As filed with the Securities and Exchange Commission on January 9, 2001
                                                   Registration 333-51970
--------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    --------

                               Amendment No. 1 to

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

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

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


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

                                   ----------

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

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

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

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

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

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

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




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

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



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







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

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



                  SUBJECT TO COMPLETION, DATED JANUARY 9, 2001


PROSPECTUS
                                5,150,000 Shares

                               SIMTEK CORPORATION

                                  Common Stock

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

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



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


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

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

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

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




              The date of this Prospectus is _______________, 2000.













                              AVAILABLE INFORMATION

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

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

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

                                TABLE OF CONTENTS

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







                                       2





                               PROSPECTUS SUMMARY

INFORMATION ABOUT US AND OUR BUSINESS

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

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

THE SHARES

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


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





                                        3



                                  RISK FACTORS

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

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

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

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

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

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

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

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

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

OUR BOARD OF DIRECTORS HAS THE AUTHORITY TO ISSUE PREFERRED STOCK

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


                                        4





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

THE RISKS INVOLVED IN MANUFACTURING SEMICONDUCTORS MAY AFFECT OUR NET INCOME

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

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

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

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

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

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

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


                                        5




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

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

WE MAY NOT REALIZE ANY NEW LICENSE REVENUES

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

DELAYS IN OR FAILURE OF PRODUCT QUALIFICATION MAY HARM OUR BUSINESS

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

OUR SUCCESS DEPENDS ON OUR ABILITY TO INTRODUCE NEW PRODUCTS

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

OUR RECENT PURCHASE OF INCOMPLETE RESEARCH AND DEVELOPMENT

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

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

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

THERE IS INTENSE COMPETITION IN THE SEMICONDUCTOR INDUSTRY

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




                                        6





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

THE LOSS OF KEY EMPLOYEES COULD MATERIALLY AFFECT OUR FINANCIAL RESULTS

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

WE DEPEND ON PATENTS TO PROTECT OUR INTELLECTUAL PROPERTY

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

OUR PRODUCTS AND TECHNOLOGY MAY INFRINGE ON OTHER PATENTS

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

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

WE DO NOT INTEND TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE

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

FOREIGN CURRENCY EXCHANGE RATE FLUCTUATIONS MAY CAUSE FINANCIAL LOSSES

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


                                        7





                                 USE OF PROCEEDS

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

                                 CAPITALIZATION

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

                                                              September 30, 2000
                                                              ------------------
                                                                    Actual
                                                                    ------

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

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

Additional paid in capital                                       37,343,790

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



                                        8






         MARKET FOR OUR COMMON STOCK AND RELATED SECURITY HOLDER MATTERS

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

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

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

     1998
First Quarter.......................................        .39          .41
Second Quarter......................................        .32          .36
Third Quarter.......................................        .22          .23
Fourth Quarter......................................        .15          .16

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

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

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

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



                                        9





                             SELECTED FINANCIAL DATA

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



                                                          For the Years Ended December 31,          Nine Months Ended September 30,
                                                          --------------------------------          -------------------------------
Statement of Operations Data:                                 1999                1998                    2000             1999
                                                              ----                ----                    ----             ----
                                                                                                          
Net Sales.............................................   $  7,754,952        $  6,522,078           $  9,220,772      $  5,443,359
Cost of Sales.........................................      4,826,266           3,693,051              5,664,717         3,562,028
                                                         -------------------------------------------------------------------------
Gross Margin..........................................      2,928,686           2,829,027              3,556,055         1,881,331
Operating Expenses:
     Design, research and development.................      1,640,025           1,558,926              5,647,835         1,206,987
     Administrative...................................        470,703             526,081                620,991           344,742
     Marketing........................................        918,642             833,604                869,669           724,606
                                                         -------------------------------------------------------------------------
         Total Operating Expenses.....................      3,029,370           2,918,611              7,138,495         2,276,335
Other income (expense), net...........................        (48,786)            128,623                 76,241           (59,087)
                                                         --------------------------------------------------------------------------
Net income (loss) before taxes........................       (149,470)             39,039             (3,506,199)         (454,091)
     Provision for income taxes.......................             -                    -                 11,600                 -
                                                         -------------------------------------------------------------------------
Net income (loss).....................................   $   (149,470)       $     39,039           $ (3,517,799)     $   (454,091)
                                                         ==========================================================================
Net income (loss) per common share:
     Diluted.........................................    $          *        $         *            $       (.08)     $       (.01)
     Basic...........................................               *        $         *            $       (.08)     $       (.01)
Weighted average common shares outstanding:..........
     Basic...........................................      33,173,966          32,977,276             41,392,310        31,955,226
     Diluted.........................................      33,173,966          34,500,334             41,392,310        31,955,226

* Less than $.01 per share.



