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 June 30, 2002
[ ] 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 August 9, 2002
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(Common Stock, $.01 par value) 54,162,273
SIMTEK CORPORATION
INDEX
For Quarter Ended June 30, 2002
PART 1. FINANCIAL INFORMATION
ITEM 1 Page
----
Balance Sheets as of June 30, 2002 and
December 31, 2001 3
Statements of Operations for the three months and six
months ended June 30, 2002 and 2001 4
Statements of Cash Flows for the six months ended
June 30, 2002 and 2001 5
Notes to Financial Statements 6-7
ITEM 2
Management's Discussion and Analysis of Results of
Operations and Financial Condition 8-13
PART II. OTHER INFORMATION
ITEM 1 Legal Proceedings 14
ITEM 2 Changes in Securities 14
ITEM 3 Defaults upon Senior Securities 14
ITEM 4 Matters Submitted to a Vote of Securities Holders 14
ITEM 5 Other Information 14
ITEM 6 Exhibits and Reports on Form 8-K 14
SIGNATURES 15
2
SIMTEK CORPORATION
BALANCE SHEETS
ASSETS
------
June 30, 2002 December 31, 2001
------------- -----------------
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents............................................... $ 1,174,999 $ 2,075,704
Certificate of deposit, restricted...................................... 300,000 300,000
Accounts receivable - trade, net........................................ 1,819,990 1,687,329
Inventory, net ......................................................... 2,338,743 1,827,082
Prepaid expenses and other.............................................. 122,083 104,071
---------------------------------
Total current assets................................................ 5,755,815 5,994,186
EQUIPMENT AND FURNITURE, net............................................... 923,835 902,213
DEFERRED FINANCING COSTS................................................... 29,700 -
OTHER ASSETS............................................................... 105,721 119,714
---------------------------------
TOTAL ASSETS............................................................... $ 6,815,071 $ 7,016,113
=================================
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable ....................................................... $ 1,886,099 $ 1,416,794
Accrued expenses........................................................ 317,150 344,817
Accrued wages........................................................... 100,780 155,243
Accrued vacation payable................................................ 177,976 138,022
Line of credit payable.................................................. 100,076 100,163
Deferred Revenue........................................................ 17,500 15,000
Obligation under capital leases......................................... 127,616 78,805
---------------------------------
Total current liabilities........................................... 2,727,197 2,248,844
NOTES PAYABLE.............................................................. 15,000 24,813
OBLIGATION UNDER CAPITAL LEASES............................................ 145,050 166,752
---------------------------------
Total liabilities................................................... 2,887,247 2,440,409
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,
54,162,273 and 54,026,273 shares issued and outstanding
at June 30, 2002 and December 31, 2001, respectively................ 541,623 540,262
Additional paid-in capital.............................................. 37,565,715 37,547,590
Treasury Stock...................................................... (12,504) (12,504)
Accumulated deficit..................................................... (34,167,010) (33,499,644)
---------------------------------
Shareholder's equity.................................................... 3,927,824 4,575,704
---------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY................................. $ 6,815,071 $ 7,016,113
=================================
The accompanying notes are an integral part of these financial statements.
