY OWNERSHIP

     The first table below sets forth  information  regarding  ownership  of our
common  stock  as of  August  24,  2001,  by each  person  who is known by us to
beneficially  own more than five percent of our common stock,  by each director,
by each  executive  officer named in the summary  compensation  table and by all
directors and executive  officers as a group.  Shares issuable within sixty days
upon the exercise of options are deemed outstanding for the purpose of computing
the percentage  ownership of persons beneficially owning such options or holding
such notes but are not deemed  outstanding  for the  purpose  of  computing  the
percentage  ownership of any other  person.  To the best of our  knowledge,  the
persons listed


                                       34





below have sole voting and investment power with respect to the shares indicated
as owned by them subject to community  property  laws where  applicable  and the
information contained in the notes to the table.


                                                  Number of           Percentage
Name and Address of Beneficial Owner            Shares Owned           of Class
------------------------------------            ------------          ----------

Hugh Norman Chapman                             3,049,722(1)             5.68%
4785 Rustler Ct.
Colorado Springs, CO 80918

Douglas M. Mitchell                               702,164(2)             1.31%
205 Ridge Dr.
Woodland Park, CO 80863

Klaus C. Wiemer                                   120,000(3)               *
5705 Archer Court
Dallas, TX  75252

Robert H. Keeley                                   95,000(4)               *
12630 Milan Road
Colorado Springs, CO  80908

John D. Heightley                                  55,000(5)               *
1275 Log Hollow Point
Colorado Springs, CO 80906

All officers and directors as a group             918,553(6)             1.71%
   (5 persons)

-----------------
* Less than one percent.


(1)  Represents  2,962,500  shares of our common stock that Mr. Chapman received
     upon our acquiring  Integrated  Logic Systems and represents  87,222 shares
     issuable upon exercise of options.

(2)  Represents 652,778 shares issuable upon exercise of options,  44,386 shares
     acquired  from the Q-DOT Group  acquisition  and 5,000 shares Mr.  Mitchell
     owns personally.

(3)  Represents 120,000 shares issuable upon exercise of options.

(4)  Includes 95,000 shares issuable upon exercise of options.

(5) Represents 55,000 shares issuable upon exercise of options.

(6)  Includes 922,778 shares issuable upon exercise of stock options.




                                       35





                              SELLING SHAREHOLDERS

     The following table sets forth information about our selling shareholders.


                                                                                              Number of     Percentage
                                                              Number of                         Shares       of Class
                                                         Shares Beneficially    Number of     Following      Following
                                                            Owned Before          Shares         the            the
Name and Address of Selling Shareholders                      Offering           Offered       Offering      Offering
----------------------------------------                 -------------------    ---------    -----------    ----------
                                                                                                   
Mr. William B. Bliss                                         1,136,581           397,804       738,777         2.12%
2985 Broadmoor Valley Road
Colorado Springs, CO 80906

Mr. Thomas K. Bohley                                            17,663             6,183        11,480           *
P. O. Box 7345
Colorado Springs, CO 80933-7345

Mr. Bruce B. Brundage                                           53,871            18,855        35,016           *
7837 S. Perry Park Rd.
Larkspur, CO 80118

Ms. Mary F. Crockett                                             1,767               619         1,148           *
1402 Lorraine Street
Colorado Springs, CO 80906-2146

Mr. Russell Farmer                                              51,451            18,008        33,443           *
15098 Zuni Street
Broomfield, CO 80020

Mr. Morgan L. Fitch, Jr. (1)                                   583,746           204,312       379,434         1.09%
4640 Clausen
Western Springs, IL 60558

Mr. Steven R. Freeman                                           12,364             4,328         8,036           *
2241 S. Huran Pkwy., #4
Ann Arbor, MI 48104

Mr. David A Gradl                                              226,663            79,333       147,330           *
1308 Pickwick Court
Naperville, IL 60563

Mr. Michael E. Harrell                                           1,767               619         1,148           *
2263 Havenridge Dr.
Colorado Springs, CO 80920

Mr. Donald L. Herman, Jr.                                       33,771            11,820        21,951           *
435 Maverick Way
Monument, CO 80132

Dr. Robert J. Kansy                                             33,771            11,820        21,951           *
5509 Harbor Town Dr.
Dallas, TX 75287




                                       36






Mr. James H. Lauffenberger                                      17,663             6,183        11,480           *
6427 Rifle Circle
Colorado Springs, CO 80919

Ms. Barbara S. Linnenbrink                                     489,287           171,251       318,036           *
475 Silver Saddle
Monument, CO 80132

Mr. Thomas E. Linnenbrink                                      894,128           312,945       581,183         1.67%
5985 Nora Point, #202
Colorado Springs, CO 80919

Mr. Douglas M. Mitchell                                        702,164(2)         15,536       686,628(2)      1.29%
205 Ridge Rd.
Woodland Park, CO 80863

Mr. Marc A. Morin                                                1,961               687         1,274           *
161 W. Ridge Dr.
Woodland Park, CO 80863

Dr. Margaret S. Mortz                                           35,325            12,364        22,961           *
3420 S. Ridgeview Drive
Spokane, WA 99206-9556

Mr. James J. Myrick                                            408,057           142,820       265,237           *
748 Greenwood Ave.
Glencoe, IL 60022

Mr. Timothy G. O'Shaughnessy                                       884               310           574           *
12415 Latigo Blvd.
Elbert, CO 80106

Dr. David E. Reed                                               17,663             6,183        11,480           *
9747 W.  99th Place
Westminister, CO 80021

Mr. J. Ray Rice                                                  2,208               773         1,435           *
7555 Wildridge Rd.
Colorado Springs, CO 80908

Dr. Peter C. T. Roberts                                         17,663             6,183        11,480           *
639 N. Sunway Drive
Gilbert, AZ 85233

Mr. William J. Schneweis                                           884               310           574           *
22 Pinon Lake Dr.
Divide, CO 80814

Mr. Brian L. Sperry                                             33,789            11,827        21,962           *
2877 Loma Place
Boulder, CO 80301

Mr. Alan Steiner                                                53,871            18,855        35,016           *
19410 Glen Cannon Way
Monument, CO 80132




                                       37






Alan B. and Barbara W. Steiner Trust                            52,988            18,546        34,442           *
19410 Glen Cannon Way
Monument, CO 80132
(Alan B. Steiner, trustee)

Patlaw Trust                                                   910,466           318,664       591,802         1.69%
c/o Jerry Prokaski, Bob Fox, Ken Samples
120 S. LaSalle Street, Suite 1600
Chicago, IL 60603
(Robert J. Fox, trustee)

Dr. Mark V. Wadsworth                                           17,663            6,183         11,480           *
520 Manzanita Ave.
Sierra Madre, CA 91024

Ms. Diane R. Williams                                           17,663            6,183         11,480           *
3740 Saints Ct.
Colorado Springs, CO 80904

Mr. Ronald J. Wood                                               1,767              619          1,148           *
11420 Salem Ct.
Peyton, CO 80831


* Less than 1 percent

(1)  Represents  shares held by Morgan L. Fitch  Revocable  Trust,  4640 Clausen
     Ave., Western Springs, IL 60558 (Morgan L. Fitch, trustee).
(2) Includes 652,778 shares issuable upon exercise of options.

     The  selling  security  holders  received  as part of our merger with Q-DOT
Group the  shares of Simtek  common  stock  that we are  registering.  Under the
merger agreement,  Q-DOT Group merged with and into us and Q-DOT Group, Inc., by
virtue of the merger,  became a wholly owned  subsidiary  of us.  Although  duly
notified  of their  appraisal  rights,  no Q-DOT  Group  stockholders  exercised
appraisal rights. Q-DOT Group's 30 stockholders received, on a pro rata basis, a
total of 5,171,131  shares of our common stock. The transaction was valued at $4
million. The transaction closed on March 14, 2001, on which date we had received
all  consideration for our common stock. The transaction was a private placement
exempt from registration pursuant to Rule 506 of Regulation D promulgated by the
SEC.  There were fewer than 35  purchasers  of our  securities,  of whom 12 were
accredited  investors.  We provided each purchaser with the information required
under Regulation D. We reasonably believed that each purchaser,  either alone or
with a purchaser representative,  was capable of evaluating the risks and merits
of  investing  in  Simtek  stock.  To the  best  of our  knowledge,  no  general
solicitation or advertising  occurred.  Following the merger,  we filed a Form D
with the SEC as required by Regulation D.

         Mr. Douglas Mitchell,  our Chief Executive  Officer,  President,  Chief
Financial Officer (acting),  and one of our directors,  served as a director and
stockholder of Q-DOT Group immediately  prior to the merger.  Mr. Mitchell owned
49,386 shares of our common stock  (excluding stock options) on the date of this
prospectus  and,  following the offering and sale of 15,536 shares,  he will own
33,850 shares, or less than 1% of our common stock.

                 SPECIFIC RELATIONSHIPS AND RELATED TRANSACTIONS

     Our president and director,  Douglas  Mitchell was also a director of Q-DOT
Group prior to our  acquisition  of Q-DOT  Group.  Mr.  Mitchell  disclosed  all
material facts as to his conflict of interest in the  acquisition.  The board of
directors  determined  that  the  acquisition  was  fair  to us and in our  best
interest.  Mr.  Mitchell  abstained  from the vote of the Q-DOT Group and Simtek
board  of  directors  decision  to  approve  the  acquisition.  At the  time  of
acquisition,  Mr. Mitchell owned  approximately 1% of the Q-DOT Group shares and
he received 44,386 shares of our common stock in connection with our acquisition
of Q-DOT  Group,  pro rata with the  terms  that all of the  other  Q-DOT  Group
shareholders'.


                                       38






     On May 9, 2000, we entered into a stock exchange agreement with Mr. Hugh N.
Chapman   pursuant  to  which  we  acquired   Integrated   Logic  Systems.   See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations -- Overview of Acquisitions and Other  Transactions."  At the time of
the acquisition, Mr. Chapman was not a holder of 5% of our stock. As a result of
the acquisition,  however,  Mr. Chapman became a holder of 5% of our outstanding
stock and as of the date of this  prospectus  holds  approximately  5.68% of our
stock.  Incident to the  acquisition,  we entered  into an "at will"  employment
agreement  with Mr.  Chapman,  terminable  by  either  party at any time with or
without  cause.  The  employment  agreement  provides  for an  annual  salary of
$70,000,  Simtek's  standard  benefits  and options to purchase  Simtek stock at
$1.203 per share,  which is  approximately  4% greater than the closing price of
our stock on the day of grant,  and with other terms and  conditions the same as
for  options  granted  to our  employees.  We  believe  that  the  terms  of our
transactions  with Mr.  Chapman were no less  favorable to us than we could have
obtained from unrelated parties.

                            DESCRIPTION OF SECURITIES

COMMON STOCK

     We are  authorized to issue  80,000,000  shares of common stock,  par value
$0.01 per share.  Each share of common stock  entitles the holder thereof to one
vote on all matters submitted to a vote of the  shareholders.  Holders of common
stock do not have preemptive rights or rights to convert their common stock into
other  securities.  Holders of common stock are entitled to receive ratably such
dividends  as may be declared  by the board of  directors  out of funds  legally
available therefor. In the event of our liquidation,  dissolution or winding up,
holders  of the common  stock have the right to a ratable  portion of the assets
remaining after payment of liabilities.

