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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


|   |  |                                                                                                 
|-- |  | ------------------------------------------------------------------------------------------------
|þ  |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR
    15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934    
|  
|   |  | For the fiscal year ended April 28,
    2002                                                    
|  
|or
|  
|o  |  | 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
    incorporation or organization) |  | (I.R.S. Employer
    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 þ         No o

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.    þ

The aggregate market value of voting stock held
by non-affiliates of Registrant, as of July 19, 2002, was
approximately $34 million (based upon the closing bid for
shares of Registrants Common Stock as reported by the
NASDAQ SmallCap Market for 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 July 19, 2002 was 16,838,268.

DOCUMENTS INCORPORATED BY REFERENCE

None.



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TABLE OF CONTENTS



|              |                                                                                                         |  |  |  |  |  |  | 
|------------- | ------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I       
|              | Item 1. Business                                                                                       
|              | Item 2. Properties                                                                                     
|              | Item 3. Legal Proceedings                                                                              
|              | Item 4. Submission of Matters to a Vote of Security Holders                                            
|PART II      
|              | Item 5. Market for Registrants Common Stock and Related Stockholder Matters                           
|              | Item 6. Selected Consolidated Financial Data                                                           
|              | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations          
|              | Item 7A. Quantitative and Quantitative Disclosures About Market Risk                                   
|              | Item 8. Financial Statements and Supplementary Data                                                    
|              | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure           
|PART III     
|              | Item 10. Directors and Executive Officers of Registrant                                                
|              | Item 11. Executive Compensation                                                                        
|              | Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|              | Item 13. Certain Relationships and Related Transactions                                                
|PART IV      
|              | Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K                               
|SIGNATURES   
|EXHIBIT 4.2  
|EXHIBIT 4.3  
|EXHIBIT 4.5  
|EXHIBIT 10.77
|EXHIBIT 10.78
|EXHIBIT 10.79
|EXHIBIT 10.80
|EXHIBIT 10.81
|EXHIBIT 10.82
|EXHIBIT 10.84
|EXHIBIT 23.1 



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CATALYST SEMICONDUCTOR, INC.

|                                           |  |                                                                                                    |     |      |    | 
|------------------------------------------ |  | -------------------------------------------------------------------------------------------------- | --- | ---- | -- | 
|                                           |  |                                                                                                    |     | Page
|                                           |  |                                                                                                    |     |     
|PART I                                    
|Item 1.                                    |  | Business                                                                                           |     |      | 2  | 
|Item 2.                                    |  | Properties                                                                                         |     |      | 10 | 
|Item 3.                                    |  | Legal Proceedings                                                                                  |     |      | 10 | 
|Item 4.                                    |  | Submission of Matters to a Vote of Security
    Holders                                            |     |      | 10 | 
|PART II                                   
|Item 5.                                    |  | Market for Registrants Common Stock and
    Related Stockholder Matters                           |     |      | 10 | 
|Item 6.                                    |  | Selected Consolidated Financial Data                                                               |     |      | 12 | 
|Item 7.                                    |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations          |     |      | 13 | 
|Item 7A.                                   |  | Quantitative and Qualitative Disclosures about
    Market Risk                                     |     |      | 28 | 
|Item 8.                                    |  | Financial Statements and Supplementary Data                                                        |     |      | 29 | 
|Item 9.                                    |  | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure           |     |      | 29 | 
|PART III                                  
|Item 10.                                   |  | Directors and Executive Officers of the Registrant                                                 |     |      | 30 | 
|Item 11.                                   |  | Executive Compensation                                                                             |     |      | 32 | 
|Item 12.                                   |  | Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters |     |      | 37 | 
|Item 13.                                   |  | Certain Relationships and Related Transactions                                                     |     |      | 40 | 
|PART IV                                   
|Item 14.                                   |  | Exhibits, Financial Statement Schedules and
    Reports on Form 8-K                                |     |      | 41 | 
|Signatures                                 |  |                                                                                                    | 42  |     
|Index to Exhibits                          |  |                                                                                                    |     |     
|Index to Consolidated Financial Statements |  |                                                                                                    | F-1 |     

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CATALYST SEMICONDUCTOR, INC.






PART I





Item 1.     Business

This report contains forward-looking
statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Words such as projected,
expects, believes, intends
and assumes and similar expressions are used to
identify forward-looking statements. These statements are made
based upon current expectations and projections about our
business and the semiconductor industry and assumptions made by
our management are not guarantees of future performance, nor do
we assume any obligation to update such forward-looking
statements after the date this report is filed. Our actual
results could differ materially from those projected in the
forward-looking statements for many reasons, including the risk
factors listed in Part II, Item 7 Managements
Discussion & Analysis of Financial Conditions and Results of
Operations  Certain Risks that May Affect Our Future
Results and the risk factors contained in Item 1
below.

Catalyst Semiconductor Inc. (Catalyst, we, us or
Registrant) designs, develops and markets a broad range of
programmable IC products serving the micro-controller
applications market. These applications include communication,
computing, industrial automation, consumer and automotive
applications. Our product portfolio includes serial and parallel
Flash/electrically erasable programmable read only memories
(EEPROM), programmable micro-controller supervisory and voltage
reference circuits and mixed signal devices. We were formed as a
California corporation in October 1985 and were reincorporated
in Delaware in May 1993. Our principal offices are located at
1250 Borregas Avenue, Sunnyvale, California 94089 and our
telephone number at that address is (408) 542-1000.

We have sought to enhance our internal design and
process technology expertise through strategic relationships
with leading semiconductor manufacturers and we currently
subcontract the fabrication of our semiconductor wafers through
Oki Electric Industry Co., Ltd. (Oki) in Japan and X-Fab Texas,
Inc. (Xfab) in Lubbock, Texas. These relationships enable us to
draw upon our foundries expertise in high volume
semiconductor manufacturing. For example, we have integrated the
designs and processes for the manufacture of our Flash memory
products with Okis fine line-width, high density CMOS
processes used for high volume Dynamic Random Access Memory
(DRAM) manufacture.

Our 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.
The market for certain Flash and EEPROM devices, which comprise
the majority of our business, is currently experiencing an
excess market supply relative to demand which is resulting in a
significant downward trend in prices. However during fiscal 2000
and the first half of fiscal 2001, the results of our operations
improved significantly, primarily due to an improvement in
market conditions. During this period, the semiconductor market
rebounded from a cyclical decline which had a favorable impact
on our revenues and gross margins and we also realized
reductions in product costs and operating expenses through a
cost reduction program that had a favorable impact on
profitability. During the last half of fiscal 2001 and the first
half of fiscal 2002, we experienced a twelve month period of
declines in our revenues, gross profits and net income due to a
resumption of the competitive factors that result in decreasing
revenues and margins. During the last six months of fiscal 2002,
unit volumes shipped, revenues, gross profits and net income
increased. We could experience a resumption of the downward
trend in revenues, product pricing and unit volumes shipped
which could adversely affect our future operating results.

Total revenues for the quarter and the fiscal
year ended April 30, 2002 were $12.5 million and
$42.8 million, respectively, compared to revenues of
$17.2 million and $98.0 million for the comparable
periods of the prior year. In addition, we earned net profits
for the quarter and for the year ended April 30,

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2002 of $1.2 million and $0.8 million
respectively, compared to net profits of $1.7 million and
$27.4 million for the comparable periods in the prior year.
During fiscal 2002, we had a net increase in inventory reserves
of $72,000 primarily related to reserves for finished goods
inventory that is over one year old and inventory that we do not
expect to be sold within a predictable period, generally six
months to one year. During fiscal 2001, we recorded
$4.7 million of additional reserves for inventory that we
do not expect to be sold within a predictable period.
Additionally, in fiscal 2001, we benefited from the release of
$2.0 million of reserves caused by the sales of inventories
we had previously reserved. We can provide no assurance that we
will be able to sustain the profitability we have experienced in
the last two quarters of fiscal 2002.


Our number of full time equivalent employees
decreased to 67 in April 2002 from 71 in April 2001. The
decrease was principally in the sales and administrative areas
in reaction to our decreased revenues. Our employees are also
supported in part by our subcontracting of certain engineering
activities to Lxi Corporation (see
Item 13  Certain Relationships and Related
Transactions) and certain other operations and
manufacturing activities to approximately 70 contract
employees located at NS Electronics Bangkok (1993) Ltd.
(NSEB) and Trio-Tech (Bangkok) Co. Ltd. (Trio-Tech), both
located in Bangkok, Thailand and ASE Holding Electronics (Phil.)
Inc. (ASE), located in the Philippines.

On June 30, 2001, we repaid the
$2.0 million outstanding balance owed to a bank and
cancelled the related borrowing agreement. At this time, we
believe that we have sufficient cash on hand and will not
immediately need to enter into another borrowing agreement for
the near term. As of April 30, 2002, we are indebted to
various creditors in the amount of approximately
$5.1 million of which approximately $4.2 million
relates to wafer production and inventory processing and
approximately $0.9 million relates to other goods and
services.

We market our products through a direct sales
force and a worldwide network of independent distributors and
sales representatives. For the year ended April 30, 2002,
international sales represented 69% of our product sales. End
user customers of our products include Hewlett Packard Inc.,
Jabil Circuit Inc., LG Electronics Inc., Micron, Inc.,
Motorola Inc., V Tech, Inc. and Samsung Asia Ltd.

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 nonvolatile memory devices do not. Among volatile
memory devices, Dynamic Random Access Memory (DRAM) devices 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. Nonvolatile memory
(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 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
    erasable programmable read only memories (EPROMs). On
    full-featured EEPROMs, which have on-chip error
    correction capabilities that

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| |                                                                                                                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | enhance system reliability, individual bytes or
    segments of the stored data can be erased and rewritten tens of
    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, including:



| |   |                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------
| |  | control panel settings and other
    user-configurable system parameters in consumer devices;                
|
| |  | cache memory for disk drives;                                                                                
|
| |  | 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 into applications in dynamic data storage due to its
    nonvolatility, high storage densities, rapid access speed and
    decreasing cost.

The different NVM semiconductor devices that we
sell are reprogrammable NVM devices 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.

Products and Applications

Catalyst provides a broad range of NVM products,
including serial and parallel EEPROMs, flash memories, NVRAMs
and mixed signal products. Our principal product lines are as
follows:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Serial EEPROM.We
    offer 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, we offer 4-wire bus interface protocol
    type products. We offer products in a wide variety of density
    (1K to 256K) and voltage (1.8V to 6V) ranges. Serial

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.We
    offer parallel EEPROM products for battery operated applications
    in a broad range of densities. We offer both standard
    5 volt-only and 3.3 volt-only parallel EEPROMs to meet
    battery operated application requirements. We also offer
    products with 16 kilobit (Kbit) to 512 Kbit densities.
    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. Parallel
    EEPROMs are primarily used in applications such as POS
    terminals, industrial controllers, LAN adapters,
    telecommunication switches, cellular phones and modems.
|
| | Flash Memory.We
    currently offer flash memory in a variety of densities. We offer
    Intel-licensed, 12-volt Flash memory devices in densities
    ranging from 512 Kbit to 2 megabit (Mb). This family
    includes Intel-licensed boot block and bulk erase technologies
    available in 1 Mb and 2 Mb densities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| | NVRAMs.We offer
    NVRAMS in a variety of configurations. NVRAMs consist of an SRAM
    and an EEPROM incorporated onto 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.                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| | Additionally, we have developed and introduced
    the following two product lines on a limited basis. While they
    have not yet made a significant contribution to our revenues, we
    continue to develop products in both product lines. Revenues
    from most, if not all, of the products in these product lines
    will be subject to the recent licensing agreement with Xicor
    (see Patents and Licenses):                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| | Micro-controller Supervisory Products.We have introduced a family of
    micro-controller supervisory products, combining reset and
    watchdog functions required by many micro-controllers, with
    serial EEPROM for non-volatile data storage. These products
    combine in the same chip two functions required by many
    micro-controller applications, which are typically offered in
    two separate products, providing a more functional, lower cost
    solution for such applications. The use of NVM elements inside
    the chip offers programming and fine tuning capabilities for the
    reset controller and watchdog timer functions, resulting in more
    flexibility in operation and simplified manufacturing logistics.                                                                                                       
|
| | Solid State Digital
    Potentiometers.We have introduced a
    family of solid state digital potentiometers, which are targeted
    at replacing mechanical potentiometers used in a variety of
    applications for the purpose of fine tuning and trimming
    electronic circuitry.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

Sales and Distribution

We market our products through a direct sales
force and a network of independent distributors and sales
representatives. In addition to our Sunnyvale headquarters
facility, we have domestic sales employees in Southern
California, Illinois and Texas and international sales offices
in England, South Korea and Taiwan. Our sales offices support
both original equipment manufacturers (OEM) and
distributors. In addition, Nippon Catalyst K.K., our
subsidiary in Japan, works closely with our principal foundry
and our Japanese distributors and OEM customers.

We seek to develop strategic relationships with
major OEMs and other customers. We offer a broad range of NVM
devices compatible with the most common industry standards and
we also work closely with our customers to provide semi-custom
solutions to address individual customers needs. In fiscal
2002, we shipped products directly or through our distribution
network to customers in the computer, consumer electronics,
telecommunications, automotive, data communication and other
industries. OEM customers purchasing our products include
Hewlett Packard Inc., Jabil Circuit Inc.,
L G Electronics Inc., Micron, Inc., Motorola Inc.,
V Tech, Inc. and Samsung Asia Ltd.

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During fiscal 2002, sales to one customer
exceeded ten percent of our revenues. Future Electronics, Inc.,
(Future) a distributor which sells principally in North America
and Europe represented 11% of our revenues during fiscal 2002.
During fiscal 2001, sales to Future accounted for 14% of our
revenues. During fiscal 2000, sales to Memec (Asia Pacific)
Ltd., a distributor in Asia, Future Electronics, Inc. and Yosun
Industrial Corp., a reseller located in Taiwan represented 13%,
12% and 11%, respectively of our revenues. International product
revenues represented approximately 69%, 60% and 61% of our total
product revenues in fiscal 2002, 2001 and 2000, respectively.
The increase in percentage of international revenues in fiscal
2002 was primarily attributable to our increased sales in the
Far East due to increased market demand and our ability to be
more competitive in the region as a result of certain cost
reductions. Our international sales are billed in
U.S. dollars. Due to the magnitude of our international
sales, we are subject to the risks of conducting business
internationally, including unexpected changes in regulatory
requirements and fluctuations in the value of the
U.S. dollar, which among other conditions could increase
the sales price of our products in local currencies, tariffs and
other barriers and restrictions and the burdens of complying
with a variety of foreign laws.

We do not recognize revenue on shipments to our
distributors until the distributor resells our products. In
addition, as is common in the semiconductor industry, we grant
price protection to our 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, we also grant our
distributors credit on an individual basis for price reductions
we approve on specific transactions.

Manufacturing

We subcontract the manufacture of all of our
products through independent semiconductor manufacturers,
primarily through Oki and Xfab, our semiconductor fabricators
and NSEB, our principal provider of assembly and test services.
We also subcontract certain production planning, product
engineering, shipping and tape and reel activities to NSEB,
Trio-Tech and ASE, which in the aggregate, utilize the services
of approximately 70 people in performing these services for
us as of April 30, 2002. We have designed our proprietary
circuit designs and fabrication processes to operate within the
overall semiconductor manufacturing processes of our contract
manufacturers. Our designs are manufactured utilizing Okis
processes developed for high volume and high yield production of
DRAMs. We also endeavor to develop our processes in a manner
that permits the manufacture of our products in the fabrication
facilities of different semiconductor manufacturing suppliers.
During the fourth quarter of fiscal 2000, we made the first
volume shipments of products fabricated at Xfab. Xfab is owned
and operated by Elex NV, the Belgian holding company that owns
24% of our outstanding shares. If we were forced to switch more
of our manufacturing from Oki, our production and delivery of
products would be delayed and our cost for such products might
be materially increased, which could adversely affect our
business, financial condition and results of operations.

Manufacturing semiconductor products is a highly
complex process that is 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 we believe that we
have suppliers willing to provide an adequate wafer supply to
meet our currently anticipated needs, we may not receive
sufficient quantities of wafers at favorable prices on a timely
basis, if at all. As is typical in the semiconductor industry,
our outside foundries have from time to time experienced lower
than anticipated production yields. We can provide no assurance
that manufacturing problems will not occur in the future. The
loss of Oki or Xfab as a supplier, any prolonged inability to
obtain adequate yields or deliveries from Oki or other
subcontractors or manufacturers, or any other circumstance that
would require us to seek alternative sources of supply, could
increase our cost for such supplies, delay shipments and have a
material adverse effect on our operating results. We currently
purchase wafer supplies under informal arrangements with Oki and
Xfab. We also have a purchase agreement with UMC for certain
Flash products which runs through February 2006. Due to
declining Flash bookings and other circumstances, we have not
ordered any wafers from UMC since December 1997. See
Item 7. Managements Discussion and Analyses of
Financial Condition and Results of Operations 
Results of Operations and  Liquidity and
Capital Resources.

We have wafer sorting operations at our
headquarters facility in Sunnyvale and we also utilize a
subcontractor in Japan for this purpose. We perform circuit
assembly and testing primarily through our

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subcontractors located in Southeast Asia. In the
assembly process, the wafers are separated into individual die,
which are then assembled into packages and tested in accordance
with our own internally-developed procedures. Following
assembly, the packaged devices are further tested and inspected
pursuant to our quality assurance program prior to shipment to
our customers. The majority of such assembly and test services
are provided by NSEB and Alphatek Semiconductor Packaging Co.
Ltd. in Bangkok, Thailand, Orient Semiconductor Electronic, Inc.
in the Philippines and Taiwan, ASE in the Philippines and Taiwan
and ChipPAC (Shanghai) Co. in China. While the timeliness, yield
and quality of semiconductor deliveries from our suppliers have
been acceptable to date, we can provide 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 us to seek alternate sources of supply, could delay
shipments. Any significant delays would have an adverse effect
on our operating results. Failure to have such services
available would have a material adverse effect on our business,
financial condition and results of operations.


As a result of our dependence on foreign
subcontractors and test facilities, our 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 our manufacturing and assembly and test sources are
located.

Research and Development

We continue to invest significant sums in
research and development to improve our fabrication processes
and develop additional products with the following
characteristics:



| |   |                                    
| | - | -----------------------------------
| |  | higher performance and reliability;
|
| |  | lower voltage requirements;        
|
| |  | smaller die sizes; and             
|
| |  | improved manufacturability.        

Our efforts include the development of successive
generations of our EEPROM and Flash memory products scaled to
smaller geometries, as well as mixed signal and micro-controller
supervisory circuits with embedded EEPROM technologies. As of
April 30, 2002, we employed 24 people in research and
development activities, compared to 22 and 15 as of
April 30, 2001 and 2000, respectively. Additionally, five
of the subcontracted personnel at NSEB provided manufacturing
engineering services as of April 30, 2002. We invested
$4.4 million, $4.5 million and $2.8 million in
research and development activities in fiscal 2002, 2001 and
2000, respectively.

Catalyst has had an informal arrangement since
1995 to obtain engineering services from Lxi Corporation, a
California corporation (Lxi), a provider of engineering services
through Essex com SRL (Essex), its wholly owned subsidiary in
Romania. Officers of the Catalyst, Messrs. Vanco, Voicu and
Gay own approximately 91%, 3% and 1%, respectively, of Lxi.
Messrs. Vanco, Voicu and Gay received no payments from Lxi
during the fiscal years ended April 30, 2002 and
April 30, 2001. Mr. Gay serves as a director of Lxi.
The number of full-time engineers we use is dependent upon the
scope and number of R&D projects we have in process at a
given time. For example, during the month of April 2002, Essex
employed the equivalent of approximately 15 full-time
engineers to perform the services on our behalf. These services
relate to key development projects of Catalyst including
development, design, layout and test program development
services. We do not have any contractual commitment to obtain
these services from Lxi, nor does Lxi have any obligation to
provide these services to us. During the fiscal years ended
April 30, 2002, 2001 and 1999, we recorded $852,000,
$714,000 and $534,000, respectively, of billings from Lxi for
engineering design services provided by Lxi. As of
April 30, 2002 the total amount owed to Lxi was $228,000.
See Item 13  Certain Relationships and
Related Transactions.

7



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##### Table of Contents



Patents and Licenses

As of April 30, 2002, we owned fifteen
U.S. patents and one international patent. The process of
seeking patent protection can be expensive and time consuming.
We can provide no assurance that patents will be issued from our
pending or future applications and, if patents are issued, they
will provide meaningful protection or other commercial advantage
to us. Moreover, our patent rights may not be upheld in the
future and we may not be able to preserve our other intellectual
property rights.

In April 2001, Xicor Corporation (Xicor), a
competitor in the nonvolatile memory and mixed signal markets,
served us with a suit alleging that some of our recently
announced digital potentiometer products infringed on a patent
that Xicor obtained in 1988. In June 2002, we entered into a
settlement agreement with Xicor according to which Catalyst has
received a license to manufacture the disputed products in
exchange for certain royalty payments based upon shipments after
July 22, 2002. As a result of this agreement, we will be able to
further develop such products and market them to our customers.
The complaint was dismissed on July 22, 2002.

In 1989, we entered into a license agreement with
Philips Export B.V. and U.S. Philips Corporation
(Philips) to license technology pertinent to their
I2C bus technology. In May 2001, we received a
communication from Philips suggesting that royalties may be due
and owing on past sales of certain products. We are continuing
to investigate this communication.

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. We can provide no assurance that we will not receive
additional notices alleging infringement and no additional
proceedings alleging infringement of intellectual property
rights will be commenced against us in the future. If either or
both of these events occur, we may not be able to obtain any
required licenses of third party intellectual property rights or
obtain such licenses on commercially reasonable terms. Failure
to obtain a license in either or both events could require us to
cease production of our products until we develop a
non-infringing design or process. Moreover, the cost of
litigation of any claim or damages resulting from either or both
events could be substantial and could materially and adversely
affect our business, financial condition and results of
operations.

We have entered into cross license agreements
with Oki and Seiko granting them nontransferable rights to
produce certain products, in exchange for royalty payments. We
are not currently receiving any royalties under these licenses.
In August 1995, we entered into an agreement with Intel
Corporation that provides us with a license to Intels
Flash memory and EEPROM technology in exchange for royalty
payments. Such payments to Intel for EEPROM technology ceased in
July 1998 and the payments for Flash technology ceased in June
2000. In addition, in February 1996, we also entered into an
agreement with UMC, granting UMC rights for a period of ten
years to produce certain products in exchange for the provision
of certain wafer capacities and certain other license rights.

Competition

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

Our more mature products, such as EEPROM devices,
compete on the basis of product performance, price and customer
service. We believe that we compete successfully with respect to
each of these competitive factors. Price competition is
significant and expected to continue. Principal competitors with
respect to our EEPROM products currently include
STMicroelectronics, Atmel, Microchip, Fairchild Semiconductor
and Xicor, most of which have substantially greater resources
than we do.

The market for Flash memory products has been
characterized by long production cycles, irregular yields,
competing technologies and, particularly since fiscal 1997,
intense price competition. We can provide no assurance that we
will be able to compete successfully in the future against our
competitors for Flash products business.

8



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##### Table of Contents



Employees

As of April 30, 2002, we had
67 employees, of whom 24 were engaged in research and
development. Our future success will depend on our ability to
attract, train, retain and motivate highly qualified employees,
who are in great demand. Our employees are not represented by
any collective bargaining organization and we have never
experienced any work stoppage. We believe that our employee
relations are good.

Executive Officers and Key Personnel

Our executive officers and certain key personnel
are as follows:

|                  |  |     |    |             |  |                                                                             
|----------------- |  | --- | -- | ----------- |  | ----------------------------------------------------------------------------
|Name              |  | Age |    | Position(s)
|                  |  |     |    |            
|Radu M. Vanco     |  |     | 52 |             |  | President, Chief Executive Officer and Chairman
    of the Board            
|Thomas E. Gay III |  |     | 53 |             |  | Vice President of Finance and Administration and
    Chief Financial Officer
|Sorin Georgescu   |  |     | 50 |             |  | Vice President of Technology Development                                    
|Irvin W. Kovalik  |  |     | 65 |             |  | Vice President of Sales                                                     
|Gelu Voicu        |  |     | 52 |             |  | Vice President of Engineering and Manufacturing                             
|Barry Wiley       |  |     | 65 |             |  | Vice President of Corporate Marketing                                       

Mr. Vancohas
served as our President and Chief Executive Officer since March
1998, as the Chairman of our Board since February 2001 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 and management positions
at SEEQ Technology, Inc. Mr. Vanco holds a MS in Electrical
Engineering from the Polytechnical Institute, Bucharest, Romania.

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

Mr. Georgescuhas served as our Vice President of
Technology Development since October 2001. From October 1998 to
October 2001, he was Director of Process Development at Tripath
Technology, Inc., a semiconductor manufacturer. From April 1998
to October 1998, he was the Vice President of Technology at
Catalyst. From October 1997 to April 1998 he was an engineering
manager at Sandisk Corporation, a semiconductor manufacturer.
From August 1994 to October 1997, he was the Director of Process
Development for Catalyst. Mr. Georgescu holds a MS in
Electrical Engineering from the Polytechnical Institute,
Bucharest, Romania.

Mr. Kovalikhas
served as our Vice President, Sales since October 1998. From
January 1998 to October 1998, he was Director of Strategic Sales
for Alliance Semiconductor, Inc., a semiconductor company. From
January 1997 to January 1998, he was Vice President of Sales for
NovaWeb Technologies, Inc., a modem manufacturer. From September
1995 to January 1997, he was Director of Strategic Sales for
Sequel, Inc., a semiconductor company. From June 1992 to June
1995, he was our Vice President, Sales. Mr. Kovalik holds
BS in Electrical Engineering for the University of Illinois.

