<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended October 31, 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 0-21488
CATALYST SEMICONDUCTOR, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 77-0083129
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1250 Borregas Avenue, Sunnyvale, California 94089
(408) 542-1000
(Address, including zip code, and telephone
number, including area code, of Registrant's
principal executive offices)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]
The number of shares outstanding of the Registrant's Common Stock as of October
26, 1996 was 7,922,098
Page 1 of 12
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CATALYST SEMICONDUCTOR, INC.
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1 Financial Statements
<S> <C> <C>
Unaudited Condensed Consolidated Balance Sheets
at October 31, 1996 and April 30, 1996 ......................................................... Page 3
Unaudited Condensed Consolidated Statements of Operations for the three and six month periods
ended October 31, 1996 and September 30, 1995 .................................................. Page 4
Unaudited Condensed Consolidated Statements of Cash Flows for the six month periods
ended October 31, 1996 and September 30, 1995 .................................................. Page 5
Notes to Unaudited Condensed Consolidated Financial Statements ................................... Page 6
Item 2 Management's Discussion and Analysis of Results of Operations and Financial Condition ............ Page 7-10
PART II - OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security Holders .............................................. Page 11
Item 6 Exhibits and Reports on Form 8-K ................................................................. Page 11
Signatures ................................................................................................ Page 12
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
CATALYST SEMICONDUCTOR, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value data)
<TABLE>
<CAPTION>
October 31, April 30,
1996 1996
---- ----
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents ...................................................... $ 4,116 $ 2,966
Restricted cash ................................................................ 5,250 5,250
Accounts receivable, net ....................................................... 9,277 10,470
Inventories .................................................................... 16,067 16,193
Other assets ................................................................... 1,061 1,346
------- -------
Total current assets ....................................................... 35,771 36,225
Property and equipment, net ....................................................... 4,075 3,050
------- -------
$39,846 $39,275
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit ................................................................. $ 4,880 $ 130
Accounts payable ............................................................... 14,484 17,310
Accrued expenses ............................................................... 2,026 2,132
Deferred gross profit on shipments to distributors ............................. 440 1,109
Current portion of debt and capital lease obligations .......................... 492 513
------- -------
Total current liabilities .................................................. 22,322 21,194
Long-term portion of debt and capital lease obligations ........................... 887 571
------- -------
Total liabilities .......................................................... 23,209 21,765
Total stockholders' equity ........................................................ 16,637 17,510
------- -------
$39,846 $39,275
======= =======
</TABLE>
See accompanying notes to the unaudited condensed consolidated
financial statements.
3
<PAGE> 4
CATALYST SEMICONDUCTOR, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
Oct. 31, 1996 Sept. 30, 1995 Oct. 31, 1996 Sept. 30, 1995
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Net revenues .................................... $12,078 $14,702 $27,910 $28,644
Cost of revenues ................................ 10,138 10,472 21,259 20,101
------- ------- ------- -------
Gross profit .................................... 1,940 4,230 6,651 8,543
Research and development ........................ 1,717 990 2,990 2,099
Selling, general and administrative ............. 2,684 2,385 4,945 4,717
------- ------- ------- -------
Income (loss) from operations ................... (2,461) 855 (1,284) 1,727
Interest income (expense), net .................. 5 (36) 33 (164)
------- ------- ------- -------
Income (loss) before income taxes ............... (2,456) 819 (1,251) 1,563
Income tax provision ............................ 32 6 78 17
------- ------- ------- -------
Net income (loss) ............................... $2,488) $ 813 $(1,329) $ 1,546
======= ======= ======= =======
Net income (loss) per share ..................... $(0.31) $ 0.10 $ (0.17) $ 0.20
======= ======= ======= =======
Shares used in per share calculation ............ 7,909 8,164 7,883 7,913
======= ======= ======= =======
</TABLE>
See accompanying notes to the unaudited condensed consolidated
financial statements.
