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FOR ANNUAL AND TRANSITION REPORTS PURSUANT
TO SECTIONS 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 26, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _______________ to ________________
Commission File Number 0-15858
IMP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-2722142
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2830 North First Street
San Jose, California 95134
(Address of Principal Executive Offices, including Zip Code)
Registrant's telephone number, including area code: (408) 432-9100
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of voting stock held by non-affiliates of the
Registrant, as of June 16, 2000 was approximately $24,310,000 (based upon the
closing price for shares of the Registrant's common stock as reported by the
Nasdaq Smallcap Market System on that date). Shares of common stock held by each
officer, director and holder of 5% or more of the outstanding common stock have
been excluded in that such persons may be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive determination
for other purposes.
On June 16, 2000, approximately 8,840,000 shares of Common Stock, $.01 par
value, were outstanding.
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PART I
ITEM 1. BUSINESS.
This Annual Report on Form 10-K, and the documents incorporated herein by
reference, contains forward-looking statements that have been made pursuant to
and in reliance on the provisions of the Private Securities Litigation Reform
Act of 1995.
Statements regarding IMP's business that are not historical facts are
"forward-looking statements" that involve risks and uncertainties, including,
but not limited to demand for the Company's products, foundry utilization, the
ability of the Company to develop new products, demand by end-users of the
products produced by the Company's customers, and the other risks detailed from
time to time in the Company's reports filed with the Securities and Exchange
Commission. Words such as "anticipates," "expects," "intends," "plan,"
"believe," "seeks," "estimates," and variations of such words and similar
expressions relating to the future operations are intended to identify
forward-looking statements.
All forward-looking statements are based on the Company's current expectations,
estimates, projections, beliefs and plans or objectives about its business and
its industry. These statements are not guarantees of future performance and are
subject to risk and uncertainty. Actual results may differ materially from those
predicted or implied in any such forward-looking statement.
Risks and uncertainties that could cause actual results to differ materially
include those set forth throughout this Form 10-K and in the documents
incorporated herein by reference. Particular attention should be paid to the
section below entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
The Company undertakes no obligation to update any forward-looking statement,
whether as a result of new information relating to existing conditions, future
events or otherwise. However, readers should carefully review future reports and
documents that the Company files from time to time with the Securities and
Exchange Commission, such as its quarterly reports on Form 10-Q (particularly
"Management's Discussion and Analysis of Financial Condition and Results of
Operations") and any current reports on Form 8-K.
INTRODUCTION
IMP designs, manufactures and sells integrated circuit (IC) semiconductor
devices, also known as microchips. We focus on a specialized technology sector
called the analog IC market. We sell our analog IC technology in two basic
forms. We manufacture IC wafers for other semiconductor vendors using our own
and customer-developed processes. This has comprised the majority of IMP
revenues for the last decade. Following a downturn in our historic lines of
business in fiscal 1997, we decided to expand our activities into the market for
standard analog power-management ICs. Our goal is to provide a broad portfolio
of devices to manage the power supply needs of the portable, wireless and
internet-based systems that are driving today's computer and communications
revolution. This new product direction builds on the historical strengths of our
people, technology and manufacturing capabilities and is intended to serve a
broad base of customers in a growing market opportunity.
Our wafer production and test factory is located in San Jose, California. This
facility, as well as our design and development procedures, are certified to
meet the quality demands of the International Standards Organization
specification number ISO 9001. We operate our own wafer fabrication plant in
order to develop and control the specialized analog technologies that are
essential for the design of products offering unique technical advantages to the
customer.
IMP was founded as a California corporation in January 1981 under the name of
International Microelectronic Products. We reincorporated in Delaware as
International Microelectronic Products, Inc. in April 1987 and our initial
public stock offering was made that same year. In September 1993, our
Certificate of Incorporation was amended to formally change the name of the
Company to the commonly used abbreviation of IMP, Inc. IMP stock is traded on
the Nasdaq SmallCap Market under the ticker symbol of IMPX. Our main offices are
located at 2830
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North First Street, San Jose, California 95134-2071. You can contact us by
telephone at 408 432-9100, by fax at 408 434-0335, and by e-mail at
[email protected].
IMP BACKGROUND
IMP was founded to employ proprietary computer aided engineering software to
provide fast-turnaround design and prototyping, as well as volume manufacturing
services, for customer-designed application-specific IC (ASIC) devices. The
company was one of the first vendors to apply this design technology to
complementary metal-oxide semiconductor (CMOS) processes. In the early 1980's,
in order to offer fast turnaround and low-cost, companies, including IMP, had to
build and operate their own wafer fabrication and testing facilities. The
Company also used this capacity to provide wafer foundry services to
semiconductor companies that did not own their own wafer fabrication factory or
that needed additional capacity. IMP has delivered production wafers
representing hundreds of millions of finished microchips to such customers as
International Rectifier, Level One and National Semiconductor. As further
discussed below, the customers that were material in fiscal 2000 comprise
primarily of International Rectifier, Level One and Linfinity Microelectronics.
These customers in addition National Semiconductor and Teamasia Semiconductors
will be material in fiscal 2001.
During the 1980's, IMP engineers created some of the industry's first
standard-cell-based analog and mixed signal designs. They applied this analog
expertise to the first non-custom products sold under the IMP name in the early
1990s. These were application-specific devices, such as programmable filters,
integrated read-channels, preamplifiers, and write drivers, for applications in
disk drive and PC tape back-up mass-storage systems. Customers for these
products included Hewlett-Packard, Iomega, Seagate Technology, and the 3M
Corporation. The revenues generated individually by these customers were in the
range of $3.0 million to $25.0 million on average, annually. While the reduction
in revenue resulting from no Iomega orders had a material impact in fiscal 1999,
sales to Hewlett-Packard and the Company's ability to sustain and attract other
key customers in fiscal 2000 was and will continue to be a material in fiscal
2001.
In early fiscal 1997 demand for IMP's wafer foundry services and mass-storage
products declined at the same time that significant additional foundry capacity
was brought on-line throughout the world. As a result the Company's sales
dropped significantly. Management took many actions to reduce costs, including
canceling non-contributing products, freezing salaries, cutting the work force
from 450 to 227 people and increasing the productivity of the remaining
personnel. However, due to the high fixed costs of operating the factory, it was
not possible to achieve profitability at such a depressed revenue level.
In 1997, the whole semiconductor industry sank into a recession. A new IMP
management team made the decision to invest in the design of standard catalog
analog products to help increase demand for its products. The specific choice of
analog power-management ICs was determined by the capabilities of the existing
equipment, by the skills of the R&D personnel and by the long-term growth
opportunities forecast for these products. In addition to matching these
capabilities, these products are sold to a broad base of users throughout the
world and are expected to reduce IMP's historical dependence on a limited base
of customers. These analog products also have the potential to increase the
profit that can be generated by each wafer.
IMP has indicated that focusing on analog products does not guarantee a return
to profitability, but is believed to be the best long-term opportunity for the
Company. The difficulty of the task was compounded and losses were increased by
the Asian economic difficulties that further reduced revenue through much of
fiscal 1999. The first new analog products resulting from this strategy began to
contribute to revenue of $340,000 in the third quarter of fiscal 1999 and $2.3
million in fiscal 2000.
THE ANALOG INTEGRATED CIRCUIT MARKET
Integrated circuits are called either digital or analog devices based on their
mode of operation. Circuits combining both analog and digital modes on the same
chip are known as mixed-signal devices. Mixed-signal devices are frequently
employed to translate information presented as an analog signal into digital
information and vice versa.
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Digital circuits generate a succession of high and low signal levels. Each level
represents a one or a zero in binary arithmetic. Digital functions are most
efficient at storing and processing signals inside a computer. Analog circuits
process continuously varying signal levels that convey information about the
value of some linear characteristic, such as the amplitude, phase, or frequency
of voltage or current. The continuously varying signals may represent "real
world" properties such as temperature, pressure, weight, or speed.
The analog integrated circuit market comprises those devices having a purely
analog operating mode, as well as mixed-signal devices having a high degree of
analog content. Examples of analog devices include, amplifiers, comparators,
regulators and certain specialized functions used in power management
applications. Mixed-signal devices falling into the analog category, include
disk-drive read-channels, data communications interface and data conversion
devices, such as analog-to-digital (ADC) and digital-to-analog converter (DAC)
products. Mixed-signal chips with predominantly digital content, such as modems,
PC audio, and graphics display functions are usually included in the market
category of digital products.
From the 1960s through the 1980s divisions of large semiconductor companies
controlled the mainstream analog IC business. While these companies are still
dominant in terms of unit shipments today, especially in the area of circuits
for TV, radio, and other consumer products, the analog IC market is also served
by a large number of independent, specialized "high-performance" analog vendors.
Some of these smaller vendors generate higher profit margins and market
valuations than their much larger counterparts. According to World Semiconductor
Trade Statistics (WSTS) data, in calendar 1999, the worldwide analog IC revenue
was $22.1 billion out of a total integrated circuit sales of $130.2 billion and
in calendar 1998, the worldwide analog IC revenue was $19.1 billion out of a
total integrated circuit sales of $109.1 billion. From 1998 to 1999 analog ICs
decreased their percent of the overall IC market from 17.5% of revenue to 17.0%.
Semiconductor Industry Association (SIA) analysts project that new electronic
systems design activity, particularly that related to supporting the ongoing
wireless and internet driven communications revolution, will support continued
growth in the market for analog ICs.
MARKETS AND APPLICATIONS
Digital signals are most efficient for manipulation of bits of data. Analog
signals best represent the values of real world parameters outside of a
computer. Analog components are therefore an essential element of every
electronic system that must operate in a real world environment, from battery
powered computers, mobile phones, pagers, hearing aids and hand-held instruments
to desktop computers, servers and mainframes to industrial equipment,
automobiles, and avionics.
A simple example of an application for analog devices is in a thermostatically
controlled electric fan. Changes in room temperature are detected using a sensor
and an amplifier and measured as an analog signal. This signal is converted with
an ADC into a digital value for a microcontroller in the fan to determine when
the motor should be turned on and at what speed. When the decision is made, a
DAC then converts the digital output of the controller back into an analog
signal which is then amplified to a high current level to drive the fan motor.
The customers for analog ICs are manufacturers of electronic equipment serving
numerous and widely differing applications in instrumentation, industrial
control, data processing, military, video, medical equipment, and voice and data
communications over private and public, local area and wide-area network
systems, such as the Internet. For each application, different users may have
unique requirements for circuits with specific resolution, accuracy, linearity,
speed, power, and signal amplitude capability, which results in a high degree of
market complexity. As a result, compared to the market for digital integrated
circuits, the analog market is characterized by a wider range of standard
products used in smaller quantities by a large number of customers. Further,
many of these products have historically enjoyed longer life cycles, less
competition from foreign manufacturers, lower capital requirements as a result
of using more mature manufacturing technologies, and relatively stable growth
rates.
An established analog IC supplier may offer hundreds of different basic device
types, in numerous package variations and operating ranges, representing
thousands of part numbers serving many different end-market segments. Power
management ICs control, distribute, generate, monitor and regulate the supply of
voltage and current, and provide electrical and thermal protection to an
electronic system. SIA's June 7, 2000 mid-year forecast report indicates a
forecast of greater than 35% annual revenues growth rate for analog IC suppliers
in calendar 2000.
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Analog ICs was projected by SIA to offer one of the most promising segments of
the IC business because of their use in fast growing portable electronic
systems.
IMP PRODUCTS AND SERVICES
Our revenues derive primarily from two types of activities:
1. Wafer Foundry and Custom IC Manufacturing Services - This is the original
base of IMP's business and in fiscal 2000 still generated more than 70% of
our revenue. We process silicon wafers using our specialized analog
BiCMOS, CMOS and DMOS technologies for other semiconductor companies that
do not own their own factory or who need additional capacity. These
customers usually design the products themselves.
Processed wafers are round silicon slices that contain hundreds or
thousands of completed microchips ready to be separated and assembled into
individual packages. This activity is commonly referred to as the "wafer
foundry" business. A number of older IMP-designed and owned products for
tape-based, mass-storage systems are today essentially custom circuits
because each is sold to a single customer.
2. Power Management ICs - These are new families of standard catalog
microchips that improve the power consumption efficiency of a wide range
of electronic systems. We focus our R&D activity on low-power and
high-voltage features for handheld and portable battery-operated
communication systems, such as pagers, cell phones, and electronic
organizers. In addition to communications systems, power management
products are used in just about every piece of electronic equipment being
designed today. We introduced our first power management products in early
fiscal 1999 and they began to contribute to revenue in the third fiscal
quarter. In fiscal 2000 they represented $2.3 million or 7% of net
revenues.
By following the approach outlined below, we are using our expertise in analog
processing circuit design and high-volume production to establish IMP as a
supplier of finished power-management ICs:
1. Develop wafer-manufacturing processes that enable the production of
advanced analog devices. Our current development activities are addressing
a variety of BiCMOS, CMOS and DMOS technologies, ranging from 30 volts to
several hundred volts in capability. We are using these technologies for
our own products as well as offering them to potential new foundry
customers.
2. Complete the first round portfolio of industry-standard analog
power-management IC products, based on the new processes described above.
Using upon customer feedback about our first round portfolio of products,
develop follow-on products to expand our offerings to meet continuously
evolving customer requirements.
3. Analog products require an extensive customer support "network" of
application and systems engineers. In order to expedite the sales of our
standard products while we develop our "network", we intend to work with
industry leading merchant analog semiconductor manufacturing companies to
leverage our standard products through their sales and marketing channels.
4. Our future standard product development is focused on differentiated and
value-added products. We use the following Product Competency description
to define what we mean by differentiated and value-added:
- A product must add a perceived value to the end user (Measured by
significantly impacting any two of the following)
* Performance
* Ease of Use
* Energy Efficiency
* Size or Weight
* Price
- A product must be difficult for a competitor to imitate
- A product must be leverageable in many diverse markets
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See "Research and Development" below for a list of new products introduced
during fiscal 2000.
SALES, DISTRIBUTION AND MARKETING
We sell our products directly to OEM customers and through a worldwide network
of independent sales representatives and distribution firms. These sales
activities are managed by our own sales and applications people who are based in
our San Jose headquarters and in regional sales office in Singapore.
In North America, at the end of fiscal 2000, we worked with 16 independent sales
representative firms having 36 offices and one distribution company having 16
sales offices in the United States and Canada. In some cases these organizations
promote products that compete with our products. In the fiscal year ending March
26, 2000, sales through our North American distribution outlets accounted for
less than 5% of net revenues. As we proceed with our transition to sales of more
standard analog IC products, we expect that our sales through distribution firms
will account for an increasing percentage of net revenue. As is customary in the
industry, distributors are entitled to price rebates and product return
privileges if the market outlook and the prices for our products change.
Our sales to customers in the United States, Asia and the rest of the world
accounted for 81%, 8%, and 11% respectively, of our net revenues for fiscal
2000, compared to 88%, 6% and 6%, respectively, of the Company's net revenues;
for fiscal 1999, and 69%, 29% and 2%, respectively, of the Company's net
revenues; for fiscal 1998. Our standard products are sold throughout the world,
while our custom and foundry products are sold primarily to North American
customers. European currency issues are not material due to the Company's
minimal contact with European markets.
In fiscal 2000, our largest customers were International Rectifier,
Hewlett-Packard, Level One and Linfinity Microelectronics, which accounted for
approximately 22%, 12%, 11% and 10%, of net revenues, respectively. No other
customer accounted for more than 10% of net revenues during fiscal 2000. In
fiscal 1999, International Rectifier and Linfinity Microelectronics accounted
for approximately 29% and 16% of net revenues, respectively. In fiscal 1998,
IMP's largest customer was Iomega Corporation, which accounted for approximately
22% of net revenues. International Rectifier accounted for approximately 14% of
net revenues in fiscal 1998. Three other customers, Level One, Colorado Memory
Systems and Linfinity, exceeded 10% of sales and accounted for a total of
approximately 32% of net revenues.
