U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549
                                    Form 10-K

            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                    For the fiscal year ended: March 31, 2000

                                       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

                      CALIFORNIA MICRO DEVICES CORPORATION
                      ------------------------------------
             (Exact name of registrant as specified in its charter)

               California                                 94-2672609
               ----------                                 ----------
(State or other jurisdiction of incorporation) (IRS Employer Identification No.)

     215 Topaz Street, Milpitas, CA                       95035-5430
     ------------------------------                       ----------
 (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

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
   ---    ---

The  aggregate  market value of the voting stock held by  non-affiliates  of the
Registrant as of March 31, 2000, was approximately  $211,090,000  based upon the
last  sale  price of the  common  stock  reported  for such  date on the  Nasdaq
National Market System.  For purposes of this  disclosure,  common stock held by
persons who hold more than 10% 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 March 31,  2000,  the number of shares of the  Registrant's  common  stock
outstanding were 11,037,543.

                       DOCUMENTS INCORPORATED BY REFERENCE

The Proxy  Statement for the  Registrant's  Annual Meeting of Shareholders to be
held August 1, 2000.


<PAGE>


                                     PART I

This report contains  forward-looking  statements  within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Act of 1934, as amended. Except for the historical information contained in this
discussion  of the  business  and  the  discussion  and  analysis  of  financial
condition  and  results  of  operations,   the  matters   discussed  herein  are
forward-looking statements. Such forward-looking statements are made pursuant to
the safe harbor  provisions of the Private  Securities  Litigation Reform Act of
1995. The  forward-looking  statements  regarding  revenues,  orders,  and sales
involve a number of risks  and  uncertainties,  including  but not  limited  to,
demand for the  Company's  product,  pricing  pressures  which could  affect the
Company's gross margin or the ability to consummate sales,  intense  competition
within the industry,  the  Company's  ability to attract and retain high quality
people,  the need for the Company to keep pace with  technological  developments
and respond  quickly to changes in customer needs,  the Company's  dependence on
third party suppliers for components for its products, expense reductions,  year
2000 issues,  and the Company's  dependence  upon  intellectual  property rights
which, if not available to the Company,  could have a material adverse effect on
the  Company.  These same  factors,  as well as others,  such as the  continuing
litigation  involving the Company,  could also affect the liquidity needs of the
Company.  Actual  results could differ  materially  from those  projected in the
forward-looking  statements as a result of factors set forth below and elsewhere
in this Form 10-K.

In this report,  "CAMD," "we," "us" and "our" refer to California  Micro Devices
Corporation.  All trademarks  appearing in this report are the property of their
respective owners.

ITEM 1. BUSINESS.

General

         We are a leading  supplier of thin film integrated  passive devices and
complementary   analog   semiconductors.   Through   proprietary   manufacturing
processes,  we integrate multiple thin film passive components onto single chips
and enhance their functionality with discrete semiconductor functions to provide
single  chip  solutions  for  densely  populated,  high  performance  electronic
systems.  Our integrated  passive devices are significantly  smaller and provide
more  functionality  than  competitive  discrete  products.  Integrated  passive
devices replace functional clusters of discrete passive components that are used
for signal  filtering and termination at busses and ports,  wave shaping,  clock
signal filtering,  biasing,  and other traditional discrete component functions.
In some  instances our  integrated  passive  devices also provide  semiconductor
functions, such as electrostatic discharge protection.

         We also  offer  analog  semiconductor  solutions  that  complement  our
integrated passive devices,  providing  electrostatic  discharge  protection for
ports, smart power management functions and micro-power  operational amplifiers.
We use our thin film passive  component  technology to enhance the functionality
of  our  semiconductor  products.  Additionally,  we  manufacture  and  sell  an
established line of telecommunications related semiconductor products.

         We focus our  expertise  on  providing  high  volume,  cost  effective,
standard  and custom  solutions  for  computer  systems  and  peripherals,  high
performance  networking,  and the mobile  communications and  telecommunications
infrastructure markets. Our customers include original equipment  manufacturers,
such as 3 COM Corporation,  the Acer Group,  Cisco Systems,  Intel  Corporation,
Inventec,  Nortel  Networks,  and Samsung  Electronics  Co.  Ltd.,  and contract
manufacturers,  including  Celestica,  Inc.,  Jabil Circuits Inc., and Solectron
Corporation.

Industry Background

         Passive components - principally resistors and capacitors - are used in
virtually  all  electronic  products.  Resistors  impede the flow of  electrical
current  and  dissipate  electrical  energy  as heat.  They  are used to  divide
voltage,   pull-up/pull-down   voltage,   and  terminate  and  control  current.
Capacitors store electrical charges and pass alternating  current while blocking
direct  current.  Capacitors  are used to  filter  noise  and  shape  waveforms.
Historically,  passive  components  have been discrete  devices that perform one
specific  function per device.  Individually  and in combination,



                                       1
<PAGE>

resistors and capacitors are used to filter,  condition,  shape, bias, terminate
and improve the  characteristics  of the electrical signals used and transmitted
by active components such as  microprocessors,  application  specific integrated
circuits, dynamic random access memories, and analog integrated circuits.

         The demand for  discrete and  integrated  passive  components  is being
driven  by  both  the  increasing  number  of  components  per  system,  and the
increasing number of systems produced.  For example, the number of passives in a
personal computer increased from a few hundred in the 486 generation of personal
computers  to as many as 1,000 in the  Pentium III series of  products.  Similar
trends are occurring in mobile phones,  where multiple bands, new  functionality
and higher  frequencies  are being  incorporated,  driving the number of passive
components from 300 in older analog phones to 600 in current devices.  According
to a 1997  report  by  Frost  &  Sullivan,  the  worldwide  market  for  passive
components  included over $5.0 billion for  resistors and resistor  networks and
over $9.0 billion for capacitors. Integrated passive devices address a small but
growing  portion  of  this  market,   particularly  in  the  personal  computer,
networking, and mobile phone segments.

         The technological  progress of the semiconductor  industry has been the
driving force behind the electronics industry,  and higher levels of integration
on a single chip have been the  underlying  factor that has made this  possible.
Higher  levels of  integration  lead to products  that are  smaller  with higher
performance and functionality and lower cost.

         The  semiconductor  industry has  segmented  into two major  technology
types - digital  circuits,  and analog circuits.  Digital circuits are used most
heavily in  computationally  intensive  functions  such as computing and digital
signal processing.  Manufacturers of digital integrated  circuits operate on the
leading edge of process technology (e.g.  sub-micron line width) to maximize the
performance and component density of their products.

         Analog  circuits are more  typically  found in  applications  requiring
precise voltage/power control,  amplification,  and other specialized functions.
They are used  throughout all system types,  providing the power  management and
ancillary  functions  necessary for system  operation.  Manufacturers  of analog
integrated circuits are able to use manufacturing facilities that are much lower
cost and older in  technology  (e.g.  larger line width)  than  digital  circuit
manufacturers.  The analog  circuit  market  tends to be less  cyclical and less
capital intensive than the digital, and is more fragmented in terms of products.
This can provide  greater  opportunities  for  executing a niche  strategy.  The
analog  circuit  market is large and growing,  with the Gartner Group  reporting
that this market  increased  from $7.6 billion in 1988 to $21.2  billion in 1998
and has shown a compound annual growth rate of 16.7% over 24 years,  compared to
16.1% for the total semiconductor market.

Industry Challenges

        Some of the fastest growing segments of the electronic  products markets
are:

               o      personal computers and servers

               o      networking products

               o      wireless communications, including mobile phones

               o      communications   infrastructure,   including  fiber  optic
                      transmission

               o      personal digital assistants and other portable  electronic
                      devices

The technological advances in these market segments and the demands of consumers
are requiring companies to design products with the following characteristics:

         Reduced Size and Weight.  Consumer  demand for smaller,  more  portable
products has created a need to reduce  component  size and minimize the required
space between components.  For example,  laptop computers and mobile phones have
continued to get smaller and lighter while at the same time the functionality of
these products has increased dramatically.

         Increased  Performance and Functionality.  The increasing use of faster
microprocessors  in computers and higher  frequencies in communication  products
require more passive components that can function properly at the high operating
speeds. For example, the number of busses, along with their speed and width, has
increased  significantly



                                       2
<PAGE>

from the 486 generation to the Pentium III series of personal computers. Each of
these busses requires passive components to terminate their transmission  lines.
Also,  as the  number of clock  lines  that  serve to  transmit  timing  signals
increased  from a few in earlier  personal  computers  to 27 in the Pentium III,
additional  passive  components  are needed for  filtering,  wave  shaping,  and
termination.

         Greater Reliability.  As electronic systems become a more integral part
of our lives,  and more  systems  become  portable,  manufacturers  must provide
greater   reliability  and  the  ability  to  withstand  hostile   environmental
conditions. For example, we depend on computer systems in almost every aspect of
our day-to-day lives, including financial  transactions,  email, health records,
the Internet,  and emergency response systems;  and on mobile  communications to
keep in touch on the road or when we are out of the office.

         Electrostatic  Discharge Protection.  As electronic systems move out of
controlled environments and become more portable and user configurable, they are
more susceptible to damage from electrostatic  discharge.  Protecting connectors
and other places where people  touch  sensitive  electronic  devices is vital to
assuring long, reliable operation.

         Shorter Time to Market.  The rapid  changes in  technology  and intense
competition  have  shortened  product  life  cycles  dramatically  and  required
manufacturers  to  seek  shorter  time to  market.  Products  such  as  personal
computers  and cell phones,  which used to have life cycles of one or two years,
are now replaced by newer  versions as  frequently  as every six to nine months,
requiring  new  products  with new  functions  to quickly  ramp into high volume
production. The use of standard circuits reduces the time required to design new
products.

         Lower  Total  Cost.  Manufacturers  of  electronic  systems  are facing
intense price  competition  and are seeking ways of lowering the overall cost of
their  products.  Lowering  the cost of  electronic  systems is  fundamental  to
increasing  their  affordability  and allowing  them to be applied to new tasks,
which allows more people access to better,  faster  technology.  There is also a
strong correlation between reducing size and reducing cost.

         Reduced Power Consumption.  As devices become more portable and need to
operate  for  longer  periods  of time,  there is an  increasing  need for power
reduction and power  management to increase battery life in portables and reduce
power consumption in other systems. At the same time, enhanced functionality and
performance  increases power requirements,  demanding that new functions be more
power  efficient,  and  techniques  be developed to  power-down  unused parts of
systems.

         Discrete  passive  components,  because of their  size and  performance
characteristics,  may not effectively meet these needs of system  designers.  In
addition,  there is a need for analog  semiconductors  that provide better power
management and operate at increasingly lower voltages and power levels.

Our Solution

         We meet the needs of our customers  through our innovative  approach of
integrating thin film passive components and our patented technique of combining
these  integrated  passive  components  with   semiconductors.   Our  thin  film
technology allows us to combine multiple resistors, capacitors, diodes and other
components  into a single,  high-density  device we market  under the brand name
"P/Active".  We also design and manufacture analog  semiconductors  that provide
power  management  functions,  and offer low  voltage,  micro power  operational
amplifiers that we can enhance by adding thin film passive  devices.  We believe
these solutions provide the following benefits:

         Smaller Size for  Miniaturization  and Portability.  Our integration of
multiple  passive  devices  into a single  integrated  device  reduces  the area
required  for the  passive  components  by as much as 80%  compared  to discrete
passive elements.  Discrete passive  components  typically consume a significant
part of the space in an electronic system, limiting either the ability to reduce
product size or to incorporate  additional  features.  For example, in a typical
mobile  phone,  as much as two  thirds of the  printed  circuit  board  space is
consumed by passive components.

         Increased  Performance at Higher Frequencies.  Our thin film technology
components  are designed to perform  consistently  at  frequencies  up to 3 GHz,
unlike discrete passive  components that behave  unpredictably at today's higher
frequencies,  particularly  in excess of 300 MHz.  Our PAC RC family of  filters
operates  properly  at up to



                                       3
<PAGE>

10 times the  frequency of  traditional  discrete  components,  and can suppress
electromagnetic interference/radio frequency interference noise by as much as 10
times more than  combinations of thick film components at very high frequencies.
The operating frequency of our integrated passive components is further extended
when combined with our new chip scale packaging technology.

         Improved  Reliability.  We reduce  the  number of  connections  through
higher levels of integration, thus improving reliability and eliminating many of
the problems  encountered in the manufacture of printed  circuit  boards.  These
problems  include  solder  migration,   cracking  and  peeling,  sensitivity  to
environmental  conditions and poor solder joints that often accompany the use of
numerous discrete passive components.  Depending on the system, up to 40% of all
system failures can be attributed to poor solder interconnections.

         Improved  Electrostatic  Discharge  Protection.  All  of  our  P/Active
products have been designed to tolerate high levels of electrostatic  discharge,
and also to help protect increasingly  sensitive integrated circuits. We produce
a family of dedicated  electrostatic  discharge protection devices, some of them
application   specific,  as  well  as  other  standard  products  which  combine
electrostatic  discharge  protection  with  passive  and  active  functions.  We
continue to enhance  these  products  to meet  increasingly  stringent  industry
requirements for electrostatic discharge protection.

         Shorter  Time to Market.  We provide  standardized  solutions to common
problems  that assist  design  engineers in their  efforts to bring  products to
market more quickly. These solutions eliminate the need for engineers to design,
layout,  and test their own solution using  numerous  discrete  components.  For
example,  our Super 1284 is a single  component  that combines 26 resistors,  17
capacitors,  and 34 diodes to provide the  complete  filtering  and  termination
functionality,  plus electrostatic  discharge  protection needed on the parallel
printer port of a computer.

         Lower  Total  Cost  Solutions.  We offer a lower  total  cost  solution
compared with most  discrete  passive  component  manufacturers  by  integrating
multiple  passive  components  into a single  chip.  Taking into account the per
component costs of assembly,  solder, testing,  repair/rework,  and warranty, we
believe a single integrated passive device offers an overall lower cost solution
even though the  materials  cost of the discrete  passive  components is usually
less. As noted above,  our Super 1284 device combines 77 previously  discrete or
low integration level components into a single package.

         Lower  Power  Consumption  and  Enhanced  Power  Management.   We  have
developed a product family combining low power CMOS technology with some passive
components  to address  the  problems  associated  with smart  power  management
techniques.  These  techniques  are used to support  devices  which must  remain
operational  when major parts of a system are powered  down or in a "sleep mode"
to save electricity.  In addition,  we build small,  cost effective  operational
amplifiers that are designed to operate in small,  low power,  hand held devices
that must  conserve  battery  power.  All of our  products  use CMOS  technology
similar  to that used in high  component  count  VLSI,  instead  of the  bipolar
semiconductor  technology  which is more  typically used in higher power drivers
and power supplies.

