<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
O2MICRO INTERNATIONAL LIMITED
The Grand Pavilion, West Bay Road
P.O. Box 1794, George Town
Grand Cayman, Cayman Islands
(345) 945-1110
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F
Form 20-F X Form 40-F _______
---
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934
Yes _________ No X
---
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b):
82- N.A.
------
1
<PAGE>
<TABLE>
<CAPTION>
INDEX
O2MICRO INTERNATIONAL LIMITED
Page No.
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2000 3
AND DECEMBER 30, 1999
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE 4
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND
SEPTEMBER 30, 1999
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE 5
MONTHS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 13
AND RESULTS OF OPERATIONS
Item 3 QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK 15
PART II OTHER INFORMATION
Item 1. EXHIBITS 16
EXHIBIT INDEX 16
Item 2. SUBSEQUENT EVENTS 16
SIGNATURE 17
</TABLE>
2
<PAGE>
O2MICRO INTERNATIONAL LIMITED
CONSOLIDATED BALANCE SHEETS
(In Thousand U.S. Dollars, Except Share Amounts)
<TABLE>
<CAPTION>
September 30, December 31,
A S S E T S 2000 1999
----------- ------------- ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 36,793 $ 5,946
Restricted cash 1,198 317
Accounts receivable - net 5,371 1,693
Inventories 5,474 3,118
Deferred income tax - current 138 -
Prepaid expenses and other current assets 726 160
--------- ----------
Total Current Assets 49,700 11,234
--------- ----------
FIXED ASSETS - NET 1,808 1,290
--------- ----------
OTHER ASSETS
Receivables from 360(degrees) web Ltd. 750 -
Deferred income tax - noncurrent 133 -
Other assets 321 267
--------- ----------
Total Other Assets 1,204 267
--------- ----------
TOTAL ASSETS $ 52,712 $ 12,791
========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Notes and accounts payable $ 4,074 $ 2,752
Income tax payable 199 12
Current portion of obligations under capital lease 46 5
Accrued expenses and other current liabilities 2,179 1,669
--------- ----------
Total Current Liabilities 6,498 4,438
--------- ----------
OBLIGATIONS UNDER CAPITAL LEASE - NET OF CURRENT PORTION 21 2
--------- ----------
GUARANTEE DEPOSITS 51 51
--------- ----------
Total Liabilities 6,570 4,491
--------- ----------
SHAREHOLDERS' EQUITY
Ordinary shares at $0.001 par value per share
Authorized - 32,000,000 and 95,000,000 shares as of December 31,
1999 and September 30, 2000, respectively. Issued - 9,912,050
and 32,699,995 shares as of December 31, 1999 and September 30,
2000, respectively. 33 10
Series A, B, C, D, E, F, G and H preference shares at $0.001 par value
Authorized - 18,933,889 shares (liquidation preference of $100,
$300, $100, $500, $500, $4,018, $6,968 and $6,484,
respectively) and 5,000,000 shares at December 31, 1999 and
September 30, 2000, respectively. Issued - 18,527,380 shares
at December 31, 1999 - 19
Additional paid-in capital 55,303 22,375
Warrants outstanding - 311,299 shares 61 61
Deferred compensation (338) (728)
Accumulated other comprehensive income (130) (38)
Accumulated deficit (8,787) (13,399)
--------- ----------
Total Shareholders' Equity 46,142 8,300
--------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 52,712 $ 12,791
========= ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
O2MICRO INTERNATIONAL LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousand U.S. Dollars, Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ----------------------
2000 1999 2000 1999
---------- -------- --------- ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
NET SALES $ 11,149 $ 6,775 $ 29,021 $ 16,165
COST OF SALES 4,410 2,457 11,090 7,250
---------- -------- --------- ---------
GROSS PROFIT 6,739 4,318 17,931 8,915
---------- -------- --------- ---------
OPERATING EXPENSES
Research and development 2,528 1,524 6,936 3,960
Selling, general and administrative 2,262 1,879 6,465 4,694
Stock-based compensation 119 221 390 599
---------- -------- --------- ---------
Total Operating Expenses 4,909 3,624 13,791 9,253
---------- -------- --------- ---------
INCOME (LOSS) FROM OPERATIONS 1,830 694 4,140 (338)
---------- -------- --------- ---------
NON-OPERATING INCOME
Interest - net 230 - 313 119
Other - net (6) 58 101 19
---------- -------- --------- ---------
Total Nonoperating Income - Net 224 58 414 138
---------- -------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAX 2,054 752 4,554 (200)
