UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- ------------------------------------------------------------
FORM 10-Q
(Mark One)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from___________ to_____________
Commission file number: 0 - 15116
SIGMA DESIGNS, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 94-2848099
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
46501 Landing Parkway
Fremont, California 94538
(Address of principal executive offices)
Telephone No. (510) 770 - 0100
-----------------------------------------
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes_______X______ No _______________
As of April 30, 1995 there were 7,512,072 shares of the
registrant's common stock outstanding.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements. Items 2. Management's Discussion and
Provide the information required Analysis of Financial Condition and
by Rule 10-01 of Regulation S-X Results of Operations.
(17CFR Part 210) Furnish the information required
by Item 303 of Regulation S-K
(#229.303 of this Chapter).
SIGMA DESIGNS, INC.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Item 1 : Financial Statements
Consolidated Condensed Balance Sheets
April 30, 1995 and January 31, 1995 ----------- 3
Consolidated Condensed Statements of
Operations Three Months
Ended April 30, 1995 and 1994 ------------ 4
Consolidated Condensed Statements of Cash Flows
Three Months Ended April 30, 1995 and 1994 ------- 5
Notes to Consolidated Condensed Financial
Statements ----------------------------- 6
Item 2 : Management's Discussion and Analysis of Financial
Condition and Results of Operations ------------- 7-8
PART II. OTHER INFORMATION
Item 6 : Exhibits and Reports on Form 8-K -------------- 9
Signatures ---------------------------------- 10
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
SIGMA DESIGNS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
April 30, 1995 January 31, 1995
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 8,361 $ 881
Short term investment - 7,349
Accounts receivable (net) 6,170 11,958
Inventories 8,163 9,736
Prepaid expenses and other 1,266 1,086
-------- --------
TOTAL CURRENT ASSETS 23,960 31,010
EQUIPMENT - Net 1,276 1,343
OTHER ASSETS 893 1,034
-------- --------
TOTAL $26,129 $33,387
======== ========
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank lines of credit $ 5,106 $ 1,710
Accounts payable 5,346 9,333
Accrued liabilities 1,827 1,748
Accrued facilities 569 773
--------- --------
TOTAL CURRENT LIABILITIES 12,848 13,564
ACCRUED FACILITIES - long term 1,110 1,102
SHAREHOLDERS' EQUITY:
Common stock 38,896 38,820
Accumulated deficit (26,725) (20,099)
---------- ---------
TOTAL SHAREHOLDERS' EQUITY 12,171 18,721
---------- ---------
TOTAL $26,129 $33,387
========== =========
See accompanying notes
SIGMA DESIGNS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands except per share data)
Three Months Ended
April 30
1995 1994
----------------------
NET SALES $ 8,011 $11,039
COST AND EXPENSES:
Cost of sales 8,799(1) 7,421
Sales and marketing 2,390 1,869
Research and development 983 1,015
General & administrative 2,364(2) 736
-------- -------
TOTAL COST AND EXPENSES 14,536 11,041
INCOME (LOSS) FROM OPERATIONS (6,525) (2)
INTEREST AND OTHER INCOME (EXPENSES) (162) 70
-------- -------
NET INCOME (LOSS) $(6,687) $ 68
======== =======
NET INCOME (LOSS) PER COMMON
AND EQUIVALENT SHARE $ (0.89) $ 0.01
======== =======
Shares used in computation 7,502 7,271
======== =======
Note(1): Including $2,350 inventory reserves for SDIS.
Note(2): Including $1,500 accounts receivable reserves for SDIS.
See accompanying notes
SIGMA DESIGNS, INC
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Three Months Ended
April 30
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($6,687) 68
Adjustments to reconcile net income (loss)
to net cash used for operating activities:
Depreciation and amortization 160 183
Loss from investment 220 -
Changes in assets and liabilities:
Accounts receivable 5,788 (3,511)
Inventories 1,573 (1,385)
Prepaid expenses and other (78) (38)
Accounts payable (3,987) 68
Accrued liabilities (117) (239)
--------- ---------
Net cash used for operating activities (3,128) (4,854)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term investments - (7,683)
Maturity of short-term investments 7,412 2,578
Equipment additions (86) (60)
Title development costs (184) -
Other (6) 75
--------- --------
Net cash provided by (used for) investing
activities 7,136 (5,090)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock sold 76 13,059
Borrowings under lines of credit 3,396 1,090
--------- --------
Net cash provided by financing activities 3,472 14,149
--------- --------
INCREASE IN CASH AND EQUIVALENTS 7,480 4,205
CASH AND EQUIVALENTS, BEGINNING PERIOD 881 1,808
--------- --------
CASH AND EQUIVALENTS, END OF PERIOD $ 8,361 $ 6,013
=====================
INTEREST PAID $ 92 $ 9
INCOME TAXES PAID $ - $ 4
See accompanying notes
SIGMA DESIGNS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. Balance sheet information as of January 31, 1995 was
derived from the Company's audited consolidated financial
statements. All other information is unaudited, but in the
opinion of management, includes all adjustments (consisting
only of normal recurring adjustments) necessary to present
fairly the results of the interim period. The results of
operations for the quarter ended April 30, 1995 are not
necessarily indicative of results to be expected for the
entire year.
