<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934. FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934. FOR THE TRANSITION PERIOD FROM ________ TO _________.
COMMISSION FILE NUMBER 0-26944
SILICON STORAGE TECHNOLOGY, INC.
(Exact name of Company as specified in its charter)
CALIFORNIA 77-0225590
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1171 SONORA COURT, SUNNYVALE, CA 94086
(Address of principal executive offices) (Zip code)
Company's telephone number, including area code: (408) 735-9110
__________
Indicate by check mark whether the Company (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Company was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
--- ---
Number of shares outstanding of the Company's Common Stock, no par value, as
of the latest practicable date, July 31, 1996: 23,094,705. Total number of
pages in document: 12. Index to Exhibits is on page 10.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1
<PAGE>
SILICON STORAGE TECHNOLOGY, INC.
FORM 10-Q: QUARTER ENDED JUNE 30, 1996
TABLE OF CONTENTS
PART I -- FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Statements of Operations ........... 3
Condensed Consolidated Balance Sheets ..................... 4
Condensed Consolidated Statements of Cash Flows ........... 5
Notes to Condensed Consolidated Financial Statements ...... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operation .................................... 7
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings ............................................10
Item 6. Exhibits and Reports on Form 8-K .............................10
2
<PAGE>
PART I
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SILICON STORAGE TECHNOLOGY, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
--------------------------- ------------------------
1995 1996 1995 1996
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Revenues:
Product revenues $7,208 $23,021 $ 9,249 $44,520
License revenues 716 350 721 1,874
------ ------- ------- -------
Net revenues 7,924 23,371 9,970 46,394
Costs and expenses:
Cost of revenues 5,573 14,041 7,489 27,193
Research and development 774 1,622 1,562 3,273
Sales and marketing 596 1,269 833 2,455
General and administrative 232 875 447 1,634
------ ------- ------- -------
7,175 17,807 10,331 34,555
------ ------- ------- -------
Income (loss) from operations 749 5,564 (361) 11,839
Interest income (expense), net (16) 424 (71) 922
Other income -- 179 -- 179
------ ------- ------- -------
Income (loss) before provision
for income taxes 733 6,167 (432) 12,940
Provision for income taxes -- 2,445 1 5,019
------ ------- ------- -------
Net income (loss) $733 $3,722 ($433) $7,921
------ ------- ------- -------
------ ------- ------- -------
Net income (loss) per share $0.04 $0.15 ($0.04) $0.31
------ ------- ------- -------
------ ------- ------- -------
Shares used in per share calculation 18,184 25,245 10,071 25,213
------ ------- ------- -------
------ ------- ------- -------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
SILICON STORAGE TECHNOLOGY, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS
December 31, June 30,
1995 1996
------------ -----------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $48,405 $31,013
Short-term investments -- 9,604
Accounts receivable, net 7,480 8,774
Accounts receivable from related parties -- 3,770
Inventories 2,483 14,791
Current deferred tax asset 1,930 2,850
Other current assets 605 591
------- -------
Total current assets 60,903 71,393
Long-term investments -- 4,608
Furniture, fixtures, and equipment, net 5,178 8,452
Other assets 322 1,415
------- -------
Total assets $66,403 $85,868
------- -------
------- -------
LIABILITIES
Trade accounts payable 3,559 10,279
Account payable to related party 4,581 9,054
Accrued expenses and other liabilities 4,754 5,113
Deferred revenue 1,337 1,283
------- -------
Total liabilities 14,231 25,729
------- -------
SHAREHOLDERS' EQUITY
Common stock and deferred stock compensation 53,457 53,503
Retained earnings (accumulated deficit) (1,285) 6,636
------- -------
Total shareholders' equity 52,172 60,139
------- -------
Total liabilities and shareholders' equity $66,403 $85,868
------- -------
------- -------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
SILICON STORAGE TECHNOLOGY, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six months ended June 30,
-------------------------
1995 1996
---- ----
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ($433) $7,921
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 733 1,387
Provision for doubtful accounts receivable 210 142
Provisions for excess and obsolete inventories 125 2,517
Deferred income taxes -- (1,070)
Changes in operating assets and liabilities:
Accounts receivable (2,734) (5,206)
Inventories (1,990) (14,825)
Prepaid expenses and other current assets (29) 14