PREFERRED STOCK

     Our Articles of Incorporation authorize 2,000,000 shares of $1.00 par value
preferred  stock.  The board of directors has the  authority to issue  preferred
stock in one or more series and to fix the rights,  preferences,  privileges and
restrictions  thereof,  including  dividend rights,  dividend rates,  conversion
rights,  voting rights,  terms of  redemption,  redemption  prices,  liquidation
preferences and the number of shares constituting any series and the designation
of such series, without further vote or action by the shareholders. The issuance
of preferred  stock may have the effect of delaying,  deferring or  preventing a
change in control  of us  without  further  action by the  shareholders  and may
adversely  affect the  voting  power and other  rights of the  holders of common
stock,  including the loss of voting  control to others.  As of the date of this
prospectus, there are not shares of preferred stock outstanding.


                              PLAN OF DISTRIBUTION

     These  shares  are being  offered  hereby  for sale by  twenty  nine of our
shareholders  who received  these shares in a  unregistered  transaction.  These
shares will be offered by the selling  shareholders from time to time (i) on the
over-the-counter  market,  where the common stock is traded,  or  elsewhere,  at
fixed prices which may be changed,  at market  prices  prevailing at the time of
offer and  sale,  at  prices  related  to such  prevailing  market  prices or at
negotiated  prices and (ii) in negotiated  transactions,  through the writing of
options on the shares,  or a  combination  of such methods of sale.  The selling
shareholders  may effect such  transactions  by offering  and selling the shares
directly or to or through securities broker-dealers, and such broker-dealers may
receive  compensation in the form of discounts,  concessions or commissions from
the  selling  shareholders  and/or  the  purchasers  of the shares for whom such
broker-dealers may act as agent or to whom the selling  shareholders may sell as
principal, or both (which compensation as to a particular broker-dealer might be
in excess of customer commissions).

     The selling  shareholders and any broker-dealers who are in connection with
the sale of the shares hereunder may be deemed to be  "underwriters"  within the
meaning of Section 2(11) of the Securities Act, and any commissions  received by
them and profit on any resale of the shares as  principal  might be deemed to be
underwriting discounts and commissions under the Securities Act.



                                       39






     We have  advised  the  selling  shareholders  that they and any  securities
broker-dealers or others who may be deemed to be statutory  underwriters will be
subject to the prospectus deliver requirements under the Securities Act. We have
also advised the selling  shareholders  that in the event of a "distribution" of
shares,  any "affiliated  purchasers," and any broker-dealer or other person who
participates  in such  distribution  may be  subject to  Regulation  M under the
Exchange Act until his or its participation in that distribution is completed. A
"distribution"  is  defined  in  Rule  101 of  Regulation  M as an  offering  of
securities  "that is  distinguished  from ordinary  trading  transactions by the
magnitude  of the  offering  and the  presence  of special  selling  efforts and
selling  methods."  Regulation  M  makes  it  unlawful  for  any  person  who is
participating  in a distribution  to bid for or purchase stock of the same class
as is the subject of the distribution.



                                  LEGAL MATTERS

     The validity of the shares offered hereby will be passed by Holme Roberts &
Owen LLP, Denver, Colorado.

                                     EXPERTS

     The financial  statements of Simtek Corporation as of December 31, 2000 and
for the years ended December 31, 2000 and December 31, 1999 included within this
Prospectus have been so included in reliance on the report of Hein + Associates,
LLP,  independent  auditors,  given on the  authority of said firm as experts in
auditing and accounting.



                                       40





                              AVAILABLE INFORMATION

     We are subject to the information  requirements of the Securities  Exchange
Act of 1934,  as amended (the  "Exchange  Act").  Accordingly,  we file reports,
proxy  statements  and  other  information  with  the  Securities  and  Exchange
Commission.  You may inspect our reports, proxy statements and other information
without charge at the public reference facilities of the Commission's  principal
office at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's
regional offices at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661
and 7 World Trade Center,  Suite 1300,  New York, NY 10048.  You may also obtain
copies  there  at the  prescribed  rates.  You  may  obtain  information  on the
operation  of the  Commission's  public  reference  facilities  by  calling  the
Commission in the United States at 1-800-SEC-0330. The Commission also maintains
a web site at  http://www.sec.gov  that contains reports,  proxy and information
statements and other information  regarding registrants that file electronically
with the Commission.

         We have filed with the  Commission,  a  registration  statement on Form
SB-2 under the Securities Act of 1933, as amended  (the"Securities  Act"),  with
respect to the common stock we are offering (the "registration statement"). This
prospectus does not contain all of the information set forth in the registration
statement and the exhibits and schedules thereto.  For further information about
us and the common stock offered, you should refer to the registration statement,
including  the exhibits and  schedules  thereto,  which may be inspected at, and
copies thereof may be obtained at prescribed  rates from,  the public  reference
facilities of the Commission at the addresses set forth above.


                                       41




                                                   SIMTEK CORPORATION

                                              INDEX TO FINANCIAL STATEMENTS



                                                                                                            PAGE
                                                                                                            ----
                                                                                                         
Independent Auditor's Report............................................................................... F-2

Consolidated Balance Sheet - December 31, 2000............................................................. F-3

Consolidated Statements of Operations - For the Years Ended December 31, 2000 and 1999..................... F-4

Consolidated Statements of Changes in Shareholders' Equity - For the Years Ended December 31,
    2000 and 1999.......................................................................................... F-5

Consolidated Statements of Cash Flows  - For the Years Ended December 31, 2000 and 1999.................... F-6-F-7

Notes to Consolidated Financial Statements - For the Years Ended December 31, 2000 and 1999................ F-8-F-23

Consolidated Balance Sheet (Unaudited) - June 30, 2001..................................................... F-24

Consolidated  Statement of Operations (Unaudited) - For the six months ended
    June 30, 2001 and June 30, 2000........................................................................ F-25

Consolidated Statement of Cash Flows (Unaudited) - For the six months ended June 30, 2001 and 2000......... F-26-F-27

Notes to the Unaudited Consolidated  Financial Statements - For the six months ended
June 30, 2001 and 2000..................................................................................... F-28-F-29





                                                         F-1


                          INDEPENDENT AUDITOR'S REPORT




Board of Directors and Shareholders
Simtek Corporation
Colorado Springs, Colorado


We  have  audited  the  accompanying   consolidated   balance  sheet  of  Simtek
Corporation and subsidiary as of December 31, 2000 and the related statements of
operations, changes in shareholders' equity and cash flows for each of the years
in the two-year  period ended December 31, 2000.  These  consolidated  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the consolidated  financial statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial position of Simtek Corporation
as of December  31,  2000,  and the results of their  operations  and their cash
flows for each of the years in the two-year  period ended  December 31, 2000, in
conformity with general accepted accounting principles.



/s/ Hein + Associates LLP
HEIN + ASSOCIATES LLP

Denver, Colorado
February  5,  2001,  except  for  restatements  as a result  of the  pooling  of
interests of Q-DOT, Inc. as described in Note 2, for which the date is March 13,
2001







                                       F-2




                               SIMTEK CORPORATION

                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2000

                                     ASSETS
                                     ------
CURRENT ASSETS:
    Cash and cash equivalents                                      $  2,853,769
    Certificate of deposit, restricted                                  300,000
    Accounts receivable - trade, net of allowance
       for doubtful accounts and return allowances
       of $177,098                                                    1,775,864
    Inventory                                                         1,130,629
    Prepaid expenses and other                                          175,955
                                                                   ------------
             Total current assets                                     6,236,217
EQUIPMENT AND FURNITURE, net                                            888,296
OTHER ASSETS                                                            163,472
                                                                   ------------
TOTAL ASSETS                                                       $  7,287,985
                                                                   ============
                      LIABILITIES AND SHAREHOLDERS' EQUITY
                      ------------------------------------

CURRENT LIABILITIES:
    Accounts payable                                               $  1,085,370
    Accrued expenses                                                    532,964
    Accrued wages                                                       302,097
    Accrued vacation payable                                            103,476
    Line of credit                                                       84,050
    Current portion of notes payable                                     34,809
    Obligation under capital leases                                      47,344
                                                                   ------------
             Total current liabilities                                2,190,110
NOTES PAYABLE                                                            20,000
OBLIGATIONS UNDER CAPITAL LEASES, NET OF CURRENT PORTION                153,670
                                                                   ------------
             Total liabilities                                        2,363,780
COMMITMENTS (Note 6)

SHAREHOLDERS' EQUITY:
    Preferred stock, $1.00 par value; 2,000,000 shares
       authorized, none issued                                                -
    Prepaid investor relations                                         (730,433)
    Common stock, $.01 par value; 80,000,000 shares
       authorized, 53,634,245 shares issued
       and outstanding                                                  536,342
    Additional paid-in capital                                       37,497,590
    Accumulated deficit                                             (32,379,294)
                                                                   ------------
             Total shareholders' equity                               4,924,205
                                                                   ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                         $  7,287,985
                                                                   ============

       See accompanying notes to these consolidated financial statements.

                                      F-3




                                                   SIMTEK CORPORATION

                                          CONSOLIDATED STATEMENTS OF OPERATIONS


                                                                                          FOR THE YEARS ENDED
                                                                                              DECEMBER 31,
                                                                                    ----------------------------------
                                                                                       2000                  1999
                                                                                    ------------        --------------
                                                                                                    
NET SALES                                                                           $14,467,814           $11,168,624

    Cost of sales                                                                     8,423,529             6,172,643
                                                                                    -----------           -----------

GROSS MARGIN                                                                          6,044,285             4,995,981

OPERATING EXPENSES:
    Research and development costs                                                    6,158,189             2,240,273
    Sales and marketing                                                               1,170,305               918,642

    General and administrative                                                        2,152,593             1,793,424
                                                                                    -----------           -----------

             Total operating expenses                                                 9,481,087             4,952,339
                                                                                    -----------           -----------

INCOME (LOSS) FROM OPERATIONS                                                        (3,436,802)               43,642
                                                                                    -----------           -----------

OTHER INCOME (EXPENSE):
    Interest income                                                                     165,736                96,942
    Interest expense                                                                    (77,234)             (172,424)
    Equity in losses of QDA and write off of related advances                          (194,662)              (52,514)
    Other income (expense)                                                                2,620                (6,172)
                                                                                    -----------           -----------

             Total other income (expense)                                              (103,540)             (134,168)
                                                                                    -----------           -----------
NET LOSS BEFORE PROVISION FOR INCOME TAXES                                          $(3,540,342)          $   (90,526)
                                                                                    -----------           -----------

      Provision for income taxes                                                              -                32,400
                                                                                    -----------           -----------
NET LOSS                                                                            $(3,540,342)          $  (122,926)
                                                                                    ===========           ===========

NET LOSS PER COMMON SHARE:
    Basic and diluted EPS                                                           $      (.07)          $         *
                                                                                    ===========           ===========
WEIGHTED AVERAGE COMMON SHARE OUTSTANDING:
    Basic and diluted EPS                                                            48,337,167            38,345,697
                                                                                    ===========           ===========
----------------------
*Less than $.01 per share.



