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Previous: GOTTSCHALKS INC, 10-Q, 1999-12-14 |
Next: STAPLES INC, 10-Q, 1999-12-14 |
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 OCTOBER 31, 1999 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)
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355 Fairview Way
Milpitas, California 95035
(Address of principal executive offices including zip code)
(408) 262-9003
(Registrant's telephone number, including area code)
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 reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ]
As of November 30, 1999 there were 15,929,070 shares of the Registrant's Common Stock and 900 shares of the Registrant's Preferred Stock issued and outstanding.
SIGMA DESIGNS, INC.
FORM 10-Q
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets - October 31, 1999 and January 31, 1999
Condensed Consolidated Statements of Cash Flows - Nine months ended October 31, 1999 and 1998
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Liquidity and Capital Resources
Item 3. Quantitative and Qualitative Disclosure about Market Risks
PART II. OTHER INFORMATION
Item 1: Legal Proceedings
Item 6: Exhibits and Reports on Form 8-K
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
SIGMA DESIGNS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
October 31, January 31,
1999 1999*
------------ ------------
(Unaudited)
Assets
Current assets:
Cash and equivalents.............................. $2,244 $2,946
Short-term investments............................ 19,516 15,112
Accounts receivable - net......................... 14,324 13,648
Inventories....................................... 6,624 10,418
Prepaid expenses & other.......................... 225 629
------------ ------------
Total current assets.................. 42,933 42,753
Equipment, net...................................... 1,434 1,311
Other assets........................................ 171 156
------------ ------------
Total assets........................................ $44,538 $44,220
============ ============
Liabilities and shareholders' equity
Current liabilities:
Bank line of credit............................... $12,341 $13,716
Accounts payable.................................. 3,180 4,109
Accrued liabilities and other..................... 1,713 1,350
------------ ------------
Total current liabilities............. 17,234 19,175
Capital lease obligations........................... 351 274
Shareholders' equity:
Preferred stock................................... 731 1,536
Common stock...................................... 66,048 64,699
Shareholder notes receivable...................... (11) (12)
Accumulated deficit and other..................... (39,815) (41,452)
------------ ------------
Total shareholders' equity............ 26,953 24,771
------------ ------------
Total liabilities and shareholders' equity.......... $44,538 $44,220
============ ============
See notes to unaudited Condensed Consolidated Financial Statements.
* Derived from audited balance sheet included in the Company's annual report
on Form 10-K for the year ended January 31, 1999
SIGMA DESIGNS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except per share data)
Three Months Ended Nine Months Ended
October 31, October 31,
--------------------- ---------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
Net sales........................... $11,283 $11,012 $39,200 $30,462
Costs and expenses:
Cost of sales................... 7,426 7,830 27,098 21,510
Research and development......... 1,732 1,534 4,687 4,312
Sales and marketing.............. 1,032 903 3,446 3,003
General and administrative....... 664 654 2,278 2,289
---------- ---------- ---------- ----------
Total costs and expenses...... 10,854 10,921 37,509 31,114
---------- ---------- ---------- ----------
Income (loss) from operations....... 429 91 1,691 (652)
Interest and other income, net...... 61 (45) 93 (10)
---------- ---------- ---------- ----------
Income (loss) before income taxes... 490 46 1,784 (662)
Provision for income taxes (credit). 20 (3) 73 (321)
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Income (loss) before dividend
on preferred stock............... 470 49 1,711 (341)
Dividends on preferred stock........ (19) (804) (75) (858)
---------- ---------- ---------- ----------
Net income (loss) available
to common shareholders........... $451 ($755) $1,636 ($1,199)
========== ========== ========== ==========
Net income (loss) per share - basic. $0.03 ($0.06) $0.10 ($0.10)
========== ========== ========== ==========
Shares used in computing per
share amount..................... 15,796 12,446 15,654 12,059
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Net income (loss) per share -
diluted......................... $0.03 ($0.06) $0.09 ($0.10)
========== ========== ========== ==========
Shares used in computing per
share amount..................... 17,614 12,446 17,544 12,059
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See notes to unaudited Condensed Consolidated Financial Statements.