INCOME TAX EXPENSES (BENEFITS) (44) - (58) 1
---------- -------- --------- ---------
NET INCOME (LOSS) 2,098 752 4,612 (201)
========== ======== ========= =========
OTHER COMPREHENSIVE INCOME
Translation adjustments on subsidiaries (9) 76 (92) 60
---------- -------- --------- ---------
COMPREHENSIVE INCOME (LOSS) $ 2,089 $ 828 $ 4,520 $ (141)
========== ======== ========= =========
EARNINGS (LOSSES) PER SHARE:
Basic $ 0.08 $ 0.08 $ 0.31 $ (0.02)
========== ======== ========= =========
Diluted $ 0.06 $ 0.03 $ 0.15 $ (0.02)
========== ======== ========= =========
NUMBER OF THOUSAND SHARES USED IN
EARNINGS (LOSSES) PER SHARE CALCULATION:
Basic 24,973 9,865 14,962 9,672
========== ======== ========= =========
Diluted 33,272 29,801 31,490 9,672
========== ======== ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
O2MICRO INTERNATIONAL LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousand U.S. Dollars)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------
2000 1999
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 4,612 $ (201)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 587 316
Amortization of deferred stock options 390 599
Amortization of options granted for services 11 -
Deferred income tax (270) -
Changes in operating assets and liabilities:
Accounts receivable - net (3,678) (2,137)
Inventories (2,356) (486)
Prepaid expenses and other current assets (402) (80)
Notes and accounts payable 1,322 466
Income tax payable 199 -
Accrued expenses and other current liabilities 497 455
--------- ---------
Net Cash Provided by (Used in) Operating Activities 912 (1,068)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Receivables from 360(degrees) Web Ltd. (750) -
Acquisitions of:
Fixed assets (991) (181)
Patent (84) (12)
Increase in:
Pledged deposits (880) (284)
Refundable deposits (8) (79)
--------- ---------
Net Cash Used in Investing Activities (2,713) (556)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from:
Public offering 32,646 -
Stock options exercised 110 22
Payments of principal of capital leases (22) (10)
Payments of short-term debt - (370)
--------- ---------
Net Cash Provided by (Used in) Financing Activities 32,734 (358)
--------- ---------
EFFECTS OF CHANGES IN FOREIGN EXCHANGE RATE (86) 53
--------- ---------
NET INCREASE (DECREASE) IN CASH $ 30,847 $ (1,929)
CASH, BEGINNING OF PERIOD 5,946 5,919
--------- ---------
CASH, END OF PERIOD $ 36,793 $ 3,990
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
Cash paid for interest $ 12 $ 10
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING
AND FINANCING ACTIVITIES
Property and equipment acquired under capital leases 95 -
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
O2MICRO INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In Thousand U.S. Dollars, Except Share Data)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared by
the company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. In
management's opinion, the financial statements reflect all adjustments,
consisting only of normal recurring accruals necessary to fairly present
the resulting operations for the indicated periods. Although the Company
believes that the disclosures are adequate to make the information
presented not misleading, it is suggested that these consolidated financial
statements be read in conjunction with the consolidated financial
statements and the notes thereto included in the Company's Form F-1
registration statement.
The results of operations for the three and nine months ended September 30,
2000 are not necessarily indicative of the results that may be expected for
the future quarters or the year ending December 31, 2000.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Use of estimates
The preparation of the accompanying consolidated financial statements
in conformity with generally accepted accounting principles in the
United States requires management to make estimates and assumptions
that affect certain reported amounts and disclosures. Thus, actual
results could differ from those estimates.
B. Revenue recognition
Revenue from product sales to customers, other than distributors, is
recognized at the time of shipment, indicating that revenue has been
realized and earned. The four criteria for revenue being realized and
earned are the evidence of sale, actual shipment, fixed or
determinable selling price, and reasonable assurance of
collectibility.