                                                            Year Ended                 Three Months Ended
                                                          December 31, 1999            September 30, 2000
                                                         -----------------             ------------------
                                                                                   
Balance Sheet Data:
Working capital......................................    $   3,026,552                   $   5,218,273
Total assets.........................................        5,508,380                       7,582,345
Convertible debentures...............................        1,500,000                               -
Shareholders' equity.................................    $   1,965,371                   $   5,868,953


                                       10



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

RESULTS OF OPERATIONS

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

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

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

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

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

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

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

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


                                       11




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

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

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

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

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

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

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

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

                                       12




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

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

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

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

FUTURE RESULTS OF OPERATIONS

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

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

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

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

LIQUIDITY AND CAPITAL RESOURCES

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

                                       13



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

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

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

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

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

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

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

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

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

                                       14


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

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

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

     For the year ended  December 31,  1998,  cash flow used in  operations  was
$223,429,  which is primarily attributable to a decrease in accounts payable and
a reversal of accrued expenses  totaling  $501,796,  an increase in inventory of
$300,677  which was  offset  with a net  income  of  $39,039,  depreciation  and
amortization  of $178,542  and an increase  in accounts  receivable  and accrued
expenses  of  $272,493.  The large  decrease  in  accounts  payable  and accrued
expenses  was due to us paying ZMD for past due invoices  after a price  dispute
was settled  between us and ZMD in the first  quarter of 1998.  The  increase in
inventory  is due to us switching  from  purchasing  finished  units from ZMD to
producing  finished units from wafers  purchased from Chartered.  This change in
procurement  requires  us  to  maintain  a  larger  wafer  and  work-in-progress
inventory  along  with a  finished  goods  inventory.  The use of cash  flows in
investing activities was due to purchases of equipment related to the testing of
our 64 kilobit  and 256 kilobit  products  built on 0.8 micron  technology  from
wafers   purchased  from  Chartered  and  from  the  purchase  of  a  restricted
certificate of deposit.  The $429,164 of equipment purchased consisted primarily
of test  fixtures  and  burn-in  boards  to  support  products  manufactured  at
Chartered and UMC and software required in the development of our MPGA products.
A $100,000  certificate of deposit was  established to secure a $250,000 line of
credit.  Cash flow from financing  activities is primarily due to the $1,500,000
financing transaction that we closed in June 1998.

ACCOUNTING STATEMENTS

     In 1998,  Statement of Financial  Accounting  Standards 133, Accounting for
Derivative  Instruments  and  Hedging  Activities  was  issued.   Statement  133
establishes  accounting and reporting  standards for derivative  instruments and
for hedging activities.  It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial  position and measure
those  instruments as fair value.  This statement is effective for the Company's
financial  statements  for the year ended  December 31, 2001 and the adoption of
this  standard  is not  expected  to have a  material  effect  on the  Company's
financial statements.

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

INFLATION

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

                                       15



                                    BUSINESS

GENERAL

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

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

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

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

ACQUISITIONS AND OTHER TRANSACTIONS

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

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

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

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

                                       16



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

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

     INDUSTRY AND PRODUCT BACKGROUND
     MEMORY

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

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

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


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

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

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

                                       17



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

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

     TECHNOLOGY

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

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

     PRODUCTS

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

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

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

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

                                       18





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

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

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

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

     METAL PROGRAMMED GATE ARRAYS

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

     TECHNOLOGY

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

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

     PRODUCTS

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


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

RESEARCH AND DEVELOPMENT

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

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


                                       19





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

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

MANUFACTURING AND QUALITY CONTROL

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

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

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

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

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

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

MARKETS

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

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


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


                                       20





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

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

SALES AND DISTRIBUTION

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

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

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

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

CUSTOMERS AND BACKLOG

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

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

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

LICENSES

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

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

                                       21





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

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

COMPETITION

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

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

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

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

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

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

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

PATENTS AND INTELLECTUAL PROPERTY

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

                                       22





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

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

Employees

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

FACILITIES

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

LEGAL PROCEEDINGS

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

                                       23



                                   MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

     Our directors and executive officers are as follows:

