Edgar Filing: SIMTEK CORP

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-KSB

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[X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 31, 2003

[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934.

Commission file number 0-19027

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

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

4250 Buckingham Drive Suite 100,
Colorado Springs, Colorado 80907
(Address of principal executive offices) (Zip Code)

(719) 531-9444
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock $.01 Par Value OTC Bulletin Board
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(Title of Class)

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
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Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of the Form 10-KSB
or any amendment to this form 10-KSB. [ ]

The registrant's revenues for its most recent fiscal year were $14,503,771.

The aggregate market value of the 52,339,923 shares of voting stock held by
non-affiliates of the registrant was approximately $97,875,656, based upon the
closing sale price of the Common Stock on February 24, 2004 of $1.87 per share
as reported by the OTC Electronic Bulletin Board. The calculation of such market
value should not be construed as an admission or conclusion by the registrant
that any person is in fact an affiliate of the registrant.

The total number of shares of Common Stock issued and outstanding as of
February 24, 2004 was 57,060,920.

Transitional Small Business Disclosure Format: Yes No X
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TABLE OF CONTENTS

PART I

Item 1: Business........................................................................................ 3

Item 2: Properties...................................................................................... 17

Item 3: Legal Proceedings............................................................................... 17

Item 4: Matters Submitted to a Vote of Security Holders................................................. 17

PART II

Item 5: Market for Registrant's Common Stock and Related Security Holder Matters........................ 18

Item 6: Management's Discussion and Analysis of Financial Condition and Results
of Operations................................................................................ 21

Item 7: Financial Statements and Supplementary Data..................................................... 34

Item 8: Changes in and Disagreements with Accountants on Accounting Financial
Disclosure................................................................................... 52

PART III

Item 9: Directors, Executive Officers, Promoters and Control Persons; Compliance
With Section 16(a) of the Exchange Act......................................................... 53

Item 10: Executive Compensation.......................................................................... 58

Item 11: Security Ownership of Certain Beneficial Owners and Management.................................. 62

Item 12: Certain Relationships and Related Transactions.................................................. 65

PART IV

Item 13: Exhibits, Financial Statement Schedules and Reports on Form 8-K................................. 66

Item 14: Principal Accountant Fees and Services.......................................................... 67

PART I

ITEM 1: BUSINESS
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GENERAL

We provide integrated circuits to the electronics market for use in a
variety of systems, such as computers, copiers, factory controllers, electric
meters and military systems. We design, market and sell our products, but we
subcontract the majority of our manufacturing requirements. We have designed and
developed nonvolatile static random access memory products since we began
business operations in May 1987. We have concentrated on the design and
development of the 4, 16, 64 and 256 kilobit and 1 megabit nonvolatile static
random access memory product families and technologies, distribution channels,
and sources of supply, including production at subcontractors. Kilobits are a
measure of the amount of data that can be stored; more kilobits imply more
storage. Megabits are also a measure of the amount of data that can be stored;
there are 1,000 kilobits in a megabit. During 2000, we added the capability to
design, develop and produce programmed semiconductor logic products. During
2003, due to adverse market conditions, we determined to no longer offer our
programmed semiconductor logic products after December 31, 2003.

In March 2001, we acquired Q-DOT Group, Inc. Q-DOT Group specializes in
advanced technology research and development for data acquisition, signal
processing, imaging and data communications. Their projects are supported by
"conventional" government and commercial contracts in addition to government
contracts sponsored by the Small Business Innovation Research program. We
operate Q- DOT Group's government contract research and development operations
as our wholly owned subsidiary. This acquisition was intended to enable us to
enter the high speed data communications market, addressing both wired and
wireless applications, based on advanced "silicon germanium" process technology.

As of December 31, 2003, our backlog for released purchase orders was
approximately $1,646,000, all of which is expected to ship by June 30, 2004.
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.

We are in production of our family of memory products. Our 256 kilobit
nonvolatile static random access memory product was qualified by our internal
quality organization to the product's data sheet and in accordance with accepted
industry standard practices in 1997 for sales into commercial and industrial
markets and in 1998 for shipment into the military market. During 2002, we
designed and qualified a 3 volt version of our 256 kilobit nonvolatile static
random access memory product for sale into commercial and industrial markets.
Our 64 kilobit nonvolatile static random access memories have been qualified for
sale into commercial, industrial and military markets. Our 16 kilobit and 4
kilobit nonvolatile static random access memory products have been qualified for
sales into commercial and industrial markets. During 2003, we designed and began
sampling of our 1 megabit nonvolatile static random access memory product for
sale into commercial and industrial markets. We are currently shipping
production-tested 1 megabit products under a provisional qualification. We
anticipate that this qualification will be complete early in the second quarter
of 2004. Our nonvolatile static random access memory products are physically
smaller and require less maintenance than static random access memory devices
that achieve nonvolatility through the use of internal batteries and are more
convenient to use than static random access memory devices that achieve

nonvolatility by being combined with additional chips. We have merged our logic
design engineers into our memory design group in order to incorporate unique
features into our next generation memory products currently under development.

We reduce capital requirements by subcontracting the majority of the
manufacturing process. Chartered Semiconductor Manufacturing began providing
silicon wafers for our nonvolatile static random access memory products in
September 1993 and continues to provide wafers based on our product technology.
In February 2003, we received notification from Chartered Semiconductor
Manufacturing that it will close its wafer fabrication facility #1, where our
memory wafers are manufactured, by March 2004. We are working with Chartered
Semiconductor Manufacturing to transfer the process of manufacturing our memory
wafers to Chartered Semiconductor Manufacturing's facility #2. Facility #2 is
newer and more modern than facility #1, processing 8 inch wafers rather than the
older 6 inch wafers processed in facility #1. Assuming the transfer can produce
memory wafers that meet our specifications, we anticipate the transfer to be
completed by mid 2004. This would provide uninterrupted supply of our current
0.8 micron family of nonvolatile static random access memory products, and would
have no material impact on our ability to support our customers. If we cannot
complete the transfer of manufacturing into facility #2 or if we cannot contract
with another supplier, this will have a material negative impact on our future
revenues and earnings.

DongbuAnam Semiconductor provides silicon wafers for our 0.25 micron
process to support our 1 megabit product family.

United Microelectronics and Chartered Semiconductor Manufacturing provided
silicon wafers for our programmed semiconductor logic products based on 0.5
micron and 0.35 micron product technology, respectively. In February 2003, we
received notification from United Microelectronics that it will be unable to
supply us with logic wafers after August 2003. We supported customers with 0.5
micron logic wafers manufactured at United Microelectronics through December
2003 by offering opportunities to purchase their life-time requirements for
these products with deliveries at the end of 2003. We do not plan to support
further sales of logic products to the market in the foreseeable future.

Amkor Technology and Amkor Test Services provide assembly and final test
services, respectively, for our nonvolatile static random access memory products
built from the wafers purchased from Chartered Semiconductor Manufacturing.
Advanced Semiconductor Engineering Inc. provided assembly services for our
programmed semiconductor logic products. Testing of our programmed semiconductor
logic products was done either internally or by Advanced Interconnect
Technologies.

During 2003, all of the wafers used to produce our 0.8 micron nonvolatile
static random access memories were purchased from Chartered Semiconductor
Manufacturing. Sales of these products accounted for approximately 78% of our
revenue for 2003. Wafers were purchased from both Chartered Semiconductor
Manufacturing and United Microelectronics in 2003 to support our programmed
semiconductor logic products. Sales of these products accounted for
approximately 7% of our revenue for 2003. The remaining 15% of our revenue was
from research and development contracts.

We currently have four sales and marketing offices, located in Colorado and
Georgia for the western and eastern North American markets, respectively, in
Windsor, England for the European market and in Hong Kong for the Far East. We
have engaged over 20 independent representative organizations with over 30 sales
offices in North America, Europe and Asia and distributor organizations with
over 100 sales offices worldwide. These organizations have multiple sales
offices and technical sales personnel covering specific geographic territories.

Through these organizations and their sales offices we believe that we are
capable of serving a significant portion of the worldwide market with our full
line of products.

MEMORY INDUSTRY AND PRODUCT BACKGROUND

The semiconductor memory market is large and highly differentiated. This
market covers a wide range of product densities, speeds, features and prices. We
believe that the ideal memory product would have:

o high bit density per chip to minimize the number of chips required in
a system;

o fast data read and write speeds to allow a system's microprocessor to
access data without having to wait;

o the ability to read and modify data an unlimited number of times;

o the ability to retain its data indefinitely when power is interrupted
(i.e. nonvolatility);

o availability in a variety of package types for modern assembly
techniques; and

o 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. They
also 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 static random
access memories in combination with Electrically Erasable Programmable Read Only
Memories and Erasable Programmable Read Only Memories.

Volatile Nonvolatile Combinations
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Static Random Access Memories Electrically Erasable Programmable Nonvolatile Static Random Access
Read Only Memory Memory

Dynamic Random Access Memory Flash Memory Nonvolatile Random Access
Memory

Erasable Programmable Read Only Static Random Access Memory plus
Memory lithium battery

Programmable Read Only Memory
Read Only Memory

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 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 the charge need not be refreshed, but
data can be retained only if power is not interrupted.

Nonvolatile Memories. A Read Only Memory is programmed, or written, once in
the later stages of the manufacturing process and cannot be reprogrammed by the
user. Programmable Read Only Memory can be programmed once by the user, while
Erasable Programmable Read Only Memory may be reprogrammed by the user a limited
number of times if the Erasable Programmable Read Only Memory is removed from
the circuit board in the equipment. Both Flash Memory and Electrically Erasable
Programmable Read Only Memory may be reprogrammed electrically by the user
without removing the memory from the equipment. However, the reprogramming time
on both Electrically Erasable Programmable Read Only Memory 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 static random access memories in combination with Erasable
Programmable Read Only Memory and Electrically Erasable Programmable Read Only
Memory chips, customers can achieve nonvolatility in their systems and still
retain the high data read and write speeds associated with static random access
memory. 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 static random access memory to the Electrically
Erasable Programmable Read Only Memory; 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 a static
random access memory with lithium batteries in a single package.

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

We use an advanced implementation of silicon-nitride-oxide-semiconductor
technology. Silicon- nitride-oxide-semiconductor 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.
Silicon-nitride-oxide-semiconductor 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 Electrically Erasable Programmable Read
Only Memories using floating gate technology, where charge is stored on a
polysilicon conductor surrounded by insulators. To protect against these
failures, many floating gate Electrically Erasable Programmable Read Only
Memories 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. Our latest 0.25
micron technology adds an additional oxide layer, forming a
silicon-oxide-nitride-oxide- semiconductor ("SONOS") stack, to support finer
geometry electrical performance.

The silicon-nitride-oxide-semiconductor technology coupled with our
nonvolatile static random access memory cell allows high performance nonvolatile
static random access memory to be manufactured using complementary metal oxide
semiconductor technology. The Silicon-nitride-oxide- semiconductor technology
that we use has proven to be highly reliable, as demonstrated by our product
qualification results to date.

OUR MEMORY PRODUCTS

Nonvolatile Static Random Access Memories. Our nonvolatile static random
access memory product family consists of nonvolatile memories that combine fast
static random access memory and nonvolatile elements within each memory cell on
a single chip of silicon. The static random access memory portion of the
nonvolatile static random access memories is operated in the same manner as most
existing static random access memory products. The static random access memory
can be written to and read from an unlimited number of times. The nonvolatile
elements can be programmed, depending upon device type, by user control or
automatically by transferring the static random access memory contents into the
nonvolatile element memory. The data stored in the nonvolatile elements can be
transferred back into the static random access memory by user control or the
data can be transferred automatically.

Our nonvolatile static random access memories have fast data access speeds
of 15, 25, 35 and 45 nanoseconds. These data access speeds correspond to those
of fast static random access memory and, we believe, meet the requirements of
much of the fast static random access memory market. The high speed
characteristics of our nonvolatile static random access memories 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 nonvolatile static random access memories can be
used to replace static random access memories with lithium batteries and
multiple chip solutions such as static random access memory plus Electrically
Erasable Programmable Read Only Memory or Flash Memory.

The various combinations of density and speed allow our nonvolatile static
random access memory products to meet the design and performance requirements of
many different types of systems.

Our newest nonvolatile static random access memory architecture, currently
implemented in our 0.25 micron product family, adds an eight-bit
micro-controller, approximately 20,000 gates of metal- programmable logic and
programmable input-output devices. We refer to this architecture as Value-
Added-Memory (VAM). It is designed to allow variations of the base-line 1
megabit nonvolatile static random access memory design to be quickly developed
for emerging market applications.

We finalized commercial and industrial qualification of two versions of our
initial 64 kilobit nonvolatile static random access memory product offering in
September 1991 and April 1992, respectively. We completed military qualification
of our initial nonvolatile static random access memories in May 1992. We began
sales into the commercial market of our initial 16 kilobit nonvolatile static
random access memory product family in 1992. The nonvolatile static random
access memory product family also includes the 4 kilobit version. We completed
the development and product qualification of the 64 kilobit AutoStoreTM

nonvolatile static random access memory in 1993. The AutoStoreTM version
automatically detects power loss and transfers the data from the static random
access memory cells into the Electrically Erasable Programmable Read Only Memory
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 nonvolatile static random access memory
occurred in 1997 and military qualification of our 256 kilobit nonvolatile
static random access memory was completed in the second quarter of 1998. In
2002, we qualified our 256 kilobit 3 volt nonvolatile static random access
memory for use in commercial and industrial applications. During 2003, we
designed and began sampling of our 1 megabit nonvolatile static random access
memory product for sale into commercial and industrial markets. We are currently
shipping production-tested 1 megabit products under a provisional qualification.
We anticipate this qualification to be complete early in the second quarter of
2004.

PROGRAMMABLE LOGIC DEVICE INDUSTRY

The electronics industry uses logic integrated circuits to route electrical
signals to perform tasks unique to that system. These unique operations
differentiate one system capability from another. Field Programmable Gate Arrays
and Complex Programmable Logic Devices 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 the technology
required to allow these products to be programmable is expensive when compared
to non-programmable, fixed function, application specific products.

OUR PROGRAMMED SEMICONDUCTOR LOGIC PRODUCTS

Before we discontinued our programmed semiconductor logic products on
December 31, 2003, such products were built to order based on customer designs
that were electronically transferred to our design workstations. Our engineers
verified the design and implemented it in the appropriate technology to provide
a cost effective solution for the customer.

Our customers often asked that we provide them with programmed
semiconductor logic products at a lower price than their existing logic products
without sacrificing the products' functionality. Our software conversion tools
translated our clients' design files of their logic products generally allowing
us to provide our clients with a logic product that has the same functionality
but at a lower cost than their existing logic products. We also developed a
testability feature that allowed us to test our programmed semiconductor logic
products without dedicating a portion of the chip area to such testing.

We subcontracted the production of our semiconductor logic products to
various fabrication facilities. We provided the fabrication facilities with the
design of our programmed semiconductor logic products and these facilities
installed our designs on the chips through standard wafer processing. Through
August 2003, we contracted with United Microelectronics for 0.5 micron
technology and with Chartered Semiconductor Manufacturing for 0.35 micron
technology, in each case through purchase orders on a case-by-case basis. In
February 2003, we received notification from United Microelectronics that it
would be unable to supply us with logic wafers after August 2003. We supported
customers with 0.5 micron logic wafers manufactured at United Microelectronics
through December 2003 by offering opportunities to purchase their life-time
requirements for these products with deliveries that were scheduled by the end
of 2003. We do not plan to support sales of logic products to the market in the
future.

PRODUCT WARRANTIES

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

RESEARCH AND DEVELOPMENT

Our research and development activities are centered around developing new
products and reducing the cost of our nonvolatile static random access memory
products. We continually work to improve yield on the 0.8 micron technology in
order to reduce costs. In order to further reduce costs, since late 1997 we have
used outside experts for testing of our 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.

During 2002, we developed and qualified a 3 volt version of our 256 kilobit
nonvolatile static random access memory product, built on the 0.8 micron
technology from Chartered Semiconductor Manufacturing. The 3 volt version of our
256 kilobit nonvolatile static random access memory product is qualified for use
in commercial and industrial applications.

