RAMTRON INTERNATIONAL CORP - FORM 10-Q/A

Attached files

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EXCEL - IDEA: XBRL DOCUMENT - RAMTRON INTERNATIONAL CORP	Financial_Report.xls
EX-31.1 - SECTION 302 CEO CERTIFICATION - RAMTRON INTERNATIONAL CORP	d227429dex311.htm
EX-31.2 - SECTION 302 CFO CERTIFICATION - RAMTRON INTERNATIONAL CORP	d227429dex312.htm
EX-32.1 - SECTION 906 CEO CERTIFICATION - RAMTRON INTERNATIONAL CORP	d227429dex321.htm
EX-32.2 - SECTION 906 CFO CERTIFICATION - RAMTRON INTERNATIONAL CORP	d227429dex322.htm
EX-10.74 - SIXTH AMENDMENT TO LOAN AND SECURITY AGREEMENT - RAMTRON INTERNATIONAL CORP	d227429dex1074.htm
EX-10.75 - SEVENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT - RAMTRON INTERNATIONAL CORP	d227429dex1075.htm
EX-10.76 - FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT (EX-IM LOAN FACILITY) - RAMTRON INTERNATIONAL CORP	d227429dex1076.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q/A

(Amendment No. 1)

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 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.


Large accelerated filer	¨	Accelerated filer ¨

Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company x

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:


34,736,993 shares		As of November 1, 2011
Common Stock, $0.01 par value

EXPLANATORY NOTE

We are filing this Amendment No. 1 on Form 10-Q/A (the “Amendment”) to Ramtron International Corporation’s (the “Company”) Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, as filed with the Securities and Exchange Commission on October 20, 2011 (the “Original Filing”), to replace the Original Filing in its entirety. As documented in the Company’s Form 8-K and press release on October 21, 2011, a portion of an incomplete draft of a Form 10-Q for the fiscal quarter ended September 30, 2011 was erroneously filed with the Securities and Exchange Commission by the Company’s EDGAR filing agent without authorization or direction from the Company. The Original Filing should be disregarded in its entirety and replaced with this Amendment.

TABLE OF CONTENTS


		Page
PART I - FINANCIAL INFORMATION

Item 1-	Financial Statements:

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

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

	Consolidated Statement of Stockholders’ Equity for the Nine Months ended September 30, 2011		5

	Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2011 and 2010		6

	Notes to Financial Statements		7

Item 2-	Management’s Discussion and Analysis of Financial Condition and Results of Operations		14

Item 4-	Controls and Procedures		24

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		33

PART I - FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

RAMTRON INTERNATIONAL CORPORATION

CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2011 AND DECEMBER 31, 2010

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


	September 30, 2011			December 31, 2010
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	8,173		$	9,945
Accounts receivable, less allowances of $2,007 and $1,814, respectively		11,657			9,910
Inventories		16,690			5,412
Deferred income taxes, net		162			368
Other current assets		1,398			2,332

Total current assets		38,080			27,967

Property, plant and equipment, net		23,433			21,170
Intangible assets, net		2,750			2,746
Long-term deferred income taxes, net		5,910			4,551
Other assets		385			398

Total assets	$	70,558		$	56,832

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	10,756		$	5,995
Accrued liabilities		2,590			1,843
Deferred revenue		86			564
Current portion of long-term debt		3,700			3,284

Total current liabilities		17,132			11,686
Other long-term liabilities		210			218
Deferred revenue		—			6
Long-term debt, less current portion		6,315			8,924

Total liabilities		23,657			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: 34,634,783 and 27,539,562 shares issued and outstanding, respectively		346			275
Additional paid-in capital		266,039			253,280
Accumulated other comprehensive loss		(382	)		(345	)
Accumulated deficit		(219,102	)		(217,212	)

Total stockholders’ equity		46,901			35,998

Total liabilities and stockholders’ equity	$	70,558		$	56,832

See accompanying notes to consolidated financial statements.

