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 March 31, 2000
[ ] 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 - 16,100,031 as of May 09, 2000.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
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RAMTRON INTERNATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except par value and per share amounts)
Mar. 31, Dec. 31,
2000 1999
--------- ---------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 9,512 $ 10,601
Accounts receivable, less allowances
of $353 and $347, respectively 2,506 1,703
Inventories 4,849 4,174
Other current assets 232 184
--------- ---------
Total current assets 17,099 16,662
Property, plant and equipment, net 5,853 6,064
Intangible assets, net 8,479 6,654
--------- ---------
$ 31,431 $ 29,380
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,460 $ 3,066
Accrued liabilities 828 985
Deferred revenue 472 1,761
Promissory note and accrued interest, DFA -- 3,335
Accrued interest, the Fund -- 230
--------- ---------
Total current liabilities 3,760 9,377
Long-term promissory note, the Fund, net of unamortized
discount of $1,097 and $1,234, respectively 5,903 5,766
--------- ---------
Total liabilities 9,663 15,143
Minority interest in subsidiary 751 --
Redeemable preferred stock, $.01 par value,
10,000 shares authorized: 1 and 1 share issued
and outstanding, respectively, entitled to
$1,000 per share plus accrued and unpaid
dividends in liquidation 829 914
--------- ---------
Stockholders' Equity:
Common stock, $.01 par value, 50,000 and 75,000
shares authorized, respectively: 16,081 and 14,609
shares issued and outstanding, respectively 161 146
Common stock warrants 1,409 1,409
Deferred compensation (818) (2,423)
Additional paid-in capital 187,489 179,204
Accumulated deficit (168,053) (165,013)
--------- ---------
Total stockholders' equity 20,188 13,323
--------- ---------
$ 31,431 $ 29,380
========= =========
See accompanying notes to consolidated financial statements.
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RAMTRON INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(Unaudited)
(in thousands, except per share amounts)
2000 1999
-------- --------
Revenue:
Product sales $ 2,270 $ 4,233
License and development fees 2,000 500
Customer-sponsored research and development fees 1,301 806
-------- --------
5,571 5,539
-------- --------
Costs and expenses:
Cost of product sales 1,267 2,417
Research and development 2,139 1,797
Customer-sponsored research and development 1,178 806
Sales, general and administrative (exclusive
of non-cash compensation expense shown below) 2,439 2,442
Stock-based compensation 1,566 --
-------- --------
8,589 7,462
-------- --------
Operating loss (3,018) (1,923)
Interest expense, related party (322) (165)
Other income, net 109 128
Minority interest in net loss of subsidiary 222 --
-------- --------
Net loss $(3,009) $(1,960)
======== ========
Loss per common share:
Net loss $(3,009) $(1,960)
Dividends on redeemable preferred stock (25) (146)
Accretion of redeemable preferred stock (6) (374)
-------- --------
Net loss applicable to common shares $(3,040) $(2,480)
======== ========
Net loss per share - basic and diluted $(0.20) $(0.21)
======== ========
Weighted average shares outstanding 15,065 12,086
======== ========
See accompanying notes to consolidated financial statements.
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RAMTRON INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(Unaudited)
(in thousands)
2000 1999
-------- --------
Cash flows from operating activities:
Net loss $(3,009) $(1,960)
Adjustments used to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 679 560
Amortization of debt discount 137 --
Stock-based compensation 1,566 --
Minority interest in net loss of subsidiary (222) --
Loss on manufacturing contract -- (486)
Changes in assets and liabilities:
Accounts receivable (803) (3,045)
Inventories (675) 382
Accounts payable and accrued liabilities (763) (788)
Accrued interest, related party (230) 165
Deferred revenue (1,289) 83
Other (5) 8
-------- --------
Net cash used in operating activities (4,614) (5,081)
-------- --------
Cash flows from investing activities:
Purchase of property, plant and equipment (102) (97)
Intellectual property (208) (319)
-------- --------
Net cash used in investing activities (310) (416)
-------- --------
Cash flows from financing activities:
Payments on license rights payable -- (550)
Issuance of capital stock, net of expenses 3,835 --
-------- --------
Net cash provided by (used in) financing activities 3,835 (550)
-------- --------
Net decrease in cash and cash equivalents (1,089) (6,047)
Cash and cash equivalents, beginning of period 10,601 15,237
-------- --------
Cash and cash equivalents, end of period $ 9,512 $ 9,190
======== ========
See accompanying notes to consolidated financial statements.
