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U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549



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Form 10-K/A

Amendment No. 1 to



|x |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
|- |  | ----------------------------------------------------

| |  | SECURITIES EXCHANGE ACT OF 1934
| |  | -------------------------------



For the fiscal year ended: March 31, 2003



OR



| ̈ |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
|- |  | --------------------------------------------------------

| |  | SECURITIES EXCHANGE ACT OF 1934
| |  | -------------------------------



For the transition period from                  to



Commission File Number: 0-15449



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CALIFORNIA MICRO DEVICES CORPORATION

(Exact name of registrant as specified in its charter)



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|California                                     |  | 94-2672609                       
|---------------------------------------------- |  | ---------------------------------
|(State or other jurisdiction of incorporation) |  | (IRS Employer Identification No.)
|                                               | 
|430 North McCarthy Blvd #100, Milpitas, CA     |  | 95035-5112                       
|(Address of principal executive offices)       |  | (Zip code)                       



Registrants
telephone number, including area code:

(408) 263-3214



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

None



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

Common Stock



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



Indicate by check mark if disclosure of delinquent files pursuant to Item 405 of Regulation S-K (Section 209.405 of this
chapter) is not contained herein, and will not be contained to the best of registrants knowledge, in any definitive proxy or information statement incorporated by reference in Part II of this Form 10-K or any amendment to this Form
10-K.    Yes  x    No ̈



Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).    Yes ̈No  x



The approximate aggregate
market value of the registrants common stock held by non-affiliates as of September 30, 2002 (the last business day of the registrants most recently completed second fiscal quarter) was $38.0 million based on the closing price for the
common stock on the Nasdaq National Market on such date.



For
purposes of this disclosure, common stock held by persons who hold more than 5% of the outstanding voting shares and common stock held by executive officers and directors of the Registrant have been excluded in that such persons may be deemed to be
affiliates as that term is defined under the rules and regulations promulgated under the Securities Act of 1933. This determination of affiliate status is not necessarily a conclusive determination for other purposes.



As of May 30, 2003, the number of shares of the Registrants common
stock outstanding was 15,887,606.



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DOCUMENTS INCORPORATED BY REFERENCE



The Proxy Statement for the Registrants Annual Meeting of Shareholders held August 8, 2003.



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EXPLANATORY NOTE



We are filing this Amendment No. 1 on Form 10-K/A (this Amendment) to our Annual Report on Form 10-K for the fiscal year ended
March 31, 2003 (the Original Report) to correct clerical errors in unaudited Footnote 17 - Quarterly Financial Data of Item 8  Financial Statements and Supplementary Data contained in the Original
Report. These errors were in the balance sheet data for the quarters ended September 30, 2002, and December 31, 2002, in which the Effect of Restatement data were originally shown as ($625) and $29, respectively, instead of $1,117 and
$1,146, respectively. These errors caused us to make corresponding changes to the corresponding As restated data as well. As a result of these corrections, Footnote 17 is now consistent with the amended quarterly reports on Form 10-Q/A
for these periods filed with the Securities and Exchange Commission on September 18, 2003, and the Current Report on Form 8-K filed with the Securities and Exchange Commission on May 8, 2003. These corrections have no effect on any of the audited
data contained in the Original Report. Thus, no changes in the financial statements or other items of the Original Report are necessary, except to include updated officer certifications as Exhibits 31 and 32 to this Amendment. This Amendment does
not reflect events occurring after the filing of the Original Report, or modify or update the disclosures contained in the Original Report in any way other than as required to reflect the corrections described above.



2



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ITEM 8.Financial Statements and Supplementary Data.



REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS



The Board of Directors and Shareholders

California Micro Devices Corporation



We have audited the accompanying balance sheets of California Micro Devices Corporation as of March 31, 2003 and 2002, and the related statements of
operations, shareholders equity, and cash flows for each of the three years in the period ended March 31, 2003. Our audits also included the financial statement schedule listed in the Index at Item 8. These financial statements and schedule
are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.



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



In our opinion, the financial
statements referred to above present fairly, in all material respects, the financial position of California Micro Devices Corporation at March 31, 2003 and 2002, and the results of its operations and its cash flows for each of the three years in the
period ended March 31, 2003, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a
whole, presents fairly in all material respects the information set forth therein.



/s/ ERNST & YOUNG LLP



San Jose, California

May 8, 2003

except for the third paragraph of Note 9, as to which the date is

June 26,
2003



3



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CALIFORNIA MICRO DEVICES CORPORATION



BALANCE SHEETS

(amounts in thousands, except share data)



|                                                                                                                                                            |  | March 31, 2003 |         |   | March 31, 2002 |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ------- | - | -------------- | -
|ASSETS:                                                                                                                                                     |  |                |         |   |                |  
|Current assets:                                                                                                                                             |  |                |         |   |                |  
|Cash and cash equivalents                                                                                                                                   |  | $              | 4,513   |   |                | $
|Short-term investments                                                                                                                                      |  |                |        |   |                |  
|Accounts receivable, less allowance for doubtful accounts of $159 and $161, in 2003 and 2002, respectively                                                  |  |                | 5,281   |   |                |  
|Inventories                                                                                                                                                 |  |                | 3,577   |   |                |  
|Prepaids and other current assets                                                                                                                           |  |                | 652     |   |                |  
|                                                                                                                                                            |  |                |         |   |                |  
|Total current assets                                                                                                                                        |  |                | 14,023  |   |                |  
|Property, plant & equipment, net                                                                                                                            |  |                | 10,087  |   |                |  
|Restricted cash                                                                                                                                             |  |                | 880     |   |                |  
|Other long term assets                                                                                                                                      |  |                | 415     |   |                |  
|                                                                                                                                                            |  |                |         |   |                |  
|Total assets                                                                                                                                                |  | $              | 25,405  |   |                | $
|                                                                                                                                                            |  |                |         |   |                |  
|LIABILITIES & SHAREHOLDERS EQUITY:                                                                                                                         |  |                |         |   |                |  
|Current liabilities:                                                                                                                                        |  |                |         |   |                |  
|Accounts payable                                                                                                                                            |  | $              | 3,195   |   |                | $
|Accrued liabilities                                                                                                                                         |  |                | 2,631   |   |                |  
|Accrued underwriter fees                                                                                                                                    |  |                |        |   |                |  
|Deferred margin on shipments to distributors                                                                                                                |  |                | 1,873   |   |                |  
|Current maturities of long-term debt and capital lease obligations                                                                                          |  |                | 1,603   |   |                |  
|                                                                                                                                                            |  |                |         |   |                |  
|Total current liabilities                                                                                                                                   |  |                | 9,302   |   |                |  
|Long-term debt and capital lease, less current maturities                                                                                                   |  |                | 8,308   |   |                |  
|Other long-term liabilities                                                                                                                                 |  |                |        |   |                |  
|                                                                                                                                                            |  |                |         |   |                |  
|Total liabilities                                                                                                                                           |  |                | 17,610  |   |                |  
|Commitments and contingencies                                                                                                                               |  |                |         |   |                |  
|Shareholders equity:                                                                                                                                       |  |                |         |   |                |  
|Preferred stockno par value; 10,000,000 shares authorized; none issued and outstanding                                                                     |  |                |        |   |                |  
|Common stockno par value; 25,000,000 shares authorized; shares issued and outstanding: 15,881,176 as of March 31, 2003 and
13,850,765 as of March 31, 2002 |  |                | 74,240  |   |                |  
|Accumulated deficit                                                                                                                                         |  |                | (66,445 | ) |                |  
|Accumulated other comprehensive income                                                                                                                      |  |                |        |   |                |  
|                                                                                                                                                            |  |                |         |   |                |  
|Total shareholders equity                                                                                                                                  |  |                | 7,795   |   |                |  
|                                                                                                                                                            |  |                |         |   |                |  
|Total liabilities and shareholders equity                                                                                                                  |  | $              | 25,405  |   |                | $
|                                                                                                                                                            |  |                |         |   |                |  



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



4



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CALIFORNIA MICRO DEVICES CORPORATION



STATEMENTS OF OPERATIONS

(amounts in thousands, except per share data)



|                                                                         |  | Year Ended March 31, |       
|------------------------------------------------------------------------ |  | -------------------- | ------
|                                                                         |  | 2003                 |       
|Net sales                                                                |  | $                    | 42,184
|Cost and expenses:                                                       |  |                      |       
|Cost of sales                                                            |  |                      | 34,051
|Research and development                                                 |  |                      | 3,719 
|Selling, general and administrative                                      |  |                      | 10,033
|Special charges                                                          |  |                      | (193  
|                                                                         |  |                      |       
|Total costs and expenses                                                 |  |                      | 47,610
|                                                                         |  |                      |       
|Operating (loss) income                                                  |  |                      | (5,426
|Interest expense                                                         |  |                      | 1,048 
|Interest and other (income) expense, net                                 |  |                      | 17    
|                                                                         |  |                      |       
|(Loss) income before income taxes                                        |  |                      | (6,491
|Provision for income taxes                                               |  |                      |      
|                                                                         |  |                      |       
|Net (loss) income                                                        |  | $                    | (6,491
|                                                                         |  |                      |       
|Net (loss) income per sharebasic                                        |  | $                    | (0.44 
|                                                                         |  |                      |       
|Weighted average common shares and share equivalents outstandingbasic   |  |                      | 14,717
|                                                                         |  |                      |       
|Net (loss) income per sharediluted                                      |  | $                    | (0.44 
|                                                                         |  |                      |       
|Weighted average common shares and share equivalents outstandingdiluted |  |                      | 14,717
|                                                                         |  |                      |       



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



5



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CALIFORNIA MICRO DEVICES CORPORATION



