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 07/31/96 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 incorporation or organization) Identification No.) 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 September 5, 1996, there were 3,330,305 shares outstanding. PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Dataram Corporation And Subsidiary Consolidated Balance Sheets July 31, 1996 and April 30, 1996 (Unaudited) (Audited) July 31, 1996 April 30, 1996 Assets Current Assets: Cash and cash equivalents $ 8,901,431 $ 8,482,447 Trade receivables, less allowance for doubtful accounts and sales returns of $890,000 at July 31, 1996 and $800,000 at April 30, 1996 9,338,894 12,077,714 Inventories 1,599,339 2,311,897 Other current assets 372,923 862,709 __________ __________ Total current assets 20,212,587 23,734,767 Property and equipment, at cost: Land 875,000 875,000 Machinery and equipment 6,251,786 6,190,426 __________ __________ 7,126,786 7,065,426 Less: accumulated depreciation and amortization 5,042,126 4,867,226 __________ __________ Net property and equipment 2,084,660 2,198,200 Other assets 5,730 5,730 __________ __________ $ 22,302,977 $ 25,938,697 ========== ========== Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 3,499,365 $ 5,909,262 Accrued liabilities 882,215 1,022,404 __________ __________ Total current liabilities 4,381,580 6,931,666 Deferred income taxes 929,000 929,000 Stockholders' Equity: Common stock, par value $1.00 per share. Authorized 18,000,000 shares; issued 3,830,305 at July 31, 1996 and 3,824,305 at April 30, 1996 3,830,305 3,824,305 Treasury stock, 323,400 shares (2,071,485) 0 Additional paid-in capital 3,440,542 3,425,142 Retained earnings 11,793,035 10,828,584 __________ __________ Total stockholders' equity 16,992,397 18,078,031 __________ __________ $ 22,302,977 $ 25,938,697 ========== ========== Dataram Corporation and Subsidiary Consolidated Statements of Earnings Three Months Ended July 31, 1996 and 1995 (Unaudited) 1996 1995 Revenues $ 17,448,290 % 24,884,747 Costs and expenses: Cost of sales 13,887,973 21,853,895 Engineering and development 229,682 434,963 Selling, general and administrative 1,833,752 1,691,045 __________ __________ 15,951,407 23,979,903 Earnings from operations 1,496,883 904,844 Other income (expense), net Interest income 68,568 0 Interest expense 0 (18,531) __________ __________ 68,568 (18,531) Earnings before income taxes 1,565,451 886,313 Income tax expense 601,000 349,000 __________ __________ Net earnings $ 964,451 $ 537,313 ========== ========== Net earnings per share of common stock $ .26 $ .14 ========== ========== Weighted average number of common shares outstanding 3,721,093 3,821,810 ========== ========== See accompanying notes to consolidated financial statements. Dataram Corporation and Subsidiary Consolidated Statements of Cash Flows Three Months Ended July 31,1996 and 1995 (Unaudited) 1996 1995 Cash flows from operating activities: Net earnings $ 964,451 $ 537,313 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Depreciation and amortization 174,900 167,100 Bad debt expense 220,795 58,097 Changes in assets and liabilities: Decrease in trade receivables 2,518,025 1,241,037 Decrease in inventories 712,558 413,251 Decrease in other current assets 489,786 277,669 Decrease in other assets 0 8,921 Decrease in accounts payable (2,409,897) (1,492,739) Decrease in accrued liabilities (140,189) (1,323,866) __________ __________ Net cash provided by (used in) operating activities 2,530,429 (113,217) __________ __________ Cash flows from investing activities: Purchase of property and equipment (61,360) (92,208) Disposal of fixed assets 0 (559) __________ __________ Net cash used in investing activities (61,360) (92,767) Cash flows from financing activities: Proceeds from sale of common shares under stock option plan 21,400 0 Purchase of treasury stock (2,071,485) 0 __________ __________ Net cash used in financing activities (2,050,085) 0 __________ __________ Net increase (decrease) in cash and cash equivalents 418,984 (205,984) Cash and cash equivalents at beginning of year 8,482,447 721,811 __________ __________ Cash and cash equivalents at end of period $ 8,901,431 $ 515,827 ========== ========== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 0 $ 18,531 Income taxes $ 0 $ 0 Dataram Corporation and Subsidiary Notes to Consolidated Financial Statements July 31, 1996 and April 30, 1996 (1) Cash and cash equivalents consist of unrestricted cash, bankers acceptances, commercial paper and other short term investments. All investments are convertible to cash within a period of approximately thirty days or less. (2) Inventories consist of the following categories: 7/31/96 4/30/96 Raw Materials $ 1,005,000 $ 1,435,000 Work In Process 50,000 45,000 Finished Goods 544,000 832,000 _________ _________ $ 1,599,000 $ 2,312,000 ========= ========= (3) The Company has an agreement with a bank which provides for a total unsecured line of credit of $11,000,000 with interest at no higher than one - -half percent below the bank's base commercial lending rate. Borrowings under the line of credit are at the convenience of