<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-K

                        FOR ANNUAL AND TRANSITION REPORTS
                     PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

[X]     Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
        Act of 1934 For the fiscal year ended May 3, 1998, or

[ ]     Transition report pursuant to Section 13 or 15(d) of the Securities
        Exchange Act of 1934
 
        For the transition period from            to           .
                                        ----------    ----------

                         COMMISSION FILE NUMBER 0-21488

                          CATALYST SEMICONDUCTOR, INC.
             (Exact name of Registrant as specified in its charter)

                   DELAWARE                                      77-0083129
          (State or other jurisdiction of                    (I.R.S. Employer
          incorporation or organization)                    Identification No.)

                1250 Borregas Avenue, Sunnyvale, California 94089
                    (Address of Principal Executive Offices)

       Registrant's telephone number, including area code: (408) 542-1000

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

           Securities registered pursuant to Section 12(g) of the Act:
                         Common Stock, $.001 par value

Indicate by check mark whether Registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Act of 1934 during the
preceding 12 months (or for such shorter period that Registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes  [X]     No  [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained to the best
of Registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

The aggregate market value of voting stock held by non-affiliates of Registrant,
as of August 14, 1998, was approximately $1 million (based upon the average of
the closing bid and asked price for shares of Registrant's Common Stock as
reported by the OTC Bulletin Board for the last trading date prior to that
date). Shares of Common Stock held by each officer, director and holder of 5% or
more of the outstanding Common Stock (including shares with respect to which a
holder has the right to acquire beneficial ownership within 60 days) have been
excluded in that such persons may be deemed to be affiliates. This determination
of affiliate status is not necessarily a conclusive determination for other
purposes.

The number of shares of Registrant's Common Stock outstanding as of August 14,
1998 was 9,961,722.

                       DOCUMENTS INCORPORATED BY REFERENCE

Part III incorporates information by reference from the definitive Proxy
Statement for Registrant's 1998 Annual Meeting of Stockholders.


<PAGE>   2

                          CATALYST SEMICONDUCTOR, INC.


<TABLE>
<S>       <C>                                                                                            <C>    
PART I

Item 1.    Business..................................................................................     Page 3
Item 2.    Properties................................................................................     Page 9
Item 3.    Legal Proceedings.........................................................................     Page 9
Item 4.    Submission of Matters to a Vote of Security Holders.......................................     Page 9

PART II

Item 5.    Market for Registrant's Common Stock and Related Stockholder Matters......................     Page 10
Item 6.    Selected Consolidated Financial Data......................................................     Page 11
Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations.....     Page 12
Item 7A    Quantitative and Cumulative Disclosures about Market Risk.................................     Page 19
Item 8.    Financial Statements and Supplementary Data...............................................     Page 20
Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure......     Page 20

PART III

Item 10.   Directors and Executive Officers of Registrant............................................     Page 20
Item 11.   Executive Compensation....................................................................     Page 20
Item 12.   Security Ownership of Certain Beneficial Owners and Management............................     Page 20
Item 13.   Certain Relationships and Related Transactions............................................     Page 20

PART IV

Item 14.   Exhibits, Financial Statement Schedules and Reports on Form 8-K...........................     Page 20

Signatures...........................................................................................     Page 23

Index to Consolidated Financial Statements...........................................................     Page F-2
</TABLE>





                                      -2-

<PAGE>   3

                          CATALYST SEMICONDUCTOR, INC.

                                     PART I

ITEM 1.  BUSINESS

         Catalyst Semiconductor, Inc. ("Catalyst," the "Company" or
"Registrant") designs, develops and markets a broad range of nonvolatile
semiconductor memory products and is in the process of developing mixed signal
and micro-controller supervisory products. Nonvolatile memory ("NVM") retains
stored data when the system power is turned off and is therefore well suited for
a wide variety of applications in the computer, consumer electronics,
telecommunications, automotive, industrial control and instrumentation markets.
The Company was formed as a California corporation in October 1985 and was
reincorporated in Delaware in May 1993. The Company's principal offices are
located at 1250 Borregas Avenue, Sunnyvale, California 94089 and its telephone
number at that address is (408) 542-1000.

         The Company has sought to enhance its internal design and process
technology expertise through strategic relationships with leading semiconductor
manufacturers and currently subcontracts the fabrication of its semiconductor
wafers principally through Oki Electric Industry Co., Ltd. ("Oki"). These
relationships enable the Company to draw upon its foundries' expertise in high
volume semiconductor manufacturing. For example, the Company has integrated the
designs and processes for the manufacture of its Flash memory products with
Oki's fine line-width, high density CMOS processes used for high volume Dynamic
Random Access Memory ("DRAM") manufacture.

         The Company's business is highly cyclical and has been subject to
significant downturns at various times which have been characterized by reduced
product demand, production overcapacity, and significant erosion of average
selling prices. Throughout fiscal 1998, the market for certain FLASH and EEPROM
devices, which compromise the majority of Catalyst's business, experienced an
excess market supply relative to demand which resulted in a significant
downward trend in prices. The Company could continue to experience a downward
trend in product pricing which could further adversely affect the Company's
operating results.

         The Company's recent operating results have consumed substantial
amounts of cash. The reduction in cash also placed restrictions on wafer
purchases which, during the fourth quarter of 1998, resulted in the
cancellation of some customer sales orders. In May 1998, the Company received
net proceeds of $1.5 million from the sale of 1,500,000 shares of its Common
Stock in a private placement. Management believes, however, that it will
require additional cash from similar or related private placements or other
sources of liquidity to meet the Company's projected working capital and other
cash requirements for fiscal 1999, and is currently pursuing these sources of
liquidity.

         As a result of these circumstances, the Company's independent
accountants' opinion on the consolidated financial statements includes an
explanatory paragraph indicating that these matters raise a substantial doubt
about the Company's ability to continue as a going concern.

         As of April 30, 1998, the Company had approximately $3.2 million, and
currently has approximately $1.4 million, of secured loans owing to its bank. As
a result of the Company's financial condition and results of operations, the
bank has determined that the Company is in default under various provisions of
the loan agreement entitling the bank to terminate the loan agreement and
declare the loans immediately due and payable. Although the Company has obtained
a letter of forbearance from the bank taking any action with respect to existing
defaults, such forbearance only extends until September 30, 1998 and only as to
the specified defaults claimed through June 30, 1998. The Company is seeking to
persuade the bank not to take action on the events of default and not to declare
the loan due and payable. In that regard the Company is seeking to obtain equity
or other funding to increase the cash available for operations and other
purposes. There can be no assurance that such efforts to obtain funding will be
successful or, if successful, that the bank will continue to forbear action on
or otherwise waive the existing defaults. If the Company's efforts are
unsuccessful, the bank is likely to declare the loans due and payable. Under
such circumstances the Company would be unable to continue operations which
would result in bankruptcy. The Company is also indebted to other creditors in
the amount of approximately $13.4 million. Continued operation of the Company
would also require such other lenders to forbear taking action or waiving
defaults under such other debt. Moreover it is anticipated that any continued
forbearance by the bank would require such other lenders to take similar action
under the other loans. In addition, although the Company is current on its lease
payments under the lease of its headquarters facility, as a result of its
financial condition, the Company is in violation of certain terms of its lease.
Similar violations have resulted under certain equipment lease agreements.

         The Company's recent operating results have been substantially lower
than expected. Total revenues for the quarter and the fiscal year ended April
30, 1998 were $4.8 million and $34.6 million, respectively, compared to
revenues of $9.0 million and $47.1 million for the comparable periods of the
prior year. In addition, the Company incurred net losses for the quarter and
for the year ended April 30, 1998 of $10.1 million and $18.9 million,
respectively, compared to net losses of $1.1 million and $4.1 million for the
comparable periods in the prior year. The Company's last profitable year was
the fiscal year ended April 30, 1996. For over two years, the Company has
experienced significant negative cash flow from operations and investing
activities. The Company has taken many steps to reduce its operating expenses
including reducing its headcount from 71 in December, 1996 to 42 in April 1998.
Although reductions in headcount could help the Company meet its operating
expense objectives, such reductions could adversely affect the Company's sales,
marketing and product development efforts. The Company anticipates that negative
cash flow from operations will continue for the foreseeable future. There can
be no assurance that the Company can generate revenue growth, or that any
revenue growth that is achieved can be sustained. To the extent that increases
in such operating expenses precede and are not subsequently followed by
increased revenues, the Company's business, results of operations and financial
condition would be materially adversely affected. There can be no assurance
that the Company will ever achieve or sustain profitability.

         The Company markets its products through a direct sales force and a
worldwide network of independent distributors and sales representatives. For the
year ended April 30, 1998, international sales represented 64% of product sales.
End user customers of the Company's products include Compaq, Fujitsu, IBM,
Matsushita Communications, Maxtor, Motorola, Siemens and Sony.

INDUSTRY BACKGROUND

         There are two general classes of semiconductor memories incorporated
into electronic systems, volatile memory and nonvolatile memory. The principal
distinguishing characteristic between the two classes is that volatile memory
devices require a continuous application of power to retain data, while NVM
devices do not. Among volatile memory devices, DRAMs are the most prevalent,
because they are capable of high-speed data transfer, feature high density
circuitry and can be manufactured at relatively low cost. DRAMs are used
primarily as the main memory in computers for temporary storage of application
program data while the system is operating. NVM devices, in contrast, are used
by computers and electronic systems primarily to store system-critical data when
the power to the system is turned off. The continuous memory capability of NVM
renders these devices well-suited for a wide range of applications in the
computer, consumer electronics, telecommunications, automotive, industrial
control and instrumentation markets. NVM devices are used to store essential
data such as PC BIOS software, which regulates the flow of data to and from
system peripherals such as the keyboard and monitor and disk drives. In
addition, NVM devices that can be programmed and reprogrammed in the system are
used to store user-selected system configurations in consumer electronics
devices such as preset stations in automobile radios and to store numbers in
cellular telephones. NVM devices have generally not been used for computer main
memory applications because historically they have been more expensive, provided
slower performance and were more costly to produce than volatile memory such as
DRAMs.

         The different NVM semiconductor devices which the Company sells are
reprogrammable NVM memory such as electrically erasable programmable read only
memory ("EEPROM"), nonvolatile random access memory ("NVRAM"); and Flash memory.
Each successive generation of NVM memory offers increasing functionality,
flexibility and performance.



                                      -3-
<PAGE>   4


         The following NVM devices are currently available from various
suppliers in the industry:

         EEPROMs. EEPROMs can be erased and reprogrammed electrically within the
system, eliminating the need for physical removal, as required by EPROMs. On
"full-featured" EEPROMs, which have on-chip error correction capabilities that
enhance system reliability, individual bytes or segments of the stored data can
be erased and rewritten thousands of times. These features generally offer
greater flexibility to systems designers than EPROMs. EEPROMs are used to store
system-critical information which needs to be updated on a periodic basis. This
includes control panel settings and other user-configurable system parameters in
consumer devices, cache memory for disk drives, and system protocols and stored
telephone numbers in cellular telephones, facsimile machines and other
telecommunications devices. EEPROMs are generally available in two
configurations, serial EEPROM devices, which transmit data through a single
input-output port, and parallel EEPROMs, which transmit data via multiple ports
concurrently. Each cell of an EEPROM (the discrete area on the device in which
one bit is stored) consists of two transistors, one to store data and one to
permit the cell to be selected when erasing data, as compared to the single,
storage transistor of an EPROM. EEPROMs can be modified to be utilized as
programmable erasable read only memory (PEROM) devices for 5-volt FLASH
applications involving sector-by-sector data read and write. EEPROMs are more
expensive to produce than EPROMs, due to their more complex circuitry.

         NVRAMs. NVRAMs consist of a Static Random Access Memory ("SRAM") device
and an EEPROM incorporated in a single semiconductor die. This enables the
device to provide both the high speed data transfer rates and read/write rates
typical of volatile SRAMs and the memory retention of NVMs when the system power
is off. However, the complexity of NVRAM devices, which typically utilize 8
transistors per cell, makes them too costly for most commercial applications.
Accordingly, NVRAMs are generally limited in application to critical,
high-performance systems, such as antilock braking systems.

         Flash Memory. Flash EEPROMs, or Flash memories, combine the benefits of
high-speed data alterability and data transfer rates and, potentially, the low
cost manufacturability of volatile memory, with the flexibility and continuous
data retention of NVM. Flash memory products can potentially be manufactured
with storage densities as great as DRAM densities and thereby achieve
manufacturing costs approaching the low cost of DRAMs. In addition, the
architecture of Flash memory potentially permits data alterability and transfer
rates as fast as DRAMs. Flash memory exhibits certain limitations as compared to
DRAMs, including a finite life span of read/write cycles, which limits its use
in computer main memory applications. However, Flash memory is being designed
into a wide variety of applications beyond the traditional application of NVM in
fixed program and data storage, and to applications in dynamic data storage due
to its nonvolatility, high storage densities, rapid access speed and decreasing
cost.

PRODUCTS AND APPLICATIONS

         Catalyst provides a broad range of NVM products, including serial and
parallel EEPROMs, Flash memories, NVRAMs and mixed signal products. The
Company's principal product lines are as follows:

         Serial EEPROM. The Company offers a broad range of serial EEPROM
products compatible with the three popular industry standard bus interface
protocols: the Inter-Integrated Circuit ("I2C") bus interface of Philips
Electronics, the Microwire interface protocol of National Semiconductor and the
Serial Peripheral Interface ("SPI") bus protocol. Additionally, Catalyst offers
4-wire bus interface protocol type products and secure access designed for
applications requiring security lock for data protection. Products are offered
in wide density (1K to 128K) and voltage (1.8V to 6V) ranges. Serial EEPROM
products are used in many applications to store user reconfigurable data. Some
of the more common applications are disk drives, modems, cellular phones, VCRs,
CD players, hearing aids, PCMCIA cards, cordless phones, laser printers,
computers and pagers.

         Parallel EEPROM. Parallel EEPROMs transfer data in multiple bits,
generally eight bits at a time. They provide faster transfer rates than serial
EEPROMs, which transfer data through a single port. Parallel EEPROMs are more
costly than serial EEPROMs and, accordingly, are used primarily in high
performance applications. Catalyst offers both standard 5 volt-only and 3.3
volt-only parallel EEPROMs to meet battery operated application



                                      -4-
<PAGE>   5


requirements. Parallel EEPROMs are primarily used in applications such as POS
terminals, industrial controllers, LAN adapters, telecommunication switches,
cellular phones and modems.

         Flash Memory. The Company currently offers Intel-licensed, 12-volt
Flash memory devices in densities ranging from 256 kilobit to 2 megabit (Mb).
The Company's BIOS Flash family is targeted toward personal computer OEMs for
BIOS code storage. This family includes Intel-licensed boot block and bulk erase
technologies available in 1 Mb, 1.5 Mb and 2 Mb densities. The 1.5 Mb devices
are unique to Catalyst. These products were developed to exploit the trend for
PC BIOS requirements that exceed 1 Mb but do not require a 2 Mb solution. The
Company's 1 Mb wordwide (x16) Flash memory product is targeted at disk drive
applications. There can be no assurance that the Company will receive additional
significant orders for this product or that it will achieve more wide-spread
market acceptance.

