Drexler Technology Fiscal 2000 First-Quarter Report - Company Financial Information

Cambridge Telcom Report, August 2, 1999

Drexler Technology Corporation (Nasdaq:DRXR), a supplier of PC-based optical memory cards and related system software and peripherals, has announced results for the fiscal 2000 first quarter ended June 30, 1999.

For the first three months of fiscal 2000, net income was $845,000, or 9 cents per share diluted, versus $975,000, or 10 cents per share diluted, for last year's first quarter.

Fiscal 2000 first-quarter revenues were $3,741,000 compared with $3,846,000 for the year-earlier quarter.

The following three LaserCard-related investment programs reduced pre-tax profits during the first quarter. Their effect was partially offset by the recognition of a portion of the Company's accumulated income tax benefits under Statement of Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes."

* The Company launched an optical memory card reader/writer manufacturing and development operation. (Manufacturing start-up and development costs are included in operating expenses.) The Company's 10-K Report dated June 25, 1999 states that "The launching of this reader/writer manufacturing and development operation...is estimated to reduce net income during fiscal 2000 by $1 million, or 10 cents per share...."

* The Company's marketing budget and staff were expanded to pursue new business opportunities for LaserCard(R) optical memory cards and systems.

* To prepare for anticipated optical memory card procurements by the U.S. government, equipment and facility modifications were expedited in the LaserCard manufacturing plant that necessarily interfered with card production and thereby cost several hundred thousand dollars in first quarter pre-tax profits.

At June 30, 1999, the Company's cash and cash equivalents totaled approximately $7,637,000 versus approximately $8,066,000 at March 31, 1999. The Company has no debt.

Based in Mountain View, Drexler Technology Corporation manufactures LaserCard optical memory cards. Drexler's wholly owned subsidiary, LaserCard Systems Corporation, develops system software for PC-based optical card systems. At June 30, 1999, there were 9,794,180 shares of Drexler Technology common stock outstanding.

Drexler Technology Corporation and Subsidiaries
Summary Consolidated Statements of Operations (Unaudited)
(In Thousands, Except per Share Data)

                                              Three Months Ended

                                             6/30/99        6/30/98

Revenues                                     $ 3,741        $ 3,846

Cost of sales                                  2,163          1,965

Operating expenses                             1,218            961

Other income, net                                 86             86

Income tax expense (benefit)                    (399)            31
                                             -------        -------

Net income                                   $   845        $   975
                                             =======        =======
Net income per share:
Basic                                        $   .09        $   .10
                                             =======        =======
Diluted                                      $   .09        $   .10
                                             =======        =======
Shares used in computing net
income per share:
Basic number of shares                         9,794          9,693
Diluted number of shares                       9,902         10,141