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

9



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##### Table of Contents



Mr. Wileyhas
served as our Vice President, Corporate Marketing since November
2000. From September 1999 to November 2000, he was Vice
President, Programmable Analog Business Unit. From July 1997 to
September 1999 he was Vice President Marketing and Sales for
IMP, Inc., a manufacturer of semiconductors. From August 1985 to
January 1996, he was Vice President, Marketing and Sales for
Cherry Semiconductor Corp. Mr. Wiley holds a MBA from the
Harvard School of Business Administration and a MA in Physics
from the University of Southern California.

Insurance

We presently carry various insurance coverages
including, but not limited to, property damage, workers
compensation, directors and officers liability, business
interruption and general liability.




Item 2.     Properties

We rent our 42,500 square foot principal
facility in Sunnyvale, California, pursuant to a lease that
expires in July 2006. We also lease space for our domestic sales
offices located in Southern California, Illinois and Texas and
international sales offices in England, Japan, Korea and Taiwan.
We believe that our existing facilities are adequate to meet our
current needs and that additional or alternative space will be
available in the future on commercially reasonable terms.




Item 3.     Legal
Proceedings

In April 2001, Xicor Corporation (Xicor), a
competitor in the nonvolatile memory and mixed signal markets,
served us with a suit alleging that some of our recently
announced digital potentiometer products infringed on a patent
that Xicor obtained in 1988. In June 2002, we entered into a
settlement agreement with Xicor according to which Catalyst has
received a license to manufacture the disputed products in
exchange for certain royalty payments based upon shipments after
July 22, 2002. As a result of this agreement, we will be able to
further develop such products and market them to our customers.
The complaint was dismissed on July 22, 2002.

In 1989, we entered into a license agreement with
Philips Export B.V. and U.S. Philips Corporation (Philips)
to license technology related to their I2C bus
technology. In May 2001, we received a communication from
Philips suggesting that royalties may be due and owing on past
sales of certain products. We are continuing to investigate this
communication.




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 of the fiscal year ended
April 30, 2002.




PART II




Item 5.     Market
for Registrants Common Stock and Related Stockholder
Matters

Common Stock Market Prices and
Dividends

Our Common Stock is currently traded on the
Nasdaq SmallCap Market under the symbol CATS. During
fiscal 2000 and part of fiscal 2001 our stock was traded on the
over-the-counter bulletin board. The following table sets forth
the high and low bid quotations on the over-the-counter market
and, after September 6, 2000, the high and low closing
sales price for the Common Stock as reported on the Nasdaq
SmallCap Market for each calendar quarter of the last two fiscal
years. Such over-the-counter market

10



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##### Table of Contents



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


|                                     |                                |      |  |      |     |  |  |      |     
|------------------------------------ | ------------------------------ | ---- |  | ---- | --- |  |  | ---- | ----
|                                     |                                | High |  | Low 
|                                     |                                |      |  |     
|Fiscal Year ended April 30,
    2001 |                                |      |  |      |     |  |  |     
|                                     | Quarter ended July 31, 2000    |      |  | 10   |     |  |  | 6    | 3/8 
|                                     | Quarter ended October 31, 2000 |      |  | 12   | 7/1 |  |  | 6 6  | 1/16
|                                     | Quarter ended January 31, 2001 |      |  | 8    | 3/8 |  |  | 3    | 7/8 
|                                     | Quarter ended April 30, 2001   |      |  | 6    | 1/4 |  |  | 3    | 1/16
|Fiscal Year ended April 30,
    2002 |                                |      |  |      |     |  |  |     
|                                     | Quarter ended July 31, 2001    |      |  | 5.97 |     |  |  | 3.55 |     
|                                     | Quarter ended October 31, 2001 |      |  | 4.35 |     |  |  | 1.73 |     
|                                     | Quarter ended January 31, 2002 |      |  | 3.30 |     |  |  | 2.23 |     
|                                     | Quarter ended April 30, 2002   |      |  | 3.95 |     |  |  | 2.67 |     

As of July 19, 2002, there were
approximately 172 registered holders of record of our
Common Stock including one holder who is the nominee for an
undetermined number of beneficial holders.

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

During certain portions of fiscal 2002, we
repurchased a total of 193,700 shares of our Common Stock
pursuant to an open market repurchase program and also
repurchased a block of 1.5 million shares of our common
stock in a separately authorized private transaction. Please
refer to Note 7  Stockholders Equity in
the Notes to Consolidated Financial Statements for additional
information regarding our repurchase program. See also
Item 13  Certain Relationships and Related
Transactions.

Sales of Unregistered Securities

None.

11



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##### Table of Contents






Item 6.     Selected
Consolidated Financial Data

The following table presents selected our
consolidated financial data. 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 Our
Future Results.

|                                  |                                     |                                       |        |        |  |      |        |        |  |      |        |        |  |   |        |        |  |   |         |       |  
|--------------------------------- | ----------------------------------- | ------------------------------------- | ------ | ------ |  | ---- | ------ | ------ |  | ---- | ------ | ------ |  | - | ------ | ------ |  | - | ------- | ----- | -
|                                  |                                     |                                      
|                                  |                                     | Year Ended April 30,                 
|                                  |                                     |                                      
|                                  |                                     | 2002                                  |        | 2001   |  | 2000 |        | 1999   |  | 1998
|                                  |                                     |                                       |        |        |  |      |        |        |  |     
|                                  |                                     |                                      
|                                  |                                     | (In thousands, except per share data)
|Statement of Operations Data:     |                                     |                                       |        |        |  |      |        |        |  |      |        |        |  |   |        |        |  |   |         |      
|Net revenues                      |                                     | $                                     | 42,791 |        |  | $    | 98,015 |        |  | $    | 49,527 |        |  | $ | 31,987 |        |  | $ | 34,579  |      
|Cost of revenues                  |                                     |                                       | 27,158 |        |  |      | 50,863 |        |  |      | 26,837 |        |  |   | 20,909 |        |  |   | 39,025  |      
|                                  |                                     |                                       |        |        |  |      |        |        |  |      |        |        |  |   |        |        |  |   |         |      
|Gross profit (loss)               |                                     |                                       | 15,633 |        |  |      | 47,152 |        |  |      | 22,690 |        |  |   | 11,078 |        |  |   | (4,446  | )    
|Operating expenses:               |                                     |                                       |        |        |  |      |        |        |  |      |        |        |  |   |        |        |  |   |         |      
|                                  | Research and development            |                                       |        | 4,380  |  |      |        | 4,543  |  |      |        | 2,846  |  |   |        | 2,335  |  |   |         | 4,462 |  
|                                  | Selling, general and administrative |                                       |        | 10,652 |  |      |        | 13,490 |  |      |        | 9,042  |  |   |        | 7,718  |  |   |         | 9,111 |  
|                                  |                                     |                                       |        |        |  |      |        |        |  |      |        |        |  |   |        |        |  |   |         |      
|Income (loss) from operations     |                                     |                                       | 601    |        |  |      | 29,119 |        |  |      | 10,802 |        |  |   | 1,025  |        |  |   | (18,019 | )    
|Interest income (expense), net    |                                     |                                       | 663    |        |  |      | 793    |        |  |      | (492   | )      |  |   | (802   | )      |  |   | (847    | )    
|                                  |                                     |                                       |        |        |  |      |        |        |  |      |        |        |  |   |        |        |  |   |         |      
|Income (loss) before income taxes |                                     |                                       | 1,264  |        |  |      | 29,912 |        |  |      | 10,310 |        |  |   | 223    |        |  |   | (18,866 | )    
|Income tax provision              |                                     |                                       | 494    |        |  |      | 2,560  |        |  |      | 300    |        |  |   |       |        |  |   |        |      
|                                  |                                     |                                       |        |        |  |      |        |        |  |      |        |        |  |   |        |        |  |   |         |      
|Net income (loss)                 |                                     | $                                     | 770    |        |  | $    | 27,352 |        |  | $    | 10,010 |        |  | $ | 223    |        |  | $ | (18,866 | )    
|                                  |                                     |                                       |        |        |  |      |        |        |  |      |        |        |  |   |        |        |  |   |         |      
|Net income (loss) per share:      |                                     |                                       |        |        |  |      |        |        |  |      |        |        |  |   |        |        |  |   |         |      
|                                  | Basic                               |                                       | $      | 0.04   |  |      | $      | 1.63   |  |      | $      | 0.69   |  |   | $      | 0.02   |  |   | $       | (2.28 | )
|                                  |                                     |                                       |        |        |  |      |        |        |  |      |        |        |  |   |        |        |  |   |         |      
|                                  | Diluted                             |                                       | $      | 0.04   |  |      | $      | 1.36   |  |      | $      | 0.50   |  |   | $      | 0.02   |  |   | $       | (2.28 | )
|                                  |                                     |                                       |        |        |  |      |        |        |  |      |        |        |  |   |        |        |  |   |         |      
|Weighted average common shares:   |                                     |                                       |        |        |  |      |        |        |  |      |        |        |  |   |        |        |  |   |         |      
|                                  | Basic                               |                                       |        | 17,829 |  |      |        | 16,744 |  |      |        | 14,552 |  |   |        | 12,189 |  |   |         | 8,263 |  
|                                  |                                     |                                       |        |        |  |      |        |        |  |      |        |        |  |   |        |        |  |   |         |      
|                                  | Diluted                             |                                       |        | 20,439 |  |      |        | 20,169 |  |      |        | 19,974 |  |   |        | 13,678 |  |   |         | 8,263 |  
|                                  |                                     |                                       |        |        |  |      |        |        |  |      |        |        |  |   |        |        |  |   |         |      

|                                                              |  |                      |        |      |  |      |        |      |  |      |        |  |  |   |        |   |  |   |        |  
|------------------------------------------------------------- |  | -------------------- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------ |  |  | - | ------ | - |  | - | ------ | -
|                                                              |  |                     
|                                                              |  | Year Ended April 30,
|                                                              |  |                     
|                                                              |  | 2002                 |        | 2001 |  | 2000 |        | 1999 |  | 1998
|                                                              |  |                      |        |      |  |      |        |      |  |     
|                                                              |  |                     
|                                                              |  | (In thousands)      
|Balance Sheet Data:                                           |  |                      |        |      |  |      |        |      |  |      |        |  |  |   |        |   |  |   |        |  
|Cash and cash equivalents                                     |  | $                    | 26,295 |      |  | $    | 30,534 |      |  | $    | 6,205  |  |  | $ | 1,852  |   |  | $ | 534    |  
|Total current assets                                          |  |                      | 45,510 |      |  |      | 50,589 |      |  |      | 21,087 |  |  |   | 9,627  |   |  |   | 16,105 |  
|Total assets                                                  |  |                      | 47,924 |      |  |      | 53,178 |      |  |      | 22,943 |  |  |   | 11,566 |   |  |   | 18,939 |  
|Total current liabilities                                     |  |                      | 9,296  |      |  |      | 12,073 |      |  |      | 12,378 |  |  |   | 12,697 |   |  |   | 22,307 |  
|Total long-term liabilities and capital lease
    obligations |  |                      | 3,262  |      |  |      | 1,992  |      |  |      | 64     |  |  |   | 81     |   |  |   | 501    |  
|Stockholders equity (deficit)                                |  |                      | 35,366 |      |  |      | 39,113 |      |  |      | 10,501 |  |  |   | (1,212 | ) |  |   | (3,869 | )

12



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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, we hereby notify our readers that the
factors set forth in Certain Factors that May Affect Our
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 our actual results and could cause our
results for future periods to differ materially from those
expressed in any forward looking statements made by or on our
behalf, including without limitation those made in this report.
All forward looking statements included in this report are based
upon information available to us on the date of filing and we
assume no obligation to update such forward-looking
statements.

Overview

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

Our 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 and fiscal 1999, the market for certain
FLASH and EEPROM devices, which comprise the majority of our
business, experienced an excess market supply relative to demand
which resulted in a significant downward trend in prices. During
fiscal 2000 and the first half of fiscal 2001, we reduced our
manufacturing costs, increased the efficiency of our
manufacturing operations and the selling prices for certain
products that we produce increased, all contributing to the
increased gross margin percentages. During the second half of
fiscal 2001, we experienced cancellations of orders by our
customers, increased supplies of competitive products, decreased
prices and decreasing revenues. Revenues, gross profits, selling
prices and net income continued to decline through the second
quarter of fiscal 2002. In the second half of fiscal 2002,
quarterly revenues, gross profits and net income increased
slightly. We could, however, experience an increase in our
manufacturing costs, a decrease in our unit shipments and a
further downward trend in product pricing in the future, all
factors which could adversely affect our operating results.

Results of Operations



| |                                                                                  
| | ---------------------------------------------------------------------------------
| | Fiscal Year Ended April 30, 2002
    Compared to Fiscal Year Ended April 30, 2001

Revenues.Total
revenues consist of net product sales. A substantial portion of
net product sales are 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, we defer revenue recognition until the distributor sells
the product to the end customer. Total revenues decreased by 56%
to $42.8 million in fiscal 2002 from $98.0 million in
fiscal 2001. The decrease was primarily attributable to a
decrease in sales of our EEPROM products and price decreases
caused by an excess supply of semiconductors and other
unfavorable industry-wide conditions. Shipments of our EEPROM
devices decreased by $46.2 million to $35.5 million or
83% of revenues in fiscal 2002 compared to $81.7 million or
83% of revenues in the prior year. The decrease was also
attributable to the deteriorating market conditions. Shipments
of our Flash memory devices decreased by $9.4 million to
$6.9 million or 16% of revenues in fiscal 2002 compared to
$16.3 million or 17% of revenues in the prior year. The
decrease in Flash product sales was also attributable to the
deteriorating market conditions. Shipments of our mixed signal
products were $0.4 million for fiscal 2002, compared to
$0.2 million in fiscal 2001. The increase in mixed signal
product shipments was due to the limited number of products
available for sale and because most of these products were
introduced in fiscal 2002. International sales contributed 69%
of net product sales in fiscal 2002 as compared to 60% in fiscal
2001. The increase in percentage of international revenues in
fiscal 2002 was primarily attributable to our increased sales in
the Far East due to increased

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##### Table of Contents



market demand and our ability to be more
competitive in the region as a result of certain cost
reductions. All sales of our products are in US dollars,
minimizing the effects of currency fluctuations.


Gross Profit.Gross
profit for fiscal 2002 was $15.6 million or a gross margin
of 37% compared to gross profit of $47.2 million or a gross
margin of 48% for fiscal 2001. The decrease in gross profit was
primarily attributable to decreased selling prices and decreased
revenues. In fiscal 2001, we benefited from the release of
$2.0 million in inventory reserves due to the sale of
inventories previously reserved. It is our policy to fully
reserve all inventories that are not expected to be sold in a
reasonable period of time from the balance sheet date, generally
within the ensuing six or twelve months. The decrease in gross
margin percentage in fiscal 2002 was due to decreased selling
prices and decreases in the level of sales of products with
higher gross margins. We pay certain foreign manufacturing
expenses in local currency, primarily Baht in Thailand and Yen
in Japan. These expenses in foreign currencies are not material
to us.

Research and Development.Research and development (R&D)
expenses consist principally of salaries for engineering,
technical and support personnel, contract engineering services,
depreciation of equipment and the cost of wafers used to
evaluate new products and new versions of current products.
R&D expenses decreased 2% to $4.4 million in fiscal
2002 from $4.5 million in fiscal 2001. The decrease was
primarily attributable to a $0.1 million decrease in wafers
purchased for development purposes. As of April 30, 2002,
we employed 24 people in research and development
activities in addition to the equivalent of 15 more at Lxi,
compared to 21 employees plus 11 under our informal
arrangement with Lxi as of April 30, 2001. As a percentage
of revenues, R&D expenses increased to 10% from 5%. This
increase in percentage was attributable to the decrease in
revenues. See Item 13  Certain
Relationships and Related Transactions.

Selling, General and Administrative.Selling, general and administrative
(SG&A) expenses consist principally of salaries for sales,
marketing and administrative personnel, commissions, promotional
activities, professional fees and director and officer (D&O)
insurance. SG&A expenses decreased $2.8 million or 21%
to $10.7 million in fiscal 2002 from $13.5 million in
fiscal 2001. This decrease was primarily attributable to a
$1.5 million decrease in personnel related expenses and a
$1.0 million decrease in commissions paid to outside
representatives. As a percentage of revenues, SG&A expenses
increased to 25% from 14%. The reason for the increase in the
percentage of revenue was the decrease in revenues.

Net Interest Income and Expense.We earned net interest income of
$663,000 or 2% of revenues in fiscal 2002 compared to net
interest income of $793,000, or 1% of revenues, in fiscal 2001.
The decrease in net interest income was primarily attributable
to the decreased interest rate paid on our cash balances.

Income Tax Provision.The provision for income taxes was
$494,000 or 39% of earnings before taxes in fiscal 2002 compared
to $2.6 million or a 9% provision for taxes in fiscal 2001.
The increase in our effective tax rate was due to the full
utilization of loss carryforwards in fiscal 2001 and tax credits
that were available as a result of credit carryforwards. During
fiscal 2002, we generated new tax loss carryforwards and
additional tax credits such that as of April 30, 2002, we
had combined net operating loss carryforwards and R&D and
stock option related credit carryforwards totaling, for federal
and state purposes, $12.0 million and $1.5 million,
respectively, which begin to expire in fiscal 2005. Of this
total of $13.5 million of tax credits, $3.3 million is
related to stock option credits which will reduce our tax
payments but the benefit will be credited to stockholders
equity rather than income when we conclude that it is more
likely than not that the net deferred tax assets will be fully
realizable.

Fiscal Year
Ended April 30, 2001 Compared to Fiscal Year Ended
April 30, 2000

Revenues.Total
revenues increased by 98% to $98.0 million in fiscal 2001
from $49.5 million in fiscal 2000. The increase was
primarily attributable to an increase in sales of our EEPROM
products and price increases caused by excess demand and other
favorable industry-wide conditions. Shipments of our EEPROM
devices increased by $41.2 million to $81.7 million or
83% of revenues in fiscal 2001 compared to $40.5 million or
82% of revenues in the prior year. The increase was attributable
to improved market conditions and increased wafer supplies from
our foundry service providers. Shipments of our Flash memory
devices increased by $7.3 million to $16.3 million or
17% of revenues in fiscal 2001 compared to $9.0 million or
18% of revenues in the prior year. The increase in Flash product
sales was attributable to increases in the quantity of

14



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##### Table of Contents



units shipped and increases in the average
selling price (ASP) for such products. International sales
contributed 60% of net product sales in fiscal 2001 as compared
to 61% in fiscal 2000. All sales of our products were in US
dollars.


Gross Profit.Gross
profit for fiscal 2001 was $47.2 million or a gross margin
of 48% compared to gross profit of $22.7 million or a gross
margin of 46% for fiscal 2000. The increase in gross profit was
primarily attributable to increased revenues, reduced production
costs and increased selling prices. We also benefited from the
release of $2.0 million in inventory reserves due to the
sale of inventories previously reserved. It is our policy to
fully reserve all inventories that are not expected to be sold
in a reasonable period of time from the balance sheet date. The
increase in gross margin percentage is due to increased selling
prices, decreased price per unit assembly and testing costs and
our increasing the level of sales of products with higher gross
margins.

Research and Development.R&D expenses increased 61% to
$4.5 million in fiscal 2001 from $2.8 million in
fiscal 2000. The increase was primarily attributable to a
$1.0 million increase in personnel related expenses. As of
April 30, 2001, we employed 21 people in research and
development activities, compared to 15 as of April 30,
2000. As a percentage of revenues, R&D expenses decreased to
5% from 6%. This decrease was attributable to the increase in
revenues.

Selling, General and Administrative.SG&A expenses increased 50% to
$13.5 million in fiscal 2001 from $9.0 million in
fiscal 2000. This increase was primarily attributable to a
$1.6 million increase in commissions paid to outside
representatives, a $1.2 million increase in personnel
related expenses and $0.5 million in additional provisions
for uncollectable receivables. As a percentage of revenues,
SG&A expenses decreased to 14% from 18%. The reason for the
decrease in the percentage of SG&A as a percentage of
revenues is the increase in revenues.

Net Interest Income and Expense.We had net interest income of $793,000
or 1% of revenues in fiscal 2001 compared to net interest
expense $492,000, or 1% of revenues, in fiscal 2000. The change
to net interest income from net interest expense is primarily
attributable to increased interest earnings from the increased
cash on hand and decreased borrowing from lenders. The decrease
in net interest expense as a percentage of revenues was
attributable to decreased borrowing and the increase in revenues.

Income Tax Provision.The provision for income taxes was
$2.6 million or 9% of earnings before taxes in fiscal 2001
compared to $300,000 or 3% provision for taxes in fiscal 2000.
During fiscal 2001, we fully utilized the tax credits that were
available as a result of previous years losses.

As of April 30, 2000 we had available net
operating loss carryforwards of approximately $22.8 million
and credit carryforwards of approximately $0.7 million for
federal tax purposes.

Critical Accounting Policies and
Estimates

The preparation of consolidated financial
statements in conformity with generally accepted accounting
principles (GAAP) in the United States of America requires
management to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses,
and related disclosures. On an on-going basis, we evaluate our
estimates, including those related to product shipments and
returns, bad debts, inventories, income taxes, warranty
obligations, contingencies and litigation. We base these
estimates on historical experience and on various other
assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or
conditions.

Specifically, we believe that the following
accounting policies and estimates are most important to the
portrayal of our financial condition and results and require
managements most difficult judgments:



| |                   
| | ------------------
| | Inventory Reserves

We record inventory reserves for estimated
unmarketable inventory equal to the cost of inventory estimated
to be in excess based upon assumptions about future demand and
market conditions. If actual

15



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market conditions are less favorable than those
projected by management, inventory write-downs are also
required. Inventory reserves are also taken based upon our
estimate of the future selling prices of our inventories.
Whenever the estimated future selling price is less than the
value of and the estimated cost to sell any portion of our
inventory, a reserve is taken for the amount by which the cost
of the inventory and costs to sell exceed the estimated future
selling price. If we overestimate the future selling prices, we
will incur additional losses when the inventory is sold for a
lower price or when we establish additional reserves to cover
the even lower estimated sales price.




| |                    
| | -------------------
| | Revenue Recognition

For products sold directly to end-users, or to
distributors that do not receive price concessions and do not
have rights of return, we recognize revenue upon shipment and
title transfer if we believe collection is reasonably assured.
Reserves for sales returns and allowances are estimated based
primarily upon historical experience and provided at the time of
shipment.

For sales to distributors with agreements
allowing for price concessions and product returns, we recognize
revenue at the time the distributor sells the product to its end
customer. Revenue is not recognized upon shipment since, due to
various forms of price concessions, the sales price is not
substantially fixed or determinable at that time. Additionally,
these distributors have contractual rights to return products,
up to a specified amount, for a given period of time. Revenue is
recognized when a distributor sells the product to an end-user,
at which time the sales price becomes fixed.

On our sales to end-users, we record estimated
reductions to revenue for the return of products at the time
revenue is recognized. If market conditions were to weaken, we
may face higher volumes of product returns possibly resulting in
an incremental reduction of revenue at the time products are
returned. If we were to experience an increased rate of product
returns, our sales would be further reduced by the increased
reserves taken to cover the increased amount of our products
expected to be returned.

At the time of shipment to distributors, we
record a trade receivable for the selling price since there is a
legally enforceable right to payment, we relieve inventory for
the carrying value of the goods shipped since legal title has
passed to the distributor and we record the gross margin in
deferred gross profit on shipments to distributors,
a component of current liabilities on our balance sheet.
Deferred margin represents the gross margin on the sale to the
distributor; however, the amount of gross margin we recognize in
future periods could be less than the deferred margin as a
result of price concessions. We do not reduce deferred margin by
estimated future price concessions; instead, price concessions
are recorded when incurred, which is generally at the time the
distributor sells the product to an end-user. The difference
between deferred margin and the margin actually recognized has
not been material in the past, however, since price concessions
are highly dependent upon market conditions, there can be no
assurance that the difference will not be material in the
future. Price concessions are not granted for amounts in excess
of the deferred margin.



| |                                     
| | ------------------------------------
| | Allowances for Doubtful
    Accounts

We maintain allowances for doubtful accounts for
estimated losses resulting from the inability of our customers
to make required payments. If the financial condition of our
customers were to deteriorate, resulting in an impairment of
their ability to make payments, additional allowances may be
required.



| |                     
| | --------------------
| | Valuation Allowances

We record a full valuation allowance to reduce
our deferred tax assets to the amount that is more likely than
not to be realized. We have considered estimated future taxable
income in assessing the need for the valuation allowance. In the
event we are to determine that we would be able to realize our
deferred tax assets in the future in excess of the net recorded
amount, an adjustment to the deferred tax asset would increase
income and shareholders equity in the period such determination
is made.

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Liquidity and Capital Resources

Total cash decreased $4.2 million to
$26.3 million as of April 30, 2002 from
$30.5 million as of April 30, 2001. Net cash provided
by operations was $1.3 million for the year ended
April 30, 2002, which was due primarily to net income of
$770,000, adjusted for depreciation and amortization of
$1,008,000, an addition to the provision for doubtful accounts
of $200,000, an increase in the provision for excess and
obsolete inventory of $72,000 and a decrease in gross accounts
receivable of $1.7 million related to decreased sales and
manufacturing activity, an increase in accounts payable of
$852,000, related to our increased wafer purchases and an
increase in other credits of $1.3 million. Such increases
were partially offset by an increase in gross inventories of
$472,000, an increase in other current assets of $642,000
related to an expected refund of income taxes paid in a previous
year and a decrease in accrued expenses of $1.1 million.
For the one year period ended April 30, 2001, net cash of
$25.8 million was provided by operations, principally by
net income of $27.4 million, adjusted for depreciation and
amortization of $1,051,000, additions to the provision for
doubtful accounts of $464,000, an increase in the provision for
excess and obsolete inventory of $2.7 million,
$3.9 million from the increase in accrued expenses,
primarily due to the provision for income taxes and
$1.1 million from the increase in deferred gross profit on
shipments to distributors. Such increase was partially offset by
an increase in gross accounts receivable of $548,000, an
increase in gross inventories of $7.5 million due to the
increase availability of wafers, plus $2.5 million from the
decrease in accounts payable due to the decreasing manufacturing
activity.