SIGMA DESIGNS, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(In thousands)
Nine Months Ended
October 31,
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1999 1998
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Cash flows from operating activities:
Net income (loss)............................... $1,711 ($341)
Adjustments to reconcile net income (loss)
to net cash provided by (used for)
operating activities:
Depreciation and amortization................. 569 391
Loss on disposal of assets.................... -- 11
Changes in assets and liabilities:
Accounts receivable....................... (676) (1,066)
Inventories............................... 3,794 (2,563)
Prepaid expenses and other................ 404 235
Accounts payable.......................... (929) 946
Accrued liabilities and other............. 311 (181)
---------- ----------
Net cash provided by (used for) operating
activities..................................... 5,184 (2,568)
---------- ----------
Cash flows from investing activities:
Fixed assets additions.......................... (438) (250)
Purchases of short-term investments............. (26,538) (17,575)
Maturity of short-term investments.............. 22,133 16,927
Other assets.................................... (15) (32)
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Net cash used for investing activities............ (4,858) (930)
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Cash flows from financing activities:
Bank borrowings, net............................ (1,375) 600
Proceeds from sales of common stock............. 538 165
Proceeds from sale of preferred stock
and warrants, net of issuance costs........... -- 4,647
Repurchase of preferred stock................... -- (215)
Dividends paid.................................. -- (87)
Repayment of capital lease obligations.......... (191) (168)
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Net cash provided by (used for) financing
activities..................................... (1,028) 4,942
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Net increase (decrease) in cash and equivalents... (702) 1,444
Cash and equivalents, beginning of period......... 2,946 697
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Cash and equivalents, end of period............... $2,244 $2,141
========== ==========
Supplemental disclosure of cash flow information:
Cash paid for interest.......................... $575 $736
Cash paid for income taxes...................... $71 $ --
Noncash investing and financing activities:
Equipment acquired under capital leases....... $254 $668
Dividends on preferred stock.................. $75 $858
Conversion of preferred stock into
common stock................................ $813 $2,472
Issuance costs for preferred stock paid
for in common stock......................... $ -- $18
See notes to unaudited Condensed Consolidated Financial Statements.
SIGMA DESIGNS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Balance sheet information as of January 31, 1999 was derived from the Company's audited consolidated financial statements. All other information is unaudited, but in the opinion of management, includes all adjustments necessary to present fairly the results of the interim period. The results of operations for the quarter and nine months ended October 31, 1999 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, 1999 and notes thereto included in the Form 10-K Annual Report previously filed with the Commission.
2. Inventories consisted of the following (in thousands):
October 31, January 31,
1999 1999
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Raw materials ..................... $3,289 $3,604
Work-in-process ................... 1,247 3,086
Finished goods .................... 2,088 3,728
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Inventories - net ................. $6,624 $10,418
=========== ===========
3. The Company had $12,000,000 outstanding as of October 31, 1999 under a $12,000,000 bank line of credit that expires in October 2000, bears interest at the bank's index rate plus 1% (6.62% at October 31, 1999), and is collateralized by funds on deposit in accounts that have been assigned to the lender. The Company also had $341,000 outstanding at October 31, 1999 under a $6,000,000 bank line of credit that expires in October 2000, bears interest at the bank's prime rate plus 0.75% (9.75% at October 31, 1999), and is collateralized by the Company's accounts receivable, inventories, equipment and intangible assets, and restricts the Company's ability to declare or pay dividends.
4. Basic EPS for the periods presented is computed by dividing net income (loss) available to common shareholders by the weighted average of common shares outstanding (excluding shares subject to repurchase). Diluted EPS for the periods presented is computed by including shares subject to repurchase as well as dilutive options and warrants granted.