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RAMTRON INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
- -----------------------------------------------------------------------------
NOTE 1. BASIS OF PRESENTATION AND MANAGEMENT OPINION
The accompanying consolidated financial statements at March 31, 2000 and 1999
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, 1999. The
results of operations for the period ended March 31, 2000 are not necessarily
indicative of the operating results for the full year.
NOTE 2. NEW ACCOUNTING STANDARDS
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. With respect to hybrid instruments, a company may elect
to apply SFAS No. 133, as amended, to (i) all hybrid contracts, (ii) only those
hybrid instruments that were issued, acquired, or substantively modified after
December 31, 1997, or (iii) only those hybrid instruments that were issued,
acquired or substantively modified after December 31, 1998. Management is
currently evaluating the effect SFAS No. 133 will have on the Company's
financial statements.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition" ("SAB No. 101"), which
provides guidance on the recognition, presentation and disclosure of revenue in
financial statements. SAB No. 101 is effective for the second quarter of 2000.
The Company is evaluating the impact SAB No. 101 will have on the Company's
financial position and results of operations.
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NOTE 3. INVENTORIES
Inventories consist of:
March 31, Dec. 31,
2000 1999
-------- --------
(in thousands)
(Unaudited)
Finished goods $3,097 $2,544
Work in process 1,752 1,630
------ ------
Total $4,849 $4,174
====== ======
NOTE 4. 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"). On
August 6, 1999, the Company and the Fund amended the terms of the Fund Credit
Facility reclassifying $1.5 million of accrued interest to principal, leaving
an outstanding principal balance under the loan as of August 6, 1999 of
$7 million. The Amended Credit Facility bears interest at 8% per annum,
payable quarterly. 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 agreement
requires the Company maintain a minimum level of net worth of $7 million,
current assets to current liabilities ratio of not less than 1.5, as defined,
and long-term debt to net worth ratio not to exceed 1.0, as defined. The
Company was in compliance with these covenants at March 31, 2000. The
outstanding face amount due under the Amended Credit Facility was $7.0 million
as of March 31, 2000.
NOTE 5. PROMISSORY NOTE, DIMENSIONAL FUND ADVISORS ("DFA")
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. The DFA Promissory Notes bore interest
at 8% per annum and was scheduled to mature on July 30, 2000. All or part of
the principal and accrued and unpaid interest of the DFA Promissory Notes were
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. On February 29, 2000 the DFA affiliates elected to
convert outstanding principal and accrued interest totaling approximately
$3,378,000 into 675,547 shares of the Company's common stock.
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NOTE 6. EARNINGS PER SHARE
The Company calculates its loss 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 net losses, all
potentially dilutive securities including warrants and stock options, would be
anti-dilutive and thus, excluded from diluted earnings per share.
As of March 31, 2000, the Company had several financial instruments or
obligations that could create future dilution to the Company's common
shareholders and are not currently classified as outstanding common shares of
the Company. The following table details such instruments and obligations and
the common stock comparative for each. The common stock number is based on
specific conversion or issuance assumptions pursuant to the corresponding terms
of each individual instrument or obligation.