Our Strategy

         Our  objective  is to use our  leadership  position  in the  design and
manufacture  of  integrated  passive  devices to capture a greater  share of the
market currently served by discrete passive components. We also want to become a
leading  manufacturer of analog  semiconductors  that are  complementary  to our
integrated passive devices. Our strategy includes the following key elements:

         Leverage Our Technology  Leadership Position.  We intend to continue to
use our extensive thin film  processing  and materials  expertise in combination
with our  semiconductor  capabilities  to create  value  added  devices  for our
customers. In passive components, we provide higher levels of integration, using
our thin film capabilities.  We use our applications  engineering capability and
system  level  expertise  to  design  products  that  are  application  specific
solutions to customer problems, as opposed to providing discrete components from
which the customer  constructs their own solution.  Using our ability to combine
thin  film  passive   devices  with   semiconductors,   we  are  developing  new
semiconductor   products   in  power   management,   micro   power   amplifiers,
electrostatic  discharge  protection,  as well as  custom  applications.  We are
leveraging our success with power management  products into additional  products
and applications where we can achieve a leadership position.



                                       4
<PAGE>

         Focus on High Volume  Solutions.  We focus on manufacturers of products
in growth  markets such as personal  computers  and servers,  mobile  phones and
telecommunications infrastructure, networking equipment that supports the growth
of the  internet and  internal  computer  networks,  high  performance  graphics
workstations,  and personal digital assistants,  all of which have an increasing
need for higher density and higher performance passive components.  We work with
customers to identify common,  high volume  applications  or, when  appropriate,
design customized  solutions to meet particular customer  applications.  We have
the  ability to expand  our  production  volumes  substantially  without  adding
significant  new facilities or overhead,  either in our Milpitas,  California or
Tempe, Arizona manufacturing facilities.

         Expand   Our   Sales  and   Marketing   Efforts   Internationally   and
Domestically.  We are continuing to expand both the breadth and intensity of our
sales coverage. We recently added sales personnel to cover Japan, Taiwan, China,
South Korea and other parts of Southeast Asia. In addition,  we have added sales
capabilities  in Europe and increased the number of area managers in the U.S. To
support our  enhanced  sales  efforts and to define more new  products,  we have
expanded our internal marketing capabilities.

         Develop   Highly   Responsive   Product   Development   and  Production
Capabilities. Many system designers leave decisions regarding passive components
to the end of the design cycle,  and they often require  custom  devices to meet
their specific needs. We continue to invest in both  development  capability and
inventory  planning and production  capabilities  to allow us to respond quickly
and shorten design and manufacturing cycles.

         Develop  Standard  Products  to Shorten  Customer  Time to  Market.  We
continue to work with existing and potential customers to identify their passive
and specialized semiconductor  requirements.  We use this information to provide
customized  solutions  that often become  standard  products and solutions  that
shorten our customer's time to market.

         Educate  the  Market on our Value  Proposition.  We are  educating  the
market that our thin film  integrated  devices  are a lower total cost  solution
than  discrete  passive  components  when the total  cost of  manufacturing  and
support is considered.  We also take an aggressive  pricing approach to make our
solutions  more  attractive  in  connection  with  certain  high  volume  market
opportunities.

Our Competitive Advantages

         We believe that we have the following competitive  advantages that will
assist us in implementing solutions to satisfy our customers' needs:

         Extensive  Experience  in Thin  Film  Technologies.  We have  extensive
experience in creating thin film passive  components.  We can use many different
substrates,  including  silicon,  ceramic  and glass while our  competitors  are
generally  limited  to one  type of  substrate.  This  allows  us to  apply  the
technology  best suited to a given problem.  We can deposit  multiple  different
resistive  materials,  use  different  dielectric  materials  and add plating of
different materials to address a wide variety of resistor and capacitor needs.

         Extensive  Experience  in Combining  Thin Film Passive  Components  and
Semiconductors.  We believe our in-house ability to combine thin film technology
with  semiconductors is unique among passive device  manufacturers.  Most of our
competitors in the passive component area lack internal semiconductor design and
manufacturing capability.  While there are some semiconductor  manufacturers who
have limited capabilities to combine semiconductors with passive components,  at
present we know of none that are selling  integrated  thin film passive  devices
incorporating semiconductor functions.

         Application  Engineering  Expertise.  Our application  engineers define
products that are application specific solutions to our customers' problems. Our
goal is to be able to specify and design  application  specific devices that not
only meet the needs of the specific  customer,  but may also be used to meet the
needs of other customers.  Traditional passive component  manufacturers  provide
components from which customers construct their own solution.


                                       5
<PAGE>

         Control of Wafer  Fabrication  Facilities With Available  Capacity.  We
currently  operate  wafer  fabrication  facilities in Milpitas,  California  and
Tempe,  Arizona.  The processes that we use to build integrated  passive devices
are  not  standard,  nor  are  many  of  the  processes  used  to  build  analog
semiconductors.  Outsourcing the required manufacturing  technology can be quite
difficult  for our  competitors.  We have  the  capacity  at our  facilities  to
significantly   increase   production  with  additional   staffing  and  minimal
additional capital expenditures.

         Integrated  Manufacturing  Capabilities.  We bring together  within our
company  the  specialized  capabilities  necessary  to  build a broad  range  of
integrated passive devices. These include laser trimming,  noise and temperature
coefficient control, testing, plating, optical inspection and chip scale bumping
technologies.  Our  competitors  generally  must  outsource one or more of these
capabilities, raising issues of availability, cost, quality control, and time to
market.

<TABLE>
Products

         Our  products  consist of thin film  integrated  passive  products  and
semiconductor  products  and  generally  range in price  from $0.20 to $1.00 per
unit, with some  specialized or special purpose products priced up to $10.00 per
unit. The following table provides information regarding our product families by
application:

<CAPTION>
             Application                Product Name                                    Typical Markets
             -----------                ------------                                    ---------------

<S>                                     <C>                                <C>
Filters ...........................     PAC 1284, PRC 1284, PRC, PACT,     Computers, Mobile Phones, Personal
                                        PAC USB, PAC GAME, PACKBM          Digital Assistants, Set Top Boxes

Termination Devices................     PACDN, PACR, PRN, PACRAMBUS,       Computers, Base Stations, Networks
                                        PACGTL, PACAS, PRC, PACTF, PACV

Resistor Networks..................     PACAC 97, PAC27A, PRN              Computers, Automobiles, Medical Devices,
                                                                           Audio Equipment, Test Equipment, Power
                                                                           Supplies, Networks

ESD Protection.....................     PACDN, DN, PDN, PACVGA             Mobile Phones, Personal Digital
                                                                           Assistants, Computers, Set Top Boxes

Power Management...................     CMPWR, PAC27                       Network Interface Cards, Modems, Cable
                                                                           Modems

Amplifiers.........................     CMC7, CMAMP, AMPM                  Audio Equipment, Instrumentation, Mobile
                                                                           Phones

Microprocessors and Peripherals....     G655, G65SC                        Telephone Switching

Dual Tone Multiple Frequency.......     CM8870, CM8880, CM8888, G8912      10-10 XXX Dialers, Telephone Switching,
                                                                           Answering Machines, Caller ID, PBX, Smart
                                                                           Phones

</TABLE>

                                       6
<PAGE>


        Thin Film Integrated Passive Products

         Our integrated  passive devices are application  specific,  high volume
standard and lower volume custom products.  They represent complete solutions to
the electronic problems of termination,  filtering,  and electrostatic discharge
protection that plague many system designers.  Most of the systems in our target
markets include a core of highly  integrated  circuits,  accompanied by discrete
passive  components,  and low integration level integrated  circuits or discrete
semiconductors.  We  service  the need for the  integration  of these  companion
components,   which  in  recent  years  have  come  to  dominate  the  size  and
significantly  impact the cost of most systems.  Our thin film product offerings
fall into two categories:

o    Our  P/Active  family  of  components,  called  "PAC" in the  above  table,
     optimizes  high  frequency  performance,  density,  reliability  and  other
     capabilities.  These  devices are  application  specific  passive  networks
     targeted to solve  industry  standard  applications  or to  complement  the
     semiconductor offerings of the industry's leading chip suppliers. They take
     full advantage of the inherent  capabilities of the silicon substrate to be
     used as interconnect  between devices,  shield for low noise  capabilities,
     and even impedance control.  They often include some semiconductor  devices
     as  part  of  the  solution,   particularly  when  electrostatic  discharge
     protection is required.

o    Our Integrated Passive Electronic Component products are cost effective for
     customers with high volume  requirements  or that can take advantage of our
     capabilities to provide tight  tolerances,  low  temperature  coefficients,
     tight matching between components, or other special characteristics.  These
     products are often custom in nature. They are typically simpler in function
     and  easier to  manufacture  and are often  well  suited  for very low cost
     applications.

         We also  offer a  variety  of  precision  and  non-precision  thin film
resistors and  capacitors  as well as  combinations  of those  elements with and
without  semiconductor  devices.  Devices  can be  manufactured  on a variety of
different   substrates.   We   have   particular   strength   in  the   area  of
resistor-capacitor  filters,  a  rapidly  growing  and  complex  segment  of the
integrated passive component  business.  We sell these products both in standard
semiconductor  industry  packages,  primarily surface mount technology,  as chip
scale packages, and as un-packaged die. Packaged devices currently represent the
dominant  portion of our  business,  although we expect  chip scale  packages to
represent an increasing portion.

        Semiconductor Products

         We manufacture CMOS based analog circuits,  utilizing  feature sizes of
1.5 microns or greater.  In fiscal 1999 and 2000,  we developed  and  introduced
four new semiconductor product families: power management solutions, operational
amplifiers,  electrostatic discharge protection devices, and combination devices
targeted at the multiple functions on the VGA port of computers.

o    Our power  management  devices are single chip solutions that implement the
     power management  techniques used in computer and network enhancements such
     as network interface cards,  modems,  and other system functions which must
     remain operational when major parts of systems are powered down.

o    Our  operational  amplifier  focus  is on  providing  extremely  low  power
     consumption  products that are attractive in the portable  systems markets.
     Operational  amplifiers  are used in the  processing  of analog  electrical
     signals.  We can integrate  multiple  operational  amplifiers  with passive
     components to provide higher level functions.

o    Our  electrostatic  discharge  protection  devices  are  typically  used to
     protect connector interfaces and other external elements. These devices are
     often combined with signal termination and filtering functions.

o    We have  introduced  a family  of  products  for the VGA  port on  personal
     computers. These devices combine buffer amplifiers, electrostatic discharge
     protection, level shifting functions, and termination and biasing resistors
     for handling the multiplicity of needs on the video port of computers.

                                       7
<PAGE>

o    Our traditional  semiconductor  business  includes mixed signal  integrated
     circuits  that  combine  digital  and analog  functions  on a single  chip.
     Product  groups include data  communications  and interface  families,  and
     telecommunication  dual  tone  multi-frequency   receiver  and  transceiver
     products.  These  products  are  used  in  customer  applications  such  as
     10-10-XXX dialers,  answering  machines,  portable telephones and switching
     systems.  Additionally,  we continue  to  manufacture  the 65CXX  family of
     microprocessors.

Foundry Operations

         We participate in the foundry business,  in which wafers are fabricated
to  customer  specifications  using  customer  designed  tooling.  Most of these
products are built using unique  processes that do not directly compete with the
larger  foundries in Southeast Asia and  elsewhere.  Our intent is to do foundry
work to leverage the  utilization  of our  facilities in Tempe,  Arizona,  while
building our own products and establishing  relationships with key partners.  In
fiscal 1999 and 2000, our major foundry  customer was Sipex  Corporation,  which
recently   announced  the  opening  of  its  own  facility.   Sipex  represented
approximately  2.5% of product  sales in fiscal  2000 and we do not  believe the
potential loss of this revenue will have a material impact on our business.

Customers

         Our products  are  incorporated  into  products  manufactured  by other
companies.  In fiscal 2000  approximately 52% of our revenues came from the sale
of our  products  directly  to original  equipment  manufacturers  and  contract
manufacturers.  No single end use customer accounted for over 10% of net product
sales and the following were our major customers for fiscal 2000:

           ACER Group                         ITI Limited
           Celestica, Inc.                    Nortel Networks
           Cisco Systems                      Samsung Electronics Co. Ltd.
           Guidant Corporation                Solectron Corporation
           Intel Corporation                  3 COM Corporation

         In fiscal  2000,  48% of our  revenues  came from sale of our  products
through  distributors.  Arrow  Inc.  and  Excelpoint  Systems,  our two  largest
distributors,  accounted  for  approximately  17% and 14% of net product  sales,
respectively.  In fiscal 1999, no single distributor  accounted for greater than
10% of net sales.  In fiscal 1998,  Bell  Milgray  Inc.,  a  distributor,  later
acquired by Arrow  Electronics,  accounted for  approximately 10% of net product
sales.

Sales and Marketing

         We focus our  marketing  efforts on high  growth  electronics  sectors,
including  the  areas of  computers  and  peripherals,  portable  communications
devices   and   telecommunications    infrastructure,   and   network   systems.
Additionally,  we concentrate our efforts on major worldwide  electronic  system
manufacturers who are considered market leaders in these segments,  and where we
feel we have the greatest opportunities and ability to influence the industry at
large.  This often  involves  a longer  design-in  cycle,  but we believe it has
greater long-term business potential.

         Our products are primarily  specified  through  contact with customers'
engineering  departments,   as  well  as  their  procurement  and  manufacturing
personnel.  Most of the systems into which our 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.

         We work with existing and potential  customers to identify  passive and
specialized  semiconductor  component needs that our capabilities  address,  and
seek to have customers  design our solutions into their products.  We facilitate
these  efforts by providing  customized  solutions as necessary to meet customer
design requirements. These customized designs, and the knowledge acquired during
the design process, can often be used to create standard products,  which we can
then  offer for  similar  applications  in other  areas.  In this  respect,  our
business style is closer to that of a  semiconductor  company,  than that of the
traditional passives company.

                                       8
<PAGE>

         Our sales  channels  consist  primarily of  independent  regional sales
representatives  managed by our sales  force,  with its  headquarters  Milpitas,
California and regional sales offices throughout the United States,  Europe, and
Asia. We sell through  distributors,  in the United States,  Asia and Europe, to
provide  sources of our products at locations  closer to the  customers.  As our
standard product line expands, more of our sales may be through distributors.

         There is a distinct shift from original equipment manufacturing towards
the use of contract  manufacturing within our customer base, and we believe that
this trend will continue.  Since the end of fiscal 1998 and  continuing  through
fiscal  2000,  a  contract  manufacturer  has been  our  single  largest  direct
purchaser  of product.  In response to this trend,  we have a separate  contract
manufacturing  account  program to further develop sales  opportunities  in this
area.

         Foreign  sales  accounted  for 43%,  39%, and 33% of product  sales for
fiscal years ended March 31, 2000, 1999, and 1998,  respectively.  Many of those
products were designed into United States based OEM's and subcontracted  through
overseas  assemblers.  We use  independent  foreign  sales  representatives  and
distributors to provide  international  sales support,  along with our employees
based abroad.  We expect that  international  sales will continue to represent a
significant  portion  of our sales  for the  foreseeable  future.  Our sales are
denominated in U.S. dollars.