3
SIMTEK CORPORATION
STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- ------------------------------
2002 2001 2002 2001
---- ---- ---- ----
NET SALES.................................................. $ 3,550,433 $ 4,732,759 $ 7,523,734 $ 9,064,480
Cost of sales........................................ 2,062,433 3,057,009 4,617,150 6,153,564
---------------------------------------------------------------------
GROSS MARGIN............................................... 1,488,000 1,675,750 2,906,584 2,910,916
OPERATING EXPENSES:
Design, research and development...................... 1,276,744 746,078 2,270,118 1,406,151
Administrative........................................ 185,176 330,706 393,396 778,999
Marketing............................................. 434,583 403,663 905,516 820,515
Investor relations.................................... - 257,800 - 515,600
---------------------------------------------------------------------
Total Operating Expenses.......................... 1,896,503 1,738,247 3,569,030 3,521,265
NET LOSS FROM OPERATIONS................................... (408,503) (62,497) (662,446) (610,349)
---------------------------------------------------------------------
OTHER INCOME (EXPENSE):
Interest income....................................... 7,344 20,010 14,607 54,907
Interest expense...................................... (10,498) (4,817) (18,985) (9,354)
Other income (expense), net........................... (81) 182 (542) 3,111
---------------------------------------------------------------------
Total other income (expense)...................... (3,235) 15,375 (4,920) 48,664
---------------------------------------------------------------------
NET LOSS BEFORE TAXES...................................... (411,738) (47,122) (667,366) (561,685)
Provision for income taxes............................ - - - -
---------------------------------------------------------------------
NET LOSS................................................... $ (411,738) $ (47,122) $ (667,366) $ (561,685)
=====================================================================
NET LOSS PER COMMON SHARE:
Basic and diluted EPS................................. $ (.01) $ * $ (.01) $ (.01)
=====================================================================
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING:
Basic and diluted..................................... 54,159,383 53,668,168 54,114,604 53,668,168
* Less Than $.01 per share
The accompanying notes are an integral part of these financial statements.
4
SIMTEK CORPORATION
STATEMENTS OF CASH FLOWS
(unaudited)
Six Months Ended June 30,
------------------------------------
2002 2001
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................................................ $ (667,366) $ (561,685)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization................................. 225,317 222,480
Common stock issued for investor relations expense - 515,560
Net change in allowance accounts.............................. (22,915) (99,797)
Deferred financing fees....................................... (29,700) -
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable....................................... (133,789) (548,102)
Inventory................................................. (501,504) (1,209,591)
Prepaid expenses and other ............................... (16,519) 33,286
Increase (decrease) in:
Accounts payable.......................................... 469,306 773,165
Accrued expenses.......................................... (28,293) (53,634)
Deferred revenue.......................................... 2,500 25,000
Customer deposits......................................... - 2,000
Taxes payable............................................. - -
----------------------------------
Net cash used in operating activities............................ (702,963) (901,318)
----------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment and furniture ................................ (234,437) (290,683)
Decrease to investment from related party........................... - 5,730
----------------------------------
Net cash used in investing activities............................... (234,437) (284,953)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on notes payable and lines of credit..................... 150,000 -
Payments on notes payable and lines of credit....................... (159,899) (96,548)
Payments on capital lease obligation................................ (61,348) (23,132)
Borrowings on capital lease obligation.............................. 88,457 -
Cash to Q-DOT Acoustics............................................. (3,714)
Exercise of stock options........................................... 19,485 6,790
Purchase of Simtek Common Stock..................................... (12,504)
----------------------------------
Net cash provided by (used in) by financing activities.............. 36,695 (129,108)
----------------------------------
NET DECREASE IN CASH AND CASH
EQUIVALENTS........................................................ (900,705) (1,315,379)
----------------------------------
CASH AND CASH EQUIVALENTS, beginning of period........................... 2,075,704 2,853,769
----------------------------------
CASH AND CASH EQUIVALENTS, end of period................................. $ 1,174,999 $ 1,538,390
==================================
The accompanying notes are an integral part of these financial statements.
5
SIMTEK CORPORATION
SIMTEK CORPORATION
NOTES TO CONSOLIDATED 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 22, 2002 for fiscal year 2001.
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 2002, Simtek Corporation ("Simtek" or the "Company") renewed its
revolving line of credit in the amount of $250,000.
3. Geographic Concentration:
Sales of our semiconductor products by location for the three months and
six months ended June 30, 2002 and 2001 were as follows (as a percentage of
semiconductor product sales only):
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
---- ---- ---- ----
United States 54% 49% 56% 41%
Europe 11% 11% 9% 16%
Far East 27% 29% 25% 36%
All others 8% 11% 10% 7%
---- ---- ---- ----
100% 100% 100% 100%
4. BUSINESS SEGMENTS:
The Company has two reportable segments. One segment designs and produces
semiconductor devices for sale into the semiconductor market. The second segment
specializes in advanced technology research and development for data
acquisition, signal processing, imaging and data communications that is
supported by government and commercial contracts. Although both segments are
managed as part of an integrated enterprise, they are reported herein in a
manner consistent with the internal reports prepared for management.
