<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/ X / Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
For the quarterly period ended 10/31/96 or
/ / 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: 1-8266
DATARAM CORPORATION
(Exact name of registrant as specified in its charter)
New Jersey 22-1831409
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
P.O. Box 7528, Princeton, NJ 08543
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (609) 799-0071
________________________________________________________________
(Former name, former address and former fiscal year, if changed since
last report)
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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the last practicable date. Common Stock
($1.00 par value): As of December 6, 1996, there were 3,244,605 shares
outstanding. <PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Dataram Corporation And Subsidiary
Consolidated Balance Sheets
October 31, 1996 and April 30, 1996
(Unaudited) (Audited)
October 31, 1996 April 30, 1996
Assets
Current Assets:
Cash and cash equivalents $ 7,736,429 $ 8,482,447
Trade receivables, less allowance
for doubtful accounts and sales returns
of $760,000 at October 31, 1996
and $800,000 at April 30, 1996 9,350,372 12,077,714
Inventories 2,204,851 2,311,897
Other current assets 460,746 862,709
__________ __________
Total current assets 19,752,398 23,734,767
Property and equipment, at cost:
Land 875,000 875,000
Machinery and equipment 6,338,342 6,190,426
__________ __________
7,213,342 7,065,426
Less: accumulated depreciation
and amortization 5,217,026 4,867,226
__________ __________
Net property and equipment 1,996,316 2,198,200
Other assets 5,730 5,730
__________ __________
$ 21,754,444 $ 25,938,697
========== ==========
<PAGE>
October 31, 1996 April 30, 1996
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 2,950,174 $ 5,909,262
Accrued liabilities 1,191,352 1,022,404
Income taxes payable 177,169 0
__________ __________
Total current liabilities 4,318,695 6,931,666
Deferred income taxes 929,000 929,000
Stockholders' Equity:
Common stock, par value $1.00 per share.
Authorized 18,000,000 shares; issued
3,298,405 at October 31, 1996
and 3,824,305 at April 30, 1996 3,298,405 3,824,305
Additional paid-in capital 2,756,889 3,425,142
Retained earnings 10,451,455 10,828,584
__________ __________
Total stockholders' equity 16,506,749 18,078,031
__________ __________
$ 21,754,444 $ 25,938,697
========== ==========
See accompanying notes to consolidated financial statements.
<PAGE>
Dataram Corporation and Subsidiary
Consolidated Statements of Earnings
Three and Six Months Ended October 31, 1996 and 1995
(Unaudited)
<TABLE>
1996 1995
2nd Quarter Six Months 2nd Quarter Six Months
<S> <C> <C> <C> <C>
Revenues $ 17,167,956 $ 34,616,246 $ 32,331,119 $ 57,215,866
Costs and expenses:
Cost of sales 13,332,847 27,220,820 28,925,556 50,779,451
Engineering and development 249,408 479,090 453,351 888,314
Selling, general and administrative 2,012,622 3,846,374 1,743,759 3,434,804
__________ __________ __________ __________
15,594,877 31,546,284 31,222,666 55,102,569
Earnings from operations 1,573,079 3,069,962 1,208,453 2,113,297
Other income (expense), net
Other income, net 16,607 16,607 0 0
Interest income 59,721 128,289 0 0
Interest expense 0 0 (38,638) (57,169)
__________ __________ __________ __________
76,328 144,896 (38,638) (57,169)
Earnings before income taxes 1,649,407 3,214,858 1,169,815 2,056,128
Income tax expense 635,000 1,236,000 462,000 811,000
__________ __________ __________ __________
Net earnings $ 1,014,407 $ 1,978,858 $ 707,815 $ 1,245,128
========== ========== ========== ==========<PAGE>
<PAGE>
Net earnings per share of common stock
Primary $ .30 $ .56 $ .18 $ .32
========== ========== ========== ==========
Fully Diluted $ .30 $ .55 $ .18 $ .32
========== ========== ========== ==========
Weighted average number of common
shares outstanding
Primary 3,391,312 3,554,602 3,883,626 3,814,900
========== ========== ========= =========
Fully Diluted 3,422,084 3,593,519 3,900,168 3,886,556
========== ========== ========= =========
See accompanying notes to consolidated financial statements. <PAGE>
</TABLE>
Dataram Corporation and Subsidiary
Consolidated Statements of Cash Flows
Six Months Ended October 31, 1996 and 1995
(Unaudited)
1996 1995
Cash flows from operating activities:
Net earnings $ 1,978,858 $ 1,245,128
Adjustments to reconcile net earnings
to net cash provided by (used in)
operating activities:
Depreciation and amortization 349,800 333,641
Bad debt expense 191,283 143,771
Changes in assets and liabilities:
Decrease (increase) in
trade receivables 2,536,059 (4,617,568)
Decrease (increase) in inventories 107,046 (4,866,402)
Decrease in other current assets 401,963 537,769
Decrease in other assets 0 9,346
Increase (decrease) in
accounts payable (2,959,089) 5,397,135
Increase (decrease) in
accrued liabilities 168,948 (942,528)
Increase in income taxes payable 177,169 0
Increase (decrease) in
deferred income taxes 0 514,000
__________ __________
Net cash provided by (used in)
operating activities 2,952,037 (2,245,708)
__________ __________
Cash flows from investing activities:
Purchase of property and equipment (147,916) (154,247)
__________ __________
Net cash used in investing activities (147,916) (154,247)
Cash flows from financing activities:
Proceeds from sale of common shares under
stock option plan 21,400 238,000
Purchase of and retirement of common shares (3,571,539) 0
Increase in long-term debt 0 1,900,000
__________ __________
Net cash provided by (used in)
financing activities (3,550,139) 2,138,000
__________ __________
Net increase (decrease) in cash
and cash equivalents (746,018) (261,955)
Cash and cash equivalents at
beginning of year 8,482,447 721,811
__________ __________
<PAGE>
Cash and cash equivalents at
end of period $ 7,736,429 $ 459,856
========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 26,583 $ 57,169
Income taxes $ 560,000 $ 402,000
See accompanying notes to consolidated financial statements.