Manufacturing

         Our manufacturing  processes are complex,  and require  production in a
highly controlled,  clean environment suitable for fine tolerances. We currently
operate wafer fabrication facilities in Milpitas,  California and Tempe, Arizona
that are ISO 9000 certified. The Milpitas facility includes a 10,000 square foot
clean room and  primarily  uses four and five inch  round and 4 1/2 inch  square
wafers to manufacture thin film passive components.  The Tempe facility includes
a 16,000 square foot clean room and is equipped for five-inch wafer  fabrication
of  both  thin  film  passive  components  and  semiconductor  products.  We use
subcontractors  in Asia,  primarily  in Thailand  and  Malaysia,  for  assembly,
packaging, and testing of most of our products.

         We manufacture our products using industry standard semiconductor wafer
fabrication  equipment  that  we  modify  as  necessary.  We  have  historically
purchased  used  processing  equipment  at  significantly  lower  cost  than new
equipment,  but have also  purchased new equipment for some  operations  when it
could  be shown to be more  cost  effective  or  where  used  equipment  was not
available.

Research and Development

         Our research and development  programs consist  primarily of developing
new products,  processes  and materials in response to identified  market needs.
Additionally,  we redesign  existing  products to reduce  costs and expand their
capabilities  and  performance.  On March 31,  2000,  we had 30 engineers in our
research and  development  department and process  development  and  improvement
organizations who averaged 17 years of experience.

         For the fiscal years ended March 31,  2000,  1999,  and 1998,  we spent
$3.4 million,  $3.7 million,  and $3.0  million,  respectively,  on research and
development activities.

Intellectual Property

         In the last five years, we have been granted 12 U.S. patents related to
our  thin  film  and  semiconductor  technologies.  We have  seven  U.S.  patent
applications  pending  relating  to  specific  embodiments  of  our  proprietary
resistor,  capacitor, diode, process and semiconductor product technologies.  We
have also  established  domestic and  international  trademarks for our P/Active
family of devices.

         We have acquired a non-exclusive,  non-assignable  license with respect
to manufacturing flip chip, or "bumped" die, from Flip Chip Technologies.  Under
the terms of this  license,  we can utilize  certain of Flip  Chip's  Ultra Chip
Scale packaging technologies.

                                       9
<PAGE>

         Our policy is to apply for patent  protection  for our unique  products
and  manufacturing  processes  where  such  protection  is  warranted.   Process
technologies  are more often  designated as trade secrets.  With respect to mask
works,  our policy is to selectively seek copyright  protection.  We protect our
trade secrets by having our employees sign  confidentiality  and  non-disclosure
agreements  as part of our  personnel  policy.  It is not our  intention to rely
solely on  protection  of  intellectual  property  rights to deter  competition.
However, when and where appropriate,  we have taken aggressive action to protect
our intellectual property rights.

Competition

         Competition in the passive  component  industry is based on a number of
factors,   including   price,   product   performance,    established   customer
relationships,  manufacturing  capabilities,  product  development  and customer
support. Our primary competition has come from established  competitors and from
pre-existing technologies.  Many of our competitors have announced that they are
or will be providing thin film products in addition to their  traditional  thick
film devices.  We have seen only sporadic thin film  competition but continue to
believe that this market will become more competitive.

         Because our  markets  are highly  fragmented,  we  generally  encounter
different  competitors in our various market areas.  Competitors with respect to
our integrated passive products include  AVX/Kyocera,  Beckman Industrial Corp.,
Intarsia, IRC, KOA-Speer,  Matsushita Electronics Components, Ltd., Murata-Eirie
of North America,  Inc., Phillips  Electronics N.V. Ltd, ROHM Co., ST Micro, TDK
Corp. of America, Vishay Intertechnology, Inc., and others. In the semiconductor
area,  we encounter  Cherry  Semiconductor,  Linear  Technology,  Maxim,  Mitel,
Motorola  Semiconductor,  Fairchild  Semiconductor,  Semtech,  ST Micro,  Telcom
Semiconductor, Texas Instruments, and others.

Environmental

         We are subject to a variety of federal,  state and local regulations in
connection  with the  discharge  and  storage  of certain  chemicals  during our
manufacturing  processes.  We believe  that we are in  compliance  with all such
environmental  regulations.  Industrial  waste  generated at our  facilities  is
either processed prior to discharge or stored in barrels with double containment
methods  until  removed  by an  independent  contractor.  We have  obtained  all
necessary permits for such discharges and storage.

Employees

         As of March 31, 2000, we had 285  full-time  and  part-time  employees,
including  29 in  sales  and  marketing,  30 in  engineering  and  research  and
development  activities and process  development and improvement  organizations,
and 205 in  manufacturing.  Of these  employees,  151 were  located in Milpitas,
California and 134 in Tempe, Arizona.


                                       10
<PAGE>


Risk Factors

We have  incurred  losses in our fiscal years 1998 and 1999 and we may be unable
to sustain profitability.

         We have  experienced  losses for each quarter and fiscal year from June
30, 1998 through  September 30, 1999. We incurred net losses of $2.8 million for
our fiscal  year ended  March 31, 1999 and  $594,000  for the nine months  ended
December 31, 1999. Our accumulated  deficit at March 31, 2000 was $33.5 million.
Although our revenues have grown in recent quarters, and profits in the quarters
ended  December 31, 1999 and March 31, 2000 were  sufficient  to make the fiscal
year ended March 31, 2000 profitable,  we cannot assure you that we will be able
to sustain revenue growth and profitability.

Our  operating  results  may  fluctuate  significantly  because  of a number  of
factors, many of which are beyond our control.

         Our operating results may fluctuate significantly.  Some of the factors
that  affect our  quarterly  and  annual  operating  results,  many of which are
difficult to control or predict, are:

         o        the  reduction,  rescheduling  or  cancellation  of  orders by
                  customers;

         o        fluctuations in the timing and amount of customer requests for
                  product shipments;

         o        fluctuations in the manufacturing output, yields and inventory
                  levels of our suppliers;

         o        changes in the mix of products that our customers purchase;

         o        our ability to introduce new products on a timely basis;

         o        the   announcement   or   introduction   of  products  by  our
                  competitors;

         o        the  availability  of  third-party  assembly  capacity and raw
                  materials;

         o        competitive pressures on selling prices;

         o        market acceptance of our products;

         o        general   conditions  in  the  computer,   telecommunications,
                  networking, and general semiconductor and passives industries;
                  and

         o        general economic conditions.

Our markets are subject to rapid technological  change.  Therefore,  our success
depends on our ability to develop and introduce new products.

         The markets for our products are characterized by:

         o        rapidly changing technologies;

         o        changing customer needs;

         o        frequent new product introductions and enhancements;

         o        increased integration with other functions; and

         o        rapid product obsolescence.

         To develop new products for our target markets,  we must develop,  gain
access to, and use leading  technologies in a cost-effective  and timely manner,
and continue to expand our technical and design expertise.  In addition, we must
have our products  designed  into our  customers'  future  products and maintain
close working  relationships with key customers in order to develop new products
that meet their changing needs.



                                       11
<PAGE>

         In  addition,  products  for  some  applications  are  based on new and
continually  evolving industry standards.  Our ability to compete will depend on
our ability to identify and ensure compliance with these industry standards.  As
a result,  we could be  required  to invest  significant  time and effort and to
incur  significant  expense to redesign our products to ensure  compliance  with
relevant standards.

         We may not be able to identify new product opportunities,  successfully
develop  and  bring to market  new  products,  achieve  design  wins or  respond
effectively  to  new  technological  changes  or  product  announcements  by our
competitors.  In addition,  we may not be  successful in developing or using new
technologies or in developing new products or product  enhancements that achieve
market acceptance.  Our pursuit of necessary  technological advances may require
substantial  time and  expense.  Failure  in any of these  areas  could harm our
operating results.

Our  future  success  depends  in  part  on the  continued  service  of our  key
engineering  and  management  personnel  and our ability to  identify,  hire and
retain additional personnel.

         There  is  intense   competition   for   qualified   personnel  in  the
semiconductor  industry,  in particular the highly skilled design,  applications
and  test  engineers  involved  in  the  development  of new  analog  integrated
circuits. Competition is especially intense in the San Francisco Bay area, where
our corporate  headquarters and our Milpitas factory are located,  as well as in
the Tempe, Arizona, area, where our other factory is located. We may not be able
to  continue  to  attract  and retain  engineers  or other  qualified  personnel
necessary for the  development of our business or to replace  engineers or other
qualified  personnel  who may leave  our  employ in the  future.  Any  growth is
expected to place increased demands on our resources and will likely require the
addition of additional management and engineering personnel, and the development
of additional expertise by existing management  personnel.  Loss of the services
of, or failure to recruit,  key engineers or other key technical and  management
personnel, or key top management, could harm our business.

We do our own wafer  fabrication  and do not have alternate  sources for most of
our processes.

         We operate  our own  semiconductor  and thin film  wafer  manufacturing
facilities.  While some of the processes from our Milpitas factory can be run in
our Tempe  facility,  and vice versa, in general our processes are unique to the
factory  in  which  they  are  being  produced.  We  provide  these  fabrication
facilities with rolling forecasts of our production  requirements.  However, the
ability of each  facility  to provide  wafers to us is limited by the  foundry's
available  capacity and  influenced  by rapid  changes in mix.  Accordingly,  we
cannot be  certain  that  these  facilities  will be able to  supply  sufficient
capacity to satisfy our  requirements.  In addition,  much of our  equipment has
been utilized for a long time, and can be subject to excessive  downtime.  Other
significant risks associated with our wafer manufacturing include:

         o        the  lack  of  assured  wafer  supply,   chemicals,  or  other
                  materials, and control over delivery schedules;

         o        the  unavailability  of, or delays in obtaining access to, key
                  process technologies;

         o        the  unavailability  of,  or delays  in the  ability  to hire,
                  sufficient manufacturing personnel;

         o        the variability in manufacturing yields and productivity; and

         o        the  availability of spare parts and  maintenance  service for
                  aging equipment.

         We could experience a substantial delay or interruption in the shipment
of our products or an increase in our costs due to many reasons, including:

         o        a sudden, unanticipated demand for our products;

         o        a manufacturing  disruption  experienced by one or more of our
                  wafer fabrication facilities;

         o        errors in fabrication or defects in raw materials;

         o        the time  required,  or the  inability  to identify or qualify
                  alternative manufacturing sources for existing or new products
                  in the case of disruption; or



                                       12
<PAGE>

         o        failure  of our  suppliers  to obtain  the raw  materials  and
                  equipment used in the  production of our  integrated  circuits
                  and integrated passives.

The markets in which we participate  are intensely  competitive and our products
are not sold pursuant to long term contracts.

         Our target  markets are intensely  competitive.  Our ability to compete
successfully in our target markets depends on the following factors:

         o        designing new products that implement new technologies;

         o        subcontracting  the assembly of new  products  and  delivering
                  them in a timely manner;

         o        product quality and reliability;

         o        technical support and service;

         o        timely product introduction;

         o        product performance and features;

         o        price;

         o        end-user acceptance of our customers' products;

         o        compliance with evolving standards; and

         o        market acceptance of competitors' products.

         In addition,  our competitors or customers may offer new products based
on new technologies,  industry  standards or end-user or customer  requirements,
including  products that have the potential to replace or provide  lower-cost or
higher-performance  alternatives  to  our  products.  The  introduction  of  new
products by our  competitors  or customers  could render our existing and future
products  obsolete or unmarketable.  In addition,  our competitors and customers
may introduce products that integrate the functions  performed by our integrated
circuits on a single integrated circuit, or combine our integrated passives onto
the integrated circuit, thus eliminating the need for our products.

         Generally,  our sales are not subject to long-term contracts but rather
to short-term releases of customer 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 not in our control.  The  percentage  of revenues from
turns orders (orders booked and shipped in the same quarter) has ranged from 61%
in the quarter  ended June 30, 1999 to as low as 41% for the quarter ended March
31, 2000, making our quarterly  revenue dependent on short term orders.  Because
of the short  life  cycles  involved  with our  customers'  products,  the order
pattern from individual customers can be erratic with inventory accumulation and
de-accumulation  during phases of the life cycle for our customers' products. As
a result,  we may  experience  quarterly  fluctuations  in revenue and operating
results and the risk of inventory write-offs.

         Because our  markets  are highly  fragmented,  we  generally  encounter
different  competitors in our various market areas.  Competitors with respect to
our integrated passive products include  AVX/Kyocera,  Beckman Industrial Corp.,
Intarsia, IRC, KOA-Speer, Matsushita Electronics Components., Ltd., Murata-Eirie
of North America,  Inc., Phillips Electronics,  ROHM Co., ST Micro, TDK Corp. of
America,  Vishay   Intertechnology,   Inc.,  N.V.,  Ltd.,  and  others.  In  the
semiconductor area, we encounter competition from Cherry  Semiconductor,  Linear
Technology,  Maxim,  Mitel,  Motorola  Semiconductor,   National  Semiconductor,
Semtech, ST Micro, Telcom Semiconductor,  Texas Instruments, and others. Many of
our competitors are greater than us in size and have larger  financial and other
resources than we do.



                                       13
<PAGE>

If we are unable to further  penetrate the markets for PCs,  telecommunications,
or  networking  devices,  or if  these  markets  fail to grow as  expected,  our
revenues could stop growing and may decline.

         A significant  portion of our revenues in recent  periods has been, and
is expected to continue to be, derived from sales of PC, telecommunications, and
networking  products.  In order for us to be  successful,  we must  continue  to
penetrate these markets. Furthermore, if these markets fail to grow as expected,
our business could be materially harmed.

If we are unable to maintain  our present  foundry  relationship  with the Sipex
Corporation,  or if their use of our capabilities were to decline,  our revenues
would be impacted.

         In the last three fiscal years we have derived  approximately 2.5 to 5%
of our revenue from foundry  business  with the Sipex  Corporation.  In the last
year,  Sipex built its own  facility.  It is likely  that Sipex will  attempt to
install the process we run for them in their own facility.  If that happens,  we
will likely lose this business.  We may not be able to find replacement  foundry
business at that time or in the future.

We  expect  that  revenues  currently  derived  from some  older  communications
products will decline in future periods,  and our business will be harmed if our
other products fail to compensate for this decline.

         We manufacture  some older  microprocessor  products that are currently
used in places  such as India's  telephone  system and other  telecommunications
products.  Since all other  significant  manufacturers  of these products are no
longer  participating  in these markets,  our revenues have increased.  However,
these  devices are not being  designed  into new systems,  so the business  will
eventually decline.  Additionally, we manufacture a family of old tone generator
products,  called DTMF circuits,  which are used for tone  recognition on analog
telephone systems. As long as this communication system is in use, there will be
periodic  spurts  of  revenue  from  increased  usage  when  new  functions  are
introduced,  but the  long-term  business  trend is most likely down.  If we are
unable to find replacement  business for this revenue, our overall business will
suffer.

