Edgar Filing: SIMTEK CORP

As filed with the Securities and Exchange Commission on January 9, 2001
Registration 333-51970
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Amendment No. 1 to

Form SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

SIMTEK CORPORATION
(Exact name of registrant as specified in its charter)

Colorado 84-1057605
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)

1465 Kelly Johnson Boulevard, Suite 301
Colorado Springs, Colorado 80920
(719) 531-9444
(Address, including zip code, and telephone number,
including area code, of Principal Executive Offices)

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Douglas M. Mitchell
Chief Executive Officer, President and Chief Financial Officer (acting)
Simtek Corporation
1465 Kelly Johnson Boulevard, Suite 301
Colorado Springs, CO 80920
(719) 531-9444
(Name, address, including zip code and telephone
number, including area code, of agent for service)

Copies to:
Garth B. Jensen, Esq.
Holme Roberts & Owen LLP
1700 Lincoln, Suite 4100
Denver, CO 80203
(303) 861-7000

Approximate Date of Commencement of Proposed Sale to the Public: From
time to time after the effective date of this Registration Statement.

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If this From is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [X]

If this Form is a post-effective amendment filed pursuant to Rule 462 (d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

If any of the securities being registered on this form are being offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]

The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8 (a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

The following language appears on the left side of the cover page:

The information in this preliminary prospectus is not complete and may be
changed. We may not sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This preliminary
prospectus is not an offer to sell these securities nor does it seek an offer to
buy these securities in any jurisdiction where the offer or sale is not
permitted.

SUBJECT TO COMPLETION, DATED JANUARY 9, 2001

PROSPECTUS
5,150,000 Shares

SIMTEK CORPORATION

Common Stock

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This prospectus is being used to register 5,150,000 shares of Simtek
Corporation's Common Stock being offered by five of our shareholders.

Our common stock is traded on the OTC Bulletin Board under the symbol
"SRAM." On January 5, 2001, the closing sale price of our common stock was
$0.4688 per share.

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SEE "RISK FACTORS" BEGINNING ON PAGE 4 TO READ ABOUT CERTAIN FACTORS YOU SHOULD
CONSIDER BEFORE BUYING OUR STOCK.

---------------

Neither the Securities and Exchange Commission Nor Any Other Regulatory
Body Has Approved or Disapproved of These Securities or Passed upon the Adequacy
or Accuracy of this Prospectus. Any Representation to the Contrary Is a Criminal
Offense.

The date of this Prospectus is _______________, 2000.

AVAILABLE INFORMATION

We are subject to the information requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). Accordingly, we file reports,
proxy statements and other information with the Securities and Exchange
Commission. You may inspect our reports, proxy statements and other information
without charge at the public reference facilities of the Commission's principal
office at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's
regional offices at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661
and 7 World Trade Center, Suite 1300, New York, NY 10048. You may also obtain
copies there at the prescribed rates. You may obtain information on the
operation of the Commission's public reference facilities by calling the
Commission in the United States at 1-800-SEC-0330. The Commission also maintains
a web site at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission.

We have filed with the Commission, a registration statement on Form SB-2
under the Securities Act of 1933, as amended (the"Securities Act"), with respect
to the common stock we are offering (the "registration statement"). This
prospectus does not contain all of the information set forth in the registration
statement and the exhibits and schedules thereto. For further information about
us and the common stock offered, you should refer to the registration statement,
including the exhibits and schedules thereto, which may be inspected at, and
copies thereof may be obtained at prescribed rates from, the public reference
facilities of the Commission at the addresses set forth above.

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TABLE OF CONTENTS

Prospectus Summary......................................................... 3
Risk Factors............................................................... 4
Use of Proceeds............................................................ 8
Capitalization............................................................. 8
Market for our Common Stock and Related Secondary Holder Matters........... 9
Selected Financial Data.................................................... 10
Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................... 11
Business................................................................... 16
Management................................................................. 24
Security Ownership......................................................... 27
Selling Shareholders....................................................... 29
Certain relationships and Related Transactions............................. 29
Description of Securities.................................................. 29
Plan of Distribution....................................................... 30
Legal Matters.............................................................. 30
Experts .................................................................. 30
Index of Financial Statements.............................................. F-1

PROSPECTUS SUMMARY

INFORMATION ABOUT US AND OUR BUSINESS

We design, develop, produce and market high performance nonvolatile
semiconductor memories and metal programmed gate array products. Nonvolatility
prevents loss of programs and data when electrical power is removed. Our
nonvolatile memory products feature fast data access and programming speeds and
electrical reprogramming capabilities. All of our products are targeted for use
in commercial electronic equipment markets. These markets are industrial control
systems, office automation, medical instrumentation, telecommunication systems,
cable television, and numerous military systems, including communications,
radar, sonar and smart weapons.

Our principal executive office is located at 1465 Kelly Johnson Blvd.,
Suite 301, Colorado Springs, Colorado 80920. Our telephone number is
719-531-9444.

THE SHARES

We are registering 5,150,000 shares that are held by five of our
shareholders.

We will not receive any of the proceeds of the shares being sold by our
shareholders.

RISK FACTORS

You should consider carefully the following risk factors before purchasing
shares of common stock.

WE HAVE LIMITED CAPITAL FOR OPERATIONS AND MAY NEED TO RAISE MORE MONEY TO
CONTINUE OPERATING OUR BUSINESS

To date, we have required significant capital for product development,
manufacturing and marketing. From the time we started business through September
30, 2000, we have raised approximately $32.1 million of gross proceeds from the
sale of our convertible debt and equity securities. During the same period, we
earned approximately $10.1 million of gross revenue from the sale of product and
technology licenses, approximately $41.0 million from net product sales and
$600,000 in royalty income.

We believe that if we are able to increase our product sales substantially
and with positive gross margins, our cash requirements for producing and
marketing our existing four product families will be satisfied. We are not sure,
however, whether this increase in product sales or positive gross margins will
occur. We may need more capital in the next year to develop new products. We are
not sure that we will be able to raise more capital. If we cannot, then we may
not be able to develop and market new products.

WE HAVE MADE OPERATING LOSSES IN THE PAST AND MAY MAKE OPERATING LOSSES IN THE
FUTURE

We began business in 1987. Through September 30, 2000, we had accumulated
losses of approximately $32.0 million. We realized net income for the first time
for the year ended December 31, 1997 and continued to realize net income through
June 30, 2000. However, for the three months ended September 30, 2000, we
realized a net loss primarily as a result of accounting charges from an
acquisition during the quarter paid for in our stock. Our ability to return to
realizing income will depend on many factors, some of which we cannot control.
These factors include market acceptance of our products and the prices that we
are able to charge, our ability to reduce our costs on products sold to the
commercial and military markets and our subcontractors' ability to manufacture
our products to our specifications cost effectively.

BECAUSE OUR COMMON STOCK IS LISTED ONLY ON THE OTC ELECTRONIC BULLETIN BOARD IT
MAY BE MORE DIFFICULT TO SELL OUR COMMON STOCK

Our common stock is listed on the OTC Electronic Bulletin Board under the
symbol SRAM. Our common stock was listed on the NASDAQ Small-Cap Market until
July 18, 1995 but because we no longer met NASDAQ's listing requirements, we
transferred to the OTC Electronic Bulletin Board. We may not be able to meet the
requirements for relisting our common stock on NASDAQ in the near future.

Securities that are not listed on the NASDAQ Small-Cap Market are subject
to a Securities and Exchange Commission rule that imposes special requirements
on broker-dealers who sell those securities to persons other than their
established customers and accredited investors. The broker-dealer must determine
that the security is suitable for the purchaser and must obtain the purchaser's
written consent prior to the sale. These requirements may make it difficult for
broker-dealers to sell our securities. This may also make it more difficult for
our security holders to sell their securities and may affect our ability to
raise more capital.

OUR BOARD OF DIRECTORS HAS THE AUTHORITY TO ISSUE PREFERRED STOCK

Our Board of Directors has the authority to issue up to 2,000,000 shares of
preferred stock in one or more series and to establish the voting powers,
preferences and other rights and qualifications thereof, without any further
vote or action by the shareholders. The issuance of preferred stock by our Board
of Directors could affect the rights of the holders of our common stock and
could potentially be used to discourage attempts by others to obtain the control
of us through merger, tender offer, proxy contest or otherwise by making such
attempts more difficult to achieve or more costly. Our Board of Directors has no

specific intention in issuing shares of preferred stock, but given our present
capital requirements, it is possible that we may need to raise capital through
the sale of preferred stock in the future.

THE RISKS INVOLVED IN MANUFACTURING SEMICONDUCTORS MAY AFFECT OUR NET INCOME

The manufacturing of semiconductors is very complex and our success in
manufacturing semiconductors depends on many factors that we are unable to
control. For example, successful manufacturing is affected by the level of
contaminates in the manufacturing environment, impurities in the materials used
and the performance of our equipment. These factors could reduce the number of
semiconductors that we are able to make in a production run, which would
increase our manufacturing costs. In order for us to be profitable, we must keep
our manufacturing costs down. We have been able to keep our overall costs down
through a number of methods including reducing the size of our chips, increasing
the number of chips per wafer, reducing our packaging costs and eliminating
defects in the manufacturing process. These measures may not work all the time,
however, and we are not sure that our existing cost saving methods will be
enough to enable us to continue generating profits.

It takes approximately three months for us to manufacture our
semiconductors. Any delays in receiving silicon wafers will delay our ability to
deliver our products to customers. This would delay sales revenue and could
cause our customers to cancel existing orders or not place future orders. In
addition, if we are not able to make all of our planned semiconductors in a
production run this could delay delivery of our products. If our semiconductors
have technical problems, we could be required to write off inventory or grant
warranty replacements. These delays or technical problems could occur at any
time and would affect our net income.

WE DEPEND GREATLY ON SUBCONTRACTORS AND THEIR POOR PERFORMANCE COULD HURT OUR
OPERATIONS

We have hired independent subcontractors to make our silicon wafers and to
assemble and test our products. Our operating results depend on our
subcontractors' ability to supply us with silicon wafers that meet our
specifications and to assemble and test enough of our products to meet our
customer's needs, all at reasonable costs.

In September 1995, we entered into an agreement with ZMD that allowed us to
purchase finished 0.8 micron units from ZMD's foundry. We purchased these units
from ZMD's foundry through the first half of 1998 and then transferred all of
our manufacturing over to products built from the wafers purchased from
Chartered Semiconductor Manufacturing Plc. of Singapore ("Chartered"). Sales of
the products purchased from ZMD accounted approximately 2% of our revenue for
the three months ended September 30, 1999 and less than 1% for the three months
ended September 30, 2000.

Currently, we depend on Chartered to manufacture all of our silicon wafers
that support our nvSRAM products. Sales of metal programmed gate array products
are supported with 0.5 micron wafers purchased from United Memories Corp. of
Taiwan ("UMC"). If Chartered or UMC are unable to meet our silicon wafer needs
on time and at a price that we find acceptable, we would have to find other
wafer manufacturers. If we cannot find other suppliers, manufacturers or
assemblers on acceptable terms, we may not be profitable. In addition, our
subcontractors must be audited and recertified by us on a regular basis for us
to continue to produce military- qualified products. There is no assurance that
we will be able to complete this recertification successfully.

Our current manufacturing agreement with Chartered has expired. Under our
old agreement, we had the right to purchase up to 600 six-inch silicon wafers
per month from Chartered's facility in Singapore. If we are unable to renew our
agreement with Chartered or the limit on wafers that we can purchase is not
increased, we may be limited in the number of semiconductors that we can sell.
Approximately all sales for the three months ended September 30, 2000 were from
products built on wafers purchased from Chartered and UMC. Approximately 98% of
our product sales for the three months ended September 30, 1999 were based on
wafers purchased from Chartered and UMC.

WE DEPEND ON OTHERS FOR SALES AND DISTRIBUTION AND MOST OF OUR SALES ARE TO A
LIMITED NUMBER OF CUSTOMERS AND DISTRIBUTORS

We use independent sales representatives and distributors to sell the
majority of our products. The agreements with these sales representatives and
distributors can be terminated without cause by either party with only 30 to 90
days written notice. If one or more of our sales representatives or distributors
terminates our relationship, we may not be able to find replacement sales
representatives and distributors on acceptable terms. This would affect our
profitability. In addition, during 1999, approximately 56% of our product sales
were to three distributors. We are not sure that we will be able to maintain our
relationship with these distributors.

WE MAY NOT REALIZE ANY NEW LICENSE REVENUES

We have received substantially all of the revenue to which we are entitled
under our existing license agreements and we have not sold any new licenses. We
are not sure whether we will be able to sell any more product or technology
licenses in the future.

DELAYS IN OR FAILURE OF PRODUCT QUALIFICATION MAY HARM OUR BUSINESS

Prior to selling a product, we must establish that it meets certain
performance and reliability standards. As part of this testing process, known as
product qualification, representative samples of products are subjected to a
variety of tests to ensure that performance in accordance with commercial,
industrial and military specifications. Delays or failure by us to accomplish
product qualification for our future products will have an adverse effect on us.
Even with successful initial product qualifications, we cannot be certain that
we will be able to maintain product qualification or achieve sufficient sales to
meet our operating requirements.

OUR SUCCESS DEPENDS ON OUR ABILITY TO INTRODUCE NEW PRODUCTS

Our success depends in part upon our ability to expand our existing product
families and to develop and market new products. The development of new
semiconductor designs and technologies typically requires substantial costs for
research and development. Even if we are able to develop new products, the
success of each new product depends on several factors including whether we
selected the proper product and our ability to introduce it at the right time,
whether the product is able to achieve acceptable production yields and whether
the market accepts the new product. We are not certain whether we will be
successful in developing new products or whether any products that we do develop
will satisfy the above factors.

OUR RECENT PURCHASE OF INCOMPLETE RESEARCH AND DEVELOPMENT

In an effort to expand our products, we recently acquired incomplete
research and development products from WebGear, Inc., a California corporation
("WebGear"). The incomplete research and development we acquired should enable
us to enter the Bluetooth technology market. In addition to this incomplete
research and development, we will be required to use significant working capital
in order to bring these products to market.

THE SEMICONDUCTOR INDUSTRY CHANGES VERY RAPIDLY AND OUR BUSINESS WOULD BE HARMED
IF WE CANNOT KEEP UP WITH THESE CHANGES

The semiconductor industry is characterized by rapid changes in technology
and product obsolescence, volatile market patterns, price erosion, product
oversupply, occasional shortages of materials, variations in manufacturing
efficiencies and significant costs associated with capital equipment and product
development. We cannot be certain that the technology we currently use will not
be made obsolete by other competing memory technologies. Any one or more of
these factors could have a material effect on our financial results.

THERE IS INTENSE COMPETITION IN THE SEMICONDUCTOR INDUSTRY

There is intense competition in the semiconductor industry. We experience
competition from a number of domestic and foreign companies, most of which have
significantly greater financial, technical, manufacturing and marketing
resources than we have. Our competitors include major corporations with
worldwide wafer fabrication and circuit production facilities and diverse,

established product lines. We also compete with emerging companies attempting to
obtain a share of the market for our product families. If any of our new
products achieve market acceptance, other companies may sell competitive
products at prices below ours. This would have an adverse effect on our
operating results. We have sold product and technology licenses to Plessey,
Nippon Steel and ZMD. At this time Plessey and Nippon Steel have not began
producing our products. ZMD has entered the market, however, and may become one
of our significant competitors.

THE LOSS OF KEY EMPLOYEES COULD MATERIALLY AFFECT OUR FINANCIAL RESULTS

Our success depends in large part on our ability to attract and retain
qualified technical and management personnel. The competition for these
personnel is intense. If we lose any of our key personnel, this could have a
material adverse affect on our ability to conduct our business and on our
financial results.

WE DEPEND ON PATENTS TO PROTECT OUR INTELLECTUAL PROPERTY

We have been issued seven U.S. patents relating to certain aspects of our
current products and we have two applications pending. We have also applied for
international patents on our technology. We plan to continue to protect our
intellectual property. We are not sure that any of the patents for which we have
applied will issue or if issued, will provide us with meaningful protection from
competition. We may also not have the money required to maintain or enforce our
patent rights. Notwithstanding our patents, other companies may obtain patents
similar to or relating to our patents. We have not determined whether our
products are free from patent infringement.

OUR PRODUCTS AND TECHNOLOGY MAY INFRINGE ON OTHER PATENTS

In the past, we have been notified by two companies that some of our
products and technologies may be related to patents owned by them and a third
party has notified us that our products or technologies may infringe on two
patents owned by that party. At the time we received the notices, we retained
legal counsel to evaluate three patents identified in the notices but we have
not yet determined whether our products infringe on the third party patents. We
have not received any recent correspondence about these claims but we are not
sure whether any further action will be taken or that new claims will not be
asserted. If infringement claims are asserted against us and are upheld, we will
try to modify our products so they are non-infringing. If we are unable to do
so, we will have to obtain a license to sell those products or stop selling the
products for which the claims are asserted. We may not be able to obtain the
required licenses. Any successful infringement claim against us or if we fail to
obtain any required license or are required to stop selling any of our products
would have a material adverse effect on our financial results.