In October 2001, we entered into an agreement with Amkor Technology to
cooperate in developing a semiconductor process module that combines our
nonvolatile technology with Amkor's advanced 0.25 micron digital complementary
metal-oxide semiconductor, or "CMOS," fabrication line. CMOS is the
semiconductor technology used in the transistors that are manufactured for most
of today's computer microchips. The module will incorporate
silicon-oxide-nitride-oxide-silicon technology, which will be used to
manufacture both high density silicon-oxide-nitride-oxide-silicon flash and
nonvolatile static random access memories, for stand alone and embedded
products. During 2002 and 2003, our research and development team along with
Amkor's research and development team worked aggressively on the co-development
program. Our 1 megabit 3.0 volt nonvolatile static random access memory was the
primary development vehicle. In February 2003, when Amkor Technology sold a
controlling interest of its wafer fabrication facility to DongbuAnam
Semiconductor, all contractual obligations were transferred to Anam U.S.A., a
wholly-owned subsidiary of DongbuAnam Semiconductor. Our co- development program
has not been affected by the change in ownership and we do not expect any
material changes in the support required to complete the program. In August
2003, we received the first complete processed silicon from this development
which yielded working samples of our new 1 megabit 3 volt nonvolatile
semiconductor memory product. We began shipping samples of our new 1 megabit 3
volt nonvolatile semiconductor memory product in September 2003. As of February
1, 2004, we had shipped samples to 104 different customers. We are currently
shipping 1 megabit products tested to production requirements on a provisional
qualification and plan to have qualification complete in the second quarter of
2004. We cannot assure you that we will not discover technical problems or
manufacturing concerns with this new product, that demand will develop for the
new product or that we will be able to sell this new product at a profit.

We anticipate that our acquisition of Q-DOT Group will enable us to enter
the high speed data communications market, addressing both wired and wireless
applications, based on advanced silicon germanium process technology. Silicon
germanium is rapidly becoming the technology of choice for many analog, mixed
signal and high speed digital circuits. During 2003 and 2002, we spent
approximately $47,000 and $107,000, respectively, on marketing and engineering
efforts to determine which applications our integrated circuits, built on the
silicon germanium process technology, would best fit into. In the next twelve
months, we anticipate spending approximately $400,000 in order to develop and
manufacture integrated circuits using the silicon germanium process technology.

Our research and development expenditures for the years ended December 31,
2003 and 2002 were $4,518,528 and $4,308,499, 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
Semiconductor Manufacturing to provide us with silicon wafers for our products.
Under the manufacturing agreement with this subcontractor, it has installed a
manufacturing process for versions of our current and future memory products. In
February 2003, we received notification from Chartered Semiconductor
Manufacturing that it will close its wafer fabrication facility #1, where our
memory wafers are manufactured, by March 2004. We are working with Chartered
Semiconductor Manufacturing to transfer the process of manufacturing our memory
wafers to Chartered Semiconductor Manufacturing's facility #2. Facility #2 is
newer and more modern than facility #1, processing 8 inch wafers rather than the
older 6 inch wafers processed in facility #1. Assuming the transfer can produce
memory wafers that meet our specifications, we anticipate the transfer to be
completed by mid-2004. This would provide uninterrupted supply of our current
0.8 micron family of nonvolatile static random access memory products, and would
have no material impact on our ability to support our customers. If we cannot
complete the transfer of manufacturing into facility #2 or if we cannot contract
with another supplier, this will have a material negative impact on our future
revenues and earnings.

DongbuAnam Semiconductor provides silicon wafers for our 0.25 micron
process to support our 1 megabit product family. Our agreement with Amkor
Technology, providing for such supply of wafers, was assigned to DongbuAnam
Semiconductor in 2003.

Through August 2003, we contracted with United Microelectronics for 0.5
micron technology and with Chartered Semiconductor Manufacturing for 0.35 micron
technology, in each case through purchase orders on a case-by-case basis. In
February 2003, we received notification from United Microelectronics that they
would be unable to supply us with logic wafers after August 2003. We supported
customers with 0.5 micron logic wafers manufactured at United Microelectronics
through December 2003 by offering opportunities to purchase their life-time
requirements for these products with deliveries scheduled by the end of 2003.

Device packaging of our nonvolatile static random access memory products
continued at the Amkor facilities in the Philippines and South Korea. Final test
for our nonvolatile static random access memory products continued with Amkor
Test Services, in Wichita, Kansas. Device packaging of our programmed
semiconductor logic products continued at Advanced Semiconductor Eng., Inc. in
Taiwan. Final test of our programmed semiconductor logic products was completed
in our Colorado Springs facility and at Advanced Interconnect Technologies in
San Jose, California.

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 2002 and 2003 as part of routine supplier
certification procedures. All such audits were completed satisfactorily. We were
certified under the Sony Corporation "Green Partner Program" based on our
internal materials control program which meets most major international
requirements for control and elimination of heavy metals and PBB, PBDE and
related organic compounds in our products and packaging materials. Our wafer
foundry and assembly subcontract facilities are all certified to the ISO14001
Environmental Control Standard.

We secured certification to the ISO9001:2000 Quality Management System,
which in addition to similar certifications held by our major manufacturing
subcontractors meets the quality system requirements of the vast majority of our
customers. We continue to support our Mil-Prf-38535 Appendix A quality system in
support of our SMD and military grade products.

MARKETS

Our memory products are targeted at fast nonvolatile static random access
memory markets, static random access memory plus Electrically Erasable
Programmable Read Only Memory markets and other nonvolatile memory products
broadly used in commercial, industrial and military electronic systems.

Our products are typically used to store critical data when power is
removed from the system. Often this data must be captured very quickly and we
believe that the fast write time of our nonvolatile static random access memory
products is a significant benefit over nonvolatile memory alternatives. Also,
our products are used in systems that are "write intensive" such as data
collection, event recording and others where we believe that the unlimited write
endurance of our nonvolatile static random access memory is superior to
alternative nonvolatile memory solutions.

Until now our markets have been limited by the density at which we could cost
effectively produce products. We believe that the introduction of our 1 megabit
nonvolatile static random access memory products in 2003 manufactured on 0.25
micron technology and the introduction of our Value Added Memory (VAM) solutions
that we expect will be introduced in 2004 will greatly increase the market
segments we serve.

TARGET APPLICATIONS FOR SIMTEK PRODUCTS

Customer applications that are in production using our nonvolatile static
random access memory products include:

Airborne Computers Lighting Control Systems
Automotive Control & Monitoring Medical Instruments
Control Systems Automated Teller Machines Currency Changers
Data Monitoring Equipment Printers
Process Control Equipment Facsimile Machines
Down Hole Drilling Systems Radar and Sonar Systems
Gaming Machines Telecommunications Systems
GPS Navigational Systems Terminals
Guidance and Targeting Systems Test Equipment
High Performance Workstations Utility Meters
Laser Printers Routers
Weapon Control Systems Security Systems
Copiers Broadcast Equipment
Cable TV and Satellite Set Top Converter Boxes Studio Recording Equipment
Multi- Function Printers Servers
RAID Controllers Factory Automation Systems
Robotics Mass Storage Systems

Our new 1 Megabit and Value Added Memory products have opened new
applications into which our products are being designed. These include
electronic vending machines, automotive data logging and a variety of data
communications applications.

We are increasing marketing and sales emphasis on office automation
products such as copiers and mass storage systems as well as increasing sales
efforts in data communications, automotive applications and metering.

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.

Independent sales representatives typically sell a limited number of
non-competing 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 generally
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 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. Marketing decisions are also based on
forecasts and inputs from our current and prospective customers. We prepare
brochures, data sheets, application notes, product collateral and product
advertising with our internal marketing resources and contracted outside
services.

CUSTOMERS AND BACKLOG

We have shipped qualified nonvolatile static random access memory products
to customers directly and through distributors since the September 1991
commercial product qualification. The majority of our sales are to Fortune 500
companies. Approximately 37% of our net product sales during 2003 were to
customers in the United States, approximately 46% were to customers in the
Pacific Rim, and approximately 12% were to customers in Europe.

As of December 31, 2003, we had a backlog of unshipped customer orders of
approximately $1,646,000, which is expected to be filled by June 30, 2004.
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.

LICENSES

Zentrum Mikroelektronik Dresden. In June of 1994, we signed a joint
development agreement with Zentrum Mikroelektronik Dresden to install the 1.2
micron products for manufacture at Zentrum Mikroelektronik Dresden and to
jointly develop the 0.8 micron technology at Chartered Semiconductor
Manufacturing. The agreement was modified in August of 1994 by a Letter of
Intent between us to bypass the installation of our nonvolatile static random
access memory products based on a 1.2 micron process technology at Zentrum
Mikroelektronik Dresden and instead modify the 0.8 micron technology to run in
the Zentrum Mikroelektronik Dresden factory. Zentrum Mikroelektronik Dresden has
paid us all the monetary requirements under this agreement including any
royalties we may receive from sales of these jointly developed products.

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 nonvolatile static random access memory
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 nonvolatile static random access
memories fall into three categories. The first category of products that compete
with our nonvolatile static random access memories are volatile and nonvolatile
chips used in combination, such as fast static random access memories used with
Erasable Programmable Read Only Memories, Electrically Erasable Programmable
Read Only Memories, or Flash memory. We believe that we have advantages over
these products because the nonvolatile static random access memory 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. Competitors in the multiple chip category include Cypress Semiconductor
Corp., Integrated Technology, Inc., Toshiba, Fujitsu, Advanced Micro Devices,
Inc., Atmel and National Semiconductor Corp. We currently hold less than 1%
market share this market category.

The second category of products that compete with our nonvolatile static
random access memories are products that combine static random access memories
with lithium batteries in specially adapted packages. These products generally
are slower in access speeds than our nonvolatile static random access memories
due in part to limitations caused by life of the lithium battery when coupled
with a faster static random access memory. Our nonvolatile static random access
memories are offered in standard, smaller, less expensive packages, and do not
have the limitation on lifetime imposed on the static random access
memory/battery solutions by the lithium battery. Our nonvolatile static random
access memories 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 static random access memory products
are available in densities of 4 megabit and greater per package. Companies
currently supplying products with lithium batteries include Dallas Semiconductor
Corp., ST Microelectronics and Texas Instruments. We currently hold
approximately 10% of this market category.

The third category consists of nonvolatile random access memories that
combine static random access memory cells and Electrically Erasable Programmable
Read Only 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 competitor's nonvolatile random access
memories. We believe that traditional manufacturers of nonvolatile random access
memories have discontinued manufacturing their products.

Zentrum Mikroelektronik Dresden, through their license agreement with us,
has the worldwide right to sell under the Zentrum Mikroelektronik Dresden label
nonvolatile static random access memories developed jointly by Zentrum
Mikroelektronik Dresden and us. With volume production established at Zentrum
Mikroelektronik Dresden, Zentrum Mikroelektronik Dresden is selling such
nonvolatile static random access memories. This has had a positive impact for us
by creating a second source, which is required by many larger companies, for our
nonvolatile static random access memory products. However, in 2002 and 2003, we
were required to reduce prices to specific markets due to the increased
competition from Zentrum Mikroelektronik Dresden. We believe that the
competition from Zentrum Mikroelektronik Dresden has increased the number of
companies using nonvolatile static random access memories, but may have put
downward pressure on average selling prices.

We are aware of other semiconductor technologies for nonvolatile memory
products. These technologies include ferroelectric memory and thin film magnetic
memory. Each of these requires a newly developed process technology, which has
processing risk, but may deliver performance characteristics superior to our
technology if perfected. Each of these processes integrates materials into the
silicon processing steps that are not commonly used for semiconductor memory

products today. If successful, these products could perform the same functions
in a system that our products currently perform, but may be manufactured in
higher density or lower cost products. Ramtron, Raytheon, Symetrix, and others
are developing ferroelectric products. IBM, Motorola and Cypress Semiconductor
are developing magnetic film products.

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 nonvolatile static random access memory products or technology.

It is common in the semiconductor industry for companies to obtain
copyright, trademark, trade secret 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 26 patents in
the United States on our nonvolatile static random access memory cell and other
circuit designs. These patents relate to circuit implementations used to design
our nonvolatile memory products. The use of these patents allows us to design
circuits with lower power consumption and faster store timing than would be
possible otherwise giving us a competitive advantage over other technologies.
These patents have terms that expire through 2008 to 2013. We have also taken
steps to obtain European patents in the large European countries, including
Germany, France, the United Kingdom and Sweden on the nonvolatile memory patents
that would have potential value in international markets. We have four
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.

Many of our product designs are not protected by patents. We have one
patent on our logic product technology but protect most of our logic product
technology as trade secrets. Our logic products accounted for approximately 7%
of our sales for the year ended December 31, 2003. We also protect aspects of
our technology that relate to our semiconductor memory products as trade
secrets. There are disadvantages to protecting intellectual property as trade
secrets rather than patents. Unlike patents, trade secrets must remain
confidential in order to retain protection as proprietary intellectual property.
We cannot assure you that our trade secrets will remain confidential. If we lose
trade secret protection, our business could suffer.

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.

Late in 2002 and in 2003, we were contacted by Syndia Corporation regarding
possible infringement on certain patents. Syndia Corporation informed us that it
had acquired a portfolio patents issued to Jerome Lemelson. This patent
portfolio was not included in the portfolio owned by Lemelson Foundation
Partnership, an entity with which we reached a licensing agreement in 1999. We
are currently reviewing any potential infringements. If there are any
infringements, we believe that we can reach a reasonable licensing agreement
with Syndia Corporation.

EMPLOYEES

As of the date of this Form 10-KSB, we have 54 full-time employees.

ITEM 2. PROPERTIES
-------------------

We lease approximately 16,000 square feet of space in Colorado Springs,
Colorado. This space includes a product engineering test floor of approximately
3,000 square feet. The lease was scheduled to expire on February 28, 2008. On
January 27, 2004, we renegotiated the terms of the lease and it is now scheduled
to expire on February 28, 2013. We lease approximately 17,000 square feet of
space in Colorado Springs which is occupied by Q-DOT Group, our wholly-owned
subsidiary. This space includes a research and development laboratory facility
of approximately 2,500 square feet. The lease expires on April 30, 2005. Through
May 31, 2002, approximately 2,400 square feet of the space was subleased and the
tenants did not renew the lease.

ITEM 3. LEGAL PROCEEDINGS
--------------------------

We are not subject to any legal proceedings and our properties are not
subject to any legal proceedings as of the date of this report.

ITEM 4. MATTERS SUBMITTED TO A VOTE OF SECURITY HOLDERS
--------------------------------------------------------

On October 28, 2003, we held a special meeting of our shareholders to
ratify the selection of Hein & Associates LLP, as our independent auditors for
the year ending December 31, 2003. The proposal was approved by the vote of our
shareholders with holders representing 48,077,808 shares voting for the
proposal, holders representing 84,672 shares voting against the proposal, and
holders representing 739,164 shares abstaining.

PART II

ITEM 5: MARKET FOR REGISTRANT'S 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 Securities and Exchange 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 bid offer as reported
by the OTC Electronic Bulletin Board on the last day of the quarter.

Common Stock
--------------------
High Bid Low Bid
-------- -------

2002
First Quarter........................................ .41 .33
Second Quarter....................................... .26 .24
Third Quarter........................................ .18 .15
Fourth Quarter ...................................... .17 .16

2003
First Quarter........................................ .16 .14
Second Quarter....................................... .43 .36
Third Quarter........................................ .80 .78
Fourth Quarter....................................... 1.26 1.20

The quotations listed above reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not represent actual transactions.

As of December 31, 2003, we had 478 shareholders of record. This number
does not reflect 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 dividends on our common stock in the foreseeable
future.

On March 14, 2001, we completed the merger of Q-DOT Group with and into us
in exchange for approximately 5,172,000 shares of our common stock, valued at
$4,000,000. Although duly notified of their appraisal rights, no Q-DOT Group
stockholder exercised appraisal rights. Q-DOT Group's 30 stockholders received,
on a pro rata basis, a total of approximately 5,172,000 shares of our common
stock. The transaction was a private placement exempt from registration pursuant
to Rule 506 of Regulation D promulgated by the SEC. There were fewer than 35
purchasers of our securities. We provided each purchaser with the information

required under Regulation D. We reasonably believed that each purchaser who was
not an accredited investor, either alone or with such person's purchaser
representative, was capable of evaluating the risks and merits of investing in
our stock. No general solicitation or advertising occurred. Following the
merger, we filed a Form D with the SEC as required by Regulation D.