Instrument or Obligation Common Stock
- ---------------------------------------------------- ------------
(in thousands)
Warrants, 25,000 exercisable at $17.00 per share,
868,810 exercisable at $16.22 per share, 814,212
exercisable at $10.81 per share, 667,000 exercisable
at $6.88 per share, 622,061 exercisable at $5.00 per
share and 905,697 exercisable at $2.25 per share. 3,903
Stock options outstanding as of March 31, 2000
with a weighted average exercise price per
share of $11.93 2,461
Series A Convertible Preferred Stock, 861 shares
outstanding and accrued dividends as of
March 31, 2000 with a conversion price of $5.00
per share. 177
Promissory note, related party, principal and
accrued interest as of March 31, 2000 totaling
$7,000,000 with a conversion price of $5.00 per
share. 1,400
------
Total 7,941
======
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NOTE 7. DEFERRED COMPENSATION
In December 1999, the Company's shareholders approved an amendment to the
Company's 1995 Stock Option Plan. Under the amended stock option plan certain
officers of the Company were granted common stock options totaling of 500,000
shares with an exercise price of $2.25 per share. The intrinsic value of stock
based compensation related to the options was approximately $2,539,000. This
amount is recorded as deferred compensation and is amortized over the vesting
period of the options as a charge to compensation expense. Amortization for
the three month period ended March 31, 2000 was $1,566,000. Unamortized
compensation expense as of March 31, 2000 is approximately $818,000.
NOTE 8. ACQUISITION OF LICENSE
On January 26, 2000, the Company's wholly owned subsidiary, Enhanced Memory
Systems ("EMS"), Inc., entered into a non-exclusive, worldwide technology
licensing agreement with Infineon Technologies AG ("Infineon"). In
consideration for the grant of the license, Infineon received 20% of the
outstanding common stock of EMS. Additionally, the agreement calls for
Infineon to provide EMS with up to $200 million per year of committed wafer
manufacturing capacity using Infineon's advanced DRAM and embedded DRAM process
capabilities and access to Infineon's design technology. The agreement has a
term of six years with optional two-year renewal periods thereafter. The
technology license was valued at approximately $1,983,000 and is recorded as an
intangible asset and is being amortized over the life of the agreement.
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 five 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. On February 2, 2000 the Court of Appeals vacated and
remanded the decision of the Patent Office for further proceedings. The
Company also filed complaints in Federal District Court in the District of
Columbia seeking a review of the decision of the Patent Office on the remaining
interference counts, which are still pending. 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, and/or its licensees, 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.
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.
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The following table represents segment information for the three months ended
March 31, 2000 and 1999.
2000 1999
------------------ ------------------
FRAM EDRAM FRAM EDRAM
-------- -------- -------- --------
(in thousands)
Product revenue $ 696 $ 1,574 $ 1,050 $ 3,183
Technology license and
development revenue 2,000 -- 500 --
Customer-sponsored research
and development revenue 1,151 150 806 --
-------- -------- -------- --------
3,847 1,724 2,356 3,183
-------- -------- -------- --------
Operating costs 5,754 2,835 3,911 3,551
-------- -------- -------- --------
Operating loss (1,907) (1,111) (1,555) (368)
Other -- 222 -- 16
-------- -------- -------- --------
Net loss $(1,907) $ (889) $(1,555) $ (352)
======== ======== ======== ========
Net loss excludes interest income, interest expense and special charges of
$213,000 and $53,000 in 2000 and 1999, 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 EDRAM and 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
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manufacture its products on a cost-effective and timely basis at its alliance
foundry operations; (v) the Company's ability to perform under existing
alliance agreements and to develop new alliance and foundry relationships;
(vi) the alliance partners' willingness to continue development activities as
they relate to their license agreements with the Company; (vii) future
potential changes in the Company's capital structure; (viii) the availability
and related cost of future financing; (ix) the retention of key personnel;
(x) the outcome of the Company's patent interference litigation proceedings,
and (xi) 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.