Transactions between reportable segments are recorded at cost.
Substantially all operating expenses are identified per each segment.
Substantially all of the Company's assets are located in the United States of
America.
6
SIMTEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Description Three Months Ended Six Months Ended
March 31, June 30,
2002 2001 2002 2001
---- ---- ---- ----
Net Sales:
Semiconductor Devices $ 3,112,363 $ 4,295,903 $ 6,604,905 $ 8,271,007
Government Contracts 438,070 436,856 918,829 793,473
--------------------------- -------------------------
Total $ 3,550,433 $ 4,732,759 $ 7,523,734 $ 9,064,480
Net Income (Loss):
Semiconductor Devices $ (413,459) $ (49,938) $ (696,614) $ (370,736)
Government Contracts 1,721 2,816 29,248 (190,949)
--------------------------- --------------------------
Total $ (411,738) $ (47,122) $ (667,366) $ (561,685)
June 30, 2002 December 31, 2001
------------- -----------------
Total Assets:
Semiconductor Devices $ 6,382,649 $ 6,579,383
Government Contracts 432,422 436,729
------------------------------
Total $ 6,815,071 7,016,113
7
SIMTEK CORPORATION
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATIONS
-------------
OVERVIEW
Beginning in the fourth quarter 2001, the Company began to experience the
downturn that has been occurring in the global semiconductor industry since late
fourth quarter 2000. This downturn has continued through the first half of 2002.
The Company's net revenue was $7,524,000 for the first six months of 2002 down
from $9,064,000 for the comparable period of 2001. The Company's net revenue was
$3,550,000 for the second quarter 2002 down from $4,733,000 for the comparable
period of 2001. These decreases in revenues were primarily due to declines in
production demand for semiconductor products and reductions in average selling
prices.
The decline in revenue for the three and six months ended June 30, 2002
compared to the three and six months ended June 30, 2001 had an impact on our
profitability. This decline along with increased research and development costs
related to our 1 megabit product development accounted for losses in the three
and six month periods ending June 30, 2002.
RESULTS OF OPERATIONS:
REVENUES - SEMICONDUCTOR DEVICES.
The following table sets forth the company's net revenues by product
markets for the three and six months ended June 30, 2002 and 2001 (in
thousands):
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 Variance 2002 2001 Variance
----- ---- ---------- ---- ---- ----------
Commercial $ 2,379 $ 3,840 $ (1,461) $ 5,198 $ 7,311 $ (2,113)
High-end industrial and
military $ 433 $ 228 $ 205 $ 810 $ 460 $ 350
Logic products $ 300 $ 228 $ 72 $ 597 $ 500 $ 97
------- ------- --------- ------- ------- --------
Total Semiconductor
Revenue $ 3,112 $ 4,296 $ (1,184) $ 6,605 $ 8,271 $ (1,666)
Commercial revenues decreased by $1,461,000 and $2,113,000 for the three
and six month periods, respectively, when compared to the comparable periods in
2001. The decreases were due to a depressed semiconductor market which resulted
in lower product demand and lower average selling prices.
High-end industrial and military product revenues accounted for increases
of $205,000 and $350,000 for the three and six month periods in 2002 as compared
to the previous periods in 2001, respectively. The increases were due to an
increase in defense contracts.
Revenues from our logic products increased by $72,000 and $97,000 for the
three and six months ended 2002 as compared to 2001, respectively. The increases
were due primarily to non recurring engineering charges received from two new
customers and an increased demand for pre-existing production programs.
8
SIMTEK CORPORATION
Two distributors and one direct customer accounted for approximately 42% of
the Company's semiconductor devices product sales for the quarter ended June 30,
2002. Products sold to distributors are re-sold to various end customers.
COST OF SALES AND GROSS MARGIN - SEMICONDUCTOR DEVICES
The Company recorded cost of sales for semiconductor devices of $1,890,000
and $4,217,000 for the three and six months ended June 30, 2002 as compared with
the $2,845,000 and $5,751,000 for the three and six months ended June 30, 2001.