4
<PAGE> 5
CATALYST SEMICONDUCTOR, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
Oct. 31, 1996 Sept. 30, 1995
------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ........................................................... $(1,329) $ 1,546
Adjustments to reconcile net income
to net cash provided by (used in) operating activities:
Depreciation and amortization ............................................... 867 850
Changes in assets and liabilities:
Accounts receivable ..................................................... 1,193 (3,157)
Inventories ............................................................. 126 168
Other assets ............................................................ 285 (223)
Accounts payable ........................................................ (2,826) 2,949
Accrued expenses ........................................................ (106) (2,215)
Deferred gross profit on shipments to distributors ...................... (669) 678
------- -------
Net cash provided by (used in) operating activities ................... (2,459) 596
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Change in short-term investments ............................................ -- 909
Cash used for the acquisition of equipment .................................. (1,892) (400)
Proceeds from the disposal of equipment ..................................... -- 613
------- -------
Cash provided by (used in) investing activities ....................... (1,892) 1,122
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock transactions, net .............................................. 456 572
Net proceeds from (payment of) line of credit ............................... 4,750 (2,981)
Proceeds from issuance of long-term debt .................................... 617 --
Payment of long-term debt and capital lease obligations .................... (322) (666)
------- -------
Cash provided by (used in) financing activities ....................... 5,501 (3,075)
------- -------
Net increase (decrease) in cash and cash equivalents ........................... 1,150 (1,357)
Cash and cash equivalents at beginning of the period .......................... 2,966 5,246
------- -------
Cash and cash equivalents at end of the period ................................. $ 4,116 $ 3,889
======= =======
</TABLE>
See accompanying notes to the unaudited condensed
consolidated financial statements.
5
<PAGE> 6
CATALYST SEMICONDUCTOR, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
In the opinion of management, the unaudited condensed consolidated interim
financial statements included herein have been prepared on the same basis as the
April 30, 1996 audited consolidated financial statements and include all
adjustments, consisting of only normal recurring adjustments, necessary to
fairly state the information set forth herein. The statements have been prepared
in accordance with the regulations of the Securities and Exchange Commission,
but omit certain information and footnote disclosures necessary to present the
statements in accordance with generally accepted accounting principles. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-K for the
year ended April 30, 1996. The results of operations for the six month period
ended October 31, 1996 are not necessarily indicative of the results to be
expected for the entire year.
NOTE 2 - NET INCOME (LOSS) PER SHARE
Net income (loss) per common and common equivalent share is computed using the
weighted average number of common and dilutive common equivalent shares
outstanding during each period presented. Dilutive common equivalent shares
consist of common stock issuable upon the exercise of stock options (using the
treasury stock method). Common Stock equivalents were excluded from the net
income (loss) per share calculations for the three and six month periods ended
October 31, 1996 as their effect is anti-dilutive.
NOTE 3 - CERTAIN BALANCE SHEET CAPTIONS (IN THOUSANDS):
<TABLE>
<CAPTION>
Oct. 31, April 30,
1996 1996
---- ----
<S> <C> <C>
Inventories:
Raw materials ........................................ $ 4,760 $ 8,093
Work-in-process ...................................... 1,329 2,371
Finished goods ....................................... 9,978 5,729
-------- ---------
$ 16,067 $ 16,193
======== =========
Property and equipment:
Engineering and test equipment ....................... $ 9,508 $ 9,037
Computer hardware and software ....................... 3,723 3,297
Furniture and office equipment ....................... 981 612
-------- ---------
14,212 12,946
Less: accumulated depreciation and amortization (10,137) (9,896)
-------- ---------
$ 4,075 $ 3,050
======== =========
</TABLE>
6
<PAGE> 7
CATALYST SEMICONDUCTOR, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following discussion should be read in conjunction with the accompanying
condensed consolidated financial statements and notes thereto included in this
report. In addition, the Company desires to take advantage of the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995.
Specifically, the Company wishes to alert readers that the factors set forth in
"Certain Factors that May Affect the Company's Future Results" as set forth
below in this Item 2, as well as other factors, in the past have affected and in
the future could affect the Company's actual results, and could cause the
Company's results for future quarters to differ materially from those expressed
in any forward looking statements made by or on behalf of the Company.
RESULTS OF OPERATIONS
In February 1996, the Company changed its fiscal year end from the Saturday
closest to March 31 to the Sunday closest to April 30. This report compares the
three and six month periods ended October 31, 1996, to the three and six month
periods ended September 30, 1995.
