UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
[ ] 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 0-17739
RAMTRON INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 84-0962308
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1850 Ramtron Drive, Colorado Springs, CO 80921
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (719) 481-7000
Indicate by check mark whether 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 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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.01 Par Value - 13,656,606 shares as of November 10, 1999.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
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RAMTRON INTERNATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except par value amounts)
Sep. 30, Dec. 31,
1999 1998
-------- --------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 5,390 $15,237
Accounts receivable, less allowances
of $341 and $134, respectively 2,466 726
Inventories 5,932 5,304
Other current assets 222 264
--------- ---------
Total current assets 14,010 21,531
Property, plant and equipment, net 6,287 7,158
Intangible assets, net 5,820 4,658
--------- ---------
Total assets $26,117 $33,347
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,191 $ 2,535
Accrued liabilities 1,110 2,089
License rights -- 550
Deferred revenue 680 760
Common stock price adjustment -- 3,224
Promissory note and accrued interest 3,269 --
Promissory note and accrued interest, related party -- 7,127
--------- ---------
Total current liabilities 9,250 16,285
Long-term promissory note and accrued
interest, related party 6,121 --
--------- ---------
Total liabilities 15,371 16,285
--------- ---------
Redeemable preferred stock, $.01 par value, 10,000
shares authorized: 1 and no shares issued and out-
standing, respectively: entitled to $1,000 per share
plus accrued and unpaid dividends in liquidation 886 --
--------- ---------
Stockholders' Equity:
Preferred stock, $0.01 par value, 10,000 shares
authorized: no and 10 shares issued and outstanding,
respectively; entitled to $1,000 per share plus
accrued and unpaid dividends in liquidation -- 8,966
Common stock, $0.01 par value, 50,000 and 75,000
shares authorized, respectively: 13,657 and 12,086
shares issued and outstanding, respectively 137 121
Common stock warrants 1,030 --
Additional paid-in capital 171,479 165,916
Accumulated deficit (162,786) (157,941)
--------- ---------
Total stockholders' equity 9,860 17,062
--------- ---------
Total liabilities and stockholders' equity $26,117 $33,347
========= =========
See accompanying notes to consolidated financial statements.
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RAMTRON INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Unaudited)
(Amounts in thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
--------- -------- -------- --------
Revenue:
Product sales $ 2,641 $ 5,142 $10,685 $15,142
License and development fees 2,000 -- 2,500 --
Royalties 1,500 -- 1,500 --
Customer-sponsored research
and development 1,046 266 3,368 871
-------- -------- -------- --------
7,187 5,408 18,053 16,013
-------- -------- -------- --------
Costs and expenses:
Cost of product sales 1,824 2,729 6,353 8,900
Research and development 1,793 3,187 5,048 8,386
Customer-sponsored research
and development 1,036 242 3,332 757
Sales, general and administrative 2,246 1,992 7,155 5,920
-------- -------- -------- --------
6,899 8,150 21,888 23,963
-------- -------- -------- --------
Operating income (loss) 288 (2,742) (3,835) (7,950)
Interest expense, related party (217) (169) (549) (501)
Other income, net 236 185 384 561
Common stock price adjustment -- (2,649) -- (2,649)
-------- -------- -------- --------
Net income (loss) $ 307 $(5,375) $(4,000) $(10,539)
======== ======== ======== ========
Income (loss) per common share:
Net income (loss) $ 307 $ (5,375) $ (4,000) $(10,539)
Dividends on convertible
preferred stock (91) (256) (371) (617)
Accretion of discount on
convertible preferred stock -- (638) (488) (1,517)
Accretion of redeemable preferred
stock to redemption value (5) -- (5) --
Gain on preferred stock settlement 3,183 -- 3,762 --
-------- -------- -------- --------
Net income (loss) applicable to
common shares $ 3,394 $(6,269) $(1,102) $(12,673)
======== ======== ======== ========
Net income (loss) per share - basic $ 0.27 $ (0.82) $ (0.09) $ (1.66)
======== ======== ======== ========
Net income (loss) per share - diluted $ 0.26 $ (0.82) $ (0.09) $ (1.66)
======== ======== ======== ========
Weighted average shares outstanding:
Basic 12,738 7,633 12,464 7,632
======== ======== ======== ========
Diluted 13,003 7,633 12,464 7,632
======== ======== ======== ========
See accompanying notes to consolidated financial statements.
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RAMTRON INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Unaudited)
(Amounts in thousands)
1999 1998
-------- --------
Cash flows from operating activities:
Net loss $(4,000) $(10,539)
Adjustments used to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 1,763 1,884
Common stock price adjustment -- 2,649
Changes in assets and liabilities:
Accounts receivable (1,739) 1,865
Inventories (628) 1,875
Accounts payable and accrued liabilities 722 (1,041)
Accrued interest, related party (39) 501
Deferred revenue (81) (125)
Other 114 (263)
-------- ---------
Net cash used in operating activities (3,888) (3,194)
-------- ---------
Cash flows from investing activities:
Purchase of property, plant and equipment (217) (654)
Intellectual property (1,846) (93)
-------- --------
Net cash used in investing activities (2,063) (747)
-------- --------
Cash flows from financing activities:
Payments on license rights payable (550) (550)
Issuance of capital stock, net of expenses -- 15,956
Preferred stock settlement (3,300) --
Other (46) --
-------- --------
Net cash provided by (used in) financing activities (3,896) 15,406
-------- --------
Net increase (decrease) in cash and cash equivalents (9,847) 11,465
Cash and cash equivalents, beginning of period 15,237 6,193
-------- --------
Cash and cash equivalents, end of period $ 5,390 $17,658
======== ========
Supplemental disclosure of cash flow information:
Cash paid for interest, related party $ 525 --
======== ========
See accompanying notes to consolidated financial statements.
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RAMTRON INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999
- -----------------------------------------------------------------------------
NOTE 1. BASIS OF PRESENTATION AND MANAGEMENT OPINION
The accompanying consolidated financial statements at September 30, 1999 and
1998 and for the periods then ended have been prepared from the books and
records of the Company without audit. The statements reflect all normal
recurring adjustments which, in the opinion of management, are necessary for
the fair presentation of financial position, results of operations and cash
flows for the periods presented.
Certain information and disclosures normally included in financial statements
have been omitted under Securities and Exchange Commission regulations. It is
suggested that the accompanying financial statements be read in conjunction
with the annual report on Form 10-K for the year ended December 31, 1998. The
results of operations for the period ended September 30, 1999 are not
necessarily indicative of the operating results for the full year.
Effective upon commencement of trading on August 9, 1999, the Company's
outstanding shares of common stock were reduced from 62,759,301 to 12,551,860
as a result of a one-for-five reverse stock split effected on August 6, 1999.