Our investing activities used $833,000 during the
year ended April 30, 2002 and were related primarily to the
acquisition of equipment for our manufacturing operations. Cash
used in investing activities for the year ended April 30,
2001 was $1.8 million which was primarily related to the
purchase of equipment for our manufacturing operations.

Financing activities used $6.8 million
during the year ended April 30, 2002, consisting primarily
of $5.1 million utilized for the repurchase of an aggregate
of 1,693,700 shares of our common stock, 1,500,000 of which were
repurchased in a private transaction and the remainder of which
were open market purchases made through our announced open
market repurchase program and approximately $2.1 million
was used to pay off the bank credit line and the remaining
capital lease obligations. Net cash provided by the sale of
common stock through the exercise of stock options totaled
$451,000 during fiscal 2002. During the year ended
April 30, 2001, the cash provided by financing activities
was $328,000, primarily from $540,000 in proceeds from stock
option exercises less $212,000 used to pay down our lease and
bank obligations.

As of April 30, 2002, we were indebted to
various creditors in the amount of approximately
$4.3 million. This amount is comprised of approximately
$3.6 million for wafers and inventory processing and
approximately $0.7 million for other goods and services.

We do not have any material contractual
obligations or commercial commitments to make any future
payments other than with respect to the facilities lease for our
principal business office in Sunnyvale which will expire in
2006. Further, we do not engage in any off-balance sheet
arrangements or transactions. The following table shows the
aggregate future minimum lease payments, by fiscal year, that we
are obligated to pay under the terms of the non-cancelable
operating leases we currently have for our various facilities,
principally our headquarters building in Sunnyvale, California
(in thousands):

|             |  |           |       | 
|------------ |  | --------- | ----- | 
|Years ending |  | Operating
|April 30,    |  | Leases   
|             |  |          
|2003         |  | $         | 529   | 
|2004         |  |           | 449   | 
|2005         |  |           | 462   | 
|2006         |  |           | 476   | 
|2007         |  |           | 120   | 
|             |  |           |       | 
|             |  | $         | 2,036 | 
|             |  |           |       | 

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In light of the current economic and competitive
climate, we continue to monitor our liquidity resources. We
believe our existing cash and cash equivalents and anticipated
cash flows from our operating activities will be sufficient to
fund our working capital and capital expenditure needs for at
least the next 12 months. In our competitive industry, we
must constantly consider the need to make significant
expenditures in connection with our research and development
efforts. We may use cash to invest in businesses, products
and/or technologies which we believe to be strategic. However,
we have no present commitments or obligations with respect to
any acquisition of other businesses or technology. We have no
present intention to seek additional debt or equity financing,
but our need to do so is highly dependent upon factors such as
the demand for our products and changes in industry and general
economic conditions. In the event that we do determine to seek
such financing, there can be no assurance that such financing
will be available on acceptable terms, if at all, and any
additional equity financing could result in incremental dilution
to our existing investors.

Effects of Transactions with Related
Parties

During the fourth quarter of fiscal 2000,
Catalyst began taking delivery of wafers fabricated at X-fab
Texas, Inc. (Xfab), a wholly owned subsidiary of Elex NV, a
Belgian holding company that owns 24% of the outstanding shares
of Catalyst. Mr. Roland Duchâtelet, the Chairman and
CEO of Elex NV, serves as a member of our Board of
Directors. The wafers provided by Xfab supplement the same
designs fabricated at Oki Semiconductor in Japan, our principal
wafer fab since 1985. Other than purchase orders currently open
with Xfab, there is no purchasing agreement in place with Xfab.
Each purchase order remains open until the wafers are delivered,
which is generally within two months of placement of the order,
although in the case of one particular wafer design, the
purchase order calls for monthly deliveries over a one year
period at a set price for each wafer delivered. The prices of
wafers purchased from Xfab are determined by periodic
negotiations with the management of Xfab and compared to quotes
obtained from other prospective wafer fabricators and pricing
surveys published by various industry trade organizations.
During the year ended April 30, 2002, our purchases from
Xfab totaled $1.2 million. As of April 30, 2002, the
total amount owed Xfab was $184,000.

We have had an informal arrangement since 1995 to
obtain engineering services from Lxi Corporation, a California
corporation (Lxi), a provider of engineering services through
Essex com SRL (Essex), its wholly owned subsidiary in Romania.
Officers of Catalyst, Messrs. Vanco, Voicu and Gay own
approximately 91%, 3% and 1%, respectively, of Lxi. The number
of full-time engineers we use is dependent upon the scope and
number of R&D projects we have in process at a given time.
For example, during the month of April 2002, Essex employed the
equivalent of approximately 15 full-time engineers to perform
the services on our behalf. These services relate to key
development projects of Catalyst including development, design,
layout and test program development services. We do not have any
contractual commitment to obtain these services from Lxi, nor
does Lxi have any obligation to provide these services to us.
During the fiscal year ended April 30, 2002 we recorded
$852,000 of engineering fees from Lxi for engineering design
services provided to us by Lxi. As of April 30, 2002 the
total amount owed to Lxi was $228,000.

One of our directors, Mr. Lionel Allan, also
serves as a consultant to us through his consulting company,
Allan Advisors, Inc. Under the terms of his consulting
agreement, we paid consulting fees of $8,333 per month
throughout Fiscal 2002. The consulting agreement will expire on
August 14, 2003.

Recent Accounting Pronouncements

In July 2001, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 141, Business Combinations
and SFAS No. 142, Goodwill and Other Intangible
Assets. SFAS No. 141 requires that business
combinations initiated after June 30, 2001 be accounted for
under the purchase method of accounting. The use of the
pooling-of-interest method of accounting is no longer allowed.
SFAS No. 142 requires that goodwill and other indefinite
life intangible assets will no longer be amortized but shall be
reviewed and tested annually for impairment. SFAS No. 142
will be effective for fiscal years beginning after
December 15, 2001 and early adoption is permitted for
companies with a fiscal year beginning after March 15,
2001. The adoption of SFAS Nos. 141 and 142 will not have
any effect our financial statements.

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In October 2001, FASB issued SFAS No. 144,
Accounting for Impairment or Disposal of Long-Lived
Assets, which supersedes SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be disposed of and the accounting and
reporting provision of Accounting Principles Board (APB)
No. 30, Reporting the Results of Operations,
Reporting the Effects of Disposal of a Segment of a Business and
Extraordinary, Unusual and Infrequently Occurring Events and
Transactions. SFAS No. 144 addresses financial
accounting and reporting for impairment or disposal of
long-lived assets including amortizable intangibles and is
effective for fiscal years beginning December 15, 2001 as
well as interim periods within those fiscal years. SFAS
No. 144 does not apply to the impairment of goodwill and
non-amortizable intangibles. We expect that the adoption of SFAS
No. 144 will not have a material effect on our financial
statements.

Certain Risks that May Affect Our Future
Results

We desire 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 our behalf. We hereby caution
stockholders, prospective investors in Catalyst and other
readers that the following important factors, among others, in
some cases have affected and in the future could affect, our
stock price or cause our actual results for the fiscal year and
quarter ending April 30, 2002 and future fiscal years and
quarters to differ materially from those expressed in any
forward-looking statements, oral or written, made by or on
behalf of us.

Our quarterly operating results may fluctuate
due to many factors and are difficult to forecast.

Our operating results have historically been and
in future quarters may be adversely affected or otherwise
fluctuate due to factors such as:



| |   |                                                                                                                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | fluctuations in customer demand for our 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 us in the five quarters ended April 30, 2002
    and during the fiscal years April 30, 1999 and 1998);
|
| |  | the need to establish additional inventory
    reserves due to the expected selling prices falling below the
    amounts paid to produce and sell certain parts, or if our
    expectations for sales of our inventory fall below the
    quantities that we have on hand;                                     
|
| |  | charges to bad debt expense caused by accounts
    receivable that become unlikely to be collected in a reasonable
    amount of time, if ever;                                                                                                                                                                
|
| |  | the timing of new product introductions and
    significant orders of our products;                                                                                                                                                                                                                            
|
| |  | increased expenses associated with new product
    introductions, process changes and/or expanding our sales
    channels;                                                                                                                                                                                     
|
| |  | gains or losses of significant customers;                                                                                                                                                                                                                                                                      
|
| |  | fluctuations in manufacturing yields;                                                                                                                                                                                                                                                                          
|
| |  | changes in our product mix;                                                                                                                                                                                                                                                                                    
|
| |  | increases in wafer prices due to increased market
    demand and other factors;                                                                                                                                                                                                                                
|
| |  | prices charged by our suppliers due to increased
    costs, decreased competition and other factors;                                                                                                                                                                                                           
|
| |  | foreign currency fluctuations; and                                                                                                                                                                                                                                                                             
|
| |  | general economic conditions.                                                                                                                                                                                                                                                                                   

We anticipate that a significant portion of our
revenue may be derived from a limited number of large orders and
we expect that the timing of receipt and fulfillment of these
orders may cause fluctuations which could be material to our
operating results, particularly on a quarterly basis.

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Our quarterly revenue and operating results are
difficult to forecast due to the previously described factors.
We base our expense levels, in significant part, on our
expectations as to future revenue and our expenses are therefore
relatively fixed in the short term. If our expected revenue
levels fall below our forecasts, as has occurred again during
the most recent fiscal year, net income is likely to be
disproportionately adversely affected because a proportionately
smaller amount of our expenses vary with our revenue.

The semiconductor industry is highly cyclical
in nature.

We operate in a highly cyclical industry that has
been subject to significant economic downturns often in
connection with, or in anticipation of, maturing product cycles
and declines in general economic conditions. This type of
downturn occurred in calendar years 1997 and 1998 and again
during 2001. We currently face and in the future may face
diminished product demand, accelerated erosion of average
selling prices and gross margins and production overcapacity
during such downturns, which may last for more than a year.
Accordingly, we 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, we experienced accelerated erosion
of average selling prices caused by adverse industry-wide
conditions during fiscal 1998 and throughout calendar year 1999
and incurred substantial losses during that period. During
fiscal 2000, the semiconductor market rebounded from its
cyclical decline which had a favorable impact on both our
revenues and our gross margins into fiscal 2001 through the
quarter ended October 2000. During each of the fiscal quarters
ended January 2001, April 2001, July 2001 and October 2001,
however, the market for our products became more competitive as
a result of increased availability of products when demand was
decreasing. Since the twelve month period ended October 2001, we
have seen increased quarterly revenues but the rate of revenue
growth that we experienced may not be sustained and could be
reversed. Thus we are concerned about the ability of continued
price and other competitive pressures to adversely affect our
future operating results similar to the adverse affects on our
1998 and 1999 operating results.

Our continued success depends in large part on
the continued growth of various electronics industries that use
semiconductors. The improved market conditions we experienced in
calendar year 1999 and the first ten months of calendar year
2000 have deteriorated significantly. During the latter half of
the fiscal year ended April 30, 2001 and in the first half
of fiscal 2002, we experienced decreases in orders from
customers and found that lower selling prices were necessary to
remain competitive in the market. We attempt to identify changes
in market conditions as soon as possible; however, market
dynamics make our prediction of and timely reaction to such
events difficult. Our business could be harmed in the future by
additional cyclical downturns in the semiconductor industry or
by slower growth by any of the markets served by our
customers products.



| |                                                                               
| | ------------------------------------------------------------------------------
| | General economic conditions may reduce our
    revenues and harm our business.

We are subject to the risks arising from adverse
changes in domestic and global economic conditions. Because of
the current worldwide economic slowdown and, in the United
States in particular, many industries are delaying or reducing
technology purchases. The impact of this slowdown on us is
difficult to predict, but it may result in reductions in
purchases of our products by our customers, longer sales cycles
and increased price competition. As a result, if the current
economic slowdown continues or worsens, we may fall short of our
revenue expectations for any given quarter in fiscal 2003 or for
the entire year. These conditions would negatively affect our
business, financial condition and results of operations.



| |                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------
| | If our products fail to keep pace with the
    rapid technological changes in the semiconductor industry, we
    could lose customers and revenue.

Our product markets are characterized by rapidly
changing technology and product obsolescence. A key factor to
our business success is the timely introduction of new products
at competitive price and performance levels. In particular, our
future success will depend on our ability to develop and
implement new design and process technologies which enable us to
achieve higher product densities and thereby reduce product
costs. For example, most of our products are currently designed
and manufactured using a 0.8 micron CMOS

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EEPROM process or a 0.6 micron Flash memory
process. We may not 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, our products may not achieve market
acceptance. Our failure to complete and introduce new products
at competitive price/ performance levels could materially and
adversely affect our business, financial condition and operating
results. Our business, financial condition and results of
operations could be materially adversely affected by delays in
developing new products, achievement of volume production of new
products, successful completion of technology transitions with
acceptable yields and reliability, or the lack of commercial
acceptance of new products we introduce to the market.




| |                                                                       
| | ----------------------------------------------------------------------
| | We depend on a small number of suppliers for
    the supply of wafers.

We do not manufacture the semiconductor wafers
used for our products. Oki Electric Industry, Co., Ltd. (Oki) in
Japan has supplied wafers to us since 1987 and was our sole
foundry source until the quarter ended April 30, 2000. At
that time, an additional foundry, Xfab, began to provide a
limited number of products to us and the volumes currently
provided by Xfab are considerably less than Oki currently
provides. We do not presently have a wafer supply agreement with
Oki or Xfab and instead purchase wafers on a purchase order and
acceptance basis. Our almost exclusive reliance on these
independent foundries involves a number of risks, including:



| |   |                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------
| |  | the risk of inadequate wafer supplies to meet our
    production needs;                                     
|
| |  | increased prices charged by such independent
    foundries;                                                 
|
| |  | the unavailability of or interruption in access
    to required or more cost effective process technologies;
|
| |  | reduced control over delivery schedules,
    manufacturing yields and costs; and                            
|
| |  | the risks associated with international
    operations more fully described below.                          

We are not always able to obtain sufficient
increased quantities of wafers from Oki to fulfill some of the
current customer demand. Although we have a wafer purchase
agreement with UMC for certain Flash products which runs through
February 2006, due to declining Flash bookings and other
circumstances, we have not ordered any wafers from UMC since
December 1997.

On September 6, 2000, we announced an
agreement with Oki that resulted in a significant increase in
foundry capacity available to us for a one year period that
commenced in September 2000 in return for two payments totaling
$10.0 million. These payments were added to the cost of
inventories purchased during the ten month period ended March
2001 and were reflected in our cost of sales as the associated
inventory was sold. The last of the inventories associated with
the payment for additional foundry capacity was sold in the
quarter ended October 2001. As market conditions deteriorated
before that inventory was sold we were expensing a portion of
such payments during a period in which the selling price of that
product decreased, adversely affecting our gross margins.

To address our wafer supply concerns, we plan to
continue working on expanding our primary foundry capability at
Oki and our secondary foundry capability with Xfab at its
facility in Lubbock, Texas. Xfab is owned by Elex NV which
is a 24% stockholder of the Company as of July 23,
2002 and Mr. Roland Duchâtelet, the chairman and CEO
of Elex NV, serves as a member of our Board of Directors.
The addition of Xfab as a second foundry source has enabled us
to somewhat reduce the risks associated with the sourcing and
quantity of our wafer supply and thereby improve control over an
important component of our business; however, sufficient
capacity may not be available from Xfab. Additionally, Oki may
not continue to provide sufficient capacity in the future and
that capacity may not be available from another manufacturer at
prices acceptable to us. Even if such capacity is available, the
qualification process and time required to make the foundry
fully operational for us could take many months or longer and be
subject to other factors described

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below and the prices could be materially higher.
Our business, financial condition and results of operations
could be materially adversely affected by:




| |   |                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------
| |  | the loss of Oki or Xfab as a supplier;                                                               
|
| |  | our inability to obtain additional capacity at
    Oki or Xfab;                                      
|
| |  | our inability to qualify Xfab for additional
    products;                                           
|
| |  | our ability to qualify other wafer manufacturers
    for desired foundry capacity; or                
|
| |  | any other circumstances causing a significant
    interruption in our supply of semiconductor wafers.



| |                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------
| | We have incurred significant losses or
    experienced significant negative cash flow from operations
    during several recent fiscal years.

We have incurred significant losses or
experienced significant negative cash flow from operations
during several recent fiscal years. Such negative cash flow
during fiscal 1999 and 1998 significantly reduced our available
capital. During fiscal 1999, we successfully took steps to
address and resolve issues relating to our poor cash flow
position. During the fiscal year ended April 30, 2002, our
cash on hand decreased by $4.2 million, principally due to
$5.1 million in repurchases of our stock. Although as of
April 30, 2002, we had cash on hand of $26.3 million,
we may not continue to generate sufficient revenue and profits
to fund our operations. We have pursued many measures designed
to reduce expenses and conserve our cash in prior periods when
we experienced decreased or negative cash flow and we continue
to monitor expenses and to conserve our available cash. However,
to the extent we suffer any adverse effects to our revenues or
margins because of delays in new product introductions, price
competition or other competitive factors, our cash position and
our business, operating results and financial condition will be
adversely affected.

We may need to seek additional equity or debt
financing to address our working capital needs and to provide
funding for capital expenditures although we have no present
intention to do so. If required, additional funding may not be
available at acceptable terms, if at all. If we are successful
in raising additional funds through the issuance of equity
securities, our existing stockholders could experience
significant dilution or the securities may have rights,
preferences or privileges senior to those of our common stock.
If adequate funds are not available to us or are not available
on acceptable terms, further reductions in our operating
expenses and capital expenditures may be required to continue
operations, either of which could have a material adverse effect
on our business, operating results and financial condition.



| |                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------
| | The trading price of our common stock could be
    subject to wide fluctuations in response to a variety of
    factors.

Our 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 investors or
others could have an immediate and significant adverse effect on
the trading price of our common stock in any given period. In
addition, the stock market in general has experienced extreme
price and volume fluctuations, 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 our
common stock.



| |                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The manufacture of semiconductor wafers is
    highly complex and sensitive to a wide variety of factors that
    may adversely affect our ability to generate future
    revenues.

The manufacture of semiconductor wafers for our
products is highly complex and sensitive to a wide variety of
factors typical in the semiconductor industry such as:



| |   |                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------
| |  | lower than anticipated production yields
    experienced by outside wafer foundries from time to time;
|
| |  | incurring the time and expense to develop
    alternative foundry sources;                            
|
| |  | experiencing substandard yield during the initial
    developmental stages of a new process;          

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| |   |                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------
| |  | inability to receive sufficient quantities of
    wafers at favorable prices on a timely basis, especially in
    periods of increased demand;
|
| |  | material disruptions in the supply of wafers as a
    result of low manufacturing yield or other manufacturing
    problems; and              
|
| |  | production transition delays.                                                                                                                 

Our ability to generate future revenues may be
adversely affected by such delays and reductions that result in
the cancellation of customer orders. Thus, any of the following
events could delay shipments, result in the loss of customers
and have a material adverse effect on our business and operating
results:



| |   |                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------
| |  | the loss of Oki or Xfab as a supplier;                                                                              
|
| |  | the failure to further develop Xfab as a reliable
    foundry in an expeditious and cost-effective manner;          
|
| |  | any prolonged inability to obtain adequate yields
    or deliveries from Oki or Xfab; and                           
|
| |  | any other circumstance that would require us to
    seek and qualify alternative sources of supply of such products.

Although we are exploring and seeking to develop
alternative wafer supply sources such as Xfab, we may not be
able to obtain such alternative sources nor may we have adequate
facilities available. Failure to have such supplies available
would have a material adverse effect on our business, financial
condition and results of operations.



| |                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Intense competition in our markets may lead to
    reduced average selling prices of our products, reduced sales of
    our products and reduced gross margins.

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 our products in particular, have decreased
significantly and rapidly over the life of each product. We
expect that average selling prices for our existing products
will decline rapidly in the 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 our
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 our overall gross margins, could cause a
negative adjustment to the valuation of our inventories and
could materially and adversely affect our operating results.

We compete with major domestic and international
semiconductor companies, most of which have substantially
greater financial, technical, sales, marketing, production,
distribution and other resources. We may not be able to compete
successfully in the future. Our more mature products, such as
Serial and Parallel EEPROM devices, compete on the basis of
product performance, price and customer service. We believe that
we compete successfully with respect to each of these factors;
however price competition is significant and expected to
continue. Principal competitors with respect to our EEPROM
products currently include STMicroelectronics, Atmel, Microchip,
Fairchild Semiconductor and Xicor, all of which have
substantially greater resources than us.

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. Our 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, we may not be able to compete successfully in the
future against our competitors on the bases of these or other
competitive factors.

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| |                                                                                                                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We periodically experience an oversupply or
    shortage of wafer fabrication capacity due to volatile demand
    and thus we risk forecasting incorrectly and producing excess or
    insufficient inventories of particular products, which may
    adversely affect our results.

We have previously experienced periodic
oversupply or shortages of wafer fabrication capacity due to the
cyclical nature of the semiconductor industry. Since we must
order products and build inventory substantially in advance of
product shipments, we risk forecasting incorrectly and producing
excess or insufficient inventories of particular products.
Demand for our products is volatile and customers often place
orders with short lead times. The ability of our customers to
reschedule or cancel orders without significant penalty could
adversely affect our liquidity, as we may be unable to adjust
our purchases from our wafer suppliers to match any customer
changes and cancellations. Our inventory may not be reduced by
the fulfillment of customer orders and in the future we may
produce excess quantities of our products. To the extent we
produce excess inventories of particular products, our operating
results could be adversely affected by charges to income that we
would be required to recognize due to significant reductions in
demand for our products or rapid declines in the market value of
inventory, resulting in inventory writedowns or other related
factors.

For example, during the last half of fiscal 1998,
we recorded charges of approximately $7.5 million due to
the rapid decrease in demand for and the selling prices of our
products. Such adjustments amounted to less than
$0.5 million in fiscal 1999 and were not material in fiscal
2000. Inventory reserve adjustments in fiscal 2001 totaled
$4.7 million which were partially offset by the release of
$2.0 million of inventory reserves taken in previous
periods relating to products that were sold during fiscal 2001.
During fiscal 2002, the net effect of inventory reserve
adjustments was minimal.

In addition, in fiscal 1998 and to some extent
during fiscal 2001 and fiscal 2002, our ability to forecast
future demand and selling prices diminished. It is our policy to
fully reserve all inventories that we do not expect to be sold
in a reasonable period of time from the balance sheet date,
generally within the ensuing six or twelve months. During most
of our recent fiscal periods, as a result of reductions in
estimated demand for our various products, we have provided
additional reserves for excess quantities and obsolescence for
certain products, primarily our Flash and EEPROM products. In
fiscal 1998, the rapid erosion of selling prices also left us
with significant amounts of inventory with a carrying value that
exceeded its current selling price resulting in adjustments to
the carrying value of the inventory to the lower of cost or
market value. We may suffer similar reductions in values of our
inventories in the future and we may be unable to liquidate our
inventory at acceptable prices.

We rely on outside providers of engineering
services and the loss of these services may cause a significant
interruption in our supply of engineering resources.

To supplement our limited engineering staff
dedicated to product research and development activities, we
utilize the services of various outside semiconductor design
services. The most significant is an informal arrangement we
have had in place since 1995 to obtain engineering services from
Lxi Corporation (Lxi) of which our officers Messrs. Vanco,
Voicu and Gay own approximately 91%, 3% and 1%, respectively.
Lxi provides these services through Essex com SRL (Essex), its
wholly owned subsidiary in Romania. The aggregate number of
hours of engineering services provided to us varies by quarter.
During the month of April 2002, Essex employed the equivalent of
approximately 15 full-time engineers to perform services
relating to key development projects including development,
design, layout and test program development services. Because we
do not have a formal contractual arrangement with Lxi, Lxi is
not obligated to perform these services. There is no guarantee
that Lxi will continue to supply a sufficient number of
engineers to fulfill our requirements for outsourced engineering
services and we may not be able to procure engineering services
from an additional source in a timely manner or at comparable
rates. Our business, financial condition and results of
operations could be materially adversely affected by the loss of
Lxi as a supplier of outsourced engineering services and, to a
lesser extent, the loss of our other providers of outsourced
engineering services, our inability to obtain comparable new
suppliers of such services, or any other circumstances causing a
significant interruption in our supply of engineering resources.
See also Item 13  Certain Relationships
and Related Transactions and Note 10 
Related Party Transactions contained in the Notes To
Consolidated

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Financial Statements of this report on
Form 10-K for additional information regarding our
relationship with Lxi.




| |                                                                                   
| | ----------------------------------------------------------------------------------
| | We may not be able to sustain market
    acceptance for our Flash memory products.