RAMTRON INTERNATIONAL CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010

(Unaudited)

(Amounts in thousands, except per share amounts)


	Three Months Ended September 30, 2011			Three Months Ended September 30, 2010			Nine Months Ended September 30, 2011			Nine Months Ended September 30, 2010
Revenue:
Product sales	$	21,736		$	19,678		$	48,712		$	53,469
License and royalty revenue		227			204			655			605

		21,963			19,882			49,367			54,074

Costs and expenses:
Cost of product sales		10,729			9,370			25,044			26,186
Research and development		4,988			4,895			13,756			12,705
Sales and marketing		2,648			2,478			7,313			6,770
General and administrative		1,786			1,941			5,666			5,614

		20,151			18,684			51,779			51,275

Operating income (loss)		1,812			1,198			(2,412	)		2,799
Interest expense		(192	)		(250	)		(612	)		(578	)
Other income (expense), net		81			(385	)		37			(406	)

Income (loss) before income tax (provision) benefit		1,701			563			(2,987	)		1,815
Income tax (provision) benefit		(529	)		(221	)		1,097			(701	)

Net income (loss)	$	1,172		$	342		$	(1,890	)	$	1,114

Other comprehensive (loss), net of tax:
Foreign currency translation adjustments		(16	)		(7	)		(37	)		(31	)

Comprehensive income (loss)	$	1,156		$	335		$	(1,927	)	$	1,083

Net income (loss) per common share:
Basic and diluted:	$	0.04		$	0.01		$	(0.07	)	$	0.04

Weighted average common shares outstanding:
Basic		31,748			27,100			29,073			27,056

Diluted		32,102			28,364			29,073			27,932

See accompanying notes to consolidated financial statements.

RAMTRON INTERNATIONAL CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 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		856		9		1,698			—			—			1,707
Stock-based compensation expense		—		—		1,346			—			—			1,346
Issuance of restricted stock		778		7		(70	)		—			—			(63	)
Issuance of common stock		5,462		55		9,785			—			—			9,840
Foreign currency translation adjustments		—		—		—			(37	)		—			(37	)
Net loss		—		—		—			—			(1,890	)		(1,890	)

Balances, September 30, 2011		34,635	$	346	$	266,039		$	(382	)	$	(219,102	)	$	46,901

See accompanying notes to consolidated financial statements.

RAMTRON INTERNATIONAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010

(Unaudited)

(Amounts in thousands)


	September 30, 2011			September 30, 2010
Cash flows from operating activities:
Net income (loss)	$	(1,890	)	$	1,114
Adjustments used to reconcile net income to net cash used in operating activities:
Depreciation		1,571			1,358
Amortization		190			188
Bad debt recovery		(33	)		(111	)
Net loss from asset disposition		—			398
Stock-based compensation		1,346			1,236
Deferred income taxes		(1,153	)		660
Imputed interest on note payable		25			33
Inventory write-off and scrap		659			1,014

Changes in assets and liabilities:
Accounts receivable		(1,714	)		(2,655	)
Inventories		(11,937	)		53
Accounts payable and accrued liabilities		7,313			3,614
Deferred revenue		(484	)		(478	)
Other		947			(686	)

Net cash (used in) provided by operating activities		(5,160	)		5,738

Cash flows from investing activities:
Purchase of property, plant and equipment		(5,269	)		(4,516	)
Purchase of intellectual property		(194	)		(105	)

Net cash used in investing activities		(5,463	)		(4,621	)

Cash flows from financing activities:
Proceeds from line of credit		1,500			2,000
Payments on line of credit		(1,500	)		(2,000	)
Proceeds from long term debt		—			6,000
Principal payments on long term debt		(2,588	)		(1,670	)
Issuance of common stock		11,484			285

Net cash provided by financing activities		8,896			4,615

Effect of foreign currency		(45	)		(30	)

Net increase (decrease) in cash and cash equivalents		(1,772	)		5,702

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

Cash and cash equivalents, end of period	$	8,173		$	13,243

Supplemental disclosure of cash flow information:
Cash paid for interest	$	620		$	541

Cash paid for income taxes	$	86		$	69

Property, plant and equipment financed by capital leases	$	370		$	1,400

Included in purchase of property, plant and equipment and accrued in prior year	$	1,805		$	1,151

See accompanying notes to consolidated financial statements.

RAMTRON INTERNATIONAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 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 and integrated semiconductor solutions, which are 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 with our memory products wireless communication capabilities as well as analog and mixed-signal functions such as microprocessor supervision, tamper detection, timekeeping, and power failure detection. 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 that we have entered into with a limited number of established semiconductor manufacturers. These arrangements typically involve 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 September 30, 2011 and for the three and nine months ended September 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 Generally Accepted Accounting Principles. The results of operations for the period ended September 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)	September 30, 2011		December 31, 2010
Finished goods	$	1,618	$	733
Work in process		15,072		4,679

	$	16,690	$	5,412

NOTE 3. OTHER CONSOLIDATED FINANCIAL STATEMENT DETAIL

Other Current Assets consist of:


(in thousands)	September 30, 2011		December 31, 2010
Prepaid expenses	$	960	$	1,604
Supplies inventory		430		353
Income tax receivable		—		334
Other		8		41

