RAMTRON INTERNATIONAL CORP - FORM 10-Q

Attached files

Attached files

Stock widget

Investing forum

RAMTRON INTERNATIONAL CORP Reports

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

file	filename
EXCEL - IDEA: XBRL DOCUMENT - RAMTRON INTERNATIONAL CORP	Financial_Report.xls
EX-32.1 - CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 OF PRINCIPAL EXECUTIVE OFFICER - RAMTRON INTERNATIONAL CORP	dex321.htm
EX-31.1 - RULE 13A-14(A)/15D-14(A) CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER - RAMTRON INTERNATIONAL CORP	dex311.htm
EX-32.2 - CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 OF PRINCIPAL FINANCIAL OFFICER - RAMTRON INTERNATIONAL CORP	dex322.htm
EX-31.2 - RULE 13A-14(A)/15D-14(A) CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER - RAMTRON INTERNATIONAL CORP	dex312.htm

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 June 30, 2011

¨	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

LOGO

RAMTRON INTERNATIONAL CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

84-0962308

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

Indicate the number of shares of the issuer’s outstanding common stock, as of the latest practicable date:


28,856,130 shares		As of July 22, 2011
Common Stock, $0.01 par value

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION


		Page
Item 1 -	Financial Statements:		3

	Consolidated Balance Sheets as of June 30, 2011 and December 31, 2010		3

	Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Six Months ended June 30, 2011 and 2010		4

	Consolidated Statement of Stockholders’ Equity for the Six Months ended June 30, 2011		5

	Consolidated Statements of Cash Flows for the Six Months ended June 30, 2011 and 2010		6

	Notes to Financial Statements		7

Item 2 -	Management’s Discussion and Analysis of Financial Condition and Results of Operations		15

Item 4 -	Controls and Procedures		23

PART II - OTHER INFORMATION

Item 1-	Legal Proceedings		24

Item 1A -	Risk Factors		24

Item 2 -	Unregistered Sales of Equity Securities and Use of Proceeds		32

Item 6 -	Exhibits		32

PART I - FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

RAMTRON INTERNATIONAL CORPORATION

CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2011 AND DECEMBER 31, 2010

(Amounts in thousands, except par value and share amounts)


	June 30, 2011			December 31, 2010
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	3,273		$	9,945
Accounts receivable, less allowances of $977 and $1,814, respectively		10,416			9,910
Inventories		10,705			5,412
Deferred income taxes, net		175			368
Other current assets		1,690			2,332

Total current assets		26,259			27,967

Property, plant and equipment, net		22,354			21,170
Intangible assets, net		2,736			2,746
Long-term deferred income taxes, net		6,397			4,551
Other assets		392			398

Total assets	$	58,138		$	56,832

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	8,582		$	5,995
Accrued liabilities		2,227			1,843
Deferred revenue		251			564
Current portion of long-term debt		3,452			3,284
Line of credit		1,500			—

Total current liabilities		16,012			11,686
Other long-term liabilities		210			218
Deferred revenue		—			6
Long-term debt, less current portion		6,961			8,924


Total liabilities		23,183			20,834

Contingencies (Note 5)

Stockholders’ equity:
Preferred stock, $.01 par value, 10,000,000 shares authorized: 0 shares issued and outstanding		—			—
Common stock, $.01 par value, 50,000,000 shares authorized: 28,442,387 and 27,539,562 shares issued and outstanding, respectively		284			275
Additional paid-in capital		255,311			253,280
Accumulated other comprehensive loss		(366	)		(345	)
Accumulated deficit		(220,274	)		(217,212	)

Total stockholders’ equity		34,955			35,998

Total liabilities and stockholders’ equity	$	58,138		$	56,832

See accompanying notes to consolidated financial statements.

RAMTRON INTERNATIONAL CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011 AND 2010

(Unaudited)

(Amounts in thousands, except per share amounts)


	Three Months Ended June 30, 2011			Three Months Ended June 30, 2010			Six Months Ended June 30, 2011			Six Months Ended June 30, 2010
Revenue:
Product sales	$	16,581		$	18,165		$	27,046		$	33,834
License and development fees		179			179			358			358

		16,760			18,344			27,404			34,192


Costs and expenses:
Cost of product sales		8,854			9,251			14,315			16,817
Research and development		4,234			4,285			8,767			7,809
Sales and marketing		2,605			2,244			4,665			4,292
General and administrative		1,826			1,868			3,880			3,673

		17,519			17,648			31,627			32,591


Operating income (loss)		(759	)		696			(4,223	)		1,601
Interest expense		(206	)		(174	)		(420	)		(329	)
Other income (expense), net		12			45			(44	)		(21	)

Income (loss) before income tax (provision) benefit		(953	)		567			(4,687	)		1,251
Income tax (provision) benefit		270			(210	)		1,625			(479	)

Net income (loss)	$	(683	)	$	357		$	(3,062	)	$	772


Other comprehensive (loss), net of tax:
Foreign currency translation adjustments		(13	)		(12	)		(21	)		(24	)

Comprehensive income (loss)	$	(696	)	$	345		$	(3,083	)	$	748


Net income (loss) per share:
Basic and diluted	$	(0.02	)	$	0.01		$	(0.11	)	$	0.03

Weighted average shares outstanding:
Basic		27,964			27,072			27,714			27,034

Diluted		27,964			28,022			27,714			27,685

See accompanying notes to consolidated financial statements.

RAMTRON INTERNATIONAL CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2011

(in thousands, except par value amounts)

(Unaudited)


	Common Stock ($.01 Par Value)
	Shares		Amount		Additional Paid-in Capital			Accumulated Other Comprehensive (Loss)			Accumulated Deficit			Stockholders’ Equity
Balances, December 31, 2010		27,539	$	275	$	253,280		$	(345	)	$	(217,212	)	$	35,998
Exercise of options		663		7		1,308									1,315
Stock-based compensation expense						788									788
Issuance of restricted stock		240		2		(65	)								(63	)
Foreign currency translation adjustments									(21	)					(21	)
Net loss												(3,062	)		(3,062	)

Balances, June 30, 2011		28,442	$	284	$	255,311		$	(366	)	$	(220,274	)	$	34,955

See accompanying notes to consolidated financial statements.

RAMTRON INTERNATIONAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2011 AND 2010

(Unaudited)

(Amounts in thousands)


	June 30, 2011			June 30, 2010
Cash flows from operating activities:
Net income (loss)	$	(3,062	)	$	772
Adjustments used to reconcile net income to net cash used in operating activities:
Depreciation		1,029			894
Amortization		126			125
Bad debt recovery		(28	)		(107	)
Stock-based compensation		788			819
Deferred income taxes		(1,653	)		460
Imputed interest on note payable		19			24
Inventory write-off and scrap		531			568

Changes in assets and liabilities:
Accounts receivable		(478	)		(2,421	)
Inventories		(5,824	)		(685	)
Accounts payable and accrued liabilities		3,520			3,489
Deferred revenue		(319	)		(316	)
Other		640			(827	)

Net cash (used in) provided by operating activities		(4,711	)		2,795


Cash flows from investing activities:
Purchase of property, plant and equipment		(2,762	)		(2,976	)
Purchase of intellectual property		(116	)		(75	)

Net cash used in investing activities		(2,878	)		(3,051	)


Cash flows from financing activities:
Proceeds from line of credit		1,500			2,000
Payments on line of credit		—			(2,000	)
Proceeds from long term debt		—			6,000
Principal payments on long term debt		(1,812	)		(900	)
Issuance of common stock		1,252			199

Net cash provided by financing activities		940			5,299


Effect of foreign currency		(23	)		(25	)

Net increase (decrease) in cash and cash equivalents		(6,672	)		5,018

Cash and cash equivalents, beginning of period		9,945			7,541

Cash and cash equivalents, end of period	$	3,273		$	12,559

Supplemental disclosure of cash flow information:
Cash paid for interest	$	432		$	332

Cash paid for income taxes	$	70		$	25

Property, plant and equipment financed by capital leases		—		$	1,400

See accompanying notes to consolidated financial statements.

RAMTRON INTERNATIONAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business. We are a fabless semiconductor company that designs, develops and markets specialized semiconductor memory, microcontroller, and integrated semiconductor solutions, used in many markets for a wide range of applications. We pioneered the integration of ferroelectric materials into semiconductor products, which enabled the development of a new class of nonvolatile memory, called ferroelectric random access memory (F-RAM). F-RAM products merge the advantages of multiple memory technologies into a single device that retains information without a power source, can be read from and written to at very fast speeds, written to many times, consumes low amounts of power, and can simplify the design of electronic systems. In many cases, we are the sole provider of F-RAM enabled semiconductor products, which facilitates close customer relationships, long application lifecycles and the potential for high-margin sales.

We also integrate wireless communication capabilities as well as analog and mixed-signal functions such as microprocessor supervision, tamper detection, timekeeping, and power failure detection into our devices. This has enabled new classes of products that address the growing market need for more functional, efficient and cost effective semiconductor products.

Our revenue is derived from the sale of our products and from license, development and royalty arrangements entered into with a limited number of established semiconductor manufacturers involving the development and sale of specific applications and products of the Company’s technologies. Product sales have been made to various customers for use in a variety of applications including utility meters, office equipment, automobiles, electronics, telecommunications, disk array controllers, and industrial control devices, among others.

The accompanying unaudited, interim consolidated financial statements at June 30, 2011 and for the three and six months ended June 30, 2011 and 2010, and the audited balance sheet at December 31, 2010 have been prepared from the books and records of Ramtron International Corporation (the “Company,” “we,” “our,” or “us”).

The preparation of our consolidated financial statements and related disclosures in conformity with generally accepted accounting principles in the United States requires us to make estimates and judgments that affect the amounts reported in our financial statements and accompanying notes. Examples include the estimate of useful lives of our property, plant and equipment, and intellectual property costs, valuation allowances associated with our deferred tax assets, valuation allowance for sales returns associated primarily with our sales to distributors, fair value estimates used in our intangible asset impairment tests, and the valuation of stock-based compensation. The statements reflect all normal recurring adjustments, which, in the opinion of the Company’s management, are necessary for the fair presentation of financial position, results of operations and cash flows for the periods presented.