STATEMENTS OF SHAREHOLDERS EQUITY

(amounts in thousands)



|                                                                                  |  | Common Stock |   |  | AccumulatedDeficit |        |   | AccumulatedOtherComprehensiveIncome/(Loss) |   |         | Total | 
|--------------------------------------------------------------------------------- |  | ------------ | - |  | ------------------ | ------ | - | ------------------------------------------ | - | ------- | ----- | 
|                                                                                  |  | Shares       |   |  | Amount             |        |   |                                            |  
|Balance at March 31, 2000                                                         |  | 11,038       |   |  | $                  | 56,836 |   |                                            | $ | (33,885 | )     | 
|Exercise of stock options                                                         |  | 359          |   |  |                    | 1,077  |   |                                            |   |        |       | 
|Issuance through employee stock purchase plan of common stock                     |  | 73           |   |  |                    | 796    |   |                                            |   |        |       | 
|Repurchases of common stock                                                       |  | (40          | ) |  |                    | (315   | ) |                                            |   |        |       | 
|Stock issued related to contingent stock award                                    |  | 30           |   |  |                    | 115    |   |                                            |   |        |       | 
|Components of comprehensive income:                                               |  |              |   |  |                    |        |   |                                            |   |         |       | 
|Net income                                                                        |  |             |   |  |                    |       |   |                                            |   | 2,536   |       | 
|Unrealized loss on available-for-sale securities                                  |  |             |   |  |                    |       |   |                                            |   |        |       | 
|                                                                                  |  |              |   |  |                    |        |   |                                            |   |         |       | 
|Comprehensive income                                                              |  |              |   |  |                    |        |   |                                            |   |         |       | 
|                                                                                  |  |              |   |  |                    |        |   |                                            |   |         |       | 
|Balance at March 31, 2001                                                         |  | 11,460       |   |  |                    | 58,509 |   |                                            |   | (31,349 | )     | 
|Exercise of stock options                                                         |  | 262          |   |  |                    | 845    |   |                                            |   |        |       | 
|Issuance through employee stock purchase plan of common stock                     |  | 129          |   |  |                    | 687    |   |                                            |   |        |       | 
|Issuance of common stock and warrants in private placement, net of issuance costs |  | 2,000        |   |  |                    | 7,611  |   |                                            |   |        |       | 
|Stock-based compensation                                                          |  |              |   |  |                    | 80     |   |                                            |   |         |       | 
|Components of comprehensive loss:                                                 |  |              |   |  |                    |        |   |                                            |   |         |       | 
|Net loss                                                                          |  |             |   |  |                    |       |   |                                            |   | (28,605 | )     | 
|Unrealized gain on available-for-sale securities                                  |  |             |   |  |                    |       |   |                                            |   |        |       | 
|                                                                                  |  |              |   |  |                    |        |   |                                            |   |         |       | 
|Comprehensive loss                                                                |  |              |   |  |                    |        |   |                                            |   |         |       | 
|                                                                                  |  |              |   |  |                    |        |   |                                            |   |         |       | 
|Balance at March 31, 2002                                                         |  | 13,851       |   |  |                    | 67,732 |   |                                            |   | (59,954 | )     | 
|Exercise of stock options                                                         |  | 387          |   |  |                    | 1,358  |   |                                            |   |        |       | 
|Issuance through employee stock purchase plan of common stock                     |  | 124          |   |  |                    | 483    |   |                                            |   |        |       | 
|Issuance of common stock and warrants in private placement, net of issuance costs |  | 1,519        |   |  |                    | 4,600  |   |                                            |   |        |       | 
|Stock-based compensation                                                          |  |              |   |  |                    | 67     |   |                                            |   |         |       | 
|Components of comprehensive loss:                                                 |  |              |   |  |                    |        |   |                                            |   |         |       | 
|Net loss                                                                          |  |             |   |  |                    |       |   |                                            |   | (6,491  | )     | 
|Unrealized loss on available-for-sale securities                                  |  |             |   |  |                    |       |   |                                            |   |        |       | 
|                                                                                  |  |              |   |  |                    |        |   |                                            |   |         |       | 
|Comprehensive loss                                                                |  |              |   |  |                    |        |   |                                            |   |         |       | 
|                                                                                  |  |              |   |  |                    |        |   |                                            |   |         |       | 
|Balance at March 31, 2003                                                         |  | 15,881       |   |  | $                  | 74,240 |   |                                            | $ | (66,445 | )     | 
|                                                                                  |  |              |   |  |                    |        |   |                                            |   |         |       | 



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



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CALIFORNIA MICRO DEVICES CORPORATION



STATEMENTS OF CASH FLOWS

(amounts in thousands)



|                                                                                                   |  | Year Ended March 31, |       
|-------------------------------------------------------------------------------------------------- |  | -------------------- | ------
|                                                                                                   |  | 2003                 |       
|Cash flows from operating activities:                                                              |  |                      |       
|Net (loss) income                                                                                  |  | $                    | (6,491
|Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: |  |                      |       
|Non-cash portion of special charges                                                                |  |                      |      
|Provision for discontinued inventory                                                               |  |                      | 670   
|Provision for discontinued inventory at distributors                                               |  |                      |      
|Depreciation and amortization                                                                      |  |                      | 2,632 
|Stock based compensation                                                                           |  |                      | 67    
|Changes in assets and liabilities:                                                                 |  |                      |       
|Accounts receivable                                                                                |  |                      | (720  
|Inventories                                                                                        |  |                      | (1,463
|Prepaid expenses and other current assets                                                          |  |                      | 27    
|Accounts payable and other current liabilities                                                     |  |                      | (3,604
|Other long term assets                                                                             |  |                      | 801   
|Other long term liabilities                                                                        |  |                      | (509  
|Deferred margin on shipments to distributors                                                       |  |                      | 680   
|                                                                                                   |  |                      |       
|Net cash (used in) provided by operating activities                                                |  |                      | (7,910
|                                                                                                   |  |                      |       
|Cash flows from investing activities:                                                              |  |                      |       
|Purchases of short-term investments                                                                |  |                      |      
|Sales of short-term investments                                                                    |  |                      | 298   
|Capital expenditures                                                                               |  |                      | (1,770
|Net change in restricted cash                                                                      |  |                      | 8     
|                                                                                                   |  |                      |       
|Net cash (used in) provided by investing activities                                                |  |                      | (1,464
|                                                                                                   |  |                      |       
|Cash flows from financing activities:                                                              |  |                      |       
|Repayments of capital lease obligations                                                            |  |                      | (13   
|Repayments of long-term debt                                                                       |  |                      | (4,291
|Borrowings of long-term debt                                                                       |  |                      | 4,810 
|Proceeds from private placement of common stock, net                                               |  |                      | 4,600 
|Proceeds from employee stock compensation plans                                                    |  |                      | 1,841 
|                                                                                                   |  |                      |       
|Net cash provided by financing activities                                                          |  |                      | 6,947 
|                                                                                                   |  |                      |       
|Net (decrease) increase in cash and cash equivalents                                               |  |                      | (2,427
|Cash and cash equivalents at beginning of period                                                   |  |                      | 6,940 
|                                                                                                   |  |                      |       
|Cash and cash equivalents at end of period                                                         |  | $                    | 4,513 
|                                                                                                   |  |                      |       
|Supplemental disclosures of cash flow information:                                                 |  |                      |       
|Interest paid                                                                                      |  | $                    | 991   
|                                                                                                   |  |                      |       



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CALIFORNIA MICRO DEVICES CORPORATION



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





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CALIFORNIA MICRO DEVICES CORPORATION



1. THE COMPANY



California Micro Devices Corporation designs and markets application specific integrated passive devices and complementary analog semiconductors for the
mobile, computing, lighting, medical and other markets. Our products provide signal integrity, electromagnetic interference filtering, electrostatic discharge protection, and power management solutions to original equipment manufacturers and
contract manufacturers. Through proprietary manufacturing processes, we integrate multiple passive components onto single chips and enhance their functionality with discrete semiconductor functions.



Our products are marketed primarily to customers in the mobile electronics,
computing, LED lighting, medical and other industries.



2. SIGNIFICANT
ACCOUNTING POLICIES



Basis of Presentation



In the accompanying financial statements, fiscal 2003,
2002, and 2001 refer to the twelve months ended March 31, 2003, 2002, and 2001, respectively. Certain prior year amounts in the financial statements and notes thereto have been reclassified to conform to the fiscal 2003 presentation. The charges
taken for discontinued inventories in the statement of cash flows are now stated at gross values rather than net in the prior year.



Use of Estimates



The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Our estimates are
based on historical experience, input from sources outside of the company, and other relevant facts and circumstances. Actual results could differ from those estimates.



Cash and Cash Equivalents



We consider all highly liquid debt instruments with a maturity date of three months or less at the date of purchase to be cash equivalents. Cash
equivalents generally consist of commercial paper and money market funds.



Short-term Investments



We invest our excess cash in high quality financial instruments. All of our marketable investments, except for investments related to our non-qualified deferred compensation program, are classified as available-for-sale and we view our
available-for-sale portfolio as available for use in current operations. Accordingly, we have classified all investments, except for amounts related to our non-qualified deferred compensation program described in Note 14, as short-term, even though
the stated maturity date may be one year or more past the current balance sheet date.



Available-for-sale securities are stated at fair market value, with unrealized gains and losses, net of tax, reported as a component of shareholders equity. The cost of securities sold is based upon the specific
identification method. Realized gains and losses and declines in value judged to be other than temporary, if incurred, are included in interest income and other (net).



Inventories and Related Reserves



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



Reserves are provided for excess and obsolete inventory, which are estimated
based on a comparison of the quantity and cost of inventory on hand to managements forecast of customer demand. Customer demand is



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CALIFORNIA MICRO DEVICES CORPORATION



dependent on many factors and requires us to use significant judgment in our forecasting process. We must also make assumptions regarding the rate at which
new products will be accepted in the marketplace and at which customers will transition from older products to newer products. Because a significant portion of our sales are through distributors and many parts may have small sales volume, the
customer demand forecast process is not inclusive of all parts. Therefore, historical trends may also be used in estimating the excess and obsolete inventory reserves. Generally, inventories in excess of twelve months demand are reserved and the
related charge is recorded to cost of sales. Once a reserve is established, it is maintained until the product to which it relates is sold or otherwise disposed of, even if in subsequent periods we forecast demand for this product.



Property, Plant and Equipment



Property, plant and equipment are stated at cost. Depreciation is computed
using the straight-line method over the shorter of the estimated useful lives of the assets, or the remaining lease term. Estimated useful lives of assets are as follows:



|Building                |  | 40 years 
|----------------------- |  | ---------
|Machinery and equipment |  | 3-7 years
|Leasehold improvements  |  | 5-7 years
|Furniture and fixtures  |  | 7 years  



Long-lived assets held
and used by us are reviewed for impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable. An impairment loss is recognized if the sum of the expected future undiscounted cash flows from the use
of the asset over its remaining useful economic life is less than the carrying value of the asset. The amount of impairment loss will be measured as the difference between the carrying value of the assets and their estimated fair values. No
impairment was recorded during fiscal 2003. See footnote 7 for additional information regarding asset impairment in fiscal 2002.



Revenue Recognition



We recognize revenue when persuasive evidence of an arrangement exists, delivery or customer acceptance, where applicable, has occurred, the fee is fixed
or determinable, and collection is reasonably assured.



Revenue
from product sales to end user customers, or to distributors that do not receive price concessions and do not have return rights, is recognized upon shipment and title transfer, if we believe collection is reasonably assured and all other revenue
recognition criteria are met. We assess the probability of collection based on a number of factors, including past transaction history and/or the creditworthiness of the customer. If we determine that collection of a receivable is not probable, we
defer recognition of revenue until the collection becomes probable, which is generally upon receipt of cash. Reserves for sales returns and allowances from end user customers are estimated based on historical experience and are provided for at the
time of shipment. At the end of each reporting period, the sufficiency of the reserve for sales returns and allowances is also assessed based on a comparison to authorized returns for which a credit memo has not been issued.