         NVRAMs. NVRAMs consist of an SRAM and an EEPROM incorporated on a
single semiconductor die. NVRAMs provide superior performance over other NVM
products and are ideal for applications that require high speed read/write
operations with nonvolatile memories, including parallel processing controllers
for LANs and antilock braking systems.

         Mixed Signal/Micro-Controller Supervisory Products. The Company
designs, manufactures and markets selected mixed signal and has under current
development micro-controller supervisory products using embedded EEPROM
technologies for specialized applications including radio frequency tags for
contactless security and access control, freight lading billing systems, data
collection and general micro-controller applications. These products are based
on the Company's NVM expertise and digital/analog mixed signal design.

SALES AND DISTRIBUTION

         The Company markets its products through a direct sales force and a
network of independent distributors and sales representatives. In addition to
its Sunnyvale headquarters facility, the Company maintains domestic sales
offices in Arizona, Florida and Georgia and international sales offices in
England and Taiwan. Sales offices support both OEM customers and distributors.
In addition, Nippon Catalyst K.K., the Company's subsidiary in Japan, works
closely with the Company's manufacturing subcontractors and Japanese
distributors.

         The Company seeks to develop strategic relationships with major OEM and
other customers. The Company offers a broad range of NVM devices compatible with
the most common industry standards, and also works closely with customers to
provide semi-custom solutions to address individual customers' needs. In fiscal
1998, the Company shipped products directly or through its distribution network
to customers in the computer, consumer electronics, telecommunications,
automotive, data communication and other industries. OEM customers of the
Company's products include Compaq, Fujitsu, IBM, Matsushita Communications,
Motorola, Siemens and Sony.

         During fiscal years 1998, 1997 and 1996, the only customer which
represented more than ten percent of Catalyst's product revenue was Marubun
Corporation, a Japanese distributor (21%, 14% and 12%, respectively). In
December 1997, Marubun resigned as a distributor effective in or about March
1998. International product sales represented approximately 64%, 63% and 60% of
the Company's product sales in fiscal 1998, 1997 and 1996. International sales
are primarily billed in U.S. dollars. Due to the magnitude of its international
sales, the Company is subject to the risks of conducting business
internationally, including unexpected changes in regulatory requirements,
fluctuations in the U.S. dollar, which could increase the sales price of the
Company's products in local currencies, tariffs and other barriers and
restrictions, and the burdens of complying with a variety of foreign laws.

         The Company generally does not recognize revenue on shipments to its
distributors until the distributor resells the Company's products. In addition,
as is common in the semiconductor industry, the Company grants price protection
to distributors, in an amount equal to the difference between the price
originally charged and the reduced price, for products held in inventory by the
distributor at the time of a price reduction. From time to time, distributors
are also granted credit on an individual basis for Company-approved price
reductions on specific transactions.



                                      -5-
<PAGE>   6


MANUFACTURING

         The Company subcontracts the manufacture of all of its products through
independent semiconductor manufacturers, primarily Oki. The Company has designed
its proprietary circuit designs and fabrication processes to operate within the
overall semiconductor manufacturing processes of its contract manufacturers.
Various of the Company's designs have been integrated with Oki's CMOS processes
utilized in high volume production of DRAMs. The Company also endeavors to
develop its processes in a manner that permits the manufacture of its products
in the fabrication facilities of different semiconductor manufacturing
suppliers. If the Company were forced to switch manufacturing from Oki, its
production and delivery of products would be delayed which could adversely
affect the Company's business, financial condition and results of operations.

         Manufacturing semiconductor products is highly complex and sensitive to
a wide variety of factors including the level of contaminants in the
manufacturing environment, impurities in the materials used and the performance
of personnel and equipment. While the Company believes that it has suppliers
willing to provide an adequate wafer supply to meet its currently anticipated
needs, there can be no assurance that the Company will receive sufficient
quantities of wafers at favorable prices on a timely basis, if at all. As is
typical in the semiconductor industry, the Company's outside foundries have from
time to time experienced lower than anticipated production yields. There can be
no assurance that manufacturing problems will not occur in the future. The loss
of Oki as a supplier, any prolonged inability to obtain adequate yields or
deliveries from Oki, UMC or other subcontractors or manufacturers, or any other
circumstance that would require the Company to seek alternative sources of
supply, could delay shipments and have a material adverse effect on the
Company's operating results. The Company currently purchases wafer supplies
under an arrangement with Oki while the parties are negotiating a definitive
agreement. The Company also has a purchase agreement with UMC which runs through
February 2006. Due to declining Flash bookings and other circumstances, the
Company has not ordered any wafers from UMC since December 1997. The Company's
ability to purchase wafers is also subject to having sufficient cash or credit
to pay for those wafers. The Company's financial condition has impaired the
Company's ability to purchase necessary wafer supplies. See "Management's
Discussion and Analyses of Financial Condition and Results of
Operations--Results of Operations," and "--Liquidity and Capital Resources."

         The Company performs circuit assembly and tests primarily through
subcontractors located in Southeast Asia. In the assembly process, the wafers
are separated into individual dies, which are then assembled into packages and
tested in accordance with procedures developed by the Company. Following
assembly, the packaged devices are further tested and inspected pursuant to the
Company's quality assurance program prior to shipment to customers. While the
timeliness, yield and quality of semiconductor deliveries from the Company's
suppliers have been acceptable to date, there can be no assurance that
manufacturing problems will not occur in the future. Any prolonged inability to
obtain adequate yields or deliveries from these manufacturers, or any other
circumstance that would require the Company to seek alternate sources of supply,
could delay shipments. Any significant delays would have an adverse effect on
the Company's operating results. The Company has concerns with the financial
viability of its primary test and assembly contractor. Although the Company is
exploring alternative contractors, there can be no assurance that it will be
able to obtain such alternative services or that the Company will have adequate
test and assembly facilities available. Failure to have such services available
would have a material effect on the Company's business, financial condition and
results of operations.

         As a result of the Company's dependence on foreign subcontractors and
test facilities, the Company's business is subject to the risks generally
associated with doing business abroad, such as fluctuations in currency exchange
rates, foreign government regulations, political unrest, disruptions or delays
in shipments and changes in economic conditions in countries in which the
Company's manufacturing and assembly and test sources are located. Due to the
Company's cash restrictions, the Company may not be able to maintain payments
to wafer and other subcontractor creditors which are within these supplier's
credit terms. Accordingly, these suppliers may restrict the Company's future
purchases and accordingly may restrict sales of the Company's products.

RESEARCH AND DEVELOPMENT

         The Company continues to invest substantial sums in research and
development to improve its fabrication processes and develop additional products
with higher performance and reliability, lower voltage requirements, smaller die
sizes and improved manufacturability. The Company's development efforts include
the development of successive generations of its EEPROM and Flash memory
products, scaled to smaller geometries and mixed signal and micro-controller
supervisory circuits with embedded EEPROM technologies. As of April 30, 1998,
the



                                      -6-
<PAGE>   7
Company employed 13 persons in research and development activities. The Company
invested $4.5 million, $5.8 million and $4.4 million in research and development
activities in fiscal 1998, 1997 and 1996, respectively. In addition, the Company
has hired the services of Essex S.A., an independent contractor in Bucharest,
Romania, to perform design services and test program development on behalf of
the Company at market rates. Mr. Vanco is a majority shareholder of Essex. As of
April 30, 1998, Essex employed approximately 12 engineers to perform the
services on behalf of Catalyst. 

PATENTS AND LICENSES

         As of April 30, 1998, the Company owned fifteen U.S. patents, one
international patent and had one additional U.S. patent application pending. The
Company intends to continue to seek patents on its inventions used in its
products and manufacturing processes. The process of seeking patent protection
can be expensive and time consuming. There can be no assurance that patents will
issue from pending or future applications or that, if patents are issued, they
will provide meaningful protection or other commercial advantage to the Company.
Moreover, there can be no assurance that any patent rights will be upheld in the
future or that the Company will be able to preserve any of its other
intellectual property rights.

         In the semiconductor industry it is typical for companies to receive
notices from time to time alleging infringement of patents or other intellectual
property rights of others. There can be no assurance that the Company will not
receive any such notification or that proceedings alleging infringement of
intellectual property rights will not be commenced against the Company in the
future. In such event, there can be no assurances that the Company could obtain
any required licenses of third party intellectual property rights or could
obtain such licenses on commercially reasonable terms. Failure to obtain a
license in any such event could require the Company to cease production of its
products until the Company develops a non-infringing design or process.
Moreover, the cost of litigation of any such claim or damages resulting
therefrom could be substantial and could materially and adversely affect the
Company's business, financial condition and results of operations.

         The Company has entered into cross license agreements with Oki and
Seiko granting them nontransferable rights to produce certain products, in
exchange for royalty payments. See "Manufacturing." The Company is not currently
receiving any royalties under these licenses. In August 1995, the Company
entered into an agreement with Intel Corporation which provides Catalyst with a
license to Intel's Flash memory and EEPROM technology in exchange for royalty
payments. The Company is currently in arrears on approximately $1 million of
royalties due to Intel. Should Intel cancel the license for the Company's
failure to pay such royalties, the Company's ability to produce its products
would be materially adversely affected which would result in a material adverse
effect on the Company's business, financial condition and results of operations.
In addition, in February 1996, the Company also entered into an agreement with
UMC, granting UMC rights to produce certain products in exchange for the
provision of certain wafer capacities and certain other license rights. In
addition, as a part of such arrangement UMC purchased 650,000 shares of the
Company's Common Stock for an aggregate cash consideration of $3.7 million.

COMPETITION

         The semiconductor industry is intensely competitive and has been
characterized by price erosion, rapid technological change and product
obsolescence. The Company competes with major domestic and international
semiconductor companies, many of whom have substantially greater financial,
technical, marketing, distribution and other resources than the Company.

         The Company's more mature products, such as EEPROM devices, compete on
the basis of product performance, price and customer service. The Company
believes it competes successfully with respect to each of these competitive
attributes. Price competition is significant and expected to continue. Principal
competitors with respect to the Company's EEPROM products currently include
SGS-Thomson, National Semiconductor, Atmel and Xicor, as well as the Company's
strategic manufacturing partner Oki, all of which have substantially greater
resources than the Company.

         The market for Flash memory products has been characterized by long
production cycles, irregular yields, competing technologies and, particularly in
fiscal 1997 and fiscal 1998, intense price competition. There can be no



                                      -7-
<PAGE>   8
assurance that the Company will be able to compete successfully in the future
against its competitors for Flash products business.

EMPLOYEES

         As of April 30, 1998, the Company had 42 employees, of whom 13 were
engaged in research and development. The Company's future success will depend on
its ability to attract, train, retain and motivate highly qualified employees,
who are in great demand. The Company's employees are not represented by any
collective bargaining organization, and the Company has never experienced any
work stoppage. The Company believes that its employee relations are good.

EXECUTIVE OFFICERS AND KEY PERSONNEL

         The executive officers and certain key personnel of the Company are as
follows:


<TABLE>
<CAPTION>
   NAME                                  AGE        POSITION(S)
   ----                                  ---        -----------
<S>                                     <C>    <C>
   Radu M. Vanco.....................    48     President, Chief Executive Officer and Director
   Marc H. Cremer....................    34     Vice President of Sales
   Thomas E. Gay III.................    49     Vice President of Finance and Administration and
                                                Chief Financial Officer
   Sorin Georgescu...................    47     Vice President of Technology
   Bassam I. Khoury..................    38     Vice President of Marketing
   Gelu Voicu........................    49     Vice President of Product Engineering and
                                                   Manufacturing
   William Priestner.................    43     Director of IS/Planning
</TABLE>

         Radu M. Vanco has served the Company as President and Chief Executive
Officer since March 1998 and as a director since November 1995. From October
1996 to March 1998 he served as Executive Vice President of Engineering, from
October 1996 to December 1997 as Chief Operating Officer, and from November 1992
to October 1995 as Vice President, Engineering. From 1991 to 1992, Mr. Vanco
served as product line director at Cypress Semiconductor. From 1985 to 1991, Mr.
Vanco held various technical positions at SEEQ Technology, Inc. Mr. Vanco holds
an M.S. in Electrical Engineering from the Polytechnical Institute, Bucharest,
Romania.

         Mr. Cremer has served the Company as Vice President of Sales since
March 1998. From April 1997 to March 1998, he served the Company as Director of
North American Sales and as Eastern U.S. Area Sales Manager from February 1997
when he joined the Company until April 1997. From 1995 to 1997, Mr. Cremer held
various sales management positions at Exel Microelectronics, Inc., a
semiconductor company, most recently as national sales manager. From 1993 to
1995, Mr. Cremer held the position of sales engineer at Sales Engineering
Concepts, Inc., a manufacturers representative. From 1990 to 1993, he held
various sales management and field applications positions for Xicor, Inc., a
semiconductor company. Mr. Cremer holds a B.S. in Electrical Engineering from
Northeastern University.

         Mr. Gay has served the Company as Vice President of Finance and
Administration, and Chief Financial Officer since May 1998. From August 1997 to
May 1998 he was Controller of Wireless Access, Inc., a communications device
manufacturing company. From April 1993 to May 1994 he was Controller for the
Company and from July 1994 to November 1996 he was a contract accountant for the
Company. From July 1988 to July 1992 he was controller of Sanmina Corporation, a
contract manufacturing company. Mr. Gay holds a B.S. in Accounting from San
Diego State University.

         Mr. Georgescu has served the Company as Vice President, Technology
since April 1998. From October 1997 to April 1998 he was a Senior Device
Engineer of Sandisk Corporation, a semiconductor company. From August 1996 to
October 1997 he was Manager of Flash Technology Development of the Company and
from October 1994 to August 1996 he was a Senior Device Engineer for the
Company. From June 1992 to October 1994 




                                      -8-
<PAGE>   9

he was a Senior Device Engineer for Power Integrations Corp., a semiconductor 
power supply company. Mr. Georgescu holds his M.S. in Electrical Engineering 
from the Polytechnical Institute, Bucharest, Romania.

         Mr. Khoury has served the Company as Vice President, Marketing since
March 1998. From April 1997 to March 1998, Mr. Khoury served the Company as
Director of Marketing, from July 1995 to March 1997, as Product Line Director of
EEPROMs and as Director of Product Engineering from May 1994 when he joined the
Company until July 1995. From 1991 to 1994, Mr. Khoury held the position of
product engineering manager at Cypress Semiconductor. From 1987 to 1991, he held
the position of product engineering manager at Seeq Technology, Inc. Mr. Khoury
holds a B.S. in Electrical and Electronic Engineering from University of
Virginia Tech.

         Mr. Voicu has served the Company as Vice President, Product Engineering
and Manufacturing since April 1998. From July 1995 to April 1998 he was Director
of Flash Product Line for the Company. From October 1993 to July 1995 he was
Manager of Product Engineering of the Company. From June 1991 to October 1993 he
served with Cypress Semiconductor, Inc., a semiconductor company, most recently
as Senior Product Engineer. Mr. Voicu holds his M.S. in Electrical Engineering
from the Polytechnical Institute, Bucharest, Romania.