In 1998, we received notice of a claim for an unspecified amount from a
foundation that owns approximately 180 patents and 70 pending applications. The
foundation claims that certain machines and processes used in the building of
our semiconductor devices infringe on the foundation's patents. In April 1999,
we reached an agreement with the foundation for us to purchase a nonexclusive
license of the foundation's patents.

WE DO NOT INTEND TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE

We have never paid cash dividends on our common stock. We do not expect to
pay dividends in the foreseeable future. We will use any earnings to finance
growth. You should not expect to receive dividends on your shares of common
stock.

FOREIGN CURRENCY EXCHANGE RATE FLUCTUATIONS MAY CAUSE FINANCIAL LOSSES

Changes in foreign currency exchange rates can reduce our revenues and
increase our costs. Under our purchase agreement with Chartered, we buy silicon
wafers in US dollars but the agreement permits a price adjustment if the six
month rolling average exchange rate changes by more than 5% from the starting
point. In addition, over 53% of our sales are outside of the United States.
Therefore, any large exchange rate fluctuation could increase our costs and thus
decrease our revenues. We do not try to reduce our exposure to these exchange
rate risks by using hedging transactions.

USE OF PROCEEDS

We will receive no proceeds from the sale of shares by our shareholders.

CAPITALIZATION

The following table shows our capitalization at September 30, 2000.

September 30, 2000
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Actual
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Preferred stock, $1.00 par value, 2,000,000 shares
authorized, none issued and outstanding $ 0

Common stock, $0.01 par value, 80,000,000 shares
authorized, 48,942,163 issued and outstanding 489,421

Additional paid in capital 37,343,790

Accumulated deficit as of September 30, 2000 (31,964,258)
------------
Shareholders' equity $ 5,868,953

MARKET FOR OUR COMMON STOCK AND RELATED SECURITY HOLDER MATTERS

Our common stock is listed on the OTC Electronic Bulletin Board under the
symbol SRAM. Securities not included in the NASDAQ Small-CAP Market are covered
by the Commission rule that imposes additional sales practice requirements on
broker-dealers who sell such securities to persons other than established
customers and accredited investors (generally institutions with assets in excess
of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual
income exceeding $200,000 or $300,000 jointly with their spouse). For
transactions covered by the rule, the broker-dealer must make a special
suitability determination for the purchaser and receive the purchaser's written
agreement to the transaction prior to the sale. Consequently, the rule may
affect the ability of broker-dealers to sell our securities, which will have an
adverse effect on the ability of our security holders to sell their securities
and the possibility of our ability to raise additional capital.

Shown below is the closing high bid and the closing low offer as reported
by the OTC Electronic Bulletin Board on the last day of the quarter.

Common Stock
------------
High Bid Low Offer
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1998
First Quarter....................................... .39 .41
Second Quarter...................................... .32 .36
Third Quarter....................................... .22 .23
Fourth Quarter...................................... .15 .16

1999
First Quarter....................................... .19 .18
Second Quarter...................................... .22 .21
Third Quarter....................................... .15 .135
Fourth Quarter...................................... .275 .261

2000
First Quarter....................................... 2.875 2.25
Second Quarter...................................... 1.5313 1.375
Third Quarter....................................... .969 .85

As of November 3, 2000, there were 372 shareholders of record, not
including shareholders who beneficially own common stock held in nominee or
"street name."

We have not paid any dividends on our common stock since inception and we
do not intend to pay any in the foreseeable future.

SELECTED FINANCIAL DATA

The statements of operations for the years ended December 31, 1999 and 1998
and the balance sheet data as of December 31, 1999 have been derived from the
financial statements that have been audited by Hein + Associates, LLP,
independent auditors. These financial statements include the acquisitions of
Integrated Logic Systems, Inc. and Macrotech Semiconductor as described in Note
10 of the December 31, 1999 financial statements. The balance sheet as of
September 30, 2000 and the statements of operations for the nine months ended
September 30, 2000 and 1999 are unaudited. In our opinion, these financial
statements include all adjustments necessary for the fair presentation of the
financial position as of September 30, 2000 and statements of operations for the
nine months ended September 30, 2000 and 1999. The balance sheet as of September
30, 2000 and the statements of operations for the nine months ended September
30, 2000 and 1999 were prepared on a consistent basis with our year end
financial information. This financial data should be read in conjunction with
our financial statements and the notes thereto included elsewhere in this
prospectus and to "Management's Discussion and Analysis of Results of Operations
and Financial Condition."

For the Years Ended December 31, Nine Months Ended September 30,
-------------------------------- -------------------------------
Statement of Operations Data: 1999 1998 2000 1999
---- ---- ---- ----

Net Sales............................................. $ 7,754,952 $ 6,522,078 $ 9,220,772 $ 5,443,359
Cost of Sales......................................... 4,826,266 3,693,051 5,664,717 3,562,028
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Gross Margin.......................................... 2,928,686 2,829,027 3,556,055 1,881,331
Operating Expenses:
Design, research and development................. 1,640,025 1,558,926 5,647,835 1,206,987
Administrative................................... 470,703 526,081 620,991 344,742
Marketing........................................ 918,642 833,604 869,669 724,606
-------------------------------------------------------------------------
Total Operating Expenses..................... 3,029,370 2,918,611 7,138,495 2,276,335
Other income (expense), net........................... (48,786) 128,623 76,241 (59,087)
--------------------------------------------------------------------------
Net income (loss) before taxes........................ (149,470) 39,039 (3,506,199) (454,091)
Provision for income taxes....................... - - 11,600 -
-------------------------------------------------------------------------
Net income (loss)..................................... $ (149,470) $ 39,039 $ (3,517,799) $ (454,091)
==========================================================================
Net income (loss) per common share:
Diluted......................................... $ * $ * $ (.08) $ (.01)
Basic........................................... * $ * $ (.08) $ (.01)
Weighted average common shares outstanding:..........
Basic........................................... 33,173,966 32,977,276 41,392,310 31,955,226
Diluted......................................... 33,173,966 34,500,334 41,392,310 31,955,226

* Less than $.01 per share.

Year Ended Three Months Ended
December 31, 1999 September 30, 2000
----------------- ------------------

Balance Sheet Data:
Working capital...................................... $ 3,026,552 $ 5,218,273
Total assets......................................... 5,508,380 7,582,345
Convertible debentures............................... 1,500,000 -
Shareholders' equity................................. $ 1,965,371 $ 5,868,953

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

GENERAL. We have designed and developed nonvolatile semiconductor products
since we commenced business operations in May 1987. We have concentrated on the
design and development of the 4, 16, 64 and 256 kilobit nvSRAM product families
and technologies, the design of a 256 kilobit EEPROM, marketing, distribution
channels, and sources of supply, including production at subcontractors. With
the acquisition of Integrated Logic Systems, Inc. ("Integrated") and Macrotech
Semiconductor ("Macrotech"), we also design, develop and produce gate array
integrated circuits.

In September 1991, we began the sale of certain commercially qualified 64
kilobit nvSRAM products based on a 1.2 micron technology. After initial
qualification of our first product in 1991, we began expanding the 64 kilobit
nvSRAM product family. By the end of 1993, we had qualified the complete product
family for commercial, industrial and military markets and had commenced sales
of these products. During 1995, we developed our 64 kilobit nvSRAM product on a
0.8 micron technology, qualification of this product occurred in 1996. In late
1996 and into 1997, we, along with assistance from ZMD, completed the design,
installation and qualification of our 256 kilobit product based on 0.8 micron
technology into ZMD's wafer fab. In 1997, we installed the 256 kilobit nvSRAM
product based on 0.8 micron technology in Chartered's wafer fab. Qualification
of this product for use in the commercial and industrial market occurred in 1997
and qualification for use in the military market occurred in the second quarter
of 1998. In the fourth quarter 1997, we qualified the 64 kilobit nvSRAM product
built on 0.8 micron technology for sale in the commercial and industrial market.
Our metal programmed gate array products are supported with 0.5 micron wafers
purchased from UMC and 0.35 micron wafers purchased from Chartered. Sales of
products built on wafers purchased from Chartered and UMC each accounted for
approximately 98% of our revenue for 1999. Sales of finished units purchased
from ZMD accounted for approximately 2% of our revenue for 1999.

In 1999, we recorded net product sales of $7,754,952 for the year ended
December 31, 1999 up from $6,522,078 recorded for the year ended December
31,1998. The increase in product sales was primarily due to demand for
semiconductor memories returning to historic levels in Japan and other areas of
the Far East. We did see a decrease in selling prices and an increase in unit
shipments due to many customers ordering production volumes of our nvSRAM
products.

In September 2000, we purchased incomplete research and development,
patents and certain trademarks from WebGear, Inc. Simtek has established a core
business within the nonvolatile SRAM application segment, and is now expanding
into other technology areas including logic and Bluetooth wireless markets.
These additional product families are intended to allow more rapid total revenue
growth and to reduce the risk inherent in our historic dependence on one product
family.

Total product sales for 1999 were $7,754,952 which was less than we
anticipated based on our customer forecasts. The shortage was primarily due to a
delay in large volume production orders being placed early in the year as we had
expected. Also, we did not see product demand return to normal levels in Japan
and other areas of the Far East until the second quarter of 1999 and the level
of sales to our high-end industrial and military markets did not remain
consistent with 1998. Sales of our 64 kilobit commercial products increased in
1999 by approximately 11%. This increase was due to new customers placing
production volume orders and the return of volume business in Japan and the Far
East. Sales of our 256 kilobit commercial products saw a 2% increase in 1999 as
compared to 1998. Sales of our 64 kilobit and 256 kilobit high-end industrial
and military market saw a decrease in 1999 of approximately 49% as compared to
1998. This decrease was due to a reduction of our average selling price of the
64 kilobit product and due to delays in certain government production contracts.

With the return of production volume orders being placed for our 16
kilobit, 64 kilobit and 256 kilobit commercial products and an increase in
competition, we did see a decrease in our average selling prices as compared to
1998. However, with this decrease, we saw an increase in unit shipments for 1999
as compared to 1998 of approximately 31%, 80% and 33% for our 16 kilobit, 64
kilobit, and 256 kilobit commercial products, respectively.

Due to the decrease in high-end industrial and military sales, we had an
approximate 5% decrease in our gross margins for 1999 as compared to 1998.

In July 1999, we qualified and began shipping small volumes of our 64
kilobit and 256 kilobit AutoStorePlus ProductsTM, these parts are intended to be
a direct replacement for encapsulated battery-back RAM's.

In the third quarter of 1999, we began sampling our RTC technology which
combines our nvSRAM's with a miniature capacitor-powered oscillator/counter that
eliminates the need for a back-up battery when system power is lost.

We recorded net product sales of $2,996,470 for the third quarter of 2000
and $9,220,772 for the nine months ended September 30, 2000 up from the
$1,782,544 recorded for the third quarter 1999 and the $5,443,359 for the nine
months ended September 30, 1999. The product sales were from our 4 kilobit, 16
kilobit, 64 kilobit and 256 kilobit nvSRAM product families and metal programmed
gate array integrated circuits. The increase in net sales for the three months
and nine months ended September 30, 2000 were primarily due to large customers
placing production orders of our nvSRAM products worldwide. Sales of our metal
programmed gate array integrated circuits accounted for approximately 11% of our
revenue for the nine months ended September 30, 2000. Two distributors and one
direct customer of our nvSRAM products accounted for approximately 51% of our
net sales for the third quarter 2000. Products sold to distributors are re-sold
to various end customers.

During the third quarter 2000, we purchased wafers built on 0.8 micron
technology from Chartered Semiconductor Manufacturing Plc. of Singapore
("Chartered") to support sales of its nvSRAM products. Sales of metal programmed
gate array products were supported with 0.5 micron wafers purchased from United
Microelectronics Corp. ("UMC") of Taiwan.

We saw an increase of approximately 8% and 5% in gross margin percentages
in the three and nine months ended September 30, 2000, respectively, as compared
to the same periods in 1999. The increase in gross margin percentages was
primarily a result of production shipments of metal programmed gate array
integrated circuits increasing in the three and nine months ended September 30,
2000 as compared to the same periods in 1999.

Total other operating expenses saw an increase of approximately $4,634,000
in the three months ended September 30, 2000 as compared to the three months
ended September 30, 1999. Research and Development saw an increase of
$4,429,000, due primarily to the issuance of stock to WebGear for the Bluetooth
technology which was recorded at an approximate cost of $4,385,000. The
remaining $45,000 increase in Research and Development costs was due primarily
to a $36,000 increase in contract services and a $19,000 increase in benefits
and employer taxes due to taxation requirements on the exercise of stock
options, these increases were offset with an approximate $10,000 decrease in
qualification costs. Administration saw an increase of approximately $146,000,
which was due to the issuance of 1,000,000 shares of stock to two investment
banker firms at a valuation of $1,031,000, of which approximately $43,000 was
amortized in the three months ended September 30, 2000. The balance of the
$103,000 increase was due to an approximate $51,000 increase in legal and audit
fees related to the acquisition of Macrotech and the purchase of the Bluetooth
Technology from WebGear and to increased payroll costs of approximately $52,000.
Sales and Marketing saw an increase of $58,000, that was due to a headcount
increase of $32,000 in payroll and benefits expense and an approximate increase
of $26,000 in sales commissions that have a direct relationship to the increase
in net revenues.

Total other operating expenses saw an increase of approximately $4,862,000
in the nine months ended September 30, 2000 as compared to the nine months ended
September 30, 1999. Research and Development saw an approximate increase of
$4,441,000, due primarily to the issuance of stock to WebGear for the Bluetooth
technology, which was recorded at an approximate cost of $4,385,000. (See
General above) The remaining $56,000 increase was due to the purchase of design
software and the maintenance contract related to the software. Administration
saw a $276,000 increase which was due to the issuance of 1,000,000 shares of
stock to two investment banker firms at a valuation of $1,031,000, of which
approximately $43,000 was amortized in the three months ended September 30,
2000. The balance of the $233,000 was related to a $135,000 increase in legal
and audit fees related to the ILSI and the Macrotech acquisitions and the costs
associated with the purchase of the Bluetooth technology from WebGear, increased
payroll costs for the nine months of $94,000, and increased travel expenses of
$4,000. Sales and Marketing saw an increase of approximately $145,000, due to a
headcount increase which created a $105,000 increase in payroll expense and due
to employer taxes due to taxation requirements on the exercise of stock options.
The remaining $40,000 increase was due to increased sales commissions.

We recorded a net loss of $4,235,689 and $3,517,799 for the three and nine
months ended September 30, 2000, respectively, as compared to a net loss of
$250,429 and $454,091 for the three and nine months ended September 30, 1999,
respectively. The decrease was due to entries recorded for the issuance of stock
to WebGear and two investment bankers.

YEARS ENDED DECEMBER 31, 1999 AND 1998. Our net product sales for 1999
totaled $7,754,952 compared to $6,522,078 in 1998. The increase in net product
sales for the year ended December 31, 1999 was due primarily to the recovery of

the Far East economy, where sales of our nvSRAMs returned to their historic
level as a percent of total sales. During 1999, sales of our 1.2 micron 64
kilobit and 0.8 micron 256 kilobit nvSRAM military products accounted for
approximately 26% of our sales, while the 256 kilobit and 64 kilobit nvSRAM
product based on 0.8 micron technology accounted for approximately 59% of sales.
Sales of our metal programmed gate array products accounted for approximately 9%
of our sales for 1999. Sales of our 4 kilobit and 16 kilobit nvSRAM products
accounted for the balance of the sales in 1999. Three distributors of our nvSRAM
products accounted for approximately 56% of our net product sales for the year
ended December 31, 1999.

Operating expenses were approximately $111,000 more for the year ended
December 31, 1999 than for the year ended December 31, 1998. The approximate
$81,000 increase in research and development costs was related to increased
payroll and depreciation expense associated with our MPGA products. There was an
approximate $85,000 increase in sales and marketing which was attributed to an
increase in sales commissions and payroll and benefits. The approximate decrease
of $55,000 in administration was due primarily to decreased payroll and benefit
costs and a decrease in legal expenses.

Other income for the year ended December 31, 1999 decreased from $128,623
at December 31, 1998 to an expense of $48,786. This decrease of $177,409 in
other income was due primarily to a one-time reversal of an accrued expense that
occurred in 1998 and an increase in interest expense for the year ended 1999.
This interest increase resulted from a full year's payments on the $1,500,000
debenture sold to affiliates of Renaissance Capital Group of Dallas, Texas
("Renaissance") in June 1998.

