SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
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[X] Annual report pursuant to section 13 or 15(d)of the Securities Exchange
Act of 1934 for the fiscal year ended December 31, 1996.
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934.
Commission file number 0-19027
SIMTEK CORPORATION
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(Exact name of registrant as specified in its charter)
Colorado 84-1057605
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or
organization)
1465 Kelly Johnson Boulevard, Suite 301, Colorado Springs, Colorado 80920
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(Address of principal executive offices) (Zip Code)
(719) 531-9444
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $.01 Par Value OTC Bulletin Board
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(Title of Class)
Class B Redeemable Warrants Not Listed
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(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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______
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of the Form 10-KSB
or any amendment to this form 10-KSB. [ X ]
The registrant's revenues for its most recent fiscal year were $5,196,653.
The aggregate market value of the 18,669,141 shares of voting stock held by
non-affiliates of the registrant was approximately $4,293,900, based upon the
closing sale price of the Common Stock on March 13, 1997 of $ 0.23 per share as
reported by the OTC Electronic Bulletin Board. The calculation of such market
value should not be construed as an admission or conclusion by the registrant
that any person is in fact an affiliate of the registrant.
The total number of shares of Common Stock issued and outstanding as of March
19, 1997 was 28,506,685.
Transitional Small Business Disclosure Format: Yes _____ No __X__
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TABLE OF CONTENTS
PART I
Item 1: Business.......................................................3
Item 2: Properties....................................................15
Item 3: Legal Proceedings.............................................15
Item 4: Matters Submitted to a Vote of Security Holders...............15
PART II
Item 5: Market for Registrant's Common Stock and
Related Security Holder Matters............................16
Item 6: Management's Discussion and Analysis of Financial
Condition and Results of Operations........................18
Item 7: Financial Statements and Supplementary Data...................23
Item 8: Changes in and Disagreements with Accountants on
Accounting Financial Disclosure............................39
PART III
Item 9: Directors and Executive Officers of the Registrant............40
Item 10: Executive Compensation........................................43
Item 11: Security Ownership of Certain Beneficial
Owners and Management.......................................45
Item 12: Certain Relationships and Related Transactions................47
PART IV
Item 13: Exhibits, Financial Statement Schedules and
Reports on Form 8-K.........................................48
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PART I
ITEM 1: BUSINESS
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GENERAL
Simtek Corporation ("Simtek" or the "Company") designs, develops, produces
and markets high performance nonvolatile semiconductor memories. Nonvolatility
prevents loss of programs and data when electrical power is removed. The
Company's nonvolatile memory products feature fast data access and programming
speeds and electrical reprogramming capabilities. Simtek's products are targeted
for use in commercial electronic equipment markets such as industrial control
systems, office automation, medical instrumentation, telecommunication systems,
cable television, and numerous military systems, including communications,
radar, sonar and smart weapons.
Since establishing in September 1991 that the Company's products meet or
exceed certain quality and reliability standards, the Company has received and
filled more than 3,100 customer evaluation requests for its products. The
Company has accepted purchase orders from many Fortune 500 companies, worldwide.
As of December 31, 1996, the Company's backlog for released purchase orders was
approximately $1,430,000, all of which is expected to be shipped by June 30,
1997. Orders are cancelable without penalty at the option of the purchaser prior
to 30 days before scheduled shipment and therefore are not necessarily a measure
of future product revenue. Since inception through December 31, 1996, the
Company has generated net revenue of approximately $12,497,000 from the sale of
products. Of this amount, $5,196,653 was generated during the year ended
December 31, 1996.
The Company has completed the development and is in production of its first
three families of products, 64 kilobit, 16 kilobit and 4 kilobit nonvolatile
static random access memories ("nvSRAMs"). The Company's 64 kilobit nvSRAMs meet
or exceed the requirements for sales into commercial, industrial and military
markets. The Company's 16 kilobit and 4 kilobit nvSRAMs have been qualified for
sales into commercial and industrial markets. Simtek believes its 64 kilobit
nvSRAMs offer lower cost per bit, greater memory capacity and faster data access
speeds than other existing single-chip nonvolatile SRAMs. Simtek's 16 kilobit
and 4 kilobit nvSRAMs provide even lower cost solutions for customers who do not
require 64 kilobits of memory. The Company's nvSRAMs are physically smaller and
require less maintenance than SRAM devices that achieve nonvolatility through
the use of internal batteries and are more convenient to use than SRAM devices
that achieve nonvolatility by being combined with additional chips.
The Company along with Zentrum Mikroelektronik Dresden GmbH ("ZMD")
completed development and product qualification of its 64 kilobit product based
0.8 micron product technology in the second quarter of 1996. Sales of the 64
kilobit product based on 0.8 micron product technology accounted for
approximately 32% of the Company's sales for 1996.
The Company along with ZMD installed its 256 kilobit nvSRAM family based
upon a 0.8 micron design and process into the ZMD fab in 1996. The Company
anticipates having the 256 kilobit nvSRAM family qualified in the second quarter
of 1997.
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The Company reduces capital requirements by subcontracting all phases of
the manufacturing process. Chartered Semiconductor Manufacturing Plc. of
Singapore ("Chartered") began providing silicon wafers for the Company's nvSRAM
products in September 1993 and continues to provide wafers based on the
Company's 1.2 micron product technology. ZMD of Dresden, Germany began supplying
the Company with 64 kilobit finished units based on 0.8 micron product
technology in the second quarter of 1996.
For sales and marketing of its products, the Company utilizes three sales
offices, one in Colorado Springs, Colorado, one in Bristol, England and one in
Savannah, Georgia. The Company has engaged 18 independent representative
organizations with 44 sales offices and 28 distributor organizations with 60
sales offices. Both organizations have multiple sales offices and sales people
covering a specific territory. Simtek has access to a worldwide market through
these organizations and their sales offices.
In June 1994, the Company granted ZMD a license to manufacture and sell its
64 kilobit and 256 kilobit nvSRAM products using the sub-micron technology, for
which ZMD agreed to pay the Company a royalty (not to exceed $600,000 in the
aggregate) based on sales of such products. ZMD agreed to prepay these royalties
at the rate of $50,000 per month commencing July 1994. By June 1995, The Company
had received all $600,000 of the prepaid royalties. The royalty payments were
intended to allow Simtek to continue development of the market for nvSRAM
products. In May 1995, the Company formally notified ZMD that it did not wish to
continue on the same terms and conditions set forth in the agreement it entered
into with ZMD in June 1994 and further amended in August 1994. All obligations
of the Company to ZMD associated with prepaid royalties were fulfilled in 1995
and as a result, the Company recorded $600,000 in royalty income in 1995.
In July 1995, management of the Company signed a new Letter of Intent with
ZMD that proposed to combine both companies' resources and create a joint task
force for the rapid development of 0.8 micron technology products for
manufacture in ZMD's wafer fab. In September 1995, the Company entered into a
one-year Cooperation Agreement with ZMD (the "Cooperation Agreement") that
defined the joint program outlined in the Letter of Intent. The agreement
formally expired August 31, 1996 and has not been renewed; however, both
companies are continuing work on the qualification of the 256 kilobit using the
0.8 micron process in ZMD's wafer fab. ZMD will also continue to supply the
Company with 64 kilobit finished units. The agreement also covered the sale of
ZMD's DRAM's and SRAM's by Simtek of which the Company recognized approximately
$9,000 in other income in 1996 from the sale of these products. ZMD agreed to
fund Simtek's costs associated with the development of the 0.8 micron process
and certain costs associated with keeping the Company's 1.2 micron products in
the marketplace. Under the agreement, ZMD has the right to convert the payments
made to Simtek into shares of Common Stock. In 1995, ZMD made a total payment of
$907,000 which ZMD converted into 5,182,857 shares of Common Stock at a price of
$0.175 per share. In 1996, ZMD made total payments of $378,551 of which $248,398
was converted to 1,353,374 shares of Common Stock at a price of $.15479 and
165,000 at a price of $.2358 per share effective December 2, 1996. The balance
of $130,153 remains as a payable to ZMD on the balance sheet at December 31,
1996. ZMD currently owns approximately 30% of the Company's stock and may not
exceed 30% without approval of Simtek's board of directors.
In March 1996, the management of ZMD and the Company's board of directors
negotiated a volume pricing agreement with ZMD for the purchase of finished
units. The pricing agreed to by both companies is substantially lower than the
cost of producing finished units of its 1.2 micron product. At that time, the
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Company presented ZMD with a purchase order, which was accepted by ZMD, to
support the majority of its commercial business. The Company continues to order
1.2 micron product from Chartered to support its industrial and military
customers.
During the first nine months of 1996, the Company continued to have a lack
of product even though yields on the 1.2 micron product stayed within an
acceptable range. The lack of product was primarily due to ZMD not achieving the
production levels required by the Company. In the fourth quarter 1996, ZMD began
shipping the Company more product which has begun to reduce the delinquencies
the Company saw through the majority of 1996. If ZMD continues to ship at the
current levels, the Company anticipates that the majority of the delinquencies
will be eliminated by the end of first quarter 1997.
INDUSTRY AND PRODUCT BACKGROUND
The semiconductor memory market is very large and highly differentiated.
The market covers a wide range of product density, speed, features and price.
The ideal memory would have (1) high bit density per chip to minimize the number
of chips required in a system; (2) fast data read and write speeds to allow a
system's microprocessor to access data without having to wait; (3) the ability
to read and modify data an unlimited number of times; (4) the ability to retain
its data indefinitely when power is interrupted (i.e. nonvolatility); (5)
availability in a variety of package types for modern assembly techniques; and
(6) the ability to be tested completely by the manufacturer to ensure the
highest quality and reliability. Although customers would like to have memory
components with all of these attributes it is not technically feasible.
Therefore, the memory market is segmented with different products combining
different mixes of these attributes.
Semiconductor memories can be divided into two main categories, volatile
and nonvolatile. Volatile memories offer high densities and fast data access and
programming speeds, but lose data when electrical power is interrupted.
Nonvolatile memories retain data in the absence of electrical power, but
typically have been subject to speed and testing limitations and wear out if
they are modified too many times. There are a number of common volatile and
nonvolatile product types, as set forth below. The list of products under
"Combinations" is limited to single packages and does not include combinations
of the listed memories in separate packages, such as SRAMs in combination with
EPROMs and EEPROMs.
Volatile Nonvolatile Combinations
-------- ----------- ------------
SRAM EEPROM nvSRAM
DRAM Flash Memory NVRAM
EPROM SRAM plus lithium battery ("Batram")
PROM
ROM
VOLATILE MEMORIES. Reprogrammable semiconductor memories store varying
amounts of electronic charge within individual memory cells to perform the
memory function. In a Dynamic Random Access Memory (DRAM), the charge must be
electrically refreshed many times per second or data are lost even when power is
continuously applied. In a Static Random Access Memory (SRAM), the charge need
not be refreshed, but data can be retained only if power is not interrupted.
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NONVOLATILE MEMORIES. A Read Only Memory (ROM) is programmed (written) once
in the later stages of the manufacturing process and cannot be reprogrammed by
the user. Programmable Read Only Memory (PROM) can be programmed once by the
user, while Erasable PROM (EPROM) may be reprogrammed by the user a limited
number of times if the EPROM is removed from the circuit board in the equipment.
Both Flash memory and Electrically Erasable PROM (EEPROM) may be reprogrammed
electrically by the user without removing the memory from the equipment.
However, the reprogramming time on both EEPROM and Flash memory is excessively
long compared to the read time such that in most systems the microprocessor must
stop for a relatively long time to rewrite the memory.
COMBINATIONS. Many customers use a combination of volatile and nonvolatile
memory functions to achieve the desired performance for their electronic
systems. By using SRAMs in combination with EPROM and EEPROM chips, customers
can achieve nonvolatility in their systems and still retain the high data read
and write speeds associated with SRAM memories. This approach, however, is not
desirable in many applications because of the size and cost disadvantages
associated with using two or more chips to provide a single memory function.
Also, it may take up to several seconds to transfer the data from the SRAM to
the EEPROM, an excessive time at power loss. As a result, attempts have been
made to combine nonvolatile and volatile memory features in a single package or
silicon chip. One approach combines an SRAM with lithium batteries in a single
package.
Nonvolatile random access memories (NVRAMs) combine volatile and
nonvolatile memory cells on a single chip and do not require a battery. The
Company's nvSRAM represents a significant advance over existing products that
combine volatility and nonvolatility on a single silicon chip. Simtek combines
an SRAM memory cell with an EEPROM memory cell to create a small nvSRAM memory
cell. The Company's unique and patented memory cell design enables the nvSRAM to
be produced at densities higher than existing NVRAMs and at a lower cost per
bit. In addition to high density and nonvolatility, the nvSRAM has fast data
access and program speeds and the SRAM portion of the memory can be modified an
unlimited number of times without wearing out.
