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 September 30, 1998
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
SIMTEK CORPORATION
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(Exact name small business issuer as specified in its charter)
Colorado 84-1057605
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1465 Kelly Johnson Blvd. Suite 301; Colorado Springs, Colorado 80920
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(Address of principal executive offices)
(719) 531-9444
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(issuer's telephone number)
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(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 November 2,1998
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(Common Stock, $.01 par value) 28,745,226
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<CAPTION>
SIMTEK CORPORATION
INDEX
For Quarter Ended September 30, 1998
PART 1. FINANCIAL INFORMATION
<S> <C> <C>
ITEM 1 Page
----
Balance Sheets as of September 30, 1998 and
December 31, 1997 3
Statements of Income and Comprehensive Income for
the three months and nine months ended September 30,
1998 and 1997 4
Statements of Cash Flows for the nine months ended
September 30, 1998 and 1997 5
Notes to Financial Statements 6
ITEM 2
Management's Discussion and Analysis of Results of
Operations and Financial Condition 7-8
PART II. OTHER INFORMATION
ITEM 1 Legal Proceedings 9
ITEM 2 Changes in Securities 9
ITEM 3 Defaults upon Senior Securities 9
ITEM 4 Matters Submitted to a Vote of Securities Holders 9
ITEM 5 Other Information 9
ITEM 6 Exhibits and Reports on Form 8-K 9
SIGNATURES 10
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<CAPTION>
SIMTEK CORPORATION
BALANCE SHEETS
ASSETS
------
September 30, 1998 December 31, 1997
------------------ -----------------
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents............................................... $ 1,965,823 $ 1,475,599
Certificate of deposit.................................................. 100,000 -
Accounts receivable - trade, net........................................ 1,249,227 921,798
Inventory, net ......................................................... 1,052,973 641,264
Deferred financing fees................................................. 11,191 -
Prepaid expenses and other.............................................. 23,811 17,960
-------------------------------------
Total current assets................................................ 4,403,025 3,056,621
Equipment and furniture, net............................................... 217,377 177,821
Deferred financing fees.................................................... 63,414 -
-------------------------------------
TOTAL ASSETS............................................................... $ 4,683,816 $ 3,234,442
=====================================
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable:
ZMD................................................................. $ 87,743 $ 716,716
Other............................................................... 477,568 173,325
Accrued expenses........................................................ 327,786 269,592
Accrued wages........................................................... 221,475 222,022
Accrued vacation payable................................................ 73,959 62,401
Payable to ZMD.......................................................... 130,153 130,153
-------------------------------------
Total current liabilities........................................... 1,318,684 1,574,209
Long term debt.......................................................... 1,500,000 -
-------------------------------------
Total Liabilities................................................... 2,818,684 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 September 30, 1998 and December 31, 1997, respectively........... 287,452 286,792
Additional paid-in capital.............................................. 29,760,875 29,752,328
Accumulated deficit..................................................... (28,183,195) (28,378,887)
-------------------------------------
Shareholder's equity.................................................... 1,865,132 1,660,233
-------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY................................. $ 4,683,816 $ 3,234,442
=====================================
The accompanying notes are an integral part of these financial statements.