We had a net loss of $149,470 for the year ended December 31, 1999 compared
to a net income of $39,039 for the year ended December 31, 1998. We realized a
positive gross margin of $2,928,686 in 1999 compared to $2,829,027 in 1998 for
percentages of 38% and 43%, respectively.

FUTURE RESULTS OF OPERATIONS

Our ability to maintain profitability will depend primarily on our ability
to continue reducing our manufacturing costs and increase net product sales by
increasing the availability of existing products, by the introduction of new
products and by expanding our customer base. Additionally, market conditions may
make it more difficult to receive enough raw materials, processed silicon wafers
and support services to satisfy customer demand.

As of September 30, 2000, the Company had open purchase orders expected to
be filled within the next six months of approximately $6,058,000. Orders are
cancelable prior to 30 days before the scheduled shipping date and, therefore,
should not be used as a measure of future product sales.

In 1999, we purchased all of our 0.8 micron and 1.2 micron technology
wafers from a single supplier, Chartered. In 1999, Chartered notified us of
their intent to discontinue production of our 1.2 micron technology. We
completed a last time buy, purchasing enough wafers to support production until
our 0.8 micron product technology could be qualified for military use.
Approximately 87% of our sales for 1999 were from finished units produced from
the 0.8 micron and 1.2 micron technology wafers. Approximately 9% of our sales
were from our metal programmed gate array products, which are supported with 0.5
micron wafers purchased from UMC. We had an agreement with Chartered to provide
wafers through September 1998. Although Chartered continues to provide us wafers
under this contract we do not have a current agreement signed, however, we are
negotiating with Chartered to renew the contract. The remaining 4% of our sales
for 1999 were from finished units purchased from ZMD in 1998. Any disruptions in
our relationship with Chartered could have an adverse impact on our operating
results.

ZMD, through their license agreement with us, has the worldwide right to
sell nvSRAM's developed jointly by us and ZMD. With volume production being
established at ZMD using the 0.8 micron product, ZMD has begun selling such
nvSRAMs. In the past year, we have seen a slight erosion of sales and selling
prices due to ZMD. However, due to ZMD creating a second source for nvSRAM
products, we believe that their presence may have a positive impact because many
large manufacturers require two sources to purchase product from.

LIQUIDITY AND CAPITAL RESOURCES

From inception through September 30, 2000, we have approximately
$32,100,000 of gross proceeds from the sale of convertible debt and equity
securities. From inception through September 30, 2000, we generated $10,085,000
of gross revenue from the sale of product and technology licenses, approximately
$36,000,000 from net product sales and $600,000 in royalty income.

Under the Cooperation Agreement entered into with ZMD in September 1995,
ZMD had the right to convert all financing into shares of our common stock at a
price of $0.175 per share for all monies paid in 1995 and at the average share
price of the quarter the monies were paid for all monies paid in 1996. In 1996,
we received $378,551 under this agreement of which $248,398 was converted into
1,353,374 shares of our common stock at a price of $.1548 and 165,000 shares of
our common stock at a price of $.2358. In May 2000, the balance of $130,513 was
converted into 551,964 shares of common stock at a price of $.2358. We and ZMD
had agreed that they could not hold more than 30% of our common stock without
the approval of our board of directors. As of December 31, 1999, ZMD held
approximately 30% of our common stock. Because of subsequent sales by ZMD, it
now holds less than 30% of our common stock and may convert the remaining
balance. We are registering the conversion pursuant to this prospectus.

On June 12, 1998, we closed a $1,500,000 financing transaction with two
funds advised by Renaissance. The funding from Renaissance consisted of
$1,500,000 of convertible debentures with a seven year term at a 9 percent per
annum interest rate (the "Debentures"). On February 22, 2000, March 2, 2000 and
March 6, 2000, Renaissance converted all $1,500,000 of the Debentures into an
aggregate of 7,692,308 shares of our common stock.

On May 9, 2000, we acquired Integrated Logic Systems, Inc. ("Integrated").
We issued 3,000,000 shares of its Common Stock in exchange for all outstanding
shares of all classes of Integrated stock. Integrated designs and sells metal
programmed gate array integrated circuits. This acquisition has been recorded as
a pooling of interest during the quarter ended June 30, 2000. Therefore, the
prior financial statements have been restated to reflect the operations of
Integrated.

On June 16, 2000, we acquired 1,875,000 shares of the common stock of
WebGear, in return for 1,250,000 shares of our common stock. The shares of
WebGear stock that we acquired represents approximately 9% of WebGear's issued
and outstanding shares of common stock as of June 16, 2000. On June 16, 2000,
the closing price for our common stock was $1.3125 per share. WebGear is engaged
in the design, development, sales and support of high technology networking and
communications products for the personal computer market. On September 29, 2000,
we purchased incomplete research and development, patents and certain trademarks
from WebGear, Inc. We issued 3,400,000 shares of our common stock and returned
to WebGear the 1,875,000 shares of WebGear common stock that we acquired from
WebGear on June 16, 2000. On September 29, 2000, the closing price of our common
stock was $0.8438 per share. WebGear is engaged in the design, development,
sales, and support of high technology networking and communications products for
the personal computer market. We have estimated the preliminary value of the
purchased patents and trademarks at $125,000 which were capitalized and recorded
as intangible assets. We have estimated the preliminary value of the incomplete
research and development acquired from WebGear at $4,384,545 which was expensed
immediately. However, we are continuing to analyze the allocation between the
patents and trademarks and the incomplete research and development. Before we
file our annual report on Form 10-KSB, this allocation could be modified based
on the completion of this analysis, and this adjustment could be material.

On July 31, 2000, we acquired Macrotech Semiconductor ("Macrotech"). We
issued 1,250,000 shares of its Common Stock in exchange for all outstanding
shares of all classes of Macrotech stock. Macrotech designs and sells metal
programmable standard cells, which are an extension of the metal programmed gate
array integrated circuits that Integrated manufactures. The acquisition was
accounted for as a pooling of interest, and the results of Macrotech have been
consolidated with ours, as if we have been merged throughout the periods
presented.

On September 14, 2000, we entered into a one-year contract with two
investment bankers, E.B.M. Associates, Inc. and World Trade Partners, each
company has received 500,000 shares of the our Common Stock. On September 14,
2000, the closing price for our common stock was $ 1.0312 per share and
accordingly $988,233 has been assigned to prepaid investor relations.

On December 6, 2000, we signed a letter of intent to acquire Q-DOT Group,
Inc. The purchase price is based on the average trading value of our stock,
payable in shares of our common stock comprising a minimum of 4 million and a
maximum of 6 million shares. We anticipate that this acquisition will close by
the end of January or in February 2001. The closing is subject to execution of
definitive agreements, third party approvals and customary closing conditions
and there can be no assurance that we will actually close the acquisition.
Working in the area of government contracts, Q-Dot specializes in advanced
technology research and development for data acquisition, signal processing,
imaging, and data communications. We anticipate that the acquisition will give
us engineering expertise and access to product developments based on high speed
Silicon Germanium technology, especially with respect to certain wireless and
high-speed fiber-optic data communications applications.

Our cash balance and cash equivalents at September 30, 2000 was $3,098,267.

Our liquidity will depend on our revenue growth and our ability to sell our
products at positive gross margins and control of our operating expenses.

The change in cash flows from operating activities for the nine months
ended September 30, 2000, was primarily a result of net loss of $3,517,799, an
increase in reserve accounts of $312,286, accounts receivable of $437,661,
prepaid expenses and other of $104,658, accrued expenses of $91,540 and
$4,384,545 required for the stock issuance to WebGear. These increases were
offset with a decrease in accounts payable of $357,249, customer deposits of
$35,083, and inventory of $279,897. The change in cash flows from investing
activities was due to the purchase of equipment of $233,574 used in the testing
of our nvSRAM products and the purchase of hardware and software used in the
design of our nvSRAM products. This increase was offset by a decrease in our
restricted cash requirements of $100,000. The change in cash flows from
financing activities was due to the exercise of stock options of $293,131,
payments of notes payable of $111,142 acquired in the Integrated acquisition and
capital contributions and distributions to stockholders in the Macrotech
acquisition.

For the year ended December 31, 1999, cash flow provided by operations was
$238,931, which is primarily due to depreciation of $247,502, a change in
reserve accounts of $90,936, an increase of accounts receivable of $270,510, and
a net increase in accounts payable, accrued expenses and customer deposits of
$423,533. The increase in accounts receivable was due to a large revenue month
in December 1999, from which the cash will not be received until the first
quarter of 2000. The increase in accounts payable was due primarily to an
increase in product demand which requires us to maintain a larger wafer and
work-in-progress inventory, which is payable to our subcontractors on 30 day
terms and to the purchase of software that is being paid for on a five year
capital lease.

The use of cash flows in investing activities for the year ended December
31, 1999, was due to purchases of equipment related to the testing of our nvSRAM
products and manufacturing and test equipment for our metal programmed gate
array products and from the purchase of a restricted certificate of deposit. The
$179,310 of equipment purchased consisted primarily of test fixtures and burn-in
boards to support products manufactured at Chartered and a reticle set to
support manufacturing of our metal programmed gate array products at UMC. A
$300,000 certificate of deposit was established as collateral for a $300,000
letter of credit that is required by one of our suppliers in the event that we
default on payments.

For the year ended December 31, 1998, cash flow used in operations was
$223,429, which is primarily attributable to a decrease in accounts payable and
a reversal of accrued expenses totaling $501,796, an increase in inventory of
$300,677 which was offset with a net income of $39,039, depreciation and
amortization of $178,542 and an increase in accounts receivable and accrued
expenses of $272,493. The large decrease in accounts payable and accrued
expenses was due to us paying ZMD for past due invoices after a price dispute
was settled between us and ZMD in the first quarter of 1998. The increase in
inventory is due to us switching from purchasing finished units from ZMD to
producing finished units from wafers purchased from Chartered. This change in
procurement requires us to maintain a larger wafer and work-in-progress
inventory along with a finished goods inventory. The use of cash flows in
investing activities was due to purchases of equipment related to the testing of
our 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 $429,164 of equipment purchased consisted primarily
of test fixtures and burn-in boards to support products manufactured at
Chartered and UMC and software required in the development of our MPGA products.
A $100,000 certificate of deposit was established to secure a $250,000 line of
credit. Cash flow from financing activities is primarily due to the $1,500,000
financing transaction that we closed in June 1998.

ACCOUNTING STATEMENTS

In 1998, Statement of Financial Accounting Standards 133, Accounting for
Derivative Instruments and Hedging Activities was issued. Statement 133
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 as fair value. This statement is effective for the Company's
financial statements for the year ended December 31, 2001 and the adoption of
this standard is not expected to have a material effect on the Company's
financial statements.

In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) 101 regarding revenue recognition. SAB 101 is to be
implemented in the fourth quarter of 2000, and the adoption of this standard is
not expected to have a material effect on the Company's financial statements.

INFLATION

The impact of inflation on our business has not been material.

BUSINESS

GENERAL

Simtek Corporation designs, develops, produces and markets high performance
nonvolatile semiconductor memories ("nvSRAM's") and metal programmed gate array
products. Nonvolatility prevents loss of programs and data when electrical power
is removed. Our nonvolatile memory products feature fast data access and
programming speeds and electrical reprogramming capabilities. Our nvSRAM
products are targeted for use in commercial electronic equipment markets such as
industrial control systems, office automation, medical instrumentation,
telecommunication systems, cable television, and numerous military systems,
including communications, radar, sonar and smart weapons. Our metal programmed
gate array products are used in applications such as computer displays,
telecommunications and office automation. We are also in the early stages of
product development targeted for the "Bluetooth" wireless market.

We are in production of our first four families of memory products, 256
kilobit, 64 kilobit, 16 kilobit and 4 kilobit nonvolatile static random access
memories ("nvSRAMs"). Our 256 kilobit nvSRAM was qualified in 1997 for sales
into the commercial and industrial markets and in 1998 for shipment into the
military market. Our 64 kilobit nvSRAMs meet or exceed the requirements for
sales into commercial, industrial and military markets. Our 16 kilobit and 4
kilobit nvSRAMs have been qualified for sales into commercial and industrial
markets. Our nvSRAMs are physically smaller and require less maintenance than
SRAM devices that achieve nonvolatility through the use of internal batteries
and are more convenient to use than SRAM devices that achieve nonvolatility by
being combined with additional chips.

Our metal programmed gate array products ("MPGA") are used to replace
programmable logic devices when a customer has completed his system design and
requires cost-reduced integrated circuits for volume manufacturing. Each MPGA is
configured using the individual customer's design files and is built to his
specific requirements.

ACQUISITIONS AND OTHER TRANSACTIONS

On May 9, 2000, we acquired Integrated Logic Systems, Inc. ("Integrated").
We issued 3,000,000 shares of its Common Stock in exchange for all outstanding
shares of all classes of Integrated stock. Integrated designs and sells metal
programmed gate array integrated circuits. We purchased approximately $30,000 of
product from Integrated in the past year.

On July 31, 2000, we acquired Macrotech Semiconductor ("Macrotech"). We
issued 1,250,000 shares of our Common Stock in exchange for all outstanding
shares of all classes of Macrotech stock. Macrotech designs and sells metal
programmable standard cells, which are an extension of the metal programmed gate
array integrated circuits that ILSI manufactures. The acquisition was accounted
for as a pooling of interest, and the results of Macrotech have been
consolidated with ours, as if we have been merged throughout the periods
presented.

On September 14, 2000, we entered into a one-year contract with two
investment bankers, E.B.M. Associates, Inc. and World Trade Partners, each
company has received 500,000 shares of our Common Stock. Both companies with
assist us in broadening our financial market presence and establishing new
relationships within the industry, investment community and financial media. On
September 14, 2000, the closing share price for our common stock was $ 1.0312
per share and accordingly $988,233 has been assigned to prepaid investor
relations.

On September 29, 2000, we purchased incomplete research and development,
patents and certain trademarks from WebGear, Inc. We issued 3,400,000 shares of
our common stock and returned to WebGear the 1,875,000 shares of WebGear common
stock that we acquired from WebGear on June 16, 2000. On September 29, 2000, the
closing price of our common stock was $0.8438 per share. We have estimated the
preliminary value of the purchased patents and trademarks at $125,000 which were
capitalized and recorded as intangible assets. We have estimated the preliminary
value of the incomplete research and development acquired from WebGear at
$4,384,545 which was expensed immediately. However, we are continuing to analyze
the allocation between the patents and trademarks and the incomplete research
and development. Before we file our annual report on Form 10-KSB, this
allocation could be modified on the completion of this analysis, and this
adjustment could be material.

INDUSTRY AND PRODUCT BACKGROUND
MEMORY

The semiconductor memory market is very large and highly differentiated.
This market covers a wide range of product densities, speeds, features and
prices. The ideal memory would have (1) high bit density per chip to minimize
the number of chips required in a system; (2) fast data read and write speeds to
allow a system's microprocessor to access data without having to wait; (3) the
ability to read and modify data an unlimited number of times; (4) the ability to
retain its data indefinitely when power is interrupted (i.e. nonvolatility); (5)
availability in a variety of package types for modern assembly techniques; and
(6) the ability to be tested completely by the manufacturer to ensure the
highest quality and reliability. Although customers would like to have memory
components with all of these attributes it currently is not technically
feasible. Therefore, the memory market is segmented with different products
combining different mixes of these attributes.

Semiconductor memories can be divided into two main categories, volatile
and nonvolatile. Volatile memories generally offer high densities and fast data
access and programming speeds, but lose data when electrical power is
interrupted. Nonvolatile memories retain data in the absence of electrical
power, but typically have been subject to speed and testing limitations and wear
out if they are modified too many times. There are a number of common volatile
and nonvolatile product types, as set forth below. The list of products under
"Combinations" is limited to single packages and does not include combinations
of the listed memories in separate packages, such as SRAMs in combination with
EPROMs and EEPROMs.

Volatile Nonvolatile Combinations
-------- ----------- ------------
SRAM EEPROM nvSRAM
DRAM Flash Memory NVRAM
EPROM SRAM plus lithium battery ("Batram")
PROM
ROM

VOLATILE MEMORIES. Rewritable semiconductor memories store varying amounts
of electronic charge within individual memory cells to perform the memory
function. In a Dynamic Random Access Memory (DRAM), the charge must be
electrically refreshed many times per second or data are lost even when power is
continuously applied. In a Static Random Access Memory (SRAM), the charge need
not be refreshed, but data can be retained only if power is not interrupted.