Revenue from product sales to distributors with agreements allowing for
either price concessions or for product returns is recognized at the time the distributor sells the product to original equipment manufacturers or other end users at which time the sales price becomes fixed. Revenue is not recognized upon initial
shipment to the distributor 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. Pursuant to our agreements with our distributors, custom, older or end-of-life products are sold with no right of return and are not eligible for price concessions. In these cases, revenue is recognized upon
shipment to the distributor, assuming all other revenue recognition criteria are met.



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CALIFORNIA MICRO DEVICES CORPORATION



At the time of shipment to distributors, we defer our gross selling price of the product shipped and
the related cost of the product shipped and reflect such net amounts on our balance sheet as a current liability entitled deferred margin on shipments to distributors. Thus, deferred margin on shipments to distributors represents the margin on the
products we ship to distributors, or the difference between our revenue and cost of the product for inventory held by the distributors at the end of the accounting period.



Other



We expense all research and development and advertising costs as incurred. Advertising expense was immaterial for fiscal years 2003, 2002 and 2001.



We expense all shipping costs related to shipments to
customers as incurred. Shipping costs are recognized in cost of goods sold.



Allowance for Doubtful Accounts



The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The Company provides an allowance for specific customer accounts where collection is
doubtful and also provides a general allowance for other accounts based on historical collection and write-off experience.



Net (Loss) Income Per Share



Basic earnings per common share are computed using the weighted-average number of common shares outstanding during the period. Diluted earnings per common
share incorporate the incremental shares issuable upon the assumed exercise of stock options and other dilutive securities. The following table sets forth the computation of basic and diluted net income (loss) per share:



|                                    |  | Year Ended March 31,                    
|----------------------------------- |  | ----------------------------------------
|                                    |  | 2003                                    
|                                    |  | (in thousands, except per share amounts)
|Basic:                              |  |                                         
|Net (loss) income                   |  | $                                       
|                                    |  |                                         
|Weighted average shares             |  |                                         
|                                    |  |                                         
|Net (loss) income per sharebasic   |  | $                                       
|                                    |  |                                         
|Diluted:                            |  |                                         
|Net (loss) income                   |  | $                                       
|                                    |  |                                         
|Weighted average shares             |  |                                         
|dilutive effect of stock options    |  |                                         
|                                    |  |                                         
|                                    |  |                                         
|                                    |  |                                         
|Net (loss) income per sharediluted |  | $                                       
|                                    |  |                                         



Options to purchase
2,942,000, 2,790,000 and 231,000 shares of common stock outstanding at March 31, 2003, 2002 and 2001, respectively, were not included in the diluted earnings per share computation, as the effect of including such shares would be antidilutive.
Warrants to purchase 483,667 and 59,250 shares of common stock outstanding at March 31, 2003 and 2002, respectively, were not included in the diluted earnings per share computation, as the effect of including such shares would be antidilutive.



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CALIFORNIA MICRO DEVICES CORPORATION



Stock-Based Compensation



As allowed under Statement of Financial Accounting Standards No. 123 (SFAS 123), Accounting for Stock
Based Compensation, we account for our employee stock plans in accordance with the provisions of Accounting Principles Boards Opinion No. 25 (APB 25), Accounting for Stock Issued to Employees and have adopted the
disclosure only provisions of SFAS 123. Stock-based awards to non-employees are accounted for in accordance with SFAS 123 and EITF 96-18 Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction
with Selling, Goods or Services. Fair value for these awards is calculated using the Black-Scholes option-pricing model, which requires that we estimate the volatility of our stock, an appropriate risk-free interest rate, estimated time until
exercise of the option, and our dividend yield. The Black-Scholes model was developed for use in estimating the fair value of traded options that do not have specific vesting schedules and are ordinarily transferable. The calculation of fair value
is highly sensitive to the expected life of the stock-based award and the volatility of our stock, both of which we estimate based primarily on historical experience. As a result, the pro forma disclosures are not necessarily indicative of pro forma
effects on reported financial results for future years.



We
generally recognize no compensation expense with respect to employee stock grants. Had we recognized compensation for the grant date fair value of employee stock grants in accordance with SFAS 123, our net (loss) income and net (loss) income loss
per share would have been revised to the pro forma amounts below. For pro forma purposes, the estimated fair value of our stock-based grants is amortized over the options vesting period for stock options granted under our stock option plans,
and the purchase period for stock purchases under our stock purchase plan.



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CALIFORNIA MICRO DEVICES CORPORATION



|                                                                                                                                      |  | Year Ended March 31,                 |        
|------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------ | -------
|                                                                                                                                      |  | 2003                                 |        
|                                                                                                                                      |  | (in thousands, except per sharedata) |        
|Net (loss) income                                                                                                                     |  |                                      |        
|As reported                                                                                                                           |  | $                                    | (6,491 
|Add: Stock-based employee compensation expense included in reported results                                                           |  |                                      | 67     
|Deduct: Total stock-based employee compensation expense determined under fair value method for all awards, net of related tax
effects |  |                                      | (3,663 
|                                                                                                                                      |  |                                      |        
|Pro forma net loss                                                                                                                    |  | $                                    | (10,087
|                                                                                                                                      |  |                                      |        
|Basic net (loss) income per share                                                                                                     |  |                                      |        
|As reported                                                                                                                           |  | $                                    | (0.44  
|Proforma                                                                                                                              |  | $                                    | (0.69  
|Diluted net (loss) income per share                                                                                                   |  |                                      |        
|As reported                                                                                                                           |  | $                                    | (0.44  
|Pro forma                                                                                                                             |  | $                                    | (0.69  



The pro forma net loss
and basic and diluted pro forma loss per share information for the year ended March 31, 2002 in the table above have been restated to reflect the correction of a clerical error. The restatement decreased pro forma net loss by approximately $1.0
million, and decreased the pro forma basic and diluted net loss per share by $.07.



The fair value of our stock-based grants was estimated assuming no expected dividends and the following weighted-average assumptions:



|                        |  | Options |   |  | Purchase Plan |  
|----------------------- |  | ------- | - |  | ------------- | -
|                        |  | 2003    |   |  | 2002          |  
|Expected life years     |  | 3.89    |   |  | 3.77          |  
|Volatility              |  | 1.02    |   |  | 1.05          |  
|Risk-free interest rate |  | 3.02    | % |  | 4.21          | %



The weighted-average
fair value of stock options granted in fiscal 2003, 2002 and 2001 were $3.69, $4.57 and $17.05 per share, respectively. The weighted-average fair value of the option element of the 1995 Employee Stock Purchase Plan stock granted in fiscal 2003, 2002
and 2001 was $1.43, $2.27 and $9.91 per share, respectively. See Note 14.



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CALIFORNIA MICRO DEVICES CORPORATION



Comprehensive Income



Accumulated other comprehensive income presented in the accompanying balance sheets at March 31, 2002 consists of the
accumulated net unrealized gains on available-for-sale securities. There is no accumulated other comprehensive income at March 31, 2003.



Income Taxes



Income taxes have been provided using the liability method in accordance with Financial Accounting Standards Board (FASB) Statement No. 109,
Accounting for Income Taxes (SFAS 109). In accordance with SFAS 109, a deferred tax asset or liability is determined based on the difference between the financial statement and tax basis of assets and liabilities as measured
by the enacted tax rates which will be in effect when these differences reverse. We provide a valuation allowance against net deferred tax assets unless, based upon the available evidence, it is more likely than not that the deferred tax assets will
be realized.



Recent Accounting Pronouncements



In June 2001, the Financial Accounting Standards Board,
or FASB, issued SFAS No. 143, Accounting for Asset Retirement Obligations, which addresses accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs.
SFAS No. 143 is effective for fiscal years beginning after June 15, 2002. We do not expect that the adoption of SFAS No. 143 will have a material effect on our financial condition or results of operations.



In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and requires that a liability for a cost associated with an exit or disposal activity
be recognized when the liability is incurred, rather than when the exit or disposal plan is approved. SFAS No. 146 nullifies EITF Issue No. 94-3, and had to be applied beginning January 1, 2003. The adoption of SFAS No. 146 has not had a material
effect on our financial condition or results of operations.



In
November 2002, the FASB issued FASB Interpretation No. 45, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, or FIN 45. FIN 45 will significantly change
current practice in the accounting for and disclosure of guarantees. FIN 45 requires certain guarantees to be recorded at fair value, which is different from the current practice of recording a liability only when a loss is probable and reasonably
estimable, as those terms are defined in SFAS No. 5, Accounting for Contingencies. FIN 45 also requires a guarantor to make significant new disclosures, even when the likelihood of making any payments under the guarantee is remote, which
is another change from the current practice. FIN 45 disclosure requirements are effective for financial statements of interim or annual periods ending after December 15, 2002, while the initial recognition and initial measurement provisions are
applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The adoption of FIN 45 did not have a material impact on our results of operations and financial condition.



In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation, Transition and Disclosure. SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. SFAS No. 148 also requires
that disclosures of the pro forma effect of using the fair value method of accounting for stock-based employee compensation be displayed more prominently and in a tabular format. Additionally, SFAS No. 148 requires disclosure of the pro forma effect
in interim financial statements. SFAS No. 148 is effective for financial statements for fiscal years ending after December 15, 2002. The adoption of SFAS No. 148 has not had a material effect on our financial condition or results of operations.



In January 2003, the FASB issued Interpretation No. 46, or FIN
46, Consolidation of Variable Interest Entities. FIN 46 requires an investor with a majority of the variable interests in a variable interest entity to consolidate the entity and also requires majority and significant variable interest
investors to provide certain disclosures. The Company does not have any investments in variable interest entities and therefore the adoption of the provisions of FIN 46 did not have a material impact on its results of operations and financial
position in 2003.



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CALIFORNIA MICRO DEVICES CORPORATION



3. CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES



The following is a summary of cash, cash equivalents and marketable
securities at March 31, 2003 and March 31, 2002, respectively:



|                                  |  | March 31,     
|--------------------------------- |  | --------------
|                                  |  | 2003          
|                                  |  | (in thousands)
|Cash and cash equivalents:        |  |               
|Cash                              |  | $             
|Money market funds                |  |               
|Commercial paper                  |  |               
|                                  |  |               
|Total cash and cash equivalents   |  | $             
|                                  |  |               
|Short-term investments:           |  |               
|U.S. Treasury and municipal bonds |  | $             
|                                  |  |               
|Total short-term investments      |  | $             
|                                  |  |               



At March 31, 2003, the
Company had no short-term investments. Gross realized gains and losses on the sales of securities are reported as other income and were not significant for all years presented. Gross unrealized gains and losses on available-for-sale securities at
March 31, 2003 and 2002 were not material.