These costs reflect an approximate 6% improvement in gross margin percentages
for the second quarter and six months ended June 30, 2002 as compared to the
second quarter and six months ended June 30, 2001. Actual gross margin
percentages for the second quarter and six month periods ending June 30, 2002
were 39% and 36%, respectively. These increases were due to lower material and
test costs. The increased sales of logic products and high-end industrial and
military products also contributed to improved gross margins.
During the first six months of 2002, the Company purchased wafers built on
0.8 micron technology from Chartered Semiconductor Manufacturing Plc. of
Singapore ("Chartered") to support sales of its nonvolatile semiconductor memory
products. Sales of the Company's logic products were supported with 0.5 micron
wafers purchased from United Microelectronics Corp. ("UMC") of Taiwan and 0.35
micron wafers purchased from Chartered.
RESEARCH AND DEVELOPMENT - SEMICONDUCTOR DEVICES
The Company believes that continued investments into new product
development are required for us to remain competitive in the markets we serve.
Beginning in the fourth quarter 2001, the Company's research and development
department has been focusing its efforts on developing a 3 volt 256 kilobit
nonvolatile semiconductor memory and the installation of our process at Amkor
Technology for the development of a 1 megabit 3 volt nonvolatile semiconductor
memory. During the second quarter 2002, the Company began shipping 3 volt 256
kilobit nonvolatile semiconductor memories to its customers.
Total research and development expenses related to the semiconductor
portion of the Company's business were $1,105,000 and $1,965,000 for the three
and six months ended June 30, 2002 compared to $584,000 and $1,093,000 for the
three and six months ended June 30, 2001.
The $521,000 increase for the three month period was related to increases
in payroll and payroll overhead costs of $163,000, contract engineering services
of $61,000, new product development costs of $213,000, equipment leases,
maintenance agreements for software and depreciation of $98,000 and a reduction
in miscellaneous other expenses of $14,000. The increase of $872,000 for the six
month period was related to increases in payroll and payroll costs of $353,000,
contract engineering services of $137,000, new product development costs of
$230,000, equipment leases, maintenance agreements for software and depreciation
of $133,000 and miscellaneous other expenses of $19,000. The primary increase in
payroll costs is related to an increase in employee headcount. Increased
headcount and contract engineering services are required in order to meet
production schedules of our new products. New product development costs are
primarily due to the purchases of silicon wafers and reticles required to
develop new products. Equipment leases, maintenance agreements for software and
depreciation are related primarily to software licenses and hardware required to
design our new products.
9
SIMTEK CORPORATION
ADMINISTRATION AND INVESTOR RELATIONS - SEMICONDUCTOR DEVICES
Total administration expenses related to the semiconductor portion of the
Company's business were $160,000 and $338,000 for the three and six months ended
June 30, 2002 as compared to the $302,000 and $581,000 for the three and six
months ended June 30, 2001.
The $142,000 and $243,000 decreases for the three and six months ended June
30, 2002 compared to June 30, 2001, respectively, were primarily due to
decreased legal, audit fees and payroll costs. The decrease occurred primarily
due to increased legal, audit fees and payroll costs which were related to the
acquisition of Q-DOT during the three and six month periods ending June 30,
2001.
The decrease of $258,000 and $516,000, in investor relations expense,
for the three and six months ended June 30, 2002 as compared to the three and
six months ended June 30, 2001 was related to the completion of the amortization
of the issuance of stock to two investment banker firms in September 2000 for
services they performed.
MARKETING - SEMICONDUCTOR DEVICES
Total marketing expenses related to the semiconductor portion of the
Company's business were $368,000 and $777,000 for the three and six months ended
June 30, 2002 as compared to the $373,000 and $753,000 for the three and six
months ended June 30, 2001.