NONVOLATILE MEMORIES. A Read Only Memory (ROM) is programmed (written) once
in the later stages of the manufacturing process and cannot be reprogrammed by
the user. Programmable Read Only Memory (PROM) can be programmed once by the
user, while Erasable PROM (EPROM) may be reprogrammed by the user a limited
number of times if the EPROM is removed from the circuit board in the equipment.
Both Flash memory and Electrically Erasable PROM (EEPROM) may be reprogrammed
electrically by the user without removing the memory from the equipment.
However, the reprogramming time on both EEPROM and Flash memory is excessively
long compared to the read time such that in most systems the microprocessor must
stop for a relatively long time to rewrite the memory.

COMBINATIONS. Many customers use a combination of volatile and nonvolatile
memory functions to achieve the desired performance for their electronic
systems. By using SRAMs in combination with EPROM and EEPROM chips, customers
can achieve nonvolatility in their systems and still retain the high data read

and write speeds associated with SRAM memories. This approach, however, is not
desirable in many applications because of the size and cost disadvantages
associated with using two or more chips to provide a single memory function.
Also, it may take up to several seconds to transfer the data from the SRAM to
the EEPROM; an excessive time at power loss. As a result, attempts have been
made to combine nonvolatile and volatile memory features in a single package or
silicon chip. One approach combines an SRAM with lithium batteries in a single
package.

Nonvolatile random access memories (NVRAMs) combine volatile and
nonvolatile memory cells on a single chip and do not require a battery. We
believe our nvSRAM represents a significant advance over existing products that
combine volatility and nonvolatility on a single silicon chip. We combine an
SRAM memory cell with an EEPROM memory cell to create a small nvSRAM memory
cell. Our unique and patented memory cell design enables the nvSRAM to be
produced at densities higher than existing NVRAMs and at a lower cost per bit.
In addition to high density and nonvolatility, the nvSRAM has fast data access
and program speeds and the SRAM portion of the memory can be modified an
unlimited number of times without wearing out.

TECHNOLOGY

We use an advanced implementation of silicon-nitride-oxide-semiconductor
(SNOS) technology. SNOS technology stores electrical charge within an insulator,
silicon nitride, and uses a thin tunnel oxide layer to separate the silicon
nitride layer from the underlying silicon substrate. SNOS technology prevents
tunnel oxide rupture in the memory cell from causing an immediate loss of data.
Oxide rupture has been a major cause of failures in Flash and EEPROMs using
floating gate technology, where charge is stored on a polysilicon conductor
surrounded by insulators. To protect against these failures, many floating gate
EEPROMs have required error correction circuitry and redundant memory cells.
This increases product cost by requiring more silicon area. Error correction and
redundancy are not required for our products to protect against tunnel oxide
rupture. In addition, our product designs incorporate a special test feature
which can predict data retention time for every individual memory cell based on
measuring the rate of charge loss out of the silicon nitride.

The SNOS technology coupled with our nvSRAM memory cell allows high
performance nonvolatile SRAMs to be manufactured using complementary metal oxide
semiconductor (CMOS) technology. The SNOS technology that we use has proven to
be highly reliable, as demonstrated by our product qualification results to
date.

PRODUCTS

nvSRAMs (NONVOLATILE STATIC RANDOM ACCESS MEMORIES). Our 256 kilobit, 64
kilobit, 16 kilobit and 4 kilobit nvSRAM product families consist of nonvolatile
memories that combine fast SRAM and nonvolatile EEPROM characteristics within
each memory cell on a single chip of silicon. The SRAM portion of the nvSRAM is
operated in the same manner as most existing SRAM products. The SRAM can be
written to and read from an unlimited number of times. The EEPROM can be
programmed, depending upon device type, by user control or automatically by
transferring the SRAM contents into the EEPROM. The EEPROM data can be
transferred back into the SRAM by user control or the data can be transferred
automatically.

Our nvSRAMs have fast data access speeds of 20, 25, 35 and 45 nanoseconds.
These data access speeds correspond to those of fast SRAMs and meet the
requirements of much of the fast SRAM market. The high speed characteristics of
our nvSRAMs allow them to be used in applications with various high performance
microprocessors and digital signal processors such as those manufactured by
Intel Corp., Texas Instruments and Motorola. Our nvSRAM can be used to replace
SRAMs with lithium batteries and multiple chip solutions such as SRAM plus
EEPROM or Flash Memory.

We finalized commercial and industrial qualification of two versions of our
initial 64 kilobit nvSRAM product offering in September 1991 and April 1992,
respectively. We completed military qualification of our initial nvSRAM in May
1992. We began sales into the commercial market of our initial 16 kilobit nvSRAM
product family in 1992. The nvSRAM product family also includes the 4 kilobit
version. We completed the development and product qualification of the 64
kilobit AutoStoreTM nvSRAM in 1993. The AutoStoreTM version automatically
detects power loss and transfers the data from the SRAM cells into the EEPROM
cells. This device does not require instructions or intervention from the system
microprocessor to notify it of the power loss. Commercial and industrial
qualification of our 256 kilobit nvSRAM occurred in 1997 and military
qualification of our 256 kilobit nvSRAM was completed in the second quarter of
1998.

NEW INTRODUCTIONS: We began shipping production qualified 256 kilobit
nvSRAM products in mid-1997. These products are the highest density monolithic
solution on the market. We believe our 256 kilobit products will expand the
market for our products.

In October 1998, we introduced a 1 megabit module using 4 of the 256
kilobit products on a single substrate. This device is intended for use by
customers requiring additional density prior to availability of the monolithic
(single-chip) version.

In July 1999, we qualified and began shipping small volumes of our 64
kilobit and 256 kilobit AutoStorePlusTM Products, these parts are intended to be
a direct replacement for encapsulated battery-back RAM's.

In the third quarter of 1999, we began sampling our Real Time Clock ("RTC")
technology which combines our nvSRAMs with a miniature capacitor-powered
oscillator/counter that eliminates the need for a back-up battery when system
power is lost.

PACKAGE TYPES: We currently supply our nvSRAMs in plastic and ceramic
dual-in-line packages, ceramic leadless chip carriers and plastic small outline
integrated circuit surface mount packages. Supplying the products in a number of
different package types increases the available market for our products at a
relatively low development cost.

METAL PROGRAMMED GATE ARRAYS

The electronics industry uses logic integrated circuits to configure
systems to perform specific functions within a system. Field Programmable Gate
Arrays ("FPGA"s) and Complex Programmable Logic Devices (CPLDs) have become
popular for this purpose, and are supplied by a number of major suppliers, such
as Xilinx and Altera. These products provide high performance, flexible
solutions, but are expensive when compared to non-programmable, fixed function
application specific products. Simtek's MPGAs provide a low-cost, high volume
alternative to the programmable logic products.

TECHNOLOGY

Simtek uses standard logic wafer processing available from various
subcontract fabrication facilities. We currently contract with UMC in Taiwan for
0.5 micron technology and with Chartered Semiconductor in Singapore for 0.35
micron technology. We plan to migrate the technology to a 0.25 micron process as
the market develops.

Simtek's conversion tools support direct netlist conversion to create
drop-in replacements at a fraction of the FPGA or CPLD cost. We can support up
to approximately 1 million logic gates plus dual port RAM. We also support full
scan test without any area penalty with our Integrated Testability feature.

PRODUCTS

MPGA products are built to order based on customer designs that are
electronically transferred to our design workstations. Our engineers then verify
the design and implement it in the appropriate technology to provide the most
cost effective solution available for the customer.

PRODUCT WARRANTIES. We presently provide a one-year limited warranty on our
products.

RESEARCH AND DEVELOPMENT

Many of our research and development activities are centered around
developing new products and reducing the cost of our nvSRAM products and the
development and design of customer specific metal programmed gate array. We have
reduced our costs by introducing our 0.8 micron technology. This technology
reduced the size of the 64 kilobit nvSRAM chip and enabled us to develop a cost
effective 256 kilobit nvSRAM. We are continuing our efforts to improve yield on
the 0.8 micron technology. In order to further reduce costs, we engaged Integra
Technologies in the fourth quarter 1997 for testing of our 0.8 micron products.
We have a test floor used for evaluation of our technologies, product designs
and product quality. The test floor is also used for production testing of
silicon wafers.

In an effort to expand our products, we acquired incomplete research and
development of certain technology that we intend to apply within the emerging
Bluetooth market segment. "Bluetooth" is an industry standard, short range
wireless communications technology designed to allow a variety of electronic
devices, such as wireless telephone, Personal Digital Assistants, notebook
computers, desktop computers, peripheral input-output devices, television

set-top boxes and Internet appliances to exchange data without the use of
physical cabling. We plan to spend approximately $750,000 over the next year in
order to develop and manufacture integrated circuits using the technology in
Bluetooth applications.

Our research and development expenditures for the years ended December 31,
1999 and 1998 were approximately $1,640,025 and $1,558,926, respectively. We
intend to continue expenditures on research and development; however, the
percentage of research and development expenditures is expected to decrease
relative to expenditures relating to the commercial production of our existing
products.

MANUFACTURING AND QUALITY CONTROL

Our manufacturing strategy is to use subcontractors whose production
capabilities meet the requirements of our product designs and technologies.

In 1992, we entered into a manufacturing agreement with Chartered (the
"Chartered Manufacturing Agreement") to provide us with silicon wafers for our
products. Under the Chartered Manufacturing Agreement, Chartered has installed a
manufacturing process for versions of our current and future products.

Finished wafer procurement reverted to Chartered during 1998 as we ceased
purchasing finished 0.8 micron units from ZMD. We used UMC for wafer procurement
of our 0.5 micron MPGA products and Chartered for wafer procurement of our 0.35
micron MPGA products. During 1999, approximately 98% of our product sales were
based on wafers purchased from Chartered.

Device packaging of our nvSRAM products continued at the Amkor facilities
in the Philippines and South Korea. Final test for 0.8 micron nvSRAM products
was established successfully at Integra Technologies in Wichita, Kansas. Device
packaging of our metal programmed gate array products continued at Advanced
Semiconductor Eng., Inc. in Taiwan. Final test of our metal programmed gate
array products was completed in our Colorado Springs facility.

Our subcontractors provide quality control for the manufacture of our
products. We maintain our own quality assurance personnel and testing capability
to assist the subcontractors with their quality programs and to perform periodic
audits of the subcontractors' facilities and finished products to ensure product
integrity.

Our quality and reliability programs were audited by several commercial and
military customers during 1999 as part of routine supplier certification
procedures. All such audits were completed satisfactorily. In April 1999, we
were audited by Defense Supply Center, Columbus ("DSCC") for the quality of our
military systems. The audit team recommended holding shipments of compliant
product until a number of issues, predominately involving subcontracted test
laboratories, were resolved. The issues were resolved by us and approved by DSCC
and shipments of compliant military product resumed in late May 1999.

MARKETS

Our memory products are targeted at fast nonvolatile SRAM markets, SRAM
plus EEPROM markets and other nonvolatile memory products broadly used in
commercial, industrial and military electronic systems.

Our MPGA products are built to customer requirements in many
application areas. Therefore, we believe that our products will address very
broad markets including these applications:

Airborne and Space Computers Lighting
Automotive Control & Monitoring Medical Instruments
Portable Telephone Modems Control Systems
Portable Computers Currency Changers
Postal Meters Data Monitoring Equipment
Printers Disk Drives
Process Control Equipment Facsimile Machines
Radar and Sonar Systems Gaming
Telecommunications Systems GPS Navigational Systems
Terminals Guidance and Targeting Systems
Test Equipment High Performance Workstations

Utility Meters Laser Printers
Vending Machines Mainframe Computers
Weapon Control Systems CD Writers
Security Systems Copiers
Broadcast Equipment Cable TV Set Top Converter Boxes
Studio Recording Equipment

We are increasing marketing and sales emphasis on office automation products
such as copiers and mass storage systems as well as beginning new sales efforts
in data communication applications.

SALES AND DISTRIBUTION

Our strategy is to generate sales through the use of independent sales
representative agencies and distributors. We believe this strategy provides the
fastest and most cost effective way to assemble a large and professional sales
force.

We currently have three sales and marketing offices, located in Colorado
Springs, Colorado, Bristol, England and Atlanta, Georgia. We have engaged 15
independent representative organizations with 36 sales offices and 30
distributor organizations with 81 sales offices. Both organizations have
multiple sales offices and sales personnel covering specific territories.
Through these organizations and their sales offices we are capable of serving a
worldwide market.

Independent sales representatives typically sell a limited number of
noncompeting products to semiconductor users in particular geographic assigned
territories. Distributors inventory and sell products from a larger number of
product lines to a broader customer base. These sales channels are
complementary, as representatives and distributors often work together to
consummate a sale, with the representative receiving a commission from us and
the distributor earning a markup on the sale of the products. We supply sales
materials to the sales representatives and distributors.

For our marketing activities, we evaluate external marketing surveys and
forecasts and perform internal studies based, in part, on inputs from our
independent sales representative agencies. We prepare brochures, data sheets and
application notes on our products.

CUSTOMERS AND BACKLOG

Approximately 35% of our net product sales during 1999 were to customers in
the Pacific Rim and approximately 15% were to customers in Europe. The remaining
product sales were to customers in North America.

As of September 30, 2000, we had open purchase orders expected to be filled
within the next nine months of approximately $6,058,000. Orders are cancelable
prior to 30 days before the scheduled shipping date and, therefore, should not
be used as a measure of future product sales

During 1999, we continued to receive initial and scheduled production
orders on our 64 kilobit product. We believe that we will continue to receive
volume production orders on our 64 kilobit product and that production orders on
our 256 kilobit product will continue to grow.

LICENSES

PRODUCT AND TECHNOLOGY LICENSE SALES. We have sold product and technology
licenses to Nippon Steel, Plessey and ZMD. Based on prior actions by Nippon
Steel and Plessey, we don't anticipate any future activity on the licenses with
Nippon Steel and Plessey.

ZMD. In June of 1994, we signed a joint development agreement with ZMD to
install the 1.2 micron products for manufacture at ZMD and to jointly develop
the 0.8 micron technology at Chartered. The Agreement was modified in August of
1994 by a Letter of Intent between us to bypass the installation of 1.2 micron
technology at ZMD and instead modify the 0.8 micron technology to run in the ZMD
factory. ZMD has paid us all the monetary requirements under this agreement
including any royalties we may receive from sales of these jointly developed
products.

CHARTERED. In September of 1992, we entered into a manufacturing agreement
with Chartered. This agreement grants Chartered the right to manufacture silicon
wafers containing our products solely for sale to us. Chartered also has the
right to manufacture silicon wafers in connection with future technology
licenses we may enter into with third parties.

FUTURE LICENSE SALES. We intend to sell product and technology licenses on
a selective basis. We will continue to seek licensing partners who can
contribute to the development of the nvSRAM market and provide a meaningful
level of revenue to us while not posing an undue threat in the marketplace.

COMPETITION

Our products compete on the basis of several factors, including data access
and programming speeds, density, data retention, reliability, testability, space
savings, manufacturability, ease of use and price.

Products that compete with our family of nvSRAMs fall into three
categories. The first category of products that compete with our nvSRAMs are
volatile and nonvolatile chips used in combination, such as fast SRAMs used with
EPROMs, EEPROMs, or Flash memory. We believe that we have advantages over these
applications because the nvSRAM allows data to be stored in milliseconds as
compared to seconds for chips used in pairs. Our single chip solution provides a
space savings and easier manufacturing. Our single chip solution generally
provides increased reliability versus multiple chips. We believe it will be able
to compete with many solutions requiring density up to 256 kilobits; however, in
those instances where the density requirement is beyond 256 kilobits the nvSRAM
does not compete. Competitors in the multiple chip category include Cypress
Semiconductor Corp., Integrated Technology, Inc., Toshiba, Fujitsu, Advanced
Micro Devices, Inc., Atmel and National Semiconductor Corp.

The second category of products that compete with our nvSRAMs are products
that combine SRAMs with lithium batteries in specially adapted packages. These
products generally are slower in access speeds than our nvSRAMs due in part to
limitations caused by life of the lithium battery when coupled with a faster
SRAM. Our nvSRAMs are offered in standard, smaller, less expensive packages, and
do not have the limitation on lifetime imposed on the SRAM/battery solutions by
the lithium battery. Our nvSRAMs can also be used for wave soldered automatic
insertion circuit board assembly since they do not have the temperature
limitations of lithium batteries. However, lithium battery-backed SRAM products
are available in densities of 1 megabit and greater per package. Companies
currently supplying products with lithium batteries include Dallas Semiconductor
Corp., ST Microelectronics and Benchmarq Microelectronics, Inc.

