[X] |
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
[ ] |
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
California
|
94-2848099
|
(State
or other jurisdiction of incorporation or
organization)
|
(IRS
Employer Identification
Number)
|
PART
I. FINANCIAL INFORMATION
|
Page
No.
|
Item
1. Financial Statements:
|
|
Condensed Consolidated Balance Sheets -- October 31, 2005 (Unaudited)
and
January 31, 2005 (Audited)
|
4
|
Condensed Consolidated Statements of Operations -- Three and nine
months
ended October 31, 2005 and 2004 (Unaudited)
|
5
|
Condensed Consolidated Statements of Cash Flows - Nine months ended
October 31, 2005 and 2004 (Unaudited)
|
6
|
Notes to Condensed Consolidated Financial Statements
|
8
|
Item
2. Management's Discussion and Analysis of Financial Condition
and Results
of Operations
|
16
|
Item
3. Quantitative and Qualitative Disclosures About Market Risk
|
33
|
Item
4. Controls and Procedures
|
34
|
PART
II. OTHER INFORMATION
|
|
Item
1. Legal Proceedings
|
35
|
Item
6. Exhibits
|
36
|
Signatures
|
37
|
October
31,
|
January
31,
|
||||||
2005
|
2005
|
||||||
(Unaudited)
|
|||||||
Assets
|
|||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
15,074
|
$
|
10,250
|
|||
Marketable
securities
|
9,395
|
8,529
|
|||||
Accounts
receivable, net
|
4,512
|
6,417
|
|||||
Note
receivable-related party
|
500
|
-
|
|||||
Inventories
|
2,990
|
3,675
|
|||||
Prepaid
expenses and other current assets
|
648
|
764
|
|||||
Total
current assets
|
33,119
|
29,635
|
|||||
Equipment
and leasehold improvements, net
|
1,762
|
1,756
|
|||||
Long-term
investments
|
1,282
|
3,313
|
|||||
Other
assets
|
166
|
233
|
|||||
Total
Assets
|
$
|
36,329
|
$
|
34,937
|
|||
Liabilities
and Shareholders' Equity
|
|||||||
Current
liabilities:
|
|||||||
Accounts
payable
|
$
|
1,769
|
$
|
3,540
|
|||
Accrued
liabilities
|
2,037
|
2,097
|
|||||
Current
portion of bank term loan
|
205
|
-
|
|||||
Total
current liabilities
|
4,011
|
5,637
|
|||||
Bank
term loan
|
288
|
-
|
|||||
Other
long-term liabilities
|
127
|
188
|
|||||
Shareholders'
equity:
|
|||||||
Common
stock, 35,000,000 shares authorized at no par
|
|||||||
value,
21,533,205 and 21,038,962 shares issued and
|
|||||||
outstanding
at October 31 and January 31, 2005, respectively
|
89,618
|
88,207
|
|||||
Accumulated
other comprehensive income
|
14
|
28
|
|||||
Accumulated
deficit
|
(57,729
|
)
|
(59,123
|
)
|
|||
Total
shareholders' equity
|
31,903
|
29,112
|
|||||
Total
Liabilities and Shareholders' Equity
|
$
|
36,329
|
$
|
34,937
|
Three
months ended
|
Nine
months ended
|
||||||||||||
October
31,
|
October
31,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
Net
revenues
|
$
|
8,497
|
$
|
7,677
|
$
|
22,833
|
$
|
23,549
|
|||||
Costs
and expenses:
|
|||||||||||||
Costs
of revenues
|
2,666
|
2,155
|
7,349
|
7,090
|
|||||||||
Research
and development
|
3,613
|
2,762
|
10,650
|
8,714
|
|||||||||
Sales
and marketing
|
1,259
|
1,137
|
3,713
|
3,563
|
|||||||||
General
and administrative
|
880
|
1,165
|
2,903
|
2,814
|
|||||||||
Total
costs and expenses
|
8,418
|
7,219
|
24,615
|
22,181
|
|||||||||
Income
(loss) from operations
|
79
|
458
|
(1,782
|
)
|
1,368
|
||||||||
Gain