The accompanying financial statements should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2010, which includes all disclosures required by GAAP. The results of operations for the period ended June 30, 2011 are not necessarily indicative of expected operating results for the full year.

Certain amounts reported in prior periods have been reclassified to conform to the current presentation.

NOTE 2. INVENTORIES

Inventories consist of:


(in thousands)	June 30, 2011		December 31, 2010
Finished goods	$	1,223	$	733
Work in process		9,482		4,679

	$	10,705	$	5,412

NOTE 3. OTHER CONSOLIDATED FINANCIAL STATEMENT DETAIL

Other Current Assets consist of:


(in thousands)	June 30, 2011		December 31, 2010
Prepaid expenses	$	1,121	$	1,604
Supplies inventory		435		353
Income tax receivable		122		334
Other		12		41

Total	$	1,690	$	2,332

Accrued Liabilities consist of:


(in thousands)	June 30, 2011		December 31, 2010
Accrued property taxes	$	116	$	196
Severance-related liabilities		346		—
Compensation-related liabilities		1,230		1,204
Other		535		443

Total	$	2,227	$	1,843

NOTE 4. SIGNIFICANT CUSTOMERS

For the six months ending June 30, 2011 and June 30, 2010, sales for our largest distributors and direct customers are as follows:


	Percentage of Company Total
	Six Months Ending June 30, 2011			Six Months Ending June 30, 2010
Customer A		14	%		7	%
Customer B		10	%		4	%

NOTE 5. CONTINGENCIES

Our industry is characterized by the existence of a large number of patents and frequent claims and related litigation regarding patents and other intellectual property rights. We cannot be certain that third parties will not make a claim of infringement against us or against our semiconductor company licensees in connection with their use of our technology. Any claims, even those without merit, could be time consuming to defend, result in costly litigation and diversion of technical and management personnel, or require us to enter into royalty or licensing agreements. These royalty or licensing agreements, if required, may not be available to us on acceptable terms or at all. A successful claim of infringement against us or one of its semiconductor manufacturing licensees in connection with use of our technology could materially impact the Company’s results of operations.

In June 2009, the Company received a summons by the trustee in the bankruptcy of Finmek S.p.A. and its affiliates (Finmek) to appear before the Padua Court in Italy (the Court overseeing the bankruptcy proceedings of Finmek). The claims of the trustee in bankruptcy are that payments totaling approximately $2.8 million made to the Company for products shipped to Finmek prior to its bankruptcy filing in May 2004 are recoverable based on an alleged awareness of Finmek’s insolvency at the time the payments were made. After the first hearing held in 2010 and the second hearing in 2011, in 2013 all parties will submit their final motions. We intend to vigorously contest the trustee’s claims. We are unable to estimate a range of possible liability, if any, that we may incur as result of the trustee’s claims and have not recorded any expense or liability in the consolidated financial statements as of June 30, 2011.

The Company is involved in other legal matters in the ordinary course of business. Although the outcomes of any such legal actions cannot be predicted, management believes that there are no pending legal proceedings against or involving the Company for which the outcome would likely to have a material adverse effect upon the Company’s financial position or results of operations.

NOTE 6. LONG-TERM DEBT


(in thousands)	June 30, 2011			December 31, 2010
Long-term debt:
Capital leases	$	1,933		$	2,674
National Semiconductor promissory note		465			697
Mortgage note		3,515			3,587
Term loan		4,500			5,250

		10,413			12,208

Long-term debt current maturities		(3,452	)		(3,284	)

Long-term debt less total current portion	$	6,961		$	8,924

On June 28, 2010, the Company and Silicon Valley Bank (SVB) executed a Second Amendment (“Amendment”) to the Company’s Amended Loan Agreement dated August 18, 2009. The Amendment provides for a $6.0 million term loan with a fixed interest rate of 6.5% per annum. The term of the loan is four years with fixed principal payments of $125,000 per month plus accrued interest. We paid a one-time commitment fee of $60,000 at signing. We have used the proceeds from our term loan facility for working capital and to fund our capital requirements.

During June, 2011, the Company and SVB determined that the Company was not in compliance with its liquidity ratio covenant for the months of April and May of 2011. As a result, on June 30, 2011 the Company and SVB executed a Default Waiver and Fifth Amendment to the Company’s Amended Loan Agreement dated August 18, 2009 (“Fifth Amendment”). SVB waived compliance with the liquidity ratio covenant for the months of April and May and adjusted the minimum liquidity ratio and EBITDA covenants. As of June 30, 2011, the Company was in compliance with such covenants which will be measured on a monthly basis through October 31, 2011. The expiration date of our revolving line of credit was extended from August 18, 2011 to October 31, 2011. The Fifth Amendment also provides for an increase in the working capital line of credit from $6.0 million to $7.5 million, a reduction of the letter of credit, foreign exchange and cash management services sublimits to $1,750,000, and a reduction of the borrowing base to be 50% of the outstanding balance of the Company’s existing term loan. In connection with the Fifth Amendment, the Company also replaced its existing Export-Import (EX-IM) Loan Agreement with a new EX-IM Loan Agreement that will guarantee advances of eligible foreign accounts. The Company’s borrowing base associated with EX-IM guarantee is the lessor of $7.5 million or up to 90% of EX-IM foreign accounts that are payable in US dollars, plus up to 65% of EX-IM eligible inventory. The Company paid a fee of $20,000 in connection with the Fifth Amendment.

At June 30, 2011 the Company had $1.5 million outstanding under its secured line of credit facility and a remaining availability of $3.0 million under this line of credit.

The Company entered into four capital leases during 2009 and 2010 totaling approximately $4.3 million with terms between two and three years with effective interest rates between 9% and 10%. We currently have three leases outstanding with a book value of $1.9 million and standby letters of credit in favor of two of the lessors for approximately $1.25 million.

In April 2004, we entered into a patent interference settlement agreement with National Semiconductor Corporation. The Company is required to pay National Semiconductor Corporation $250,000 annually through 2013. As of June 30, 2011, the present value of this promissory note is $465,000. We recorded this note at the discounted present value assuming an annualized discount rate of 5.75%. The face value of this note as of June 30, 2011 was $500,000.

On December 15, 2005, the Company, through its subsidiary, Ramtron LLC, for which Ramtron International Corporation serves as sole member and sole manager, closed on its mortgage loan facility with American National Insurance Company. Ramtron LLC entered into a promissory note evidencing the loan with the principal amount of $4,200,000, with a maturity date of January 1, 2016, bearing interest at 6.17%. We are obligated to make monthly principal and interest payments of $30,500 until January 2016 and a balloon payment of $2,757,000 in January 2016. Ramtron LLC also entered into an agreement for the benefit of American National Insurance Company securing our real estate as collateral for the mortgage loan facility.

Payments of our outstanding promissory notes and leases are as follows as of June 30, 2011:


(in thousands)	2011		2012		2013		2014		2015		Thereafter		Total
Term loan	$	750	$	1,500	$	1,500	$	750	$	—	$	—	$	4,500
National Semiconductor promissory note		—		250		250		—		—		—		500
Mortgage note		77		158		168		179		190		2,743		3,515
Capital leases		724		1,340		—		—		—		—		2,064
Less amount representing interest on the capital leases and promissory note														(166	)

Total debt													$	10,413

The carrying amounts and estimated fair values of our long-term debt, which are our only material financial instruments, are as follows:


	June 30, 2011				December 31, 2010
(in thousands)	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Term loan	$	4,500	$	4,503	$	5,250	$	5,244
National Semiconductor promissory note		465		457		697		685
Capital leases		1,933		1,978		2,674		2,747
Mortgage note		3,515		3,450		3,587		3,500

	$	10,413	$	10,388	$	12,208	$	12,176

The above fair values were estimated based on discounted future cash flows. Differences from carrying amounts are attributable to interest rate changes subsequent to when the transactions occurred.

NOTE 7. STOCK-BASED COMPENSATION

Stock-based Compensation Plans

We grant stock options and restricted stock under the 2005 Incentive Award Plan (as amended, the “2005 Plan”). The previous and expired 1995 Stock Option Plan (the “1995 Plan”) and 1999 Stock Option Plan, as amended, are only relevant to grants outstanding under these plans or in respect of the 1995 Stock Option Plan, forfeitures that increase the available shares under the 2005 Plan. The 2005 Plan reserves a total of 6,603,544 shares of our common stock for issuance, of which 1,603,544 shares were incorporated from our 1995 Plan. The additional shares from the 1995 Plan were incorporated into the 2005 Plan because the shares had not been issued, were subject to awards under the 1995 Plan that had expired, or were forfeited or became unexercisable for any reason. In accordance with the terms of the 2005 Plan, the shares were carried forward to and included in the reserve of shares available for issuance pursuant to the 2005 Plan. The exercise price of all non-qualified stock options must be no less than 100% of the Fair Market Value on the effective date of the grant under the 2005 Plan, and the maximum term of each grant is ten years. The 2005 Plan permits the issuance of incentive stock options, the issuance of restricted stock, and other types of awards. The exercise of stock options and issuance of restricted stock and restricted stock units is satisfied by issuing authorized unissued common stock or treasury stock. As of June 30, 2011, we had not granted any incentive stock options.

The number of shares available for future grant under the 2005 Plan was 1,398,045 as of June 30, 2011.

Total stock-based compensation recognized in our consolidated statement of income was as follows:


(in thousands)	Three Months Ended June 30, 2011		Three Months Ended June 30, 2010		Six Months Ended June 30, 2011		Six Months Ended June 30, 2010
Income Statement Classifications:
Cost of Product Sales	$	38	$	26	$	73	$	51
Research and development		125		90		208		180
Sales and marketing		82		66		164		127
General and administrative		196		227		343		461

Total	$	441	$	409	$	788	$	819

Stock Options

Stock options granted become exercisable in installments pursuant to the terms of each agreement evidencing options granted. As of June 30, 2011, there was approximately $1,052,000 of unrecognized compensation cost, adjusted for estimated forfeitures, related to non-vested options granted to our employees and directors, which will be recognized over a weighted-average period of 2.6 years. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures.