Total	$	1,398	$	2,332

Accrued Liabilities consist of:


(in thousands)	September 30, 2011		December 31, 2010
Accrued property taxes	$	159	$	196
Severance-related liabilities		153		—
Compensation-related liabilities		1,937		1,204
Other		341		443

Total	$	2,590	$	1,843

NOTE 4. SIGNIFICANT CUSTOMERS

For the nine months ended September 30, 2011 and September 30, 2010, sales for our largest distributor are as follows:


	Percentage of Company Total
	Nine Months Ended September 30, 2011			Nine Months Ended September 30, 2010
Customer A		11	%		9	%

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 our semiconductor manufacturing licensees in connection with use of our technology could materially and adversely 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, Italy court overseeing the bankruptcy. 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 the Finmek affiliates’ insolvency at the time the payments were made. The first hearing in the Finmek case was held in January 2010 and at the request of both parties, the hearing was moved to April 2011. At the April 2011 hearing, the judge moved the hearing to March 2013, at which time all parties are to 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 September 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)	September 30, 2011			December 31, 2010
Long-term debt:
Capital leases	$	1,942		$	2,674
National Semiconductor promissory note		471			697
Mortgage note		3,477			3,587
Term loan		4,125			5,250

		10,015			12,208
Long-term debt current maturities		(3,700	)		(3,284	)

Long-term debt less total current portion	$	6,315		$	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.

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 September 30, 2011, the Company was in compliance with such covenants, which will be measured on a monthly basis through December 31, 2011. On October 31, 2011, the expiration date of our revolving line of credit was extended from October 31, 2011 to December 31, 2011. The Company will pay a $14,000 fee in connection with this extension. The Company intends to seek to negotiate an additional one to two year renewal of this agreement. 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 September 30, 2011 the Company had $4.3 million available on its secured revolving line of credit facility and no amounts outstanding.

The Company currently has four capital leases outstanding, totaling approximately $4.1 million, with terms between two and three years and effective interest rates between 9% and 10%. These leases have a total book value of $1.9 million and we have 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 September 30, 2011, the present value of this promissory note is $471,000. 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 September 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 September 30, 2011:


(in thousands)	2011		2012		2013		2014		2015		Thereafter		Total
Term loan	$	375	$	1,500	$	1,500	$	750	$	—	$	—	$	4,125
National Semiconductor promissory note		—		250		250		—		—		—		500
Mortgage note		38		158		168		179		190		2,744		3,477
Capital leases		414		1,544		102		—		—		—		2,060
Less amount representing interest on the capital leases and promissory note														(147	)

Total debt													$	10,015

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


	September 30, 2011				December 31, 2010
(in thousands)	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Term loan	$	4,125	$	4,121	$	5,250	$	5,244
National Semiconductor promissory note		471		464		697		685
Capital leases		1,942		1,982		2,674		2,747
Mortgage note		3,477		3,399		3,587		3,500

	$	10,015	$	9,966	$	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 September 30, 2011, we had not granted any incentive stock options.

The number of shares available for future grants under the 2005 Plan was 706,841 as of September 30, 2011.

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


(in thousands)	Three Months Ended September 30, 2011		Three Months Ended September 30, 2010		Nine Months Ended September 30, 2011		Nine Months Ended September 30, 2010
Income Statement Classifications:
Cost of Sales	$	76	$	26	$	150	$	77
Research and development		161		92		368		272
Sales and marketing		53		67		217		194
General and administrative		268		232		611		693

Total	$	558	$	417	$	1,346	$	1,236

Stock Options

Stock options granted become exercisable in installments pursuant to the terms of each agreement evidencing options granted. As of September 30, 2011, there was approximately $1.4 million 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 2.8 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 5.5 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 September 30, 2011 are as follows:


Risk free interest rate	2.0	%
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 nine months ended September 30, 2011 and 2010 were $1.60 and $2.13, respectively.

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


	Number of Stock Options			Weighted Average Exercise Price Per Share
	(in thousands)
Outstanding at December 31, 2010		5,758		$	2.90
Granted		826		$	2.73
Forfeited		(442	)	$	2.35
Exercised		(856	)	$	1.98
Expired		(1,113	)	$	3.83

Outstanding at September 30, 2011		4,173		$	2.88

The intrinsic value of the outstanding options at September 30, 2011 was $114,000 and was calculated as the difference between the market value as of September 30, 2011 and the exercise price of the options. The closing market value as of September 30, 2011 was $1.97 as reported by the Nasdaq Global Market.