Pursuant to a Convertible Loan Agreement, dated as of June 28, 2002, we
issued convertible debentures to Renaissance Capital Growth and Income Fund III,
Inc., Renaissance US Growth & Income Trust, PLC and BFS US Special Opportunities
Trust, PLC. or, collectively, the "RENN investment funds." One of our directors
holds the position of Senior Vice President of RENN Capital Group. We received
$3,000,000 in funding. The convertible debentures have 7-year terms at a 7.5%
per annum interest rate; each RENN investment fund invested $1,000,000. The
holder of the debentures has the right, at any time, to convert all, or in
multiples of $100,000, any part of the debenture into fully paid and
nonassessable shares of our common stock. The debentures are convertible into
our common stock at $0.312 per share. There is no public trading market for the
debentures. We have registered for resale the common stock issuable upon
conversion of the debentures. RENN Capital Group, Inc. (formerly Renaissance
Capital Group, Inc.) is agent for the selling security holders with respect to
the Convertible Loan Agreement and the debentures issued thereby. The private
transaction did not involve any advertising or general solicitation. We relied
on Section 4(2) of the Securities Act as an exemption from registration.

On November 7, 2003, we closed a $1,500,000 equity financing transaction
with the RENN investment funds. One of our directors holds the position of
Senior Vice President of RENN Capital Group. In exchange for the $1,500,000, we
issued 1,651,982 shares of our common stock to the RENN investment funds. The
purchase price was $0.908 per share and was based on the average closing price
of our common stock as reported on the Over-the-Counter Bulletin Board over the
five trading days before closing. In addition to the shares of common stock,
each of the three RENN investment funds received warrants to acquire 250,000
shares of our common stock. The warrants have a 5-year term with an exercise
price of $1.25 per share for 125,000 shares and $1.50 per share for 125,000
shares. The private transaction did not involve any advertising or general
solicitation and we relied on Rule 506 of Regulation D as an exemption from
registration. Following the transaction, we filed a Form D with the SEC as
required by Regulation D.

The following table sets forth information with respect to our equity
compensation plans as of December 31, 2003. This table does not include options
to purchase 94,601 shares of our common stock which options were assumed by us
as a result of the acquisition of Q-DOT Group in 2001.

Equity Compensation Plan Information

Number of securities
remaining available for
future issuance under
Number of securities to Weighted-average equity compensation
be issued upon exercise exercise price of plans (excluding
of outstanding options, outstanding options, securities reflected in
Plan Category warrants and rights warrants and rights column (a))
------------- ----------------------- -------------------- -----------------------

Equity compensation plans (a) (b) (c)
approved by security
holders 275,000 $0.45 --
Equity compensation plans
not approved by security
holders 5,519,081 $0.45 792,965
Total 5,794,081 $0.45 792,965

Please see Note 6, "Stock Option Plans," to our Financial Statements
included herewith.

ITEM 6: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
--------------------------------------------------------------------------------
OF OPERATIONS
-------------

THIS ANNUAL REPORT ON FORM 10-KSB CONTAINS STATEMENTS WHICH CONSTITUTE
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"). DISCUSSION CONTAINING
SUCH FORWARD-LOOKING STATEMENTS MAY BE FOUND IN THE MATERIAL SET FORTH BELOW AND
UNDER "BUSINESS," AS WELL AS WITHIN THE ANNUAL REPORT GENERALLY. IN ADDITION,
WHEN USED IN THIS ANNUAL REPORT, THE WORDS "BELIEVES," "ANTICIPATES," "EXPECTS,"
"PLANS," "INTENDS" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY
FORWARD-LOOKING STATEMENTS. FORWARD- LOOKING STATEMENTS AND STATEMENTS OF
EXPECTATIONS, PLANS AND INTENT ARE SUBJECT TO A NUMBER OF RISKS AND
UNCERTAINTIES. ACTUAL RESULTS IN THE FUTURE COULD DIFFER MATERIALLY FROM THOSE
DESCRIBED IN THE FORWARD-LOOKING STATEMENTS, AS A RESULT, AMONG OTHER THINGS, OF
CHANGES IN TECHNOLOGY, CUSTOMER REQUIREMENTS AND NEEDS, AMONG OTHER FACTORS. WE
UNDERTAKE NO OBLIGATION TO RELEASE PUBLICLY THE RESULTS OF ANY REVISIONS TO
THESE FORWARD-LOOKING STATEMENTS THAT MAY BE MADE TO REFLECT ANY FUTURE EVENTS
OR CIRCUMSTANCES.

OVERVIEW OF RECENT DEBT AND EQUITY TRANSACTIONS

On November 7, 2003, we closed a $1,500,000 equity financing with the RENN
investment funds. One of our directors holds the position of Senior Vice
President of RENN Capital Group. In exchange for the $1,500,000, we issued
1,651,982 shares of our common stock to the RENN investment funds. The purchase
price of $0.908 per share was based on the average closing price of our common
stock as reported on the Over-the-Counter Bulletin Board over the five trading
days before closing. In addition to the shares of common stock, each of the RENN
investment funds received warrants to acquire 250,000 shares of our common
stock. The warrants have a 5-year term with an exercise price of $1.25 per share
for 125,000 shares and $1.50 per share for 125,000 shares.

On July 1, 2002, we received $3,000,000 in a financing transaction with the
RENN investment funds. RENN Capital Group, Inc. is the agent for the RENN
investment funds. One of our directors holds the position of Senior Vice
President of RENN Capital Group. The $3,000,000 funding consists of convertible
debentures with a 7-year term at a 7.5% per annum interest rate; each of the
RENN investment funds invested $1,000,000. The holder of the debentures has the
right, at any time, to convert all, or in multiples of $100,000, any part of the
debenture into fully paid and nonassessable shares of our common stock. The
debentures are convertible into our common stock at $0.312 per share, which was
in excess of the market price per share on July 1, 2002. Based on the conversion
rate of $0.312 per share, it would entitle each RENN investment fund to
3,205,128 shares, totaling approximately 18% post-conversion for the RENN
investment funds, of our outstanding common stock, assuming no other options or
warrants are exercised.

RESULTS OF OPERATIONS

General. We have designed and developed nonvolatile static random access
products since we commenced business operations in May 1987. We have
concentrated on the design and development of our nonvolatile static random
access memory product families and technologies, marketing, distribution
channels, and sources of supply, including production at subcontractors. During
2000, we added the capability to design, develop and produce gate array
integrated circuits, or our logic products but ceased supporting this product as
of December 31, 2003.

Our business was founded on a specialized technology that supports
development of nonvolatile static random access memories. We developed our
current memory products out of this technology. This single product family does
not allow growth into a broad range of applications. Therefore, in an effort to
expand our products, we acquired from WebGear incomplete research and
development of Bluetooth technology. "Bluetooth" is an industry standard, short
range wireless communications technology designed to allow a variety of
electronic devices, such as wireless telephones, 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.

During the twelve month period ending December 31, 2002, we spent
approximately $123,000 on the development of our Bluetooth technology. Due to a
poor semiconductor market and delays related to widespread adoption of Bluetooth
technology, we have decided to stop further development of our Bluetooth
technology until the semiconductor market recovers and the Bluetooth technology
becomes generally accepted.

In September 1991, we began the sale of our commercially qualified 64
kilobit nonvolatile static random access memory products based on a 1.2 micron
process technology. A 1 micron process technology is manufactured with spacing
between design elements of approximately one millionth of one meter. Generally
speaking, the smaller the spacing between design elements, the less expensive
the production cost of our memory products. Accordingly, we generally try to
design with lower micron technology. Kilobits are a measure of the amount of
data that can be stored. More kilobits imply more storage.

Beginning in 1991, after initial qualification of our first product,
through 1995, we began expanding the 64 kilobit nonvolatile static random access
memory product family. We achieved qualification of the complete product family
for commercial, industrial and military markets and had commenced sales of these
products. When we say we "qualify" a product, we mean that our internal quality
organization confirms the product's performance to the product's data sheet and
accepted industry standards. Commercial products operate from 0 degrees to 70
degrees Centigrade, industrial products from -40 degrees to 85 degrees
Centigrade and military products from -55 degrees to 125 degrees Centigrade.
Specific customers require operation over different temperatures for their
applications. In 1995 through 1997, we developed and qualified our 64 kilobit
and 256 kilobit nonvolatile static random access memory products based on a 0.8
micron process technology. We qualified these products for use in the
commercial, industrial and military markets. Development and qualification
originally occurred in Zentrum Mikroelektronik Dresden's silicon wafer
fabrication facility. In 1997, we transferred the process development of these
products to Chartered Semiconductor Manufacturing's silicon wafer fabrication
facility. Qualification of these products for use in the commercial, industrial
and military markets was completed in 1998. In October 2001, we entered into an
agreement with Amkor Techology, who later sold controlling interest in its wafer
fabrication facility to DongbuAnam Semiconductor. The agreement we entered into
includes the development of a module which incorporates
silicon-oxide-nitride-oxide- silicon technology, that will be used to
manufacture both high density silicon oxide nitride oxide silicon flash and non
volatile static random access memories for stand alone embedded products. The
primary development product is our 1 megabit 3.0 volt nonvolatile static random
access memory. In September 2003, we began shipping samples of the 1 megabit 3.0
volt nonvolatile static random access memory. As of February 1, 2004, we had
shipped samples to 104 different customers. We are currently shipping 1 megabit
products tested to production requirements on a provisional qualification and
plan to have qualification complete in the second quarter of 2004. In 2002, we

developed and qualified for sale, into the commercial and industrial markets, a
3 volt version of our 256 kilobit nonvolatile static random access memory
product built on 0.8 micron process technology in Chartered Semiconductor
Manufacturing's silicon wafer fabrication facility.

In February 2003, we received notification from Chartered Semiconductor
Manufacturing that it will close its wafer fabrication facility #1, where our
memory wafers are manufactured, by March 2004. We are working with Chartered
Semiconductor Manufacturing to transfer the process of manufacturing our memory
wafers to Chartered Semiconductor Manufacturing's facility #2. Facility #2 is
newer and more modern than facility #1, processing 8 inch wafers rather than the
older 6 inch wafers processed in facility #1. Assuming the transfer can produce
memory wafers that meet our specifications, we anticipate the transfer to be
completed by mid-2004. This would provide uninterrupted supply of our current
0.8 micron family of nonvolatile static random access memory products, and would
have no material impact on our ability to support our customers. If we cannot
complete the transfer of manufacturing into facility #2 or if we cannot contract
with another supplier, this will have a material negative impact on our future
revenues and earnings. We have not had a manufacturing contract with Chartered
Semiconductor Manufacturing since 1998. However, we have maintained a good
relationship with Chartered for the pricing and delivery of our wafers. Due to
our not having a contract with Chartered Semiconductor Manufacturing and the
volatility of the semiconductor market, we may have no control over the pricing
and availability of the wafers we require in order to build our products. The
risk of us not receiving the products and pricing we need from Chartered
Semiconductor Manufacturing has escalated, but we are evaluating alternative
sources of supply. If we are unable to obtain the products and pricing we need,
our business could suffer.

Our programmed semiconductor logic products were supported with silicon
wafers, built on 0.5 micron process technology, purchased from United
Microelectronics and silicon wafers purchased from Chartered Semiconductor
Manufacturing built on a 0.35 micron process technology. Products manufactured
with smaller spacing generally support lower product costs by reducing the
amount of raw material required for the product. In February 2003, we received
notification from United Microelectronics that it would be unable to supply us
with logic wafers after August 2003. We supported customers with 0.5 micron
logic wafers manufactured at United Microelectronics through December 2003 by
offering opportunities to purchase their life-time requirements for these
products with deliveries scheduled by the end of the year. We do not plan to
support sales logic products to the market in the foreseeable future.

Sales of products built on wafers purchased from Chartered Semiconductor
Manufacturing and United Microelectronics accounted for essentially all of our
semiconductor product sales revenue for 2002 and 2003.

REVIEW OF 2003 OPERATIONS - SEMICONDUCTOR DEVICES

Total product sales of our semiconductor devices for 2003 were
approximately $12,300,000. We have seen an increase in units shipments of our
commercial products in 2003. The majority of this increase was for large
production orders, with competitive bidding, which resulted in a decrease of
average selling prices as compared to 2002. Revenues from our 4/16 kilobit, 64
kilobit and 256 kilobit commercial products saw a total increase of
approximately 7% in 2003 as compared to 2002. The majority of the increase was
for large production orders, with competitive bidding, which resulted in a
decrease of average selling prices. Revenues from our high-end industrial and

military products saw an approximate decrease of approximately 28% in 2003 as
compared to 2002. This decrease was due to a slow-down of production related to
military systems. Sales of our logic products saw a decrease of approximately
13% in 2003 as compared to 2002. This decrease was primarily due to our decision
to phase-out this product line by December 31, 2003.

Due to a decrease in high-end industrial and military product revenues and
decreases average selling prices of our commercial products, we had an
approximate 9% decrease in our gross margins for 2003 as compared to 2002.

REVIEW OF 2003 OPERATIONS - GOVERNMENT CONTRACTS

Total revenue received from our research and development contracts for 2003
was approximately $2,200,000 up from the $1,900,000 in 2002. This was equal to
15% of our total revenue in 2003.

RESULTS OF OPERATIONS - YEARS ENDED DECEMBER 31, 2003 AND 2002

REVENUES - SEMICONDUCTOR DEVICES

The following table sets forth our net revenues for semiconductor devices
by product markets for the twelve months ended December 31, 2003 and 2002 (in
thousands):

2003 2002 Variance
---- ---- --------

Commercial $ 9,548 $ 8,892 $ 656
High-end industrial and
military $ 1,759 $ 2,433 $(674)
Logic products $ 956 $ 1,097 $(141)
------- ------- ------
Total Semiconductor
Revenue $12,263 $12,422 $(159)

Commercial product revenues increased by $656,000 for the twelve month
period ending December 31, 2003 as compared to the same period in 2002. The
increase was due to an increase in unit demand of our commercial nonvolatile
semiconductor memory products.

High-end industrial and military product revenues accounted for a decrease
of $674,000 for the twelve month period ending December 31, 2003 as compared
with the same period in 2002. The decrease in revenue was due primarily to a
slow-down of production related to military contracts.

Revenues from our logic products decreased by $141,000 for the twelve month
period ending December 31, 2003 as compared to the same period in 2002. The
decrease was due primarily to a reduction in demand for this product and our
decision to eliminate this product line effective December 31, 2003.

One distributor and one direct customer accounted for approximately 30% of
our semiconductor device product sales for the twelve months ended December 31,
2003. Products sold to distributors are sold without significant recourse.
Distributor contracts allow distributors to return up to 5% in value of product
inventory in each six month period. This allows them to keep inventory current

to market demand. Distributors resell our products to various end customers. If
one of these distributors was to terminate its relationship with us, we believe
that there would not be a material impact on our semiconductor device product
sales.

COST OF SALES AND GROSS MARGINS - SEMICONDUCTOR DEVICES

We recorded costs of sales for semiconductor devices of $8,528,000 and
$7,578,000 for the twelve months ended December 31, 2003 and December 31, 2002,
respectively. These costs reflect an approximate 9% decrease in gross margin
percentages for twelve months ended December 31, 2003 as compared to the twelve
months ended December 31, 2002. Actual gross margin percentages were 30% and 39%
for the twelve months ended December 31, 2003 and 2002, respectively. The
decreases were due primarily to a decrease in sales of our high-end industrial
and military products and to lower average selling prices of our commercial
products

RESEARCH AND DEVELOPMENT - SEMICONDUCTOR DEVICES

We believe that continued investments in new product development are
required for us to remain competitive in the markets we serve. Beginning in the
fourth quarter 2001, our research and development department has been focusing
its efforts on the installation of our process at Amkor Technology for the
development of a 1 megabit 3 volt nonvolatile static random access memory.
Development of the 1 megabit 3 volt nonvolatile static random access memory is
continuing and we began shipping samples in September 2003. We are currently
shipping 1 megabit products tested to production requirements on a provisional
qualification and plan to have qualification complete in the second quarter of
2004.