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CALIFORNIA MICRO DEVICES CORPORATION



4. CONCENTRATIONS OF CREDIT RISK



Our financial instruments that expose us to concentrations of credit risk consist primarily of cash, cash equivalents,
short-term investments and trade accounts receivable.



We
primarily use one financial institution for our banking activities and maintain available cash in our short term money markets funds.



A significant portion of our sales are to customers whose activities are related to computer and computer peripherals, wireless communications, medical,
and LED lighting industries, including many who are located in foreign countries. We generally extend credit to these customers and, therefore, the aforementioned industries and economic influences of customers geographic locations affect
collection of accounts receivable. However, we monitor extensions of credit and require collateral, such as letters of credit, whenever deemed necessary. We maintain a reserve for potentially uncollectable accounts receivable based on our assessment
of collectibility and historical experience.



5. CONCENTRATION OF OTHER
RISKS



Markets



We market our products into high-technology industries, such as mobile
electronics, computing, LED lighting, medical and other markets that are characterized by rapid technological change, intense competitive pressure, and volatile demand patterns. Most of the systems into which the Companys products are designed
have short life cycles. As a result, we require a significant number of new design wins on an ongoing basis to maintain and grow revenue.



Customers



Generally, our sales are not subject to long-term contracts but rather to short-term releases of customers purchase orders, most of which are
cancelable on relatively short notice. The timing of these releases for production as well as custom design work is in the control of the customer. Because of the short life cycles involved with our customers products, the order pattern from
individual customers can be erratic with significant accumulation and de-accumulation of inventory during phases of the life cycle.



Two manufacturers represented 29% and one distributor represented 12% of our fiscal 2003 revenue. Loss of any of these customers could have a substantial
negative effect on our revenues and results of operations.



Manufacturing



Our manufacturing processes are
complex, and require production in a highly controlled, clean environment suitable for fine tolerances. Normal manufacturing risks include errors in fabrication processes, defects in raw materials, process changes, as well as other factors that can
affect yields.



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CALIFORNIA MICRO DEVICES CORPORATION



Subcontractors



Beginning in fiscal 2002, we implemented a strategy to outsource the wafer fabrication of a substantial portion of our
products to ASMC, an outside foundry, located in China. As a result of this strategy, we are subject to certain risks including reduced control over delivery schedules, quality assurance, manufacturing yields and production costs, lack of guaranteed
production capacity or product supply and lack of availability of, or delayed access to, key process technologies. We also use independent subcontractors, primarily in Thailand, for assembly, packaging and testing of most of our product. The common
industry practice of using independent subcontractors to manufacture, test, package and assemble products is subject to risks resulting from unfavorable economic conditions, political strife, prolonged work stoppages, natural or man-made disasters,
or power shortages in these countries, or other factors, and may adversely affect the ability of our independent subcontractors to manufacture, test, package and assemble our products.



Liquidity



Cash and cash equivalents at March 31, 2003 were $4.5 million. In fiscal 2002, we began to implement a restructuring program aimed at streamlining our
manufacturing operations, bringing our costs more in line with the current revenue levels and restoring profitability. We believe these actions and other actions we may take will continue to reduce our operating costs during fiscal 2004 and that we
will have sufficient financial resources to fund our operations for at least the next 12 months. However, there can be no assurance that such steps will be successful. If we are not successful, then we may have to cut expenses in order to conserve
our cash or raise additional financing, of which there can be no assurance of success.



6. BALANCE SHEET COMPONENTS



|                                 |  | March 31,      |        
|-------------------------------- |  | -------------- | -------
|                                 |  | 2003           |        
|                                 |  | (in thousands) |        
|Inventories:                     |  |                |        
|Raw materials                    |  | $              | 348    
|Work-in-process                  |  |                | 1,166  
|Finished goods                   |  |                | 2,063  
|                                 |  |                |        
|                                 |  | $              | 3,577  
|                                 |  |                |        
|Property, plant and equipment:   |  |                |        
|Land                             |  | $              | 137    
|Building                         |  |                | 3,030  
|Machinery, equipment and tooling |  |                | 27,054 
|Leasehold improvements           |  |                | 1,883  
|Furniture and fixtures           |  |                | 371    
|                                 |  |                |        
|                                 |  |                | 32,475 
|Less: accumulated depreciation   |  |                | (22,388
|                                 |  |                |        
|                                 |  | $              | 10,087 
|                                 |  |                |        
|Accrued liabilities:             |  |                |        
|Accrued salaries and benefits    |  | $              | 916    
|Restructuring accrual            |  |                |       
|Other accrued liabilities        |  |                | 1,715  
|                                 |  |                |        
|                                 |  | $              | 2,631  
|                                 |  |                |        



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CALIFORNIA MICRO DEVICES CORPORATION



7. RESTRUCTURING AND ASSET IMPAIRMENT



During fiscal 2003, we completed the restructuring program approved by the Board of Directors in the second quarter of 2002,
in which we streamlined our manufacturing operations and now focus our business on products and markets in which we have, or believe we can achieve, a leadership position while leveraging our core technology strengths. Key parts of this strategy
include the plan to outsource a significant portion of our wafer manufacturing to an independent foundry and to discontinue certain older products.



In connection with outsourcing a significant portion of our wafer manufacturing, we have consolidated all of our internal wafer fabrication activities and
chip scale packaging activities into our Tempe, Arizona facility with selected high-value backend manufacturing activities continuing at our Milpitas, California headquarters. In connection with these actions, we recorded restructuring and asset
impairment charges of $4.2 million in the year ended March 31, 2002, which was reflected in operating expenses as Special Charges. The restructuring program included workforce reduction and lease termination costs. At the end of the
third quarter of fiscal 2003, we determined that our original estimate of restructuring costs exceeded the actual amount required to complete the plan. Therefore, we reversed the remaining restructuring liability of approximately $193,000 as a
benefit to operations. There is no restructuring liability remaining at March 31, 2003.



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CALIFORNIA MICRO DEVICES CORPORATION



A roll forward of the restructuring and asset impairment charges incurred during the year ended March
31, 2002 through March 31, 2003 is as follows:



|(in thousands)          |  | Total Charge March 31, 2002 |       | Non-cash Charges |   | Cash Payments March 31, 2002 |  | Restructuring Liability at March 31, 2002 |    | Cash Payments |   |     | Reversal of Amounts Related to Restructuring |   |      | Restructuring Liability at March 31, 2003
|----------------------- |  | --------------------------- | ----- | ---------------- | - | ---------------------------- |  | ----------------------------------------- | -- | ------------- | - | --- | -------------------------------------------- | - | ---- | -----------------------------------------
|Workforce reduction     |  | $                           | 438   |                  | $ |                             |  | $                                         |   |               | $ | 438 |                                              | $ | (332 | )                                        
|Impairment of equipment |  |                             | 3,395 |                  |   | 3,395                        |  |                                           |   |               |   |    |                                              |   |     |                                          
|Facilities and other    |  |                             | 322   |                  |   |                             |  |                                           | 49 |               |   | 273 |                                              |   | (186 | )                                        
|                        |  |                             |       |                  |   |                              |  |                                           |    |               |   |     |                                              |   |      |                                          
|Total                   |  | $                           | 4,155 |                  | $ | 3,395                        |  | $                                         | 49 |               | $ | 711 |                                              | $ | (518 | )                                        
|                        |  |                             |       |                  |   |                              |  |                                           |    |               |   |     |                                              |   |      |                                          



Workforce reduction



In connection with the restructuring program, we reduced
our headcount by approximately 65 employees, primarily in the manufacturing functions and primarily located at our Milpitas, California facility. The workforce reduction resulted in a $438,000 charge in fiscal year 2002 relating to severance and
fringe benefits of which $106,000 was reversed in fiscal 2003. All employees affected by the workforce reduction were informed of the plan in enough detail so that they could determine their type and amount of benefit. Approximately 15 employees had
been terminated as of March 31, 2002, with their severance and benefits paid in April 2002, and the majority of the remaining employees were terminated by the end of the second quarter of fiscal 2003.



Impairment of equipment



As part of our restructuring program, we are outsourcing a significant
portion of our wafer fabrication activities and have consolidated our internal wafer fabrication activities and chip scale packaging activities into our Tempe, Arizona facility with selected high-value backend manufacturing activities continuing at
our Milpitas, California headquarters. With the outsourcing of a significant portion of our wafer fabrication activities, the number and volume of products generated from the equipment located at our Tempe facility have been significantly reduced.
As a result of these circumstances in fiscal 2002, we performed an analysis to determine if the manufacturing equipment at our Tempe, Arizona facility was impaired. Based on the analysis performed, which was based on our estimates of future
undiscounted cash flows, we determined that these assets were impaired and wrote-down the recorded value of the assets to their estimated fair value, resulting in a charge of $3.4 million in fiscal 2002. Fair value was estimated as the amount for
which the assets could be purchased in an arms-length transaction.



Facilities and other



The restructuring plan
called for us to relocate from our Milpitas facility once all internal wafer fabrication activities had been consolidated into our Tempe, Arizona facility. As required by the lease for the Milpitas facility, we were obligated to restore the Milpitas
facility to its pre-lease condition. Accordingly, we recorded $251,000 in estimated renovation costs related to the Milpitas facility in fiscal 2002. Of the total restructuring liability pertaining to facilities, $87,000 was reversed in fiscal 2003.



Cash expenditures relating to the workforce reduction were
paid in fiscal 2003. The restructuring liability is included in accrued liabilities in the balance sheet as of March 31, 2002. The restructuring program is complete and no liability remains as of the end of March 31, 2003.



8. FAIR VALUE OF FINANCIAL INSTRUMENTS



We have evaluated the estimated fair value of our financial instruments. The
amounts reported as cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value due to their short-term maturities. Historically, the fair values of short-term investments are estimated based on
quoted market prices.



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CALIFORNIA MICRO DEVICES CORPORATION



The carrying and estimated fair values of our long-term debt are follows (in thousands):



|                           |  | March 31,    
|-------------------------- |  | -------------
|                           |  | 2003         
|                           |  | CarryingValue
|Long-term debt obligations |  | 9,911        



The fair value of our
long-term debt obligations is based on the estimated market rate of interest for similar debt instruments with the same remaining maturities.