This report on form 10-Q should be read in conjunction
with the Company's audited consolidated financial statements
for the year ended January 31, 1995 and notes thereto
included in the Form 10-K Annual Report previously filed
with the Commission.
2. Inventories consisted of the following:
April 30, 1995 January 31, 1995
(In thousands)
Finished goods $3,494 $3,787
Work-in process 4,782 4,590
Raw materials 6,233 6,979
Less reserves (6,346) (5,620)
---------- ----------
Total inventories $ 8,163 $9,736
=========== ==========
3. Net income (loss) per share was based on the weighted
average common shares and dilutive common share equivalents.
Common equivalent shares were excluded in periods with
losses as they were anti-dilutive.
4. Interest and other income for the three months ended
April 30, 1995 included a $220,000 investment write-off
related to a discontinued joint venture in China.
5. In April, 1995 in connection with a proposed acquisition
of its imaging subsidiary, SDIS, the Company recorded
$3,850,000 of reserves to write down certain assets of SDIS
to net realizable value.
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company had a net loss of $6.7 million ($0.89 per share)
on net sales of $8.0 million for the fiscal quarter ended
April 30, 1995 compared to net income of $68,000 ($0.01 per
share) on net sales of $11.0 million for the same quarter in
the prior year. The loss was attributable to lower than expected
sales, $3.9 million write down of certain assets of its imaging
subsidiary, SDIS, to net realizable value in connection with the
proposed acquisition described below, operating losses incurred
by SDIS and the investment to develop, license and market a line
of interactive MPEG software titles.
On May 16, 1995, SDIS signed a letter of intent granting rights
to purchase SDIS' assets and liabilities to Thomas S. Benson &
Associates, a private investment and management group. The letter
of intent covers an exclusive period of 60 days during which it is
expected that Benson & Associates will complete due diligence and
financing arrangements. At the conclusion of these activities and
the signing of a definitive agreement, it is expected that Benson &
Associates will establish SDIS as a fully independent company, ending
its affiliation with the Company. This arrangement follows an
announcement made by the Company in February that it planned to sell
SDIS in order to focus the Company's resources on the development of
Sigma's MPEG multimedia product line.
Sales of multimedia products represented 82% of net sales as
compared with 61% for the same quarter last year. Sales of
high-resolution display systems accounted for 16% of net
sales as compared with 13% for the same quarter in the prior
year. Sales of other products represented 2% of net sales
as compared with 26% for the same period last year. Sales to
one international OEM customer accounted for 11% of total
net sales in the quarter ended April 30, 1995. The Company's
international sales represented 68% of net sales in the
first quarter of fiscal 1996 as compared with 39% in the
comparable quarter of the prior year. The increase in
percentage of international sales was due primarily to
stronger market acceptance of the Company's REALmagic
products in Asia as compared to domestic markets.
The Company's gross margin as a percentage of net sales for
the quarter ended April 30, 1995 decreased to 19.0%
(excluding $2.4 million of inventory reserve for SDIS which
was included in the cost of goods sold) from 33.0% in the
same period of the prior year. The decrease was primarily
due to lower profit margins from the sales of display
systems and competitive pricing pressures from the sales of
multimedia products.
Sales and marketing expenses increased by $521,000 (27.9%)
as compared to the corresponding period of the prior year.
The increase was due to higher advertising, promotion
expenses required to promote REALmagic product line and its
related interactive software titles. Research and
development expenses decreased by $32,000 (3.2%) as compared
to the same period of the prior year. The decrease was due
to reduced research and development efforts on new display
systems. General and administrative expenses increased by
$128,000 (17.4%) (excluding $1.5 million accounts receivable
reserves for SDIS) as compared to the same corresponding
period of the prior year. The higher general and
administrative costs reflected the general increase in
operating expenses .
Interest and other income of ($162,000) was net of a
$220,000 write-off of investment related to a discontinued
joint-venture in China.
FINANCIAL CONDITION
The Company had cash and short term investments of $8.4
million at April 30, 1995, as compared with $ 8.2 million at
January 31, 1995. The Company's primary sources of funds
to date have been cash generated from operations and
proceeds from previous stock offerings. The Company
requires substantial funds to continue to develop the market
for its MPEG technology and to take advantage of the opportunities
in this market. The Company believes that its current cash and cash
equivalents, its existing $6.0 million cash-secured line of credit
and a $6.0 million assets secured line of credit will be sufficient
to satisfy its needs until such time as the Company begins to
generate cash from operations. However, there can be no assurance
that the Company will not require additional financing, or that
required funding will be available on terms acceptable to the
Company. In the event that such financing is required by the
Company but cannot be raised on acceptable terms, the Company
could scale back the levels of investment in the development of
these markets and continue to satisfy its needs with its existing
resources for the next twelve months.
PART II. OTHER INFORMATION
Item 6: EXHIBITS AND REPORTS ON FORM 8-K
No report on Form 8-K was filed with the Securities and
Exchange Commission during the quarter.
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.
Date: June 14, 1995 SIGMA DESIGNS,INC.
/S/ Thinh Q. Tran
-----------------------
Thinh Q. Tran
President and Chief
Executive Officer
/S/ Q. Binh Trinh
-----------------------
Q. Binh Trinh
Vice President - Finance
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
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