Total research and development expenses related to the semiconductor
portion of our business were $3,987,000 and $3,795,000 for the twelve months
ended December 31, 2003 and December 31, 2002, respectively.

The $192,000 increase for the twelve month period was related to increases
in payroll and payroll overhead costs of $390,000, equipment leases, maintenance
agreements for software and depreciation of $195,000 and reductions in contract
engineering and professional services of $226,000, new product development costs
of $147,000 and other expenses of $20,000. 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.

SALES AND MARKETING - SEMICONDUCTOR DEVICES

Total marketing expenses related to the semiconductor portion of our
business were $1,213,000 and $1,336,000 for the twelve months ended December 31,
2003 and December 31, 2002, respectively.

The $123,000 decrease for the twelve month period was related to an
increase in advertising of $18,000 and reductions in payroll and payroll related
costs of $101,000, travel costs of $33,000 and sales commissions of $7,000. The
increase in advertising was due to increased advertising for our new 1 megabit
product. The decrease in payroll and payroll related costs was a direct result
of reduced headcount. The decrease of travel expenses was due to a reduction in
travel within the sales organization. The decrease in sales commissions is a
direct result of decreased revenue.

ADMINISTRATION - SEMICONDUCTOR DEVICES

Total administration expenses related to the semiconductor portion of our
business were $706,000 and $639,000 for the twelve months ended December 31,
2003 and December 31, 2002, respectively.

The $67,000 increase was due primarily to increased professional fees,
payroll and payroll related costs and travel of $62,000, $7,000, and $3,000,
respectively and a reduction in bad debt of $5,000. The increase in professional
fees was due to costs associated with our shareholder meeting, board fees,
increased legal and audit fees. The majority of these increases were implemented
to ensure ongoing compliance with newly enacted regulations resulting from the
Sarbanes-Oxley Act.

TOTAL OTHER INCOME (EXPENSE) - SEMICONDUCTOR DEVICES

The $115,000 increase in total other income (expense) for the twelve month
period ending December 31, 2003 as compared to the twelve month period ending
December 31, 2002 was primarily related to an increase of interest expense and
an increase in interest income which was a direct result of the $3,000,000
funding we received on July 1, 2002 from RENN Capital Group.

NET LOSS - SEMICONDUCTOR DEVICES

We recorded a net loss of $2,389,000 and $1,028,000 for the twelve months
ended December 31, 2003 and December 31, 2002, respectively. The increase of
$1,361,000 in net loss for the twelve month period was due primarily to a
decrease in gross margins, and an increase in research and development costs and
administration costs.

REVENUES - GOVERNMENT CONTRACTS

The following table sets forth our net revenues from the government
contracts portion of our business for the twelve months ended December 31, 2003
and December 31, 2002 (in thousands):

2003 2002 Variance
---- ---- --------

Government Contracts $2,241 $1,905 $ 336

The increase of revenue for the twelve months ended December 31, 2003 as
compared to the twelve months ended December 31, 2002 was the result of

increased direct labor costs and increased materials and services that were
invoiced against development contracts. Direct labor increased due to the
addition of employees.

Costs on contracts with the government (including allocable indirect costs)
are subject to audit and adjustment by negotiations between Q-DOT and government
representatives. Costs submitted for reimbursement are subject to government
audits for compliance with government cost accounting standards, federal
acquisitions regulations and other contract terms. Negotiations for all of the
years through March 31, 1999 have been completed without any material
adjustments. Management does not believe the results of the March 31, 2000,
December 31, 2000, December 31, 2001, December 31, 2002 and December 31, 2003
government audits and subsequent negotiations will have a material effect on the
accompanying financial statements.

COST OF SALES AND GROSS MARGIN - GOVERNMENT CONTRACTS

We recorded cost of sales for government contracts of $1,093,000 and
$903,000 for the twelve months ended December 31, 2003 and December 31, 2002,
respectively. These costs reflect an approximate 2% decrease in gross margin
percentages for the twelve months ended December 31, 2003 as compared to twelve
months ended December 31, 2002. The decrease in gross margin percentages was
primarily due to an increase in non-direct labor which could not be billed as
revenue. Actual gross margin percentages for the twelve months ending December
31, 2003 and December 31, 2002 were 51% and 53%, respectively.

RESEARCH AND DEVELOPMENT - GOVERNMENT CONTRACTS

Total research and development expenses related to the government contracts
portion of our business were $531,000 and $514,000 for the twelve months ended
December 31, 2003 and December 31, 2002, respectively.

The $17,000 increase for the twelve month period was related to decreases
in payroll and payroll overhead costs of $103,000 and an increase in software
maintenance contacts and equipment leases of $120,000. The primary reason for
the decrease in payroll and payroll overhead costs was due to decreased
recruiting expenses and decreased contract maintenance.

MARKETING - GOVERNMENT CONTRACTS

Total marketing expenses related to the government contracts portion of our
business were $334,000 and $306,000 for the twelve months ended December 31,
2003 and December 31, 2002, respectively.

The increase of $28,000 for the twelve months ended December 31, 2003 as
compared to December 31, 2002 was primarily due to an increase in bid and
proposal activities required to complete small business innovative research
proposals requiring engineering and administrative support.

ADMINISTRATION - GOVERNMENT CONTRACTS

Total administration expenses related to the government contracts portion
of our business were $142,000 and $116,000 for the twelve month period ended
December 31, 2003 and December 31, 2002, respectively.

The $26,000 increase for the twelve months ended December 31, 2003 as
compared to December 31, 2002 was due to an increase in indirect labor expenses
of $40,000 which was offset by decreased legal fees of $14,000.

NET INCOME (LOSS) - GOVERNMENT CONTRACTS

We recorded a net income of $116,000 for the twelve months ended December
31, 2003 as compared to net income of $65,000 for the twelve months ended
December 31, 2002 for the government contracts portion of our business. The
$51,000 increase in net income for the twelve month period was due primarily to
increased revenue.

FUTURE RESULTS OF OPERATIONS

Our ability to achieve profitability will depend primarily on our ability
to continue reducing our manufacturing costs and increasing net product sales by
improving the availability of existing products, by the introduction of new
products and by expanding our customer base. We are also dependent on the
overall state of the semiconductor industry and the demand for semiconductor
products by equipment manufacturers.

We are continuing our co-development program with Amkor Technology to
develop a semiconductor process module that combines our nonvolatile technology
with Amkor's advanced 0.25 micron digital complementary metal-oxide
semiconductor, or "CMOS," fabrication line. CMOS is the semiconductor technology
used in the transistors that are manufactured into most of today's computer
microchips. The module will incorporate silicon oxide nitride oxide silicon
technology, which will be used to manufacture both high density silicon oxide
nitride oxide silicon flash and nonvolatile static random access memories, for
stand alone and embedded products. During 2002 and 2003, our research and
development team along with Amkor's research and development team worked
aggressively on the co-development program. Our 1 megabit 3.0 volt nonvolatile
static random access memory was the primary development vehicle. In February
2003, Amkor Technology sold controlling interest of their wafer fabrication
facility to DongbuAnam Semiconductor. All contractual obligations were
transferred to Anam U.S.A., a wholly owned subsidiary of DongbuAnam
Semiconductor. Our co-development program has not been affected by the change in
ownership and we do not expect any material changes in the support required to
complete the program. In August 2003, we received the first complete processed
silicon from this development which yielded working samples of our new 1 megabit
3 volt nonvolatile semiconductor memory product. We began shipping samples of
our new 1 megabit 3 volt nonvolatile semiconductor memory product in September
2003. As of February 1, 2004, we had shipped samples to 104 different customers.
We are currently shipping 1 megabit products test to production requirements on
a provisional qualification and plan to have qualification complete in the
second quarter of 2004. We cannot assure you that we will not discover technical
problems or manufacturing concerns with this new product, that demand will
develop for the new product or that we will be able to sell this new product at
a profit.

As of December 31, 2003, we had a backlog of unshipped customer orders of
approximately $1,646,000 expected to be filled by June 30, 2004. 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.

We cannot assure you that the growth in demand, or demand for our products,
will increase in the future. We continue to explore alternatives to further
reduce our cost to manufacture our existing products built on 0.8 micron
technology. In 2002, we continued to focus on yield improvement of our products
built on our 0.8 micron technology with the hopes of further reducing costs. We
are currently reviewing additional cost reduction measures that may have the
potential to improve our earnings.

In 2003 and 2002, we purchased all of our silicon wafers to produce our 0.8
micron nonvolatile static random access memory products from a single supplier,
Chartered Semiconductor Manufacturing. Approximately 92% of our semiconductor
device sales for 2003 and 91% of our semiconductor product sales for 2002 were
from finished units produced from these silicon wafers. We had an agreement with
Chartered Semiconductor Manufacturing to provide wafers through September 1998.
Although Chartered Semiconductor Manufacturing continues to provide us wafers
under the terms defined in this contract we do not have a current signed
agreement. In February 2003, we received notification from Chartered
Semiconductor Manufacturing that it will close its wafer fabrication facility
#1, where our memory wafers are manufactured, by March 2004. We are working with
Chartered Semiconductor Manufacturing to transfer the process of manufacturing
our memory wafers to Chartered Semiconductor Manufacturing's facility #2. If we
cannot complete the transfer of manufacturing into facility #2 or if we cannot
contract with another supplier, this will have a material negative impact on our
future revenues and earnings. DongbuAnam Semiconductor provides silicon wafers
for our 0.25 micron process to support our 1 megabit product family.

Zentrum Mikroelektronik Dresden has established production and sales of
nonvolatile static random access memory products. We believe that this second
source for nonvolatile static random access memory products, may have a positive
impact on our business because many large manufacturers require two sources from
which to purchase product. We will not be receiving any further license payments
from our contract with Zentrum Mikroelektronik Dresden. We also, however, expect
increased competition from Zentrum Mikroelektronik Dresden with respect to
nonvolatile static random access memory products.

We intend to continue designing, developing and subcontracting the
production of our memory products. We also propose to continue to sell to
existing and new customers through our normal sales and marketing efforts. We
will also begin development of high performance data communications products
based on silicon germanium process expertise gained through our acquisition of
Q-DOT Group. We believe that the addition of data communication products will
allow us to expand our product offering into new applications and additional
customers. We anticipate that this will reduce our dependence on any single
product line and provide additional potential sources of revenue.

LIQUIDITY AND CAPITAL RESOURCES

On November 7, 2003, we closed a $1,500,000 equity financing with the RENN
investment funds. One of our directors holds the position of Senior Vice
President of RENN Capital Group. In exchange for the $1,500,000, we issued
1,651,982 shares of our common stock to the RENN investment funds. In addition
to the shares of common stock, each fund received warrants to acquire 250,000
shares of our common stock. The warrants have a 5-year term with an exercise
price of $1.25 per share for 125,000 shares and $1.50 per share for 125,000
shares.

On July 1, 2002, we received $3,000,000 in a financing transaction with the
RENN investment funds pursuant to a Convertible Loan Agreement. RENN is the
agent for the RENN investment funds. One of our directors holds the position of
Senior Vice President of RENN Capital Group. The $3,000,000 funding consists of
convertible debentures with a 7-year term at a 7.5% per annum interest rate;
each of the three investment funds invested $1,000,000. The holder of the
debentures has the right, at any time, to convert all, or in multiples of
$100,000, any part of the debenture into fully paid and nonassessable shares of
our common stock. The debentures are convertible into our common stock at $0.312
per share, which was in excess of the market price per share on July 1, 2002.
Based on the conversion rate of $0.312 per share, it would entitle each
investment fund to 3,205,128 shares, totaling approximately 18% post-conversion
for the three investment funds, of our outstanding common stock, assuming no
other options or warrants are exercised. During the first nine months of 2003,
we were not in compliance with two of the covenants set forth in the loan
agreement. On February 27, 2004, we received a waiver for one of the covenants
and a modification and a waiver to the loan agreement with respect to the other.
The waiver and modification are effective through April 1, 2005. We are
currently in compliance with the modified covenant and estimate that we will
remain in compliance in the forthcoming year. However, significant variances
in future actual operations from our current estimates could result in the
reclassification of this note to current liabilities.

The change in cash flows for the year ended December 31, 2003 used in
operating activities was primarily a result of a net loss of $2,272,641, which
is offset by $497,701 in depreciation and amortization, decreases in allowance
accounts, accounts receivable, inventory, prepaid expenses, accounts payable and
deferred revenue of $16,376, $402,361, $411,358, $114,542, $49,314 and $40,500,
respectively and increases in accrued expenses of $64,626. The decrease of
$402,361 in accounts receivable was directly related to certain customers paying
invoices within our payment terms. The decrease in inventory was primarily due
to an increase in finished goods shipments at the end of 2003. The decrease in
prepaid expenses of $114,542 was due primarily to the renegotiation of certain
software licenses. The decrease in accounts payable of $49,314 was primarily due
to the timing of payments for standard operating expenses. The increase in
accrued expenses was due primarily to increased vacation payable. The increase
in vacation payable has occurred due to certain employees not using as much
vacation time. The change in cash flows used in investing activities of $501,244
was primarily due to the purchase of equipment required to test our nonvolatile
semiconductor memory products and software acquired for research and development
activities. The cash flows provided by financing activities of $1,640,296 was
due to $1,475,515 (after expenses) received from an equity financing we did with
RENN Capital Group in November 2003, net borrowings on a line of credit of
$150,000, proceeds of $183,131 for the exercise of stock options by certain
employees less payments on a capital lease obligation of $168,350.

The change in cash flows for the year ended December 31, 2002 used in
operating activities was primarily a result of a net loss of $962,867, which is

offset by $443,146 in depreciation and amortization, a decrease in
allowance accounts, inventory, accounts payable and accrued expenses of $71,150,
$261,442, $328,848 and $122,594, respectively. These decreases were offset by
increase in accounts receivable, prepaid and other and deferred revenue of
$618,653, $123,972 and $25,500, respectively. The $261,442 decrease in inventory
and the $618,653 increase in accounts receivable, were due to an increase in
customer demand in the late fourth quarter of 2002, this increase allowed us to
dispose of inventory on hand. The $328,848 decrease of accounts payable was
primarily due to the timing of raw materials received within the period.
Materials were received and paid for late in 2001, but due to a soft market
demand, had not been fully consumed, resulting in larger inventory levels at
December 31, 2001. The $122,594 decrease in accrued expenses was due to our
completing payments of accrued salary and vacation payments to our former Chief
Financial Officer. The $123,972 increase in prepaid expenses and other was
directly related to an increase in software licensing and maintenance agreements
that are required to be paid in advance. These software licensing agreements are
required for us to design our 1 megabit nonvolatile static random access memory.
The change in cash flows used in investing activities of $163,657 was primarily
due to the purchase of hardware and software required for research and
development activities and equipment required to manufacture our semiconductor
devices at Chartered Semiconductor Manufacturing and United Microelectronics
Corp. The cash flows provided by financing activities of $2,699,678 were due
primarily to the $3,000,000, net of $116,175 in financing fees, received from
RENN Capital Group, borrowings and payments on notes payable and a capital lease
obligation and the exercise of stock options by employees of the Company.

SHORT-TERM LIQUIDITY.

Our cash balance at December 31, 2003 was $3,431,679.

Our future liquidity will depend on our revenue growth and our ability to
sell our products at positive gross margins and control of our operating
expenses. Over the coming year, we expect to spend approximately $11,000,000 for
operating expenses assuming revenue growth. We expect to meet these capital
needs from sales revenues and, to the extent we do not have sufficient revenues,
from our existing cash reserves.

LONG-TERM LIQUIDITY.

We continue to evaluate our long term liquidity. Our growth plans may
require additional funding from outside sources. We are in ongoing discussions
with investment banking organizations to ensure access to funds as required.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Simtek's consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America,
which require us to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses and the related
disclosures. A summary of these significant accounting policies can be found in
Simtek's Notes to Consolidated Financial Statements included in this Form
10-KSB. The estimates used by management are based upon Simtek's historical
experiences combined with managements understanding of current facts and
circumstances. Certain of our accounting polices are considered critical as they
are both important to the portrayal of our financial condition and the results
of our operations and require significant or complex judgments on our part. We

believe that the following represent the critical accounting policies of Simtek
as described in Financial Reporting Release No. 60, Cautionary Advice Regarding
Disclosure About Critical Accounting Policies, which was issued by the
Securities and Exchange Commission: inventories; deferred income taxes;
allowance for doubtful accounts; and, allowance for sales returns.

