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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 10/31/99 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 2, 1999, there were 5,281,236 shares outstanding.
This amount does not reflect the pending 3 for 2 stock split announced
November 10, 1999 and distributable on December 15, 1999.
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PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Dataram Corporation And Subsidiary
Consolidated Balance Sheets
October 31, 1999 and April 30, 1999
(Unaudited) (Audited)
October 31, 1999 April 30, 1999
Assets
Current Assets:
Cash and cash equivalents $ 8,389,248 $ 8,092,527
Trade receivables, less allowance
for doubtful accounts and sales returns
of $600,000 at October 31, 1999
and $450,000 at April 30, 1999 16,955,823 12,016,106
Inventories 4,449,631 3,290,300
Other current assets 653,210 475,387
__________ __________
Total current assets 30,447,912 23,874,320
Property and equipment, at cost:
Land 875,000 875,000
Machinery and equipment 5,929,089 5,188,696
__________ __________
6,804,089 6,063,696
Less: accumulated depreciation
and amortization 3,172,993 2,572,993
__________ __________
Net property and equipment 3,631,096 3,490,703
Other assets 9,210 8,655
__________ __________
$ 34,088,218 $ 27,373,678
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 10,062,136 $ 4,344,179
Accrued liabilities 2,054,773 1,840,647
Income taxes payable 230,408 250,408
__________ __________
Total current liabilities 12,347,317 6,435,234
Deferred income taxes 919,000 919,000
Stockholders' Equity:
Common stock, par value $1.00 per share.
Authorized 18,000,000 shares; issued
7,575,015 at October 31,
1999 and issued and outstanding
5,236,810 at April 30, 1999 7,575,015 5,236,810
Retained earnings 13,246,886 14,782,634
__________ __________
Total stockholders' equity 20,821,901 20,019,444
__________ __________
$ 34,088,218 $ 27,373,678
========== ==========
See accompanying notes to consolidated financial statements.
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Dataram Corporation and Subsidiary
Consolidated Statements of Earnings
Three and Six Months Ended October 31, 1999 and 1998
(Unaudited)
1999 1998
2nd Quarter Six Months 2nd Quarter Six Months
Revenues $ 29,385,690 $ 50,550,374 $ 16,261,859 $ 34,012,021
Costs and expenses:
Cost of sales 21,940,071 37,354,818 11,095,422 23,365,271
Engineering and development 343,087 676,062 371,824 703,434
Selling, general and administrative 3,857,280 6,907,116 2,810,081 5,747,042
__________ __________ __________ __________
26,140,438 44,937,996 14,277,327 29,815,747
Earnings from operations 3,245,252 5,612,378 1,984,532 4,196,274
Interest income 117,005 224,687 135,588 252,085
__________ __________ __________ __________
Earnings before income taxes 3,362,257 5,837,065 2,120,120 4,448,359
Income tax provision 1,281,000 2,225,000 830,000 1,741,000
__________ __________ __________ __________
Net earnings $ 2,081,257 $ 3,612,065 $ 1,290,120 $ 2,707,359
========== ========== ========== ==========
Net earnings per share of common stock
Basic $ .27 $ .46 $ .16 $ .33
========== ========== ========== ==========
Diluted $ .22 $ .38 $ .14 $ .29
========== ========== ========== ==========
Weighted average number of common
shares outstanding
Basic 7,790,938 7,809,215 8,314,641 8,329,428
========== ========== ========= =========
Diluted 9,460,072 9,419,416 9,218,127 9,214,509
========== ========== ========= =========
See accompanying notes to consolidated financial statements.
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Dataram Corporation and Subsidiary
Consolidated Statements of Cash Flows
Six Months Ended October 31,1999 and 1998
(Unaudited)
1999 1998
Cash flows from operating activities:
Net earnings $ 3,612,065 $ 2,707,359
Adjustments to reconcile net earnings
to net cash provided by
operating activities:
Depreciation and amortization 600,000 624,000
Bad debt expense 164,450 113,189
Changes in assets and liabilities:
(Increase) decrease in trade receivables (5,104,167) 1,762,167
Increase in inventories (1,159,331) (824,965)
Increase in other current assets (177,823) (133,928)
Increase in other assets (555) (3,000)
Increase (decrease) in accounts payable 5,717,957 (1,494,995)
Increase in accrued liabilities 214,126 117,165
Decrease in income taxes payable (20,000) (101,423)
__________ __________
Net cash provided by
operating activities 3,846,722 2,765,569
__________ __________
Cash flows from investing activities:
Purchase of property and equipment (740,393) (641,391)
__________ __________
Net cash used in investing activities (740,393) (641,391)
Cash flows from financing activities:
Proceeds from sale of common shares under
stock option plan 573,022 0
Purchase and cancellation of common stock (3,382,630) 0
Purchase of common stock held in treasury 0 (422,741)
__________ __________
Net cash used in financing activities (2,809,608) (422,741)
__________ __________
Net increase in cash
and cash equivalents 296,721 1,701,437
Cash and cash equivalents at
beginning of year 8,092,527 7,529,906
__________ __________
Cash and cash equivalents at
end of period $ 8,389,248 $ 9,231,343
========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 40,484 $ 38,751
Income taxes $ 2,065,000 $ 1,855,200
See accompanying notes to consolidated financial statements.