         Mr. Priestner has served the Company as Director of IS/Planning since
September 1997. From June 1994 to September 1997, he was IS Manager for the
Company. From October 1993 to June 1994 he was a programmer analyst for the
Company. From January 1990 to October 1993 he served as MIS Administrator of The
Lutz Snyder Company, a real estate sales company.

INSURANCE

         Catalyst presently carries various insurance coverages including, but
not limited to, property damage, workers' compensation, directors and officers
liability, business interruption and general liability.

         IN ORDER TO TAKE ADVANTAGE OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, THE COMPANY HEREBY NOTIFIES
READERS THAT THE FACTORS SET FORTH IN "CERTAIN FACTORS THAT MAY AFFECT THE
COMPANY'S FUTURE RESULTS" AS SET FORTH BELOW IN ITEM 7 BELOW, AS WELL AS OTHER
FACTORS, IN THE PAST HAVE AFFECTED AND IN THE FUTURE COULD AFFECT THE COMPANY'S
ACTUAL RESULTS, AND COULD CAUSE THE COMPANY'S RESULTS FOR FUTURE PERIODS TO
DIFFER MATERIALLY FROM THOSE EXPRESSED IN ANY FORWARD LOOKING STATEMENTS MADE BY
OR ON BEHALF OF THE COMPANY, INCLUDING WITHOUT LIMITATION THOSE MADE IN THIS
REPORT.

ITEM 2.  PROPERTIES

         The Company rents its 42,500 square foot principal facility in
Sunnyvale, California, pursuant to a lease that expires in July 2006. As
permitted in the lease, the Company has subleased out 17,000 square feet of such
office space which it does not need at this time. The sublease will expire in
September, 1999. The Company also has domestic sales offices in Arizona, Florida
and Georgia and international sales offices in England, Taiwan and Japan. The
Company believes that its existing facilities are adequate to meet its current
needs and that additional or alternative space will be available in the future
on commercially reasonable terms.

ITEM 3.  LEGAL PROCEEDINGS

         On June 26, 1998 Micro-Comp Industries filed a complaint against the
Company in Santa Clara County Superior Court. The complaint alleges that the
Company failed to pay for integrated circuits delivered to the Company by UMC
and seeks $1.6 million in damages. The Company has filed an answer and
cross-complaint and intends to defend the action vigorously.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matters were submitted to a vote of security holders during the
fourth quarter for the fiscal year ended April 30, 1998.





                                      -9-
<PAGE>   10


                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

COMMON STOCK MARKET PRICES AND DIVIDENDS

         The Company's Common Stock is currently traded in the over-the-counter
market but is not regularly quoted in the automated quotation system of a
registered securities association. From the effective date of the Company's
initial public offering through August 4, 1998, the Common Stock was traded in
the over-the-counter market on the Nasdaq National Market under the symbol
"CATS." Commencing August 5, 1998, trading of the Company's Common Stock on
Nasdaq was discontinued. The following table sets forth the high and low closing
sales price for the Common Stock as reported on the Nasdaq National Market for
each calendar quarter of the last two fiscal years.


<TABLE>
<CAPTION>
                                                                            HIGH              LOW
                                                                            ----              ---
<S>                                                                       <C>                <C> 
         FISCAL YEAR ENDED APRIL 30, 1997
                  Quarter ended July 31, 1996 ..................            8 1/2            4 3/4
                  Quarter ended October 31, 1996 ...............            6 7/8            4 5/8
                  Quarter ended January 31, 1997 ...............            4 3/4            2 1/8
                  Quarter ended April 30, 1997 .................           3 1/16            1 1/2

         FISCAL YEAR ENDED APRIL 30, 1998
                  Quarter ended July 31, 1997 ..................           3 1/16          1 15/32
                  Quarter ended October 31, 1997 ...............           3 7/16          1 13/16
                  Quarter ended January 31, 1998 ...............            2 1/8            27/32
                  Quarter ended April 30, 1998 .................            1 3/8              5/8
</TABLE>

         As of August 12, 1998, there were approximately 172 registered holders
of record of the Company's Common Stock including a number of holders who are
nominees for an undetermined number of beneficial holders.

         No cash dividends have been declared or paid by the Company on the
Common Stock and the Company does not anticipate paying any such dividends in
the foreseeable future.

RECENT SALES OF UNREGISTERED SECURITIES

         In May 1998, the Company sold 1,500,000 shares of its Common Stock to a
corporate investor in a private placement transaction at $1.00 per share for an
aggregate cash consideration of $1,500,000. There were no sales discounts or
commissions paid. The offer and sale of the securities was exempt from
registration under the Securities Act of 1933, as amended, pursuant to Section
4(2) of such Act. The proceeds of such offering are being used for general
corporate purposes. In connection with such issuance the investor agreed to
various standstill and voting provisions including not acquiring additional
shares of Company Stock or taking actions to control the Company. The Company
also has certain repurchase rights with respect to the shares sold over the
twelve months from the date of issuance.


                                      -10-
<PAGE>   11

ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA

         The following table presents selected consolidated financial data of
the Company. This historical data should be read in conjunction with the
attached consolidated Financial Statements and the related notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing in Item 7 of this Form 10-K including the information
under the caption "Certain Factors that May Affect the Company's Future
Results".


<TABLE>
<CAPTION>
                                                                    YEAR ENDED
                                           ----------------------------------------------------------------
                                                        APRIL 30,                            MARCH 31,
                                           ------------------------------------      ----------------------
                                             1998          1997         1996(1)        1995          1994
                                           --------      --------      --------      --------      --------
<S>                                        <C>           <C>           <C>           <C>           <C>     
STATEMENT OF OPERATIONS DATA:                           (IN THOUSANDS, EXCEPT PER SHARE DATA)

Net revenues .........................     $ 34,579      $ 47,094      $ 60,186      $ 48,764      $ 54,252

Cost of revenues .....................       39,025        36,720        42,199        33,910        54,755
                                           --------      --------      --------      --------      --------

Gross profit (loss) ..................       (4,446)       10,374        17,987        14,854          (503)
Operating expenses:
   Research and development ..........        4,462         5,771         4,407         4,252         6,464
   Selling, general and administrative        9,111         8,437         9,733         8,263        14,856
                                           --------      --------      --------      --------      --------

Income (loss) from operations ........      (18,019)       (3,834)        3,847         2,339       (21,823)

Interest income (expense), net .......         (847)         (205)         (225)         (223)          339
                                           --------      --------      --------      --------      --------

Income (loss) before income taxes ....      (18,866)       (4,039)        3,622         2,116       (21,484)

Income tax provision .................           --            --            48            94           122
                                           --------      --------      --------      --------      --------

Net income (loss) ....................     $(18,866)     $ (4,039)     $  3,574      $  2,022      $(21,606)
                                           ========      ========      ========      ========      ========

Net income (loss) per share:  Basic ..     $  (2.28)     $  (0.51)     $   0.44      $   0.29      $  (3.55)
                                           ========      ========      ========      ========      ========
                      Diluted ........     $  (2.28)     $  (0.51)     $   0.43      $   0.27      $  (3.55)
                                           ========      ========      ========      ========      ========
Weighted average common shares:  Basic        8,263         7,918         8,144         6,976         6,079
                                           ========      ========      ========      ========      ========
                      Diluted ........        8,263         7,918         8,241         7,409         6,079
                                           ========      ========      ========      ========      ========
</TABLE>


<TABLE>
<CAPTION>
                                                         APRIL 30,                      MARCH 31,
                                                 ----------------------     ----------------------------------
                                                   1998          1997       1996(1)        1995         1994
                                                 --------      --------     --------     --------     --------
<S>                                              <C>           <C>          <C>          <C>          <C>     
BALANCE SHEET DATA:

Cash and cash equivalents ..................     $    534      $  2,695     $  2,966     $  5,246     $  4,965

Total current assets .......................       16,019        28,646       36,225       26,587       25,343

Total assets ...............................       18,853        32,553       39,275       30,817       30,632

Total current liabilities ..................       22,221        16,631       21,194       20,104       23,844

Long-term debt and capital lease obligations          501         1,885          571        1,347           82

Stockholders' equity (deficit) .............       (3,869)       14,037       17,510        9,366        6,706
</TABLE>


-----------------------
(1)      In February 1996, the Company changed its fiscal year end from March 31
         to April 30 of each year. The first such fiscal year began on May 1,
         1995 and ended on April 30, 1996.





                                      -11-
<PAGE>   12

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

         THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE
CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED IN THIS ANNUAL
REPORT ON FORM 10-K. IN ADDITION, IN ORDER TO TAKE ADVANTAGE OF THE "SAFE
HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, THE
COMPANY HEREBY NOTIFIES READERS THAT THE FACTORS SET FORTH IN "CERTAIN FACTORS
THAT MAY AFFECT THE COMPANY'S FUTURE RESULTS" AS SET FORTH BELOW IN THIS ITEM 7,
AS WELL AS OTHER FACTORS, IN THE PAST HAVE AFFECTED AND IN THE FUTURE COULD
AFFECT THE COMPANY'S ACTUAL RESULTS, AND COULD CAUSE THE COMPANY'S RESULTS FOR
FUTURE PERIODS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN ANY FORWARD LOOKING
STATEMENTS MADE BY OR ON BEHALF OF THE COMPANY, INCLUDING WITHOUT LIMITATION
THOSE MADE IN THIS REPORT.

OVERVIEW

         Catalyst Semiconductor, Inc., incorporated October 8, 1985, designs,
develops and markets nonvolatile memory semiconductor products including Serial
and Parallel EEPROMs and Flash memory. Revenues are derived from sales of
semiconductor products designed by the Company and manufactured by other
companies.

         The Company's business is highly cyclical and has been subject to
significant downturns at various times which have been characterized by reduced
product demand, production overcapacity, and significant erosion of average
selling prices. Throughout fiscal 1998, the market for certain FLASH and EEPROM
devices, which comprise the majority of Catalyst's business, experienced an
excess market supply relative to demand which resulted in a significant downward
trend in prices. The Company could continue to experience a downward trend in
product pricing which could further adversely affect the Company's operating
results.

         The Company's recent operating results have consumed substantial
amounts of cash. The reduction in cash has also placed restrictions on wafer
purchases which, during the fourth quarter of 1998, resulted in the cancellation
of some customer sales orders. In May 1998, the Company received net proceeds of
$1.5 million from the sale of 1,500,000 shares of its Common Stock in a private
placement. Management believes, however, that it will require additional cash
from similar or related private placements or other sources of liquidity to meet
the Company's projected working capital and other cash requirements for fiscal
1999, and is currently pursuing these sources of liquidity.

         As a result of these circumstances, the Company's independent
accountants' opinion on the consolidated financial statements includes an
explanatory paragraph indicating that these matters raise substantial doubt
about the Company's ability to continue as a going concern.

RESULTS OF OPERATIONS

         FISCAL YEAR ENDED APRIL 30, 1998 COMPARED TO FISCAL YEAR ENDED APRIL
30, 1997

         Revenues. Total revenues consist primarily of net product sales. A
substantial portion of net product sales has been made through independent
distributors. Revenue from product sales to original equipment manufacturers and
from sales to distributors who have no, or limited, product return rights and no
price protection rights, is recognized upon shipment net of allowances for
estimated returns. When distributors have rights to return products or price
protection rights, the Company defers revenue recognition until the distributor
sells the product to the customer. Total revenues decreased by 27% to $34.6
million in fiscal 1998 from $47.1 million in fiscal 1997. The decrease was
primarily attributable to price erosion caused by excess supply and other
adverse industry-wide conditions. Additionally, the Company was unable to
purchase sufficient wafers during the fourth quarter of fiscal 1998 due to lack
of working capital. The Company is reliant upon receiving and fulfilling orders
within the same quarter to meet or exceed its current revenue levels. A
continuation of weak demand, capital deficiencies and price erosion for the
Company's products could lead to continued poor operating results. In May and
June of 1998, the company received substantial cancellations of the backlog
existing at fiscal year end. International sales contributed 64% of net product
sales in fiscal 1998 as compared to 63% in fiscal 1997.



                                      -12-
<PAGE>   13

         Gross Profit (Loss). Gross loss for fiscal 1998 was $4.4 million, or a
gross loss of 13% of revenues, compared to gross profit of $10.4 million, or 22%
of revenues, for fiscal 1997. The decreases in absolute dollars were primarily
attributable to reduced revenues and $7.5 million in charges taken in the third
and fourth quarters of fiscal 1998. These charges were taken primarily to adjust
the value of certain inventories to reflect reductions in current market pricing
below the cost to produce the inventory and to adjust the value of certain
inventories for which the Company has quantities that exceed forecasted demand.
Gross margins were also adversely affected by excess supplies of competitive
products and other adverse industry-wide conditions, lower than anticipated
yields achieved on the Company's 0.6 micron version of its Flash memory devices,
rework charges incurred to re-mark and re-test certain products in preparation
of shipping those products to customers of the Company, and expedite charges
incurred to ensure that delivery was made in time to meet customer schedules.

         Research and Development. Research and development ("R&D") expenses
consist principally of salaries for engineering, technical and support
personnel, depreciation of equipment, and the cost of wafers used to evaluate
new products and new versions of current products. R&D expenses decreased 22% to
$4.5 million in fiscal 1998 from $5.8 million in fiscal 1997. The decrease in
dollars was primarily attributable to decreases in R&D personnel costs. As a
percentage of revenues, R&D expenses increased to 13% from 12%. This increase
was primarily attributable to decreased sales.

         Selling, General and Administrative. Selling, general and
administrative ("SG&A") expenses consist principally of salaries for sales,
marketing and administrative personnel, commissions, promotional activities and
directors and officers ("D&O") insurance. SG&A expenses increased 8% to $9.1
million in fiscal 1998 from $8.4 million in fiscal 1997. This increase was
primarily attributable to bad debt expenses and severance accruals. As a
percentage of revenues, SG&A expenses increased to 26% from 18%. The increase in
SG&A as a percentage of revenues was attributable to absolute spending
increasing while revenues decreased.

         Net Interest Expense. Net interest expense increased by 313% to
$847,000, or 2% of revenues, in fiscal 1998, as compared to $205,000, or .4% of
revenues, in fiscal 1997. The increase was primarily attributable to increased
average outstanding borrowings. Increased borrowings were not offset by
increased balances in interest bearing cash accounts.

         Income Tax Provision. As a result of the Company's loss, the provision
for income taxes remained at zero in fiscal 1998.

         As of April 30, 1998 the Company had available net operating loss
carryforwards of approximately $37.6 million and credit carryforwards of
approximately $1.0 million for federal tax purposes, which begin to expire in
fiscal 2001. Availability of the net operating loss and general business credit
carryforwards may potentially be reduced in the event of substantial changes in
equity ownership.

         FISCAL YEAR ENDED APRIL 30, 1997 COMPARED TO FISCAL YEAR ENDED APRIL
30, 1996

         Revenues. Total revenues decreased by 22% to $47.1 million in fiscal
1997 from $60.2 million in fiscal 1996. The decrease was primarily attributable
to price erosion caused by excess supply and other adverse industry-wide
conditions. International sales contributed 63% of net product sales in fiscal
1997 as compared to 60% in fiscal 1996.