Unless otherwise disclosed, all share and per share data have been
retroactively adjusted to reflect the effects of the reverse split.
NOTE 2. NEW ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
("SFAS No. 130"). The purpose of SFAS No. 130 is to establish standards for
reporting and display of comprehensive income and its components (revenue,
expenses, gains, and losses) in a full set of general-purpose financial
statements. Comprehensive income is the change in equity of a business
enterprise during a period from transactions and other events and
circumstances from non-owner sources. It includes all changes in equity
during a period except those resulting from investments by owners and
distributions to owners. The Company adopted SFAS No. 130 during the first
quarter of 1998. For the periods ended September 30, 1999 and 1998, the
Company did not have any material transactions that were required to be
reported in comprehensive income as compared to its net loss.
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities"
("SOP 98-5"). This statement is effective for financial statements for fiscal
years beginning after December 15, 1998. In general, SOP 98-5 requires costs
of start-up activities and organization costs to be expensed as incurred.
Initial application of SOP 98-5 is reported as the cumulative effect of a
change in accounting principle. Adoption of SOP 98-5 did not have a material
impact on the Company's financial statements.
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In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). SFAS No. 133, as amended, is
effective for fiscal years beginning after June 15, 2000. SFAS No. 133
establishes accounting and reporting standards requiring that every derivative
instrument (including certain derivative instruments embedded in other
contracts) be recorded in the balance sheet as either an asset or liability
measured at its fair value. It also requires that changes in the derivative's
fair value be recognized currently in earnings unless specific hedge
accounting criteria are met. Special accounting for qualifying hedges allows
a derivative's gains and losses to offset related results on the hedged item
in the income statement, and requires that a company must formally document,
designate and assess the effectiveness of transactions that receive hedge
accounting. SFAS No. 133 may not be applied retroactively, and must be
applied to (i) derivative instruments and (ii) certain derivative instruments
embedded in hybrid contracts that were issued, acquired or substantively
modified after either January 1, 1998 or January 1, 1999. Management is
currently evaluating the effect SFAS No. 133 will have on the Company's
financial statements.
NOTE 3. INVENTORIES
Inventories consist of:
Sep. 30, Dec. 31,
1999 1998
-------- --------
(in thousands)
(Unaudited)
Finished goods $3,492 $3,595
Work in process 2,440 1,660
Raw material -- 49
------ ------
Total $5,932 $5,304
====== ======
NOTE 4. PROMISSORY NOTE
In connection with the restructuring of the Company's Series A Preferred Stock
in August 1999, the Company entered into agreements with certain affiliates of
Dimensional Fund Advisors, Inc. (the "DFA Affiliates") to issue to each DFA
Affiliate an unsecured convertible promissory note (together, the "DFA
Promissory Notes") in consideration of the termination of certain Common Stock
purchase rights of the DFA Affiliates. Such purchase rights were recorded as
a common stock price adjustment liability in balance sheet disclosures prior
to September 30, 1999. The DFA Promissory Notes bear interest at 8% per annum
and mature on July 30, 2000. All or part of the principal and accrued and
unpaid interest of the DFA Promissory Notes are convertible into common stock
at the option of the holder of the note at a conversion ratio of one share of
common stock for each $5.00 of principal and accrued interest converted. The
outstanding principal balance and accrued interest as of September 30, 1999
under the DFA Promissory Notes were approximately $3,224,000 and $45,000,
respectively.
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NOTE 5. LONG-TERM PROMISSORY NOTE, RELATED PARTY
In September 1995, the Company and the National Electrical Benefit Fund (the
"Fund") entered into a Loan Agreement (the "Fund Credit Facility") pursuant to
which the Fund agreed to lend to the Company up to $12 million bearing
interest at 12% per annum. The borrowings under the Fund Credit Facility
totaled $5.5 million as of August 6, 1999. On August 6, 1999, the Company and
the Fund amended the terms of the Fund Credit Facility. Pursuant to the terms
of the amended credit facility (the "Amended Credit Facility"), $1.5 million
of accrued interest was reclassified to principal, leaving an outstanding
principal balance under the loan as of August 6, 1999 of $7 million. The
remaining accrued interest balance as of August 6, 1999 of approximately
$525,000 that was not reclassified to principal was paid to the Fund at the
time of the amendment. The Amended Credit Facility bears interest at 8% per
annum, payable quarterly, with the first interest payment due January 31,
2000. The maturity date of the Amended Credit Facility is March 15, 2002. No
additional borrowings are available to the Company under the Amended Credit
Facility and the loan is secured by a first priority lien on substantially all
of the Company's assets. The Fund has the right to convert all or any portion
of the amounts outstanding under the Amended Credit Facility into common stock
at any time or times before maturity of the loan at a conversion price equal
to $5.00 for each share of common stock. The outstanding principal balance
and accrued interest as of September 30, 1999 under the Amended Credit
Facility was $7.0 million and $87,000, respectively.
As consideration for the Fund to amend the terms of the credit facility, the
Company agreed to amend the exercise price of outstanding warrants held by the
Fund to purchase 805,697 shares of the Company's common stock to $5.00 and
extend the expiration date of such warrants to September 30, 2008. The
Company also issued new warrants to purchase 100,000 shares of the Company's
common stock with an exercise price of $2.35 with an expiration date of
August 6, 2009. The amended warrants and the new warrants were valued using
the Black Scholes option pricing method with a resulting value of
approximately $1.0 million. This amount is accounted for as a discount to
the outstanding promissory note payable and will be amortized over the
remaining life of the note as a charge to interest expense in the Company's
consolidated statements of operations. The unamortized discount pertaining to
the note and warrants as of September 30, 1999 was approximately $966,000.
NOTE 6. INCOME TAXES
The Company recognizes deferred income tax assets and liabilities for the
expected future income tax consequences of temporary differences between the
financial reporting and tax basis of assets, liabilities and carryovers. The
Company also recognizes deferred tax assets for the expected future effects of
all deductible temporary differences, loss carryovers and tax credit
carryovers. Deferred tax assets are then reduced, if deemed necessary, by a
valuation allowance for the amount of any tax benefits which, more likely than
not, based on current circumstances, are not expected to be realized.
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NOTE 7. EARNINGS PER SHARE
The Company calculates its earnings per share pursuant to Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS No. 128").
Under SFAS No. 128, basic earnings per share is computed by dividing reported
earnings available to common stockholders by weighted average shares
outstanding. Diluted earnings per share reflects the potential dilution
assuming the issuance of common shares for all dilutive potential common
shares outstanding during the period. As a result of the Company's historical
and year to date net losses, all potentially dilutive securities including
warrants and stock options, would be anti-dilutive and thus, excluded from
diluted earnings per share.