                         See accompanying notes to these consolidated financial statements.

                                                     F-4







                                                   SIMTEK CORPORATION

                                CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                     FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


                                              Common Stock                Additional    Prepaid                           Total
                                       ----------------------------        Paid-in      Investor      Accumulated      Shareholders'
                                         Shares           Amount           Capital      Relations       Deficit          Equity
                                       ----------      ------------      ------------   ---------    ------------      -------------
                                                                                                     
BALANCES, January 1, 1999              38,166,957        $381,669        $30,349,288    $       -    $(28,579,097)     $ 2,151,860

    Contributions                               -               -            202,752            -               -          202,752
    Exercise of stock options             210,000           2,100             32,166            -               -           34,266
    Sale of common stock                        -               -             23,145            -               -           23,145
    Stock issued for directors fees             -               -             14,499            -               -           14,499
    Net loss                                    -               -                  -            -        (122,926)        (122,926)
                                       ----------        --------        -----------    ---------     -----------      -----------

BALANCES, December 31, 1999            38,376,957         383,769         30,621,850            -     (28,702,023)       2,303,596
                                       ----------        --------        -----------    ---------     -----------      -----------

    Exercise of stock options           1,863,016          18,630            278,437            -               -          297,067
    Webgear purchase                    4,150,000          41,500          4,046,146            -               -        4,087,646
    Conversion of debt                  8,244,272          82,443          1,488,959            -               -        1,571,402
    Stock issuance for services         1,000,000          10,000          1,021,200     (730,433)              -          300,767
    Contributions                               -               -             16,103            -               -           16,103
    Sale of common stock                        -               -              1,963            -               -            1,963
    Stock issued for directors fees             -               -              6,734            -               -            6,734
    Stock issued for compensation               -               -             16,198            -               -           16,198
    Adjustment for net income during
      the three month period ended
      March 31, 2000 (Note 2)                   -               -                  -            -        (136,929)        (136,929)
    Net loss                                    -               -                  -            -      (3,540,342)      (3,540,342)
                                       ----------        --------        -----------    ---------    ------------      -----------
BALANCES, December 31, 2000            53,634,245        $536,342        $37,497,590    $(730,433)   $(32,379,294)     $ 4,924,205
                                       ==========        ========        ===========    ==========   ============      ===========

                                 See accompanying notes to these consolidated financial statements.


                                                               F-5



                                                   SIMTEK CORPORATION
                                          CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                  FOR THE YEARS ENDED
                                                                                      DECEMBER 31,
                                                                                --------------------------
                                                                                    2000           1999
                                                                                ------------   -----------
                                                                                         
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                                                    $(3,540,342)   $ (122,926)
    Adjustments to reconcile net income to net cash from
      operating activities:
             Depreciation and amortization
                                                                                    430,962       391,718
             Stock issuance for services                                             22,932        14,499
             Webgear purchase of incomplete research and development              3,962,645             -
             Contributed service                                                          -        70,000
             Unrealized gain of securities                                                -         6,930
             Net change in allowance accounts                                       196,407       (90,936)
             Deferred financing fees                                                  1,865        11,191
             Deferred income taxes                                                        -        29,800
             Changes in assets and liabilities:
               (Increase) decrease in:
                 Accounts receivable                                               (152,364)     (174,429)
                 Inventory                                                          (85,270)      (48,930)
                 Investments                                                              -        13,146
                 Prepaid expenses and other                                         174,311        38,860
               Increase (Decrease) in:
                 Accounts payable                                                   (39,689)      342,754
                 Accrued expenses                                                    44,371      (179,291)
                 Customer deposits                                                  (53,010)       51,850
                                                                                 ----------    ----------
         Net cash provided by operating activities                                  962,818       354,236
                                                                                 ----------    ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchase/Sales of equipment and furniture, net                                 (381,165)     (317,625)
    Decrease (increase) in certificate of deposit, restricted                       100,000      (300,000)
    Advances to equity investment                                                    14,606        (3,425)
                                                                                 ----------    ----------
         Net cash used in investing activities                                     (266,559)     (621,050)
                                                                                 ----------    ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
    Payments on capital lease obligation                                            (40,644)      (13,914)
    Borrowings from line-of-credit and the issuance of a note                       908,231     1,715,769
    Payments on lines of credit                                                  (1,133,000)   (1,698,538)
    Payments on notes payable                                                      (136,135)     (124,610)
    Exercise of stock options                                                       297,067        34,266
    Sale of common stock                                                              1,963        23,145
    Contributions                                                                    16,103       132,752
                                                                                 ----------    ----------
         Net cash provided by (used in) financing activities                        (86,415)       68,870
                                                                                 ----------    ----------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                609,844      (197,944)

CASH AND CASH EQUIVALENTS, beginning of year                                      2,243,925     2,385,602
                                                                                 ----------    ----------

CASH AND CASH EQUIVALENTS, end of year                                           $2,853,769    $2,187,658
                                                                                 ==========    ==========

                  See accompanying notes to these consolidated financial statements.

                                             F-6





                                         SIMTEK CORPORATION
                                CONSOLIDATED STATEMENTS OF CASH FLOWS
                                               (cont.)




SUPPLEMENTAL CASH FLOW INFORMATION:
    Cash paid for interest                                                       $   77,435    $  172,424
                                                                                 ==========    ==========
    Cash paid (refund of) for income taxes                                       $   14,200    $   (8,480)
                                                                                 ==========    ==========

NONCASH INVESTING AND FINANCING TRANSACTIONS:
    Conversion of debenture into shares of common stock, net of deferred
       Financing costs related to debenture                                      $1,441,249    $        -
                                                                                 ==========    ==========
    Conversion of payable to ZMD into shares of common stock                     $  130,153    $        -
                                                                                 ==========    ==========
    Purchase of equipment through payables and capital leases                    $        -    $  255,573
                                                                                 ==========    ==========
    Issuance of stock for prepaid services                                       $  730,434    $        -
                                                                                 ==========    ==========
    Issuance of stock for patents and trademarks                                 $  118,750    $        -
                                                                                 ==========    ==========




                  See accompanying notes to these consolidated financial statements.

                                             F-7


                               SIMTEK CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1.   NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:
     ------------------------------------------------------

     NATURE OF BUSINESS OPERATIONS - Simtek Corporation (the "Company") designs,
     develops,  markets and  subcontracts  the  production  of high  performance
     nonvolatile  semiconductor  memories  and  programmed  semiconductor  logic
     products.  The Company's  operations  have  concentrated  on the design and
     development  of the 256  kilobit,  64 kilobit,  and 16 kilobit  nonvolatile
     semiconductor   memory  product   families  and  associated   products  and
     technologies   as  well  as  the  development  of  sources  of  supply  and
     distribution  channels.  The Company also provides electronics  engineering
     research and development contracts.

     POOLING OF  INTERESTS  - 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.   Prior  to  the
     acquisition,  Q-DOT had a fiscal year end of March 31. The  adjustment  for
     the change in the year-end is reflected in the current period  statement of
     stockholders' equity (see Note 2).

     CONSOLIDATION POLICY - The accompanying  consolidated  financial statements
     include the accounts of the Company and its wholly-owned  subsidiary Q-DOT.
     The Company holds 1% interest in QD Acoustics,  LLC (QDA) but has effective
     control  over it due to an  operating  agreement  which  gives the  Company
     control of all operational  decisions.  In addition,  all losses of QDA are
     allocated to the company and net profits are allocated first to the Company
     to the extent of any previous allocations of losses. Any additional profits
     of QDA are allocated  prorata  based on percentage of ownership.  The other
     major  shareholders of QDA are minor  shareholders  of the Company.  QDA is
     accounted for by the equity method of accounting.

     REVENUE  RECOGNITION  SEMICONDUCTOR  PRODUCTS  - Product  sales  revenue is
     recognized  when a valid  purchase order has been received and the products
     are  shipped to  customers,  including  distributors.  Customers  receive a
     one-year  product  warranty  and sales to  distributors  are  subject  to a
     limited  product  exchange  program and product  pricing  protection in the
     event of changes in the Company's  product  price.  The Company  provides a
     reserve for possible product  returns,  price changes and warranty costs at
     the time the sale is recognized.

     REVENUE  RECOGNITION  GOVERNMENT  CONTRACTS - Revenues  from  cost-plus-fee
     contracts are recognized on the basis of costs  incurred  during the period
     plus the fee earned.  Revenues from fixed-price contracts are recognized on
     the   percentage-of-completion   method.  The  percentage-of-completion  is
     measured by the total costs  incurred to date to estimated  total costs for
     each  contract.  This method is used  because  management  considers  costs
     incurred to be the best  available  measure of progress on these  contacts.
     Because of inherent  uncertainties  in estimating  costs,  it is reasonably
     possible that the estimates used will change within the near term.



                                      F-8


                               SIMTEK CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     CONTRACT  REVENUES AND RELATED COSTS - Substantially  all of Q-DOT revenues
     result from contract services  performed for the various agencies of United
     States  Government  (the  "Government")  under a variety of  contracts  and
     subcontracts,  some of which provide for reimbursement of  costs-plus-fees,
     and others which are  fixed-price.  The majority of the  contracts  are for
     services  performed in Colorado.  For some services  rendered on Government
     contracts which the time between  providing the services and the final cash
     realization from the sale of such services may extend two or more years.

     Costs on contracts with the government (including allocable indirect costs)
     are subject to audit and adjustment by negotiations between the Company and
     Government  representatives.  Costs submitted for reimbursement are subject
     to  Government  audits for  compliance  with  government  costs  accounting
     standards,  federal  acquisitions  regulations  and other  contract  terms.
     Negotiations  for  all of the  years  through  March  31,  1997  have  been
     completed without any material adjustments. Management does not believe the
     results of the March 31, 1998,  March 31, 1999, March 31, 2000 and December
     31, 2000 Government audits and subsequent negotiations will have a material
     effect on the accompanying financial statements.

     Direct costs of contracts include all direct labor, supplies, and equipment
     costs. Provisions for estimated losses on uncompleted contracts are made in
     the period in which such losses are determined. Changes in job performance,
     job conditions,  and estimated profitability and final contract settlements
     may  result in  revisions  to costs and income  and are  recognized  in the
     period in which the revisions are determined.

     At the time a loss on a contract  becomes  known,  the entire amount of the
     estimated loss on both short and long-term contracts is accrued.

     CASH AND  CASH  EQUIVALENTS  - The  Company  considers  all  highly  liquid
     investments  with an original  maturity of three  months or less to be cash
     equivalents.  As of December 31, 2000,  substantially  all of the Company's
     cash  and  cash   equivalents   were  held  by  a  single  bank,  of  which
     approximately $2,894,630 was in excess of Federally insured amounts.