         Gross Profit. Gross profit decreased by 42% to $10.4 million in fiscal
1997 from $18.0 million in fiscal 1996. The decrease was primarily attributable
to price erosion caused by excess supply and other adverse industry-wide
conditions. Lower cost versions of the Company's Serial and Parallel EEPROMs,
produced on 0.8 micron processes, and Flash memory devices, produced on 0.6
micron processes, were in design or already released to production.

         Research and Development. R&D expenses increased 31% to $5.8 million in
fiscal 1997 from $4.4 million in fiscal 1996. As a percentage of revenues, R&D
expenses increased to 12% from 7%. The increase was primarily attributable to
increases in R&D personnel costs, facility costs (related to the Company's move
into a new facility in August 1996), depreciation expense, other outside
services (primarily the Company's independent contractors for



                                      -13-
<PAGE>   14


engineering services in Romania) and higher material costs for wafers being used
to evaluate new products and new versions of current products.

         Selling, General and Administrative. SG&A expenses decreased 13% to
$8.4 million in fiscal 1997 from $9.7 million in fiscal 1996. This decrease was
primarily attributable to decreases in commissions due to lower revenues and
personnel costs. As a percentage of revenues, SG&A expenses increased to 18%
from 16%. This increase was attributable to absolute spending decreasing at a
rate lower than the revenue decrease.

         Net Interest Expense. Net interest expense was $205,000 in fiscal 1997,
as compared to $225,000 in fiscal 1996. Increased borrowings were offset by
increased balances in interest bearing cash accounts.

         Income Tax Provision. As a result of the Company's loss, the provision
for income taxes decreased from $48,000 in fiscal 1996 to zero in fiscal 1997.

LIQUIDITY AND CAPITAL RESOURCES

         Total cash (including $5.8 million of restricted cash) decreased $1.7
million to $6.3 million as of April 30, 1998 from $7.9 million as of April 30,
1997. The decrease was primarily attributable to net cash used to purchase
equipment and repay debt and capital lease obligations. As of April 30, 1998,
$5.8 million of the total cash was pledged as security on letters of credit
required by certain of the Company's wafer foundries. Net cash provided by
operating activities totaled $0.3 million during fiscal 1998. This was primarily
attributable to net operating losses offset by a change in working capital
amounts.

         The Company has approximately $3.2 million of secured loans owing to
its bank. As a result of the Company's financial condition and results of
operations, the bank has determined that the Company is in default under various
provisions of the loan agreement entitling the bank to terminate the loan
agreement and declare the loans immediately due and payable. Although the
Company has obtained a letter of forbearance from the bank taking any action
with respect to existing defaults, such forbearance only extends until September
30, 1998 and only as to the specified defaults claimed through June 30, 1998.
The Company is seeking to persuade the bank not to take action on the events of
default and not to declare the loan due and payable. The Company is seeking to
renegotiate a further extension of such forbearance. Although the Company is
seeking to remedy its noncompliance or renegotiate the terms of the loan
agreement, there can be no assurance that the Company will be successful in its
efforts and that the bank will not accelerate all amounts due under the bank
agreement.

         On February 15, 1997, a vendor loaned $1.2 million to the Company in
settlement of billings for assembly and test services totaling the same amount.
The loan bears interest at 18% and was due and payable on May 15, 1998, but has
an arrangement to extend it to October 15, 1998.

         The Company is currently seeking additional equity or debt financing to
address its working capital needs and to provide funding for capital
expenditures. There can be no assurances, however, that financing will be
available on terms acceptable to the Company, if at all. If the Company is not
successful in raising additional capital, in view of the uncertainties relating
to arrangements with its bank and other lenders, the Company can not reasonably
assess how long its current cash balances, cash generated from operations and
borrowings available under any remaining loans or lines of credit and from
equipment financing, even with substantial reductions in operating expenses and
capital expenditures, will permit the Company to continue operations.

CERTAIN FACTORS THAT MAY AFFECT THE COMPANY'S FUTURE RESULTS

         THE COMPANY DESIRES TO TAKE ADVANTAGE OF CERTAIN PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, ENACTED IN DECEMBER 1995 (THE
"REFORM ACT") THAT PROVIDES A "SAFE HARBOR" FOR FORWARD-LOOKING STATEMENTS MADE
BY OR ON BEHALF OF THE COMPANY. THE COMPANY HEREBY CAUTIONS STOCKHOLDERS,
PROSPECTIVE INVESTORS IN THE COMPANY AND OTHER READERS THAT THE FOLLOWING
IMPORTANT FACTORS, AMONG OTHERS, IN SOME CASES HAVE AFFECTED, AND IN THE FUTURE
COULD AFFECT, THE COMPANY'S STOCK PRICE OR CAUSE THE COMPANY'S ACTUAL RESULTS
FOR THE FISCAL YEAR ENDING APRIL 30, 1999, FOR THE FISCAL QUARTER ENDING JULY
31, 1998, AND FUTURE FISCAL YEARS AND



                                      -14-
<PAGE>   15


QUARTERS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN ANY FORWARD-LOOKING
STATEMENTS, ORAL OR WRITTEN, MADE BY OR ON BEHALF OF THE COMPANY.

         The Company's business and future operating results are subject to
potential fluctuations due to a number of factors including the following:

         Defaults under Outstanding Loans; Risk of Bankruptcy. The Company has
approximately $3.4 million of secured loans owing to its bank. As a result of
the Company's financial condition and results of operations, the bank has
determined that the Company is in default under various provisions of the loan
agreement entitling the bank to terminate the loan agreement and declare the
loans immediately due and payable. Although the Company has obtained a letter of
forbearance from the bank taking any action with respect to existing defaults,
such forbearance only extends until September 30, 1998 and only as to the
specified defaults claimed through June 30, 1998. The Company is seeking to
persuade the bank not to take action on the events of default and not to declare
the loan due and payable. In that regard the Company is seeking to obtain equity
or other funding to increase the cash available for operations and other
purposes. There can be no assurance that such efforts to obtain funding will be
successful or, if successful, that the bank will continue to forbear action on
or otherwise waive the existing defaults. If the Company's efforts are
unsuccessful, the bank is likely to declare the loans due and payable. Under
such circumstances the Company would be unable to continue operations which
would result in bankruptcy. The Company is also indebted to other creditors in
the amount of approximately $13.4 million. Continued operation of the Company
would also require such other lenders to forbear taking action or waiving
defaults under such other debt. Moreover it is anticipated that any continued
forbearance by the bank would require such other lenders to take similar action
under the other loans. In addition, although the Company is current on its lease
payments under the lease of its headquarters facility, as a result of its
financial condition, the Company is in violation of certain terms of its lease.
Similar violations have resulted under certain equipment lease agreements.

         Need for Additional Capital. The Company has incurred significant
losses and experienced significant negative cash flow from operations for over
two years. Such negative cash flow has significantly reduced the Company's
available capital. If the Company is successful in having its lenders agree to
waive or forbear actions on defaults under existing loans or to renegotiate the
terms of such loans to enable the Company to keep such loans outstanding, or
perhaps as a condition to such waivers, the Company will need to obtain
additional capital. If the Company is not successful in raising additional
capital, in view of the uncertainties relating to arrangements with its bank and
other lenders, the Company can not reasonably assess how long its current cash
balances, cash generated from operations and borrowings available under any
remaining loans or lines of credit and from equipment financing, even with
substantial reductions in operating expenses and capital expenditures, will
permit the Company to continue operations. There can be no assurance that the
Company will generate sufficient revenue to fund its operations in the absence
of additional funding sources. The Company has pursued and continues to pursue
measures designed to reduce expenses and conserve cash such as deferring
payments to vendors and other suppliers, headcount reductions, deferrals of
planned expenditures, other expense reductions and other measures. Although such
activities help preserve cash and enable the Company to continue operations, the
lack of available capital hinders the Company's ability to continue
manufacturing, sales, product development and other ongoing operational
activities necessary to generating revenues. Such activities can have a
material, adverse affect on the Company's business, financial condition and
operating results. Furthermore, to the extent the Company suffers further
adverse effects to its revenues or margins because of delays in new product
introductions, price competition or other competitive factors, the Company's
cash position and its business, operating results and financial condition will
be further adversely affected.

         The Company is currently seeking additional equity or debt financing to
address its working capital needs and to provide funding for capital
expenditures. The Company's fund raising efforts to date have not been
successful and there can be no assurance that such funding will be available at
acceptable terms, if at all. If the Company is successful in raising funds
through the issuance of equity securities, existing stockholders of the Company
would likely experience substantial dilution, or the securities may have rights,
preferences or privileges senior to those of the Company's Common Stock. If
adequate funds are not available or are not available on acceptable terms,
further reductions in its operating expenses and capital expenditures would be
required to continue operations either of which could have a material adverse
effect on the Company's business, operating results and financial condition.



                                      -15-
<PAGE>   16
         Recent Operating Results; Anticipated Future Losses. The Company's
recent operating results have been substantially worse than expected. Total
revenues for the quarter and the fiscal year ended April 30, 1998 were $4.8
million and $34.6 million, respectively, compared to revenues of $9.0 million
and $47.1 million for the comparable periods of the prior year. In addition, the
Company incurred net losses for the quarter and for the year ended April 30,
1998 of $10.1 million and $18.9 million, respectively, compared to net losses of
$1.1 and million and $4.1 million for the comparable periods in the prior year.
The Company's last profitable year was the fiscal year ended April 30, 1996. For
over two years, the Company has experienced significant negative cash flow from
operations. The Company has taken many steps to reduce its operating expenses
including reducing its headcount from 71 in December 1996 to 42 in April 1998.
Although reductions in headcount could help the Company meet its operating
expense objectives, such reductions could adversely impact the Company's sales,
marketing and product development efforts. The Company anticipates that negative
cash flow from operations will continue for the foreseeable future. There can be
no assurance that the Company can generate revenue growth, or that any revenue
growth that is achieved can be sustained. To the extent that increases in such
operating expenses precede and are not subsequently followed by increased
revenues, the Company's business, results of operations and financial condition
would be materially adversely affected. There can be no assurance that the
Company will ever achieve or sustain profitability.

         Fluctuations in Operating Results. The Company's operating results have
historically been and in future quarters may be adversely affected or otherwise
fluctuate due to factors such as timing of new product introductions and
announcements by the Company and its competitors, fluctuations in customer
demand for the Company's products, volatility in supply and demand affecting
market prices generally (such as the increases in supply of competitive products
and significant declines in average selling prices experienced by the Company in
the fiscal years ended April 30, 1998 and 1997), increased expenses associated
with new product introductions or process changes, increased expenditures
related to expanding the Company's sales channels, gains or losses of
significant customers, timing of significant orders of the Company's products,
fluctuations in manufacturing yields, changes in product mix, wafer price
increases due to foreign currency fluctuations and general economic conditions.
The Company anticipates that a significant portion of its revenue will be
derived from a limited number of large orders, and the timing of receipt and
fulfillment of any such orders is expected to cause material fluctuations in the
Company's operating results, particularly on a quarterly basis.

         Due to the foregoing factors, quarterly revenue and operating results
are difficult to forecast. The Company's expense levels are based, in
significant part, on the Company's expectations as to future revenue and are
therefore relatively fixed in the short term. If revenue levels fall below
expectations, as has occurred during the years ended April 30, 1998 and 1997,
net income is likely to be disproportionately adversely affected because a
proportionately smaller amount of the Company's expenses varies with its
revenue. There can be no assurance that the Company will be able to achieve or
maintain profitability on a quarterly or annual basis in the future. Due to the
foregoing factors, the Company's operating results may fall below the
expectations of securities analysts and investors, which could have a material
adverse effect on the market price of the Company's Common Stock. Reductions in
revenue expectations can also require the Company to take additional reserves
against inventory valuations based upon the reduced likelihood that the Company
will be able to liquidate its inventories at profitable prices.

         Inventory. The cyclical nature of the semiconductor industry
periodically results in oversupply or shortages of wafer fabrication capacity
such as the Company has experienced from time to time. Since the Company must
order products and build inventory substantially in advance of product
shipments, there is a risk that the Company will forecast incorrectly and
produce excess or insufficient inventories of particular products because demand
for the Company's products is volatile and customers place orders with short
lead times. The ability of the Company's customers to reschedule or cancel
orders without significant penalty could adversely affect the Company's
liquidity, as the Company may be unable to adjust its purchases from its wafer
suppliers to match such customer changes and cancellations. There can be no
assurance that the Company's inventory will be reduced by the fulfillment of
customer orders or that in the future the Company will not produce excess
quantities of its products. To the extent the Company produces excess
inventories of particular products, the Company's operating results could be
adversely affected by charges that the Company could recognize due to
significant reductions in demand for its products, rapid declines in the market
value of inventory resulting in inventory writedowns or other related factors.



                                      -16-
<PAGE>   17

For example, during the last half of fiscal 1998, the Company recorded charges
of approximately $7.5 million attributable to reserves for lower of cost or
market adjustments and for excess and obsolete inventory adjustments. There can
be no assurance that the Company will not suffer similar reductions in values of
its inventories in the future or that the Company will be able to liquidate its
inventory at acceptable prices.

         Competition. The semiconductor industry is intensely competitive and
has been characterized by rapid price erosion, declining gross margins, rapid
technological change, product obsolescence and heightened international
competition in many markets. Average selling prices in the semiconductor
industry generally, and for the Company's products in particular, have decreased
significantly and rapidly over the life of each product. The Company expects
that average selling prices for its existing products will continue to decline
rapidly for the foreseeable future and that average selling prices for each new
product will decline significantly over the life of the product. Declines in
average selling prices for the Company's products, if not offset by reductions
in the cost of producing those products or by sales of new products with higher
gross margins, would decrease the Company's overall gross margins, could cause a
negative adjustment to the valuation of the Company's inventories and could
materially and adversely affect the Company's operating results.

         The Company competes with major domestic and international
semiconductor companies, many of which have substantially greater financial,
technical, sales, marketing, production, distribution and other resources than
the Company. The can be no assurance that the Company will be able to compete
successfully in the future. The Company's more mature products, such as Serial
and Parallel EEPROM devices, compete on the basis of product performance, price
and customer service. The Company believes it competes successfully with respect
to each of these competitive attributes; however price competition is
significant and expected to continue. Principal competitors with respect to the
Company's EEPROM products currently include SGS-Thomson, National Semiconductor,
Atmel and Xicor, as well as the Company's strategic manufacturing partner Oki,
all of which have substantially greater resources than the Company.

         The market for Flash memory products has been characterized by long
production cycles, irregular yields, competing technologies and, particularly
since the first quarter of fiscal 1997, intense price competition resulting in
major reductions in average selling prices and corresponding reductions in
margins. The Company's Flash memory products compete on the basis of product
performance, price and customer service. However, given the development of
higher density/lower cost products and the intense price competition prevalent
for these products, there can be no assurance that the Company will be able to
compete successfully in the future against its competitors on the bases of these
or other competitive factors.