Trade accounts payable/accounts payable to related party 4,976 11,193
Accrued expenses and other liabilities 452 359
Deferred revenue (62) (54)
------- -------
Net cash provided by (used in) operating activities 1,248 2,378
------- -------
Cash flows from investing activities:
Acquisition of furniture, fixtures and equipment (2,085) (4,661)
Purchases of available-for-sale investments -- (48,561)
Sales and maturities of available-for-sale investments -- 34,349
Other (6) (943)
------- -------
Net cash provided by (used in) investing activities (2,091) (19,816)
------- -------
Cash flows from financing activities:
Proceeds from loan from corporate partner 3,776 --
Issuance of shares of common stock and other 21 46
Change in restricted cash balance 800 --
Repayment of notes payable to bank (800) --
------- -------
Net cash provided by (used in) financing activities 3,797 46
------- -------
Net increase (decrease) in cash and cash equivalents 2,954 (17,392)
Cash and cash equivalents at beginning of period 2,751 48,405
------- -------
Cash and cash equivalents at end of period $5,705 $31,013
------- -------
------- -------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE>
SILICON STORAGE TECHNOLOGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited condensed interim consolidated financial statements
include all adjustments, consisting only of normal recurring adjustments and
accruals, that in the opinion of the management of Silicon Storage Technology,
Inc. (the "Company" or "SST") are necessary for a fair presentation of the
Company's financial position as of June 30, 1996 and the results of operations
and cash flows for the six months ended June 30, 1995 and 1996. The unaudited
interim consolidated financial statements should be read in conjunction with the
audited consolidated financial statements of the Company and the notes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1995, filed with the Securities and Exchange Commission.
The year-end balance sheet at December 31, 1995 was derived from audited
financial statements, but does not include all disclosures required by generally
accepted accounting principles.
2. COMPUTATION OF NET INCOME PER SHARE
Net income (loss) per share is computed using the weighted average number of
common and common equivalent shares outstanding during the period. Common
equivalent shares are excluded from the computation if their effect is
antidilutive, except that pursuant to Securities and Exchange Commission Staff
Accounting Bulletin No. 83, all common and common equivalent shares issued
during the twelve months preceding the filing date of the Company's initial
public offering have been included in the calculation of the number of shares
used to determine earnings per share as if the shares had been outstanding
for all periods presented using the treasury stock method.
3. INVENTORIES (IN THOUSANDS):
December 31, June 30,
----------- -----------
1995 1996
----------- -----------
(unaudited)
Raw materials $ 133 $ 4,216
Work in process 1,831 6,285
Finished goods 519 4,290
----------- -----------
$2,483 $14,791
----------- -----------
----------- -----------
4. LEGAL PROCEEDINGS
On January 3, 1996, Atmel Corporation ("Atmel") sued the Company in the U.S.
District Court for the Northern District of California. Atmel's complaint
alleges that the Company, by making, using and selling devices, is willfully
infringing five U.S. patents owned by, or exclusively licensed to, Atmel.
Regarding each of these five patents, Atmel seeks a judgment that the Company
has infringed the patent, an injunction prohibiting further infringement, treble
the amount of damages caused by the alleged infringement and attorney's fees,
costs and expenses. On February 13, 1996 the Company filed an answer denying
Atmel's allegations and asserting affirmative defenses and counterclaims. There
can be no assurance that the Atmel complaint or other third party assertions
will be resolved without costly litigation or in a manner that is not adverse to
the Company. Accordingly, while the Company has accrued certain amounts for
costs associated with this matter, it is reasonably possible that the ultimate
resolution could result in payments in excess of the amounts accrued in the
accompanying financial statements and/or require royalty payments in the future
which could adversely impact gross margins. No estimate of these possible
payments can be made.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.
The following discussion may be understood more fully by reference to the
condensed consolidated financial statements, notes to the condensed consolidated
financial statements, and management's discussion and analysis contained in the
Company's Annual Report on Form 10-K for the year ended December 31, 1995, as
filed with the Securities and Exchange Commission.