<PAGE>
Dataram Corporation and Subsidiary
Notes to Consolidated Financial Statements
October 31, 1996 and April 30, 1996
(1) Cash and cash equivalents consist of unrestricted cash, bankers
acceptances, commercial paper and other short term investments. All
investments are convertible to cash within a period of approximately
thirty days or less.
(2) Inventories consist of the following categories:
10/31/96 4/30/96
Raw Materials $ 1,526,000 $ 1,435,000
Work In Process 171,000 45,000
Finished Goods 508,000 832,000
_________ _________
$ 2,205,000 $ 2,312,000
========= =========
(3) The Company has an agreement with a bank which provides for a
total unsecured line of credit of $11,000,000 with interest at no
higher than one-half percent below the bank's base commercial lending
rate. Borrowings under the line of credit are at the convenience of
Company management and may be repaid at any time. The line of credit
agreement expires in October, 1997, unless otherwise amended or
extended.
(4) In 1982, the Company adopted an incentive stock option plan. As of
October 31, 1996, no further options may be granted under the plan and
options to purchase 6,000 shares were exercised in fiscal 1997 at an
exercise price of $3.57 per share and no further options remain
outstanding.
In September 1992, an incentive and nonstatutory stock option plan
was adopted by the shareholders which provides for the granting of up
to 950,000 shares of common stock to key employees. As of October 31,
1996, options to purchase 479,000 shares at prices ranging from $5.125
to $7.125 per share were outstanding. As of October 31, 1996 options to
purchase 32,000 shares had been exercised and options to purchase
196,400 shares were exercisable.
In November 1992 and March 1993, the Company granted to three
nonemployee directors of the Company and the Company's outside general
counsel five year options to acquire a total of 120,000 shares of the
Company's common stock at an exercise price of $11.25 per share. On
September 10, 1996, the Company granted to a fourth non-employee
director five year options to acquire 30,000 shares at an exercise
price of $6.9375. As of October 31, 1996, none of these options had
been exercised and options to purchase 112,500 shares were exercisable.
(5) In June of 1996, the Company announced an open market repurchase
plan providing for the repurchase of up to 250,000 shares of the
Company's common stock. In July of 1996, the plan was amended to
<PAGE>
provide for the repurchase of up to 500,000 shares of the Company's
common stock. On September 10, 1996 the Board of Directors authorized
the repurchase of an additional 300,000 shares. As of October 31, 1996
a total of 531,900 shares had been repurchased at a total cost of
$3,572,000.
(6) Information furnished reflects all adjustments which are, in the
opinion of management, necessary to a fair presentation of the results
of this interim statement.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
_______________________________
As of October 31, 1996, working capital amounted to $15.4 million
reflecting a current ratio of 4.6 compared to working capital of $16.8
million and a current ratio of 3.4 as of April 30, 1996.
The Company's financial condition remains strong. The Company has
an $11.0 million unsecured line of credit with a bank which expires in
October 1997. At the end of the quarter there was no amount outstanding
under the line of credit. With its current working capital balance and
the line of credit, management believes that it will be able to support
its growth and other capital needs for the foreseeable future.
Results of Operations
_____________________
Revenues for the three month period ending October 31, 1996 were
$17,168,000 compared to revenues of $34,616,000 for the comparable
prior year period. Fiscal 1997 six month revenues totaled $34,616,000
versus six month revenues of $57,216,000 for the prior fiscal year.