     INVENTORY  -  The  Company  records  inventory  using  the  lower  of  cost
     (first-in, first-out) or market. Inventory at December 31, 2000 includes:

               Raw materials                            $  177,947
               Work in process                             872,948
               Finished goods                              176,398
                                                        ----------
                                                         1,227,293
               Less reserves                               (96,664)
                                                        ----------
                                                        $1,130,629
                                                        ==========

     DEPRECIATION  - Equipment and furniture are recorded at cost.  Depreciation
     is provided over the assets' estimated useful lives of three to seven years
     using the straight-line and accelerated  methods.  The cost and accumulated
     depreciation  of furniture and equipment sold or otherwise  disposed of are


                                      F-9



                               SIMTEK CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


     removed  from the accounts  and the  resulting  gain or loss is included in
     operations.  Maintenance  and repairs are charged to operations as incurred
     and betterments are capitalized.

     RESEARCH AND DEVELOPMENT COSTS - Research and development costs are charged
     to operations in the period incurred.

     ADVERTISING - The Company incurs advertising expense in connection with the
     marketing of its  product.  Advertising  costs are expensed as  advertising
     takes place.  Advertising expense was $87,672 and $94,936 in 2000 and 1999,
     respectively.

     LOSS PER SHARE - The loss per share is  presented  in  accordance  with the
     provisions of Statement of Financial  Accounting  Standards (SFAS) No. 128,
     Earnings Per Share.  SFAS No. 128 replaced the  presentation of primary and
     fully diluted  earnings (loss) per share (EPS) with a presentation of basic
     EPS and diluted EPS. Basic EPS is calculated by dividing the income or loss
     available to common  shareholders by the weighted  average number of common
     shares  outstanding  for the period.  Diluted EPS  reflects  the  potential
     dilution that could occur if securities or other  contracts to issue common
     stock were  exercised  or  converted  into  common  stock.  As the  Company
     incurred  losses in 1999 and 2000,  all common stock  equivalents  would be
     considered   anti-dilutive.   For  purposes  of  calculating  diluted  EPS,
     2,817,722  and  1,337,750  options  for 2000 and 1999,  respectively,  were
     excluded  from  diluted  EPS as  they  had  an  anti-dilutive  effect.  The
     convertible  debentures also had an anti-dilutive  effect on 1999 and were,
     therefore, excluded from the computation of diluted EPS.

     ACCOUNTING   ESTIMATES  -  The  preparation  of  financial   statements  in
     conformity  with  generally   accepted   accounting   principles   requires
     management  to make  estimates  and  assumptions  that  affect the  amounts
     reported in the financial statements and the accompanying notes. The actual
     results  could  differ  from  those  estimates.   The  Company's  financial
     statements  are based upon a number of  estimates,  including the allowance
     for doubtful  accounts,  technological  obsolescence  of  inventories,  the
     estimated useful lives selected for property and equipment,  sales returns,
     warranty  reserve,  percentage  of  completion  on  projects  in process at
     year-end,  and the valuation  allowance on the deferred tax assets.  Due to
     the  uncertainties  inherent  in the  estimation  process,  it is at  least
     reasonably  possible  that the  estimates  for these items could be further
     revised in the near term and such revisions could be material.

     FINANCIAL INSTRUMENTS - The estimated fair values for financial instruments
     are  determined  at  discrete  points  in time  based  on  relevant  market
     information. These estimates involve uncertainties and cannot be determined
     with precision.  The carrying amounts of the accounts receivable,  accounts
     payable  and  accrued  liabilities  approximate  fair value  because of the
     short-term maturities of these instruments. The fair value of notes payable
     approximates their carrying value as generally their interest rates reflect
     the Company's current effective annual borrowing rate.

     CONCENTRATION  OF CREDIT  RISK -  Financial  instruments  that  potentially
     subject the Company to  significant  considerations  of credit risk consist
     primarily  of  accounts   receivable.   The  Company  has  no   significant
     off-balance sheet  concentrations of credit risk.  Accounts  receivable are
     typically  unsecured  and are  derived  from  transactions  with  and  from
     customers located in the United States.


                                      F-10


                               SIMTEK CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


     IMPAIRMENT OF LONG-LIVED ASSETS - In the event that facts and circumstances
     indicate  that the cost of  assets  or other  assets  may be  impaired,  an
     evaluation  of  recoverability  would be  performed.  If an  evaluation  is
     required,  the estimated future undiscounted cash flows associated with the
     asset would be compared to the asset's  carrying  amount to  determine if a
     write-down to market value or discounted cash flow value is required.

     STOCK-BASED  COMPENSATION - As permitted under the SFAS No. 123, Accounting
     for  Stock-Based  Compensation,  the Company  accounts for its  stock-based
     compensation  in accordance  with the  provisions of Accounting  Principles
     Board (APB) Opinion No. 25,  Accounting  for Stock Issued to Employees.  As
     such,  compensation expense is recorded on the date of grant if the current
     market price of the underlying  stock exceeds the exercise  price.  Certain
     pro forma net income and EPS  disclosures  for employee stock option grants
     are also included in the notes to the  financial  statements as if the fair
     value method as defined in SFAS No. 123 had been applied.  Transactions  in
     equity  instruments with  non-employees for goods or services are accounted
     for by the fair value  method.  In fiscal  2000,  the  Company  adopted the
     Financial  Accounting  Standards Board Interpretation No. 44 which requires
     that outside directors be considered employees for purposes of stock option
     accounting,  if the  Company is  accounting  for its  employee  stock-based
     compensation  in accordance with APB 25. It also affects  modifications  to
     fixed stock options or awards that effects the life, exercise price, or the
     number of shares to be issued. The adoption of this  interpretation did not
     have a material effect on the Company's consolidated financial statements.

     INCOME TAXES - The Company  accounts  for income taxes under the  liability
     method of SFAS No.  109,  whereby  current  and  deferred  tax  assets  and
     liabilities  are  determined  based on tax rates and laws enacted as of the
     balance  sheet  date.  Deferred  tax expense  represents  the change in the
     deferred tax asset/liability balance. Valuation allowances are recorded for
     deferred tax assets that are not expected to be realized.

     BUSINESS  SEGMENTS  - The  Company  has  adopted  Statement  of  Accounting
     Standards No. 131,  Disclosures About Segments of an Enterprise and Related
     Information ("SFAS 131"), which established standards for the way companies
     report  information  about their operating  segments.  Prior period amounts
     have been restated to conform to the requirements of this new statement.

     RECLASSIFICATIONS - Certain reclassifications have been made to conform the
     December 31, 2000 financial statements to subsequent 2001 interim financial
     reporting.  Such  reclassifications  had no effect  on net loss for  fiscal
     2000.

     RECENTLY ISSUED  ACCOUNTING  PRONOUNCEMENTS  -SFAS No. 133,  Accounting for
     Derivative  Instruments  and Hedging  Activities,  was issued in June 1998.
     This  statement   establishes   accounting  and  reporting   standards  for
     derivative  instruments  and for hedging  activities.  It requires  that an
     entity  recognize all  derivatives  as either assets or  liabilities in the
     statement  of  financial  position and measure  those  instruments  at fair
     value. This statement is effective for the Company's  financial  statements
     for the year ended  December 31, 2001 and the adoption of this  standard is
     not  expected  to  have  a  material  effect  on  the  Company's  financial
     statements.


                                      F-11


                               SIMTEK CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



     In December 1999, the  Securities  and Exchange  Commission  (SEC) released
     Staff  Accounting  Bulletin  (SAB) 101,  Revenue  Recognition  in Financial
     Statements.  SAB 101 establishes  guidelines in applying generally accepted
     accounting principles to the recognition of revenue in financial statements
     based on the following four criteria; persuasive evidence of an arrangement
     exists,  delivery has occurred or services have been rendered, the seller's
     price  to the  buyer  is  fixed  or  determinable,  and  collectibility  is
     reasonably  assured.  SAB 101, as amended , was effective no later than the
     fourth fiscal  quarter of the Company's  fiscal year ending year 2000.  The
     adoption  of SAB  101 did  not  have a  material  effect  on its  financial
     position or result of operations.

2.   ACQUISITIONS:
     ------------

     On May 9, 2000, Simtek  Corporation  acquired 100% of the outstanding stock
     of Integrated Logic Systems  Incorporated  (Integrated Logic) which designs
     and sells  metal  gate  array  integrated  circuits  in  Colorado  Springs,
     Colorado  for common  stock  (3,000,000  shares) with a market value at the
     date of issuance of $3.75 million.  The  acquisition was accounted for as a
     pooling of interests, and the results of the Integrated Logic business have
     been combined with those of Simtek  Corporation,  as if the two  businesses
     had been merged throughout the periods presented.

     The following is Integrated  Logic's  operating results for the period from
     January 1, 2000 to May 9, 2000  which has been  included  in the  Company's
     results of operations for the year ending December 31, 2000:

          Revenue                        $ 279,585
          Expenses                        (233,763)
                                         ---------
          Net                            $  45,822
                                         =========

     On July 31, 2000, Simtek Corporation acquired 100% of the outstanding stock
     of  Macrotech  Semiconductor,  Inc.  (Macrotech)  which is  involved in the
     design,  development and production of gate array  integrated  circuits and
     related  services  in San Jose,  California  for  common  stock  (1,250,000
     shares) with a market value at the date of issuance of $1.76  million.  The
     acquisition was accounted for as a pooling of interests, and the results of
     the Macrotech business have been combined with those of Simtek Corporation,
     as if the two businesses had been merged throughout the periods presented.

     The following is Macrotech's  operating results for the period from January
     1, 2000 to July 31, 2000 which has been included in the  Company's  results
     of operations for the year ending December 31, 2000:

          Revenue                        $ 291,835
          Expenses                        (248,508)
                                         ---------
          Net                            $  43,327
                                         =========

     On March 13, 2001, the Company acquired Q-DOT in exchange for approximately
     5,172,000  shares  of our  Common  Stock.  Q-DOT  specializes  in  advanced
     technology   research  and   development  for  data   acquisition,   signal


                                      F-12


                               SIMTEK CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


     processing,  imaging and data  communications.  Q-DOT will be operated as a
     wholly owned subsidiary of Simtek for its government  contract research and
     development operations. The acquisition has been accounted for as a pooling
     of interest,  and the results of Q-DOT have been consolidated with those of
     Simtek as if the two  businesses  had been  merged  throughout  the periods
     presented.

     Q-DOT  had  a  March  31,  fiscal  year-end  and,  accordingly,  the  Q-DOT
     statements  of  operations  for the year  ended  March  31,  2000 have been
     combined  with the Company's  statements of operations  for the fiscal year
     ended  December 31, 1999. In order to conform  Q-DOT's March 31 year-end to
     the  Company's  December  31,  year-end,   the  consolidated  statement  of
     stockholders'  equity was adjusted for the $136,929 for the operations from
     January 1, 2000 to March 31, 2000,  which are included in the  consolidated
     statements  of  operations  in both the years ended  December  31, 1999 and
     2000. The following is a summary of operating results for that period:

          Revenue                        $ 923,632
          Expenses                         786,703
                                         ---------
          Net income                     $ 136,929
                                         =========

     Separate revenues and net income of the Company,  Integrated Logic Systems,
     Macrotech  Semiconductors,  Inc. and Q-DOT Group, Inc. are presented in the
     following table:

                                               2000             1999
                                               ----             ----

          Revenue:
            Simtek Corporation             $11,579,330       $ 6,992,388
            ILSI                               279,585           703,588
            Macrotech                          291,835            58,976
            Q-DOT                            2,317,064         3,413,672
                                           -----------       -----------
               Revenue, as reported        $14,467,814       $11,168,624
                                           ===========       ===========


          Net Income (Loss):
            Simtek Corporation             $(3,467,975)      $   132,255
            ILSI                                45,821           (68,224)
            Macrotech                           43,327          (213,501)
            Q-DOT                             (161,515)           26,544
                                           -----------       -----------
               Net (loss) as reported      $(3,540,342)      $  (122,926)
                                           ===========       ===========

     The pooling of ILSI and Macrotech  during the year ended  December 31, 2000
     and the subsequent pooling of Q-DOT on March 13, 2001(Unaudited)  decreased
     the loss per share by $.02 for the year ending December 31, 2000 and had no
     effect on 1999 earnings per share.