Outside North America, we sell our products through various channels, including
independent sales representative, distributor, and stocking
representative/distributor firms. These companies may buy and stock our products
for resale or may act as our agent in arranging for direct sales from our
factory to a customer.
Our international sales are primarily denominated in U.S. currency. As a
result, changes in exchange rates that strengthen the U.S. dollar can increase
the price in local currency of our products in foreign markets and make the
Company's products relatively more expensive than those of local manufacturers.
This could lead to a reduction in our sales or our profitability in those
foreign markets. We have not taken any measures, such as hedging currencies, to
protect us against possible changes in exchange rates. We do not expect the Euro
trends or issues to have a material effect on our revenues during fiscal 2001.
Our export sales are subject to some governmental restrictions, including
regulations contained in the Export Administration Act of 1979 and the Export
Administration Amendments Act of 1985. However, we have not experienced any
material difficulties to date because of these restrictions.
We typically warrant our products against defects in materials and workmanship
for a period of one year. Our warranty expense to date has been minimal.
Due to the relatively long manufacturing cycle for integrated circuits, we build
some of our inventory in advance of receiving orders from our customers. As a
consequence of inaccuracies inherent in forecasting demand for such products,
inventory imbalances periodically occur that result in surplus amounts for some
of our products and shortages of others. Such shortages can adversely affect our
relationships with our customers; surpluses can result in larger than desired
inventory levels.
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Our backlog consists of distributor and OEM customer orders typically required
to be shipped no more than six months following the order date. Our customers
may generally cancel or reschedule orders to purchase products without
significant penalty. As a result, to reflect changes in their needs, our
customers frequently revise the quantities of our products to be delivered and
their delivery schedules. Since backlog can be canceled or rescheduled without
significant penalty, we do not believe our backlog is a meaningful indicator of
future revenue. When these products are shipped to the distributor, they are not
recognized by the company as revenue until the distributor sells them to the end
customer. Such products when sold may result in revenue lower than the stated
backlog invoice amounts as a result of discounts we may authorize at the time of
sale by the distributors.
RESEARCH AND DEVELOPMENT
The success of our standard analog IC strategy will depend substantially on our
ability to define, design, develop, and introduce on a timely basis new
differentiated products meeting our Product Competency standard. Our existing
standard products are opening opportunities with customers to help determine the
requirements for our next generation of standard products. Meanwhile, we have
many more first generation standard products in the final stages of development
(these products were started over a year ago). Because it takes between six
months and two years (or sometimes more) to create a new standard product, it
will take some time for products meeting our Product Competency standard to be
introduced.
Research and development in analog integrated circuits is characterized
primarily by new process development, circuit design and product and test
engineering contributions that enable new device functionality or improved
performance. Our research and development efforts are also directed at improving
and reducing the cost of existing manufacturing process technologies and
products. With respect to more established products, our research and
development efforts also include product redesign, reduction of chip size and
improvement in the yield of good die per wafer to reduce device costs.
As of March 26, 2000, we had 31 people engaged in research and development. Our
research and development efforts are dependent upon attracting and retaining
qualified analog process, design, product engineering, test and applications
engineers, of which there is a limited supply. We also use independent
contractors for certain research and development projects.
In fiscal 1998, 1999 and 2000, we spent approximately $8.1 million, $8.2 million
and $4.7 million, respectively, on research and development. We expect to
continue to invest substantial funds in research and development activities.
Our research and development programs are currently focused on the development
of new power management analog IC products and enhancing and expanding our
portfolio of CMOS and BiCMOS processes with the greatest amount of resources
concentrated in the area of IC product development.
During fiscal 2000 we introduced the following new products and processes to the
market:
Electroluminescent Lamp (EL) Drivers
Electroluminescent lamps are used to back light liquid crystal displays on
pagers, cell phones, personal organizers, watches, and clocks as well as to
provide illumination for a wide variety of industrial and consumer applications.
The EL driver IC must translate a low-voltage signal, typically from a battery
supply, and raise it up to the high-voltage level required to excite the
phosphor of the lamp.
IMP 527 Generates 180-volt peak-to-peak AC (alternating current) drive
signal when operated from a single 1.5-volt battery cell
Microprocessor Supervisors
Microprocessor supervisor ICs monitor power supplies to insure the system
microprocessor or embedded microcontroller is adequately powered or has been
restarted properly after a power failure or
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"brownout". Improper voltages cause unreliable operation, stop the processor,
or, even worse, allow the system controller to issue improper commands. More
complex devices also integrate functions that monitor processor operation and
issue system initialization signals when system failures or "lock-ups" are
detected.
IMP1810 Supervisor with push-pull output, active low reset; designed for
5-volt powered systems
IMP1811 Supervisor with open-drain output, active low reset; designed for
5-volt powered systems
IMP1812 Supervisor with push-pull output, active high reset; designed for
5-volt powered systems
IMP1815 Supervisor with push-pull output, active low reset; designed for
3/3.3-volt powered systems
IMP1816 Supervisor with open-drain output, active low reset; designed for
3/3.3-volt powered systems
IMP1817 Supervisor with push-pull output, active high reset; designed for
3/3.3-volt powered systems
IMP1834 Dual voltage supervisor with selectable reset threshold tolerance
and push-pull outputs with active low reset
IMP1834A Dual voltage supervisor with selectable reset threshold tolerance
and open-drain outputs with active low reset
IMP1834D Dual voltage supervisor with selectable reset threshold tolerance
and push-pull outputs with active high reset
IMP1233M Low power supervisor; thresholds from 2.72 volts to 4.625 volts
IMP1233D Low power supervisor in compact SOT-223 package; thresholds from
4.125 volts to 4.625 volts
IMP1232LP Low power Supervisor with selectable watchdog period and selectable
thresholds
IMP706P Low threshold voltage supervisor with watchdog timer
IMP706 Low threshold voltage supervisors with watchdog timer; thresholds
(R/S/T/J) from 2.63 volts to 4.0 volts
IMP708 Low threshold voltage supervisors with active high and active low
(R/S/T/J) reset outputs; thresholds from 2.63 volts to 4.0 volts
Universal Serial Bus Power Management
The Universal Serial Bus (USB) provides an easy way for connecting peripherals
such as scanners, cameras, printers, joy sticks and modems to a personal
computer (PC). Peripherals can be swapped, installed and configured while a
computer is on and working.
The universal serial bus is a four-wire cable of which two wires are used to
distribute power and two wires are used for data transfer. Power management
highside switches are placed in series with the 5-volt power source supplied
through USB hub ports. Hubs are attachment points for USB based peripherals.
The switches provide voltage switching capability, over-current protection,
thermal protection and inrush current limiting and are typically used in hubs or
peripherals with integrated hubs. Both single and dual USB power distribution
switches were introduced in fiscal year 2000.
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IMP2525 Single high-side power switch with 140-milliohm resistance
IMP252A Low resistance, single high-side power switch with 70-milliohm
resistance
IMP2526 Dual high-side power switch with 140-milliohm resistance
Voltage Regulators
Voltage regulators control the voltage of a device or of a circuit at a
specified level. To minimize power loss and increase efficiency, the difference
between the input voltage and required output voltage should be minimized. Low
dropout (LDO) voltage regulators are designed to supply a regulated output
voltage with a low input voltage.
Four low dropout (LDO) linear voltage regulators were introduced in fiscal year
2000.
IMP37 800 milliampere CMOS LDO voltage regulator; output voltages of
2.5/3.0/3.3 volts
IMP2014 60 milliampere CMOS LDO voltage regulator with battery life
extending shutdown mode; output voltages of 2.5 to 4.0 volts
IMP2015 110 milliampere CMOS LDO voltage regulator with battery life
extending shutdown mode; output voltages of 2.5 to 4.0 volts
IMP2185 160 milliampere CMOS LDO voltage regulator with battery life
extending shutdown mode; output voltages of 2.5 to 4.0 volts
There can be no assurance that we will be successful in selling the new products
introduced so far, or that we will be able to successfully complete the products
currently in development. There can also be no assurance that we will be able to
identify additional new product opportunities successfully and develop and bring
to market such new products or that we will be able to respond effectively to
new technological changes or new product announcements by others. Moreover, the
end markets for our new products, such as the computer, communications and
control markets, are subject to rapid technological change and there can be no
assurance that as such markets change our product offerings will remain current
and suitable for them.
COMPETITION
We currently compete in the markets for analog silicon foundry services,
application specific mass-storage and data communications devices, and standard
analog power-management integrated circuit products. All these sectors are
highly competitive and subject to rapid technological change.
Currently, our principal competitors in the analog silicon foundry services
market include American Microsystems Inc., a division of Japan Energy
Corporation; Austrian Micro Systems; California Micro Devices; Supertex, and
Tower Semiconductor, as well as internal manufacturing facilities within our
customers. To a lesser degree we compete with large Asian foundries, such as
Chartered Semiconductor of Singapore, Taiwan Semiconductor Manufacturing
Company, and UMC Group of Taiwan.
The principal competitive factors in the silicon foundry market include service,
price, manufacturing capability, quality, and manufacturing cycle time. We
believe that our competitive strengths arise from our experience in
manufacturing specialized CMOS and BiCMOS analog and high-voltage process
technologies. There can be no assurance that we will be able to compete
successfully in the future.
The market for analog ICs is also intensely competitive with the competitive
pressures expected to increase. Significant competitive factors in the analog
market for standard products include product features, performance, price, the
timing of product introductions, the emergence of new computer and communication
standards, quality and customer support. With respect to application-specific
mass-storage products such as read channels, our principal competitor is Silicon
Systems, a division of Texas Instruments. With respect to application-specific
data
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communications devices such as SCSI termination devices, our principal
competitors are Dallas Semiconductor, Linfinity Microelectronics and Unitrode, a
division of Texas Instruments. We plan to continue to supply our mass-storage
and SCSI devices as long as a viable market remains for them, however we are not
currently developing any new products based on these technologies. In the focus
area of power management products, because the markets are diverse and highly
fragmented, we expect to encounter different competitors on different products.
Our principal competitors are expected to include Micrel, Supertex, Sipex,
Dallas Semiconductor, TelCom Semiconductor, Linear Technology, and Maxim
Integrated Products. Other competitors will likely include Analog Devices Inc.,
Linfinity Microelectronics, Motorola, National Semiconductor Corporation,
Semtech, Texas Instruments, and certain European and Asian manufacturers.
In addition, we have licensed technology from and to parties, which have, in
certain cases, the right to use the technology to develop products competitive
with ours.
Our principal competitors and many of our potential competitors have
substantially greater technical, manufacturing, financial and marketing
resources than we have. We also face competition from smaller highly focused
companies, although not all such companies have internal wafer manufacturing
capability.
Due to the increasing demands for analog circuits, we expect intensified
competition from existing suppliers and from the entry of new competitors.
Increased competition could adversely affect our financial condition or results
of operations.
There can be no assurance that we will be able to compete successfully in the
future, or that competitive pressure will not adversely affect us. Competitive
pressures could reduce market acceptance of our products and result in price
reductions and increases in expenses that could have an adverse affect on our
business, financial condition or results of operations.
PATENTS AND LICENSES
We have been granted 23 United States patents, one of which is jointly owned,
and we have filed for additional United States and foreign patent applications
on our inventions. The issued patents expire between 2003 to 2016. Although
patents, patent protection and patent applications may have value, we believe
that other factors such as managerial and technological experience and creative
abilities of our personnel are of more significance in our industry. There are
only 5 patents that apply to currently shipping products, and the revenue from
such products is on the average approximately $1.1 million per quarter in fiscal
2000.
In the past we have entered into cross-licensing agreements under which we have
acquired certain products and rights to the technologies of our partners and our
customers in exchange for the transfer of similar rights to our partners and our
customers for royalties, up-front fees or for other consideration. We expect to
enter into additional arrangements in the future.
Because of technological developments in the semiconductor industry, it is
possible that certain of our designs or processes may involve infringement of
existing patents or patents that have not yet been issued. From time to time
other companies and individuals have advised us that some of our products and
technologies may violate their patent rights, mask work rights, copyrights or
trademark rights. We have signed agreements with two such parties to allow us to
use their patents in exchange for royalty payments.
We have been contacted by the Lemelson Medical Foundation and we are currently
in discussion with the Lemelson Medical Foundation to resolve claims it has made
against us regarding alleged patent violations. This foundation has filed patent
violation legal actions against 88 semiconductor companies and the Company has
been named as one of many defendants in this action. We believe that, based on
statements by the Lemelson Medical Foundation, licenses or rights under Lemelson
patents, or any future patents, can be negotiated. However, we cannot be sure
that we can negotiate rates which will allow us to compete economically in the
marketplace.
We have acquired software and licenses to software from a number of software
companies, primarily for computer-aided design of our integrated circuits.
10
<PAGE> 11
We attempt to protect our trade secrets and other proprietary information
through employment proprietary information and invention agreements with each of
our employees, and non-disclosure agreements with appropriate customers and
suppliers. The non-disclosure agreements generally have terms ranging from one
to five years and may cover information such as technical, or financial, or
operational, or sales, or marketing. Depending upon the circumstances, either
mutual or one-way non-disclosures are covered. Although we plan to protect our
rights vigorously, there can be no assurance that our measures will be
successful.
MANUFACTURING
During fiscal 2000, all of the wafers we shipped directly or that were assembled
as finished products were manufactured in our San Jose, California facility.
This wafer manufacturing facility has the capacity to produce up to 15,000 five
inch wafers per month. The maximum practical number of wafers may be less, or
more, than this at any specific time due to the number of masking levels or
other critical process steps demanded by the current product mix. We believe
that our in-house wafer fabrication facility provides us with the ability to
produce competitive products because it allows close collaboration between our
design and process engineers, provides control over wafer supply, offers the
potential for lower manufacturing costs, and accelerates product introduction
schedules.
During periods of low demand, the high fixed costs associated with our wafer
fabrication factory have had a serious impact on our ability to run a profitable
operation. For example, during the last three-quarters of fiscal 1997, all of
fiscal 1998, and the first half of fiscal 1999, and fiscal 2000 our operating
results were negatively impacted due to low utilization of the factory. During
some of this time, we operated the factory at less than 50% of capacity.
Because of the unique nature of our manufacturing processes, it would be
difficult for us to arrange for independent suppliers to make wafers for us in a
short period of time. If a fire, natural disaster, utility interruption or any
other event prevents us from operating the factory for more than a few days, our
revenue and financial condition could be severely impacted. We believe that we
have sufficient manufacturing capacity to meet our near term plans although
prolonged problems with any specific piece of equipment could cause us to miss
our goals. At periods of peak demand in the past we have subcontracted some
production to outside foundries. If this situation arises again there are a
number of foundries which, given appropriate lead times, could meet some of our
needs. However, we cannot guarantee that we will be able to meet our customers
required delivery schedules.
We use subcontractors for a number of very specialized processing steps where
our volume is not sufficient to justify purchasing and operating the equipment
ourselves. One example is growing special epitaxial layers of silicon on our
wafers. We purchase most of our raw materials, including silicon wafers, on a
purchase order basis from a limited number of vendors. If our subcontractors or
our vendors are unable to provide these services or materials in the future our
relationships with our customers could be seriously affected and our revenues
and financial condition could be severely damaged.
On those products where we provide finished devices to our customers, after the
wafers are fabricated and tested at our San Jose, California facility, they are
sent to contract assembly houses to be packaged. After the wafers are scribed
and the individual die are packaged, the units are returned to us for final
testing. We then ship the completed devices to distributors and customers
worldwide. In the future we may perform testing and shipping functions at
external vendors.
Our products are packaged by a limited number of third party subcontractors in
Indonesia and other Asian countries. Some of the raw materials included in these
operations are obtained from sole source suppliers. Although we seek to reduce
our dependence on sole and limited source suppliers both for assembly services
and for materials, disruption or financial, operational, production, yield or
quality assurance difficulties at any of these sources could occur and cause us
to have severe delivery problems.
