UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
SIMTEK CORPORATION
- --------------------------------------------------------------------------------
(Exact name small business issuer as specified in its charter)
Colorado 84-1057605
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1465 Kelly Johnson Blvd. Suite 301; Colorado Springs, Colorado 80920
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(719) 531-9444
- --------------------------------------------------------------------------------
(issuer's telephone number)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
Class Outstanding at August 7,1998
- --------------------------------------------------------------------------------
(Common Stock, $.01 par value) 28,745,226
<PAGE>
SIMTEK CORPORATION
INDEX
For Quarter Ended June 30, 1998
PART 1. FINANCIAL INFORMATION
ITEM 1 Page
----
Balance Sheets as of June 30, 1998 and
December 31, 1997 3
Statements of Income and Comprehensive Income for
the three months and six months ended June 30, 1998
and 1997 4
Statements of Cash Flows for the six months ended
June 30, 1998 and 1997 5
Notes to Financial Statements 6
ITEM 2
Management's Discussion and Analysis of Results of
Operations and Financial Condition 7-9
PART II. OTHER INFORMATION
ITEM 1 Legal Proceedings 10
ITEM 2 Changes in Securities 10
ITEM 3 Defaults upon Senior Securities 10
ITEM 4 Matters Submitted to a Vote of Securities Holders 10
ITEM 5 Other Information 10
ITEM 6 Exhibits and Reports on Form 8-K 10
SIGNATURES 11
<PAGE>
<TABLE>
<CAPTION>
SIMTEK CORPORATION
BALANCE SHEETS
ASSETS
June 30, 1998 December 31, 1997
------------- -----------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents............................................... $ 1,788,420 $ 1,475,599
Certificate of deposit.................................................. 100,000 -
Accounts receivable - trade, net........................................ 1,331,151 921,798
Inventory, net ......................................................... 1,013,317 641,264
Deferred financing fees................................................. 8,248 -
Prepaid expenses and other.............................................. 197,820 17,960
------------------------------------------
Total current assets................................................ 4,438,956 3,056,621
Equipment and furniture, net............................................... 227,563 177,821
Deferred financing fees.................................................... 48,798 -
------------------------------------------
TOTAL ASSETS............................................................... $ 4,715,317 $ 3,234,442
==========================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable:
ZMD................................................................. $ 314,362 $ 716,716
Other............................................................... 258,510 173,325
Accrued expenses........................................................ 367,883 269,592
Accrued wages........................................................... 221,475 222,022
Accrued vacation payable................................................ 75,185 62,401
Payable to ZMD.......................................................... 130,153 130,153
------------------------------------------
Total current liabilities........................................... 1,367,568 1,574,209
Long term debt.......................................................... 1,500,000 -
------------------------------------------
Total Liabilities................................................... 2,867,568 1,574,209
SHAREHOLDERS' EQUITY:
Preferred stock, $1.00 par value, 2,000,000 shares
authorized and none issued and outstanding ......................... - -
Common stock, $.01 par value, 80,000,000 shares authorized,
28,745,226 and 28,679,185 shares issued and outstanding
at June 30, 1998 and December 31, 1997, respectively................ 287,452 286,792
Additional paid-in capital.............................................. 29,760,875 29,752,328
Accumulated deficit..................................................... (28,200,578) (28,378,887)
------------------------------------------
Shareholder's equity.................................................... 1,847,749 1,660,233
------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY................................. $ 4,715,317 $ 3,234,442
==========================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
SIMTEK CORPORATION
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES.................................................. $ 1,801,948 $ 1,536,243 $ 3,341,279 $ 3,301,761
Cost of sales........................................ 1,015,389 834,337 1,824,600 1,922,568
-----------------------------------------------------------------------
GROSS MARGIN............................................... 786,559 701,906 1,516,679 1,379,193
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSE:
Design, research and development...................... 416,484 336,932 715,884 666,041
Administrative........................................ 109,243 60,145 224,405 143,424
Marketing............................................. 209,083 218,798 401,647 403,664
-----------------------------------------------------------------------
Total selling, general and administrative
expenses..................................... 734,810 615,875 1,341,936 1,213,129
INCOME FROM OPERATIONS..................................... 51,749 86,031 174,743 166,064
-----------------------------------------------------------------------
OTHER INCOME (EXPENSE):
Interest income, net.................................. 4,352 14,800 18,769 27,044
Other income (expense), net........................... (2,813) (1,252) (4,843) 4,251
-----------------------------------------------------------------------
Total other income (expense)...................... 1,539 13,548 13,926 31,295
-----------------------------------------------------------------------
INCOME BEFORE INCOME TAXES................................. 53,288 99,579 188,669 197,359
