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 10/31/00 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 November 28, 2000, there were 8,565,219 shares
outstanding.
<TABLE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Dataram Corporation And Subsidiary
Consolidated Balance Sheets
October 31, 2000 and April 30, 2000
(Unaudited) (Audited)
October 31, 2000 April 30, 2000
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 17,914,790 $ 13,649,601
Trade receivables, less allowance
for doubtful accounts and sales returns
of $550,000 at October 31, 2000
and $450,000 at April 30, 2000 17,659,726 16,241,229
Inventories 6,775,521 4,651,277
Other current assets 911,608 584,428
__________ __________
Total current assets 43,261,645 35,126,535
Property and equipment, at cost:
Land 875,000 875,000
Machinery and equipment 10,034,939 8,009,925
__________ __________
10,909,939 8,884,925
Less: accumulated depreciation
and amortization 4,727,076 3,877,476
__________ __________
Net property and equipment 6,182,863 5,007,449
Other assets 18,160 17,160
__________ __________
$ 49,462,668 $ 40,151,144
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 10,471,265 $ 9,537,747
Accrued liabilities 2,748,374 2,878,550
__________ __________
Total current liabilities 13,219,639 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 8,565,219 at October 31,
2000 and 8,278,403 at April 30, 2000 8,565,219 8,278,403
Additional paid in capital 3,271,296 980,461
Retained earnings 23,565,514 17,634,983
__________ __________
Total stockholders' equity 35,402,029 26,893,847
__________ __________
$ 49,462,668 $ 40,151,144
========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
Dataram Corporation and Subsidiary
Consolidated Statements of Earnings
Three and Six Months Ended October 31, 2000 and 1999
(Unaudited)
2000 1999
2nd Quarter Six Months 2nd Quarter Six Months
<S> <C> <C> <C> <C>
Revenues $ 39,865,951 $ 77,861,763 $ 29,385,690 $ 50,550,374
Costs and expenses:
Cost of sales 30,755,272 59,615,860 21,940,071 37,354,818
Engineering and development 414,370 786,391 343,087 676,062
Selling, general and administrative 4,059,985 8,405,581 3,857,280 6,907,116
__________ __________ __________ __________
35,229,627 68,807,832 26,140,438 44,937,996
Earnings from operations 4,636,324 9,053,931 3,245,252 5,612,378
Interest income, net 291,983 521,600 117,005 224,687
__________ __________ __________ __________
Earnings before income taxes 4,928,307 9,575,531 3,362,257 5,837,065
Income tax provision 1,877,000 3,645,000 1,281,257 2,225,000
__________ __________ __________ __________
Net earnings $ 3,051,307 $ 5,930,531 $ 2,081,000 $ 3,612,065
========== ========== ========== ==========
Net earnings per share of common stock
Basic $ .36 $ .70 $ .27 $ .46
========== ========== ========== ==========
Diluted $ .31 $ .60 $ .22 $ .38
========== ========== ========== ==========
Weighted average number of common
shares outstanding
Basic 8,559,356 8,493,064 7,790,930 7,809,215
========== ========== ========= =========
Diluted 9,944,063 9,916,452 9,460,072 9,419,416
========== ========== ========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
Dataram Corporation and Subsidiary
Consolidated Statements of Cash Flows
Six Months Ended October 31,2000 and 1999
(Unaudited)
2000 1999
<S> <C>
Cash flows from operating activities: <C>
Net earnings $ 5,930,531 $ 3,612,065
Adjustments to reconcile net earnings
to net cash provided by
operating activities:
Depreciation and amortization 849,600 600,000
Bad debt expense 148,032 164,450
Changes in assets and liabilities:
Increase in trade receivables (1,566,529) (5,104,167)
Increase in inventories (2,124,244) (1,159,331)
Increase in other current assets (327,180) (177,823)
Increase in other assets (1,000) (555)
Increase in accounts payable 933,518 5,717,957
(Decrease)increase in accrued liabilities (130,176) 214,126
Decrease in income taxes payable 0 (20,000)
__________ __________
Net cash provided by
operating activities 3,712,552 3,846,722
__________ __________
Cash flows from investing activities:
Purchase of property and equipment (2,025,014) (740,393)
__________ __________
Net cash used in investing activities (2,025,014) (740,393)
Cash flows from financing activities:
Proceeds from sale of common shares under
stock option plan (including tax benefits) 2,577,651 573,022
Purchase and subsequent cancellation
of common stock 0 (3,382,630)
__________ __________
Net cash used in financing activities 2,577,651 (2,809,608)
__________ __________
Net increase in cash
and cash equivalents 4,265,189 296,721
Cash and cash equivalents at
beginning of year 13,649,601 8,092,527
__________ __________
Cash and cash equivalents at
end of period $ 17,914,790 $ 8,389,248
========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 32,603 $ 40,484
Income taxes $ 2,055,000 $ 2,065,000
See accompanying notes to consolidated financial statements.