11
<PAGE> 12
EXECUTIVE OFFICERS OF THE COMPANY
The current executive officers of the Company as of March 26, 2000 with their
respective ages and positions were:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Brad Whitney............ 46 President, Chief Executive Officer and Director
Joy Leo................. 39 Vice President, Finance, Administration and Chief
Financial Officer
Tarsaim Batra........... 61 Vice President, Manufacturing and Chief Operating
Officer
Moiz B. Khambaty........ 66 Vice President, Technology
Ron Laugesen............ 61 Vice President, Product Engineering
Jerry DaBell............ 54 Senior Vice President, Design Engineering
</TABLE>
Mr. Whitney joined the Company in January, 2000 as President, Chief Executive
Officer and a member of the Board of Directors. Prior to joining IMP, Mr.
Whitney served as Senior Vice President of New Business for Bourns Incorporated.
From 1992 until 1997, he served as President and Chief Operating Officer of
Linfinity Microelectronics Incorporated,
Ms. Leo joined the Company in February, 2000 as Vice President of Finance and
Chief Financial Officer. Ms. Leo joins IMP from Innomedia Incorporated of San
Jose, California, where she served as Vice President of Finance, Operations and
Administration from 1998 until 2000. From 1995 - 1998 she served as Vice
President and Finance and Chief Financial Officer of Philips Components, a
division of Philips Electronics NV.
Dr. Batra joined the Company in November 1994 as a yield improvement consultant.
In May 1995, he was promoted to Manager, Operations Research. In November 1996,
he was promoted to Director of Manufacturing and in February 1997 he was
promoted to Vice President, Manufacturing. In November 1999, he was promoted to
Chief Operating Officer. Prior to joining IMP, Dr. Batra's thirty year career in
the semiconductor industry encompassed various manufacturing, engineering and
research positions. He was General Manager, Semiconductor Division of California
Micro Devices from 1989 to 1994.
Dr. Khambaty joined the Company in November 1981 as Manager of Technology
Development. In October 1983 he was promoted to Director, Technology Development
and in April 1984 to Vice President, Technology. From 1978 to 1981 Dr. Khambaty
was a Sr. Staff Scientist with Gould Electronics (AMI, Inc.). From 1956 to 1978
he was employed in various engineering and managerial positions with Siemens,
Fairchild, Honeywell and the Atomic Energy Establishment of the Government of
India.
Mr. Laugesen joined the Company in 1989 as ISDN Design Manager. In May 1997, he
was named as Vice President of Product and Test Engineering. Prior to joining
IMP, Mr. Laugesen was Design and Product Engineer Manager at IDT Corporation
from 1986 to 1989. From 1977 to 1986 Mr. Laugesen was employed as Telecomm
Design Manager at AMD.
Mr. DaBell joined the Company in May 1988 as Vice President of Design
Technology. In July 1988 he was promoted to Vice President of Design
Engineering. In March 1993 he was assigned to the position of Vice President,
Business Development and in May 1997 was promoted to Senior Vice President,
Product Development. From 1973 to 1988 Mr. DaBell was employed in various design
engineering and management positions with Gould Electronics (AMI, Inc.). From
1971 to 1973 he served as an instrumental engineer with the General Electric
Company.
Officers are elected by and serve at the discretion of the Board of Directors.
EMPLOYEES
As of March 26, 2000, IMP employed approximately 172 people, including
approximately 85 in manufacturing; 27 in manufacturing support; 31 in research
and development, including process development, circuit design, product and test
engineering; 7 in sales and marketing; and 22 in administrative, financial and
management positions.
None of our employees are represented by collective bargaining agreements, nor
have we ever experienced any work stoppage through employee initiated actions.
We believe that our employee relations are good.
Our ability to attract and retain qualified personnel is essential to our future
success. The number of skilled analog designers and other specialized engineers
and technicians qualified to meet the demands of IMP's business is particularly
limited, and competition for these people is intense. Our growth also requires
the hiring or training of middle and upper-level managers. If we are unable to
hire, retain, and motivate enough qualified technical and management people, our
operations and financial results will be adversely affected.
12
<PAGE> 13
ENVIRONMENTAL AND SAFETY REGULATION
Federal, state, and local regulations impose a variety of safety and
environmental controls on how we store, handle, discharge and dispose of many of
the chemicals and gases that we use to manufacture our products. Our facilities
have been designed to comply with these regulations, and we believe that our
operations are managed so as to meet the requirements as closely as possible.
While we have not had any accidents or other incidents serious enough to affect
our business results, if we fail to correctly store, use and dispose of
regulated materials we could be liable for fines and other penalties.
Increasing public attention has been focused on the safety and environmental
impacts of electronic manufacturing operations. While we have not experienced
any materially adverse effects on our business to date from such regulations,
there can be no assurance that changes or new interpretations of such
regulations will not impose costly equipment, facility or other requirements.
ITEM 2. PROPERTIES
The Company's primary manufacturing activities and process technology research
and development activities are located in a 59,000 square foot building in San
Jose, California leased under agreements expiring in fiscal 2006. The Company
has the right to extend these leases for one additional six-year period. The
Company's general administrative activities, sales and marketing and certain
engineering activities are located in a nearby 22,000 square foot building
leased under an agreement expiring in fiscal 2006. The Company's internal
circuit design research and development activities are performed in a 5,500
square foot office located in Pleasanton, California under an agreement expiring
in fiscal 2003.
ITEM 3. LEGAL PROCEEDINGS
The Company has been named as one of many defendants in a legal action. (See
Notes to Financial Statements, Note 5)
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended March 26, 2000.
13
<PAGE> 14
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
PRICE RANGE OF COMMON STOCK
The Common Stock of the Company was traded on the Nasdaq National Market under
the symbol "IMPX". As of April 7, 1999, the Common Stock of the Company began
trading on the Nasdaq Smallcap Market. The following tables set forth the high
and the low last reported sales price for the Common Stock as reported by the
Nasdaq National Market. All share price figures reflect the 1-for-10 reverse
split that occurred during fiscal year 1999.
<TABLE>
<CAPTION>
FISCAL YEAR END FISCAL YEAR END
MARCH 26, 2000 MARCH 28, 1999
--------------------- ---------------------
HIGH LOW HIGH LOW
------- ----- ------- -------
<S> <C> <C> <C> <C>
First Quarter $ 4.25 $2.31 $ 15.31 $ 9.06
Second Quarter $ 4.50 $1.06 $ 9.37 $ 3.12
Third Quarter $ 6.12 $2.00 $ 6.56 $ 1.88
Fourth Quarter $ 8.06 $3.06 $ 7.81 $ 3.12
</TABLE>
The Company intends to retain any future earnings for the use in its business
and, accordingly, does not anticipate paying any cash dividends on its common
stock in the foreseeable future.
As of June 16, 2000, there were approximately 855 shareholders of record (not
including beneficial holders of stock held in street name) of the Company's
Common Stock, which closed at $2.75 per share on the Nasdaq Smallcap Market as
of that date.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
FISCAL YEAR ENDED(1)
-------------------------------------------------------------
MARCH 26, MARCH 28, MARCH 29, MARCH 30, MARCH 31,
2000 1999 1998 1997 1996
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net revenues $ 34,837 $ 33,391 $ 40,420 $ 64,891 $ 76,827
Net income (loss)(2) (3,601) (7,919) (3,799) (12,367) 5,469
Basic and diluted net income (loss)
per share(3) (1.00) (2.73) (1.35) (4.39) 1.96
Balance Sheet Data:
Total assets 18,391 25,961 31,949 37,271 50,733
Long term obligations excluding 857 2,942 6,173 9,074 8,979
current portion
Stockholders' equity $ 3,483 $ 4,985 $ 10,598 $ 14,301 $ 25,445
</TABLE>
(1) The Company's fiscal year ends on the Sunday nearest March 31. Fiscal
2000, 1999, 1998, and 1997 each consisted of 52 weeks; and fiscal 1996
consisted of 53 weeks.
(2) In fiscal 1997, the Company recorded $1,862,000 in restructuring charges.
(3) See Note 1 of Notes to Financial Statements for an explanation of the
computation of net income (loss) per share.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Except for the historical information contained herein, the matters discussed
below are forward-looking statements that involve certain risks and
uncertainties, including the risks and uncertainties set forth below in this
section under the sub-heading "Factors Affecting Future Results."
14
<PAGE> 15
RESULTS OF OPERATIONS
The following table sets forth certain items from the Company's consolidated
statements of operations as a percentage of net revenues for the periods
indicated.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------
MARCH 26, MARCH 28, MARCH 29,
2000 1999 1998
--------- --------- ---------
<S> <C> <C> <C>
Total revenues 100.0% 100.0% 100.0%
Cost of Revenue 81.1 80.4 74.3
----- ----- -----
Gross Margin 18.9% 19.6% 25.7%
Operating Expenses:
R&D/Design 13.5 24.5 20.1
Selling, general and
administrative 12.5 15.7 12.7
----- ----- -----
Operating (loss) income (7.1) (20.6) (7.1)
Other income, net (3.2) (3.1) (2.3)
----- ----- -----
(Loss) income before provision
for income taxes (10.3) (23.7) (9.4)
Provision for income taxes -- -- --
----- ----- -----
Net (loss) income (10.3)% (23.7)% (9.4)%
----- ----- -----
</TABLE>
Net Revenues. Net revenues in fiscal 2000 increased 4% to $34.8 million, from
$33.4 million in fiscal 1999. Net revenues in fiscal 1999 decreased 17% to $33.4
million from $40.4 million in fiscal 1998. The increase in net revenues in
fiscal 2000 was primarily due to a increase in sales for the Company's standard
products. Foundry product sales accounted for 69% of net revenues in fiscal
2000, 83% in fiscal 1999, and 67% in fiscal 1998. The Company is attempting to
shift from foundry product sales to sales of the Company's standard products.
The increase in net revenues of standard products from fiscal 1999 to fiscal
2000 is in part due to a one time increase in revenue to Hewlett-Packard. In
fiscal 2000, sales to Hewlett-Packard amounted to $4.2 million, representing 12%
of the Company's net revenue, while in fiscal 1999, sales to Hewlett-Packard
amounted to $2.3 million, or 7% of the Company's net revenue. The decrease in
net revenues of standard products from 1998 to fiscal 1999 is the result of a
reduction in revenue from Iomega, one of the Company's largest customers. In
fiscal 1998, sales to Iomega amounted to $9.0 million, representing 22% of the
Company's net revenue for fiscal 1998. In fiscal 1999, sales to Iomega fell to
$190,000, a decrease of $8.9 million from fiscal 1998, and accounting for 0.5%
of the Company's net revenue for fiscal 1999.
Our sales to customers in the United States, Asia and the rest of the world
accounted for 81%, 8%, and 11% respectively, of our net revenues for fiscal
2000, compared to 88%, 6% and 6%, respectively, of the Company's net revenues;
for fiscal 1999, and 69%, 29% and 2%, respectively, of the Company's net
revenues; for fiscal 1998. Our standard products are sold throughout the world,
while our custom and foundry products are sold primarily to North American
customers.
In fiscal 2000, our largest customers were International Rectifier,
Hewlett-Packard, Level One, and Linfinity Microelectronics, which accounted for
approximately 22%, 12%, 11% and 10%, of net revenues, respectively. No other
customer accounted for more than 10% of net revenues during fiscal 2000. In
fiscal 1999, IMP's largest customers were International Rectifier, with 29% of
net revenues, and Linfinity Microelectronics, with 16% of net revenues. In
fiscal 1998, IMP's largest customer was Iomega Corporation, which accounted for
approximately 22% of net revenues. International Rectifier accounted for
approximately 14% of net revenues in fiscal 1998. Three other customers, Level
One, Colorado Memory Systems and Linfinity, exceeded 10% of sales and accounted
for a total of approximately 32% of net revenues.
Cost of revenues. Cost of revenues as a percentage of net revenues was 81% in
fiscal 2000 compared to 80% in fiscal 1999 and 74% in fiscal 1998. The 1%
increase in cost of revenues as a percentage of net revenues in fiscal 2000
compared to fiscal 1999 was principally the result of lower factory utilization,
selling price erosion and product mix changes on standard products. The increase
in cost of revenues as a percentage of net revenues in fiscal 1999 compared to
fiscal 1998 was due to lower factory utilization, selling price erosion and
product mix changes on standard products.
15
<PAGE> 16
Research and Development Expenses. Research and development expense in fiscal
2000 was $4.7 million, compared to $8.2 million in fiscal 1999, and $8.1 million
in fiscal 1998. The decrease from fiscal 1999 to fiscal 2000 was due to cost
reduction efforts, including a reduction-in-force in September, 1999 as well as
engineers being assigned to revenue producing projects in fiscal 2000.
Selling, General and Administrative Expenses. Selling, general and
administrative expense in fiscal 2000 was $4.4 million compared to $5.2 million
in fiscal 1999, and $5.1 million in fiscal 1998. The decline in selling, general
and administrative expense in fiscal 2000, as compared to fiscal 1999, was
primarily due to cost reduction efforts, including a reduction-in-force that
occurred in September, 1999, as well as a renegotiation of sales commission
agreements which resulted in lower commission expenses in fiscal 2000.
Other Income and Expenses. Net interest and other expenses in fiscal 2000 were
$1.1 million compared to $1.0 million in fiscal 1999 and $0.9 million in fiscal
1998. The increase in fiscal 2000 was primarily attributable to lower interest
income from decreased cash balances and higher expense due to higher average
borrowing and higher interest rates during the fiscal year. The increase in
fiscal 1999 compared to fiscal 1998 was primarily attributable to lower interest
income from decreased cash balances in fiscal 1999.
The Company had a net loss of $3.6 million in fiscal 2000, or $1.00 per share,
compared to a loss of $7.9 million in fiscal 1999 or $2.73 per share, and a loss
of $3.8 million in fiscal 1998, or $1.35 per share. The fiscal 2000 and 1999 net
losses were primarily attributable to low factory utilization.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased to $0.3 million at March 26, 2000 from $1.6
million at March 28, 1999, and $11.8 million at March 29, 1998. The decrease
from fiscal 1999 to fiscal 2000 was primarily due to continued operating losses,
lower borrowing capabilities from our credit facilities due to concentration
limitations on qualified accounts receivable and continued repayment of debts.
The decrease from fiscal 1998 to fiscal 1999 was primarily due to operating
losses, higher inventories and higher accounts receivable.
Cash and cash equivalents provided by operating activities in fiscal 2000 were
$1.5 million, compared to cash and cash equivalents used by operating activities
in fiscal 1999 of $8.3 million, and cash and cash equivalents provided by
operating activities of $4.8 million in fiscal 1998. The fiscal 1999 to fiscal
2000 increase in cash and cash equivalents provided by operating activities was
primarily due to lower operating losses and lower accounts receivable. The
fiscal 1998 to fiscal 1999 decrease in cash and cash equivalents was due to
increased operating losses, higher inventory levels and higher accounts
receivable.
Cash and cash equivalents used for investing activities were $1.4 million in
fiscal 2000, approximately $1.8 million in fiscal 1999, and $700,000 in fiscal
1998, reflecting cash invested in property and equipment acquisitions.
Cash and cash equivalents used in financing activities were approximately $1.5
million in fiscal 2000. The Company received proceeds of $4.3 million from a
credit facility, including $1.7 million in equipment notes payable, repaid $4.9
million on the credit facility, repaid $1.1 million of equipment notes payable,
and made principal payments of $1.9 million on capital lease obligations. In
addition, the Company had proceeds from the sale of stock of $2.1 million. In
fiscal 1999, the Company received proceeds of $4.0 million from a credit
facility, repaid $3.2 million of equipment notes payable, and made payments on
capital lease obligations and notes payable in the amount of $3.1 million. In
fiscal 1998 the Company paid $5.7 million on notes and capital lease.