A significant amount of our net revenues have
been and continue to be derived from sales of Flash memory
products. Flash memory products represented 16% of our shipments
during the fiscal year ended April 30, 2002 and represented
17%, 18% and 25% of our shipments, respectively, in each of
fiscal years 2001, 2000 and 1999. 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. Our operating
results in fiscal 1999 and 1998 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, STMicroelectronics, Sharp,
Texas Instruments and Toshiba) are expected to further increase
Flash memory production. Most of these competitors are
manufacturing and selling devices with larger memories which are
utilized in more recently developed products such as digital
cameras. Due to intense competition, limited development
resources and other factors, we have decided not to develop any
of the higher density Flash memory devices at this time. We may
not be able to sustain the market acceptance for our Flash
memory products. We anticipate continued price and other
competitive pressures, which adversely affected our fiscal 1998
and 1999 operating results, to adversely affect our future
operating results.

We rely on third-party subcontractors to sort,
assemble, test and ship our products to customers.

We outsource portions of our planning, finish
work and test functions for certain products, as well as our
inventory management (shipping and receiving) function to
subcontractors who are primarily located in Thailand and The
Philippines. This reliance on third parties subjects us to risks
such as reduced control over delivery schedules and quality, a
potential lack of adequate capacity during periods when demand
is high and potential increases in product costs due to factors
outside our control such as capacity shortages and currency
risks. Such risks could lead to delays in product deliveries,
lost sales and increased costs which could harm our customer
relationships and result in lower profitability.

International sales comprise a significant
portion of our product sales, which exposes us to foreign
political and economic risks.

For the fiscal year ended April 30, 2002,
international sales comprised 69% of our product sales.
Additionally, for fiscal 2001, 2000 and 1999, international
sales accounted for approximately 60%, 61% and 45%,
respectively, of our product sales. The lower percentage in
international sales in 1999 was primarily attributable to the
transition in Japan from Marubun Corporation, our former
distributor which resigned in fiscal 1998, to various smaller
alternative distributors that serve similar markets and our
inability to compete with the low selling prices in certain Far
East markets. In fiscal 2000, we were able to reenter certain
Far East markets, contributing to the increased international
sales. We expect that international sales will continue to
represent a significant portion of our product sales in the
future. However, our international operations may be adversely
affected by the following factors:



| |   |                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | greater fluctuations in demand for our products
    due to the increased sensitivity to pricing changes in certain
    markets, particularly the Far East;
|
| |  | fluctuations in exchange rates;                                                                                                                           
|
| |  | imposition of government controls;                                                                                                                        
|
| |  | political and financial instability;                                                                                                                      
|
| |  | trade restrictions;                                                                                                                                       
|
| |  | changes in regulatory requirements;                                                                                                                       

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| |   |                                                           
| | - | ----------------------------------------------------------
| |  | difficulties in staffing international
    operations; and
|
| |  | longer payment cycles.                                    

Currently, all our sales are invoiced and paid in
U.S. Dollars, reducing our direct exposure to currency
fluctuations. Recently, several customers in Europe have
requested that we develop the ability to invoice them in Euros.
Except for Yoshikawa Semiconductor in Japan, a provider of wafer
sorting services and certain contract personnel costs and
incidental manufacturing supply purchases in Thailand, over 98%
of our purchases are in US dollars, minimizing any direct
currency fluctuation risk. Our business however, is subject to
other risks generally associated with doing business with
foreign subcontractors including, but not limited to foreign
government regulations and political and financial unrest which
may cause disruptions or delays in shipments to our customers or
access to our inventories. Our business, financial condition and
results of operations may be materially adversely affected by
these or other factors related to our international operations.

A relatively small number of customers have
accounted for a significant portion of our net revenue in the
past and the loss of one or more of our current customers,
additional volume pricing arrangements or an early termination
or delay in shipments can affect our results
adversely.

A relatively small number of customers have
accounted for a significant portion of our net revenue in the
past. For the fiscal year ended April 30, 2002, sales to
Future Electronics, Inc., a worldwide distributor, represented
11% of our revenues. For the fiscal year ended April 30,
2001, sales to Future Electronics, Inc. represented 14% of our
revenues. For the fiscal year ended April 30, 2000, sales
to Memec (Asia Pacific) Ltd., a distributor in Asia, Future
Electronics, Inc. and Yosun Industrial Corp., a reseller located
in Taiwan, each represented more than 10% of our revenues (13%,
12% and 11% respectively).

In addition, we have experienced and may continue
to experience lower margins on sales to significant customers as
a result of volume pricing arrangements. We also do not
typically enter into long-term contracts with our customers and
we cannot be certain as to future order levels from our
customers. When we do enter into a long-term contact, the
contract is generally terminable at the convenience of the
customer and it may be difficult to replace that revenue source
in the short-term upon cancellation.

Our business, operating results and financial
condition could be materially adversely affected by the loss of
one or more of our current customers, additional volume pricing
arrangements, an early termination or delay in shipments by one
of our major customers.

We have been unable to fulfill all our
customers orders according to the schedule originally
requested due to the constraints in our wafer supply.

Due to the constraints in our wafer supply, from
time to time we have been unable to fulfill all our
customers orders according to the schedule originally
requested. Although we strive to increase our supply of wafers
and communicate to our customers the scheduled delivery dates
that we believe that we can reasonably expect to meet, our
customers may not accept the alternative delivery date or may
seek to cancel their outstanding orders. This would result in
lower revenues and profits, excess inventories and increased
inventory reserves. Our 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 us and our competitors,
fluctuations in customer demand for our 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 us in recent
fiscal years).

We rely upon our intellectual property and
proprietary technology and may receive notices from time to time
that allege we have infringed the intellectual property rights
of others.

In the semiconductor industry, companies place
extensive reliance upon their intellectual property and
proprietary technology and it is typical for companies to
receive notices from time to time that allege infringement of
patents or other intellectual property rights of others. For
example, we were served with a

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complaint alleging that we are infringing the
intellectual property rights of Xicor, Inc., a maker of
nonvolatile memory products. We entered into a settlement
agreement with Xicor in June 2002 pursuant to which we have
received a license to manufacture the disputed products in
exchange for certain royalty payments to Xicor in connection
with shipments of certain of our digital potentiometer products
made subsequent to July 22, 2002, the date on which the
complaint was dismissed. We may receive other notices and/or
become a party to proceedings alleging our infringement of
intellectual property rights in the future. Such claims, if
successful, could require us to pay royalties on previous sales
of the products which are alleged to infringe. Additionally, in
such event, we may not be able to obtain any required licenses
of third party intellectual property rights or be able to obtain
such licenses on commercially reasonable terms. Failure to
obtain such a license in any event could require us to cease
production of our products until we develop a non-infringing
design or process. Our business, financial condition and results
of operations could be materially adversely affected by the cost
of litigation of any such claim or resulting damage award.
Please see Note 9  Contingencies
contained in the Notes To Consolidated Financial Statements
Item 3. Legal Proceedings in this Report on
Form 10-K for additional information.


Our securities are traded in a limited
market.

Our common stock was traded on the Nasdaq
National Market from May 1993 until it was delisted in August
1998 for sustained trading below the minimum level of $1.00 per
share required by the Nasdaq stock exchange for continued
listing. Our stock was traded on the Over-The-Counter Bulletin
Board market until September 6, 2000 when we were re-listed
on the Nasdaq SmallCap Market. The over-the-counter market was
generally less visible to investors and therefore we were unable
to meet the liquidity requirements of some major commercial,
institutional and private investors thus limiting the market for
our securities. We submitted a request on October 16, 2000
that our securities be listed on the National Market, but due to
general market and other conditions, our stock subsequently
closed below the $5.00 price per share which is required to
qualify for National Market listing and Nasdaq closed the
listing application. We intend to reapply for Nasdaq National
Market listing if and when our shares trade for an extended
period above the $5.00 level, but we are unable to ascertain the
amount of time Nasdaq will take to consider such application, if
Nasdaq will reply favorably to such application or, if
additional information is requested, how much time and effort
will be required on our part to adequately demonstrate and
verify our qualifications.

Our backlog may not result in future revenue,
which may adversely affect our business.

Due to possible customer changes in delivery
schedules and cancellations of orders, our backlog at any
particular date is not necessarily indicative of actual sales
for any succeeding period. A reduction of backlog during any
particular period or the failure of our backlog to result in
future revenue could harm our business.

Our ability to operate successfully depends
upon the continued service of certain key employees and the
continued ability to attract and retain additional highly
qualified personnel.

Our 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 we may not be able to retain such
personnel or attract other highly qualified personnel. Our
business, financial condition and results of operations could be
materially adversely affected by the loss of or failure to
attract and retain any such highly qualified personnel.

We depend on manufacturers
representatives and distributors to distribute our
products.

We market and distribute our products primarily
through manufacturers representatives and independent
distributors. Our distributors typically offer competing
products. The distribution channels have been characterized by
rapid change, including consolidations and financial
difficulties. Our operating results could be materially
adversely affected by the loss of one or more
manufacturers representatives or distributors, or the
decision by one or more distributors to reduce the number of our
products offered by such distributors or to carry the product
lines of our competitors.

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We may not be able to expand our proprietary
technology if we do not acquire rights to use key technologies,
consummate potential acquisitions or investments or successfully
integrate them with our business.

To expand our proprietary technologies, we may
acquire or make investments in complementary businesses,
technologies or products if appropriate opportunities arise. We
may be unable to identify suitable acquisition or investment
candidates at reasonable prices or on reasonable terms or
consummate transactions with such candidates, the failure of
which could slow our growth strategy. We may also have
difficulty in acquiring licenses to use proprietary technologies
of third parties to expand our product lines. We may have
difficulty integrating the acquired products, personnel or
technologies of any acquisition we might make. These
difficulties could disrupt our ongoing business, distract our
management and employees and increase our expenses.

Our operations could be harmed by earthquakes
and other natural disasters.

Our corporate headquarters are located in
California near major earthquake faults. Additionally, our
principal wafer supplier, Oki, is located in Japan which is also
subject to the risk of business disruption by earthquakes. Our
operations could be harmed in the event of a major earthquake or
other natural disaster near our headquarters or other key areas
of the world.

We may not carry adequate insurance coverage
to protect our business from certain types of loss.

Although we carry general comprehensive liability
insurance and other types of insurance coverages typical for
most publicly-traded companies, the insurance coverage we retain
may not cover the specific damages that we incur. For example,
we do not carry earthquake insurance coverage and our commercial
coverage does not include protection for lost profits.
Consequently, our business may not be protected if we incur
losses of a type for which we do not retain coverage.
Additionally, disputes with our carriers regarding policy
coverages might occur which could mean that we would be unable
to recover all of our damages in the event of a loss. Such
occurrences could negatively affect our business, financial
condition and results of operations.

A change of control may be delayed by
resistive measures adopted by us.

Our 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 our
stock, our Boards ability to issue blank check
Preferred Stock without stockholder approval and our staggered
terms for our directors, could have the effect of delaying or
preventing a change in control of us.




Item 7A.     Quantitative
and Quantitative Disclosures About Market Risk

Interest Rate Risk.We do not use derivative financial
instruments in our investment portfolio. Our investment
portfolio is generally comprised of cash deposits. Our policy is
to place these investments in instruments that meet high credit
quality standards. These securities are subject to interest rate
risk and could decline in value if interest rates fluctuate. Due
to the short duration and conservative nature of our investment
portfolio, we do not expect any material loss with respect to
our investment portfolio.

Foreign Currency Exchange Rate Risk.The majority of our sales, cost of
manufacturing and marketing are transacted in U.S. Dollars.
Accordingly, our results of operations are not currently subject
to foreign exchange rate fluctuations. Gains and losses from
such fluctuations have not been material to us to date.

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Item 8.     Financial
Statements and Supplementary Data

The Consolidated Financial Statements and
Supplementary Data required by this Item are set forth at the
pages indicated in Item 14(a). Please refer to the index to
Consolidated Financial Statements on page F-1 hereof.

Quarterly Results of Operations

|                     |         |                                                      |        |             |  |             |        |           |  |          |        |             |  |             |        |           |  |   |        |      |  |   |       |       |   |   |        |      |  |   |        |      | 
|-------------------- | ------- | ---------------------------------------------------- | ------ | ----------- |  | ----------- | ------ | --------- |  | -------- | ------ | ----------- |  | ----------- | ------ | --------- |  | - | ------ | ---- |  | - | ----- | ----- | - | - | ------ | ---- |  | - | ------ | ---- | 
|                     |         |                                                     
|                     |         | Three Months Ended                                  
|                     |         |                                                     
|                     |         | July 31,                                             |        | October 31, |  | January 31, |        | April 30, |  | July 31, |        | October 31, |  | January 31, |        | April 30,
|                     |         | 2000                                                 |        | 2000        |  | 2001        |        | 2001      |  | 2001     |        | 2001        |  | 2002        |        | 2002     
|                     |         |                                                      |        |             |  |             |        |           |  |          |        |             |  |             |        |          
|                     |         |                                                     
|                     |         | (All numbers are in thousands except per share data)
|Net revenues         |         | $                                                    | 25,441 |             |  | $           | 31,834 |           |  | $        | 23,579 |             |  | $           | 17,161 |           |  | $ | 10,516 |      |  | $ | 9,166 |       |   | $ | 10,654 |      |  | $ | 12,455 |     
|Gross profit         |         |                                                      | 13,055 |             |  |             | 16,641 |           |  |          | 11,036 |             |  |             | 6,420  |           |  |   | 4,038  |      |  |   | 2,659 |       |   |   | 3,762  |      |  |   | 5,174  |     
|Net income           |         |                                                      | 8,193  |             |  |             | 10,423 |           |  |          | 7,011  |             |  |             | 1,725  |           |  |   | 371    |      |  |   | (977  | )     |   |   | 164    |      |  |   | 1,212  |     
|Net income per share |         |                                                      |        |             |  |             |        |           |  |          |        |             |  |             |        |           |  |   |        |      |  |   |       |       |   |   |        |      |  |   |        |     
|                     | Basic   |                                                      | $      | 0.51        |  |             | $      | 0.63      |  |          | $      | 0.41        |  |             | $      | 0.10      |  |   | $      | 0.02 |  |   | $     | (0.05 | ) |   | $      | 0.01 |  |   | $      | 0.07 | 
|                     | Diluted |                                                      |        | 0.40        |  |             |        | 0.50      |  |          |        | 0.35        |  |             |        | 0.09      |  |   |        | 0.02 |  |   |       | (0.05 | ) |   |        | 0.01 |  |   |        | 0.06 | 






|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure

None.

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PART III




Item 10.     Directors
and Executive Officers of Registrant

Information relating to our executive officers
required by this item appears in Item 1. Executive
Officers and Key Personnel of this report on
Form 10-K.

Directors

Set forth below are the names of and certain
information as of July 25, 2002 about the current directors
of Catalyst.

|                    |  |     |    |                      |  |                                                                                                             
|------------------- |  | --- | -- | -------------------- |  | ------------------------------------------------------------------------------------------------------------
|Name                |  | Age |    | Principal Occupation
|                    |  |     |    |                     
|Lionel M. Allan     |  |     | 59 |                      |  | President and Chief Executive Officer of Allan
    Advisors, Inc.                                           
|Cynthia M. Butitta  |  |     | 47 |                      |  | Principal, Altair Capital Associates, Chief
    Operating Officer and Chief Financial Officer of Telik, Inc.
|Roland Duchâtelet   |  |     | 55 |                      |  | Chairman of the Board, Elex NV; Chairman of
    Melexis NV                                                  
|Henry C. Montgomery |  |     | 66 |                      |  | Chairman of the Board of Montgomery Financial
    Services Corporation                                      
|Glen G. Possley     |  |     | 62 |                      |  | Managing General Partner, Glen-Ore Associates                                                               
|Radu M. Vanco       |  |     | 52 |                      |  | President, Chief Executive Officer and Chairman
    of the Board of Catalyst Semiconductor, Inc.            

Except as indicated below, each director has been
engaged in the principal occupation set forth above during the
past five years. There are no family relationships between any
of our directors or executive officers.

Lionel M. Allanhas
served as a director since August 1995. Mr. Allan is
President and Chief Executive Officer of Allan Advisors, Inc., a
legal consulting firm that he founded in 1992. Mr. Allan is
also a director of KTEH Public Television Channel 54, in
San Jose, California and is a director of Accom, Inc., a digital
video systems company. Mr. Allan is a past director of
Global Motorsport Group, Inc. (formerly known as Custom Chrome,
Inc.) and is also a director of several privately held
corporations. Mr. Allan received an AB from the University
of Michigan and a JD from Stanford University.

Cynthia M. Butittahas served as a director since June
2000. Ms. Butitta co-founded Altair Capital Associates,
LLC, a provider of financial advisory services in November 1998
where she continues to serve as a principal and she founded
Butitta Consulting Services LLC in September 1997. From December
1995 to September 1997, she served as the CFO and Vice President
of Finance and Administration for Connetics, Inc., a
biopharmaceutical company. She also served as the CFO of Telik,
Inc. from August 1998 to May of 2001 and presently serves Telik
as both its CFO and Chief Operating Officer. From June 1994 to
December 1995, Ms. Butitta served as the CFO and Vice
President of Finance and Administration at InSite Vision, Inc.
Ms. Butitta holds a BS in Business and Accounting from
Edgewood College in Madison, Wisconsin and a MBA from the
University of Wisconsin, Madison.

Roland M. Duchâtelethas served as a director since
September 1999. From September of 1989 to present,
Mr. Duchâtelet has served as Chairman of Elex NV, a
holding company in Belgium which owns 4,000,000 shares of our
Common Stock representing approximately 24% of our outstanding
Common Stock. Additionally, Mr. Duchâtelet serves as
Chairman of the Board of Directors of Melexis NV, a
position he has held since May of 1994 and is also a director of
EPIQ NV. Mr. Duchâtelet holds a BS in Applied
Economic Sciences, a MBA and a PhD in Electronic Engineering,
each from the University of Leuven, Belgium.

Henry C. Montgomeryhas served as a director since July
2000. Mr. Montgomery previously served as a member of our
Board of Directors from 1990 to 1995. Since 1980,
Mr. Montgomery has been and continues to serve as the
Chairman of the Board of Montgomery Financial Services
Corporation, a management consulting and financial services
firm, which has assisted companies in transition or that are
financially troubled from time to time. From January 2000 to
March 2001, Mr. Montgomery served as Executive Vice
President,

30



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Finance and Administration and Chief Financial
Officer of Indus International, Inc., a public company engaged
in enterprise asset management systems. From May to September
1999 he served as interim Executive Vice President of Finance
and Administration and currently serves on the board of
directors at Spectrian Corporation, a public company engaged in
making cellular base station power amplifiers and power
transistors. From November 1996 through July 1997,
Mr. Montgomery served as Executive Vice President of
SyQuest Technology, Inc., a public company engaged in the
development, manufacture and sale of computer hard drives. On
November 17, 1998, SyQuest filed a petition under
Chapter 11 of the U.S. Bankruptcy Code. From March 1995 to
November 1996, Mr. Montgomery served as President and Chief
Executive Officer of New Media Corporation, a privately-held
company engaged in developing, manufacturing and selling PCMCIA
cards for the computer industry. On October 14, 1998, New
Media filed a petition under Chapter 11 of the
U.S. Bankruptcy Code. Mr. Montgomery also serves as a
director of Consolidated Freightways Corporation, a public
company in the trucking industry and Swift Energy Company, a
publicly owned independent oil and gas company. He holds a BA in
Economics from Miami University in Oxford, Ohio.


Dr. Glen G. Possleyhas served as a director since July
2000 and as our lead director since May 2001. He is currently a
managing general partner at Glen-Ore Associates. From January
1998 through January 2000, Dr. Possley was a partner at
International Technology Ventures and N-Able Group. From June
1994 to December 1997 Dr. Possley was President of
SubMicron Technology, Inc., a semiconductor company. From April
1992 to May 1994 he was Senior Vice President of Manufacturing
at Ramtron International, a semiconductor company.
Dr. Possley is currently a director of Novellus Systems,
Inc., a semiconductor company. He received a BS in Mathematics
from Western Illinois University and a PhD in Physical Chemistry
from the University of Kentucky.

Radu M. Vancohas
served as our President and Chief Executive Officer since March
1998, as the Chairman of our Board since February 2001 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.
Mr. Vanco holds an MS in Electrical Engineering from the
Polytechnical Institute, Bucharest, Romania.

Pursuant to our Certificate of Incorporation, our
board of directors is divided into three classes, with the
classes serving for staggered, three year terms. In accordance
with our Bylaws, the Board has presently set the number of
directors at six, consisting of two Class I directors, two
Class II directors and two Class III directors. Our
Class I directors are Henry C. Montgomery and Radu M. Vanco
who will hold office until the annual meeting next following the
end of the fiscal year ending April 30, 2002. Our
Class II directors are Cynthia M. Butitta and Glen G.
Possley who will hold office until the annual meeting next
following the end of the fiscal year ending April 30, 2003.
Our Class III directors are Lionel M. Allan and Roland
Duchâtelet who will hold office until the annual meeting
next following the end of the fiscal year ending April 30,
2004.

Section 16(a) Beneficial Reporting
Compliance

Section 16(a) of the Securities Exchange Act
of 1934, as amended (Exchange Act) requires our executive
officers and directors and persons who own more than ten percent
of a registered class of our equity securities to file an
initial report of ownership on Form 3 and changes in
ownership on Form 4 or 5 with the Securities and Exchange
Commission (SEC). Executive officers, directors and greater than
ten percent stockholders are also required by SEC rules to
furnish us with copies of all Section 16(a) forms they
file. Based solely on our review of copies of such forms
received by us, we believe that during the fiscal year ended
April 30, 2002, all such reports were timely filed. Again
based solely on our review of copies of such forms received by
us, we believe that all filing requirements applicable to our
officers, directors and ten percent stockholders have been
complied with.

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Item 11.     Executive
Compensation

The following table shows the compensation paid
by us in Fiscal 2002, 2001 and 2000 to (i) our Chief
Executive Officer and (ii) our four most highly compensated
officers other than the Chief Executive Officer who served as
executive officers at April 30, 2002 (collectively, Named
Officers).

Summary Compensation Table

|                            |                         |        |      |                     |  |          |         |                        |  |            |         |            |  |            |        |              |  |  |   |   |  |  |         |         |  |  |   |   |  |   |     |     | 
|--------------------------- | ----------------------- | ------ | ---- | ------------------- |  | -------- | ------- | ---------------------- |  | ---------- | ------- | ---------- |  | ---------- | ------ | ------------ |  |  | - | - |  |  | ------- | ------- |  |  | - | - |  | - | --- | --- | 
|                            |                         |        |      |                     |  |          |         |                        |  |           
|                            |                         |        |      |                     |  |          |         | Long Term Compensation |  |           
|                            |                         |        |      |                     |  |          |         |                        |  |           
|                            |                         |        |      |                     |  |          |         |                        |  |            |         |           
|                            |                         |        |      |                     |  |          |         |                        |  | Awards     |         | Payouts    |  |           
|                            |                         |        |      |                     |  | Other    |         |                        |  |            |         |           
|                            |                         |        |      | Annual Compensation |  | Annual   |         | Restricted             |  | Securities |         |            |  | All Other 
|                            |                         | Fiscal |      |                     |  | Compen-  |         | Stock                  |  | Underlying |         | LTIP       |  | Compen-   
|Name and Principal Position |                         | Year   |      | Salary($)           |  | Bonus($) |         | sation($)(1)           |  | Awards($)  |         | Options(#) |  | Payouts($) |        | sation($)(2)
|                            |                         |        |      |                     |  |          |         |                        |  |            |         |            |  |            |        |             
|Radu M. Vanco               |                         |        | 2002 |                     |  | $        | 344,500 |                        |  |            |        |            |  | $          | 11,500 |              |  |  |  |   |  |  | 300,000 |         |  |  |  |   |  | $ | 253 |    
|                            | President, Chief        |        |      | 2001                |  |          |         | 344,500                |  |            | $       | 391,869    |  |            |        | 8,400        |  |  |   |  |  |  |         | 500,000 |  |  |   |  |  |   |     | 276 | 
|                            | Executive Officer and   |        |      | 2000                |  |          |         | 337,500                |  |            |         | 422,500    |  |            |        | 8,400        |  |  |   |  |  |  |         |        |  |  |   |  |  |   |     | 288 | 
|                            | Chairman of the Board   |        |      |                     |  |          |         |                        |  |            |         |            |  |            |        |              |  |  |   |   |  |  |         |         |  |  |   |   |  |   |     |     | 
|Gelu Voicu                  |                         |        | 2002 |                     |  |          | 200,000 |                        |  |            |        |            |  |            | 11,500 |              |  |  |  |   |  |  | 120,000 |         |  |  |  |   |  |   | 196 |    
|                            | Vice President, Product |        |      | 2001                |  |          |         | 197,788                |  |            |         | 160,417    |  |            |        | 8,400        |  |  |   |  |  |  |         | 100,000 |  |  |   |  |  |   |     | 276 | 
|                            | Engineering and         |        |      | 2000                |  |          |         | 164,349                |  |            |         | 157,500    |  |            |        | 1,400        |  |  |   |  |  |  |         |        |  |  |   |  |  |   |     | 288 | 
|                            | Manufacturing           |        |      |                     |  |          |         |                        |  |            |         |            |  |            |        |              |  |  |   |   |  |  |         |         |  |  |   |   |  |   |     |     | 
|Thomas E. Gay III           |                         |        | 2002 |                     |  |          | 165,000 |                        |  |            |        |            |  |            | 11,500 |              |  |  |  |   |  |  | 80,000  |         |  |  |  |   |  |   | 175 |    
|                            | Vice President, Finance |        |      | 2001                |  |          |         | 149,536                |  |            |         | 133,058    |  |            |        | 8,400        |  |  |   |  |  |  |         | 75,000  |  |  |   |  |  |   |     | 251 | 
|                            | and Administration and  |        |      | 2000                |  |          |         | 130,000                |  |            |         | 97,500     |  |            |        | 5,600        |  |  |   |  |  |  |         |        |  |  |   |  |  |   |     | 288 | 
|                            | Chief Financial Officer |        |      |                     |  |          |         |                        |  |            |         |            |  |            |        |              |  |  |   |   |  |  |         |         |  |  |   |   |  |   |     |     | 
|Irvin W. Kovalik            |                         |        | 2002 |                     |  |          | 157,165 |                        |  |            |        |            |  |            | 11,500 |              |  |  |  |   |  |  | 80,000  |         |  |  |  |   |  |   | 493 |    
|                            | Vice President, Sales   |        |      | 2001                |  |          |         | 156,923                |  |            |         | 81,408     |  |            |        | 8,400        |  |  |   |  |  |  |         | 75,000  |  |  |   |  |  |   |     | 792 | 
|                            |                         |        | 2000 |                     |  |          | 150,000 |                        |  |            | 126,874 |            |  |            | 8,400  |              |  |  |  |   |  |  |        |         |  |  |  |   |  |   | 702 |    
|Barry Wiley                 |                         |        | 2002 |                     |  |          | 150,000 |                        |  |            | 13,966  |            |  |            |       |              |  |  |  |   |  |  | 60,000  |         |  |  |  |   |  |   | 921 |    
|                            | Vice President,         |        |      | 2001                |  |          |         | 150,000                |  |            |         | 8,885      |  |            |        |             |  |  |   |  |  |  |         | 50,000  |  |  |   |  |  |   |     | 792 | 
|                            | Marketing               |        |      | 2000                |  |          |         | 90,196                 |  |            |         |           |  |            |        |             |  |  |   |  |  |  |         |        |  |  |   |  |  |   |     |    | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Amounts included under Other Annual
    Compensation represent the dollar value of car allowances
    paid by us for the benefit of such Named Officer for Fiscal
    2002, 2001 and 2000.                                                                                                                                                                                                                                                                                                                                                                                         
|   
|(2) | Amounts included under All Other
    Compensation represent the dollar value of term life
    insurance premiums paid by us for the benefit of such Named
    Officer for Fiscal 2002, 2001 and 2000 as follows:
    Mr. Vanco  $253, $276 and $288 respectively for
    life insurance; Mr. Voicu  $196, $276 and $288
    respectively for life insurance; Mr. Gay  $175,
    $251 and $288 respectively for life insurance;
    Mr. Kovalik  $493, $792 and $702 respectively
    for life insurance; and Mr. Wiley  $921, $792
    and $0 respectively for life insurance.