                                      F-13


                               SIMTEK CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


3.   EQUIPMENT AND FURNITURE:
     -----------------------

     Equipment and furniture at December 31, 2000 consists of the following:

          Leased software under capital leases               $  255,573
          Research and development equipment
                                                              1,622,860
          Computer equipment and software
                                                              1,808,613
          Office furniture                                      248,709
          Other equipment                                       135,644
                                                             ----------
                                                              4,071,399
          Less accumulated depreciation and amortization     (3,183,103)
                                                             ----------
                                                             $  888,296
                                                             ==========

     The cost of equipment and furniture  acquired for research and  development
     activities that has  alternative  future use is capitalized and depreciated
     over its estimated useful life.

     Depreciation and amortization  expense of $430,962 and $391,718 was charged
     to operations for the years ended December 31, 2000 and 1999, respectively.
     Included  in the  amortization  expense  for 2000 and 1999 was  $51,120 and
     $17,040, respectively, of amortization of software under capital leases. At
     December 31, 2000,  accumulated  amortization  for software  under  capital
     leases was $68,160.


4.   REVOLVING LINE-OF-CREDIT AND LETTER-OF-CREDIT:
     ---------------------------------------------

     As  of  December   31,   2000,   the  Company  had  a  $250,000   revolving
     line-of-credit  (LOC), a reduction of $100,000 since December 31, 1999. The
     LOC bears  interest  at prime plus .75%  (9.5% at  December  31,  2000) and
     matures in March 2001.  At December  31,  2000,  the Company had no balance
     outstanding.  As of December 31, 2000,  the Company had a second  revolving
     bank line of credit that  expires  February 1, 2001.  At December 31, 2000,
     the Company had $84,050 outstanding  against this line of credit.  Interest
     is payable monthly and accrues at 10.25% annually.

     The  Company  also has a note  payable of $34,809  with the bank that bears
     interest at prime plus 1%. The note is payable in monthly  installments  of
     $2,083, plus interest,  through June 30, 2002. Future payments on this note
     payable are as follows: 2001 - $24,996; 2002 - $9,813.

     Borrowings  outstanding  under these loan agreements are  collateralized by
     all  of  the  Company's  assets.  The  Company  has  certain  covenants  in
     connection with these loans.  The Company was not in compliance at December
     31, 2000 and 1999 with certain  covenants.  Therefore,  all bank borrowings
     are  classified as current,  as the bank could demand  repayment if the non
     compliance is not cured. Subsequent to year end these notes were paid off.

     Interest  Expense  for  fiscal  2000  and 1999 was  $77,234  and  $172,424,
     respectively.

     The Company has a letter of credit  arrangement  with one of the  Company's
     suppliers which requires the Company to maintain a $300,000  certificate of
     deposit as collateral, which is reflected as restricted cash.


                                      F-14


                               SIMTEK CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




5.   CONVERTIBLE DEBENTURES:
     ----------------------

     During June 1998,  the Company  received  proceeds of  $1,500,000  from the
     issuance of convertible debentures (the "Debentures").  The Debentures were
     convertible  into shares of common stock of the  Company.  After a one-time
     conversion price adjustment  calculated pursuant to the original agreement,
     the  debentures  conversion  price changed from $.35 per share to $.195 per
     share in May 1999. In February 2000,  the entire  $1,500,000 of convertible
     debt was converted into 7,692,308  shares of common stock of the Company at
     the conversion rate of $.195 per share.

6.   COMMITMENTS:
     ------------

     OFFICES  LEASES - The Company  leases  office  space  under a lease,  which
     expires on December  31, 2001.  Monthly  lease  payments are  approximately
     $12,000 (not  including CAM  charges).  The Company has moved where monthly
     lease  payments  will be  approximately  $14,000.  The new lease  agreement
     effective  March 1, 2001 to February 28, 2008  requires the new landlord to
     begin  paying all costs  related to the old  location  starting on March 1,
     2001.

     Through the acquisition of Q-DOT, the Company has non-cancelable  long-term
     lease  agreements for office space,  office  furnishings and equipment that
     expire at various  dates  through  April  2005.  A  facility  lease and the
     equipment  leases  contain an option to extend the leases for an additional
     one-year period.

     The Company leases  furniture,  equipment,  and its office under  operating
     leases, which expire over the next seven years.

     Future minimum lease  payments  under the  equipment,  furniture and office
     leases described above are approximately as follows:

               Year
             --------
               2001                                            $  384,262
               2002                                               328,368
               2003                                               342,701
               2004                                               354,125
               2005 & After                                       715,719
                                                               ----------
                                                               $2,125,175
                                                               ==========

     Office rent and equipment lease expense  totaled  $733,645 and $641,693 for
     the years ended December 31, 2000 and 1999, respectively.


                                      F-15


                               SIMTEK CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


     In addition,  the Company leases research and development  software under a
     capital lease,  which will expire over the next five years. At December 31,
     2000,  future  minimum lease payments  under the lease  described  above is
     approximately as follows:

               Year
             --------
               2001                                            $   63,888
               2002                                                63,888
               2003                                                63,888
               2004                                                47,916
                                                               ----------
               Total net minimum lease payments                   239,580
               Less amount representing interest                  (38,566)
                                                               ----------
               Present value of net minimum lease payments     $  201,014
                                                               ==========

     ACCRUED  SALARY  - Due to  limited  working  capital  of the  Company,  the
     Company's  former CFO agreed with the Company's Board of Directors to defer
     his salary from April 1, 1994 through December 31, 1996. As of December 31,
     2000, a total of $210,000 was accrued and unpaid.

7.   SHAREHOLDERS' EQUITY:
     --------------------

     In 1999, the  shareholders'  of Macrotech,  which was acquired by Simtek in
     2000 and  accounted  for as a pooling of interest,  contributed  $70,000 in
     services  and  paid  for  $132,000  of  Marcotech's   expenses.   In  2000,
     shareholders'  of Macrotech  contributed  $16,103 in services  prior to the
     acquistion.

     In February  and March 2000,  Renaissance  Capital  Group of Dallas,  Texas
     ("Renaissance") converted the $1,500,000 debenture established in June 1998
     into 7,692,308 shares of the Simtek Common Stock.

     During  April,  2000,  as  significant  shareholder  of the  Company  (ZMD)
     converted  $130,153  liability  into 551,964  shares of common stock of the
     Company.

     On May 9, 2000, the Company acquired  Integrated  Logic. The Company issued
     3,000,000 shares of its common stock in exchange for all outstanding shares
     of all classes of  Integrated  Logic stock.  Integrated  Logic  designs and
     sells  programmed  semiconductor  logic  products.  The  Company  purchased
     approximately  $30,000  of  product  from  Integrated  Logic  in  the  year
     preceding the  acquisition.  The acquisition was accounted for as a pooling
     of interest,  and the results of  Integrated  Logic have been  consolidated
     with the  Company's,  as if the two had been merged  throughout the periods
     presented.

     On June 16, 2000, the Company acquired 1,875,000 shares of the common stock
     of WebGear,  Inc., in return for 1,250,000 shares of Simtek's common stock.
     On  September  29,  2000,  the Company  purchased  incomplete  research and
     development, patents and certain trademarks from WebGear, Inc. The original
     contract  price for the  incomplete  research and  development  totaled the
     1,875,000 shares of WebGear, Inc. stock plus 3,400,000 shares of our common


                                      F-16


                               SIMTEK CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



     stock  of  which  500,000  were  held in  escrow  based  on  WebGear,  Inc.
     fulfilling all obligations under the contract.  In December 2000,  WebGear,
     Inc.  defaulted  on one  condition  of the  contract,  thus forcing them to
     relinquish the 500,000 escrow shares of Simtek's common stock which reduced
     the shares issued to 2,900,000 of our common stock.

     On July 31,  2000,  the Company  acquired  Macrotech.  The  Company  issued
     1,250,000 shares of our common stock in exchange for all outstanding shares
     of all classes of Macrotech stock.  Macrotech  designs and sells programmed
     semiconductor  logic  products,  which are an extension  of the  programmed
     semiconductor  logic  products  that  Integrated  Logic  manufactures.  The
     acquisition was accounted for as a pooling of interest,  and the results of
     Macrotech  have been  consolidated  with  Simtek's,  as if the two had been
     merged throughout the periods presented.

     On September 14, 2000,  the Company  entered into a one-year  contract with
     two investment bankers, E.B.M.  Associates,  Inc. and World Trade Partners.
     Each  company  has  received  500,000  shares of common  stock,  which were
     nonforfeitable  and fully vested upon issuance on September  14, 2000,  the
     grant  date.  Both  companies  will assist the  Company in  broadening  our
     financial  market presence and establishing  new  relationships  within the
     industry,  investment  community and financial media, by arranging meetings
     for our management with industry  analysts,  presenting company profiles to
     analysts and brokerage firms, mailings and constant personal  communication
     with investors.  E.B.M. Associates Inc. supports these activities primarily
     in retail  investment  markets,  while World Trade Partners  supports these
     activities primarily in institutional markets.  E.B.M. Associates and World
     Trade Partners  cooperate to coordinate their activities.  On September 14,
     2000,  the closing share price for the Company's  common stock was $ 1.0312
     per share and  accordingly  $1,031,000  was  assigned  to prepaid  investor
     relations.  The cost  associated  with this  transaction is being amortized
     over the life of the contract, of which approximately $301,000 was expensed
     in 2000. The balance will be expensed over the term of the contract, ending
     in the third quarter of 2001.

     On  September  29,  2000,  the Company  purchased  incomplete  research and
     development,   patents  and  certain  trademarks  from  WebGear,  Inc.  The
     incomplete  research  and  development  consists of hardware  and  software
     developed  for wireless data  communications  that needs to be modified for
     use with the Bluetooth technology  standard.  The Company originally issued
     3,400,000  shares of our common stock which was amended in December 2000 to
     2,900,000  by the  return of  500,000  shares of common  stock  which  were
     previously held in escrow.  The Company also returned to WebGear,  Inc. the
     1,875,000  shares of WebGear,  Inc.  common stock that Simtek acquired from
     WebGear, Inc. on June 16, 2000. On September 29, 2000, the closing price of
     Simtek's  common  stock was $0.8438  per share.  The Company has valued the
     purchased  patents and trademarks at $125,000,  which was  capitalized  and
     recorded  as  intangible  assets.  The  Company  has valued the  incomplete
     research and development acquired from WebGear,  Inc. at $3,962,646,  which
     was expensed immediately.