Company management and may be repaid at any time. The line of credit agreement expires in October, 1997, unless otherwise amended or extended. (4) In 1982, the Company adopted an incentive stock option plan. As of July 31, 1996, no further options may be granted under the plan and options to purchase 6,000 shares were exercised in the first quarter of fiscal 1997 at an exercise price of $3.57 per share and no further options remain outstanding. In September 1992, an incentive and nonstatutory stock option plan was adopted by the shareholders which provides for the granting of up to 950,000 shares of common stock to key employees. As of July 31, 1996, options to purchase 342,000 shares at prices ranging from $5.125 to $7.125 per share were outstanding. As of July 31, 1996 options to purchase 32,000 shares had been exercised and options to purchase 151,900 shares were exercisable. In November 1992 and March 1993, the Company granted to three non-employee directors of the Company and the Company's outside general counsel five year options to acquire a total of 120,000 shares of the Company's common stock at an exercise price of $11.25 per share. As of July 31, 1996, none of these options had been exercised and options to purchase 90,000 shares were exercisable. (5) In June of 1996, the Company announced an open market repurchase plan providing for the repurchase of up to 250,000 shares of the Company's common stock. In July of 1996, the plan was amended to provide for the repurchase of up to 500,000 shares of the Company's common stock. As of July 31, 1996, 323,400 shares had been repurchased under the plan. On September 3, 1996, the Company announced that the repurchase plan had been completed. A total of 500,000 shares have been repurchased at a total cost of $3,346,000. (6) Information furnished reflects all adjustments which are, in the opinion of management, necessary to a fair presentation of the results of this interim statement. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources As of July 31, 1996, working capital amounted to $15.8 million reflecting a current ratio of 4.6 compared to working capital of $16.8 million and a current ratio of 3.4 as of April 30, 1996. The Company's financial condition remains strong. The Company has an $11.0 million unsecured line of credit with a bank which expires in October 1997. 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. Results of Operations Revenues for the three month period ending July 31, 1996 were $17,448,000 compared to revenues of $24,885,000 for the comparable prior year period. The decline in revenues was the result of declining average selling prices for the Company's products reflecting a seventy five percent decrease in the price of dynamic random access memory chips (DRAMs)which are the primary raw material in memory boards. As a result of competitive conditions in the memory board marketplace, the Company passed these cost savings through to our customers. Increased unit volume partially offset the reduction in selling prices. Total megabytes shipped have increased by approximately 110% in the first quarter versus the same period last year. Cost of sales for the first quarter were 80% of revenues versus 88% for the same prior year period. The increase in operating margins is the result of increase unit volume which created significant economies of scale, combined with aggressive purchasing and materials management. Prices for the four and sixteen megabit, the primary raw material in computer memory boards, decrease by approximately 55% during the quarter. To minimize the impact of the changes in raw material values, the company has maintained tight control over inventory levels, while still meeting customer delivery requirements. The price of DRAMS has continued to decline and it is uncertain as to when prices will stabilize. Engineering and development costs in fiscal 1997's first quarter were $230,000 versus $435,000 for the same prior year period. The decrease in cost was due to modest reductions in staff, and an overall control of cost primarily associated with lower product design costs of today's simplified memory boards. The Company intends 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 increased to 11% of revenues from 7% for the same prior year period. Three month total expenditures increased by $143,000 from the prior year period. This increase is primarily the result of planned marketing and promotional expenditures. The company has also strategically added to our sales department this quarter to accelerate our ability to service new and existing customers. Other income (expense),net for the first quarter of fiscal 1997 consisted primarily of interest income on short term investments. Prior year other income (expense) consisted of interest expense associated with the Company's revolving credit line. 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 1997 (Attached). 28 (b). Press Release reporting completion of stock repurchase program (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 4, 1996 By: MARK E. MADDOCKS ____________________ Mark E. Maddocks Vice President, Finance (Principal Financial Officer)