For grants issued during 2011, the fair value for stock options was estimated at the date of grant using the Black-Scholes option pricing model, which requires management to make certain assumptions. Expected volatility was estimated based on the historical volatility of our stock over the past 6 years, which approximates the calculated expected term of our options over the past 10 years, a period we considered a fair indicator of future exercises. We based the risk-free interest rate that we use in the option valuation model on U.S. Treasury Notes with remaining terms similar to the expected terms on the options. Forfeitures are estimated at the time of grant based upon historical experience. We do not anticipate paying any cash dividends in the foreseeable future and therefore use an expected dividend yield of zero in the option pricing model.

The assumptions used to value option grants for the quarter ended June 30, 2011 are as follows:


Risk free interest rate		2.2%
Expected dividend yield		0%
Expected term (in years)		5.5 yrs
Expected volatility		68%

The weighted average fair value per share of options granted during the six months ended June 30, 2011 and 2010 were $2.17 and $1.26, respectively.

The following table summarizes stock option activity related to our plans for the six months ended June 30, 2011:


	Number of Stock Options			Weighted Average Exercise Price Per Share
	(in thousands)
Outstanding at December 31, 2010		5,758		$	2.90
Granted		436		$	2.80
Forfeited		(440	)	$	2.33
Exercised		(663	)	$	1.95
Expired		(821	)	$	4.02

Outstanding at June 30, 2011		4,270		$	2.89

The intrinsic value of the outstanding options at June 30, 2011 was $1.8 million and was calculated as the difference between the market value as of June 30, 2011 and the exercise price of the options. The closing market value as of June 30, 2011 was $2.98 as reported by the Nasdaq Global Market.

Cash received from option exercises for the six months ended June 30, 2011 was approximately $1.3 million.

Restricted Stock

Restricted stock grants generally vest one to four years from the date of grant. No exercise price or cash payment is required for the release of the restricted stock. The fair value of the Company’s common stock at the time of grant is amortized to expense on a straight-line basis over the vesting period. As of June 30, 2011, there was approximately $600,000 of unrecognized compensation cost related to non-vested restricted shares, which will be recognized over a weighted-average period of 1.1 years.

A summary of non-vested restricted shares during the six months ended June 30, 2011 are as follows:


	Number of Restricted Shares			Weighted Average Grant Date Fair Value Per Share
	(in thousands)
Outstanding at December 31, 2010		191		$	1.70
Granted		425		$	2.53
Forfeited		(166	)	$	2.02
Vested/Released		(58	)	$	2.18

Outstanding at June 30, 2011		392		$	2.40

Restricted Stock Units

Restricted stock units represent rights to receive shares of common stock at a future date. No exercise price or cash payment is required for receipt of restricted stock units or the shares issued in settlement of the award. The fair value of the Company’s common stock at the time of the grant is amortized to expense on a straight-line basis over the vesting period.

A summary of the Company’s restricted stock units as of June 30, 2011 are as follows:


(in thousands)	Number of Restricted Units			Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at December 31, 2010		143
Grants		235
Forfeited		(36	)
Vested/Released		—

Outstanding at June 30, 2011		342			1.3	$	1,018

As of June 30, 2011, there was approximately $700,000 remaining in unrecognized compensation cost related to unvested outstanding restricted stock units with a weighted-average recognition period of 2.1 years.

NOTE 8. INCOME TAXES

The Company accounts for income taxes using the asset and liability method of accounting for deferred income taxes. Deferred tax assets and liabilities are recognized for the future tax consequence attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis, operating losses and tax credit carryforwards.

A valuation allowance is required to the extent it is more likely than not that a deferred tax asset will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date.

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the projected future taxable income and tax planning strategies in making this assessment.

For the six months ended June 30, 2011, the Company incurred an operating loss and recorded a $1,625,000 income tax benefit. The benefit recorded was a non-cash transaction.

For the six months ended June 30, 2011, the Company’s effective income tax rate was approximately 35%, as the Company’s non-deductible items had a minimal impact to the effective tax rate.

Any significant increase or reduction in estimated future taxable income may require the Company to record additional adjustments to the valuation allowance against the remaining deferred tax assets. Any increase or decrease in the valuation allowance would result in additional or lower income tax expense in such period and could have a significant impact on the period’s earnings.

NOTE 9. EARNINGS PER SHARE

Basic net income (loss) per share is computed by dividing reported net income (loss) available to common stockholders by weighted average shares outstanding. Diluted net income per share reflects the potential dilution assuming the issuance of common shares for all dilutive potential common shares outstanding during the period.

The following table sets forth the calculation of net income (loss) per common share for the three and six months ended June 30, 2011 and 2010:


(in thousands, except per share amounts)	Three Months Ended June 30, 2011			Three Months Ended June 30, 2010			Six Months Ended June 30, 2011			Six Months Ended June 30, 2010
Net income (loss)	$	(683	)	$	357		$	(3,062	)	$	772


Common shares outstanding:
Historical common shares outstanding at beginning of period		28,107			27,344			27,540			27,170
Less: Non-vested restricted stock at beginning of period		(432	)		(282	)		(191	)		(232	)
Weighted average common shares issued during period		289			10			365			96

Weighted average common shares at end of period - basic		27,964			27,072			27,714			27,034


Effect of other dilutive securities:
Options		—			674			—			418
Restricted stock		—			276			—			233

Weighted average common shares at end of period - diluted		27,964			28,022			27,714			27,685


Net income (loss) per share:
- basic and diluted	$	(0.02	)	$	0.01		$	(0.11	)	$	0.03

As of June 30, 2011 and June 30, 2010, we had several equity instruments or obligations that could create future dilution to the Company’s common stockholders and are not currently classified as outstanding common shares of the Company. The following table details the shares of common stock that are excluded from the calculation of earnings per share (prior to the application of the treasury stock method) due to their impact being anti-dilutive:


(in thousands)	Three Months Ended June 30, 2011		Three Months Ended June 30, 2010		Six Months Ended June 30, 2011		Six Months Ended June 30, 2010
Stock Options		4,270		3,368		4,270		3,430
Restricted stock/units		734		—		734		—

NOTE 10. SEGMENT INFORMATION

Our continuing operations are conducted through one business segment. Our business develops, manufactures and sells ferroelectric nonvolatile random access memory products, microcontrollers, integrated products, and licenses the technology related to such products.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS; FACTORS AFFECTING FUTURE RESULTS

The following discussion and analysis should be read in conjunction with our consolidated financial statements and notes thereto and other financial data included elsewhere herein. Certain statements under this caption constitute “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, and, as such, are based on current expectations and are subject to certain risks and uncertainties. You should not place undue reliance on these forward-looking statements for many reasons including those risks discussed under Part II- Item 1A “Risk Factors,” and elsewhere in our Quarterly Report on Form 10-Q, and in our Annual Report on Form 10-K for the year ended December 31, 2010. Forward-looking statements may be identified by the use of forward-looking words or phrases such as “will,” “may,” “believe,” “expect,” “intend,” “anticipate,” “could,” “should,” “plan,” “estimate,” and “potential,” or other similar words.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Significant Estimates. The preparation of our consolidated financial statements and related disclosures in conformity with generally accepted accounting principles in the United States requires us to make estimates and judgments that affect the amounts reported in our financial statements and accompanying notes. By their nature, these estimates and judgments are subject to an inherent degree of uncertainty. On an ongoing basis, we re-evaluate our judgments and estimates including those related to bad debts and sales returns and allowances, inventories, long-lived assets, intangible assets, income taxes, accrued expenses, stock compensation accruals, and other contingencies. We base our estimates and judgments on our historical experience, market trends, financial forecasts and projections and on other assumptions that we believe are reasonable under the circumstances, and apply them on a consistent basis. Any factual errors or errors in these estimates and judgments may have a material impact on our financial condition and operating results.

Recognition of Revenue. Revenue from product sales to direct customers and distributors is recognized upon shipment as we generally do not have any post-shipment obligations and allow limited rights of return to certain customers. In the event a situation occurs to create a post-shipment obligation, we would defer revenue recognition until the specific obligation was satisfied. We defer recognition of sales to distributors when we are unable to make a reasonable estimate of product returns due to insufficient historical product return information. The revenue recorded is dependent upon estimates of expected customer returns and sales discounts based upon both historical data and management estimates.

Revenue from licensing programs is recognized over the period we are required to provide services under the terms of the agreement. Revenue from royalties is recognized upon the notification to us of shipment of product from our technology license partners to direct customers.

Inventory Valuation/Scrap. We write-down our inventory, with a resulting increase in our scrap expense, for estimated obsolescence or lack of marketability for the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required.

Allowance for Doubtful Accounts and Returns. We seek to maintain a stringent credit approval process although our management must make significant judgments in assessing our customers’ ability to pay at the time of shipment. Despite this assessment, from time to time, customers are unable to meet their payment obligations. If we are aware of a customer’s inability to meet its financial obligations to us, we record an allowance to reduce the receivable to the amount we believe we will be able to collect from the customer. For all other customers, we record an allowance based upon the amount of time the receivables are past due and collection attempts. If actual accounts receivable collections differ from these estimates, an adjustment to the allowance may be necessary with a resulting effect on operating expense. We continue to monitor customers’ credit worthiness, and use judgment in establishing the estimated amounts of customer receivables which will ultimately not be collected.

An allowance for sales returns is established based on historical and current trends in product returns and customer rebates. Our distributors have a right to return products under certain conditions. We recognize revenue on shipments to distributors at the time of shipment, along with a reserve for estimated returns based on historical data and future estimates. Also, certain distributors are granted rebates if specific end customers purchase our products.