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<CAPTION>
SIMTEK CORPORATION
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
---------------------------- ---------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES.................................................. $ 1,464,760 $ 1,582,536 $ 4,806,039 $ 4,884,297
Cost of sales......................................... 843,025 905,393 2,667,625 2,827,961
---------------------------------------------------------------------
GROSS MARGIN............................................... 621,735 677,143 2,138,414 2,056,336
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSE:
Design, research and development...................... 284,871 204,858 1,000,755 870,899
Administrative........................................ 104,923 132,612 329,328 276,036
Marketing............................................. 209,112 183,095 610,759 586,759
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Total selling, general and administrative
expenses..................................... 598,906 520,565 1,940,842 1,733,694
INCOME FROM OPERATIONS..................................... 22,829 156,578 197,572 322,642
---------------------------------------------------------------------
OTHER INCOME (EXPENSE):
Interest income, net.................................. (10,977) 12,667 7,791 39,711
Other income (expense), net........................... 9,296 (1,546) 4,454 2,705
---------------------------------------------------------------------
Total other income (expense)...................... (1,681) 11,121 12,245 42,416
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INCOME BEFORE INCOME TAXES................................. 21,148 167,699 209,817 365,058
Provision for income taxes............................ 3,765 1,620 14,125 1,620
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NET INCOME AND COMPREHENSIVE
INCOME................................................... $ 17,383 $ 166,079 $ 195,692 $ 363,438
=====================================================================
BASIC AND DILUTED EPS...................................... $ 0.00 $ 0.01 $ 0.01 $ .01
=====================================================================
BASIC WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING....................................... 28,721,138 28,571,328 28,721,138 28,571,328
EFFECT OF DILUTIVE OPTIONS................................. 1,437,267 2,562,737 1,847,911 2,040,690
---------------------------------------------------------------------
DILUTIVE SHARES OUTSTANDING................................ 30,158,405 31,134,065 30,569,049 30,612,018
=====================================================================
The accompanying notes are an integral part of these financial statements.
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<CAPTION>
SIMTEK CORPORATION
STATEMENTS OF CASH FLOWS
Nine Months Ended Sept. 30,
---------------------------
1998 1997
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income ...................................................... $ 195,692 $ 363,438
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation............................................... 104,512 94,629
Deferred financing fees.................................... 3,731 -
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable.................................... (327,429) (304,557)
Inventory.............................................. (411,709) (73,203)
Prepaid expenses and other ............................ (5,851) 9,728
Increase (decrease) in:
Accounts payable....................................... (324,730) 16,001
Accrued expenses....................................... 69,205 132,466
-----------------------------------
Net cash provided by (used in) operating activities........... (696,579) 238,502
-----------------------------------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of certificate of deposit .............................. (100,000) -
Purchase of equipment and furniture.............................. (144,068) (75,146)
------------------------------------
Net cash (used in) investing activities.......................... (244,068) (75,146)
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options........................................ 9,207 23,325
Proceeds from convertible debenture.............................. 1,500,000 -
Deferred financing costs......................................... (78,336) -
-----------------------------------
Net cash provided by financing activities..................... 1,430,871 23,325
-----------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS............................. 490,224 186,681
-----------------------------------
CASH AND CASH EQUIVALENTS, beginning of period........................ 1,475,599 964,456
-----------------------------------
CASH AND CASH EQUIVALENTS, end of period.............................. $ 1,965,823 $ 1,151,137
===================================
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest........................................... $ 42,152 $ 851
===================================
Cash paid for income taxes....................................... $ 14,125 $ 1,620
===================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
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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 nine month periods ended September 30, 1998 and 1997.
NEW PRONOUNCEMENTS - SFAS No. 133. "Accounting for Derivative Instruments
and Hedging Activities," was issued In June 1998. This statement establishes
accounting and reporting standards for derivative instruments and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value. This statement is effective for the Company's
financial statements for the year ended December 31, 2000 and the adoption of
this standard is not expected to have a material effect on the Company's
financial statements.
SFAS No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits," was issued in February 1998. This statement revises
the disclosure requirement for pensions and other postretirement benefits. This
statement is effective for the Company's financial statements for the year ended
December 31, 1998 and the adoption of this standard is not expected to have a
material effect on the Company's financial statements.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," was issued in June 1997. This statement establishes standard for
the way public business enterprises report information about operating segments.
It also establishes standards for related disclosure about products and
services, geographical areas and major customers. This statement is effective
for the Company's financial statements for the year ended December 31, 1998 and
the adoption of this standard is not expected to have a material effect on the
Company's financial statements.