Employee Benefit Plans

Each current Named Officer is entitled to
participate in our Stock Option Plan (Option Plan). The Option
Plan provides for the grant of options, stock purchase rights,
Stock Appreciation Rights (SARs) and long-term performance
awards.

The following table sets forth certain
information with respect to stock options granted during Fiscal
2002 to the Named Officers. No SARs were granted in Fiscal 2002.
In accordance with the rules of the Securities and Exchange
Commission, also shown below is the potential realizable value
over the term of the option (the period from the grant date to
the expiration date) based on assumed rates of stock
appreciation from the option exercise price of 5% and 10%,
compounded annually. These amounts are based on certain assumed

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##### Table of Contents



rates of appreciation and do not represent our
estimate of future stock price. Actual gains, if any, on stock
option exercises will be dependent on the future performance of
the Common Stock.


Option Grants in Fiscal 2002

|                  |  |                      |         |                               |  |             |      |                                    |  |       |      |        |  |  |           |  |  |   |         |  |  |   |         | 
|----------------- |  | -------------------- | ------- | ----------------------------- |  | ----------- | ---- | ---------------------------------- |  | ----- | ---- | ------ |  |  | --------- |  |  | - | ------- |  |  | - | ------- | 
|                  |  |                      |         |                               |  |             |      |                                   
|                  |  | Individual Grants(1) |         |                              
|                  |  |                      |         | Potential Realizable Value at
|                  |  |                      |         | Percent of Total              |  |             |      | Assumed Annual Rates of Stock     
|                  |  | Number of            |         | Options                       |  |             |      | Price Appreciation for Option Term
|                  |  | Securities           |         | Granted to                    |  | Exercise    |      |                                   
|                  |  | Underlying           |         | Employees in                  |  | or Base     |      | Expiration                         |  |      
|Name              |  | Options Granted(#)   |         | Fiscal Year(2)                |  | Price($/SH) |      | Date                               |  | 5%($) |      | 10%($)
|                  |  |                      |         |                               |  |             |      |                                    |  |       |      |       
|Radu M. Vanco     |  |                      | 300,000 |                               |  |             | 15.3 | %                                  |  | $     | 1.73 |        |  |  | 9/26/2011 |  |  | $ | 385,037 |  |  | $ | 920,527 | 
|Gelu Voicu        |  |                      | 120,000 |                               |  |             | 6.1  |                                    |  | $     | 1.73 |        |  |  | 9/26/2011 |  |  |   | 154,015 |  |  |   | 368,211 | 
|Thomas E. Gay III |  |                      | 80,000  |                               |  |             | 4.1  |                                    |  | $     | 1.73 |        |  |  | 9/26/2011 |  |  |   | 102,676 |  |  |   | 245,474 | 
|Irv Kovalik       |  |                      | 80,000  |                               |  |             | 4.1  |                                    |  | $     | 1.73 |        |  |  | 9/26/2011 |  |  |   | 102,676 |  |  |   | 245,474 | 
|Barry Wiley       |  |                      | 60,000  |                               |  |             | 3.1  |                                    |  | $     | 1.73 |        |  |  | 9/26/2011 |  |  |   | 77,007  |  |  |   | 184,105 | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | No Stock Appreciation Rights were granted to the
    Named Executive Officers in Fiscal 2002. Options vest  1/3
    on the date of grant and the remaining  2/3 vest ratably
    each month over the next 36-month period. The options have a
    10-year term, but are subject to earlier termination in
    connection with a termination of employment. See also
     Employment Agreements and Change-in-Control
    Arrangements for a description of certain acceleration
    provisions which may be applicable to these options under
    certain circumstances.
|   
|(2) | We granted stock options representing 1,963,500
    shares to employees in Fiscal 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

The following table sets forth information with
respect to options exercised in Fiscal 2002 by the Named
Officers and the value of unexercised options at April 30,
2002.

Aggregate Option Exercises in Fiscal 2002 and
Fiscal Year-End Option Values

|                 |  |                 |         |             |  |                        |           |                         |  |             |         |               |  |  |         |  |  |   |         |  |  |   |         | 
|---------------- |  | --------------- | ------- | ----------- |  | ---------------------- | --------- | ----------------------- |  | ----------- | ------- | ------------- |  |  | ------- |  |  | - | ------- |  |  | - | ------- | 
|                 |  |                 |         |             |  |                        |           |                         |  |            
|                 |  |                 |         |             |  | Number of Securities   |           |                        
|                 |  |                 |         |             |  | Underlying             |           | Value of Unexercised   
|                 |  |                 |         |             |  | Unexercised Options at |           | In-the-Money Options at
|                 |  |                 |         |             |  | April 30, 2002(#)      |           | April 30, 2002(1)      
|                 |  | Shares Acquired |         | Value       |  |                        |           |                        
|Name             |  | on Exercise(#)  |         | Realized($) |  | Exercisable            |           | Unexercisable           |  | Exercisable |         | Unexercisable
|                 |  |                 |         |             |  |                        |           |                         |  |             |         |              
|Radu M. Vanco    |  |                 | 695,942 |             |  | $                      | 1,851,340 |                         |  |             | 249,651 |               |  |  | 635,073 |  |  | $ | 134,495 |  |  | $ | 618,224 | 
|Gelu Voicu       |  |                 | 200,000 |             |  |                        | 533,000   |                         |  |             | 158,031 |               |  |  | 189,969 |  |  |   | 178,925 |  |  |   | 158,125 | 
|Thomas E Gay III |  |                 | 0       |             |  |                        | 0         |                         |  |             | 270,157 |               |  |  | 139,843 |  |  |   | 560,135 |  |  |   | 140,715 | 
|Irv Kovalik      |  |                 | 25,000  |             |  |                        | 97,775    |                         |  |             | 133,908 |               |  |  | 146,092 |  |  |   | 195,669 |  |  |   | 157,431 | 
|Barry Wiley      |  |                 | 0       |             |  |                        | 0         |                         |  |             | 109,359 |               |  |  | 142,641 |  |  |   | 150,321 |  |  |   | 169,479 | 



---



|    |                                                                                                                                                                                                                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Represents the per share market price at fiscal
    year end ($2.80) less the exercise price per share. For purposes
    of this calculation, the fiscal year end market price of the
    shares is deemed to be the closing sale price of our Common
    Stock as reported on the Nasdaq SmallCap Market on
    April 26, 2002.

Compensation of Directors

During the first two quarters of Fiscal 2002, our
non-employee directors, currently consisting of
Messrs. Allan, Duchâtelet, Montgomery and Possley and
Ms. Butitta, each received quarterly fees in an amount
equal to $6,250 for each quarter (or $25,000 on an annualized
basis) in which they attended a Board meeting (with the
exception of our lead independent director, Mr. Possley,
who received a fee of $12,500 per quarter (or $50,000 on an
annualized basis)), plus $2,500 per each Board meeting attended
and $1,000 for each committee meeting attended which was
scheduled on a date other than a Board meeting date. During the
third and fourth quarters of Fiscal 2002, the Board reduced the
director fees to a flat fee of $7,500 per quarter

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##### Table of Contents



(with the exception of the lead independent
director fee which is $13,750 per quarter). Our directors are
also reimbursed for reasonable out-of-pocket expenses incurred
in connection with attendance at such meetings.


Each of our non-employee directors is entitled to
participate in our 1993 Director Stock Option Plan (Director
Option Plan) by receiving automatic annual grants of our Common
Stock. Each of our non-employee directors received a grant of an
option to purchase 15,000 shares on May 1, 2001 under the
Director Option Plan and each such director was also granted an
option to purchase 10,000 shares of our Common Stock on
May 3, 2001 pursuant to our 1998 Special Equity Incentive
Plan. Additionally, on September 27, 2001, each
non-employee director was granted an option to purchase 50,000
shares of our Common Stock pursuant to the 1998 Special Equity
Incentive Plan, which options were granted in lieu of the
automatic annual grant that each such director would have
received on May 1, 2002. All options granted prior to
May 1, 2000 under the Director Option Plan are subject to
cumulative yearly vesting as to one-third of the total grant on
each anniversary of the date of grant and terminate five years
from the date of grant unless terminated sooner upon termination
of the optionees status as a director or otherwise
pursuant to the Director Option Plan. Grants made under the
Director Option Plan subsequent to May 1, 2000 are subject
to monthly vesting for a period of thirty-six months and
terminate ten years from the date of grant unless terminated
sooner upon termination of the optionees status as a
director or otherwise pursuant to the Director Option Plan. The
grants made on September 27, 2001 from the 1998 Special
Equity Incentive Plan vested one-third immediately with the
balance vesting monthly over the ensuing 36 months. Under
the terms of our Director Option Plan and pursuant to Change of
Control Agreements entered into or to be entered into with our
non-employee directors, all outstanding options (under the
Director Option Plan, the 1998 Special Equity Incentive Plan or
otherwise) that are invested on the date of the change of
control will automatically become fully exercisable and vested
and will be exercisable for a period of three years following
the change of control.

Employment Contracts and Change-in-Control
Arrangements

We entered into an employment agreement with
Mr. Vanco in May 1998. This agreement has a four-year term
which commenced effective as of August 1, 1998 and will
expire effective as of July 31, 2002. We are currently in
negotiations with Mr. Vanco with respect to entering into a
new employment agreement. We entered into severance agreements
with each of our executive officers as follows: Mr. Gay in
June 1998, Mr. Kovalik in May 1999, Mr. Wiley in
September 1999, Mr. Voicu in April 2001 and Mr. Sorin
Georgescu, our Vice President of Technology in November 2001.
The severance agreements with Mssrs. Gay, Kovalik and Wiley were
extended through the end of April 2003 pursuant to an Extension
to Severance Agreement entered into with each such officer
effective as of February 2002. These agreements entitle such
officers to certain severance payments in the event of a
termination as a result of a merger, sale or change in ownership
of Catalyst (Change of Control) and certain other benefits upon
any involuntary termination by us without cause (Involuntary
Termination). Pursuant to the terms and conditions of the
employment and severance agreements described above, such
individuals will receive the following benefits:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) Mr. Vanco  for an
    Involuntary Termination following a Change of Control he shall
    receive severance payments equal to one time his current
    compensation (base salary plus bonus accrued in the year of
    termination) if terminated; for an Involuntary Termination apart
    from a Change of Control he shall receive a severance payment
    equal to his current compensation; upon a Change of Control or
    his death or Involuntary Termination, all stock options become
    immediately vested and remain exercisable for a period of three
    years following any such death or Involuntary Termination;                                                                                             
|
| | (b) Mr. Voicu  for an
    Involuntary Termination following a Change of Control he shall
    receive a severance payment equal to one hundred percent (100%)
    of his current compensation (base salary plus bonus accrued in
    the year of termination); and all unvested stock options become
    immediately vested and remain exercisable for a period of three
    years following such termination; for an Involuntary Termination
    apart from a Change of Control he shall receive a severance
    payment equal to fifty percent (50%) of his current
    compensation; and all vested stock options remain exercisable
    for a period of one year following such Involuntary Termination
    (or his death); and

34



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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (c) Messrs. Gay, Georgescu, Kovalik and
    Wiley  for an Involuntary Termination following a
    Change of Control, each shall receive a severance payment equal
    to fifty percent (50%) of his annual salary and all unvested
    stock options become immediately vested and remain exercisable
    for a period of three years following such termination; for an
    Involuntary Termination apart from a Change of Control each
    shall receive a severance payment equal to twenty-five percent
    (25%) of his annual salary and all vested stock options remain
    exercisable for a period of one year following such Involuntary
    Termination (or his death).

For the purposes of determining the severance
payments described above, salary is generally defined as the
annual salary payable to an officer for the fiscal year in which
such officers termination occurs plus any guaranteed bonus.

Compensation Committee Interlocks and Insider
Participation

None of our executive officers serves as a member
of the board of directors or compensation committee of any
entity which has one or more executive officers serving as a
member of our Board of Directors. During Fiscal 2002,
Messrs. Allan and Possley and Ms. Butitta served as
the members of the Compensation Committee of the Board of
Directors. Mr. Vanco participated in the Boards final
approval of executive compensation matters (except as to those
matters pertaining to his own compensation).

Board Compensation Committee Report On
Executive Compensation

The following is a report of the Compensation
Committee of our Board of Directors (Committee) describing the
compensation philosophy and policies applicable to our executive
officers with respect to the compensation paid to such officers
during Fiscal 2002. The actual compensation paid to the Named
Officers during Fiscal 2002 is shown in the Summary
Compensation Table.

The Committee is responsible for reviewing and
approving our compensation policies and the actual compensation
paid to our executive officers. At the end of Fiscal 2002, the
Committee was comprised of three (3) of the non-employee
directors, Messrs. Allan and Possley and Ms. Butitta.

Compensation
Philosophy.The general philosophy of
our compensation program is to offer our Chief Executive Officer
and other executive officers competitive compensation packages
based upon both our performance as well as the individuals
performance and contributions. Our compensation policies are
intended to motivate and reward highly qualified executives for
long-term strategic management and the enhancement of
stockholder value, to support a performance-oriented environment
that rewards achievement of our specific internal goals and to
attract and retain executives whose abilities are critical to
our long-term success and competitiveness. This is further
subject to our financial condition and results of operations.
Our compensation program is comprised of three main components,
Base Salary, Bonus Plan and Stock Options.

Base Salary.Base
salary for executive officers is set annually by reviewing the
competitive pay practices of comparable companies, the skills
and performance level of the individual executives and our needs.

Bonus Plan.Our
officers are eligible for bonuses under the terms of individual
bonus arrangements. When bonuses are given, they are based upon
our performance and financial condition, the individuals
achievement of specific corporate goals as well as the
individuals experience and contributions to our success.
During Fiscal 2002, as a result of our performance, none of our
executive officers received a bonus.

Stock Options.The
Committee believes that stock options provide additional
incentives to officers to work toward maximizing stockholder
value. The Committee views stock options as one of the more
important components of our long-term, performance-based
compensation philosophy. These options are provided through
initial grants at or near the date of hire and through
subsequent periodic grants based upon performance and
promotions, as well as additional grants to provide continuing
motivation as earlier grants vest in full. Options granted by us
to our executive officers and other employees have exercise
prices equal to fair market value at the time of grant and,
generally, vest over a four-year period.

35



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##### Table of Contents



Severance
Arrangements.See Item 13.
Certain Relationships and Related Transactions for a
description of severance arrangements for certain executive
officers.

Compensation for the Chief Executive
Officer.Mr. Vancos base
salary was established at a level which the Committee determined
to be similar to the amounts paid by comparably sized and
comparably performing companies. Effective May 1, 2000,
Mr. Vancos base annual salary was increased to
$344,500.

The Committee considers equity based
compensation, in the form of stock options, to be an important
component of a Chief Executive Officers compensation.
These grants are intended to motivate leadership for our
long-term growth and profitability. Options to purchase
300,000 shares of our Common Stock were granted to
Mr. Vanco in Fiscal 2002.

Tax Deductibility of Executive
Compensation.The Committee has
considered the potential impact of Section 162(m) of the
Internal Revenue Code adopted under the federal Revenue
Reconciliation Act of 1993. This Section disallows a tax
deduction for any publicly-held corporation for individual
compensation exceeding $1,000,000 in any taxable year for any of
the executive officers named in the Proxy Statement, unless
compensation is performance-based. The Committee has studied the
impact of Section 162(m) on our Option Plan and believes
that options granted under or equity compensation plans to our
officers will meet the requirements for qualifying as
performance-based. The Committee therefore believes that
Section 162(m) will not affect the tax deductions available
to us with respect to the compensation of our executive
officers. It is the Committees policy to qualify, to the
extent reasonable, our executive officers compensation for
deductibility under applicable tax law. However, if competitive
or business circumstances warrant we may in the future pay
compensation to our executive officers that may not be
deductible.



| |                                                         
| | --------------------------------------------------------
| | THE COMPENSATION COMMITTEE OF THE BOARD OF
    DIRECTORS
|
| | Cynthia M. Butitta, Lionel M. Allan                     
| | and Glen G. Possley                                     

36



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##### Table of Contents





Performance Graph

The following line graph compares the annual
percentage change in the cumulative total stockholder return for
our Common Stock with the S&P 500 Index and the S&P
Electronics (Semiconductors) Index for the period commencing
April 30, 1997 and ending on April 30, 2002. The graph
assumes that $100 was invested on April 30, 1997 and that
all dividends are reinvested. Historic stock price performance
should not necessarily be considered indicative of future stock
price performance.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL
RETURN*

AMONG CATALYST SEMICONDUCTOR, INC., THE
S & P 500 INDEX


AND THE S & P SEMICONDUCTORS
INDEX


(PERFORMANCE GRAPH)



|  |                                                                                                                                                                                                                                                                      
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | $100 invested on 4/30/97 in stock or
    index-including reinvestment of dividends. Fiscal year ending
    April 30. Copyright ©2002, Standard & Poors,
    a division of The McGraw-Hill Companies, Inc. All rights
    reserved. www.researchdatagroup.com/S&P.htm

|                                   |  |                         |        |         |  |         |        |         |  |         |        |         |  |   |        |  |  |   |        |  |  |   |        | 
|---------------------------------- |  | ----------------------- | ------ | ------- |  | ------- | ------ | ------- |  | ------- | ------ | ------- |  | - | ------ |  |  | - | ------ |  |  | - | ------ | 
|                                   |  |                        
|                                   |  | Cumulative Total Return
|                                   |  |                        
|                                   |  | 4/30/97                 |        | 4/30/98 |  | 4/30/99 |        | 4/30/00 |  | 4/30/01 |        | 4/30/02
|                                   |  |                         |        |         |  |         |        |         |  |         |        |        
|Catalyst Semiconductor, Inc.       |  | $                       | 100.00 |         |  | $       | 48.15  |         |  | $       | 17.78  |         |  | $ | 451.85 |  |  | $ | 250.67 |  |  | $ | 165.93 | 
|S & P 500                          |  |                         | 100.00 |         |  |         | 141.07 |         |  |         | 171.85 |         |  |   | 189.26 |  |  |   | 164.71 |  |  |   | 143.91 | 
|S & P Electronics (Semiconductors) |  |                         | 100.00 |         |  |         | 105.81 |         |  |         | 155.01 |         |  |   | 368.00 |  |  |   | 172.41 |  |  |   | 140.72 | 

Notwithstanding anything to the contrary set
forth in any our previous filings under the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as
amended, which might incorporate future filings made by us under
those statutes, the preceding Report of the Compensation
Committee of the Board of Directors on Executive Compensation,
the Audit Committee Report and the Performance Graph are not to
be incorporated by reference into any of those previous filings;
nor is such report or graph to be incorporated by reference into
any future filings which we may make under those statutes.






|         |                                                                                                       
|-------- | ------------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder
    Matters

The following table sets forth information known
to us regarding beneficial ownership of our common stock as of
July 23, 2002 by:



| |   |                                                                                              
| | - | ---------------------------------------------------------------------------------------------
| |  | each person known by us to beneficially own more
    than 5% of the outstanding common stock;
|
| |  | each of our Named Officers;                                                                  

37



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##### Table of Contents





| |   |                                                        
| | - | -------------------------------------------------------
| |  | each of our directors; and                             
|
| |  | all of our Named Officers and directors as a
    group.

Beneficial ownership is determined in accordance
with the rules of the Securities and Exchange Commission and
includes voting or investment power with respect to securities.
All shares of common stock subject to options exercisable within
60 days following July 23, 2002 are deemed to be
outstanding and beneficially owned by the persons holding those
options for the purpose of computing the number of shares
beneficially owned and the percentage of ownership of that
person. They are not, however, deemed to be outstanding and
beneficially owned for the purpose of computing the percentage
ownership of any other person. Except as otherwise indicated the
address for each person listed as a director or officer is
c/o Catalyst Semiconductor, Inc., 1250 Borregas
Avenue, Sunnyvale, California. Unless otherwise indicated, each
person has sole voting and investment power with respect to all
shares shown as beneficially owned, subject to community
property laws where applicable. Percentage of beneficial
ownership is based on 16,838,268 common stock outstanding as of
July 19, 2002.

|                                                                            |                                                       |                     |           |          |  |  |      |   | 
|--------------------------------------------------------------------------- | ----------------------------------------------------- | ------------------- | --------- | -------- |  |  | ---- | - | 
|                                                                            |                                                       |                    
|                                                                            |                                                       | Shares Beneficially
|                                                                            |                                                       | Owned              
|                                                                            |                                                       |                    
|                                                                            |                                                       | Number              |           | Percent 
|Name and Address of Beneficial Owner                                        |                                                       | of Shares           |           | of Total
|                                                                            |                                                       |                     |           |         
|Elex NV                                                                     |                                                       |                     | 4,000,000 |          |  |  | 23.8 | %
|                                                                            | Transportstraat 1
    B 3980
    Tessenderlo, Belgium |                     |           |          |  |  |      |   | 
|Roland Duchâtelet(1)(2)                                                     |                                                       |                     | 4,062,961 |          |  |  | 24.0 |  
|Radu M. Vanco(1)                                                            |                                                       |                     | 974,647   |          |  |  | 5.6  |  
|Gelu Voicu(1)                                                               |                                                       |                     | 417,426   |          |  |  | 2.4  |  
|Thomas E. Gay III(1)                                                        |                                                       |                     | 329,417   |          |  |  | 1.9  |  
|Irvin W. Kovalik(1)                                                         |                                                       |                     | 176,291   |          |  |  | 1.0  |  
|Barry Wiley                                                                 |                                                       |                     | 135,678   |          |  |  | *    |  
|Henry C. Montgomery                                                         |                                                       |                     | 67,761    |          |  |  | *    |  
|Lionel M. Allan(1)                                                          |                                                       |                     | 102,963   |          |  |  | *    |  
|Cynthia Butitta                                                             |                                                       |                     | 57,961    |          |  |  | *    |  
|Glen G. Possley                                                             |                                                       |                     | 57,961    |          |  |  | *    |  
|All current directors and executive officers as a
    group (10 persons)(3) |                                                       |                     | 6,383,066 |          |  |  | 34.6 |  



---



|  |                                                                               
|- | ------------------------------------------------------------------------------
|* | Percentage of shares beneficially owned is less
    than one percent of total.



|    |                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------
|(1) | Includes shares issuable upon exercise of stock
    options as of July 23, 2002 or within 60 days
    thereafter as follows:

|                |  |                                                                                                                                                                      
|--------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Radu M. Vanco   |  | 33,334 shares at $1.7300
    150,000 shares at $0.1250
    98,958 shares at $5.3750
    145,832 shares at $7.2500                                                    
|Lionel M. Allan |  | 57,501 shares at $0.1250
    2,501 shares at $0.4690
    26,851 shares at $1.7300
    4,444 shares at $4.0700
    6,666 shares at $4.1800
    5,000 shares at $8.3750
|Cynthia Butitta |  | 26,851 shares at $1.7300
    4,444 shares at $4.0700
    6,666 shares at $4.1800
    20,000 shares at $9.5000                                                        

38



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##### Table of Contents



|                    |  |                                                                                                                                          
|------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------
|Glen G. Possley     |  | 26,851 shares at $1.7300
    4,444 shares at $4.0700
    6,666 shares at $4.1800
    20,000 shares at $7.8750                            
|Henry C. Montgomery |  | 26,851 shares at $1.7300
    4,444 shares at $4.0700
    6,666 shares at $4.1800
    20,000 shares at $7.8750                            
|Gelu Voicu          |  | 65,500 shares at $0.1250
    64,444 shares at $1.7300
    29,687 shares at $5.3750
    43,749 shares at $7.2500                          
|Thomas E. Gay III   |  | 217,500 shares at $0.1250
    42,962 shares at $1.7300
    19,790 shares at $5.3750
    29,165 shares at $7.2500                         
|Irvin W. Kovalik    |  | 84,374 shares at $0.1250
    42,962 shares at $1.7300
    19,790 shares at $5.3750
    29,165 shares at $7.2500                          
|Roland Duchâtelet   |  | 26,851 shares at $1.7300
    20,000 shares at $2.0000
    4,444 shares at $4.0700
    6,666 shares at $4.1800
    5,000 shares at $8.3750
|Barry Wiley         |  | 83,666 shares at $1.0000
    32,222 shares at $1.7300
    19,790 shares at $5.3750                                                       



|    |                                                                                                                                                                                                                                                                               
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Includes 4,000,000 shares held by Elex NV of
    which Mr. Duchâtelet is a controlling person.
    Mr. Duchâtelet disclaims beneficial ownership as to
    these shares.                                                                                                      
|   
|(3) | Includes 1,592,697 shares issuable upon exercise
    of stock options as of July 23, 2002 or within 60 days
    thereafter, held by Messrs. Vanco, Allan, Possley,
    Montgomery, Voicu, Gay, Kovalik, Duchâtelet and Wiley and
    Ms. Butitta as described in Note 1 above.