Our dependence on third-party  subcontractors  to assemble and test our products
subjects us to a number of risks, including an inadequate supply of products and
higher manufacturing costs.

         We depend on  independent  subcontractors  for the assembly and most of
the testing of our products. As a result, we face significant risks including:

         o        reduced control over delivery schedules and quality;

         o        the  potential  lack of adequate  capacity  during  periods of
                  excess industry demand;

         o        difficulties selecting and integrating new subcontractors;

         o        limited warranties on products supplied to us;

         o        potential  increases in prices due to capacity  shortages  and
                  other factors; and

         o        potential misappropriation of our intellectual property.

         If we fail to  deliver  our  products  on time or if the  costs  of our
products increase,  then our profitability and customer  relationships  could be
harmed.

Our  reliance  upon  foreign  suppliers  exposes  us to  risks  associated  with
international operations.

         We use assembly and test subcontractors in Asia,  primarily in Thailand
and Malaysia for most of our products.  We intend to continue  transferring  our
testing and shipping  operations to foreign  subcontractors.  Our  dependence on
these subcontractors involves the following substantial risks:

         o        political and economic instability;

         o        disruption to air transportation from Asia; and



                                       14
<PAGE>

         o        changes in tax laws, tariffs and freight rates.

         These risks may lead to delayed  product  delivery or increased  costs,
which would harm our profitability and customer  relationships.  In addition, we
maintain significant  inventory of die at our foreign  subcontractors that could
be at risk.

         We also  "drop-ship"  product  from  these  foreign  subcontractors  to
customers.  This has the effect of both saving freight  charges and reducing the
delivery  cycle time.  However,  it  increases  our exposure to  disruptions  in
operations  not under our direct  control  and has  required  us to enhance  our
computer and information systems to coordinate this remote activity.

The limited number of  subcontractors  we use may expose us to an increased risk
of manufacturing disruption or uncontrolled price changes.

         Due to the volume of our products,  we believe it is impractical for us
to spread  our use of  subcontractors  over more  than a few  suppliers  without
significant increases in our costs. Although to date we have not experienced any
material  disruptions with respect to our  subcontractors,  if the operations of
one or more of our  subcontractors  should be  disrupted,  our  business  may be
adversely impacted.  In addition,  the volatility of the semiconductor  industry
has  occasionally  resulted in  shortages  of  subcontractor  capacity and other
disruption of supplies. We may not be able to find sufficient  subcontractors at
a reasonable price or at all if such disruptions occur.

Our reliance on foreign  customers  could cause  fluctuations  in our  operating
results.

         International  sales  accounted  for 43% of net sales for  fiscal  year
2000,  39% for fiscal 1999 and 33% of net sales for fiscal  1998.  International
sales may account for an increasing portion of our revenues, which would subject
us to the following risks:

         o        changes in regulatory requirements;

         o        tariffs and other barriers;

         o        timing and availability of export licenses;

         o        political and economic instability;

         o        difficulties in accounts receivable collections;

         o        difficulties in staffing and managing  foreign  subsidiary and
                  branch operations;

         o        difficulties in managing distributors;

         o        difficulties in obtaining  governmental  approvals for certain
                  products;

         o        limited intellectual property protection;

         o        foreign currency exchange fluctuations;

         o        the burden of complying  with and the risk of violating a wide
                  variety of complex foreign laws and treaties; and

         o        potentially adverse tax consequences.

         In addition,  because  sales of our products have been  denominated  to
date in United  States  dollars,  increases  in the value of the  United  States
dollar could  increase  the  relative  price of our products so that they become
more  expensive  to customers  in the local  currency of a  particular  country.
Furthermore,  because some of our customer  purchase  orders and  agreements are
influenced,  if not governed,  by foreign laws, we may be limited in our ability
to enforce our rights under these agreements and to collect damages, if awarded.

                                       15
<PAGE>

We  rely on our  distributors  and  sales  representatives  to sell  many of our
products.

         We  sell  many  of  our  products   through   distributors   and  sales
representatives.  Our  distributors  and sales  representatives  could reduce or
discontinue  sales of our products or may sell our competitor's  products.  They
may not devote the  resources  necessary to sell our products in the volumes and
within the time frames that we expect. In addition, we depend upon the continued
viability   and   financial   resources   of  these   distributors   and   sales
representatives,  some of which are small  organizations  with  limited  working
capital.  These  distributors  and  sales   representatives,   in  turn,  depend
substantially  on  general  economic   conditions  and  conditions   within  the
electronics  industry.  We believe that our success will continue to depend upon
these distributors and sales representatives.  If our distributor Arrow Inc., in
particular,  or  some  of  our  other  distributors  and  sales  representatives
experience  financial  difficulties,  or otherwise become unable or unwilling to
promote and sell our products, our business could be harmed.

Many of our  products  have long,  high-risk  sales cycles that expose us to the
possibility of delayed return,  or complete loss of our research and development
investment.

         Due to the nature of our  products,  we not only have a long  design-in
cycle,  but many of the  design  wins  risk  replacement  with  other  competing
components until the time the system is released to manufacturing.  It typically
takes us more than 12 months to realize volume  shipments after we first achieve
a design win with a customer.  We first work with  customers to achieve a design
win,  which may take nine months or longer.  Our  customers  then  complete  the
design, testing and evaluation process and begin to ramp up production, a period
which typically lasts an additional three months or longer.  At any point during
this time, we may lose the design. As a result, a significant period of time may
elapse  between our  research and  development  efforts and our  realization  of
revenue, if any, from volume purchasing of our products by our customers.

Due to the  volatility  of  demand  for our  products,  our  inventory  may from
time-to-time  be in excess of our needs,  which could cause  write-downs  of our
inventory.

         Generally  our products  are sold  pursuant to  short-term  releases of
customer  purchase orders and some orders must be filled on an expedited  basis.
In  addition,  many of our products are  specific to  individual  customers.  We
typically plan our production and inventory  levels based on internal  forecasts
of  customer   demand,   which  is  highly   unpredictable   and  can  fluctuate
substantially.  Therefore,  we often  order  materials  and at  least  partially
fabricate product in anticipation of customer requirements.  In order to achieve
level line  loading and  efficiencies  in  manufacturing,  we may also order and
process materials in advance of anticipated customer demand.

         In the last two  years,  there has been a trend  toward  vendor-managed
inventory among some large customers.  In such  situations,  we do not recognize
either revenue or bookings until such time as the customer  withdraws  inventory
from stock.  This  imposes the burden upon us of carrying  additional  inventory
that is on customer premises.

        The  Company  values  its   inventories  on  a  part-by-part   basis  to
appropriately  consider excess inventory levels and obsolete  inventory based on
backlog and demand, and to consider reductions in sales price.  However,  due to
the volatility of demand,  and the fact that many of the Company's  products are
specific  to  individual   customers,   backlog  is  subject  to  revisions  and
cancellations and anticipated demand is constantly changing, which may result in
adjustments to inventory valuations in the future.

Our backlog may not result in future revenue.

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


                                       16
<PAGE>

Our operating expenses are relatively fixed.  Therefore, we have limited ability
to reduce expenses quickly in response to any revenue shortfalls.

         Our operating  expenses are relatively  fixed,  and therefore,  we have
limited  ability  to  reduce  expenses   quickly  in  response  to  any  revenue
shortfalls.  Consequently,  our operating results will be harmed if our revenues
do not  meet our  projections.  We may  experience  revenue  shortfalls  for the
following and other reasons:

         o        significant  pricing  pressures that occur because of declines
                  in average selling prices over the life of a product;

         o        sudden  shortages  of raw  materials or  fabrication,  test or
                  assembly  capacity  constraints  that  lead our  suppliers  to
                  allocate  available  supplies or  capacity to other  customers
                  and, in turn, harm our ability to meet our sales  obligations;
                  and

         o        reduction, rescheduling, or cancellation of customer orders.

We may, in the future,  make  acquisitions  that will involve numerous risks. We
cannot  assure  you that we will be able to  address  these  risks  successfully
without substantial expense, delay or other operational or financial problems.

         The risks involved with acquisitions include:

         o        diversion of management's attention;

         o        failure to retain key personnel;

         o        amortization of acquired intangible assets;

         o        customer  dissatisfaction  or  performance  problems  with  an
                  acquired company;

         o        the cost associated with  acquisitions  and the integration of
                  acquired operations; and

         o        assumption   of  known  or   unknown   liabilities   or  other
                  unanticipated events or circumstances.

         We  cannot  assure  you  that we will be able to  address  these  risks
successfully  without  substantial  expense,   delay  or  other  operational  or
financial problems.

We may not be able to protect our intellectual property rights adequately.

         Our  ability to  compete  is  affected  by our  ability to protect  our
intellectual  property rights. We rely on a combination of patents,  trademarks,
copyrights, mask work registrations,  trade secrets,  confidentiality procedures
and  non-disclosure  and  licensing  arrangements  to protect  our  intellectual
property  rights.  Despite  these  efforts,  the  steps we take to  protect  our
proprietary  information may not be adequate to prevent  misappropriation of our
technology,  and our competitors may  independently  develop  technology that is
substantially similar or superior to our technology.

         More  specifically,  our  pending  patent  applications  or any  future
applications may not be approved, and any issued patents may not provide us with
competitive  advantages and may be challenged by third  parties.  If challenged,
our  patents  may be found to be invalid or  unenforceable,  and the  patents of
others may have an adverse  effect on our ability to do  business.  Furthermore,
others may  independently  develop similar products or processes,  duplicate our
products or processes, or design around any patents that may be issued to us.

We could be harmed  by  litigation  involving  patents  and  other  intellectual
property rights.

         As a general  matter,  the  semiconductor  and related  industries  are
characterized by substantial  litigation regarding patent and other intellectual
property  rights.  We may be accused of  infringing  the  intellectual  property
rights  of  third  parties.  Furthermore,  we may have  certain  indemnification
obligations  to  customers  with  respect  to the  infringement  of  third-party
intellectual  property  rights  by our  products.  Infringement  claims by third
parties or claims



                                       17
<PAGE>

for  indemnification  by customers or end users of our products  resulting  from
infringement claims may be asserted in the future and such assertions, if proven
to be true, may harm our business.

         Any litigation  relating to the  intellectual  property rights of third
parties,  whether or not  determined  in our favor or settled by us,  would at a
minimum be costly and could divert the efforts and  attention of our  management
and  technical  personnel.  In the  event  of any  adverse  ruling  in any  such
litigation,  we  could  be  required  to  pay  substantial  damages,  cease  the
manufacturing,  use and  sale of  infringing  products,  discontinue  the use of
certain processes or obtain a license under the intellectual  property rights of
the third party  claiming  infringement.  A license  might not be  available  on
reasonable terms, or at all.

Earthquakes  and other natural  disasters may damage our  facilities or those of
our suppliers.

         Our Milpitas facility, including our corporate headquarters, is located
in California near major earthquake faults that have experienced  earthquakes in
the past. In addition,  some of our  suppliers are located near fault lines.  In
the event of a major earthquake or other natural disaster near our headquarters,
our operations could be harmed.  Similarly,  a major earthquake or other natural
disaster near one or more of our major suppliers,  like the one that occurred in
Taiwan in September 1999, could disrupt the operations of those suppliers, which
could limit the supply of our products and harm our business.

         Additionally,  our  facility  in Tempe,  Arizona is located in a desert
region of the southwestern United States.  Disruption of water supplies or other
infrastructure  support  could  limit the  supply of our  products  and harm our
business.

Our stock price is volatile.

         The market price of our common stock has  fluctuated  significantly  to
date.  In the future,  the market  price of our common stock could be subject to
significant  fluctuations  due to general  market  conditions and in response to
quarter-to-quarter variations in:

         o        our anticipated or actual operating results;

         o        announcements or introductions of new products;

         o        technological   innovations   or   setbacks   by  us  or   our
                  competitors;

         o        conditions  in  the  semiconductor   and  passive   components
                  markets;

         o        the commencement of litigation;

         o        changes  in  estimates  of  our   performance   by  securities
                  analysts;

         o        announcements of merger or acquisition transactions; and

         o        general economic and market conditions.

         In addition,  the stock market in recent years has experienced  extreme
price and volume  fluctuations that have affected the market prices of many high
technology companies, particularly semiconductor companies, that have often been
unrelated or disproportionate to the operating  performance of companies.  These
fluctuations,  as well as general  economic and market  conditions  may harm the
market price of our common stock.

The  anti-takeover  provision of our  certificate  of  incorporation  and of the
California  General  Corporation  Law may  delay,  defer or  prevent a change of
control.

         Our board of  directors  has the  authority  to issue up to  10,000,000
shares of preferred  stock and to determine the price,  rights,  preferences and
privileges and restrictions, including voting rights of those shares without any
further vote or action by our stockholders.  The rights of the holders of common
stock will be subject to, and may be harmed by, the rights of the holders of any
shares of  preferred  stock that may be issued in the  future.  The  issuance of
preferred  stock may delay,  defer or prevent a change in control.  The terms of
the preferred stock that might be issued could



                                       18
<PAGE>

potentially  make more  difficult or expensive our  consummation  of any merger,
reorganization,  sale of substantially  all of our assets,  liquidation or other
extraordinary  corporate  transaction.  California  Corporation  law requires an
affirmative  vote of all  classes  of  stock  voting  independently  in order to
approve a change in control. In addition,  the issuance of preferred stock could
have a dilutive effect on our stockholders.  Further, our stockholders must give
30 days advance notice prior to the relevant meeting to nominate a candidate for
director or present a proposal to our  stockholders  at a meeting.  These notice
requirements  could  inhibit a takeover  by  delaying  stockholder  action.  The
California  Corporation  law also  restricts  business  combinations  with  some
stockholders once the stockholder acquires 15% or more of our common stock.

There may be a substantial  disbursement  of shares from the former  Chairman of
California Micro Devices that could negatively impact the stock price.

         The  former  Chairman  of  California   Micro  Devices  still  controls
approximately  1,700,000 shares of the Company's stock. He has been convicted of
securities  fraud and is  appealing  that  decision.  As part of the  sentencing
related to this conviction,  he was ordered to disgorge  1,500,000 shares to the
class of offended shareholders, in settlement of the class action suits that had
been filed in parallel civil actions.  To date, nothing has been settled in this
matter,  as the  criminal  appeal  has not yet  been  adjudicated,  and no other
interim  settlement  has been reached.  Assuming that the present  sentencing is
upheld,  the  1,500,000  shares of stock  would be  disbursed  over  some  3,500
claimants.  We do not know what effect  disbursement of this amount of stock may
have on the price of our stock.

If we have not  adequately  prepared for the transition to Year 2000 and related
issues, our business, operating results and financial condition could suffer.