on sale of long-term investments
|
1,497
|
-
|
2,580
|
-
|
|||||||||
Interest
and other income (expense), net
|
370
|
63
|
598
|
516
|
|||||||||
Income
before income taxes
|
1,946
|
521
|
1,396
|
1,884
|
|||||||||
Provision
for (benefit from) income taxes
|
(2
|
)
|
(4
|
)
|
2
|
27
|
|||||||
Net
income
|
$
|
1,948
|
$
|
525
|
$
|
1,394
|
$
|
1,857
|
|||||
Basic
net income per share
|
$
|
0.09
|
$
|
0.03
|
$
|
0.07
|
$
|
0.09
|
|||||
Shares
used in computing per share amount
|
21,447
|
20,838
|
21,307
|
20,754
|
|||||||||
Diluted
net income per share
|
0.08
|
$
|
0.02
|
0.06
|
$
|
0.08
|
|||||||
Shares
used in computing per share amount
|
24,401
|
23,629
|
23,179
|
23,363
|
Nine
months ended
|
|||||||
October
31,
|
|||||||
2005
|
2004
|
||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|||||||
Net
income
|
$
|
1,394
|
$
|
1,857
|
|||
Adjustments
to reconcile net income to net cash provided
|
|||||||
by operating
activities:
|
|||||||
Depreciation
and amortization
|
593
|
342
|
|||||
Provision
for (reversal of) inventory valuation
|
(22
|
)
|
276
|
||||
Provision
for bad debts and sales returns
|
72
|
260
|
|||||
Gain
on sale of long-term investment
|
(2,580
|
)
|
-
|
||||
Investment
impairment charges
|
31
|
-
|
|||||
Accretion
of contributed leasehold improvements
|
(61
|
)
|
(63
|
)
|
|||
Changes
in operating assets and liabilities:
|
|||||||
Accounts
receivable
|
1,834
|
(1,607
|
)
|
||||
Inventories
|
707
|
(1,088
|
)
|
||||
Prepaid
expenses and other current assets
|
182
|
(7
|
)
|
||||
Accounts
payable
|
(1,771
|
)
|
(677
|
)
|
|||
Accrued
liabilities and others
|
(66
|
)
|
726
|
||||
Net
cash provided by operating activities
|
313
|
19
|
|||||
CASH
FLOWS USED FOR INVESTING ACTIVITIES:
|
|||||||
Purchase
of short-term investments
|
(33,173
|
)
|
(9,552
|
)
|
|||
Sale
of short-term investments
|
32,300
|
3,650
|
|||||
Purchase
of Equipment
|
(600
|
)
|
(377
|
)
|
|||
Sale
of Equipment
|
-
|
1
|
|||||
Sale
of Long-term investment
|
4,580
|
-
|
|||||
Purchase
of long-term investments
|
-
|
(2,000
|
)
|
||||
Issuance
of short-term promissory note
|
(500
|
)
|
-
|
||||
|
|||||||
Net
cash provided by (used for) investing activities
|
2,607
|
(8,278
|
)
|
||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|||||||
Bank
term loan borrowings
|
600
|
-
|
|||||
Net
proceeds from sale of common stock
|
1,411
|
805
|
|||||
Repayment
of bank term loan
|
(102
|
)
|
-
|
||||
Repayment
of capital lease obligations
|
-
|
(2
|
)
|
||||
Net
cash provided by financing activities
|
1,909
|
803
|
|||||
Effect
of foreign exchange rates changes on cash
|
(5
|
)
|
26
|
||||
INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS
|
4,824
|
(7,430
|
)
|
||||
CASH
AND CASH EQUIVALENTS:
|
|||||||
Beginning
of period
|
10,250
|
18,962
|
|||||
End
of period
|
$
|
15,074
|
$
|
11,532
|
Nine
months ended
|
|||||||
October
31,
|
|||||||
2005
|
2004
|
||||||
|
|
||||||
Supplimental
disclosure of cash flow information:
|
|||||||
Cash
paid for interest
|
$
|
29
|
$
|
1
|
|||
Cash
paid for income tax
|
$
|
9
|
$
|
3
|
Three
months ended
October
31,
|
Nine
months ended
October
31,
|
|||||||
2005
|
2004
|
2005
|
2004
|
|||||
Stock
Option Plans:
|
||||||||
Risk
free interest rate