Equity Plan Compensation Information

The following table provides information as of
April 30, 2002 about our Common Stock that may be issued
upon the exercise of options, warrants and rights under all of
our existing equity compensation plans, including the 1993
Director Stock Option Plan (DOP), the Stock Option Plan (SOP),
the 1998 Special Equity Incentive Plan (SEIP) and the Employee
Stock Purchase Plan (ESPP):

|                                                               |       |                      |           |                      |  |                           |       |  |  |  |           |     | 
|-------------------------------------------------------------- | ----- | -------------------- | --------- | -------------------- |  | ------------------------- | ----- |  |  |  | --------- | --- | 
|                                                               |       |                      |           |                      |  | Number of Securities     
|                                                               |       | Number of Securities |           |                      |  | Remaining Available for  
|                                                               |       | to be Issued         |           | Weighted-Average     |  | Future Issuance Under    
|                                                               |       | Upon Exercise of     |           | Exercise Price of    |  | Equity Compensation Plans
|                                                               |       | Outstanding Options, |           | Outstanding Options, |  | (Excluding Securities    
|Plan Category                                                  |       | Warrants and Rights  |           | Warrants and Rights  |  | Reflected in Column (a)) 
|                                                               |       |                      |           |                      |  |                          
|                                                               |       |                      |           |                      |  |                          
|                                                               |       | (a)                  |           | (b)                  |  | (c)                      
|Equity compensation plans approved by security
    holders     |       |                      | 5,167,478 |                      |  | $                         | 2.776 |  |  |  | 1,488,881 | (1)
|Equity compensation plans not approved by
    security holders |       |                      | 0         | (2)                  |  |                           | 0.00  |  |  |  | 0         |    
|                                                               | Total |                      |           |                      |  |                           |       |  |  |  |           |     | 



---



|    |                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes 392,505 shares remaining for issuance
    pursuant to options under the DOP, 468,496 shares remaining for
    issuance pursuant to options and stock purchase rights under the
    SOP, 107,709 shares

39



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##### Table of Contents



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | remaining for issuance pursuant to options, stock
    appreciation rights, stock purchase rights and long term
    performance awards under the SEIP and 520,171 shares remaining
    for issuance under the ESPP. The ESPP was suspended in 1998 when
    Catalyst was de-listed from the Nasdaq National Market. The
    number of shares available for issuance was increased by
    stockholder approval on August 2, 2000 in connection with
    our application for re-listing on the Nasdaq National Market,
    which has not yet been achieved, therefore, we have not issued
    any shares pursuant to the ESPP during this period. We continue
    to monitor our ability to meet the criteria for re-listing on
    the National Market and we anticipate re-activating the ESPP at
    such time as we are able to achieve re-listing on the Nasdaq
    National Market.
|   
|(2) | We do not have any compensation plans under which
    equity securities are authorized for issuance which have not
    been approved by our stockholders.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             






|         |                                                   
|-------- | --------------------------------------------------
|Item 13. | Certain Relationships and Related
    Transactions

During the fourth quarter of fiscal 2000, we
began taking delivery of wafers fabricated at X-fab Texas, Inc.
(Xfab), a wholly owned subsidiary of Elex NV, a Belgian
holding company that owns approximately 24% of the outstanding
shares of our common stock as of July 19, 2002.
Mr. Roland Duchâtelet, the Chairman and CEO and a
major stockholder of Elex NV, has served as a member of our
Board of Directors since 1999. The wafers provided by Xfab
supplement the same designs fabricated at Oki Semiconductor in
Japan, our principal wafer fab since 1985. Other than purchase
orders currently open with Xfab, there is no purchasing
agreement in place with Xfab. Each purchase order remains open
until the wafers are delivered, which is generally within two
months of placement of the order, although in the case of one
particular wafer design, the purchase order calls for monthly
deliveries over a one year period at a set price for each wafer
delivered. The prices of wafers purchased from Xfab are
determined by periodic negotiations with the management of Xfab
and compared to quotes obtained from other prospective wafer
fabricators and pricing surveys published by various industry
trade organizations. During the fiscal year ended April 30,
2002, our purchases from Xfab totaled $1,208,000. As of
April 30, 2002, the total amount owed Xfab was $184,000.

On April 25, 2002, we completed the purchase
of a total of 1,500,000 shares of our Common Stock (the
Repurchased Shares) from Elex NV in a private
transaction at a price per share of $3.1255 or an aggregate
purchase price of $4,688,250. This sale was effectuated pursuant
to a Stock Transfer Agreement dated April 19, 2002 between
Elex and Catalyst. The price for the Repurchased Shares was
determined at a 5% discount to the closing price of our Common
Stock on April 19, 2002, the date we agreed to make such
repurchase. For additional information regarding this
transaction, please refer to our Report on Form 8-K (SEC
File No. 0-21488) filed with the SEC on April 30, 2002.

We have had an informal arrangement since 1995 to
obtain engineering services from Lxi Corporation, a California
corporation (Lxi), a provider of engineering services through
Essex com SRL (Essex), its wholly owned subsidiary in Romania.
Officers of Catalyst, Messrs. Vanco, Voicu and Gay own
approximately 91%, 3% and 1%, respectively, of Lxi.
Messrs. Vanco, Voicu and Gay received no payments from
Essex or Lxi during the fiscal years ended April 30, 2002,
April 30, 2001 and April 30, 2000. Mr. Gay
continues to serve as a director of Lxi. The number of full-time
engineers we use is dependent upon the scope and number of
R&D projects we have in process at a given time. For
example, during the month of April 2002, Essex employed the
equivalent of approximately 15 full-time engineers to
perform the services on our behalf. These services relate to key
development projects of Catalyst including development, design,
layout and test program development services. Catalyst does not
have any contractual commitment to obtain these services from
Lxi, nor does Lxi have any obligation to provide these services
to us. During the fiscal year ended April 30, 2002 we
recorded $852,000 of engineering fees from Lxi for engineering
design services provided to us by Lxi. As of April 30, 2002
the total amount owed to Lxi was $228,000.

For information regarding the employment and
severance agreements we have entered into with certain of our
executive officers please refer to Item 11. Executive
Compensation  Employment Contracts and
Change-in-Control Arrangements.

Mr. Allan serves as a consultant to us
through his consulting company, Allan Advisors, Inc., which
received consulting fees of $8,333 per month throughout Fiscal
2002. Pursuant to an Extension of Consulting

40



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##### Table of Contents



Agreement, entered into between us and
Mr. Allan, effective as of June 7, 2001, we extended
the term of the consulting agreement to August 14, 2003.
Mr. Allans consulting agreement calls for
acceleration of all unvested options granted to him upon a
change of control of Catalyst and all such options will remain
exercisable for a three year period following the change of
control event.


Our Certificate of Incorporation limits the
liability of directors to the maximum extent permitted by the
Delaware General Corporation Law. Our Bylaws also provide that
we will indemnify our directors, officers, employees and agents
in such circumstances. In addition, we have entered into
separate indemnification agreements with our officers and
directors that may require us, among other things, to indemnify
them against certain liabilities that may arise by reason of
their status or service as directors or officers and to advance
their expenses incurred as a result of any proceeding against
them as to which they could be indemnified.

The transactions described were negotiated at
arms length such that their terms are as favorable to us as we
believe could have been obtained from an unaffiliated third
party.




PART IV






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

(a)(1) Financial Statements

See Index to Consolidated Financial Statements on
page F-1 hereof.

(a)(2) Financial Statement Schedules

Schedule II  Valuation and
Qualifying Accounts.

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

(b) Reports on Form 8-K

Catalyst filed one report on Form 8-K filed
during the quarter ended April 30, 2002 to report the
repurchase of shares of our common stock from Elex NV.

(c) Exhibits

The exhibits listed in the accompanying Index to
Exhibits are filed or incorporated by reference as part of this
Report on Form 10-K.

41



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##### Table of Contents






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 July 29, 2002.



| |                             
| | ----------------------------
| | CATALYST SEMICONDUCTOR, INC.



| |     |                  
| | --- | -----------------
| | By: | /s/ RADU M. VANCO

| |                                           
| | ------------------------------------------
| |                                           
| | Radu M. Vanco                             
| | President, Chief Executive Officer
    and
| | Chairman of the Board                     

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 July 29, 2002.



| |     |                  
| | --- | -----------------
| | By: | /s/ RADU M. VANCO

| |                                           
| | ------------------------------------------
| |                                           
| | Radu M. Vanco                             
| | President, Chief Executive Officer
    and
| | Chairman of the Board                     
| | (Principal Executive Officer)             



| |     |                      
| | --- | ---------------------
| | 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)    



| |     |                    
| | --- | -------------------
| | By: | /s/ LIONEL M. ALLAN

| |                
| | ---------------
| |                
| | Lionel M. Allan
| | Director       



| |     |                       
| | --- | ----------------------
| | By: | /s/ CYNTHIA M. BUTITTA

| |                   
| | ------------------
| |                   
| | Cynthia M. Butitta
| | Director          



| |     |                         
| | --- | ------------------------
| | By: | /s/ ROLAND M. DUCHÂTELET

| |                     
| | --------------------
| |                     
| | Roland M. Duchâtelet
| | Director            

42



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| |     |                        
| | --- | -----------------------
| | By: | /s/ HENRY C. MONTGOMERY

| |                    
| | -------------------
| |                    
| | Henry C. Montgomery
| | Director           



| |     |                    
| | --- | -------------------
| | By: | /s/ GLEN G. POSSLEY

| |                
| | ---------------
| |                
| | Glen G. Possley
| | Director       

43



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##### Table of Contents



CATALYST SEMICONDUCTOR, INC.

CONSOLIDATED FINANCIAL STATEMENTS

As of April 30, 2002 and 2001


and


For the Three Fiscal Years Ended April 30,
2002, 2001 and 2000


with Report of Independent
Accountants


CATALYST SEMICONDUCTOR, INC.

INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS

|                                                                                                                    |  |       |     | 
|------------------------------------------------------------------------------------------------------------------- |  | ----- | --- | 
|                                                                                                                    |  | Pages
|                                                                                                                    |  |      
|Report of Independent Accountants                                                                                   |  |       | F-2 | 
|Consolidated Balance Sheets as of April 30,
    2002 and 2001                                                       |  |       | F-3 | 
|Consolidated Statements of Operations for the
    years ended April 30, 2002, 2001 and 2000                         |  |       | F-4 | 
|Consolidated Statements of Stockholders
    Equity (Deficit) for the years ended April 30, 2002, 2001
    and 2000 |  |       | F-5 | 
|Consolidated Statements of Cash Flows for the
    years ended April 30, 2002, 2001 and 2000                         |  |       | F-6 | 
|Notes to Consolidated Financial Statements                                                                          |  |       | F-7 | 

F-1



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##### Table of Contents



REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of

Catalyst Semiconductor, Inc.


In our opinion, the consolidated financial
statements listed in the index appearing under
Item 14(a)(1) present fairly, in all material respects, the
financial position of Catalyst Semiconductor, Inc. and its
subsidiary at April 30, 2002 and 2001 and the results of their
operations and their cash flows for each of the three years in
the period ended April 30, 2002, in conformity with
accounting principles generally accepted in the United States of
America. In addition, in our opinion, the financial statement
schedule listed in the index appearing under Item 14(a)(2)
presents fairly, in all material respects, the information set
forth therein when read in conjunction with the related
consolidated financial statements. These financial statements
and financial statement schedule are the responsibility of the
Companys management; our responsibility is to express an
opinion on these financial statements and financial statement
schedule based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally
accepted in the United States of America, 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 our opinion.



| |                               
| | ------------------------------
| | /s/ PRICEWATERHOUSECOOPERS LLP

San Jose, California

May 22, 2002


F-2



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##### Table of Contents



CATALYST SEMICONDUCTOR, INC.

CONSOLIDATED BALANCE SHEETS

|                                              |                                                                                                                                                                                        |                                            |        |        |        |  |        |        |        | 
|--------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------ | ------ | ------ |  | ------ | ------ | ------ | 
|                                              |                                                                                                                                                                                        |                                           
|                                              |                                                                                                                                                                                        | April 30,                                 
|                                              |                                                                                                                                                                                        |                                           
|                                              |                                                                                                                                                                                        | 2002                                       |        | 2001  
|                                              |                                                                                                                                                                                        |                                            |        |       
|                                              |                                                                                                                                                                                        |                                           
|                                              |                                                                                                                                                                                        | (In thousands, except                     
|                                              |                                                                                                                                                                                        | par value data)                           
|ASSETS                                       
|Current assets:                               |                                                                                                                                                                                        |                                            |        |        |        |  |        |       
|                                              | Cash and cash equivalents                                                                                                                                                              |                                            | $      | 26,295 |        |  | $      | 30,534 |       
|                                              | Accounts receivable, net                                                                                                                                                               |                                            |        | 8,929  |        |  |        | 10,811 |       
|                                              | Inventories                                                                                                                                                                            |                                            |        | 8,749  |        |  |        | 8,349  |       
|                                              | Other assets                                                                                                                                                                           |                                            |        | 1,537  |        |  |        | 895    |       
|                                              |                                                                                                                                                                                        |                                            |        |        |        |  |        |       
|                                              |                                                                                                                                                                                        | Total current assets                       |        |        | 45,510 |  |        |        | 50,589 | 
|Property and equipment, net                   |                                                                                                                                                                                        |                                            | 2,414  |        |        |  | 2,589  |       
|                                              |                                                                                                                                                                                        |                                            |        |        |        |  |        |       
|                                              |                                                                                                                                                                                        | Total assets                               |        | $      | 47,924 |  |        | $      | 53,178 | 
|                                              |                                                                                                                                                                                        |                                            |        |        |        |  |        |       
|LIABILITIES AND STOCKHOLDERS
    EQUITY     
|Current liabilities:                          |                                                                                                                                                                                        |                                            |        |        |        |  |        |       
|                                              | Line of credit                                                                                                                                                                         |                                            | $      |       |        |  | $      | 2,025  |       
|                                              | Accounts payable                                                                                                                                                                       |                                            |        | 4,701  |        |  |        | 3,970  |       
|                                              | Accounts payable  related parties                                                                                                                                                     |                                            |        | 412    |        |  |        | 291    |       
|                                              | Accrued expenses                                                                                                                                                                       |                                            |        | 2,481  |        |  |        | 3,757  |       
|                                              | Deferred gross profit on shipments to distributors                                                                                                                                     |                                            |        | 1,702  |        |  |        | 1,972  |       
|                                              | Current portion of capital lease obligations                                                                                                                                           |                                            |        |       |        |  |        | 58     |       
|                                              |                                                                                                                                                                                        |                                            |        |        |        |  |        |       
|                                              |                                                                                                                                                                                        | Total current liabilities                  |        |        | 9,296  |  |        |        | 12,073 | 
|Other credits                                 |                                                                                                                                                                                        |                                            | 3,262  |        |        |  | 1,992  |       
|                                              |                                                                                                                                                                                        |                                            |        |        |        |  |        |       
|                                              |                                                                                                                                                                                        | Total liabilities                          |        |        | 12,558 |  |        |        | 14,065 | 
|                                              |                                                                                                                                                                                        |                                            |        |        |        |  |        |       
|Commitments and contingencies (Notes 4 and 9) |                                                                                                                                                                                        |                                            |        |        |        |  |        |       
|Stockholders equity:                         |                                                                                                                                                                                        |                                            |        |        |        |  |        |       
|                                              | Preferred stock, $.001 par value, 2,000 shares
    authorized; no shares issued and outstanding                                                                                        |                                            |        |       |        |  |        |       |       
|                                              | Common stock, $.001 par value, 45,000 shares
    authorized; 18,696 issued and 17,002 outstanding at
    April 30, 2002 and 17,532 shares issued and outstanding at
    April 30, 2001 |                                            |        | 19     |        |  |        | 18     |       
|Additional paid in capital                    |                                                                                                                                                                                        |                                            | 48,755 |        |        |  | 48,168 |       
|Treasury stock, 1,694 at April 30, 2002       |                                                                                                                                                                                        |                                            | (5,105 | )      |        |  |       |       
|Accumulated deficit                           |                                                                                                                                                                                        |                                            | (8,303 | )      |        |  | (9,073 | )     
|                                              |                                                                                                                                                                                        |                                            |        |        |        |  |        |       
|                                              |                                                                                                                                                                                        | Total stockholders equity                 |        |        | 35,366 |  |        |        | 39,113 | 
|                                              |                                                                                                                                                                                        |                                            |        |        |        |  |        |       
|                                              |                                                                                                                                                                                        | Total liabilities and stockholders equity |        | $      | 47,924 |  |        | $      | 53,178 | 
|                                              |                                                                                                                                                                                        |                                            |        |        |        |  |        |       

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

F-3



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##### Table of Contents



CATALYST SEMICONDUCTOR, INC.

CONSOLIDATED STATEMENTS OF
OPERATIONS

|                                            |         |                       |        |        |  |      |        |        |  |   |        |        | 
|------------------------------------------- | ------- | --------------------- | ------ | ------ |  | ---- | ------ | ------ |  | - | ------ | ------ | 
|                                            |         |                      
|                                            |         | Year Ended April 30, 
|                                            |         |                      
|                                            |         | 2002                  |        | 2001   |  | 2000
|                                            |         |                       |        |        |  |     
|                                            |         |                      
|                                            |         | (In thousands, except
|                                            |         | per share data)      
|Net revenues                                |         | $                     | 42,791 |        |  | $    | 98,015 |        |  | $ | 49,527 |       
|Cost of revenues                            |         |                       | 27,158 |        |  |      | 50,863 |        |  |   | 26,837 |       
|                                            |         |                       |        |        |  |      |        |        |  |   |        |       
|Gross profit                                |         |                       | 15,633 |        |  |      | 47,152 |        |  |   | 22,690 |       
|Research and development                    |         |                       | 4,380  |        |  |      | 4,543  |        |  |   | 2,846  |       
|Selling, general and administrative         |         |                       | 10,652 |        |  |      | 13,490 |        |  |   | 9,042  |       
|                                            |         |                       |        |        |  |      |        |        |  |   |        |       
|Income from operations                      |         |                       | 601    |        |  |      | 29,119 |        |  |   | 10,802 |       
|Interest income (expense), net              |         |                       | 663    |        |  |      | 793    |        |  |   | (492   | )     
|                                            |         |                       |        |        |  |      |        |        |  |   |        |       
|Income before income taxes                  |         |                       | 1,264  |        |  |      | 29,912 |        |  |   | 10,310 |       
|Income tax provision                        |         |                       | 494    |        |  |      | 2,560  |        |  |   | 300    |       
|                                            |         |                       |        |        |  |      |        |        |  |   |        |       
|Net income                                  |         | $                     | 770    |        |  | $    | 27,352 |        |  | $ | 10,010 |       
|                                            |         |                       |        |        |  |      |        |        |  |   |        |       
|Net income per share:                       |         |                       |        |        |  |      |        |        |  |   |        |       
|                                            | Basic   |                       | $      | 0.04   |  |      | $      | 1.63   |  |   | $      | 0.69   | 
|                                            |         |                       |        |        |  |      |        |        |  |   |        |       
|                                            | Diluted |                       | $      | 0.04   |  |      | $      | 1.36   |  |   | $      | 0.50   | 
|                                            |         |                       |        |        |  |      |        |        |  |   |        |       
|Weighted average common shares outstanding: |         |                       |        |        |  |      |        |        |  |   |        |       
|                                            | Basic   |                       |        | 17,829 |  |      |        | 16,744 |  |   |        | 14,552 | 
|                                            |         |                       |        |        |  |      |        |        |  |   |        |       
|                                            | Diluted |                       |        | 20,439 |  |      |        | 20,169 |  |   |        | 19,974 | 
|                                            |         |                       |        |        |  |      |        |        |  |   |        |       

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

F-4



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##### Table of Contents



CATALYST SEMICONDUCTOR, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS
EQUITY (DEFICIT)

|                               |  |                |        |            |  |         |    |          |  |             |        |       |  |   |        |   |  |   |         |   |  |   |        |  
|------------------------------ |  | -------------- | ------ | ---------- |  | ------- | -- | -------- |  | ----------- | ------ | ----- |  | - | ------ | - |  | - | ------- | - |  | - | ------ | -
|                               |  |                |        |            |  |         |    |          |  |            
|                               |  | Common Stock   |        |            |  |         |    |          |  |            
|                               |  |                |        | Additional |  |         |    |          |  |            
|                               |  |                |        | Par        |  | Paid in |    | Treasury |  | Accumulated |        |      
|                               |  | Shares         |        | Value      |  | Capital |    | Stock    |  | Deficit     |        | Total
|                               |  |                |        |            |  |         |    |          |  |             |        |      
|                               |  |               
|                               |  | (In thousands)
|Balance at April 30, 1999      |  |                | 13,958 |            |  | $       | 14 |          |  | $           | 45,209 |       |  | $ |       |   |  | $ | (46,435 | ) |  | $ | (1,212 | )
|Exercise of stock options      |  |                | 2,052  |            |  |         | 2  |          |  |             | 1,701  |       |  |   |       |   |  |   |        |   |  |   | 1,703  |  
|Net income                     |  |                |       |            |  |         |   |          |  |             |       |       |  |   |       |   |  |   | 10,010  |   |  |   | 10,010 |  
|                               |  |                |        |            |  |         |    |          |  |             |        |       |  |   |        |   |  |   |         |   |  |   |        |  
|Balance at April 30, 2000      |  |                | 16,010 |            |  |         | 16 |          |  |             | 46,910 |       |  |   |       |   |  |   | (36,425 | ) |  |   | 10,501 |  
|Exercise of stock options      |  |                | 1,522  |            |  |         | 2  |          |  |             | 1,258  |       |  |   |       |   |  |   |        |   |  |   | 1,260  |  
|Net income                     |  |                |       |            |  |         |   |          |  |             |       |       |  |   |       |   |  |   | 27,352  |   |  |   | 27,352 |  
|                               |  |                |        |            |  |         |    |          |  |             |        |       |  |   |        |   |  |   |         |   |  |   |        |  
|Balance at April 30, 2001      |  |                | 17,532 |            |  |         | 18 |          |  |             | 48,168 |       |  |   |       |   |  |   | (9,073  | ) |  |   | 39,113 |  
|Exercise of stock options      |  |                | 1,164  |            |  |         | 1  |          |  |             | 587    |       |  |   |       |   |  |   |        |   |  |   | 588    |  
|Purchase of stock for treasury |  |                | (1,694 | )          |  |         |   |          |  |             |       |       |  |   | (5,105 | ) |  |   |        |   |  |   | (5,105 | )
|Net income                     |  |                |       |            |  |         |   |          |  |             |       |       |  |   |       |   |  |   | 770     |   |  |   | 770    |  
|                               |  |                |        |            |  |         |    |          |  |             |        |       |  |   |        |   |  |   |         |   |  |   |        |  
|Balance at April 30, 2002      |  |                | 17,002 |            |  | $       | 19 |          |  | $           | 48,755 |       |  | $ | (5,105 | ) |  | $ | (8,303  | ) |  | $ | 35,366 |  
|                               |  |                |        |            |  |         |    |          |  |             |        |       |  |   |        |   |  |   |         |   |  |   |        |  

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

F-5



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##### Table of Contents



CATALYST SEMICONDUCTOR, INC.