The valuation of inventories involves complex judgments on our part. Excess
finished goods inventories are a natural component of market demand of
semiconductor devices. We continually evaluate and balance the levels of
inventories based on sales projections, current orders scheduled for future
delivery and historical product demand. While certain finished goods items will
sell out, quantities of other finished goods items will remain. These finished
goods are reserved as excess inventory. We believe we have adequate controls
with respect to the amount of finished goods inventories that are anticipated to
become excess. While we believe this process produces a fair valuation of
inventories, changes in general economic conditions of the semiconductor
industry could materially affect valuation of our inventories.

The allowance for doubtful accounts reflects a reserve that reduces
customer accounts receivable to the net amount estimated to be collectible.
Estimating the credit worthiness of customers and the recoverability of customer
accounts requires management to exercise considerable judgment. In estimating
uncollectible amounts, we consider factors such as industry specific economic
conditions, historical customer performance and anticipated customer
performance. While we believe our processes to be adequate to effectively
quantify our exposure to doubtful accounts, changes in industry or specific
customer conditions may require us to adjust our allowance for doubtful
accounts.

We record an allowance for sales returns as a net adjustment to customer
accounts receivable. The allowance for sales returns consists of two separate
segments, distributor stock rotation and distributor price reductions. When we
record the allowance, the net method reduces customer accounts receivables and
gross sales. Generally, we calculate the stock rotation portion of the allowance
based upon distributor inventory levels. The contracts we have with our
distributors allow them to return to us a 5% percent of their inventory in
exchange for inventory which better meets their demands. At times, we are
required to allow our distributors to lower the selling price of a specific
device in order to meet competition. When this occurs, we record an allowance
for potential credit that our distributor's will be requesting. This allowance
is based on approved pricing changes, inventory affected and historical data. We
believe that our processes to adequately predict our allowance for sales returns
are effective in quantifying our exposures due to industry or specific customer
conditions.

We record an allowance that directly relates to the warranty of our
products for one year. The allowance for warranty return reduces our gross
sales. This allowance is calculated by looking at annual revenues and historical
rates of our products returned due to warranty issues. While we believe this
process adequately predicts our allowance for warranty returns, changes in the
manufacturing or design of our product could materially affect valuation of our
warranties.

We have various government contracts which are subject to audit by the
government. However, audits for the periods ending March 31, 2000, December 31,
2000, December 31, 2001, December 31, 2002 and December 31, 2003 have not been
completed. In addition, certain of these contracts are based on our estimate as
to their percentage of completion as of the balance sheet date. Our historical
experience has not resulted in a material adjustment to prior recorded revenue
amounts.

We have recorded a valuation allowance on deferred tax assets. Future
operations may change our estimate in connection with potential utilization of
these assets.

ACCOUNTING PRONOUNCEMENTS

In May 2003, the Financial Accounting Standards Board ("FASB") issued
Statements of Financial Accounting Standards No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity." SFAS
No. 150 requires issuers to classify as liabilities (or assets in some
circumstances) three classes of freestanding financial instruments that embody
obligations for the issuer. SFAS No. 150 is effective for financial instruments
entered into or modified after May 31, 2003 and is otherwise effective at the
beginning of the first interim period beginning after June 15, 2003. We believe
the adoption of SFAS No. 150 will have no immediate impact on our financial
position or results of operations.

INFLATION

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

OFF BALANCE-SHEET ARRANGEMENTS

We are party to a lease agreement with Baja Properties, LLC as landlord
pursuant to which we lease approximately 16,000 square feet of space in Colorado
Springs, Colorado. The lease is scheduled to expire on February 28, 2013. Our
monthly rental payment obligation is approximately $16,000.

SIMTEK CORPORATION

INDEX TO FINANCIAL STATEMENTS

PAGE
----

Independent Auditor's Report.............................................. 35

Consolidated Balance Sheet - December 31, 2003............................ 36

Consolidated Statements of Operations - For the Years Ended
December 31, 2003 and 2002............................................ 37

Consolidated Statements of Changes in Shareholders' Equity -
For the Years Ended December 31, 2003 and 2002........................ 38

Consolidated Statements of Cash Flows - For the Years Ended
December 31, 2003 and 2002........................................... 39

Notes to Consolidated Financial Statements - For the Years
Ended December 31, 2003 and 2002..................................... 40-51

INDEPENDENT AUDITOR'S REPORT

Board of Directors and Shareholders
Simtek Corporation
Colorado Springs, Colorado

We have audited the accompanying consolidated balance sheet of Simtek
Corporation and subsidiary as of December 31, 2003 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, 2003. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 consolidated
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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Simtek Corporation
as of December 31, 2003, and the results of their operations and their cash
flows for each of the years in the two-year period ended December 31, 2003, in
conformity with accounting principles generally accepted in the United States of
America.

/s/ Hein & Associates LLP
HEIN & ASSOCIATES LLP

Denver, Colorado
January 28, 2004

SIMTEK CORPORATION

CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2003

ASSETS
------

CURRENT ASSETS:
Cash and cash equivalents $ 3,431,679
Certificate of deposit, restricted 300,000
Acounts receivable - trade, net of allowance for
doubtful accounts and return allowances of
approximately $130,000 1,923,542
Inventory, net 1,201,432
Prepaid expenses and other current assets 129,554
------------
Total current assets 6,986,207
EQUIPMENT AND FURNITURE, net 862,009
DEFERRED FINANCING COSTS 91,280
OTHER ASSETS 58,291
------------
TOTAL ASSETS $ 7,997,787
============

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

CURRENT LIABILITIES:
Accounts payable $ 1,038,634
Accrued expenses 390,079
Accrued vacation payable 179,580
Line of credit 150,000
Obligation under capital leases 123,585
------------
Total current liabilities 1,881,878
NOTES PAYABLE 5,000
DEBENTURES 3,000,000
OBLIGATIONS UNDER CAPITAL LEASES, NET OF CURRENT PORTION 61,221
------------
Total liabilities 4,948,099
COMMITMENTS AND CONTINGENCIES (Notes 5 and 7)

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,
56,723,352 shares issued and 56,713,352 shares
outstanding 567,134
Additional paid-in capital 39,230,210
Treasury stock, at cost; 10,000 shares (12,504)
Accumulated deficit (36,735,152)
------------
Total shareholders' equity 3,049,688
------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 7,997,787
============

See accompanying notes to these consolidated financial statements.

SIMTEK CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

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

2003 2002
------------- -------------

NET SALES $ 14,503,771 $ 14,326,705

Cost of sales 9,621,249 8,481,262
------------ ------------
GROSS MARGIN 4,882,522 5,845,443

OPERATING EXPENSES:
Research and development costs 4,518,528 4,308,499
Sales and marketing 1,546,774 1,641,508
General and administrative 847,503 754,676
------------ ------------
Total operating expenses 6,912,805 6,704,683
------------ ------------

LOSS FROM OPERATIONS (2,030,283) (859,240)

OTHER INCOME (EXPENSE):
Interest income 30,116 42,447
Interest expense (254,144) (147,921)
Other income (expense) (18,330) 1,847
------------ ------------
Total other income (expense) (242,358) (103,627)
------------ ------------

LOSS BEFORE PROVISION FOR INCOME TAXES $ (2,272,641) $ (962,867)

Provision for income taxes -- --
------------ ------------
NET LOSS $ (2,272,641) $ (962,867)
============ ============

NET LOSS PER COMMON SHARE:
Basic and diluted EPS $ (.04) $ (.02)
============ ============
WEIGHTED AVERAGE COMMON SHARE OUTSTANDING:
Basic and diluted EPS 54,889,008 54,204,525
============ ============

See accompanying notes to these consolidated financial statements.

SIMTEK CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002

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

BALANCES, January 1, 2002 54,026,273 $ 540,262 $37,547,590 $(12,504) $(33,499,644) $ 4,575,704

Exercise of stock options 356,000 3,561 47,285 - - 50,846
Net loss - - - - (962,867) (962,867)
---------- --------- ----------- -------- ------------ -----------

BALANCES, December 31, 2002 54,382,273 543,823 37,594,875 (12,504) (34,462,511) 3,663,683
---------- --------- ----------- -------- ------------ -----------

Exercise of stock options 679,097 6,791 176,340 - - 183,131
Equity financing November 7, 2003, net
of $24,485 in costs 1,651,982 16,520 1,458,995 - - 1,475,515
Net loss - - - - (2,272,641) (2,272,641)
---------- --------- ----------- -------- ------------ -----------
BALANCES, December 31, 2003 56,713,352 $ 567,134 $39,230,210 $(12,504) $(36,735,152) $ 3,049,688
========== ========= =========== ======== ============ ===========

See accompanying notes to these consolidated financial statements.

SIMTEK CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS

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

2003 2002
------------ ------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(2,272,641) $ (962,867)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 497,701 443,146
Loss on disposal of assets 36,542 5,705
Net change in allowance accounts (16,376) (71,150)
Deferred financing fees 16,596 8,298
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable 402,361 (618,653)
Inventory 411,358 261,442
Prepaid expenses and other 114,542 (123,972)
Increase (Decrease) in:
Accounts payable (49,314) (328,848)
Accrued expenses 64,626 (122,594)
Deferred revenue (40,500) 25,500
----------- -----------
Net cash used in operating activities (835,105) (1,483,993)
---------- -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment and furniture (501,244) (163,657)
----------- -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings from line-of-credit and the issuance of a note 250,000 --
Payments on notes payable and line of credit (100,000) (109,976)
Payments on capital lease obligation (168,350) (125,017)
Equity financing November 2003, net 1,475,515 --
Convertible debentures, net of deferred financing fees -- 2,883,825
Exercise of stock options 183,131 50,846
----------- -----------
Net cash provided by financing activities 1,640,296 2,699,678
----------- -----------

NET INCREASE IN CASH AND CASH EQUIVALENTS 303,947 1,052,028
3,127,732 2,075,704
----------- -----------
CASH AND CASH EQUIVALENTS, beginning of year
CASH AND CASH EQUIVALENTS, end of year $ 3,431,679 $ 3,127,732
=========== ===========

SUPPLEMENTAL CASH FLOW INFORMATION:
Purchase of equipment through payables and capital leases $ 144,160 $ 88,457
=========== ===========
Cash paid for interest $ 253,219 $ 146,804
=========== ===========

See accompanying notes to these consolidated financial statements.

SIMTEK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NATURE OF BUSINESS OPERATIONS - Simtek Corporation (the "Company") designs,
develops, markets and subcontracts the production of high performance
nonvolatile semiconductor memories and programmed semiconductor logic
products. The Company's operations have concentrated on the design and
development of the 1 megabit, 256 kilobit, 64 kilobit, and 16 kilobit
nonvolatile semiconductor memory product families and associated products
and technologies as well as the development of sources of supply and
distribution channels. The Company also provides electronics engineering
research and development contracts.

CONSOLIDATION POLICY - The accompanying consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiary Q-DOT.

REVENUE RECOGNITION, SEMICONDUCTOR PRODUCTS - 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.

REVENUE RECOGNITION, GOVERNMENT CONTRACTS - Revenues from cost-plus-fee
contracts are recognized on the basis of costs incurred during the period
plus the fee earned. Revenues from fixed-price contracts are recognized on
the percentage-of-completion method. The percentage-of-completion is
measured by the total costs incurred to date to estimated total costs for
each contract. This method is used because management considers costs
incurred to be the best available measure of progress on these contracts.
Because of inherent uncertainties in estimating costs, it is reasonably
possible that the estimates used will change within the near term.

CONTRACT REVENUES AND RELATED COSTS - Substantially all of Q-DOT revenues
result from contract services performed for the various agencies of United
States Government (the "Government") under a variety of contracts and
subcontracts, some of which provide for reimbursement of costs-plus-fees,
and others which are fixed-price. The majority of the contracts are for
services performed in Colorado. For some services rendered on Government
contracts, the time between providing the services and the final cash
realization from the sale of such services may extend two or more years.

Costs on contracts with the government (including allocable indirect costs)
are subject to audit and adjustment by negotiations between the Company and
Government representatives. Costs submitted for reimbursement are subject
to Government audits for compliance with government cost accounting
standards, federal acquisitions regulations and other contract terms.
Negotiations for all of the years through March 31, 1999 have been
completed without any material adjustments. Management does not believe the
results of the March 31, 2000, December 31, 2000, December 31, 2001,
December 31, 2002 and December 31, 2003 government audits and subsequent
negotiations will have a material effect on the accompanying financial
statements.

Direct costs of contracts include all direct labor, supplies, and equipment
costs. Provisions for estimated losses on uncompleted contracts are made in
the period in which such losses are determined. Changes in job performance,
job conditions, and estimated profitability and final contract settlements
may result in revisions to costs and income and are recognized in the
period in which the revisions are determined.

SIMTEK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

At the time a loss on a contract becomes known, the entire amount of the
estimated loss on both short and long- term contracts is accrued.

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, 2003, substantially all of the Company's
cash and cash equivalents were held by a single bank, of which
approximately $3,561,647 was in excess of Federally insured amounts.

Receivables and Credit Policies - Trade receivables consist of
uncollateralized customer obligations due under normal trade terms
requiring payment within 30 days of the invoice date. In most cases, trade
receivables are applied to a specific identified invoice. Management
reviews trade receivables periodically and reduces the carrying amount by a
valuation allowance that reflects management's best estimate of the amount
that may not be collectible.

Inventory - The Company records inventory using the lower of cost
(first-in, first-out) or market. Inventory at December 31, 2003 included:

Raw materials $ 54,257
Work in process 814,454
Finished goods 484,757
-----------
1,353,468
Less reserves for excess inventory (152,036)
-----------
$ 1,201,432
===========

DEPRECIATION & Amortization - 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. The Company has patents and
trademarks valued at $125,000 which were capitalized and recorded as
intangible assets. The Company is currently amortizing the patents and
trademarks over a five year life.

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 as advertising
takes place. Advertising expense was $39,660 and $15,162 in 2003 and 2002,
respectively.

LOSS PER SHARE - 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. As the Company
incurred losses in 2002 and 2003, all common stock equivalents would be
considered anti-dilutive. For purposes of calculating diluted EPS,
5,794,081 and 5,539,386 options for 2003 and 2002, respectively, were
excluded from diluted EPS as they had an anti-dilutive effect.

SIMTEK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ACCOUNTING ESTIMATES - The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States of America 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 significant
estimates, including the allowance for doubtful accounts, technological
obsolescence of inventories, the estimated useful lives selected for
property and equipment, sales returns, warranty reserve, percentage of
completion on projects in process at year-end, potential adjustments for
government contracts and the valuation allowance on the deferred tax
assets.

CONCENTRATION OF CREDIT RISK - Financial instruments that potentially
subject the Company to significant concentration of credit risk consist
primarily of accounts receivable. The Company has no significant off-
balance sheet concentrations of credit risk. Accounts receivable are
typically unsecured and are derived from transactions with and from
customers located worldwide.

IMPAIRMENT OF LONG-LIVED ASSETS - In the event that facts and circumstances
indicate that the cost of 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 loss and EPS disclosures for employee stock option grants are
included below 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. Had
compensation cost been determined based on the fair value at the grant
dates for awards under those plans consistent with the fair value method,
the Company's net loss and EPS would have been increased to the pro forma
amounts indicated below.

Years Ended December 31,
-------------------------------
2003 2002
-------------- --------------

Net loss as reported $ (2,272,641) $ (962,867)
Add: Stock based compensation included in reported net loss -- --
Deduct: Fair value of stock based compensation (520,073) (621,701)
------------- -------------
Pro forma net loss $ (2,792,714) $ (1,584,568)
============= =============

Net loss as reported - basic and diluted $ (.04) $ (.02)
Deduct: Fair value of loss per share (.01) (.01)
------------- -------------
Pro forma net loss - basic and diluted $ (.05) $ (.03)
============= =============

The fair value of each option granted in 2003 and 2002 was estimated on the
date of grant, using the Black- Scholes option-pricing model with the
following:

SIMTEK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Options Granted During
----------------------
2003 2002
-------- ---------

Expected volatility 122.2% 132.9%
Risk-free interest rate 2.0% 3.2%

Expected dividends -- --

Expected terms (in years) 4.0 4.0

INCOME TAXES - The Company accounts for income taxes under the liability
method, 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.