TECHNOLOGY
The Company uses an advanced implementation of
silicon-nitride-oxide-semiconductor (SNOS) technology. SNOS technology stores
electrical charge within an insulator, silicon nitride, and uses a thin tunnel
oxide layer to separate the silicon nitride layer from the underlying silicon
substrate. SNOS technology prevents tunnel oxide rupture in the memory cell from
causing an immediate loss of data. Oxide rupture has been a major cause of
failures in EEPROMs using floating gate technology, where charge is stored on a
polysilicon conductor surrounded by insulators. To protect against these
failures, many floating gate EEPROMs have required error correction circuitry
and redundant memory cells. This increases product cost by requiring more
silicon area. Error correction and redundancy are not required for the Company's
products to protect against tunnel oxide rupture. In addition, the Company's
product designs incorporate a special test feature which can predict data
retention time for every individual memory cell based on measuring the rate of
charge loss out of the silicon nitride.
The SNOS technology coupled with the Company's nvSRAM memory cell allows
high performance nonvolatile SRAMs to be manufactured using complementary metal
oxide semiconductor (CMOS) technology. The SNOS technology used by the Company
has proven to be highly reliable, as demonstrated by the Company's product
qualification results.
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PRODUCTS
NVSRAMS (NONVOLATILE STATIC RANDOM ACCESS MEMORIES). The Company's 256
kilobit, 64 kilobit, 16 kilobit and 4 kilobit nvSRAM product families consist of
nonvolatile memories that combine fast SRAM and nonvolatile EEPROM
characteristics within each memory cell on a single chip of silicon. The SRAM
portion of the nvSRAM is operated in the same manner as most existing SRAM
products. The SRAM can be written to and read from an unlimited number of times.
The EEPROM can be programmed, depending upon device type, by user control or
automatically by transferring the SRAM contents into the EEPROM. The EEPROM data
can be transferred back into the SRAM by user control or automatically.
Simtek's nvSRAMs have fast data access speeds of 25, 30, 35 and 45
nanoseconds. These data access speeds correspond to those of fast SRAMs and meet
the requirements of much of the fast SRAM market. The high speed characteristics
of Simtek's nvSRAMs allow them to be used in applications with various high
performance microprocessors and digital signal processors such as those
manufactured by Intel Corp., Texas Instruments and Motorola. The Simtek nvSRAM
can be used to replace SRAMs with lithium batteries and multiple chip solutions
such as SRAM plus EEPROM or Flash Memory.
The Company announced its initial 64 kilobit nvSRAM product family in
mid-1989. The Company finalized commercial and industrial qualification of two
versions of its initial nvSRAM product offering in September 1991 and April
1992, respectively. The Company completed military qualification of its initial
nvSRAM in May 1992. The Company announced its initial 16 kilobit nvSRAM product
family in December 1992 for sales into the commercial market. The nvSRAM product
family also includes the 4 kilobit version. The Company completed the
development and product qualification of the 64 kilobit AutoStoreTM nvSRAM in
the fourth quarter of 1993. The AutoStoreTM version automatically detects power
loss and transfers the data from the SRAM cells into the EEPROM cells. This
device does not require instructions or intervention from the system
microprocessor to notify it of the power loss.
In addition to its qualified product sales, the Company has shipped nvSRAM
samples to more than 3100 prospective customers for evaluation and currently has
a worldwide customer base of over 300 companies in products ranging from utility
meters to military aircraft.
NEW INTRODUCTIONS: The Company resumed sampling the 256 kilobit nvSRAM
products during the fourth quarter of 1996. These products are 16 times denser
than the nearest competitor with a monolithic solution. The 256 kilobit products
will expand the market for Simtek products. Simtek has received over 300 sample
requests for and supplied approximately 100 potential customers with samples of
the 256 kilobit products.
PACKAGE TYPES: The Company currently supplies its nvSRAMs in plastic and
ceramic dual-in-line packages, ceramic leadless chip carriers and plastic small
outline integrated circuit surface mount packages. Simtek plans to offer the new
256 kilobit products in 300 and 600 mil PDIPs and SOICs. Supplying the products
in a number of different package types increases the available market for Simtek
products at a relatively low development cost.
PRODUCT WARRANTIES. Simtek presently provides a one-year limited warranty
on its products.
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Simtek currently offers the high performance nvSRAMs listed below:
nvSRAMs Supplied
Product Description Speed Package Flow
- --------------------------------------------------------------------------------
STK20C04 4K (512x8) HW Store 30,35,45 ns 600-P Comm./Ind.
STK22C48 16K (2Kx8) AutoStoreTM 30,35,45 ns 600-P Comm./Ind.
STK25C48 16K (2Kx8) AutoStoreTM 30,35,45 ns 600-P Comm./Ind.
STK10C48 16K (2Kx8) HW Store 30,35,45ns PDIP Comm./Ind.
SOIC Comm./Ind.
600-P Comm./Ind.
STK11C48 16K (2Kx8) SW Store 30,35,45ns PDIP Comm./Ind.
SOIC Comm./Ind.
600-P Comm./Ind.
STK10C68 64K (8Kx8) HW Store 25,30,35,45 ns CDIP Comm./Ind./Mil.
PDIP Comm./Ind.
SOIC Comm./Ind.
LCC Comm./Ind./Mil.
STK11C68 64K (8Kx8) SW Store 25,30,35,45 ns CDIP Comm./Ind./Mil.
PDIP Comm./Ind.
SOIC Comm./Ind.
LCC Comm./Ind./Mil.
STK12C68 64K (8Kx8) AutoStoreTM 25,30,35,45 ns CDIP Comm./Ind./Mil.
PDIP Comm./Ind.
SOIC Comm./Ind.
LCC Comm./Ind./Mil.
STK15C68 64K (8Kx8) AutoStoreTM 25,35,45 ns 600-P Comm./Ind.
PDIP Comm./Ind.
SOIC Comm./Ind.
STK11C88* 256K (32Kx8) SW Store 25,35,45 PDIP Comm./Ind.
SOIC Comm./Ind.
600-P Comm./Ind.
STK14C88* 256K (32Kx8) AutoStoreTM 25,35,45 PDIP Comm./Ind.
SOIC Comm./Ind.
CDIP Comm./Ind./Mil
LCC Comm./Ind./Mil
STK15C88* 256K (32Kx8) AutoStoreTM 25,35,45 PDIP Comm./Ind.
SOIC Comm./Ind.
600-P Comm./Ind.
* Denotes product is in qualification.
RESEARCH AND DEVELOPMENT
Much of the Company's research and development activities are centered
around developing new products and reducing the cost of its nvSRAM products.
Cost reduction is being done principally in two ways. First, the Company is
continuing its efforts to improve yield of good die per wafer and to streamline
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its 1.2 micron production process while at the same time improving overall
product quality. Second, the Company has introduced its 0.8 micron technology.
This technology shrinks the size of the 64 kilobit nvSRAM chip and has enabled
the Company to develop a cost effective 256 kilobit nvSRAM. The Company has a
test floor used for evaluation of its technologies, product designs and product
quality. The test floor is also used for production testing of incoming wafers.
The Company's research and development expenditures for the years ended
December 31, 1996 and 1995 were $994,444 and $1,335,123, respectively. The
Company intends to continue expenditures on research and development; however,
the percentage of research and development expenditures is expected to decrease
relative to expenditures relating to the commercial production of its existing
products.
MANUFACTURING AND QUALITY CONTROL
The Company's manufacturing strategy is to use subcontractors whose
production capabilities meet the requirements of the Company's product designs
and technologies.
On September 29, 1992, the Company and Chartered entered into a
manufacturing agreement (the "Chartered Manufacturing Agreement") to provide the
Company with silicon wafers for the Company's products through at least
September 29, 1997. Under the Chartered Manufacturing Agreement, Chartered has
installed a manufacturing process for versions of the Company's current and
future products. Manufacture of the Company's products began in the third
quarter of 1993. The Company reimbursed Chartered $177,502 in April 1993 to
cover Chartered's cost of installing the nvSRAM production process. The
Chartered Manufacturing Agreement also provides for Chartered to manufacture
wafers for the Company's licensees of its technology.
According to the Chartered Manufacturing Agreement, the Company has the
right to purchase up to 2,000 six-inch silicon wafers per month from Chartered's
facility in Singapore. However, through fourth quarter 1995, the entire
semiconductor industry was in a state of demand exceeding supply and Chartered
was no exception. This shortage has been alleviated and management believes that
the current industry capacity will not have a material adverse effect on the
Company during 1997. During 1996, approximately 68% of the Company's product
sales were based on wafers purchased from Chartered.
The Cooperation Agreement entered into with ZMD in September 1995, provided
for Simtek to purchase finished 0.8 micron units from their foundry. In June
1996, the Company began purchasing qualified production quantities. Sales of the
64 kilobit product based on 0.8 micron product technology accounted for
approximately 32% of the Company's sales in 1996.
The Company's subcontractors provide quality control for the manufacture of
the Company's products. The Company maintains its own quality assurance
personnel and testing capability to assist the subcontractors with their quality
programs and to perform periodic audits of the subcontractors' facilities and
finished products to ensure product integrity.
The Company's quality and reliability programs were audited by several
commercial and military customers during 1996 as part of routine supplier
certification procedures. All such audits were completed satisfactorily.
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The Company believes the gross margins on military sales of its products
meet or exceed average gross margins on military sales for the semiconductor
industry. At the present time, the Company believes the gross margins on
commercial sales of its products meet industry standards.
MARKETS
Simtek products are targeted at fast nonvolatile SRAM markets, SRAM plus
EEPROM markets and other nonvolatile memory products broadly used in commercial,
industrial and military electronic systems.
The Company's product families are standard products designed for many
applications in contrast to products designed for specific application
("ASIC's", or Application Specific Integrated Circuits). Therefore, management
believes that its products will address very broad markets. The Company has
received orders and inquiries regarding its nvSRAMs from over 10,000 potential
customers as a result of exposure of the Company's products at trade shows,
articles appearing in industry trade journals, direct advertising and the
Company's sales network. The Company has sold product, received requests and
sent samples of its nvSRAM products to approximately 3100 potential customers
for applications such as:
Airborne and Space Computers Lighting
Automotive Control & Monitoring Medical Instruments
Portable Telephone Modems Control Systems
Portable Computers Currency Changers
Postal Meters Data Monitoring Equipment
Printers Disk Drives
Process Control Equipment Facsimile Machines
Radar and Sonar Systems Gaming
Telecommunications Systems GPS Navigational Systems
Terminals Guidance and Targeting Systems
Test Equipment High Performance Workstations
Utility Meters Laser Printers
Vending Machines Mainframe Computers
Weapon Control Systems CD Writers
Security Systems Copiers
Broadcast Equipment Cable TV Set Top Converter Box
Studio Recording Equipment
SALES AND DISTRIBUTION
The Company's strategy is to generate sales through the use of independent
sales representative agencies and distributors. Management believes this
strategy provides the fastest and most cost effective way to assemble a large
and professional sales force.
Simtek currently has three sales and marketing offices, one in Colorado
Springs, Colorado, one in Bristol, England and one in Savannah, Georgia. The
Company has engaged 18 independent representative organizations with 44 sales
offices and 28 distributor organizations with 60 sales offices. Both
organizations have multiple sales offices and sales people covering a specific
territory. Through these organizations and their sales offices Simtek is capable
of serving a worldwide market.
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Independent sales representatives typically sell a limited number of
noncompeting products to semiconductor users in particular geographic assigned
territories. Distributors inventory and sell products from a larger number of
product lines to a broader customer base. These sales channels are
complementary, as representatives and distributors often work together to
consummate a sale, with the representative receiving a commission from the
Company and the distributor earning a markup on the sale of the products. The
Company supplies sales materials to the sales representatives and distributors.
For its marketing activities, the Company evaluates external marketing
surveys and forecasts and performs internal studies based, in part, on inputs
from its independent sales representative agencies. The Company prepares
brochures, data sheets and application notes on its products.
CUSTOMER AND BACKLOG:
The Company has shipped qualified nvSRAM products to customers directly and
through distributors since the September 30, 1991 commercial product
qualification; the majority of the customers are Fortune 500 companies.
Approximately 27% of the Company's net product sales during 1996 were to
customers in Europe and approximately 26% were to customers in the Pacific Rim.
The remaining product sales were to customers in North America.