Revenues. Total revenues consist primarily of net product sales. A
substantial portion of net product sales has been made through independent
distributors. The Company generally does not recognize revenues on such sales
until the distributor resells the Company's products. Total revenues decreased
by 18% to $12.1 million for the quarter ended October 31, 1996 from $14.7
million for the quarter ended September 30, 1995. For the six months ended
October 31, 1996, total revenues decreased 3% to $27.9 million from $28.6
million for the six months ended September 30, 1995. The decreases were
primarily attributable to price erosion caused by adverse industry-wide
conditions. Although all product lines experienced price erosion, the Flash
memory product line had the largest decrease-approximately 20% during the
quarter ended October 31, 1996. The Company has experienced a decrease in
backlog for its products due primarily to industry-wide capacity increases and
shorter leadtimes on orders. This reduction in backlog has limited the Company's
ability to anticipate future demand. A continuation of weak demand for the
Company's products could lead to continued poor operating results.
Gross Profit. Gross profit decreased by 54% to $1.9 million, or 16% of
revenues, for the quarter ended October 31, 1996 from $4.2 million, or 29% of
revenues, for the quarter ended September 30, 1995. For the six months ended
October 31, 1996, gross profit decreased by 22% to $6.7 million, or 24% of
revenues, from $8.5 million, or 30% or revenues, for the six months ended
September 30, 1995. The decreases were primarily attributable to price erosion
caused by adverse industry-wide conditions. Lower cost versions of the Company's
Flash products, produced on 0.6 micron processes, are expected to be completed
in the April 1997 quarter and reductions in product cost are expected in the
July 1997 quarter, when those products begin shipping to customers.
Research and Development. Research and development (R&D) expenses consist
principally of salaries for engineering, technical and support personnel,
depreciation of equipment, and the cost of wafers used to evaluate new products
and new versions of current products. R&D expenses increased by 73% to $1.7
million, or 14% of revenues, for the quarter ended October 31, 1996 from $1.0
million, or 7% of revenues, for the quarter ended September 30, 1995. For the
six months ended October 31, 1996, R&D expenses increased by 42% to $3.0
million, or 11% of revenues, from $2.1 million, or 7% of revenues, for the six
months ended September 30, 1995. The primary reasons for the increase in
absolute dollars spent were increased personnel costs and higher material costs
for wafers being evaluated for new products and new versions of current
products. Although these expenses, in absolute dollars, are likely to decrease
in the short-term due primarily to reductions in the Company's workforce and
holiday shutdown periods, these expenses are likely to increase in future
quarters due to the Company's plans for expanding its Flash memory product line.
Selling, General and Administrative. Selling, general and administrative
(SG&A) expenses consist principally of salaries for sales, marketing and
administrative personnel, commissions, promotional activities and directors and
officers (D&O) insurance. SG&A expenses increased by 13% to $2.7 million, or 22%
of revenues, for the quarter ended October 31, 1996 from $2.4 million, or 16% of
revenues, for the quarter ended September 30, 1995. For the six months ended
October 31, 1996, SG&A expenses increased by 5% to $4.9 million, or 18% of
revenues, from $4.7 million, or 16% of revenues, for the six months ended
September 30, 1995. The primary reasons for the increase in absolute dollars
spent were increased personnel costs and facilities expenses. Although these
expenses, in absolute dollars, are likely to decrease in the short-term due
primarily to reductions in the Company's workforce and holiday shutdown periods,
these expenses are likely to fluctuate in future quarters due to fluctuating
revenue levels.
7
<PAGE> 8
CATALYST SEMICONDUCTOR, INC.
Net Interest Income (Expense.) Net interest income was $5,000 for the quarter
ended October 31, 1996, as compared to net interest expense of $36,000 for the
quarter ended September 30, 1995. For the six months ended October 31, 1996, net
interest income was $33,000, as compared to net interest expense of $164,000 for
the six months ended September 30, 1995. The changes were primarily attributable
to decreased borrowing rates on the Company's bank line of credit and for the
six month periods decreased average outstanding balance.
Income Tax Provision. The income tax provision is due primarily to
alternative minimum taxes on U.S. and state taxable income and foreign income
taxes.
As of April 30, 1996 the Company had available net operating loss
carryforwards of approximately $18.0 million and credit carryforwards of
approximately $1.0 million for federal tax purposes, expiring from 2001 to 2008.