Allowances for sales return and discounts are provided at the time of
recognition of related revenues and on the basis of experience, and
these provisions are deducted from sales.
The Company, however, has limited control over distributors' selling
of products bought from the Company to third parties. Thus, the
Company recognizes revenue on sales to distributors when the
distributors sell the Company's products to third parties. Thus,
products held by distributors are included in Company inventory.
C. Research and development
Research and development (R&D) costs are expenditures incurred for a
planned search for new knowledge to develop new products or processes
or significantly enhance existing products or processes. They also
include expenditures incurred for the design and testing of product
alternatives or construction of prototypes. All R&D expenditures are
charged to current income.
6
<PAGE>
D. Stock-based compensation
The Company follows Accounting Principles Board Opinion No. 25 -
"Accounting for Stock Issued to Employees" ("APB Opinion No. 25") and
the disclosure provisions of Statement of Financial Accounting
Standards No. 123 - "Accounting for Stock-Based Compensation" ("SFAS
No. 123") for its employee stock options. Under APB Opinion No. 25,
compensation expense is measured on the basis of the difference, if
any, between the fair value of the Company's stock and the exercise
price on the date of the grant.
E. Comprehensive income
The Company adopted the provisions of SFAS No. 130 - "Reporting
Comprehensive Income." Under SFAS No. 130, comprehensive income
includes all changes in equity during an accounting period from
business transactions with non-owner sources. To date, comprehensive
income comprises only translation adjustments pertaining to
subsidiaries.
F. Earnings (losses) per share
SFAS No. 128 - "Earnings Per Share" sets the standards for computing
and presenting earnings per share. Basic earnings per share are
calculated by dividing net earnings (loss) less preferred dividends by
the weighted average number of ordinary shares outstanding. Fully
diluted earnings per share are calculated by dividing net earnings
less preferred dividends by the weighted average number of ordinary
shares and dilutive ordinary share equivalents, i.e, as if the
preference shares had been converted to ordinary shares and the
options and the warrants had been exercised during the periods
covered.
<TABLE>
<CAPTION>
3. ACCOUNTS RECEIVABLE - NET Sept. 30, 2000 Dec. 31, 1999
-------------- --------------
(Unaudited)
<S> <C> <C>
Accounts receivable $ 5,663 $ 1,969
Allowances for:
Doubtful receivable (50) (28)
Sales returns and discounts (242) (248)
------- -------
$ 5,371 $ 1,693
======= =======
</TABLE>
<TABLE>
<CAPTION>
4. INVENTORIES Sept. 30, 2000 Dec. 31, 1999
-------------- -------------
(Unaudited)
<S> <C> <C>
Finished goods $1,937 $1,913
Work-in-process 1,252 737
Raw materials 2,285 468
------ ------
$5,474 $3,118
====== ======
</TABLE>
7
<PAGE>
5. INCOME TAX
Income (loss) before income taxes consisted of:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ ------------------------------
2000 1999 2000 1999
------------ ----------- -------------- ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
The Company - Cayman Islands $ 2,636 $ 1,222 $ 5,408 $ 765
O2Micro, Inc.-USA 103 86 346 291
O2Micro-Taiwan (124) (11) 936 (19)
O2Micro-Taiwan branch (450) (503) (1,933) (1,195)
O2Micro-Japan (118) (42) (324) (42)
O2Micro-Singapore 7 - 121 -
------- ------- --------- ---------
$ 2,054 $ 752 $ 4,554 $ (200)
======= ======= ========= =========
</TABLE>
Provision for income taxes expenses (benefits) consisted of:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- ------------------------------
2000 1999 2000 1999
------------ ------------ ------------ -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Current income taxes
O2Micro, Inc.-USA
- Federal $ 1 $ - $ (271) $ -
- State - - 1 1
O2Micro-Taiwan (47) - 202 -
O2Micro-Japan - - 1 -
O2Micro-Singapore 2 - 9 -
-------- ---------- --------- ---------
Income tax expenses (benefits) $ (44) $ - $ (58) $ 1
======== ========== ========= =========
</TABLE>
The Company and its subsidiaries file separate income tax returns.