Cash received from option exercises for the nine months ended September 30, 2011 was approximately $1.7 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 September 30, 2011, there was approximately $1.5 million of unrecognized compensation cost related to non-vested restricted shares, which will be recognized over a weighted-average period of 2.6 years.

A summary of non-vested restricted shares during the nine months ended September 30, 2011 is 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		963			2.60
Forfeited		(166	)		2.02
Vested/Released		(58	)		2.18

Outstanding at September 30, 2011		930		$	2.55

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 market 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 September 30, 2011 is as follows:


	Number of Restricted Units (in thousands)			Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2010		143
Grants		234
Forfeited		(51	)
Vested/Released		—

Outstanding at September 30, 2011		326			1.0	$	643

As of September 30, 2011, there was approximately $632,000 remaining in unrecognized compensation cost related to unvested outstanding restricted stock units with a weighted-average recognition period of 1.8 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 nine months ended September 30, 2011, the Company incurred an operating loss and recorded a $1,097,000 income tax benefit. The benefit recorded was a non-cash transaction.

For the nine months ended September 30, 2011, the Company’s effective income tax rate was approximately 37%, 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 nine months ended September 30, 2011 and 2010:


(in thousands, except per share amounts)	Three Months Ended September 30, 2011			Three Months Ended September 30, 2010			Nine Months Ended September 30, 2011			Nine Months Ended September 30, 2010
Net income (loss)	$	1,172		$	342		$	(1,890	)	$	1,114

Common shares outstanding:
Historical common shares outstanding at beginning of period		28,442			27,357			27,540			27,170
Less: Non-vested restricted stock at beginning of period		(391	)		(282	)		(191	)		(232	)
Weighted average common shares issued during period		3,697			25			1,724			118

Weighted average common shares at end of period - basic		31,748			27,100			29,073			27,056

Effect of other dilutive securities:
Options		115			937			—			606
Restricted stock		239			327			—			270

Weighted average common shares at end of period - diluted		32,102			28,364			29,073			27,932

Net income (loss) per share:
- basic and diluted	$	0.04		$	0.01		$	(0.07	)	$	0.04

As of September 30, 2011 and 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 September 30, 2011		Three Months Ended September 30, 2010		Nine Months Ended September 30, 2011		Nine Months Ended September 30, 2010
Stock Options		2,603		2,810		4,173		3,398
Restricted stock/units		581		—		1,256		—

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 and integrated semiconductor solutions, and has licensed the technology related to such products to certain semiconductor manufacturers.

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 that 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 September 30, 2011

•

Revenue growth for the three months ended September 30, 2011 was driven by increased product shipments to customers as the Company executed its capacity expansion plan and continued to resolve its wafer manufacturing, product assembly and testing related supply constraints.

•

In August 2011, the Company appointed Peter Zimmer as vice president of worldwide sales, bringing 29 years of semiconductor sales management, engineering, marketing and quality assurance experience to the Company.

Product Highlights for the Three Months Ended September 30, 2011

•

In July 2011, we announced pre-qualification sampling of a 64-Kilobit F-RAM product built on our new manufacturing line at IBM Corporation’s Burlington, Vermont factory. We are now sampling to customers two families of 5-volt serial F-RAM devices in 4K, 16K and 64K densities that are being built on the new manufacturing line.

Financial Highlights for the Three Months Ended September 30, 2011

•

Total revenue for the three months ended September 30, 2011 was $22.0 million, which was an increase of 10% from $19.9 million in the three months ended September 30, 2010.

•

Net income was $1.2 million, or $0.04 per share, for the three months ended September 30, 2011, compared with net income of $342,000, or $0.01 per share, for the three months ended September 30, 2010.

•

Product gross margin for the three months ended September 30, 2011 was 51%, which was 1% lower than a gross margin of 52% for the three months ended September 30, 2010.

•

On August 2, 2011, the Company completed a public offering of 5,462,500 shares of its common stock, resulting in net proceeds of approximately $9.8 million.

Financial Highlights for the Nine Months Ended September 30, 2011

•

Total revenue for the nine months ended September 30, 2011 was $49.4 million, which was a decrease of 8.7% from $54.1 million in the nine months ended September 30, 2010.

•

Net loss was $1.9 million, or $(0.07) per share, for the nine months ended September 30, 2011, compared with net income of $1.1 million, or $0.04 per share, for the nine months ended September 30, 2010.

•

Product gross margin for the nine months ended September 30, 2011 was 49%, which was 2 percentage points lower than a gross margin of 51% for the nine months ended September 30, 2010.