RESULTS OF OPERATIONS
Revenue for the first quarter of 2000 remained flat as compared to the
respective period in 1999 at approximately $5.6 million. Revenues for the
quarter were comprised of product sales, a FRAM license milestone fee pursuant
to an existing license agreement and customer-sponsored research and
development fees. Customer-sponsored research and development revenue for the
quarter totaled $1.3 million and resulted primarily from process development
activities with one of the Company's existing FRAM licensees as compared to
$.8 million for the respective period in 1999.
Revenue from product sales for the three months ending March 31, 2000 is
$2.3 million, a decrease of approximately $2.0 million as compared to the same
period in 1999. Product sales for the current quarter consisted of
$1.6 million from the Company's EDRAM business and $.7 million from the
Company's FRAM business. For the respective period in 1999, EDRAM product
sales totaled $3.2 million and FRAM product sales totaled $1.1 million.
EDRAM unit shipments decreased by approximately 50% during the first quarter
ended March 31, 2000, when compared to the respective period in 1999 and
average selling prices were comparable with the same period a year ago. The
decrease in product revenues for the first quarter resulted primarily from a
decrease in the volume of 4-megabit EDRAM products sold to customers for use in
communications equipment, voice messaging systems and RAID disc controllers. A
decreasing demand for the Company's 4-megabit EDRAM products is expected to
continue to occur in future periods as the Company continues to focus its sales
and development efforts on higher density 16-megabit and 64-megabit memory
products. During the quarter ended March 31, 2000, the Company shipped small
volumes of its 16-megabit ESDRAM and 64-megabit HSDRAM products. Prototype
shipments of the Company's 64-megabit ESDRAM products are expected to begin in
the fourth quarter of 2000.
FRAM product revenues for the quarter ended March 31, 2000, decreased to
$.7 million, a decrease of 34% as compared to the same period in 1999. The
decrease is primarily attributable to completing certain non-recurring
manufacturing contracts to deliver RFID products during the first half of 1999.
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Cost of product sales as a percentage of product revenues during the first
quarter remained flat at approximately 56% as compared with the same period in
1999. EDRAM cost of product sales for the three months ended March 31, 2000
increased to 55% from 48% during the same period in 1999. This increase
results primarily from the sale of 64-megabit HSDRAM products during the first
quarter of 2000 at lower margins as compared to the Company's higher
performance, higher margin, EDRAM products. Cost of sales associated with the
Company's FRAM products improved during the quarter to 58% compared to 86% for
the same period in 1999, primarily as a result of manufacturing substantially
all FRAM products at alliance foundry manufacturing facilities in the first
quarter of 2000.
Combined research and development expenses increased by $714,000 or 27% to
$3.3 million in the first quarter when compared with the same period in 1999.
Increased activity in the FRAM joint development program with Fujitsu is the
primary reason for the increase in expenses over the same period in 1999.
During the three months ended March 31, 1999, the Company allocated the
majority of its fabrication facility resources to the production of RFID
products temporarily reducing research and development activities.
Additionally, Company experienced increases in research and development related
payroll expenses, photomask, wafer test supplies and precious metal target
expenses totaling $335,000 in the three month period ended March 31, 2000.
Sales, general and administrative ("SG&A") expenses for the first quarter
remained flat at $2.4 million for each of the three month periods ended
March 31, 2000 and 1999. The Company recorded increased foreign withholding tax
expenses from the recognition of $2.0 million of license and development fee
revenues, which were offset by reduced financial advisory and legal expenses as
compared to the same period in 1999. Additionally, the Company's amortization
expenses increased $161,000 for the three month period ended March 31, 2000
resulting from the recognition of value received in the form of a technology
license from Infineon Technologies AG ("Infineon").