Reconciliation of the significant differences between the statutory income tax
rate and the effective income tax rate on pre-tax income (loss) is as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- -----------------------------
2000 1999 2000 1999
------------ ---------- ---------- ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Cayman statutory rate 0.0% 0.0% 0.0% 0.0%
Foreign in excess of statutory rate 0.2% 0.0% 4.6% 0.3%
Change in valuation allowance (2.3)% (0.0)% (5.9)% (0.3)%
------ ------ ------ -------
Effective tax rate (2.1)% (0.0)% (1.3)% (0.0)%
====== ====== ====== =======
</TABLE>
8
<PAGE>
6. EARNINGS (LOSS) PER SHARE
The following is the calculation of basic and diluted earnings per ordinary
share (in thousands, expect per share data):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
2000 1999 2000 1999
---------- ------- --------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Basic earnings per ordinary share:
Net income (loss) available to ordinary shareholders $ 2,098 $ 752 $ 4,612 $ (201)
======= ======= ======= ========
Weighted average ordinary shares outstanding 24,973 9,865 14,962 9,672
Basic earnings (losses) per ordinary share $ 0.08 $ 0.08 $ 0.31 $ ( 0.02)
======= ======= ======= ========
Diluted earnings per ordinary share:
Net income (loss) available to ordinary shareholders $ 2,098 $ 752 $ 4,612 $ (201)
======= ======= ======= ========
Weighted average ordinary shares outstanding 24,973 9,865 14,962 9,672
Effect of dilutive securities:
Options 1,858 1,310 1,853 -
Warrants 265 99 265 -
Convertible securities 6,176 18,527 14,410 -
------- ------- ------- --------
Diluted weighted average ordinary shares outstanding 33,272 29,801 31,490 9,672
Fully diluted earnings (losses) per ordinary share $ 0.06 $ 0.03 $ 0.15 (0.02)
======= ======= ======= ========
</TABLE>
Certain anti-dilutive outstanding options and warrants were excluded from the
computation of diluted earnings per share since their exercise prices
exceeded the average market price of the ordinary shares during the periods.
The anti-dilutive stock options excluded amounted to 325,000 shares, and
their exercise prices were between $4.50 and $6.50 as of September 30, 1999.
7. OBLIGATIONS UNDER CAPITAL LEASE
Company leases office space and certain equipment under noncancellable
operating lease agreements that expire on various dates through September
2004. The Company's office lease provides for periodic rent increases based
on the general inflation rate. The Company also leases certain equipment
under a capital lease expiring in July 2003. The lease provides for a bargain
purchase option upon the expiration of the lease. As of September 30, 2000,
minimum lease payments under all noncancellable leases were as follows:
9
<PAGE>
<TABLE>
<CAPTION>
Capital Operating
Year Leases Leases
---- ------- ---------
<S> <C> <C>
2000 $ 18 $ 251
2001 49 869
2002 10 550
2003 5 467
2004 and thereafter - 360
------- --------
Total minimum lease payments 82 $ 2,497
========
Less: Amount representing interest 15
-------
Present value of minimum lease payments 67
Less: Current portion 46
-------
Long-term capital lease obligations $ 21
=======
</TABLE>
The total cost of the equipment under capital lease was $65 as of December
31, 1999 and $160 as of September 30, 2000. Accumulated amortization was $55
as of December 31, 1999 and $79 as of September 30, 2000.
8. CONTINGENCY
A. On March 2000, Philips Electronics North America Corporation (Philips)
asked the Company to evaluate the need for licenses for audio CDs and
I/2/C serial interface, which are being used in the Company's products.
Management believes that, although it is probable for Philips to assert a
licensing claim, the Company would not be subject to any material exposure
with respect to past activities.
B. As a result of a premature delivery of preliminary prospectuses relating
to the Company's initial public offering, the Company may be subject to
claims from purchasers of the securities in the initial public offering,
who may have a right of rescission with respect to all of the shares
purchased by them through an improper offer. However, it is not possible
for the Company to reliably estimate the amount and timing of any future
rescission.