The following table sets forth the basic and diluted EPS computation for the periods presented (in thousands except per share data):
Three Months Ended Nine Months Ended
October 31, October 31,
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1999 1998 1999 1998
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Numerator:
Net income (loss) available
to common shareholders........... $451 ($755) $1,636 ($1,199)
========== ========== ========== ==========
Denominator:
Weighted average shares
outstanding...................... 15,851 12,481 15,701 12,124
Common shares subject to
repurchase....................... (55) (35) (56) (65)
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Shares used in computing basic...... 15,796 12,446 15,645 12,059
Effect of dilutive securities:
Common shares subject to
repurchase....................... 55 -- 56 --
Stock options and warrants.......... 1,763 -- 1,843 --
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Shares used in computing diluted.... 17,614 12,446 17,544 12,059
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Basic earnings (loss) per
common share..................... $0.03 ($0.06) $0.10 ($0.10)
========== ========== ========== ==========
Diluted earnings (loss) per
common share..................... $0.03 ($0.06) $0.09 ($0.10)
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The Company excluded certain potentially dilutive securities each period from its diluted EPS computation because inclusion of such securities would be antidilutive. A summary of the excluded potential dilutive securities follows (in thousands):
Three Months Ended Nine Months Ended
October 31, October 31,
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1999 1998 1999 1998
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Common shares subject to
repurchase..................... -- 35 -- 65
Stock options..................... 10 3,049 10 3,049
Stock warrants.................... -- 114 -- 114
Convertible preferred stock....... 1 11 1 11
5. The reconciliation of net income (loss) before dividends on preferred stock to comprehensive income (loss) is as follows (in thousands):
Three Months Ended Nine Months Ended
October 31, October 31,
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1999 1998 1999 1998
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Net income (loss) before dividends
on preferred stock............... $470 $49 $1,711 ($341)
Other comprehensive income
(loss) -- net unrealized gain
(loss) on short-term investments. 12 3 (1) --
---------- ---------- ---------- ----------
Total comprehensive income (loss)... $482 $52 $1,710 ($341)
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6. The Company follows the requirements of SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." The Company's operating segments consist of its geographically based entities in the United States and Hong Kong. All such operating entities segments have similar economic characteristics, as defined in SFAS No. 131, and accordingly, it is the Company's opinion that it operates in one reportable segment.
7. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," which defines derivatives, requires that all derivatives be carried at fair value, and provides for hedging accounting when certain conditions are met. This statement is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. On a forward-looking basis, although the Company has not fully assessed the implications of this new statement, the Company does not believe adoption of this statement will have a material impact on the Company's financial position or results of operations.
8. In February 1998, two putative class action complaints were filed against the Company in the United States District Court, Northern District of California, Romine et al. v. Sigma Designs, Inc., et al., No C-98-0537-TEC (N.D.Cal.) and Shah, et al. v. Sigma Designs, Inc. et al., No. C- 98-0582-MHP (N.D.Cal.). The federal court consolidated complaint alleges that Sigma Designs, Inc. and certain of its current and former officers and/or directors issued false or misleading statements regarding the Company's business prospects during the period October 24, 1995 through February 13, 1997. The complaint does not specify the amount of damages sought by the plaintiffs. On October 8, 1999, the Company filed a motion to dismiss the consolidated complaint. In response to this motion, the plaintiffs agreed to file a second amended complaint, which must be filed by February 1, 2000. The Company expects to file a motion to dismiss the second amended complaint. The hearing on that motion would be held on May 29, 2000. The Company believes that it has meritorious defenses to the allegations made in the complaints and intends to conduct a vigorous defense.
The Company is also party to an employment related claim against it. Although the ultimate outcome of this matter is not presently determinable, management believes that the resolution of this matter will not have a material adverse effect on the Company's financial position or results of operations.