</TABLE>
Notes to Consolidated Financial Statements
October 31, 2000 and 1999
(Unaudited)
Basis of Presentation
The information at October 31, 2000 and for the three and six months
ended October 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 October 31,
2000 and April 30, 2000 consist of the following categories:
October 31, 2000 April 30, 2000
________________ ______________
Raw material $ 2,601,000 $ 2,454,000
Work in process 1,197,000 223,000
Finished goods 2,978,000 1,974,000
________________ ______________
$ 6,776,000 $ 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 concen-
tration 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 per-
forms 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
On October 31, 2000, the Company amended and restated its existing credit
facility with its bank. Under the agreement, the Company maintains the
revolving credit facility of $12,000,000 until October 31, 2001, at which
point it will decrease to $6,000,000 until October 31, 2002. The
agreement provides for Eurodollar rate loans and base rate loans at an
interest rate no higher than the bank's base commercial lending rate less
3/4%. 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 October 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 October 31, 2000, working capital amounted to $30.0 million
reflecting a current ratio of 3.3 compared to working capital of $27.7
million and a current ratio of 2.8 as of April 30, 2000.
During fiscal 2001, the Company amended and restated its $12 million
unsecured revolving credit line with its bank. On October 31, 2001, $6
million of the facility is scheduled to expire and on October 31, 2002,
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 October
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 October 31, 2000
increased 36% to $39,866,000 compared to revenues of $29,386,000 for the
comparable prior year period. Unit volume measured in gigabytes shipped
increased by approximately 22% 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. Revenue for Intel processor based server
memory, introduced last year, increased by approximately 125% from second
quarter fiscal 2000. Fiscal 2001 six month revenues totaled $77,862,000
versus six month revenues of $50,550,000 for the prior fiscal year, an
increase of 54%.
Cost of sales for the second quarter and first six months of fiscal 2001
were 77% and 76%, respectively of revenues versus 75% and 74% for the
same prior year periods. The increase in cost of sales as a percentage of
revenues is primarily attributable to the growth of shipments of memory
for the Intel processor based servers. These products typically carry
smaller margins than the remainder of the Company's memory products.
Engineering and development costs in fiscal 2001's second quarter
and first six months were $414,000 and $786,000, respectively versus
$343,000 and $676,000 for the same prior year periods. The Company
intends to maintain its commitment to the timely introduction of new
memory products as new servers are introduced.
Selling, general and administrative costs in this year's second
quarter and first six months decreased to 10% and 11%, respectively of
revenues from 13% and 14% for the same prior year periods. Year-to-date
selling, general and administrative costs increased by $1,498,000 in
fiscal 2001 versus fiscal 2000. The increase in costs is primarily
attributable to planned increases in sales staff and marketing programs.
Interest income, net sfor the second quarter and six months 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 5. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
27 (a). Financial Data Schedule
28 (a). Press Release reporting results of Second Quarter, Fiscal
Year 2001 (Attached).
28 (b). Amendment to revolving line of credit agreement (Attached).
28 (c). Revolving Line of Credit Note.
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: November 28, 2000 By: MARK E. MADDOCKS
_______________________ ________________________
Mark E. Maddocks
Vice President, Finance
(Principal Financial Officer)
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