The third category consists of NVRAMs that combine SRAM memory cells and
EEPROM memory cells on a monolithic chip of silicon. Our current product
offerings are of higher density, faster access times and we believe can be
manufactured at lower costs per bit than NVRAMS. Another company that is
currently supplying NVRAMs is Xicor, Inc. We believe that Xicor's highest
density single chip part is 16 kilobit.

ZMD, through their license agreement with us, has the worldwide right to
sell under the ZMD label nvSRAMs developed jointly by ZMD and us. With volume
production established at ZMD using the 0.8 micron product, ZMD has begun
selling such nvSRAMs. This has had a positive impact for us by creating a second
source, which is required by many larger companies, for our nvSRAM products.
However, in 1999, we were required to reduce prices to certain markets due to
the increased competition from ZMD. We believe that the competition from ZMD has
not had a major impact on our revenues.

We are aware of other semiconductor technologies for nonvolatile memory
products. These technologies include ferroelectric memory and thin film magnetic
memory. Ramtron, Raytheon, Symetrix, National Semiconductor and others are
developing ferroelectric products. Honeywell, Inc. is developing magnetic film
products.

MPGA-type solutions are supported by semiconductor companies such as AMI,
NEC and Temic.

PATENTS AND INTELLECTUAL PROPERTY

We undertake to protect our product designs and technologies under the
relevant intellectual property laws as well as by utilizing internal disclosure
safeguards. Under our licensing programs, we exercise control over the use of
our protected intellectual property and have not permitted our licensees to
sublicense our nvSRAM products or technology.

It is common in the semiconductor industry for companies to obtain
copyright, trademark and patent protection of their intellectual property. We
believe that patents are significant in our industry, and we are seeking to
build a patent portfolio. We expect to enter into patent license and
cross-license agreements with other companies. We have been issued seven patents
in the United States on our nvSRAM memory cell and other circuit designs. These
patents have terms that expire through 2008 to 2013. We have also taken steps to
obtain international patents on certain of our products. We have two
applications that have been allowed and intend to prepare patent applications on
additional circuit designs we have developed. However, as with many companies in
the semiconductor industry, it may become necessary or desirable in the future
for us to obtain licenses from others relating to our products.

We have received federal registration of the term "Novcel" a term we use to
describe our technology. We have not sought federal registration of any other
trademarks, including "Simtek" and "QuantumTrapTM" or our logo.

Employees

As of the date of this prospectus, we had 30 full-time employees and one
temporary employee.

FACILITIES

We lease approximately 9,170 square feet of space in Colorado Springs,
Colorado. This space includes a product engineering test floor of approximately
2,350 square feet. Subsequent to December 31, 1999, we signed two addendums to
our lease agreement that allows us to occupy approximately 2,900 additional
square feet on June 1, 2000. The original lease along with its addendum expires
on December 31, 2001. With this addition, we believe that our existing
facilities will be adequate to meet our reasonably foreseeable needs or that,
upon expiration of the current lease, alternative facilities will be available
to us on acceptable terms to meet our requirements.

LEGAL PROCEEDINGS

There were no legal proceedings against us as of the date of this
prospectus.

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

Our directors and executive officers are as follows:

Name Age Position
---- --- --------

Douglas M. Mitchell.................... 51 Director, Chief Executive
Officer and President, Chief
Financial Officer (acting)

Klaus C. Wiemer........................ 62 Director

Robert H. Keeley....................... 59 Director

Harold Blomquist....................... 48 Director

John Heightley ..................... 63 Director

DOUGLAS M. MITCHELL, served as our Chief Operating Officer from July 1,
1997 until January 1, 1998 at which time he became Chief Executive Officer,
President and a director. Mr. Mitchell has over 20 years of experience in the
semiconductor and electronics systems industry holding various marketing and
sales management positions. Prior to joining us, he was President and Chief
Executive Officer of a wireless communications company, Momentum Microsystems.
Prior to this Mr. Mitchell was Vice President of Marketing with SGS-Thomson
Microelectronics, responsible for marketing and applications engineering of
Digital Signal Processing, transputer, microcontroller and graphics products in
North America. SGS-Thomson had acquired Inmos Corporation where Mr. Mitchell had
been Manager, US Marketing and Sales. Mr. Mitchell has held management positions
at Texas Instruments and Motorola and has been responsible for various product
definition and product development. Mr. Mitchell holds a Bachelors degree in
electrical engineering from the University of Texas and a Masters of Business
Administration degree from National University.

KLAUS C. WIEMER, has served as a director since May 1993. He also serves on
the boards of Neomagic Corp (NMGC) of Santa Clara, CA and InterFET Corp of
Garland, TX. From July 1993 to May 1994, Dr. Wiemer served as President and
Chief Executive Officer of our company. Since May 1994, Dr. Wiemer has been an
independent consultant. From April 1991 to April 1993, Dr. Wiemer was President
and Chief Executive Officer of Chartered Semiconductor Manufacturing Pte., Ltd.
in Singapore, and from July 1987 to March 1991, Dr. Wiemer was President and
Chief Operating Officer of Taiwan Semiconductor Manufacturing Company. Prior to
1987, Dr. Wiemer was a consultant for the Thomas Group specializing in the area
of integrated circuit manufacturing and previously worked for fifteen years with
Texas Instruments. Dr. Wiemer holds a Bachelors degree in physics from Texas
Western College, a Masters degree in physics from the University of Texas and a
Ph.D. in physics from Virginia Polytechnic Institute.

ROBERT H. KEELEY, has served as a director since May 1993. He is currently
the El Pomar Professor of Business Finance at the University of Colorado at
Colorado Springs. From 1986 until he joined the faculty at the University of
Colorado at Colorado Springs in 1992, Dr. Keeley was a professor in the
Department of Industrial Engineering and Engineering Management at Stanford
University. Prior to joining Stanford, he was a general partner of Hill and
Carmen (formerly Hill, Keeley and Kirby), a venture capital firm. Dr. Keeley
holds a Bachelors degree in electrical engineering from Stanford University, an
M.B.A. from Harvard University and a Ph.D. in business administration from
Stanford University. Dr. Keeley is also a director of Analytical Surveys, Inc.
and a number of private companies.

HAROLD A. BLOMQUIST, was appointed as a director in May 1998. Mr. Blomquist
is currently president of American Microsystems ("AMI") Japan, Ltd. in Toyko;
senior managing director and board chairman of AMI GmbH in Dresden, Germany;
senior vice president of AMI's worldwide sales and strategic marketing; and a
member of the board of directors for both AMI and AMI's holding company, GA
Tech, Inc. Before joining AMI in April 1990, Mr. Blomquist held a series of
increasingly responsible positions in engineering, sales, and marketing for
several semiconductor firms, including Texas Instruments, Inmos and General
Semiconductor. Mr. Blomquist was granted a BSEE degree from the University of
Utah and also attended the University of Houston, where he pursued a joint Juris
Doctor/MBA course of study.

JOHN HEIGHTLEY, was appointed as a director in September 1998. Mr.
Heightley is currently executive vice president and chief technology officer for
United Memories of Colorado Springs. From 1990 to 1996, Mr. Heightley was
president and chief executive officer of Adaptive Solutions, Inc. In 1986 and
1987, he held the position of president and chief executive officer of Gigabit
Logic, Inc.; in 1987 he was appointed chairman of Gigabit along with his
responsibilities as president and chief executive officer. Mr. Heightley held
these positions until 1990. Prior to Gigabit, Mr. Heightley served as president
and chief executive officer of Ramtron Corporation from 1985 to 1986 and from
1978 to 1985 he served as a member of the board of directors, president, chief
operating officer and vice president of memory products for Inmos International,
plc. Mr. Heightley was granted a B.S. degree in Engineering Science from Penn
State University and earned a M.S. degree in Electrical Engineering from M.I.T.

RICHARD L. PETRITZ, founder and Chairman of the Board retired in August
1998. Dr. Petritz had a long and distinguished semiconductor career that began
in 1958 at Texas Instruments before he went on to found such other semiconductor
companies as Mostek and Inmos International, plc. As of the date of this filing,
a replacement as Chairman of the Board has not been named.

Subject to the requirement that the Board of Directors be classified if it
consists of six or more persons, directors serve until the next annual meeting
or until their successors are elected and have qualified. Officers serve at the
discretion of the Board of Directors. Vacancies on the Board of Directors are
filled by the existing directors. Under the agreement entered into with ZMD in
1994, ZMD has the right to appoint two members to the Board of Directors. At
this time ZMD has no representation on our Board of Directors. ZMD will no
longer have this appointment right following the sale of all of our common stock
that it owns.

SPECIAL PROVISIONS IN ARTICLES OF INCORPORATION

Our articles of incorporation contain a provision limiting the liability of
directors to the fullest extent permitted under the Colorado Corporation Code
(the "Code"). The Code allows a corporation to limit the personal liability of a
director to the corporation or its shareholders for monetary damages for
breaches of fiduciary duty as a director except for

1. breaches of the director's duty of loyalty,

2. acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of the law,

3. certain other acts specified in the Code, and

4. transactions from which the director derived an improper benefit.

The provisions of the Code will not impair our ability to seek injunctive
relief for breaches of fiduciary duty. Such relief, however, may not always be
available as a practical matter.

Our articles of incorporation also contain a provision that requires us to
indemnify, to the fullest extent permitted under the Code, directors and
officers against all costs and expenses reasonably incurred in connection with
the defense of any claim, action, suit or proceeding, whether civil, criminal,
administrative, investigative or other, in which such person may be involved by
virtue of being or having been a director, officer or employee.

EXECUTIVE COMPENSATION

The following table sets forth certain information for each of our last
three fiscal years with respect to the annual and long-term compensation of the
only individual acting as the Chief Executive Officer during the fiscal year
ended December 31, 1999. No other executive officers as of December 31, 1999 had
combined annual salary and bonus for the fiscal year ended December 31, 1997
that exceeded $100,000.

Summary Compensation Table

Long Term Compensation
------------------------------
Annual Compensation Awards Payouts
---------------------------------------------------------------------------
Name Other Restricted
and Annual Stock LTIP All Other
Principal Compen- Award(s) Options/ Payouts Compen-
Position Year Salary($) Bonus($) sation($) ($) SARs(#) ($) sation($)
- --------- -------------------------------------------------------------------------------------

Douglas M. Mitchell(1) 1999 $120,000 -- -- -- 30,000 -- --
Chief Executive 1998 $120,000 -- -- -- 250,000 -- --
Officer and President 1997 $60,716(2) -- -- -- 400,000 -- --

(1) Mr. Mitchell became our Chief Executive Officer and President on January 1,
1998.

(2) Mr. Mitchell was hired in May 1997. The salary reflected was paid in his
capacity as Chief Operating Officer and Executive Vice President.

OPTION GRANT TABLE

The following table sets forth certain information with respect to options
granted by us during the fiscal year ended December 31, 1999 to the individual
named in the summary compensation table above.

Shares Potential
subject to Market Realizable Value
Options/SAR's Price at Assumed
Shares Granted to Exercise per Annual Rate of
subject to Employees Price Share on Stock Price
Options/SAR's in Fiscal Per Date of Expiration Appreciation for
Name Granted % of Total Share Grant Date Option Term
----------------------- ------------- ------------ -------- -------- ---------- --------------------
5% 10%
--------------------

Douglas M. Mitchell 30,000(1) 17% $0.17 $0.17 4/27/2006 2,076 4,838

(1) 30,000 options were granted to Mr. Mitchell in his capacity as Chief
Executive Officer and President, these options vest at 1/36th per month
over 3 years.

YEAR-END OPTION TABLE

The following table sets forth as of December 31, 1999 the number of shares
subject to unexercised options held by the individual named in the summary
compensation table above. 6,667 options had an exercise price greater than the
last sale price of our common stock underlying the options as reported by the
OTC Electronic Bulletin Board on the last trading day of the fiscal year ended
December 31, 1999. No options were exercised by the individual during the fiscal
year ended December 31, 1999.

Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values

Value of Unexercised
Number of Unexercised in-the-money
Options/SARs at Fiscal Options/SARs
Shares Value Year-End at Fiscal Year-End
Acquired on Realized Exercisable Unexercisable Exercisable Unexercisable
Name Exercise (#) ($) (#) (#) ($) ($)
---- ---------------- -------- ----------- ------------- ----------- -------------

Douglas M. Mitchell - - 484,444 195,556 $1,740 $6,090

EMPLOYMENT AGREEMENTS

Mr. Mitchell is employed as President and Chief Executive Officer pursuant
to an employment agreement with us. Under the terms of the employment agreement,
Mr. Mitchell receives and annual salary of $120,000 and such additional benefits
that are generally provided other employees. Mr. Mitchell's employment agreement
expires June 1, 2001 but is automatically renewed for successive one-year terms
unless we or Mr. Mitchell elects not to renew. If we terminate the employment of
Mr. Mitchell without cause, Mr. Mitchell is entitled to continuation of his base
salary and benefits, mitigated by income Mr. Mitchell may earn, for the
remainder of the term of the agreement. Mr. Mitchell is subject to a
noncompetition covenant for a period of one year from the date of termination.

CONFIDENTIALITY AND NONDISCLOSURE AGREEMENTS

We generally require our employees to execute confidentiality and
nondisclosure agreements upon the commencement of employment with us. The
agreements generally provide that all inventions or discoveries by the employee
related to our business and all confidential information developed or made known
to the employee during the term of employment shall be the exclusive property of
us and shall not be disclosed to third parties without the prior approval of us.

DIRECTORS' COMPENSATION

Each director who is not also an employee receives $1,000 for each meeting
of the Board, attended in person, and $500 for each meeting of a committee of
the Board. Directors are also reimbursed for their reasonable out-of-pocket
expenses incurred in connection with their duties to us. During the fiscal year
ended December 31, 1999, 15,000 stock options were granted, at the market price
on date of grant, each to Dr. Klaus Wiemer , Dr. Robert Keeley, Mr. Harold
Blomquist and 40,000 stock options were granted to Mr. John Heightley.

SECURITY OWNERSHIP

The first table below sets forth certain information regarding ownership of
our common stock as of November 30, 2000, by each person who is known by us to
beneficially own more than five percent of our common stock, by each director,
by each executive officer named in the summary compensation table and by all
directors and executive officers as a group. Shares issuable within sixty days
upon the exercise of options are deemed outstanding for the purpose of computing
the percentage ownership of persons beneficially owning such options or holding
such notes but are not deemed outstanding for the purpose of computing the
percentage ownership of any other person. To the best of our knowledge, the

persons listed below have sole voting and investment power with respect to the
shares indicated as owned by them subject to community property laws where
applicable and the information contained in the notes to the table.

Number of Percentage
Name and Address of Beneficial Owner Shares Owned of Class
------------------------------------- ------------ --------

WebGear 4,415,000 9.02%
11501 Dublin Blvd. #20
Dublin, CA 94568

Hugh Norman Chapman 3,000,000 6.13%
4785 Rustler Ct.
Colorado Springs, CO 80918

Zentrum Mikroelektronik Dresden GmbH 2,848,749 5.82%
Grenzstrabe 28
01109 Dresden, Germany

Douglas M. Mitchell 534,195 (1) 1.08%
205 Ridge Dr.
Woodland Park, CO 80863

Klaus C. Wiemer 120,000 (2) *
5705 Archer Court
Dallas, TX 75252

Robert H. Keeley 85,000 (3) *
12630 Milan Road
Colorado Springs, CO 80908

Harold Blomquist 30,000 (4) *
1630 Huntington Dr.
Pocatello, ID 83204

John D. Heightley 55,000 (5) *
1275 Log Hollow Point
Colorado Springs, CO 80906

All officers and directors as a group 834,195 (6) 1.70%
(5 persons)

* Less than one percent.

(1) Represents 534,195 shares issuable upon exercise of options.
(2) Represents 120,000 shares issuable upon exercise of options.
(3) Includes 95,000 shares issuable upon exercise of options, does not include
10,000 shares held by Robert Keeley's wife.
(4) Represents 30,000 shares issuable upon exercise of options.
(5) Represents 55,000 shares issuable upon exercise of options.
(6) Includes 834,195 shares issuable upon exercise of stock options.

SELLING SHAREHOLDERS

The following table sets forth information about our selling shareholders:

Number of Percentage of
Shares Class
Number of Number of Following Following the
Name and Address of Selling Shareholders Shares Owned Shares Offered the Offering Offering
---------------------------------------- ------------ -------------- ------------ -------------

WebGear 4,415,000 2,900,000 1,515,000 3.10%
11501 Dublin Blvd #20
Dublin, CA 94568

Jaskarn Johal 625,000 0 0%
610 Park View Drive, Suite 206
Santa Clara, CA 95054

Kashmira S. Johal 625,000 0 0%
5560 Arezzo Drive
San Jose, CA 95138

E. B. M. Associates, Inc. 500,000 0 0%
6309 D Graycliff Drive
Boca Raton, FL 33496

World Trade Partners, Inc. 500,000 0 0%
One East Blvd. Suite 700
Fort Lauderdale, FL 33301

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

ZMD currently owns approximately 6% of our common stock. In 1998, we
purchased $1,715,867 of product from ZMD. We purchased less than $60,000 of
product from ZMD in 1999.