Availability of the net operating loss and general business credit carryforwards
may potentially be reduced in the event of substantial changes in equity
ownership.
LIQUIDITY AND CAPITAL RESOURCES
Total cash of $9.4 million (including $5.3 million of restricted cash)
increased $1.4 million from April 30, 1996 to October 31, 1996. The increase was
primarily attributable to borrowings against the Company's bank line of credit,
offset in part by net cash used by operating activities and for the acquisition
of equipment. As of October 31, 1996, $5.3 million of the cash was pledged as
security on letters of credit required by certain of the Company's wafer
foundries. Net cash used by operating activities totaled $2.5 million for the
six months ended October 31, 1996. This net use of cash is primarily
attributable to net operating losses, coupled with a decrease in accounts
payable, offset in part by a decrease in accounts receivable.
The Company believes that current cash balances, together with cash generated
from operations and borrowings available under the Company's bank line of credit
and from equipment financing, will be sufficient to fund capital and working
capital needs through the quarter ending January 31, 1997. Thereafter, the
Company may require additional equity or debt financing to address its working
capital needs, to provide funding for capital expenditures or to fund increases
to restricted cash requirements. There can be no assurances, however, 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.
CERTAIN FACTORS THAT MAY AFFECT THE COMPANY'S FUTURE RESULTS
The Company desires to take advantage of certain provisions of the Private
Securities Litigation Reform Act of 1995, enacted in December 1995 (the "Reform
Act") that provides a "safe harbor" for forward-looking statements made by or on
behalf of the Company. The Company hereby cautions shareholders, prospective
investors in the Company and other readers that the following important factors,
among others, in some cases have affected, and in the future could affect, the
Company's stock price or cause the Company's actual results for the fiscal
quarter ending January 31, 1997, for the fiscal year ending April 30, 1997, and
future fiscal quarters and years to differ materially from those expressed in
any forward-looking statements, oral or written, made by or on behalf of the
Company.
The Company's business and future operating results are subject to potential
fluctuations due to a number of factors including the following:
Fluctuations in Operating Results. Although the Company was profitable in
fiscal years 1996 and 1995, operating results benefited from high gross margins
achieved on sales of inventories of older generation Flash products, for which
the costs had previously been charged off and the recognition of revenue
previously deferred as a result of foreign distributors who agreed to amend
their agreements with the Company. The Company will not receive any further
material benefit from sales of charged off inventory. The Company experienced a
net operating loss in the quarter ended October 31, 1996 primarily due to price
erosion caused by adverse industry-wide conditions and there can be no
assurances that the Company will be able to return to profitability in future
periods. The Company's operating results have historically been and will
continue to be subject to fluctuation and may be adversely affected in future
quarters due to factors such as timing and market acceptance of new products
introduced by the Company and its competitors, fluctuations in customer demand
for the Company's products, volatility in supply and demand affecting market
prices generally, increased expenses associated with new product introductions
or process changes, increased expenditures related to expanding the Company's
sales channels, gains or losses of significant customers, timing of significant
orders for the Company's products, fluctuations in manufacturing yields, wafer
price increases under wafer supply agreements due to foreign currency
fluctuations, changes in product mix and general economic conditions.
8
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CATALYST SEMICONDUCTOR, INC.
Semiconductor Industry. The semiconductor industry is highly cyclical and has
been subject to significant economic down turns at various times, characterized
by diminished product demand, accelerated erosion of average selling prices and
production overcapacity. Accordingly, the Company may experience substantial
period to period fluctuations in future operating results due to general
semiconductor industry conditions, overall economic conditions or other factors.
For example, semiconductor market conditions are currently characterized by
short lead-times and therefore decreased ability to anticipate demand. In the
quarter ended October 31, 1996, prices for the Company's Flash memory products
declined approximately 20%. If poor general market conditions persist, the
Company's operating results could continue to be adversely affected.
Future Capital Needs. The Company has had limited cash resources in recent
periods and operating activities have consumed significant amounts of cash. The
Company believes that substantial investments in research and development and
sales and marketing expenses are essential to revenue growth and to maintain and
enhance the Company's competitive position. There can be no assurance that the
Company will be able to generate sufficient cash from operations or other
sources to fund these investments. Moreover, there can be no assurance that such
expenditures will result in successful product introductions or increased
revenues. Although certain expenses can be managed or controlled on a short term
basis, a substantial portion of such expenses are essentially fixed on a quarter
to quarter basis. As a result, to the extent the Company suffers adverse effects
to its revenues or margins because of delays in new product introductions,
fluctuations in customer demand for the Company's products, volatility in supply
and demand affecting market prices generally or other competitive factors, the
Company may be unable to take actions in the short term to substantially reduce
expenses.