CONSOLIDATED STATEMENTS OF CASH
FLOWS

|                                                         |                                                                                       |                                             |                                                    |                                                         |       |        |        |        |       |        |        |        |      |        |       |  
|-------------------------------------------------------- | ------------------------------------------------------------------------------------- | ------------------------------------------- | -------------------------------------------------- | ------------------------------------------------------- | ----- | ------ | ------ | ------ | ----- | ------ | ------ | ------ | ---- | ------ | ----- | -
|                                                         |                                                                                       |                                            
|                                                         |                                                                                       | Year Ended April 30,                       
|                                                         |                                                                                       |                                            
|                                                         |                                                                                       | 2002                                        |                                                    | 2001                                                    |       | 2000  
|                                                         |                                                                                       |                                             |                                                    |                                                         |       |       
|                                                         |                                                                                       |                                            
|                                                         |                                                                                       | (In thousands)                             
|Cash flows from operating
    activities:                |                                                                                       |                                             |                                                    |                                                         |       |        |        |        |       |        |        |       
|                                                         | Net income                                                                            |                                             | $                                                  | 770                                                     |       |        | $      | 27,352 |       |        | $      | 10,010 |     
|                                                         | Adjustments to reconcile net income to net cash
    provided by operating activities: |                                             |                                                    |                                                         |       |        |        |        |       |        |        |        |     
|                                                         |                                                                                       | Depreciation of property and equipment      |                                                    |                                                         | 1,008 |        |        |        | 1,051 |        |        |        | 939  |       
|                                                         |                                                                                       | Provision for doubtful accounts receivable  |                                                    |                                                         | 200   |        |        |        | 464   |        |        |        |     |       
|                                                         |                                                                                       | Provision for excess and obsolete inventory |                                                    |                                                         | 72    |        |        |        | 2,698 |        |        |        | (971 | )     
|                                                         |                                                                                       | Changes in assets and liabilities:          |                                                    |                                                         |       |        |        |        |       |        |        |        |      |       
|                                                         |                                                                                       |                                             | Accounts receivable                                |                                                         |       | 1,682  |        |        |       | (548   | )      |        |      | (5,608 | )    
|                                                         |                                                                                       |                                             | Inventories                                        |                                                         |       | (472   | )      |        |       | (7,516 | )      |        |      | (646   | )    
|                                                         |                                                                                       |                                             | Other assets                                       |                                                         |       | (642   | )      |        |       | (271   | )      |        |      | 118    |      
|                                                         |                                                                                       |                                             | Accounts payable (including related parties)       |                                                         |       | 852    |        |        |       | (2,484 | )      |        |      | 700    |      
|                                                         |                                                                                       |                                             | Accrued expenses                                   |                                                         |       | (1,139 | )      |        |       | 3,947  |        |        |      | 1,090  |      
|                                                         |                                                                                       |                                             | Deferred gross profit on shipments to distributors |                                                         |       | (270   | )      |        |       | 1,092  |        |        |      | (181   | )    
|                                                         |                                                                                       |                                             | Other credits                                      |                                                         |       | 1,270  |        |        |       |       |        |        |      |       |      
|                                                         |                                                                                       |                                             |                                                    |                                                         |       |        |        |        |       |        |        |       
|                                                         |                                                                                       |                                             |                                                    | Net cash provided by operating activities               |       |        | 3,331  |        |       |        | 25,785 |        |      |        | 5,451 |  
|                                                         |                                                                                       |                                             |                                                    |                                                         |       |        |        |        |       |        |        |       
|Cash flows from investing
    activities:                |                                                                                       |                                             |                                                    |                                                         |       |        |        |        |       |        |        |       
|                                                         | Acquisition of property and equipment                                                 |                                             |                                                    | (833                                                    | )     |        |        | (1,784 | )     |        |        | (856   | )   
|                                                         |                                                                                       |                                             |                                                    |                                                         |       |        |        |        |       |        |        |       
|                                                         |                                                                                       |                                             |                                                    | Net cash used in investing activities                   |       |        | (833   | )      |       |        | (1,784 | )      |      |        | (856  | )
|                                                         |                                                                                       |                                             |                                                    |                                                         |       |        |        |        |       |        |        |       
|Cash flows from financing
    activities:                |                                                                                       |                                             |                                                    |                                                         |       |        |        |        |       |        |        |       
|                                                         | Common stock issuances                                                                |                                             |                                                    | 451                                                     |       |        |        | 540    |       |        |        | 1,627  |     
|                                                         | Treasury stock purchases                                                              |                                             |                                                    | (5,105                                                  | )     |        |        |       |       |        |        |       |     
|                                                         | Payment of line of credit                                                             |                                             |                                                    | (2,025                                                  | )     |        |        | (3     | )     |        |        | (914   | )   
|                                                         | Payment of long-term debt and capital lease
    obligations                           |                                             |                                                    | (58                                                     | )     |        |        | (209   | )     |        |        | (955   | )   
|                                                         |                                                                                       |                                             |                                                    |                                                         |       |        |        |        |       |        |        |       
|                                                         |                                                                                       |                                             |                                                    | Net cash provided by (used in) financing
    activities |       |        | (6,737 | )      |       |        | 328    |        |      |        | (242  | )
|                                                         |                                                                                       |                                             |                                                    |                                                         |       |        |        |        |       |        |        |       
|Net increase (decrease) in cash and cash
    equivalents |                                                                                       |                                             | (4,239                                             | )                                                       |       |        | 24,329 |        |       |        | 4,353  |       
|Cash at beginning of the period                          |                                                                                       |                                             | 30,534                                             |                                                         |       |        | 6,205  |        |       |        | 1,852  |       
|                                                         |                                                                                       |                                             |                                                    |                                                         |       |        |        |        |       |        |        |       
|Cash at end of the period                                |                                                                                       | $                                           | 26,295                                             |                                                         |       | $      | 30,534 |        |       | $      | 6,205  |       
|                                                         |                                                                                       |                                             |                                                    |                                                         |       |        |        |        |       |        |        |       
|Noncash financing activity:                              |                                                                                       |                                             |                                                    |                                                         |       |        |        |        |       |        |        |       
|                                                         | Deferred compensation on exercised stock options                                      |                                             | $                                                  | 137                                                     |       |        | $      | 720    |       |        | $      | 76     |     
|                                                         |                                                                                       |                                             |                                                    |                                                         |       |        |        |        |       |        |        |       
|Supplemental cash flow disclosures:                      |                                                                                       |                                             |                                                    |                                                         |       |        |        |        |       |        |        |       
|                                                         | Cash paid during the year for:                                                        |                                             |                                                    |                                                         |       |        |        |        |       |        |        |        |     
|                                                         |                                                                                       | Interest                                    |                                                    | $                                                       | 45    |        |        | $      | 362   |        |        | $      | 522  |       
|                                                         |                                                                                       |                                             |                                                    |                                                         |       |        |        |        |       |        |        |       
|                                                         |                                                                                       | Income taxes                                |                                                    | $                                                       | 91    |        |        | $      | 768   |        |        | $      | 2    |       
|                                                         |                                                                                       |                                             |                                                    |                                                         |       |        |        |        |       |        |        |       

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

F-6



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##### Table of Contents



CATALYST SEMICONDUCTOR, INC.

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

Note 1  Description of Operations
and Summary of Significant Accounting Policies



| |           
| | ----------
| | Operations

Catalyst Semiconductor, Inc. (Catalyst or the
Company), incorporated in October 1985 and reincorporated in
Delaware in May 1993, 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. During fiscal 2000, the semiconductor market
rebounded from a cyclical decline which had a favorable impact
on the Companys revenues and gross margins. Further,
reductions in product costs and operating expenses, which were
realized due to a cost reduction program by management, have had
a favorable impact on profitability. The rebound continued
through the first half of fiscal 2001 but during the latter half
of the year and for the first half of fiscal 2002, demand for
the Companys products and unit pricing decreased
significantly, resulting in lower gross profits and decreased
net income. The most recent two quarters have shown a short term
trend of modestly increasing revenues, gross profit margins and
net income. While it is too short a term to indicate whether the
recent increases indicate the beginnings of a continuing trend,
the results were sufficiently positive to result in net profits
for fiscal 2002.



| |                      
| | ---------------------
| | 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. Certain prior period balances have
been reclassified to conform to the current period presentation.

The preparation of consolidated financial
statements in conformity with generally accepted accounting
principles in the United States of America requires management
to make estimates and judgments that affect the reported amounts
of assets, liabilities, revenues and expenses and related
disclosures. On an on-going basis, the Company evaluates its
estimates, including those related to product shipments and
returns, bad debts, inventories, income taxes, warranty
obligations, contingencies and litigation. Catalyst bases these
estimates on historical experience and on various other
assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or
conditions.



| |                             
| | ----------------------------
| | Foreign currency translation

The functional currency of the Companys
Japanese subsidiary is the United States Dollar. As such, gains
and losses resulting from translation from local currency to the
U.S. dollar are included in determining income or loss for
the period.



| |                    
| | -------------------
| | 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

F-7



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##### Table of Contents



CATALYST SEMICONDUCTOR, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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.



| |                                        
| | ---------------------------------------
| | Fair value of financial
    instruments

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



| |                          
| | -------------------------
| | Cash and cash equivalents

The Company considers all highly liquid
investments purchased with an original maturity of three months
or less to be cash equivalents.



| |            
| | -----------
| | Inventories

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



| |                       
| | ----------------------
| | 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.



| |                             
| | ----------------------------
| | Concentration of credit risk

Financial instruments which potentially subject
the Company to concentrations of credit risk consist principally
of cash and accounts receivable. The Company invests primarily
in money market accounts and certificates of deposit and places
its investments with high quality financial institutions. 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 of
America, Europe and the Far East and the Company performs
ongoing credit evaluations of these customers.

One customer accounted for 11% of revenues during
the year ended April 30, 2002. One customer accounted for
14% of revenues during the year ended April 30, 2001. Three
customers accounted for 13%, 12% and 11% of revenues during the
year ended April 30, 2000.

One customer accounted for 14% of gross accounts
receivable as of April 30, 2002. Two customers accounted for 15%
and 12% of gross accounts receivables as of April 30, 2001.



| |                              
| | -----------------------------
| | 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 a possible loss of sales or
reduced margins.



| |                         
| | ------------------------
| | 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
related interpretations 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.

F-8



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##### Table of Contents



CATALYST SEMICONDUCTOR, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The Company accounts for equity instruments
issued to non-employees in accordance with the provisions of
SFAS No. 123 and Emerging Issues Task Force
(EITF) No. 96-18, Accounting for Equity
Instruments That Are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or
Services, which requires that such equity instruments are
recorded at their fair value on the measurement date.



| |                     
| | --------------------
| | Net income per share

Basic earnings per share (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
give 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.

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

|                                     |               |                                       |        |       |  |      |        |       |  |   |        |       | 
|------------------------------------ | ------------- | ------------------------------------- | ------ | ----- |  | ---- | ------ | ----- |  | - | ------ | ----- | 
|                                     |               |                                      
|                                     |               | Year Ended April 30,                 
|                                     |               |                                      
|                                     |               | 2002                                  |        | 2001  |  | 2000
|                                     |               |                                       |        |       |  |     
|                                     |               |                                      
|                                     |               | (In thousands, except per share data)
|Net income                           |               | $                                     | 770    |       |  | $    | 27,352 |       |  | $ | 10,010 |      
|                                     |               |                                       |        |       |  |      |        |       |  |   |        |      
|Shares calculation:                  |               |                                       |        |       |  |      |        |       |  |   |        |      
|Average shares outstanding  basic   |               |                                       | 17,829 |       |  |      | 16,744 |       |  |   | 14,552 |      
|Effect of dilutive securities:       |               |                                       |        |       |  |      |        |       |  |   |        |      
|                                     | Stock options |                                       |        | 2,610 |  |      |        | 3,425 |  |   |        | 5,422 | 
|                                     |               |                                       |        |       |  |      |        |       |  |   |        |      
|Average shares outstanding  diluted |               |                                       | 20,439 |       |  |      | 20,169 |       |  |   | 19,974 |      
|                                     |               |                                       |        |       |  |      |        |       |  |   |        |      
|Net income per share  basic         |               | $                                     | 0.04   |       |  | $    | 1.63   |       |  | $ | 0.69   |      
|                                     |               |                                       |        |       |  |      |        |       |  |   |        |      
|Net income per share  diluted       |               | $                                     | 0.04   |       |  | $    | 1.36   |       |  | $ | 0.50   |      
|                                     |               |                                       |        |       |  |      |        |       |  |   |        |      

Options to purchase 1,719,300 shares at prices
ranging from $4.07 to $9.50 per share were outstanding during
fiscal 2002 and were excluded in the computation of diluted EPS
because their effect would have been antidilutive. Options to
purchase 612,500 shares at prices ranging from $6.88 to $9.50
per share were outstanding during fiscal 2001 and were excluded
in the computation of diluted EPS because their effect would
have been antidilutive. Options to purchase 204,000 shares at
prices ranging from $4.63 to $8.38 per share were outstanding
during fiscal 2000 and were not included in the computation of
diluted EPS because the inclusion of such options and shares
would have been antidilutive.



| |                     
| | --------------------
| | Comprehensive Income

Comprehensive income is defined as the change in
equity of a company during a period from transactions and other
events and circumstances, excluding transactions resulting from
investments by owners and distributions to owners. The Company
had no items of comprehensive income other than net income for
any period presented.



| |                  
| | -----------------
| | Segment Reporting

The Company adopted SFAS No. 131,
Disclosures about Segments of an Enterprise and Related
Information SFAS No. 131 supersedes SFAS No. 14,
Financial Reporting for Segments of a Business
Enterprise, and replaces the industry segment
approach with the management approach. The
management approach designates the internal organization that is
used by management for making operating

F-9



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##### Table of Contents



CATALYST SEMICONDUCTOR, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

decisions and assessing performance as the source
of a companys reportable segments. SFAS No. 131 also
requires disclosures about products and services, geographic
areas and major customers. The Company operates in one segment;
the semiconductor manufacturing segment.



| |                  
| | -----------------
| | Advertising Costs

Advertising costs are expensed as incurred and
were not material in the fiscal years ended April 30, 2002,
2001 or 2000.



| |                                         
| | ----------------------------------------
| | Recently Issued Accounting
    Standards

In July 2001, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 141, Business
Combinations and SFAS No. 142, Goodwill and
Other Intangible Assets. SFAS No. 141 requires that
business combinations initiated after June 30, 2001 be
accounted for under the purchase method of accounting. The use
of the pooling-of-interest method of accounting is no longer
allowed. SFAS No. 142 requires that goodwill and other
indefinite life intangible assets will no longer be amortized
but shall be reviewed and tested annually for impairment. SFAS
No. 142 will be effective for fiscal years beginning after
December 15, 2001. The Company expects that the adoption of
SFAS Nos. 141 and 142 will not have a material effect on
its financial statements.

In October 2001, FASB issued SFAS No. 144,
Accounting for Impairment or Disposal of Long-Lived
Assets, which supersedes SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be disposed of and the accounting and
reporting provision of Accounting Principles Board
(APB) No. 30, Reporting the Results of
Operations, Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions. SFAS No. 144 addresses
financial accounting and reporting for impairment or disposal of
long-lived assets including amortizable intangibles and is
effective for fiscal years beginning December 15, 2001 as
well as interim periods within those fiscal years. SFAS
No. 144 does not apply to the impairment of goodwill and
non-amortizable intangibles. The Company expects that the
adoption of SFAS No. 144 will not have a material effect on
its financial statements.

Note 2  Balance Sheet
Components

|                     |                                       |                |       |       |   |   |        |        |  
|-------------------- | ------------------------------------- | -------------- | ----- | ----- | - | - | ------ | ------ | -
|                     |                                       |               
|                     |                                       | April 30,     
|                     |                                       |               
|                     |                                       | 2002           |       | 2001 
|                     |                                       |                |       |      
|                     |                                       |               
|                     |                                       | (In thousands)
|Accounts receivable: |                                       |                |       |       |   |   |        |       
|                     | Accounts receivable                   |                | $     | 9,879 |   |   | $      | 11,561 |  
|                     | Less: Allowance for doubtful accounts |                |       | (950  | ) |   |        | (750   | )
|                     |                                       |                |       |       |   |   |        |       
|                     |                                       | $              | 8,929 |       |   | $ | 10,811 |       
|                     |                                       |                |       |       |   |   |        |       

F-10



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##### Table of Contents



CATALYST SEMICONDUCTOR, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

No amounts were written off in respect of bad
debts in the years ended April 30, 2002, 2001 and 2000,
respectively.

|                        |                                                 |   |       |        |   |   |       |        |  
|----------------------- | ----------------------------------------------- | - | ----- | ------ | - | - | ----- | ------ | -
|Inventories:            |                                                 |   |       |        |   |   |       |       
|                        | Work-in-process                                 |   | $     | 5,590  |   |   | $     | 6,113  |  
|                        | Finished goods                                  |   |       | 3,159  |   |   |       | 2,236  |  
|                        |                                                 |   |       |        |   |   |       |       
|                        |                                                 | $ | 8,749 |        |   | $ | 8,349 |       
|                        |                                                 |   |       |        |   |   |       |       
|Property and equipment: |                                                 |   |       |        |   |   |       |       
|                        | Engineering and test equipment                  |   | $     | 5,884  |   |   | $     | 5,383  |  
|                        | Computer hardware and software                  |   |       | 807    |   |   |       | 854    |  
|                        | Furniture and office equipment                  |   |       | 1,337  |   |   |       | 1,324  |  
|                        |                                                 |   |       |        |   |   |       |       
|                        |                                                 |   | 8,028 |        |   |   | 7,561 |       
|                        | Less: accumulated depreciation and amortization |   |       | (5,614 | ) |   |       | (4,972 | )
|                        |                                                 |   |       |        |   |   |       |       
|                        |                                                 | $ | 2,414 |        |   | $ | 2,589 |       
|                        |                                                 |   |       |        |   |   |       |       

Depreciation expense for the years ended
April 30, 2002, 2001 and 2000 was $1,008, $1,051 and $939,
respectively.

|                  |                               |   |       |       |  |   |       |       | 
|----------------- | ----------------------------- | - | ----- | ----- |  | - | ----- | ----- | 
|Accrued expenses: |                               |   |       |       |  |   |       |      
|                  | Accrued employee compensation |   | $     | 886   |  |   | $     | 1,612 | 
|                  | Other                         |   |       | 1,595 |  |   |       | 2,145 | 
|                  |                               |   |       |       |  |   |       |      
|                  |                               | $ | 2,481 |       |  | $ | 3,757 |      
|                  |                               |   |       |       |  |   |       |      

Note 3  Line of
Credit

As of April 30, 2001, the Company had
approximately $2.0 million of secured loans owed to a bank.
As of the same date, the Company had $2.0 million cash deposited
at the same bank in an interest bearing account to serve as
collateral. The borrowing agreement bore interest at a variable
rate equal to the banks prime lending rate (7.5% at
April 30, 2001) plus 2.5%. On June 30, 2001, the Company
repaid the outstanding balance and cancelled the agreement. The
Company does not currently have a borrowing relationship with
any lending institutions.

Note 4  Leases

At April 30, 2001, the net book value of
assets recorded as property and equipment under capital leases
aggregated $36,000 which is net of accumulated amortization of
$743,000. All equipment leases were paid in full during fiscal
2002 and the Company has not entered into any further capital
leasing arrangements. The amortization of assets recorded under
capital leases is included within depreciation and amortization
expense.

F-11



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##### Table of Contents



CATALYST SEMICONDUCTOR, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The Company leases its office facilities under
operating leases which expire in 2006. Total rent expense under
these leases was $541,000, $539,000 and $531,000 for fiscal
2002, 2001 and 2000, respectively. The aggregate future minimum
lease payments, by fiscal year, under non-cancelable operating
leases with initial terms of one year or more as of
April 30, 2002 are as follows (in thousands):

|             |  |           |       | 
|------------ |  | --------- | ----- | 
|Years Ending |  | Operating
|April 30,    |  | Leases   
|             |  |          
|2003         |  | $         | 529   | 
|2004         |  |           | 449   | 
|2005         |  |           | 462   | 
|2006         |  |           | 476   | 
|2007         |  |           | 120   | 
|             |  |           |       | 
|             |  | $         | 2,036 | 
|             |  |           |       | 

Note 5  Income Taxes

The Companys provision for income taxes is
comprised as follows (in $000s):

|                                 |         |                    |     |      |  |      |       |       |  |   |     |     | 
|-------------------------------- | ------- | ------------------ | --- | ---- |  | ---- | ----- | ----- |  | - | --- | --- | 
|                                 |         |                   
|                                 |         | For the Year Ended
|                                 |         | April 30,         
|                                 |         |                   
|                                 |         | 2002               |     | 2001 |  | 2000
|                                 |         |                    |     |      |  |     
|Current:                         |         |                    |     |      |  |      |       |       |  |   |     |    
|                                 | Federal |                    | $   | 421  |  |      | $     | 1,996 |  |   | $   | 297 | 
|                                 | State   |                    |     |     |  |      |       | 533   |  |   |     | 3   | 
|                                 | Foreign |                    |     | 73   |  |      |       | 31    |  |   |     |    | 
|                                 |         |                    |     |      |  |      |       |       |  |   |     |    
|Total provision for income taxes |         | $                  | 494 |      |  | $    | 2,560 |       |  | $ | 300 |    
|                                 |         |                    |     |      |  |      |       |       |  |   |     |    

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:

|                                                                          |  |                    |     |      |  |      |     |   |  |  |     |  
|------------------------------------------------------------------------- |  | ------------------ | --- | ---- |  | ---- | --- | - |  |  | --- | -
|                                                                          |  |                   
|                                                                          |  | For the Year Ended
|                                                                          |  | April 30,         
|                                                                          |  |                   
|                                                                          |  | 2002               |     | 2001 |  | 2000
|                                                                          |  |                    |     |      |  |     
|Statutory federal tax rate                                                |  |                    | 35  | %    |  |      | 35  | % |  |  | 34  | %
|State taxes                                                               |  |                    | 3   |      |  |      | 2   |   |  |  |    |  
|Research credits                                                          |  |                    | (13 | )    |  |      |    |   |  |  |    |  
|Foreign                                                                   |  |                    | 6   |      |  |      |    |   |  |  |    |  
|Benefit of net operating loss carryforwards not
    previously recognized |  |                    |    |      |  |      | (28 | ) |  |  | (31 | )
|Other                                                                     |  |                    | 8   |      |  |      |    |   |  |  |    |  
|                                                                          |  |                    |     |      |  |      |     |   |  |  |     |  
|Total provision for income taxes                                          |  |                    | 39  | %    |  |      | 9   | % |  |  | 3   | %
|                                                                          |  |                    |     |      |  |      |     |   |  |  |     |  

F-12



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##### Table of Contents



CATALYST SEMICONDUCTOR, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Deferred tax assets are comprised of the
following (in $000s):

|                                           |  |           |         |      |  |   |        |  
|------------------------------------------ |  | --------- | ------- | ---- |  | - | ------ | -
|                                           |  |          
|                                           |  | April 30,
|                                           |  |          
|                                           |  | 2002      |         | 2001
|                                           |  |           |         |     
|Capitalized research                       |  | $         | 2,221   |      |  | $ | 1,915  |  
|Non deductible reserves and accruals       |  |           | 2,205   |      |  |   | 1,669  |  
|Credit carryforwards                       |  |           | 1,249   |      |  |   | 1,249  |  
|Loss carryforwards                         |  |           | 3,870   |      |  |   |       |  
|Deferred income and sales returns reserves |  |           | 733     |      |  |   | 731    |  
|Other                                      |  |           | 362     |      |  |   | 314    |  
|                                           |  |           |         |      |  |   |        |  
|Gross deferred tax assets                  |  |           | 10,624  |      |  |   | 5,878  |  
|Valuation allowance                        |  |           | (10,624 | )    |  |   | (5,878 | )
|                                           |  |           |         |      |  |   |        |  
|Net deferred tax assets                    |  | $         |        |      |  | $ |       |  
|                                           |  |           |         |      |  |   |        |  

Based on the available objective evidence and the
recent history of losses, management cannot conclude that it is
more likely than not that the net deferred tax assets will be
fully realizable. Accordingly, the Company has provided a full
valuation allowance against its net deferred tax assets at
April 30, 2002 and 2001.

Deferred tax assets of approximately
$3.9 million at April 30, 2002 pertain to certain
carryforwards resulting from the exercise of employee stock
options. When recognized, $3.3 million of the tax benefit
and resulting reversal of valuation allowance against these
carryforwards will be accounted for as a credit to additional
paid-in capital rather than a reduction of the income tax
provision.

At April 30, 2002, the Company had
$11.0 million and $1.0 million of federal and state
net operating loss carryforwards, respectively, available to
offset future taxable income. The federal and state net
operating loss carryforwards will expire between 2013 and 2019,
if not utilized.

At April 30, 2002, the Company had
$1.0 million and $500,000 of federal and state research
credit carryovers, respectively, available to offset future
taxable income. The federal and state credits begin to expire in
fiscal year 2005.

Under the Internal Revenue Code, the amounts of
and benefits from net operating loss and tax credit
carryforwards may be impaired or limited in certain
circumstances. Events which cause limitations in the amount of
net operating losses and tax credit carryforwards that the
Company may utilize in any one year include, but are not limited
to, a cumulative ownership change of more than 50%, as defined,
over a three year period.

Note 6  Stock Plans



| |                   
| | ------------------
| | Stock Option Plans

In October 1989, the Company adopted a founder
stock plan for incentive stock options and non-statutory stock
options. The founder stock plan was amended and restated in
March 1993 as the stock option plan (the Option
Plan) which had the effect of extending its expiration
date to March 2003. In January 1999 and September 2000, the
stockholders authorized an additional 1.8 million shares
and 2.5 million shares, respectively, to be reserved under
the Option Plan. A total of 7.6 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 generally

F-13



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##### Table of Contents



CATALYST SEMICONDUCTOR, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

must 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 non-employee
directors. In November 1999 and September 2000, the stockholders
authorized additional 100,000 and 450,000 shares,
respectively, to be reserved under the Director Plan. A total of
770,000 shares of Common Stock have been reserved for
issuance under the Director Plan. Options granted under the
Director Plan prior to May 1, 2000 are for periods not to
exceed five years and not to exceed a period of ten years for
grants made thereafter. 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, 2002, a total of
377,000 options at exercise prices ranging from $0.47 to
$9.50 per share, have been granted under the Director Plan,
79,000 of which were exercisable.