9. In December, 1999, the Company established a wholly owned subsidiary, Realmagic France S.A.S. in France. The core business of the new company is software and chipsets development.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
Sigma Designs, Inc. ("the Company") reported a net income of $451,000 (or $0.03 per share, basic and diluted) on net sales of $11,283,000 for the fiscal quarter ended October 31, 1999 compared to a net loss of $755,000 (or $0.06 per share, basic and diluted) on net sales of $11,012,000 for the same quarter in the prior year. Net sales for the third quarter of fiscal 2000 and for the nine months ended October 31, 1999 increased 2% and 29%, respectively, as compared to the same periods last year. The increase was primarily attributable to increased sales of the Company's proprietary MPEG-2 decoding chipsets and video networking products. Sequentially, net sales declined $2,851,000 (20%) during the third quarter of fiscal 2000 as compared to the second quarter of fiscal 2000. The decrease was primarily due to disruption of product shipment from suppliers in the aftermath of the Taiwan earthquake on September 21, 1999. As a consequence of the earthquake, the Company's near future sales may be adversely affected due to a protential shortgae of silicon wafers from Taiwan suppliers and the allocation thereof.
The following table sets forth the Company's net sales in each product group and market segment (in thousands):
Three Months Ended Nine Months Ended
October 31, October 31,
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1999 1998 1999 1998
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By product group:
Boards............................. $4,194 $4,737 $17,408 $13,862
Chipsets........................... 6,514 5,713 20,943 15,599
Accessories & other................ 575 562 849 1,001
--------- --------- --------- ---------
Total sales - net................... $11,283 $11,012 $39,200 $30,462
========= ========= ========= =========
By market segment:
Internet/intranet video networking. $1,097 $1,139 $5,205 $6,460
PC-DVD upgrade..................... 3,560 3,598 12,667 7,377
OEM chipsets....................... 6,514 5,713 20,943 15,572
Other.............................. 112 562 385 1,053
--------- --------- --------- ---------
Total sales - net................... $11,283 $11,012 $39,200 $30,462
========= ========= ========= =========
MPEG chipset sales for the third quarter of fiscal 2000 increased 14% to $6,514,000, and MPEG boards sales decreased 11% to $4,194,000 as compared to the corresponding period in the prior year. MPEG-based boards and chipsets represented 95% of net sales for the quarter ended October 31, 1999 which was the same as compared with same quarter last year. For the nine months ended October 31, 1999, MPEG-based boards and chipsets represented 98% of net sales as compared with 97% for the same period last year. By market group, MPEG chipsets, PC-DVD upgrade boards, and video networking products accounted for 58%, 32%, and 10% of total net sales, respectively, in the third quarter of fiscal 2000 as compared with 52%, 33%, and 10% of total net sales, respectively, in the same quarter last year. For the nine months ended October 31, 1999, MPEG chipsets, PC-DVD upgrade boards, and video networking products accounted for 53%, 32% and 13% of total net sales, respectively, as compared with 51%, 24% and 21% of net sales, respectively, in the same period last year. The board level product line is targeted at OEM customers in the PC-DVD market and system integrators addressing the internet/intranet video networking for corporate customers. The chipsets are targeted at manufacturers and large volume OEM customers building interactive multimedia products for business and consumer markets.
The Company's international sales represented 65% of net sales in the quarter ended October 31, 1999 as compared with 63% in the comparable quarter of the prior year. Revenues generated from international sales were concentrated in one Asian country, Taiwan, which accounted for 40% of net sales for the quarter ended October 31, 1999, as compared with 50% in the same quarter last year. For the nine months ended October 31, 1999, international sales accounted for 69% of net sales which was the same as the comparable period of the prior year. Sales to two international customers accounted for approximately 38% of net sales in the third quarter ended October 31, 1999, and 41% of net sales for the nine months ended October 31, 1999. The Company's customers in Taiwan are primarily computer board manufacturers.
The Company's gross margin as a percentage of net sales for the quarter ended October 31, 1999 was 34% as compared to 29% during the same quarter last year. For the nine months ended October 31, 1999, gross margin was 31% as compared with 29% for the same period last year. The year-over-year increase in gross margin for both the third quarter and the nine months of fiscal 2000 was primarily attributable to the increase of chipset sales which have a more favorable gross margin compared to all other prodcuts.