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

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

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

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

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

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


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

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

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

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

                                       24





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

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

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

SPECIAL PROVISIONS IN ARTICLES OF INCORPORATION

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

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

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

3.   certain other acts specified in the Code, and

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

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

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


                                       25





EXECUTIVE COMPENSATION

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


                                              Summary Compensation Table

                                                                            Long Term Compensation
                                                                        ------------------------------
                               Annual Compensation                       Awards             Payouts
                           ---------------------------------------------------------------------------
Name                                               Other                Restricted
and                                                Annual               Stock               LTIP    All Other
Principal                                          Compen-              Award(s)  Options/ Payouts  Compen-
Position               Year  Salary($)  Bonus($)   sation($)              ($)     SARs(#)   ($)     sation($)
- ---------              -------------------------------------------------------------------------------------
                                                                            
Douglas M. Mitchell(1) 1999  $120,000     --         --                    --      30,000   --      --
Chief Executive        1998  $120,000     --         --                    --     250,000   --      --
Officer and President  1997  $60,716(2)   --         --                    --     400,000   --      --


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

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

OPTION GRANT TABLE

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



                                             Shares                                                   Potential
                                           subject to                   Market                    Realizable Value
                                         Options/SAR's                  Price                        at Assumed
                            Shares         Granted to    Exercise        per                       Annual Rate of
                          subject to       Employees       Price       Share on                      Stock Price
                        Options/SAR's      in Fiscal        Per        Date of     Expiration     Appreciation for
Name                       Granted         % of Total      Share        Grant         Date           Option Term
----------------------- -------------    ------------    --------      --------    ----------   --------------------
                                                                                                   5%         10%
                                                                                                --------------------
                                                                                        
Douglas M. Mitchell       30,000(1)           17%          $0.17        $0.17       4/27/2006    2,076       4,838


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


                                       26




YEAR-END OPTION TABLE

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


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


                                                                                             Value of Unexercised
                                                           Number of Unexercised                 in-the-money
                                                          Options/SARs at Fiscal                 Options/SARs
                             Shares          Value               Year-End                     at Fiscal Year-End
                           Acquired on     Realized     Exercisable    Unexercisable    Exercisable      Unexercisable
Name                      Exercise (#)        ($)           (#)             (#)             ($)               ($)
----                      ---------------- --------     -----------    -------------    -----------      -------------
                                                                                          
Douglas M. Mitchell             -              -          484,444         195,556         $1,740            $6,090


EMPLOYMENT AGREEMENTS

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

CONFIDENTIALITY AND NONDISCLOSURE AGREEMENTS

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

DIRECTORS' COMPENSATION

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

                               SECURITY OWNERSHIP

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


                                       27





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




                                                     Number of       Percentage
Name and Address of Beneficial Owner               Shares Owned       of Class
-------------------------------------              ------------       --------
                                                                
WebGear                                            4,415,000          9.02%
11501 Dublin Blvd. #20
Dublin, CA  94568

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

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

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

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

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

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

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

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

* Less than one percent.



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


                                       28





                              SELLING SHAREHOLDERS

     The following table sets forth information about our selling shareholders:



                                                                                       Number of     Percentage of
                                                                                        Shares           Class
                                                Number of           Number of          Following     Following the
Name and Address of Selling Shareholders       Shares Owned       Shares Offered     the Offering       Offering
----------------------------------------       ------------       --------------     ------------    -------------
                                                                                             
WebGear                                        4,415,000            2,900,000          1,515,000         3.10%
11501 Dublin Blvd #20
Dublin, CA 94568

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

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

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

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



                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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


                            DESCRIPTION OF SECURITIES

COMMON STOCK

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

PREFERRED STOCK

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


                                       29





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


                              PLAN OF DISTRIBUTION

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

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

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

                                  LEGAL MATTERS

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

                                     EXPERTS

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


                                       30




                                                  SIMTEK CORPORATION

                                              INDEX TO FINANCIAL STATEMENTS

                                                                                                                Page
                                                                                                                ----

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

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

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

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

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

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

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

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

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

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



                                       F-1




                          INDEPENDENT AUDITOR'S REPORT




Board of Directors and Shareholders
Simtek Corporation
Colorado Springs, Colorado


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

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

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



/S/ Hein + Associates LLP
HEIN + ASSOCIATES LLP

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




                                       F-2





                                                   SIMTEK CORPORATION

                                                      BALANCE SHEET
                                                    DECEMBER 31, 1999


                                                         ASSETS
                                                         ------
                                                      (See Note 10)
CURRENT ASSETS:
                                                                                                
    Cash and cash equivalents                                                                      $ 2,180,649
    Restricted certificate of deposits                                                                 400,000
    Accounts receivable - trade, net of allowance for doubtful accounts and
         return allowances of $45,271                                                                1,146,631
    Inventory                                                                                        1,015,620
    Prepaid expenses and other                                                                          36,117
                                                                                                   -----------
             Total current assets                                                                    4,779,017

EQUIPMENT AND FURNITURE, net                                                                           679,938

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


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

COMMITMENTS (Note 6)

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



                                  See accompanying notes to these financial statements.