The decrease for the three month period ended June 30, 2002 as compared to
June 30, 2001 was the net effect of increase payroll and payroll costs and
decreased sales commissions which are a direct result of revenue. The increase
of $24,000 for the six month period ended June 30, 2002 as compared to June 30,
2001 was the net effect of a $89,000 increase in payroll and payroll costs and
decreases in contract services of $27,000 and sales commissions of $38,000
TOTAL OTHER INCOME (EXPENSES) - SEMICONDUCTOR DEVICES
The decrease in total other income (expense) for the three and six month
period ended June 30, 2002 as compared to June 30, 2001 was primarily related to
a decrease in interest income which was a direct result of decreased cash on
hand
NET LOSS - SEMICONDUCTOR DEVICES
The Company recorded a net loss of $413,000 and $697,000 for the three and
six months ended June 30, 2002 as compared to a net loss of $50,000 and $371,000
for the three and six months ended June 30, 2001. The increases in net loss for
the two periods were due primarily to increased research and development costs
and decreased sales.
REVENUES - GOVERNMENT CONTRACTS
The following table sets forth the company's net revenues from its
government contracts portion of its business for the three and six months ended
June 30, 2002 and 2001 (in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 Variance 2002 2001 Variance
----- ---- -------- ---- ---- --------
Government Contracts $ 438 $ 437 $ 1 $ 919 $ 793 $ 126
10
SIMTEK CORPORATION
COST OF SALES AND GROSS MARGIN - GOVERNMENT CONTRACTS
The Company saw a 9% improvement in its gross margin percentages for the
second quarter 2002 as compared to the second quarter 2001 and a 7% improvement
for the six months ended June 30, 2002 as compared to the six months ended June
30, 2001. The improvements were related to decreases in direct material and
supply costs. Actual gross margin percentages for the second quarter and six
month periods ending June 30, 2002 were 61% and 56%, respectively.
RESEARCH AND DEVELOPMENT - GOVERNMENT CONTRACTS
Total research and development expenses related to the government contracts
portion of the Company's business were $171,000 and $305,000 for the three and
six months ended June 30, 2002 compared to $162,000 and $313,000 for the three
and six months ended June 30, 2001.
The $9,000 increase for the three month period was related to
increases in payroll and payroll overhead costs. The $8,000 decrease for the six
month period was related to decreased software amortization.
ADMINISTRATION AND INVESTOR RELATIONS - GOVERNMENT CONTRACTS
Total administration expenses related to the government contracts portion
of the Company's business were $26,000 and $55,000 for the three and six months
ended June 30, 2002 as compared to the $29,000 and $198,000 for the three and
six months ended June 30, 2001.
The $143,000 decrease for the six months ended June 30, 2002 compared to
June 30, 2001 was primarily due to decreased legal, audit fees and payroll
costs. The decrease occurred primarily due to the six month period ending June
30, 2001, saw increased legal, audit fees and payroll costs which were related
to the acquisition of Q- DOT.
MARKETING - GOVERNMENT CONTRACTS
Total marketing expenses related to the government contracts portion of the
Company's business were $67,000 and $128,000 for the three and six months ended
June 30, 2002 as compared to the $31,000 and $67,000 for the three and six
months ended June 30, 2001.
The increases of $36,000 and $61,000 for the three and six month periods
ending June 30, 2002 as compared to June 30, 2001 were primarily due to an
increase in bid and proposal activities.
NET INCOME (LOSS) - GOVERNMENT CONTRACTS
The Company recorded a net income of $2,000 and $29,000 for the three and
six months ended June 30, 2002 as compared to a net income of $3,000 and a net
loss of $190,000 for the three and six months ended June 30, 2001. The increase
in net income from a net loss for the six month period was due primarily to the
elimination of costs related to the Company's acquisition of Q-DOT.
FUTURE RESULTS OF OPERATIONS
The Company's ability to be profitable will depend primarily on its ability
to continue reducing manufacturing costs and increasing 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 also dependent on
the overall state of semiconductor industry and the demand for semiconductor
products by equipment manufacturers.
11
SIMTEK CORPORATION
The Company is continuing its co-development program with Amkor to develop
a semiconductor process module that combines the Company's nonvolatile
technology with Amkor's advanced 0.25 micron digital CMOS fabrication line. The
module will incorporate silicon oxide nitride oxide silicon ("SONOS")
technology, which will be used to manufacture both high density SONOS flash and
nonvolatile static RAM memories, for stand alone and embedded products. The
Company's current schedule is to have qualified samples of a 1 megabit 3.0 volt
nonvolatile semiconductor memory available by the first quarter of 2003.
