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 7/31/00 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 August 25, 2000, there were 8,547,819 shares outstanding.
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Dataram Corporation And Subsidiary
Consolidated Balance Sheets
July 31, 2000 and April 30, 2000
(Unaudited) (Audited)
July 31, 2000 April 30, 2000
Assets
Current Assets:
Cash and cash equivalents $ 16,252,693 $ 13,649,601
Trade receivables, less allowance
for doubtful accounts and sales returns
of $550,000 at July 31, 2000
and $450,000 at April 30, 2000 18,044,550 16,241,229
Inventories 6,243,859 4,651,277
Other current assets 698,058 584,428
__________ __________
Total current assets 41,239,160 35,126,535
Property and equipment, at cost:
Land 875,000 875,000
Machinery and equipment 8,774,628 8,009,925
__________ __________
9,649,628 8,884,925
Less: accumulated depreciation
and amortization 4,302,276 3,877,476
__________ __________
Net property and equipment 5,347,352 5,007,449
Other assets 17,160 17,160
__________ __________
$ 46,603,672 $ 40,151,144
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 11,275,975 $ 9,537,747
Accrued liabilities 2,509,713 2,878,550
Income taxes payable 610,599 0
__________ __________
Total current liabilities 14,396,287 12,416,297
Deferred income taxes 841,000 841,000
Stockholders' Equity:
Common stock, par value $1.00 per share.
Authorized 54,000,000 shares; issued
and outstanding 8,547,819 at July 31,
2000 and 8,278,403 at April 30, 2000 8,547,819 8,278,403
Additional paid in capital 2,304,359 980,461
Retained earnings 20,514,207 17,634,983
__________ __________
Total stockholders' equity 31,366,385 26,893,847
__________ __________
$ 46,603,672 $ 40,151,144
========== ==========
See accompanying notes to consolidated financial statements.
Dataram Corporation and Subsidiary
Consolidated Statements of Earnings
Three Months Ended July 31, 2000 and 1999
(Unaudited)
2000 1999
Revenues $ 37,995,812 $ 21,164,684
Costs and expenses:
Cost of sales 28,860,588 15,414,747
Engineering and development 372,021 332,975
Selling, general and administrative 4,345,596
3,049,836
__________ __________
33,578,205 18,797,558
Earnings from operations 4,417,607 2,367,126
Interest income, net 229,617 107,682
__________ __________
Earnings before income taxes 4,647,224 2,474,808
Income tax provision 1,768,000 944,000
__________ __________
Net earnings $ 2,879,224 $ 1,530,808
========== ==========
Net earnings per share of common stock:
Basic $ .34 $ .20
========== ==========
Diluted $ .29 $ .17
========== ==========
Weighted average number of common
shares outstanding:
Basic 8,426,771 7,827,491
========== ==========
Diluted 9,958,790 9,264,369
========== ==========
See accompanying notes to consolidated financial statements.
Dataram Corporation and Subsidiary
Consolidated Statements of Cash Flows
Three Months Ended July 31,2000 and 1999
(Unaudited)
2000 1999
Cash flows from operating activities:
Net earnings $ 2,879,224 $ 1,530,808
Adjustments to reconcile net earnings
to net cash provided by
operating activities:
Depreciation and amortization 424,800 300,000
Bad debt expense (recovery) 96,866 (55,782)
Changes in assets and liabilities:
(Increase) decrease in trade receivables (1,900,187) 2,290,122
Increase in inventories (1,592,582) (1,012,944)
Increase in other current assets (113,630) (170,302)
Increase (decrease) in accounts payable 1,738,228 (140,968)
Decrease in accrued liabilities (368,837) (871,295)
Increase in income taxes payable 610,599 257,000
__________ __________
Net cash provided by
operating activities 1,774,481 2,126,639
__________ __________
Cash flows from investing activities:
Purchase of property and equipment (764,703) (506,890)
__________ __________
Net cash used in investing activities (764,703) (506,890)
Cash flows from financing activities:
Proceeds from sale of common shares under
stock option plan (including tax benefits) 1,593,314 417,813
Purchase and subsequent cancellation
of common stock 0 (621,560)
Net cash provided by (used in) financing __________ __________
activities 1,593,314 (203,747)
__________ __________
Net increase in cash
and cash equivalents 2,603,092 1,416,002
Cash and cash equivalents at
beginning of period 13,649,601 8,092,527
__________
__________
Cash and cash equivalents at
end of period $ 16,252,693 $ 9,508,529
========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 32,603 $ 36,682
Income taxes $ 250,000 $ 525,200
See accompanying notes to consolidated financial statements.