Deferred Income Taxes. As part of the process of preparing our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, we are required to estimate our income taxes on a consolidated basis. We record deferred tax assets and liabilities for the estimated future tax effects of temporary differences between the tax basis of assets and liabilities and amounts recorded in the consolidated financial statements, and for operating loss and tax credit carryforwards. Realization of the recorded deferred tax assets depends upon the generation of sufficient taxable income in future years to obtain benefit from the reversal of net deductible temporary differences and from tax credit and operating loss carryforwards. A valuation allowance is provided to the extent that management deems it more likely than not that the net deferred tax assets will not be realized. The amount of deferred tax assets considered realizable is subject to adjustment up or down in future periods if estimates of future taxable income are changed. Future adjustments could materially affect our financial results as reported in conformity with accounting principles generally accepted in the United States of America and could cause us not to achieve our projected results.

In assessing the potential to realize our deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. We consider the scheduled reversal of deferred tax assets and liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that we will realize the benefits of these deductible differences. The amount of the deferred tax assets considered realizable, however, could be reduced if estimates of future taxable income during the carryforward period are reduced.

Long-lived Assets. We review the carrying values of long-lived assets whenever events or changes in circumstances indicate that such carrying values may not be recoverable. Under current standards, the assets must be carried at historical cost if the projected cash flows from their use will recover their carrying amounts on an undiscounted basis and without considering interest. However, if projected cash flows are less than their carrying value, the long-lived assets must be reduced to their estimated fair value. Considerable judgment is required to project such cash flows and, if required, estimate the fair value of the impaired long-lived asset. The estimated future cash flows are based upon, among other things, assumptions about expected future operating performance and may differ from actual cash flows. There can be no assurance that future long-lived asset impairments will not occur.

Share-based Payment Assumptions. We estimate volatility, forfeitures, and expected term of our options granted based upon historical data. All of these variables have an effect on the estimated fair value of our share-based awards.

RESULTS OF OPERATIONS

Business Highlights for the Three Months Ended June 30, 2011

•

During the second quarter of 2011, the Company’s revenue grew as wafer production and test capacity increased. As a result of securing increased manufacturing capacity, the Company expects to fully resolve its supply constraints before the end of 2011.

•

Taiwan-based King Yuan Electronics Co., LTD (KYEC) was selected to expand the test capacity for the Company’s line of F-RAM products.

•

In April 2011, the Company appointed Mark R. Kent to Chief Financial Officer, bringing nearly 30 years of finance experience with a strong track record of financial leadership in semiconductor companies.

Product Highlights for the Three Months Ended June 30, 2011

•

The Company’s customers began sampling the first pre-qualification ferroelectric random access memory (F-RAM) devices built at the Company’s new wafer source at IBM Corporation.

•

Upgrades were announced to the Company’s family of Processor Companion products targeted at the high-volume, processor-based electronics system market.

•

The Company continues to sample MaxArias wireless memory to customers and is beginning to receive prototype application orders for the product.

Financial Highlights for the Three Months Ended June 30, 2011

•

Total revenue for the three months ended June 30, 2011 was $16.8 million, which was a decrease of 9% from $18.3 million in the three months ended June 30, 2010.

•

Net loss was $683,000, or $(0.02) per share, for the three months ended June 30, 2011, compared with net income of $357,000, or $0.01 per share, for the three months ended June 30, 2010.

•

Product gross margin for the three months ended June 30, 2011 was 47%, which was 2 percentage points lower than a gross margin of 49% for the three months ended June 30, 2010.

•

The Company secured a default waiver and amendment to its amended loan agreement which includes an increase in the Company’s secured line of credit and a new Export-Import loan agreement which guarantees advances made on eligible foreign accounts.

Financial Highlights for the Six Months Ended June 30, 2011

•

Total revenue for the six months ended June 30, 2011 was $27.4 million, which was a decrease of 20% from $34.2 million in the six months ended June 30, 2010.

•

Net loss was $3.1 million, or $(0.11) per share, for the six months ended June 30, 2011, compared with net income of $772,000, or $0.03 per share, for the six months ended June 30, 2010.

•

Product gross margin for the six months ended June 30, 2011 was 47%, which was 3 percentage points lower than a gross margin of 50% for the six months ended June 30, 2010.

Business Outlook for 2011

With the continued easing of supply constraints, we believe we will achieve our previously disclosed full-year total revenue guidance of between $65 million and $70 million for the year. However, during the second half of the year, we plan to bolster our engineering to support our capacity ramp and accelerate product development, which we expect will negatively impact our earnings. As a result, we are projecting a net loss of up to $0.04 per share for the second half of 2011.

During the remainder of 2011, management plans to:

•

Invest profits in additional engineering to expedite our product development timeline and increase customer design-in activity.

•

Hire a worldwide sales executive.

•

Complete the transition to our new wafer foundry at IBM, in connection with our new foundry initiative.

•

Secure increased product test capacity to support the increased wafer volume from our foundries.

•

Introduce ultra-low power devices that will use a fraction of the active energy used by products of our competitors.

•

Begin selling the first production devices in our family of MaxArias wireless memory products.

PERIOD COMPARISONS FOR THE

THREE AND SIX MONTHS ENDED JUNE 30, 2011 AND 2010

Revenue


(in thousands, except average selling price)	Three Months Ended June 30, 2011				Three Months Ended June 30, 2010		Six Months Ended June 30, 2011				Six Months Ended June 30, 2010
Product sales	$	16,581			$	18,165	$	27,046			$	33,834
% change compared to prior period			(9	%)					(20	%)
Units shipped		15,974				19,625		25,114				39,035
% change compared to prior period			(19	%)					(36	%)
Average selling price	$	1.04			$	0.92	$	1.07			$	0.87
% change compared to prior period			13	%					23	%
Other revenue	$	179			$	179	$	358			$	358
% change compared to prior period			0	%					0	%
Total revenue	$	16,670			$	18,344	$	27,404			$	34,192
% change compared to prior period			(9	%)					(20	%)

Three Months:

Product revenue decreased $1.6 million, or 9%, for the three months ended June 30, 2011 compared to the prior year period. This decrease was due to a 3.7 million unit decrease in shipments compared to the prior year quarter as a result of supply constraints. Our units shipped increased from the first quarter of 2011 by 6.8 million units.

Other revenue, consisting of license and development fees, was $179,000 for the quarter ended June 30, 2011, which was unchanged from the quarter ended June 30, 2010. This revenue was in connection with a license fee that will terminate in the middle of the quarter ending December 31, 2011.

Six Months:

Product revenue decreased $6.8 million, or 20%, for the six months ended June 30, 2011 compared to the same period last year. This decrease was due to a 13.9 million unit decrease in shipments as a result of supply constraints during the six months ended June 30, 2011. Higher than anticipated demand for our products put a strain on our capacity ahead of being able to move production to our new foundry at IBM. As a result, we designed replacement products to be produced at our established wafer foundry at Texas Instruments. We are presently working to increase our wafer capacity at our established foundry while we work to establish a commercial manufacturing process at our new foundry.

Other revenue, consisting of license and development fees, was $358,000, which was unchanged from the six month period ending June 30, 2010.

Cost of Product Sales


(in thousands)	Three Months Ended June 30, 2011			Three Months Ended June 30, 2010			Six Months Ended June 30, 2011			Six Months Ended June 30, 2010
Cost of product sales	$	8,854		$	9,251		$	14,315		$	16,817
Gross margin percentage		47	%		49	%		47	%		50	%

Three Months:

Cost of product sales was $8.9 million, which was a decrease of $400,000 from the same period in 2010. This decrease was due to a $1.6 million decrease in product sales. Gross product margin decreased to 47%, compared with 49% for the same period last year. The decrease in product gross margin was due primarily to product mix, as well as new products, which at this stage have lower yields and increased test costs.

Six Months:

Cost of product sales was $14.3 million, which was a decrease of $2.5 million from 2010. This decrease was due to a $6.8 million decrease in product sales. Product gross margin decreased by 3% to 47%, compared with 50% for the same period last year. The decrease in product gross margin was due primarily to product mix, as well as new products, which at this stage have lower yields and increased test costs.

Research and Development Expense


(in thousands)	Three Months Ended June 30, 2011			Three Months Ended June 30, 2010			Six Months Ended June 30, 2011			Six Months Ended June 30, 2010
Research and development expense	$	4,234		$	4,285		$	8,767		$	7,809
Percent of total revenue		25	%		23	%		32	%		23	%

Three Months:

Research and development expense for the three months ended June 30, 2011 was $4.2 million, which was relatively flat with the three months ending June 30, 2010.

Six Months:

Research and development expense for the six months ended June 30, 2011 was $8.8 million, which was an increase of $1.0 million over the six months ended June 30, 2010. This increase was due to a $1.2 million increase in engineering wafer expenses associated with our IBM foundry project, partially offset by decreased variable compensation accruals of $260,000 for the six months ending June 30, 2011.

Sales and Marketing Expense


(in thousands)	Three Months Ended June 30, 2011			Three Months Ended June 30, 2010			Six Months Ended June 30, 2011			Six Months Ended June 30, 2010
Sales and marketing expense	$	2,605		$	2,244		$	4,665		$	4,292
Percent of total revenue		16	%		12	%		17	%		13	%

Three Months

Sales and marketing expense was $2.6 million, which was an increase of $361,000 from the same period in 2010. This increase was due primarily to a $95,000 severance accrual relating to the resignation of the chief marketing officer, increased outside services and commissions of $200,000, and increased sales office rents of $55,000 for the quarter ending June 30, 2011.

Six Months

Sales and marketing expense was $4.7 million for the six months ended June 30, 2011, which was a $373,000 increase compared to the six months ended June 30, 2010. This increase is due to compensation based expenses including severance accruals and stock based compensation of $215,000, combined with increased sales office rent of $95,000 for the six months ending June 30, 2011.