The decline in revenues was the result of declining average selling
prices for the Company's products reflecting an eighty percent decrease
in the price of dynamic random access memory chips (DRAMs)which are the
primary raw material in memory boards. As a result of competitive
conditions in the memory board marketplace, the Company passed these
cost savings through to our customers. Increased unit volume partially
offset the reduction in selling prices. Total megabytes shipped have
increased by approximately 115% and 110% in this year's second quarter
and six months, respectively versus the same periods last year.
Cost of sales for the second quarter and six months of fiscal 1997
were 78% and 79%, respectively of revenues versus 89% for both of the
same prior year periods. The increase in operating margins is the
result of increased unit volume which created significant economies of
scale, combined with aggressive purchasing and materials management.
Prices for the four and sixteen megabit DRAM continued to decline
during the second quarter. To minimize the impact of the changes in raw
material values, the Company has maintained tight control over
inventory levels, while still meeting customer delivery requirements.
The price of DRAMS has continued to decline and it is uncertain as to
when prices will stabilize.
Engineering and development costs in fiscal 1997's first quarter
and six months were $249,000 and 479,000, respectively versus $453,000
and $888,000 for the same prior year periods. The decrease in cost was
due to modest reductions in staff, and an overall control of cost
primarily associated with lower product design costs of today's
simplified memory boards. The Company intends to maintain its
commitment to timely introduction of new memory products as new
workstations and computers are introduced.
<PAGE>
Selling, general and administrative costs in this year's second
quarter increased to 12% of revenues from 6% for the same prior year
period. Three month total expenditures increased by $269,000 from the
comparable prior year period. This increase is largely attributable to
certain planned marketing and promotional expenditures, as well as
certain legal expenses incurred related to a Complaint filed by Sun
Microsystems, Inc. Six month selling, general and administrative costs
increased by $412,000 in fiscal 1997 versus fiscal 1996. The Company
has strategically added to its sales department this year to accelerate
our ability to service new and existing customers.
Other income (expense),net for the second quarter and six months
of fiscal 1997 consisted primarily of interest income on short term
investments. Prior year other income (expense) consisted of interest
expense associated with the Company's revolving credit line.<PAGE>
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On October 15, 1996, Dataram was served with a Complaint filed
against it by Sun Microsystems, Inc. ("Sun") in the United States
District Court for the Northern District of California. This Complaint
claims infringement by Dataram of five patents issued to Sun which
enable the use of single in-line memory modules in the memory systems
for certain Sun workstations. Sun seeks to enjoin Dataram from
infringing the patents, and seeks damages and attorney's fees. Dataram
has answered the Complaint, asserting that the patents which were
issued to Sun are invalid or not infringed by Dataram products.
Dataram is seeking payment of its attorney fees in this action from
Sun. Also, Dataram has filed counterclaims charging Sun with anti-
trust violations, unfair competition and product disparagement.
ITEM 5. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
27 (a). Financial Data Schedule
99 (a). Press Release reporting results of Second Quarter, Fiscal
Year 1997.
99 (b). Press Release reporting the Sun Microsystems, Inc.
Complaint.
B. Reports on Form 8-K
No reports on Form 8-K have been filed during the current quarter.
<PAGE>
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.
DATARAM CORPORATION
Dec. 9, 1996 MARK E. MADDOCKS
Date: ___________________ By: _____________________________
Mark E. Maddocks
Vice President, Finance
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-END> OCT-31-1996
<CASH> 7,736,429
<SECURITIES> 0
<RECEIVABLES> 10,110,372
<ALLOWANCES> 760,000
<INVENTORY> 2,204,851
<CURRENT-ASSETS> 19,752,398
<PP&E> 7,213,342
<DEPRECIATION> 5,217,026
<TOTAL-ASSETS> 21,754,444
<CURRENT-LIABILITIES> 4,318,695
<BONDS> 0
0
0
<COMMON> 3,298,405
<OTHER-SE> 13,208,344
<TOTAL-LIABILITY-AND-EQUITY> 21,754,444
<SALES> 17,167,956
<TOTAL-REVENUES> 17,167,956
<CGS> 13,332,847
<TOTAL-COSTS> 13,332,847
<OTHER-EXPENSES> 249,408
<LOSS-PROVISION> 72,926
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,649,407
<INCOME-TAX> 635,000
<INCOME-CONTINUING> 1,014,407
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,014,407
<EPS-PRIMARY> .30
<EPS-DILUTED> .30
</TABLE>
FOR IMMEDIATE RELEASE CONTACT: Mark Maddocks
Vice-President, Finance
Telephone: (609) 799-0071
DATARAM ACHIEVES STRONG EARNINGS GAINS
FOR SECOND QUARTER, SIX MONTHS OF FISCAL '97
PRINCETON, NJ, November 7, 1996-Dataram Corporation (AMEX: DTM)
Benefiting from considerably increased unit volume and production
efficiencies, Dataram Corporation reported higher earnings for the
second quarter and six months of fiscal 1997, Robert V. Tarantino,
president and chief executive officer, announced today.