Inventory. The cyclical nature of the semiconductor industry periodically
results in shortages and over-supply of wafer fabrication capacity such as the
Company experiences from time to time. Since the Company must order products and
build inventory substantially in advance of product shipments, there is a risk
that the Company will forecast incorrectly and produce excess or insufficient
inventories of particular products because demand for the Company's products is
volatile and customers place orders with short lead times. The ability of the
Company's customers to reschedule or cancel orders without significant penalty
could adversely affect the Company's liquidity, as the Company may be unable to
adjust its purchases from its wafer suppliers to match such customer changes and
cancellations. There can be no assurance that the Company in the future will not
produce excess quantities of any of its products. To the extent the Company
produces excess inventories of particular products, the Company's operating
results could be adversely affected, as was the case during the last half of
fiscal 1994, during which period the Company took significant charges largely to
reflect a decline in the market value of inventory.
Flash Memory Market. The market for Flash memory products has been
characterized by long production cycles, inconsistent yields, competing
technologies and intense overall competition. The Company's fiscal 1995
operating results were adversely affected by lack of market acceptance of its
Flash memory products particularly when Intel, the dominant supplier in the
Flash market, significantly increased Flash production volume in the second half
of fiscal 1994. Intel and other competitors (which include Advanced Micro
Devices, Atmel, Fujitsu, Hitachi, Mitsubishi, SGS-Thomson, Sharp, Texas
Instruments and Toshiba) are expected to further increase Flash memory
production. There can be no assurance that the Company will be able to sustain
market acceptance for its Flash memory products in the light of competition from
such major domestic and international companies. The Company anticipates
continued price and other competitive pressures, which adversely affected fiscal
1995 and 1994 operating results and could further adversely affect the Company's
future operating results. For example, prices for the Company's Flash memory
products declined approximately 20% in the quarter ended October 31, 1996.
Competition. The semiconductor industry is intensely competitive and
characterized by severe price competition, price erosion, rapid technological
change, product obsolescence and intellectual property litigation. The Company
competes with major domestic and international semiconductor companies, most of
whom have substantially greater financial, technical, marketing and distribution
resources than the Company. There can be no assurance that the Company will be
able to compete successfully in the future.
Dependence on Independent Foreign Manufacturers; Manufacturing Risks. The
Company does not manufacture the semiconductor wafers used for its products. The
Company principally utilizes facilities of OKI in Japan, and is transitioning
manufacturing of certain products to United Microelectronics Corporation (UMC)
in Taiwan, to fabricate and test the Company's wafers, and subcontractors in
South East Asia to assemble finished integrated circuits. To date, a majority of
these wafers and all of the Company's Flash wafers have been manufactured by
OKI. The manufacture of semiconductor products is highly complex and sensitive
to a wide variety of factors, and as is typical in the semiconductor industry
the Company's outside wafer foundries from time to time have experienced lower
than anticipated production yields. While the Company believes it has an
adequate wafer supply to meet its currently anticipated needs, there can be no
assurance that the Company will continue to receive sufficient quantities of
wafers at favorable prices on a timely basis, if at all, or that the Company
will be able to attain higher levels of wafer supply as demand requires.
Material disruptions in the supply of wafers as a result of manufacturing yield
or other manufacturing problems are not uncommon in the semiconductor industry.
The
9
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CATALYST SEMICONDUCTOR, INC.
Company has publicly announced that it has experienced production transition
delays which adversely affected operating results in the third quarter of fiscal
year 1994 and also adversely affected operating results in fiscal year 1994.