         We  have  executed  a plan  designed  to  make  our  computer  systems,
applications,  computer and  manufacturing  equipment and  facilities  Year 2000
compliant. To date, none of our systems,  applications,  equipment or facilities
have  experienced  material  difficulties  from the transition to Year 2000, nor
have we been notified that any of our suppliers have had any such  difficulties.
However, due to the breadth of potential issues related to the Year 2000, we may
yet experience problems in the future and the final determination may still take
several months.  The effect on our  operational  results from any failure of our
systems,  applications,  equipment  or  facilities,  or  our  critical  external
suppliers, related to the Year 2000 issue cannot yet be finally determined.

Our failure to comply with environmental regulations could result in substantial
liability to us.

        We are subject to a variety of federal,  state and local laws, rules and
regulations  relating to the  protection  of health and the  environment.  These
include  laws,  rules and  regulations  governing the use,  storage,  discharge,
release,  treatment  and  disposal  of  hazardous  chemicals  during  and  after
manufacturing, research and development and sales demonstrations, as well as the
maintenance  of  healthy  and   environmentally   sound  conditions  within  our
facilities. If we fail to comply with present or future regulations, we could be
subject to substantial liability for clean up efforts, property damage, personal
injury and fines or suspension or cessation of our  operations.  Restrictions on
our ability to expand or continue  to operate  our  present  locations  could be
imposed upon us or we could be required to acquire costly remediation  equipment
or incur other significant expenses.

Issuance of new laws or accounting regulations, or re-interpretation of existing
laws or regulations, could materially impact our business or stated results.

        From time to time,  the  government,  courts,  and financial  accounting
boards  issue new laws or  accounting  regulations,  or  modify or  re-interpret
existing  ones.  We cannot  guarantee  that there will not be future  changes in
laws, interpretations, or regulations that would effect our financial results or
the  way in  which  we  present  them.  Additionally,  changes  in the  laws  or
regulations  could have adverse  effects on hiring and many other aspects of our
business  that  would  affect  our  ability  to  compete,  both  nationally  and
internationally.



                                       19
<PAGE>


ITEM 2. PROPERTIES.

        We  currently  lease   approximately   40,000  square  feet  of  office,
development and manufacturing space including a 10,000 square foot clean room in
Milpitas,  California,  pursuant to an agreement  that expires on June 30, 2002,
that  provides for a current  monthly rent of $32,640 plus  operating  expenses.
This rent amount will be increased 3% annually. We also owns 5 acres of land and
a 46,000  square foot  building in Tempe,  Arizona  which houses a 16,000 square
foot clean  room,  wafer  fabrication,  manufacturing,  and  engineering  design
center.

        The Company  also leases  approximately  24,000  square feet of space in
Tempe,  Arizona,  which formerly  housed test  facilities  and warehouse  space.
Monthly rent on the leased Tempe facilities as of March 31, 2000 is $11,152 plus
operating  expenses,  pursuant to an agreement that expires in March 2001. These
facilities  are currently  being  subleased  through the term of the lease.  The
sublease  revenue is  expected  to cover the costs of the lease.  See Note 12 of
Notes to Financial Statements.

        We  estimate  that  our  wafer  fabrication   capacity  utilization  was
approximately  45% in Tempe  and 35% in  Milpitas  by the end of the year  ended
March 31, 2000. Ramping up to full wafer fabrication capacity from both of these
locations would require moderate  additional capital  expenditures as well as an
ongoing replacement of aging equipment.

ITEM 3. LEGAL PROCEEDINGS.

        From August 5, 1994 through  February 16, 1995,  eleven  purported class
action  complaints were filed against us in the United States District Court for
the Northern District of California.

        By court order dated May 20, 1997, these actions have been settled.  Our
contribution  towards the  settlement  consisted of the payment of $6 million in
cash and the issuance of 608,696 new shares of the Company's common stock to the
class.  Each new  share was  accompanied  by a  Contingent  Value  Right  (CVR),
personal to the shareholder,  that guaranteed the shareholder  would receive the
difference  between  $11.50 and the highest 20 day average  trading price of the
Company's  common stock  (assuming the average price is less than $11.50) over a
defined period.  As of January 5, 2000 the 20-day average trading price exceeded
$11.50 and the CVR was  extinguished.  We had put $2 million  into a  restricted
account as a  guarantee  for  performance  under the CVR. As a result of the CVR
being  extinguished,  this $2 million is no longer restricted and is included in
cash and short-term securities as of March 31, 2000.

        The Company has  cooperated  with the Justice  Department and the SEC in
their  investigation of its former officers.  The Justice Department has advised
we are not currently a target or subject of investigation. The SEC has taken the
position that it is premature,  at this stage in its  investigation,  to discuss
the resolution of the investigation of the Company.

        The  Company  is  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 are not aware of any
pending  legal  proceedings  against the Company  that,  individually  or in the
aggregate,  would  have a material  adverse  effect on our  business,  operating
results, or financial condition.

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

        Not Applicable.




                                       20
<PAGE>


                                     PART II

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

        The Company's  common stock trades on the Nasdaq National Market tier of
The Nasdaq Stock Market under the symbol "CAMD".

        Closing prices by quarter for fiscal 2000 and 1999 are as follows:

                                         Common Stock

        Fiscal 2000        Q1             Q2             Q3             Q4
        -----------        --             --             --             --
        High               $2 11/16       $5 11/16       $13 3/8        $33 7/8
        Low                $1 7/8         $2 1/8         $4             12 15/16

        Fiscal 1999        Q1             Q2             Q3             Q4
        -----------        --             --             --             --
        High               $6 3/8         $4 1/16        $3             $3 5/16
        Low                $4 3/8         $1 7/8         $1 5/8         $2 1/4


        Certain debt covenants  restrict the payment of dividends.  No dividends
were paid in fiscal 2000,  1999,  or 1998.  We expect to continue that policy in
the foreseeable future.  There were approximately  10,000 common shareholders of
record as of March 31, 2000.

<TABLE>
ITEM 6. SELECTED FINANCIAL DATA.

        The  selected  financial  data (in  thousands  except per  common  share
information)  set forth below with respect to operating  and balance  sheet data
are derived from the financial statements of the Company.
<CAPTION>

                                                                           Twelve Months Ended March 31,
                                                          2000           1999            1998            1997           1996
                                                        --------       --------        --------        --------       --------
<S>                                                     <C>            <C>             <C>             <C>            <C>
Total revenues                                          $ 43,763       $ 33,617        $ 33,043        $ 32,936       $ 39,882

Income (loss) before income taxes                       $    632       $ (2,771)       $ (3,005)       $    704       $  5,119

Net income (loss)                                       $    632       $ (2,771)       $ (3,005)       $    704       $  5,119

Net income (loss) per common share
     Basic                                              $   0.06       $  (0.28)       $  (0.30)       $   0.07       $   0.48
     Diluted                                            $   0.05       $  (0.28)       $  (0.30)       $   0.07       $   0.48


Total assets                                            $ 39,086       $ 33,644        $ 35,994        $ 38,270       $ 44,928

Long-term obligations                                   $  8,116       $  8,422        $  8,159        $  8,499       $  7,896

</TABLE>

                                       21
<PAGE>



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

        In the following  discussion,  fiscal 2000,  1999, and 1998 refer to the
twelve months ended March 31, 2000, 1999, and 1998, respectively.

Results of Operations

        Product sales for fiscal 2000 totaled  $43.8  million  compared to $33.6
million in fiscal 1999 and $32.5  million in fiscal  1998.  The 30%  increase in
product  sales for  fiscal  2000 was due  primarily  to  increased  sales of new
products, with the majority of the increase being in products for the networking
and  telecommunications  markets.  Units  shipped  increased  53% in fiscal 2000
compared to the year-earlier  period. Sales of new products (products introduced
within the past three  years) for fiscal  2000  increased  by 96% in dollars and
119% in units as  compared  to the  year-earlier  period.  Thin film  integrated
devices  represented  69% of product sales and 73% of unit  shipments for fiscal
2000 as  compared  to 69% of  product  sales and 82% of units  shipped in fiscal
1999. In total the number of thin film parallel port solutions shipped increased
by 21% in fiscal 2000 as compared  fiscal 1999,  but the number of units shipped
declined due to increased  mix of single chip and lower mix of two chip parallel
port  solutions.  The 3% increase  in product  sales for fiscal 1999 over fiscal
1998 reflects primarily the increase in unit sales of the Company's new P/Active
family of products (introduced in calendar 1997),  partially offset by a decline
in  demand  for some of the older  semiconductor  products.  Thin film  products
(including P/Active) accounted for approximately 69% of product sales and 82% of
units  shipped in fiscal 1999  compared to 66% of product sales and 79% of units
shipped in fiscal 1998.

        Technology  related  revenues,  consisting of  cost-sharing  payments by
Hitachi  Metals Ltd.  (HML)  related to joint  process  and product  development
projects,  were $569,000 in fiscal 1998. There were no cost-sharing  payments by
HML in fiscal 1999 and fiscal 2000 and we expect no further revenue from HML for
joint research and development in the future.

        Research  and  development  expenses  were $3.4  million in fiscal  2000
compared to $3.7  million in fiscal 1999 and $3.0  million in fiscal  1998.  The
higher level of  expenditures  in fiscal 1999 compared to fiscal 2000 and fiscal
1998 reflected a higher level of material costs  associated  with an emphasis on
process development efforts.

        Selling, marketing, and administrative expenses in fiscal 2000 were $9.7
million  compared to $7.3 million in fiscal 1999 and $7.9  million in 1998.  The
increase in fiscal 2000 is  primarily  due to increased  commissions,  increased
personnel  costs  (including the expansion of our presence in Europe and the Far
East),  and increased  promotional  activities.  Fiscal 1999 expenses were lower
than fiscal 1998 primarily due to proceeds from a legal  settlement  achieved in
fiscal 1999.

        Interest expense was $890,000,  $892,000,  and $941,000, in fiscal 2000,
1999, and 1998,  respectively.  The decrease in interest  expense in fiscal 1999
compared  to fiscal  1998  primarily  reflects  expiration  of  certain  capital
equipment leases. Interest and other income was $419,000 in fiscal 2000 compared
to $219,000 in fiscal 1999 and $511,000 in fiscal  1998.  The increase in fiscal
2000 compared to fiscal 1999 was largely due to increased investment income. The
decrease  in fiscal 1999 as  compared  to fiscal  1998 is  primarily  due to the
comparatively lower level of cash and investments period to period.

        As a result of the above factors, the Company had net income of $632,000
in fiscal 2000  compared to a net loss of $2.8  million in fiscal 1999 and a net
loss of $3.0 million in fiscal 1998.

        We  did  not  incur  income  tax  expense  in  fiscal  2000  due  to the
availability of tax loss  carryforwards,  nor in fiscal 1999 and fiscal 1998 due
to having net losses in those years.  On March 31, 2000, the Company had Federal
and  State  tax loss  carryforwards  of  approximately  $34.8  million  and $6.1
million, respectively. See Note 13 of Notes to Financial Statements.


                                       22
<PAGE>

Liquidity and Capital Resources

        Total cash,  short-term securities and investments as of March 31, 2000,
increased  to $6.6  million  compared to $4.9  million on March 31,  1999.  This
increase was primarily  attributable  to the inclusion of previously  restricted
cash  associated  with its 1997 class action  settlement,  since the stock price
guarantee  included in the settlement has been met.  Receivables  increased $4.4
million,  which was  attributable  to increased  product  sales during the three
months ended March 31, 2000. Inventories increased by $1.6 million during fiscal
2000, related to increased  work-in-process to support new product introductions
and  increased  sales of new and  existing  products.  But this was  essentially
offset by a $1.6 million  increase in accounts  payable.  Other  current  assets
increased  $388,000,  to $980,000 at March 31,  2000,  due to  increased  annual
insurance payments and prepayments of payroll taxes made during the fiscal year.
We also received $3.2 million from the sale of common stock through our employee
stock plans during fiscal 2000.

        We have a $3.0 million  revolving  secured line of credit agreement that
expires on July 31, 2000.  Under the terms of the line of credit,  we can borrow
at prime plus one-half percent,  collateralized by eligible receivables. We also
have a $1.0 million capital  equipment  financing  facility that expires on June
30,  2003;  under the terms of this  facility we can borrow at prime plus 0.75%.
During fiscal 2000 we borrowed $238,000 against the capital equipment  financing
facility  and there were no  borrowings  against the  revolving  line of credit.
There were no borrowings on either of these facilities on March 31, 1999. We are
in  compliance  with our  financial  covenants.  On April 21, 2000 we secured an
additional  $500,000 capital equipment  financing  facility under the same terms
and conditions of the original facility. The new line expires on August 3, 2003.

        We expect to fund our  future  liquidity  needs  through  existing  cash
balances, cash flows from operations,  bank borrowings,  and equipment lease and
loan financing  arrangements.  Depending on market conditions and the results of
operations, we may pursue other sources of liquidity.

        We believe we have sufficient financial resources to fund our operations
for the foreseeable future.

Impact of the Year 2000

        The Year 2000 issue is primarily the result of computer programs using a
two-digit format, as opposed to four digits, to indicate the year.

        We have  experienced no material impact on our operations as a result of
the transition to the Year 2000.  Problems relating to the Year 2000 issue could
still arise, but we do not believe that they will have a material adverse effect
on our financial  condition or results of operations.  The Company considers its
operations  to be Year 2000  functional  and  ready to  support  its  customers,
however we continue to monitor our systems to watch for any potential  issues in
the future.




                                       23
<PAGE>



ITEM 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

        The Company  owns  financial  instruments  that are  sensitive to market
risks as part of its investment  portfolio.  The investment portfolio is used to
preserve  our  cash  until  it  is  required  to  fund  operations  and  capital
investments.  None of  these  market-risk  sensitive  instruments  are  held for
trading  purposes  except  for  amounts  related to our  non-qualified  deferred
compensation  program.  We do not own  derivative  financial  instruments in our
investment  portfolio.  The investment  portfolio contains  instruments that are
subject to fluctuation in interest rates.

        Our investment  portfolio  includes debt  instruments that are primarily
United Stated  government  bonds,  high-grade  corporate  bonds and money market
funds of less  than one year in  duration.  These  investments  are  subject  to
interest rate risk, and could decline in value if interest rates  increase.  Our
investment  portfolio  also  consists of certain  commercial  paper that is also
subject to interest rate risk. Due to the short duration and conservative nature
of these  instruments,  we do not  believe  that we have a material  exposure to
interest rate risk.

        The interest rates on nearly all of our long-term debt and capital lease
obligations  are fixed and therefore not subject to interest rate  fluctuations.
See Note 11 of Notes to Financial Statements.




