UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2001
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
SIMTEK CORPORATION
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(Exact name small business issuer as specified in its charter)
Colorado 84-1057605
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4250 Buckingham Dr. #100; Colorado Springs, CO 80907
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(Address of principal executive offices)
(719) 531-9444
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(issuer's telephone number)
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
Class Outstanding at May 9, 2001
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(Common Stock, $.01 par value) 53,684,245
SIMTEK CORPORATION
INDEX
For Quarter Ended March 31, 2001
PART 1. FINANCIAL INFORMATION
ITEM 1 Page
Balance Sheets as of March 31, 2001 and
December 31, 2000 3
Statements of Operations for the three months ended
March 31, 2001 and 2000 4
Statements of Cash Flows for the three months ended
March 31, 2001 and 2000 5
Notes to Financial Statements 6
ITEM 2
Management's Discussion and Analysis of Results of
Operations and Financial Condition 7-9
PART II. OTHER INFORMATION
ITEM 1 Legal Proceedings 10
ITEM 2 Changes in Securities 10
ITEM 3 Defaults upon Senior Securities 10
ITEM 4 Matters Submitted to a Vote of Securities Holders 10
ITEM 5 Other Information 10
ITEM 6 Exhibits and Reports on Form 8-K 10
SIGNATURES 11
SIMTEK CORPORATION
BALANCE SHEETS
ASSETS
March 31, 2001 December 31, 2000
--------------- -----------------
CURRENT ASSETS:
Cash and cash equivalents............................................... $ 2,615,626 $ 2,853,769
Certificate of deposit, restricted...................................... 300,000 300,000
Accounts receivable - trade, net........................................ 2,100,007 1,775,865
Inventory, net ......................................................... 1,869,577 1,130,629
Prepaid expenses and other.............................................. 617,210 922,818
-----------------------------------
Total current assets................................................ 7,502,420 6,983,081
EQUIPMENT AND FURNITURE, net............................................... 998,786 926,473
DUE FROM RELATED PARTY..................................................... 22,562 6,497
OTHER ASSETS............................................................... 112,500 118,750
-----------------------------------
TOTAL ASSETS............................................................... $ 8,636,268 $ 8,034,801
===================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable........................................................ $ 2,456,738 $ 1,100,049
Accrued expenses........................................................ 353,513 546,795
Notes Payable........................................................... 24,996 24,996
Accrued wages........................................................... 295,049 254,865
Accrued vacation payable................................................ 156,762 136,875
Line of credit payable.................................................. - 84,050
Obligations under capital lease......................................... 48,436 47,344
-------------------------------------
Total current liabilities........................................... 3,335,494 2,194,974
NOTES PAYABLE.............................................................. 23,564 29,813
OBLIGATIONS UNDER CAPITAL LEASES........................................... 141,144 153,670
-----------------------------------
Total liabilities................................................... 3,500,202 2,378,457
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, $1.00 par value, 2,000,000 shares
authorized and none issued and outstanding ......................... - -
Treasury stock.......................................................... (12,504) -
Common stock, $.01 par value, 80,000,000 shares authorized,
53,684,245 and 48,462,514 shares issued and outstanding at
March 31, 2001 and December 31, 2000, respectively.................. 536,842 484,625
Additional paid-in capital.............................................. 37,503,880 37,549,307
Accumulated deficit..................................................... (32,892,152) (32,377,588)
-----------------------------------
Shareholder's equity.................................................... 5,136,066 5,656,344
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY................................. $ 8,636,268 $ 8,034,801
===================================
The accompanying notes are an integral part of these financial statements.
3
SIMTEK CORPORATION
STATEMENTS OF OPERATIONS
For the quarters ended March 31,
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2001 2000
---- ----
NET SALES.................................................................. $ 4,331,721 $ 3,826,027
Cost of sales........................................................ 3,096,555 2,128,721
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GROSS MARGIN............................................................... 1,235,166 1,697,306
OPERATING EXPENSES:
Design, research and development...................................... 660,074 623,465
Administrative........................................................ 704,103 213,285
Marketing............................................................. 416,852 274,892
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Total Operating expenses.......................................... 1,781,029 1,111,642
INCOME (LOSS) FROM OPERATIONS.............................................. (545,863) 585,664
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OTHER INCOME (EXPENSE):
Interest income (expense), net........................................ 30,360 (7,589)
Other expense, net.................................................... 939 (1,928)
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Total other income (expense)...................................... 31,299 (9,517)
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NET INCOME (LOSS) BEFORE TAXES............................................. (514,564) 576,147
Provision for income taxes............................................ - 38,000
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NET INCOME (LOSS).......................................................... $ (514,564) $ 538,147
===================================
NET INCOME PER COMMON SHARE:
Basic................................................................. $ (.01) $ .01
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Diluted............................................................... $ (.01) $ .01
===================================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic................................................................. 53,651,912 41,472,635
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Diluted.............................................................. 53,651,912 44,848,779
=====================================
The accompanying notes are an integral part of these financial statements.