The computation of basic and diluted earnings per share for the quarter ended
September 30, 1999 were as follows:
(in thousands, except per share data)
Basic:
Net income $ 307
Dividends on convertible preferred stock (91)
Accretion of redeemable preferred stock
to redemption value (5)
Gain on preferred stock settlement 3,183
--------
Net income applicable to common shares $3,394
Weighted average common shares outstanding 12,738
--------
Basic earnings per share $0.27
========
Diluted:
Net income applicable to common shares $3,394
--------
Weighted average common shares outstanding 12,738
Assumed conversion of warrants, net of common
shares assumed repurchased with the proceeds 195
Assumed exercise of stock options, net of common
shares assumed repurchased with the proceeds 70
--------
Adjusted weighted average shares outstanding 13,003
--------
Diluted earnings per share $0.26
========
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NOTE 8. STOCKHOLDERS' EQUITY
PREFERRED STOCK. In February 1998, the Company issued and sold in a private
placement 17,425 shares of Series A Convertible Preferred Stock ("Preferred
Stock"), resulting in gross proceeds of approximately $17.4 million. Each
share of Preferred Stock was entitled to receive cumulative dividends at the
rate of 6% per annum, payable in shares of Preferred Stock. Except for
certain exceptions, the holders of the Preferred Stock had no voting rights.
The shares of Preferred Stock, including any accrued dividends thereon, would
automatically convert into common stock on the fifth anniversary of the date
of the original issuance to the extent any shares of Preferred Stock remained
outstanding at that time. Until September 1, 1998, the Preferred Stock was
convertible at a Conversion Price of $50.00. Thereafter, subject to a maximum
conversion price, as defined, the Conversion Price was equal to the lowest
trading price of the common stock for the 22-trading days immediately
preceding the conversion date, less a discount of 7% (beginning September 1,
1998) and increasing by 1% per month to 15% (on or after May 1, 1999).
Each purchaser of the Preferred Stock agreed to trading limitations for the
offer or sale of common stock resulting from the conversion of the Preferred
Stock. In addition, the purchasers of the Preferred Stock and their
affiliates agreed not to engage in any short sales, swaps, purchasing of puts,
or other hedging activities that involved the direct or indirect use of the
common stock to hedge their investment in the Preferred Stock; however, the
investor could write call options if the call exercise price was greater than
the effective Conversion Price on the day that the call was written. These
hedging restrictions did not apply to certain short sales within three days of
conversion in amounts not greater than the number of shares issuable upon
conversion.
The conversion discount of the Preferred Stock was considered to be an
additional preferred stock dividend. The discount computed at issuance of
$3,075,000 was recorded as a reduction of preferred stock and an increase to
additional paid-in-capital. The discount was recognized ratably as a non-cash
deemed dividend over the applicable fourteen month period. If shares were
converted prior to the full accretion, no additional discount was taken during
the fourteen month period.
On October 21, 1998, the Company suspended conversions of the Preferred Stock
because the Company had issued, from its authorized shares, the maximum number
of common shares available for such conversions (4,494,768 shares). No
further conversions of the Preferred Stock could be effected until the
Company's shareholders approved an authorization of additional common stock.
At the time of suspension of the Preferred Stock conversions, approximately
$8.9 million face value of Preferred Stock, plus accrued dividends, remained
outstanding.
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On July 20, 1999, the Company's common stockholders approved the restructuring
of the terms of the Company's Preferred Stock and on August 6, 1999, the
Company entered into an agreement with the holders of a majority of the
outstanding Preferred Stock to restate the terms of the Preferred Stock. In
accordance with the restated terms of the Preferred Stock, holders thereof had
until the close of business on August 16, 1999, to elect (i) to continue to
own shares of Preferred Stock, (ii) to exchange shares of Preferred Stock,
including accrued dividends, for cash in the amount per Preferred Stock share
equal to 50% of the liquidation value thereof, or (iii) to exchange the shares
of Preferred Stock, including accrued dividends, for shares of the Company's
Common Stock at an exchange ratio of $3.75 liquidation value of Series A
Preferred per share of Common Stock. Effective as of August 16, 1999, of the
8,878 shares of Preferred Stock outstanding on August 6, 1999, 4,204 shares
plus accrued dividends were retired and canceled in exchange for the payment
in the aggregate of $2,290,431 to the former holders thereof; 3,802 shares of
Preferred Stock were exchanged for 1,104,746 shares of Common Stock; and 872
shares of Preferred Stock with restated terms remained outstanding.
The restated terms of the remaining Preferred Stock include (i) a fixed
conversion at $5.00 per share; (ii) a three-year term expiring on July 31,
2002; (iii) an adjusted dividend rate of 11% per annum (subject to possible
future adjustments); and (iv) a mandatory redemption feature at the date of
maturity.
For the nine months ended September 30, 1999, the Company had recorded
$371,000 of dividends, $493,000 of accreted discount and a gain on the
settlement of the Preferred Stock of $3.8 million. The $3.8 million gain on
the settlement of the Preferred Stock included a $489,000 gain recorded during
April 1999 from an earlier Preferred Stock settlement. The remaining balance
of the $3.8 million gain was determined on August 16, 1999 pursuant to the
decisions of holders of the Preferred Stock regarding their restructuring
options as described above. The gain was determined on that date by comparing
the fair value of the new instrument (i.e., cash, common stock and/or restated
Preferred Stock) with the recorded value of the exchanged Preferred Stock,
including dividends, with the difference being the recorded gain.
NOTE 9. CONTINGENCIES
PATENT INTERFERENCE PROCEEDING. A patent interference proceeding, which was
declared in 1991 in the United States Patent and Trademark Office (the "Patent
Office") between the Company, National Semiconductor Corporation ("National")
and the Department of the Navy in regard to one of the Company's issued United
States patents, is continuing. The Patent involved covers a basic
ferroelectric memory cell design invention the Company believes is of
fundamental importance to its FRAM business in the United States. An
interference is declared in the Patent Office when two or more parties each
claim to have made the same invention. The interference proceeding is
therefore conducted to determine which party is entitled to the patent rights
covering the invention. In the present interference contest, the Company is
the "senior" party, which means that it is in possession of the issued United
States Patent and retains all rights associated with such patent. The other
two parties involved in the interference are the "junior" parties, and each
has the burden of proof of convincing the Patent Office by a preponderance of
the evidence that it was the first to invent the subject matter of the
invention and thus is entitled to the corresponding patent rights. Only the
Company and National filed briefs in this matter. Oral arguments were
presented before the Patent Office on March 1, 1996.