In April 1999, the Company entered into an agreement with The CIT Group for a
$9.5 million financing facility. Included in the $9.5 million is a facility for
up to $2.0 million in secured term loans and a facility which allows the Company
to borrow up to $7.5 million in debt financing based on accounts receivable and
inventory balances at 1.5% over prime. On March 26, 2000 the debt balance was
$3.1 million and the availability was $6.4 million. However, the availability
was severely limited by concentration limitations on qualified accounts
receivable.
During the second quarter of fiscal year 2000, the Company was unable to meet
its obligations under its equipment notes payable and certain of its capital
leases. These instances of non-payment put the Company in default of these
agreements and in default of the revolving credit facility entered into in April
1999 due to a cross default clause in
16
<PAGE> 17
the revolving credit facility agreement. The Company has renegotiated the
payment terms under the equipment notes payable amounting to $1,086,000 and
capital lease obligations with an aggregate balance of $2,655,000 as of March
26, 2000. However, the Company has been unable to renegotiate the payment terms
under one capital lease obligation amounting to $872,000 as of March 26, 2000.
As of June 26, 2000, the lessor has not required acceleration of such obligation
and management intends to continue to pursue renegotiated payment terms. As
such, as of June 26, 2000, the Company remains in default of the revolving
credit facility and capital lease obligations with an aggregate total balance of
$4,934,000 as of March 26, 2000 due to cross default clauses in these
agreements. As a result, the Company may not be able to continue to draw on
unused amounts under the revolving credit facility.
The Company's current portion of debt and capital lease obligations of $7.0
million is comprised of (i) $2.5 million of equipment notes payable, (ii) $1.7
million of the accounts receivable revolver, and (iii) $2.8 million of capital
lease obligations. The capital lease obligations are comprised of twelve
individual leases of which seven (comprising 34% of the total dollar amount of
the current obligations) are currently not in default and five (comprising 66%
of the total current obligations) are currently in default.
The Company's long term portion of debt and capital lease obligations of
$857,000 is comprised of capital lease obligations only. The capital lease
obligation is comprised of three creditors that account for the outstanding
long-term portion of the capital lease obligation.
The Company's operating needs are funded principally from the collection of
accounts receivable. As discussed previously, the Company has been unable at
times to pay all of its obligations. Should the Company's cash flow from
collection of accounts receivable decline by reason of delays in collections or
a decrease in sales, the Company could find itself again unable to meet its
obligations currently.
As of March 26, 2000 we had cash and cash equivalents of approximately $261,000.
Our cash and cash equivalents have declined over each of the past several
quarters. However, as discussed below, on June 26, 2000, the Company sold
4,793,235 shares of its Common Stock for a cash purchase price of $3,930,000. A
substantial portion of the proceeds was used to pay existing obligations. If we
continue to report operating losses and negative cash flow, we will need to
obtain additional funding to remain in operation. There can be no assurance that
such funding will be available to us at reasonable rates, if at all.
Even as the Company focuses on short-term liquidity concerns, management
recognizes the need to build momentum and identify the additional capital that
will be required in the long term to foster the Company's continued growth. To
ensure an improvement in the Company's liquidity and capital resources, the
Company has implemented tighter cash management practice and has focused heavily
on balance sheet management.
In October 1999, the Company entered into a stock purchase agreement (the
"Agreement") under which Teamasia Semiconductors (India) Ltd., ("Teamasia"), a
corporation headquartered in India involved in the manufacturing and sale of
discrete semiconductor devices purchased an aggregate of 16.7% of the Company's
common stock outstanding for consideration of $2,050,000. The transaction closed
during the quarter ending December 26, 1999. Under this agreement, Teamasia is
also obligated to place orders with the Company for wafer fabrication.
On December 15, 1999, the Company and Teamasia entered into a second stock
purchase agreement (the "Phase Two Stock Purchase Agreement") under which
Teamasia would make an additional equity investment in the Company. The Phase
Two Stock Purchase Agreement was approved by the shareholders of the Company the
Company's annual meeting held on June 14, 2000. Upon subsequent completion of
the transaction, Teamasia and its affiliates were issued 4,793,235 shares of
common stock in exchange for $3.9 million. As of June 26, 2000, Teamasia owned
approximately 5,464,000 shares of common stock representing a 51% ownership of
the Company on a fully diluted basis. During the period between December 15,
1999 and the date of approval of the Phase Two Stock Purchase Agreement,
Teamasia was required to use reasonable efforts to provide the Company with
additional financing up to the amount of the purchase price upon commercially
reasonable terms, if the Company so requested. During this period, Teamasia did
not provide the Company with additional financing and as such, there was no
repayment at the closing of the Phase Two Stock Purchase Agreement.
As of June 26, 2000, the Company believes that its existing cash and cash
equivalents of $3.9 million from the sale of equity securities described in Note
4 to the attached financial statements together with the cash generated from
operations, available borrowings under its credit facility and other financing
options, will be sufficient to fund acquisitions of equipment and provide
adequate working capital through at least the next twelve months. The Company
will continue to focus heavily on cash management practices and on balance sheet
management.
17
<PAGE> 18
YEAR 2000 ISSUES
The Company conducted a Year 2000 readiness program (the "Y2K Program") to
ensure that its information systems and other date-sensitive equipment continue
uninterrupted into the Year 2000. All of the Company's essential processes,
systems and business functions were compliant with the Year 2000 requirements by
the end of 1999. The Company did not experience any Year 2000 consequences that
affected its business, financial position, liquidity or results of operations.
The costs of the Company's Y2K Program were funded with cash flows from
operations. Some of these costs related solely to the modification of existing
systems, while others were for new systems that also improved business
functionality. The total cost to the Company of its Y2K Program has not been and
is not presently anticipated to be material to the Company's business, financial
position, liquidity or results of operations. See "Factors That May Affect
Future Results -- Year 2000 Compliance" below.
FACTORS AFFECTING FUTURE RESULTS
The Company's business, financial condition and results of operations have been,
and in the future may be, affected by a variety of factors, including those set
forth below and elsewhere in this report.
There May Be A Short-term Need for A Cash Infusion into the Company
The Company has minimal financial resources and operating needs are funded
principally from the collection of accounts receivable. Should the cash flow
from accounts receivable be lessened or interrupted by slow collections, limited
borrowing capabilities from our credit facility, or by a decrease in revenue
generation, the Company could very quickly find itself again unable to meet its
obligations. Should such a cash flow shortfall occur, the potential sources for
additional capital investment are neither in place nor identified.
We May Continue to Report Losses and Negative Cash Flow in the Future
Although we experienced a growth in revenues in the last two quarters of fiscal
1999, we have reported operating losses and negative cash flow since the second
quarter of fiscal 1997. Unless a trend of increasing revenue is achieved, there
is substantial risk that we will continue to report losses and negative cash
flow in the future. Our cash balance has decreased over each of the last several
quarters. As of March 26, 2000 we had cash and cash equivalents of approximately
$261,000. If we do continue to report operating losses and negative cash flow we
will need to obtain additional funding beyond the Teamasia cash infusions to
remain in operation. There can be no assurance that such funding will be
available to us at reasonable rates, if at all.
Our Common Stock Price May Be Volatile Because Our Stock Trades on the Nasdaq
Smallcap Market
Effective April 1999, our common stock was moved from the Nasdaq National Market
to the Nasdaq SmallCap Market where it continues to trade under the symbol
"IMPX." Our common stock trading price remains below $5.00 per share and could
also be subject to the requirements of certain rules promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), which require
additional disclosure by broker-dealers in connection with any trades involving
a stock defined as a penny stock (generally, any non-Nasdaq equity security that
has a market price of less than $5.00 per share, subject to certain exceptions).
The additional burdens imposed upon broker-dealers by such requirements could
discourage broker-dealers from trading in our common stock. Additionally, future
announcements concerning the Company, its competitors or its principal
customers, including quarterly operating results, changes in earnings estimates
by analysts, technological innovations, new product introductions, governmental
regulations or litigation may cause the market price of the Company's Common
Stock to continue to fluctuate substantially. Further, in recent years the stock
market has experienced extreme price and volume fluctuations that have
particularly affected the market prices of equity securities of many high
technology companies and that often have been unrelated or disproportionate to
the operating performance of such companies. These fluctuations, as well as
general economic, political and market conditions such as recessions or
international currency fluctuations may materially adversely affect the market
price of the Common Stock.
18
<PAGE> 19
Control by Existing Shareholders
As of June 15, 2000, Teamasia Semiconductors PTE Limited and its affiliates
beneficially owned, in the aggregate, 51% of the fully diluted Common Stock of
the Company. As a result, these shareholders, acting together, possess
significant voting power over the Company, giving them the ability among other
things to influence significantly the election of the Company's Board of
Directors and approve significant corporate transactions. Such control could be
a merger, consolidation, takeover or other business combination involving the
Company, or discourage a potential acquirer from making a tender offer or
otherwise attempting to obtain total control of the Company.
Our Success Depends on Operating Our Foundry at High Capacity.
In the near term our success depends on our ability to attract additional orders
from new and existing customers for our analog and high-voltage wafer
fabrication services. In the past, during periods of low demand, high fixed
wafer fabrication costs have had a material adverse effect on our results of
operations. For example, during the last three quarters of fiscal 1997, all of
fiscal 1998, the first half of fiscal 1999, and fiscal 2000, our operating
results were materially adversely affected by the low utilization of the
Company's manufacturing facility.
Our Success Depends on Our Development and Marketing of New Analog Products.
In the long term, our success depends on our ability to develop new analog
integrated circuit products for existing and new applications, to introduce such
products in a timely manner, and to gain customer acceptance for our products.
The development of new analog integrated circuits is highly complex and from
time to time we have experienced delays in developing and introducing new
products. Successful product development and introduction depends on a number of
factors including proper new product definition, completion of design and
testing of new products on time, achievement of acceptable manufacturing yields
and market acceptance of our and our customers' products. Moreover, successful
product design and development depends on our ability to attract, retain and
motivate qualified analog design engineers, of which there is a limited number.
There can be no assurance that we will be able to meet these challenges or
adjust to changing market conditions as quickly and cost-effectively as
necessary to compete successfully.
Due to the complexity and variety of analog circuits, the limited number of
analog circuit designers and the limited effectiveness of computer-aided design
systems in the design of analog circuits, we cannot be certain that we will be
able to continue to successfully develop and introduce new products on a timely
basis. We seek to design alternate source products that have already achieved
market acceptance from other vendors, as well as new proprietary IMP products.
However, we cannot be sure that any products we introduce will be accepted by
customers or that any product initially accepted by our customers will result in
production orders. If we fail to continue to develop, introduce and sell new
products successfully, we could experience material and adverse affects to our
long-term business and operating results.
Our Success Will be Dependent Upon Our Ability to Fabricate Higher-Margin
Products.
The ability of the Company to transition from the fabrication of lower-margin
products to higher-margin products, including both those developed by the
Company and those for which it serves as a third-party foundry, is very
important for the Company's future results of operations. Rapidly changing
customer demands may result in the obsolescence of existing Company inventories.
There can be no assurances that the Company will be successful in its efforts to
keep pace with changing customer demands. In this regard, the ability of the
Company to develop higher-margin products will be materially and adversely
affected if it is unable to retain its engineering personnel due to the
Company's current business climate.
We May Not Be Able to Compete Successfully Against Current and Future
Competitors.
Many of our competitors have substantially greater technical, manufacturing,
financial and marketing resources than we do. Our international sales are
primarily denominated in U.S. currency. Consequently, changes in exchange rates
that strengthen the U.S. dollar could increase the price in local currencies of
our products in foreign markets and make our products relatively more expensive
than our competitor's products that are denominated in local currency.
19
<PAGE> 20
Due to the current demand for semiconductors of all types, including both
foundry services and analog integrated circuits, we expect continued strong
competition from existing suppliers and the entry of new competitors. Such
competitive pressures could reduce the market acceptance of our products and
result in market price reductions and increases in expenses that could adversely
affect our business, financial condition or results of operations.
If Protection of Our Trademarks and Proprietary Rights is Inadequate, Our
Business Will Be Materially Harmed.
Although we are not currently a party to any material litigation relating to
patents and other intellectual property rights, because of technological
developments in the semiconductor industry, it is possible that certain of our
designs or processes may involve infringement of existing patents. We also
cannot be sure that any of our patents will not be invalidated, circumvented or
challenged, that the rights granted thereunder will provide competitive
advantages to us or that any of our pending or future patent applications will
be issued. We have from time to time received, and may in the future receive,
communications from third parties asserting patents, maskwork rights, or
copyrights on certain of our products and technologies. The Company has been
contacted by the Lemelson Medical Foundation. This foundation has filed patent
violation legal actions against 88 semiconductor companies. The Company is
currently not one of the defendants in this action but might be added at a later
date. Although we are not currently a party to any material litigation, if a
third party were to make a valid intellectual property claim and a license were
not available on commercially reasonable terms, our operating results could be
materially and adversely affected. Litigation, which could result in substantial
cost to us and diversion of our resources, may also be necessary to enforce our
patents or other intellectual property rights or to defend us against claimed
infringement of the rights of others.
If We Cannot Manufacture Products in Sufficient Quantity or Quality, Our
Business Will Be Materially Harmed.
The fabrication of integrated circuits is a highly complex and precise process.
Minute impurities, contaminants in the manufacturing environment, difficulties
in the fabrication process, defects in the masks used to print circuits on a
wafer, manufacturing equipment failure, wafer breakage or other factors can
cause a substantial percentage of wafers to be rejected or numerous die on each
wafer to be nonfunctional. The majority of our costs of manufacturing are fixed,
and, consequently, the number of shippable die per wafer for a given product is
critical to our results of operations. If we do not achieve acceptable
manufacturing yields, or if we experience product shipment delays, or if we
encounter capacity constraints, or issues related to volume production ramp-ups,
our financial condition or results of operations would be materially and
adversely affected. We have from time to time in the past experienced lower than
expected production yields, which have delayed product shipments and adversely
affected gross margins. Moreover, we cannot be sure that we will be able to
maintain acceptable manufacturing yields in the future.
We manufacture all of our wafers at the one fabrication facility in San Jose.
Given the unique nature of our processes, it would be difficult to arrange for
independent manufacturing facilities to supply such wafers in a short period of
time. Any inability to utilize our manufacturing facility as a result of fire,
natural disaster or utility interruption, otherwise, would have a material
adverse effect on our financial condition or results of operations. Although we
believe that we have adequate capacity to support our near term plans, we have
in the past subcontracted the fabrication of a portion of our wafer production
to outside foundries, and may need to do so again. At the present time, there
are several wafer foundries that are capable of supplying certain of our needs.
However, we cannot be sure that we will always be able to find the necessary
foundry capacity.
Our Inability to Forecast Correctly Could Adversely Affect our Relationships
With Customers and Result in Larger Than Desired Inventory Levels
Due to the relatively long manufacturing cycle for integrated circuits, we build
some of our inventory before we receive orders from our customers. Because of
inaccuracies inherent in forecasting the demand for such products, inventory
imbalances periodically occur that result in surplus amounts of some of our
products and shortages of others. Such shortages can adversely affect customer
relationships; surpluses can result in larger than desired inventory levels. Our
backlog consists of distributor and OEM customer orders required to be shipped
within six months following the order date. Customers may generally cancel or
reschedule orders to purchase products without significant penalty to the
customer. As a result, to reflect changes in their needs, customers frequently
revise the quantities of our products to be delivered and their delivery
schedules. Because backlog can be canceled or
20
<PAGE> 21
rescheduled without significant penalty, we do not believe our backlog is a
meaningful indicator of future revenue. In addition, our backlog includes our
orders from domestic distributors as to which revenues are not recognized until
the products are sold by the distributors. Such products when sold may result in
revenue lower than the stated backlog amounts as a result of discounts that we
authorize at the time of sale by the distributors.