General and Administrative Expense


(in thousands)	Three Months Ended June 30, 2011			Three Months Ended June 30, 2010			Six Months Ended June 30, 2011			Six Months Ended June 30, 2010
General and administrative expense	$	1,826		$	1,868		$	3,880		$	3,673
Percent of total revenue		11	%		10	%		14	%		11	%

Three Months

General and administrative expense for the three months ended June 30, 2011was $1.8 million, reflecting a slight decrease of $42,000 from the same period in 2010. This decrease was due primarily to a $200,000 decrease in management and employee variable compensation accruals and other compensation related expenses, offset by professional fees of $110,000.

Six Months

General and administrative expense for the six months ended June 30, 2011 was $3.9 million, which was an increase of $207,000 from the six months ended June 30, 2010. This increase was due to increased professional, consulting and recruiting fees of $390,000, which was partially offset by reduced compensation-related expenses of $180,000, compared to the six months ending June 30, 2010.

Other Non-Operating Income (Expenses)


(in thousands)	Three Months Ended June 30, 2011			Three Months Ended June 30, 2010			Six Months Ended June 30, 2011			Six Months Ended June 30, 2010

Interest expense	$	(206	)	$	(174	)	$	(420	)	$	(329	)
Other income (expense)	$	12		$	45		$	(44	)	$	(21	)
Income tax benefit (provision)	$	270		$	(210	)	$	1,625		$	(479	)

Three Months

Interest expense was $206,000 for the three months ended June 30, 2011, which was an increase of $32,000 from the three months ended June 30, 2010. This increase was in connection with the $6.0 million term loan we obtained in June 2010.

Other income was $12,000 for the three months ended June 30, 2011, compared with other income of $45,000 for the same period in 2010. The decrease in other income was due primarily to reduced foreign exchange gains in the three months ending June 30, 2011 compared to the prior year quarter ending June 30, 2010.

For the three months ended June 30, 2011, the Company recorded a $270,000 income tax benefit due to our operating loss for the period. During the three months ended June 30, 2010, the Company recorded a $210,000 income tax provision.

Six Months

Interest expense was $420,000 during the six months ended June 30, 2011, which was a $91,000 increase from the six months ended June 30, 2010. This increase is primarily due to interest in connection with our term loan, which had an average outstanding balance of approximately $4.8 million during the six month period ending June 30, 2011. The term loan originated in June 2010.

Other expense was $44,000 for the six months ended June 30, 2011, which was an increase of $23,000 compared to the six month period ending June 30, 2010. This increase in expense was primarily related to an increase in foreign exchange losses compared to the six months ending June 30, 2010.

Income tax benefit for the six months ended June 30, 2011 was $1.6 million due to our operating loss for the period. The effective tax rate was 35%. During the six months ended June 30, 2010, the Company recorded a $479,000 non-cash tax provision.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flow Summary

Our cash flows from operating, investing and financing activities, as reflected in the consolidated statements of cash flows for the six months ended June 30, 2011 and 2010, are summarized as follows:


(in thousands)	2011			2010
Cash provided by (used in):
Operating activities	$	(4,711	)	$	2,795
Investing activities		(2,878	)		(3,051	)
Financing activities		940			5,299
Effect of exchange rate changes on cash		(23	)		(25	)

Net (decrease) increase in cash and cash equivalents	$	(6,672	)	$	5,018

Cash Flow from Operating Activities

The net amount of cash used in operating activities during the six months ended June 30, 2011 was $4.7 million and was primarily due to our loss from operations of $3.1 million, after adjusting for non-cash items of $800,000, or a net use of cash of $2.3 million. Working capital used an additional $2.4 million in cash due primarily to an increase in inventory of $5.8 million, due to an expected sales increase for the third quarter of 2011. This was offset by a $3.5 million increase in accounts payable and accrued liabilities.

The net amount of cash provided by operating activities during the six months ended June 30, 2010 was $2.8 million, and was primarily due to earnings from operations, after adjusting for non-cash items, of $3.6 million and increases in accounts payable and accrued liabilities of $3.5 million due to increased purchases. This was offset in part by an increase in accounts receivable and inventory of $3.1 million due to the sales increase for the six-month period ended June 30, 2010.

Cash Flows from Investing Activities

The net amount of cash used in investing activities during the six months ended June 30, 2011 and 2010 was $2.9 million and $3.1 million, respectively, which was primarily related to capital purchases associated with our IBM foundry initiative and test equipment to expand our back-end capacity.

Cash Flow from Financing Activities

The net amount generated by financing activities of $0.9 million was due to a $1.5 million draw on our line of credit and $1.3 million in proceeds from the exercise of stock options. This was partially offset by principal payments on our debt, primarily our capital leases and term loan, of $1.8 million.

The net amount of cash generated by financing activities during the six months ended June 30, 2010 was $5.3 million. The primary source of cash for financing activities was a $6 million term loan we obtained during the second quarter of 2010, partially offset by $0.9 million in principal payments.

Liquidity

Our future liquidity depends primarily on revenue, gross margins, control of operating expenses, management of our working capital and capital expenditures, and our ability to obtain financing. Based upon our current sales backlog, we believe that we have sufficient resources from cash on hand, funds from operations and availability under our secured line of credit facility to fund current operations through at least the second quarter of 2012.

The Company had $3.3 million in cash and cash equivalents at June 30, 2011. We currently have approximately $3.0 million available to us under the $7.5 million secured line of credit facility. As of June 30, 2011, we had $1.5 million outstanding on the secured line of credit facility.

Cash and cash equivalents decreased by $6.7 million in the first half of 2011. This decrease was due primarily to our reduced sales levels as a result of capacity constraints. In response to this, during the three months ended June 30, 2011, we increased our inventory levels to meet pent-up demand. Operational and working capital requirements consumed approximately $4.7 million of cash during the first half of 2011.

In addition to the operational issues noted above, we purchased additional wafer foundry and test equipment of approximately $2.8 million to help alleviate our capacity issues.

At June 30, 2011, we have outstanding capital commitments of approximately $847,000, including IBM foundry-related capital. If sales are not sufficient to support our line of credit borrowing base, we would need to delay non-committed capital purchases and delay additional personnel increases to conserve cash. During the second half of the year, we also plan to invest in engineering to support our continued capacity ramp and accelerate new product launches.

Expenditures relating to capital and engineering support expenses for our IBM foundry project incurred from inception to date are approximately $27.7 million, and we estimate an additional $0.8 million of capital expenditures and $2.7 million of expenses for the remainder of the year. If we do not generate enough cash from our operations or have sufficient available borrowings under our secured line of credit facility, or if actual expenditures for capital and engineering support for our IBM foundry project are higher than estimated, the IBM foundry project could be delayed.

If net cash flow is not sufficient to meet our cash requirements, we may use our line of credit facility mentioned above or any other credit facility we may obtain. We would be required to obtain approval from Silicon Valley Bank (“SVB”) for any additional debt financing, other than specific debt such as approved lease lines of credit, per the terms of our existing loan agreement. We may be required to seek additional debt or equity capital to repay our debt, restore liquidity, or execute our business strategy. Any issuance of common or preferred stock or convertible securities to obtain additional funding would result in dilution of our existing stockholders’ interests.

Debt Instruments

On June 28, 2010, the Company and SVB executed a Second Amendment (“Amendment”) to our Amended and Restated Loan and Security Agreement dated August 18, 2009. The Amendment provides for a 4-year $6.0 million term loan with a fixed interest rate of 6.5% per annum. The maturity date for the term is June 28, 2014. Principal payments are fixed at $125,000 per month plus accrued interest. The interest rate increased to 6.75% for the first half of 2011 under the terms of our covenant waivers obtained from SVB on March 2, 2011. The interest rate reverted back to 6.5% on July 1, 2011.

During June, 2011, the Company and SVB determined that we were not in compliance with our liquidity ratio covenant for the months of April and May of 2011. As a result, on June 30, 2011 the Company and SVB executed a Default Waiver and Fifth Amendment to the Company’s Amended Loan Agreement dated August 18, 2009 (“Fifth Amendment”). SVB waived compliance with the liquidity ratio covenant for the months of April and May and adjusted the minimum liquidity ratio and EBITDA covenants. These covenants will now be measured on a monthly basis through October 31, 2011. The expiration date of our revolving line of credit was extended from August 18, 2011 to October 31, 2011. The Fifth Amendment also provides for an increase in the working capital line of credit from $6.0 million to $7.5 million, a reduction of the letter of credit, foreign exchange and cash management services sublimits to $1,750,000, and a reduction of the borrowing base to be 50% of the outstanding balance of the Company’s existing term loan. In connection with the Fifth Amendment, we also replaced our existing Export-Import (EX-IM) Loan Agreement with a new EX-IM Loan Agreement that will guarantee advances of eligible foreign accounts. Our borrowing base associated with the EX-IM guarantee is the lessor of $7.5 million or up to 90% of EX-IM foreign accounts that are payable in US dollars, plus up to 65% of EX-IM eligible inventory. We are now required to report our borrowing base on a weekly basis.

At June 30, 2011we had $1.5 million outstanding under our secured line of credit facility and a remaining availability of $3.0 million under this line of credit. We anticipate the availability under our line of credit facility, which is measured on a weekly basis, to fluctuate significantly.

If we cannot ship product consistently throughout the quarter, our borrowing base relating to accounts receivable could be materially impacted. The expiration date of our secured line of credit has been extended to October 31, 2011 and we will actively pursue an extension during the second half of 2011. If we cannot generate sufficient cash from operations or obtain a sufficient borrowing base on our secured line of credit facility, we may seek to obtain additional equity or debt financing. Additional debt financing would require approval from SVB in accordance with our existing covenants.

We entered into four capital leases during 2009 and 2010 totaling approximately $4.3 million with terms between two and three years with effective interest rates between 9% and 10%. We currently have three leases outstanding with a book value of $1.9 million and standby letters of credit in favor of two of the lessors for approximately $1.25 million. Our ability to obtain equipment lease financing could be severely limited if we cannot comply with existing debt covenants during the remainder of 2011 and beyond.

