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, 1996
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 organozation) 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, 1996 there were 8,791,482 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
Condensed Consolidated Balance Sheets
April 30, 1996 and January 31, 1996 ----------- 3
Condensed Consolidated Statements of
Operations Three Months
Ended April 30, 1996 and 1995 ------------ 4
Condensed Consolidated Statements of Cash Flows
Three Months Ended April 30, 1996 and 1995 ------- 5
Notes to Condensed Consolidated 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.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
April 30, 1996 January 31, 1996
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 773 $ 3,810
Short term investments 13,480 10,966
Accounts receivable (net) 7,921 4,789
Inventories 3,339 2,044
Prepaid expenses and other 816 760
-------- --------
TOTAL CURRENT ASSETS 26,329 22,369
EQUIPMENT - Net 816 910
OTHER ASSETS 245 134
-------- --------
TOTAL $27,390 $23,413
======== ========
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank lines of credit $ 7,717 $ 6,392
Accounts payable 5,271 2,785
Accrued liabilities 1,353 1,704
Accrued facilities 356 418
--------- --------
TOTAL CURRENT LIABILITIES 14,697 11,299
ACCRUED FACILITIES - long term 440 517
SHAREHOLDERS' EQUITY:
Common stock 45,742 45,501
Accumulated deficit (33,489) (33,904)
---------- ---------
TOTAL SHAREHOLDERS' EQUITY 12,253 11,597
---------- ---------
TOTAL $27,390 $23,413
========== =========
See accompanying notes
SIGMA DESIGNS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands except per share data)
Three Months Ended
April 30
1996 1995
----------------------
NET SALES $ 8,735 $ 8,011
COST AND EXPENSES:
Cost of sales 5,768 8,799(1)
Sales and marketing 1,158 2,390
Research and development 876 983
General & administrative 614 2,364(2)
-------- -------
TOTAL COST AND EXPENSES 8,416 14,536
-------- -------
INCOME(LOSS)FROM OPERATIONS 319 (6,525)
INTEREST AND OTHER INCOME (EXPENSES) 40 (162)
-------- -------
NET INCOME (LOSS) $ 359 $(6,687)
======== =======
NET INCOME (LOSS) PER COMMON
AND EQUIVALENT SHARE $ 0.04 $ (0.89)
======== =======
Shares used in computation 9,817 7,502
======== =======
Note(1): Includes $2,350 inventory reserves related to SDIS subsidiary.
Note(2): Includes $1,500 accounts receivable reserves related to SDIS.
See accompanying notes
SIGMA DESIGNS, INC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Three Months Ended
April 30
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 359 $ (6,687)
Adjustments to reconcile net income to net cash
used for operating activities:
Depreciation and amortization 130 160
Loss from investment - 220
Changes in assets and liabilities:
Accounts receivable (3,132) 5,788
Inventories (1,295) 1,573
Prepaid expenses and other (166) (78)
Accounts payable 2,486 (3,987)
Accrued liabilities (488) (117)
--------- ---------
Net cash used for operating activities (2,106) (3,128)
--------- ---------
INVESTING ACTIVITIES:
Purchase of short-term investments (13,408) -
Maturity of short-term investments 10,947 7,412
Equipment additions (36) (86)
Title development costs - (184)
Other - (6)
--------- --------
Net cash provided by(used for)investing
activities (2,497) 7,136
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock sold 241 76
Borrowings under lines of credit 1,325 3,396
--------- --------
Net cash provided by financing activities 1,566 3,472
--------- --------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS (3,037) 7,480
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 3,810 881
--------- --------
CASH AND EQUIVALENTS, END OF PERIOD $ 773 $ 8,361
=====================
INTEREST PAID $ 121 $ 92
See accompanying notes
SIGMA DESIGNS,INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. Balance sheet information as of January 31, 1996 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, 1996 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, 1996 and notes thereto
included in the Form 10-K Annual Report previously filed
with the Commission.
2. Inventories consisted of the following:
April 30, 1996 January 31, 1996
(In thousands)
Finished goods $1,265 $1,497
Work-in process 2,375 1,524
Raw materials 2,578 2,477
Less reserves (2,879) (3,454)
---------- ----------
Total inventories $ 3,339 $2,044
=========== ==========
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. On April 22, 1996, the Company announced an agreement under which
it would acquire Active Design Corporation in a transaction to be
accounted for as a pooling-of-interests. This transaction closed on
May 3, 1996. Active Design is a development stage company which has
not generated any revenues since its inception in May 1995. The
pooling-of-interests method of accounting requires the Company to
report financial results as though the transaction had occurred at
the beginning of all periods presented. Had this transaction occurred
at the beginning of the quarter ended April 30, 1996, the Company's
results would have included Active Design's net loss for the quarter
and merger expenses, resulting in a combined net loss of $104,000
($0.01 per share).