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The Patent Office decided the interference on May 6, 1997, holding that all of
the claims were patentable to National, one of the "junior" parties. The
other "junior" party, the Department of the Navy, was not granted any patent
claims pursuant to the interference proceedings. On June 20, 1997, the
Company filed a Request for Reconsideration with the Patent Office concerning
the interference decision. Pursuant to the Request for Reconsideration, the
Company requested that four separate issues be reconsidered because, from the
Company's perspective, they were either ignored or misconstrued in the
original decision. A decision on the Request for Reconsideration was issued
on November 19, 1998, again holding that all of the claims were patentable to
National. On January 9, 1999, the Company appealed the decision of the Patent
Office on one of the interference counts directly to the Court of Appeals for
the Federal Circuit. A hearing on this specific matter is scheduled to be
heard on December 6, 1999 and the case could be decided some time during the
year 2000. The Company also filed complaint's in Federal District Court in
the District of Columbia seeking a review of the decision of the Patent Office
on the remaining interference counts. These District Court actions are
currently in a preliminary motion phase. The Company remains in possession of
the issued United States Patent and retains all rights associated with such
patent while it pursues its appeal options. The "junior" party has received
no rights associated with this patent decision and will not receive any such
rights as long as the appeal process continues.
If the Company's patent rights that are the subject of the interference
proceeding are ultimately lost or significantly compromised, the Company would
be precluded from producing FRAM products in the United States using the
Company's existing design architecture, absent being able to obtain a suitable
license to exploit such rights. If such patent rights are ultimately awarded
to National, and if a license to such rights is not subsequently entered into
by the Company with National, National could use the patent to prevent the
manufacture, use or sale by the Company within the United States of any
products that come within the scope of such patent rights, which would include
all FRAM products as currently designed, and which would materially adversely
affect the Company. The Company has vigorously defended its patent rights in
this interference contest and will continue such efforts. The Company is
uncertain as to the ultimate outcome of the interference proceeding, as well
as to the resulting effects upon the Company's financial position or results
of operations.
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PATENT INFRINGEMENT PROCEEDING. In October 1998, the Company filed a claim
for patent infringement in the United States District Court, Northern District
of California against NEC Corporation, NEC Electronics, Inc. and NEC USA, Inc.
(collectively, "NEC"). The complaint claims that NEC infringed and continues
to infringe on certain patents of the Company by offering to sell and/or
selling NEC's Virtual Channel SDRAM products, and by actively inducing others
to infringe such patents without authority or license from the Company.
The complaint seeks relief from NEC to cease its infringement activities and
requests damages be awarded to the Company resulting from the infringement
activities. The relief also asks for reimbursement of attorney's fees and
certain other relief the Court deems proper. NEC has responded by denying the
infringement claims as brought against it by the Company. NEC also filed
certain counterclaims against the Company, which were subsequently retracted
by NEC or stayed by the Court. On June 7, 1999, the Company announced that
the United States International Trade Commission (the "ITC") had begun an
investigation of the Company's complaint that NEC has infringed two of the
Company's fundamental DRAM patents. The ITC hearing is scheduled to begin on
November 8, 1999 in Washington D.C. and an initial decision regarding the
outcome of such trial is expected prior to March 7, 2000. The initial
decision is expected to become final prior to the end of April 2000 pending
further review by the courts. If a further review does take place, the final
decision is then expected to occur prior to the end of June 2000. The Company
has vigorously pursued enforcement of its rights pursuant to its intellectual
property and will continue such efforts. The Company is uncertain as to the
ultimate outcome of the infringement proceedings and the ITC investigation, as
well as to the resulting effects upon the Company's financial position or
results of operations.
LITIGATION
NTC LIQUIDATING TRUST. The Company was listed as a defendant in a lawsuit
filed in October 1997, by the Trustee of the NTC liquidating Trust against
Brown Brothers Harriman, Citibank N.A. (the Company's stock transfer agent)
and the Company. The NTC Liquidating Trust was created under Colorado law, in
connection with implementation of Chapter 11 plans of liquidation for Oren
Benton, a former principal shareholder of the Company. The trustee's claim
was based on allegations that Benton and affiliated persons caused shares of
common stock of the Company to be converted, concealed, or wrongly transferred
in violation of the automatic stay in effect as of the Benton bankruptcy
filing. On October 20, 1998, the United States Bankruptcy court for the
District of Colorado determined that the Trustee had not pled facts sufficient
to establish Benton's interest in the shares of common stock of Ramtron on the
date of his bankruptcy filing under non-bankruptcy law. As a consequence, the
court determined that the complaint was not sufficient to support a claim that
the Ramtron stock was property of the estate subject to an automatic stay.
The court ordered that all claims in the case be dismissed. On October 29,
1998, the Trustee filed an appeal to this decision and on November 9, 1998,
the court ordered that the Company and Citibank N.A. were dismissed without
prejudice from the appeal.
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DEERE PARK. In November 1998, Deere Park Capital Management LLC ("Deere
Park"), a holder of the Company's Series A Convertible Preferred Stock
("Preferred Stock"), filed a lawsuit against the Company in the Court of
Chancery of the State of Delaware seeking a declaratory judgement and specific
performance of the Company's alleged obligation to convert a portion of Deere
Park's shares of Preferred Stock to common stock, as well as damages of $2.4
million plus costs and attorneys fees. On December 16, 1998, the Company
filed its answer denying the allegations of the complaint and asserting, among
other things, that the Company had fully performed its contractual obligations
with respect to the conversions alleged in the complaint. On January 20,
1999, Deere Park moved for permission to file an amended complaint. Shortly
thereafter, in early February 1999, Deere Park filed a second action against
the Company in the Court of Chancery for the State of Delaware. Like the
proposed amended complaint in its original lawsuit, Deere Park alleged in the
second action that the Company breached certain obligations to convert Deere
Park's shares of Preferred Stock; however, Deere Park's new complaint added a
claim for relief and relied on different facts to support the claims asserted
therein. On February 23, 1999, the Company answered Deere Park's second
action by denying the substance of Deere Park's new allegations and raised
certain affirmative defenses that the Company previously had not raised.
Effective as of August 6, 1999, Deere Park dismissed all claims against the
Company with prejudice pursuant to the finalization of the Company's capital
restructuring.
TALISMAN. On January 29, 1999, Talisman Capital Opportunity Fund, LLC
("Talisman"), another holder of Preferred Stock, filed a suit against the
Company in the United States District Court for the Southern District of New
York, also alleging that the Company failed to honor its obligations to
convert shares of its Preferred Stock and seeking damages of over $1.5 million
plus costs and attorney's fees. In its answer served on February 22, 1999,
the Company denied the substance of Talisman's allegations and asserted
several affirmative defenses. On April 7, 1999, the Company entered into an
agreement with Talisman to settle the pending litigation. Pursuant to the
terms of a confidential settlement agreement, the Company agreed to make a
cash payment to Talisman in consideration for the cancellation of all
Talisman's remaining shares of Series A Preferred Stock. Accordingly,
Talisman's suit over the Company was dismissed and Talisman ceased to be a
holder of the Company's Series A Preferred Stock.