As of December 31, 1996 the Company had a backlog of unshipped customer
orders of approximately $1,430,000, which is expected to be filled by June 30,
1997. Orders are cancelable without penalty at the option of the purchaser prior
to 30 days before scheduled shipment and therefore are not necessarily a measure
of future product revenue.
During 1996, the Company continued to receive initial production orders and
a limited number of scheduled production orders. Management believes the Company
will continue to receive volume production orders during 1997 and beyond.
LICENSES
PRODUCT AND TECHNOLOGY LICENSE SALES. The Company has sold product and
technology licenses to Nippon Steel, Plessey and ZMD.
ZMD. In June of 1994, the Company signed a joint development agreement with
ZMD to install the 1.2 micron products for manufacture at ZMD and to jointly
develop the 0.8 micron technology at Chartered. The Agreement was modified in
August of 1994 by a Letter of Intent between the two Companies to bypass the
installation of 1.2 micron technology at ZMD and instead modify the 0.8 micron
technology in order for it to run in the ZMD factory. For this cooperative
development, ZMD has paid Simtek $750,000 for Simtek's development expenses. ZMD
received a license to manufacture and sell the 64 kilobit and 256 kilobit nvSRAM
products built in the sub-micron technology. ZMD fulfilled their obligation,
under the Letter of Intent, to pay the Company $600,000 in prepaid royalties on
their future product sales. These payments were intended to allow Simtek to
continue development of the market for nvSRAM products. As of December 31, 1995,
ZMD paid $750,000 for technology development which converted to equity on
February 28, 1995 and $600,000 in prepaid royalties which converted to royalty
income during 1995.
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In September 1995, the Company entered into a one-year Cooperation
Agreement with ZMD, one of the items in the agreement was that the two companies
would jointly develop and install the 64 kilobit and 256 kilobit nvSRAM based on
0.8 micron technologies into ZMD's wafer fabrication facility. It was also
understood that the two companies would cooperate in the development of
additional derivative nvSRAM products based upon the same technology. ZMD and
Simtek will have joint ownership of all products and processes developed by the
companies using the 0.8 micron process flow. In March 1996, the two companies
agreed on a fixed pricing structure based on unit demand. In June 1996, ZMD
began shipping the Company qualified production units of the 64 kilobit nvSRAM
based on 0.8 micron technology. Sales of this product accounted for
approximately 32% of the Company's revenue for 1996.
CHARTERED. In September of 1992, the Company entered into a manufacturing
agreement with Chartered. This agreement grants Chartered the right to
manufacture silicon wafers containing the Simtek products solely for sale to the
Company. Chartered also has the right to manufacture silicon wafers in
connection with future technology licenses that the Company may enter into with
third parties. During 1996, approximately 68% of the Company's sales were from
finished units produced from the wafers purchased from Chartered.
FUTURE LICENSE SALES. The Company intends to sell product and technology
licenses on a selective basis. Management will continue to seek licensing
partners who can contribute to the development of the nvSRAM market and provide
a meaningful level of revenue to Simtek while not posing an undue threat in the
marketplace.
COMPETITION
The Company's products compete on the basis of several factors, including
data access and programming speeds, density, data retention, reliability,
testability, space savings, manufacturability, ease of use and price.
Products that compete with the Company's family of nvSRAMs fall into three
categories. The first category of products that compete with Simtek's nvSRAMs
are volatile and nonvolatile chips used in combination, such as fast SRAMs used
with EPROMs, EEPROMs, or Flash memory. Management believes that Simtek has
advantages in these applications because the nvSRAM allows data to be stored in
milliseconds as compared to seconds for chips used in pairs. The Company's
single chip solution provides a space savings and easier manufacturing. The
Company's single chip solution also provides increased reliability versus
multiple chips. Simtek will be able to compete with many solutions requiring
density up to 256 kilobit; however, in those instances where the density
requirement is beyond 256 kilobit the nvSRAM does not compete. Competitors in
the multiple chip category include Cypress Semiconductor Corp., Integrated
Technology, Inc., Toshiba, Fujitsu, Advanced Micro Devices, Inc., Atmel and
National Semiconductor Corp.
The second category of products that compete with the Company's nvSRAMs are
products that combine SRAMS with lithium batteries in specially adapted
packages. These products are slower in access speeds than the Company's nvSRAMs
due in part to limitations caused by life of the lithium battery when coupled
with a faster SRAM. The Company's nvSRAMs are offered in standard, smaller, less
expensive packages, and do not have the limitation on lifetime imposed on the
SRAM/battery solutions by the lithium battery. The Company's nvSRAMs can also be
used for wave soldered automatic insertion circuit board assembly since they do
12
<PAGE>
not have the temperature limitations of lithium batteries. Again, the Simtek
product line up to 256 kilobit nvSRAM will allow for competing in many
applications. However, lithium battery-backed SRAM products are available in
densities up to 1 megabit per package. Companies currently supplying products
with lithium batteries include Dallas Semiconductor Corp., SGS-Thomson, Inc and
Benchmarq Microelectronics, Inc.
The third category consists of NVRAMs that combine SRAM memory cells and
EEPROM memory cells on a monolithic chip of silicon. The Company's current
product offerings are of higher density, faster access times and can be
manufactured at lower costs per bit than NVRAMS. Another company that is
currently supplying NVRAMs is Xicor, Inc. Their highest density single chip part
is 16 kilobit.
ZMD, through their license agreement with Simtek, has the worldwide right
to sell nvSRAMs under the ZMD label developed jointly by Simtek and ZMD. With
volume production being established at ZMD using the 0.8 micron product, ZMD may
begin selling such nvSRAMs. This may have a positive impact for Simtek by
creating a second source for Simtek's nvSRAM products. However, a potentially
negative impact to Simtek may be the presence of ZMD as a competitor to Simtek.
The Company's management is aware of other semiconductor technologies for
nonvolatile memory products. These technologies include ferroelectric memory and
thin film magnetic memory. Ramtron, Raytheon, Symetrix, National and others are
developing ferroelectric products. Honeywell, Inc. is developing magnetic film
products.
PATENTS AND INTELLECTUAL PROPERTY
The Company undertakes to protect its product designs and technologies
under the relevant intellectual property laws as well as by utilizing internal
disclosure safeguards. Under the Company's licensing programs, the Company
exercises control over the use of its protected intellectual property and has
not permitted its licensees to sublicense the Company's nvSRAM products or
technology.
It is common in the semiconductor industry for companies to obtain
copyright, trademark and patent protection of their intellectual property.
Management believes that patents are significant in its industry, and the
Company is seeking to build a patent portfolio. The Company expects to enter
into patent license and cross-license agreements with other companies. The
Company has been issued six patents in the United States on its nvSRAM memory
cell and other circuit designs. The Company has also taken steps to obtain
international patents on certain of its products. The Company has two
applications pending and intends to prepare patent applications on additional
circuit designs it has developed.
As with many companies in the semiconductor industry, it may become
necessary or desirable in the future for the Company to obtain licenses from
others relating to its products. The Company has, in the past, received
notification of possible infringement of patents from three other semiconductor
manufacturers and these matters are under consideration by management and
Company counsel. Although patent holders in the industry typically offer
licenses for their patents and these have been offered to Simtek, there can be
no assurance that licenses can be obtained on acceptable terms. Management
believes that these potential claims will not have an adverse effect on the
results of operations or the financial position of the Company.
13
<PAGE>
The Company has received federal registration of the term "Novcel" it uses
to describe its technology. The Company has not sought federal registration of
any other trademarks, including "Simtek" or its logo.
EMPLOYEES
As of the date of this Form 10-KSB, the Company has 17 full-time employees
and four temporary employees. Of these employees eight are engaged in design and
engineering activities, four in sales and marketing, six in product operations
and quality assurance, and three in management and administration.
The Company also uses the resources of selected consultants from time to time.
The Company considers that its relations with its employees are generally
satisfactory.
14
<PAGE>
ITEM 2. PROPERTIES
- -------------------
Simtek leases approximately 9,170 square feet of space in Colorado Springs,
Colorado. This space includes a product engineering test floor of approximately
2,350 square feet. The lease covering the Company's facilities expires on
October 31, 1998. Management believes that its existing facilities will be
adequate to meet its reasonably foreseeable needs or that alternative facilities
will be available to it on acceptable terms to meet its requirements.
ITEM 3. LEGAL PROCEEDINGS
- --------------------------
There are no legal proceedings pending against the Company.
ITEM 4. MATTERS SUBMITTED TO A VOTE OF SECURITY HOLDERS
- --------------------------------------------------------
Due to no annual meeting of shareholders in 1996, there were no matters
submitted to a vote in 1996.
15
<PAGE>
PART II
Item 5: Market for Registrant's Common Stock and Related Security Holder
Matters
- -------------------------------------------------------------------------
The Common Stock is listed on the OTC Electronic Bulletin Board under
symbol SRAM. The Common Stock was listed on the NASDAQ Small-Cap Market until
July 18, 1995 and then transferred to the OTC Electronic Bulletin Board because
the Company no longer met the requirements for inclusion on the NASDAQ Small-Cap
Market. In order for the Company to have its Common Stock relisted on the
National Market System, the Company must meet all the requirements for an
initial listing. The Class A and Class B Redeemable Warrants were included on
the NASDAQ Small-Cap Market until March 15, 1995 at which time they were
delisted because the Company no longer met the requirement of maintaining two
active market makers. On March 6, 1996 the Class A Redeemable Warrants expired.
Securities not included in the NASDAQ Small-CAP Market are covered by the
Securities and Exchange Commission rule that imposes additional sales practice
requirements on broker-dealers who sell such securities to persons other than
established customers and accredited investors (generally institutions with
assets in excess of $5,000,000 or individuals with net worth in excess of
$1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their
spouse). For transactions covered by the rule, the broker-dealer must make a
special suitability determination for the purchaser and receive the purchaser's
written agreement to the transaction prior to the sale. Consequently, the rule
may affect the ability of broker-dealers to sell the Company's securities, which
will have an adverse effect on the ability of the Company's security holders to
sell their securities and the possibility of the Company's ability to raise
additional capital.
Through second quarter 1995, shown are the closing high bid and low ask
prices for the Common Stock as reported by the National Association of
Securities Dealers, Inc on the last day of the quarter. Beginning with the third
quarter 1995, shown is the closing high bid and the closing low offer as
reported by the OTC Electronic Bulletin Board on the last day of the quarter.
Common Stock
----------------------
High Bid Low Offer
-------- ---------
1995
First Quarter................................. .31 .34
Second Quarter................................ .38 .44
Third Quarter................................. .28 .35
Fourth Quarter................................ .11 .13
1996
First Quarter................................. .18 .23
Second Quarter................................ .15 .20
Third Quarter................................. .20 .24
Fourth Quarter................................ .16 .19
As of December 31, 1996, there were 305 shareholders of record, not
including shareholders who beneficially own Common Stock held in nominee or
"street name."
16
<PAGE>
The Company has not paid any dividends on its Common Stock since inception
and does not intend to pay any in the foreseeable future.
17
<PAGE>
ITEM 6: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
GENERAL. Simtek has designed and developed nonvolatile semiconductor
products since it commenced business operations in May 1987. The Company has
concentrated on the design and development of the 16, 64 and 256 kilobit nvSRAM
product families and technologies, the design of a 256 kilobit EEPROM,
marketing, distribution channels, and sources of supply, including production at
subcontractors.
In September 1991, the Company began the sales of certain commercially
qualified 64 kilobit nvSRAM products. After initial qualification of its first
product in 1991, the Company began expanding the 64 kilobit nvSRAM product
family. By the end of 1993, the Company had qualified the complete product
family for commercial, industrial and military markets and had commenced sales
of these products. The Company began sampling its 256 kilobit nvSRAM in the
fourth quarter of 1994, but was required to cease due to cashflow requirements.
In 1996, the Company along with ZMD installed the 256 kilobit nvSRAM product and
process in ZMD's wafer fab which has enabled the Company to renew sampling the
256 kilobit nvSRAM.
The Company has devoted substantial efforts to raising capital through
sales of product and technology licenses and debt and equity securities.
Substantially all of the Company's revenue through December 31, 1991 was derived
from product and technology license sales.
The Company's customer base expanded from the end of 1995 to December 31,
1996 along with the existing customers placing volume production orders. The
increase in the customer base led to an increase in net product sales. Simtek
recorded net product sales of $5,196,653 for the year ended December 31,1996 up
from the $2,038,749 recorded for the year ended December 31, 1995.