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company had a net income of $359,000 ($0.04 per share) on net
sales of $8,735,000 for the fiscal quarter ended April 30, 1996
compared to a net loss of $6,687,000 ($0.89 per share) on net
sales of $8,011,000 for the same quarter in the prior year. The
prior year net loss included $3,850,000 reserves related to its
SDIS subsidiary, the operations of which were subsequently
disposed of in that year. Sales of multimedia products represented
100% of net sales as compared with 82% for the same quarter last
year. Sales to one domestic customer accounted for 12% of total
net sales while sales to two international customers accounted for
30% and 15% of total net sales respectively in the quarter ended
April 30, 1996. The Company's international sales represented
21% of net sales in the first quarter of fiscal 1997 as compared
with 68% in the comparable quarter of the prior year. The
decrease in percentage of international sales was due primarily
to stronger market acceptance of the Company's REALmagic
products in the U.S. as compared to Asian markets during this
first fiscal quarter.
On April 22, 1966, the Company announced an agreement under which
it would acquire Active Design Corporation in a transaction to be
accounted for as a pooling-of-interests. This transaction closed
on May 3, 1996. Active Design is a development stage company
which has not generated any revenues since its inception in May
1995. The pooling-of-interests method of accounting requires the
Company to report financial results as though the transaction had
occurred at the beginning of all periods presented. Had this
transaction occurred at the beginning of the quarter ended April
30, 1996, the Company's results would have included Active Design's
net loss for the quarter and merger expenses, resulting in a
combined net loss of $104,000 ($0.01 per share).
The Company's gross margin as a percentage of net sales for
the quarter ended April 30, 1996 increased to 34.0% from -9.8%
(19.5% after excluding $2,350,000 inventory reserves which were
included in the cost of goods sold) reported in the
same period of the prior year. The increase was primarily
due to a change in product mix to chipset sales which have higher
profit margins.
Sales and marketing expenses decreased by $1,232,000 (51.5%)
as compared to the corresponding period of the prior year.
The decrease was due to a decision by the Company to focus
less on the retail channels which require more advertising,
promotion and trade show expenses and more on the OEM channels.
Research and development expenses decreased by $107,000 (10.9%)
as compared to the same period of the prior year. The decrease
was due to the elimination of research and development efforts
on new display systems by SDIS, the Company's former monitor
subsidiary. General and administrative expenses decreased by
$1,750,000 (74.0%) ($250,000 after excluding $1,500,000 accounts
receivable reserves which were included in last year balance) as
compared to the same corresponding period of the prior year. The
decrease in general and administrative costs reflected the
elimination of expenses related to SDIS.
FINANCIAL CONDITION
The Company had cash and short term investments of $14.3 million
at April 30, 1996, as compared with $ 14.8 million at January 31,
1996. The Company's primary sources of funds to date have been
cash generated from operations, proceeds from previous stock
offerings and bank borrowings under lines of credit. The Company
believes that its current cash and short term investments reserve
combined with the availability of funds under its existing cash
and asset-based banking arrangements will be sufficient to satisfy
its needs for the next twelve months. Beyond the next twelve months,
the Company believes that to the extent it does not generate
positive cash flow from operations that it may have to raise
additional capital through either public or private offerings of
its common stock or from additional bank financing.
FACTORS AFFECTING FUTURE OPERATING RESULTS
The Company's quarterly results have been in the past and may be in
the future vary due to a number of factors, including but not limited
to new product introduction by the Company and its competitors;
market acceptance of the Company's products; shift in demand for
the Company's products; gains or losses of significant customers;
reduction in selling prices; inventories obsolescence; an interrupted
or inadequate supply of semiconductor chips; the Company's inability
to protect its intellectual properties or a loss of key personnel.
Any unfavorable change in the foregoing or other factors could have
a material effect on the Company's business, financial and results
of operations.
Due to the factors noted above, the Company's future earnings and
stock price may be subject to significant volatility, particularly
on a quarterly basis. Past financial performance should not be
considered a reliable indicator of future performance and investors
should not use historical trends to anticipate results or trends of
future periods. Any shortfall in revenue or earnings from the level
anticipated by security analysts could have an immediate and
significant adverse effect on the trading price of the Company's
common stock in any given period. Additionally, the Company may
not learn of such shortfall until late in a fiscal quarter, which
could result in even more immediate and adverse effect on the trading
price of the Company's common stock. Further, the Company operates
in a highly dynamic industry which often results in volatility of
the Company's common stock price.
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, 1996 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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