Business Outlook for the Remainder of 2011

Given the considerable progress we have made in product deliveries, increasing production capacity at our Texas wafer source, and our year-to-date revenue of $49.4 million, we expect full-year revenue to be between $65 million and $70 million.

Although we expect continued improvement in yields and lower product testing costs in the fourth quarter, we will begin to depreciate equipment on our new manufacturing line, which we expect to add approximately $400,000 to our expenses in the fourth quarter.

Further, indications of weakening demand in the overall semiconductor industry have caused us to slow down the pace of investments in engineering resources in connection with technology development.

Taking these factors into account along with our current outlook for gross margin and operating expenses in the fourth quarter, we now anticipate net income of $0.02 to $0.05 per share for the second half of 2011, which is an improvement over our previously published outlook.

Some of our back end assembly and test operations are conducted by contract manufacturers based in Thailand. Recent severe flooding in Thailand has disrupted industry supply chains, especially in the automotive and electronic industries. The flood waters reached one of our assembly factories responsible for about 20% of our production output. We have confirmed with our other contract manufacturer, whose facility we understand has not been damaged, that it will be able to absorb the manufacturing volumes from the damaged factory. Presently, we do not expect the flooding situation to impact our near term revenue prospects or significantly delay product deliveries to our customers. Flooding continues throughout Thailand and we continue to monitor developments on a daily basis for potential effects on our business. If the flooding reaches the factory of our second contract manufacturer based in Thailand, we may experience a substantial disruption of our product supply chain. Some of our customers’ operations may be affected by the flooding in Thailand that would cause them to cancel or defer orders for our products. Such developments would have a material adverse effect on our revenues and liquidity for the rest of 2011 and into 2012. In addition, we are currently evaluating our potential exposure for product and equipment damage at the contract manufacturer in Thailand that experienced the flooding.

During the remainder of 2011, management plans to:

•

Fully resolve any remaining supply constraints before the end of 2011;

•

Intensify its focus on creating new and innovative products that leverage our F-RAM technology advantage;

•

Work to improve product manufacturing yields on our manufacturing line in Burlington, Vermont;

•

Begin customer sampling of F-RAM enabled ultra-low power memory devices.

PERIOD COMPARISONS FOR THE

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010


Revenue
(in thousands, except average selling price)	Three Months Ended September 30, 2011				Three Months Ended September 30, 2010		Nine Months Ended September 30, 2011				Nine Months Ended September 30, 2010
Product sales	$	21,736			$	19,678	$	48,712			$	53,469
% change compared to prior period			10	%					(9	%)
Units shipped		18,872				16,962		43,986				55,996
% change compared to prior period			11	%					(21	%)
Average selling price	$	1.15			$	1.16	$	1.11			$	0.95
% change compared to prior period			(1	%)					17	%
Other revenue	$	227			$	204	$	655			$	605
% change compared to prior period			11	%					8	%
Total revenue	$	21,963			$	19,882	$	49,367			$	54,074
% change compared to prior period			10	%					(9	%)

Three Months:

Product revenue increased $2.1 million, or 10%, for the three months ended September 30, 2011, compared to the same period last year. This increase was due to increased shipments of 1.9 million units compared to the same quarter last year, which was driven by the fulfillment of delinquent backlog created by our recent supply constraints.

Other revenue, consisting of license and development fees and royalty income, increased 11% to $227,000 for the three months ended September 30, 2011, compared to same period last year. We expect other revenue to decrease in the quarter ending December 31, 2011 by approximately 25%, with the expiration of our remaining product licensing agreement.

Nine Months:

Product revenue decreased $4.8 million, or 9%, for the nine months ended September 30, 2011 compared to the same period last year. This decrease was due to decreased shipments of 12 million units as a result of supply constraints during the nine months ended September 30, 2011. Higher than anticipated demand for our products put a strain on our capacity ahead of being able to establish production at our Burlington, Vermont foundry. As a result, customers were placed on allocation and our product shipments were limited as we designed replacement products to be produced at our established wafer foundry at Texas Instruments.

Other revenue, consisting of license and development fees and royalty income, was $655,000, or an 8% increase from the same period last year. This increase is due to increased royalty income.

Cost of Product Sales


(in thousands)	Three Months Ended September 30, 2011			Three Months Ended September 30, 2010			Nine Months Ended September 30, 2011			Nine Months Ended September 30, 2010
Cost of product sales	$	10,729		$	9,370		$	25,044		$	26,186
Gross margin percentage		51	%		52	%		49	%		51	%

Three Months:

Cost of product sales for the three months ended September 30, 2011 was $10.7 million, which was an increase of $1.4 million from the same period in 2010. This increase was due to a $2.1 million increase in product sales. Gross product margin decreased to 51%, compared with 52% for the same period last year. The decrease in product gross margin was due primarily to product mix and new cost structures associated with moving a significant portion of our product manufacturing to an alternate foundry.