REVIEW OF 1996 OPERATIONS. In 1996, the Company focused on the objectives
of the 1996 business plan which was approved by the Simtek Board of Directors in
March 1996. Some of the highlights of the plan were, 1) sales revenue of
$6,000,000; 2) achieve positive gross margins with a cost reduction on the 64
kilobit 1.2 micron product and the introduction of the 64 kilobit 0.8 micron
product; 3) work with ZMD to bring the 64 kilobit nvSRAM 0.8 micron product to
qualification and then production; 4) work with ZMD to complete a new design of
the 256 kilobit nvSRAM in 0.8 micron technology and to install it in the ZMD
fab; 5) with overall improved cost controls, generate a profit in the third and
fourth quarter of 1996; and 6) find a source of additional funding to support
the production and marketing of the 256 kilobit nvSRAM product. Described below
is how the Company performed against its goals:
Total sales of product for 1996 were $5,196,653, this was 13% less than the
Company had anticipated. The shortage was due to lack of 64 kilobit nvSRAM 0.8
micron product availability from ZMD which was supposed to be resolved in the
third quarter but did not occur until December 1996. Management of the Company
believes that the majority of the delinquencies associated with this shortage
will be eliminated in the first quarter 1997.
Yield improvement work on the 1.2 micron wafers from Chartered brought the
yield up to an acceptable level which reduced the die cost of each part (die
18
<PAGE>
cost is the most significant portion of the finished unit cost). Cost reduction
was also done in the back end test flow which in turn further reduced the cost
of the finished unit. In March 1996, management of the Company reached a
finished unit based pricing agreement with ZMD for the first 2,550,000 units the
Company purchases from ZMD. In March 1996, the Company gave ZMD a purchase
order, which was accepted by ZMD, for the first 700,000 units at the specified
prices. With the yield improvement and cost reduction in the back end test flow
on the 1.2 micron product and the pricing agreement with ZMD, the Company
realized positive gross margins for all of 1996 and a net income of $144,516 for
the year 1996.
The Company worked with ZMD on the development and qualification of the 0.8
micron 64 kilobit nvSRAM product throughout the year. Production units were
first shipped to the Company in June 1996. Work began on the installation of the
256 kilobit nvSRAM product and process into ZMD's wafer fab, but was delayed in
order to do yield improvement on the 64 kilobit 0.8 micron product. The Company
and ZMD began work on the 256 kilobit nvSRAM product again in late 1996.
Controlled spending in 1996 throughout the Company helped reduce the
selling, general and administrative expenses by 17% as compared to 1995. This
control along with the reduction in material costs resulted in a net income,
based solely on product sales, in the second quarter of 1996 and continued
throughout the balance of 1996.
Due to the improved gross margins, the generation of net income and ZMD
funding a portion of the costs associated with the 256 kilobit development, the
Company was not required to find an additional source of financing in 1996.
On August 31, 1996, the Cooperation Agreement that Simtek entered into with
ZMD in September 1995 terminated. However, both companies continue to work
together to finalize qualification of the 256 kilobit nvSRAM using the 0.8
micron process. Under the Cooperation Agreement, ZMD agreed to finance the
Company with approximately $1,800,000 payable in monthly installments through
August 1996. Through June 1996, ZMD actually financed the Company with
approximately $1,280,000; after June the Company began generating a net income.
Of the $1,280,000 paid to Simtek $907,000 was paid in 1995 and converted into
5,182,857 shares of Common Stock while $378,551 was paid in 1996 of which only
$248,398 was converted into 1,518,374 shares of Common Stock. The balance of
$130,153 remains as a payable to ZMD on the balance sheet as of December 31,
1996. ZMD currently owns approximately 30% of the Company's stock, but may not
exceed 30% without approval of Simtek's Board of Directors.
YEARS ENDED DECEMBER 31, 1996 AND 1995. Simtek's net product sales for 1996
totaled $5,196,653 compared to $2,038,749 for 1995. The increase in net product
sales for the year ended 1996 was due to increased customer acceptance of nvSRAM
products and better product availability for all of 1996. During 1996, sales of
the Company's 64 kilobit nvSRAM military products accounted for approximately
36% of the sales, while sales of the 64 kilobit nvSRAM product based on 0.8
micron technology accounted for approximately 32%. Sales of the Company's 16
kilobit and 64 kilobit nvSRAM product based on 1.2 micron technology accounted
for the balance of the increase in sales as compared to 1995. Three distributors
of the Company's nvSRAM products and one direct customer accounted for
approximately 44% and 17%, respectively, of the Company's net product sales for
the year ended 1996.
19
<PAGE>
The Company had a net income of $144,516 for the year ended December 31,
1996 compared to a net loss of $1,931,008 for the year ended December 31, 1995.
The Company realized a positive gross margin of $2,123,042 in 1996 compared to a
negative gross margin of $154,046 in 1995.
Selling, general and adminstrative saw a decrease in expenses, the largest
decrease was in research and development; due primarily to employees who left in
late 1995 and were not replaced until late 1996. Also, the expenses of reticles
and silicon wafers for the 256 kilobit at Chartered ended when the project was
curtailed. The expense of reticles and silicon wafers for the 256 kilobit at ZMD
through December 31, 1996, were paid for by ZMD. Administration saw a decrease
which was due to the resignation of Sheldon Taylor, the Chief Executive Officer
and due to the completion of commitments for consulting services related to the
1994 public offering.
FUTURE RESULTS OF OPERATIONS
The Company's ability to maintain profitability will depend primarily on
its ability to continue reducing its manufacturing costs and increase net
product sales by increasing the availability of existing products and by the
introduction of new products.
The Company believes that with the cooperation of ZMD it will expedite the
introduction and production of its 256 kilobit nvSRAM products based upon 0.8
micron technology. The two companies are currently deciding which derivative
nvSRAM products to develop next.
As of December 31, 1996, the Company had a backlog of unshipped customer
orders of $1,430,000 expected to be filled by June 30, 1997. About 30% of this
backlog is due to delinquencies from lack of product availability. The Company
believes that the majority of these delinquencies will be filled in the first
quarter of 1997. Orders are cancelable without penalty at the option of the
purchaser prior to 30 days before scheduled shipment and therefore are not
necessarily a measure of future product revenue.
The Cooperation Agreement entered into with ZMD, in September 1995,
expired on August 31, 1996. Under that agreement, ZMD is no longer liable for
funding Simtek. It may be necessary for the Company to raise additional capital
to fund production and marketing of its 0.8 micron 256 kilobit nvSRAM and the
development of other new products. The Company does not have any commitments for
such additional capital as of the date of this report.
In 1996, the Company purchased all of its 1.2 micron technology wafers,
from a single supplier, Chartered. Approximately 68% of the Company's sales for
1996 were from finished units produced from these wafers. The Company has an
agreement with Chartered to provide wafers through September 1997. In 1996, the
Company also purchased finished units from ZMD based on 0.8 micron technology;
sales from these products accounted for approximately 32% of the Company's sales
for 1996. Any disruptions in the Company's relationships with these suppliers
could have an adverse impact on the Company's operating results.
ZMD, through their license agreement with Simtek, has the worldwide right
to sell nvSRAM's developed jointly by Simtek and ZMD. With volume production
being established at ZMD using the 0.8 micron product, ZMD may begin selling
such nvSRAMs. This may have a positive impact for Simtek by creating a second
source for Simtek's nvSRAM products. However, a potentially negative impact to
Simtek may be the presence of ZMD as a competitor to Simtek.
20
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
From inception through December 31, 1996, the Company raised $32,113,878 of
gross proceeds from the sale of convertible debt and equity securities. From
inception through December 31, 1996, the Company generated $10,085,000 of gross
revenue from the sale of product and technology licenses, $12,497,162 from net
product sales and $600,000 in royalty income.
Under the Cooperation Agreement entered into with ZMD in September 1995,
ZMD had the right to convert all financing into shares of Common Stock at a
price of $0.175 per share for all monies paid in 1995 and may convert monies
paid in 1996 at the average share price of the quarter the monies were paid. In
1996, the Company received $378,551 under this agreement of which only $248,398
was converted into 1,353,374 shares of Common Stock at a price of $.1548 and
165,000 shares of Common Stock at a price of $.2358. The balance of $130,153
remains as a payable to ZMD on the balance sheet as of December 31, 1996. ZMD
currently owns approximately 30% of the Company's Common Stock and may not
exceed 30% without the approval of Simtek's Board of Directors.
The Company had accounts payable, accrued expenses and other payables to
related parties of $1,291,623 at December 31, 1996.
The Company's cash balance at December 31, 1996 was $964,456.
The Company's liquidity will depend on its revenue growth and its ability
to sell its products at positive gross margins and control its operating
expenses.
The Company may require additional capital in the fourth quarter 1997 to
fund production and marketing of its 0.8 micron 256 kilobit nvSRAM and the
development of other new products. The Company does not have any commitments for
such additional capital as of the date of this report.
During 1996, cash flows from operations was $291,287, which is primarily
attributable to a net income of $144,516, plus depreciation and amortization of
$134,393. Net cash used in investing activities of $18,724 was the result of
purchases of equipment and furniture. Net cash flows from financing activities
of $380,021 was primarily the result of proceeds from ZMD under the Cooperation
Agreement.
During 1995, cash flows used in operations was $1,499,853, which was
primarily attributable to a net loss of $1,931,008, less depreciation and
amortization of $204,539. Net cash used in investing activities of $9,755 was
the result of purchases of equipment and furniture. Net cash flows from
financing activities of $972,491 was the result of proceeds from ZMD for
research and development arrangement.
In addition, as is further described in Note 5, the Company has been
notified by three companies that certain of the Company's products may relate to
patents owned by them and could result in the Company having to license the
patents.
A change in the operations of the Company, including the sale or
liquidation of the Company's assets or liabilities could cause amounts realized
21
<PAGE>
to be substantially different than the recorded amounts in the accompanying
financial statements. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
In fiscal 1996, the Company adopted Financial Accounting Standards Board
Statement 123 "Accounting for Stock-Based Compensation" (FAS 123). FAS 123
encourages, but does not require, companies to recognize compensation expense
for grants of stock, stock options, and other equity instruments to employees
based on fair value. Companies that do not adopt the fair value accounting rules
must disclose the impact of adopting the new method in the notes to the
financial statements. Transactions in equity instruments with non-employees for
goods or services must be accounted for on the fair value method. The Company
has elected not to adopt the fair value accounting prescribed by FAS 123 for
employees, and is subject only to the disclosure requirements prescribed by FAS
123.
INFLATION
The impact of inflation on the Company's business has not been material.
22
<PAGE>
SIMTEK CORPORATION
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Independent Auditor's Report................................................24
Balance Sheet - December 31, 1996...........................................25
Statements of Operations - For the Years Ended
December 31, 1996 and 1995...............................................26
Statement of Changes in Shareholders' Equity - For the Years
Ended December 31, 1996 and 1995.........................................27
Statements of Cash Flows - For the Years Ended
December 31, 1996 and 1995...............................................28
Notes to Financial Statements...............................................29
23
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Shareholders
Simtek Corporation
Colorado Springs, Colorado
We have audited the accompanying balance sheet of Simtek Corporation as of
December 31, 1996 and the related statements of operations, changes in
shareholders' equity and cash flows for each of the years in the two-year period
ended December 31, 1996. 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 audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Simtek Corporation as of
December 31, 1996, and the results of its operations and its cash flows for each
of the years in the two-year period ended December 31, 1996, in conformity with
general accepted accounting principles.
HEIN + ASSOCIATES LLP
Denver, Colorado
February 21, 1997
24
<PAGE>
SIMTEK CORPORATION
BALANCE SHEET
DECEMBER 31, 1996
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 964,456
Accounts receivable - trade, net of allowance
for doubtful accounts and
return allowances of $63,092 593,378
Inventory 327,221
Prepaid expenses and other 25,850
-----------
Total current assets 1,910,905
EQUIPMENT AND FURNITURE, net 229,008
-----------
TOTAL ASSETS $ 2,139,913
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable:
ZMD $ 290,957
Other 212,279
Accrued expenses 349,654
Accrued wages 222,136
Accrued vacation payable 86,444
Payable to ZMD 130,153
-----------
Total current liabilities 1,291,623
-----------
COMMITMENTS AND CONTINGENCIES (Notes 4 and 5)
SHAREHOLDERS' EQUITY:
Preferred stock, $1.00 par value;
2,000,000 shares authorized,
none issued and outstanding -
Common stock, $.01 par value;
40,000,000 shares authorized,
28,506,685 shares issued and outstanding 285,067
Additional paid-in capital 29,730,728
Accumulated deficit (29,167,505)
------------
Total shareholders' equity 848,290
------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,139,913
============
See accompanying notes to these financial statements.
