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) Page 8 of 8