BUSINESS SEGMENTS - The Company has adopted Statement of Accounting
Standards No. 131, Disclosures About Segments of an Enterprise and Related
Information ("SFAS 131"), which established standards for the way companies
report information about their operating segments. Prior period amounts
have been restated to conform to the requirements of this new statement.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS -In May 2003, the Financial
Accounting Standards Board ("FASB") issued Statements of Financial
Accounting Standards No. 150, "Accounting for Certain Financial Instruments
with Characteristics of Both Liabilities and Equity". SFAS No. 150 requires
issuers to classify as liabilities (or assets in some circumstances) three
classes of freestanding financial instruments that embody obligations for
the issuer. SFAS No. 150 is effective for financial instruments entered
into or modified after May 31, 2003 and is otherwise effective at the
beginning of the first interim period beginning after June 15, 2003.
Management believes the adoption of SFAS No. 150 will have no immediate
impact on its financial position or results of operations.

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

Equipment and furniture at December 31, 2003 consisted of the following:

Leased software under capital leases $ 589,210
Research and development equipment 1,729,907
Computer equipment and software 1,421,038
Office furniture 235,135
Other equipment 270,899
-----------
4,246,189
Less accumulated depreciation and amortization (3,384,180)
-----------
$ 862,009
===========

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.

SIMTEK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Depreciation and amortization expense of $497,701 and $443,146 was charged
to operations for the years ended December 31, 2003 and 2002 respectively.
Included in the amortization expense for 2003 and 2002 was $112,921 and
$83,886, respectively, of amortization of software and research and
development equipment under capital leases. At December 31, 2003,
accumulated amortization for software under capital leases was $320,952.

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

As of December 31, 2003, the Company had a $250,000 revolving line of
credit (LOC). The LOC bears interest at prime plus .75% (4.75% at December
31, 2003), matures in April 2004, and is collateralized by the assets of
the Company. $150,000 was outstanding as of December 31, 2003.

When the Company acquired Integrated Logic Systems, it also acquired a note
payable related to a reorganization plan that Integrated Logic Systems went
through. The reorganization plan required that annual payments of $5,000,
with no interest, be made to a legal entity serving as a trustee for these
creditors, payments started on September 15, 1995. 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. Based on the statute
of limitations for the State of Colorado, the Company began writing off
$5,000 per year in 2001. At December 31, 2003, the note payable was $5,000.

The Company has a letter of credit arrangement with one of the Company's
suppliers which requires the Company to maintain a $300,000 certificate of
deposit as collateral, which is reflected as restricted cash.

4. CONVERTIBLE DEBENTURES:
----------------------

On July 1, 2002, the Company received funding of $3,000,000 in a financing
transaction with RENN Capital Group, Inc. (formerly Renaissance Capital
Group, Inc.). RENN Capital Group, Inc. is the agent for three investment
funds: Renaissance Capital Growth and Income Fund III, Inc., Renaissance US
Growth & Income Trust, PLC and BFS US Special Opportunities Trust, PLC. One
of the Company's directors holds the position of Senior Vice President of
RENN Capital Group. The $3,000,000 funding consists of convertible
debentures with a 7-year term at a 7.5% per annum interest rate. Each fund
equally invested $1,000,000. The holder of the debenture shall have the
right, at any time, to convert all, or in multiples of $100,000, any part
of the Debenture into fully paid and nonassessable shares of Simtek
Corporation common stock. The debentures are convertible into Simtek common
stock at $0.312 per share, which was in excess of the market price per
share on July 1, 2002. Based on the conversion rate of $0.312 per share, it
would entitle each fund to 3,205,128 shares of Simtek common stock. During
the first nine months of 2003, the Company was not in compliance with two
of the covenants set forth in the loan agreement. On February 27, 2004, the
Company received a waiver for one of the covenants and a modification and a
waiver to the loan agreement with respect to the other. The waiver and
modification are effective through April 1, 2005. The Company is currently
in compliance with the modified covenant and estimates they will remain in
compliance in the forthcoming year. However, significant variances in
future actual operations from the Company's current estimates could result
in the reclassification of this note to current liabilities.

5. COMMITMENTS:
-----------

OFFICES LEASES - The Company leases office space under a lease, which
expires on February 28, 2013. Monthly lease payments are approximately
$16,000.

SIMTEK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Through the acquisition of Q-DOT, the Company has non-cancelable long-term
lease agreements for office space, office furnishings and equipment that
expire at various dates through December 2006.

The Company leases furniture, equipment, and its office under operating
leases, which expire over the next seven years.

Future minimum lease payments under the equipment, furniture and office
leases described above are as follows:

Years Ending
December 31,
----------------
2004 $ 861,405
2005 685,549
2006 228,122
2007 208,616
2008 & After 1,267,849
----------
$3,251,541
==========

Office rent and equipment lease expense totaled $769,870 and $603,344 for
the years ended December 31, 2003 and 2002, respectively.

In addition, the Company leases research and development software under
four capital leases, which will expire over the next three years. At
December 31, 2003, future minimum lease payments under the lease described
above is as follows:

Years Ending
December 31,
----------------
2004 $150,663
2005 52,620
2006 8,770
--------

Total net minimum lease payments 212,053

Less interest and taxes (27,247)
---------
Present value of net minimum lease payments 184,806
Less current portion of capital leases (123,585)
---------
$ 61,221
=========

EMPLOYMENT AGREEMENTS - Mr. Mitchell is employed as President and Chief
Executive Officer pursuant to an employment agreement with the Company.
Under the terms of the employment agreement, Mr. Mitchell receives an
annual salary of $175,000 and such additional benefits that are generally
provided other employees. Mr. Mitchell's employment agreement expired June
1, 2001 but was, and is, automatically renewed for successive one-year
terms unless the Company or Mr. Mitchell elects not to renew. If the
Company terminates 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.

SIMTEK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. SHAREHOLDERS' EQUITY:
--------------------

On November 7, 2003, the Company closed a $1,500,000 equity financing with
RENN Capital Group, Inc.. In exchange for the $1,500,000, the Company
issued 1,651,982 shares of its common stock to RENN Capital Group, Inc. One
of the Company's directors holds the position of Senior Vice President of
RENN Capital Group. The purchase price was based on the average closing
price of the Company's common stock as reported on the Over-the-Counter
Bulletin Board over the five trading days before closing, which average
closing price was $0.908 per share. In addition to the shares of common
stock, each fund received warrants to acquire 250,000 shares of the
Company's common stock. The warrants have a 5-year term with 125,000 shares
being exercisable at $1.25 per share and 125,000 shares being exercisable
at $1.50 per share.

WARRANTS - A summary of the warrants outstanding as of December 31, 2003,
is as follows:

Per
# of Warrant Extended
Warrants Expiration Exercise Value of
Warrant Holder Description Issue Date Outstanding Date Price Warrants
-------------- ----------- ---------- ----------- ---------- --------- ----------

BFSUS Special Oportunities Trust Plc. Warrants 11/7/2003 125,000 11/7/2008 $1.25 $ 156,250

BFSUS Special Oportunities Trust Plc Warrants 11/7/2003 125,000 11/7/2008 $1.50 $ 187,500

Renaissance US Growth & Investment
Trust Plc. Warrants 11/7/2003 125,000 11/7/2008 $1.25 $ 156,250

Renaissance US Growth & Investment
Trust Plc. Warrants 11/7/2003 125,000 11/7/2008 $1.50 $ 187,500

Renaissance Capital Growth & Income
Fund III Warrants 11/7/2003 125,000 11/7/2008 $1.25 $ 156,250

Renaissance Capital Growth & Income
Fund III Warrants 11/7/2003 125,000 11/7/2008 $1.50 $ 187,500
------- ----------
Total Warrants 750,000 $1,031,250
======= ==========

STOCK OPTION PLANS - The Company has approved two stock option plans that
authorize 600,000 incentive stock options and 9,900,000 non-qualified stock
options that may be granted to directors, employees, and consultants. On
September 26, 2001, the Incentive Stock Option Plan terminated. All options
outstanding at the time of the plan termination may be exercised in
accordance with their terms. The Non-Qualified Stock Option Plan which was
adopted in 1994 remains in effect. The plans permitted the 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
are 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.

Following is a summary of activity under these stock option plans for the
years ended December 31, 2003 and 2002:

SIMTEK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2003 2002
------------------------------ ----------------------------
Weighted Weighted
Average Average
Number Exercise Number Exercise
of Shares Price of Shares Price
----------- ------------ ----------- -----------

Outstanding, beginning of year 5,539,386 $ .47 5,286,872 $ .46

Granted 1,224,500 .21 912,500 .35
Expired (45,000) (.13) (153,986) .14
Exercised (679,097) (.27) (356,000) (.14)
Canceled (245,708) (.39) (150,000) (.31)
---------- ---------

Outstanding, end of year 5,794,081 $ .45 5,539,386 $ .47
========= =========

All options granted during 2003 and 2002, were at the current market price
and the weighted average fair value was $0.17 and $0.29, respectively. At
December 31, 2003, options for 4,349,935 shares were exercisable and of the
remaining options of 1,444,146; 971,965, 418,827 and 53,354 shares will
become exercisable in 2004, 2005, and 2006, respectively.

The following information summarizes stock options outstanding at December
31, 2003:

Outstanding Exercisable
------------------------------------------------------------------------------------ -----------------------------------
Weighted Average
---------------------------------------------------------

Remaining Weighted Weighted
Exercise Number Contractual Average Number Average
Price Outstanding Life in Months Exercise Price Exercisable Exercise Price
-------- ----------- -------------- -------------- ----------- --------------

$0.13 - 0.19 1,420,391 59 $0.17 624,870 $0.17
$0.25 - 0.32 1,029,419 52 $0.27 756,641 $0.27
$0.32 - 0.50 1,923,576 45 $0.40 1,673,007 $0.36
$0.60 - 0.83 820,695 57 $0.65 695,417 $0.62
$1.13 - 1.50 600,000 41 $1.28 600,000 $1.25
--------- ---------
5,794,081 4,349,935
========= =========

INCENTIVE STOCK OPTION PLAN - At the time of the acquisition of Q-DOT,
Q-DOT had an Incentive Stock Option Plan for the benefit of its employees.
At December 31, 2000, Q-DOT had outstanding options to purchase 5,356
shares of its stock. At the time of closing, these options converted into
94,601 options to purchase Simtek Common Stock. No further options will be
issued under this plan and all options outstanding will continue to vest
per their original vesting schedule. These options have not been included
in the above tables. As of December 31, 2003 there were 90,185 options to
purchase Simtek Common Stock outstanding.

SIMTEK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

Sales by location for the years ended December 31, 2003 and 2002 were as
follows (as a percentage of sales):

2003 2002
---- ----

United States 46% 61%
Europe 11% 9%
Far East 38% 24%
All Others 5% 6%
---- ----
Total 100% 100%

Sales from government contracts accounted for approximately 15% and 13% of
total sales for the years ended December 31, 2003 and 2002, respectively.
Sales from the Company's military products accounted for approximately 12%
and 17% of total sales for the years ended December 31, 2003 and 2002,
respectively.

Sales to unaffiliated customers which represent 10% or more of the
Company's sales for the years ended December 31, 2003 and 2002 were as
follows (as a percentage of sales) :

Customer 2003 2002
-------- ---- ----

A 16% 12%
B 7% 16%

All customers identified above are from the semiconductor segment of the
Company's business.

At December 31, 2003, the Company had gross trade receivables totaling
$311,767 due from the above two customers.

In 2003 and 2002, the Company purchased all of its memory wafers, based on
0.8 micron technology from a single supplier Chartered Semiconductor
Manufacturing. Approximately 78% and 80% of the Company's net revenue for
2003 and 2002, respectively, were from finished units produced from these
wafers. The Company had an agreement with Chartered Semiconductor
Manufacturing to provide wafers, which expired in September 1998. This
agreement has not been extended or terminated, however, this supplier still
provides wafers to the Company. In February 2003, the Company received
notification from Chartered Semiconductor Manufacturing that they will
close their wafer fabrication facility #1, where the Company's memory
wafers are manufactured, by March 2004. The Company and Chartered are in
the process of transferring the manufacturing of the Company's memory
wafers to Chartered's manufacturing facility #2. Facility #2 is newer and
more modern than facility #1, processing 8 inch wafers rather than the
older 6 inch wafers processed in facility #1. Assuming the transfer can
produce memory wafers that meet the Company's specifications, the Company
anticipates the transfer to be completed in time to provide an
uninterrupted supply of the Company's current 0.8 micron family of
nonvolatile Static Random Access memory products. This would avoid any
material impact on its ability to support customers. If the Company and
Chartered cannot complete the transfer of manufacturing into facility

SIMTEK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

#2 or if the Company cannot contract with another supplier, this will have
a material negative impact on the Company's future revenues and earnings.
The Company has not had a manufacturing contract with Chartered
Semiconductor Manufacturing since 1998. However, the Company has maintained
a good relationship with Chartered for the pricing and delivery of the
Company's wafers. Due to not having a contract with Chartered Semiconductor
Manufacturing and the volatility of the semiconductor market, the Company
may not have control over the pricing and availability of the wafers the
Company requires in order to build the Company's products. The risk of the
Company not receiving the products and pricing the Company needs from
Chartered Semiconductor Manufacturing has escalated, but the Company is
evaluating alternative sources of supply. If the Company is unable to
obtain the products and pricing it needs, the Company's business could
suffer.

In addition, the Company purchased all of its logic wafers from two
suppliers located in Singapore and Taiwan. Approximately 7% of its net
revenue for 2003 and 2002 were from finished units produced from these
wafers. In February 2003, the Company received notification from United
Microelectronics that it will be unable to supply us with logic wafers
after August 2003. The Company supported customers with 0.5 micron logic
wafers manufactured at United Microelectronics through December 2003 by
offering opportunities to purchase their life-time requirements for these
products with deliveries scheduled by the end of the year. As of December
31, 2003, the Company does not plan to support sales of logic products to
the market.

8. TAXES:
-----

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 $ 3,000
Reserves 142,000
Accrued expenses 79,000
------------
Net current deferred tax before
valuation allowance 224,000
Valuation allowance (224,000)
------------
Total current deferred tax $ --
============

Non-Current:
Net operating losses $ 11,791,000
Property and equipment (19,000)
Intangibles 1,172,000
AMT credit 8,000
------------
Net non-current deferred tax asset before
valuation allowance 12,952,000
Valuation allowance (12,952,000)
------------
Total non-current deferred tax asset $ --
============

SIMTEK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 2003 decreased
$525,000 and increased $526,000 in 2002.

At December 31, 2003, the Company has approximately $32,000,000 available
in net operating loss carryforwards which begins to expire from 2004 to
2016. As a result of certain non-qualified stock options which have been
exercised, approximately $3,603,000 of the net operating loss carryforward
will be charged to "paid in capital," when, and if, the losses are
utilized. Also, a substantial portion of the net operating loss may be
subject to Internal Revenue Code Section 382 limitations.

Total income tax expense for 2003 and 2002 differed from the amounts
computed by applying the U.S. Federal statutory tax rates to pre-tax income
as follows:

2003 2002
------ -------

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%
----- -----
$ - $ -
===== =====

9. 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.

Description Years Semiconductor Government Total
Devices Contracts

Net sales 2003 $ 12,262,820 $ 2,240,951 $ 14,503,771
2002 12,422,087 1,904,618 14,326,705

Net income (loss) 2003 $ (2,388,730) $ 116,089 $ (2,272,641)
2002 (1,027,908) 65,041 (962,867)

Interest income 2003 $ 30,116 $ -- $ 30,116
2002 42,447 -- 42,477

SIMTEK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Interest expense 2003 $ (254,144) $ -- $ (254,144)
2002 (146,176) (1,745) (147,921)

Depreciation and 2003 $ 469,498 $ 28,203 $ 497,701
amortization 2002 407,193 35,953 443,146

Total Assets 2003 $ 7,302,829 $ 694,958 $ 7,997,787
2002 7,931,832 575,218 8,507,050

Item 8: Changes in and Disagreements with Accountants on Accounting and
------------------------------------------------------------------------
Financial Disclosure
--------------------

None in 2003.