|
4.36%
|
2.56%
|
4.29%
|
2.57%
|
||||
Expected
volatility
|
59%
|
|
67%
|
61%
|
80%
|
|||
Expected
life (in years after vesting)
|
1.4
|
1.4
|
1.4
|
1.4
|
||||
Expected
dividends
|
-
|
-
|
-
|
-
|
||||
Employee
Stock Purchase Plans:
|
||||||||
Risk
free interest rate
|
3.34%
|
1.64%
|
3.13%
|
1.26%
|
||||
Expected
volatility
|
62%
|
60%
|
62%
|
71%
|
||||
Expected
life (in years)
|
0.5
|
0.5
|
0.5
|
0.5
|
||||
Expected
dividends
|
-
|
-
|
-
|
-
|
Three
months ended
October
31,
|
Nine
months ended
October
31,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
Net
income as reported
|
$
|
1,948
|
$
|
525
|
$
|
1,394
|
$
|
1,857
|
|||||
Stock-based
employee compensation expense determined
under
fair value based method, net of taxes
|
(417
|
)
|
(569
|
)
|
(1,432
|
)
|
(1,313
|
)
|
|||||
Pro
forma net income (loss)
|
$
|
1,531
|
$
|
(44
|
)
|
$
|
(38
|
)
|
$
|
544
|
|||
Basic
net income
(loss) per share:
|
|||||||||||||
As
reported
|
$
|
0.09
|
$
|
0.03
|
$
|
0.07
|
$
|
0.09
|
|||||
Pro
forma
|
$
|
0.07
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
$
|
0.03
|
|||
Diluted
net income (loss) per share:
|
|||||||||||||
As
reported
|
$
|
0.08
|
$
|
0.02
|
$
|
0.06
|
$
|
0.08
|
|||||
Pro
forma
|
$
|
0.06
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
$
|
0.02
|
October
31,
2005
|
January
31,
2005
|
||||||
Raw
materials
|
$
|
669
|
$
|
1,264
|
|||
Work
in process
|
515
|
251
|
|||||
Finished
goods
|
1,806
|
2,160
|
|||||
Inventories
|
$
|
2,990
|
$
|
3,675
|
Less
than one year
|
$ | 205 | ||
Second
year
|
215
|
|||
Third
year
|
73
|
Three
months ended
October
31,
|
Nine
months ended
October
31,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
Numerator:
|
|||||||||||||
Net
income, as reported
|
$
|
1,948
|
$
|
525
|
$
|
1,394
|
$
|
1,857
|
|||||
Denominator:
|
|||||||||||||
Weighted
average common shares outstanding
|
21,447
|
20,838
|
21,307
|
20,754
|
|||||||||
Shares
used in computation, basic
|
21,447
|
20,838
|
21,307
|
20,754
|
|||||||||
Effect
of dilutive securities:
|
|||||||||||||
Stock
options
|
2,954
|
2,791
|
1,872
|
2,609
|
|||||||||
Shares
used in computation, diluted
|
24,401
|
23,629
|
23,179
|
23,363
|
|||||||||
Net
income per share:
|
|||||||||||||
Basic
|
$
|
0.09
|
$
|
0.03
|
$
|
0.07
|
$
|
0.09
|
|||||
Diluted
|
$
|
0.08
|
$
|
0.02
|
$
|
0.06
|
$
|
0.08
|
Three
months ended
October
31,
|
Nine
months ended
October
31,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
Stock
options
|
-
|
74
|
-
|
74
|
Three
months ended
October
31,
|
Nine
months ended
October
31,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
Net
income
|
$
|
1,948
|
$
|
525
|
$
|
1,394
|
$
|
1,857
|
|||||
Other
comprehensive income (loss)
|
|||||||||||||
-
cumulative translation adjustment
|
(2
|
)
|
4
|
(14
|
)
|
22
|
|||||||
Total
comprehensive income
|
$
|
1,946
|
$
|
529
|
$
|
1,380
|
$
|
1,879
|
Balance
Beginning
of
Period
|
Additions
|
Change
in
pre-existing
warranty
|
Deductions
|
Balance
End
of
Period
|
||||||||||||
Accrued
Warranty Three Months
|
||||||||||||||||
Ended:
October 31, 2005
|
$
|
198
|
$
|
31
|
$
|
(3
|
)
|
$
|
(5
|
)
|
$
|
221
|
||||
Ended:
October 31, 2004
|
162
|
4
|
28
|
(12
|
)
|
182
|
||||||||||