         Dependence on Independent Foreign Manufacturers and Subcontractors;
Manufacturing Risks. The Company does not manufacture the semiconductor wafers
used for its products. The Company principally utilizes facilities of Oki
Electric Industry Co., Ltd. ("OKI") in Japan, and United Microelectronics
Corporation ("UMC") in Taiwan, to fabricate and test the Company's wafers and
subcontractors in Southeast Asia to assemble and test its integrated circuits.
To date, a majority of these wafers have been manufactured by OKI. The
manufacture of semiconductor products is highly complex and sensitive to a wide
variety of factors and, as is typical in the semiconductor industry, the
Company's outside wafer foundries from time to time have experienced lower than
anticipated production yields. While the Company believes it has an adequate
wafer supply to meet its currently anticipated needs, there can be no assurance
that the Company will continue to receive sufficient quantities of wafers at
favorable prices on a timely basis, if at all, or that the Company will be able
to attain higher levels of wafer supply as demand requires. Material disruptions
in the supply of wafers as a result of manufacturing yield or other
manufacturing problems are not uncommon in the semiconductor industry. The
Company may also be subject to production transition delays. There can be no
assurance that the Company will not experience such problems in the future.
Moreover, delays in the Company's payments to wafer suppliers resulting from the
Company's current cash constraints can often result in delays or reductions in
wafer deliveries and assembly and test services from the Company's suppliers.
Such delays and reductions can result in cancellations of customer orders
thereby adversely affecting the Company's ability to generate future revenues.
The loss of OKI as a supplier, any prolonged inability to obtain adequate yields
or deliveries from OKI or other subcontractor manufacturers, or any other
circumstance that would require the Company to seek and qualify alternative
sources of supply of products or services, could delay shipments, result in the
loss of customers and have a material adverse effect on the Company's business
and



                                      -17-
<PAGE>   18


operating results. Moreover, the inability to procure supplies and services from
these foreign subcontractor manufacturers on commercially reasonable terms as a
result of foreign currency exchange rate fluctuations may have a material
adverse effect on the Company's operating results. The Company also has concerns
about the financial viability of its primary test and assembly contractor.
Although the Company is exploring alternative contractors, there can be no
assurance that it will be able to obtain such alternative services or that the
Company will have adequate test and assembly facilities available. Failure to
have such services available would have a material adverse effect on the
Company's business, financial condition and results of operations. In addition,
the Company's business is subject to other risks generally associated with doing
business with foreign subcontractors including, but not limited to, foreign
government regulations, political and financial unrest which may cause
disruptions or delays in shipments to the Company's customers or access to the
Company's inventories.

         International Operations. For fiscal 1998, 1997 and 1996 international
sales accounted for approximately 64%, 63% and 60%, respectively, of the
Company's product sales. The Company expects that international sales will
continue to represent a significant portion of its product sales in the future.
The Company's international operations may be adversely affected by fluctuations
in exchange rates, imposition of government controls, political and financial
instability, trade restrictions, changes in regulatory requirements,
difficulties in staffing international operations and longer payment cycles. In
particular, recent adverse developments in the economic environment in the Far
East may have a material adverse effect on the Company's subcontractors. There
can be no assurance these or other factors related to international operations
will not have a material adverse affect on the Company's business, financial
condition and results of operations.

         New Product Development and Technological Change. The markets for the
Company's products are characterized by rapidly changing technology and product
obsolescence. The timely introduction of new products at competitive
price/performance levels is a key factor to the success of the Company's
business. In particular, the Company's future success will depend on its ability
to develop and implement new design and process technologies which enable the
Company to achieve higher product densities and thereby reduce product costs.
For example, most of the Company's products are currently designed and
manufactured using a 0.8 micron CMOS EEPROM process or a 0.5 micron Flash memory
process. There can be no assurance that the Company will be able to select and
develop new products and technologies and introduce them to the market in a
timely manner and with acceptable fabrication yields and production costs.
Furthermore, there can be no assurance that the Company's products will achieve
market acceptance. The failure of the Company to complete and introduce new
products at competitive price/performance levels could materially and adversely
affect the Company's business, financial condition and operating results. Delays
in developing new products, achieving volume production of new products,
successfully completing technology transitions with acceptable yields and
reliability or the lack of commercial acceptance of new products introduced by
the Company, could have a material adverse effect on the Company's business,
financial condition and results of operations.

         Flash Memory Market. A significant amount of the Company's net revenues
during 1998 were derived from sales of Flash memory products. The market for
Flash memory products has been characterized by intense price competition, long
production cycles, inconsistent yields, competing technologies, rapidly
declining average selling prices, declines in gross margins and intense overall
competition. The Company's fiscal 1997 and fiscal 1998 operating results were
adversely affected by intense price competition caused by increased supplies of
products and other adverse industry-wide conditions. Intel and other competitors
(which include Advanced Micro Devices, Atmel, Fujitsu, Hitachi, Micron,
Mitsubishi, SGS-Thomson, Sharp, Texas Instruments and Toshiba) are expected to
further increase Flash memory production. There can be no assurance that the
Company will be able to sustain the market acceptance for its Flash memory
products. The Company anticipates continued price and other competitive
pressures, which adversely affected fiscal 1997 and fiscal 1998 operating
results to adversely affect the Company's future operating results.

         Semiconductor Industry. The semiconductor industry is highly cyclical
and has been subject to significant economic downturns at various times,
characterized by diminished product demand, accelerated erosion of average
selling prices and gross margins, and production overcapacity. Accordingly, the
Company may experience substantial period to period fluctuations in future
operating results due to general semiconductor industry conditions, overall
economic conditions or other factors. For example, the Company experienced and
continues to experience accelerated erosion of average selling prices caused by
adverse industry-wide conditions in fiscal 1997 and fiscal 1998.

         Dependence on Proprietary Technology; Risk of Intellectual Property
Litigation. In the semiconductor industry companies place extensive reliance
upon their intellectual property and proprietary technology and it is



                                      -18-
<PAGE>   19


typical for companies to receive notices from time to time that allege
infringement of patents or other intellectual property rights of others. There
can be no assurance that the Company will not receive any such notification or
that proceedings alleging infringement of intellectual property rights will not
be commenced against the Company in the future. In such event, there can be no
assurances that the Company could obtain any required licenses of third party
intellectual property rights or could obtain such licenses on commercially
reasonable terms. Failure to obtain such a license in any event could require
the Company to cease production of its products until the Company develops a
non-infringing design or process. Moreover, the cost of litigation of any such
claim or damages resulting therefore could be substantial and could materially
and adversely affect the Company's business, financial condition and results of
operations.

         Dependence upon Key Personnel. The Company's ability to operate
successfully will depend, to a large extent, upon the continued service of
certain key employees, and the continued ability to attract and retain
additional highly qualified personnel. Competition for such personnel,
particularly for highly skilled design, process and test engineers, is intense
and there can be no assurance that the Company can retain such personnel or that
it can attract other highly qualified personnel. The loss of or failure to
attract and retain any such highly qualified personnel could have a material
adverse affect on the Company's business, financial condition and results of
operations.

         Customer Concentration. A relatively small number of customers have
accounted for a significant portion of the Company's net revenue in the past.
During fiscal years 1998, 1997 and 1996, the only customer which represented
more than ten percent of Catalyst's product revenue was Marubun Corporation, a
Japanese distributor (21%, 14% and 12%, respectively). In December 1997, Marubun
resigned as a distributor effective in or about March 1998. Loss of one or more
of the Company's current customers could materially and adversely affect the
Company's business, operating results and financial condition. In addition, the
Company has experienced and may continue to experience lower margins on sales to
significant customers as a result of volume pricing arrangements.

         Dependence on Manufacturer Representatives and Distributors. The
Company markets and distributes its products primarily through manufacturers'
representatives and independent distributors. The Company's distributors
typically offer competing products. The distribution channels have been
characterized by rapid change, including consolidations and financial
difficulties. The loss of one or more manufacturers' representatives or
distributors, or the decision by one or more distributors to reduce the number
of the Company's products offered by such distributors or to carry the product
lines of the Company's competitors, could have a material, adverse effect on the
Company's operating results.

         Year 2000 Compliance. The Company is currently working to assess the
potential impact of the Year 2000 on the processing of date-sensitive
information by the Company's computerized information systems. The Year 2000
problem is the result of computer programs being written using two digits
(rather than four) to define the applicable year. Any of the Company's programs
that have time-sensitive software may recognize a date using "00" as the year
1900 rather than the year 2000, which could result in miscalculations or system
failures. Costs of addressing potential problems are being considered but are
not expected to have a material adverse effect on the Company's business,
financial position, results of operations or cash flows in future periods.
However, if the Company or its vendors are unable to resolve such processing
issues in a timely manner, it could result in a material financial risk.
Accordingly, the Company plans to devote the necessary resources to resolve all
significant Year 2000 issues in a timely manner.

         Takeover Resistive Measures. The Company's Stockholder Rights Plan,
which provides stockholders with certain rights to acquire shares of Common
Stock in the event a third party acquires more than 15% of the Company's stock,
the Board's ability to issue "blank check" Preferred Stock without stockholder
approval and the Company's staggered terms for its directors, could have the
effect of delaying or preventing a change in control of the Company.

         Volatility of Stock Price. The Company's stock price has been and may
continue to be subject to significant volatility. Any shortfall in revenues or
earnings from levels expected or projected by securities analysts or others
could have an immediate and significant adverse effect on the trading price of
the Company's Common Stock in any given period. In addition, the stock market in
general has experienced extreme price and volume fluctuations particularly
affecting the market prices for many high technology companies and small
capitalization companies, and these fluctuations have often been unrelated to
the operating performance of the specific companies. These broad fluctuations
may adversely affect the market price for the Company's Common Stock.

ITEM 7A.   QUANTITATIVE AND CUMULATIVE DISCLOSURES ABOUT MARKET RISK



                                      -19-
<PAGE>   20


           Not applicable.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

           (A)    FINANCIAL STATEMENTS

           See index to Financial Statements on page F-2 hereof.

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
           FINANCIAL DISCLOSURE

           None

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

         Information relating to the Company's directors required by this item
is incorporated herein by reference to the section entitled "Proposal 1 --
Election of Directors" in the 1998 Proxy Statement. Information relating to the
Company's executive officers required by this item appears in "Item 1 --
Executive Officers and Key Personnel" of this report. Additional information
relating to the Company's directors and executive officers required by this item
is incorporated herein by reference to the section entitled "Additional
Information -- Compliance with Section 16(a) of the Securities Exchange Act" in
the 1998 Proxy Statement.

ITEM 11.  EXECUTIVE COMPENSATION

         The information required by this item is incorporated herein by
reference to the sections entitled "Proposal 1 -- Election of Directors -
Compensation of Directors" and "Additional Information - Executive Compensation"
in the 1998 Proxy Statement.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

          The information required by this item is incorporated herein by
reference to the sections entitled "Additional Information - Security Ownership"
in the 1998 Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information required by this item is incorporated herein by
reference to the sections entitled " Additional Information - Certain
Relationships and Related Transactions" in the 1998 Proxy Statement.

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

         (a)(1)   FINANCIAL STATEMENTS

         See Index to Financial Statements on page F-2 hereof .
         (a)(2)   FINANCIAL STATEMENT SCHEDULES

         See Item 14(a)(1) above. Schedules other than those included in
referenced Index have been omitted because they are not required or are not
applicable.

         (a)(3)   EXHIBITS


<TABLE>
<S>      <C>      <C>
3.2      (1)      Restated Certificate of Incorporation of Registrant.

3.4      (1)      Bylaws of Registrant.
</TABLE>






                                      -20-
<PAGE>   21



<TABLE>
<S>      <C>      <C>
4.1      (5)      Preferred Shares Rights Agreement, dated as of December 3, 1996, between Catalyst Semiconductor, Inc. and First
                  National Bank of Boston, including the Certificate of Designation of Rights, Preferences and Privileges of
                  Series A Participating Preferred Stock, the Form of Rights Certificate and the Summary of Rights attached
                  thereto as Exhibits A, B and C respectively.

10.3     (1)      Stock Purchase Agreement dated March 31, 1992 between Kamlesh Kumari and Registrant, together with Promissory
                  Note and Guarantee by B.K. Marya.

10.7     (1)      Stock Option Plan, as amended, including forms of Stock Option Agreement.

10.8     (1)      1993 Employee Stock Purchase Plan.

10.9     (1)      1993 Director Stock Option Plan.

10.12    (1)      Distributor Agreement dated February 1990 between Arrow Electronics, Inc. and Registrant.

10.14    (1)      Distributor Agreement dated June 30, 1986 between Registrant and Marubun Corporation.

10.15    (1)      Irrevocable License Agreement dated May 8, 1988 between Seiko Instruments, Inc. and Registrant.

10.16    (1)      64 KBIT CMOS EEPROM, 1M BIT CMOS EEPROM and 256 KBIT CMOS EEPROM Consulting and Design Work Agreement dated
                  March 26, 1986 between OKI Electric Industry Co., Ltd. and the Registrant.

10.17    (1)      FLASH EEPROM Development and License Agreement dated July 18, 1988 between OKI Electric Co., Ltd. and
                  Registrant.

10.18    (1)      4M FLASH Development and License Agreement dated May 27, 1992 between OKI Electric Co., Ltd. and Registrant.

10.27    (1)      Form of Indemnification Agreement entered into by Registrant with each of its directors and executive officers.

10.34    (2)      Wafer Supply Agreement dated February 24, 1995 between OKI Electric Industry Co., Ltd. and the Registrant.

10.36    (3)+     License Agreement dated August 18, 1995 between Intel Corporation and Registrant

10.38    (4)      Standard Industrial Lease dated March 22, 1996 between Marin County Employees Retirement Association and
                  Registrant.

10.39    (4)+     Master Agreement dated February 7, 1996 between United Microelectronics Corporation and the Registrant.

10.41    (4)+     Amendment dated May 20, 1996 to the Wafer Supply Agreement dated February 24, 1994 between OKI Electric Industry
                  Co., Ltd. and Registrant.

10.42    (4)      Separation and Consulting Agreements dated August 14, 1995 between B.K. Marya and Registrant.

10.43    (4)      Separation and Consulting Agreements dated August 30, 1995 between Donald B. Witmer and the Registrant.

10.44    (4)      Employment Agreement dated April 25, 1995 between Christopher Carstens and Registrant.

10.45    (4)      Employment Agreement dated August 14, 1995 between C. Michael Powell and Registrant.

10.46    (4)      Employment Agreement dated October 14, 1995 between Radu Vanco and Registrant.

10.47    (4)      Loan Agreement and Loan Forgiveness Agreement dated September 7, 1995 between C. Michael Powell and Registrant.

10.48    (4)      Loan Forgiveness Agreement dated March 12, 1996 between Radu Vanco and Registrant.

10.49             Loan and Security Agreement dated June 19, 1997 between Coast Business Credit, a division of Southern Pacific
                  Thrift & Loan Association ("Coast"), and Registrant.

10.50             Loan and Security Agreement (CEFO Facility) dated June 19, 1997 between Coast Business Credit, a division of
                  Southern Pacific Thrift & Loan Association ("Coast"), and Registrant.

10.51             Commercial Security Agreement dated April 1, 1998 between Registrant and Oki Electric Industry Co., Ltd.

10.52             Wafer Purchase Agreement dated March 23, 1998 between Registrant and Trio-Tech International PTE LTD with
                  Variation Agreement dated April 16, 1998 between Registrant and Trio-Tech.