Except for the historical information contained herein, the following
discussion may contain forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from
those discussed here. Factors that could cause or contribute to the Company's
actual results to differ materially from expected results include: the
availability, deliverability and cost of wafers from the Company's suppliers,
competitive pricing pressures, fluctuations in manufacturing yields, new
product announcements and introductions by the Company or its competitors,
changes in demand for, or in the mix of, the Company's products, the gain or
loss of significant customers, market acceptance of products utilizing the
Company's SuperFlash technology, changes in the channels through which the
Company's products are distributed, foreign currency fluctuations,
unanticipated research and development expenses associated with new product
introductions and the timing of significant orders. Operating results could
also be adversely affected by general economic conditions and a downturn in
the market for consumer products which incorporate the Company's products,
such as personal computers and cellular telephones. All of these factors,
and other factors, are difficult to forecast and can materially affect the
Company's quarterly or annual operating results. Fluctuations in revenues and
operating results may cause volatility in the Company's stock price. Please
also refer to the Company's Form 10-K for the year ended December 31, 1995 in
the Risk Factors section for a discussion of such risk factors.
GENERAL
SST ("Silicon Storage Technology, Inc." or the "Company") was incorporated in
California in 1989. The Company is a supplier of Flash memory devices,
addressing the requirements of high volume customers and applications.
Currently, the Company offers medium density devices ranging from 512Kbit to
4Mbit that target a broad range of existing and emerging applications in the
personal computer, PC peripheral, communications, multimedia, set-top box, and
video game markets. For fiscal year 1996 to date, a majority of the Company's
product revenues have been derived from the sale of 1Mbit memory devices. The
majority of these 1Mbit memory devices are used in personal computers and PC
peripheral products. The Company is developing higher density memory products to
address emerging markets such as digital cameras, voice recorders, video
telephones, memory cards, network adaptor cards, digital cellular phones and
printer font storage.
During the second quarter of 1996, the Company derived approximately 42% of its
product revenues from sales to Taiwan-based PC manufacturers. The Company
intends to diversify its customer base by increasing sales in other geographic
areas and targeting additional high volume applications such as the cellular
telephone, CD-ROM drive, hard disk drive, video game, electronic organizer and
set-top box markets. The Company is increasing the scope of its international
sales efforts and expects that international sales will continue to account for
a significant portion of its product revenues although the percentage may
fluctuate from period to period. Although the Company's international sales are
primarily denominated in U.S. dollars, these sales are subject to a number of
risks associated generally with international sales, including the effect of
geo-political uncertainties, currency fluctuations, state-imposed restrictions
on the repatriation of funds, import and export duties and restrictions.
RESULTS OF OPERATION: QUARTER ENDED JUNE 30, 1996
The following discussion relates to the financial statements of the Company for
the three months ended June 30, 1996 (current quarter) of the fiscal year ending
December 31, 1996, in comparison to the three months ended June 30, 1995
(comparable quarter of the prior year). In addition, certain comparisons with
the three months ended March 31, 1996 (previous quarter) are provided where
management believes it is useful to the understanding of continuing trends.
Operating results for the six months ended June 30, 1996 are not necessarily
indicative of the results to be achieved for the full fiscal year ending
December 31, 1996.
7
<PAGE>
NET REVENUES. Net revenues were $46.4 million for the six months ended June 30,
1996 as compared to $10.0 million for the six months ended June 30, 1995. Net
revenues increased year-to-year for the first half due primarily to increased
shipments of 1Mbit and 512Kbit products. Net revenues were $23.4 million in the
current quarter as compared to $7.9 million for the comparable quarter of the
prior year and $23.0 million in the previous quarter due primarily to higher
shipment volumes. Product revenues were $23.0 million in the current quarter as
compared to $7.2 million for the comparable quarter of the prior year and $21.5
million in the previous quarter due to increased shipments of 1Mbit and 512Kbit
products. License, royalty and development revenues were $0.4 million for the
current quarter as compared to $0.7 million in the comparable quarter for the
prior year. Current quarter license revenues consist primarily of one
nonrefundable upfront license and development fee from a third party and a
royalty payment from a related party. Such upfront license fees and royalty
payments may or may not recur in future quarters.
During the second quarter of 1996, the Company derived approximately 42% of
shipment dollars from sales to Taiwan-based PC manufacturers, as compared to 71%
for the comparable quarter of the prior year and 49% during the previous
quarter. Shipment dollars differ from revenue dollars shown in the financial
statements in that distributor sales are deferred and not recognized as revenue
dollars until sell-through to end users. While the Company intends to diversify
both the market application of its products and its customer base, there can be
no assurance that such diversification will occur. International sales
accounted for approximately 87% of shipment dollars during the current quarter,
as compared to 87% for the comparable quarter of the prior year and 92% during
the previous quarter. For the six months ended June 30, 1996, 45% of shipment
dollars were from Taiwan and, over the same period, 89% of shipment dollars
were from international sales. International sales are anticipated to account
for a substantial majority of all shipment dollars in the near term.