9. LONG-TERM DEBT



Long-term debt consists of the following (amounts in thousands):



|                                                          |  | March 31,2003 |       | March 31,2002
|--------------------------------------------------------- |  | ------------- | ----- | -------------
|Industrial revenue bonds at 10.5%, due through March 2018 |  | $             | 6,535 |              
|Equipment financing facilities due through February 2004  |  |               |      |              
|Equipment financing facilities due through September 2005 |  |               | 2,775 |              
|Equipment financing agreement due through March 2005      |  |               | 534   |              
|Capital lease agreements                                  |  |               | 67    |              
|                                                          |  |               |       |              
|                                                          |  | $             | 9,911 |              
|Less current maturities                                   |  |               | 1,603 |              
|                                                          |  |               |       |              
|                                                          |  | $             | 8,308 |              
|                                                          |  |               |       |              



Our industrial revenue
bonds are collateralized by a lien on all of our land and buildings in Tempe, Arizona, and certain equipment acquired with the proceeds of the bonds, and require certain minimum annual sinking fund payments ranging from $185,000 in fiscal 2003 to
$780,000 in fiscal 2018. We have the right to prepay the 10.5% Industrial Revenue Bond by redeeming all or part of the outstanding principal amounts without penalty. At March 31, 2003 and 2002, restricted cash of $880,000 and $888,000, respectively,
was held in sinking fund trust accounts. Of these amounts, $800,000 is to be used for principal and interest payments in the event of default by the Company, and the balance is used for semi-annual interest and principal payments. As of March 31,
2003, $6,535,000 was outstanding under this agreement. These bonds are subject to certain covenants, including a restriction on the payment of dividends. The financial covenants associated with these bonds are requirements to maintain minimum
current and quick ratios, shareholders equity, and debt coverage, and not to exceed maximum ratios of total liabilities to equity and long-term debt to working capital. As of March 31, 2002 and continuing through March 31, 2003, we were not in
compliance with the long-term debt to working capital ratio covenant, shareholders equity, and debt coverage. We have not been in compliance with these covenants since December 31, 2001. In accordance with the terms of the industrial revenue bond,
the Company has retained a management consulting firm acceptable to the Trustee who has prepared a report to the Issuer and the Trustee making recommendations and establishing a progress schedule over a period not to exceed six successive quarters
after the date of issuance of such report, to correct all deficiencies. The report of such management consulting firm was completed and filed with the Issuer and the Trustee in March 2003 (within 120 days of the end of the fourth quarter in which
the Company was not in compliance with the requirements) as set forth in the loan agreement and has been accepted by the Trustee. In accordance with the terms of the bonds, our non-compliance would need to continue through September 30, 2004 in
order for the industrial revenue bonds to become callable and accordingly, there is no impact on our short-term liquidity due to our current non-compliance. We have begun to implement the recommendations of the management consulting firm. We believe
we will be in compliance with all financial covenants within the period allowed and therefore, we have not reclassified the long-term portion of this debt of $6.5 million to short-term on our balance sheet at March 31, 2003.



20



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CALIFORNIA MICRO DEVICES CORPORATION



As of March 31, 2002, we had $1,786,000 outstanding under equipment financing facilities due through
February 2004. These borrowings bore interest at 9.9% per year, respectively, and principal and interest payments were due in monthly installments through February 2004. During fiscal 2003, the Company used its facilities under the Loan and Security
Agreement described below to repay this debt in full.



In June
2002, we entered into a Loan and Security Agreement (Agreement) that allows us to borrow up to a total of $5.0 million under an equipment line of credit and a revolving line of credit. The amount available under the Agreement is based on
the amount of eligible equipment and accounts receivable. Under the Agreement, which includes a subjective acceleration clause, we are subject to certain financial covenants and restrictions and must maintain a compensating balance of $2.75 million
with the bank in order to maintain our borrowing capability. The financial covenants relate to a required monthly minimum quick ratio and quarterly tangible net worth. Borrowings under the equipment line and the revolving line bear interest at an
annual rate of prime plus 3.0% and prime plus 0.75%, respectively. As of March 31, 2003, the equipment line of credit rate was 7.25%. Principal, in equal installments, and interest are due monthly for the term of 36 months for all borrowings made
under the equipment line. Borrowings under the revolving credit line have a term of 12 months, with principal due at maturity and interest due in monthly installments. Borrowings under both lines are collateralized by substantially all of our
assets. During the twelve-months ending March 31, 2003, we had borrowed $3.5 million under the equipment line and $1.3 million under the revolving line of credit, of which $1.5 million was used to pay off other capital equipment financing facilities
in full in the first quarter of fiscal 2003. As of March 31, 2003, $2.8 million remained outstanding on the equipment line of credit and the $1.3 million borrowed on the revolving line of credit had been paid in full. Therefore, $2.2 million was
available under the equipment line of credit and the revolving line of credit as of March 31, 2003. We were in not compliance with the tangible net worth ratio under our Agreement as of March 31, 2003. It is highly possible that we will not be in
compliance with certain of our covenants for the first two quarters of fiscal 2004. The Bank has subsequently provided a waiver to the March 31, 2003 covenants, has modified the future covenants and extended the term of the agreement to July 31,
2003. On June 26, 2003, the bank agreed to further modify the loan agreement such that if we fail in the future to comply with either of the financial covenants defined in the agreement, as amended, the credit facilities will convert to an asset
based lending facility. The Borrowing Base, as defined within the agreement, must be adequate to support all outstanding obligations with any excess being immediately repaid. Presently, our Borrowing Base is sufficient to support all outstanding
obligations therefore we have continued to classify as long term on our balance sheet, all obligations scheduled to be repaid beyond twelve months. However, there can be no assurance that the Borrowing Base will remain sufficient and we may be
required to repay all or part of our outstanding indebtedness to the Bank earlier than scheduled.



In March 2001, we entered into a equipment Financing Agreement (Agreement) with Epic Funding Corporation which allows us to finance $975,000
of equipment over a term of 4 years with interest at 9.6% payable in 48 installments of approximately $25,000 per month. The total outstanding obligation as of March 31, 2003 was approximately $534,000.



During fiscal 2003, we entered into new capital leases to finance some
equipment purchases. The total outstanding capital lease obligations were $67,000 at March 31, 2003, due in monthly installments with interest rates ranging from 10.4% to 12.6%. Fixed assets purchased under capital leases and the associated
accumulated depreciation were not material as of March 31, 2003 and 2002.



Future maturities of long-term debt, including sinking fund requirements and capital lease obligations at March 31, 2003 are as follows (amounts in thousands):



|2004       |  | $ | 1,646
|---------- |  | - | -----
|2005       |  |   | 1,693
|2006       |  |   | 710  
|2007       |  |   | 283  
|2008       |  |   | 300  
|Thereafter |  |   | 5,279
|           |  |   |      
|           |  | $ | 9,911
|           |  |   |      



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CALIFORNIA MICRO DEVICES CORPORATION



10. COMMITMENTS



Operating Leases



We lease certain manufacturing facilities and sales offices under operating leases expiring from fiscal 2004 to fiscal 2007. Future minimum lease payments
under non-cancelable operating lease agreements having an initial term in excess of one year at March 31, 2003 are as follows:



|     |  | (in thousands)
|---- |  | --------------
|2004 |  | $             
|2005 |  |               
|2006 |  |               
|2007 |  |               
|     |  |               
|     |  | $             
|     |  |               



Rent expense was
$719,000, $485,000 and $459,000 in fiscal 2003, 2002 and 2001, respectively. Rent expense was net of sublease income of $176,000 in fiscal 2001. There was no sublease income in fiscal 2003 and 2002.



As of March 31, 2003 the Company had approximately $800,000 in non-cancelable
assembly purchase contract commitments.



11. INCOME TAXES



The Companys provision for income taxes consists of the following
(amounts in thousands):



|                           |  | Year Ended March 31,
|-------------------------- |  | --------------------
|                           |  | 2003                
|Current:                   |  |                     
|Federal                    |  | $                   
|State                      |  |                     
|                           |  |                     
|Provision for Income Taxes |  | $                   
|                           |  |                     



A reconciliation of
the Companys effective tax rate to the federal statutory rate is as follows:



|                                  |  | Year Ended March 31, |   
|--------------------------------- |  | -------------------- | --
|                                  |  | 2003                 |   
|Federal statutory tax rate        |  | 34                   | % 
|Losses with no current benefit    |  | (34                  | )%
|Utilization of loss carry forward |  |                     |   
|                                  |  |                      |   
|Effective income tax rate         |  | 0                    | % 
|                                  |  |                      |   



Deferred income taxes
reflect the tax effects of net operating loss and credit carry forwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant
components of our deferred tax assets and liabilities are as follows:



|                                           |  | March 31,       |        
|------------------------------------------ |  | --------------- | -------
|                                           |  | 2003            |        
|                                           |  | ( in thousands) |        
|Deferred Tax Assets:                       |  |                 |        
|Net operating loss carryforwards           |  | $               | 23,079 
|Tax credits carry forwards                 |  |                 | 407    
|Inventory reserve                          |  |                 | 3,165  
|Other non-deductible accruals and reserves |  |                 | 3,135  
|                                           |  |                 |        
|Total Deferred Tax Assets                  |  |                 | 29,786 
|Valuation Allowance                        |  |                 | (28,752
|                                           |  |                 |        
|Net Deferred Tax Assets                    |  |                 | 1,034  
|Deferred Tax Liabilities:                  |  |                 |        
|Tax over book depreciation                 |  |                 | 1,034  
|                                           |  |                 |        
|Total Net Deferred Tax Assets              |  | $               |       
|                                           |  |                 |        



Statement of Financial
Accounting Standards No. 109 provides for the recognition of deferred tax assets if realization of such assets is more likely than not. Based on the weight of available evidence, the Company has provided a valuation allowance against total deferred
tax assets. The Company will continue to evaluate its ability to realize the deferred tax assets on a quarterly basis. The valuation allowance increased by $1,868,000 during the year ended March 31, 2003, and increased by $11,584,000 during the year
ended March 31, 2002. Approximately $3.4 million of the valuation allowance for deferred tax assets relates to stock option deductions, which when recognized will be directly allocated to common stock.



At March 31, 2002, we had federal and state net operating loss carry forwards
of approximately $65.0 million and $14.0 million, respectively, which expire in the years 2004 through 2023 and federal and state research and development tax credits of approximately $240,000 each. The federal research and development tax credits
expire in the years 2008 through 2021, while the state tax credits carry forward indefinitely.



Utilization of the Companies net operating loss may be subject to substantial annual limitation due to the ownership change provisions of the Internal Revenue Code of 1986 and similar state provisions. The annual
limitation may result in the expiration of net operating losses and credits before utilization.