During the three month period ended March 31, 2000, the Company recognized
$1.6 million of non-cash expenses for stock based compensation. In September
1999, certain officers of the Company were granted options to purchase common
stock of the Company at $2.25 per share (the closing price on the date of
grant), subject to shareholder approval to amend the Company's 1995 Stock
Option Plan (the "95 Plan"). These options vest 50% on March 31, 2000 and 50%
on March 31, 2001. The Company's shareholders approved the amendment to the
95 Plan on December 22, 1999. On that date, the closing price of the Company's
common stock was $7.41 per share. The intrinsic value of stock based
compensation related to the stock options is $2,578,000 and is recognized as
non-cash compensation expense over the vesting period of the options.
Accordingly, the Company recorded $1,566,000 of non-cash compensation expense
during the three month period ended March 31, 2000. The Company will recognize
the remaining compensation expense of $818,000 ratably over the next four
quarters.
Related party interest expense increased $157,000 due to amortization of debt
discounts related to the Fund's long-term promissory note and interest expense
on the Company's promissory note to DFA.
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During the first quarter of 2000, preferred stock dividends and accretion of
discount decreased by approximately $489,000 as a result of restructuring the
terms of the Company's Preferred Stock on August 6, 1999. Effective as of
August 16, 1999, 8,006 shares of Preferred Stock plus accrued dividends were
retired and canceled for certain cash payments, or exchanged for shares of
common stock at the option of the holder. 872 shares of Preferred Stock with
restated terms remained outstanding at August 16, 1999. At March 31, 2000,
861 shares of Preferred Stock remained outstanding.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, because revenues generated from operations and licensing
have been insufficient to fund operations, the Company has depended for
funding principally on its stockholders, and in particular from 1989 until
February 1995 on Oren L. Benton ("Benton"), a former principal stockholder
and director and the former Chief Executive Officer of the Company, and from
1989 through 1997 on the National Electrical Benefit Fund (the "Fund"), a
principal stockholder of the Company. Benton and the Fund financed the
Company's cash flow requirements through equity investments and loans, most of
which were subsequently converted into equity.
The Company also raised funds through the private placement of convertible
preferred stock in 1993, all of which has been converted into common stock.
In 1995, the Company entered into a $12 million loan facility, bearing interest
at 12%, between the Company and the Fund. During 1999, the Company and the
Fund agreed to amend the terms of the credit facility extending the maturity
date to March 15, 2002, decreasing the interest rate to 8% and requiring the
Company to maintain certain financial ratios, as defined in the loan document.
The Company's borrowings under the Fund's credit facility, including
outstanding principal and accrued interest, totaled approximately $7.0 million
as of March 31, 2000. No additional borrowings are available to the Company
under the Amended Credit Facility. In December 1997, the Company sold
approximately $4.0 million of common stock, and in February 1998, the Company
sold approximately $17.4 million of Series A Convertible Preferred Stock, to
certain institutional investors in separate private placements in order to
obtain funds for working capital and general corporate purposes. The Company
sold approximately $5.4 million of common stock and common stock warrants in a
private placement in December 1999.
Cash and cash equivalents decreased by $1.1 million in the three months ended
March 31, 2000 to $9.5 million. The Company generated $3.8 million (net of
expenses) from the exercise of common stock warrants, which was offset by the
use of $4.6 million to fund operating activities and $.3 million for the
purchase of capital equipment and continuing investments in the Company's
intellectual property portfolio.
Receivables increased by $.8 million during the quarter to $2.5 million from
$1.7 million at the end of 1999. The increase in the receivables balance is
primarily due to outstanding license and development fees due to the Company.
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Inventories increased to $4.8 million (16%) during the period ended March 31,
2000 from $4.2 million at the end of 1999. Inventory levels increased
primarily due to increased FRAM wafer shipments from the Company's
manufacturing alliance partners during the period.
Accounts payable and accrued liabilities decreased $800,000 during the three
months ended March 31, 2000 from $4.1 million at the end of 1999 to $3.3
million at March 31, 2000. This decrease resulted primarily from payment of the
remaining accrued legal fees associated with the defense of the Company's
proprietary EDRAM patent position.