NOTE 10. SEGMENT INFORMATION
Ramtron is engaged primarily in the design, development, manufacture and sale
of specialty high-performance semiconductor memory devices. Ramtron has two
principal businesses, ferroelectric nonvolatile random access memory ("FRAM")
technology and products, and high-speed DRAM products called Enhanced-DRAM
("EDRAM") products.
The accounting policies for determining segment net income (loss) are the same
used in the consolidated financial statements. There are no internal sales
between segments.
Page-13
<PAGE>
The following table represents segment information for the three months ended
September 30, 1999 and 1998.
1999 1998
------------------ ------------------
FRAM EDRAM FRAM EDRAM
-------- -------- -------- --------
(in thousands)
Product revenue $ 830 $1,811 $ 499 $4,642
Technology license and
development revenue 2,000 -- -- --
Royalty revenue 1,500 -- -- --
Customer-sponsored research
and development revenue 1,046 -- 266 --
-------- -------- -------- --------
5,376 1,811 765 4,642
Operating costs 4,088 2,811 3,880 4,269
-------- -------- -------- --------
Operating income (loss) 1,288 (1,000) (3,115) 373
Other 214 (1) 3 (9)
-------- -------- -------- --------
Net income (loss) $1,502 $(1,001) $(3,112) $ 364
======== ======== ======== ========
Net income (loss) excludes interest income, interest expense and special
charges of $194,000 and $2,627,000 in 1999 and 1998, respectively, not
allocated to business segments.
The following table represents segment information for the nine months ended
September 30, 1999 and 1998.
1999 1998
------------------ ------------------
FRAM EDRAM FRAM EDRAM
-------- -------- -------- --------
(in thousands)
Product revenue $ 2,750 $ 7,935 $ 2,045 $13,097
Technology license and
development revenue 2,500 -- -- --
Royalty revenue 1,500 -- -- --
Customer-sponsored research
and development revenue 3,368 -- 871 --
-------- -------- -------- --------
10,118 7,935 2,916 13,097
Operating costs 12,730 9,158 12,232 11,731
-------- -------- -------- --------
Operating income (loss) (2,612) (1,223) (9,316) 1,366
Other 131 17 50 (19)
-------- -------- -------- --------
Net income (loss) $(2,481) $(1,206) $(9,266) $ 1,347
======== ======== ======== ========
Page-14
<PAGE>
Net income (loss) excludes interest income, interest expense and special
charges of $313,000 and $2,620,000 in 1999 and 1998, respectively, not
allocated to business segments.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FACTORS AFFECTING FUTURE RESULTS
This quarterly report contains forward-looking statements. Except for
historical information, the matters discussed in this report are forward-
looking statements that are subject to certain risks and uncertainties that
could cause the actual results to differ materially from those projected.
Words such as "expects," "plans," "anticipates," "believes," "estimates" and
variations of such words are intended to represent forward-looking statements.
The Company undertakes no obligation to publicly release the results of any
revisions to these forward-looking statements, which may be made to reflect
events or circumstances after the date hereof. Factors that might cause such
a difference include but are not limited to: (i) the timely completion of the
development and qualification for manufacturing of the Company's new EDRAM and
FRAM products; (ii) broader customer acceptance of its existing EDRAM and
Enhanced Synchronous DRAM ("ESDRAM") products and low-density FRAM products;
(iii) acceptance of new high-density FRAM products, which may be developed;
(iv) the Company's ability to manufacture its products on a cost-effective and
timely basis at its alliance foundry and third party manufacturing operations;
(v) the Company's ability to perform under existing alliance agreements and to
develop new alliance and foundry relationships; (vi) the Company's alliance
partners' willingness to continue development activities under their license
agreements with the Company; (vii) the effect on the Company of the Company's
August 1999 capital restructuring, including the 1-for-5 reverse stock split;
(viii) future potential changes in the Company's capital structure; (ix) the
availability and related cost of future financing; (x) the retention of key
personnel; (xi) the ultimate outcomes of the Company's patent interference and
patent infringement proceedings, and (xii) factors not directly related to the
Company, such as competitive pressures on pricing, marketing conditions in
general, competition, technological progression, product obsolescence and the
changing needs of potential customers and the semiconductor industry in
general and for memory products in particular.
Page-15
<PAGE>
RESULTS OF OPERATIONS
Revenue for the third quarter of 1999 increased by 33% to $7.2 million from
$5.4 million in the respective period in 1998. For the nine months ended
September 30, 1999, revenue increased by 13% to $18.1 million from $16.0
million in the respective period in 1998. Revenues for the quarter and nine
month periods ended September 30, 1999 were comprised of product sales,
license and development fees, royalties and customer-sponsored research and
development activities. The Company recorded $2.0 million and $2.5 million of
license fee revenues during the quarter and the nine month periods,
respectively, from the achievement of milestones pursuant to existing FRAM
license and development agreements. For the same periods in 1998, the Company
did not record any such license and development fee revenues. Customer-
sponsored research and development revenues were recorded in amounts totaling
$1.0 million and $3.4 million for the quarter and nine-month periods,
respectively, resulting primarily from FRAM process development activities
with an existing licensee. During the quarter, the Company also recorded
royalty income of $1.5 million compared with no such royalty revenue recorded
for the same period in 1998. The $1.5 million nonrefundable payment was
received under a FRAM licensing agreement with an existing licensee. Such
payment was consideration for a direct licensing right to use Ramtron
intellectual property in the design, manufacture and sale of RF/ID products
using the Company's ferroelectric technology.
Product revenues for the third quarter and nine months ended September 30,
1999 were $2.6 million and $10.7 million, respectively, representing decreases
of 49% and 29% for the quarter and nine month periods over the respective
periods in 1998. Product revenues for the third quarter and nine month
periods from a year ago totaled $5.1 million and $15.1 million, respectively.
Product sales revenue for the current and prior year resulted from FRAM and
EDRAM product sales with EDRAM product sales accounting for approximately 69%
and 74% of total product sales in the quarter and nine month periods ended
September 30, 1999, respectively. For the same periods in 1998, EDRAM product
sales accounted for 90% and 87% of total product sales.