25
<PAGE>
SIMTEK CORPORATION
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED
DECEMBER 31,
----------------------------
1996 1995
------------ -------------
NET SALES $ 5,196,653 $ 2,038,749
Cost of sales 3,073,611 2,192,795
------------ ------------
GROSS MARGIN 2,123,042 (154,046)
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE:
Research and development costs 994,444 1,335,123
Sales and marketing 567,049 516,679
Administrative 439,429 556,500
------------ ------------
Total selling, general and
administrative expense 2,000,922 2,408,302
------------ ------------
INCOME (LOSS) FROM OPERATIONS 122,120 (2,562,348)
------------ ------------
OTHER INCOME (EXPENSE):
Royalty income -- 600,000
Interest income, net 16,745 24,283
Other income 5,651 7,057
------------ ------------
Total other income 22,396 631,340
------------ ------------
NET INCOME (LOSS) $ 144,516 $ (1,931,008)
============ ============
NET INCOME (LOSS) PER COMMON SHARE $ .01 $ (.09)
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 27,103,059 21,497,035
============ ============
See accompanying notes to these financial statements.
26
<PAGE>
<TABLE>
<CAPTION>
SIMTEK CORPORATION
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
COMMON STOCK ADDITIONAL TOTAL
-------------------------- PAID-IN ACCUMULATED SHAREHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT EQUITY
---------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCES, January 1, 1995 19,949,300 $ 199,493 $ 27,909,434 $(27,381,013) $ 727,914
Shares converted from ZMD research and
development arrangements 7,029,011 70,290 1,586,710 -- 1,657,000
Net loss -- -- -- (1,931,008) (1,931,008)
---------- ------------ ------------ ------------ ------------
BALANCES, December 31, 1995 26,978,311 269,783 29,496,144 (29,312,021) 453,906
Exercise of stock options 10,000 100 1,370 -- 1,470
Shares converted from ZMD research and
development arrangement 1,518,374 15,184 233,214 -- 248,398
Net income -- -- -- 144,516 144,516
---------- ------------ ------------ ------------ ------------
BALANCES, December 31, 1996 28,506,685 $ 285,067 $ 29,730,728 $(29,167,505) $ 848,290
========== ============ ============ ============ ============
</TABLE>
See accompanying notes to these financial statements.
27
<PAGE>
SIMTEK CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED
DECEMBER 31,
---------------------------
1996 1995
----------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 144,516 $(1,931,008)
Adjustments to reconcile net income
(loss) to net cash from
operating activities:
Depreciation and amortization 134,393 204,539
(Gain) loss on disposal of equipment -- (1,567)
Net change in reserve accounts 87,885 --
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable (400,709) 13,859
Inventory (77,868) 342,571
Prepaid expenses and other (6,561) 111,080
Increase (Decrease) in:
Prepaid royalty receipts, net -- (300,000)
Accounts payable 225,958 (34,119)
Accrued expenses 183,673 94,792
----------- -----------
Net cash provided by (used in)
operating activities 291,287 (1,499,853)
----------- -----------
CASH FLOWS USED IN INVESTING ACTIVITIES -
Purchase of equipment and furniture (18,724) (9,755)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES -
Proceeds from research and
development arrangement 378,551 972,491
Exercise of stock options 1,470 --
----------- -----------
Net cash provided by financing activities 380,021 972,491
----------- -----------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 652,584 (537,117)
CASH AND CASH EQUIVALENTS, beginning of year 311,872 848,989
----------- -----------
CASH AND CASH EQUIVALENTS, end of year $ 964,456 $ 311,872
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 3,769 $ 87
=========== ===========
Conversion of ZMD liability to common stock $ 248,398 $ 1,657,000
=========== ===========
See accompanying notes to these financial statements.
28
<PAGE>
SIMTEK CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:
------------------------------------------------------
NATURE OF BUSINESS OPERATIONS - Simtek Corporation (the "Company") has been
involved in the design and development of nonvolatile semiconductor
products since it commenced business operations in 1987. The Company's
operations have concentrated on the design and development of the 256
kilobit, 64 kilobit, and 16 kilobit nvSRAM product families and associated
products and technologies as well as the development of sources of supply
and distribution channels. As discussed throughout the notes to the
financial statements, the Company has entered into several significant
transactions with Zentrum Mikroelektronik Dresden GmbH (ZMD), a
manufacturer of silicon wafers.
CASH AND CASH EQUIVALENTS - The Company considers all highly liquid
investments with an original maturity of three months or less to be cash
equivalents. As of December 31, 1996, all of the Company's cash and cash
equivalents were held by a single bank, of which $885,790 was in excess of
federally insured amounts.
REVENUE RECOGNITION - Licensing agreement revenues are recognized when the
license is executed, any agreement performance milestones have been
achieved and accepted, and the agreement contingencies are satisfied.
Research and development costs associated with license revenues are
expensed as incurred.
Product sales revenue is recognized when the products are shipped to
customers, including distributors. Customers receive a one year product
warranty and sales to distributors are subject to a product right of return
and product pricing protection in the event of changes in the Company's
product price. The Company provides a reserve for possible product returns,
price changes and warranty costs at the time the sale is recognized.
Royalty income is recognized on the Company's licensed technology when the
Company has fulfilled all obligations associated with the royalties. During
1995, the Company recognized $600,000 in royalty income from ZMD.
INVENTORY - The Company records inventory using the lower of average cost
(first-in, first-out) or market. Inventory at December 31, 1996 includes:
Raw materials $ 33,332
Work in process 247,115
Finished goods 123,939
--------
404,386
Less reserves (77,165)
--------
$327,221
========
DEPRECIATION - Equipment and furniture is recorded at cost. Depreciation is
provided over the assets' estimated useful lives of three to seven years
using straight-line and accelerated methods. The cost and accumulated
depreciation of furniture and equipment sold or otherwise disposed of are
29
<PAGE>
SIMTEK CORPORATION
NOTES TO FINANCIAL STATEMENTS
removed from the accounts and the resulting gain or loss is included in
operations. Maintenance and repairs are charged to operations as incurred
and betterments are capitalized.
NET INCOME (LOSS) PER SHARE - Net income (loss) per common share is
calculated by dividing net income (loss) by the weighted average shares of
common stock and common stock equivalents outstanding. Common stock
equivalents having an anti-dilutive or immaterial effect are not included
in the computation. Income per common share, assuming full dilution,
approximates primary income per common share.
ACCOUNTING ESTIMATES - The preparation of financial statements in
conformity generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the
financial statements and the accompanying notes. The actual results could
differ from those estimates. The Company's financial statements are based
upon a number of estimates, including the allowance for doubtful accounts,
technological obsolescence of inventories, the estimated useful lives
selected for property and equipment, sales returns, warranty reserve, and
the valuation allowance on the deferred tax assets. Due to the
uncertainties inherent in the estimation process, it is at least reasonably
possible that the estimates for these items could be further revised in the
near term and such revisions could be material.
IMPAIRMENT OF LONG-LIVED ASSETS - In fiscal 1996, the Company adopted
Financial Accounting Standards Board Statement 121 "Impairment of
Long-Lived Assets" (FAS 121). In the event that facts and circumstances
indicate that the cost of assets or other assets may be impaired, an
evaluation of recoverability would be performed. If an evaluation is
required, the estimated future undiscounted cash flows associated with the
asset would be compared to the asset's carrying amount to determine if a
write-down to market value or discounted cash flow value is required.
Adoption of FAS 121 had no effect on the December 31, 1996 financial
statements.
STOCK-BASED COMPENSATION - In fiscal 1996, the Company adopted Financial
Accounting Standards Board Statement 123 "Accounting for Stock-Based
Compensation" (FAS 123). FAS 123 encourages, but does not require,
companies to recognize compensation expense for grants of stock, stock
options, and other equity instruments to employees based on fair value.
Companies that do not adopt the fair value accounting rules must disclose
the impact of adopting the new method in the notes to the financial
statements. Transactions in equity instruments with non-employees for goods
or services must be accounted for on the fair value method. The Company has
elected not to adopt the fair value accounting prescribed by FAS 123 for
employees, and is subject only to the disclosure requirements prescribed by
FAS 123.
2. LIQUIDITY:
---------
The Company's ability to maintain profitability will depend primarily on
its ability to continue reducing its manufacturing costs and increase net
sales by increasing the availability of existing products and by the
30
<PAGE>
SIMTEK CORPORATION
NOTES TO FINANCIAL STATEMENTS
introduction of new products. In 1996, the Company purchased all of its
wafers, based on 1.2 micron technology from a single supplier.
Approximately 68% of the Company's sales for 1996 were from finished units
produced from these wafers. The Company has an agreement with this supplier
to provide wafers through September 1997. During 1996, the Company executed
a purchase order with ZMD for 700,000 finished units based on 0.8 micron
technology; sales from these products accounted for approximately 32% of
the Company's sales for 1996. Any disruptions in the Company's
relationships with these suppliers could have an adverse impact on the
Company's operating results. The Company may require additional capital in
the fourth quarter 1997 to fund production and marketing of its 0.8 micron
256 kilobit nvSRAM and the development of other new products. The Company
does not currently have any commitments for additional capital.
3. EQUIPMENT AND FURNITURE:
-----------------------
Equipment and furniture at December 31, 1996 consists of the following:
Research and development equipment and software $ 703,683
Computer equipment and software 95,110
Office furniture 23,982
Other equipment 832,792
-------------
1,655,567
Less accumulated depreciation and amortization (1,426,559)
-------------
$ 229,008
=============
The cost of equipment and furniture acquired for research and development
activities that has alternative future use is capitalized and depreciated
over its estimated useful life.
Depreciation and amortization expense of $134,393 and $204,539 was charged
to operations for the years ended December 31, 1996 and 1995, respectively.
4. PAYABLE TO ZMD:
--------------
In February 1995, ZMD converted $750,000 owed to it under a prior research
and development arrangement into 1,846,154 shares of common stock.
In September 1995, the Company entered into a new Cooperation Agreement
with ZMD for the purpose of jointly developing products. The Cooperation
Agreement expired August 31, 1996. However, the Companies are currently
working together to finalize the qualification of the 256 kilobit nvSRAM
using 0.8 micron process.
Under the Cooperation Agreement, the Company received $907,000 in 1995,
which was converted into 5,182,857 shares of the Company's Common Stock
during 1995. During 1996, the Company received $378,551 from ZMD under the
terms of the Cooperation Agreement. Of the $378,551 received during 1996,
31
<PAGE>
SIMTEK CORPORATION
NOTES TO FINANCIAL STATEMENTS
$248,398 was converted into 1,518,374 shares of common stock. Because ZMD's
ownership of the Company may not exceed 30% without the approval of the
Company's Board of Directors, the additional $130,153 that was received
from ZMD in 1996 was not converted into common stock and is recorded as a
liability at December 31, 1996. The Cooperation Agreement also allowed ZMD
to add a second member to the Company's Board of Directors.
In addition, at December 31, 1996, the Company also owed ZMD $319,759,
primarily for purchases of inventory, and had a receivable of $28,802 from
ZMD. These amounts are reflected net on the balance sheet.
5. COMMITMENTS AND CONTINGENCIES:
-----------------------------
OFFICES LEASES - The Company leases office space under a lease which
expires on October 31, 1998. Monthly lease payments are approximately
$7,254.
The Company leases furniture and equipment under operating leases which
expire over the next three years. Monthly lease payments, including sales
tax, are approximately $18,600. At December 31, 1996, future minimum lease
payments under the equipment, furniture and office leases described above
are as follows:
Year
----
1997 $ 257,789
1998 200,453
1999 60,924
---------
$ 519,166
=========
Office rent and equipment lease expenses were $242,591 and $173,581 for the
years ended December 31, 1996 and 1995, respectively.
PATENT CONTINGENCIES - The Company has, in the past, received notification
of possible infringement of patents from three other semiconductor
manufactures and these matters are under consideration by management and
company counsel. Although patent holders in the industry typically offer
licenses for their patents and these have been offered to Simtek, there can
be no assurance that licenses can be obtained on acceptable terms.
Management believes that these potential claims will not have an adverse
effect on the results of operations or the financial position of the
Company.
ACCRUED SALARY - Due to the cash position of the Company, the Company's
president agreed with the Company's Board of Directors to defer his salary
effective April 1, 1994. As of December 31, 1996, the president had an
accrued salary of $210,000.
6. SHAREHOLDERS' EQUITY:
--------------------
WARRANTS - The Company issued Class B warrants, redeemable at the Company's
option, in connection with its February, 1993, public offering. The Company
32
<PAGE>
SIMTEK CORPORATION
NOTES TO FINANCIAL STATEMENTS
has also issued Representative warrants to theunderwriters of its public
offerings. In 1989 and 1990, the Company issued warrants to acquire Common
Stock to certain of its shareholders. The Company's warrants contain
certain anti-dilutive provisions which will result in adjustment to the
warrant terms upon certain events occurring. During 1996, warrants for the
purchase of 8,946,650 shares of common stock expired.