In April 2004, we entered into a patent interference settlement agreement with National Semiconductor Corporation. We are required to pay National Semiconductor Corporation $250,000 annually through 2013. As of June 30, 2011, the present value of this promissory note is $465,000. We recorded this note at the discounted present value assuming an annualized discount rate of 5.75%. The face value of this note as of June 30, 2011 was $500,000.

On December 15, 2005, Ramtron LLC, our wholly-owned subsidiary, closed on a mortgage loan facility with American National Insurance Company. Ramtron LLC entered into a promissory note evidencing the loan with the principal amount of $4,200,000, with a maturity date of January 1, 2016, bearing interest at 6.17%. We are obligated to make monthly principal and interest payments of $30,500 until January 2016 and a balloon payment of $2,757,000 in January 2016. Ramtron LLC also entered into an agreement for the benefit of American National Insurance Company securing our real estate as collateral for the mortgage loan facility.

ITEM 4.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures and Related CEO and CFO Certifications

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure. In connection with the preparation of this Quarterly Report on

Form 10-Q, as of June 30, 2011, an evaluation was performed under the supervision and with the participation of the Company’s management, including the CEO and CFO, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based on this evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures are effective.

Changes in Internal Control and Financial Reporting

There were no changes in the Company’s internal control over financial reporting during its most recently completed fiscal quarter that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

In June 2009, the Company received a summons by the trustee in the bankruptcy of Finmek S.p.A. and its affiliates (Finmek) to appear before the Padua Court in Italy (the Court overseeing the bankruptcy proceedings of Finmek). The claims of the trustee in bankruptcy are that payments totaling approximately $2.8 million made to the Company for products shipped to Finmek prior to its bankruptcy filing in May 2004 are recoverable based on an alleged awareness of Finmek’s insolvency at the time the payments were made. After the first hearing held in 2010 and the second hearing in 2011, in 2013 all parties will submit their final motions. We intend to vigorously contest the trustee’s claims. We are unable to estimate a range of possible liability, if any, that we may incur as a result of the trustee’s claims and have not recorded any expense or liability in the consolidated financial statements as of June 30, 2011.

ITEM 1A.

RISK FACTORS

As previously discussed, our actual results could differ materially from our forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed below. These and many other factors described in this report could adversely affect our operations, performance and financial condition.

Our achievement of sustained profitability is uncertain.

We had a net loss during the six months ended June 30, 2011 of $3.1 million, which followed a net income of $1.6 million for the year ended December 31, 2010. Our ability to reflect a profit from ongoing operations in future periods is subject to significant risks and uncertainties, including, but not limited to, our ability to successfully sell our products at prices that are sufficient to cover our operating costs, to enter into additional technology development and license arrangements, to obtain sufficient contract manufacturing capacity and, if necessary, to raise additional financing to fund our growth. There is no guarantee that we will be successful in reducing these risks.

We have spent substantial amounts of money in developing our products and in our efforts to obtain commercial manufacturing capabilities for those products. At June 30, 2011, our accumulated deficit was $220 million. Our ability to increase revenue and achieve profitability in the future will depend substantially on our ability to increase sales of our products by gaining new customers and increasing sales to our existing customers, our success in reducing manufacturing costs, while increasing our contract manufacturing capacity, our ability to significantly increase sales of existing products, and our success in introducing and profitably selling new products.

We may need to raise additional funds to finance our operations.

In view of our expected future working capital requirements in connection with the fabrication and sale of our specialized memory, microcontroller and integrated semiconductor products, as well as our projected research and development and other operating expenditures, we may be required to seek additional equity or debt financing. We cannot be sure that any additional financing or other sources of capital will be available to us on acceptable terms, or

at all. The inability to obtain additional financing when needed would have a material adverse effect on our business, financial condition and operating results, which could adversely affect our ability to continue our business operations. We would be required to obtain approval from Silicon Valley Bank for any additional debt financing. If additional equity financing is obtained, any issuance of common or preferred stock or convertible securities to obtain funding would result in dilution of our existing stockholders’ interests.

Expenditures relating to capital and engineering support for our new wafer foundry project are significant. If we cannot generate sufficient cash from operations, maintain or increase our borrowing base on our secured line of credit facility, or obtain other equity or debt financing, full commercial production at our new wafer foundry project could be delayed, which would have a material adverse effect on our business operations.

We are subject to certain covenants related to our bank loan and line of credit and such covenants may be challenging to the Company.

We are required to comply with certain covenants under the loan agreement, as amended, and our line of credit, including requirements to maintain a minimum EBITDA and maintain certain liquidity ratios, and restrictions on certain business actions without the consent of Silicon Valley Bank (SVB). If we are not able to comply with such covenants at a point of time in the future, our outstanding loan balance will be due and payable immediately, our existing line of credit could be cancelled, and unless we are able to obtain a waiver from the bank for such covenant violations, our business, financial condition and results of operations would be harmed. We did not meet our liquidity ratio covenant in the months of April and May 2011. SVB has waived compliance with this covenant and adjusted the minimum liquidity and EBITDA covenants for future periods. We have met these covenants for the month and quarter ending June 30, 2011. Due to the waiver and revised covenants, we paid a $20,000 fee and moved to weekly reporting of eligible accounts receivable and inventories for our borrowing base. In addition, the expiration date of our secured line of credit has been extended to October 31, 2011 and we will actively pursue an extension during the second half of 2011. SVB may require new and/or more restrictive covenants in the future with increased cost to the Company.

If we fail to vigorously protect our intellectual property, our competitive position may suffer.

Our future success and competitive position depend in part upon our ability to develop additional and maintain existing proprietary technology used in our products. We protect our intellectual property rights through a combination of patent, trademark, copyright and trade secret laws, as well as licensing agreements and employee and third party non-disclosure and assignment agreements. We cannot provide assurances that any of our pending patent applications will be approved or that any of the patents that we own will not be challenged, invalidated or circumvented by others or be of sufficient scope or strength to provide us with any meaningful protection or commercial advantage.

Policing the unauthorized use of our intellectual property is difficult and costly, and we cannot be certain that the steps we have taken will prevent the misappropriation or unauthorized use of our technologies, particularly in countries where the laws may not protect our proprietary rights as fully as in the United States. In addition, we cannot be certain that we will be able to prevent other parties from designing and marketing semiconductor products or that others will not independently develop or otherwise acquire the same or substantially equivalent technologies as ours.

We may be subject to intellectual property infringement claims by others that result in costly litigation and could harm our business and ability to compete. Our industry is characterized by the existence of a large number of patents, as well as frequent claims and related litigation regarding these patents and other intellectual property rights. In particular, many leading semiconductor memory companies have extensive patent portfolios with respect to manufacturing processes, product designs, and semiconductor memory technology, including ferroelectric memory technology. We may be involved in litigation to enforce our patents or other intellectual property rights, to protect our trade secrets and know-how, to determine the validity of property rights of others, or to defend against claims of invalidity. This type of litigation can be expensive, regardless of whether we win or lose. Also, we cannot be certain that third parties will not make a claim of infringement against us or against our licensees in connection with their use of our technology. In the event of claims of infringement against our licensees with respect to our technology,

we may be required to indemnify our licensees, which could be very costly. Any claims, even those without merit, could be time consuming to defend, result in costly litigation and diversion of technical and management personnel, or require us to enter into royalty or licensing agreements. Royalty or licensing agreements, if required, may not be available to us on acceptable terms or at all. A successful claim of infringement against us or one of our semiconductor manufacturing licensees in connection with our use of our technology would harm our business and result in significant cash expense to us to cover litigation costs, as well as the reduction of future license revenue.

Catastrophic events causing system failures may disrupt our business.

We are a highly automated business and rely on our network infrastructure and enterprise applications, internal technology systems and our Web site for our development, marketing, operational, support, hosted services and sales activities. A disruption or failure of these systems in the event of a major earthquake, fire, telecommunications failure, cyber-attack, war, terrorist attack, or other catastrophic event could cause system interruptions, reputational harm, delays in our product development, breaches of data security and loss of critical data, and could prevent us from fulfilling our customers’ orders. We have developed certain disaster recovery plans and certain backup systems to reduce the potentially adverse effect of such events, but a catastrophic event that results in the destruction or disruption of any of our data centers or our critical business or information technology systems could severely affect our ability to conduct normal business operations and, as a result, our future operating results could be adversely affected.

Earthquakes, other natural disasters and power shortages or interruptions may damage our business.

If a major earthquake, power outage or other natural disaster occurs that damages our contract manufacturers’ facilities or restricts their operations, or interrupts our and our suppliers’ and customers’ communications, our business, financial condition and results of operations would be materially adversely affected. A major earthquake or other natural disaster near one or more of our major suppliers could disrupt the operations of those suppliers, which could limit the supply of our products and harm our business.

Our future success depends in part on a relatively small number of key employees.

Our future success depends, among other factors, on the continued service of our key technical and management personnel and on our ability to continue to attract and retain qualified employees. We are particularly dependent on the highly skilled design, process, materials and testing engineers involved in the development and oversight of the manufacture of our semiconductor products and processes. The competition for these personnel is intense, and the loss of key employees, including our executive officers, or our inability to attract additional qualified personnel in the future, could have both an immediate and a long-term adverse effect on us. In addition, the substantial breadth of demands on our relatively small number of key management employees, including new product development, managing supplier and customer relationships, and seeking new capital sources and other business development activities are significant, and could divert our management’s attention from our business operations.

In January 2011, our former chief executive and chief operating officers both resigned. Our former chief financial officer was named CEO, and a new CFO was hired in April 2011. We do not intend to name a replacement chief operating officer. In March 2011, we appointed a vice president of customer satisfaction, responsible for directing the quality assurance program as well as managing the product and test engineering organizations. In June 2011, our former chief marketing officer resigned and we expect to announce a new head of worldwide sales in the third quarter of 2011.