Nine Months:

For the nine months ended September 30, 2011, cost of product sales was $25.0 million, which was a decrease of $1.1 million from 2010. This decrease was due to a $4.8 million decrease in product sales. Product gross margin decreased by 2% to 49%, compared with 51% for the same period last year. The decrease in product gross margin was due primarily to product mix and new cost structures associated with moving a significant portion of our product manufacturing to an alternate foundry.

Research and Development Expense



(in thousands)	Three Months Ended September 30, 2011			Three Months Ended September 30, 2010			Nine Months Ended September 30, 2011			Nine Months Ended September 30, 2010
Research and development expense	$	4,988		$	4,895		$	13,756		$	12,705
Percent of total revenue		23	%		25	%		28	%		24	%

Three Months:

Research and development expense for the three months ended September 30, 2011 was $5.0 million, which was consistent with the three months ended September 30, 2010.

Nine Months:

Research and development expense for the nine months ended September 30, 2011 was $13.8 million, which was an increase of $1.0 million over the nine months ended September 30, 2010. This increase was due primarily to a $500,000 increase in engineering-related expenses associated with our Burlington, Vermont foundry project, coupled with increases in product launch costs.

Sales and Marketing Expense



(in thousands)	Three Months Ended September 30, 2011			Three Months Ended September 30, 2010			Nine Months Ended September 30, 2011			Nine Months Ended September 30, 2010
Sales and marketing expense	$	2,648		$	2,478		$	7,313		$	6,770
Percent of total revenue		12	%		12	%		15	%		13	%

Three Months

Sales and marketing expense for the three months ended September 30, 2011 was $2.6 million, which was an increase of $170,000 from the same period in 2010. This increase was due primarily to office rent, sales commissions, and miscellaneous service fees.

Nine Months

Sales and marketing expense was $7.3 million for the nine months ended September 30, 2011, which was a $543,000 increase compared to the nine months ended September 30, 2010. This increase was due to compensation based expenses including severance accruals and stock based compensation of $225,000, combined with increased sales office rent and miscellaneous service fees totaling $200,000.

General and Administrative Expense


(in thousands)	Three Months Ended September 30, 2011			Three Months Ended September 30, 2010			Nine Months Ended September 30, 2011			Nine Months Ended September 30, 2010
General and administrative expense	$	1,786		$	1,941		$	5,666		$	5,614
Percent of total revenue		8	%		10	%		11	%		10	%

Three Months

General and administrative expense for the three months ended September 30, 2011was $1.8 million, which was a decrease of $155,000 from the same period in 2010. This decrease was due primarily to a reduction in the variable compensation accrual of approximately $80,000, combined with decreased consulting fees of approximately $60,000.

Nine Months

General and administrative expense for the nine months ended September 30, 2011 was $5.7 million, which was consistent with the nine months ended September 30, 2010.

Other Non-Operating Income (Expenses)


(in thousands)	Three Months Ended September 30, 2011			Three Months Ended September 30, 2010			Nine Months Ended September 30, 2011			Nine Months Ended September 30, 2010
Interest expense	$	(192	)	$	(250	)	$	(612	)	$	(578	)
Other income (expense)	$	81		$	(385	)	$	37		$	(406	)
Income tax benefit (provision)	$	(529	)	$	(221	)	$	1,097		$	(701	)

Three Months

Interest expense was $192,000 for the three months ended September 30, 2011, which was a decrease of $58,000 from the three months ended September 30, 2010. This decrease was due to lower principal balances outstanding on our capital leases and term loan.

Other income was $81,000 for the three months ended September 30, 2011, compared with other expense of $385,000 for the same period in 2010. During the three months ended September 30, 2010, we disposed of customer-specific photomasks with a book value of $400,000, compared to no such dispositions in the three months ended September 30, 2011.

For the three months ended September 30, 2011, the Company recorded a $529,000 income tax provision, compared to a tax provision of $221,000 for the three months ended September 30, 2010. The increase in the provision is related to an increase in pre-tax income of $1.1 million.

Nine Months

Interest expense was $612,000 during the nine months ended September 30, 2011, which was a $34,000 increase from the nine months ended September 30, 2010. This increase is primarily due to interest in connection with our term loan, which had an average outstanding balance of approximately $4.7 million during the nine month period ended September 30, 2011. The term loan originated in June 2010.