                                       24
<PAGE>




ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

                   Index to Financial Statements and Schedules

                                                                     Page Number
                                                                     -----------
Financial Statements:

Report of Ernst & Young LLP, Independent Auditors                           26

Balance Sheets                                                              27
        March 31, 2000 and March 31, 1999

Statements of Operations                                                    28
        Years ended March 31, 2000, March 31, 1999, and March 31, 1998

Statements of Shareholders' Equity                                          29
        Years ended March 31, 2000, March 31, 1999, and March 31, 1998

Statements of Cash Flows                                                    30
        Years ended March 31, 2000, March 31, 1999, and March 31, 1998

Notes to Financial Statements                                               31

Financial Statement Schedule:

Schedule 2      Valuation and Qualifying Accounts                           46



                                       25
<PAGE>



                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, 2000 and 1999, and the related statements of
operations,  shareholders' equity, and cash flows for each of the three years in
the  period  ended  March 31,  2000.  Our audits  also  included  the  financial
statement  schedule  listed  in the  index  at Item  14(a)(2).  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  misstatements.  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  as of March 31,  2000 and  1999,  and the  results  of its
operations  and its cash flows for each of the three  years in the period  ended
March 31, 2000 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
April 26, 2000


                                       26
<PAGE>

<TABLE>

                                                CALIFORNIA MICRO DEVICES CORPORATION
                                                           BALANCE SHEETS
                                            (Amounts in Thousands, Except Per Share Data)
<CAPTION>

                                                                                                       March 31,          March 31,
                                                                                                         2000               1999
                                                                                                       --------            --------
<S>                                                                                                    <C>                 <C>
ASSETS:
Current assets:
  Cash and cash equivalents                                                                         $  1,490            $    764
  Short-term investments                                                                               5,069               4,169
  Accounts receivable, less allowance for doubtful
    accounts of $219 in 2000 and $224 in 1999                                                          8,875               4,471
  Inventories                                                                                          9,994               8,438
  Other assets                                                                                           980                 592
                                                                                                    --------            --------
      Total current assets                                                                            26,408              18,434

  Property and equipment, net                                                                         10,637              11,540
  Restricted cash                                                                                        902               2,900
  Other long-term assets                                                                               1,139                 770
                                                                                                    --------            --------
      Total assets                                                                                  $ 39,086            $ 33,644
                                                                                                    ========            ========

LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
  Accounts payable                                                                                  $  4,821            $  3,239
  Accrued salaries and benefits                                                                        1,097                 998
  Other accrued liabilities                                                                              742                 554
  Deferred margin on shipments to distributors                                                           516                 576
  Current maturities of long-term debt                                                                   398                 306
  Current maturities of capital lease obligations                                                        417                 379
                                                                                                    --------            --------
      Total current liabilities                                                                        7,991               6,052

  Long-term debt, less current maturities                                                              7,342               7,503
  Other long-term liabilities and capital leases less current maturities                                 793                 919
                                                                                                    --------            --------
      Total liabilities                                                                               16,126              14,474

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: 11,037,543 as of March 31, 2000
    and 10,116,144 as of March 31, 1999                                                               56,479              53,328

Accumulated deficit                                                                                  (33,528)            (34,160)
Accumulated other comprehensive income                                                                     9                   2
                                                                                                    --------            --------
Total shareholders' equity                                                                            22,960              19,170
                                                                                                    --------            --------
Total liabilities and shareholders' equity                                                          $ 39,086            $ 33,644
                                                                                                    ========            ========

<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>

                                                                 27
<PAGE>


<TABLE>
                                                CALIFORNIA MICRO DEVICES CORPORATION
                                                      STATEMENTS OF OPERATIONS
                                            (Amounts in Thousands, Except Per Share Data)

<CAPTION>
                                                                                          Years Ended March 31,
                                                                              2000                 1999                 1998
                                                                            --------             --------             --------
<S>                                                                         <C>                  <C>                  <C>
Revenues:
  Net product sales                                                         $ 43,763             $ 33,617             $ 32,474
  Technology related revenues                                                   --                   --                    569
                                                                            --------             --------             --------
    Total revenues                                                            43,763               33,617               33,043

Cost and expenses:
  Cost of sales                                                               29,571               24,730               24,701
  Research and development                                                     3,366                3,685                3,017
  Selling, marketing and administrative                                        9,723                7,300                7,900
                                                                            --------             --------             --------
    Total costs and expenses                                                  42,660               35,715               35,618
                                                                            --------             --------             --------
Operating income (loss)                                                        1,103               (2,098)              (2,575)

Interest expense                                                                 890                  892                  941
Interest income and other (income) expense, net                                 (419)                (219)                (511)
                                                                            --------             --------             --------

Net income (loss)                                                           $    632             $ (2,771)            $ (3,005)
                                                                            ========             ========             ========

Basic earnings (loss)  per share                                            $   0.06             $  (0.28)            $  (0.30)
                                                                            ========             ========             ========

Diluted earning (loss) per share                                            $   0.05             $  (0.28)            $  (0.30)
                                                                            ========             ========             ========

Weighted average common shares outstanding
                                                                              10,324               10,017                9,971
Dilutive effect of employee stock options
Weighted average common shares outstanding,
  assuming dilution                                                            1,318                  --                   --
                                                                            --------             --------             --------
                                                                              11,642               10,017                9,971
                                                                            ========             ========             ========

<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>


                                                                 28

<PAGE>

<TABLE>


                                                CALIFORNIA MICRO DEVICES CORPORATION
                                                 STATEMENTS OF SHAREHOLDERS' EQUITY
                                              (Amounts in Thousands, Except Share Data)

<CAPTION>
                                                                Common Stock                          Accumulated
                                                         ---------------------------                     Other
                                                           Number Of                    Accumulated  Comprehensive
                                                             Shares        Amount         Deficit     Income/(Loss)     Total
                                                          ----------     ----------     ----------     ----------     ----------
<S>                                                       <C>            <C>            <C>            <C>            <C>
Balance at March 31, 1997                                  9,741,124     $   51,939     $  (28,384)    $       25     $   23,580

Components of comprehensive loss:
  Net loss                                                      --             --           (3,005)          --           (3,005)
  Change in unrealized loss on
    available for sale investments                              --             --             --              (20)           (20)
                                                                                                                      ----------
    Total comprehensive loss                                    --             --             --             --           (3,025)

  Exercise of stock options                                   51,742            214           --             --              214
  Employee Stock Purchase Plan
                                                             185,485            858           --             --              858
                                                          ----------     ----------     ----------     ----------     ----------
Balance at March 31, 1998                                  9,978,351         53,011        (31,389)             5         21,627

Components of comprehensive loss:
  Net loss
                                                                --             --           (2,771)          --           (2,771)
  Change in unrealized loss on
    available for sale investments                              --             --             --               (3)            (3)
                                                                                                                      ----------
    Total comprehensive loss                                    --             --             --             --           (2,774)

  Exercise of stock options                                    6,600             26           --             --               26
  Employee Stock Purchase Plan                               100,993            211           --             --              211
  Stock award                                                    200              1           --             --                1
  Licensing agreement                                         30,000             79           --             --               79
                                                          ----------     ----------     ----------     ----------     ----------
Balance at March 31, 1999                                 10,116,144         53,328        (34,160)             2         19,170

Components of comprehensive income
   Net income                                                   --             --              632           --              632
   Change in unrealized income on available
     for sale investments                                       --             --             --                7              7
                                                                                                                      ----------
   Total comprehensive income                                   --             --             --             --              639
                                                                                                                      ----------
Exercise of stock options                                    729,641          2,191           --             --            2,191
Employee Stock Purchase Plan                                 191,758            960           --             --              960
                                                          ----------     ----------     ----------     ----------     ----------
Balance at March 31, 2000                                 11,037,543     $   56,479     $  (33,528)    $        9     $   22,960
                                                          ==========     ==========     ==========     ==========     ==========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>

                                                                 29
<PAGE>

<TABLE>


                                                CALIFORNIA MICRO DEVICES CORPORATION
                                                      STATEMENTS OF CASH FLOWS
                                                       (Amounts in Thousands)
<CAPTION>

                                                                                                      Years Ended March 31,
                                                                                                2000          1999         1998
                                                                                              -------       -------       -------
<S>                                                                                           <C>           <C>           <C>
Cash flows from operating activities:
  Net income (loss)                                                                           $   632       $(2,771)      $(3,005)
  Adjustments to reconcile  net income  (loss) to net cash (used in)
  Provided by operating activities:
      Depreciation and amortization                                                             2,899         2,945         2,852
      Issuance of common stock in exchange for licensing agreement                               --              79          --
Change in operating assets and liabilities:
  Accounts receivable                                                                          (4,404)          616        (1,148)
  Inventories                                                                                  (1,556)         (346)          751
  Other assets                                                                                   (388)          394          (113)
  Trade accounts payable and other current liabilities                                          1,869          (347)          268
  Other long-term assets                                                                         (384)         (381)           16
  Other long-term liabilities                                                                     290           323          --
  Deferred margin on shipments to distributors                                                    (60)           (5)            5
                                                                                              -------       -------       -------
Net cash provided by (used in) operating activities                                            (1,102)          507          (374)
                                                                                              -------       -------       -------

Investing activities:
  Purchases of short-term investments                                                          (3,626)       (4,822)       (6,144)
  Sales of short-term investments                                                               2,735         5,760         7,481
  Capital expenditures                                                                         (1,981)       (1,544)       (1,132)
  Net change in restricted cash                                                                 1,998             9            (6)
                                                                                              -------       -------       -------
Net cash (used in) provided by investing activities                                              (874)         (597)          199
                                                                                              -------       -------       -------

Financing activities:

  Repayments of capital lease obligations                                                        (379)         (357)         (585)
  Repayments of debt                                                                             (306)         (157)         (175)
  Additions of long-term debt                                                                     238           650          --
  Proceeds from issuance of common stock                                                        3,151           238         1,072
                                                                                              -------       -------       -------
Net cash provided by financing activities                                                       2,704           374           312
                                                                                              -------       -------       -------
Net increase in cash and cash equivalents                                                         728           284           137
Cash and cash equivalents at beginning of period                                                  762           480           343
                                                                                              =======       =======       =======
Cash and cash equivalents at end of period                                                    $ 1,490       $   764       $   480
                                                                                              =======       =======       =======

Supplemental disclosures of cash flow information:
  Interest paid                                                                               $   890       $   892       $   941
Supplemental disclosures of non-cash investing and financing activities:
  Capital expenditures financed through capital lease obligations                             $  --         $  --         $   163
  Unrealized gain (loss) on securities                                                        $     7       $    (3)      $   (20)

<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>

                                                                 30
<PAGE>




                      CALIFORNIA MICRO DEVICES CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

1.      THE COMPANY

        We design, develop,  manufacture and market thin film integrated passive
devices  and  complementary   analog   semiconductors   for  Original  Equipment
Manufacturers   and  contract   manufacturers   who  need  high  density,   high
performance,  lower  cost  and  unique  functionality.   The  Company  uses  its
silicon-based  thin film  materials  and  semiconductor  process  technology  to
integrate multiple passive and active elements onto a single integrated circuit.

        Our analog  semiconductor  products  include  primarily analog and mixed
signal products for the  telecommunications  industry,  electrostatic  discharge
protection devices, power management devices and operational amplifiers.

        Our  products  are  marketed  primarily to customers in the computer and
computer  peripherals,   wireless   communications,   networking,   and  medical
industries.

2.      SIGNIFICANT ACCOUNTING POLICIES

        Basis of Presentation

         In the accompanying  financial statements,  fiscal 2000, 1999, and 1998
refer to twelve months ended March 31, 2000, 1999, and 1998, respectively.

        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  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 its current operations.
Accordingly, we have classified all investments,  except for amounts related our
non-qualified deferred compensation program described in Note 15, 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 are included in interest income and other (net).

        Inventories

        Inventories  are  stated  at the  lower  of  cost  or  market.  Cost  is
determined using the first-in, first-out (FIFO) basis.


                                       31
<PAGE>



        Property and Equipment

        Property and equipment are stated at cost. Depreciation and amortization
are 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

        Revenue Recognition

        Revenue from product  sales to end user  customers  is  recognized  upon
shipment.  We generally  recognize revenue on shipments to distributors upon the
final  sales  by the  distributor  to  OEMs  or  other  end  users.  Distributor
agreements allow the distributors  certain rights of return and price protection
on unsold  merchandise.  As a  result,  the we  believe  that  deferral  of such
distributor  sales and related cost of sales as deferred gross margins until the
merchandise  is  resold  by  the  distributors  results  in  a  more  meaningful
measurement of revenue from distributors.

        Revenue  under  license  and  technology  agreements  is  recognized  as
technology  related  sales  upon  completion  of the  appropriate  terms  of the
agreement.  Revenue under product  development and engineering design agreements
is  recognized as  technology  related sales using the  percentage-of-completion
method.

        Advertising

We expense all advertising as incurred.

        Net Income (Loss) 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.  Options to purchase
77,000 shares of common stock  outstanding  during fiscal 2000 were not included
in the earnings per share computation,  as the effect of including them would be
antidilutive. Options to purchase 2,478,000 and 2,315,000 shares of common stock
outstanding during fiscal 1999 and fiscal 1998, respectively,  were not included
in the  computation of diluted net income per common share because the effect in
years with a net loss would be antidulitive.

        Employee Stock Plans

        As allowed  under  Statement  of Financial  Accounting  Standard No. 123
(SFAS  123),  "Accounting  for Stock  Based  Compensation,"  we account  for our
employee stock plans in accordance  with the provision of Accounting  Principles
Board's Opinion No. 25 (APB 25), "Accounting for Stock Issued to Employees." and
have adopted the disclosure provisions of SFAS 123.

        Comprehensive Income

        Accumulated   other   comprehensive   income  (loss)  presented  in  the
accompanying balance sheets consists of the accumulated net unrealized losses on
available-for-sale securities.


                                       32
<PAGE>


        Recent Accounting Pronouncements

        Statement of Financial  Accounting  Standards No. 133,  "Accounting  for
Derivative Instruments and Hedging Activities" ("SFAS No. 133") requires that we
recognize all derivatives on the balance sheet at fair value.  Derivatives  that
are not hedges must be adjusted to fair value  through net income.  SFAS No. 133
is effective for the our year ending December 31, 2001. We do not currently hold
any  derivatives  and do not anticipate  holding any  derivatives in the future.
Accordingly,  we do not expect this  pronouncement  to materially  impact future
results.

        The Securities and Exchange  Commission (SEC) Staff Accounting  Bulletin
No. 101 (SAB 101),  "Revenue  Recognition  in Financial  Statements"  summarizes
certain of the SEC's views in applying generally accepted accounting  principles
to revenue recognition in financial statements.  We are reviewing our compliance
with SAB 101, but do not expect it to have a material impact on our consolidated
results of operations.

        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. Actual results could differ from those estimates.

3.      HITACHI METALS, LTD.

        During fiscal 2000 we terminated  our Joint  Development  Agreement with
Hitachi Metals Ltd. (HML).  In prior years,  HML may have shared in a percentage
of the actual  expenditures for mutually agreed upon joint product  development.
We included  HML's share of product  development  expenses in the  Statements of
Operations  as  "Technology  related  revenues".  Additionally,  HML has stopped
selling our product subject to a private label agreement we had with them. We do
not expect to receive  revenue from HML for joint  research and  development  or
from product sales in the future.