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Notes to Consolidated Financial Statements
October 31, 1999 and 1998
(Unaudited)
Basis of Presentation
The information at October 31, 1999 and for the three and six months ended
October 31, 1999 and 1998, 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, 1999
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 $546,781 and retained earnings in the amount of $1,978,224. On November 11,
1998 the Company's Board of Directors announced a two-for-one stock split
effected in the form of a dividend for shareholders of record at the close of
business on November 23, 1998 and payable December 3, 1998. The stock split
has been charged to additional paid in capital in the amount of $2,125,871 and
retained earnings in the amount of $655,534. Weighted average shares
outstanding and net earnings per share in the accompanying financial
statements have been restated to give retroactive effect to these stock
splits.
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, 1999 and April
30, 1999 consist of the following categories:
October 31, 1999 April 30, 1999
________________ ______________
Raw material $ 2,403,000 $ 1,335,000
Work in process 564,000 508,000
Finished goods 1,483,000 1,447,000
________________ ______________
$ 4,450,000 $ 3,290,000
================ ==============
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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.
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 2000 and 1999. As of October 31, 1999, the amount available for
borrowing under the revolving credit facility was $12,000,000.
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.
Common Stock
During the quarter ended October 31, 1999, the Company purchased and retired
210,200 shares of its common stock. For the six month period ended October 31,
1999, 279,900 shares have been purchased and retired. These amounts do not
reflect the pending 3 for 2 stock split announced November 10, 1999 and
distributable on December 15, 1999.
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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.
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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 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, 1999, working capital amounted to $18.1 million
reflecting a current ratio of 2.5 compared to working capital of $17.4 million
and a current ratio of 3.7 as of April 30, 1999.
During the second quarter of fiscal 2000, the Company amended and
restated its $12 million unsecured revolving credit line with its bank to
renew the expiring portion of the facility. Annually, $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. The credit facility was unused during the first six months of
fiscal 2000 and fiscal 1999. As of Octber 31, 1999 there was no amount
outstanding under the line of credit.
On September 10, 1998, the Company announced an open market repurchase program
providing for the repurchase of up to 500,000 shares of its common stock. On
June 15, 1999, the Company announced an additional open market repurchase plan
providing for the repurchase of up to 500,000 shares of the Company's common
stock. During the quarter ended October 31, 1999, the Company purchased
210,200 shares of its common stock at an average price of $13.14 per share. As
of October 31, 1999 there are 382,100 shares remaining available for purchase.
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.
Year 2000
The Company's products are all year 2000 compliant. The Company has
completed its upgrade of its manufacturing, accounting, production and
inventory control systems and software and management believes that these
systems and software are now year 2000 compliant. The Company has numerous
personal computers and peripheral devices used in information technology and
non-information technology applications which have been tested for year 2000
compliance. The Company has upgraded or replaced any non year 2000 compliant
devices and management believes that these devices are all year 2000
compliant. Management estimates that the financial impact of the upgrades has
not had a material effect on the Company's consolidated financial condition,
results of operations and liquidity.
As part of the Company's Year 2000 readiness program, the Company has
identified its key vendors and suppliers and management believes that its key
vendors and suppliers are year 2000 compliant. The Company has a diverse and
ever changing customer base, with no single customer typically accounting for
10% or more of its revenue. The Company has not ascertained the stage of year
2000 readiness of its current customers.
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The possible consequences of the Company, its key vendors, certain
customers, governments or government agencies, financial institutions,
utilities, etc. of not being year 2000 compliant by January 1, 2000 include
but are not limited to, among other things, a temporary plant closing, delays
in the delivery of products, delays in collection of receivables, and
inventory and supply obsolescence. Because of the widespread nature of this
problem, no assurances can be made that the Company will not be materially
adversely affected by a temporary inability of the Company to conduct its
business in the ordinary course for a period of time after January 1, 2000.
However, management believes that the actions it has taken should
significantly reduce the adverse effect any such disruptions may have.
Results of Operations
Revenues for the three month period ending October 31, 1999 were
$29,386,000 compared to revenues of $16,262,000 for the comparable prior year
period. Fiscal 2000 six month revenues totaled $50,550,000 versus six month
revenues of $34,012,000 for the prior fiscal year. The increase in revenues
was the result of strong volume growth coupled with more stable average
selling prices. Volume, measured in gigabytes shipped, increased 104% in the
second quarter compared to the prior year comparable period.
Cost of sales for the second quarter and six months of fiscal 1999 were 75%
and 74%, respectively of revenues versus 68% and 69% for the same prior year
periods. The increase in the cost of sales was mainly the result of reduced
sales of certain of the Company's Digital Equipment Corporation (now Compaq)
compatible memory products which command high margins.
Engineering and development costs in fiscal 2000's second quarter and six
months were $343,000 and $676,000, respectively versus $372,000 and $703,000
for the same prior year periods. 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 this year's second quarter
and six months decreased to 13% and 14%, respectively of revenues from 17% for
the same prior year periods. Three month total expenditures increased by
$1,047,000 from the comparable prior year period. Six month selling, general
and administrative costs increased by $1,160,000 in fiscal 2000 versus fiscal
1999. The increase in costs is primarily attributable to a continued expansion
of the Company's sales force, as well as an increase in costs associated with
increased revenues and profits.
Other income (expense),net for the second quarter and six months of
fiscal 1999 and fiscal 2000 consists 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.
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PART II: OTHER INFORMATION
ITEM 5. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
10 (a). Amendment to revolving line of credit agreement (Attached).
27 (a). Financial Data Schedule
28 (a). Press Release reporting results of Second Quarter, Fiscal Year
2000 (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: December 10, 1999 By: MARK E. MADDOCKS
_____________________ ___________________________
Mark E. Maddocks
Vice President, Finance
(Principal Financial Officer)
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