A summary of the warrants outstanding as of December 31, 1996, is as
follows:
<TABLE>
<CAPTION>
Number
Per of Shares Dollars
Number Warrant Number Per Share Issuable upon
Issue of Warrants Exp. Exercise of Shares Purchase upon Exer. of Exer. of all
Description Date Outstanding Date Price per warr. price all warrants warrants
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class B Warrant 2/17/93 1,725,000 2/12/98 $1.80 1.50 $1.20 2,587,500 $3,105,000
Class B Warrant 2/25/93 81,333 2/12/98 1.80 1.50 1.20 122,000 146,399
--------- ---- --------- ----------
Total Class B
Warrants 1,806,333 $1.80 1.50 $1.20 2,709,500 $3,251,399
========= ===== ===== ========= ==========
Other Warr-Petritz 9/29/89 63,300 10/26/97 $.50 1.00 $.50 63,300 $ 31,650
Other Warr-Petritz 9/27/90 52,751 10/26/97 .50 1.00 .50 52,751 26,376
Other Warr-TTLP 9/29/89 126,600 10/26/97 .50 1.00 .50 126,600 63,300
Other Warr-TTLP 9/27/90 105,499 10/26/97 .50 1.00 .50 105,499 52,750
-------- --------- ----------
Total Other
Warrants 348,150 1.00 $.50 348,150 $ 174,076
======== ==== ========= ==========
Repres. Warr. 3/6/91 195,000 10/26/97 $.50 1.00 $.50 195,000 $ 97,500
Repres. Warr 10/30/92 300,000 10/26/97 .50 1.00 .50 300,000 150,000
Repres. Warr.* 2/25/93 172,500 2/12/98 7.43 * * * *
Repres. Warr. 1/31/94 400,000 1/30/99 1.60 1.00 1.60 400,000 640,000
--------- --------- ----------
Total Repres.
Warrants 1,067,500 895,000 $ 887,500
========= ========= ==========
Total Warrants 3,221,983 3,952,650 $4,312,975
========= ========= ==========
</TABLE>
------------------------
* Each Representative Warrant has anti-dilution provisions detailed in the
Representatives Warrant Agreement dated February 17, 1993 between Simtek
Corporation and Berkeley Securities Corporation.
STOCK OPTION PLANS - The Company has two stock option plans that authorize
an aggregate of 4,500,000 shares for stock options that may be granted to
directors, employees, and consultants. The plans permit the issuance of
incentive and non-statutory options and provide for a minimum exercise
price equal to 100% of the fair market value of the Company's common stock
on the date of grant. The maximum term of options granted under the plans
is 10 years and options granted to employees expire three months after the
termination of employment. None of the options may be exercised during the
33
<PAGE>
SIMTEK CORPORATION
NOTES TO FINANCIAL STATEMENTS
first six months of theoption term. No options may be granted after 10
years from the adoption date of each plan. The Incentive Stock Option Plan
was adopted in 1991, and the Non-Qualified Stock Option Plan was adopted in
1994. The following is a summary of activity under these stock option plans
for the years ended December 31, 1996 and 1995:
1996 1995
-------------------- --------------------
Weighted Weighted
Average Average
Number Exercise Number Exercise
of Shares Price of Shares Price
--------- -------- ---------- --------
Outstanding, beginning of year 3,620,000 $.17 2,888,200 $.17
Granted, including 2,882,500 .14 1,598,000 .17
exchanges
Exchanged* (2,470,000) .17 -
Exercised (10,000) .15 -
Canceled (875,000) .17 (866,200) .17
---------- ----------
Outstanding, end of year 3,147,500 $.14 3,620,000 $.17
========== ==========
------------------------
* All options outstanding at January 19, 1996 were reissued with an
exercise price of $.147 for the Incentive Stock Options, and $.133 for
the Non-Qualified Stock options. The original vesting requirements and
expiration dates were not changed.
For all options granted during 1996 and 1995, and all options repriced
during 1996, the weighted average market price of the Company's common
stock on the grant date and repricing date was approximately equal to the
weighted average exercise price. At December 31, 1996, options for
1,852,822 shares were exercisable and options for the remaining 829,178,
433,889, and 31,611 shares will become exercisable in 1997, 1998, and 1999,
respectively. If not previously exercised, options outstanding at December
31, 1996, will expire as follows:
34
<PAGE>
SIMTEK CORPORATION
NOTES TO FINANCIAL STATEMENTS
Weighted
Average
Number Exercise
Year Ending December 31, of Shares Price
------------------------ ----------- ---------
1998 13,300 $.15
1999 79,500 .15
2000 268,000 .13
2001 1,014,200 .13
2002 1,360,000 .13
2003 412,500 .13
----------
3,147,500
==========
PRO FORMA STOCK-BASED COMPENSATION DISCLOSURES - The Company applies APB
Opinion 25 and related interpretations in accounting for its stock options
and warrants which are granted to employees. Accordingly, no compensation
cost has been recognized for grants of options and warrants to employees
since the exercise prices were not less than the market value of the
Company's common stock on the grant dates. Had compensation cost been
determined based on the fair value at the grant dates for awards under
those plans consistent with the method of FAS 123, the Company's net income
(loss) and earnings per share would have been reduced to the pro forma
amounts indicated below.
Year Ended December 31,
------------------------
1996 1995
--------- ------------
Net income (loss) applicable
to common stockholders
As reported $144,516 $(1,931,008)
Pro forma (40,132) (1,943,392)
Net income (loss) per common shareholders:
As reported $ .01 $ (.09)
Pro forma - (.09)
Fully diluted .01 (.09)
Fully diluted - pro forma - (.09)
35
<PAGE>
SIMTEK CORPORATION
NOTES TO FINANCIAL STATEMENTS
The fair value of each option granted in 1996 and 1995, and the fair value
of each option repriced in 1996, was estimated on the date of grant, (or
repricing) using the Black-Scholes option-pricing model with the following
weighted average assumptions:
Options
Repriced Options Granted During
During -----------------------
1996 1996 1995
-------- ------- ------
Expected volatility 131.0% 122.0% 139.0%
Risk-free interest rate 6.0% 6.0% 6.0%
Expected dividends - - -
Expected terms (in years) 4.0 4.0 4.0
OTHER - Preferred Stock may be issued in such series and preferences as
determined by the Board of Directors.
7. SIGNIFICANT CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS AND OTHER
RISKS AND UNCERTAINTIES:
----------------------------------------------------------------------
Sales to foreign customers and sales of military products were as follows
(as a percentage of sales):
1996 1995
---- ----
Foreign customers 53% 47%
Military products sales 36% 33%
Sales to unaffiliated customers which represent 10% or more of the
Company's sales for the years ended December 31, 1996 and 1995 were as
follows:
Customer 1996 1995
-------- ---- ----
A 24% 13%
B 10% 11%
C 10% 12%
D 17% 19%
The Company frequently sells large quantities of inventory to its
customers. At December 31, 1996, the Company had gross trade receivables
totaling approximately $534,000 due from six customers.
36
<PAGE>
SIMTEK CORPORATION
NOTES TO FINANCIAL STATEMENTS
In 1996, the Company purchased all of its wafers, based on 1.2 micron
technology from a single supplier located in Singapore. Approximately 68%
of the Company's sales for 1996 were from finished units produced from
these wafers. The Company has an agreement with this supplier to provide
wafers through September 1997. In 1996, the Company also purchased finished
units from ZMD based on 0.8 micron technology for $1,119,131 and sales from
these products accounted for approximately 32% of the Company's sales for
1996. ZMD currently owns approximately 30% of the Company. However, any
disruptions in the Company's relationships with these suppliers could have
an adverse impact on the Company's operating results. Assuming a
manufacturer of the Company's products could be procured, management
believes there could be significant delays in manufacturing while the
manufacturer incorporates the Company's products and processes.
8. INCOME TAXES:
Under SFAS 109, deferred taxes result from temporary differences between
the financial statement carrying amounts and the tax bases of assets and
liabilities. The components of deferred taxes are as follows:
Deferred Tax
Assets
-------------
Current:
Accounts receivable $ 106,000
Inventories 29,000
Accrued expenses 210,000
---------
Total 345,000
Valuation allowance (345,000)
----------
Total current deferred tax $ -
==========
Non-current:
Property and equipment $ 19,000
Net operating losses 1,419,000
AMT credit 60,000
----------
Net deferred tax asset before allowance 1,498,000
Valuation allowance (1,498,000)
----------
Total non-current deferred tax asset $ -
==========
The net current and non-current deferred tax assets have a 100% valuation
allowance resulting from the inability to predict sufficient future taxable
income to utilize the assets.
At December 31, 1996, the Company has approximately $3,800,000 available in
net operating loss carryforwards which begin to expire from 2004 to 2010.
The utilization of these net operating loss carryforwards will be subject
to restrictions because of the ownership change of the Company that
occurred as a result of issuances of the Company's Common Stock. These
restrictions limit the amount of utilizable net operating loss
carryforwards each year.
37
<PAGE>
SIMTEK CORPORATION
NOTES TO FINANCIAL STATEMENTS
Total income tax expense for 1996 differed from the amounts computed by
applying the U.S. Federal statutory tax rates to pre-tax income as follows:
Total expense computed by applying the U.S.
statutory rate (34%) $ 49,000
Effect of changes in accounts receivable reserve 44,000
Effect of net operating loss carryforward (92,000)
Other (1,000)
-----------
Provision for income taxes $ -
===========
38
<PAGE>
ITEM 8: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
- --------------------------------------------------------------------------
None in 1996.
39
<PAGE>
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -----------------------------------------------------------
The directors and executive officers of the Company are as follows
Name Age Position
- ---- --- --------
Richard L. Petritz......... 74 Chairman of the Board of Directors, Chief
Executive Officer and President
Sheldon A. Taylor.......... 56 Director
Klaus C. Wiemer............ 59 Director
Robert H. Keeley........... 55 Director
Kurt Garbrecht............. 64 Director
Detlef Golla............... N/A Director
RICHARD L. PETRITZ, a founder of Simtek, has served as Chairman of the
Board of Directors of the Company since its inception and served as President of
the Company from inception until July 1993. On January 1, 1996 he again became
Chief Executive Officer and President of the Company. Dr. Petritz was a founder
of Inmos International, plc, a semiconductor memory and microcomputer
manufacturer. Dr. Petritz was the Chief Executive Officer of Inmos from 1978
through June 1983 and Chairman of Inmos from 1980 through 1982. Dr. Petritz was
also a founder and the first President of Mostek Corporation, a semiconductor
memory manufacturer that was acquired by a wholly owned subsidiary of United
Technologies Corporation in October 1979. Prior to that time, he was the
director of Texas Instruments' semiconductor research and development
laboratories. Dr. Petritz holds a Bachelors degree in electrical engineering, a
Masters degree in electrical engineering and a Ph.D. in physics, all from
Northwestern University. He is a fellow of both the American Physical Society
and the Institute of Electrical and Electronics Engineers.
SHELDON A. TAYLOR, served as President, Chief Executive Officer and
Director from August 1994 to December 31, 1995. He continues to serve Simtek as
a Director. Mr. Taylor has over 30 years of semiconductor business experience,
including the positions of General Manager of Intel's EPROM and SRAM business,
President and CEO of WaferScale Integration, Inc. and President and CEO of IXYS.
Mr. Taylor holds a Bachelors of science in electrical engineering from Drexel
University and has done extensive graduate work in physics and business.
KLAUS C. WIEMER, has served as a director of the Company since May 1993.
From July 1993 to May 1994, Dr. Wiemer served as President and Chief Executive
Officer of the Company. Since April 1996, Dr. Wiemer has been President and
Chief Operating Officer of InterConnect Technology Sdn Bhd, a company chartered
under the laws of Malaysia, with headquarters in Kuching, Sarawak, Malaysia.
InterConnect Technology is a semiconductor contract manufacturing company. From
April 1991 to April 1993, Dr. Wiemer was President and Chief Executive Officer
40
<PAGE>
of Chartered Semiconductor Manufacturing Pte., Ltd. in Singapore, and from July
1987 to March 1991, Dr. Wiemer was President and Chief Operating Officer of
Taiwan Semiconductor Manufacturing Company. Prior to 1987, Dr. Wiemer was a
consultant for the Thomas Group specializing in the area of integrated circuit
manufacturing and previously worked for fifteen years with Texas Instruments.