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CALIFORNIA MICRO DEVICES CORPORATION



12. INTEREST INCOME AND OTHER, NET



Interest income and other, net, consists of (amounts in thousands):



|                       |  | Year Ended March 31, |    
|---------------------- |  | -------------------- | ---
|                       |  | 2003                 |    
|Interest income        |  | $                    | 79 
|Other income (expense) |  |                      | (96
|                       |  |                      |    
|                       |  | $                    | (17
|                       |  |                      |    



Interest income
reflects the amounts earned from investments in cash equivalents and short-term securities.



13. CAPITAL STOCK



Common Stock



In November 2002, in a private
placement, we entered into stock and warrant purchase agreements pursuant to which we (1) sold 1,519,000 shares of no par value common stock at $3.40 per share and (2) granted 424,417 warrants to purchase shares of common stock with an exercise
price of $4.36 per share, raising gross proceeds of $5.2 million. Offering expenses of approximately $564,000 were offset against the proceeds for net cash proceeds of $4.6 million. The warrants are immediately exercisable and expire three years
from the date of issuance. The fair value of these warrants, estimated using the Black-Scholes model with the following assumptionsvolatility of .573, expected life of 3 years, risk free interest rate of 2.32%, no dividend yieldwas
approximately $577,000, or $1.36 per share, and was recorded as common stock on the balance sheet. The issuance of these shares and these warrants did not require shareholder approval.



In December 2001, in a private placement, we sold 2,000,000 shares of our no par value common stock at $4.11 per share,
yielding gross cash proceeds of $8.2 million. Cash offering expenses of approximately $609,000 were offset against the proceeds for net cash proceeds of $7.6 million. In addition to cash expenses, we issued the placement agent warrants to purchase
up to 59,250 shares of our common stock at an exercise price of $4.11 per share. The warrants are immediately exercisable and expire five years from the date of issuance. The fair value of these warrants, estimated using the Black-Scholes model with
the following assumptionsvolatility of .95, expected life of 5 years, risk free interest rate of 5.83%, no dividend yieldwas approximately $187,000, or $3.16 per share, and was recorded as common stock on the balance sheet. The issuance
of these shares and this warrant did not require shareholder approval.



Preferred Stock



We have 10,000,000 shares of
preferred stock authorized, of which 400,000 is designated Series A Participating Preferred Stock. The Board of Directors has the authority to issue the Preferred Stock and to fix the rights, privileges, preferences and restrictions related to the
Preferred Stock. No shares of preferred stock were outstanding at March 31, 2003 and 2002.



Shareholder Rights Plan



In September 2001, our Board of Directors adopted a shareholder rights plan, pursuant to which one preferred stock purchase right (a Right) was distributed for each share of common stock held as of October 12, 2001. Each Right,
when exercisable, will entitle the holder to purchase from us one one-thousandth of a share of our Series A Participating Preferred Stock at a price of $50.00 (the Purchase Price).



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CALIFORNIA MICRO DEVICES CORPORATION



The Rights entitle the holder to receive, upon exercise, shares of common stock (and in certain
circumstances, a combination of securities or other assets) having a value of twice the Purchase Price if a person or group acquires beneficial ownership of 15% or more of our outstanding common stock, subject to certain exceptions for existing
shareholders. Additionally, if we are involved in a business combination or sale of 50% or more of our assets or earning power, each Right will entitle the holder to receive, upon exercise, shares of common stock of the acquiring entity having a
value of twice the Purchase Price. Our Board of Directors has the right to cause each Right to be exchanged for common stock or substitute consideration.



We have the right to redeem the Rights at a price of $0.001 per Right in certain circumstances. The Rights expire on September 24, 2011.



14. EMPLOYEE BENEFIT PLANS AND STOCK COMPENSATION



401(K) Savings Plan



We maintain a 401(k) Savings Plan covering substantially all of our
employees. Under the plan and through December 31, 2002, eligible employees contributed to the plan with the Company matching at a rate of 50% of the participants contributions not in excess of 6% of compensation. Participants
contributions are fully vested at all times. The Companys contributions vest incrementally over a two-year period. During fiscal 2003, 2002, and 2001, we expensed $207,000, $295,000, and $305,000, respectively, relating to our contributions
under the plan. As of January 1, 2003, the Company discontinued its policy regarding future matching of the participants contributions.



Nonqualified Deferred Compensation Plan



In April 1997, we implemented a nonqualified deferred compensation plan for the benefit of eligible employees. This plan was designed to permit certain
discretionary employer contributions in excess of the tax limits applicable to the 401(k) plan and to permit employee deferrals in excess of certain tax limits. Company assets that were earmarked to pay benefits under the plan were held by a rabbi
trust. The diversified assets held by the rabbi trust were classified as trading securities and were recorded at fair market value with changes recorded to other income and expense. The assets were classified within other long-term assets on the
balance sheet. Changes in the liability related to the rabbi trust account were recorded as adjustments to compensation expense. In fiscal 2003, we recorded a benefit to compensation expense of $90,000 due to the decrease in the market value of the
trust assets, with the same amount being recorded as a loss in other (income) expense. In fiscal 2002, we recognized compensation expense of $25,000 as a result of an increase in the market value of the trust assets, with the same amount being
recorded as securities gains included in interest income. In fiscal 2001, we recorded a benefit to compensation expense of $82,000 due to the decrease in the market value of the trust assets, with the same amount being recorded as a loss in other
(income) expense. Additionally, during 2001, we expensed $2,000 relating to our contributions under the plan. We did not make any contributions under the plan in fiscal 2003 or 2002. The balances held by the rabbi trust were classified as long-term
liabilities. The balance in this account was zero at March 31, 2003 and $509,000 at March 31, 2002, respectively. As of January 1, 2003 the Nonqualified Deferred Compensation plan was terminated. As of March 31, 2003 all monies in the trust assets
have been refunded back to the participants.



Stock Option
Plans



The 1995 Employee Stock Option Plan (1995
Plan) is administered by the compensation committee consisting of not less than two qualified directors. The 1995 Non-Employee Directors Plan (the Directors Plan) is administered by not less than three members of the Board of
Directors and the amount of shares granted to the directors on an annual basis are fixed in amount, as approved by the shareholders.



Under our 1995 Plan, options may be granted to employees and consultants at prices not less than 85% of the fair market value of our common stock on the
date of grant for shares issued under a non-qualified stock option agreement. Options may also be issued to key employees at prices not less than 100% of the fair market value of our common stock on the date of grant for shares issued under an
incentive stock option agreement. In fiscal 2003, the number of shares authorized for issuance under the 1995 Plan was increased by 460,000 shares bringing the total authorized shares under the 1995 Plan to 4,115,000. At March 31, 2003, 284,620
shares remained available for future grant.



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CALIFORNIA MICRO DEVICES CORPORATION



The Directors Plan provides for a fixed issuance amount to the directors at prices not less than 100%
of the fair market value of the common stock at the time of the grant. In fiscal 2003, the number of shares authorized for issuance under the Directors Plan was increased by 60,000 shares bringing the total authorized shares under the Directors Plan
to 450,000. As of March 31, 2003, 93,681 shares remained available for future grant.



Generally, options under the plans become exercisable and vest over varying periods ranging up to four years as specified by the Board of Directors. Option terms do not exceed ten years from the date of the grant and
all plans except for the 1981 Employee Incentive Stock Option Plan (the 1981 Plan) expire within 20 years of date of adoption. No options may be granted during any period of suspension or after termination of any plan. Unexercised
options expire upon, or within, three months of termination of employment, depending upon the circumstances surrounding termination.



In fiscal 2002, our Board of Directors granted options to purchase 650,000 shares of our common stock to three executives outside of the 1995 Plan
described above (Non-Plan Options). All Non-Plan Options were granted at exercise prices equal to the fair market value on the date of grant, have vesting periods of four years and expire in ten years. Our Non-Plan Options did not
require the approval of, and were not approved by, our shareholders. The weighted average exercise price of the Non-Plan Options granted in fiscal 2002 is $5.86 per share.



The following is a summary of stock option activity and related information, including Non-Plan Options (in thousands,
except per share data):



|                          |  | ShareholderApproved Plans |   | Non- ShareholderApproved Plan |                              | All Plans
|------------------------- |  | ------------------------- | - | ----------------------------- | ---------------------------- | ---------
|                          |  | Shares                    |   |                               | WeightedAverageExercisePrice |          
|Balance at March 31, 2000 |  | 1,952                     |   |                               | $                            | 4.27     
|Granted                   |  | 671                       |   |                               | $                            | 17.05    
|Exercised                 |  | (370                      | ) |                               | $                            | 3.63     
|Canceled                  |  | (197                      | ) |                               | $                            | 14.64    
|                          |  |                           |   |                               |                              |          
|Balance at March 31, 2001 |  | 2,056                     |   |                               | $                            | 7.56     
|Granted                   |  | 730                       |   |                               | $                            | 6.87     
|Exercised                 |  | (252                      | ) |                               | $                            | 3.36     
|Canceled                  |  | (394                      | ) |                               | $                            | 11.40    
|                          |  |                           |   |                               |                              |          
|Balance at March 31, 2002 |  | 2,140                     |   |                               | $                            | 7.11     
|Granted                   |  | 761                       |   |                               | $                            | 5.31     
|Exercised                 |  | (387                      | ) |                               | $                            | 3.51     
|Canceled                  |  | (222                      | ) |                               | $                            | 8.71     
|                          |  |                           |   |                               |                              |          
|Balance at March 31, 2003 |  | 2,292                     |   |                               | $                            | 6.97     
|                          |  |                           |   |                               |                              |          



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CALIFORNIA MICRO DEVICES CORPORATION



The following table summarizes information about options outstanding at March 31, 2003:



|                          |  | Options Outstanding |  | Options Exercisable                    
|------------------------- |  | ------------------- |  | ---------------------------------------
|Range of Exercises Prices |  | NumberOutstanding   |  | WeightedAverageRemainingContractualLife
|                          |  | (thousands)         |  |                                        
|$2.25$2.88               |  | 172                 |  | 4.02                                   
|$2.97$3.50               |  | 156                 |  | 5.47                                   
|$3.93$3.93               |  | 46                  |  | 1.87                                   
|$3.94$5.88               |  | 828                 |  | 9.04                                   
|$6.40$6.40               |  | 450                 |  | 8.04                                   
|$6.44$6.50               |  | 187                 |  | 6.76                                   
|$6.70$6.70               |  | 271                 |  | 8.39                                   
|$6.84$8.05               |  | 453                 |  | 8.47                                   
|$8.19$12.50              |  | 272                 |  | 6.09                                   
|$17.94$22.56             |  | 107                 |  | 7.34                                   
|                          |  |                     |  |                                        
|$2.25$22.56              |  | 2,942               |  | 7.67                                   
|                          |  |                     |  |                                        



In September 1999, the
Company entered into a stock based incentive program with a non-employee consultant located in Europe for up to 30,000 shares of restricted Company common stock based upon achievement of certain incentives over an 18-month period. The consultant
achieved those incentives in fiscal year 2000 and 2001 and the shares were issued in 2001. In connection with this agreement, the Company recorded a non-cash compensation expense of $115,000 for fiscal 2001.