If Our Subcontractors are Unable to Perform in a Timely Manner or We are Unable
to Obtain Materials Necessary for Our Products, Our Business will be Materially
Harmed
We depend on a number of subcontractors for certain of our manufacturing
processes, such as epitaxial deposition services. If any of these subcontractors
fails to perform these processes on a timely basis, there could be manufacturing
delays, which could materially adversely affect our results of operations.
Currently, we purchase certain materials, including silicon wafers, on a
purchase order basis from a limited number of vendors. Any interruption or
termination of supply from any of these suppliers could have a material adverse
effect on our financial condition and results of operations. Our products are
packaged by a limited group of third party subcontractors in Indonesia and other
Asian countries. Certain of the raw materials included in such products are
obtained from sole source suppliers. Although we are trying to reduce our
dependence on our sole and limited source suppliers, disruption or termination
of any of these sources could occur and such disruptions could have a material
adverse effect on our financial condition or results of operations. As is common
in the industry, independent third party subcontractors in Asia currently
assemble all of our products. In the event that any of our subcontractors were
to experience financial, operational, production or quality assurance
difficulties resulting in a reduction or interruption in our supply, our
operating results would be adversely affected until alternate subcontractors, if
any, became available.
If We Fail to Comply with Environmental and Safety Regulations, Our Business
Will Be Materially Harmed.
Federal, state, and local regulations impose a variety of safety and
environmental controls on the storage, handling, discharge and disposal of
certain chemicals and gases used in semiconductor manufacturing. Our facilities
have been designed to comply with these regulations, and we believe that our
activities are conducted in material compliance with such regulations. We cannot
be sure, however, that interpretation and enforcement of current or future
environmental regulations will not impose costly requirements upon us. If we
fail to control adequately the storage, use and disposal of regulated
substances, we could incur future liabilities.
Increasing public attention has been focused on the safety and environmental
impacts of electronic manufacturing operations. While to date we have not
experienced any materially adverse effects on our business from such
regulations, we cannot be sure that changes or new interpretations of such
regulations will not impose costly equipment, facility or other requirements.
Dependence on Key Personnel
The present and future success of the Company depends on its ability to continue
to attract, retain and motivate qualified senior management, sales and technical
personnel, particularly highly skilled semiconductor design and development
personnel, and process engineers, for whom competition is intense. The loss of
Dr. Khambaty, key executive officers, key design and development personnel, or
process engineers, or the inability to hire and retain sufficient qualified
personnel could have a material adverse effect on the Company's business,
financial condition and results of operations. There can be no assurance that
the Company will be able to retain these employees.
Year 2000 Compliance
The Company has completed its Year 2000 Program and generally believes that its
products, IT systems and non-IT systems are Year 2000 compliant. At this time
the Company has not experienced any Year 2000 compliance problems. However, due
to the general uncertainty inherent in the Year 2000 problem, resulting in part
from the uncertainty of the Year 2000 readiness of third-parties and the
interconnectedness of global businesses, the Company cannot ensure its ability
to timely and cost-effectively resolve problems associated with the Year 2000
issue that may affect the Company's operations and business, or expose it to
third-party liability.
21
<PAGE> 22
RECENT ACCOUNTING PRONOUNCEMENTS
In March 2000, the Financial Accounting Standards Board issued Interpretation
No. 44 ("FIN No. 44"), "Accounting for Certain Transactions involving Stock
Compensation," an interpretation of APB No. 25. FIN No. 44 clarifies the
application of APB No. 25 for (a) the definition of employee for purposes of
applying APB No. 25, (b) the criteria for determining whether a plan qualifies
as a noncompensatory plan, (c) the accounting consequence of various
modifications to the terms of a previously fixed stock option or award, and (d)
the accounting for an exchange of stock compensation awards in a business
combination. FIN No. 44 is effective July 1, 2000, but certain conclusions cover
specific events that occur after either December 15, 1998, or January 12, 2000.
The impact of implementing FIN 44 on the Company's financial statements has not
yet been determined.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial Statements." SAB
101 provides guidance on applying generally accepted accounting principles to
revenue recognition in financial statements. The impact of implementing SAB 101
on the Company's financial statements is still being assessed by management.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133
establishes accounting and reporting standards for derivative instruments and
for hedging activities and requires recognition of all derivatives as assets or
liabilities and measurement of those instruments at fair value. In June 1999,
the Financial Accounting Standards Board issued SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities-Deferral of the Effective Date of
FASB Statement No. 133," which deferred the required date of adoption of SFAS
No. 133 for one year, to fiscal years beginning after June 15, 2000. The impact
of the implementing SFAS 133 on the Company's financial statements is not
anticipated to be significant as the Company does not currently purchase
derivative securities.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has various debt instruments outstanding that mature by 2002.
Certain of these instruments have interest rates that are based on associated
rates that may fluctuate over time based on economic changes in the environment,
such as the Prime Rate. The Company is subject to interest rate risk, and could
be subjected to increased interest payments if market interest rates fluctuate.
The Company estimates that a ten percent increase in interest rates would cause
interest expense to increase by an immaterial amount.
Due to its international sales, the Company is exposed to risks associated with
foreign exchange rate fluctuations. Those exposures may change over time as
business practices evolve and could have a material adverse effect on the
Company's operating results and financial condition. All of the Company's sales
are denominated in U.S. dollars. An increase in the value of the U.S. dollar
relative to foreign currencies could make the Company's products more expensive,
reducing the demand for the Company's products. A decline in the demand of the
Company's product could have a material adverse effect on the Company's
operating results and financial position. European currency issues are not
material due to the Company's minimal contact with European markets.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Index to financial statements and financial statement schedules.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Financial statements:
Report of Independent Accountants.................................................................. 24
Balance sheets as of March 26, 2000 and March 28, 1999............................................. 25
Statements of operations for each of the three years in the period ended March 26, 2000............ 26
Statement of stockholders' equity for each of the three years in the period March 26, 2000......... 27
Statements of cash flows for each of the three years in the period ended March 26, 2000............ 28
Notes to financial statements...................................................................... 29
</TABLE>
22
<PAGE> 23
<TABLE>
<S> <C>
Financial statement schedules for each of the three years in the period ended March 26, 2000
Report of Independent Accountants on Financial Statement Schedules.................................. 44
Schedule II - Valuation and Qualifying Accounts..................................................... 45
</TABLE>
23
<PAGE> 24
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of IMP, Inc.
In our opinion, the accompanying balance sheets and related statements of
operations, of stockholders' equity and of cash flows present fairly, in all
material respects, the financial position of IMP, Inc. at March 26, 2000 and
March 28, 1999, and the results of its operations and its cash flows for each of
the three years in the period ended March 26, 2000, in conformity with
accounting principles generally accepted in the United States. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has failed to make the scheduled payments due
under certain of its notes payable and capital lease obligations due to ongoing
liquidity deficiencies that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ PRICEWATERHOUSECOOPERS LLP
San Jose, California
June 19, 2000
24
<PAGE> 25
IMP, Inc.
BALANCE SHEETS
(In thousands, except per share data)
<TABLE>
<CAPTION>
MARCH 26, MARCH 28,
2000 1999
--------- ---------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 261 $ 1,606
Accounts receivable, net of allowances
for doubtful accounts and returns of
$220 and $2,529 4,918 9,191
Accounts receivable from a related party 85 --
Inventories 6,724 6,076
Other current assets 67 693
-------- --------
Total current assets 12,055 17,566
-------- --------
Leasehold improvements and machinery and equipment:
Leasehold improvements 9,072 9,072
Machinery and equipment 83,696 82,299
-------- --------
92,768 91,371
Less accumulated depreciation and amortization (86,854) (83,470)
-------- --------
Net leasehold improvements and
machinery and equipment 5,914 7,901
-------- --------
Deposits and other long term assets 422 494
-------- --------
$ 18,391 $ 25,961
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of debt $ 4,191 $ 5,212
Current portion of capital lease obligations 2,788 3,216
Trade accounts payable 2,814 6,375
Accrued payroll and related expenses 1,162 1,322
Other current liabilities 3,096 1,909
-------- --------
Total current liabilities 14,051 18,034
-------- --------
Long term portion of debt -- 594
-------- --------
Long term portion of capital lease obligations 857 2,348
-------- --------
Commitments & contingencies (Notes 5 and 8)
Stockholders' equity:
Convertible preferred stock, $0.001 par
value; 5,000 shares authorized; no shares
issued and outstanding -- --
Common stock, $0.01 par value; 50,000
shares authorized; 4,246 and 3,569 shares
issued and outstanding 42 35
Additional paid in capital 74,763 72,671
Accumulated deficit (67,425) (63,824)
Treasury stock; at cost, 203 shares (3,897) (3,897)
-------- --------
Total stockholders' equity 3,483 4,985
======== ========
$ 18,391 $ 25,961
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
25
<PAGE> 26
IMP, Inc.
STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
MARCH 26, MARCH 28, MARCH 29,
2000 1999 1998
--------- --------- ---------
<S> <C> <C> <C>
Net revenues:
Component $ 29,898 $ 31,087 $ 38,481
Design and Engineering services 4,939 2,304 1,939
-------- -------- --------
34,837 33,391 40,420
-------- -------- --------
Cost of revenues
Component 25,915 25,563 28,896
Design and Engineering services 2,356 1,273 1,136
-------- -------- --------
28,271 26,836 30,032
-------- -------- --------
Gross profit 6,566 6,555 10,388
-------- -------- --------
Operating expenses:
Research and development 4,693 8,191 8,121
Selling, general and administrative 4,370 5,243 5,142
-------- -------- --------
Total operating expenses 9,063 13,434 13,263
-------- -------- --------
Loss from operations (2,497) (6,879) (2,875)
Interest and other expense, net (1,104) (1,040) (924)
-------- -------- --------
Net loss $ (3,601) $ (7,919) $ (3,799)
======== ======== ========
Net loss per common share:
Basic and diluted $ (1.00) $ (2.73) $ (1.35)
======== ======== ========
Shares used in per share computation:
Basic and diluted 3,602 2,901 2,823
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
26
<PAGE> 27
IMP, Inc.
STATEMENT OF STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
-------------------- PAID IN ACCUMULATED TREASURY STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT STOCK EQUITY
-------- -------- ---------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, March 30, 1997 3,028 $ 30 $ 70,274 $(52,106) $ (3,897) $ 14,301
Issuance of common stock under incentive
stock option plan and employee stock 6 -- 96 -- -- 96
purchase plan
Net loss -- -- -- (3,799) -- (3,799)
-------- -------- -------- -------- -------- --------
Balance, March 29, 1998 3,034 30 70,370 (55,905) (3,897) 10,598
Issuance of common stock under incentive
stock option plan and employee stock
purchase plan 8 -- 53 -- -- 53
Issuance of common stock and warrants in
conjunction with equity financing 527 5 2,248 -- -- 2,253
Net loss -- -- -- (7,919) -- (7,919)
-------- -------- -------- -------- -------- --------
Balance, March 28, 1999 3,569 35 72,671 (63,824) (3,897) 4,985
Issuance of common stock under
incentive stock option
plan and employee stock purchase plan 6 -- 14 -- -- 14
Issuance of common stock in
conjunction with stock purchase agreement 671 7 2,043 -- -- 2,050
Issuance of warrants to a consultant 35 35
Net loss -- -- -- (3,601) -- (3,601)
-------- -------- -------- -------- -------- --------
Balance, March 26, 2000 4,246 $ 42 $ 74,763 $(67,425) $ (3,897) $ 3,483
</TABLE>
The accompanying notes are an integral part of these financial statements.
27
<PAGE> 28
IMP, Inc.
STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------
MARCH 26, MARCH 28, MARCH 29,
2000 1999 1998
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (3,601) $ (7,919) $ (3,799)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization 3,384 4,923 6,262
Warrants issued to consultant 35 --
Bad debt expenses (35) (187) 675
Provision for obsolete and slow moving inventory 358 (305) (585)
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 4,308 (3,647) 80
Decrease (increase) in accounts receivable from a related party (85) -- --
Decrease (increase) in inventories (1,006) (2,707) 827
Decrease (increase) in other current assets 626 257 (191)
Decrease (increase) in long term assets 72 (119) (300)
Increase (decrease) in trade accounts payable (3,561) 357 1,907
Increase (decrease) in accrued payroll and related expenses (160) (632) 391
Increase (decrease) in other current liabilities 1,187 1,633 (474)
-------- -------- --------
Net cash provided by (used in) operating activities 1,522 (8,346) 4,793
-------- -------- --------
Cash flows from investing activities:
Net cash used for investing activities
for purchases of capital equipment (1,379) (1,830) (688)
-------- -------- --------
Cash flows from financing activities:
Principal proceeds from credit facility 2,601 3,953 --
Principal proceeds from equipment notes payable and
term loan 1,731 -- --
Principal payments on credit facility (4,887) -- --
Principal payments on equipment notes payable (1,060) (3,164) (1,740)
Principal payments under capital lease obligations (1,937) (3,132) (3,948)
Proceeds from issuance of common stock 2,064 2,253 --
Proceeds from exercise of options to purchase common stock -- 53 96
-------- -------- --------
Net cash used in financing activities (1,488) (37) (5,592)
-------- -------- --------
Net decrease in cash and cash equivalents (1,345) (10,213) (1,487)
Cash and cash equivalents at beginning of period 1,606 11,819 13,306
-------- -------- --------
Cash and cash equivalents at end of period $ 261 $ 1,606 $ 11,819
======== ======== ========
Supplemental information:
Cash paid during the year for interest $ 1,106 $ 1,205 $ 1,504
======== ======== ========
Acquisition of equipment under capital lease obligations $ 18 $ 610 $ 2,245
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
28
<PAGE> 29
IMP, Inc.
NOTES TO FINANCIAL STATEMENTS
Years ended March 26, 2000, March 28, 1999,
and March 29, 1998
Note 1 - The Company and its significant accounting policies
IMP, Inc. (the "Company") develops and manufactures analog CMOS integrated
circuit solutions for communications, computer and control applications.
Fiscal year - The Company's fiscal year ends on the Sunday nearest March 31.
Fiscal 2000, 1999 and 1998 each consisted of 52 weeks.
Basis of presentation - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. During the months of August,
September, and October 1999, the Company failed to make the scheduled payments
due under its equipment notes payable and substantially all of its capital lease
obligations (see Notes 2 and 8). These instances of non-payment put the Company
in default of these agreements and in default of the revolving credit facility
entered into on April 30, 1999 (see Note 2) due to a cross default clause in the
revolving credit facility agreement.
The Company has successfully renegotiated the payment terms under the equipment
notes payable amounting to $1,086,000 and capital lease obligations amounting to
$2,655,000 as of March 26, 2000. However, the Company was unable to renegotiate
the payment terms under one capital lease obligation amounting to $872,000 as of
March 26, 2000. As such, this obligation remained in default through March 26,
2000. Subsequent to March 26, 2000, the lease term under this capital lease
expired. Due to ongoing liquidity deficiencies, the Company was unable to
immediately exercise its buy-out option under this capital lease. The Company
has negotiated with the lessor and continues to lease the equipment on a
month-to-month basis and intends to continue to do so until such time as the
Company is able to satisfy the buy-out obligation. The Company is working with
another capital leasing facility to refinance this obligation. As of June 16,
2000, the lessor has not required acceleration of payment of such obligation.
As of June 16, 2000, the Company remains in default of the revolving credit
facility and the capital lease obligations with balances of $3,100,000 and
$1,829,000 as of March 26, 2000, respectively, due to cross default clauses in
these agreements. The indebtedness related to agreements in which the Company
remains in default is classified as current on the Company's balance sheet
because such creditors and lessors continue to have the right to effectively
declare the principal amount of the Company's indebtedness to be immediately due
and payable (or to exercise an equivalent remedy with respect to a capitalized
lease).