Accrued
Warranty Nine Months
|
||||||||||||||||
Ended:
October 31, 2005
|
191
|
70
|
(11
|
)
|
(29
|
)
|
221
|
|||||||||
Ended:
October 31, 2004
|
134
|
41
|
51
|
(44
|
)
|
182
|
Three
months ended
October
31,
|
Nine
months ended
October
31,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
Boards
|
$
|
1,171
|
$
|
650
|
$
|
2,728
|
$
|
2,764
|
|||||
Chipsets
|
6,908
|
6,175
|
18,948
|
19,268
|
|||||||||
Other
|
418
|
852
|
1,157
|
1,517
|
|||||||||
Total
net revenues
|
$
|
8,497
|
$
|
7,677
|
$
|
22,833
|
$
|
23,549
|
Three
months ended
October
31,
|
Nine
months ended
October
31,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
IP
video application market
|
$
|
4,247
|
$
|
3,740
|
$
|
13,051
|
$
|
12,948
|
|||||
Advanced
DVD/media player market
|
3,053
|
2,664
|
7,355
|
8,187
|
|||||||||
HDTV
product market
|
603
|
249
|
754
|
309
|
|||||||||
PC
add-in and other markets
|
594
|
1,024
|
1,673
|
2,105
|
|||||||||
Total
net revenues
|
$
|
8,497
|
$
|
7,677
|
$
|
22,833
|
$
|
23,549
|
Three
months ended
October
31,
|
Nine
months ended
October
31,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
North
America
|
$
|
1,272
|
$
|
1,312
|
$
|
3,003
|
$
|
3,523
|
|||||
Asia
and other regions
|
6,548
|
3,709
|
18,553
|
13,945
|
|||||||||
Europe
|
677
|
2,656
|
1,277
|
6,081
|
|||||||||
Total
net revenues
|
$
|
8,497
|
$
|
7,677
|
$
|
22,833
|
$
|
23,549
|
·
|
new
product introductions by us and our competitors;
|
·
|
changes
in our pricing models and product sales mix;
|
·
|
unexpected
reductions in unit sales, average selling prices and/or gross margins,
particularly if they occur
precipitously;
|
·
|
expenses
related to compliance with Section 404 of the Sarbanes-Oxley Act
of
2002;
|
·
|
market
acceptance of the technology embodied in our products generally
and our
products in particular;
|
·
|
the
level of acceptance of our products by our OEM customers, and acceptance
of our OEM customers’ products by their end user
customers;
|
·
|
shifts
in demand for the technology embodied in our products generally
and our
products in particular and those of our
competitors;
|
·
|
the
losses of one or more significant
customers;
|
·
|
the
timing of, and potential unexpected delays in, our customer orders
and
product shipments;
|
·
|
reduction
in average selling prices and gross margins, which could occur
either
gradually or precipitously;
|
·
|
inventory
obsolescence;
|
·
|
write-downs
of accounts receivable;
|
·
|
an
interrupted or inadequate supply of semiconductor chips or other
materials
included in our products;
|
·
|
our
inability to protect our intellectual
property;
|
·
|
loss
of key personnel;
|
·
|
technical
problems in the development, ramp up, and manufacturing of products
which
could cause shipping delays;
|
·
|
the
effect of terrorist attacks and any related conflicts or similar
events
worldwide;
|
·
|
availability
of third-party manufacturing capacity for production of certain
products;
|
·
|
the
impact of a recurrence of severe acute respiratory syndrome, or
SARS, or a
similar event, upon our revenues and our supply sources for our
products;
and
|
·
|
the
impact of potential economic instability in the Asia-Pacific
region.