     The discounted cash flow method was used to value the in-process technology
     acquired.  A ten  year  life  and a  27.5%  discount  rate  were  used  for
     valuation.  Calculations  assumed revenues from products developed from the
     incomplete  research and  development  would commence in late 2001 and that
     gross  margins  could be  sustained  at an average  50% over the  projected


                                      F-17


                               SIMTEK CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



     product lives.  The Company has assumed that  operating  costs would follow
     the normal  percentage  of revenue  rates that the Company has  established
     over the past five years.  WebGear developed a wireless  networking product
     that operates with a 900 MHz narrow-band radio and uses protocol conversion
     techniques,  firmware and software which are similar to the requirements to
     implement  Bluetooth bridging  technology.  These will be used as base-line
     technologies  to  implement  our  integrated  circuits,  along with  system
     architecture   definitions  developed  by  WebGear  that  include  hardware
     descriptions and software  protocol stacks.  The Company  estimates that we
     will invest  approximately  $750,000 in further  development costs to bring
     the first  product to market.  Samples are scheduled for the second half of
     2001 with  production  within 3 months of sampling.  The Company  estimates
     that  the  use  of  the  purchased   incomplete  research  and  development
     accomplishes  two-thirds of the product  development  required for sampling
     and  management  of the Company  believes they have an 80%  probability  of
     technical  success.  There  is  technical  risk as the  Bluetooth  industry
     standards  organization  is modifying and upgrading the  specification  and
     potential market delays as major Bluetooth product suppliers  implement the
     standard in consumer products.

     On March 13, 2001, the Company acquired Q-DOT in exchange for approximately
     5,172,000  shares of Simtek's common stock.  Q-DOT  specializes in advanced
     technology   research  and   development  for  data   acquisition,   signal
     processing,  imaging and data  communications.  Q-DOT's  projects have been
     supported by conventional  government and commercial  contracts in addition
     to government  contacts sponsored by the Small Business Innovation Research
     (SBIR)  contracts.  Q-DOT will be operated as a wholly owned  subsidiary of
     Simtek for its government contract research and development operations. The
     acquisition will be accounted for as a pooling of interest, and the results
     of Q-DOT will be  consolidated  with  Simtek's  as if they had been  merged
     throughout the periods.

     STOCK  OPTION  PLANS - The Company has approved two stock option plans that
     authorize an aggregate  of 7,000,000  shares for stock  options that may be
     granted to directors, employees, and consultants.  Subsequently, on January
     2, 2001, the Company authorized an additional  2,000,000 shares that can be
     issued  under the stock  option  plans.  The plans  permit the  issuance of
     incentive  and  non-statutory  options and  provide for a minimum  exercise
     price equal to 100% of the fair market value of the Company's  common stock
     on the date of grant.  The maximum term of options  granted under the plans
     is 10 years and options granted to employees  expire three months after the
     termination of employment.  None of the options may be exercised during the
     first six months of the option  term.  No options  may be granted  after 10
     years from the adoption date of each plan. The Incentive  Stock Option Plan
     was adopted in 1991, and the Non-Qualified Stock Option Plan was adopted in
     1994.


                                      F-18


                               SIMTEK CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



     Following  is a summary of activity  under these stock option plans for the
     years ended December 31, 2000 and 1999:




                                                        2000                             1999
                                            ------------------------------  ------------------------------
                                                              Weighted                        Weighted
                                                              Average                          Average
                                            -------------  ---------------  --------------  --------------
                                                Number        Exercise         Number         Exercise
                                              of Shares        Price          of Shares         Price
                                            -------------  ---------------  --------------  --------------
                                                                                  
     Outstanding, beginning of year            4,182,486       $   .20         4,137,736      $   .19

            Granted                            1,036,750           .97           296,750          .17
            Expired                              (81,000)         (.17)          (42,000)         .15
            Exercised                         (1,863,016)         (.16)         (210,000)        (.16)
            Canceled                            (137,498)         (.37)                -            -
                                              ----------                       ---------

     Outstanding, end of year                  3,137,722       $   .47         4,182,486      $   .20
                                              ==========                       =========


     All options  granted during 2000 and 1999, were at the current market price
     and the  weighted  average  fair value was $.77 and .14,  respectively.  At
     December 31, 2000, options for 2,226,979 shares were exercisable and of the
     remaining  options of  456,583,  327,250,  and  126,910  shares will become
     exercisable in 2001, 2002, and 2003, respectively.

     If not previously  exercised or forfeited,  options outstanding at December
     31, 2000, will expire as follows:

                                                                   Weighted
                                                                    Average
                                                    Number         Exercise
        Year Ending December 31,                  of Shares         Price
     -------------------------------            -------------   -------------

                 2001                               387,100        $  .14
                 2002                               498,986           .14
                 2003                               190,000           .17
                 2004                               459,608           .33
                 2005                               398,085           .37
                 2006                               225,471           .17
                 2007                               978,472          1.01
                                                  ---------
                                                  3,137,772        $  .47
                                                  =========

     INCENTIVE  STOCK  OPTION  PLAN - At the time of the  acquisition  of Q-DOT,
     Q-DOT had an Incentive  Stock Option Plan for the benefit of its employees.
     At December 31, 2000, Q-DOT had granted options to purchase 7,380 shares of
     its stock.  At the time of closing,  these options  converted  into 130,350
     options to  purchase  Simtek  Common  Stock.  These  options  have not been
     included in the above tables.

     PRO FORMA  STOCK-BASED  COMPENSATION  DISCLOSURES - The Company applies APB
     Opinion 25 and related  interpretations in accounting for its stock options
     and warrants which are granted to employees.  Accordingly,  no compensation
     cost has been  recognized  for grants of options and  warrants to employees
     since  the  exercise  prices  were not less  than the  market  value of the
     Company's  common  stock on the grant  dates.  Had  compensation  cost been


                                      F-19


                               SIMTEK CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


     determined  based on the fair  value at the grant  dates for  awards  under
     those plans  consistent  with the method of SFAS No. 123, the Company's net
     income and EPS would have been reduced to the pro forma  amounts  indicated
     below.

 


                                                             Year Ended December 31,
                                                          -----------------------------
                                                              2000             1999
                                                          ------------     ------------
                                                                     
     Net loss applicable to common shareholders:
             As reported                                  $(3,540,342)     $  (149,470)
             Pro forma                                     (3,765,937)        (272,062)

     Net loss per common shareholders:
             As reported - basic and diluted              $     (.07)      $         -
             Pro forma - basic and diluted                      (.07)                -


     The fair value of each option granted in 2000 and 1999 was estimated on the
     date of  grant,  using  the  Black-Scholes  option-pricing  model  with the
     following:

                                             Options Granted During
                                           ----------------------------
                                              2000            1999
                                           -----------     ------------

     Expected volatility                     127.0%          119.7%
     Risk-free interest rate                   5.5%            5.5%
     Expected dividends                          -               -
     Expected terms (in years)                 4.0             4.0


     Other -  Preferred  Stock may be issued in such series and  preferences  as
     determined by the Board of Directors.

8.   SIGNIFICANT  CONCENTRATION OF CREDIT RISK, MAJOR CUSTOMERS, AND OTHER RISKS
     ---------------------------------------------------------------------------
     AND UNCERTAINTIES:
     ------------------

     Sales by location for the ended  December 31, 2000 and 1999 were as follows
     (as a percentage of sales): 2000 1999

                                          2000           1999
                                          ----           ----

     United States                         46%            63%
     Europe                                14%            11%
     Far East                              34%            25%
     All Others                             6%             1%
                                          ----           ----
                        Total             100%           100%

     Sales from government  contracts accounted for approximately 15% and 33% of
     total sales for the years ended  December 31, 2000 and 1999,  respectively.
     Sales from our military products accounted for approximately 12% and 18% of
     total sales for the years ended December 31, 2000 and 1999, respectively.

                                      F-20


                               SIMTEK CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



     Sales  to  unaffiliated  customers  which  represent  10%  or  more  of the
     Company's  sales for the years  ended  December  31,  2000 and 1999 were as
     follows (as a percentage of sales):

                   Customer                           2000          1999
                 ------------                       --------      --------

                      A                                18%           31%
                      B                                 -            13%
                      C                                14%            -
                      D                                10%            -
                      E                                 -            12%


     At December  31,  2000,  the Company had gross trade  receivables  totaling
     $898,020 due from the above three customers.

     In 2000 and 1999, the Company purchased all of its memory wafers,  based on
     0.8  micron  technology  from  a  single  supplier  located  in  Singapore.
     Approximately  89% and 96% of the Company's memory sales for 2000 and 1999,
     respectively,  were from finished  units  produced  from these wafers.  The
     Company  had an  agreement  with this  supplier  to provide  wafers,  which
     expired  in  September  1998.  This  agreement  has not  been  extended  or
     terminated, however, this supplier still provides wafers to the Company. In
     addition,  the Company purchased all of its logic wafers from two suppliers
     located in  Singapore  and  Taiwan.  Approximately  11% and 9% of its logic
     sales in 2000 and 1999,  respectively,  were from finished  units  produced
     from these  wafers.  The  Company  does not have an  agreement  with either
     supplier,  however,  the  Company  has not  seen  any  disruption  in wafer
     deliveries. In 1999, the Company also purchased finished units from ZMD for
     $22,480,  and sales from these products  accounted for  approximately 4% of
     the Company's sales in 1999. Any disruptions in the Company's relationships
     with  these  suppliers  could  have  an  adverse  impact  on the  Company's
     operating  results.  Assuming an alternate  manufacturer  of the  Company's
     products could be procured,  management believes there could be significant
     delays in manufacturing  while the manufacturer  incorporates the Company's
     products and processes.

9.   TAXES:
     -----

     Under SFAS No.  109,  deferred  taxes  result  from  temporary  differences
     between  the  financial  statement  carrying  amounts  and the tax bases of
     assets and liabilities. The components of deferred taxes are as follows:




                                      F-21


                               SIMTEK CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                                                Deferred Tax
                                                             Assets (Liability)
                                                            -------------------

Current:
  Allowance for doubtful accounts                              $      3,000
  Inventory reserve                                                  36,000
  Accrued expenses                                                  276,000
                                                               ------------
  Net current deferred tax before valuation allowance               315,000
  Valuation allowance                                              (315,000)
                                                               ------------
Total current deferred tax                                     $          -
                                                               ============

Non-Current:
  Property and equipment                                       $    205,000
  Incomplete research and development                             1,431,000
  Net operating losses                                           10,126,000
  R&D credit carryforward                                         1,200,000
  AMT credit                                                          8,000
                                                               ------------
Net non-current deferred tax asset before valuation
 allowance                                                       12,970,000
Valuation allowance                                             (12,970,000)
                                                               ------------
Total non-current deferred tax asset                           $          -
                                                               ============

     The net current and  non-current  deferred tax assets have a 100% valuation
     allowance resulting from the inability to predict sufficient future taxable
     income to utilize the assets.  The valuation  allowance for 2000  increased
     $91,000 and decreased $219,000 in 1999.