Item 8A: Controls and Procedures
--------------------------------

(a) Evaluation of disclosure controls and procedures.

Douglas Mitchell, who serves as the Company's chief executive officer and
chief financial officer (acting), after evaluating the effectiveness of the
Company's disclosure controls and procedures (as defined in Exchange Act Rules
13a-14(c) and 15d-14(c) the filing date of this annual report (the "Evaluation
Date") concluded that as of the Evaluation Date, the Company's disclosure
controls and procedures were adequate and effective to ensure that information
required to be disclosed by the Company in reports that it files or submits
under the Exchange Act is recorded, processed, summarized and reported as
specified in the SEC's rules and forms.

(b) Changes in internal control over financial reporting.

There were no changes in the Company's internal control over financial
reporting during the three months ended December 31, 2003, that have materially
affected, or are reasonably likely to materially affect, internal control over
financial reporting.

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
--------------------------------------------------------------------------------
WITH SECTION 16(A) OF THE EXCHANGE ACT
--------------------------------------

Our directors and executive officers are as follows:

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

Douglas M. Mitchell.............................. 55 Director, Chief Executive Officer, President and
Chief Financial Officer (acting) and Chairman
of the Board of Q-DOT Group, Inc.

Thomas Linnenbrink............................... 60 Director, President, Chief Executive Officer,
and Technical Director of Q-DOT Subsidiary

Donald G. Carrigan............................... 56 Vice President Sales and Marketing, Corporate
Secretary

David W. Still................................... 48 Vice President of Engineering

Klaus C. Wiemer.................................. 66 Director

Robert H. Keeley................................. 63 Director

Harold Blomquist................................. 52 Chairman of the Board

John Heightley................................... 67 Director

Robert C. Pearson................................ 68 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 is also the Chairman of the Board of our
subsidiary, Q-DOT Group. 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.
Previously, Mr. Mitchell was Vice President of Marketing and Sales for Array
Microsystems, a digital signal processing integrated circuit company
specializing in video image processing. 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.

THOMAS E. LINNENBRINK, has served as President, Chief Executive Officer,
Technical Director and a director of Q-DOT, Inc. since he co-founded it in 1977.
Mr. Linnenbrink also founded Q-DOT Group, in 1990 and served as its President,
Chief Executive Officer, and a director until Simtek acquired it in March 2001.
Mr. Linnenbrink has served in various technical management and marketing
positions for more than 35 years while advancing the state-of-the-art in data
acquisition and signal processing. He pioneered high-speed charge-coupled device
(CCD) and silicon germanium (SiGe) technology and applications. Mr. Linnenbrink
has published numerous technical papers and holds more than a dozen patents. He
currently chairs IEEE Technical Committee 10, which writes and promotes
standards for ADCs, DACs, digital waveform recorders, and pulse technology. Mr.
Linnenbrink holds a Bachelors degree in electrical engineering from the Illinois
Institute of Technology and a Masters of Science degree in engineering science
with emphasis on automatic control from Rensselaer Polytechnic Institute.

DONALD G. CARRIGAN has served as Vice President of Sales and Marketing and
Corporate Secretary since joining Simtek in September of 2001. Mr. Carrigan has
over 29 years experience in the semiconductor industry. Prior to joining Simtek
he was vice president of sales for Ramtron International Corporation and an
executive officer of Ramtron. During his 12 years at Ramtron, Mr. Carrigan held
various marketing and sales positions as well as General Manager of the
ferroelectric product business unit. Prior to joining Ramtron, Mr. Carrigan was
with Inmos Corporation for 8 years where he held various positions in
engineering and marketing management including the Director of Marketing
position. Mr. Carrigan also held positions in engineering management and R & D
with NCR Microelectronics and Texas Instruments. Mr. Carrigan holds a Bachelors
degree in Electrical Engineering from the University of Tennessee, Knoxville,
Tennessee and a Masters degree in Electrical Engineering from Southern Methodist
University, Dallas, Texas.

DAVID W. STILL has served as the Vice President of Engineering at Simtek
since December of 2001. Mr. Still has over 25 years experience in various
corporate, management, and technical positions within the semiconductor
industry, where he has successfully managed engineering teams developing
products in CMOS, bipolar, and GaAs processes, as well as associated CAD
software. Prior to his work at Simtek, he served as Vice President of IC
engineering for Comsilica, developing SOC WLAN products for 802.11a and b
wireless networks. Previously, he served as manager of the Colorado Design
Center for Lattice Semiconductor (formerly Minc), an FGPA / CPLD CAD software
company. Mr. Still was also a Vice President of Engineering at Array
Microsystems, a digital video product company, where he managed the CMOS IC
design and software development groups. He has also held engineering management
positions with Prisma and Honeywell. At Honeywell, he received two technical
excellence awards for his contributions to PLA designs. Mr. Still has published
over 18 technical papers and has received 2 patents. Mr. Still holds a Masters
Degree in Electrical Engineering from Arizona State University and a Bachelors
Degree in Electrical Engineering from the University of Nebraska.

KLAUS C. WIEMER has served as a director since May 1993. He also serves on
the boards of InterFET Corp of Richardson, TX, UTAC of Singapore and Scientific
Systems of Dublin, Ireland. From July 1993 to May 1994, Dr. Wiemer served as
President and Chief Executive Officer of our company. Dr. Wiemer is the founder
of Communicant Semiconductor Technologies AG, an integrated circuit foundry
start-up company located in Frankfurt/Oder, Germany, and served as its CEO until
May 2002. 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 two private companies.

HAROLD A. BLOMQUIST was originally appointed as a director in May 1998,
resigned from the Board in July 2001 to avoid a potential conflict of interest
with his employer and was re-appointed in January 2002. In October 2003, Mr.
Blomquist was elected to the position of Chairman of the Board of Directors. Mr.
Blomquist is currently employed as President and Chief Executive Officer of
Morpho Technologies, Inc., a three-year-old fabless semiconductor company
located in Irvine, CA. He has served as a Director on the Board of Microsemi,
Inc. since February 2003 and as a consultant to venture investors and early
stage technology companies in the semiconductor and electronic components areas.
In the past, he was employed as Chief Executive Officer of Tower Semiconductor,
USA, Inc., and President and Chief Executive Officer of ZMD America, Inc. Before
ZMD America, Inc., Mr. Blomquist served as a member of the Board of Directors of
AMIS Holding Co., Sr. Vice President of AMI Semiconductor and General Manager
and Chief Executive of two of AMIS' foreign subsidiaries, AMI GmbH in Dresden,
Germany, and AMI Japan Co. Ltd., in Tokyo, Japan. Prior to 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 Corporation and General Semiconductor. Mr. Blomquist
was granted a BSEE degree with a double major in Business Administration 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, chief technology officer and a director
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.

ROBERT C. PEARSON has served as a director since July 2002. He joined RENN
Capital Group, Inc. in April 1997 and is Senior Vice President-Investments. From
May 1994 to May 1997, Mr. Pearson was an independent financial management
consultant primarily engaged by RENN Capital. From May 1990 to May 1994, he
served as Chief Financial Officer and Executive Vice President of Thomas Group,
Inc., a management consulting firm, where he was instrumental in moving a small

privately held company from a start-up to a public company with over $40 million
in revenues. Prior to 1990, Mr. Pearson spent 25 years at Texas Instruments
Incorporated where he served in several positions including Vice
President-Controller and later as Vice President-Finance. Mr. Pearson holds a BS
in Business from the University of Maryland and was a W.A. Paton Scholar with an
MBA from the University of Michigan. He is currently a Director of Poore
Brothers, Inc., CaminoSoft, Inc., Advanced Power Technology, Inc., and Simtek,
all publicly held. He is also a Director of eOriginal, Inc., a privately held
company.

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.

In 1994, we entered into a Product License Development and Support
Agreement, with Zentrum Mikroelektronik Dresden. This agreement, modified later
in 1994 and again in 1995, provides Zentrum Mikroelektronik Dresden the right to
appoint two members to our board of directors which members must be acceptable
to, and approved by, our board of directors. Although this agreement and its
modifications do not have a set termination date, Zentrum Mikroelektronik
Dresden's two nominees to our board of directors resigned in April 1998 and
Zentrum Mikroelektronik Dresden has not attempted to nominate anyone to our
board since then. Zentrum Mikroelektronik Dresden currently holds a competitive
position to us in the marketplace. Furthermore, Zentrum Mikroelektronik
Dresden's right to appoint two members to our board of directors was subject to
Zentrum Mikroelektronik Dresden's compliance with the terms of the Product
License Development and Support Agreement and its amendments. We cannot assure
you that Zentrum Mikroelektronik Dresden will not claim that it has the right to
appoint two members to our board of directors in the future, again acceptable to
and approved by our board of directors, or that Zentrum Mikroelektronik Dresden
will not succeed in securing such appointment.

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 Business
Corporation Act. The Colorado Business Corporation Act 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:

o breaches of the director's duty of loyalty to the corporation or to its
shareholders;

o acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of the law;

o other acts specified in the Colorado Business Corporation Act, such as acts
involving voting for or assenting to a distribution made in violation of
the Colorado Business Corporation Act or our articles of incorporation;

o transactions from which the director derived an improper personal benefit.

The provisions of the Colorado Business Corporation Act 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 Act, 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.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers and controlling
persons of Simtek pursuant to the foregoing provisions, or otherwise, Simtek has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

To our knowledge, based solely upon a review of reports furnished to us and
written representations that no other reports were required, during the fiscal
year ended December 31, 2003, all filing requirements applicable to officers,
directors and greater than 10% beneficial owners of our common shares under
Section 16(a) of the Exchange Act were complied with, except as noted below:

Mr. Douglas Mitchell filed one amendment to Form 4 on April 14, 2003 (which
amended a Form 4 previously filed on April 2, 2003 with respect to a transaction
occurring on April 2, 2003), one Form 4 on May 23, 2003 with respect to the
acquisition of stock on March 14, 2001 and five stock option grants occurring on
June 24, 1997, June 5, 1998, April 27, 1999, January 14, 2000 and January 2,
2001, respectively, and one Form 3 on May 23, 2003 with respect to an event
occurring on May 21, 1997. Mr. Robert Pearson filed one Form 4 on April 21, 2003
with respect to a transaction occurring on April 15, 2003. Mr. Robert Keeley
filed one Form 4 on May 23, 2003 with respect to five stock option grants
occurring on June 5, 1998, April 27, 1999, April 17, 2000, April 16, 2001 and
April 15, 2002, respectively, and one Form 3 on May 23, 2003 with respect to an
event occurring on May 25, 1993. Mr. John Heightley filed: one Form 4 on May 23,
2003 with respect to three stock option grants occurring on April 17, 2000,
April 16, 2001 and April 15, 2002, respectively; and one Form 3 on May 23, 2003
with respect to an event occurring on September 21, 1998. Mr. Klaus Wiemer filed
one Form 4 on May 23, 2003 with respect to five stock option grants occurring on
June 5, 1998, April 27, 1999, April 17, 2000, April 16, 2001 and April 15, 2002,
respectively, and one Form 3 on May 23, 2003 with respect to an event occurring
on May 25, 1993. Mr. Harold Blomquist filed one Form 4 on May 23, 2003 with
respect to a stock option grant occurring on April 15, 2002, and one Form 3 on
May 23, 2003 with respect to an event occurring on January 02, 2002. Mr. Harold
Blomquist also filed one Form 4 on January 13, 2004 for an event occurring on
October 31, 2003. Mr. David Still filed one Form 3 on January 24, 2003 with
respect to an event occurring on December 4, 2001. Mr. Donald Carrigan filed one
Form 3 on January 24, 2003 with respect to an event occurring on September 19,
2001. Mr. Thomas Linnenbrink filed one Form 3 on February 5, 2003 with respect
to an event occurring on March 13, 2001.

AUDIT COMMITTEE AND FINANCIAL EXPERT

Our board of directors has established an audit committee comprised of
Messrs. Blomquist, Keeley and Wiemer. Our board has determined that Mr. Keeley
has the requisite education, background or experience to be considered an "audit
committee financial expert" as that term is defined by the SEC.

ITEM 10. EXECUTIVE COMPENSATION
--------------------------------

SUMMARY COMPENSATION TABLE

The following table sets forth 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, 2003 and each other executive officer of the Company who served
during any part of 2003 whose annual salary and bonus for the fiscal year ended
December 31, 2003 exceeded $100,000.

Summary Compensation Table

Long Term Compensation
----------------------
Annual Compensation Awards
----------------------------------------- ----------------------

Name Other
and Annual Securities
Principal Compen- Underlying
Position Year Salary($) Bonus($) sation($) Options
--------- ---- --------- -------- --------- ----------

Douglas M. Mitchell(1) 2003 $175,000 -- -- 200,000
Chief Executive Officer 2002 $175,000 -- -- --
Chief Financial Officer 2001 $167,708 $34,375 -- 300,000
(acting) and President

Thomas Linnenbrink(2) 2003 $141,200 -- -- 30,000
Chief Executive Officer 2002 $135,408 -- -- 30,000
President and Technical 2001 $111,447 $13,520(3) $5,700(4) 150,000
Director of Q-DOT
Subsidiary

Donald G. Carrigan(5) 2003 $132,500 $29,268(6) -- 30,000
Vice President of Sales 2002 $130,000 $42,228(6) -- --
and Marketing 2001 $40,625 -- -- 250,000

David W. Still(7) 2003 $134,000 -- -- 50,000
Vice President of 2002 $130,000 -- -- --
Engineering 2001 $ 20,417 -- -- 250,000

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

(2) Simtek acquired Q-DOT Group on March 14, 2001 and these payments reflect
what he was paid after that date in his capacity as President of our Q-DOT
Group subsidiary.

(3) Mr. Linnenbrink personally secured bank loans used in the operations of
Q-DOT Group. Mr. Linnenbrink was guaranteed compensation for personally
securing these loans. The loans were paid off on March 14, 2002 and Mr.
Linnenbrink will receive no further compensation related to these loans.

(4) At the time of the Q-DOT Group acquisition, Mr. Linnenbrink was paid for
vacation hours that were in excess of Simtek's vacation policy.

(5) Mr. Carrigan became our Vice President of Sales and Marketing on August 31,
2001.

(6) Mr. Carrigan is on a bonus plan that is directly related to net revenue and
department spending.

(7) Mr. Still became our Vice President of Engineering on December 3, 2001.

OPTION GRANT TABLE

The following table sets forth certain information with respect to options
granted by us during the fiscal year ended December 31, 2003 to the individuals
named in the summary compensation table above.

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

Douglas Mitchell 200,000(1) 26.16% $0.14 $0.14 3/3/2010 $11,399 $26,564
Thomas Linnenbrink 30,000(2) 3.92% $0.16 $0.16 2/3/2010 $1,954 $4,554
Donald Carrigan 30,000(3) 3.92% $0.17 $0.17 1/22/2010 $2,076 $4,838
David Still 50,000(4) 6.54% $0.17 $0.17 1/22/2010 $3,460 $8,064

(1) 200,000 options were granted to Mr. Mitchell in his capacity as Chief
Executive Officer, President and acting Chief Financial Officer, these
options vest at 1/36th per month over 3 years.

(2) 30,000 options were granted to Mr. Linnenbrink in his capacity as Chief
Executive Officer, President and Technical Director of our Q-DOT Group
subsidiary; these options vest at 1/36th per month over 3 years.

(3) 30,000 options were granted to Mr. Carrigan in his capacity as Vice
President of Sales and Marketing, these options vest at 1/36th per month
over 3 years.

(4) 50,000 options were granted to Mr. Still in his capacity as Vice President
of Engineering, these options vest at 1/36th per month over 3 years.

YEAR-END OPTION TABLE

The following table sets forth, as of December 31, 2003, the number of
shares subject to unexercised options held by the individuals named in the
summary compensation table above. 1,505,279 exercisable options had an exercise
price less 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, 2003.