EDRAM unit shipments of discrete equivalent parts decreased by approximately
51% and 35% during the quarter and the nine-month period, respectively, when
compared with the same periods in 1998. Such unit shipment decreases resulted
from slowdowns in bookings and billings for the Company's 4-megabit EDRAM
products. The Company believes that the downward trend in 4-megabit EDRAM
product revenues is a result of fluctuations in demand from a limited
number of 4-megabit EDRAM customers. Although the trend in 4-megabit EDRAM
revenues has been down during 1999, the Company still has substantial demand
for the product and such demand is expected to continue for at least two more
years. During the third quarter, the Company announced commercial production
of a 16-megabit ESDRAM product targeted for communications applications. The
ESDRAM product is expected to be the transition product for the Company's 4-
megabit EDRAM in future periods leading to a 64-megabit ESDRAM product during
the year 2000. Average selling prices for the Company's 4-megabit EDRAM
Page-16
<PAGE>
products decreased by 21% and 6% during the quarter and the nine-month period,
respectively, when compared with the same periods in 1998. The decrease in
average selling prices during the quarter and nine month periods resulted from
the Company making a decision to sell low demand "512K X 8" EDRAM products at
significantly discounted prices during the third quarter. The discounted sale
of the "12K X 8" EDRAM inventory helped a significant customer to lower
overall system costs in a price sensitive application. The remaining
balance of "512K X 8" EDRAM inventory is expected to be sold during the fourth
quarter of 1999, at which time overall average selling prices are expected to
improve. The decrease in demand for the Company's 4-megabit EDRAM products is
expected to continue to occur in future periods as new higher density products
become available in greater quantities and at competitive prices. The Company
anticipates that average selling prices of its 4-megabit EDRAM products will
experience overall downward price pressures during future periods. The
Company's EDRAM prices are subject to industry demand for such products and
the prices of competing specialty memories.
FRAM product revenues for the third quarter and the nine months ended
September 30, 1999 increased to $830,000 and $2,750,000, respectively,
representing increases of 66% and 34% over the same periods in 1998. FRAM
product revenues for the same periods in 1998 were $499,000 and $2,045,000.
Such increases resulted from the increased availability of FRAM products from
one of the Company's foundry sources and from renewed sales and marketing
activities in response to the increased FRAM product availability. The
Company is expecting a second FRAM product foundry to be in production during
the first quarter of 2000. The availability of this second foundry is
expected to increase the number of FRAM products available for sale as a
result of advanced manufacturing capabilities that will allow for new designs
and higher memory density products.
Cost of product sales as a percentage of product revenues during the quarter
and for the nine months ended September 30, 1999 were 69% and 59%,
respectively, compared with 53% and 59% for the same periods in 1998. The
increase in cost of product sales as a percentage of product revenues in the
third quarter and the nine months ended September 30, 1999 compared with the
respective periods in 1998 resulted primarily from lower average selling
prices on certain of the Company's 4-megabit EDRAM products as discussed
above. Cost of product sales associated with the Company's FRAM products
improved during the quarter resulting primarily from the majority of FRAM
products sold being manufactured at the Company's foundry supplier. Cost of
product sales as a percentage of product revenues for FRAM products is
expected to continue to decrease in future quarters as a larger volume of FRAM
products sold will be manufactured at the Company's alliance foundry
manufacturing facilities and costs of manufacturing are expected to decrease
as volumes increase.
Page-17
<PAGE>
Research and development expenses (including customer-sponsored research and
development) decreased by approximately $600,000 or 17% to $2.8 million
in the third quarter of 1999 when compared with the respective period in
1998, and for the nine month period ended September 30, 1999, research and
development expenses decreased by $763,000 or 8% when compared with the
respective period in 1998. The Company has incurred increases in research
and development expenses during 1999 resulting from increased costs
associated with the design and development of the Company's 16-megabit
and 64-megabit ESDRAM products and from costs incurred to support customer-
sponsored research and development activities in FRAM process development.
These increases in research and development expenses during the nine month
period were partially offset by decreases in expenses resulting from the
cessation of FRAM production operations at the Company's Colorado Springs FRAM
fabrication facility, which occurred during the first quarter of 1999.
Sales, general and administrative ("SG&A") expenses for the quarter ended
September 30, 1999 increased by $254,000 (13%) in comparison with the same
period in 1998 to $2.2 million. For the nine month period ended September 30,
1999, SG&A expenses increased by $1.2 million (21%) as compared with the same
periods in 1998. The increases in SG&A expenses for the three and nine month
periods resulted primarily from financial advisory fees and legal and related
expenses incurred in connection with the Company's preferred stock
restructuring efforts and from an increase in foreign withholding taxes
totaling $150,000 from the recognition of $1,500,000 of license fee revenue
during the nine month period ended September 30, 1999. These increases were
partially offset by lower commission costs on decreased product sales during
the nine months ended September 30, 1999 as compared with the respective
periods in 1998.
Interest expense, related party during the third quarter and for the nine
months ended September 30, 1999 increased slightly from the respective periods
in 1998. During August 1999, the Company renegotiated an outstanding
promissory note with the National Electrical Benefit Fund (a principal
shareholder), whereby $1.5 million of accrued interest on the promissory note
was reclassified to principal. Subsequent to the reclassification, the
outstanding principal balance on the note was $7.0 million. Interest accrued
on the increased principal balance was the primary reason for the increase in
interest expense during the quarter and nine month periods ended September 30,
1999 when compared with the same periods in 1998.
During the quarter and the nine month period ended September 30, 1999, the
Company recorded preferred stock non-cash imputed dividends, accretion of
discount and accretion of redeemable preferred stock to redemption value
totaling $96,000 and $864,000, respectively. The imputed dividend and
accretion of discount resulted from certain provisions of the Company's
Preferred Stock, whereby a dividend is to be paid to the holders of the
Preferred Stock, and the conversion price of the Preferred Stock was
determined by applying a discount, which increased over a fourteen month
period from 7% to a maximum of 15% in May 1999. The dividend is recognized
Page-18
<PAGE>
ratably pursuant to all outstanding Preferred Stock. The discount was
recognized ratably as a non-cash deemed dividend over the applicable fourteen
month period. A $3.8 million gain on the restructuring of the Preferred Stock
was recorded in the nine month period ended September 30, 1999. The gain
includes a $489,000 gain recorded during April 1999 from the exchange of
Preferred Stock for cash with one of the Company's Preferred Stock
shareholders pursuant to a litigation settlement. The remaining balance of
the $3.8 million gain was determined on August 16, 1999 as a result of
decisions made by holders of outstanding Preferred Stock regarding certain
exchange rights such holders received pursuant to the restructuring of the
Preferred Stock. The gain was determined by comparing the fair value of the
new instrument received by the holders (i.e., cash, common stock and/or
restated Preferred Stock) with the recorded value of the exchanged Preferred
Stock, including dividends. The difference was recorded as a gain on
Preferred Stock Settlement(see "Note 8").