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SIMTEK CORPORATION
Item 2: Management's Discussion and Analysis of Financial Condition and Results
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of Operations
-------------
RESULTS OF OPERATIONS:
Simtek Corporation ("Simtek" or the "Company") recorded net product sales
of $1,464,760 for the third quarter of 1998 and $4,806,039 for the nine months
ended September 30, 1998 down from the $1,582,536 recorded for the third quarter
1997 and the $4,884,297 for the nine months ended September 30, 1997. The
product sales were from the Company's 4 kilobit, 16 kilobit, 64 kilobit and 256
kilobit nvSRAM product families. The decreases were due to lower demand for
semiconductor memories, primarily in Japan and other areas in the far east, and
increased price pressures due to unfavorable international currency valuations.
Two distributors and one direct customer of the Company's nvSRAM products
account for approximately 55% of the Company's net sales for the third quarter
1998. Products sold to distributors are re-sold to various end customers.
In the third 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. 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 53% of the Company's
revenue for the third quarter 1998. The balance of the Company's revenue for the
third quarter 1998, was primarily from the sales of commercial 64 kilobit and
256 kilobit finished units purchased from Zentrum Mikroelektronik Dresden GmbH
("ZMD").
Selling, general and administrative expenses saw an increase in the third
quarter of 1998 of approximately $78,000 over the third quarter 1997. Of this
increase, $80,000 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 $28,000 decrease which was
primarily due to not incurring costs associated with the shareholders meeting
held in 1997 and the registration statement filed in 1997 to register shares
underlying the warrants. The approximate $26,000 increase in Sales and Marketing
was primarily due to increased advertising.
The Company recorded a net income of $17,383 in the third quarter of 1998
and a net income of $195,692 for the nine months ended September 30, 1998 as
compared to a net income of $166,079 for the third quarter of 1997 and a net
income of $363,438 for the nine months ended September 30, 1997. The decrease in
net income was primarily due to decreased revenues and increased selling,
general and administrative expenses.
The change in cash flows from operating activities was primarily a result
of an increase in accounts receivable and inventory 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 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 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.
-7-
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SIMTEK CORPORATION
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 third 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 September 30, 1998, the Company's backlog of unshipped customer
orders expected to be filled within the next six months was approximately
$800,000. Orders may be canceled prior to 30 days before the scheduled shipping
date and, therefore, backlog 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.
The debenture entered into with Renaissance Capital Group of Dallas, Texas
("Renaissance") in June 1998, 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.
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.
-8-
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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 July 27, 1998 announcing "Simtek Announces
Financial Results for the Second Quarter of 1998"
Form 8-K filed August 5, 1998 announcing "Simtek Chairman Dr.
Richard Petritz Set to Leave August 31; Says Company He Founded
is "In Good Strong Hands"
Form 8-K filed September 24, 1998; Second Quarter 1998 Interim
Report to Shareholders
-9-
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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)
November 2, 1998 By /s/ Douglas Mitchell
--------------------------------
DOUGLAS MITCHELL
Chief Executive Officer and
President
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED
IN ITS ENTIRETY TO SUCH FORM 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,965,823
<SECURITIES> 0
<RECEIVABLES> 1,249,227
<ALLOWANCES> 56,385
<INVENTORY> 1,052,973
<CURRENT-ASSETS> 4,403,025
<PP&E> 1,875,894
<DEPRECIATION> 1,658,517
<TOTAL-ASSETS> 4,683,816
<CURRENT-LIABILITIES> 1,318,684
<BONDS> 0
0
0
<COMMON> 287,452
<OTHER-SE> 29,760,875
<TOTAL-LIABILITY-AND-EQUITY> 4,683,816
<SALES> 4,806,039
<TOTAL-REVENUES> 4,806,039
<CGS> 2,667,625
<TOTAL-COSTS> 4,608,467
<OTHER-EXPENSES> 12,245
<LOSS-PROVISION> 4,453
<INTEREST-EXPENSE> 42,130
<INCOME-PRETAX> 209,817
<INCOME-TAX> 14,125
<INCOME-CONTINUING> 195,692
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 195,692
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
