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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 07/31/98 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 31, 1998, there were 2,781,405 shares
outstanding.
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PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Basis of Presentation
The information at July 31, 1998 and for the three months ended July
31, 1998 and 1997, 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
ststements for the year ended April 30, 1998 included in the Company's
Annual Report on Form 10-K filed with the Securities and Exchange
Commission.
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.
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.
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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
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.
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Dataram Corporation And Subsidiary
Consolidated Balance Sheets
July 31, 1998 and April 30, 1998
(Unaudited) (Audited)
July 31, 1998 April 30, 1998
Assets
Current Assets:
Cash and cash equivalents $ 10,709,917 $ 7,529,906
Trade receivables, less allowance
for doubtful accounts and sales returns
of $500,000 at July 31, 1998
and $450,000 at April 30, 1998 7,621,950 10,075,838
Inventories 2,369,728 2,923,165
Other current assets 643,925 493,013
__________ __________
Total current assets 21,345,520 21,021,922
Property and equipment, at cost:
Land 875,000 875,000
Machinery and equipment 9,362,225 8,805,875
__________ __________
10,237,225 9,680,875
Less: accumulated depreciation
and amortization 6,587,979 6,245,979
__________ __________
Net property and equipment 3,649,246 3,434,896
Other assets 10,380 7,380
__________ __________
$ 25,005,146 $ 24,464,198
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 3,150,634 $ 4,698,786
Accrued liabilities 1,647,599 1,548,315
Income taxes payable 808,693 236,116
__________ __________
Total current liabilities 5,606,926 6,483,217
Deferred income taxes 1,013,000 1,013,000
Stockholders' Equity:
Common stock, par value $1.00 per share.
Authorized 18,000,000 shares; issued
and outstanding 2,781,405 at July 31, 1998
and at April 30, 1998 2,781,405 2,781,405
Additional paid-in capital 2,125,871 2,125,871
Retained earnings 13,477,944 12,060,705
__________ __________
Total stockholders' equity 18,385,220 16,967,981
__________ __________
$ 25,005,146 $ 24,464,198
========== ==========
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Dataram Corporation and Subsidiary
Consolidated Statements of Earnings
Three Months Ended July 31, 1998 and 1997
(Unaudited)
1998 1997
Revenues $ 17,750,162 $ 18,147,292
Costs and expenses:
Cost of sales 12,269,849 14,634,977
Engineering and development 331,610 223,578
Selling, general and administrative 2,936,961 2,280,159
__________ __________
15,538,420 17,138,714
Earnings from operations 2,211,742 1,008,578
Other income (expense)
Other income net 0 2,000
Interest income, expense net 116,497 64,694
__________ __________
116,497 66,694
Earnings before income taxes 2,328,239 1,075,272
Income tax expense 911,000 406,000
__________ __________
Net earnings $ 1,417,239 $ 669,272
========== ==========
Net earnings per share of common stock:
Basic $ .51 $ .22
========== ==========
Diluted $ .46 $ .21
========== ==========
Weighted average number of common
shares outstanding
Basic 2,781,405 3,053,603
========== ==========
Diluted 3,063,154 3,199,120
========== ==========
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Dataram Corporation and Subsidiary
Consolidated Statements of Cash Flows
Three Months Ended July 31,1998 and 1997
(Unaudited)
1998 1997
Cash flows from operating activities:
Net earnings $ 1,417,239 $ 669,272
Adjustments to reconcile net earnings
to net cash provided by
operating activities:
Depreciation and amortization 342,000 125,100
Bad debt expense 103,580 87,649
Changes in assets and liabilities:
Decrease (Increase)in trade receivables 2,350,308 (395,044)
Decrease in inventories 553,437 1,404,678
Increase in other current assets (150,912) (108,134)
Increase in other assets (3,000) (1,550)
Decrease in accounts payable (1,548,152) (913,433)
Increase (decrease)in accrued liabilities 99,284 (481,056)
Increase in income taxes payable 572,577 391,000
__________ __________
Net cash provided by
operating activities 3,736,361 778,482
__________ __________
Cash flows from investing activities:
Purchase of property and equipment (556,350) (603,745)
__________ __________
Net cash used in investing activities (556,350) (603,745)
Cash flows from financing activities:
Proceeds from sale of common shares under
stock option plan 0 57,000
Purchase and cancellation of common stock 0 (359,558)
__________ __________
Net cash used in financing activities 0 (302,558)
__________ __________
Net increase (decrease) in cash
and cash equivalents 3,180,011 (127,821)
Cash and cash equivalents at
beginning of year 7,529,906 6,835,671
__________ __________
Cash and cash equivalents at
end of period $ 10,709,917 $ 6,707,850
========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 38,751 $ 37,453
Income taxes $ 365,200 $ 43,058
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
As of July 31, 1998, working capital amounted to $15.7 million reflecting a
current ratio of 3.8 compared to working capital of $14.5 million and a current
ratio of 3.2 as of April 30, 1998.
The Company's financial condition remains strong. The Company has a $12
million unsecured line of credit with a bank, of which $6 miilion is scheduled
to expire in October 1998 and $6 million expires in October 1999. The Company
intends to renew any expiring portion of the facility by the expiration date and
maintain a $12 million total facility. 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.
The Company's products are all year 2000 compliant. The Company has
completed its upgrade of its manufacturing, accounting, production and inventory
control sytems and software and these systems and software are now year 2000
compliant. The Company has numerous personal computers and peripheral devices
which are currently being tested for year 2000 compliance. None of these devices
are involved in mission critlcal applications and the Company intends to upgrade
or replace any non year 2000 compliant devices by the end of the current fiscal
year. Management estimates that the financial impact of the upgrade will not
have a material effect on the Company's consolidated financial condition,
results of operations and liquidity.
Results of Operations
Revenues for the three month period ended July 31, 1998 were $17,750,000
compared to revenues of $18,147,000 for the comparable prior year period. The
Company continues to build on the sales/distribution network utilized to sell
our products, focusing on increasing the number of corporate customers and
distributors.
Cost of sales for the first quarter were 69% of revenues versus 81% for
the same prior year period. The decrease in the cost of sales was mainly the
result of the Company's focus on providing high-capacity products which
generate favorable margins. The Company continues to be first to market with
many of its products.
Engineering and development costs in fiscal 1999's first quarter were
$332,000 versus $224,000 for the same prior year period. The Company continues
to maintain its commitment to timely introduction of new memory products as
new workstations and computers are introduced.
Selling, general and administrative costs in this year's first quarter
were 17% of revenues versus 13% for the same prior year period. Three month
total expenditures increased by $657,000 from the prior year period. This
increase is primarily the result of increased investment in the Company's sales
and marketing organization to enhance our ability to service new and existing
customers.
Other income (expense),net for the first quarter of fiscal 1999 and fiscal
1998, consists primarily of interest income on short term investments.
Safe Harbor Statement
The information provided in this press release 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.
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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 First Quarter, Fiscal Year 1998
(Attached).
28(b). Press Release announcing 500,000 share repurchase plan (Attached).
28(c). Press Release announcing Robert V. Tarantino Elected Chairman of
Dataram Corporation (Attached).
B. Reports on Form 8-K
No reports on Form 8-K have been filed during the current quarter.
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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
MARK E. MADDOCKS
Date: _______________ By: ____________________________
Mark E. Maddocks
Vice President, Finance
(Principal Financial Officer)
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