9. SEGMENT INFORMATION
The Company adopted SFAS No. 131-"Disclosures about Segments of an Enterprise
and Related Information." SFAS 131 requires a new basis of determining
reportable business segments, i.e., the management approach. The approach
requires that business segment information used by management to assess
performance and manage company resources be the source for information
disclosure. SFAS 131 also requires disclosures of products and services,
geographic areas and major customers based on specific measurement criteria.
a. Industry: The Company is engaged in a single industry, which is the
design, development and marketing of semiconductor products.
10
<PAGE>
b. Foreign market sales
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ---------------------
2000 1999 2000 1999
---------- -------- --------- --------
Area
-------------
<S> <C> <C> <C> <C>
Asia $ 11,128 $ 5,349 $ 27,208 $ 14,011
United States 21 1,178 855 1,763
Europe - 248 958 391
-------- -------- --------- --------
$ 11,149 $ 6,775 $ 29,021 $ 16,165
======== ======== ========= ========
</TABLE>
c. Sales to major customers
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
---------------------------------------- ---------------------------------------
2000 1999 2000 1999
------------------ ------------------- ------------------ ------------------
Customers Amount % Amount % Amount % Amount %
--------- --------- ------- --------- -------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A $ 2,184 19.6 $ 1,997 29.5 $ 5,669 19.5 $ 6,433 39.8
B 850 7.6 1,370 20.2 4,410 15.2 2,084 12.9
C 1,511 13.5 962 14.2 3,809 13.1 2,888 17.9
D 1,267 11.4 650 9.6 3,054 10.5 1,391 8.6
</TABLE>
d. Geographic information
<TABLE>
<CAPTION>
Cayman
U.S.A Islands Taiwan Japan Singapore Elimination Consolidated
-------- --------- -------- -------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
For the nine months ended
September 30, 2000 (Unaudited)
------------------------------
Sales to customers other than the
parent and its subsidiaries $ - $25,022 $ 3,999 $ - $ - $ - $ 29,021
Intercompany service revenue 7,255 3,201 - - 750 11,206 -
-------- ------- -------- -------- --------- ----------- ----------
Total sales $ 7,255 $28,223 $ 3,999 $ - $ 750 $ (11,206) $ 29,021
======== ======= ======== ========= ========= =========== ==========
Gross profit $ 7,255 $17,133 $ 800 $ - $ 750 $ (8,007) $ 17,931
======== ======= ======== ======== ========= ===========
Operating expenses (13,791)
Nonoperating income - net 414
----------
Income before income tax 4,554
Income tax benefit 58
----------
Net income $ 4,612
==========
Identifiable assets $ 1,174 $58,379 $ 3,333 $ 44 $ 670 $ (10,888) $ 52,712
======== ======= ======== ======== ========= =========== ==========
For the nine months ended
September 30, 1999 (Unaudited)
-----------------------------
Sales to customers other
than the parent and its
subsidiaries $ - $16,165 $ - $ - $ - $ - $ 16,165
Intercompany service revenue 4,909 - - - - (4,909) -
------- ------- -------- -------- --------- ----------- ----------
</TABLE>
(Forward)
11
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Total sales $4,909 $16,165 $ - $ - $ - $ (4,909) $ 16,165
====== ======= ======== ======== ========= ========== =========
Gross profit $4,909 $ 8,930 $ - $ - $ - $ (4,924) $ 8,915
====== ======= ======== ======== ========= ==========
Operating expenses (9,253)
Nonoperating income - net 138
---------
Loss before income tax (200)
Income tax expense (1)
Net loss $ (201)
Identifiable assets $1,211 $12,542 $ 580 $ 35 $ 293 $ (4,070) $ 10,591
====== ======= ======== ======== ========= ========== =========
For the three months ended
September 30, 2000 (Unaudited)
-----------------------------
Sales to customers other than the $ - $10,722 $ 427 $ - $ - $ - $ 11,149
parent and its subsidiaries
Intercompany service revenue 2,545 356 - - 750 (3,651) -
------ ------- -------- -------- --------- ---------- ---------
Total sales $2,545 $11,078 $ 427 $ - $ 750 $ (3,651) $ 11,149
====== ======= ======== ======== ========= ========== =========