                                                           F-3



                                                   SIMTEK CORPORATION

                                                STATEMENTS OF OPERATIONS



                                                                                        FOR THE YEARS ENDED
                                                                                            DECEMBER 31,
                                                                                   ------------------------------
                                                                                      1999                1998
                                                                                   ----------          ----------
                                                                                
NET SALES                                                                          $7,754,952          $6,522,078

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

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

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

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

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

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

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

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

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

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



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


                                  See accompanying notes to these financial statements.


                                                           F-4






                                                      SIMTEK CORPORATION

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


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

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

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

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

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

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















                                  See accompanying notes to these financial statements.


                                                              F-5






                                                   SIMTEK CORPORATION

                                                STATEMENTS OF CASH FLOWS
                                                                                          FOR THE YEARS ENDED
                                                                                              DECEMBER 31,
                                                                                      ----------------------------
                                                                                         1999              1998
                                                                                      ----------        ----------
                                                                                                  
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income                                                                        $ (149,470)       $   39,039
    Adjustments to reconcile net income to net cash from
        operating activities:
            Depreciation and amortization                                                247,502           178,542
            Contributed services                                                          70,000            23,333
            Unrealized gain of securities                                                  6,930            13,570
            Reversal of accrued liability                                                      -          (110,000)
            Net change in reserve accounts                                               (90,936)          (10,394)
            Deferred financing fees                                                       11,191             6,528
            Changes in assets and liabilities:
              (Increase) decrease in:
                  Accounts receivable                                                   (270,510)          130,453
                  Investments                                                             13,146            40,060
                  Inventory                                                              (48,930)         (300,677)
                  Prepaid expenses and other                                              26,475           (33,091)
              Increase (Decrease) in:
                  Accounts payable                                                       450,135          (391,796)
                  Accrued expenses                                                       (75,852)          142,040
                  Customer Deposits                                                       49,250            39,964
                                                                                      ----------        ----------
        Net cash (used in) provided by operating activities                              238,931          (232,429)
                                                                                      ----------        ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchase of equipment and furniture                                                 (179,310)         (429,164)
    Increase in restricted cash                                                         (300,000)         (100,000)
    Payments on capital lease obligation                                                 (13,914)                -
                                                                                      ----------        ----------
        Net cash used in investing activities                                           (493,224)         (529,164)
                                                                                      ----------        ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from convertible debenture, net of deferred financing fees                        -         1,421,664
    Proceeds from line-of-credit and the issuance of note                                142,000            60,000
    Proceeds from issuance of stock                                                            -             4,000
    Capital Contributions                                                                132,752            50,673
    Payments on bank overdraft                                                                 -           (23,316)
    Payments on notes payable                                                            (99,614)          (23,301)
    Exercise of stock options                                                             34,266             9,207
                                                                                      ----------        ----------
        Net cash provided by financing activities                                        209,404         1,498,927
                                                                                      ----------        ----------

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


                                  See accompanying notes to these financial statements.


                                                              F-6




                               SIMTEK CORPORATION

                          NOTES TO FINANCIAL STATEMENTS

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

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

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

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

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

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


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

                                                          $1,015,620


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

                                       F-7




                               SIMTEK CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

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

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

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

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

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

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

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


                                       F-8




                               SIMTEK CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

     Recently Issued  Accounting  Pronouncements - SFAS No. 133,  Accounting for
     Derivative  Instruments  and Hedging  Activities,  was issued in June 1998.
     This  statement   establishes   accounting  and  reporting   standards  for
     derivative  instruments  and for hedging  activities.  It requires  that an
     entity  recognize all  derivatives  as either assets or  liabilities in the
     statement  of  financial  position and measure  those  instruments  at fair
     value. This statement is effective for the Company's  financial  statements
     for the year ended  December 31, 2001 and the adoption of this  standard is
     not  expected  to  have  a  material  effect  on  the  Company's  financial
     statements.