COST OF REVENUES. Gross margin was $19.2 million for the six months ended
June 30, 1996 as compared to $2.5 million for the six months ended June 30,
1995. Gross margin increased year-to-year for the first half of 1996 due to
increased production volumes and resulting economies of scale which lowered
cost per unit. Gross margin was $9.3 million or 40% of net revenues in the
second quarter of 1996 as compared to $2.4 million or 30% of net revenues for
the comparable quarter in 1995 and $9.9 million or 43% for the previous
quarter. The overall increase in gross margin from the second quarter of
1995 to the second quarter of 1996 is primarily a result of significantly
increased production volumes and improved yields which resulted in lower cost
per unit. Total gross margin in the current quarter decreased compared to
the previous quarter due to a lower mix of higher margin license and
development fees. Since the amount of license revenue recognized, if any,
varies greatly from quarter to quarter, similar changes in gross margin may
occur in future periods. Future fluctuations in gross margins may occur as a
result of changes in the mix between license revenues and product revenues or
the impact of changes in the product mix.
The Company's agreement with Sanyo provides for wafer price adjustments based on
dollar/yen exchange rate fluctuations. As a result, a strengthening yen could
result in higher cost of revenues. Gross margins may also be affected by the
availability, deliverability and cost of wafers from the Company's suppliers,
competitive pricing pressures, fluctuations in manufacturing yields, new product
announcements and introductions by the Company or its competitors, changes in
demand for, or in the mix of, the Company's products, the gain or loss of
significant customers, market acceptance of products utilizing the Company's
SuperFlash technology, changes in the channels through which the Company's
products are distributed, foreign currency fluctuations, unanticipated research
and development expenses associated with new product introductions and the
timing of significant orders.
Average selling prices of Flash memory product are subject to significant
fluctuation due to periodic changes in supply and demand. Average selling
prices are declining and will adversely affect gross margins unless the Company
is able to offset such declines with reductions in per unit costs or changes in
product mix.
RESEARCH AND DEVELOPMENT. Research and development expenses were $3.3 million
for the six months ended June 30, 1996 as compared to $1.6 million for the six
months ended June 30, 1995. Research and development expenses increased year-
to-year for the first half due to increases in personnel, depreciation, and
project related expenses. Research and development expenses were $1.6 million or
7% of net revenues during the second quarter of 1996 compared to $0.8 million or
10% of net revenues during the comparable quarter of 1995 and down slightly from
$1.7 million or 7% of net revenues during the first quarter of 1996. The
increase in research and development expenses since last year is primarily a
result of hiring additional personnel, depreciation related to purchases of
additional engineering test equipment, and increased prototyping and product
qualification costs associated with the Company's process and
8
<PAGE>
development efforts. Research and development dollar expenses have decreased
since the prior quarter ended March 31, 1996 due to lower product
qualification costs.
SALES AND MARKETING. Sales and marketing expenses were $2.5 million for the six
months ended June 30, 1996 as compared to $0.8 million for the six months ended
June 30, 1995. Sales and marketing expenses increased year-to-year for the
first half due to increases in personnel and sales commissions paid to
manufacturer's representatives. Sales and marketing expenses were $1.3 million
or 5% of net revenues during the second quarter of 1996, as compared to $0.6
million or 8% of net revenues for the comparable quarter in 1995 and $1.2
million or 5% of net revenues during the first quarter of 1996. Sales and
marketing expenses consist primarily of sales commissions to manufacturer's
representatives, salaries of the Company's sales and marketing personnel and
product literature expenses. The increase in expense from the second quarter of
1995 as compared to the second quarter of 1996 corresponds primarily to
commissions associated with the increase in product revenues during the same
period -- from $7.2 million during the second quarter of 1995 to $23 million
during the second quarter of 1996. Sales and marketing expenses increased
slightly from the first quarter of 1996 primarily due to headcount increases.
GENERAL AND ADMINISTRATIVE. General and administrative expenses were $1.6
million for the six months ended June 30, 1996 as compared to $0.4 million for
the six months ended June 30, 1995. General and administrative expenses
increased year-to-year for the first half due to increases in personnel,
facility-related expenses and public company expenses. General and
administrative expenses were $0.9 million or 4% of net revenues during the
quarter ended June 30, 1996, and $0.2 million or 3% of net revenues during the
comparable quarter ended June 30, 1995. The increase is primarily due to the
higher headcount, facilities-related expenses, and costs necessary to meet
public company reporting and other obligations. Expenses were $0.8 million or
3% of net revenues during the previous quarter. Growth since the previous
quarter is primarily the result of increases in headcount and facility lease
expenses.