As of June 30, 2002, the Company had a backlog of unshipped customer orders
of approximately $2,242,000 expected to be filled by December 31, 2002. Orders
are cancelable without penalty at the option of the purchaser prior to 30 days
before scheduled shipment and therefore are not necessarily a measure of future
product revenue.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2002, the Company had net working capital of $3,028,618 as
compared to a net working capital of $3,895,961 as of June 30, 2001.
On July 1, 2002, the Company received funding of $3,000,000 in a financing
transaction with Renaissance Capital of Dallas, Texas ("Renaissance"). The
$3,000,000 funding consists of convertible debentures with a 7-year term at a
7.5% per annum interest rate. The debentures are convertible at the option of
the holder into Simtek common stock at $0.312 per share, which was in excess of
the market price per share on July 1, 2002. Renaissance has the right to appoint
one member to the Simtek Board of Directors and they exercised this right on
July 25, 2002. As funding occurred after June 30, 2002, it is not reflected in
the accompanying balance sheet.
The change in cash flows for the six months ended June 30, 2002 used in
operating activities was primarily a result of a net loss of $667,366, which is
offset by $225,317 in depreciation and amortization, a decrease in accrued
expenses of $28,293, increases in accounts receivable, allowance accounts,
deferred financing fees, prepaid expenses and other and deferred revenue of
$133,789, $22,915, $29,700, $16,519 and $2,500, respectively. Increases in
inventory and accounts payable of $501,504 and $469,306, respectively, are
directly related to each other. The change in cash flows used in investing
activities of $234,437 were primarily due to the purchase of equipment required
to manufacture our semiconductor devices at Chartered and UMC and hardware and
software required for research and development activities. The cash flows
provided by financing activities were due primarily to borrowings and payments
on notes payable and a capital lease obligation and the exercise of stock
options by employees of the Company.
The change in cash flows for the six months ended June 30, 2002 used in
operating activities was $901,318, which is primarily due to a net loss of
$561,685, which is offset by depreciation and amortization of $222,480, $515,560
in investor relations expense, a decrease of prepaid expenses and other of
$33,286, and a decrease in accrued expenses of $53,634. Increases in accounts
receivable, net change in allowance accounts, inventory and accounts payable of
$548,102, $ 99,797, $1,209,591 and $773,165, respectively were related to
increased product demand. The change in cash flows used in investing activities
of $284,953 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 used in financing activities
of $129,108 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.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
SFAS No. 141, Business Combinations and SFAS No. 142, Goodwill and other
Intangible Assets. SFAS 141 states that all business combinations should be
accounted for using the purchase method of accounting; use of
pooling-of-interest method is prohibited. Accounting for the excess of the fair
12
SIMTEK CORPORATION
value of net assets of cost (negative goodwill), will be allocated to certain
assets first with any remaining excess recognized as an extraordinary gain. SFAS
No. 141 is effective for business combination completed afer June 30, 2001.
Adoption of SFAS No. 141 is not expected to have a material impact on the
accounting for business acquisitions prior to July 1, 2001. SFAS No. 142
addresses the accounting for all purchased intangible assets but not the
accounting for internally developed intangible assets. Goodwill will no longer
be amortized and will be reviewed for impairment in accordance with SFAS No.
142. Goodwill will be tested annually and on an interim basis if an event or
circumstance occurs between the annual tests that might reduce the fair value of
the reporting unit below its carrying value. SFAS No. 142 is effective for
fiscal years beginning after December 31, 2001, with early adoption permitted
under certain circumstances. Goodwill and intangible assets acquired in a
transaction completed after June 30, 2001 but before SFAS No. 142 is initially
applied will be accounted for in accordance with SFAS No. 142. Therefore
amortization of goodwill acquired prior to July 1, 2001 will cease when we elect
to adopt SFAS No. 142.