10.53             Addendum dated May 29, 1998 to Employment Agreement dated October 14, 1995 between Radu Vanco and Registrant.

10.54             Severance Agreement dated April 28, 1998 between Sorin Georgescu and Registrant.

10.55             Severance Agreement dated April 28, 1998 between Gelu Voicu and Registrant.

10.57             Severance Agreement dated April 28, 1998 between Marc H. Cremer and Registrant.
</TABLE>




                                      -21-
<PAGE>   22

<TABLE>
<S>      <C>      <C>

10.58             Severance Agreement dated April 28, 1998 between Bassam Khoury and Registrant.

10.59             Severance Agreement dated June 1, 1998 between Thomas E. Gay III and Registrant.

10.60             Amendment No. 1 to Preferred Shares Rights Agreement dated as of May 22, 1998 between Registrant and BankBoston,
                  N.A., as rights agent.

10.61             Common Stock Purchase Agreement dated as of May 26, 1998 between Registrant and Elex N.V. ("Elex") with
                  Standstill Agreement dated as of May 26, 1998 between Registrant and Elex.

10.62             Letter Agreement dated August 6, 1998 between Coast and Registrant concerning default and forbearance under the
                  Company's bank agreements.

21.1     (1)      List of Subsidiaries of Registrant.

23.1              Consent of Independent Accountants.

24.1              Power of Attorney (reference is made to page __ of this report on Form 10-K).

27.1              Financial Data Schedule.
</TABLE>


         (1)      Incorporated by reference to Registrant's Registration
                  Statement on Form S-1 filed with the Commission on May 11,
                  1993 (File No. 33-60132), as amended.

         (2)      Incorporated by reference to Registrant's Form 10-K filed for
                  the year ended March 31, 1995.

         (3)      Incorporated by reference to Registrant's Form 10-Q filed for
                  the quarter ended September 30, 1995.

         (4)      Incorporated by reference to Registrant's Form 10-K filed for
                  the year ended April 30, 1996.

         (5)      Incorporated by reference to Exhibit 1 to Registrant's Form
                  8-A filed on January 22, 1997. + Confidential treatment has
                  been granted as to a portion of this Exhibit. Such portion has
                  been redacted and filed separately with the Securities and
                  Exchange Commission.

                  (b)      REPORTS ON FORM 8-K

                  There were no reports on Form 8-K filed during the quarter
                  ended April 30, 1998.





                                      -22-
<PAGE>   23


                                   SIGNATURES


         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized, in the City of Sunnyvale
and State of California, on August 17, 1998.

                                            CATALYST SEMICONDUCTOR, INC.

                                        By: /s/  Radu M. Vanco
                                           -----------------------------------
                                            Radu M. Vanco
                                            President, Chief Executive Officer
                                            and Director


                                POWER OF ATTORNEY

         KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Radu M. Vanco and Thomas E. Gay III, his
attorney-in-fact, with the power of substitution, for him in any and all
capacities, to sign any amendments to this Report on Form 10-K, and to file the
same, with exhibits thereto and other documents in connection therewith with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes may do or cause to be
done by virtue hereof.

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of
Registrant and in the capacities and on the dates indicated.


Date:   August 17, 1998             By: /s/ Radu M. Vanco
     ----------------------            ----------------------------------------
                                            Radu M. Vanco
                                            President, Chief Executive Officer
                                            and Director
                                            (Principal Executive Officer)

Date:   August 17, 1998             By: /s/ Thomas E. Gay III
     ----------------------            ----------------------------------------
                                            Thomas E. Gay III
                                            Vice President of Finance and 
                                            Administration
                                            and Chief Financial Officer
                                            (Principal Financial and Accounting
                                            Officer)

Date:   August 17, 1998             By: /s/ Lionel M. Allan
     ----------------------            ----------------------------------------
                                            Lionel M. Allan
                                            Director

Date:   August 17, 1998             By: /s/ C. Michael Powell
     ----------------------            ----------------------------------------
                                            C. Michael Powell
                                            Director

Date:   August 17, 1998             By: /s/ Hideyuki Tanigami
     ----------------------            ----------------------------------------
                                            Hideyuki Tanigami
                                            Director

Date:   August 17, 1998             By: /s/ Patrick Verderico
     ----------------------            ----------------------------------------
                                            Patrick Verderico
                                            Director




                                      -23-
<PAGE>   24

                          CATALYST SEMICONDUCTOR, INC.

                        CONSOLIDATED FINANCIAL STATEMENTS

                          AS OF APRIL 30, 1998 AND 1997


                                       AND


         FOR THE THREE FISCAL YEARS ENDED APRIL 30, 1998, 1997 AND 1996
                     WITH REPORT OF INDEPENDENT ACCOUNTANTS





                                      F-1

<PAGE>   25

                          CATALYST SEMICONDUCTOR, INC.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>
<CAPTION>
                                                                                                       PAGES
                                                                                                       -----
<S>                                                                                                   <C>
Report of Independent Accountants............................................................           F-3
Consolidated Balance Sheets as of April 30, 1998 and 1997....................................           F-4
Consolidated Statements of Operations for the years ended April 30, 1998, 1997 and 1996 .....           F-5
Consolidated Statements of Stockholders' Equity for the years ended April 30,  1998,
    1997 and 1996 ...........................................................................           F-6
Consolidated Statements of Cash Flows for the years ended April 30, 1998, 1997 and 1996......           F-7
Notes to Consolidated Financial Statements...................................................           F-8 - F-17
</TABLE>







                                      F-2

<PAGE>   26

                        REPORT OF INDEPENDENT ACCOUNTANTS


To the Board of Directors and Stockholders of
   Catalyst Semiconductor, Inc.


   In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of Catalyst
Semiconductor, Inc. and its subsidiary at April 30, 1998 and 1997, and the
results of their operations and their cash flows for each of the three years in
the period ended April 30, 1998, in conformity with generally accepted
accounting principles. 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 of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.

   The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from operations
and has a net stockholders' deficit that raise substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 1. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.


PRICEWATERHOUSECOOPERS LLP

San Jose, California
July 27, 1998




                                      F-3

<PAGE>   27

                          CATALYST SEMICONDUCTOR, INC.

                           CONSOLIDATED BALANCE SHEETS
                      (in thousands, except par value data)




<TABLE>
<CAPTION>
                                                                                  April 30,
                                                                            ----------------------
                                                                              1998          1997
                                                                            --------      --------
<S>                                                                         <C>           <C>     
   ASSETS

Current assets:
   Cash ..............................................................      $    534      $  2,695
   Restricted cash ...................................................         5,750         5,250
   Accounts receivable, net ..........................................         4,726         7,074
   Inventories .......................................................         4,194        12,732
   Other assets ......................................................           815           895
                                                                            --------      --------
       Total current assets ..........................................        16,019        28,646
Property and equipment, net ..........................................         2,834         3,907
                                                                            --------      --------
                                                                            $ 18,853      $ 32,553
                                                                            ========      ========

   LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
   Line of credit ....................................................      $  3,225      $  3,449
   Accounts payable ..................................................        13,400        10,942
   Accrued expenses ..................................................         3,650         1,269
   Deferred gross profit on shipments to distributors ................           475           378
   Current portion of long-term debt and capital lease obligations....         1,471           593
                                                                            --------      --------
       Total current liabilities .....................................        22,221        16,631
Long-term debt and capital lease obligations .........................           501         1,885
                                                                            --------      --------
       Total liabilities .............................................        22,722        18,516
                                                                            --------      --------

Commitments and contingencies (Notes 4 and 8)

Stockholders' equity (deficit):
   Preferred stock, $.001 par value, 2,000 shares authorized;
      zero shares issued and outstanding .............................            --            --
   Common stock and paid-in-capital in excess of $.001 par value,
       25,000 shares authorized; 8,445 and 7,989 shares
       issued and outstanding ........................................        42,789        41,829
   Accumulated deficit ...............................................       (46,658)      (27,792)
                                                                            --------      --------
       Total stockholders' equity (deficit) ..........................        (3,869)       14,037
                                                                            --------      --------
                                                                            $ 18,853      $ 32,553
                                                                            ========      ========
</TABLE>



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



                                      F-4
<PAGE>   28


                          CATALYST SEMICONDUCTOR, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (in thousands, except per share data)


<TABLE>
<CAPTION>
                                                        Year ended April 30,
                                                ------------------------------------
                                                  1998          1997          1996
                                                --------      --------      --------
<S>                                            <C>           <C>           <C>     
Net revenues ..............................     $ 34,579      $ 47,094      $ 60,186

Cost of revenues ..........................       39,025        36,720        42,199
                                                --------      --------      --------
Gross profit (loss) .......................       (4,446)       10,374        17,987

Research and development ..................        4,462         5,771         4,407
Selling, general and administrative .......        9,111         8,437         9,733
                                                --------      --------      --------
Income (loss) from operations .............      (18,019)       (3,834)        3,847

Interest income (expense), net ............         (847)         (205)         (225)
                                                --------      --------      --------
Income (loss) before income taxes .........      (18,866)       (4,039)        3,622

Income tax provision ......................           --            --            48
                                                --------      --------      --------
Net income (loss) .........................     $(18,866)     $ (4,039)     $  3,574
                                                ========      ========      ========


Net income (loss) per share:
   Basic ..................................     $  (2.28)     $  (0.51)     $   0.44
                                                ========      ========      ========
   Diluted ................................     $  (2.28)     $  (0.51)     $   0.43
                                                ========      ========      ========
Weighted average common shares outstanding:
   Basic ..................................        8,263         7,918         8,144
                                                ========      ========      ========

   Diluted ................................        8,263         7,918         8,241
                                                ========      ========      ========
</TABLE>



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



                                      F-5

<PAGE>   29

                          CATALYST SEMICONDUCTOR, INC.

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                 (in thousands)



<TABLE>
<CAPTION>
                                                          COMMON STOCK
                                               ----------------------------------
                                                                       ADDITIONAL
                                                               PAR       PAID IN    ACCUMULATED
                                                SHARES        VALUE      CAPITAL      DEFICIT         TOTAL
                                               --------     --------     --------     --------      --------
<S>                                           <C>          <C>          <C>          <C>           <C>     
Balance at April 30, 1995 ................        6,604     $      7     $ 36,010     $(27,327)     $  8,690

Issuance of common stock to UMC ..........          650            1        3,678           --         3,679
Issuance of common stock for employee
  stock purchase plan ....................           29           --          127           --           127
Exercise of stock options ................          507           --        1,359           --         1,359
Amortization of deferred
  compensation ...........................           --           --           81           --            81
Net income ...............................           --           --           --        3,574         3,574
                                               --------     --------     --------     --------      --------

Balance at April 30, 1996 ................        7,790            8       41,255      (23,753)       17,510

Issuance of common stock for employee
  stock purchase plan ....................           47           --          120           --           120
Exercise of stock options ................          152           --          400           --           400
Amortization of deferred
  compensation ...........................           --           --           46           --            46
Net loss .................................           --           --           --       (4,039)       (4,039)
                                               --------     --------     --------     --------      --------

Balance at April 30, 1997 ................        7,989            8       41,821      (27,792)       14,037

Issuance of common stock to creditors ....          259           --          675           --           675
Issuance of common stock for employee
  stock purchase plan ....................           87           --           87           --            87
Exercise of stock options ................          110           --          198           --           198
Net loss .................................           --           --           --      (18,866)      (18,866)
                                               --------     --------     --------     --------      --------
Balance at April 30, 1998 ................        8,445     $      8     $ 42,781     $(46,658)     $ (3,869)
                                               ========     ========     ========     ========      ========
</TABLE>




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


                                      F-6

<PAGE>   30

                          CATALYST SEMICONDUCTOR, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)



<TABLE>
<CAPTION>
                                                                          Year ended April 30,
                                                                  ------------------------------------
                                                                    1998          1997           1996
                                                                  --------      --------      --------
<S>                                                               <C>           <C>           <C>     
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss) ........................................     $(18,866)     $ (4,039)     $  3,574
   Adjustments to reconcile net income (loss)
     to net cash used in operating activities:
      Depreciation and amortization .........................        2,629         1,731         1,704
      Changes in assets and liabilities:
       Accounts receivable ..................................        2,348         3,396        (2,545)
       Inventories ..........................................        8,538         3,461        (9,341)
       Other assets .........................................           80           451          (642)
       Accounts payable .....................................        3,133        (5,179)        8,327
       Accrued expenses .....................................        2,381          (863)       (2,787)
       Deferred gross profit on shipments to distributors ...           97          (731)          263
                                                                  --------      --------      --------
         Net cash used in operating activities ..............          340        (1,773)       (1,447)
                                                                  --------      --------      --------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Change in short-term investments .........................           --            --           909
   Cash used for the acquisition of equipment ...............       (1,556)       (2,734)       (1,236)
   Proceeds from the disposal of equipment ..................           --           146           616
                                                                  --------      --------      --------
         Cash provided by (used in) investing activities ....       (1,556)       (2,588)          289
                                                                  --------      --------      --------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Common stock transactions, net ...........................          285           566         5,248
   Net proceeds from (payment of) line of credit ............         (224)        3,319        (3,086)
   Payment of long-term debt and capital lease obligations ..         (506)         (633)         (936)
   Proceeds from long-term debt and capital lease obligations           --           838            --
   Change in restricted cash ................................         (500)           --            --
                                                                  --------      --------      --------
         Cash provided by financing activities ..............         (945)        4,090         1,226
                                                                  --------      --------      --------

Net increase (decrease) in cash and cash equivalents ........       (2,161)         (271)           68
Cash at beginning of the period .............................        2,695         2,966         2,898
                                                                  --------      --------      --------

Cash at end of the period ...................................     $    534      $  2,695      $  2,966
                                                                  ========      ========      ========

Supplemental disclosures:
   Cash paid during the year for:
     Interest ...............................................     $  1,425      $    541      $    536
                                                                  ========      ========      ========
     Income taxes ...........................................     $     15      $     41      $     51
                                                                  ========      ========      ========
</TABLE>




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


                                      F-7

<PAGE>   31

                          CATALYST SEMICONDUCTOR, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

   OPERATIONS

      Catalyst Semiconductor, Inc. ("Catalyst" or the "Company"), incorporated
October 8, 1985, designs, develops and markets nonvolatile memory semiconductor
products including Serial and Parallel EEPROMs and Flash memory. Revenues are
derived from sales of semiconductor products designed by the Company and
manufactured by other companies.

      The Company's business is highly cyclical and has been subject to
significant downturns at various times which have been characterized by reduced
product demand, production overcapacity, and significant erosion of average
selling prices. Throughout fiscal 1998, the market for certain FLASH and EEPROM
devices, which comprise the majority of Catalyst's business, experienced an
excess market supply relative to demand which resulted in a significant downward
trend in prices. The Company could continue to experience a downward trend in
product pricing which could further adversely affect the Company's operating
results.

      The Company's recent operating results have consumed substantial amounts
of cash. The reduction in cash has also placed restrictions on wafer purchases
which, during the fourth quarter of 1998, resulted in the cancellation of some
customer sales orders. In May 1998, the Company received net proceeds of $1.5
million from the sale of 1,500,000 shares of its Common Stock in a private
placement. Management believes, however, that it will require additional cash
from similar or related private placements or other sources of liquidity to meet
the Company's projected working capital and other cash requirements for fiscal
1999, and is currently pursuing other sources of liquidity.