Other income was $37,000 for the nine months ended September 30, 2011, compared to other expense of $406,000 for the nine-month period ended September 30, 2010. During the nine months ended September 30, 2010, we disposed of customer-specific photomasks with a book value of $400,000, compared to no such dispositions in the nine months ended September 30, 2011.

Income tax benefit for the nine months ended September 30, 2011 was $1.1 million due to our operating loss for the period. The effective tax rate was 37%. During the nine months ended September 30, 2010, the Company recorded a $701,000 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 nine months ended September 30, 2011 and 2010, are summarized as follows:


(in thousands)	2011			2010
Cash provided by (used in):
Operating activities	$	(5,160	)	$	5,738
Investing activities		(5,463	)		(4,621	)
Financing activities		8,896			4,615
Effect of exchange rate changes on cash		(45	)		(30	)

Net (decrease) increase in cash and cash equivalents	$	(1,772	)	$	5,702

Cash Flow from Operating Activities

Cash used for operating activities during the nine months ended September 30, 2011 was $5.2 million. Cash generated from operations, after adjusting for non-cash items, was $700,000. Cash was used to fund a $13.6 million increase in inventory and accounts receivable, which was partially offset by a $7.3 million increase in accounts payable and accrued liabilities. Our primary supplier resolved their production constraints in the third quarter resulting in a wafer bank increase and higher inventory. We expect inventory to continue to increase during the fourth quarter of 2011 and then decrease during the first quarter of 2012 as it becomes more aligned with our projected sales and operational needs.

The net amount of cash provided by operating activities during the nine months ended September 30, 2010 was $5.7 million, and was primarily due to earnings from operations after adjusting for non-cash items.

Cash Flows from Investing Activities

The net amount of cash used in investing activities during the nine months ended September 30, 2011 was $5.5 million, which was primarily for test equipment purchases to expand our back-end test and assembly capacity and equipment in connection with our Burlington, Vermont foundry.

The net amount of cash used in investing activities during the nine months ended September 30, 2010 was $4.6 million, which was for purchases in connection with our Burlington, Vermont foundry, and capitalized wafer photomasks for new products.

Cash Flow from Financing Activities

The net amount of cash generated by financing activities during the nine months ended September 30, 2011 was $8.9 million. Net proceeds from our sale of stock in August 2011 were $9.8 million. The company also received $1.7 million in proceeds from employee stock options exercised. Offsetting these increases were $2.6 million in principal payments on our debt, primarily our capital leases and term loan.

The net amount of cash generated by financing activities during the nine months ended September 30, 2010 was $4.6 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 $1.7 million in principal payments.

We also financed $400,000 and $1.4 million of capital expenditures for the nine months ending September 30, 2011 and 2010, respectively, with capital leases which we reported as supplemental information on the cash flow statement.

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, consumption of our inventory buildup, and expected future demand, 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 operations through at least the third quarter of 2012.

The Company had $8.2 million in cash and cash equivalents at September 30, 2011. We also have approximately $4.3 million available to us under our $7.5 million secured line of credit facility. As of September 30, 2011, we had no amounts outstanding under our secured line of credit facility.

Cash and cash equivalents decreased by $1.8 million in the first nine months of 2011. Cash was used to fund a $13.6 million increase in inventory and accounts receivable, which was partially offset by a $7.3 million increase in accounts payable and accrued liabilities. We also purchased $5.3 million in capital equipment. Offsetting the above were $11.5 million in proceeds received from the issuance of common stock, including approximately $9.8 million from our sale of stock in August 2011, combined with $1.7 million in proceeds from employee stock option exercises.

The increase in inventory had a direct impact on our increase in accounts payable of $4.8 million for the nine months ended September 30, 2011. The Company expects our inventory to increase further during the fourth quarter as we receive wafers that we are committed to purchase and are non-cancellable. If operating cash flow is not sufficient to fund these purchases, we will borrow funds against our line of credit facility with Silicon Valley Bank (“SVB”) and pursue other potentially available sources of cash, including seeking additional capital leases to fund equipment-related capital expenditures for the remainder of the year. Although this line of credit facility was due to expire on October 31, 2011, we have negotiated an extension through December 31, 2011 and we are currently renegotiating for a one to two year renewal. There is no assurance that we will be able to agree on terms that will be acceptable.