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

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


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

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


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

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


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

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






                                      F-9




                               SIMTEK CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

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


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

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

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

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



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

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

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

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


                                       F-10




                               SIMTEK CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

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

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

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


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

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

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


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


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

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



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

                                       F-11




                               SIMTEK CORPORATION
                          NOTES TO FINANCIAL STATEMENTS



          Total net minimum lease payments                303,468

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

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


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

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

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



                                      F-12




                               SIMTEK CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

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

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



                                                    For the Year Ended December 31, 1999
                                               ----------------------------------------------
                                                 Income            Shares           Per Share
                                               (Numerator)      (Denominator)        Amount
                                               -----------      -------------       ---------
                                                                              
     Basic EPS -
       Income (loss) available to common
        shareholders                            $(149,470)       33,173,966            $ *
       Effect of dilutive options                       -                 -            ===
                                                ---------        ----------

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


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

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


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


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

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

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


                                      F-13




                               SIMTEK CORPORATION
                          NOTES TO FINANCIAL STATEMENTS


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



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

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

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

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


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

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

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

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

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


                                      F-14




                               SIMTEK CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

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


                                                                          Year Ended December 31,
                                                                       -----------------------------
                                                                           1999             1998
                                                                       ------------     ------------
                                                                                    
     Net income (loss) applicable to common shareholders:
       As reported                                                       $(149,470)       $ 39,039
       Pro forma                                                          (272,061)        (90,761)

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



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


                                                                   Options Granted During
                                                                   -----------------------
                                                                     1999           1998
                                                                   --------       --------
                                                                            
           Expected volatility                                     119.7%         125.4%
           Risk-free interest rate                                   5.5%           5.5%
           Expected dividends                                          -              -
           Expected terms (in years)                                 4.0            4.0


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



                                      F-15




                               SIMTEK CORPORATION
                          NOTES TO FINANCIAL STATEMENTS


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

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

                                                     1999     1998
                                                     ----     ----

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


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

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


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

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



                                      F-16




                               SIMTEK CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

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

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


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

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

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

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

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


                                                                                1999              1998
                                                                              --------          ---------
                                                                                           
     Statutory rate                                                            (34.0)%           (34.0)%
     State income taxes, net of Federal income tax benefit                      (3.3)%            (3.3)%
          Increase (reduction) in valuation allowance related to of net
            operating loss carryforwards and change in temporary
            differences                                                          37.3%             37.3%
                                                                               -------            ------
                                                                               $    -             $   -
                                                                               =======            ======


                                      F-17




                               SIMTEK CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

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

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

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

                                                  1999            2000
                                                  ----            ----

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

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


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

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

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



                                      F-18





                                     SIMTEK CORPORATION

                                       BALANCE SHEETS
                                         (unaudited)
              ASSETS
              ------
                                                                             September 30, 2000
                                                                            -------------------
                                                                          
CURRENT ASSETS:
   Cash and cash equivalents...............................................  $    3,098,267
   Certificate of deposit, restricted......................................         300,000
   Accounts receivable - trade, net........................................       1,510,484
   Inventory, net .........................................................         739,183
   Prepaid investor relations..............................................         988,233
   Prepaid expenses and other..............................................         129,584
                                                                             --------------

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

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

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

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

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

SHAREHOLDERS' EQUITY:
   Preferred stock, $1.00 par value, 2,000,000 shares
       authorized and none issued and outstanding .........................              -
   Common stock, $.01 par value, 80,000,000 shares authorized,
       48,942,163 and 33,205,226 shares issued and outstanding
       at September 30, 2000 and December 31, 1999, respectively...........        489,421
   Additional paid-in capital..............................................     37,343,790
   Accumulated deficit.....................................................    (31,964,258)
                                                                             -------------
   Shareholder's equity....................................................      5,868,953
                                                                             -------------

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

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


                                          F-19




                                                          SIMTEK CORPORATION

                                                       STATEMENTS OF OPERATIONS
                                                              (unaudited)


                                                           Three Months Ended September 30,          Nine Months Ended September 30,
                                                           --------------------------------         -------------------------------
                                                                2000               1999                   2000             1999
                                                                ----               ----                   ----             ----
                                                                                                         
NET SALES...............................................   $    2,996,470    $    1,782,544         $    9,220,772   $    5,443,359

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

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

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

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

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

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

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

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

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

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

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

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

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

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


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


                                                     F-20





                                                       SIMTEK CORPORATION

                                                    STATEMENTS OF CASH FLOWS
                                                           (unaudited)
                                                                                  Nine Months Ended September 30,
                                                                             ----------------------------------------
                                                                                 2000                        1999
                                                                                 ----                        ----
                                                                                                 