   BASIS OF PRESENTATION


      Catalyst has a fiscal year that ends on the Sunday nearest April 30th. For
presentation purposes, the consolidated financial statements and notes refer to
the calendar month end. The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiary after elimination of all
significant intercompany balances and transactions.

      The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

   FOREIGN CURRENCY TRANSLATION

      The functional currency of the Company's Japanese subsidiary is the
Japanese yen. Accordingly, all assets and liabilities are translated at the
current exchange rate at the end of the period and revenues and expenses at
exchange rates in effect when incurred. Cumulative translation adjustments and
net gains and losses resulting from foreign exchange transactions were not
significant during any of the periods presented.



                                       F-8

<PAGE>   32

                          CATALYST SEMICONDUCTOR, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


   REVENUE RECOGNITION

      Revenue from product sales to original equipment manufacturers and from
sales to distributors who have no, or limited, product return rights and no
price protection rights, is recognized upon shipment net of allowances for
estimated returns. When distributors have rights to return products or price
protection rights, the Company defers revenue recognition until the time the
distributor sells the product to the end customer. Upon shipment by the Company,
amounts billed to distributors with rights to product returns or price
protection rights are included as accounts receivable, inventory is relieved,
the sale is deferred and the gross profit is reflected as a current liability
until the merchandise is sold to the end customer by the distributors. During
the fourth quarter of fiscal 1996, three distributors agreed to amend their
agreements and thereby waive price protection and certain return rights,
resulting in recognition of revenue previously deferred of approximately $2.4
million.

      Fees on development and license contracts are recognized using the
percentage of completion method, which generally coincides with the time when
the milestones defined in the contracts have been met and accepted by the
customer. Non-refundable deposits received in connection with development and
license contracts are recognized on a straight-line basis over the lives of the
contracts. Service fees derived from development and license agreements are
recognized as the services are performed. Royalties are recognized when the
licensee sells the related products. Development costs incurred relating to
license revenue and royalty income were not significant during any of the
periods presented.

   INVENTORIES

      Inventories are stated at the lower of cost, determined on the first-in,
first-out basis, or market.

      During fiscal 1996, the Company's operating results were favorably
impacted by the sale of Flash memory products for which the costs had been
written-down to an estimated net realizable value of zero at the end of fiscal
1994. If the costs had not been written-down in fiscal 1994, then cost of sales
would have been $2.2 million higher than the amounts reported for fiscal 1996.


PROPERTY AND EQUIPMENT

      Property and equipment are stated at cost and depreciated on a
straight-line basis over the estimated economic useful lives of the assets
(generally two to five years). Leasehold improvements are stated at cost and
amortized over their estimated useful lives or the remaining lease term,
whichever is shorter.

   FAIR VALUE OF FINANCIAL INSTRUMENTS

      For certain of the Company's financial instruments, including cash and
cash equivalents, short-term investments, accounts receivable, line of credit,
notes payable and accounts payable, the carrying amounts approximate fair value
due to their short maturities.



                                      F-9

<PAGE>   33

                          CATALYST SEMICONDUCTOR, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



   CONCENTRATION OF CREDIT RISK

      Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash equivalents,
restricted cash and accounts receivable. Catalyst invests primarily in money
market accounts and certificates of deposit and places its investments with high
quality financial institutions. The restricted cash is held at a financial
institution as collateral for a letter of credit required by one of the
Company's foundries. The Company's accounts receivable are derived from sales to
original equipment manufacturers and distributors serving a variety of
industries located primarily in the United States, Europe and the Far East and
the Company performs ongoing credit evaluations of these customers. A majority
of the accounts payable balance is payable to a foreign foundry.

   DEPENDENCE ON WAFER SUPPLIERS

      The Company does not directly manufacture finished silicon wafers. The
Company's strategy has been to maintain relationships with wafer foundries.
However, there can be no assurance that the Company will be able to satisfy its
future wafer needs from current or alternative manufacturing sources. This could
result in possible loss of sales or reduced margins.

     During fiscal 1996, the Company signed an agreement with United
Microelectronics Corporation (UMC) of Taiwan. Under the terms of this agreement
the Company received a significant commitment of wafers from UMC in exchange for
rights to certain of the Company's designs. In addition, the Company received
net proceeds of $3.7 million from the sale of 650,000 shares of common stock to
UMC.


   STOCK-BASED COMPENSATION

      The Company accounts for stock-based employee compensation arrangements in
accordance with provisions of Accounting Principles Board ("APB") No. 25,
"Accounting for Stock Issued to Employees," and complies with the disclosure
provisions of Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation." Under APB No. 25, compensation cost
is recognized based on the difference, if any, on the date of grant between the
fair value of the Company's stock and the amount an employee must pay to acquire
the stock.

   NET INCOME (LOSS) PER SHARE

      During the quarter ended January 31, 1998, the Company adopted Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128").
SFAS 128 requires presentation of both Basic EPS and Diluted EPS. Basic EPS is
computed by dividing net income available to common stockholders (numerator) by
the weighted average number of common shares outstanding (denominator) during
the period. Diluted EPS gives effect to all dilutive potential common shares
outstanding during a period. In computing Diluted EPS, the average price for the
period is used in determining the number of shares assumed to be purchased from
exercise of stock options, warrants and convertible preferred stock. Net income
(loss) per share presented for all prior periods has been restated to conform to
the provisions of SFAS 128.



                                      F-10
<PAGE>   34

                          CATALYST SEMICONDUCTOR, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


     A reconciliation of the numerators and denominators of the basic and
diluted income per share is presented below:


<TABLE>
<CAPTION>
                                                               Year ended April 30,
                                                     ----------------------------------------
                                                       1998            1997            1996
                                                     --------        --------        --------
                                                      (in thousands, except per share data)
<S>                                                  <C>             <C>             <C>     
Net income (loss) ............................       $(18,866)       $ (4,039)       $  3,574
Shares calculation:
Average shares outstanding--basic ............          8,263           7,918           8,144
Effect of dilutive securities:
        Stock options ........................             --              --              97
                                                     --------        --------        --------
Average shares outstanding--diluted ..........          8,263           7,918           8,241
                                                     ========        ========        ========

Net income (loss) per share--basic ...........       $  (2.28)       $  (0.51)       $   0.44
                                                     ========        ========        ========

Net income (loss) per share--diluted .........       $  (2.28)       $  (0.51)       $   0.43
                                                     ========        ========        ========
</TABLE>
     

     Options to purchase 2,637,000 shares of common stock at prices ranging from
$0.69 to $6.30 per share were outstanding during 1998 and 2,466,000 shares of
common stock at prices ranging from $1.08 to $6.30 per share were outstanding
during 1997, and were not included in the computation of diluted EPS because the
inclusion of such options and shares would have been antidilutive.

   NEW ACCOUNTING STANDARDS

      In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement No. 130, "Reporting Comprehensive Income" ("FAS 130"). FAS 130
establishes standards for reporting comprehensive income and its components in a
financial statement that is displayed with the same prominence as other
financial statements. Comprehensive income as defined includes all changes in
equity (net assets) during a period from non-owner sources. Examples of items to
be included in comprehensive income, which are excluded from net income, include
foreign currency translation adjustments and unrealized gain/loss on
available-for-sale securities. The disclosure prescribed by FAS 130 must be made
beginning with the first quarter of fiscal 1999.

      In June 1997, the FASB issued Statement No. 131, "Disclosures about
Segments of an Enterprise and Related Information" ("FAS 131"). This statement
establishes standards for the way companies report information about operating
segments in annual financial statements. It also establishes standards for
related disclosures about products and services, geographic areas, and major
customers. The Company has not yet determined the impact, if any, of adopting
this new standard. The disclosures prescribed by FAS 131 are effective for the
Company's annual consolidated financial statements for the year ending April 30,
1999.


                                      F-11

<PAGE>   35

                          CATALYST SEMICONDUCTOR, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


NOTE 2 - BALANCE SHEET COMPONENTS (IN THOUSANDS):


<TABLE>
<CAPTION>
                                                                                    April 30,
                                                                            ------------------------
                                                                              1998            1997
                                                                            --------        --------
<S>                                                                        <C>             <C>     
         Accounts receivable:
            Accounts receivable .....................................       $  5,052        $  7,199
            Less:  Allowance for doubtful accounts ..................           (326)           (125)
                                                                            --------        --------
                                                                            $  4,726        $  7,074
                                                                            ========        ========
         Inventories:
            Work-in-process .........................................       $  2,410        $  5,123
            Finished goods ..........................................          1,784           7,609
                                                                            --------        --------
                                                                            $  4,194        $ 12,732
                                                                            ========        ========
         Property and equipment:
            Engineering and test equipment ..........................       $  7,691        $  9,392
            Computer hardware and software ..........................          3,470           3,364
            Furniture and office equipment ..........................          1,275           1,183
                                                                            --------        --------
                                                                              12,436          13,939
            Less: accumulated depreciation and amortization .........         (9,602)        (10,032)
                                                                            --------        --------
                                                                            $  2,834        $  3,907
                                                                            ========        ========
</TABLE>


NOTE 3 -LINE OF CREDIT:

      Under the terms of a bank revolving line of credit in place at April 30,
1998, the Company could borrow the lesser of $13.5 million or an amount
determined by a formula applied to eligible accounts receivable, local inventory
and backlog from certain foreign customers. The line of credit bears interest at
a variable rate equal to the bank's prime lending rate plus 2.25% (13.75% at
April 30, 1998). As of April 30, 1998, $5.75 million of the amount borrowable
had been pledged as security for bank letters of credit. The revolving line of
credit expires on June 19, 1999. Amounts borrowed on the line of credit are
secured by accounts receivable and inventory and subject to compliance with loan
covenants. At April 30, 1998 and 1997, the Company had borrowings of $3.2
million outstanding and $3.4 million under the line of credit agreements. At
April 30, 1998, the Company was in default under various provisions of the loan
agreement entitling the Bank to terminate the loan agreement and declare the
loans immediately due and payable. As a result of noncompliance with the terms
of the loan, the Company cannot currently borrow any additional funds under the
line.

      On February 15, 1997, a vendor loaned $1.2 million to the Company in
settlement of billings for assembly and test services totaling the same. The
loan, which bears interest at 18%, was due and payable on May 15, 1998. The loan
is classified under the current portion of long-term debt at April 30, 1998.

NOTE 4 - LEASES:

      At April 30, 1998 and 1997, the net book value of assets recorded as
property and equipment under capital leases aggregated $0.7 million and $0.5
million, which is net of accumulated amortization of $1.5 million and $1.2
million, respectively. The amortization of assets recorded under capital leases
is included with depreciation and amortization expense.

      The Company leases its office facilities under operating leases. Total
rent expense under these leases was $416,000, $498,000 and $412,000 for fiscal
1998, 1997 and 1996, respectively.




                                      F-12

<PAGE>   36

                          CATALYST SEMICONDUCTOR, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

      The aggregate future minimum lease payments, by fiscal year, under capital
and non-cancelable operating leases with initial terms of one year or more at
April 30, 1998 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                    Capital       Operating
                                                                     Leases        Leases
                                                                     ------        ------
<S>                                                                 <C>           <C>   
      1999 ...................................................       $  432        $  401
      2000 ...................................................          222           413
      2001 ...................................................          204           413
      2002 ...................................................           26           425
      2003 ...................................................           --           438
      Thereafter .............................................           --         1,434
                                                                     ------        ------
      Total minimum payments .................................          884        $3,524
                                                                                   ======
      Less: amount representing interest .....................         (101)
                                                                     ------      
      Present value of future minimum lease payments .........          783
      Current portion of capital lease obligations ...........         (282)
                                                                     ------      
      Long-term portion of capital lease obligations .........       $  501
                                                                     ======      
</TABLE>

NOTE 5 - INCOME TAXES:

      The provision for income taxes for the year ended April 30, 1996 was
comprised of minor amounts of current foreign and state income taxes.

      Deferred tax assets are comprised of the following (in thousands):


<TABLE>
<CAPTION>
                                                                           April 30,
                                                                    ------------------------
                                                                      1998            1997
                                                                    --------        --------
<S>                                                                 <C>             <C>     
      Deferred income and sales returns reserves ............       $    250        $    374
      Loss carryforwards ....................................         13,150           8,497
      Research and development credit carryforwards .........            959             959
      Non deductible reserves and accruals ..................          1,482           1,132
      Other .................................................            500             549
                                                                    --------        --------
        Total deferred tax assets ...........................         16,341          11,511
      Valuation allowance ...................................        (16,341)        (11,511)
                                                                    --------        --------
                                                                    $    ---        $    ---
                                                                    ========        ========
</TABLE>

     The provision for income taxes differs from the amount of income tax
determined by applying the applicable statutory federal income tax rate to
pretax income (loss) as a result of the following:


<TABLE>
<CAPTION>
                                                                            Year ended April 30,
                                                                       ----------------------------
                                                                       1998       1997         1996
                                                                       ----       ----         ----
<S>                                                                   <C>         <C>          <C>
      Statutory federal tax rate ...............................       (34)%       (34)%        34%
      State income taxes .......................................        --          --           1
      Foreign income and withholding taxes .....................        --          --           1
      Realized deferred tax assets previously reserved .........        --          --         (34)
      Tax benefits not currently recognized ....................        34          34          --
                                                                      ----        ----        ----
            Effective tax rate .................................       ---%        ---%          2%
                                                                      ====        ====        ====
</TABLE>

     Tax loss carryforwards at April 30, 1998 are approximately $37.6 million
for federal purposes. These carryforwards begin to expire in fiscal 2007. The
research and development credits begin to expire in fiscal 2001. Availability of
the net operating loss and credit carryforwards may potentially be reduced in
the event of certain substantial changes in equity ownership.




                                      F-13
<PAGE>   37

                          CATALYST SEMICONDUCTOR, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     No provision is made for income taxes relating to potential future
distributions of accumulated earnings from the Company's foreign subsidiary,
which at April 30, 1998 were not significant, since it is the Company's
intention to reinvest substantially all of the undistributed earnings in its
foreign operations.

NOTE 6 - STOCK PLANS:

   STOCK OPTION PLANS

     In October 1989, the Company adopted a stock option plan (the "Option
Plan") for incentive stock options and non-statutory stock options. A total of
3.3 million shares of Common Stock have been reserved for issuance under the
Option Plan. Options granted under the Option Plan are for periods not to exceed
ten years. Incentive stock option and non-statutory stock option grants under
the Option Plan must generally be at prices equal to 100% of the fair market
value of the stock at the date of grant. Options generally vest over four year
periods.

     During 1993, the Company adopted a Director Stock Option Plan (the
"Director Plan") which provides for the grant of nonstatutory stock options to
nonemployee directors. A total of 220,000 shares of Common Stock have been
reserved for issuance under the Director Plan. Options granted under the
Director Plan are for periods not to exceed five years. Option grants under the
Director Plan must be at prices equal to 100% of the fair market value of the
stock at the date of grant. Options vest over a period of three years. As of
April 30, 1998 a total of 171,000 options at exercise prices ranging from $0.90
to $6.00 per share, have been granted under the Director Plan, 52,000 of which
were exercisable.