|
·
|
Analog
Devices;
|
·
|
ATI
Technologies;
|
·
|
Broadcom;
|
·
|
Cirrus
Logic;
|
·
|
Conexant
Systems;
|
·
|
ESS
Technology;
|
·
|
LSI
Logic/C-Cube;
|
·
|
Mediatek;
|
·
|
Phillips;
|
·
|
Pixelworks;
|
·
|
STMicroelectronics;
|
·
|
Texas
Instruments; and
|
·
|
Zoran
Corporation.
|
·
|
the
potential disruption of our ongoing
business,
|
·
|
unexpected
costs or incurring unknown
liabilities,
|
·
|
the
diversion of management resources from other business concerns
while
involved in integrating new businesses, technologies or
products,
|
·
|
the
inability to retain the employees of the acquired
businesses,
|
·
|
difficulties
relating to integrating the operations and personnel of the acquired
businesses,
|
·
|
adverse
effects on the existing customer relationships of acquired
companies,
|
·
|
the
potential incompatibility of business
cultures,
|
·
|
adverse
effects associated with entering into markets and acquiring technologies
in areas in which we have little experience,
and
|
·
|
acquired
intangible assets becoming impaired as a result of technological
advancements, or worse-than-expected performance of the acquired
company.
|
·
|
compatibility
with emerging standards and multiple platforms;
and
|
·
|
improvements
to our silicon architecture.
|
·
|
the
absence of adequate capacity;
|
·
|
the
unavailability of, or interruptions in access to, certain process
technologies; and
|
·
|
reduced
control over delivery schedules, manufacturing yields and
costs.
|
·
|
our
announcement of the introduction of new
products;
|
·
|
our
competitors’ announcements of the introduction of new products;
and
|
·
|
market
conditions in the technology, entertainment and emerging growth
company
sectors.
|
31.1
|
Certification
of the President and Chief Executive Officer pursuant to Exchange
Act Rule
13a-14(a) or 15d-14(a), as adopted pursuant to Section 302(a) of
the
Sarbanes-Oxley Act of 2002.
|
31.2
|
Certification
of the Chief Financial Officer and Secretary pursuant to Exchange
Act Rule
13a-14(a) or 15d-14(a), as adopted pursuant to Section 302(a) of
the
Sarbanes-Oxley Act of 2002.
|
32.1
|
Certificate
of Chief Executive Officer and Chief Financial Officer pursuant
to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.¹
|
|
SIGMA
DESIGNS, INC.
|
|
(Registrant)
|
By: /s/
Thinh Q. Tran
|
||||
|
Thinh
Q. Tran
Chairman
of the Board, President and Chief Executive Officer
(Principal
Executive Officer)
|
|||
|
|
|||
|
By: /s/
Kit Tsui
|
|||
|
Kit
Tsui
Chief
Financial Officer and Secretary
(Principal
Financial and Accounting
Officer)
|