General economic trends and other factors, including the effects of the recent worldwide credit crisis, may negatively affect our business.

Adverse changes in general economic or political conditions in any of the major countries in which we do business could adversely affect our operating results.

Our products are complex and any defects in our products may result in liability claims, an increase in our costs and a reduction in our revenue.

Our products are complex and may contain defects, particularly when first introduced or as new versions are released or defects may result from the manufacturing process employed by our foundries. We develop integrated semiconductor products containing functions in addition to memory, thereby increasing the overall complexity of our products. We rely primarily on our in-house testing personnel to design test operations and procedures to detect any defects prior to delivery of our products to our customers. However, we rely on both in-house personnel and subcontractors to perform our testing. Because our products are manufactured by third parties and involve long lead times, we may experience delays in meeting key introduction dates or scheduled delivery dates to our customers if problems occur in the manufacture or operation or performance of our products. These defects also could cause us to incur significant re-engineering or production costs, divert the attention of our engineering personnel from our new product development efforts and cause significant customer relations issues and damage to our business reputation. Any defects could require product replacement, cost of remediation, or recall or we could be obligated to accept product returns. Any of the foregoing could cause us to incur substantial costs and harm our business. A defect or failure in our product could cause failure in our customer’s end-product, so we could face product liability claims for property damage, lost profits damages, or consequential damages that are disproportionately higher than the revenue and profits we receive from the products involved. There can be no assurance that any insurance we maintain will sufficiently protect us from any such claims.

We depend on a small number of suppliers for the supply of our products and the success of our business may be dependent on our ability to maintain and expand our relationships with foundries and other suppliers.

We currently rely on foundry services from Texas Instruments (TI) for commercial manufacturing of our F-RAM products. We are currently capacity-limited at TI and may continue to be limited in the future as we do not have a contract in place for a minimum capacity. When Fujitsu notified us in 2009 that they were going to cease manufacturing our products, they built a finite amount of product inventory to meet our anticipated demand as we completed a timely product manufacturing transition to alternative foundries. Due to higher than anticipated demand for our products during 2010, we experienced shortages on certain Fujitsu supplied devices as we worked to bring up capacity at our alternative foundry sources. As a result, we extended order lead times and have placed certain customers on allocation. We have transitioned many customers to alternative or replacement products built at TI. If commercial manufacturing from our new wafer foundry at IBM is delayed or we are not able to obtain qualified replacement products from TI in a timely manner, we will be unable to fill our customers’ orders, which may have a material adverse effect on our revenue and results of operations. Furthermore, as a result of TI’s license of Ramtron’s technology, they could become a future competitor. Also, our ability to develop advanced products may be limited under the current supply agreement.

Our foundry agreements with Texas Instruments and IBM may not be renewed at the end of the contract term or negotiation of new contract terms may not be acceptable. In this event, the engagement of alternative foundry services will become necessary, which would require capital investment and related cash funding, and would likely result in our inability to fill our customers’ orders. In addition, we rely on a small number of other contract manufacturers and foundries to manufacture our other products. Reliance on a limited number of foundries involves several risks, including capacity constraints or delays in the timely delivery of our products, reduced control over delivery schedules and the cost of our products, variations in manufacturing yields, dependence on the foundries for quality assurance, and the potential loss of production and a slowdown in filling our orders due to seismic activity, other force majeure events and other factors beyond our control, including increases in the cost of the wafers we purchase from our foundries.

Although we continuously evaluate sources of supply and may seek to add additional foundry capacity in the future, there can be no assurance that such additional capacity can be obtained at acceptable prices, if at all. Because our products require the foundries to make specified modifications to their standard process technologies and integrate our ferroelectric materials into their processes, transitioning the manufacturing of our products to other foundries or other facilities of an existing foundry may require process design changes and substantial lead time. Any delay resulting from such transition could negatively affect product performance, delivery, and yields or increase manufacturing costs.

We are also subject to the risks of service disruptions and raw material shortages affecting our foundry suppliers, which could also result in additional costs or charges to us.

We also rely on domestic and international subcontractors for packaging and testing of products, and are subject to risks of disruption of these services and possible quality problems. The occurrence of any supply or other problem resulting from these risks could have a material adverse effect on our revenue and results of operations.

We cannot provide any assurance that foundry or packaging and testing services will be available to us on terms and conditions, and at the times, acceptable to us. If we are unable to obtain foundry and packaging and testing services meeting our needs, we may be unable to produce products at the times and for the costs we anticipate and our relationships with our customers may be harmed and financial condition and results of operations may be adversely affected.

We are a relatively small company with limited resources, compared to some of our current and potential competitors, and we may not be able to compete effectively and increase our market share.

Our nonvolatile memory, microcontroller and integrated semiconductor products, which presently account for a substantial portion of our revenue, compete against products offered by current and potential competitors with longer operating histories, significantly greater financial and personnel resources, better name recognition and a larger base of customers than we have. In addition, many of our competitors have their own facilities for the production of semiconductor memory components or have recently added significant production capacity. As a result, these competitors may have greater credibility with our existing and potential customers. They also may be able to adopt more aggressive pricing policies and devote greater resources to the development, promotion and sale of their products than we can to ours. In addition, some of our current and potential competitors have already established supplier or joint development relationships with the decision makers at our current or potential customers. These competitors may be able to leverage their existing relationships to discourage their customers from purchasing products from us or persuade them to replace our products with their products. These and other competitive pressures may prevent us from competing successfully against current or future competitors, and may materially harm our business. Competition could force us to decrease our prices, reduce our sales, lower our gross profits or decrease our market share, any of which could have a material adverse effect on our revenues and results of operations. Our competitors include companies such as ST Microelectronics, Everspin Technologies Inc., Cypress Semiconductor Corporation, Microchip Technology Inc., Atmel Corporation, Fujitsu, Texas Instruments, Panasonic, Rohm, and Maxim Integrated, which produce or may produce products that compete with our current products and may compete with our future products. Our ability to compete with these and other competitors will depend on a number of factors, including our ability to continue to recruit and retain qualified engineers and other employees, our ability to introduce new and competitive products in a timely manner, the availability of foundry, packaging and testing services for our products to meet our customers’ demands, effective utilization and protection of our intellectual property rights, and general economic and regulatory conditions.

Emerging technologies and standards may pose a threat to the competitiveness of our products.

Competition affecting our F-RAM products may also come from alternative nonvolatile technologies such as magnetic random access memory or phase change memory, or other developing technologies. We cannot provide assurance that we will be able to identify new product opportunities successfully, develop and bring to market new products, achieve design wins or respond effectively to new technological changes or product announcements by our competitors. In addition, we may not be successful in developing or using new technologies or in developing new products or product enhancements that achieve market acceptance. Our competitors or customers may offer new products based on new technologies, new industry standards or end-user or customer requirements, including products that have the potential to replace, or provide lower-cost or higher-performance alternatives to, our products. The introduction of new products by our competitors or customers could render our existing and future products obsolete or unmarketable.

A memory technology other than F-RAM nonvolatile memory technology may be adopted or become generally accepted in integrated semiconductor products, or in stand-alone memory products, and our competitors may be in a better financial and marketing position than we are to influence such adoption or

acceptance. The adoption or acceptance of such alternative memory technology could also render our existing and future products obsolete or unmarketable. Additionally, the inability to timely supply our customer orders with our F-RAM products may also cause such customers to sample or purchase such alternative memory products, and such customers may thereafter choose to continue using such alternative products even after our F-RAM product supply availability returns.

Our research and development efforts are focused on a limited number of new technologies and products, and any delay in the development, or the abandonment, of these technologies or products by industry participants, or their failure to achieve market acceptance, could compromise our competitive position.

Our F-RAM semiconductor memory and integrated semiconductor products are used as components in electronic devices in various markets. As a result, we have devoted and expect to continue to devote a large amount of resources to develop products based on new and emerging technologies and standards that will be commercially introduced in the future. Our research and development expense, for the quarter ended June 30, 2011, was $4.2 million, or 25% of our total revenue.

If we do not accurately anticipate new technologies and standards, or if the products that we develop based on new technologies and standards fail to achieve market acceptance, our competitors may be better positioned to satisfy market demand than us. Furthermore, if markets for new technologies and standards develop later than we anticipate, or do not develop at all, demand for our products that are currently in development would suffer, resulting in lower sales of these products or lower sale prices, or both, than we currently anticipate, which would adversely affect our revenue and gross profits. We cannot be certain that any products we may develop based on new technologies or for new standards will achieve market acceptance. If we experience difficulties in manufacturing our existing products on our established or new manufacturing lines, we may have to commit our design and R&D resources to resolving those issues, which may delay the development of new products and compromise our competitive market position.

If we do not continually develop new products that achieve market acceptance, our revenue may decline.

We need to develop new products and new process and manufacturing technologies. We believe that our ability to compete in the markets in which we expect to sell our F-RAM based microcontroller and integrated semiconductor products will depend, in part, on our ability to produce products that address customer needs efficiently and in a cost-effective manner and also our ability to incorporate effectively other semiconductor functions with our F-RAM products. Our inability to successfully develop and have manufactured new products would harm our ability to compete and have a negative impact on our operating results.

If we fail to introduce new products in a timely manner or are unable to manufacture such products successfully, or if our customers do not successfully introduce new systems or products incorporating our products, or if market demand for our new products does not develop as anticipated, our business, financial condition and results of operations could be seriously harmed.

Our expansion into new products and markets may be unsuccessful.

We plan to introduce new products into new markets in the future. We do not have experience in the markets our new products will address and these products may not achieve acceptance in those markets because they do not solve a substantial market need or are not competitively priced. Even if our new products achieve substantial market penetration, we may not be able to produce them in sufficient quantities or at prices that will enable us to generate profits for several years. The introduction of new products into new markets also increases the demands on our management and key employees, who may fail to manage those demands successfully. Our introduction of new products may be unsuccessful or delayed, which would result in a reduction in projected revenue from such new products.