     At December 31, 2000, the Company has approximately  $27,000,000  available
     in net  operating  loss  carryforwards  which  begin to expire from 2004 to
     2015.  As a result of certain  non-qualified  stock options which have been
     exercised,  approximately $3,200,000 of the net operating loss carryforward
     will be  charged  to  "paid in  capital,"  when,  and if,  the  losses  are
     utilized.  Also, a  substantial  portion of the net  operating  loss may be
     subject to Internal Revenue Code Section 382 limitations.

     Total  income  tax  expense  for 2000 and 1999  differed  from the  amounts
     computed by applying the U.S. Federal statutory tax rates to pre-tax income
     as follows:




                                                                                  1999          1998
                                                                                --------      --------
                                                                                        
     Statutory rate                                                               (34.0)%      (34.0)%
     State income taxes, net of Federal income tax benefit                         (3.3)%       (3.3)%
     Increase (reduction) in valuation allowance related to of net operating
         loss carryforwards and change in temporary differences                    37.3%        37.3%
                                                                                --------      -------
                                                                                $     -       $    -
                                                                                ========      =======


                                      F-22



                               SIMTEK CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


10.  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.




                                                     Semiconductor         Government
Description                          Year               Devices            Contracts               Total
-----------                          ----           --------------         ----------              -----
                                                                 
Net sales                            2000            $12,150,750          $ 2,317,064           $14,467,814

                                     1999              7,754,952            3,413,672            11,168,624
 Income (loss) from
   Operations                        2000            $(3,515,122)         $    78,320           $(3,436,802)

                                     1999               (100,685)             144,327                43,642
 Interest income                     2000            $   165,736                    -           $   165,736

                                     1999                 96,942                    -                96,942
 Interest expense                    2000            $   (52,790)         $   (24,444)          $   (77,234)

                                     1999               (151,402)             (21,022)             (172,424)
 Depreciation and
  amortization                       2000            $   307,837          $   123,125           $   430,962

                                     1999                247,502              144,216               391,718
 Noncash items:
   Purchase of
     incomplete research
     and development                 2000            $ 3,962,645                    -            $ 3,962,645

                                     1999                      -                    -                      -

Stock issued for services            2000            $ 1,031,200          $    22,932            $ 1,054,132

                                     1999                      -               14,999                 14,999

Assets                               2000            $ 6,786,593          $   501,392            $ 7,287,985

                                     1999              5,508,380              955,128              6,463 508


                                      F-23





                               SIMTEK CORPORATION

                                  BALANCE SHEET
                                  (Unaudited)


                      ASSETS
                      ------
                                                                  June 30, 2001
                                                                  -------------
                                                                
CURRENT ASSETS:
   Cash and cash equivalents.....................................  $  1,538,390
   Certificate of deposit, restricted............................       300,000
   Accounts receivable - trade, net..............................     2,266,593
   Inventory, net ...............................................     2,343,497
   Intercompany receivable.......................................         3,712
   Prepaid expenses and other....................................       132,175
                                                                   ------------
       Total current assets......................................     6,584,367

EQUIPMENT AND FURNITURE, net.....................................       968,998
OTHER ASSETS.....................................................       155,776
                                                                   ------------

TOTAL ASSETS.....................................................  $  7,709,141
                                                                   ============

       LIABILITIES AND SHAREHOLDERS' EQUITY
       ------------------------------------

CURRENT LIABILITIES:
   Accounts payable .............................................  $  1,858,535
   Accrued expenses..............................................       299,513
   Accrued wages.................................................       275,446
   Accrued vacation payable......................................       158,049
   Obligation under capital leases...............................        49,552
   Short term debt...............................................        22,311
   Line of Credit................................................            -
   Deferred Revenue..............................................        25,000
                                                                   ------------
       Total current liabilities.................................     2,688,406
                                                                   ------------
NOTES PAYABLE....................................................        20,000
OBLIGATION UNDER CAPITAL LEASES..................................       128,330
                                                                   ------------
       Total liabilities.........................................     2,836,736

SHAREHOLDERS' EQUITY:
   Preferred stock, $1.00 par value, 2,000,000 shares
       authorized and none issued and outstanding ...............             -
   Prepaid investor relations....................................      (214,833)
   Treasury Stock................................................       (12,504)
   Common stock, $.01 par value, 80,000,000 shares
       authorized, 53,684,2455 shares issued and
       outstanding at June 30, 2001..............................       536,842
   Additional paid-in capital....................................    37,503,879
   Accumulated deficit...........................................   (32,940,979)
                                                                   ------------
   Shareholder's equity..........................................     4,872,405
                                                                   ------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.......................  $  7,709,141
                                                                   ============

   The accompanying notes are an integral part of these financial statements.

                                      F-24




                                  SIMTEK CORPORATION

                               STATEMENTS OF OPERATIONS
                                     (Unaudited)


                                                              Six Months Ended June 30,
                                                              -------------------------
                                                                2001             2000
                                                                ----             ----
                                                                       
NET SALES.................................................. $ 9,064,480      $ 7,678,004

     Cost of  sales........................................   6,153,564        4,497,866
                                                            ----------------------------

GROSS MARGIN...............................................   2,910,916        3,180,138

OPERATING EXPENSES:
     Design, research and development......................   1,406,151        1,156,895
     Administrative........................................   1,294,599          569,582
     Marketing.............................................     820,515          663,854
                                                            ----------------------------

         Total Operating Expenses..........................   3,521,265        2,390,331

INCOME (LOSS) FROM OPERATIONS..............................    (610,349)         789,807
                                                            ----------------------------

OTHER INCOME (EXPENSE):
     Interest income, net..................................      45,553           16,161
     Other income (expense), net...........................       3,111           (5,822)
                                                            ----------------------------

         Total other income (expense)......................      48,664           10,339
                                                            ----------------------------

NET INCOME (LOSS) BEFORE TAXES.............................    (561,685)         800,146

     Provision for income taxes............................           -           44,000
                                                            ----------------------------

NET INCOME (LOSS).......................................... $  (561,685)     $   756,146
                                                            ============================

BASIC AND DILUTED EPS...................................... $      (.01)     $       .02
                                                            ============================

BASIC WEIGHTED AVERAGE SHARES
 OUTSTANDING...............................................  53,668,168       44,889,695

EFFECT OF DILUTIVE OPTIONS.................................           -        5,206,918
                                                            ----------------------------

DILUTIVE SHARES OUTSTANDING................................  53,668,168       50,096,613
                                                            ============================


* Less Than $.01 per share



               The accompanying notes are an integral part of these financial statements.

                                                   F-25



                                         SIMTEK CORPORATION

                                      STATEMENTS OF CASH FLOWS
                                             (Unaudited)

                                                                                      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.

                                                   F-26


                                         SIMTEK CORPORATION

                                      STATEMENTS OF CASH FLOWS
                                              (Unaudited)
                                                (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.




                                                   F-27


                               SIMTEK CORPORATION
                         NOTES TO FINANCIAL STATEMENTS
                                  (Unaudited)

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 on page F-3 To F-24.

          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.


                                      F-28



                               SIMTEK CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)


3.   GEOGRAPHIC CONCENTRATION:

     Sales by location  for the six months  ended June 30, 2001 and 2000 were as
     follows (as a percentage of sales):

                                                 2001             2000
                                                 ----             ----
         United States                            44%              51%
         Europe                                   14%              14%
         Far East                                 35%              27%
         All Others                                7%               8%
                                                 ----             ----
                                                 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 six months  ended June 30,  2001 and 2000 Q-DOT had revenue of
     $793,473 and  $1,453,702,  respectively  and net loss of $190,949 and a net
     income of $38,258,  respectively. The acquisition did not have an impact on
     earnings (loss) per share for either of the interim periods.


5.   ACCOUNTING FOR Q-DOT ACQUISITION:

          Prior to March 13, 2001,  Q-DOT had effective  control over QDA due to
     an operating agreement and Q-DOT funded QDA. On March 13, 2001, the Company
     acquired Q-DOT, and ceased funding QDA. The Company does not intend to fund
     QDA in the future and is in the process of revising the operating agreement
     with QDA. However,  until such time as the operating  agreement is formally
     revised,  the  Company  will  continue  to account for QDA under the equity
     method. During fiscal 2001, QDA has been inactive and the equity losses for
     the period ended June 30, 2001 are insignificant.


                                      F-29




                                     PART II
                     INFORMATION NOT REQUIRED IN PROSPECTUS

Capitalized  terms used but not otherwise defined in Part II are used as defined
in the prospectus contained in this registration statement.

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

     The  following  table  sets forth the  expenses  (other  than  underwriting
discounts  and  commissions)  expected  to be incurred  in  connection  with the
issuance and  distribution  of the securities  registered  hereby,  all of which
expenses, except for the Commission registration fee are estimated:

     Securities and Exchange Commission registration fee..........    $   268
     Legal fees and expenses    ..................................     30,000
     Accounting fees..............................................     25,000
     Miscellaneous................................................      2,500
                                                                      -------

     Total........................................................    $57,768
                                                                      =======

     The above expenses will be borne by us.

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES

     On June 12, 1998, we sold $1.5 million of convertible  debentures each with
a 7-year  term and  accruing  interest  at 9% per  annum.  The  debentures  were
convertible  at the option of the holder  into  shares of our common  stock.  On
February 22, 2000, each of  Rennaissance  Capital Growth & Income Fund III, Inc.
("Fund  III")and  Rennaissance  US Growth & Income  Trust Plc  ("Growth & Income
Trust") converted  $195,000 of a $750,000  convertible  debenture into 1,000,000
shares of our common stock.  On March 2 and 6, 2000,  each of Fund III, Inc. and
Growth & Income Trust  converted  $195,000 of a $750,000  convertible  debenture
into 1,000,000 shares of our common stock. On March 6, 2000, Fund III and Growth
and  Income  Trust  converted  the  balance  of the  debentures  into a total of
3,692,308   shares  of  our  common  stock.   These  holders  were   financially
sophisticated  and had  access  to the same  type of  information  about us as a
registration  statement would  disclose.  No general  solicitation  occurred for
either the original  issuance of the convertible  debentures and the issuance of
common stock upon their conversion.

     During April 2000,  Zentrum  Mikroelektronik  Dresden  converted a $130,153
liability into 551,964 shares of our common stock.  The conversion  price was at
$0.2358 per share.  The price was based upon the Cooperation  Agreement  entered
into  with  Zentrum   Mikroelektronik   Dresden  in  September   1995.   Zentrum
Mikroelektronik Dresden was financially sophisticated and had access to the same
type of information  about us as a registration  statement  would  disclose.  No
general solicitation occurred.

     In May 2000, we issued  3,000,000 shares of our common stock to Hugh Norman
Chapman  as  consideration  for  our  acquisition  of  100%  of the  issued  and
outstanding  stock of Integrated Logic Systems,  one of the companies that house
our  semiconductor  logic  business.  No  advertising  or  general  solicitation
occurred.  We only  offered to issue,  and did issue,  stock to one  person--Mr.
Chapman.  Mr. Chapman had  substantial  business  dealings with us prior to this
transaction.  Mr. Chapman received or had access to the same type of information
about us as a registration statement would disclose. We reasonably believed that
Mr. Chapman was financially sophisticated.