DESCRIPTION OF SECURITIES

COMMON STOCK

We are authorized to issue 80,000,000 shares of common stock, par value
$0.01 per share. Each share of common stock entitles the holder thereof to one
vote on all matters submitted to a vote of the shareholders. Holders of common
stock do not have preemptive rights or rights to convert their common stock into
other securities. Holders of common stock are entitled to receive ratably such
dividends as may be declared by the Board of Directors out of funds legally
available therefor. In the event of our liquidation, dissolution or winding up,
holders of the common stock have the right to a ratable portion of the assets
remaining after payment of liabilities.

PREFERRED STOCK

Our Articles of Incorporation authorize 2,000,000 shares of $1.00 par value
preferred stock. The Board of Directors has the authority to issue preferred
stock in one or more series and to fix the rights, preferences, privileges and
restrictions thereof, including dividend rights, dividend rates, conversion
rights, voting rights, terms of redemption, redemption prices, liquidation
preferences and the number of shares constituting any series and the designation
of such series, without further vote or action by the shareholders. The issuance
of preferred stock may have the effect of delaying, deferring or preventing a

change in control of us without further action by the shareholders and may
adversely affect the voting power and other rights of the holders of common
stock, including the loss of voting control to others. As of the date of this
prospectus, there are not shares of preferred stock outstanding.

PLAN OF DISTRIBUTION

These shares are being offered hereby for sale by five of our shareholders
who received these shares in unregistered transactions. These shares will be
offered by the selling shareholders from time to time (i) on the
over-the-counter market, where the common stock is traded, or elsewhere, at
fixed prices which may be changed, at market prices prevailing at the time of
offer and sale, at prices related to such prevailing market prices or at
negotiated prices and (ii) in negotiated transactions, through the writing of
options on the shares, or a combination of such methods of sale. The selling
shareholders may effect such transactions by offering and selling the shares
directly or to or through securities broker-dealers, and such broker-dealers may
receive compensation in the form of discounts, concessions or commissions from
the selling shareholders and/or the purchasers of the shares for whom such
broker-dealers may act as agent or to whom the selling shareholders may sell as
principal, or both (which compensation as to a particular broker-dealer might be
in excess of customer commissions).

The selling shareholders and any broker-dealers who are in connection with
the sale of the shares hereunder may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act, and any commissions received by
them and profit on any resale of the shares as principal might be deemed to be
underwriting discounts and commissions under the Securities Act.

We have advised the selling shareholders that they and any securities
broker-dealers or others who may be deemed to be statutory underwriters will be
subject to the prospectus deliver requirements under the Securities Act. We have
also advised the selling shareholders that in the event of a "distribution" of
shares, any "affiliated purchasers," and any broker-dealer or other person who
participates in such distribution may be subject to Regulation M under the
Exchange Act until his or its participation in that distribution is completed. A
"distribution" is defined in Rule 101 of Regulation M as an offering of
securities "that is distinguished from ordinary trading transactions by the
magnitude of the offering and the presence of special selling efforts and
selling methods." Regulation M makes it unlawful for any person who is
participating in a distribution to bid for or purchase stock of the same class
as is the subject of the distribution.

LEGAL MATTERS

The validity of the shares offered hereby will be passed by Holme Roberts &
Owen LLP, Denver, Colorado.

EXPERTS

The financial statements of Simtek Corporation as of December 31, 1999 and
for the years ended December 31, 1999 and December 31, 1998 included within this
Prospectus have been so included in reliance on the report of Hein + Associates
LLP, independent auditors, given on the authority of said firm as experts in
auditing and accounting.

SIMTEK CORPORATION

INDEX TO FINANCIAL STATEMENTS

Page
----

Independent Auditor's Report.............................................................................. F-2

Balance Sheet - December 31, 1999......................................................................... F-3

Statements of Operations - For the Years Ended December 31, 1999 and 1998................................. F-4

Statements of Changes in Shareholders' Equity - For the Years Ended December 31, 1999 and 1998............ F-5

Statements of Cash Flows - For the Years Ended December 31, 1999 and 1998................................. F-6

Notes to Financial Statements - For the Years Ended December 31, 1999 and 1998............................ F-7 - F-18

Balance Sheet - September 30, 2000........................................................................ F-19

Statement of Operations- For the three and nine months ended September 30, 2000 and 1999.................. F-20

Statement of Cash Flows - For the three and nine months ended September 30, 2000 and 1999................. F-21

Notes to Financial Statements - For the three and nine months ended September 30, 2000 and 1999........... F-22-F-23

F-1

INDEPENDENT AUDITOR'S REPORT

Board of Directors and Shareholders
Simtek Corporation
Colorado Springs, Colorado

We have audited the accompanying balance sheet of Simtek Corporation as of
December 31, 1999 and the related statements of operations, changes in
shareholders' equity and cash flows for each of the years in the two-year period
ended December 31, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Simtek Corporation as of
December 31, 1999, and the results of its operations and its cash flows for each
of the years in the two-year period ended December 31, 1999, in conformity with
general accepted accounting principles.

/S/ Hein + Associates LLP
HEIN + ASSOCIATES LLP

Denver, Colorado
February 2, 2000, except with respect for certain acquisitions discussed in Note
10 which are accounted for as a pooling of interest. For the acquisition of
Integrated Logic Systems, Inc. our report date is May 19, 2000 and the
acquisition of Macrotech Semiconductor our report date is October 3, 2000.

F-2

SIMTEK CORPORATION

BALANCE SHEET
DECEMBER 31, 1999

ASSETS
------
(See Note 10)
CURRENT ASSETS:

Cash and cash equivalents $ 2,180,649
Restricted certificate of deposits 400,000
Accounts receivable - trade, net of allowance for doubtful accounts and
return allowances of $45,271 1,146,631
Inventory 1,015,620
Prepaid expenses and other 36,117
-----------
Total current assets 4,779,017

EQUIPMENT AND FURNITURE, net 679,938

OTHER ASSETS 49,425
-----------
TOTAL ASSETS $ 5,508,380
===========

LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 969,678
Accrued expenses 157,908
Accrued wages 228,307
Accrued vacation payable 83,688
Customer Deposits 100,474
Obligation under capital leases 51,115
Notes payable short-term 31,142
Payable to ZMD 130,153
-----------
Total current liabilities 1,752,465
-----------
CONVERTIBLE DEBENTURES 1,500,000
NOTES PAYABLE 100,000
OBLIGATIONS UNDER CAPITAL LEASES 190,544
-----------
Total liabilities 3,543,009

COMMITMENTS (Note 6)

SHAREHOLDERS' EQUITY:
Preferred stock, $1.00 par value; 2,000,000 shares authorized, none issued -
Common stock, $.01 par value; 80,000,000 shares authorized,
33,205,226 shares issued and outstanding 332,052
Additional paid-in capital 30,079,777
Accumulated deficit (28,446,458)
-----------
Total shareholders' equity 1,965,371
-----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 5,508,380
===========

See accompanying notes to these financial statements.

F-3

SIMTEK CORPORATION

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED
DECEMBER 31,
------------------------------
1999 1998
---------- ----------

NET SALES $7,754,952 $6,522,078

Cost of sales 4,826,266 3,693,051
---------- ----------

GROSS MARGIN 2,928,686 2,829,027

OPERATING EXPENSES:
Research and development costs 1,640,025 1,558,926
Sales and marketing 918,642 833,604
General and administrative 470,703 526,081
---------- ----------

Total operating expenses 3,029,370 2,918,611
---------- ----------

INCOME FROM OPERATIONS (100,684) (89,584)
---------- ----------

OTHER INCOME (EXPENSE):
Interest income 96,942 78,587
Other income 2,175 134,233
Gain of securities 3,499 365
Interest expense (151,402) (84,397)
---------- ----------

Total other income (expense) (48,786) 128,623
---------- ----------

NET INCOME $ (149,470) $ 39,039
========== ==========

NET INCOME PER COMMON SHARE:
Basic $ * $ *
========== ==========
Diluted $ * $ *
========== ==========

WEIGHTED AVERAGE COMMON SHARE OUTSTANDING:
Basic 31,173,966 32,977,276
========== ==========
Diluted 31,173,966 34,500,334
========== ==========

-----------------------
*Less than $.01 per share.

See accompanying notes to these financial statements.

F-4

SIMTEK CORPORATION

STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

Common Stock Additional Total
------------------------- Paid-in Accumulated Shareholders'
Shares Amount Capital Deficit Equity
---------- -------- ---------- ----------- -------------

BALANCES, January 1, 1998 31,679,185 $316,792 $29,770,806 $(28,336,027) $1,751,571

Exercise of stock options 66,041 660 8,547 - 9,207
Issuance of shares 1,250,000 12,500 (8,500) - 4,000
Contributed services - - 23,333 - 23,333
Contributed assets - - 50,673 - 50,673
Net income - - - 39,039 39,039
---------- -------- ----------- ------------ ----------

BALANCES, December 31, 1998 32,995,226 329,952 29,844,859 (28,296,988) 1,877,823

Exercise of stock options 210,000 2,100 32,166 - 34,266
Contributed services - - 70,000 - 70,000
Contributed assets - - 132,752 - 132,752
Net income (loss) - - - (149,470) (149,470)
---------- -------- ----------- ------------ ----------

BALANCES, December 31, 1999 33,205,226 $332,052 $30,079,777 $(28,446,458) $1,965,371
========== ======== =========== ============ ==========

See accompanying notes to these financial statements.

F-5

SIMTEK CORPORATION

STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED
DECEMBER 31,
----------------------------
1999 1998
---------- ----------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ (149,470) $ 39,039
Adjustments to reconcile net income to net cash from
operating activities:
Depreciation and amortization 247,502 178,542
Contributed services 70,000 23,333
Unrealized gain of securities 6,930 13,570
Reversal of accrued liability - (110,000)
Net change in reserve accounts (90,936) (10,394)
Deferred financing fees 11,191 6,528
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable (270,510) 130,453
Investments 13,146 40,060
Inventory (48,930) (300,677)
Prepaid expenses and other 26,475 (33,091)
Increase (Decrease) in:
Accounts payable 450,135 (391,796)
Accrued expenses (75,852) 142,040
Customer Deposits 49,250 39,964
---------- ----------
Net cash (used in) provided by operating activities 238,931 (232,429)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment and furniture (179,310) (429,164)
Increase in restricted cash (300,000) (100,000)
Payments on capital lease obligation (13,914) -
---------- ----------
Net cash used in investing activities (493,224) (529,164)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from convertible debenture, net of deferred financing fees - 1,421,664
Proceeds from line-of-credit and the issuance of note 142,000 60,000
Proceeds from issuance of stock - 4,000
Capital Contributions 132,752 50,673
Payments on bank overdraft - (23,316)
Payments on notes payable (99,614) (23,301)
Exercise of stock options 34,266 9,207
---------- ----------
Net cash provided by financing activities 209,404 1,498,927
---------- ----------

NET INCREASE IN CASH AND CASH EQUIVALENTS (44,889) 737,334
CASH AND CASH EQUIVALENTS, beginning of year 2,225,538 1,488,204
---------- ----------
CASH AND CASH EQUIVALENTS, end of year $2,180,649 $2,225,538
========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 151,402 $ 84,583
========== ==========
Cash paid/refund for/of income taxes $ (8,480) $ 16,245
========== ==========
NONCASH INVESTING AND FINANCING TRANSACTIONS:
Purchase of equipment through payables and capital leases $ 255,573 $ -
========== ==========

See accompanying notes to these financial statements.

F-6

SIMTEK CORPORATION

NOTES TO FINANCIAL STATEMENTS

1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:
------------------------------------------------------

NATURE OF BUSINESS OPERATIONS - Simtek Corporation (the "Company") has been
involved in the design and development of nonvolatile semiconductor
products since it commenced business operations in 1987 and metal
programmed gate array integrated circuits since May 2000 (see note 10 for
information regarding the acquisition). The Company's operations have
concentrated on the design and development of the 256 kilobit, 64 kilobit,
and 16 kilobit nvSRAM product families and associated products and
technologies as well as the development of sources of supply and
distribution channels. The Company has also been involved in the design,
development and production of metal programmed gate array integrated
circuits. These products are used in applications such as computer displays
and telecommunications. As discussed throughout the notes to the financial
statements, the Company has entered into several significant transactions
with Zentrum Mikroelektronik Dresden GmbH (ZMD), a manufacturer of silicon
wafers.

CASH AND CASH EQUIVALENTS - The Company considers all highly liquid
investments with an original maturity of three months or less to be cash
equivalents. As of December 31, 1999, a portion of the Company's cash and
cash equivalents were held by a single bank, of which approximately
$2,168,194 was in excess of Federally insured amounts.

TRADING SECURITIES - The cost of trading securities in computing realized
gains or losses is determined by the specific identification method. The
change in net unrealized holding gains or losses on trading securities that
have been charged to operations for 1999 and 1998 were $6,930 and $13,570,
respectively. Realized losses for 1999 and 1998 were $3,431 and $13,205,
respectively. There were no trading securities as of December 31, 1999.

REVENUE RECOGNITION - Product sales revenue is recognized when a valid
purchase order has been received and the products are shipped to customers,
including distributors. Customers receive a one year product warranty and
sales to distributors are subject to a limited product exchange program and
product pricing protection in the event of changes in the Company's product
price. The Company provides a reserve for possible product returns, price
changes and warranty costs at the time the sale is recognized.

INVENTORY - The Company records inventory using the lower of cost
(first-in, first-out) or market. Inventory at December 31, 1999 includes:

Raw materials $ 61,813
Work in process 792,974
Finished goods 287,236
----------
1,142,023
Less reserves (126,403)
----------

$1,015,620

DEPRECIATION - Equipment and furniture are recorded at cost. Depreciation
is provided over the assets' estimated useful lives of three to seven years
using the straight-line and accelerated methods. The cost and accumulated
depreciation of furniture and equipment sold or otherwise disposed of are
removed from the accounts and the resulting gain or loss is included in
operations. Maintenance and repairs are charged to operations as incurred
and betterments are capitalized.

F-7

SIMTEK CORPORATION
NOTES TO FINANCIAL STATEMENTS

RESEARCH AND DEVELOPMENT COSTS - Research and development costs are charged
to operations in the period incurred.

ADVERTISING - The Company incurs advertising expense in connection with the
marketing of its product. Advertising costs are expensed the first time the
advertising takes place. Advertising expense was $94,936 and $127,524 in
1999 and 1998, respectively.

INCOME PER SHARE - The income per share is presented in accordance with the
provisions of Statement of Financial Accounting Standards (SFAS) No. 128,
Earnings Per Share. SFAS No. 128 replaced the presentation of primary and
fully diluted earnings (loss) per share (EPS) with a presentation of basic
EPS and diluted EPS. Basic EPS is calculated by dividing the income or loss
available to common shareholders by the weighted average number of common
shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common
stock were exercised or converted into common stock.

ACCOUNTING ESTIMATES - The preparation of financial statements in
conformity generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the
financial statements and the accompanying notes. The actual results could
differ from those estimates. The Company's financial statements are based
upon a number of estimates, including the allowance for doubtful accounts,
technological obsolescence of inventories, the estimated useful lives
selected for property and equipment, sales returns, warranty reserve, and
the valuation allowance on the deferred tax assets. Due to the
uncertainties inherent in the estimation process, it is at least reasonably
possible that the estimates for these items could be further revised in the
near term and such revisions could be material.

IMPAIRMENT OF LONG-LIVED ASSETS - In the event that facts and circumstances
indicate that the cost of assets or other assets may be impaired, an
evaluation of recoverability would be performed. If an evaluation is
required, the estimated future undiscounted cash flows associated with the
asset would be compared to the asset's carrying amount to determine if a
write-down to market value or discounted cash flow value is required.

STOCK-BASED COMPENSATION - As permitted under the SFAS No. 123, Accounting
for Stock-Based Compensation, the Company accounts for its stock-based
compensation in accordance with the provisions of Accounting Principles
Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees. As
such, compensation expense is recorded on the date of grant if the current
market price of the underlying stock exceeds the exercise price. Certain
pro forma net income and EPS disclosures for employee stock option grants
are also included in the notes to the financial statements as if the fair
value method as defined in SFAS No. 123 had been applied. Transactions in
equity instruments with non-employees for goods or services are accounted
for by the fair value method.