Stock Option Cancellation and Re-grant Program



In January 2001, the Board of Directors ratified a plan to allow non-officer
employees holding options to purchase the Companys common stock to cancel certain stock option grants in exchange for a commitment that options to purchase the same number of common shares would be granted six months and one day after the
cancellation date provided that the participant has not terminated employment prior to such time (the Cancellation and Re-grant Program). The new options vest ratably over a period of 36 months and are not exercisable during the first
year following the grant date. All other terms of options granted under the Cancellation and Re-grant Program are substantially the same as the cancelled options. Options to purchase 110,500 shares of common stock were cancelled under the
Cancellation and Re-grant Program. In August 2001, options to purchase a total of 109,000 shares of common stock with an exercise price of $6.70 per share were granted in connection with the Cancellation and Re-grant Program.



Employee Stock Purchase Plan



The 1995 Employee Stock Purchase Plan as Amended June 15, 1999, (the
Purchase Plan) is available for all full-time employees possessing less than 5% of the Companys common stock on a fully diluted basis. The Purchase Plan provides for the issuance of up to 1,130,000 shares at 85% of the fair market
value of the common stock at certain defined points in the plan offering periods. Purchase of the shares is made through employees payroll deductions and may not exceed 15% of their total compensation. The Purchase Plan terminates on February
9, 2005, or earlier at the discretion of the Companys Board of Directors. As of March 31, 2003, 216,393 shares were available for future issuance under the Purchase Plan.



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CALIFORNIA MICRO DEVICES CORPORATION



The following is a summary of stock purchased under the plan:



|                                     |  | Year Ended March 31,
|------------------------------------ |  | --------------------
|                                     |  | 2003                
|Aggregate purchase price             |  | $                   
|Shares purchased                     |  |                     
|Employee participants as of March 31 |  |                     



15. LITIGATION



We are a party to lawsuits, claims, investigations, and proceedings,
including commercial and employment matters, which are being handled and defended in the ordinary course of business. We review the current status of any pending or threatened proceedings with our outside counsel on a regular basis and, considering
all the other known relevant facts and circumstances, recognize any loss that we consider probable and estimable as of the balance sheet date. As of March 31, 2003 and March 31, 2002, we had not recorded any significant liability on our balance
sheet for any pending or threatened litigation, claims, or proceedings.



We have two cases pending in the Santa Clara County, State of California Superior Court in which the amount sought by the plaintiffs has been estimated by the Company to be between five and ten million dollars when intangible items are
quantified and therefore a verdict in their favor would be materially adverse to our business. Although several years old, both cases have been stayed by courts until fairly recently; as a result, both cases are early in the discovery phase, making
it difficult to assess the probability of the opposing parties or ourselves prevailing with a significant degree of confidence. As a result, we have not made any substantial accrual for these cases.



The first case involves counterclaims brought by our former CEO, Chan
Desaigoudar on August 3, 1995, after we sued him on May 5, 1995, for fraud and breach of fiduciary duty. The counterclaims are for, among other items, wrongful termination and improper termination of his stock option. The second case involves a
former employee, Tarsaim L. Batra, who has sued the company and three of our former officers, Mr. Desaigoudar, Steve Henke and Surendra Gupta, on September 13, 1993, and April 19, 1994, in two cases which have been consolidated, likewise for
wrongful termination of his employment and for deprivation of his stock options. The U.S. government in the past has prosecuted Messrs. Desaigoudar, Henke, and Gupta for criminal securities law violations. Mr. Gupta plead guilty before trial while
Messrs. Desaigoudar and Henke were convicted; however, their convictions were overturned and a retrial was imminent when in May 2002, they each entered a guilty plea as to one or more of the counts.



We believe that we have meritorious defenses to the claims of the opposing
parties in both of these cases. Currently, we intend to vigorously pursue our defenses and/or our claims against the opposing parties in these matters. Should we unexpectedly learn facts during discovery which lead us to reasonably estimate a
negative outcome to these cases, or should one or both of these cases result in a verdict or settlement for the other parties, then we will provide for such liability, as appropriate.



16. SEGMENT INFORMATION



Our operations are classified into one reportable segment. Substantially all of our operations and a significant portion of our long-lived assets reside
in the United States although we have sales operations in Europe, Japan, Hong Kong and Taiwan. In fiscal 2003, approximately $2.6 million of our net assets resided in the Far East region. In fiscal 2003, two original equipment manufacturers and one
distributor represented 18%, 11% and 12% respectively of our fiscal 2003 net sales. In fiscal 2002, one distributor and one original equipment manufacturer, represented 14% and 11% of net sales, respectively. In fiscal 2001, no single customer
accounted for greater than 10% of net sales. In fiscal 2003, net sales to customers in the United States, Taiwan, China and Hong Kong were $14.1 million, $7.0 million, $4.9 million and $4.3 million respectively and accounted for 34%, 17%, 12% and
10% of net sales respectively. In fiscal 2002, net sales to customers in the United States, Taiwan and Hong Kong were $12.1 million, $6.4 million and $3.4 million, respectively, and



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CALIFORNIA MICRO DEVICES CORPORATION



accounted for 40%, 21% and 11% of net sales, respectively. In fiscal 2001 net sales to customers in the United States and Taiwan were $30.1 million and $9.1
million, respectively, and accounted for 52% and 16% of net sales, respectively



Net sales to geographic regions reported below are based upon the customers ship to locations (amounts in thousands):



|                                         |  | Year Ended March 31,
|---------------------------------------- |  | --------------------
|                                         |  | 2003                
|Net product sales to geographic regions: |  |                     
|United States, Canada and Brazil         |  | $                   
|Europe                                   |  |                     
|Far East and other                       |  |                     
|                                         |  |                     
|Net product sales                        |  | $                   
|                                         |  |                     



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CALIFORNIA MICRO DEVICES CORPORATION



17. QUARTERLY FINANCIAL DATA (UNAUDITED)



During the first three quarters of fiscal 2003, the Company expensed certain manufacturing variances, which it subsequently
determined should have been capitalized to inventory. Accordingly, the Company has restated the financial statements for the first three quarters of fiscal 2003 to reflect the correction of this error, which affects cost of sales, operating income,
net loss, inventories, and accumulated deficit.



|                                       |  | For the Three Months Ended            |       
|-------------------------------------- |  | ------------------------------------- | ------
|                                       |  | June 30,2002                          |       
|                                       |  | (in thousands, except per share data) |       
|Fiscal 2003:                           |  |                                       |       
|Net sales                              |  | $                                     | 9,368 
|Cost of sales                          |  |                                       |       
|As previously reported                 |  |                                       | 8,148 
|Effect of restatement                  |  |                                       | (1,742
|                                       |  |                                       |       
|As restated                            |  |                                       | 6,406 
|Operating (loss) income                |  |                                       |       
|As previously reported                 |  | $                                     | (2,322
|Effect of restatement                  |  |                                       | 1,742 
|                                       |  |                                       |       
|As restated                            |  | $                                     | (580  
|Net loss                               |  |                                       |       
|As previously reported                 |  | $                                     | (2,563
|Effect of restatement                  |  |                                       | 1,742 
|                                       |  |                                       |       
|As restated                            |  | $                                     | (821  
|Basic and diluted net loss per share   |  |                                       |       
|As previously reported                 |  | $                                     | (0.18 
|Effect of restatement                  |  |                                       | 0.12  
|                                       |  |                                       |       
|As restated                            |  | $                                     | (0.06 
|                                       |  |                                       |       
|Fiscal 2002:                           |  |                                       |       
|Net sales                              |  | $                                     | 6,105 
|Cost of sales                          |  |                                       | 6,658 
|Operating loss                         |  |                                       | (4,165
|Net loss                               |  | $                                     | (4,291
|Basic and diluted net (loss) per share |  | $                                     | (0.37 

---

|(1) |  | Includes $193,000 of fiscal 2002 restructuring charges that were not required and were reversed in the third quarter of fiscal 2003.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Includes $4.2 million of restructuring and asset impairment charges.
|--- |  | --------------------------------------------------------------------

|(3) |  | Includes write off of discontinued inventory of $4.1 million.
|--- |  | -------------------------------------------------------------

|(4) |  | Includes a provision against inventory of $529,000.
|--- |  | ---------------------------------------------------



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CALIFORNIA MICRO DEVICES CORPORATION



|                       |  | June 30,2002 |         |   | September 30,2002 |   |         | December 31,2002 |  |   | March 31, 2003 |  
|---------------------- |  | ------------ | ------- | - | ----------------- | - | ------- | ---------------- |  | - | -------------- | -
|Inventories            |  |              |         |   |                   |   |         |                  |  |   |                |  
|As previously reported |  | $            | 3,380   |   |                   | $ | 4,390   |                  |  | $ | 4,188          |  
|Effect of restatement  |  |              | 1,742   |   |                   |   | 1,117   |                  |  |   | 1,146          |  
|                       |  |              |         |   |                   |   |         |                  |  |   |                |  
|As restated            |  | $            | 5,122   |   |                   | $ | 5,507   |                  |  | $ | 5,334          |  
|Current Assets         |  |              |         |   |                   |   |         |                  |  |   |                |  
|As previously reported |  | $            | 13,627  |   |                   | $ | 14,868  |                  |  | $ | 14,831         |  
|Effect of restatement  |  |              | 1,742   |   |                   |   | 1,117   |                  |  |   | 1,146          |  
|                       |  |              |         |   |                   |   |         |                  |  |   |                |  
|As restated            |  | $            | 15,369  |   |                   | $ | 15,985  |                  |  | $ | 15,977         |  
|Total Assets           |  |              |         |   |                   |   |         |                  |  |   |                |  
|As previously reported |  | $            | 26,429  |   |                   | $ | 28,029  |                  |  | $ | 27,546         |  
|Effect of restatement  |  |              | 1,742   |   |                   |   | 1,117   |                  |  |   | 1,146          |  
|                       |  |              |         |   |                   |   |         |                  |  |   |                |  
|As restated            |  | $            | 28,171  |   |                   | $ | 29,146  |                  |  | $ | 28,692         |  
|Accumulated Deficit    |  |              |         |   |                   |   |         |                  |  |   |                |  
|As previously reported |  | $            | (62,517 | ) |                   | $ | (63,858 | )                |  | $ | (64,052        | )
|Effect of restatement  |  |              | 1,742   |   |                   |   | 1,117   |                  |  |   | 1,146          |  
|                       |  |              |         |   |                   |   |         |                  |  |   |                |  
|As restated            |  | $            | (60,775 | ) |                   | $ | (62,741 | )                |  | $ | (62,906        | )
|Shareholders Equity   |  |              |         |   |                   |   |         |                  |  |   |                |  
|As previously reported |  | $            | 6,204   |   |                   | $ | 5,424   |                  |  | $ | 10,143         |  
|Effect of restatement  |  |              | 1,742   |   |                   |   | 1,117   |                  |  |   | 1,146          |  
|                       |  |              |         |   |                   |   |         |                  |  |   |                |  
|As restated            |  | $            | 7,946   |   |                   | $ | 6,541   |                  |  | $ | 11,289         |  