Sales and marketing expenses increased by $129,000 (14%) and $443,000 (15%) during the third quarter and the nine months of fiscal 2000 as compared to the same periods in fiscal 1999. The increases were largely due to the addition of business development staff, sales and marketing support related expenses in connection with our operations in China. Overall research and development expenses increased by $198,000 (13%) and $375,000 (9%) during the third quarter and the nine months of fiscal 2000 as compared to the same periods in fiscal 1999. The increase in R&D spending was the result of a combination of increases in depreciation expense associated with R&D equipment and tools acquired during fiscal 1999, the addition of engineering personnel, and technical support expense for the development of the Company's MPEG-2 decoding chipset and board products. Overall general and administrative expenses increased $10,000 (2%) during the third quarter and decreased $11,000 (0.5%) during the nine months of fiscal 2000 as compared to the same periods in fiscal 1999. The increase was largely due to additional legal fees incurred in connection with the filing of a motion to dismiss the class action complaints filed against the Company in February 1998. The decrease was primarily the result of the non-recurring professional fees associated with a settlement during the second quarter ended July 31, 1998 from the California Franchise Tax Board for a claim previously filed by the Company.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and short-term investments of $21.8 million at October 31, 1999, as compared with $18.1 million at January 31, 1999. The increase of $3.7 million in cash and short-term investments during the nine months of fiscal 2000 was primarily generated from operating activities, as inventories decreased by $3.8 million during such period. Cash used in investing activities and financing activities for the nine months ended October 31, 1999 was $4.9 million and $1 million, respectively. The primary investing activities during the first nine months of fiscal 2000 included purchases of short-term investments, and the primary financing activities were repayments of bank lines of credit. In January 1999, the Company issued 1,900 shares of series C nonvoting convertible preferred stock for $1,000 per share, and warrants to purchase 95,000 shares of the Company's common stock. As of October 31, 1999, 900 shares of series C preferred stock and warrants to purchase 95,000 shares of the Company's common stock remained outstanding.
The primary sources of funds to date have been cash generated from operations, proceeds from stock issuances, and bank borrowings under lines of credit. The Company believes that its current cash and short-term investments combined with the availability of funds under its existing cash and asset-based banking arrangements will be sufficient to meet present and anticipated working capital requirements and other cash needs for the next twelve months. However, the Company may have to raise additional capital through either public or private offerings of its common or preferred stock or from additional bank financing prior to that time. There is no assurance that such capital will be available to the Company. The estimate of time the Company's cash and other resources will last is a forward-looking statement that is subject to the risks and uncertainties set forth below, as well as other factors, and actual results may differ as a result of such factors.
FACTORS AFFECTING FUTURE OPERATING RESULTS
The Company's quarterly results have in the past and may in the future vary significantly due to a number of factors, including but not limited to new product introductions by the Company and its competitors; market acceptance of the technology embodied in the Company's products generally and the Company's products in particular; shifts in demand for the technology embodied in the Company's products generally and the Company's products in particular and/or those of the Company's competitors; gains or losses of significant customers; reduction in average selling prices and gross margins, which may occur either gradually or precipitously; inventory obsolescence; write-downs of accounts receivable; an interrupted or inadequate supply of semi-conductor chips or other materials, for example, our souce of supply for silicon wafers was, and may continue in the near future to be affected by the earthquake in Taiwan; the Company's inability to protect its intellectual property; loss of key personnel; technical problems in the development, rampup, and manufacture of products causing shipping delays; and availability of third-party manufacturing capacity for production of certain of the Company's products. The Company derives a substantial portion of its revenues from sales to the Asia Pacific region, a region of the world that is subject to increased economic instability. There can be no assurance that such instability will not have a material adverse effect on the Company's future international sales. Any adverse change in the foregoing or other factors could have a material adverse effect on the Company's business, financial condition, 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 could have an immediate and significant adverse effect on the trading price of the Company's common stock. 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. Furthermore, the Company operates in a highly dynamic industry, which often results in volatility of the Company's common stock price.
IMPACT OF THE YEAR 2000 ISSUE
The Year 2000 Issue is the result of computer programs being written using two digits rather than four to define the applicable year. Any computer programs that have date-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations including, among other things, a temporary inability to process transactions, send invoices, or engage in similar normal business activities.