Deferred revenue decreases of $1.3 million are primarily attributable to
recognition of customer-sponsored research and development revenue, which was
earned in the three month period ended March 31, 2000.
Equipment and plant expenditures are expected to be minimal during the
remainder of 2000.
On February 29, 2000, the DFA affiliates elected to convert outstanding
principal and accrued interest totaling approximately $3,378,000 into 675,547
shares of the Company's common stock. See Note 5 - "Promissory Note,
Dimensional Fund Advisors."
During 2000, the Company will continue to receive cash relating to FRAM and
EDRAM licensing agreements for milestone achievements on existing licensing
agreements. Payments pursuant to potential new licensing agreements are
expected to create additional cash flows during 2000 and 2001. An increase in
product sales activity and customer-sponsored research and development revenues
is anticipated in 2000. Additionally, the Company expects to continue to
receive cash inflows for research and development support provided by Fujitsu
throughout 2000.
Based on the Company's capital resources as of March 31, 2000 and the expected
operating costs and cash flows from product sales and licensing revenues, the
Company expects to be able to fund its operations through year-end 2000.
The Company is currently involved in a patent interference proceeding (see
Note 9 - "Contingencies - Patent Interference Proceeding.") If the Company is
ultimately unsuccessful in these proceedings, there would be no retroactive
cash payment requirements from the Company to the junior party as a result of
such an adverse decision. While the Company cannot accurately estimate the
financial effects of such a result, the Company believes that it could,
depending on when a final non-appealable judgment is ultimately rendered,
materially adversely affect the Company's FRAM product business and operating
results and, thus, have a materially adverse effect on the Company's financial
condition as a whole.
Page-14
<PAGE>
In view of the Company's expected future working capital requirements in
connection with the design, manufacturing and sale of its FRAM and EDRAM
products, the Company's projected continuing research and development
expenditures, other operating expenditures and the results of pending patent
litigation, the Company may be required to seek additional equity or debt
financing before or soon after year-end 2000. There is no assurance, however,
that the Company will be able to obtain such financing on terms acceptable to
the Company, or at all. Any issuance of common or preferred stock to obtain
additional funding would result in further dilution of existing stockholders'
interests in Ramtron. The inability to obtain additional financing when needed
would have a material adverse effect on our business, financial condition and
operating results and could adversely affect the Company's ability to continue
our business operations.
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 typically
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 all of 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 could be
materially adversely affected.
YEAR 2000 COMPLIANCE
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 in the year 2000 or prior. 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.
Page-15
<PAGE>
Throughout 1999 the Company maintained an active Year 2000 program to update
and replace software and hardware that it determined would be effected by the
date change in the year 2000 and to monitor the remediation progress of all
critical suppliers. All remediation efforts were completed prior to December
1999. The Company did not experience any material interruption of business as
a result of year 2000 date changes.
MARKET RISK
There have been no material changes in market risk related to the Company's
financial instruments since December 31, 1999.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
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 five 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. On February 2, 2000 the Court of Appeals vacated and
remanded the decision of the Patent Office for further proceedings. The
Company also filed complaints in Federal District Court in the District of
Columbia seeking a review of the decision of the Patent Office on the remaining
interference counts, which are still pending. 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.
ITEMS 2 - 5 NONE
ITEM 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
On February 18, 2000, the Registrant filed a report on Form 8-K. The item
reported were Item 5 - "Other Events" and Item 7 - "Financial Statements
and Exhibits."
On March 17, 2000, the Registrant filed a report on Form 8-K. The item
reported were Item 5 - "Other Events" and Item 7 - "Financial Statements
and Exhibits."
Page-16
<PAGE>
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)
May 12, 2000 /S/ LuAnn D. Hanson
-------------------------
LuAnn D. Hanson
Acting Chief Financial Officer
(Principal Accounting Officer)
Page-17
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