     In June 2000, we issued 1,250,000 shares of our common stock to WebGear, as
consideration  for our acquisition of 1,875,000  shares of WebGear common stock.
In  September,  we issued  2,900,000  shares of our  common  stock to WebGear as
consideration,  together with 1,250,000  shares of WebGear common stock, for our
acquisition of intellectual  property assets of WebGear.  These assets primarily
relate to the wireless data communications  industry.  No advertising or general
solicitation  occurred  with respect to these  transactions  involving  WebGear.
WebGear  received  or had access to the same type of  information  about us as a
registration statement would disclose. WebGear was financially sophisticated and
an "accredited investor."

                                      II-1




     In July  2000,  we issued  625,000  shares of our  common  stock to each of
Jaskarn Johal and Kashmira S. Johal as consideration for our acquisition of 100%
of the stock of Macrotech  Semiconductor,  one of the  companies  that house our
semiconductor logic business.  No advertising or general  solicitation  occurred
with  respect to the  Macrotech  Semiconductor  transaction.  We only offered to
issue, and did issue,  stock to Messrs. J. Johal and K. Johal.  Messrs. J. Johal
and  K.  Johal  had  substantial   business  dealings  with  us  prior  to  this
transaction.  Messrs.  J. Johal and K. Johal  received or had access to the same
type of information  about us as a registration  statement  would  disclose.  We
reasonably  believed  that  Messrs.  J.  Johal  and K.  Johal  were  financially
sophisticated.

     In September  2000,  we issued  500,000  shares of our common stock each to
both E.B.M.  Associates  and World Trade  Partners  in  consideration  for their
agreement to provide  financial  advisory  services.  No  advertising or general
solicitation occurred with respect to our issuance of stock to E.B.M. Associates
or World  Trade  Partners.  We only  offered to issue,  and did issue,  stock to
E.B.M.  Associates and World Trade Partners.  E.B.M.  Associates and World Trade
Partners  received or had access to the same type of  information  about us as a
registration  statement  would  disclose.  We  reasonably  believed  that E.B.M.
Associates and World Trade Partners were financially sophisticated.

     On March 14, 2001,  we completed  the merger of Q-DOT Group,  Inc. with and
into us in exchange  for  approximately  5,171,731  shares of our common  stock,
valued at $4,000,000. Although duly notified of their appraisal rights, no Q-DOT
Group  stockholder  exercised  appraisal  rights.  Q-DOT Group's 30 stockholders
received, on a pro rata basis, a total of approximately  5,171,731 shares of our
common stock. The transaction was a private  placement exempt from  registration
pursuant to Rule 506 of  Regulation D promulgated  by the SEC.  There were fewer
than 35  purchasers of our  securities  accredited  investors.  We provided each
purchaser  with the  information  required  under  Regulation  D. We  reasonably
believed that each purchaser who was not an accredited investor, either alone or
with such person's purchaser representative, was capable of evaluating the risks
and merits of investing in our stock.  No general  solicitation  or  advertising
occurred.  Following  the merger,  we filed a Form D with the SEC as required by
Regulation D.

     With respect to our acquisition of Q-DOT Group, we issued stock in reliance
upon Rule 506 of Regulation D. The other  issuances  described above were deemed
to be exempt from registration under the Act, in reliance on Section 4(2) of the
Act as transactions by an issuer not involving a public offering.

ITEM 28.  UNDERTAKINGS

     Insofar as indemnification for liabilities arising under the Securities Act
of 1933 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 Securities  and Exchange  Commission
such  indemnification  is against  public policy as expressed in the 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 of  controlling  person of the registrant in the
successful  defense of any  action,  suit or  proceeding)  is  asserted  by such
director,  officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been  settled by  controlling  precedent,  submit to a court of  appropriate
jurisdiction the question whether such  indemnification  by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

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 of 1933;

    (ii)  To reflect in the  prospectus  any facts or events  arising  after the
          effective  date of the  registration  statement  (or the  most  recent
          post-effective  amendment  thereof)  which,  individually  or  in  the
          aggregate, represent a fundamental change in the information set forth
          in the  registration  statement.  Notwithstanding  the foregoing,  any
          increase  or decrease  in volume of  securities  offered (if the total


                                      II-2





          dollar  value of  securities  offered  would not exceed that which was
          registered)  and  any  deviation  from  the  low  or  high  end of the
          estimated  maximum  offering  range  may be  reflected  in the form of
          prospectus  filed with the  Commission  pursuant to Rule 424(b) if, in
          the aggregate,  the changes in volume and price represent no more than
          a 20% change in the maximum aggregate  offering price set forth in the
          "Calculation of Registration Fee" table in the effective  registration
          statement.

    (iii) To  include  any  material  information  with  respect  to the plan of
          distribution not previously disclosed in the registration statement or
          any material change to such information in the registration statement.

(2)  That, for the purpose of determining any liability under the Securities Act
     of 1933,  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.

     The  undersigned   registrant  hereby  undertakes  that,  for  purposes  of
     determining  any liability under the Securities Act of 1933, each filing of
     the  registrant's  annual report pursuant to section 13(a) or section 15(d)
     of the Securities Exchange Act of 1934 (and, where applicable,  each filing
     of an employee  benefit  plan's annual report  pursuant to section 15(d) of
     the Securities  Exchange Act of 1934) that is  incorporated by reference in
     the  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.


                                      II-3





Exhibits

       3.1    Amended and Restated Articles of Incorporation.(2)
       3.2    Amended and Restated Articles of Incorporation November 1997.(7)
       3.3    Bylaws.(2)
       4.1    1987-I Employee Restricted Stock Plan.(1)
       4.2    Form  of  Restricted  Stock  Agreement  between  the  Company  and
              Participating Employees.(1)
       4.3    Form of Common Stock Certificate.(3)
       4.4    Simtek Corporation 1991 Stock Option Plan.(4)
       4.5    Form of Incentive Stock Option  Agreement  between the Company and
              Eligible Employees.(4)
       4.6    1994 Non-Qualified Stock Option Plan.(5 )
       4.7    Amendment to the 1994 Non-Qualified Stock Option Plan.(6)
       5.1    Opinion of Holme, Roberts & Owen, LLP
       10.1   Form of Non-Competition and Non-Solicitation Agreement between the
              Company and certain of its employees.(1)
       10.2   Form of  Employee  Invention  and  Patent  Agreement  between  the
              Company and certain of its employees.(1)
       10.3   Product License  Development and Support  Agreement between Simtek
              Corporation  and  Zentrum  Mikroelektronik  Dresden  dated June 1,
              1994(5)
       10.4   Cooperation  Agreement  between  Simtek  Corporation  and  Zentrum
              Mikroelektronik Dresden dated September 14, 1995(6)
       10.5   Manufacturing    Agreement   between    Chartered    Semiconductor
              Manufacturing and Simtek Corporation dated September 16, 1992(6)
       10.6   Employment agreement between the Simtek Corporation and Douglas M.
              Mitchell(8)
       10.7   Share  Exchange   Agreement  dated  May  9,  2000  between  Simtek
              Corporation and Hugh N. Chapman (9)
       10.8   Share  Exchange  Agreement  dated  June 16,  2000  between  Simtek
              Corporation and WebGear (9)
       10.9   Share  Exchange  Agreement  dated  July 31,  2000  between  Simtek
              Corporation and Jaskarn Johal and Kashmira S. Johal (10)
       10.10  Asset Purchase  Agreement  between Simtek  Corporation and WebGear
              (11)
       10.11  Amendment to Asset Purchase  Agreement between Simtek  Corporation
              and WebGear (12)
       10.12  Agreement  and Plan of  Merger  among  Simtek  Corporation,  Q-DOT
              Group, Inc. and Q-DOT, Inc. (13)
       10.13  Employment  Agreement  between  Simtek  Corporation  and  Hugh  N.
              Chapman
       23.1   Consent of Hein + Associates, LLP
       23.2   The consent of Holme Roberts & Owen LLP is included in Exhibit 5.1

-------------
(1)  Incorporated by reference to the Company's Form S-1 Registration  Statement
     (Reg. No. 33- 37874) filed with the Commission on November 19, 1990.
(2)  Incorporated  by  reference  to the  Company's  Amendment  No.1 to Form S-1
     Registration  Statement  (Reg. No.  33-37874)  filed with the Commission on
     February 4, 1991.
(3)  Incorporated  by  reference  to the  Company's  Amendment  No.2 to Form S-1
     Registration  Statement  (Reg. No.  33-37874)  filed with the Commission on
     March 4, 1991.
(4)  Incorporated by reference to the Company's Form S-1 Registration  Statement
     (Reg. No. 33- 46225) filed with the Commission on March 6, 1992.
(5)  Incorporated by reference to the Company's Annual Report on Form 10-K filed
     with the Commission on March 25, 1995
(6)  Incorporated by reference to the Company's Annual Report on Form 10-K filed
     with the Commission on March 27, 1996
(7)  Incorporated by reference to the Company's Annual Report on Form 10-K filed
     with the Commission on March 24, 1998
(8)  Incorporated  by reference to the  Company's  Annual  Report on Form 10-KSB
     filed with the Commission on March 12, 1999

                                      II-4





(9)  Incorporated by reference to the Form SB-2 Registration Statement (Reg. No.
     333-40988( filed with the Commission on July 7, 2000
(10) Incorporated  by  reference  to the Form 8-K filed with the  Commission  on
     August 14, 2000
(11) Incorporated  by  reference  to the Form 8-K filed with the  Commission  on
     October 13, 2000
(12) Incorporated  by reference to the  Company's  Amendment  No. 2 to From SB-2
     Registration Statement (Reg. No. 333-40988)
(13) Incorporated  by reference to the  Company's  Form 8-K filed with the March
     23, 2001







                                      II-5




                                   SIGNATURES

     In accordance  with 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 SB-2 and authorized  this  registration
statement  to be  signed  on its  behalf  by  the  undersigned,  thereunto  duly
authorized,  in the City of Colorado Springs,  State of Colorado on September 4,
2001

                                           Simtek Corporation,
                                           a Colorado corporation


                                           By:  /s/Douglas M. Mitchell
                                              ----------------------------------
                                                Douglas M. Mitchell
                                                Chief Executive Officer and
                                                President

     In accordance  with the  requirements  of the Securities Act of 1933,  this
registration  statement  has  been  signed  by  the  following  persons  in  the
capacities and on the dates stated.

                                   SIGNATURE



 /s/Douglas M. Mitchell
-------------------------------------------------
Douglas M. Mitchell
Director, Chief Executive Officer, President and
Chief Financial Officer (acting)
September 4, 2001


 *
-------------------------------------------------
Robert H. Keeley
Director
September 4, 2001


 *
-------------------------------------------------
John Heightley
Director
September 4, 2001


 *
-------------------------------------------------
Klaus Wiemer
Director
September 4, 2001


Kimberley Carothers
------------------------------------------------
Controller (Principal Accounting Officer)
September 4, 2001

* By Douglas M. Mitchell attorney in fact





                                      II-6