Dr. Wiemer holds a Bachelors degree in physics from Texas Western College, a
Masters degree in physics from the University of Texas and a Ph.D. in physics
from Virginia Polytechnic Institute.
ROBERT H. KEELEY, has served as a director of the Company since May 1993.
He is currently the El Pomar Professor of Finance at the University of Colorado
at Colorado Springs. From 1986 until he joined the faculty at the University of
Colorado at Colorado Springs in 1992, Dr. Keeley was a professor in the
Department of Industrial Engineering and Engineering Management at Stanford
University. Prior to joining Stanford, he was a professor at the Wharton School
of Business at the University of Pennsylvania and a general partner of Hill,
Carmen and Washing (formerly Hill, Keeley and Kirby), a venture capital firm.
Dr. Keeley holds a Bachelors degree in electrical engineering from Stanford
University, an M.B.A. from Harvard University and a Ph.D. in business
administration from Stanford University. Dr. Keeley is also a director of
Analytical Surveys, Inc. and Divide Drives, Inc.
KURT GARBRECHT, has served as a director of the Company since September
1994. He is currently the Chief Executive Officer of Zentrum Mikroelektronic
Dresden GmbH ("ZMD"). Dr. Garbrecht has had a distinguished career in the
semiconductor business, having been a senior manager of the Siemens Company
semiconductor operation for more than 10 years.
DETLEF GOLLA, has served as a director of the Company since August 1996. He
is currently the Chief Financial Officer of Zentrum Mikroelektronic Dresden GmbH
("ZMD").
Subject to the requirement that the Board of Directors be classified if it
consists of six or more persons, directors serve until the next annual meeting
or until their successors are elected and have qualified. Officers serve at the
discretion of the Board of Directors. Vacancies on the Board of Directors are
filled by the existing directors. Thomas James Associates, Inc. ("Thomas
James"), the underwriter for the Company's third public offering, has the right
to designate for election one member of the Board until January 28, 1999. Thomas
James has not designated any person for election to the Board.
SPECIAL PROVISIONS IN ARTICLES OF INCORPORATION
The Company's Articles of Incorporation contain a provision limiting the
liability of directors of the Company to the fullest extent permitted under the
Colorado Corporation Code (the "Code"). The Code allows a corporation to limit
the personal liability of a director to the corporation or its shareholders for
monetary damages for breaches of fiduciary duty as a director except for (a)
breaches of the director's duty of loyalty, (b) acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of the law,
(c) certain other acts specified in the Code, and (d) transactions from which
the director derived an improper benefit. The provisions of the Code will not
impair the Company's ability to seek injunctive relief for breaches of fiduciary
duty. Such relief, however, may not always be available as a practical matter.
The Company's Articles of Incorporation also contain a provision that
requires the Company to indemnify, to the fullest extent permitted under the
Code, directors and officers of the Company against all costs and expenses
reasonably incurred in connection with the defense of any claim, action, suit or
41
<PAGE>
proceeding, whether civil, criminal, administrative, investigative or other, in
which such person may be involved by virtue of being or having been a director,
officer or employee.
42
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information for each of the
Company's last three fiscal years with respect to the annual and long-term
compensation of each individual acting as the Company's Chief Executive Officer
during the fiscal year ended December 31, 1996. No executive officer of the
Company as of December 31, 1996 had combined annual salary and bonus for the
fiscal year ended December 31, 1996 that exceeded $100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
--------------------------------
Annual Compensation Awards Payouts
------------------------------------------------------------------------
Other Restricted
Name and Annual Stock LTIP All Other
Principal Compen- Award(s) Options/ Payouts Compen-
Position Year Salary($) Bonus($) sation($) ($) SARs(#) ($) sation($)
- --------- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Richard L. Petritz(1) 1996 $ 60,000(2) -- -- -- -- -- --
Chairman and 1995 $ 60,000(2) -- -- -- -- -- --
President 1994 120,000(2) -- -- -- -- -- --
(1) Dr. Petritz also served as the Company's Chief Executive Officer from May
1987 until July 1, 1993. He resumed these duties as of January 1, 1996.
(2) Due to the cash position of the Company, Dr. Petritz agreed with the
Company's Board of Directors to defer his salary effective April 1, 1994.
This amount is included in the $222,136 of accrued wages on the Company's
balance sheet as of December 31, 1996.
</TABLE>
OPTION GRANT TABLE
There were no options granted during the fiscal year ended December 31,
1996 to the individual named in the summary compensation table above.
YEAR-END OPTION TABLE
There were no options held by the individual named in the summary
compensation table above.
EMPLOYMENT AGREEMENTS
RICHARD L. PETRITZ. Dr. Petritz was employed by the Company as Chairman and
senior adviser to the Company's Chief Executive Officer during 1995. Under the
terms of his employment, Dr. Petritz is obligated to work 30 hours per week, for
which Dr. Petritz receives an annual salary of $60,000, payable monthly. Dr.
Petritz receives additional benefits that are generally provided other
employees. Dr. Petritz's employment term expired December 31, 1995 but is
automatically renewed for successive one- year terms unless the Company or Dr.
Petritz elects not to continue with the employment arrangement.
43
<PAGE>
On January 1, 1996, Dr. Petritz became Chief Executive Officer and President.
The terms of his compensation remain the same as in 1995.
CONFIDENTIALITY AND NONDISCLOSURE AGREEMENTS
The Company generally requires its employees to execute confidentiality and
nondisclosure agreements upon the commencement of employment with the Company.
The agreements generally provide that all inventions or discoveries by the
employee related to the Company's business and all confidential information
developed or made known to the employee during the term of employment shall be
the exclusive property of the Company and shall not be disclosed to third
parties without the prior approval of the Company.
DIRECTORS' COMPENSATION
Each director of the Company who is not also an employee of the Company
receives $1,000 for each meeting of the Board, attended in person, and $500 for
each meeting of a committee of the Board. Directors are also reimbursed for
their reasonable out-of-pocket expenses incurred in connection with their duties
to the Company. During the fiscal year ended December 31, 1996 no options were
granted to the Directors of the Company.
44
<PAGE>
ITEM 11: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------
The table below sets forth certain information regarding ownership of the
Company's Common Stock as of December 31, 1996 by each person who is known by
the Company to beneficially own more than five percent of the Common Stock, by
each director of the Company, by each executive officer named in the summary
compensation table and by all directors and executive officers of the Company as
a group. Shares issuable within sixty days after December 31, 1996 upon the
exercise of warrants or options are deemed outstanding for the purpose of
computing the percentage ownership of persons beneficially owning such warrants
or options or holding such notes but are not deemed outstanding for the purpose
of computing the percentage ownership of any other person. The number of shares
issuable upon exercise of outstanding Class B Redeemable Warrants gives effect
to anti-dilution provisions triggered by issuances of the Company's securities
through December 31, 1996. After giving effect to these anti-dilution
provisions, each Class B Redeemable Warrant entitles the holder thereof to
purchase 1.50 shares of Common Stock at an effective purchase price of $1.20 per
share. To the knowledge of the Company, the persons listed below have sole
voting and investment power with respect to the shares indicated as owned by
them subject to community property laws where applicable and the information
contained in the notes to the table.
Name and Amount and Nature
Address of of Beneficial Percent of
Beneficial Owner Ownership Class
- --------------------------------------------------------------------------------
Dr. Kurt Garbrecht, CEO 8,547,385 (1) 29.98%
Mr. Detlof Golla, CFO
Zentrum Mikroelektronik Dresden GmbH
Grenzstra e 28
01109 Dresden, Germany
Richard L. Petritz 1,376,210 (2) 4.81%
3109-D Broadmoor Valley Rd.
Colorado Springs, CO 80906
Klaus C. Wiemer 120,000 (3) *
5705 Archer Court
Dallas, TX 75252
Robert H. Keeley 85,000 (4) *
12630 Milan Road
Colorado Springs, CO 80908
Sheldon A. Taylor 150,000 (5) *
1384 Cuernavaca Circulo
Mountain View, CA 94040
45
<PAGE>
All officers and directors as a group
(5 persons) 10,278,595 (6) 35.51%
* Less than one percent.
(1) Dr. Kurt Garbrecht and Mr. Detlof Golla are the chief executive officer and
chief financial officer of Zentrum Mikroelektronik Dresden GmbH. The
8,547,385 shares of Common Stock are held in the name of Zentrum
Mikroelektronik Dresden GmbH.
(2) Includes 116,051 shares issuable upon exercise of other warrants. Does not
include 289,900 shares owned by irrevocable trusts created for the benefit
of Dr. Petritz's lineal descendants. Dr. Petritz has no voting or
investment power with respect to such shares and disclaims beneficial
ownership thereof.
(3) Includes 100,000 shares issuable upon exercise of options.
(4) Includes 75,000 shares issuable upon exercise of options.
(5) Includes 150,000 shares issuable upon exercise of options.
(6) Includes 116,051 shares issuable upon exercise of othe warrants and
325,000 shares issuable upon exercise of stock options.
46
<PAGE>
ITEM 12: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
Dr. Kurt Garbrecht, a director of the Company, and Mr. Detlof Golla are
currently the Chief Executive Officer and Chief Financial Officer, respectively
of ZMD. In June 1994, the Company entered into a product license development and
support agreement with ZMD pursuant to which the Company agreed to install its
1.2 micron product technology at ZMD's manufacturing facility in Germany and the
Company and ZMD agreed to jointly develop 0.8 micron product technology. ZMD was
obligated to pay and did pay Simtek $750,000 for Simtek's development expenses
incurred in connection with the agreement. ZMD was given the right, exercisable
at any time prior to December 31, 1995, to convert all or a portion of the
development funding into shares of the Company's Common Stock, up to a maximum
of 20% of the outstanding shares of Common Stock. Effective February 28, 1995,
ZMD converted the $750,000 into 1,846,154 shares of Common Stock.
Under the Cooperation Agreement entered into with ZMD in September 1995,
ZMD had the right to convert all financing into shares of Common Stock at a
price of $0.175 per share for all monies paid in 1995 and may convert financing
paid in 1996 at the average share price of the quarter the monies were paid.
Through December 31, 1995, total payments of $907,000 had been made. Effective
December 31, 1995, ZMD converted the $907,000 into 5,182,857 shares of Common
Stock at a price of $0.175 per share. In 1996, the Company received $378,551
under this agreement of which only $248,398 was converted into 1,353,374 shares
of Common Stock at a price of $.1548 and 165,000 shares of Common Stock at a
price of $.2358. The remaining $130,153 is shown as a payable to ZMD on the
balance sheet as of December 31, 1996. ZMD currently owns approximately 30% of
the Company's Common Stock and may not exceed 30% without the approval of
Simtek's Board of Directors.
47
<PAGE>
PART IV
ITEM 13: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- -------------------------------------------------------------------------
Documents filed as part of this report:
A: (1) Financial Statements
Reference is made to the listing on page 23 for an index of all
financial statements filed as part of this report.
(2) All other schedules are omitted because they are not required, are
inapplicable, or the information is otherwise shown in the
financial statements or the notes thereto.
B. Reports on Form 8-K:
The following table lists all reports filed on Form 8-K for the fourth
quarter of 1996.
Date Item
---- ----
October 28, 1996 Other information - Second Quarter 1996
Interim Report.
December 23, 1996 Other information - Third Quarter 1997
Interim report.
C. Exhibits:
Exhibit Index regarding exhibits filed in accordance with Item 601, at page
50 hereof.
D. Other Financial Statements:
All other schedules are omitted because they are not required, are
inapplicable, or the information is otherwise shown in the financial
statements or the notes thereto.
48
<PAGE>
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 the City of Colorado
Springs, State of Colorado, United States of America, on March 18, 1997.
SIMTEK CORPORATION
/s/RICHARD L. PETRITZ
By:_______________________________________
Richard L. Petritz
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed on March 18, 1997 by the following persons on behalf of the
Registrant and in the capacities indicated.
SIGNATURE TITLE
/s/RICHARD L. PETRITZ Chairman of the Board
_____________________________________
Richard L. Petritz
/s/RICHARD L. PETRITZ
_____________________________________ Chief Executive Officer and
Richard L. Petritz President
/s/RICHARD L. PETRITZ Chief Financial Officer (acting)
_____________________________________
Richard L. Petritz
/s/SHELDON A. TAYLOR Director
_____________________________________
Sheldon A. Taylor
/s/ROBERT H. KEELEY Director
_____________________________________
Robert H. Keeley
/s/KLAUS WIEMER Director
_____________________________________
Klaus Wiemer
/s/KURT GARBRECHT Director
_____________________________________
Kurt Garbrecht
/s/DETLEF GOLLA Director
_____________________________________
Detlef Golla
49
<PAGE>
EXHIBIT INDEX TO FORM 10-K
FOR FISCAL YEAR ENDED DECEMBER 31, 1996
Exhibits:
All exhibits listed below incorporated herein by reference.