In December 1998, the Company adopted an
additional stock option plan entitled the 1998 Special Equity
Incentive Plan (Special Option Plan) for incentive stock options
and non-statutory stock options for certain directors, officers
and consultants of the Company. A total of 3.5 million
shares of Common Stock have been reserved for issuance under the
Special Option Plan. Options granted under the Special Option
Plan are for periods not to exceed ten years. Options generally
vest over four year periods. During fiscal 1999, options
totaling 3.0 million shares were granted to employees and
directors under the plan at a price of $0.125 per share when the
market was at $0.33 per share. As a result, an aggregate of
$517,000 of compensation expense will be recognized over the
four year vesting period of the options, $110,000, $120,000 and
$136,000 of which was recognized during the years ended
April 30, 2002, 2001 and 2000, respectively. As of
April 30, 2002, $94,000 of compensation expense remains to
be recognized.

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

|                           |  |                |        |             |  |            |        |   |  |   |      | 
|-------------------------- |  | -------------- | ------ | ----------- |  | ---------- | ------ | - |  | - | ---- | 
|                           |  | Options        |        |             |  | Weighted  
|                           |  | Available      |        | Options     |  | Avg. Price
|                           |  | for Grant      |        | Outstanding |  | Per Share 
|                           |  |                |        |             |  |           
|                           |  |                |        |            
|                           |  | (In thousands) |        |            
|Balance at April 30, 1999  |  |                | 1,045  |             |  |            | 6,810  |   |  | $ | 0.56 | 
|Granted                    |  |                | (1,295 | )           |  |            | 1,295  |   |  | $ | 1.58 | 
|Canceled                   |  |                | 1,141  |             |  |            | (1,141 | ) |  | $ | 0.35 | 
|Exercised                  |  |                |       |             |  |            | (2,052 | ) |  | $ | 0.80 | 
|                           |  |                |        |             |  |            |        |   |  |   |      | 
|Balance at April 30, 2000  |  |                | 891    |             |  |            | 4,912  |   |  | $ | 0.57 | 
|Additional shares reserved |  |                | 2,950  |             |  |            |       |   |  |   |      | 
|Granted                    |  |                | (1,702 | )           |  |            | 1,702  |   |  | $ | 6.42 | 
|Canceled                   |  |                | 668    |             |  |            | (668   | ) |  | $ | 2.33 | 
|Exercised                  |  |                |       |             |  |            | (1,522 | ) |  | $ | 0.35 | 
|                           |  |                |        |             |  |            |        |   |  |   |      | 
|Balance at April 30, 2001  |  |                | 2,807  |             |  |            | 4,424  |   |  | $ | 2.63 | 
|Granted                    |  |                | (2,078 | )           |  |            | 2,078  |   |  | $ | 1.88 | 
|Canceled                   |  |                | 171    |             |  |            | (171   | ) |  | $ | 6.08 | 
|Exercised                  |  |                |       |             |  |            | (1,164 | ) |  | $ | 0.39 | 
|                           |  |                |        |             |  |            |        |   |  |   |      | 
|Balance at April 30, 2002  |  |                | 900    |             |  |            | 5,167  |   |  | $ | 2.78 | 
|                           |  |                |        |             |  |            |        |   |  |   |      | 

F-14



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##### Table of Contents



CATALYST SEMICONDUCTOR, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The range of exercise prices table below
summarizes information regarding stock options outstanding at
April 30, 2002. The options exercisable as of
April 30, 2001 and 2000 were 1,057,000 and 1,347,000
respectively.

|           |  |                     |       |                     |  |           |     |                   |  |           |      |  |  |  |       |  |  |   |      | 
|---------- |  | ------------------- | ----- | ------------------- |  | --------- | --- | ----------------- |  | --------- | ---- |  |  |  | ----- |  |  | - | ---- | 
|           |  |                     |       |                    
|           |  | Options Outstanding |       | Options Exercisable
|           |  |                     |       |                    
|Actual     |  |                     |       | Weighted-           |  | Weighted- |     |                   |  | Weighted-
|Range of   |  | Number              |       | Average             |  | Average   |     | Number            |  | Average  
|Exercise   |  | Outstanding         |       | Remaining           |  | Exercise  |     | Exercisable       |  | Exercise 
|Prices     |  | at April 30, 2002   |       | Contractual Life    |  | Price     |     | at April 30, 2002 |  | Price    
|           |  |                     |       |                     |  |           |     |                   |  |          
|           |  | (In thousands)      |       | (Years)             |  |           |     | (In thousands)    |  |          
|$0.11-0.13 |  |                     | 803   |                     |  |           | 6.6 |                   |  | $         | 0.12 |  |  |  | 443   |  |  | $ | 0.12 | 
|0.25-0.33  |  |                     | 412   |                     |  |           | 6.9 |                   |  |           | 0.29 |  |  |  | 266   |  |  |   | 0.29 | 
|0.40-0.50  |  |                     | 154   |                     |  |           | 6.8 |                   |  |           | 0.40 |  |  |  | 53    |  |  |   | 0.40 | 
|1.00-1.04  |  |                     | 271   |                     |  |           | 7.5 |                   |  |           | 1.00 |  |  |  | 146   |  |  |   | 1.00 | 
|1.73-2.00  |  |                     | 1,807 |                     |  |           | 9.3 |                   |  |           | 1.73 |  |  |  | 607   |  |  |   | 1.74 | 
|4.07-6.06  |  |                     | 1,049 |                     |  |           | 8.6 |                   |  |           | 5.43 |  |  |  | 381   |  |  |   | 5.49 | 
|6.30-8.38  |  |                     | 641   |                     |  |           | 7.5 |                   |  |           | 7.30 |  |  |  | 300   |  |  |   | 7.31 | 
|9.50-9.50  |  |                     | 30    |                     |  |           | 3.1 |                   |  |           | 9.50 |  |  |  | 10    |  |  |   | 9.50 | 
|           |  |                     |       |                     |  |           |     |                   |  |           |      |  |  |  |       |  |  |   |      | 
|$0.11-9.50 |  |                     | 5,167 |                     |  |           | 8.1 |                   |  | $         | 2.78 |  |  |  | 2,206 |  |  | $ | 2.60 | 
|           |  |                     |       |                     |  |           |     |                   |  |           |      |  |  |  |       |  |  |   |      | 



| |                  
| | -----------------
| | 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
750,000 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.
The Purchase Plan was suspended effective June 1998 due to the
Companys delisting from the NASDAQ National stock market
in August 1998. As of April 30, 2002, a total of
231,000 shares have been issued under the Purchase Plan.



| |                                            
| | -------------------------------------------
| | Pro Forma Stock Compensation
    Disclosure

The fair value of each option granted under the
Option Plan, the Director Plan and the Special Option Plan 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 2002, 2001 and 2000,
respectively: dividend yield of 0 percent for all years,
expected volatility of 85, 100 and 100 percent, risk
free interest rates of 3.74%, 5.90% and 6.00% and expected lives
of 4 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:
dividend yield of 0 percent, expected volatility of
79 percent, risk free interest rate of 5.36% and an
expected life of 0.5 years for non-officer/director
employees and officers and directors for 1998. The Purchase Plan
was suspended effective June 1998 due to the Companys
delisting from the NASDAQ National stock market in August 1998.
As a result of such suspension, no fair value for the Purchase
Plan was calculated under the Black-Scholes option-valuation
model for fiscal 2002, 2001 or 2000.

F-15



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##### Table of Contents



CATALYST SEMICONDUCTOR, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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 the stock option plans
and its Purchase Plan 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):

|                                       |         |                      |        |       |   |      |        |      |  |   |       |      | 
|-------------------------------------- | ------- | -------------------- | ------ | ----- | - | ---- | ------ | ---- |  | - | ----- | ---- | 
|                                       |         |                     
|                                       |         | Year Ended April 30,
|                                       |         |                     
|                                       |         | 2002                 |        | 2001  |   | 2000
|                                       |         |                      |        |       |   |     
|Pro-forma net income (loss)            |         | $                    | (2,515 | )     |   | $    | 25,465 |      |  | $ | 9,604 |     
|Pro-forma net income (loss) per share: |         |                      |        |       |   |      |        |      |  |   |       |     
|                                       | Basic   |                      | $      | (0.14 | ) |      | $      | 1.52 |  |   | $     | 0.66 | 
|                                       | Diluted |                      | $      | (0.14 | ) |      | $      | 1.20 |  |   | $     | 0.48 | 



| |                                               
| | ----------------------------------------------
| | Options Granted to Consultants and
    Vendors

In March 1999, the Company entered into an
arrangement with a sales representative providing for options
for the purchase of up to 200,000 shares of the
Companys common stock. The options under this agreement
vested 16,667 shares for each $1.0 million in
shipments of the Companys products by the representative
through April 30, 2002 when the arrangement expired. The
options were valued using the Black-Scholes option pricing model
and in accordance with the guidance in EITF 96-18. Total
expense of $156,000, $260,000 and $167,000 was recorded in the
fiscal years ended April 30, 2002, 2001 and 2000,
respectively, based upon shipments of $3.0 million,
$2.7 million and $1.3 million in the respective
periods. Cumulatively, during the term of the agreement, the
Company recorded $670,000 of compensation expense and the sales
representative earned a total of 116,667 options.

Note 7  Stockholders
Equity



| |                                    
| | -----------------------------------
| | Common Stock Repurchase
    Program

In September 2001, the Board of Directors
authorized a program for the open market repurchase of up to
1,500,000 shares of Catalyst common shares. During fiscal
2002, total shares repurchased under the program were 193,700,
for a cost of $417,000. In a separately authorized transaction,
the Board made an arrangement to repurchase
1,500,000 shares from its largest shareholder at a price
per share equal to 95% of the closing price April 19, 2002,
resulting in the payment of an aggregate of $4,688,000 for the
shares. The Company accounts for treasury stock using the cost
method.



| |                              
| | -----------------------------
| | Shareholders Rights
    Plan

In December 1996, the Company implemented the
Preferred Shares Rights Agreement (Rights Plan) to protect
shareholders rights in the event of a proposed takeover of
the Company. Under the Rights Plan, each share of the
Companys outstanding common stock carries one preferred
share purchase right (Right). The Right entitles the holder,
subject to certain conditions, to purchase one one-thousandth of
a share of Series A Participating Preferred Stock and,
under certain circumstances, to instead purchase shares of
common stock of the Company or its acquirer at a discounted
price. The Rights are redeemable by the Company and expire in
2006. A full description of the Rights Plan, as amended, may be
found by referring to Exhibits 4.1 through 4.5 which
are set forth in the Index to Exhibits contained in
the Companys Report of Form 10-K for the fiscal year
ended April 30, 2002.

F-16



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##### Table of Contents



CATALYST SEMICONDUCTOR, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Note 8  Segment Reporting

The company operates in one business segment,
being the semiconductor manufacturing segment.

Revenues by destination were as follows (in
thousands):

|               |             |                      |        |        |  |      |        |        |  |   |        |        | 
|-------------- | ----------- | -------------------- | ------ | ------ |  | ---- | ------ | ------ |  | - | ------ | ------ | 
|               |             |                     
|               |             | Year Ended April 30,
|               |             |                     
|               |             | 2002                 |        | 2001   |  | 2000
|               |             |                      |        |        |  |     
|North America  |             | $                    | 13,470 |        |  | $    | 39,584 |        |  | $ | 19,416 |       
|Japan          |             |                      | 4,923  |        |  |      | 11,200 |        |  |   | 4,362  |       
|Other Far East |             |                      | 19,838 |        |  |      | 33,320 |        |  |   | 21,696 |       
|Europe         |             |                      | 4,560  |        |  |      | 13,911 |        |  |   | 4,053  |       
|               |             |                      |        |        |  |      |        |        |  |   |        |       
|               | Total sales |                      | $      | 42,791 |  |      | $      | 98,015 |  |   | $      | 49,527 | 
|               |             |                      |        |        |  |      |        |        |  |   |        |       

Sales and purchase transactions are denominated
in U.S. dollars, except for certain purchases which were
denominated in Thai Baht and Japanese Yen and which were not
significant for the years ended April 30, 2002, 2001 and
2000.

Note 9  Contingencies

On April 17, 2001, Xicor Corporation
(Xicor), a competitor in the nonvolatile and mixed signal
markets, served a complaint against the Company in the United
States District Court for the District of Delaware. The
complaint alleged that some of the Companys recently
announced digital potentiometer products infringed on a patent
that Xicor obtained in 1988. In June 2002, the Company entered
into a settlement agreement with Xicor according to which
Catalyst has received a license to manufacture the disputed
products in exchange for certain royalty payments based upon
sales of those products after July 22, 2002. The complaint was
dismissed on July 22, 2002.

In 1989, the Company entered into a license
agreement with Philips Export B.V. and U.S. Philips
Corporation (Philips) to license technology relating to their
I2C bus technology. The Company received a
communication from Philips in May 2001 suggesting that royalties
may be due and owing on past sales of certain products. The
Company continues to investigate this communication.

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.

Note 10  Related Party
Transactions

During the fourth quarter of fiscal 2000, the
Company began taking delivery of wafers fabricated at X-Fab
Texas, Inc. (Xfab), a wholly owned subsidiary of Elex NV, a
Belgian holding company that owns 24% of the outstanding shares
of the Company. The wafers provided by Xfab supplement the same
designs fabricated at Oki Semiconductor in Japan, the
Companys principal wafer fab since 1985. The Company
believes that the cost of such wafers is no greater than
comparable materials available from alternative foundry
services. During the fiscal years ended April 30, 2002,
2001 and 2000, the Companys purchases from Xfab totaled
$1.2 million, $6.6 million and $899,000, respectively.
As of April 30, 2002 and 2001, the total amount owed Xfab
was $184,000 and $169,000, respectively.
Mr. Duchâtelet is the Chairman and CEO of
Elex N.V. and serves as a member of the Companys
Board of Directors.

The Company has had an arrangement since 1995 to
obtain engineering services from Lxi Corporation, a California
corporation (Lxi), a provider of engineering services through
Essex com SRL (Essex), its wholly

F-17



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##### Table of Contents



CATALYST SEMICONDUCTOR, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

owned subsidiary in Romania. The number of
full-time engineers we use is dependent upon the scope and
number of R&D projects we have in process at a given time.
For example, during the month of April 2002, Essex employed the
equivalent of approximately 15 engineers to perform services on
behalf of Catalyst. The services relate to key development
projects of the Company including development, design, layout
and test program development services. Officers of the Company
own approximately 95% of Lxi. During the fiscal years ended
April 30, 2002, 2001 and 2000 the Company recorded
$852,000, $714,000 and $534,000, respectively, of engineering
fees to Lxi for engineering design services provided by Lxi to
us. As of April 30, 2002 and 2001, the total amount owed to
Essex and Lxi was $228,000 and $122,000, respectively. The
officers received no payments during the fiscal years ended
April 30, 2002, April 30, 2001 and April 30,
2000. One officer had previously served as the Treasurer of Lxi
prior to his joining the Company. Such officer resigned such
position immediately prior to joining the Company. Such officer
continues to serve as a director of Lxi.

One director, Mr. Allan, also serves as a
consultant to the Company through his consulting company, Allan
Advisors, Inc. Under the terms of the consulting agreement, the
Company paid consulting fees of $8,333 per month throughout
Fiscal 2002. During each of the fiscal years ended
April 30, 2002, 2001 and 2000, the Company paid $100,000 to
Allan Advisors under such agreement. The consulting agreement
will expire on August 14, 2003.

F-18



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##### Table of Contents



SCHEDULE II  VALUATION
AND QUALIFYING ACCOUNTS

|                                           |  |                |        |           |  |            |       |            |  |   |        |   |  |   |        | 
|------------------------------------------ |  | -------------- | ------ | --------- |  | ---------- | ----- | ---------- |  | - | ------ | - |  | - | ------ | 
|                                           |  |                |        | Additions |  |            |       |           
|                                           |  |                |        | Charged   |  |            |       |           
|                                           |  | Balance at     |        | to        |  |            |       | Balance at
|                                           |  | Beginning      |        | Costs and |  |            |       | End of    
|Year Ended April 30,                       |  | of Year        |        | Expenses  |  | Deductions |       | Year      
|                                           |  |                |        |           |  |            |       |           
|                                           |  |               
|                                           |  | (In thousands)
|2002                                       |  |                |        |           |  |            |       |            |  |   |        |   |  |   |        | 
|Allowance for doubtful accounts receivable |  | $              | 750    |           |  | $          | 200   |            |  | $ |       |   |  | $ | 950    | 
|Valuation reserve for deferred tax assets  |  |                | 5,878  |           |  |            | 4,746 |            |  |   |       |   |  |   | 10,624 | 
|                                          
|2001                                       |  |                |        |           |  |            |       |            |  |   |        |   |  |   |        | 
|Allowance for doubtful accounts receivable |  |                | 286    |           |  |            | 464   |            |  |   |       |   |  |   | 750    | 
|Valuation reserve for deferred tax assets  |  |                | 14,535 |           |  |            |      |            |  |   | (8,657 | ) |  |   | 5,878  | 
|                                          
|2000                                       |  |                |        |           |  |            |       |            |  |   |        |   |  |   |        | 
|Allowance for doubtful accounts receivable |  |                | 286    |           |  |            |      |            |  |   |       |   |  |   | 286    | 
|Valuation reserve for deferred tax assets  |  |                | 15,455 |           |  |            |      |            |  |   | (920   | ) |  |   | 14,535 | 

S-1



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##### Table of Contents



INDEX TO EXHIBITS

|        |           |             |  |                                                                                                                                                                                                                                                                                                                                                                                                          
|------- | --------- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |           |            
|No.     |           | Description
|        |           |            
|        | 3.2(11)   |             |  | Restated Certificate of Incorporation of
    Registrant.                                                                                                                                                                                                                                                                                                                                                 
|        | 3.4(10)   |             |  | 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.
|        | 4.2       |             |  | Amendment No. 1 to Preferred Shares Rights
    Agreement dated as of May 22, 1998 between Registrant and
    BankBoston, N. A., as rights agent.                                                                                                                                                                                                                                                         
|        | 4.3       |             |  | Amendment No. 2 to Preferred Shares Rights
    Agreement dated as of September 14, 1998 between Registrant
    and BankBoston, N. A., as rights agent.                                                                                                                                                                                                                                                   
|        | 4.4(18)   |             |  | Amendment No. 3 to Preferred Shares Rights
    Agreement dated as of September 27, 2001 between Registrant
    and EquiServe Trust Company N.A., as rights agent.                                                                                                                                                                                                                                        
|        | 4.5       |             |  | Amendment No. 4 to Preferred Shares Rights
    Agreement dated as of July 17, 2002 between Registrant and
    EquiServe Trust Company N.A., as rights agent.                                                                                                                                                                                                                                             
|        | 10.7(11)* |             |  | Stock Option Plan.                                                                                                                                                                                                                                                                                                                                                                                       
|        | 10.8(16)* |             |  | 1993 Employee Stock Purchase Plan.                                                                                                                                                                                                                                                                                                                                                                       
|        | 10.9(16)* |             |  | 1993 Director Stock Option Plan.                                                                                                                                                                                                                                                                                                                                                                         
|        | 10.12(1)  |             |  | Distributor Agreement dated February 1990 between
    Arrow Electronics, Inc. and Registrant.                                                                                                                                                                                                                                                                                                            
|        | 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.                                                                                                                                                                                                                                                                                
|        | 10.27(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.                                                                                                                                                                                                                                                       
|        | 10.49(6)  |             |  | Loan and Security Agreement dated June 19,
    1997 between Coast Business Credit, a division of Southern
    Pacific Thrift & Loan Association (Coast) and Registrant.                                                                                                                                                                                                                                  
|        | 10.51(6)  |             |  | Commercial Security Agreement dated April 1,
    1998 between Registrant and Oki Electric Industry Co., Ltd.                                                                                                                                                                                                                                                                                             
|        | 10.52(6)  |             |  | 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.                                                                                                                                                                                                         
|        | 10.59(6)* |             |  | Severance Agreement dated June 1, 1998
    between Thomas E. Gay III and Registrant.                                                                                                                                                                                                                                                                                                                     
|        | 10.61(6)  |             |  | 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.                                                                                                                                                                                                             



---



##### Table of Contents



|        |            |             |  |                                                                                                                                                                                                    
|------- | ---------- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |            |            
|No.     |            | Description
|        |            |            
|        | 10.62(6)   |             |  | Letter Agreement dated August 6, 1998
    between Coast and Registrant concerning default and forbearance
    under the Companys bank agreements.                                                 
|        | 10.63(7)*  |             |  | Agreement dated August 14, 1995 between
    Registrant and Lionel M. Allan (Amendment).                                                                                                            
|        | 10.64(8)   |             |  | Common Stock Purchase Agreement dated as of
    September 14, 1998 between Registrant and Elex NV with
    Standstill Agreement dated as of September 14, 1998 between
    Registrant and Elex, NV.
|        | 10.65(8)   |             |  | Letter Agreement dated September 21, 1998
    between Coast Business Credit and Registrant concerning
    forbearance under the Companys Bank Agreement.                                          
|        | 10.67(12)* |             |  | Modification dated January 1, 1999 of
    Consulting Agreement dated August 14, 1995 between the
    Company and Allan Advisors, Inc.                                                              
|        | 10.68(13)  |             |  | Amendment No. One to Loan and Security
    Agreement dated as of April 21, 1999 between Registrant and
    Coast Business Credit, a division of Southern Pacific Bank.                             
|        | 10.69(16)  |             |  | 1998 Special Equity Incentive Plan.                                                                                                                                                                
|        | 10.70(14)* |             |  | Employment Agreement dated August 18, 1998
    between Radu Vanco and Registrant.                                                                                                                  
|        | 10.71(14)* |             |  | Severance Agreement dated May 11, 1999
    between Irv Kovalik and Registrant.                                                                                                                     
|        | 10.72(15)* |             |  | Severance Agreement dated May 11, 1999
    between Frank Reynolds and Registrant.                                                                                                                  
|        | 10.73(15)* |             |  | Consulting Agreement dated January 1, 2000
    between Hideyuki Tanigami and Registrant.                                                                                                           
|        | 10.74(15)* |             |  | Amendment to Consulting Agreement dated
    June 23, 2000 between Hideyuki Tanigami and Registrant.                                                                                                
|        | 10.75(17)* |             |  | Extension of Consulting Agreement dated
    June 7, 2001 between Allan Advisors, Inc. and Registrant.                                                                                              
|        | 10.76(17)* |             |  | Severance Agreement dated September 21, 1999
    between Barry Wiley and Registrant.                                                                                                               
|        | 10.77*     |             |  | Severance Agreement dated April 26, 2001
    between Gelu Voicu and Registrant.                                                                                                                    
|        | 10.78*     |             |  | Severance Agreement dated November 8, 2001
    between Sorin Georgescu and Registrant.                                                                                                             
|        | 10.79*     |             |  | Extension to Severance Agreement dated as of
    February 27, 2002 between Thomas E. Gay and Registrant.                                                                                           
|        | 10.80*     |             |  | Extension to Severance Agreement dated as of
    February 27, 2002 between Irv Kovalik and Registrant.                                                                                             
|        | 10.81*     |             |  | Extension to Severance Agreement dated as of
    February 27, 2002 between Barry Wiley and Registrant.                                                                                             
|        | 10.82*     |             |  | Extension to Severance Agreement dated as of
    February 27, 2002 between Frank Reynolds and Registrant.                                                                                          
|        | 10.83(18)  |             |  | Stock Purchase Agreement dated April 19,
    2002 between Elex NV and Registrant.                                                                                                                  
|        | 10.84*     |             |  | Form of Change of Control Agreement between
    Registrant and its non-employee directors.                                                                                                         
|        | 21.1(1)    |             |  | List of Subsidiaries of Registrant.                                                                                                                                                                
|        | 23.1       |             |  | Consent of Independent Accountants.                                                                                                                                                                



---



|    |                                                                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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.                                                                     
|   
|(6) | Incorporated by reference to Registrants
    Form 10-K filed for the year ended May 3, 1998.                                                                      
|   
|(7) | Incorporated by reference to Registrants
    Form 10-K/A (Am. No. 1) filed for the year ended
    May 3, 1998.                                                    
|   
|(8) | Incorporated by reference to Registrants
    Form 10-Q filed for the quarter ended August 2, 1998.                                                                
|   
|(9) | Incorporated by reference to Registrants
    Form 10-Q filed for the quarter ended November 1, 1998.                                                              



---



##### Table of Contents





|     |                                                                                                                            
|---- | ---------------------------------------------------------------------------------------------------------------------------
|(10) | Incorporated by reference to Registrants
    Form 10-Q/A (Am. No. 1) filed for the quarter ended
    November 1, 1998.    
|    
|(11) | Incorporated by reference to an Appendix to
    Registrants Definitive Proxy Statement filed
    December 18, 1998.       
|    
|(12) | Incorporated by reference to Registrants
    Form 10-Q filed for the quarter ended January 21, 1999.                      
|    
|(13) | Incorporated by reference to Registrants
    Form 8-K, Date of Report: April 15, 1999.                                    
|    
|(14) | Incorporated by reference to Registrants
    Form 10-K filed for the year ended May 2, 1999.                              
|    
|(15) | Incorporated by reference to Registrants
    Form 10-K filed for the year ended April 30, 2000.                           
|    
|(16) | Incorporated by reference to an Appendix to
    Registrants Definitive Proxy Statement previously filed
    July 27, 2000.
|    
|(17) | Incorporated by reference to Registrants
    Form 10-K filed for the year ended April 30, 2001.                           
|    
|(18) | Incorporated by reference to Registrants
    Form 8-K filed April 30, 2002.                                               



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|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.



|  |                                                                                                                                                      
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------
|* | Constitutes a management contract or compensatory
    plan or arrangement required to be filed as an exhibit pursuant
    to Item 14(c) of Form 10-K.