Provision for income taxes............................ - - 10,360 -
-----------------------------------------------------------------------
NET INCOME AND COMPREHENSIVE
INCOME.................................................... $ 53,288 $ 99,579 $ 178,309 $ 197,359
=======================================================================
BASIC AND DILUTED EPS...................................... $ 0.00 $ 0.00 $ 0.01 $ .01
=======================================================================
BASIC WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING................................ 28,708,826 28,521,740 28,708,826 28,521,740
EFFECT OF DILUTIVE OPTIONS................................. 1,969,713 2,278,203 2,056,008 1,782,730
-----------------------------------------------------------------------
DILUTIVE SHARES OUTSTANDING................................ 30,678,539 30,799,943 30,764,834 30,304,470
=======================================================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
SIMTEK CORPORATION
STATEMENTS OF CASH FLOWS
Six Months Ended June 30,
----------------------------
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ...................................................... $ 178,309 $ 197,359
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation............................................... 72,936 60,013
Deferred financing fees.................................... 687 -
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable.................................... (409,353) (210,639)
Inventory.............................................. (372,053) (201,875)
Prepaid expenses and other ............................ (179,860) 6,701
Increase (decrease) in:
Accounts payable....................................... (317,169) 268,074
Accrued expenses....................................... 110,528 65,785
---------------------------------------
Net cash provided by (used in) operating activities........... (915,975) 185,418
---------------------------------------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of certificate of deposit .............................. (100,000) -
Purchase of equipment and furniture.............................. (122,678) (8,032)
----------------------------------------
Net cash (used in) investing activities.......................... (222,678) (8,032)
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options........................................ 9,207 16,345
Proceeds from convertible debenture.............................. 1,500,000 -
Deferred financing costs......................................... (57,733) -
---------------------------------------
Net cash provided by financing activities..................... 1,451,474 16,345
---------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS............................. 312,821 193,731
---------------------------------------
CASH AND CASH EQUIVALENTS, beginning of period........................ 1,475,599 964,456
---------------------------------------
CASH AND CASH EQUIVALENTS, end of period.............................. $ 1,788,420 $ 1,158,187
=======================================
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest........................................... $ 627 $ 801
=======================================
Cash paid for income taxes....................................... $ 10,360 $ -
=======================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
-5-
<PAGE>
SIMTEK CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES:
The financial statements included herein are presented in accordance
with the requirements of Form 10-QSB and consequently do not include all of the
disclosures normally made in the registrant's annual Form 10-KSB filing. These
financial statements should be read in conjunction with the financial statements
and notes thereto included in Simtek Corporation's Annual Report and Form 10-KSB
filed on March 24, 1998 for fiscal year 1997.
In the opinion of management, the unaudited financial statements
reflect all adjustments of a normal recurring nature necessary to present a fair
statement of the results of operations for the respective interim periods. The
year-end balance sheet data was derived from audited financial statements, but
does not include all disclosures required by generally accepted accounting
principles.
In June, 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130, Reporting Comprehensive
Income ("FAS 130"). FAS 130, which is effective for fiscal years beginning after
December 15, 1997, defines comprehensive income as all changes in shareholders'
equity exclusive of transactions with owners, such as capital investments.
Comprehensive income includes net income or loss, changes in certain assets and
liabilities that are reported directly in equity such as translation adjustments
on investments in foreign subsidiaries, and certain changes in minimum pension
liabilities. The Company's comprehensive income was equal to its net income for
the three month and six month periods ended June 30, 1998 and 1997.
-6-
<PAGE>
SIMTEK CORPORATION
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- -------------------------------------------------------------------------------
OF OPERATIONS
-------------
RESULTS OF OPERATIONS:
Simtek Corporation ("Simtek" or the "Company") recorded net product
sales of $1,801,948 for the second quarter of 1998 and $3,341,279 for the six
months ended June 30, 1998 up from the $1,536,243 recorded for the second
quarter 1997 and the $3,301,761 for the six months ended June 30, 1997. The
product sales were from the Company's 4 kilobit, 16 kilobit, 64 kilobit and 256
kilobit nvSRAM product families. The increases reflected continuing growth in
demand from the Company's nvSRAM products. Two distributors and one direct
customer of the Company's nvSRAM products account for more than 63% of the
Company's net sales for the second quarter 1998. Products sold to distributors
are re-sold to various end customers.