        Sales to and receivables from Hitachi Metals,  Ltd., and its subsidiary,
Hitachi Kinzoku Shoji,  Ltd., were not material in fiscal years 2000,  1999, and
1998.




                                       33
<PAGE>


4.      CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES

        The  following is a summary of cash,  cash  equivalents  and  marketable
securities  at March 31,  2000 and  March 31,  1999,  respectively  (amounts  in
thousands):

                                                         March 31,     March 31,
                                                           2000           1999
                                                         -------        -------
         Cash equivalents
           Money market funds                            $ 1,136        $ 2,251
           Commercial paper                                  354            535
         Less:
           Amount classified as restricted cash*            --           (2,000)
                                                         -------        -------
         Total cash equivalents                          $ 1,490        $   786
                                                         =======        =======
         Short-term investments
           Commercial paper                              $ 1,694        $  --
           U. S. Treasuries & U.S. Government agencies     1,493          2,251
           Corporate bonds                                 1,882          1,918
                                                         =======        =======
         Total short-term investments                    $ 5,069        $ 4,169
                                                         =======        =======

        *See Note 16 of Notes to Financial Statements.

        Money market funds of $23,000,  related to a benefit plan,  are included
in the above table.

<TABLE>
        The following is a summary of available-for-sale securities at March 31,
2000 and March 31, 1999, respectively, (amounts in thousands):
<CAPTION>

                                                                         Gross        Gross         Estimated
                                                                      Unrealized    Unrealized        Fair
                                                         Cost           Gains         Losses          Value
                                                        ------         ------         ------          ------
<S>                                                     <C>            <C>            <C>             <C>
         March 31, 2000:
           Commercial paper                             $2,029         $   19         $ --            $2,048
           U.S. Treasuries & U.S. government agencies    1,497           --               (4)          1,493
           Corporate bonds                               1,890           --               (8)          1,882
                                                        ------         ------         ------          ------
             Total                                      $5,416         $   19         $  (12)         $5,423
                                                        ======         ======         ======          ======

         March 31, 1999:
           Commercial paper                             $  535         $ --           $ --            $  535
           U.S. Treasuries & U.S. government agencies    2,254              1             (4)          2,251
           Corporate bonds                               1,918              3             (3)          1,918
                                                        ------         ------         ------          ------
             Total                                      $4,707         $    4         $   (7)         $4,704
                                                        ======         ======         ======          ======
</TABLE>

        Of the  fiscal  2000  securities  listed  above,  $4.9  million  of debt
securities  (at  estimated  fair market  value)  mature within one year and $0.5
million mature between one and two years. Realized gains and losses on the sales
of  securities  are  reported as other income and were not  significant  for all
years presented.




                                       34
<PAGE>


5.      CONCENTRATIONS OF CREDIT RISK

        Our financial  instruments that are exposed to  concentrations of credit
risk  consist  primarily  of  temporary  cash  investments  and  trade  accounts
receivable.

        We place our temporary cash  investments and short-term  securities with
substantial financial service institutions.

        A significant portion of our sales are to customers whose activities are
related  to  computer  and  computer   peripherals,   wireless   communications,
networking, medical, and consumer electronics industries, including some 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 requires collateral, such as letters of credit,
whenever deemed necessary.

6.      CONCENTRATION OF OTHER RISKS

        Markets

        We market our products into high-technology industries, such as personal
computers,  telecommunications,  and networking, 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 are in the control of the customer, not
us. 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.
For these reasons, our backlog and bookings as of any particular date may not be
representative of actual sales for any succeeding period.

        Inventories

        We value  our  inventories  on a  part-by-part  basis  to  appropriately
consider  excess  inventory  levels and obsolete  inventory based on backlog and
demand,  and  to  consider  reductions  in  sales  price.  However,  due  to the
volatility  of demand,  and the fact that many of our  products  are specific to
individual  customers,  backlog is subject to revisions  and  cancellations  and
anticipated  demand is constantly  changing,  which may require  adjustments  to
inventory valuations in the future.

        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.

        Subcontractors

        We use  subcontractors  in Asia,  primarily  Thailand and Malaysia,  for
assembly,  packaging,  and test of most of our  product.  This  common  industry
practice is subject to political and economic risks and industry  volatility has
occasionally   resulted  in  shortages  of  subcontractor   capacity  and  other
disruptions to supply.




                                       35
<PAGE>


7.      INVENTORIES

        Inventories consist of the following (amounts in thousands):

                                                 March 31,      March 31,
                                                   2000           1999
                                                  ------         ------
         Raw materials                            $  452         $  428
         Work-in-process                           6,473          5,263
         Finished goods                            3,069          2,747
                                                  ------         ------
                                                  $9,994         $8,438
                                                  ======         ======


8.      PROPERTY AND EQUIPMENT

        Property and equipment consist of the following (amounts in thousands):

                                                         March 31,     March 31,
                                                           2000           1999
                                                          -------        -------
         Land                                             $   137        $   137
         Buildings                                          3,030          3,030
         Machinery, equipment and tooling                  24,709         22,772
         Leasehold improvements                               758            714
         Furniture and fixtures                               367            367
                                                          -------        -------
                                                           29,001         27,020
         Less accumulated depreciation and amortization    18,364         15,480
                                                          =======        =======
                                                          $10,637        $11,540
                                                          =======        =======


9.      SHORT-TERM BORROWINGS

        We have a $3.0 million  revolving  secured line of credit agreement that
expires on July 31, 2000.  Under the terms of the line of credit,  we can borrow
at prime plus one-half percent,  collateralized by eligible accounts receivable.
We also have a $1.0 million capital equipment financing facility that expires on
June 30,  2003;  under the terms of this  facility  we can  borrow at prime plus
0.75%. There were no borrowings on either of these facilities at March 31, 1999.
During  fiscal  2000 there were no  borrowings  against  the  revolving  line of
credit. We borrowed $238,000 against the capital  equipment  financing  facility
during fiscal 2000. We are in compliance with our financial covenants.  On April
21, 2000 we secured an additional  $500,000 capital equipment financing facility
under the same terms and conditions that expires August 3, 2003.

10.     FAIR VALUE OF FINANCIAL INSTRUMENTS

        We have evaluated the estimated fair value of its financial instruments.
The  amounts  reported  as  cash  and  cash  equivalents,  accounts  receivable,
short-term  borrowings,  accounts payable and accrued expenses  approximate fair
value  due to  their  short-term  maturities.  The  fair  values  of  short-term
investments  are  estimated  based on quoted market  prices.  The fair value for
long-term  debt was  estimated  using  discounted  cash flow  analysis  based on
estimated interest rates for similar types of borrowing arrangements.

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

                                                         Carrying       Fair
                                                          Amount       Value
                                                          ------       -----
         Long-term debt (excluding capital leases)        $7,740       $8,320


                                       36
<PAGE>

11.     LONG-TERM DEBT
<TABLE>

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

                                                                       March 31,     March 31,
                                                                          2000        1999
                                                                        ------       ------
<S>                                                                     <C>          <C>
         Industrial revenue bonds at 10.5%, due through March 1, 2018   $7,045       $7,185
         Equipment financing agreement due through June 14, 2002           457          624
         Equipment financing agreement due through June 30, 2003           238         --
                                                                        ------       ------
                                                                         7,740        7,809
         Less current maturities                                           398          306
                                                                        ------       ------
                                                                        $7,342       $7,503
                                                                        ======       ======
</TABLE>

        In January 1999, we borrowed $650,000 under a credit agreement, due June
14, 2002,  collateralized by certain of our equipment. The agreement extends for
42 months, carries an interest rate of 9.9%, and has a prepayment option.

        In  September  1999 we secured  capital  equipment  financing  agreement
collateralized by accounts receivable and other assets. The agreement carries an
interest rate of prime plus 3/4 of 1% and expires in June 2003. In April 2000 we
secured additional  capital equipment  financing from the same institution under
the same terms and conditions with an expiration date of August 2003.

        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  $155,000 in fiscal 2001 to $780,000 in fiscal 2018. As of March 1,
2000, we may prepay the 10.5%  Industrial  Revenue Bond by redeeming all or part
of the outstanding principal amounts without penalty. At March 31, 2000, cash of
$900,000 was held in sinking fund trust accounts of which $800,000 is to be used
for principal and interest payments in the event of default by the Company,  and
the balance to be used for semi-annual interest and principal payments.

        The Industrial  Revenue Bonds and certain lease  agreements  require the
maintenance of various financial  covenants  including certain minimum levels of
net  worth,  current  ratio,  quick  ratio,  ratio  of debt to net  worth,  debt
coverage,  and debt to working  capital ratio.  We are in compliance  with these
covenants at March 31, 2000. As a result of these covenants,  our ability to pay
dividends is restricted.

        Future  maturities  of  long-term  debt at March 31, 2000 are as follows
(amounts in thousands):

                 2001                          $     398
                 2002                                451
                 2003                                336
                 2004                                225
                 2005                                225
                 2006 and thereafter               6,105
                                               ---------
                                               $   7,740
                                               =========




                                       37
<PAGE>



12.     LEASE COMMITMENTS

        Operating Leases

        We  lease  certain  manufacturing   facilities  under  operating  leases
expiring  in fiscal 2001 and 2003.  We sublets a leased  facility in Arizona for
the remaining  period of the lease.  The rents received should equal the amounts
we owe during the remaining  lease period.  Future gross minimum lease payments,
under  non-cancelable  operating  leases,  for the years  ending March 31 are as
follows (amounts in thousands):

                 2001                           $     548
                 2002                                 414
                 2003                                 104
                                                ----------
                                                    1,066

                   Sublease receipts                 (148)
                                                ----------
                                                $     918
                                                ==========

        Rent expense was $445,000, $450,000, and $417,000 net of sublease income
of  $148,000,   $147,000,   and  $143,000  in  fiscal  2000,   1999,  and  1998,
respectively.

        Capital Leases

        Obligations  under  capital  leases are at interest  rates  ranging from
approximately  7%  to  10%,   depending   primarily  upon  the  purchase  option
arrangements  at the end of the lease term, and are due in monthly  installments
through April 2002. Future minimum lease payments,  under capital leases for the
years ending March 31, are as follows (amounts in thousands):

        2001                                                     $   455
        2002                                                         181
                                                                 -------
        Total minimum lease payments                                 636
          Less amount representing interest                           41
                                                                 -------
        Present value of net minimum lease payments                  595
          Less current maturities                                    417
                                                                 -------
                                                                 $   178
                                                                 =======


        Machinery and equipment under capital leases are as follows  (amounts in
thousands):

                                                  March 31,        March 31,
                                                    2000              1999
                                                 ------------      -----------
        Cost                                     $   1,619         $  1,619
        Less accumulated depreciation                  609              377
                                                 ------------      -----------
                                                 $   1,010         $  1,242
                                                 ============      ===========


                                       38
<PAGE>


13.     INCOME TAXES

        Due  to  current   year  losses  and  the   availability   of  tax  loss
carryforwards,  there was no provision  for income  taxes for the periods  ended
March 31, 2000,  1999, and 1998. A  reconciliation  of our effective tax rate to
the federal statutory rate is as follows:

                                                      Years Ended March 31,
                                                   2000        1999        1998
                                                   ----        ----        ----
Federal statutory tax rate                          34%        (34)%       (34)%
Losses with no current benefit                     --           34%         34%
Utilization of loss carryforward                   (34)%       --          --
                                                   ---         ---         ---
Effective income tax rate                            0%          0%         0%
                                                   ===         ===         ===


        Deferred  income taxes reflect the tax effects of net operating loss and
credit  carryforwards 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 (amounts in thousands):

                                                         March 31,     March 31,
                                                           2000         1999
                                                         --------      --------
         Deferred tax assets:
           Net operating loss carryforwards              $ 12,200      $ 10,500
           Tax credit carryforwards                           500           450
           Inventory reserves                               3,500         3,500
           Other non-deductible accruals and reserves         400           900
                                                         --------      --------
         Total deferred tax assets                         16,600        15,350
           Less valuation allowance                       (16,300)      (15,050)
                                                         --------      --------
         Net deferred tax asset                               300           300
                                                         --------      --------
         Deferred tax liabilities:

           Tax over book depreciation                         300           300
                                                         --------      --------
         Total net deferred tax asset                    $   --        $   --
                                                         ========      ========


        As we had net losses in fiscal 1998 and fiscal  1999,  and the first two
quarters of fiscal 2000,  we have provided a valuation  allowance  against total
deferred  tax assets.  We will  continue to evaluate  our ability to realize the
deferred tax asset on a quarterly  basis. The valuation  allowance  increased by
$1,250,000  and  $950,000  during  the  years  ended  March  31,  2000 and 1999,
respectively.  Approximately  $3,000,000 of the valuation allowance for deferred
tax  assets  relates  to  benefits  of  stock  option   deductions  which,  when
recognized, will be directly allocated to common stock.

        At  March  31,  2000,  we had  federal  and  state  net  operating  loss
carryforwards  of  approximately  $34,800,000  and $6,100,000  respectively.  In
addition,  we had federal and California  credit  carryforwards of approximately
$300,000 and $200,000,  respectively. These carryforwards will expire at various
dates  beginning in 2008 through  2020,  except for certain  state net operating
losses which expire from 2000 through 2005.

        Utilization of the net operating losses and credit  carryforwards may be
subject to substantial  annual  limitation due to 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.


                                       39
<PAGE>


14.     INTEREST INCOME AND OTHER, NET

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

                                                      Years Ended March 31,
                                               2000         1999            1998
                                              -----         -----          -----
              Interest income                 $ 300         $ 295          $ 403
              Other income (expense)            119           (76)           108
                                              -----         -----          -----
                                              $ 419         $ 219          $ 511
                                              =====         =====          =====

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

15.     EMPLOYEE BENEFIT PLANS

        401(K) Savings Plan

        We maintain a 401(K)  Savings  Plan  covering  substantially  all of our
employees.  Under the plan, eligible employees may contribute up to 15% of their
base  compensation to the plan with the Company matching at a rate of 50% of the
participants'  contributions  up to a maximum of 3% of their base  compensation.
Participants'  contributions  are  fully  vested  at all  times.  The  Company's
contributions  vest  incrementally  over a two-year period.  During fiscal 2000,
1999,  and 1998, we expensed  $278,000,  $217,000,  and $210,000,  respectively,
relating to our contributions under the plan.

        Nonqualified Deferred Compensation Plan

        In April 1997, we implemented a nonqualified  deferred compensation plan
for the benefit of eligible  employees.  This plan is 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  earmarked to pay benefits under the plan are held by a
rabbi trust. We have  classified the diversified  assets held by the rabbi trust
as trading,  and recorded  them at fair market value.  Under current  accounting
rules,  assets of a rabbi trust must be  accounted  for as if they are assets of
the Company;  therefore, all earnings and expenses are recorded in our financial
statements.  Compensation expense of $151,000 was recognized in fiscal 2000 as a
result of  increases  in the  market  value of the trust  assets,  with the same
amount being recorded as securities gains included in interest income. In fiscal
1999  and  fiscal  1998  the  market  value  change  in  trust  assets  was  not
significant.  Additionally, during fiscal 2000, 1999 and 1998, we expensed zero,
$8,000 and $21,000, respectively, relating to our contributions under the plan.