At September 30, 2011, we had outstanding capital commitments of approximately $600,000. Expenditures incurred for capital and engineering support for our Burlington, Vermont foundry project from inception to date have been approximately $29.2 million, and we estimate an additional $1.5 million of expenses will be incurred before the end of the year. If we do not generate enough cash from our

operations, do not have sufficient receivables to make available borrowings under our secured line of credit facility, or if actual expenditures for capital and engineering support for our Burlington, Vermont foundry project are higher than estimated, planned equipment purchases and other expenses to be incurred in connection with the Burlington foundry project could be delayed, which would further delay commercial production from this foundry.

Our existing loan agreement with SVB requires SVB to approve any additional debt financing we may seek to obtain, other than specific approved debt, such as lease lines of credit. We may be required to seek additional debt or equity to repay our existing debt or execute our business strategy. Any issuance of equity securities to obtain additional funds 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.

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 are now measured on a monthly basis through December 31, 2011. The expiration date of our revolving line of credit was extended from October 31, 2011 to December 31, 2011. The Fifth Amendment also provided 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 guarantees advances of eligible foreign accounts. Our borrowing base associated with the EX-IM guarantee is the lesser 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.

At September 30, 2011 no amounts were outstanding under our secured revolving line of credit facility and we had availability of $4.3 million under this facility. The availability under this line of credit facility, which is measured on a monthly basis, could fluctuate as it is primarily based on eligible accounts receivable.

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 facility was extended on October 31, 2011 to December 31, 2011, and we are actively pursuing a renewal of this facility before the end of the year. 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 the covenants in our existing agreements.

We currently have four capital leases outstanding, totaling approximately $4.1 million, with terms between two and three years and effective interest rates between 9% and 10%. These leases have a total book value of $1.9 million and we have 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 September 30, 2011, the present value of this promissory note is $471,000. 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 September 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 September 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, the judge moved the hearing to March 2013, at which time all parties are to 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 September 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 nine months ended September 30, 2011 of $1.9 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 September 30, 2011, our accumulated deficit was $219 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). SVB may require new and more restrictive covenants in the future, with increased costs to the Company. 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.

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, flood, 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 January 2011, our former chief executive and chief operating officers both resigned. Our former chief financial officer was named chief executive officer. A replacement chief financial officer was hired in April 2011 and resigned in October 2011. At that time our controller was appointed as interim chief financial officer. We are conducting

an executive search for a chief financial officer. 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 appointed a new vice president of worldwide sales in August 2011, to oversee our worldwide sales organization for all product lines. In addition, we appointed a vice president of marketing in October 2011. If we experience further turnover in our key management personnel, we will incur additional expenses and our operating results may be materially and adversely affected.

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. Our foundry agreements with TI and with 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, 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 September 30, 2011, was $5.0 million, or 23% 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 September 30, 2011, approximately 44% of our total product sales revenue was generated by five customers. Our top customers include our distributors. 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:

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actual or anticipated variations in our operating results;

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

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

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

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conditions or trends in the semiconductor memory products industry;

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unexpected design or manufacturing difficulties;

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

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

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

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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

There were no purchases of equity securities by the Company during the three months ended September 30, 2011.

ITEM 6.

EXHIBITS

(a) Exhibits:



10.71		Change in Control Severance Agreement between the Registrant and Mark R. Kent dated August 31, 2011 (1)

10.72		Change in Control Severance Agreement between the Registrant and Peter Zimmer dated August 31, 2011 (1)

10.73		Second Amended and Restated Change in Control Severance Agreement between the Registrant and Eric A. Balzer dated August 31, 2011 (1)

10.74		Sixth Amendment to Loan and Security Agreement between the Registrant and Silicon Valley Bank dated September 6, 2011

10.75		Seventh Amendment to Loan and Security Agreement between the Registrant and Silicon Valley Bank dated October 31, 2011

10.76		First Amendment to Loan and Security Agreement (Ex-Im Loan Facility) between the Registrant and Silicon Valley Bank dated October 31, 2011

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 *
100.LAB		XBRL Taxonomy extension label linkbase *
101.PRE		XBRL Taxonomy extension presentation linkbase *

Notes to Exhibits List:

(1)	Incorporated by reference to our Form 8-K (Commission File No. 0-17739) filed with the Securities and Exchange Commission on September 7, 2011

*	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 nine months ended September 30, 2011 and 2010, (ii) Condensed Consolidated Balance Sheet at September 30, 2011 and December 31, 2010, (iii) Consolidated Statements of Cash Flows for the nine months ended September 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/ Gery E. Richards

Gery E. Richards

Interim Chief Financial Officer

(Principal Accounting Officer and

Duly Authorized Officer of the Registrant)

Date: November 4, 2011

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