We will depend on IBM and Texas Instruments, our only F-RAM product contract manufacturers, to supply components of the new products, and, if the new products are ordered in substantial quantities, or, if for any other reason, those contract manufacturers are not able timely to supply sufficient components for the new products, our new products may be unsuccessful in the markets, which would result in our not achieving expected revenue from the new products.

We compete in certain markets with some of our F-RAM technology licensees, which may reduce our product sales.

We have licensed the right to fabricate products based on our F-RAM technology and memory architecture to certain independent semiconductor device manufacturers. Fujitsu and Texas Instruments, who are currently licensed to use our F-RAM technology, market certain F-RAM memory products that compete with certain of our F-RAM products. Some of our licensees have suspended or terminated their F-RAM initiatives, while others may still be pursuing a possible F-RAM based technology initiative or product development without our knowledge. We expect manufacturers that develop products based on our technology to sell such products worldwide. We are entitled to royalties from sales of F-RAM products by some but not all of these licensees, and we have the right under certain of our licensing agreements to negotiate an agreement for a portion of the licensee’s F-RAM product manufacturing capacity. Texas Instruments may, however, give the development and manufacture of their own F-RAM products a higher priority than ours. Any competition in the marketplace from F-RAM products manufactured and marketed by our licensees could reduce our product sales and harm our operating results.

We may not be able to replace our expected revenue from significant customers, which could adversely affect our business.

Our success depends upon continuing relationships with significant customers who, directly or indirectly, purchase significant quantities of our products. For the three months ended June 30, 2011, approximately 46% of our total product sales revenue was generated by five customers. Any reduction of product sales to our significant customers, without a corresponding increase in revenue from existing and new customers, may result in significant decreases in our revenue, which would harm our cash flows, operating results and financial condition. We cannot assure that we would be able to replace these relationships in a timely manner or at all.

Our product allocation and inability to fulfill all of our customers’ orders on a timely basis during the first half of 2011 may have caused certain customers to seek substitute products from our competitors, or to design-out our products by substitution of alternative technologies and systems. If any of our significant customers or a substantial number of our other customers find alternative suppliers or adopt alternative means of filling the need for our products, our future orders may be less than anticipated, which may result in our building increased inventories and reducing our revenues, which would materially and adversely affect our cash flows, operating results and financial condition.

We expect that international sales will continue to represent a significant portion of our product sales in the future. As a result, we are subject to a number of risks resulting from such operations.

International sales comprise a significant portion of our product sales, which exposes us to foreign political and economic risks. Such risks include political and economic instability and changes in diplomatic and trade relationships, foreign currency fluctuations, unexpected changes in regulatory requirements, delays resulting from difficulty in obtaining export licenses for certain technology, tariffs and other barriers and restrictions, and the burdens of complying with a variety of foreign laws. Competitors based in the countries where we have substantial sales, such as Japan, may be able to supply products to customers in those countries more efficiently and at lower prices than we are able to do. There can be no assurance that such factors will not adversely impact our results of operations in the future or require us to modify our current business practices.

Our business is also subject to risks generally associated with doing business with third-party manufacturers in non-U.S. jurisdictions including, but not limited to, government regulations and political and financial unrest which may cause disruptions or delays in shipments to our customers or access to our inventories. Our business, financial condition and results of operations may be materially adversely affected by these or other factors related to our international operations.

We are subject to environmental laws that are subject to change and may restrict the marketability of certain of our products, which could adversely impact our financial performance or expose us to future liabilities.

We are subject to laws and regulations relating to the use of and human exposure to hazardous materials. Our failure to comply with these laws and regulations could subject us to future liabilities or result in the limitation or suspension of the sale or production of product, including without limitation, products that do not meet the various regulations relating to use of lead-free components in products. These regulations include the European Union’s Restrictions on Hazardous Substances (“RoHS”), Directive on Waste Electrical and Electronic Equipment (“WEEE”), and the directive on End of Life for Vehicles (ELV); California’s SB20 and SB50 which mimic RoHS; and China’s WEEE adopted by the State Development and Reform Commission. New electrical and electronic equipment sold in the European Union may not exceed specified concentration levels of any of the six RoHS substances (lead, cadmium, hexavalent chromium, mercury, PBB, and PBDE) unless the equipment falls outside the scope of RoHS or unless one of the RoHS exemptions is satisfied. Our products as manufactured contain lead, but in ceramic form (the “ferroelectric memory capacitor”) and are at levels below the threshold concentration levels specified by RoHS and similar directives. However, these directives are still subject to amendment and such changes may be unfavorable to our products. Any supply of products that infringe applicable environmental laws may subject us to penalties, customer litigation or governmental sanctions, which may result in significant costs to us, which could adversely impact our results of operations.

Our business operations are also subject to strict environmental regulations and legal uncertainties, which could impose unanticipated requirements on our business in the future and subject us to liabilities.

Federal, state and local regulations impose various environmental controls on the discharge of chemicals and gases used in the manufacturing processes of our third-party foundry and contract manufacturers. Compliance with these regulations can be costly. Increasing public attention has been focused on the environmental impact of semiconductor operations. Any changes in environmental rules and regulations may impose the need for additional investments in capital equipment and the implementation of compliance programs in the future.

Any failure by us or our foundries or contract manufacturers to comply with present or future environmental rules and regulations regarding the discharge of hazardous substances could subject us to serious liabilities or cause our foundries or contract manufacturers to suspend manufacturing operations, which could seriously harm our business, financial condition and results of operations.

In addition to the costs of complying with environmental, health and safety requirements, in the future we may incur costs defending against environmental litigation brought by government agencies and private parties. We may be defendants in lawsuits brought by parties in the future alleging environmental damage, personal injury or property damage. A significant judgment against us could harm our business, financial condition and results of operations.

Our stock price is extremely volatile and you may not be able to resell your shares at or above the price you paid.

The market price of our common stock has fluctuated widely in recent periods and is likely to continue to be volatile. A number of other factors and contingencies can affect the market price for our common stock, including the following:

•

actual or anticipated variations in our operating results;

•

the low daily trading volume of our stock, which has in recent years traded at prices below $5 per share;

•

announcements of technological innovations or new products by us or our competitors;

•

competition, including pricing pressures and the potential impact of competitors’ products on our sales;

•

conditions or trends in the semiconductor memory products industry;

•

unexpected design or manufacturing difficulties;

•

any announcement of potential design or manufacturing defects in our products;

•

changes in financial estimates or recommendations by stock market analysts regarding us or our competitors;

•

announcements by us or our competitors of acquisitions, strategic partnerships or joint ventures; and additions or departures of our senior management; and

•

one shareholder owning over 5% of our outstanding common stock, the sale of which could affect the stock price.

In addition, in recent years the stock market in general, and shares of technology companies in particular, have experienced extreme price and volume fluctuations. These fluctuations have often been unrelated or disproportionate to the operating performance of these technology companies. These broad market and industry fluctuations may harm the market price of our common stock, regardless of our operating results.

Provisions in our certificate of incorporation and preferred shares rights agreement may have anti-takeover effects and could affect the price of our common stock.

Our board of directors has the authority to issue up to 10,000,000 shares of preferred stock in one or more series and to fix the voting powers, designations, preferences and relative rights, qualifications, limitations or restrictions of the preferred stock, without any vote or action by our stockholders. Our authority to issue preferred stock with rights preferential to those of our common stock could be used to discourage attempts by others to obtain control of or acquire us, including an attempt in which the potential purchaser offers to pay a per share price greater than the current market price for our common stock, by making those attempts more difficult or costly to achieve. In addition, we may seek in the future to obtain new capital by issuing shares of preferred stock with rights preferential to those of our common stock. This provision could limit the price that investors might be willing to pay in the future for our common stock.

We also entered into a preferred shares rights agreement with Citicorp N.A., as rights agent on April 19, 2001, which gives our stockholders certain rights that would likely delay, defer or prevent a change of control of us in a transaction not approved by our board of directors. On July 1, 2007, Computershare Trust Company, N.A. assumed these duties as rights agents. On March 2, 2011, the rights agreement was amended and its expiration extended to April 19, 2016.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(c)	Issuer Purchases of Equity Securities:


Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs
January 1 – January 31, 2011 (1)		10,178	$	3.44		—		—
February 1 – February 28, 2011		—		—		—		—
March 1 – March 31, 2011		—		—		—		—
April 1 – April 30, 2011		—		—		—		—
May 1 – May 31, 2011		—		—		—		—
June 1 – June 30, 2011(1)		9,170	$	2.94		—		—

Total		19,348	$	3.20		—		—

(1)	Represents shares withheld from vested restricted stock and restricted stock units to satisfy the minimum withholding requirement for federal and state taxes.

ITEM 6.

EXHIBITS

(a)

Exhibits:


31.1		Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer
31.2		Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer
32.1		Certification Pursuant to 18 U.S.C. Section 1350 of Principal Executive Officer
32.2		Certification Pursuant to 18 U.S.C. Section 1350 of Principal Financial Officer


101.INS		XBRL Instance document *

101.SCH		XBRL Taxonomy extension schema *

101.CAL		XBRL Taxonomy extension calculation linkbase *

101.DEF		XBRL Taxonomy extension definition linkbase *

101.LAB		XBRL Taxonomy extension label linkbase *

101.PRE		XBRL Taxonomy extension presentation linkbase *

Notes to Exhibits List:

*	Submitted electronically herewith.

Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Statements of Operations and Comprehensive Income (Loss) for the quarters and six months ended June 30, 2011 and 2010, (ii) Condensed Consolidated Balance Sheets at June 30, 2011 and December 31, 2010, (iii) Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and 2010 and (iv) Notes to Condensed Consolidated Financial Statements. In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be part of any registration statement or other document filed under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

RAMTRON INTERNATIONAL CORPORATION

(Registrant)

/s/ Mark R. Kent

Mark R. Kent

Chief Financial Officer

(Principal Accounting Officer and

Duly Authorized Officer of the Registrant)

Date: July 26, 2011

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company