        Stock Option Plans

        The 1995 Employee  Stock Option Plan is  administered  by a stock option
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  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,  for  fiscal  year-ended  March 31,  2000 and 1999,
1,779,933  and  2,433,563  shares of common  stock are  reserved  for  issuance,
respectively.  The 1995 Plan  provides for issuance of options to employees  and
consultants  at prices not less than 85% of fair market value for shares  issued
under a non-qualified stock option agreement.  Options may also be issued to key
employees for not less than 100% of fair market value for shares issued under an
incentive stock option agreement.

        Under the Directors Plan, for fiscal year-ended March 31, 2000 and 1999,
254,250  and  274,875   shares  of  common  stock  are  reserved  for  issuance,
respectively.  The 1995 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.

                                       40
<PAGE>

        In addition  to the two 1995  plans,  we have a plan that was adopted in
1981 (The  Employee  Incentive  Stock  Option  Plan),  and another plan that was
adopted in 1987 (The 1987  Stock  Option  Plan)  both of which are still  extant
although no new options are being issued under these plans. These plans provided
for  the  issuance  of  1,500,000   and   2,500,000   shares  of  common  stock,
respectively. Under these plans, the Company has granted incentive stock options
and non-qualified options to designated employees, officers, and directors.

         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 the 1981  Employee  Incentive  Stock Option Plan (the "1981 Plan") expire
within 20 years of date of adoption.  The Board of Directors  may  terminate the
1981 Plan at any time. 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.

<TABLE>
        The  following  is a  summary  of  stock  option  activity  and  related
information,  including  the effect of  repricing  in grants  and  cancellations
during   fiscal  1999  and  1998  of  1,325,742   shares  and  692,150   shares,
respectively:

<CAPTION>
                                                   2000                              1999                           1998
                                        -----------------------------    ---------------------------    ----------------------------
                                                           Weighted-                        Weighted-                      Weighted-
                                                            Average                          Average                        Average
                                                            Exercise                        Exercise                       Exercise
                                          Options            Price        Options           Price         Options            Price
                                         ---------         --------      ---------         --------      ---------         --------
<S>                                      <C>               <C>          <C>                <C>           <C>               <C>
Options:
  Outstanding at
    beginning of year                    2,477,595         $   3.58      2,315,331         $   5.44      2,032,446         $   6.13
  Granted                                  455,210         $   5.80      1,756,742         $   3.02      1,178,297         $   6.12
  Exercised                               (729,641)        $   3.00         (6,600)        $   3.93        (51,742)        $   4.19
  Canceled                                (250,703)        $   3.69     (1,587,878)        $   5.68       (843,670)        $   8.11
                                         ---------         --------      ---------         --------      ---------         --------
  Outstanding at
    end of year                          1,952,461         $   4.27      2,477,595         $   3.58      2,315,331         $   5.44
                                         =========         ========      =========         ========      =========         ========

  Exercisable                            1,044,826         $   4.06        717,201         $   4.68        861,577         $   4.91
  Available for grant*                     106,031          --             325,760          --             182,016          --

<FN>
         *  Available for grant under plans which are currently active.
</FN>
</TABLE>


<TABLE>
        The following table summarizes  information about options outstanding at
March 31, 2000:

<CAPTION>
                                                Options Outstanding                         Options Exercisable
                                  ------------------------------------------------     ------------------------------
                                                  Weighted-Average
                                                    Remaining                                         Weighted-Average
               Range Of              Number        Contractual     Weighted-Average       Number          Exercise
           Exercise Prices         Outstanding     Life (Years)    Exercise Price       Exercisable         Price
        -----------------------   --------------  ---------------  ---------------     --------------    ------------
<S>                                 <C>               <C>              <C>               <C>               <C>
            $2.25 - $2.66               35,000         8.89             $2.49                4,999          $2.66
            $2.81 - $2.81              543,086         7.02             $2.81              288,985          $2.81
            $2.87 - $3.50              371,326         7.05             $3.17              110,629          $3.31
            $3.93 - $3.93              488,798         4.87             $3.93              488,798          $3.93
            $4.12 - $9.00              501,751         8.25             $6.78              150,915          $7.43
           $12.75 - $17.94              12.500         9.63            $17.73                  500         $12.75
                                  --------------  ---------------  ---------------     --------------    ------------
                                     1,952,461         7.04             $4.27            1,044,826          $4.06
                                  ==============  ===============  ===============     ==============    ============

</TABLE>

                                       41
<PAGE>


        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 960,000  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 to be 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 fiscal  year-end  March 31,  2000,  1999,  and 1998,  372,813,
64,571, and 5,564 shares were reserved for issuance, respectively.

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

                                                  2000        1999        1998
                                                --------    --------    --------
Aggregate purchase price                        $680,004    $211,000    $858,000
Shares purchased                                 191,758     100,993     185,485
Employee participants as of March 31                 185         161         151


        Stock-Based Compensation

        In accordance with the intrinsic value method, we generally recognize no
compensation   expense  with  respect  to  employee  stock  grants.   Pro  forma
information  regarding  net (loss) and net (loss) per share is  required by SFAS
123 for grants  after April 1, 1995,  as if we had  accounted  for stock  grants
under  the fair  value  method is and  presented  below.  The fair  value of our
stock-based grants was estimated using a Black-Scholes option-pricing model. The
Black-Scholes  option  valuation  model was developed for use in estimating  the
fair  value of traded  options  that have  specific  vesting  schedules  and are
ordinarily not transferable.  Because the Black-Scholes model requires the input
of highly subjective assumptions,  including the expected stock price volatility
which can materially  affect the fair value estimate,  in management's  opinion,
the existing models do not necessarily  provide a reliable single measure of the
fair value of its grants.

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

                                             Options                                Purchase Plan
                                -----------------------------------       -----------------------------------
                                  2000         1999        1998             2000         1999        1998
                                ----------   ---------   ----------       ----------   ----------  ----------
<S>                               <C>           <C>         <C>               <C>         <C>         <C>
        Expected life years       3.43          2.81        3.02              0.25        0.21        0.34
        Volatility                1.03%         0.96%        .61%             1.13%       1.29%       0.64%
        Risk-free interest rate   6.13%         4.69%       5.77%             5.06%       5.00%       5.43%
</TABLE>


<TABLE>
        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 the 1995 Plan and the Director  Plan,  and the  purchase  period for stock
purchases under the Purchase Plan. The pro forma information follows (amounts in
thousands except per share amounts):

<CAPTION>
                                                                        Years Ended March 31,
                                                                 2000            1999            1998
                                                              -----------     -----------     -----------
<S>                                                           <C>             <C>             <C>
        Net (loss) - pro forma                                $   (786)       $  (5,112)      $  (5,073)
        Diluted net (loss) per share - pro forma              $  (0.08)       $   (0.51)      $   (0.51)
</TABLE>

        The weighted-average  fair value of stock options granted in fiscal 2000
and 1999 were $5.80 and $4.04 per share, respectively. The weighted-average fair
value of the option  element of the Purchase  Plan stock  granted in fiscal 2000
and 1999 was $1.39 and $0.95 per share, respectively.




                                       42
<PAGE>


16.     LITIGATION

        From August 5, 1994 through  February 16, 1995,  eleven  purported class
action  complaints were filed against us in the United States District Court for
the Northern District of California.

        By court order dated May 20,  1997,  these  actions  were  settled.  Our
contribution  towards the  settlement  consisted of the payment of $6 million in
cash and the issuance of 608,696 new shares of the Company's common stock to the
class.  Each new  share was  accompanied  by a  Contingent  Value  Right  (CVR),
personal to the shareholder,  that guaranteed the shareholder  would receive the
difference  between  $11.50 and the highest 20 day average  trading price of the
Company's  common stock  (assuming the average price is less than $11.50) over a
defined period.  As of January 5, 2000 the 20-day average trading price exceeded
$11.50 and the CVR was  extinguished.  We had put $2 million  into a  restricted
account as a  guarantee  for  performance  under the CVR. As a result of the CVR
being  extinguished  this $2 million is no longer  restricted and is included in
cash and short-term securities as of March 31, 2000.

        We have  cooperated  with the  Justice  Department  and the SEC in their
investigation of its former officers. The Justice Department has advised us that
we are not currently a target or subject of investigation. The SEC has taken the
position that it is premature,  at this stage in its  investigation,  to discuss
the resolution of the investigation of the Company.

        The  Company  is  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 are not aware of any
pending  legal  proceedings  against the Company  that,  individually  or in the
aggregate,  would  have a material  adverse  effect on our  business,  operating
results, or financial condition

17.     SEGMENT INFORMATION

        Our operations are classified into one reportable segment. Substantially
all of our operations and long-lived assets reside in the United States although
we have sales operations in Europe, Japan, Hong Kong and Taiwan. In fiscal 2000,
Arrow Electronics and Excelpoint Systems PTE, both  distributors,  accounted for
17% and 14% of net  sales,  respectively.  In fiscal  1999,  no single  customer
accounted for greater than 10% of net sales.  In fiscal 1998, Bell Milgray Inc.,
a distributor, later acquired by Arrow Electronics,  accounted for approximately
10% of net product sales.  Other than the United States and Singapore  (10.5% of
net sales in fiscal  2000),  no one country  accounted  for more than 10% of net
sales in fiscal  2000,  1999 and 1998.  Sales in to Singapore  were  $4,598,000,
$2,054,000 and $1,272,000 in fiscal 2000, 1999, and 1998, respectively.

<TABLE>
Foreign currency transaction gains and losses are not significant.

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

<CAPTION>
                                                               Years Ended March 31,
                                                       2000            1999            1998
                                                    ------------    -----------     -----------
<S>                                                  <C>             <C>             <C>
        Net product sales to geographic regions:
          United Stat es                             $ 24,836        $ 20,476        $ 21,776
          Europe                                        3,882           3,126           3,411
          Far East and other                           15,045          10,015           7,287
                                                    ------------    -----------     -----------
        Net product sales                            $ 43,763        $ 33,617        $ 32,474
                                                    ============    ===========     ===========
</TABLE>


ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

        There were no  disagreements  with the  independent  auditors  in fiscal
2000, 1999, and 1998.


                                       43
<PAGE>



                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

        The  information  required  by this Item is set forth in the 2000  Proxy
Statement  under  the  captions   "Directors  and  Executive   Officers  of  the
Registrant"  and  "Executive   Compensation"  and  is  incorporated   herein  by
reference.

ITEM 11. EXECUTIVE COMPENSATION.

        The  information  required  by this Item is set forth in the 2000  Proxy
Statement under the caption "Executive  Compensation" and is incorporated herein
by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

        Information  related to security  ownership of certain beneficial owners
and security  ownership of management  is set forth in the 2000 Proxy  Statement
under  the  caption  "Security   Ownership  of  Certain  Beneficial  Owners  and
Management" and is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

        No reportable relationships and transactions.


                                       44
<PAGE>


                                     PART IV

ITEM 14. 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.

<TABLE>
         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.

<CAPTION>
                 Exhibit
                 Number             Description                             Document if Incorporated by Reference
                 -------------      ----------------------------------      ------------------------------------------------------
<S>                                 <C>                                     <C>
                 3(i)               Articles of Incorporation, as           Exhibit 3(i) to the Company's Annual Report on Form
                                    amended.                                10K (File No. 0-15549) for the fiscal year ended
                                                                            March 31, 1995, ("1995 Form 10-K").

                 3(ii)              By-Laws,  as amended.                   Exhibit  3(ii) to the  Company's  Annual  Report on
                                                                            Form 10K (File No.  0-15549)  for the  fiscal  year
                                                                            ended March 31, 1995, ("1995 Form 10-K").

                 10.11              Commitment letter from Comerica
                                    Bank.

                 23.1               Consent of Ernst & Young,
                                    Independent Auditors

                 27*                Financial Data Schedule

        (b)       1.       Reports on Form 8-K:

                  None

<FN>
*Exhibit on EDGAR filing only.
</FN>
</TABLE>

                       DOCUMENTS INCORPORATED BY REFERENCE

        Portions of the  Registrant's  Proxy  Statement in  connection  with its
August 1, 2000  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, 2000) are incorporated by reference into Part III.


                                       45

<PAGE>

<TABLE>
                                             SCHEDULE 2

                                CALIFORNIA MICRO DEVICES CORPORATION
                                  VALUATION AND QUALIFYING ACCOUNTS


                             Years Ended March 31, 2000, 1999, and 1998
                                       (Amounts in Thousands)

<CAPTION>
                                                                 Additions
                                                   Balance at    Charged to                    Balance at
                                                   Beginning      Cost and       Deductions      End of
                                                    of Year       Expense           (1)           Year
                                                  ------------- -------------   ------------- -------------
<S>                                                  <C>            <C>             <C>          <C>
Year ended March 31, 2000
  Allowance for doubtful accounts
    (deducted from accounts receivable)              $ 224          $ -             $ 5          $ 219
                                                     ======         ====            ====         =====


Year ended March 31, 1999
  Allowance for doubtful accounts
    (deducted from accounts receivable)              $ 380          $ -            $ 156         $ 224
                                                     ======         ====           ======        =====


Year ended March 31, 1998
  Allowance for doubtful accounts
    (deducted from accounts receivable)              $ 437          $ -            $ 57          $ 380
                                                     ======         ====           =====         =====

<FN>
(1) Represents write-offs net of recovery of receivables.
</FN>
</TABLE>

                                       46
<PAGE>



                                   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 27th day of
April 2000.

CALIFORNIA MICRO DEVICES CORPORATION
          (Registrant)

By:     /s/ Jeffrey C. Kalb
     --------------------------------
        JEFFREY C. KALB

        President and Chief Executive Officer

<TABLE>
        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 13th day of June 1999.
<CAPTION>
<S>                                            <C>
By:

        /s/ Jeffrey C. Kalb                    President and Chief Executive Officer and Director
     ----------------------------------        (Principal Executive Officer)
        JEFFREY C. KALB

        /s/ John E. Trewin                     Vice President and Chief Financial Officer
     ----------------------------------        (Principal Financial and Accounting Officer)
        JOHN E. TREWIN

        /s/ Wade Meyercord                     Chairman of the Board
     ----------------------------------
        WADE MEYERCORD

        /s/ Angel G. Jordan                    Director
     ----------------------------------
        ANGEL G. JORDAN

        /s/ J. Daniel McCranie                 Director
     ----------------------------------
        J. DANIEL MCCRANIE

        /s/ Stuart Schube                      Director
     ----------------------------------
        STUART SCHUBE

        /s/ John Sprague                       Director
     ----------------------------------
        JOHN SPRAGUE

        /s/ Donald Waite                       Director
     ----------------------------------
        DONALD WAITE

</TABLE>

                                       47