In June 2001, the FASB also approved for issuance SFAS 143 "Asset
Retirement Obligations." SFAS 143 establishes accounting requirements for
retirement obligations associated with tangible long-lived assets, including (1)
the timing of the liability recognition, (2) initial measurement of the
liability, (3) allocation of asset retirement cost to expense, (4) subsequent
measurement of the liability and (5) financial statement disclosures. SFAS 143
requires that an asset retirement cost should be capitalized as part of the cost
of the related long-lived asset and subsequently allocated to expense using a
systematic and rational method. We will adopt the statement effective no later
than January 1, 2003, as required. The transition adjustment resulting from the
adoption of SFAS 143 will be reported as a cumulative effect of a change in
accounting principle. We do not believe the adoption of this standard will have
a material effect on our financial statements.
In October 2001, the FASB also approved SFAS 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS 144 replaces SFAS 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of. The new accounting model for long-lived assets to be disposed of
by sale applies to all long-lived assets, including discontinued operations, and
replaces the provisions of APB Opinion No. 30, Reporting Results of
Operations-Reporting the Effects of Disposal of a Segment of a Business, for the
disposal of segments of a business. Statement 144 requires that those long-lived
assets be measured at the lower of carrying amount or fair value less cost to
sell, whether reported in continuing operations or in discontinued operations.
Therefore, discontinued operations will no longer be measured at net realizable
value or include amounts for operating losses that have not yet occurred.
Statement 144 also broadens the reporting of discontinued operations to include
all components of an entity with operations that can be distinguished from the
rest of the entity and that will be eliminated from the ongoing operations of
the entity in a disposal transaction. The provisions of Statement 144 are
effective for financial statements issued for fiscal years beginning after
December 15, 2001 and, generally, are to be applied prospectively. At this time,
we do not believe adoption of this standard will have a material effect on our
financial statements.
13
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
10.16 Convertible Loan Agreement between Simtek Corporation as
borrower and Renaissance Capital Growth & Income Fund III,
Inc. and Renaissance US Growth and Income Trust, PLC and
BFSUS Special Opportunities Trust, PLC as lenders.
10.17 7.5% $1,000,000 Convertible Debenture between Simtek
Corporation and HSBC Global Custody Nominee (U.K.) Limited
for the benefit of BFSUS Special Opportunities Trust, PLC
10.18 7.5% $1,000,000 Convertible Debenture between Simtek
Corporation and Renaissance Capital Growth & Income Fund
III, Inc.
10.19 7.5% $1,000,000 Convertible Debenture between Simtek
Corporation and Renaissance Capital US Growth & Income
Trust, PLC.
10.20 Borrowers Security Agreement between Simtek Corporation as
borrower and Renaissance Capital Growth & Income Fund III,
Inc. and Renaissance US Growth and Income Trust, PLC and
BFSUS Special Opportunities Trust, PLC as lenders.
10.21 Pledge Agreement between Simtek Corporation as borrower and
Renaissance Capital Growth & Income Fund III, Inc. and
Renaissance US Growth and Income Trust, PLC and BFSUS
Special Opportunities Trust, PLC as lenders.
(b) Reports on Form 8-K
Form 8-K filed April 3, 2002 - Press Release "Simtek Announces Revenue
Growth to New Record Levels - Financial Results for 2001"
Form 8-K filed May 23, 2002 - Press Release "Simtek Announces First
Quarter 2002 Financial Results"
14
SIMTEK CORPORATION
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
August 13, 2002 By /s/Douglas Mitchell
----------------------------------------
DOUGLAS MITCHELL
Chief Executive Officer, President
and Chief Financial Officer (Acting)
CERTIFICATION
The undersigned Chief Executive Officer and Chief Financial Officer of the
Registrant hereby certify that this Report fully complies with the requirements
of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the
information contained in this Report fairly presents, in all material respects,
the financial condition and results of operations of the Registrant.
By /s/Douglas Mitchell
---------------------------------------
DOUGLAS MITCHELL
Chief Executive Officer
By /s/Douglas Mitchell
---------------------------------------
DOUGLAS MITCHELL
Chief Financial Officer
15