INCOME TAXES - The Company accounts for income taxes under the liability
method of SFAS No. 109, whereby current and deferred tax assets and
liabilities are determined based on tax rates and laws enacted as of the
balance sheet date. Deferred tax expense represents the change in the
deferred tax asset/liability balance. Valuation allowances are recorded for
deferred tax assets that are not expected to be realized.

F-8

SIMTEK CORPORATION
NOTES TO FINANCIAL STATEMENTS

Recently Issued Accounting 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, 2001 and the adoption of this standard is
not expected to have a material effect on the Company's financial
statements.

2. EQUIPMENT AND FURNITURE:
-----------------------

Equipment and furniture at December 31, 1999 consists of the following:

Leased software under capital leases $ 255,573
Research and development equipment 1,357,999
Computer equipment and software 1,271,774
Office furniture 62,878
Other equipment 75,144
-----------
3,023,368
Less accumulated depreciation
and amortization (2,343,430)
-----------

$ 679,938
===========

The cost of equipment and furniture acquired for research and development
activities that has alternative future use is capitalized and depreciated
over its estimated useful life.

Depreciation and amortization expense of $247,502 and $178,542 was charged
to operations for the years ended December 31, 1999 and 1998, respectively.
Included in the amortization expense for 1999 and 1998 was $17,040 and
$-0-, respectively, of amortization of capital leases. At December 31,
1999, accumulated amortization for software under capital leases was
$17,040.

3. OTHER PAYABLES:
--------------

Payable to ZMD - Under the terms of a cooperation agreement with ZMD, the
Company received $378,551 during 1996 from ZMD. Of the $378,551 received
during 1996, $248,398 was converted into 1,518,374 shares of common stock.
Because the cooperation agreement specifies that ZMD's ownership of the
Company may not exceed 30% without the approval of the Company's Board of
Directors, the additional $130,153 that was received from ZMD in 1996 was
not converted into common stock and is recorded as a liability at December
31, 1999. Pursuant to the terms of the cooperation agreement, ZMD is
allowed to have two members on the Company's Board of Directors.

F-9

SIMTEK CORPORATION
NOTES TO FINANCIAL STATEMENTS

NOTES PAYABLE - SHORT-TERM - Notes payable consists of the following:

Note payable due in monthly interest and principle payments at 9.5%. The
last principle and interest payment is on September 15, 2000. The note is
collateralized by the underlying assets of the note. $ 5,981

Note payable under the Company reorganization plan due in annual payments
of $5,000 starting on September 15, 1995 with no interest. The legal entity
serving as the trustee for these creditors was dissolved in 1995 and all
payments made to the trustee by the Company have been returned 20,000

Final settlement under the Company reorganization plan for unsecured
creditors. Payments are due annually and are based upon gross income
calculation with a gross annual minimum payment of $10,000 for four years
commencing in April 1996. Amount is net of settlements with creditors. 5,161
-------
$31,142
=======

Note Payable to Related Party - Unsecured note payable of $100,000 due on
June 30, 2001 to Hugh N. Chapman with interest at 12% per annum. Interest
payable monthly and principle due on June 30, 2001.

4. REVOLVING LINE-OF-CREDIT AND LETTER-OF-CREDIT:
---------------------------------------------

As of December 31, 1999, the Company had a $350,000 revolving
line-of-credit (LOC). The LOC bears interest at prime plus .75% (8.58% at
December 31, 1999) and matures in March 2000. The LOC requires the Company
to maintain a $100,000 certificate of deposit as collateral. The LOC is
also collateralized by substantially all assets of the Company. At December
31, 1999, the Company had no balance outstanding.

At December 31, 1999, the Company had a second revolving LOC in the amount
of $25,000 with second financial institution. The LOC bears interest at
prime plus 2% (10.5% at December 31, 1999). The LOC will mature in February
2000. The LOC is also guaranteed by the assets of the Company. At December
31, 1999, the Company had no balance outstanding.

One of the Company's suppliers revised their credit terms whereby the
Company is now required to have a $300,000 letter-of-credit in the event of
default on payments by the Company. This letter-of-credit requires the
Company to maintain a $300,000 certificate of deposit as collateral.

F-10

SIMTEK CORPORATION
NOTES TO FINANCIAL STATEMENTS

5. CONVERTIBLE DEBENTURES:
----------------------

During June 1998, the Company received proceeds of $1,500,000 from the
issuance of convertible debentures (the "Debentures"). The Debentures are
convertible into shares of common stock of the Company. After a one-time
conversion price adjustment in May 1999, the debentures conversion price
changed from $.35 per share to $.195 per share.

Certain other events may trigger a downward adjustment of the Debenture
conversion price, including common stock offerings whereby the common stock
is sold for less than the conversion price. The Debentures mature in June
2005, however, may be redeemed earlier by the holder under certain limiting
circumstances. Interest at 9% is paid monthly, with monthly principal
payments of $15,000 beginning in June 2001. All outstanding principal and
interest is due in June 2005. The Debentures are collateralized by
substantially all the assets of the Company.

6. COMMITMENTS AND CONTINGENCIES:
-----------------------------

Offices Leases - The Company leases office space under a lease which
expires on December 31, 2001. Monthly lease payments are approximately
$9,000. Subsequent to year-end, the Company signed an addendum to their
office lease which will provide additional office space from June 1, 2000
through December 31, 2001. Monthly lease payments will increase to
approximately $11,000 starting June 1, 2000.

The Company leases furniture and equipment under operating leases which
expire over the next two years. Monthly lease payments, including sales
tax, are approximately $18,000. Future minimum lease payments under the
equipment, furniture and office leases described above, including the lease
addendum signed subsequent to December 31, 1999, are approximately as
follows:

Year
----
2000 $185,383
2001 164,528
--------
$349,911
========

Office rent and equipment lease expense totaled $264,935 and $279,243 for
the years ended December 31, 1999 and 1998, respectively.

In addition, the Company leases research and development software under a
capital lease which will expire over the next five years. At December 31,
1999, future minimum lease payments under the lease described above is
approximately as follows:

Year
2000 $ 63,888
2001 63,888
2002 63,888
2003 63,888
2004 47,916
--------

F-11

SIMTEK CORPORATION
NOTES TO FINANCIAL STATEMENTS

Total net minimum lease payments 303,468

Less amount representing interest (61,809)
--------

Present value of net minimum lease payments $241,659
========

ACCRUED SALARY - Due to limited working capital of the Company, the
Company's former CFO agreed with the Company's Board of Directors to defer
his salary from April 1, 1994 through December 31, 1996. As of December 31,
1999, a total of $210,000 was accrued and unpaid.

EMPLOYMENT AGREEMENTS - During the year ended December 31, 1998, the
Company entered into an employment agreement with the Company's President
and Chief Executive Officer. As of December 31, 1999, the base salary under
this agreement is $120,000 per year, and expires June 1, 2001. The Company
may terminate the agreement for good cause. If terminated for any other
reason, the Company will pay the continuation of the base salary and
benefits, mitigated by income earned by the employee, for the remainder of
the term of the agreement.

REVERSAL OF ACCRUED LIABILITY - In 1994 and 1995, the Company accrued a
$110,000 liability for services, the value of which were disputed by the
Company. During 1998, the Company reevaluated this liability and determined
it was highly unlikely it would ever be paid and, therefore, recognized
$110,000 of other income for the reversal of the claim.

F-12

SIMTEK CORPORATION
NOTES TO FINANCIAL STATEMENTS

7. SHAREHOLDERS' EQUITY:
--------------------

EARNINGS PER SHARE - The following is a reconciliation of basic and diluted
EPS:

For the Year Ended December 31, 1999
----------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ---------

Basic EPS -
Income (loss) available to common
shareholders $(149,470) 33,173,966 $ *
Effect of dilutive options - - ===
--------- ----------

Diluted EPS -
Income (loss) available to common
shareholders plus assumed conversions $(149,470) 33,173,966 $ *
========= ========== ===
--------------------
* Less than $.01 per share

For the Year Ended December 31, 1998
----------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
Basic EPS -
Income available to common
shareholders $ 39,039 32,977,276 $ *
===
Effect of dilutive options - 1,523,058
--------- ----------

Diluted EPS -
Income available to common shareholders
plus assumed conversions $ 39,039 34,500,334 $ *
========= ========== ===

--------------------
* Less than $.01 per share

Options to purchase 4,182,486 and 4,137,736 shares of common stock were
outstanding at December 31, 1999 and 1998, respectively. Of that total,
2,559,986 had a dilutive effect on the 1998 EPS. For purposes of
calculating diluted EPS, those options resulted in 1,523,058 incremental
shares for 1998 determined using the treasury stock method. The remaining
1,577,750 options had an anti-dilutive effect 1998, respectively, and were,
therefore, excluded from the computation of diluted EPS. These options had
exercise prices ranging from $.19 to $.56 per share for 1998. The
convertible debentures also had an anti-dilutive effect on 1999 and 1998
and were, therefore, excluded from the computation of diluted EPS.

WARRANTS - All warrants outstanding at December 31, 1998 expired
unexercised during 1999. These warrants had an anti-dilutive effect on
diluted EPS during 1998.

STOCK OPTION PLANS - The Company has approved two stock option plans that
authorize an aggregate of 5,500,000 shares for stock options that may be
granted to directors, employees, and consultants. The plans permit the

F-13

SIMTEK CORPORATION
NOTES TO FINANCIAL STATEMENTS

issuance of incentive and non-statutory options and provide for a minimum
exercise price equal to 100% of the fair market value of the Company's
common stock on the date of grant. The maximum term of options granted
under the plans is 10 years and options granted to employees expire three
months after the termination of employment. None of the options may be
exercised during the first six months of the option term. No options may be
granted after 10 years from the adoption date of each plan. The Incentive
Stock Option Plan was adopted in 1991, and the Non-Qualified Stock Option
Plan was adopted in 1994. Following is a summary of activity under these
stock option plans for the years ended December 31, 1999 and 1998:

1999 1998
--------------------------- --------------------------
Weighted Weighted
Average Average
Number Exercise Number Exercise
of Shares Price of Shares Price
--------- -------- ---------- --------

Outstanding, beginning of year 4,137,736 $ .19 3,844,150 $.16

Granted, including exchanges 296,750 .17 504,100 .37
Expired (42,000) .15 (7,000) .18
Exercised (210,000) (.16) (66,041) (.14)
Canceled - - (137,473) (.47)
--------- ---------

Outstanding, end of year 4,182,486 $ .20 4,137,736 $.19
========= =========

For all options granted during 1999 and 1998, the weighted average fair
value was $.17 and $.30, respectively. At December 31, 1999, options for
3,625,237 shares were exercisable and options of the remaining options,
342,843, 181,434, and 32,972 shares will become exercisable in 2000, 2001,
and 2002, respectively. If not previously exercised or forfeited, options
outstanding at December 31, 1999, will expire as follows:

Weighted
Average
Number Exercise
Year Ending December 31, of Shares Price
------------------------ --------- --------

2000 134,800 $.15
2001 865,765 .14
2002 1,245,921 .14
2003 381,500 .15
2004 755,150 .30
2005 502,600 .37
2006 296,750 .17
---------

4,182,486 $.20
=========

Pro Forma Stock-Based Compensation Disclosures - The Company applies APB
Opinion 25 and related interpretations in accounting for its stock options
and warrants which are granted to employees. Accordingly, no compensation
cost has been recognized for grants of options and warrants to employees
since the exercise prices were not less than the market value of the

F-14

SIMTEK CORPORATION
NOTES TO FINANCIAL STATEMENTS

Company's common stock on the grant dates. Had compensation cost been
determined based on the fair value at the grant dates for awards under
those plans consistent with the method of SFAS No. 123, the Company's net
income and EPS would have been reduced to the pro forma amounts indicated
below.

Year Ended December 31,
-----------------------------
1999 1998
------------ ------------

Net income (loss) applicable to common shareholders:
As reported $(149,470) $ 39,039
Pro forma (272,061) (90,761)

Net income (loss) per common shareholders:
As reported - basic $ - $ -
As reported - diluted - -
Pro forma - basic and diluted - -

The fair value of each option granted in 1999 and 1998 was estimated on the
date of grant, using the Black- Scholes option-pricing model with the
following weighted average assumptions:

Options Granted During
-----------------------
1999 1998
-------- --------

Expected volatility 119.7% 125.4%
Risk-free interest rate 5.5% 5.5%
Expected dividends - -
Expected terms (in years) 4.0 4.0

OTHER - Preferred Stock may be issued in such series and preferences as
determined by the Board of Directors.

F-15

SIMTEK CORPORATION
NOTES TO FINANCIAL STATEMENTS

8. SIGNIFICANT CONCENTRATION OF CREDIT RISK, MAJOR CUSTOMERS, AND OTHER RISKS
---------------------------------------------------------------------------
AND UNCERTAINTIES:
-----------------

Sales to foreign customers and sales of military products for the years
ended December 31, 1999 and 1998 were as follows (as a percentage of
sales):

1999 1998
---- ----

Foreign customers 53% 33%
Military products sales 29% 39%

Sales to unaffiliated customers which represent 10% or more of the
Company's sales for the years ended December 31, 1999 and 1998 were as
follows (as a percentage of sales):
Customer 1999 1998
----------- ---- ----

A 31% 15%
B 13% 14%
C - 15%
D - 20%
E 12% -

The Company frequently sells large quantities of inventory to its
customers. At December 31, 1999, the Company had gross trade receivables
totaling $605,669 due from three customers.

In 1999 and 1998, the Company purchased all of its wafers for its nvSRAM
products from a single supplier located in Singapore. Approximately 87% and
47% of the Company's sales for 1999 and 1998, respectively, were from
finished units produced from these wafers. The Company had an agreement
with this supplier to provide wafers through September 1998. This agreement
has not been extended or terminated, however, this supplier still provides
wafers to the Company. In 1999 and 1998, the Company also purchased
finished units from ZMD for $22,480 and $1,715,867, respectively, and sales
from these products accounted for approximately 4% and 48% of the Company's
sales for 1999 and 1998, respectively. At December 31, 1999 and 1998, ZMD
owned approximately 30% of the Company. In 1999 and 1998, the Company also
purchased wafers from a another supplier in Taiwan to produce its metal
programmed gate array products. Sales from finished units produced from
these wafers accounted for approximately 9% and 5% of the Company's sales
for 1999 and 1998, respectively. Any disruptions in the Company's
relationships with these suppliers could have an adverse impact on the
Company's operating results. Assuming an alternate manufacturer of the
Company's products could be procured, management believes there could be
significant delays in manufacturing while the manufacturer incorporates the
Company's products and processes.

F-16

SIMTEK CORPORATION
NOTES TO FINANCIAL STATEMENTS

9. INCOME TAXES:
------------

Under SFAS No. 109, deferred taxes result from temporary differences
between the financial statement carrying amounts and the tax bases of
assets and liabilities. The components of deferred taxes are as follows:

Deferred Tax
Assets (Liability)
------------------
Current:
Allowance for doubtful accounts $ 2,000
Inventory reserve 106,000
Prepaids 4,000
Accrued expenses 130,000
------------
Total 242,000
Valuation allowance (242,000)
------------
Total current deferred tax $ -
============

Non-current:
Property and equipment $ 21,000
Net operating losses 11,770,000
R&D credit carryforward 1,312,000
AMT credit 70,000
------------
Net deferred tax asset before
valuation allowance 13,173,000
Valuation allowance (13,173,000)
------------
Total non-current deferred tax asset $ -
============

The net current and non-current deferred tax assets have a 100% valuation
allowance resulting from the inability to predict sufficient future taxable
income to utilize the assets. The valuation allowance for 1999 decreased
$224,000 and increased $274,000 in 1998.

At December 31, 1999, the Company has approximately $31,900,000 available
in net operating loss carryforwards which begin to expire from 2004 to
2019. A substantial portion of the net operating loss may be subject to 382
limitations.

Total income tax expense for 1999 and 1998 differed from the amounts
computed by applying the U.S. Federal statutory tax rates to pre-tax income
as follows:

1999 1998
-------- ---------

Statutory rate (34.0)% (34.0)%
State income taxes, net of Federal income tax benefit (3.3)% (3.3)%
Increase (reduction) in valuation allowance related to of net
operating loss carryforwards and change in temporary
differences 37.3% 37.3%
------- ------
$ - $ -
======= ======

F-17

SIMTEK CORPORATION
NOTES TO FINANCIAL STATEMENTS

10. ACQUISITION:
-----------

On May 9, 2000, the Company acquired Integrated Logic Systems, Inc.
("Integrated"). The Company issued 3,000,000 shares of its Common Stock in
exchange for all outstanding shares of all classes of Integrated stock. On
July 31, 2000, the Company acquired Macrotech Semiconductor, Inc.
("Macrotech"). The Company issued 1,250,000 shares of its Common Stock in
exchange for all outstanding shares of all classes of Macrotech stock.
Integrated and Macrotech design and sell metal programmed gate array
integrated circuits. These acquisitions have been recorded as a pooling of
interest. Therefore, prior financial statements have been restated to
reflect the operations of Integrated and Macrotech. All acquisition costs
associated with the merger have been expensed.

