Dataram Corp. (NASDAQ:DRAM) filed Quarterly Report for the period ended 2009-01-31.
Dataram Corp. is a worldwide leader in the design and manufacture of high capacity reliable and innovative memory solutions. With over thirty nine years of experience Dataram provides customized memory solutions for OEMs and compatible memory for leading brands including HP Dell IBM SGI Sun Microsystems and Intel. Dataram provides a full line of compatible memory products for leading manufacturers including HP memory upgrades IBM server memory SGI memory upgrades Sun memory upgrades Dell server memory Intel and AMD Opteron memory . Dataram engineers many groundbreaking memory upgrades that double capacity and are not available from the manufacturers. Dataram Corp. has a market cap of $11.4 million; its shares were traded at around $1.28 with and P/S ratio of 0.3.
Highlight of Business Operations:During the first nine months of fiscal year 2009, net cash used in operating
activities totaled approximately $1,998,000. Net loss in the nine-month
period was approximately $2,022,000. Deferred income taxes increased by
$1,328,000 and accounts payable decreased by $1,140,000. Cash used in
operating activities was partially offset by a decrease in accounts
receivable of approximately $1,283,000 and by a decrease in inventory of
approximately $344,000. Depreciation expense of approximately $263,000 and
non-cash stock-based expense of approximately $515,000 were also recorded.
Research and development expense in fiscal 2009's third quarter and nine
months were $574,000 and $1,041,000, respectively, versus nil in the same
prior year periods. In the current fiscal year, the Company has implemented
a strategy to introduce new and complementary products into its offerings
portfolio. The Company is currently focusing on the development of certain
high performance storage products. As part of that strategy, in January,
2009, the Company entered into a software purchase and license agreement
with another company whereby the Company has the exclusive right to purchase
specified software for a price of $900,000 plus a contingent payment of
$100,000. Third quarter research and development expense includes $300,000
of expense related to a payment for the software purchase and license. The
software and the storage product, which incorporates the software is
currently under development and is not deemed saleable at the present time.
Should the Company elect to continue with the development project, the
Company must make two additional $300,000 payments no later than six and
twelve months, respectively from the date of the agreement, at which point
the Company will own the software.
Selling, general and administrative (S,G&A) expense in fiscal 2009's third
quarter and nine months increased by $522,000 and $1,605,000 respectively,
from the comparable prior year periods. Current year third quarter expense
includes $180,000 of severance expense for a terminated employee.
Additionally, the Company's bad debt and sales returns and allowance expense
is approximately $96,000 higher in this year's third quarter when compared
to the prior year third quarter. This is primarily due to management's
assessment of the increased inherent risk in carrying accounts receivable in
the current economic environment. Stock based compensation expense is
approximately $72,000 higher in the third quarter of this fiscal year when
compared to the comparable prior year period. The balance of the year over
year third quarter increase consists primarily of increased sales and
marketing expenditures totaling approximately $174,000. Nine month S,G&A
expense includes a charge of approximately $716,000 related to a retirement
agreement entered into with the Company's former chief executive officer.
Of this amount, approximately $660,000 relates to payments defined in the
agreement and the balance consists primarily of legal fees incurred by the
Company associated with this matter. Stock-based compensation expense is
recorded as a component of S,G&A expense and totaled $138,000 and $394,000,
respectively, in the third quarter and nine months, compared to $66,000 and
$231,000 in the comparable prior year periods.
Other income, net for the third quarter and nine months totaled $92,000 and
$217,000, respectively, for fiscal 2009 and $233,000 and $681,000, for the
same respective periods in fiscal 2008. Other income in fiscal 2009's third
quarter consisted primarily of $86,000 of net interest income received.
Additionally, other income included $5,000 of foreign currency gain,
primarily as a result of the EURO strengthening relative to the US dollar.
Fiscal 2009's nine months other income consisted primarily of $276,000 of
net interest income received and $57,000 of foreign currency loss, primarily
as a result of the EURO weakening relative to the US dollar. Other income in
fiscal 2008's third quarter consisted primarily of $195,000 of net interest
income. Additionally, there was $39,000 of foreign currency gain, primarily
as a result of the EURO strengthening relative to the US dollar. Other
income in fiscal 2008's nine months consisted primarily of $597,000 of net
interest income. Additionally, there was $84,000 of foreign currency gain,
primarily as a result of the EURO strengthening relative to the US dollar.
Income tax expense (benefit) for the third quarter and nine months of fiscal
2009 was a benefit of $657,000 and $1,290,000 respectively, versus expense
of $214,000 and $780,000 for the same prior year periods. The Company's
effective tax rate for financial reporting purposes in fiscal 2009 is
approximately 38.8%. However, the Company has Federal NOL carry-forwards
totaling approximately $1.6 million and therefore will continue to make cash
payments for income taxes at an approximate rate of 8.0% of pretax earnings
until it utilizes all of its NOL carry-forwards.
Stock Option Expense - In December 2004, SFAS No. 123 (revised 2004),
"Share-Based Payment"("SFAS 123(R)") was issued. SFAS 123(R) revises
SFAS 123 and supersedes APB No. 25, "Accounting for Stock Issued to
Employees" ("APB 25"). SFAS 123, as originally issued in 1995, established
as preferable a fair value-based method of accounting for share-based
payment transactions with employees. However, SFAS 123 as amended permitted
entities the option of continuing to apply the intrinsic value method under
APB 25 that the Company had been using, as long as the footnotes to the
financial statements disclosed what net income would have been had the
preferable fair value-based method been used. SFAS 123(R) requires that the
compensation cost relating to all share-based payment transactions,
including employee stock options, be recognized in the historical financial
statements. That cost is measured based on the fair value of the equity or
liability instrument issued and amortized over the related service period.
The Company adopted the guidance in SFAS 123(R) effective May 1, 2006.
As such, the accompanying consolidated statement of operations for fiscal
2009's third quarter and nine months ended January 31, 2009 includes
approximately $138,000 and $394,000, of compensation expense, respectively,
in the selling, general and administrative expense line item related to the
fair value of options granted to employees and directors under the Company's
stock-based employee compensation plans which is being amortized over the
service period in the consolidated financial statements, as required by
SFAS 123(R). These awards have been classified as equity instruments, and as
such, a corresponding increase of approximately, $394,000 has been reflected
in additional paid-in capital in the accompanying consolidated balance sheet
as of January 31, 2009. Fiscal 2008's third quarter and nine months ended
January 31, 2008 includes approximately $66,000 and $231,000 of compensation
expense, respectively in the selling, general and administrative expense
line and as such, a corresponding increase of approximately, $231,000 has
been reflected in additional paid-in capital in the accompanying
consolidated balance sheet as of January 31, 2008. The fair value of each
stock option granted is estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions: Expected
life is based on the Company's historical experience of option exercises
relative to option contractual lives; Expected volatility is based on the
historical volatility of the Company's share price; Expected dividend yield
assumes the current dividend rate remains unchanged; Risk free interest rate
approximates United States government debt rates at the time of option
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