As discussed above, the Company is currently in the process of renegotiating
certain of the capital leases and expects to successfully reach agreements such
that the Company's indebtedness will not become immediately due and payable. On
June 15, 2000, the Company received $3.9 million from the sale of equity
securities (see Note 4). Management believes that the implementation of its
operating plans in conjunction with the successful renegotiation of the
obligations and the cash received from the sale of equity securities will be
sufficient to fund the Company's operations for at least the next 12 months.
If the Company is unable to successfully continue to meet its obligations under
the renegotiated payment terms on its capital lease obligations, or if the
creditors of the obligations in default under cross default clauses exercise
their rights to accelerate the payment terms, or if management's operating plans
don't materialize, this could significantly and adversely impact the Company's
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
29
<PAGE> 30
Cash and cash equivalents - The Company considers all highly liquid financial
instruments purchased with an original maturity of three months or less to be
cash equivalents. The fair market value of these highly liquid instruments
approximates cost at March 26, 2000 and March 28, 1999.
Fair Value of Financial Instruments - Carrying amounts of certain of the
Company's financial instruments including cash and cash equivalents, accounts
receivable, the credit facility, accounts payable and other accrued liabilities
approximate fair value due to their short maturities. Based on borrowing rates
currently available to the Company for loans with similar terms, the carrying
values of the note payable and capital lease obligations approximate fair value.
Inventories - Inventories are stated at the lower of standard cost (which
approximates actual cost on a first-in first-out basis) or market.
Inventories consist of the following:
<TABLE>
<CAPTION>
MARCH 26, 2000 MARCH 28, 1999
-------------- --------------
(IN THOUSANDS)
<S> <C> <C>
Raw materials $ 722 $1,103
Work-in-process 4,484 4,120
Finished goods 1,518 853
------ ------
$6,724 $6,076
====== ======
</TABLE>
Leasehold improvements and machinery and equipment - Leasehold improvements and
machinery and equipment are stated at cost and are amortized using the
straight-line method over the shorter of the period of the lease or the
estimated useful lives of the assets. The estimated useful life of machinery and
equipment is five years. Machinery and equipment at March 26, 2000 and March 28,
1999 includes $10.2 million and $15.2 million, respectively, of assets under
lease that have been capitalized. Accumulated depreciation for such machinery
and equipment approximated $8.7 million and $11.4 million, respectively.
The Company evaluates recoverability of its long-lived assets in accordance with
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of" ("SFAS
No. 121"). SFAS 121 requires recognition of impairment of long-lived assets in
the event the net book value of such assets exceeds the future undiscounted cash
flows attributable to such assets. In that event, a loss is recognized based on
the amount by which the carrying value exceeds the fair value of the long-lived
asset. Fair value is determined using the anticipated cash flows discounted at a
rate commensurate with the risk involved. Losses on long-lived assets to be
disclosed of are determined in a similar manner, except that fair values are
reduced for the costs of disposal. No losses from impairment have been
recognized in the financial statements.
Revenue recognition - Component revenues are recognized as products are shipped
except for sales through distributors, which are recognized on a sell-through
basis. Design and engineering service revenues are recognized under design and
engineering contracts as defined development phases are completed by the Company
and accepted by the customers.
Stock based compensation - Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"), establishes a fair value
method of accounting for stock-based employee compensation plans. The Company
has chosen to continue to account for stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" and to comply with the pro forma
disclosure requirements of SFAS 123.
Net loss per share - Basic net loss per share is computed by dividing net loss
by the weighted average number or common shares outstanding during the period.
Diluted net loss per share is computed using the weighted average number of
common and potential common shares outstanding during the period, except when
anti-dilutive. In computing dilutive net loss per share, the average stock price
for the period is used in determining the number of shares assumed to be
purchased from the exercise of stock options.
30
<PAGE> 31
Options to purchase 264,000, 262,000 and 234,000 shares of common stock were
outstanding at March 26 2000, March 28, 1999 and March 29, 1998, respectively,
but were not included in the computation of diluted net loss per share as the
Company was in a loss situation and to do so would have been anti-dilutive.
Concentration of credit risk - The Company performs credit evaluations of its
customers and maintains reserves for losses. At March 26, 2000 customers
individually representing more than 10% of the Company's 2000 net revenues also
accounted for 36% of accounts receivable. At March 28, 1999, customers
individually representing more than 10% of the Company's 1999 net revenues also
accounted for 39% of accounts receivable. The Company's products are primarily
sold to resellers.
During fiscal 2000, 1999, and 1998, sales to certain customers individually
represented more than 10% of the Company's net revenues as follows:
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Iomega * * 22%
International Rectifier 22% 29% 14%
Level One 11 * 11%
CMS, a subsidiary of
Hewlett Packard 12% * 11%
Linfinity 10% 16% 10%
</TABLE>
* less than 10% of net revenues
Reverse stock split - Effective January 13, 1999, the Company effected a
one-for-ten reverse stock split of its common stock. All shares and per share
amounts in this report have been retroactively restated to reflect such reverse
split.
Financial statements comparability - Certain prior years balances were
reclassified to conform to current year presentation.
Recent accounting pronouncements - In March 2000, the Financial Accounting
Standards Board issued Interpretation No. 44 ("FIN No. 44") "Accounting for
Certain Transactions involving Stock Compensation," an interpretation of APB No.
25. FIN No. 44 clarifies the application of APB No. 25 for (a) the definition of
employee for purposes of applying APB No. 25, (b) the criteria for determining
whether a plan qualifies as a noncompensatory plan, (c) the accounting
consequence of various modifications to the terms of a previously fixed stock
option or award, and (d) the accounting for an exchange of stock compensation
awards in a business combination. FIN No. 44 is effective July 1, 2000, but
certain conclusions cover specific events that occur after either December 15,
1998, or January 12, 2000. Management believes that the impact of implementing
FIN 44 on the Company's financial statements is not anticipated to be
significant.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin ("SAB") No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements." SAB 101 provides guidance on applying generally accepted accounting
principles to revenue recognition in financial statements. The impact of
implementing SAB 101 on the Company's financial statements is still being
assessed by management.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133
establishes accounting and reporting standards for derivative instruments and
for hedging activities and requires recognition of all derivatives as assets or
liabilities and measurement of those instruments at fair value. In June 1999,
the Financial Accounting Standards Board issued SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities-Deferral of the Effective Date of
FASB Statement No. 133," which deferred the required date of adoption of SFAS
No. 133 for one year, to fiscal years beginning after June 15, 2000. The impact
of the implementing SFAS 133 on the Company's financial statements is not
anticipated to be significant as the Company does not currently purchase
derivative securities.
31
<PAGE> 32
Note 2 - Debt
Debt consists of the following:
<TABLE>
<CAPTION>
MARCH 26, MARCH 28,
2000 1999
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Credit facility $ 1,667 $ 3,953
Credit facility equipment term loan 1,438 0
Equipment notes payable 1,086 1,853
------- -------
Total debt 4,191 5,806
Less current portion (4,191) (5,212)
------- -------
Long term portion of debt $ 0 $ 594
======= =======
</TABLE>
Credit Facility - On April 30, 1999, the Company entered into a revolving credit
facility with The CIT Group. The maximum and minimum amount of the borrowing is
$9.5 million and $2.5 million, respectively. $7.5 million of the facility allows
the Company to borrow up to 80% of eligible accounts receivable and 25% of the
Company's inventory of raw materials. Up to $1.0 million of the $7.5 million may
be based on the raw material inventory. $2.0 million of the facility is for term
loans relating to equipment. The facility is for a minimum period to April 30,
2002. The interest rate for the revolving credit facility is prime rate plus
1.5%, and the term loan is prime rate plus 2%. The facility is collateralized by
inventory, equipment and fixtures, and other assets, excluding all assets under
leases from other financiers. On March 26, 2000, the availability under the
credit facility amounted to $6.4 million less. However, the availability was
severely limited by concentration limitations on qualified accounts receivable.
Equipment notes payable - In fiscal 1995, the Company fully utilized a $3.0
million borrowing facility with an asset-based lender allowing the Company to
finance 100% of the cost of collateralized equipment. In May 1996, the facility
was increased to $5.0 million that the Company fully utilized. The Company used
the additional proceeds to purchase equipment. The note accrues interest at
9.98% and requires 60 equal monthly principal payments that began in June 1996.
The note does not contain any restrictive or financial covenants.
See discussion under Note 1 regarding defaults on payments.
Note 3 - Other Current Liabilities
Other current liabilities consist of the following:
<TABLE>
<CAPTION>
MARCH 26, MARCH 28,
2000 1999
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Equipment Liabilities $ 740 $ 476
Accrued Commissions 607 638
Accrued Royalties 607 453
Other 1,142 342
------ ------
$3,096 $1,909
====== ======
</TABLE>
Note 4 - Stockholders' equity
Equity - In October 1999, the Company entered into a stock purchase agreement
(the "Agreement") under which Teamasia Semiconductors (India) Ltd.,
("Teamasia"), a private corporation headquartered in India involved in the
manufacturing and sale of discrete semiconductor devices purchased an aggregate
of 16.7% of the Company's common stock outstanding for consideration of
$2,050,000. The transaction closed during the quarter ending December 26, 1999.
The sale of all of the shares and therefore the receipt of all of the $2,050,000
was subject to the Company's compliance with certain terms and conditions. The
Company met such terms and conditions and has received all of the $2,050,000.
The agreement placed certain restrictions on the use of the funds received by
the Company for the sale of stock under the agreement. Under the agreement,
Teamasia is also obligated to place orders with the Company for wafer
fabrication. See Note 9 for a description of transactions with Teamasia during
fiscal 2000.
On December 15, 1999, the Company and Teamasia entered into a second stock
purchase agreement (the "Phase Two Stock Purchase Agreement") under which
Teamasia would make an additional equity investment in the
32
<PAGE> 33
Company. The Phase Two Stock Purchase Agreement was approved by the shareholders
of the Company at the Company's annual meeting held on June 14, 2000. Upon
subsequent completion of the transaction, Teamasia and its affiliates were
issued 4,793,235 shares of common stock in exchange for $3.9 million. As of June
16, 2000, Teamasia owned approximately 5,464,000 shares of common stock
representing a 51% ownership of the Company on a fully diluted basis. During the
period between December 15, 1999 and the date of approval of the Phase Two Stock
Purchase Agreement, Teamasia was required to use reasonable efforts to provide
the Company with additional financing up to the amount of the purchase price
upon commercially reasonable terms, if the Company so requested. During this
period, Teamasia did not provide the Company with additional financing and as
such, there was no repayment at the closing of the Phase Two Stock Purchase
Agreement.
Employee stock purchase plan - In December 1986, the Company adopted a qualified
"employee stock purchase plan" under Section 423 of the Internal Revenue Code,
which was effective on June 10, 1987, upon the completion of the Company's
initial public offering of its common stock. Shares are purchased by
participants at 85% of the lower of the fair market value at the date of entry
into the plan or at the end of the offering period through payroll deductions
(up to 15% of participants base compensation). During fiscal 2000, 6,000 shares
at an aggregate price of approximately $14,000 were issued. During fiscal 1999,
8,000 shares at an aggregate price of approximately $53,000 were issued. During
fiscal year 1998, 5,600 shares at an aggregate price of approximately $96,000
were issued.
Stock option plan - The Company has an option plan which provides for the
issuance of incentive stock options and non-statutory stock options to
employees, officers and directors to purchase common stock at a price not less
than 85% (100% for incentive stock options) of the fair market value of the
stock on the grant date. To date all options have been granted at 100% of fair
market value. The plan was most recently restated in August 1994 and renamed the
Stock Option Plan which terminates in 2005. In May 1998, the Company's Board of
Directors authorized (and shareholders subsequently approved) an additional
50,000 shares to be reserved for issuance under the plan. The Stock Option Plan
provides for a total of 611,700 shares of the stock to be issued. Options
granted under the plan generally vest ratably over four years and expire five to
ten years from the date of grant. The Board of Directors has the right to
determine the terms of each option including allowing optionees to exercise
their options early, subject to a right to repurchase unvested shares.
In September 1997, substantially all stock options with exercise prices in
excess of $1.44, with the exception of directors and officers, and in February
1998, substantially all stock options with exercise prices in excess of $1.16,
were cancelled and replaced with new options with an exercise price of $1.44 and
$1.16, respectively.
The Board of Directors may grant the right to surrender unexercised options for
an amount equal to the difference between the fair market value of the number of
shares vested at the surrender date and the aggregate option price vested for
such shares. The Company has not granted any such stock appreciation rights.
Summary of option activity - The following table summarizes the Company's stock
option activity and related weighted average exercise price within each category
for each of the years ended March 26, 2000, March 28, 1999, and March 29, 1998,
(in thousands, except per share amounts):
<TABLE>
<CAPTION>
2000 1999 1998
------------------- ------------------- -------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
SHARES PRICE SHARES PRICE SHARES PRICE
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at
beginning of fiscal year 262 $10.97 234 $13.00 123 $29.60
Options granted 135 2.33 58 5.16 356 13.10
Options canceled (133) 10.35 (30) 15.46 (244) 21.50
Options exercised -- -- 0 -- (1) 12.50
---- ------ ---- ------ ---- ------
Options outstanding
at end of fiscal year 264 $ 6.84 262 $10.97 234 $13.00
==== ====== ==== ====== ==== ======
Options exercisable
at end of fiscal year 86 $12.66 113 13.09 53 $15.50
==== ====== ==== ====== ==== ======
</TABLE>
No shares were available for grant under the Company's option plan as of March
26, 2000. As of this date, the Company had commitments to grant options for
1,150,000 shares of common stock. On June 15, 2000, the shareholders
approved the adoption of the 1999 and the 2000 stock option plans which
authorized 250,000 and 1,000,000 shares, respectively, as available for grant.
After granting the 1,150,000 shares as referred to above, the
33
<PAGE> 34
Company has 41,500 and 58,500 shares available for future grant under the 1999
and the 2000 stock option plans, respectively.
The following table summarizes information with respect to stock options
outstanding at March 26, 2000.
<TABLE>
<CAPTION>
WEIGHTED
OUTSTANDING EXERCISABLE AVERAGE
------------------- ----------------- REMAINING
WEIGHTED WEIGHTED CONTRACTUAL
RANGE OF AVERAGE AVERAGE LIFE
EXERCISE PRICES SHARES PRICE SHARES PRICE (YEARS)
--------------- ------ -------- ------ -------- -----------
<S> <C> <C> <C> <C> <C>
$2.25 - $5.00 160 $ 2.74 11 4.91 9
5.30 - 11.30 5 8.07 3 8.30 6
11.60 - 14.40 91 11.97 64 12.01 4
15.00 - 59.40 8 29.99 8 30.03 4
--- ------ -- -----
264 86
=== ==
</TABLE>
The fair value of options granted in fiscal 2000, 1999 and 1998 was estimated
using the Black-Scholes model with the following assumptions:
<TABLE>
<CAPTION>
STOCK OPTION PLAN EMPLOYEE STOCK PURCHASE PLAN
---------------------- ----------------------------
2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Expected life (in years) 4 6 4 .5 .5 .5
Risk-free interest rate 6.0% 5.35% 6.2% 5.3% 4.5% 5.4%
Volatility 135% 135% 85% 135% 135% 75%
Dividend yield 0% 0% 0% 0% 0% 0%
</TABLE>
The weighted average fair value of Employee Stock Purchase Plan shares granted
during fiscal 2000, 1999 and 1998 was $1.68, $4.57 and $7.30 per share,
respectively. The weighted average estimated fair value of shares granted under
the Stock Option Plan during fiscal 2000, 1999 and 1998 was $1.98, $4.72 and
$14.20, respectively.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. Had the Company
recorded compensation costs based on the estimated grant date fair value, as
defined by SFAS 123, for awards granted under its stock option plan and employee
stock purchase plan, the Company's net loss per share would have been increased
to the pro forma amounts below for the years ended March 26, 2000, March 28,
1999, and March 29, 1998:
<TABLE>
<CAPTION>
2000 1999 1998
------- ------- -------
<S> <C> <C> <C>
Pro forma net loss $(4,309) $(8,706) $(4,494)
Pro forma basic and diluted loss per share $ (1.20) $ (3.00) $ (1.59)
</TABLE>
The pro forma effect on net income and earnings per share may not be
representative of the pro forma effect on net income in future years.