18. SUBSEQUENT EVENTS (UNAUDITED)



Environmental



During Fiscal 2003, we closed our Milpitas wafer fabrication facility. As
part of the closure process, we retained a state-licensed environmental contractor familiar with this type of semiconductor manufacturing facility to prepare and implement a site closure plan and a site health and safety plan (HASP) to remove,
decontaminate as necessary, and dispose of equipment and materials using approved methods and to work with the appropriate agencies to obtain certifications of closure. Upon inspection of the facility by the County of Santa Clara, one of four soil
samples obtained by drilling through the floor in one room detected an elevated level of nickel. The County referred to matter to the State Department of Toxic Substances Control (DTSC) for follow-up. A walk-through of the facility occurred in May
2003 with DTSC, during which the agency indicated that a request for additional samples could follow. On June 26, 2003 we received correspondence from DTSC requesting that we complete a questionnaire as the next step in the process. If DTSC makes
the request, additional samples would be collected and analyzed. Based on the results of such sampling, remedial action could be required. The extent of any remedial action that may be required is not known at this time. However, based on
preliminary consultation with our environmental contractor, we do not expect that the cost of any such remedial action would be material, but an estimate of the costs cannot be determined until we receive further information from DTSC. Therefore we
have not recognized any expense regarding this contingent liability.



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CALIFORNIA MICRO DEVICES CORPORATION



PART IV



ITEM 15.Exhibits, Financial Statement Schedules and Reports on Form 8-K.



The following documents are filed as a part of this Report:



| | (a) |  | 1.     See Item 8 for a list of financial statements filed herein.
| | --- |  | ------------------------------------------------------------------



| | 2. |  | See Item 8 for a list of financial statement schedules filed. All other schedules have been omitted because they are not applicable or the required information is shown in the
Financial Statements or the notes thereto.
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. |  | Exhibit Index:
| | -- |  | --------------



The exhibits listed below are filed herewith or incorporated by reference as indicated pursuant to Regulation S-K. The exhibit number refers to number
indicated pursuant to the Instructions to the Exhibit Table for Regulation S-K.



|ExhibitNumber |  | Description                                                                                                                                     |  | Document if Incorporated by Reference                                                                                         
|------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------
|              |  |                                                                                                                                                
|3(i)a         |  | Articles of Incorporation, as amended.                                                                                                          |  | Exhibit 3(i) to the Companys Annual Report on Form 10-K for the fiscal year ended March 31, 1995.                            
|              |  |                                                                                                                                                
|3(i)b         |  | Certificate of Correction of Certificate of Amendment of Articles of Incorporation                                                              |  | Exhibit 3(I)b to the Companys Annual Report on Form 10-K for the year ended March 31, 2002 filed on June 25, 2002.           
|              |  |                                                                                                                                                
|3(i)c         |  | Certificate of Determination of Series A Participating Preferred Stock                                                                          |  | Registration Statement on Form 8-A filed on September 21, 2001.                                                               
|              |  |                                                                                                                                                
|3(ii)         |  | By-laws, as amended.                                                                                                                            |  | Exhibit 3(ii) to the Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 2002 filed on August, 14, 2002.   
|              |  |                                                                                                                                                
|4.1           |  | 1995 Employee Stock Option, Amended as of July 26, 1996, July 18, 1997, August 7, 1998, August 1, 2000, and August 7, 2001                      |  | Registration Statement on Form S-8 filed on May 15, 2002.                                                                     
|              |  |                                                                                                                                                
|4.2           |  | 1995 Non-Employee Directors Stock Option Plan, Amended as of July 26, 1006, July 18, 1997, August 7, 1998, August 1, 2000, and August 7, 2001. |  | Registration Statement on Form S-8 filed on May 15, 2002.                                                                     
|              |  |                                                                                                                                                
|4.3           |  | Stock Purchase Agreement dated November 21, 2001 between the Company and Investors.                                                             |  | Exhibit 4.3 to the Companys Quarterly Report on Form 10-Q for the quarter ended December 31, 2001 filed on February 14, 2002.
|              |  |                                                                                                                                                
|4.4           |  | Non-Qualified Stock Option Agreement by and between the Company and David E. Witkowski dated September 7, 2001.                                 |  | Registration Statement on Form S-8 filed on May 15, 2002.                                                                     



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CALIFORNIA MICRO DEVICES CORPORATION



|ExhibitNumber |  | Description                                                                                                                                                                                                                  |  | Document if Incorporated by Reference                                                                                            
|------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------
|              |  |                                                                                                                                                                                                                             
|4.5           |  | Non-Qualified Stock Option Agreement by and between the Company and Kenneth E. Thornbrugh dated as of January 24, 2002.                                                                                                      |  | Registration Statement on Form S-8 filed on May 15, 2002.                                                                        
|              |  |                                                                                                                                                                                                                             
|4.6           |  | Offer letter dated March 29, 2001 between the Company and Robert V. Dickinson, President and CEO of the Company.                                                                                                             |  | Exhibit 1 to the Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 2001 filed on August 14, 2001.           
|              |  |                                                                                                                                                                                                                             
|4.7           |  | Stock Option Agreement dated April 16, 2001, between the Company and Robert V. Dickinson, President and CEO of the Company.                                                                                                  |  | Exhibit 2 to the Companys Quarterly Report On Form 10-Q for the quarter ended June 30, 2001 filed on August 14, 2001.           
|              |  |                                                                                                                                                                                                                             
|10.11         |  | Commitment letter from Comerica Bank.                                                                                                                                                                                        |  | Exhibit 10.11 to the Companys Quarterly Report on Form 10-Q for the quarter ended September 30, 2001 filed on November 14, 2001.
|              |  |                                                                                                                                                                                                                             
|10.12         |  | Wafer Manufacturing Agreement between the Company and Advanced Semiconductor Manufacturing Corporation, dated February 20, 2002. (Confidential treatment has been requested with
respect certain portions of this agreement. |  | Exhibit 10.12 to the Companys Annual Report on Form 10-K for the year ended March 31, 2002 filed on June 25, 2002.              
|              |  |                                                                                                                                                                                                                             
|10.13         |  | Loan and Security Agreement by and between Silicon Valley Bank and the Company, dated June 17, 2002.                                                                                                                         |  | Exhibit 10.13 to the Companys Annual Report on Form 10-K for the year ended March 31, 2002 filed on June 25, 2002.              
|              |  |                                                                                                                                                                                                                             
|10.14         |  | Loan Default Agreement with Silicon Valley Bank.                                                                                                                                                                             |  | Exhibit 10.15 to the Companys Quarterly Report on Form 10-Q for the quarter ended December 31, 2002 filed on February 14, 2003. 
|              |  |                                                                                                                                                                                                                             
|10.15         |  | Stock and Warrant Purchase Agreement from November, 2002 Private Placement.                                                                                                                                                  |  | Exhibit 10.16 to the Companys Quarterly Report on Form 10-Q for the quarter ended December 31, 2002 filed on February 14, 2003. 
|              |  |                                                                                                                                                                                                                             
|10.16         |  | Placement Agency Agreement for November, 2002 Private Placement.                                                                                                                                                             |  | Exhibit 10.17 to the Companys Quarterly Report on Form 10-Q for the quarter ended December 31, 2002 filed on February 14, 2003. 
|              |  |                                                                                                                                                                                                                             
|10.17         |  | License Agreement and its First Amendment with Flip Chip Technologies.                                                                                                                                                       |  | Exhibit 10.14 to the Companys Quarterly Report on Form 10-Q for the quarter ended December 31, 2002 filed on February 14, 2003. 
|              |  |                                                                                                                                                                                                                             
|23.1          |  | Consent of Ernst & Young, LLP, Independent                                                                                                                                                                                   |  |                                                                                                                                  



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CALIFORNIA MICRO DEVICES CORPORATION



|     |  |                                                                                           
|---- |  | ------------------------------------------------------------------------------------------
|     |  | Auditors                                                                                  
|     |  |                                                                                           
|31.1 |  | Rule 13a-14(a)/15d-14(a) Certification of Robert V. Dickinson, principal executive officer
|     |  |                                                                                           
|31.2 |  | Rule 13a-14(a)/15d-14(a) Certification of R. Gregory Miller, principal financial officer  
|     |  |                                                                                           
|32.1 |  | Statement of Robert V. Dickinson, Chief Executive Officer, under 18 U.S.C. § 1350         
|     |  |                                                                                           
|32.2 |  | Statement of R. Gregory Miller, Chief Financial Officer, under 18 U.S.C. § 1350           



| | (b) |  | Reports on Form 8-K:
| | --- |  | --------------------



On March 13, 2003, we filed a Form 8-K under Item 5, including the risk factors from our S-3 declared effective February 25, 2003, in
order that they could be incorporated by reference into our other pending registration statements.



DOCUMENTS INCORPORATED BY REFERENCE



Portions of the Registrants Proxy Statement in connection with its August 8, 2003 Annual Meeting of Shareholders (which will be filed with the
Securities and Exchange Commission within 120 days of the end of the fiscal year ended March 31, 2003) are incorporated by reference into Part III.



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CALIFORNIA MICRO DEVICES CORPORATION



SIGNATURES



Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 26th day of September 2003.



CALIFORNIA MICRO DEVICES CORPORATION (Registrant)By:

/S/ ROBERT V. DICKINSONRobert V. Dickinson President and Chief Executive Officer




Pursuant to the
requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on the 26th day of September 2003.



By:

|                                           | 
|------------------------------------------ | 
|/S/ ROBERT V. DICKINSONRobert V. Dickinson | 
|                                           | 
|/S/ R. GREGORY MILLERR. Gregory Miller     | 
|                                           | 
|/S/ WADE MEYERCORDWade Meyercord           | 
|                                           | 
|/S/ EDWARD C. ROSSEdward C. Ross           | 
|                                           | 
|/S/ JOHN SPRAGUEJohn Sprague               | 
|                                           | 
|/s/ DAVID L. WITTROCKDavid L. Wittrock     | 



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