----------------------------------------------------------
3.1 Amended and Restated Articles of Incorporation.(2)
3.2 Bylaws.(2)
4.1 1987-I Employee Restricted Stock Plan.(1)
4.2 Form of Restricted Stock Agreement between the Company and Participating
Employees.(1)
4.3 Warrant Agreement between the Company and Josephthal Lyon & Ross
Incorporated.(3)
4.4 Stock Purchase Warrant issued by the Company to Transitions Three Limited
Partnership.(1)
4.5 Stock Purchase Warrant issued by the Company to Richard L. Petritz.(1)
4.6 Stock Purchase Warrant issued by the Company to Transitions Three Limited
Partnership.(1)
4.7 Stock Purchase Warrant issued by the Company to Richard L. Petritz.(1)
4.8 Stock Purchase Warrant issued by the Company to Transitions Three Limited
Partnership.(1)
4.9 Stock Purchase Warrant issued by the Company to Richard L. Petritz.(1)
4.10 Stock Purchase Warrant issued by the Company to Transitions Three Limited
Partnership.(2)
4.11 Stock Purchase Warrant issued by the Company to Richard L. Petritz.(2)
4.12 Stock Purchase Warrant issued by the Company to Transitions Three Limited
Partnership.(2)
4.13 Stock Purchase Warrant issued by the Company to Richard L. Petritz.(2)
4.14 Warrant Agreement between the Company and Continental Stock Transfer &
Trust Company.(3)
4.15 Form of Common Stock Certificate.(3)
4.16 Form of Warrant Certificate.(3)
4.17 Simtek Corporation 1991 Stock Option Plan.(5)
4.18 Form of Incentive Stock Option Agreement between the Company and Eligible
Employees.(5)
4.19 Form of Promissory Note issued by the Company in the October 1992 private
placement.
4.20 Form of Warrant Agreement between the Company and Continental Stock
Transfer & Trust Company.(7)
4.21 Form of Representative's Warrant Agreement between the Company and
Berkeley Securities Corporation.(7)
4.22 Form of Unit Certificate.(8)
4.23 Form of Representative's Warrant Agreement (with form of warrant
attached).(8)
4.24 1994 Non-Qualified Stock Option Plan.(9)
4.25 Amendment to the 1994 Non-Qualified Stock Option Plan.(10)
10.1 Amended General Licensing Agreement effective March 24, 1988 between
the Company and Nippon Steel Corporation.(1)
10.2 Amended Basic CMOS Technology Specific Licensing Agreement effective
March 24, 1988 between the Company and Nippon Steel Corporation.(1)
10.3 Amended Nitride Process Technology Specific Licensing Agreement effective
March 24, 1988 between the Company and Nippon Steel Corporation.(1)
10.4 256K EEPROM Amended Product Specific Licensing Agreement effective
March 24, 1988 between the Company and Nippon Steel Corporation.(1)
10.5 256K SRAM and 64K nvSRAM Agreement effective October 12, 1989 between the
Company and Nippon Steel Corporation.(2)
10.6 CAD Software License Agreement effective January 25, 1990 between the
Company and Nippon Steel Corporation.(1)
10.7 Supplemental Agreement effective March 26, 1990 between the Company and
Nippon Steel Corporation amending the 256K EEPROM Amended Product
Specific Licensing Agreement effective March 24, 1988 between the
Company and Nippon Steel Corporation and the 256K SRAM and 64K nvSRAM
Agreement effective October 12, 1989 between the Company and Nippon Steel
Corporation.(1)
10.8 Supplemental Agreement effective March 26, 1990 between the Company and
Nippon Steel Corporation amending the Amended Nitride Process Technology
Specific Licensing Agreement effective March 24, 1988 between the Company
and Nippon Steel Corporation and the 256K SRAM and 64K nvSRAM Agreement
effective October 12, 1989 between the Company and Nippon Steel
Corporation.(1)
50
<PAGE>
10.9 Supplemental Agreement effective March 26, 1990 between the Company and
Nippon Steel Corporation amending the Amended Basic CMOS Technology
Specific Licensing Agreement effective March 24, 1988 between the
Company and Nippon Steel Corporation and the 256K SRAM and 64K nvSRAM
Agreement effective October 12, 1989 between the Company and Nippon
Steel Corporation.(1)
10.10 Supplemental Agreement II effective June 19, 1990 between the Company
and Nippon Steel Corporation.(1)
10.11 Supplemental Agreement II effective September 28, 1990 between the
Company and Nippon Steel Corporation amending the Amended Basic CMOS
Technology Specific Licensing Agreement effective March 24, 1988, the
Amended Nitride Process Technology Specific Licensing Agreement
effective March 24, 1988, and the 256K EEPROM Amended Product Specific
Licensing Agreement effective March 24, 1988.(1)
10.12 Evaluation, Development and License Agreement effective July 24, 1989
between the Company and GEC Plessey Semiconductors Limited, as successor
in interest to The Plessey Company plc.(2)
10.13 Product License Agreement effective January 19, 1990 between the Company
and GEC Plessey Semiconductors Limited, as successor in interest to The
Plessey Company plc.(1)
10.14 First Amendment to Evaluation, Development and License Agreement
effective September 30, 1990 between the Company and GEC Plessey
Semiconductors Limited amending the Evaluation, Development and License
Agreement effective July 24, 1989 between the Company and GEC Plessey
Semiconductors Limited, as successor in interest to The Plessey Company
plc.(2)
10.15 First Amendment to Product License Agreement effective September 30,
1990 between the Company and GEC Plessey Semiconductors Limited amending
the Product License Agreement effective January 19, 1990 between the
Company and GEC Plessey Semiconductors Limited, as successor in interest
to The Plessey Company plc.(1)
10.16 Employment Agreement dated effective January 1, 1991 between the Company
and Richard L. Petritz.(2)
10.17 Form of Non-Competition and Non-Solicitation Agreement between the
Company and certain of its employees.(1)
10.18 Form of Employee Invention and Patent Agreement between the Company and
certain of its employees.(1)
10.19 Master Equipment Lease Agreement effective June 8, 1988 between the
Company and Equitable Life Leasing Corporation.(1)
10.20 Letter Agreement effective December 18, 1987 between the Company and Ford
Colorado Properties, Incorporated.(1)
10.21 License Agreement effective November 9, 1990 between the Company and
Nippon Steel Corporation.(1)
10.22 Form of Sales Representative Agreement between the Company and its sales
representatives.(2)
10.23 Investors Registration Rights Agreement dated January 31, 1991 among the
Company, TTLP, Dr. Richard L. Petritz and NS America, Inc.(2)
10.24 Founders Registration Rights Agreement dated January 31, 1991 among th
Company, Dr. Richard L. Petritz, Dr. Gary F. Derbenwick, Elaine H.
Derbenwick, the Pamela J. Petritz Cooper Irrevocable Family Trust and
the Jeffrey Marc Cooper Irrevocable Family Trust.(2)
10.25 License Agreement dated January 14, 1991 between the Company and
Nippon Steel Corporation.(2)
10.26 Second Amendment to Product License Agreement dated January 31, 1991
between the Company and GEC Plessey Semiconductors Limited.(2)
10.27 Second Amendment to Evaluation, Development and License Agreement dated
January 31, 1991 between the Company and GEC Plessey Semiconductors
Limited.(2)
10.28 Letter Agreement dated as of March 4, 1991 between the Company and
Sym-Tek Systems, Inc.(4)
10.29 Settlement Agreement dated effective March 4,1991 between the Company
and Sym-Tek Systems, Inc.(4)
10.30 Letter Agreement dated January 20, 1992 between the Company and Sym-Tek
Systems, Inc.(5)
10.31 Development, License and Product Agreement dated effective April 19,
1991 between the Company and Electronics System Group of TRW
Incorporated.(5)
10.32 Notice of Termination of Development, License and Product Agreement
between the Company and Electronics System Group of TRW Incorporated.(5)
10.33 Warrant Agreement between the Company and Continental Stock Transfer &
Trust Company.(6)
10.34 Placement Agent Agreement between the Company and Josephthal Lyon & Ross
Incorporated.(6)
51
<PAGE>
10.35 Amendment No. 1 to Representative's Warrant Agreement between the Company
and Josephthal Lyon & Ross Incorporated.(6)
10.36 Form of Financial Advisory and Investment Banking Agreement between the
Company and Berkeley Securities Corporation.(6)
10.37 Form of Warrant issued by the Company in the October 1992 and January
1993 private placements.(8)
10.38 Convertible Secured Note Purchase Agreement between the Company and
Continental Stock Transfer & Trust Company.(8)
10.39 Underwriting Agreement between the Company and Josephthal Lyon & Ross
Incorporated. (originally filed as Exhibit 1.1)(3)
10.40 Underwriting Agreement between the Company and Berkeley Securities
Corporation.(originally filed as Exhibit 1.1)(7)
10.41 Product License Development and Support Agrreement between Simtek
Corporation and Zentrum Mikroelektronik Dresden GmbH dated June 1,
1994(9)
10.42 Letter of Intent Corporation Agreement between Simtek Corporation and
Zentrum Mikroelektronik Dresden GmbH dated August 26, 1994(9)
10.43 Employment Agreement between Simtek Corporation and Sheldon Taylor(9)
10.44 Letter Intent between Simtek Corporation and Zentrum Mikroelektronik
Dresden GmbH dated July 21, 1995(10)
10.45 Cooperation Agreement between Simtek Corporation and Zentrum
Mikroelektronik Dresden GmbH dated September 14, 1995(10)
10.46 Subscription Agreement between Simtek Corporation and Zentrum
Mikroelektronik Dresden GmbH dated February 28, 1995(10)
10.47 Subscription Agreement between Simtek Corporation and Zentrum
Mikroelektronik Dresden GmbH dated December 31, 1995(10)
10.48 Manufacturing Agreement between Chartered Semiconductor Manufacturing,
PTE, LTD. and Simtek Corporation dated September 16, 1992(10)
- -----------------------
(1) Incorporated by reference to the Company's Form S-1 Registration
Statement (Reg. No. 33-37874) filed with the Commission on November 19,
1990.
(2) Incorporated by reference to the Company's Amendment No.1 to Form S-1
Registration Statement (Reg. No. 33-37874) filed with the Commission on
February 4, 1991.
(3) Incorporated by reference to the Company's Amendment No.2 to Form S-1
Registration Statement (Reg. No. 33-37874) filed with the Commission
on March 4, 1991.
(4) Incorporated by reference to the Company's Post-Effective Amendment No.1
to Form S-1 Registration Statement (Reg. No. 33-37874) filed with the
Commission on March 14, 1991.
(5) Incorporated by reference to the Company's Form S-1 Registration
Statement (Reg. No. 33-46225) filed with the Commission on March 6, 1992.
(6) Incorporated by reference to the Company's Form S-1 Registration
Statement (Reg. No. 33-55516) filed with the Commission on December 10,
1992.
(7) Incorporated by reference to the Company's Amendment No.1 to Form S-1
Registration Statement (Reg. No. 33-55516) filed with the Commission on
January 29, 1993.
(8) Incorporated by reference to the Company's Amendment No.2 to Form S-1
Registration Statement (Reg. No. 33-55516) filed with the Commission on
February 10, 1993.
(9) Incorporated by reference to the Company's Annual Report on Form 10-K
filed with the Commission on March 25, 1995.
(10) Incorporated by reference to the Company's Annual Report on Form 10-K
filed with the Commission on March 27, 1996
52
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY TO SUCH FORM 10-K.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 964,456
<SECURITIES> 0
<RECEIVABLES> 656,470
<ALLOWANCES> 63,092
<INVENTORY> 327,221
<CURRENT-ASSETS> 1,910,105
<PP&E> 1,655,567
<DEPRECIATION> 1,426,559
<TOTAL-ASSETS> 2,139,913
<CURRENT-LIABILITIES> 1,291,623
<BONDS> 0
0
0
<COMMON> 285,067
<OTHER-SE> 563,223
<TOTAL-LIABILITY-AND-EQUITY> 2,139,913
<SALES> 5,196,653
<TOTAL-REVENUES> 5,196,653
<CGS> 3,073,611
<TOTAL-COSTS> 3,073,611
<OTHER-EXPENSES> 2,000,922
<LOSS-PROVISION> 15,180
<INTEREST-EXPENSE> 3,763
<INCOME-PRETAX> 144,516
<INCOME-TAX> 0
<INCOME-CONTINUING> 144,516
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 144,516
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