Warrant - In November 1999, the Company issued a warrant to purchase 20,220
shares at an exercise price of $2.47 per share to a consultant. The warrant was
exercisable immediately and will expire in November 2004. The fair value of the
warrant was determined as approximately $34,900 on the date of issuance using
the Black-Scholes pricing model with the following assumptions: risk-free
interest rate of 5.92%, dividend yield of 0%, a volatility of 135%, and an
expected life of 3 years. This amount was charged as selling, general and
administrative expenses.
Note 5 - Litigation
A third party has filed legal action against the Company claiming that some of
its products infringe on their patents. The Company disputes such claim and
intends to vigorously contest it. Based on the advise of the Company's legal
counsel, management does not expect that such claim will have a material adverse
effect on the Company or its business.
34
<PAGE> 35
Note 6 - Income taxes
No provision for federal or state income taxes has been recorded for fiscal
years 2000, 1999 and 1998. The Company's provisions are computed by applying the
estimated annual tax rate to income, taking into account net operating loss
carry forwards and alternative minimum taxes. At March 26, 2000 the Company had
net operating loss carryforwards for federal and state income tax purposes of
approximately $55.7 million and $14.4 million which may be utilized to reduce
future taxable income. These amounts expire at various dates, beginning in 2001
through 2020. Such carryforwards may be limited in certain circumstances,
including but not limited to, cumulative stock ownership changes of more than 50
percent over a three year period. As a result of the Teamasia transaction
described in Note 4, the Company believes that these carryforwards will be
limited. Deferred tax assets (liabilities) are comprised of the following (in
thousands):
<TABLE>
<CAPTION>
MARCH 26, MARCH 28,
2000 1999
--------- ---------
<S> <C> <C>
Net operating loss carryforwards, tax-effected $ 19,788 $ 22,014
Currently non-deductible expenses 1,659 5,101
Investment and R&D tax credit 2,261 2,669
Other (112) 506
-------- --------
Total 23,596 30,290
Valuation allowance (23,596) (30,290)
-------- --------
Net deferred tax asset $ -- $ --
======== ========
</TABLE>
Management has recorded a full valuation allowance against all of its deferred
tax assets on the basis that sufficient uncertainty exists regarding the
realizability of the assets. These factors include losses generated in prior
years and the lack of carryback capacity to realize deferred tax assets.
Note 7 - Geographic information
The Company is engaged in the design, development, manufacture and marketing of
integrated circuits. Revenue has been allocated to countries on the basis of the
location to which billings were mailed. Revenue allocated to countries for 2000,
1999 and 1998 are as follows (in millions, except the percentages):
<TABLE>
<CAPTION>
MARCH 26, 2000 MARCH 28, 1999 MARCH 29, 1998
------------------- ------------------- -------------------
AMOUNT PERCENTAGE AMOUNT PERCENTAGE AMOUNT PERCENTAGE
------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
United States $28.3 81% $29.4 88% $27.8 69%
Asia 2.6 8% 2.1 6% 11.8 29%
Rest of the World 3.9 11% 1.9 6% 0.9 2%
</TABLE>
Note 8 - Leasing arrangements and commitments
The Company leases certain machinery and equipment under long-term lease
agreements which are reported as capital leases. The terms of the leases range
from four to five years, with purchase options at the end of the respective
lease terms. Such purchase options require payment of approximately $1.2 million
over the next 12 months. The Company intends to exercise such options requiring
minimal payments. The Company leases its San Jose facility under a
non-cancelable operating lease which was to expire in December 1999; however,
the Company exercised an option to extend the lease for an additional six-year
period. The Company also leases a facility in Pleasanton under a non-cancelable
operating lease which expires in February 2003, with an option to extend the
lease for one five-year term. The leases require the Company to pay taxes,
insurance and maintenance expenses. Rental expense is recorded using the
straight-line method and totaled $1,529,000, $1,360,000, and $1,472,000 in
fiscal 2000, 1999 and 1998 respectively. Future minimum lease payments,
including capitalized purchase options, at March 26, 2000 are as follows (in
thousands):
35
<PAGE> 36
<TABLE>
<CAPTION>
CAPITAL OPERATING
FISCAL YEAR ENDING MARCH LEASES LEASES
------------------------ ------- ---------
<S> <C> <C>
2001 3,042 1,714
2002 872 1,762
2003 29 1,799
2004 -- 1,768
2005 -- 1,817
Thereafter -- 1,709
------- -------
Total minimum payments 3,943 $10,569
======= =======
Less imputed interest (298)
-------
Present value of payments under capital leases 3,645
Less current portion (2,788)
-------
Long-term lease obligations $ 857
=======
</TABLE>
See discussion under Note 1 regarding default on payments.
Note 9 - Related Party Transactions
As part of the stock purchase agreement entered into in October 1999 (see Note
4), Teamasia agreed to purchase wafers from the Company commencing with the
Company's third fiscal quarter 2000. This agreement further stipulates that
Teamasia's purchase commitments are not to be less than 25% of the Company's
installed capacity for the fourth fiscal quarter 2000 and the first and second
fiscal quarters 2001. However, the Company and Teamasia have agreed to a two
quarter delay as to the purchase quantity commitments.
Receivables balance and revenue from services performed amounted to
approximately $85,000 and $134,000 as of, and for the year ended March 26, 2000,
respectively. The Company did not have any transactions with Teamasia during
fiscal 1999 and 1998.
Note 10 - Subsequent event, revolving credit facility
Commencing on April 1, 2000, the interest rate for the revolving credit facility
with The CIT Group is prime plus 2%. The increase in the interest rate of 0.5%
is a provision set forth within the revolving credit facility entered into with
The CIT Group on April 30, 1999.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
36
<PAGE> 37
PART III
ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT
(1) Identification of Directors:
BOARD OF DIRECTORS OF THE COMPANY
The current board of directors of the Company as of June 1, 2000 with their
respective ages and positions were:
<TABLE>
<CAPTION>
NAME AGE
---- ---
<S> <C>
Brad Whitney.........................46
Zvi Grinfas..........................59
Bernard Vonderschmitt................76
Subbarao Pinamaneni..................46
</TABLE>
Mr. Whitney, Chief Executive Officer and President, was appointed to the
Board of Directors in January 2000 to fill an existing vacancy. From 1998 to
1999 he served as Senior Vice President of New Business for Bourns, Inc. From
1992 until 1997 he served as President and Chief Operating Officer of Linfinity
Microelectronics, Inc.
Mr. Grinfas, Chairman of the Board, is a co-founder of the Company and has
been a director of the Company since its organization in January 1981. He served
as Senior Vice President for the Company, managing the Business Development
Group, until December 1984. At that time he became Senior Vice President,
Engineering, a position he held until May 1986, when he became Vice President,
Business Development and Sales Director of Southern Europe of IMP Europe
Limited. Mr. Grinfas ceased working for IMP Europe Limited in December 1988, and
was then employed as a consultant, which included serving in the function of
General Manager, Microelectronic Operations for Elron Electronics Industries,
Ltd. from February 1989 through February 1990. Mr. Grinfas served as Chief
Executive Officer and President of the Company from August, 1999 until January,
2000; after his service in these capacities, Mr. Grinfas has assumed a reduced
role in the management of the Company.
Mr. Vonderschmitt, was co-founder of Xilinx, Inc. ("Xilinx"), a supplier of
field programmable gate arrays. He served as the President of Xilinx from its
inception in February 1984 to August 1994 and as its Chief Executive Officer
from August 1994 to January 1996 and is currently Chairman of the board of
directors of Xilinx. Mr. Vonderschmitt also serves as a director on the boards
of directors of Credence Systems Corporation and Sanmina Corporation, as well as
private companies. He has been a director of the Company since February 1991.
Mr. Subbarao Pinamaneni, has over 20 years of experience in the
semiconductor industry. He has worked for major semiconductor companies,
including National Semiconductor and Altera Semiconductors, in the United States
and Asia. His responsibilities have included managing packaging and testing
operations. Mr. Pinamaneni is the nominee to the Company's Board of Directors of
Teamasia Semiconductors (India) Ltd. pursuant to the provisions of the Stock
Purchase Agreement, dated October 8, 1999, by and between the Company and
Teamasia, a copy of which is included as Exhibit B to this Proxy Statement. In
April 1995, Mr. Pinamaneni filed a voluntary petition for Chapter 11 Bankruptcy
which case was concluded in November 1997. Mr. Pinamaneni serves as Managing
Director of Teamasia.
(2) Identification of Executive Officers:
See Part 1, Item 1, "Executive Officers of the Company"
(3) Information with respect to compliance with Section 16(a) of the
Securities Exchange Act of 1934 is incorporated by reference from the
information under the caption "Section 16(a) Information" in the Registrant's
37
<PAGE> 38
Amended Annual Report on Form 10-K405 for the year ended March 26, 2000 filed
with the Securities and Exchange Commission on June 26, 2000.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth certain summary information concerning the
compensation received by the Chief Executive Officer of the Company and the four
most highly compensated executive officers of the Company ("Named Executive
Officers"), for services rendered to the Company and its subsidiaries whose
total salary and bonus for such fiscal year exceeded $100,000 for each of the
last three (3) fiscal years and all individuals serving as the registrant's
chief executive officer or acting in a similar capacity during the last
completed fiscal year ("CEO"), regardless of compensation level.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Securities
Salary Underlying Other Compensation
Year ($) (1) Bonus ($) Options ($) (2)
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Brad Whitney, President, Chief 2000 30,778 -- -- --
Executive
Officer and Director 1999 -- -- -- --
1998 -- -- -- --
---------------------------------------------------------------------------------------------
Tarsaim Batra, Vice President, 2000 144,942 -- 30,000 6,984
Manufacturing and
Chief Operating Officer 1999 132,126 -- -- 6,636
1998 140,200 -- 12,445 6,601
---------------------------------------------------------------------------------------------
Moiz Khambaty, 2000 147,490 -- 25,000 9,320
Vice President, Technology 1999 146,480 -- -- 9,192
1998 146,449 -- 10,000 8,616
---------------------------------------------------------------------------------------------
Ron Laugesen, 2000 135,291 -- 20,000 3,984
Vice President, Product Engineering 1999 137,388 -- -- 3,636
1998 -- 28,750 10,490 3,600
---------------------------------------------------------------------------------------------
Jerry DaBell, 2000 152,595 -- 25,000 5,289
Senior Vice President, 1999 153,037 -- -- 5,797
Design Engineering (3) 1998 149,866 -- 11,000 5,989
---------------------------------------------------------------------------------------------
Zvi Grinfas, 2000 81,455 -- 29,178 1,044
Former President, and Chief 1999 -- -- -- --
Executive Officer
1998 -- -- 2,000 --
---------------------------------------------------------------------------------------------
James Philips Ferguson, 2000 99,018 -- -- 4,534
Former President and Chief Executive 1999 200,008 -- -- 9,240
Officer
1998 140,460 -- 25,000 7,980
---------------------------------------------------------------------------------------------
</TABLE>
(1) Salary includes amounts deferred pursuant to the Company's 401(K) plan.
The amounts shown under the Bonus column include cash bonuses earned for
the indicated fiscal years.
(2) Includes the premium paid on behalf of each executive officer for
supplemental life insurance plus any other amount as indicated for each
individual.
(3) As of March 27, 2000, Mr. DaBell is no longer an officer of the Company.
OPTION EXERCISES AND HOLDINGS
The table below sets forth information concerning the exercise of stock options
during the 2000 fiscal year by the Named Executive officers and those who were
formerly Executive Officers during fiscal year 2000 and the unexercised options
held as of the end of the 2000 fiscal year by such individuals. For purpose of
the latter calculation, the fiscal year end market value of the shares is deemed
to be $4.875, the closing sale price of the Company's Common Stock as reported
on the National Association of Securities Dealers Automated Quotations System on
Monday, March 27, 2000. No stock appreciation rights were exercised by the Named
Executive Officers and those who were formerly Executive Officers during the
2000 fiscal year, and no stock appreciation rights were held by those
individuals at the end of such year.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER NUMBER OF OPTIONS AT IN-THE-MONEY OPTIONS AT
OF SHARES FY00-END (#) FY00-END ($)
ACQUIRED VALUE ------------------------------------------------
NAME ON EXERCISE REALIZED EXERCISED UNEXERCISED EXERCISED UNEXERCISED
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Brad Whitney -- -- -- -- -- --
Tarsaim Batra -- -- 8,490 33,955 41,389 165,531
Moiz Khambaty -- -- 6,540 28,460 31,883 138,743
Ron Laugesen -- -- 7,117 23,373 34,695 113,943
Jerry DaBell -- -- 7,415 28,585 36,148 139,352
Zvi Grinfas -- -- 4,791 30,381 23,356 148,107
James Philips Ferguson -- -- -- -- -- --
</TABLE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the Company
regarding the ownership of the Company's Common Stock as of March 26, 2000 for
(i) each director (ii) all persons who are beneficial owner of five percent (5%)
or more of the Company's Common Stock, (iii) the Company's Chief Executive
Officer and the Company's four most highly paid executive officers who earned in
excess of $100,000 during the fiscal year ended March 26, 2000, and (iv) all
current directors and executive officers of the Company as a group. Unless
otherwise indicated, each of the stockholders has sole voting and investment
power with respect to the shares beneficially owned, subject to community
property laws where applicable.
<TABLE>
<CAPTION>
Percent of
Number of Total Shares
Name Shares Outstanding(1)
-----------------------------------------------------------------
<S> <C> <C>
Teamasia Semiconductors PTE Ltd. 671,173 (2) 16.6%
James Phillips Ferguson (3) 2,500 *
Zvi Grinfas (4) 39,837 *
Bernard V. Vonderschmitt 4,117 *
Jerry DaBell (5) 10,028 *
Moiz Khambaty 7,167 *
Subbarao Pinamaneni (6) 0 *
Tarsaim Batra 9,499 *
Ron Laugesen 11,512 *
Brad Whitney (7) 1,000 *
Joy Leo 0 *
All current directors and
executive officers as a group (8
persons) 73,132 1.8%
</TABLE>
* Less than one percent (1%).
(1) Percentage of beneficial ownership is calculated assuming 4,050,801
shares of Common Stock were outstanding on April 26, 2000. This
percentage may include Common Stock of which such individual or entity
has the right to beneficial ownership within 60 days of April 26, 2000,
including but not limited to the exercise of an option; however, such
Common Stock shall not be deemed outstanding for the purpose of computing
the percentage owned by any other individual or entity. Such calculation
is required by General Rule 13d-3(d)(1)(i) under the Securities Exchange
Act of 1934.
(2) This does not include the 4,793,235 Shares of Common Stock to be issued
upon the consummation of the transaction described in Proposal No. 2,
below. The address of Teamasia is PSA Building, P.O. Box 512, Singapore
911148.
(3) As of September 1999, Mr. Ferguson is no longer a director or officer of
the Company. 3,000 of Mr. Ferguson's shares are held in the Francis L.
Ferguson Trust.
(4) 1,298 of the shares beneficially owned by Mr. Grinfas are in the name of
Zvi and Eva Grinfas.
(5) As of March 2000, Mr. DaBell is no longer an officer of the Company.
Shares beneficially owned by Mr. DaBell are in the name of Jerry and
Christy DaBell.