The Company has tested its products, and management believes that the Company's products are not date-sensitive and, therefore, are Year 2000 ready. The Company has also conducted a review of its exposure to the Year 2000 problem, including working with computer systems and software vendors. Although the full impact of the Year 2000 problem is unknown at this time, management believes that the Company's internal information systems are Year 2000 compliant and does not expect to further incur any significant operating expenses or invest in additional computer systems to resolve issues related to the Year 2000 problem, with respect to both our information technology as well as product and service functions.
The Company has also been in contact with its significant suppliers and vendors to determine whether the products or services supplied by them are Year 2000 compliant, and there were no negative responses. However, significant uncertainty remains concerning the effects of the Year 2000 problem, including uncertainty regarding assurances made by vendors. In addition, the Company has not investigated Year 2000 compliance of other entities who are not major vendors of the Company or who are users or purchasers of our products. The Company cannot assume that third parties will be Year 2000 compliant, and if they are not, we cannot assume that we will not be subject to actions, liabilities, or damages associated with these failures. The Company will develop appropriate contingency plans in the event that a significant exposure arises relative to any such third party. The Company's estimate of costs related to Year 2000 compliance is a forward-looking statement that is subject to risks and uncertainties, including whether management's assumptions of future events prove to be correct, that could cause actual costs to be higher.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following discussion about the Company's market risk disclosures involves forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements. The Company faces exposure to market risk from adverse movements in interest rates and foreign currency exchange rates, which could impact its operations and financial condition. The Company does not use derivative financial instruments for speculative purposes.
Interest Rate Sensitivity. At October 31, 1999, the Company held $19.5 million in short-term investments consisting of U.S. government and corporate debt securities with an average original maturity of less than one year. These available-for-sale securities are subject to interest rate risk and will fall in value if market interest rates increase. If market rates were to increase immediately and uniformly by 10 percent from levels at October 31, 1999, the fair market value of the short-term investments would decline by an immaterial amount. The Company generally expects to have the ability to hold its investments until maturity and therefore would not expect operating results or cash flows to be affected to any significant degree by the effect of a sudden change in market interest rates for short-term investments.
At October 31, 1999, the Company had $12,000,000 outstanding under a $12,000,000 variable interest rate bank line of credit and $341,000 outstanding under a $6,000,000 variable interest rate bank line of credit. If short-term interest rates were to increase to 10 percent, the increased interest expense associated with these arrangements would not have a material impact on the Company's net income and cash flows.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In February 1998, two putative class action complaints were filed against the Company in the United States District Court, Northern District of California, Romine et al. v. Sigma Designs, Inc., et al., No. C- 98-0537-TEC (N.D.Cal.) and Shah, et al. v. Sigma Designs, Inc. et al., No. C-98-0582-MHP (N.D.Cal). The federal court consolidated complaint alleges that Sigma Designs, Inc. and certain of its current and former officers and/or directors issued false or misleading statements regarding the Company's business prospects during the period October 24, 1995 through February 13, 1997. The complaint does not specify the amount of damages sought by the plaintiffs. On October 8, 1999, the Company filed a motion to dismiss the consolidated complaint. In response to this motion, the plaintiffs agreed to file a second amended complaint, which must be filed by February 1, 2000. The Company expects to file a motion to dismiss the second amended complaint. The hearing on that motion would be held on May 29, 2000. The Company believes that it has meritorious defenses to the allegations made in the complaints and intends to conduct virgorous defense.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the registrant during the quarter ended October 31, 1999.
SIGMA DESIGNS, INC.
SIGNATURES
Pursuant to the requirement of the Security Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| SIGMA DESIGNS, INC. |
| (Registrant) |
Dated: December 14, 1999
| By: | /s/ Thinh Q. Tran |
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| Thinh Q. Tran | |
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Chairman of the Board,
President and Chief Executive Officer (Principal Executive Officer) |
| By: | /s/ Kit Tsui |
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| Kit Tsui | |
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Director of Finance, Chief
Financial Officer and Secretary (Principal Financial and Accounting Officer) |
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