There can be no assurance that the Company will not experience such problems in
the future. The loss of OKI as a supplier, the inability to integrate UMC as a
supplier on a timely basis, any prolonged inability to obtain adequate yields or
deliveries from OKI or other subcontractor manufacturers, or any other
circumstance that would require the Company to seek alternative sources of
supply, could delay shipments and have a material adverse effect on the
Company's business and operating results. Moreover, the inability to procure
supplies and services from these foreign subcontractor manufacturers on
commercially reasonable terms as a result of foreign currency exchange rate
fluctuations may have a material adverse effect on the Company's operating
results. The Company has a wafer purchase agreement with OKI under which the
price of wafers is based upon the exchange rate between the US dollar and
Japanese Yen. As a result, exchange rate fluctuations will cause the Company's
cost per die to fluctuate in the future and gross profit could be adversely
affected. In addition, the Company's business is subject to other risks
generally associated with doing business with foreign subcontractors.
International Operations. For the six months ended October 31, 1996,
international sales accounted for 68% of the Company's product sales. In fiscal
1996, 1995 and 1994, international sales accounted for 60%, 61% and 53%,
respectively, of the Company's product sales. The Company expects that
international sales will continue to represent a significant portion of its
product sales in the future. The Company also expects to continue to subcontract
its manufacturing activity to foreign companies as noted above. The Company's
international operations may be adversely affected by a variety of factors
including fluctuations in exchange rates, imposition of government controls,
political and economic instability, trade restrictions, changes in regulatory
requirements, difficulties in staffing international operations and longer
payment cycles. There can be no assurance these or other factors related to
international operations will not have a material adverse affect on the
Company's business, financial condition and results of operations.
New Product Development and Technological Change. The markets for the
Company's products are characterized by rapidly changing technology and product
obsolescence, and the timely introduction of new products is a key factor in the
success of the Company's business. In particular, the Company's future success
will depend on its ability to develop and implement new design and process
technologies which enable the Company to achieve higher product densities. For
example, most of the Company's products are currently designed and manufactured
using a 1.0 micron CMOS EEPROM process or a 0.7 micron Flash memory process.
There can be no assurance that the Company will be able to select and develop
new products and technologies and introduce them to the market in a timely
manner and with acceptable fabrication yields and production costs. The Company
currently has such major transitions in process. These transitions are to change
certain EEPROM products from 1.0 micron to 0.8 micron designs, certain Flash
memory products from 0.7 micron to 0.6 micron designs at OKI and the development
of new Flash memory products on 0.5 micron designs at UMC. Delays in developing
new products or achieving volume production of new products, or the lack of
commercial acceptance of new products introduced by the Company, could have a
material adverse effect on the Company's business and operating results.
Risk of Intellectual Property Litigation. In the semiconductor industry it is
typical for companies to receive notices from time to time that allege
infringement of patents or other intellectual property rights of others. There
can be no assurance that the Company will not receive any such notification or
that proceedings alleging infringement of intellectual property rights will not
be commenced against the Company in the future. In such event, there can be no
assurances that the Company could obtain any required licenses of third party
intellectual property rights or could obtain such licenses on commercially
reasonable terms. Failure to obtain such a license in any event could require
the Company to cease production of its products until the Company develops a
non-infringing design or process. Moreover, the cost of litigation of any such
claim or damages resulting therefrom could be substantial and could materially
and adversely affect the Company's business, financial condition and results of
operations.
Takeover Resistive Measures. The Company's Shareholder Rights Plan and the
ability of the Company's Board of Directors to issue "blank check" preferred
stock without further approval of the stockholders could have the effect of
delaying or preventing a change in control of the Company.
Volatility of Stock Price. The Company's stock price has been subject to
significant volatility. Any shortfall in revenues or earnings from levels
expected or projected by securities analysts or others in the future could have
an immediate and significant adverse effect on the trading price of the
Company's Common Stock in any given period. In addition, the stock market in
general has experienced extreme price and volume fluctuations particularly
affecting the market prices for many high technology and small capitalization
companies, and these fluctuations have often been unrelated to the operating
performance of the specific companies. These broad fluctuations have adversely
affected and may in the future adversely affect the market price for the
Company's Common Stock.
10
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CATALYST SEMICONDUCTOR, INC.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Stockholders held on August 2, 1996 the
following proposals were adopted by the margins indicated.
<TABLE>
<CAPTION>
Number of Shares
Voted For Withheld
--------- --------
<S> <C> <C> <C>
1. To elect two Class I directors to serve for a three-year term
expiring upon the 1999 Annual Meeting of Stockholders or until
such directors' successors are duly elected and qualified.