INTEREST INCOME (EXPENSE). Net interest income was $0.9 million for the six
months ended June 30, 1996 as compared to $71 thousand of interest expense
for the six months ended June 30, 1995. Interest income increased due to
interest earned on proceeds from the Company's initial public offering in
November, 1995. Interest income was $0.4 million or 2% of net revenues during
the second quarter of 1996 compared to $16 thousand of interest expense
during the comparable quarter of 1995 and $0.5 million of interest income or
2% of net revenues during the first quarter of 1996. Interest income
(expense) relates primarily to interest income earned on net cash proceeds
from the initial public offering in November 1995. Interest income (expense)
declined from the first quarter of 1996 due to declining cash balances
resulting primarily from purchases of inventory and capital equipment and
payment of state and federal taxes.
OTHER INCOME. Other income was $0.2 million or 1% of net revenues during the
second quarter of 1996 as compared to $0 during the first quarter of 1996 and $0
for the comparable quarter in the prior year. Other income consists primarily
of a gain on the sale of equipment to a supplier. Such other income may or may
not recur in future quarters.
PROVISION FOR INCOME TAXES. The Company's effective income tax rate is 38% in
the current quarter and the first six month of 1996, which results in a $5.0
million provision for income taxes as of June 30, 1996, as compared to a
provision of $1 thousand for the first six months of 1995 due to the Company's
net operating loss position at that time. The provision for income taxes was
$2.6 million during the first quarter of 1996. The decrease in the provision
for income taxes from the first to the second quarter of 1996 relates to the
Company's lowered income before taxes for the second quarter.
NET INCOME (LOSS) PER SHARE. The Company's net income per share for the current
quarter was $.15, compared to a net loss per share of $.04 in the comparable
quarter of the prior year and net income of $.17 per share in the previous
quarter. Net income per share increased from the comparable quarter of the
prior year due higher sales volumes and improved gross margins. Net income per
share compared to the previous quarter decreased primarily due to a lower mix of
higher margin license and development fees. The Company's net income for the
six months ended June 30, 1996 was $0.31, as compared to a net loss of $0.04 for
the same period in the prior year. The Company change from a net loss position
in the prior year to a net income position in the current year is primarily due
to higher shipment volumes and improved gross margins.
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Principal sources of liquidity at June 30, 1996 consist of $40.6 million of
cash, cash equivalents, and short-term investments and $4.6 million of
long-term investments. As of June 30, 1996, the Company had no open lines of
credit or non-trade debt. However, the Company may endeavor to open a line of
credit in the future to secure additional working capital to finance growth
in operations. The Company believes that the cash balances, together with
funds expected to be generated from operations will be sufficient to meet its
projected working capital and other cash requirements through at least the
next twelve months. However, there can be no assurance that events in the
future will not require the Company to seek additional capital sooner or, if
so required, that it will be available on terms acceptable to the Company.
The Company made capital expenditures of approximately $3.4 million during the
current quarter as compared to $2.1 million during the comparable quarter of the
prior year and $1.2 in the previous quarter. These expenditures were primarily
for the purchase of manufacturing test equipment, design and engineering tools,
and computer equipment. Similar levels of capital spending are expected to
continue, and may even increase, during the rest of 1996. In addition, the
Company may use its working capital to secure additional foundry capacity. These
expenditures may be in the form of deposits, equipment purchases, loans or
equity investments or joint ventures in or with wafer fabrication or other
companies.
Year-to-date, the Company's operating activities have provided cash of $2.4
million, which consists primarily of net income of $7.9 million and increases in
accounts payable of $11.2 million offset by inventory increases of $14.8
million. Inventory increases were primarily the result of increasing raw
materials allocations from suppliers and the timing of the receipt of inventory
purchased. In comparison, the Company's operating activities provided cash of
$1.2 million for the six months ended June 30, 1995, because a $2.7 million
increase in accounts receivable and a $2.0 million increase in inventories
was offset by a $5.0 million increase in accounts payable. The increase in
cash provided by operating activities from year to year is primarily due to
increases in net income and accounts payable, offset by increases in
inventory, from the first half of 1995 to the first half of 1996.