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 at Fiscal Options
Year-End at Fiscal Year-End
Shares Value
Acquired on Realized Exercisable Unexercisable Exercisable Unexercisable
Name Exercise (#) ($) (#) (#) ($) ($)
------------------ ------------- -------- ----------- ------------- ----------- -------------

Douglas Mitchell - - 961,667 158,333 $801,884 $165,616
Thomas Linnenbrink - - 165,000 45,000 $106,308 $ 38,592

Donald G. Carrigan - - 196,667 83,333 $185,692 $ 80,208

David W. Still - - 181,945 118,055 $165,737 $110,763

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 an annual salary of $175,000 and such additional benefits
that are generally provided other employees. Mr. Mitchell's employment agreement
expired June 1, 2001 but was, and 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. The Chairman of the Board receives $4,000 per calendar quarter,
$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, 2003, 15,000 stock options were
granted, at the market price on date of grant, to Mr. Harold Blomquist, Dr.
Klaus Wiemer, Dr. Robert Keeley, Mr. John Heightley and Mr. Robert Pearson,
which market price was $0.165 per share. During 2003, Mr. Harold Blomquist was
granted an additional 75,000 stock options which he received for his appointment
as Chairman of the Board. The options were granted at the market price on date
of grant, which market price was $0.83 per share.

We have adopted a code of business conduct and ethics that applies to our
Chief Executive Officer, the Chief Financial Officer, and the Controller, as
well as to our directors and employees. The code of business conduct and ethics
can be found at our Internet website at www.simtek.com.

ITEM 11: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
------------------------------------------------------------------------

The first table below sets forth information regarding ownership of our
common stock as of February 25, 2004, 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
after March 31, 2004 upon the exercise of options and 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. Shares
issuable upon the conversion of the debentures have been included for the
purpose of computing the percentage ownership. 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.

Name and Amount and Nature
Address of of Beneficial Percent of
Beneficial Owner Ownership Class
---------------- ----------------- ----------

Douglas M. Mitchell 1,062,164 (1) 1.83%
205 Ridge Dr.
Woodland Park, CO 80863

Klaus C. Wiemer 165,000 (2) *
5705 Archer Court
Dallas, TX 75252

Robert H. Keeley 85,000 (3) *
P. O. Box 25599
Silverthorne, CO 80497

John D. Heightley 100,000 (4) *
1275 Log Hollow Point
Colorado Springs, CO 80906

Thomas E. Linnenbrink 1,079,961 (5) 1.89%
1457 Smoochers Circle
Colorado Springs, CO 80904

Harold A. Blomquist 75,000 (6) *
13625 Antelope Station
Poway, CA 92064

Donald G. Carrigan 236,056 (7) *
425 Scrub Oak Circle
Monument, CO 80132

David W. Still 223,611 (8) *
4250 Buckingham Dr. Suite 100
Colorado Springs, CO 80907

Mr. Robert Pearson 15,000 (9) *
8080 N. Central Expressway,
Suite 210-LB59
Dallas, TX 75203

RENN Capital Group (10) 14,017,367 (11) 20.79%
8080 N. Central Expressway,
Suite 210-LB59
Dallas, TX 75203

All officers and directors as
a group (9 persons) 3,041,792 (12) 4.38%

-----------------------------
* Less than one percent.

(1) Represents 44,386 shares of our common stock that Mr. Mitchell acquired
through our acquisition of Q-DOT Group, 20,000 shares of our common stock
that Mr. Mitchell personally owns and includes 997,778 shares issuable upon
exercise of options.

(2) Represents 85,000 shares of our common stock that Mr. Wiemer acquired upon
the exercise of 85,000 options and includes 80,000 shares issuable upon
exercise of options.

(3) Includes 60,000 shares issuable upon exercise of options. Includes 15,000
shares of our common stock the Mr. Keeley acquired upon the exercise of 15,
000 options and includes 10,000 shares of our common stock held by Mr.
Keeley's wife, Sandra D. Keeley. Mr. Keeley disclaims beneficial ownership
of these shares.

(4) Includes 100,000 shares issuable upon exercise of options.

(5) Represents 894,128 shares of our common stock that Mr. Linnenbrink acquired
through our acquisition of Q-DOT Group and includes 185,833 shares issuable
upon exercise of options.

(6) Includes 75,000 shares issuable upon exercise of options.

(7) Represents 500 shares of our common stock that Mr. Carrigan personally owns
and includes 235,556 shares issuable upon exercise of options.

(8) Includes 223,611 shares issuable upon exercise of options.

(9) Includes 15,000 shares issuable upon exercise of options.

(10) Pursuant to the Convertible Loan Agreement, dated as of June 28, 2002, by
and among Simtek and the RENN investment funds, the RENN investment funds
have the right to designate a nominee to serve as a member of the board of
directors. Mr. Robert C. Pearson currently serves on Simtek's board of
directors as such nominee.

(11) Assumes conversion, at a conversion price of $0.312 per share, of all
debentures issued to affiliates of RENN. Assumes exercise of warrants held
by the RENN investment funds for 750,000 shares of our common stock. Also
represents 1,651,982 shares of our common stock that the RENN investment
funds acquired pursuant to the $1,500,000 equity investment on November 7,
2003.

(12) Includes 1,972,778 shares issuable upon exercise of options. Does not
include the 14,017,367 shares beneficially owned by RENN Capital Group. Mr.
Robert Pearson is a Senior Vice President of RENN Capital Group. Mr.
Pearson also holds the position of a director on Simtek's board of
directors.

ITEM 12: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------

Our president and director, Douglas Mitchell was also a director of Q-DOT
Group prior to our acquisition of Q-DOT Group. Mr. Mitchell disclosed all
material facts as to his conflict of interest in the acquisition. The board of
directors determined that the acquisition was fair to us and in our best
interest. Mr. Mitchell abstained from the vote of the Q-DOT Group and Simtek
board of directors decision to approve the acquisition. At the time of
acquisition, Mr. Mitchell owned approximately 1% of the Q-DOT Group shares and
he received 44,386 shares of our common stock in connection with our acquisition
of Q-DOT Group, pro rata with the terms that all of the other Q-DOT Group
shareholders.

On July 1, 2002, we received funding of $3,000,000 in a convertible
debenture financing transaction with the RENN investment funds. RENN Capital
Group is the agent for the RENN investment funds. Mr. Robert Pearson, a Senior
Vice President of RENN Capital Group, became a Simtek director following such
transaction. RENN Capital Group, or its affiliates, owns 2,000,000 shares of our
common stock.

On November 7, 2003, we closed a $1,500,000 equity financing with the RENN
investment funds. One of our directors holds the position of Senior Vice
President of RENN Capital Group. In exchange for the $1,500,000, we issued
1,651,982 shares of our common stock to the RENN investment funds. In addition
to the shares of common stock, each fund received warrants to acquire 250,000
shares of our common stock. The warrants have a 5-year term with an exercise
price of $1.25 per share for 125,000 shares and $1.50 per share for 125,000
shares.

PART IV

ITEM 13: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
-------------------------------------------------------------------------

Documents filed as part of this report:

A: (1) Financial Statements

Reference is made to the listing on page 34 for an index of all
financial statements filed as part of this report.

(2) All other schedules are omitted because they are not required, are
inapplicable, or the information is otherwise shown in the financial
statements or the notes thereto.

B. Reports on Form 8-K:

The following table lists all reports filed on Form 8-K for the fourth
quarter of 2003.

Date Item
---- ----

November 12, 2003 Item 5: Other Information and Required FD Disclosure -
Simtek Closes $1.5 Million Financing with RENN Capital
Group of Dallas

Item 7: Financial Statements, Pro Forma Financial
Information and Exhibits.

November 14, 2003 Item 5: Other Information and Required FD Disclosure -
Press Release, Dated November 13, 2003, of the Company
with respect to the Third Quarter Financial Results

C. Exhibits:

10.27 Amendment dated January 27, 2004 between Simtek
Corporation and Baja Properties, LLC (Landlord)
(together with amendment dated June 7, 2000 and
Lease Agreement dated July 26, 2000)

14.1 Code of Business Conduct and Ethics

31 Certification Pursuant to Section 304 of
Sarbanes-Oxley Act of 2002

32 Certification Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act 0f 2002

Exhibit Index regarding exhibits filed in accordance with Item 601, at page
69 hereof.

D. Other Financial Statements:

All other schedules are omitted because they are not required, are
inapplicable, or the information is otherwise shown in the financial
statements or the notes thereto.

ITEM 14: PRINCIPAL ACCOUNTANT FEES AND SERVICES
------------------------------------------------

Hein & Associates LLP served as the Company's principal accountants for the
fiscal year ended December 31, 2003, and the board has selected Hein &
Associates LLP as Simtek's principal accountants for the 2004 fiscal year.

AUDIT FEES

Simtek was billed an aggregate of approximately $55,000 and $56,000 in fees
for professional services rendered during the fiscal years ended December 31,
2003 and December 31, 2002, respectively in connection with the audit of
Simtek's consolidated financial statements for such fiscal years and the reviews
of the financial statements included in the Simtek's Forms 10-QSB for such
fiscal years and statutory and regulatory filings or engagements for such years.

AUDIT-RELATED FEES

Simtek was not billed for any assurance and related services by Hein &
Associates LLP during the fiscal years ended December 31, 2003 and December 31,
2002.

FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES

During the year ended December 31, 2003, Hein & Associates LLP did not
provide or bill Simtek for any services related to the design and implementation
of financial information systems.

ALL OTHER FEES

Hein & Associates LLP did not bill the Company for any other services
rendered to Simtek for the fiscal years ended December 31, 2003 and December 31,
2002.

TAX FEES

Simtek was billed an aggregate of approximately $14,000 and $14,000 in fees
for professional services rendered during the fiscal year ended December 31,
2003 and December 31, 2002, respectively for tax compliance, tax advice and tax
planning.

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, in the City of Colorado
Springs, State of Colorado, United States of America, on March 4, 2004

SIMTEK CORPORATION

By: /S/ DOUGLAS M. MITCHELL
-------------------------------------
Douglas M. Mitchell
Chief Executive Officer and
President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed on March 4, 2004 by the following persons on behalf of the
Registrant and in the capacities indicated.

SIGNATURE TITLE

/S/ DOUGLAS M. MITCHELL Chief Executive Officer and
------------------------------------- President

Douglas M. Mitchell

/S/ DOUGLAS M. MITCHELL Chief Financial Officer
------------------------------------- (acting)
Douglas M. Mitchell

/S/ DOUGLAS M. MITCHELL Director
-------------------------------------
Douglas M. Mitchell

/S/ ROBERT H. KEELEY Director
-------------------------------------
Robert H. Keeley

/S/ KLAUS WIEMER Director
-------------------------------------
Klaus Wiemer

/S/ HAROLD BLOMQUIST Director
-------------------------------------
Harold Blomquist

/S/ KIMBERLEY A. CAROTHERS Controller
-------------------------------------
Kimberley A. Carothers

EXHIBIT INDEX TO FORM 10-K

FOR FISCAL YEAR ENDED DECEMBER 31, 2003

Exhibits:
--------

All exhibits listed below are incorporated herein by reference.

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.(1)
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)
4.8 Q-DOT Group, Inc. Incentive Stock Option Plan of March 1994 adopted by
Simtek (15)
4.9 Form of Q-DOT Group, Inc. Incentive Stock Option Agreement between the
Company and Eligible Employees.(15)
4.10 Amendment to the 1994 Non-Qualified Stock Option Plan.(15)
10.1 Form of Non-Competition and Non-Solicitation Agreement between the
Company and certain of its employees.(1)
10.2 Form of Employee Invention and Patent Agreement between the Company
and certain of its employees.(1)
10.3 Product License Development and Support Agreement between Simtek
Corporation and Zentrum Mikroelektronik Dresden GmbH dated June 1,
1994(5)
10.4 Cooperation Agreement between Simtek Corporation and Zentrum
Mikroelektronik Dresden GmbH dated September 14, 1995(6)
10.5 Manufacturing Agreement between Chartered Semiconductor Manufacturing,
PTE, LTD. and Simtek Corporation dated September 16, 1992(6)
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, Inc. (12)
10.12 Agreement and Plan of Merger among Simtek Corporation, W-DOT Group,
Inc. and Q-DOT, Inc. (13)
10.13 Employment Agreement between Simtek Corporation and Hugh N. Chapman
(14)
10.14 Technology Development, License and Product Agreement between Amkor
Technology and Simtek (16)
10.15 Manufacturing Services Agreement between Amkor Technology, Inc. and
Simtek Corp (16)
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 (17)
10.17 7.5% $1,000,000 Convertible Debenture between Simtek Corporation and
BSFSUS Special Opportunities Trust, PLC (17)
10.18 7.5% $1,000,000 Convertible Debenture between Simtek Corporation and
Renaissance Capital Growth & Income Fund III, Inc. (17)
10.19 7.5% $1,000,000 Convertible Debenture between Simtek Corporation and
Renaissance Capital US Growth & Income Trust, PLC (17)
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 (17)
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 (17)
10.22 Technology Development, License and Product Agreement between Amkor
Technology and Simtek - Amended September 2002 (18)
10.23 Assignment, dated February 21, 2003, of the Agreement(s) between
Simtek Corporation and Amkor Technology, Inc.(19) 69

10.24 Securities Purchase Agreement between Simtek Corporation and
Renaissance Capital Growth & Income Fund III, Inc. and Renaissance US
Growth and Income Trust, PLC and BFSUS Special Opportunities Trust,
PLC(20)
10.25 Form of $1.25 Stock Purchase Warrant(20)
10.26 Form of $1.50 Stock Purchase Warrant(20)
10.27 Amendment dated January 27, 2004 between Simtek Corporation and Baja
Properties, LLC (Landlord) (together with amendment dated June 7, 2000
and underlying lease dated July 26, 2000)
14.1 Code of Business Conduct and Ethics
23.1 Consent of Independent Public Accountants
31 Certification Pursuant to Section 304 of the Sarbanes-Oxley Act of
2002
32 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes- Oxley Act of 2002

------------------
(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 13, 2000
(12) Incorporated by reference to the Company's Amendment No. 2 to From SB-2
Registration Statement (Reg. No. 333-40988)
(13) Incorporated by reference to the Company's Form 8-K filed with the March
23, 2001
(14) Incorporated by reference to the Form SB-2 Registration Statement Amendment
#3 (Reg. No. 333-60492) filed with the Commission on September 4, 2001
(15) Incorporated by reference to the Company's Form S-8 Registration Statement
(Reg. No. 333-73794) filed with the Commission on November 20, 2001
(16) Incorporated by reference to the Company's Annual Report on Form 10-KSB
filed with the Commission on March 27, 2002
(17) Incorporated by reference to the Company's Quarterly Report on Form 10-QSB
filed with the Commission on August 13, 2002
(18) Incorporated be reference to the Company's Quarterly Report on Form 10-QSB
filed with the Commission on November 8, 2002
(19) Incorporated by reference to the Company's Annual Report on Form 10-KSB
filed with the Commission on March 27, 2003
(20) Incorporated by reference from the Current Report on Form 8-K filed by the
Company with the SEC on November 12, 2003

CORPORATE INFORMATION

BOARD OF DIRECTORS-Simtek Corporation

Harold Blomquist, Chairman of Board 1,2,3

Klaus C. Wiemer 1,2,3

Douglas M. Mitchell

Robert Keeley 1,2,3

John Heightley

Robert Pearson

Board of Directors Committees
1 Compensation Committee
2 Stock Committee
3 Audit Committee

BOARD OF DIRECTORS-Q-DOT Subsidiary

Douglas M. Mitchell, Chairman of the Board

Thomas Linnenbrink

Donald L. Herman, Jr.

CORPORATE OFFICERS

Douglas M. Mitchell
Chief Executive Officer, President
and Acting Chief Financial Officer

Thomas Linnenbrink
Chief Executive Officer, President
and Technical Director of Q-DOT Subsidiary

Donald Carrigan
Vice President Sales and Marketing and
Corporate Secretary

David Still
Vice President of Engineering

CORPORATE COUNSEL

Holme Roberts & Owen LLP
1700 Lincoln St. Suite 4100
Denver, CO 80203

INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS

Hein & Associates LLP
717 Seventeenth Street, Suite 1600
Denver, Colorado 80202-3338

REGISTRAR AND TRANSFER AGENT

Continental Stock Transfer & Trust Company
17 Battery Place
New York, New York 10004

OTC ELECTRONIC BULLETIN BOARD
SYMBOL

Common Stock: SRAM

CORPORATE OFFICES

4250 Buckingham Drive #100
Colorado Springs, Colorado 80907
Tel: (719) 531-9444
Fax: (719) 531-9481