Notes to Consolidated Financial Statements
July 31, 2000 and 1999
(Unaudited)
Basis of Presentation
The information for the three months ended July 31, 2000 and 1999, is
unaudited but includes all adjustments (consisting only of normal recurring
adjustments) which, in the opinion of management, are necessary to state
fairly the financial information set forth therein in accordance with
generally accepted accounting principles. The interim results are not
necessarily indicative of results to be expected for the full fiscal year.
These financial statements should be read in conjuction with the audited
financial statements for the year ended April 30, 2000 included in the
Company's Annual Report on Form 10-K filed with the Securities and Exchange
Commission.
Stock Splits
On November 10, 1999 the Company's Board of Directors announced a three-for-
two stock split effected in the form of a dividend for shareholders of record
at the close of business on November 24, 1999 and payable December 15, 1999.
The stock split has been charged to additional paid in capital in the amount
of $263,000 and retained earnings in the amount of $2,377,000. Weighted
average shares outstanding and net earnings per share in the accompanying
financial statements have been restated to give retroactive effect to the
stock split.
Significant Accounting Policies
Principles of consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary, Dataram International Sales Corporation (a
Domestic International Sales Corporation (DISC)). All significant intercompany
transactions and balances have been eliminated.
Cash and cash equivalents
Cash and cash equivalents consist of unrestricted cash, money market preferred
stock and commercial paper with original maturities of three months or less.
Inventory valuation
Inventories are valued at the lower of cost or market, with costs determined
by the first-in, first-out method. Inventories at July 31, 2000 and April 30,
2000 consist of the following categories:
July 31, 2000 April 30, 2000
________________ ______________
Raw material $ 2,297,000 $ 2,454,000
Work in process 1,574,000 223,000
Finished goods 2,373,000 1,974,000
________________ ______________
$ 6,244,000 $ 4,651,000
================ ==============
Property and equipment
Property and equipment is recorded at cost. Depreciation is generally computed
on the straight-line basis. Depreciation rates are based on the estimated
useful lives which range from three to five years for machinery and equipment.
When property or equipment is retired or otherwise disposed of, related costs
and accumulated depreciation are removed from the accounts. Repair and
maintenance costs are charged to operations as incurred.
Revenue recognition
Revenue from product sales is recognized when the related goods are shipped to
the customer and all significant obligations of the Company have been
satisfied. Estimated warranty costs are accrued.
Product development and related engineering
The Company expenses product development and related engineering costs as
incurred. Engineering effort is directed to development of new or improved
products as well as ongoing support for existing products.
Income taxes
The Company follows the asset and liability method of accounting for income
taxes in accordance with the provisions of Statement of Financial Accounting
Standards SFAS No. 109, "Accounting for Income Taxes". Under the asset and
liability method of SFAS No. 109, deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to
differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates in effect for the year in
which those temporary differences are expected to be recovered or settled.
Under SFAS No. 109, the effect on deferred tax assets and liabilities of a
change in tax rates is recognized in earnings in the period that the tax rate
changes.