Net earnings for the second quarter ended October 31, 1996
were $1,014,000, or $.30 per share compared to $708,000, or $.18
per share for the second quarter of last year. For the six months
ended October 31, 1996, net earnings totaled $1,979,000, or $.55
per share compared to $1,245,000 or $.32 per share for the prior
year. Revenues for the second quarter and six months of fiscal
1997 were $17.2 million and $34.6 million versus $32.3 million and
$57.2 million for fiscal 1996.
"These favorable results demonstrate our ability to sustain
strong earnings growth in an extremely challenging business
environment characterized by severely reduced selling prices for
computer memory products," Tarantino said.
Continued....
<PAGE>
Dataram Earnings Release - Page 2
"DRAM chips -- the major cost component of computer memory boards
- -- which were priced at $25 per megabyte one year ago, are now
available at $5 per megabyte. Our competitive selling proposition
is to pass through these cost savings to our customers."
"Unit volume remains strong," Tarantino reported. "Gigabytes
of memory shipped this quarter have more than doubled last year's
comparable quarter shipments and are approximately 45% higher than
this year's first quarter."
"We are committed to increasing revenues as well as earnings,"
he declared. "We have made strategic additions to our sales and
marketing organization in an intensified effort to broaden our
distribution channels and make significant inroads into new
markets."
Tarantino also announced that the Company, as part of
previously announced stock repurchase plans, bought 208,500 shares
of its common stock in the second quarter of fiscal 1997 bringing
the total year to date purchases to 531,900 shares which have been
retired. With no debt and strong operating cash flow, Dataram
plans to finance remaining purchases from internal resources.
The Company strengthened its Board of Directors with the
addition of Roger C. Cady, vice president, business development of
Dynatech Corporation, a $300 million communications technology
company based in Burlington, MA. Dataram will benefit from Mr.
Cady's experience and expertise in strategic planning and
acquisitions for several high tech firms as the Company pursues
strategies to broaden its product base.
Dataram develops, manufactures and markets quality computer
memory products for workstations, servers and personal computers.
Continued.... <PAGE>
Dataram Earnings Release - Page 3
Dataram Corporation and Subsidiary
Consolidated Summary Information
(In thousands except per share amounts)
Quarter Ended Six Months Ended
October 31 October 31
1996 1995 1996 1995
Revenues $17,168 $32,331 $34,616 $57,216
Net Earnings $1,014 $708 $1,979 $1,245
Net Earnings Per Share $.30 $.18 $.55 $.32
Average Shares
Outstanding 3,422 3,900 3,594 3,887
FOR IMMEDIATE RELEASE CONTACT: Mark Maddocks
Vice President, Finance
Telephone: (609) 799-0071
DATARAM DISCLOSES COMPLAINT
PRINCETON, NJ, October 15, 1996 Dataram Corporation (AMEX: DTM)
Dataram Corporation announced today that it has been served with
a Complaint filed by Sun Microsystems, Inc. alleging that certain
of Dataram's memory boards violate five patents issued to Sun.
Sun's marketing department has made such allegations in the past
against Dataram and other independent memory board manufacturers.
Dataram continues to believe it has a right to manufacture and
sell its Sun compatible memory boards, none of which violate any
intellectual property rights of Sun Microsystems.
Robert Tarantino, President and Chief Executive Officer of
Dataram Corporation, said, "It is not our intention to submit to
what we believe is a heavy handed marketing approach being
utilized by Sun. It is most unfortunate that Sun Microsystems, a
company which over the years has deserved the reputation of being
an innovator in its field, has chosen to compete in the courtroom
rather than in the marketplace."
Mr. Tarantino noted that three of the five patents do not
even involve Dataram memory products. "Sun is well aware that
these patents are useless in the production of quality memory
boards."
"The remaining two patents are invalid as they merely
restate prior art in the field, including Dataram's own prior
art. Dataram believes its products do not infringe any valid Sun
Microsystems patent. Dataram has been in the business of
manufacturing and selling memory systems for thirty years and
during that time has earned the respect of its customers and
competitors for the quality of its products and the integrity of
its organization. The Company routinely reviews filed patents
before going to market, and in its entire history has never
before been accused of violating another company's intellectual
property rights."
According to Mr. Tarantino, as a result of the step taken by
Sun, Dataram will be compelled to file counterclaims seeking
appropriate redress from Sun for its current program of
"marketing" through product disparagement, its abusive misuse of
its patent portfolio and its interference with Dataram's existing
and potential customer relationships.
Dataram Corporation is a manufacturer and marketer of
quality memory boards for workstations, servers, and personal
computers.