Gross profit $2,545 $ 6,669 $ 86 $ - $ 750 $ (3,311) $ 6,739
====== ======= ======== ======== ========= ==========
Operating benefit (4,909)
Nonoperating income - net 224
---------
Income before income tax 2,054
Income tax benefit 44
---------
Net income $ 2,098
=========
Identifiable assets $1,174 $58,379 $ 3,333 $ 44 $ 670 $ (10,888) $ 52,712
====== ======= ======== ======== ========= ========== =========
For the three months ended
September 30, 1999 (Unaudited)
------------------------------
Sales to customers other than the $ - $ 6,775 $ - $ - $ - $ - $ 6,775
parent and its subsidiaries
Intercompany service revenue 1,741 - - - - (1,741) -
------ ------- -------- -------- --------- --------- ---------
Total sales $1,741 $ 6,775 $ - $ - $ - $ (1,741) $ 6,775
====== ======= ======== ======== ========= ========== =========
Gross profit $1,741 $ 4,334 $ - $ - $ - $ (1,757) $ 4,318
====== ======= ======== ======== ========= ==========
Operating benefit (3,624)
Nonoperating income - net 58
---------
Income before income tax 752
Income tax benefit -
---------
Net income $ 752
=========
Identifiable assets $1,211 $12,542 $ 580 $ 35 $ 293 $ (4,070) $ 10,591
====== ======= ======== ======== ========= ========== =========
</TABLE>
12
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following information should be read in conjunction with the consolidated
interim financial statements and the notes thereto in Part I, Item 1 of this
quarterly report and with Management's Discussion and Analysis of Financial
Condition and Results of Operations contained in the Company's F-1 Registration
Statement.
THIS REPORT CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS. THESE STATEMENTS
INVOLVE RISKS AND UNCERTAINTIES, AND ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. ALL FORWARD-LOOKING
STATEMENTS INCLUDED IN THIS REPORT ARE MADE AS OF THE DATE HEREOF, AND THE
COMPANY ASSUMES NO OBLIGATION TO UPDATE ANY SUCH FORWARD-LOOKING STATEMENTS
BEYOND SUCH DATE.
Overview
We design, develop and market high performance mixed signal integrated
circuits for power management, power saving applications and computer security
applications. Our net sales have been derived primarily from the sale of mixed
signal integrated circuit products to customers in the mobile computing and
communications device markets.
We utilize a fabless semiconductor business model, which means we focus on
designing, developing and marketing products and have these products
manufactured by large independent semiconductor foundries. Because we are a
fabless semiconductor company, we do not need to invest significant capital to
manufacture semiconductor devices, and can take advantage of some of the cost-
efficiencies of third-party foundries. We place purchase orders for specific
quantities of packaged semiconductor devices at set prices. We also use third
parties to test and assemble our products, which reduces the capital we need to
invest in these activities.
We sell our products through a combination of direct sales offices, sales
representatives and distributors. We maintain direct sales offices in Santa
Clara, California; Pfluggerville, Texas; Taipei, Taiwan and Tokyo, Japan.
Additionally, we have sales representatives in China, Singapore, Taiwan, the
United Kingdom and the United States, as well as two distributors in Japan.
Results of Operations
The following table summarizes historical results of operations as a
percentage of revenues for the periods shown.
<TABLE>
<CAPTION>
Three Months Ended Nine Months
September 30, Ended September 30,
---------------------- -----------------------
2000 1999 2000 1999
--------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Consolidated Statement of Operations Data:
Revenues............................................... 100.0% 100.0% 100.0% 100.0%
Cost of revenues....................................... 39.6 36.3 38.2 44.9
------- -------- ------- -------
Gross profit........................................... 60.4 63.7 61.8 55.1
Operating expenses:....................................