Concentration of credit risk
Financial instruments that potentially subject the Company to concentration of
credit risk consist primarily of cash and cash equivalents. The Company
maintains its cash and cash equivalents in financial institutions and
brokerage accounts. To the extent that such deposits exceed the maximum
insurance levels, they are uninsured. The Company performs ongoing evaluations
of its customers' financial condition, as well as general economic conditions
and, generally, requires no collateral from its customers.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Long-term debt
During the second quarter of fiscal 2000, the Company amended and restated its
credit facility with its bank. Under the amended agreement, the Company
modified certain financial covenants and increased the revolving credit
facility to $12,000,000 until October 31, 2000, at which point it will
decrease to $6,000,000 until October 31, 2001. The agreement provides for
Eurodollar rate loans, CD rate loans and base rate loans at an interest rate
no higher than the bank's base commercial lending rate less 1/2%. The Company
is required to pay a commitment fee equal to 1/16 of one percent per annum on
the unused commitment. The agreement contains certain restrictive financial
covenants including a minimum current ratio, minimum tangible net worth
requirement, minimum interest coverage ratio, maximum debt to equity ratio and
certain other covenants, as defined by the agreement. There were no borrowings
during fiscal 2001 and 2000. As of July 31, 2000, the amount available for
borrowing under the revolving credit facility was $12,000,000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and section 21E of
the Securities and Exchange Act of 1934, as amended. Actual results could
differ materially from those projected in the forward looking statements.
Liquidity and Capital Resources
As of July 31, 2000, working capital amounted to $26.8 million reflecting
a current ratio of 2.9 compared to working capital of $22.7 million and a
current ratio of 2.8 as of April 30, 2000.
During fiscal 2000, the Company amended and restated its $12 million
unsecured revolving credit line with its bank. On October 31, 2000, $6 million
of the facility is scheduled to expire and on October 31, 2001, the remaining
$6 million of the facility is scheduled to expire. The Company intends to
renew any expiring portion of the facility by the expiration date and maintain
a $12 million total facility. As of July 31, 2000 there was no amount
outstanding under the line of credit. Management believes that its working
capital together with internally generated funds and its bank line of credit
are adequate to finance the Company's operating needs and future capital
requirements.
Results of Operations
Revenues for the three month period ending July 31, 2000 increased 80% to
$37,996,000 from revenues of $21,165,000 for the comparable prior year period.
Unit volume measured in gigabytes shipped increased by approximately 76% over
the prior comparable year period. The increase in revenues was the result of
increased demand for the Company's memory products driven by the growth both
in shipments of network servers and memory content per server.
Cost of sales for the first quarter were 76% of revenues versus 73% for
the same prior year period. The increase in cost of sales as a percentage of
revenues is primarily attributable to the relatively higher growth in revenues
of the Company's products for the Intel market place which command lower
margins than the Company's compatibles products.
Engineering and development costs in fiscal 2001's first quarter were
$372,000 versus $333,000 for the same prior year period. The Company intends
to maintain its commitment to the timely introduction of new memory products
as new workstations and computers are introduced.
Selling, general and administrative costs in fiscal 2001's first quarter
decreased to 11% of revenues from 14% for the same prior year period. Three
month total expenditures increased by $1,296,000 from the comparable prior
year period. The increase in costs is primarily attributable to the planned
increases in sales staff and marketing programs.
Other income (expense),net for the first quarter of fiscal 2001 and 2000
consisted primarily of interest income on short term investments.
Safe Harbor Statement
The information provided in this interim report may include forward-
looking statements relating to future events, such as the development of new
products, the commencement of production or the future financial performance
of the Company. Actual results may differ from such projections and are
subject to certain risks including, without limitation, risks arising from:
changes in the price of memory chips, changes in the demand for memory systems
for workstations and servers, increased competition in the memory systems
industry, delays in developing and commercializing new products and other
factors described in the Company's most recent Annual Report on Form 10-K
filed with the Securities and Exchange Commission which can be reviewed at
http://www.sec.gov.
PART II: OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
A. The Company has filed an Amendment to its Certificate of Incorporation
(the "Amendment"). The Amendment increases the authorized shares of Common
Stock from 18,000,000 to 54,000,000 resulting from two stock splits.
Subsequently, the Company also filed a Restated Certificate of Incorporation
which incorporates the Amendment.
ITEM 5. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
3 Amendment to Certificate of Incorporation dated August 2, 2000
3 Restated Certificate of Incorporation dated August 3, 2000
27 Financial Data Schedule
99 Press Release reporting results of the first Quarter of Fiscal
Year 2001 (Attached).
B. Reports on Form 8-K
No reports on Form 8-K have been filed during the current quarter.
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
Date: September 7, 2000 By: MARK E. MADDOCKS
_____________________ ______________________________
Mark E. Maddocks
Vice President, Finance
(Principal Financial Officer)
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