In the second quarter 1998, the Company purchased wafers built on 1.2
micron technology from Chartered Semiconductor Manufacturing Plc. of Singapore
("Chartered") to support sales of its high end 64 kilobit industrial and
military devices and 16 kilobit commercial devices. The Company also purchased
wafers built on 0.8 micron technology from Chartered. Sales of devices built
with both types of wafers purchased from Chartered accounted for approximately
40% of the Company's revenue for the second quarter 1998. The balance of the
Company's revenue for the second quarter 1998, was primarily from the sales of
commercial 64 kilobit and 256 kilobit finished units purchased from Zentrum
Mikroelektronik Dresden GmbH ("ZMD").
The Company saw a slight decrease of approximately 2% in gross
margins in the second quarter 1998 as compared to the second quarter 1997. The
decrease in gross margin was due primarily to a decrease in average selling
prices associated with large production volume orders.
Selling, general and administrative expenses saw an increase in the
second quarter of 1998 of approximately $119,000 over the second quarter 1997.
Of this increase, $79,000 was primarily due to costs associated with the
installation of the 64 kilobit and 256 kilobit product based on 0.8 micron
technology into Chartered. Administration saw an approximate $49,000 increase
which was primarily due to headcount additions. The approximate $9,000 decrease
in Sales and Marketing was primarily due to better cost controls.
The Company recorded a net income of $53,288 in the second quarter of
1998 and a net income of $178,309 for the six months ended June 30, 1998 as
compared to a net income of $99,579 for the second quarter of 1997 and a net
income of $197,359 for the six months ended June 30, 1997. The decrease in net
income was primarily due to increased selling, general and administrative
expenses.
The change in cash flows from operating activities was primarily a
result of an increase in accounts receivable, inventory and prepaid expenses and
a decrease in accounts payable. The accounts receivable increase was due to an
increased level of billings at the end of the period which averages
approximately 45 days to receipt of payment. Inventory and prepaid expenses
increased so that the Company could ensure product availability during the major
transition of manufacturing to Chartered Semiconductor and due to wafer
purchases from Chartered to fill the manufacturing pipeline. These inventory
levels will be reduced as the transition to Chartered is completed. Accounts
payables were decreased to bring the Company current with vendor's standard
payment terms.
The change in cash flows from investing activities was due to
purchases of equipment related to the testing of the Company's 64 kilobit and
256 kilobit products built on 0.8 micron technology from wafers purchased from
Chartered and from the purchase of a restricted certificate of deposit. The
-7-
<PAGE>
SIMTEK CORPORATION
equipment purchased consisted primarily of test fixtures and burn-in boards to
support products manufactured at Chartered. The certificate of deposit was
established to secure a $250,000 line of credit. The change in cash flow from
financing activities is due to the $1,500,000 financing transaction that the
Company closed in June 1998.
FUTURE RESULTS OF OPERATIONS
The Company's ability to remain profitable will depend primarily on
its ability to continue reducing manufacturing costs and increase net product
sales by increasing the availability of existing products and by the
introduction of new products. In the second quarter 1998, the Company continued
to ship production orders of all of its nvSRAM product families along with
shipping smaller quantities to customers interested in designing this product
into its applications. The Company is currently deciding which new or derivative
product it will develop next.
As of June 30, 1998, the Company's backlog of unshipped customer
orders expected to be filled within the next six months was approximately
$1,132,000. Orders are cancelable prior to 30 days before the scheduled shipping
date and, therefore, should not be used as a measure of future product sales.
LIQUIDITY AND CAPITAL RESOURCES
ZMD continues to own approximately 30% of the Company's Common Stock
and may not exceed 30% without approval of Simtek's Board of Directors.
On June 12, 1998, the Company closed a $1,500,000 financing
transaction with two funds advised by Renaissance Capital Group of Dallas, Texas
("Renaissance"). The funding from Renaissance consists of $1,500,000 of
convertible debentures with a seven year term at a 9 percent per annum interest
rate (the"Debenture"). If the Debenture is not redeemed or converted prior to
June 12, 2001, monthly installment payments of $10 per $1,000 owing will begin.