PART II
ITEM 1. LEGAL PROCEEDINGS
Except for the historical information contained herein, the following discussion
contains forward-looking statements that involve risks and uncertainties. The
Company's actual results could differ materially from those discussed herein.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed in this section.
On January 3, 1996, Atmel sued the Company in the U.S. District Court for the
Northern District of California. Atmel's complaint alleges that the Company, by
making, using and selling devices, is willfully infringing five U.S. patents
owned by or exclusively licensed to Atmel. Regarding each of these five
patents, Atmel seeks a judgment that the Company has infringed the patent, an
injunction prohibiting further infringement, treble the amount of damages caused
by the alleged infringement and attorney's fees, costs and expenses. On
February 13, 1996 the Company filed an answer denying Atmel's allegations and
asserting affirmative defenses and counterclaims.
At the present time, there is no other pending litigation or proceeding
involving a director, officer, employee or other agent of the Company in which
indemnification would be required or permitted. The Company is not aware of any
threatened litigation or proceeding which may result in a claim for such
indemnification.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS. The Company hereby incorporates by reference all exhibits filed
in connection with Form 10-K for the year ended December 31, 1995 and Form 10-Q
filed for the quarter ended March 31, 1996.
EXHIBIT NUMBER DESCRIPTION
11.1 Statement Regarding Computation of Net Income Per Share
(b) Reports on Form 8-K filed during the quarter ended June 30, 1996: None.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Company has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Sunnyvale, County of Santa Clara, State of
California, on the 13th day of August, 1996.
SILICON STORAGE TECHNOLOGY, INC.
By: /s/ BING YEH
------------------------------------
Bing Yeh
President and Chief Executive Officer
/s/ MICHAEL J. PRAISNER
------------------------------------
Michael J. Praisner
Principal Financial and Accounting
Officer
11
<PAGE>
EXHIBIT 11.1
SILICON STORAGE TECHNOLOGY, INC.
STATEMENT REGARDING COMPUTATION OF NET INCOME PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRIMARY AND FULLY DILUTED BASIS:
THREE MONTHS ENDED JUNE 30,
---------------------------
1995 1996
------ ------
<S> <C> <C>
Weighted average shares of common stock 6,562 22,791
Weighted average shares of common stock
obtainable on exercise of options and
warrants and upon conversion of convertible
preferred stock 8,064 2,454
SAB 83 3,558 --
------ ------
Shares used in per share calculation 18,184 25,245
------ ------
Net income $733 $3,722
------ ------
Net income per share $0.04 $0.15
------ ------
------ ------
<CAPTION>
PRIMARY AND FULLY DILUTED BASIS:
SIX MONTHS ENDED JUNE 30,
---------------------------
1995 1996
------ ------
<S> <C> <C>
Weighted average shares of common stock 6,529 22,791
Weighted average shares of common stock
obtainable on exercise of options and
warrants and upon conversion of convertible
preferred stock 7,701 2,422
SAB 83 3,558 --
------ ------
Shares used in per share calculation 17,788 25,213
------ ------
Net income $733 $3,722
------ ------
Net income per share $0.04 $0.15
------ ------
------ ------
</TABLE>
Net income per share is presented under the primary basis as the effect of
dilution under the fully diluted basis is not material.
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS AND CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS FOUND IN THE COMPANY'S FORM 10-Q FOR THE YEAR-TO-DATE, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 31,013
<SECURITIES> 14,212
<RECEIVABLES> 12,544
<ALLOWANCES> 0
<INVENTORY> 14,791
<CURRENT-ASSETS> 71,393
<PP&E> 8,452
<DEPRECIATION> 0
<TOTAL-ASSETS> 85,868
<CURRENT-LIABILITIES> 25,729
<BONDS> 0
0
0
<COMMON> 53,503
<OTHER-SE> 6,636
<TOTAL-LIABILITY-AND-EQUITY> 85,868
<SALES> 44,520
<TOTAL-REVENUES> 1,874
<CGS> 46,394
<TOTAL-COSTS> 27,193
<OTHER-EXPENSES> 7,362
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 12,940
<INCOME-TAX> 5,019
<INCOME-CONTINUING> 7,921
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,921
<EPS-PRIMARY> 0.31
<EPS-DILUTED> 0.31
</TABLE>