Radu M. Vanco 7,083,619 373,897
Hideyuki Tanigami 7,094,049 363,467
</TABLE>
<TABLE>
<CAPTION>
Voted Broker
Voted For Against Abstain Non-Votes
--------- ------- ------- ---------
<S> <C> <C> <C> <C> <C>
2. To approve an amendment to the Company's Stock Option
Plan to increase the number of shares of Common Stock
reserved for issuance thereunder by 830,000 shares. 1,785,480 910,568 67,931 4,693,536
3. To approve an amendment to the Company's 1993 Director
Stock Option Plan to increase the number of shares of
Common Stock reserved for issuance thereunder by 50,000
shares. 2,727,977 709,710 70,221 3,949,607
4. To ratify the appointment of Price Waterhouse LLP as
independent accountants of the Company for the fiscal year
ending April 30, 1997. 7,377,731 39,692 40,093 0
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
27 Financial Data Schedule
(B) There were no reports on Form 8-K filed during the quarter ended
October 31, 1996.
11
<PAGE> 12
CATALYST SEMICONDUCTOR, INC.
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, in the City of Sunnyvale and State of
California.
Date:December 13, 1996 By: /s/C. Michael Powell
------------------ --------------------
C. Michael Powell
Chairman of the Board of Directors, President,
Chief Executive Officer and Chief Financial
Officer
Date:December 13, 1996 By: /s/Daryl E. Stemm
------------------ -------------------
Daryl E. Stemm
Director of Finance and Administration and
Chief Accounting Officer
12
<PAGE> 13
EXHIBIT INDEX
Exhibit
Index Description
------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE>5
<LEGEND>THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE BALANCE SHEETS AS OF OCTOBER 31 AND APRIL 30, 1996,
STATEMENTS OF OPERATIONS AND STATEMENTS OF CASH FLOWS FOR THE THREE AND SIX
MONTH PERIODS ENDED OCTOBER 31, 1996 AND SEPTEMBER 30, 1995 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS 6-MOS 6-MOS
<FISCAL-YEAR-END> APR-30-1997 APR-30-1997 APR-30-1997 APR-30-1996
<PERIOD-START> AUG-01-1996 JUL-01-1995 MAY-01-1996 APR-01-1995
<PERIOD-END> OCT-31-1996 SEP-30-1995 OCT-31-1996 SEP-30-1995
<EXCHANGE-RATE> 1 1 1 1
<CASH> 9,366 9,366 8,216 8,216
<SECURITIES> 0 0 0 0
<RECEIVABLES> 9,427 9,427 10,570 10,570
<ALLOWANCES> (150) (150) (100) (100)
<INVENTORY> 16,067 16,067 16,193 16,193
<CURRENT-ASSETS> 35,771 35,771 36,225 36,225
<PP&E> 14,212 14,212 12,946 12,946
<DEPRECIATION> (10,137) (10,137) (9,896) (9,896)
<TOTAL-ASSETS> 39,846 39,846 39,275 39,275
<CURRENT-LIABILITIES> 22,322 22,322 21,194 21,194
<BONDS> 887 887 571 571
0 0 0 0
0 0 0 0
<COMMON> 41,718 41,718 41,263 41,263
<OTHER-SE> (25,081) (25,081) (23,753) (23,753)
<TOTAL-LIABILITY-AND-EQUITY> 39,846 39,846 39,275 39,275
<SALES> 12,078 14,702 27,910 28,644
<TOTAL-REVENUES> 12,078 14,702 27,910 28,644
<CGS> 10,138 10,472 21,259 20,101
<TOTAL-COSTS> 10,138 10,472 21,259 20,101
<OTHER-EXPENSES> 4,371 3,375 7,885 6,816
<LOSS-PROVISION> 30 0 50 0
<INTEREST-EXPENSE> (5) 36 (33) 164
<INCOME-PRETAX> (2,456) 819 (1,251) 1,563
<INCOME-TAX> 32 6 78 17
<INCOME-CONTINUING> (2,488) 813 (1,329) 1,546
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> (2,488) 813 (1,329) 1,546
<EPS-PRIMARY> (0.31) 0.10 (0.17) 0.20
<EPS-DILUTED> (0.31) 0.10 (0.17) 0.20
</TABLE>