Under certain conditions, Renaissance may require the Company to redeem the
debenture. The Company also has the right under certain conditions to redeem or
require conversion of the debenture.
The debentures are convertible into Simtek common stock at $0.35 per
share. The agreement allows for a one-time adjustment to the $0.35 conversion
price under the following circumstances. If the volume-weighted average closing
bid price of the Company's common stock for the 30 consecutive trading days
following the Company's public press release of its December 31, 1998 fiscal
year-end financial results (the "1998 Conversion Price Adjustment") is a price
less than the initial $0.35 conversion price and if the Company does not achieve
December 31, 1998 fiscal year pre-tax income of $700,000, excluding
extraordinary gains and interest related to the Debenture, then the conversion
price shall be subject to a one-time downward adjustment to an amount equal to
100% of 1998 Conversion Price Adjustment. The following other conditions allow
for an adjustment to the conversion price; 1) issuance of shares at less than
the conversion price; 2) sale of shares; 3) stock dividends and 4) stock splits,
subdivisions or combinations.
The terms of the Debenture require the Company to file a "shelf"
registration statement covering all of the common stock issuable upon conversion
of the debentures within 180 days of the date of issue of the debentures. The
terms of the Debenture allow for piggy-back registration rights if the Company
proposes to register any of its common stock under the 1933 Act in connection
with the public offering of such securities for its own account or for the
account of its security holders.
The Debenture agreement also allows for Renaissance to designate a
nominee to serve as a member of the Company's Board of Directors, in the event
of a monetary default under the Debenture agreement, Renaissance may appoint an
additional nominee to serve as a member of the Company's Board of Directors. As
of the date of this filing, Renaissance has not designated a nominee to serve as
a member of the Company's Board of Directors. The Debenture also requires that
the Company pay Renaissance a monitoring fee of $1,000 per month for consulting
and monitoring services.
-8-
<PAGE>
SIMTEK CORPORATION
Management has initiated an enterprise-wide program to prepare the
Company's computer and manufacturing systems and applications for the year 2000.
The Company expects to incur internal staff costs as well as consulting and
other expenses related to the year 2000 project. At this point, the Company is
not able to determine the estimated cost for its year 2000 project and, if
unresolved, whether the year 2000 issue will have a material impact on the
operations of the Company.
-9-
<PAGE>
SIMTEK CORPORATION
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults upon Senior Securities - None
Item 4. Matters Submitted to a Vote of Securities Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
--------
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
-------------------
Form 8-K filed April 20, 1998 announcing "Simtek Announces Financial
Results for the First Quarter of 1998"
Form 8-K filed May 18, 1998; "1997 Annual Report to Shareholders"
Form 8-K filed June 16, 1998; press releases announcing "Working
Capital Infusion"
-10-
<PAGE>
SIMTEK CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SIMTEK CORPORATION
(Registrant)
August 11, 1998 By /s/ Douglas Mitchell
--------------------------------
DOUGLAS MITCHELL
Chief Executive Officer and
President
August 11, 1998 By /s/ Richard L. Petritz
--------------------------------
RICHARD L. PETRITZ
Chief Financial Officer (acting)
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1998 AND IS QUALIFIED IN
ITS ENTIRETY TO SUCH FORM 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,788,420
<SECURITIES> 0
<RECEIVABLES> 1,331,151
<ALLOWANCES> 125,467
<INVENTORY> 1,013,317
<CURRENT-ASSETS> 4,438,956
<PP&E> 1,854,503
<DEPRECIATION> (1,626,939)
<TOTAL-ASSETS> 4,715,317
<CURRENT-LIABILITIES> 1,367,568
<BONDS> 0
0
0
<COMMON> 287,452
<OTHER-SE> 29,760,875
<TOTAL-LIABILITY-AND-EQUITY> 1,847,749
<SALES> 3,341,279
<TOTAL-REVENUES> 3,341,279
<CGS> 1,824,600
<TOTAL-COSTS> 3,166,536
<OTHER-EXPENSES> (13,926)
<LOSS-PROVISION> 4,843
<INTEREST-EXPENSE> 7,839
<INCOME-PRETAX> 188,669
<INCOME-TAX> 10,360
<INCOME-CONTINUING> 178,309
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 178,309
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