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SIMTEK CORPORATION
STATEMENTS OF CASH FLOWS
Three Months Ended March 31,
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2001 2000
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ............................................... $ (514,563) $ 538,147
Adjustments to reconcile net income (loss) to net cash from
operating activities:
Depreciation and amortization.............................. 111,272 111,646
Increase (decrease) in net change of reserve
accounts.............................................. 21,423 68,951
Deferred financing fees.................................... - 1,865
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable.................................... (380,109) (374,074)
Inventory.............................................. (750,648) (106,515)
Prepaid expenses and other ............................ 305,608 (87,265)
Increase (decrease) in:
Accounts payable....................................... 1,356,691 (56,028)
Accrued expenses....................................... (86,970) 76,426
Customer Deposits...................................... - (41,750)
------------------------------------
Net cash provided by operating activities..................... 62,704 131,403
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment and furniture.............................. (177,334) (62,193)
Payments on capital lease obligation............................. (11,435) (7,863)
Reduction of certificate of deposit.............................. - 100,000
------------------------------------
Net cash provided by (used in) investing activities........... (188,769) 29,944
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on Notes Payable........................................ (6,249) (8,190)
Purchase of Simtek Common Stock.................................. (12,504) -
Cash to Q-DOT Acoustics.......................................... (16,065) (71,753)
Cash to Q-DOT Group.............................................. - (272)
Payments of line of credit....................................... (84,050) (222,769)
Capital Contribution............................................. - 20,170
Stock issued for directors compensation.......................... - 14,562
Exercise of stock options........................................ 6,790 201,994
------------------------------------
Net cash used in financing activities......................... (112,078) (66,258)
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NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS................................................... (238,143) 95,089
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CASH AND CASH EQUIVALENTS, beginning of period........................ 2,853,769 2,243,925
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CASH AND CASH EQUIVALENTS, end of period.............................. $ 2,615,626 $ 2,339,014
====================================
SUPPLEMENTAL NON-CASH INFORMATION:
Conversion of debenture into shares of common stock, net
of deferred financing costs related to the debenture............ $ - $ 1,441,249
The accompanying notes are an integral part of these financial statements.
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SIMTEK CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES:
The financial statements included herein are presented in accordance with
the requirements of Form 10-QSB and consequently do not include all of the
disclosures normally made in the registrant's annual Form 10-KSB filing. These
financial statements should be read in conjunction with the financial statements
and notes thereto included in Simtek Corporation's Annual Report and Form 10-KSB
filed on March 29, 2001 for fiscal year 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 April 2001, Simtek Corporation ("Simtek" or the "Company") renewed its
revolving line of credit for another year in the amount of $250,000.
3. EQUITY:
In March 2001, Simtek completed the merger with Q-DOT Group, Inc.
("Q-DOT"). Simtek issued 5,171,731 shares of our Common Stock, valued at
$4,000,000 based on a twenty day average share closing price of approximately
$0.77. Q-DOT specializes in advanced technology research and development for
data acquisition, signal processing, imaging and data communications. The
company's projects have been supported by conventional government and commercial
contracts in addition to Small Business Innovation Research (SBIR) contracts.
Q-DOT will be operated as a wholly owned subsidiary of Simtek for its government
contract research and development operations. The acquisition will be accounted
for as a pooling of interest, and the results of Q-DOT will be consolidated with
ours in future financials as if we have been merged throughout the periods.
4. GEOGRAPHIC CONCENTRATION:
Sales by location for the three months ended March 31, 2001 and 2000 were
as follows (as a percentage of sales):
2001 2000
North America 38% 63%
Europe 20% 12%
Far East and Japan 42% 25%
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SIMTEK CORPORATION
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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RESULTS OF OPERATIONS:
Simtek Corporation recorded net product sales of $4,331,721 for the first
quarter of 2001 up from the $3,826,027 recorded for the first quarter 2000. The
product sales from the Company's 4 kilobit, 16 kilobit, 64 kilobit and 256
kilobit nvSRAM product families and metal programmed gate array integrated
circuits were $3,975,104 for the first quarter of 2001 and $2,902,395 for the
first quarter of 2000. The increase in sales was due primarily to an increase in
large customers placing production orders of our products worldwide. Sales of
the Company's high end industrial and military products decreased in the three
months ended March 31, 2001 as compared to the three months ended March 31,
2000. This decrease was due to a decrease in defense contacts. We believe that
these sales will increase to their historic levels, but it remains unclear when
this will occur. Two distributors of the Company's nvSRAM products account for
more approximately 44% of the Company's net sales for the first quarter 2001.
Products sold to distributors are re-sold to various end customers. The revenue
generated from research and development contracts acquired in the Q-DOT merger
was $356,617 for the first quarter of 2001 down from the $923,632 recorded for
the first quarter of 2000. This decrease was primarily due to reduced billing
rates against government contracts due to employee attrition.
During the first quarter 2001, the Company 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.
The Company saw an approximate 15% decrease in its gross margin percentages
for the first quarter 2001 as compared to the first quarter 2000. This decrease
was due primarily to an increase in the cost of the raw materials required to
produce our products. In March 2001, the Company was able to negotiate better
pricing from its suppliers and has been able to reduce certain internal costs
required to build its product. Management believes that these cost reduction
measures should have an impact on the gross margins beginning in the third
quarter of 2001.