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents balance as of September 30, 1999 was
approximately $5.4 million, representing a $9.8 million decrease from
December 31, 1998. The Company used approximately $3.9 million in operations
during the first nine months of 1999 compared with a use of $3.2 million in
operations for the respective period in 1998. The use of $3.9 million in
operations during the nine month period ended September 30, 1999 resulted
primarily from (i) the funding of losses of $2.2 million (net of $1.8 million
in non-cash adjustments), (ii) an increase in accounts receivable of $1.7
million, and (iii) an increase in inventories totaling $628,000. Such uses of
cash during the nine-month period were partially offset by a $722,000 increase
in accounts payable and accrued liabilities. The increase in accounts
receivables resulted primarily from a $1.0 million receivable from a FRAM
license partner associated with a FRAM license and development milestone
achieved by the Company during the third quarter of 1999. The increase in
inventories of $628,000 was the result of increases in work-in-process
inventories for both EDRAM and FRAM products in anticipation of increasing
future product shipments and as an increase to finished goods to address
possible year 2000 product delivery interruptions. Approximately $2.0 million
was used in investing activities during the nine months ended September 30,
1999 compared with $747,000 in the respective period in 1998. Such use of
cash in 1999 resulted primarily from capitalized legal costs associated with
the Company's ongoing EDRAM patent infringement lawsuit filed against NEC in
October 1998. Approximately $3.9 million was used in financing activities
during the nine months ended September 30, 1999 compared with a source of cash
during the same period in 1998 of $15.4 million resulting from the proceeds of
an equity private placement. The use of cash during 1999 resulted from a
payment of $550,000 for certain purchased license rights associated with the
Company's ferroelectric technology and payments of $3.3 million pursuant to
the restructuring of the Company's Preferred Stockholders (see "Note 8"). As
of September 30, 1999, the Company had working capital of $4.8 million and
total stockholders' equity of $9.9 million.
Page-19
<PAGE>
The Company's future capital requirements include financing the growth of
working capital items such as accounts receivable and inventory, the funding
of continued research and development efforts and the costs associated with
currently existing and any future patent infringement and interference
proceedings. In addition to other activities directed toward identifying and
accessing funding sources, the Company is continuing to pursue additional
license and development arrangements with third parties to partially satisfy
its future capital requirements.
Based on the Company's capital resources as of September 30, 1999 and expected
operating costs and anticipated cash flows from product sales, licensing
revenues and customer-sponsored research and development revenues, the Company
expects to be able to fund its operations through at least year-end 1999.
All debt outstanding under the Fund credit facility, repayment of which is
secured by liens on the Company's headquarters facility and principal assets,
becomes due and payable on March 15, 2002. The DFA convertible promissory
notes become due and payable on July 30, 2000. In view of the Company's
future cash flows and working capital requirements, the Company is seeking to
obtain additional equity or debt financing before or soon after year-end 1999.
The Company cannot be sure any additional financing or other sources of
capital will be available, or if available, will be on acceptable terms to the
Company. If additional financing or other sources of capital are not obtained
by the end of 1999 or shortly thereafter, the Company's ability to carry on
its current business operations would be materially adversely affected.
OUTLOOK
The Company expects revenues will continue to be sporadic in the foreseeable
future until the Company's products gain wider market acceptance and can be
manufactured in increased volumes and in a more cost-effective manner. The
Company has historically depended and continues to depend on revenues from new
license arrangements and upon the achievement of milestones under the
Company's existing and new license agreements as the major contributor of
positive quarterly operating results. Such license revenue does not occur on
a consistent basis and is, therefore, expected to create substantial
fluctuations in the Company's future quarterly revenues and results of
operations. The Company is continuing its efforts to improve and increase
commercial production and sales of its EDRAM products and low-density FRAM
products, decrease the cost of producing such products and develop and
commercialize new high and low-density FRAM products and enhancements to its
existing FRAM and EDRAM products.
There can be no assurance that the Company's foundry and alliance partners
will be able to achieve commercial production of the products currently in
development. If such commercial production is not achieved or is not achieved
in a timely manner, the Company's results of operations would be materially
adversely affected.
Page-20
<PAGE>
YEAR 2000
The Company utilizes software and related technologies throughout its business
and relies on suppliers of services and materials that will be affected by the
date change to the year 2000 or prior to such change. The Year 2000 issue
exists because many computer systems and applications currently use two-digit
fields to designate a year. As the century date change occurs, date sensitive
systems will recognize the year 2000 as 1900, or not at all. This inability
to recognize the year 2000 may cause systems to process critical financial and
operational information incorrectly. The Company initiated a Year 2000
project to address the Year 2000 issues as they relate to the Company.
The Company's Year 2000 project is being managed by a team of internal staff.
The team's activities are designed to ensure that there are no adverse effects
on the Company's operations and that transactions with customers, vendors and
financial institutions are fully supported. The Company has had formal
communications with vendors, customers and financial institutions to ensure
that those parties have appropriate plans to remediate Year 2000 issues as
such issues interface with the Company's systems or otherwise effect the
Company. The Company has completed the assessment, testing, contingency
planning and substantially all of the remediation phases of its Year 2000
project and will continue to re-test and remediate Year 2000 sensitive systems
and operations throughout the remainder of 1999 and beyond, if required. The
Company believes, based on progress to date, that the costs of complying with
the Year 2000 issues will not have a material effect on the Company's
financial position. The Company believes that the estimated total cost of
compliance for Year 2000 will be less than $250,000.
The Company determined that certain of its software and hardware required
replacement or updating so that its systems would operate properly with
respect to dates in the periods prior to the year 2000 and beyond. The
Company does not currently use any third-party custom written software in its
operations and, therefore, does not believe that a significant exposure exists
in Year 2000 compliance as the majority of its software is issued with
frequent updates, which have addressed or are expected to address the Year
2000 compliance issue. The Company believes that with its updates to existing
software and purchases of new software and the replacement or modification to
certain non-compliant hardware, the Year 2000 issue will not pose a
significant operational problem for the Company's systems. However, if such
updates, replacements or modifications are not effectively made or made in a
timely manner, the Year 2000 issue could have a material impact on the
operations of the Company. The Company believes that its primary exposure
from the Year 2000 issue lies with major suppliers and subcontractors not
achieving Y2K compliance. Failure to properly address these exposures for
Year 2000 compliance could result in delays in product deliveries during the
period immediately following December 31, 1999. The Company believes that its
most reasonably likely worst case scenario would be that one or several of its
subcontractors are unable to supply product or services to the Company for an
extended period of time. Such failure to supply product or services,
depending on the length of delay, could exhaust the Company's product
inventories and, therefore, cause delays in product shipments to the Company's
customers.
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<PAGE>
The Company has assessed and continues to assess the extent to which its
operations are vulnerable from interactions with its vendors, customers and
financial institutions should those organizations fail to properly remediate
their systems. While the Company believes its planning efforts are adequate
to address its Year 2000 concerns, there can be no guarantee that the systems
of other companies on which the Company's systems and operations rely will be
converted on a timely basis and will not have a material adverse effect on the
Company's business, results of operations and financial condition. The
Company believes that it has no exposure to contingencies related to the Year
2000 issue for the products it manufactures and sells.