(6) Mr. Pinamaneni is a Managing Director and stockholder of Teamasia PTE
Ltd. Mr. Pinamaneni disclaims beneficial ownership of the Company's
Common Stock owned by Teamasia Semiconductors PTE Ltd. (except to extent
of his beneficial ownership therein).
(7) Shares beneficially owned by Mr. Whitney are in the name of Brad and Gail
Whitney.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In October 1999, the Company entered into a stock purchase agreement (the
"Agreement") under which Teamasia Semiconductors (India) Ltd., ("Teamasia"), a
corporation headquartered in India involved in the manufacturing and sale of
discrete semiconductor devices purchased an aggregate of 16.7% of the Company's
common stock outstanding for consideration of $2,050,000. The transaction closed
during the quarter ending December 26, 1999. Under this agreement, Teamasia is
also obligated to place orders with the Company for wafer fabrication.
On December 15, 1999, the Company and Teamasia entered into a second stock
purchase agreement (the "Phase Two Stock Purchase Agreement") under which
Teamasia would make an additional equity investment in the Company. The Phase
Two Stock Purchase Agreement was approved by the shareholders of the Company the
Company's annual meeting held on June 14, 2000. Upon subsequent completion of
the transaction, Teamasia and its affiliates were issued 4,793,235 shares of
common stock in exchange for $3.9 million. As of June 26, 2000, Teamasia owned
approximately 5,464,000 shares of common stock representing a 51% ownership of
the Company on a fully diluted basis. During the period between December 15,
1999 and the date of approval of the Phase Two Stock Purchase Agreement,
Teamasia was required to use reasonable efforts to provide the Company with
additional financing up to the amount of the purchase price upon commercially
reasonable terms, if the Company so requested. During this period, Teamasia did
not provide the Company with additional financing and as such, there was no
repayment at the closing of the Phase Two Stock Purchase Agreement.
EMPLOYMENT CONTRACTS
Except as described below, none of the Company's executive officers have
employment contracts or severance agreements with the Company, and their
employment may be terminated at any time at the discretion of the Board of
Directors.
By letter agreement between the Company and its new Chief Executive Officer and
President, Brad Whitney, dated January 13, 2000, the Company confirmed, among
other things, an annual salary of $200,000 along with a severance package that
includes twelve (12) months' salary in the event of an involuntary termination
of Mr. Whitney's employment without cause. Mr. Whitney will also receive stock
options and other employee benefits and can earn a performance-based bonus if
the Company meets certain financial results during the 2001 fiscal year and
following fiscal years.
By letter agreement between the Company and its new Chief Financial Officer, Joy
E. Leo, effective January 31, 2000, the Company confirmed, among other things,
an annual salary of $170,000 along with a severance package that includes six
(6) months' salary in the event of an involuntary termination of Ms. Leo's
employment without cause. Ms. Leo will also receive stock options and other
employee benefits and can earn a performance-based bonus if the Company meets
certain financial results during the 2001 fiscal year and following fiscal
years.
38
<PAGE> 39
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The following financial statements are included in Item 8 of this Annual
Report on Form 10-K:
- Report of Independent Accountants
- Balance sheets as of March 26, 2000 and March 28, 1999
- Statements of operations for each of the three years in the
period ended March 26, 2000
- Statement of stockholder's equity for each of the three
years in the period ended March 26, 2000
- Statements of cash flows for each of the three years in the
period ended March 26, 2000
- Notes to financial statements
(a) 2. Financial statement schedules for each of the three years in
the period ended March 26, 2000:
Report of Independent Accountants on Financial Statement Schedule II -
Valuation and Qualifying Accounts
All other schedules are omitted since the required information is not present in
amounts sufficient to require submission of the schedules, or because the
required information is included in the financial statements or notes thereto.
(a) 3. Listing of Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
3.1(5) Restated Certificate of Incorporation.
3.2(1) Bylaws.
3.3(8) Certificate of Amendment to Restated Certificate of
Incorporation.
10.21(1) Real Property Lease Agreement dated as of August 26, 1981
between the Company and Orchard Investment Company No. 701.
10.22(1) Real Property Lease Agreement dated as of July 6, 1983 between
the Company and Orchard Investment Company No. 701.
10.23(1) Real Property Lease Agreement dated as of August 1, 1984
between the Company and Orchard Investment Company No. 701.
10.29(1) Form of Indemnification Agreement executed by the Company and
its officers and directors.
10.40(2)+ Letter Agreement dated October 19, 1987 between the Company
and George Rassam.
10.47(6) Technology Agreement between the Company and IMP Europe
Limited.
10.48(6) Supply Agreement between the Company and IMP Europe Limited.
10.49(6) Agreement for the sale and purchase of all the A Ordinary
Shares in IMP Europe Limited dated as of July 3, 1990, between
the Company and Dialogue Semiconductor Limited.
10.50(7)* License Agreement dated as of September 12, 1991, between the
Company and Asahi Chemical Industry Co., Ltd.
10.51(7)* Distributorship Agreement dated as of December 1, 1991 by and
between the Company and Asahi Chemical Industry Co., Ltd.
</TABLE>
39
<PAGE> 40
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
10.53(7)* Heads of Agreement dated as of March 27, 1992, between the
Company and South African Micro-Electronic Systems Pty
Limited.
10.54(8) First Amendment dated March 11, 1994 to Real Property Lease
Agreement dated August 26, 1981 between the Company and
Orchard Investments Company No. 701.
10.55(8) First Amendment dated December 21, 1987, Second Amendment
dated March 15, 1989, Third Amendment dated November 25,1991,
Fourth Amendment dated December 13, 1993 and Fifth Amendment
dated March 11, 1994 to the Real Estate Lease Agreement dated
July 6, 1983 between the Company and Orchard Investment
Company No. 701.
10.56(9) Loan Modification Agreement dated September 19, 1995 by and
between the Company and Silicon Valley Bank.
10.57(9)+ Letter Agreement dated February 13, 1995 between the Company
and David Laws.
10.58(9) Real Property Sublease Agreement dated November 9, 1992 by and
between the Company and AT&T Resource Management Corporation,
and Master Lease dated September 23, 1986 by and between AT&T
Resource Management Corporation and American Telephone and
Telegraph Company.
10.60(3)+ 1996 Employee Stock Purchase Plan.
10.61(4)+ IMP, Inc. Stock Option Plan (as amended and restated through
May 14, 1997).
23.1 Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
27.1 Financial Data Schedule (Previously filed).
</TABLE>
+ Indicates, as required by Item 14(a)(3), a management contract or
compensation plan required to be filed as an exhibit.
* "*" on such exhibits indicates that portions have been omitted for which
confidential treatment has been requested and filed separately with the
Securities and Exchange Commission.
(1) Incorporated by reference from an identically numbered exhibit filed with
the Company's Registration Statement on Form S-1 (File No. 33-13600)
declared effective by the Securities and Exchange Commission on June 10,
1987.
(2) Incorporated by reference from an identically numbered exhibit filed with
the Company's Annual Report on Form 10-K for the year ended March 27, 1988
filed with the Securities and Exchange Commission on June 25, 1988.
(3) Incorporated by reference to exhibit number 99.1 filed with the Company's
Registration Statement on Form S-8 (File No. 333-14997), as filed with the
Securities and Exchange Commission on October 29, 1996.
(4) Incorporated by reference to exhibit number 99.1 filed with the Company's
Registration Statement on Form S-8 (File No. 333-36723) as filed with the
Securities and Exchange Commission on September 30, 1997.
(5) Incorporated by reference from an identically numbered exhibit filed with
the Company's Annual Report on Form 10-K for the year ended March 26, 1989
filed with the Securities and Exchange Commission on June 26, 1989.
6) Incorporated by reference from an identically numbered exhibit filed with
the Company's Annual Report on Form 10-K for the year ended March 31, 1991
filed with the Securities and Exchange Commission on July 1, 1991.
(7) Incorporated by reference from an identically numbered exhibit filed with
the Company's Annual Report on Form 10-K for the year ended March 29, 1992
filed with the Securities and Exchange Commission on June 29, 1992, as
amended by Amendment to Application or Report on Form 8 filed with the
Securities and Exchange Commission on September 16, 1992.
40
<PAGE> 41
(8) Portions incorporated by reference from an identically numbered exhibit
filed with the Company's Amendment to the Annual Report on Form 10-K for
the year ended March 27, 1994 filed with the Securities and Exchange
Commission on July 6, 1994.
(9) Portions incorporated by reference from an identically numbered exhibit
filed with the Company's Annual Report on Form 10-K for the year ended
March 26, 1995 filed with the Securities and Exchange Commission on June
26, 1995.
(b) Reports on Form 8-K
The Company filed a report on Form 8-K on February 16, 1999 in connection
with the sale of common stock.
41
<PAGE> 42
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in San Jose, California on
this 28th day of June, 2000.
IMP, INC.
By: /s/ Brad Whitney
----------------------------------
Brad Whitney
President and CEO
42
<PAGE> 43
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENT, that each person whose signature
appears below constitutes and appoints Brad Whitney or Joy Leo, or either of
them, with the power of substitution, his attorney-in-fact and agents, to sign
any and all amendments to this Annual Report on Form 10-K, and to file the same,
with exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorney-in-fact, or his substitute or substitutes may do or cause
to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
President and Chief March 10, 2000
---------------------------------- Executive Officer
Brad Whitney
/s/ Joy Leo Vice President Finance March 10, 2000
---------------------------------- and Chief Financial
Joy Leo Officer
/s/ Zvi Grinfas Director March 10, 2000
----------------------------------
Zvi Grinfas
/s/ Subbarao Pinamaneni Director March 10, 2000
----------------------------------
Subbarao Pinamaneni
/s/ Bernard V. Vonderschmitt Director March 10, 2000
----------------------------------
Bernard V. Vonderschmitt
</TABLE>
43
<PAGE> 44
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
To the Board of Directors of IMP, Inc.
Our audits of the financial statements referred to in our report dated June 19,
2000 appearing in this Annual Report on Form 10-K of IMP, Inc. also included an
audit of the financial statement schedules listed in Item 14(a)(2) of this Form
10-K. In our opinion, these financial statement schedules present fairly, in all
material respects, the information set forth therein when read in conjunction
with the related financial statements.
/s/ PRICEWATERHOUSECOOPERS LLP
San Jose, California
June 19, 2000
44
<PAGE> 45
SCHEDULE II
IMP, Inc.
Valuation and Qualifying Accounts
(in thousands)
<TABLE>
<CAPTION>
BALANCE AT THE CHARGED TO BALANCE AT
BEGINNING OF COSTS AND DEDUCTION THE END OF
THE PERIOD EXPENSES* WRITE-OFFS PERIOD
-------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Provisions for returns,
allowance and doubtful
accounts and returns:
Year ended March 29, 1998 $2,041 $ 674 $ 0 $2,715
Year ended March 28, 1999 $2,715 $ (186) $ 0 $2,529
Year ended March 26, 2000 $2,529 $ (35) $2,274 $ 220
</TABLE>
* Includes amounts charged directly to revenues
45
<PAGE> 46
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
3.1(5) Restated Certificate of Incorporation.
3.2(1) Bylaws.
3.3(8) Certificate of Amendment to Restated Certificate of
Incorporation.
10.21(1) Real Property Lease Agreement dated as of August 26, 1981
between the Company and Orchard Investment Company No. 701.
10.22(1) Real Property Lease Agreement dated as of July 6, 1983 between
the Company and Orchard Investment Company No. 701.
10.23(1) Real Property Lease Agreement dated as of August 1, 1984
between the Company and Orchard Investment Company No. 701.
10.29(1) Form of Indemnification Agreement executed by the Company and
its officers and directors.
10.40(2)+ Letter Agreement dated October 19, 1987 between the Company
and George Rassam.
10.47(6) Technology Agreement between the Company and IMP Europe
Limited.
10.48(6) Supply Agreement between the Company and IMP Europe Limited.
10.49(6) Agreement for the sale and purchase of all the A Ordinary
Shares in IMP Europe Limited dated as of July 3, 1990, between
the Company and Dialogue Semiconductor Limited.
10.50(7)* License Agreement dated as of September 12, 1991, between the
Company and Asahi Chemical Industry Co., Ltd.
10.51(7)* Distributorship Agreement dated as of December 1, 1991 by and
between the Company and Asahi Chemical Industry Co., Ltd.
</TABLE>
<PAGE> 47
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
10.53(7)* Heads of Agreement dated as of March 27, 1992, between the
Company and South African Micro-Electronic Systems Pty
Limited.
10.54(8) First Amendment dated March 11, 1994 to Real Property Lease
Agreement dated August 26, 1981 between the Company and
Orchard Investments Company No. 701.
10.55(8) First Amendment dated December 21, 1987, Second Amendment
dated March 15, 1989, Third Amendment dated November 25,1991,
Fourth Amendment dated December 13, 1993 and Fifth Amendment
dated March 11, 1994 to the Real Estate Lease Agreement dated
July 6, 1983 between the Company and Orchard Investment
Company No. 701.
10.56(9) Loan Modification Agreement dated September 19, 1995 by and
between the Company and Silicon Valley Bank.
10.57(9)+ Letter Agreement dated February 13, 1995 between the Company
and David Laws.
10.58(9) Real Property Sublease Agreement dated November 9, 1992 by and
between the Company and AT&T Resource Management Corporation,
and Master Lease dated September 23, 1986 by and between AT&T
Resource Management Corporation and American Telephone and
Telegraph Company.
10.60(3)+ 1996 Employee Stock Purchase Plan.
10.61(4)+ IMP, Inc. Stock Option Plan (as amended and restated through
May 14, 1997).
23.1 Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
27.1 Financial Data Schedule (Previously filed).
</TABLE>
+ Indicates, as required by Item 14(a)(3), a management contract or
compensation plan required to be filed as an exhibit.
* "*" on such exhibits indicates that portions have been omitted for which
confidential treatment has been requested and filed separately with the
Securities and Exchange Commission.
(1) Incorporated by reference from an identically numbered exhibit filed with
the Company's Registration Statement on Form S-1 (File No. 33-13600)
declared effective by the Securities and Exchange Commission on June 10,
1987.
(2) Incorporated by reference from an identically numbered exhibit filed with
the Company's Annual Report on Form 10-K for the year ended March 27, 1988
filed with the Securities and Exchange Commission on June 25, 1988.
(3) Incorporated by reference to exhibit number 99.1 filed with the Company's
Registration Statement on Form S-8 (File No. 333-14997), as filed with the
Securities and Exchange Commission on October 29, 1996.
(4) Incorporated by reference to exhibit number 99.1 filed with the Company's
Registration Statement on Form S-8 (File No. 333-36723) as filed with the
Securities and Exchange Commission on September 30, 1997.
(5) Incorporated by reference from an identically numbered exhibit filed with
the Company's Annual Report on Form 10-K for the year ended March 26, 1989
filed with the Securities and Exchange Commission on June 26, 1989.
(6) Incorporated by reference from an identically numbered exhibit filed with
the Company's Annual Report on Form 10-K for the year ended March 31, 1991
filed with the Securities and Exchange Commission on July 1, 1991.
(7) Incorporated by reference from an identically numbered exhibit filed with
the Company's Annual Report on Form 10-K for the year ended March 29, 1992
filed with the Securities and Exchange Commission on June 29, 1992, as
amended by Amendment to Application or Report on Form 8 filed with the
Securities and Exchange Commission on September 16, 1992.
<PAGE> 48
(8) Portions incorporated by reference from an identically numbered exhibit
filed with the Company's Amendment to the Annual Report on Form 10-K for
the year ended March 27, 1994 filed with the Securities and Exchange
Commission on July 6, 1994.
(9) Portions incorporated by reference from an identically numbered exhibit
filed with the Company's Annual Report on Form 10-K for the year ended
March 26, 1995 filed with the Securities and Exchange Commission on June
26, 1995.
(b) Reports on Form 8-K
The Company filed a report on Form 8-K on February 16, 1999 in connection
with the sale of common stock.