     During fiscal 1993, the Company issued to certain employees stock options
at prices which gave rise to deferred compensation expense. In connection with
the issuance of these stock options, the Company recorded $316,000 as deferred
compensation and recognized $46,000 and $81,000 as compensation expense for
fiscal 1997 and 1996, respectively. The remaining $189,000 was recognized in
years prior to fiscal 1996.

                                      F-14

<PAGE>   38
                          CATALYST SEMICONDUCTOR, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


     A summary of activity under the Option Plan and the Director Plan are as
follows:


<TABLE>
<CAPTION>
                                                       Options                           Weighted
                                                      Available          Options         Avg Price
                                                      for Grant        Outstanding       Per Share
                                                      ---------        -----------       ---------
                                                                     (in thousands)
<S>                                                   <C>             <C>                <C>     
      Balance at April 30, 1995 ..............              46            1,708           $   2.02

      Additional shares reserved .............             700               --
      Granted ................................          (1,425)           1,425           $   5.73
      Canceled ...............................             243             (243)          $   3.00
      Exercised ..............................              --             (507)          $   2.17
                                                        ------            -----           
      Balance at April 30, 1996 ..............            (436)           2,383           $   3.80

      Additional shares reserved .............             880               --
      Granted ................................          (2,205)           2,205           $   2.74
      Canceled ...............................           1,970           (1,970)          $   4.66
      Exercised ..............................              --             (152)          $   2.06
                                                        ------            -----           
      Balance at April 30, 1997 ..............             209            2,466           $   2.41

      Granted ................................          (2,995)           2,995           $   1.15
      Canceled ...............................           2,804           (2,804)          $   2.20
      Exercised ..............................              --             (110)          $   1.82
                                                        ------            -----           
      Balance at April 30, 1998 ..............              28            2,547           $   1.26
                                                        ======            =====           
</TABLE>



   The Range of Exercise Prices table below summarizes information regarding
stock options outstanding at April 30, 1998.


<TABLE>
<CAPTION>
                                                                           Range of Exercise Prices
                                              ------------------------------------------------------------------------------------
                                              0.69-0.91      1.06-1.06      1.69-1.94      2.69-3.00      5.00-6.30        Total
                                              ---------      ---------      ---------      ---------      ---------      ---------
<S>                                           <C>            <C>            <C>            <C>            <C>            <C>      
     Options Outstanding:

     Number outstanding .................           389          1,785            304             39             30          2,637
     Weighted-average remaining
       contractual life (years) .........           9.7            7.3            2.5            1.5            2.8            6.8
     Weighted-average exercise price ....     $    0.70      $    1.06      $    1.88      $    2.83      $    5.37      $    1.26

     Options Exercisable:

     Number exercisable .................            18          1,238            289             39              7          1,681
     Weighted-average exercise price ....     $    0.69      $    1.06      $    1.89      $    2.83      $    5.39      $    1.42
</TABLE>

     In January 1998, the Board of Directors offered employee holders of options
the opportunity to cancel such options and receive an equal amount of options
with an exercise price per share equal to the then current fair market value. As
a result, options to purchase approximately 1.8 million shares were canceled and
an equal number were granted at an exercise price of $1.06.

   OTHER STOCK PLANS

     The Board of Directors and Stockholders approved the Company's Employee
Stock Purchase Plan (the "Purchase Plan") in March 1993. A total of 250,000
shares of Common Stock have been reserved for issuance under the Purchase Plan.
Sales made through this plan will be at the lower of 85% of the market price at
the date of purchase or on the first day of each six-month offering period. As
of April 30, 1998, a total of 228,000 shares have been issued under the Purchase
Plan.


   PRO FORMA STOCK COMPENSATION DISCLOSURE

     The fair value of each option granted is estimated on the date of grant
using the Black-Scholes option-valuation model with the following
weighted-average assumptions used for options granted in 1998, 1997 and 1996,
respectively: dividend yield of 0 percent for all years, expected volatility of
79, 80 and 80 percent, risk free interest rates of 5.50, 6.12 and 5.86, and
expected lives of 3 years for non-officer/director employees and 4 years for
officers and directors for all years.

     The fair value of each share granted under the Purchase Plan is estimated
on the date of grant using the Black-Scholes option-valuation model with the
following weighted-average assumptions used for shares granted in 1998, 1997 and
1996, respectively: dividend yield of 0 percent for all years, expected
volatility of 79, 86 and 80 percent, risk free interest rates of 5.36, 5.32 and
5.43, and expected lives of 0.5 years for non-officer/director employees and 
officers and directors for all years.



                                      F-15

<PAGE>   39

                          CATALYST SEMICONDUCTOR, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


     The Company has elected to continue to apply APB Opinion 25 in accounting
for its stock option plans. Accordingly, no compensation cost has been
recognized for its stock option plans and its Purchase Plan. Had compensation
cost for the Company's stock-based compensation plans been determined based on
the fair value at the grant dates for awards under those plans consistent with
the method of SFAS 123, the Company's net income (loss) and net income (loss)
per share would have been reduced to the pro forma amounts below (in thousands,
except per share amounts):

<TABLE>
<CAPTION>
                                                                                   Year ended April 30,
                                                                       -------------------------------------------
                                                                          1998             1997             1996
                                                                       ----------       ----------      ----------
<S>                                                                    <C>              <C>             <C>       
     Proforma net income (loss):                                      $  (20,226)      $   (5,750)     $    3,072
                                                                  
     Pro-forma net income (loss) per share:       Basic:              $    (2.45)      $    (0.73)     $     0.38
                                                  Diluted:            $    (2.45)      $    (0.73)     $     0.37
</TABLE>

     The above pro forma amounts include compensation expense based on the fair
value of options vesting during the years ended April 30, 1998, 1997 and 1996
and exclude the effects of options granted prior to May 1, 1995. Accordingly,
the above pro forma net income (loss) and net income (loss) per share are not
representative of the effects of computing stock option compensation expense
using the fair value method for future periods.

NOTE 7 - INTERNATIONAL OPERATIONS AND SIGNIFICANT CUSTOMERS:

      Revenues from export sales were as follows (in thousands):


<TABLE>
<CAPTION>
                                                          Year ended  April 30,
                                                    ---------------------------------
                                                     1998          1997         1996
                                                    -------      -------      -------
<S>                                                 <C>          <C>          <C>    
     Japan ...................................      $ 8,883      $ 9,321      $ 9,733
     Other Far East ..........................        8,122       10,771       13,453
     Europe ..................................        5,263        9,501       12,672
                                                    -------      -------      -------
        Total export sales ...................      $22,268      $29,593      $35,858
                                                    =======      =======      =======
</TABLE>

      The Company sells product to its Japanese distributor, which is also a
stockholder. Revenue from this stockholder represented $7.2 million, $6.5
million and $7.3 million or approximately 21%, 14% and 12% of product sales for
the years ended April 30, 1998, 1997 and 1996, respectively. No other customer
accounted for 10% or more of product sales.

      Sales and purchase transactions are denominated in U.S. dollars, except
for certain sales and purchases which were denominated in Japanese yen and which
were insignificant for the years ended April 30, 1998, 1997 and 1996. Certain
test equipment, with a net book value of approximately $0 million, $0.9 million
and $0.9 million at April 30, 1998, 1997 and 1996, respectively, is located at a
foreign subcontractor's facilities. Except for such equipment, the Company has
no significant assets located outside of the U.S.


NOTE 8 - LEGAL MATTERS AND OTHER CONTINGENCIES:

      In September 1997, the Company settled certain actions filed by Samsung
and another party against the Company. In connection with these settlements, the
Company paid $200,000 in cash and issued 259,000 shares of its common stock in
exchange for full settlement of certain accounts payable balances owed by the
Company.




                                      F-16
<PAGE>   40

                          CATALYST SEMICONDUCTOR, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     In the normal course of business, the Company receives notification of
threats of legal action in relation to claims of patent infringement by the
Company. Although no assurances can be given to the results of these claims,
management does not believe that any such results will have a material adverse
impact on the Company's financial condition or results of operations.

     The Company is also negotiating with several creditors who have threatened
or filed legal action for the non-payment of amounts owed to them by the
Company. Management believes that the resolution of these claims will be
forthcoming and the resolution will not have a material adverse impact on the
Company's financial condition or results of operations.

NOTE 9 - SUBSEQUENT EVENT:

     In May 1998, a private investor purchased 1,500,000 shares of the Company's
common stock in a private placement for $1.00 per share. The offer and sale of
the securities was exempt from registration under the Securities Act of 1933,
as amended, pursuant to Section 4(2) of such Act. In connection with such
issuance the investor agreed to various standstill and voting provisions
including not acquiring additional shares of Company Stock or taking actions to
control the Company. The Company also has certain repurchase rights with
respect to the shares sold over the twelve months from the date of issuance.






                                      F-17





<PAGE>   41


                               INDEX TO EXHIBITS


<TABLE>
<CAPTION>
Exhibit 
Number                        Description
------                        -----------
<S>      <C>      <C>
3.2      (1)      Restated Certificate of Incorporation of Registrant.

3.4      (1)      Bylaws of Registrant.

4.1      (5)      Preferred Shares Rights Agreement, dated as of December 3, 1996, between Catalyst Semiconductor, Inc. and First
                  National Bank of Boston, including the Certificate of Designation of Rights, Preferences and Privileges of
                  Series A Participating Preferred Stock, the Form of Rights Certificate and the Summary of Rights attached
                  thereto as Exhibits A, B and C respectively.

10.3     (1)      Stock Purchase Agreement dated March 31, 1992 between Kamlesh Kumari and Registrant, together with Promissory
                  Note and Guarantee by B.K. Marya.

10.7     (1)      Stock Option Plan, as amended, including forms of Stock Option Agreement.

10.8     (1)      1993 Employee Stock Purchase Plan.

10.9     (1)      1993 Director Stock Option Plan.

10.12    (1)      Distributor Agreement dated February 1990 between Arrow Electronics, Inc. and Registrant.

10.14    (1)      Distributor Agreement dated June 30, 1986 between Registrant and Marubun Corporation.

10.15    (1)      Irrevocable License Agreement dated May 8, 1988 between Seiko Instruments, Inc. and Registrant.

10.16    (1)      64 KBIT CMOS EEPROM, 1M BIT CMOS EEPROM and 256 KBIT CMOS EEPROM Consulting and Design Work Agreement dated
                  March 26, 1986 between OKI Electric Industry Co., Ltd. and the Registrant.

10.17    (1)      FLASH EEPROM Development and License Agreement dated July 18, 1988 between OKI Electric Co., Ltd. and
                  Registrant.

10.18    (1)      4M FLASH Development and License Agreement dated May 27, 1992 between OKI Electric Co., Ltd. and Registrant.

10.27    (1)      Form of Indemnification Agreement entered into by Registrant with each of its directors and executive officers.

10.34    (2)      Wafer Supply Agreement dated February 24, 1995 between OKI Electric Industry Co., Ltd. and the Registrant.

10.36    (3)+     License Agreement dated August 18, 1995 between Intel Corporation and Registrant

10.38    (4)      Standard Industrial Lease dated March 22, 1996 between Marin County Employees Retirement Association and
                  Registrant.

10.39    (4)+     Master Agreement dated February 7, 1996 between United Microelectronics Corporation and the Registrant.

10.41    (4)+     Amendment dated May 20, 1996 to the Wafer Supply Agreement dated February 24, 1994 between OKI Electric Industry
                  Co., Ltd. and Registrant.

10.42    (4)      Separation and Consulting Agreements dated August 14, 1995 between B.K. Marya and Registrant.

10.43    (4)      Separation and Consulting Agreements dated August 30, 1995 between Donald B. Witmer and the Registrant.

10.44    (4)      Employment Agreement dated April 25, 1995 between Christopher Carstens and Registrant.

10.45    (4)      Employment Agreement dated August 14, 1995 between C. Michael Powell and Registrant.

10.46    (4)      Employment Agreement dated October 14, 1995 between Radu Vanco and Registrant.

10.47    (4)      Loan Agreement and Loan Forgiveness Agreement dated September 7, 1995 between C. Michael Powell and Registrant.

10.48    (4)      Loan Forgiveness Agreement dated March 12, 1996 between Radu Vanco and Registrant.

10.49             Loan and Security Agreement dated June 19, 1997 between Coast Business Credit, a division of
                  Southern Pacific Thrift & Loan Association ("Coast"), and Registrant.

10.50             Loan and Security Agreement (CEFO Facility) dated June 19, 1997 between Coast Business Credit, a division of
                  Southern Pacific Thrift & Loan Association ("Coast"), and Registrant.

10.51             Commercial Security Agreement dated April 1, 1998 between Registrant and Oki Electric Industry Co., Ltd.

10.52             Wafer Purchase Agreement dated March 23, 1998 between Registrant and Trio-Tech International PTE LTD with
                  Variation Agreement dated April 16, 1998 between Registrant and Trio-Tech.

10.53             Addendum dated May 29, 1998 to Employment Agreement dated October 14, 1995 between Radu Vanco and Registrant.

10.54             Severance Agreement dated April 28, 1998 between Sorin Georgescu and Registrant.

10.55             Severance Agreement dated April 28, 1998 between Gelu Voicu and Registrant.

10.57             Severance Agreement dated April 28, 1998 between Marc H. Cremer and Registrant.
</TABLE>





<PAGE>   42

<TABLE>
<S>      <C>      <C>

10.58             Severance Agreement dated April 28, 1998 between Bassam Khoury and Registrant.

10.59             Severance Agreement dated June 1, 1998 between Thomas E. Gay III and Registrant.

10.60             Amendment No. 1 to Preferred Shares Rights Agreement dated as of May 22, 1998 between Registrant and BankBoston,
                  N.A., as rights agent.

10.61             Common Stock Purchase Agreement dated as of May 26, 1998 between Registrant and Elex N.V. ("Elex") with
                  Standstill Agreement dated as of May 26, 1998 between Registrant and Elex.

10.62             Letter Agreement dated August 6, 1998 between Coast and Registrant concerning default and forbearance under the
                  Company's bank agreements.

21.1     (1)      List of Subsidiaries of Registrant.

23.1              Consent of Independent Accountants.

24.1              Power of Attorney (reference is made to page __ of this report on Form 10-K).

27.1              Financial Data Schedule.
</TABLE>


         (1)      Incorporated by reference to Registrant's Registration
                  Statement on Form S-1 filed with the Commission on May 11,
                  1993 (File No. 33-60132), as amended.

         (2)      Incorporated by reference to Registrant's Form 10-K filed for
                  the year ended March 31, 1995.

         (3)      Incorporated by reference to Registrant's Form 10-Q filed for
                  the quarter ended September 30, 1995.

         (4)      Incorporated by reference to Registrant's Form 10-K filed for
                  the year ended April 30, 1996.

         (5)      Incorporated by reference to Exhibit 1 to Registrant's Form
                  8-A filed on January 22, 1997.

         +        Confidential treatment has been granted as to a portion of
                  this Exhibit. Such portion has been redacted and filed
                  separately with the Securities and Exchange Commission.