Total other operating expenses saw an increase of approximately $670,000 in
the three months ended March 31, 2001 as compared to the three months ended
March 31, 2000. Administration saw the largest increase of approximately
$491,000. Of the approximate $491,000 increase, approximately $258,000 was
related to the amortization of the shares of stock issued in September 2000, to
two investment banker firms in return for services to us. Approximately $213,000
was related to increased legal, audit and labor related to the merger with
Q-DOT. The remaining $20,000 was related to increased payroll. Marketing saw the
next largest increase of approximately $142,000, primarily due to approximately
$86,000 paid in sales commission to independent sales representatives as a
direct result of our increased revenue. The balance of approximately $56,000 was
related to an increased payroll due to an increased headcount. Research and
development saw an approximate increase of $37,000 which was related to
increased payroll due to an increased headcount.
The Company recorded a net loss of $514,564 in the first quarter of 2001 as
compared to a net income of $576,147 for the first quarter of 2000. This
decrease was due primarily to the decrease in gross margins and the increase in
administration costs.
The change in cash flows from operating activities was $62,704, which is
primarily due to a net loss of $514,563, which is offset by depreciation and
amortization of $111,272, a decrease of prepaid expenses and other of $305,608,
and a decrease in accrued expenses of $86,970. Increases in accounts receivable,
inventory and accounts payable of $380,109, $750,648 and $1,356,691,
7
SIMTEK CORPORATION
respectively were related to increased product demand. The change in cash flows
from investing activities of $188,769 was primarily due to the purchases of
equipment and furniture related to the testing of our 64 kilobit and 256 kilobit
products built on 0.8 micron technology and the purchase of computer and
software required for research and development. The change in cash flows from
financing activities of $112,078 was due primarily to the payments on a line of
credit, notes payable, the buyback of Simtek common stock and cash required to
fund a subsidiary of Q-DOT.
FUTURE RESULTS OF OPERATIONS
The Company's ability to remain profitable will depend primarily on its
ability to continue reducing manufacturing costs and to increase net product
sales by increasing the availability of existing products, by the introduction
of new products and by expanding its customer base. The Company is currently
deciding which new or derivative product it will develop next.
As of March 31, 2001, the Company had received purchase orders expected to
be filled within the next six months of approximately $6,439,000. Orders are
cancelable prior to 30 days before the scheduled shipping date and, therefore,
should not be used as a measure of future product sales.
LIQUIDITY AND CAPITAL RESOURCES
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. The payable to ZMD of $130,153 that
showed on the balance sheet at December 31, 1999 was converted into 551,964
shares of our Common Stock. During 2000, ZMD began selling their shares of our
Common Stock.
On June 12, 1998, we closed a $1,500,000 financing transaction with two
funds advised by Renaissance. The funding from Renaissance consists of
$1,500,000 of convertible debentures with a seven year term at a 9 percent per
annum interest rate (the "Debentures"). In the first quarter of 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 in exchange for 3,000,000 shares of
our Common Stock worth approximately $3,500,000 based on the closing price per
share of ($1.1875) on the closing date.
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 worth approximately
$1,640,000 based on the closing price per share ($1.3125) on the closing date.
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. In December 2000, the
agreement was amended and WebGear returned 500,000 shares of our Common Stock to
us making the total number of shares for this phase 2,900,000, worth
approximately $2,447,000, based on the closing price of our Common Stock. On
September 29, 2000, the closing price of our Common Stock was $0.8438 per share.
On July 31, 2000, we acquired Macrotech for 1,250,000 shares of our Common
Stock worth approximately $1,700,000 based on the closing price per share
($1.375) on the closing date.
On December 6, 2000, we signed a letter of intent to acquire Q-DOT. The merger
was completed on March 13, 2001 for consideration of approximately 5,172,000
shares of our Common Stock, valued at $4,000,000 based on a twenty day average
share closing price of approximately $0.77 prior to the closing date.
8
SIMTEK CORPORATION
In April 2001, the Company renewed its revolving line of credit for another
year in the amount of $250,000. The line of credit is collateralized by
substantially all assets of the Company. The line of credit bears interest at
prime plus .75% on any outstanding balance. As of March 31, 2001, the Company
had no balance outstanding.
The Company may require additional capital to fund production and marketing
of any new products it may develop. The Company does not have any commitments
for such additional capital as of the date of this report.
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SIMTEK CORPORATION
PART II. OTHER INFORMATION
Item 1. Legal Proceedings -None
Item 2. Changes in Securities - None
Item 3. Defaults upon Senior Securities - None
Item 4. Matters Submitted to a Vote of Securities Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) Reports on Form 8-K
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Form 8-K filed on March 22, 2001 - Item 2 Acquisition or
disposition of assets
10
SIMTEK CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SIMTEK CORPORATION
(Registrant)
May 11, 2001 By /s/ Douglas Mitchell
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DOUGLAS MITCHELL
Chief Executive Officer, President
and Chief Financial Officer (acting)
11