Research and development............................. 22.7 22.5 23.9 24.5
Selling, general and administrative.................. 20.2 27.7 22.3 29.0
Stock-based compensation............................. 1.1 3.3 1.3 3.7
------- ------- ------- -------
Total operating expenses.......................... 44.0 53.5 47.5 57.2
------- ------- ------- -------
Income (loss) from operations.......................... 16.4 10.2 14.3 (2.1)
Interest and other income (expense).................... 2.4 0.9 1.6 0.9
Net profit (loss)...................................... 18.8% 11.1% 15.9% (1.2)%
======= ======= ======= =======
</TABLE>
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Net Sales. Net sales consist of product revenues generated principally by
sales of our integrated circuit products. Net sales for the three months ended
September 30, 2000 were $11.1 million, an increase of $4.3 million or 65% from
$6.8 million for the three months ended September 30, 1999. Net sales for the
nine months ended September 30, 2000 increased 80% to $29.0 million compared to
$16.2 million for the same period last year. These increases in net sales
reflect increased unit shipments of our existing products as well as new
products, increased market acceptance of our products and an increase in market
demand for analog and mixed-signal semiconductor products in general.
Gross Profit. Gross profit represents revenues less cost of revenues. Cost
of revenues primarily consists of the cost of purchasing packaged integrated
circuit products manufactured and assembled for us by independent foundries and
packaging vendors and other costs associated with the procurement, storage and
shipment of products. Gross profit increased $2.4 million or 56% and $9.0
million or 101% for the three months and nine months ended September 30, 2000,
respectively, over the corresponding periods in 1999. Gross profit as a
percentage of net sales changed over these periods due to the mix of products
sold. We expect that our gross profit as a percentage of revenues will fluctuate
in the future as a result of the timing of the introduction of new products and
overall product mix.
Research and Development Expenses. Research and development expenses
consist primarily of salaries and related costs of employees engaged in
research, design and development activities and, to a lesser extent of, expenses
for outside engineering consultants. Research and development expenses increased
by $1.0 million or 66% and $3.0 million or 75% for the three months and nine
months ended September 30, 2000, respectively, as compared to the same periods
in 1999. This increase primarily reflected the addition of research and
development personnel and associated costs. As a percentage of net sales,
research and development expenses were 23.9% for the nine months ended September
30, 2000 and 24.5% for the same period last year. This decrease as a percentage
of net sales was a result of research and development expenses increasing less
rapidly than net sales during the two comparative periods. We expect that
research and development expenses in absolute dollar amount will continue to
increase in the foreseeable future.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses consist primarily of employee-related expenses,
professional fees, trade show and other promotional expenses, and sales
commissions to agents. Selling, general and administrative expenses increased by
$383,000 or 20% and $1.8 million or 38% for the three months and nine months
ended September 30, 2000, respectively, as compared to the same periods in 1999.
This increase was primarily due to increased sales commissions relating to
higher sales, increased product marketing costs associated with introduction of
new products and hiring of additional personnel. As a percentage of net sales,
selling, general and administrative expenses were 22.3% for the nine months
ended September 30, 2000 and 29.0% for the same period last year. This decrease
was a result of selling, general and administrative expenses increasing less
rapidly than sales during the two comparative periods.
Deferred Compensation. In connection with the grant of stock options to
employees, we record aggregate deferred compensation. This amount is presented
as a reduction of shareholders' equity and amortized ratably over the vesting
period of the applicable stock grants. Amortization of deferred compensation
recorded in the first nine months of 2000 was $390,000, 35% lower than the
amount recorded in the same period last year.
Non-operating Income-net. Non-operating income-net reflects interest earned
on average cash balances, less interest on borrowings and foreign exchange
transaction gains and losses. Non-operating income-net was $224,000 and $414,000
in the three and nine month periods ended September 30, 2000, recording
increases of $166,000 and $276,000 over the corresponding periods last year.
These changes reflect an increase in average cash balances from period to
period.
Income Taxes. We recorded an income tax net benefit of $44,000 and $58,000
in the three and nine month periods ended September 30, 2000, reflecting an
increase in the possibility of realization of net operating loss carryforwards
and research and development credits, according to SFAS No. 109.