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income (loss)................................................       $  (3,517,799)            $    (454,091)
     Adjustments to reconcile net income (loss) to net cash provided
        by (used in) operating activities:
           Depreciation and amortization..............................             221,917                   178,792
           Investment banker stock issuance...........................              42,967                         -
           WebGear purchase of research and development
               for common stock.......................................           4,384,545                         -
           Increase (decrease) in net change of reserve accounts                   312,286                   (28,980)
           Deferred financing fees....................................               1,865                     8,393
           Changes in assets and liabilities:
           (Increase) decrease in:
               Accounts receivable....................................            (437,661)                 (236,511)
               Inventory..............................................             279,897                   104,139
               Prepaid expenses and other ............................            (104,658)                   19,769
           Increase (decrease) in:
               Accounts payable.......................................            (357,249)                  298,148
               Customer deposits......................................             (35,083)                    7,220
               Accrued expenses.......................................              91,540                    (8,162)
                                                                             ---------------------------------------
        Net cash provided by (used in) operating activities                        882,567                  (111,283)
                                                                             ---------------------------------------
CASH FLOWS USED IN INVESTING ACTIVITIES:
     Purchase of equipment and furniture .............................            (233,574)                 (140,721)
     Interest received on certificate of deposit......................                   -                    (7,868)
     Decrease (increase) in restricted cash...........................             100,000                  (300,000)
                                                                             ---------------------------------------
     Net cash used in investing activities............................            (133,574)                 (448,589)
CASH FLOWS FROM FINANCING ACTIVITIES:
     Exercise of stock options........................................             293,131                    34,266
     Payments on notes payable........................................            (111,142)                  (13,595)
     Capital Contributions............................................              43,503                   178,178
     Distributions to stockholders....................................             (27,400)                        -
     Payments on capital lease obligation.............................             (29,467)                        -
     Proceeds from line of credit and notes...........................                   -                    57,922
                                                                             ---------------------------------------
        Net cash provided by financing activities.....................             168,625                   256,771
                                                                             ---------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH
      EQUIVALENTS.....................................................             917,618                  (303,101)
                                                                             ---------------------------------------
CASH AND CASH EQUIVALENTS, beginning of period........................           2,180,649                 2,245,614
                                                                             ---------------------------------------
CASH AND CASH EQUIVALENTS, end of period..............................       $   3,098,267             $   1,942,513
                                                                             =======================================

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




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


                                                    F-21



                               SIMTEK CORPORATION

                          NOTES TO FINANCIAL STATEMENTS


1.   SIGNIFICANT ACCOUNTING POLICIES:

     The financial  statements  included herein are presented in accordance with
the  requirements  of Form  10-QSB and  consequently  do not  include all of the
disclosures  normally made in the registrant's annual Form 10-KSB filing.  These
financial statements should be read in conjunction with the financial statements
and notes thereto included in Simtek Corporation's Annual Report and Form 10-KSB
filed on March 7, 2000 for fiscal year 1999 and Simtek  Corporation's Form 8-K/A
Amendment #1 filed on October 16, 2000.

     In the opinion of management,  the unaudited  financial  statements reflect
all  adjustments  of a normal  recurring  nature  necessary  to  present  a fair
statement of the results of operations for the respective  interim periods.  The
year-end balance sheet data was derived from audited financial  statements,  but
does not  include all  disclosures  required by  generally  accepted  accounting
principles.  Results of operations for the interim  periods are not  necessarily
indicative of the results of operations for the full fiscal year.

2.   LINE OF CREDIT:

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

3.   EQUITY:

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

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

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

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




                                       F-22



                               SIMTEK CORPORATION

                          NOTES TO FINANCIAL STATEMENTS


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

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

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

4.   GEOGRAPHIC CONCENTRATION:

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

                                                 2000            1999
                                                 ----            ----

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






                                      F-23




                                     PART II
                     INFORMATION NOT REQUIRED IN PROSPECTUS

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



ITEM 27.  EXHIBITS

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

5.1   Legality opinion of Holme Roberts & Owen LLP.*

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

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

27    Financial Data Schedule

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

*    Previously filed.

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

                                      II-1



                                   SIGNATURES


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


                                        Simtek Corporation
                                           a Colorado corporation


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


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


SIGNATURE                           TITLE



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


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


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


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


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





                                      II-2