Separate revenues and net income (loss) of the merged entities are
presented in the following table.

1999 2000
---- ----

Revenue:
Simtek Corporation $6,992,388 $6,180,550
Integrated Logic Systems, Inc. 703,588 324,278
Macrotech 58,976 17,250
---------- ----------
Revenue as reported $7,754,952 $6,5224,078

Net Income (Loss):
Simtek Corporation $ 132,255 $ 162,781
Integrated Logic Systems, Inc. (68,224) (27,393)
Macrotech (213,501) (96,349)
---------- ----------
Net Income, as reported $ (149,470) $ 39,039

The effect of these acquisitions on net income (loss) per common share is
minimal.

11. SUBSEQUENT EVENTS (UNAUDITED):
-----------------------------

Subsequent to December 31, 1999, $1,500,000 of the convertible debt was
converted in 7,692,308 shares of common stock of the Company at a
conversion price of $.195 per share.

F-18

SIMTEK CORPORATION

BALANCE SHEETS
(unaudited)
ASSETS
------
September 30, 2000
-------------------

CURRENT ASSETS:
Cash and cash equivalents............................................... $ 3,098,267
Certificate of deposit, restricted...................................... 300,000
Accounts receivable - trade, net........................................ 1,510,484
Inventory, net ......................................................... 739,183
Prepaid investor relations.............................................. 988,233
Prepaid expenses and other.............................................. 129,584
--------------

Total current assets................................................ 6,765,751
EQUIPMENT AND FURNITURE, net............................................... 691,594
PATENT AND TRADEMARKS...................................................... 125,000
OTHER ASSETS............................................................... -
--------------

TOTAL ASSETS............................................................... $ 7,582,345
==============

LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------

CURRENT LIABILITIES:
Accounts payable ....................................................... $ 612,430
Accrued expenses........................................................ 374,825
Accrued wages........................................................... 326,533
Accrued vacation payable................................................ 102,022
Customer Deposits....................................................... 65,391
Obligation under capital leases......................................... 46,277
Short term debt......................................................... 20,000
Payable to ZMD.......................................................... -
--------------
Total current liabilities........................................... 1,547,478
--------------

CONVERTIBLE DEBENTURES..................................................... -
NOTES PAYABLE.............................................................. -
OBLIGATION UNDER CAPITAL LEASES............................................ 165,914
--------------
Total liabilities................................................... 1,713,392

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,
48,942,163 and 33,205,226 shares issued and outstanding
at September 30, 2000 and December 31, 1999, respectively........... 489,421
Additional paid-in capital.............................................. 37,343,790
Accumulated deficit..................................................... (31,964,258)
-------------
Shareholder's equity.................................................... 5,868,953
-------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY................................. $ 7,582,345
=============

The accompanying notes are an integral part of these financial statements.

F-19

SIMTEK CORPORATION

STATEMENTS OF OPERATIONS
(unaudited)

Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
2000 1999 2000 1999
---- ---- ---- ----

NET SALES............................................... $ 2,996,470 $ 1,782,544 $ 9,220,772 $ 5,443,359

Cost of sales..................................... 1,884,683 1,260,199 5,664,717 3,562,028
------------------------------------------------------------------------

GROSS MARGIN............................................ 1,111,787 522,345 3,556,055 1,881,331

OPERATING EXPENSES:
Design, research and development................... 4,816,352 386,946 5,647,835 1,206,987
Administrative..................................... 249,980 104,113 620,991 344,742
Marketing.......................................... 327,901 269,475 869,669 724,606
------------------------------------------------------------------------

Total Operating Expenses....................... 5,394,233 760,534 7,138,495 2,276,335

LOSS FROM OPERATIONS.................................... (4,282,446) (238,189) (3,582,440) (395,004)
------------------------------------------------------------------------

OTHER INCOME (EXPENSE):
Interest income, net............................... 38,538 (13,177) 66,583 (38,579)
Other income (expense), net........................ 8,219 937 9,658 (20,508)
-------------------------------------------------------------------------

Total other income (expense)................... 46,757 (12,240) 76,241 (59,087)
-------------------------------------------------------------------------

NET LOSS BEFORE TAXES................................... (4,235,689) (250,429) (3,506,199) (454,091)

Provision for income taxes......................... - - 11,600 -
------------------------------------------------------------------------

NET LOSS................................................ $ (4,235,689) $ (250,429) $ (3,517,799) $ (454,091)
========================================================================

BASIC AND DILUTED EPS................................... $ (0.10) $ (.01) $ (0.08) $ (.01)
========================================================================

BASIC WEIGHTED AVERAGE SHARES
OUTSTANDING............................................ 43,454,222 31,955,226 41,392,310 31,955,226

EFFECT OF DILUTIVE OPTIONS.............................. - - - -
------------------------------------------------------------------------

DILUTIVE SHARES OUTSTANDING............................. 43,454,222 31,955,226 41,392,310 31,955,226
========================================================================

The accompanying notes are an integral part of these financial statements.

F-20

SIMTEK CORPORATION

STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended September 30,
----------------------------------------
2000 1999
---- ----

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................................ $ (3,517,799) $ (454,091)
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Depreciation and amortization.............................. 221,917 178,792
Investment banker stock issuance........................... 42,967 -
WebGear purchase of research and development
for common stock....................................... 4,384,545 -
Increase (decrease) in net change of reserve accounts 312,286 (28,980)
Deferred financing fees.................................... 1,865 8,393
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable.................................... (437,661) (236,511)
Inventory.............................................. 279,897 104,139
Prepaid expenses and other ............................ (104,658) 19,769
Increase (decrease) in:
Accounts payable....................................... (357,249) 298,148
Customer deposits...................................... (35,083) 7,220
Accrued expenses....................................... 91,540 (8,162)
---------------------------------------
Net cash provided by (used in) operating activities 882,567 (111,283)
---------------------------------------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of equipment and furniture ............................. (233,574) (140,721)
Interest received on certificate of deposit...................... - (7,868)
Decrease (increase) in restricted cash........................... 100,000 (300,000)
---------------------------------------
Net cash used in investing activities............................ (133,574) (448,589)
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options........................................ 293,131 34,266
Payments on notes payable........................................ (111,142) (13,595)
Capital Contributions............................................ 43,503 178,178
Distributions to stockholders.................................... (27,400) -
Payments on capital lease obligation............................. (29,467) -
Proceeds from line of credit and notes........................... - 57,922
---------------------------------------
Net cash provided by financing activities..................... 168,625 256,771
---------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS..................................................... 917,618 (303,101)
---------------------------------------
CASH AND CASH EQUIVALENTS, beginning of period........................ 2,180,649 2,245,614
---------------------------------------
CASH AND CASH EQUIVALENTS, end of period.............................. $ 3,098,267 $ 1,942,513
=======================================

SUPPLEMENTAL CASH FLOW INFORMATION:
Conversion of debenture into shares of common stock, net
of deferred financing costs related to the debenture $ 1,441,249 $ -
Conversion of payable to ZMD into shares of common stock $ 130,153 $ -

The accompanying notes are an integral part of these financial statements.

F-21

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 7, 2000 for fiscal year 1999 and Simtek Corporation's Form 8-K/A
Amendment #1 filed on October 16, 2000.

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. Results of operations for the interim periods are not necessarily
indicative of the results of operations for the full fiscal year.

2. LINE OF CREDIT:

In March 2000, Simtek Corporation ("Simtek" or the "Company") renewed its
revolving line of credit for another year in the amount of $250,000, thereby
reducing it by $100,000 since December 31, 1999. At the time of renewal, the
$100,000 certificate of deposit required for this line of credit was released.

3. EQUITY:

In February and March 2000, Renaissance Capital Group of Dallas, Texas
("Renaissance") converted the $1,500,000 debenture established in June 1998 into
7,692,308 shares of the Simtek Common Stock. Renaissance sold 5,692,308 of these
shares under SEC Rule 144 in the first quarter of 2000.

In March 2000, the Company filed a Form SB-2 registration statement to
register 3,547,385 shares of Common Stock owned by Zentrum Mikoelectronik
Dresden Gmbh ("ZMD") and an additional 551,964 shares that ZMD was entitled to
upon conversion (April 12, 2000) of a $130,153 payable to them into shares of
Common Stock. This registration statement became effective on April 7, 2000. ZMD
sold 4,000,000 shares under SEC Rule 144. Prior to the sale of these shares, ZMD
owned approximately 13% of the Company's Common Stock.

In May 2000, the Company acquired Integrated Logic Systems, Inc. ("ILSI").
Simtek issued 3,000,000 shares of its Common Stock in exchange for all
outstanding shares of all classes of ILSI stock. ILSI designs and sells metal
programmed gate array integrated circuits. The acquisition was accounted for as
a pooling of interest and the results of ILSI have been consolidated with those
of Simtek, as if the two businesses had been merged throughout the periods
presented.

On June 16, 2000, the Company acquired 1,875,000 shares of the common stock
of WebGear, Inc., a California corporation ("WebGear"), in return for 1,250,000
shares of the Company's common stock. The shares of WebGear stock that the
Company acquired represented approximately 9% of WebGear's issued and
outstanding shares of common stock as of June 16, 2000. On June 16, 2000, the
closing price for Simtek's common stock was $1.3125 per share. WebGear is
engaged in the design, development, sales and support of high technology
networking and communications products for the personal computer market.

F-22

SIMTEK CORPORATION

NOTES TO FINANCIAL STATEMENTS

On July 31, 2000, the Company acquired Macrotech Semiconductor
("Macrotech"). Simtek issued 1,250,000 shares of its Common Stock in exchange
for all outstanding shares of all classes of Macrotech stock. Macrotech designs
and sells metal programmable standard cells, which are an extension of the metal
programmed gate array integrated circuits that ILSI manufactures. The
acquisition was accounted for as a pooling of interest, and the results of
Macrotech have been consolidated with those of Simtek, as if the two businesses
had been merged throughout the periods presented.

On September 14, 2000, the Company entered into a one-year contract with
two investment bankers, E.B.M. Associates, Inc. and World Trade Partners, each
company has received 500,000 shares of the Company's Common Stock. Both
companies will assist Simtek in broadening its financial market presence and
establishing new relationships within the industry, investment community and
financial media. On September 14, 2000, the closing share price for Simtek's
common stock was $ 1.0312 per share and accordingly $988,233 has been assigned
to prepaid investor relations which will be amortized over the forth coming year
and approximately $43,000 was expensed during the period ending September 30,
2000.

On September 29, 2000, the Company purchased incomplete research and
development, patents and certain trademarks from WebGear, Inc. The Company
issued 5,000,000 shares of its common stock (including 2,000,000 shares placed
in escrow) and returned to WebGear the 1,875,000 shares of WebGear common stock
that Simtek acquired from WebGear on June 16, 2000. On September 29, 2000, the
closing price of Simtek's common stock was $0.8438 per share. Subsequently, the
parties have agreed to adjust the shares issued by the Company to 3,400,000
shares of common stock, subject to execution of formal agreements. The Company
has estimated the preliminary value of the purchased patents and trademarks at
$125,000 which were capitalized and recorded as intangible assets. The Company
has estimated the preliminary value of the incomplete research and development
acquired from WebGear at $4,384,545 which was expensed immediately. The Company,
however, is continuing to analyze the allocation between the patents and
trademarks and the incomplete research and development. Before the Company files
its annual report on Form 10-KSB, this allocation could be modified based on the
completion of this analysis, and this adjustment could be material.

4. GEOGRAPHIC CONCENTRATION:

Sales by location for the three months ended September 30, 2000 and 1999
were as follows (as a percentage of sales):

2000 1999
---- ----

North America 39% 37%
Europe 18% 16%
Far East and Japan 43% 47%

F-23

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

Capitalized terms used but not otherwise defined in Part II are used as defined
in the prospectus contained in this registration statement.

ITEM 27. EXHIBITS

3.1 Amended and Restated Articles of Incorporation.(2)
3.2 Amended and Restated Articles of Incorporation November 1997.(7)
3.3 Bylaws.(2)
4.1 1987-I Employee Restricted Stock Plan.(1)
4.2 Form of Restricted Stock Agreement between the Company and Participating
Employees.(3)
4.3 Form of Common Stock Certificate.(3)
4.4 Simtek Corporation 1991 Stock Option Plan.(4)
4.5 Form of Incentive Stock Option Agreement between the Company and Eligible
Employees.(4)
4.6 1994 Non-Qualified Stock Option Plan.(5)
4.7 Amendment to the 1994 Non-Qualified Stock Option Plan.(6)

5.1 Legality opinion of Holme Roberts & Owen LLP.*

10.1 Form of Non-Competition and Non-Solicitation Agreement between the Company
and certain of its employees.(3)
10.2 Form of Employee Invention and Patent Agreement between the Company and
certain of its employees.(3)
10.3 Product License Development and Support Agreement between Simtek
Corporation and Zentrum Mikroelektronik Dresden GmbH dated June 1, 1994(6)
10.4 Cooperation Agreement between Simtek Corporation and Zentrum
Mikroelektronik Dresden GmbH dated September 14, 1995(7)
10.5 Manufacturing Agreement between Chartered Semiconductor Manufacturing,
PTE, LTD. and Simtek Corporation dated September 16, 1992(7)
10.6 Employment agreement between the Simtek Corporation and Douglas M.
Mitchell(8)
10.7 Share Exchange Agreement dated May 9, 2000 between Simtek Corporation and
Hugh N. Chapman (9)
10.8 Share Exchange Agreement dated June 16, 2000 between Simtek Corporation
and WebGear Inc.(9)
10.9 Share Exchange Agreement dated July 31, 2000 between Simtek Corporation
and Jaskarn Johal and Kashmira S. Johal (10)
10.10 Asset Purchase Agreement between Simtek Corporation and WebGear, Inc.(11)
10.11 Amendment to Asset Purchase Agreement between Simtek Corporation and
WebGear (12).

23.1 Consent of Independent Public Accountants - Hein + Associates LLP*
23.2 The Consent of Holme Roberts & Owen LLP is included in Exhibit 5.1.*

27 Financial Data Schedule

-----------------------

* Previously filed.

(1) Incorporated by reference to the Company's Form S-1 Registration Statement
(Reg. No. 33-37874) filed with the Commission on November 19, 1990.
(2) Incorporated by reference to the Company's Amendment No.1 to Form S-1
Registration Statement (Reg. No. 33-37874) filed with the Commission on
February 4, 1991.
(3) Incorporated by reference to the Company's Amendment No.2 to Form S-1
Registration Statement (Reg. No. 33-37874) filed with the Commission on
March 4, 1991.
(4) Incorporated by reference to the Company's Form S-1 Registration Statement
(Reg. No. 33-46225) filed with the Commission on March 6, 1992.
(5) Incorporated by reference to the Company's Annual Report on Form 10-K filed
with the Commission on March 25, 1995.
(6) Incorporated by reference to the Company's Annual Report on Form 10-K filed
with the Commission on March 27, 1996.
(7) Incorporated by reference to the Company's Annual Report on Form 10-K filed
with the Commission on March 24, 1998.
(8) Incorporated by reference to the Company's Annual Report on Form 10-KSB
filed with the Commission on March 12, 1999.
(9) Incorporated by reference to the Form SB-2 Registration Statement (Reg. No.
333-40988) filed with the Commission on July 7, 2000.
(10) Incorporated by reference to the Form 8-K filed with the Commission on
August 14, 2000.
(11) Incorporated by reference to the Form 8-K filed with the Commission on
October 16, 2000.
(12) Incorporated by reference to the Company's Amendment No. 2 to Form SB-2
Registration Statement (Reg. No. 333-40988).

II-1

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Colorado
Springs, State of Colorado, on this 8th day of January 2001.

Simtek Corporation
a Colorado corporation

By: /s/ Douglas M. Mitchell
-------------------------------------
Douglas M. Mitchell
Chief Executive Officer and President

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has caused this Amendment to the Registration Statement to be signed by the
following persons in the capacities on January 8, 2001.

SIGNATURE TITLE

/s/ Douglas M. Mitchell
--------------------------- Director, Chief Executive Officer, President
Douglas M. Mitchell and Chief Financial Officer (Acting)

/s/ Robert H. Keeley
--------------------------- Director
Robert H. Keeley

/s/ John Heightley
---------------------------- Director
John Heightley

/s/ Klaus Wiemer
--------------------------- Director
Klaus Wiemer

/s/ Harold Blomquist
--------------------------- Director
Harold Blomquist

II-2