Our quarterly results of operations have fluctuated significantly in the
past and may continue to fluctuate in the future based on a number of factors,
not all of which are in our control. In particular, our results of operations
have fluctuated in the past due, among other things, to competitive pressures on
selling prices; the volume of
14
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product sales; the timing and cancellation of customer orders; lengthy sales
cycles; pricing concessions on volume sales; changes in product mix; product
pricing from foundries; our ability to develop, introduce and market new
products and technologies on a timely basis; introduction of products and
technologies by our competitors; and market acceptance of our and our customers'
products. Our results of operations may also fluctuate in the future based on a
number of factors, including but not limited to, those listed above, general
business conditions in the semiconductor industry; general economic conditions;
currency fluctuations; the availability of foundry capacity and raw materials,
and our ability to expand and implement our sales and marketing programs. As a
result of the foregoing factors, we believe period to period comparisons are not
necessarily meaningful and should not be relied upon as indicative of future
results.
Liquidity and Capital Resources
On September 30, 2000, we had $43.2 million in working capital and $38.0
million in cash, cash equivalents and short-term investments. Our operating
activities generated cash in the amount of $912,000 in the nine months ended
September 30, 2000. Additionally, our financing activities provided $32.7
million primarily due to the net proceeds from the initial public offering of
our stock.
Our investing activities used cash of $2.7 million in the nine months ended
September 30, 2000. Investing activities primarily represented purchases of
capital equipment and increases in refundable deposits.
We believe that our cash balances will be sufficient to meet our capital
requirements for the foreseeable future. Our future capital requirements will
depend on many factors, including the inventory levels maintained, the level of
investment made in new technology and improvements to existing technology, the
levels of promotion and advertising required to launch new products and attain
competitive position in the marketplace and the market acceptance of our
products. Thereafter, we may need to raise additional funds through public or
private financing. No assurance can be given that additional funds will be
available or that we can obtain additional funds on terms favorable to us.
Disclosure Regarding Forward-Looking Statements
This Form 6-K contains statements of a forward-looking nature. These statements
are made under the "safe harbor" provisions of the U.S. Private Securities
Litigation Reform Act of 1995. You can identify these forward-looking statements
by terminology such as "may," "will," "expects," "should," "could," "expects,"
"plans," "intends," "anticipates," "believes," "estimates," "predicts,"
"potential" or "continue" or the negative of these terms and other comparable
terminology. The forward-looking statements contained in this Form 6-K involve
known and unknown risks, uncertainties and other factors that may cause
O\\2\\Micro or the industry's actual results, levels of activity, performance or
achievements to be materially different from the future results, levels of
activity, performance or achievements expressed or implied by these statements.
These factors include, among other things, those risks outlined in O\\2\\Micro
filings with the Securities and Exchange Commission; including its registration
statement on Form F-1, as amended. O\\2\\Micro does not undertake any obligation
to update this forward-looking information, except as required under applicable
law.
Item 3 Quantitative and Qualitative Disclosure about Market Risk
In the normal course of business, the financial position of the Company is
routinely subject to a variety of risks, including market risk associated with
interest rate movements and currency rate movements on non-U.S. dollar
denominated assets and liabilities, as well as collectibility of accounts
receivable. The Company regularly assesses these risks and has established
policies and business practices to protect against the adverse effects of these
and other potential exposures. As a result, the Company does not anticipate
material losses in these areas.
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PART 2. OTHER INFORMATION
Item 1. Exhibits
(a) Exhibits:
---------
The Exhibit Index attached hereto is hereby incorporated by reference
to this Item.
(b)
EXHIBIT INDEX
Exhibit
Number Exhibit Title
------------- -----------------------------------------------------
27 Financial Data Schedule
99 Press Release
Item 2. Subsequent Events
On November 3, 2000 the Company filed a suit against privately-held Monolithic
Power Systems (MPS) of Santa Clara, California, USA in Federal Court in the
Northern District of California.
MPS alleged in a letter to O2Micro that a new product under development by
O2Micro would overlap an MPS patent. Based upon analysis, O2Micro
concluded that the new product does not infringe the MPS patent and that the MPS
patent is invalid based on prior art.
O2Micro seeks declaratory judgment of both non-infringement and a ruling
that the MPS patent is invalid. The suit also seeks damages from MPS.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
O2MICRO INTERNATIONAL LIMITED
Date: November 27, 2000 /s/ Sterling Du
--------------------------------
Name: Sterling Du
Title: Chief Executive Officer
17