The above discussion regarding costs, risks and completion dates for the Year
2000 is based on the Company's best estimates given information that is
currently available and is subject to change. As the Company proceeds with
this project, it may discover that actual results will differ materially from
any estimates provided.
MARKET RISK
There have been no material changes in market risk related to the Company's
financial instruments since December 31, 1998.
SUBSEQUENT EVENT
On November 9, 1999, the Company entered into an agreement with NEC
Corporation to settle its pending patent infringement lawsuit and
International Trade Commission dispute. The agreement calls for the
termination of patent infringement cases at the International Trade Commission
and United States District Court for the Northern District of California.
Under the terms of the agreement, the Company granted to NEC an unrestricted
license to use certain EDRAM specific intellectual property in N-way
associative cache DRAM architectures in exchange for certain considerations.
Such considerations are required to remain confidential per the terms of the
agreement. The agreement also allows NEC and its customers to enable direct-
mapped cache features of its VCM memory in exchange for certain additional
considerations that are also required to remain confidential per the terms of
the agreement.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
In November 1998, Deere Park Capital Management LLC ("Deere Park"), a holder
of the Company's Series A Convertible Preferred Stock ("Preferred Stock"),
filed a lawsuit against the Company in the Court of Chancery of the State of
Delaware seeking a declaratory judgement and specific performance of the
Company's alleged obligation to convert a portion of Deere Park's shares of
Preferred Stock to common stock, as well as damages of $2.4 million plus costs
and attorneys fees. On December 16, 1998, the Company filed its answer
denying the allegations of the complaint and asserting, among other things,
Page-22
<PAGE>
that the Company had fully performed its contractual obligations with respect
to the conversions alleged in the complaint. On January 20, 1999, Deere Park
moved for permission to file an amended complaint. Shortly thereafter, in
early February 1999, Deere Park filed a second action against the Company in
the Court of Chancery for the State of Delaware. Like the proposed amended
complaint in its original lawsuit, Deere Park alleged in this second action
that the Company breached certain obligations to convert Deere Park's shares
of Preferred Stock; however, Deere Park's new complaint added a claim for
relief and relied on different facts to support the claims asserted therein.
On February 23, 1999, the Company answered Deere Park's second action by
denying the substance of Deere Park's new allegations and raising certain
affirmative defenses that the Company previously had not raised. On August 6,
1999, Deere Park dismissed all claims against the Company with prejudice
pursuant to the finalization of the Company's preferred stock restructuring.
On January 29, 1999, Talisman Capital Opportunity Fund, LLC ("Talisman"),
another holder of Preferred Stock, filed a suit against the Company in the
United States District Court for the Southern District of New York, also
alleging that the Company failed to honor its obligations to convert
shares of its Preferred Stock and seeking damages of over $1.5 million plus
costs and attorney's fees. In its answer served on February 22, 1999, the
Company denied the substance of Talisman's allegations and asserted several
affirmative defenses. On April 7, 1999, the Company entered into an agreement
with Talisman to settle the pending litigation. Pursuant to the terms of a
confidential settlement agreement, the Company agreed to make a cash payment
to Talisman in consideration for the cancellation of all Talisman's remaining
shares of Series A Preferred Stock. Accordingly, Talisman's suit over the
Company has been dismissed and Talisman is no longer a holder of Series A
Preferred Stock.
ITEMS 2 - 3 NONE
ITEM 4 - Submission of Matters to a Vote of Security Holders
On July 20, 1999, the Company held a Special Meeting of its Common
Stockholders (the "Special Meeting") in Colorado Springs, Colorado. Proxies
for the meeting were solicited by the Board of Directors of the Company
pursuant to Regulation 14A under the Securities and Exchange Act of 1934.
(Vote counts shown in this section are prior to the Company's one-for-five
reverse stock split effected in August 1999.)
At the Special Meeting, the Company's stockholders approved, with 39,350,542
votes cast in favor, 1,752,679 votes cast against and 486,346 abstentions, an
amendment to restate the Company's Certificate of Designation, Preferences,
Rights and Limitations relating to the Company's Series A Convertible
Preferred Stock so as to amend the terms of the outstanding Series A
Convertible Preferred Stock to provide for, among other things, (i) a fixed
rather than variable rate of conversion to Common Stock, (ii) a limited cash
exchange option, (iii) redemption at the option of the Company on or after
July 31, 2000, (iv) mandatory redemption on July 31, 2002, (v) a dividend of
11% per annum (which may increase under certain circumstances), and (vi) fixed
dividend payment dates.
Page-23
<PAGE>
At the Special Meeting, the Company's stockholders also approved, with
39,417,969 votes cast in favor, 2,094,769 votes cast against and 76,829
abstentions, an amendment to the Company's Certificate of Incorporation to
effect a reverse stock split of the Company's Common Stock, whereby each five
shares of Common Stock would be combined, converted and changed into one share
of Common Stock.
At the Special Meeting, the Company's stockholders did not approve, with
10,213,151 votes cast in favor, 30,713,095 votes cast against and 663,321
abstentions, an amendment to the Company's Certificate of Incorporation to
provide the Board of Directors of the Company with the authority to effect, in
the Board's sole discretion, at any time prior to January 1, 2000, a reverse
stock split of the Company's Common Stock whereby the shares of Common Stock
would be combined, converted and changed into Common Stock in any one of the
following ratios, as selected by the Board of Directors of the Company in its
sole discretion: 1.5:1, 2:1, 2.5:1, 3:1, 3.5:1, 4:1, 4.5:1, or 5:1.
ITEM 5 - Other Information
In August 1999, the Company's Board of Directors approved a new employee stock
option plan entitled the Ramtron International Corporation 1999 Stock Option
Plan (the "1999 Plan"). The 1999 Plan calls for the maximum number of shares
reserved for issuance pursuant to the plan to be 700,000 shares. The 1999
Plan is administered by the Company's Board of Directors and participation in
the plan is limited to employees who are not officers or directors of the
Company.
ITEM 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
On July 2, 1999, the Registrant filed a report on Form 8-K.
The item reported was Item 5 - "Other Events."
On July 21, 1999, the Registrant filed a report on Form 8-K.
The item reported was Item 5 - "Other Events."
On August 31, 1999, the Registrant filed a report on Form 8-K.
The item reported was Item 5 - "Other Events." Pro-forma
Statements of Operations and Balance Sheets were included with
such Form 8-K filing.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RAMTRON INTERNATIONAL CORPORATION
(Registrant)
November 12, 1999 /S/ Richard L. Mohr
------------------------------
Richard L. Mohr
Executive Vice President and
Chief Financial Officer
(Principal Accounting Officer
Page-24
<PAGE>
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886
0
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