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Dataram Corp. Reports Operating Results (10-Q)

September 11, 2009 | About:
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10qk

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Dataram Corp. (DRAM) filed Quarterly Report for the period ended 2009-07-31.

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 $19.7 million; its shares were traded at around $2.22 with and P/S ratio of 0.8.

Highlight of Business Operations:

During the first fiscal quarter ended July 31, 2009, net cash used in

operating activities totaled approximately $5,108,000. Net loss in the

period was approximately $978,000. Inventories increased by approximately

$2,285,000. In the quarter ended July 31, 2009, the MMB business unit

described in Note 2 increased their inventory levels by approximately

$1.0 million to properly support normal sales levels. At April 30, 2009,

the MMB business unit inventory totaled approximately $170,000. Inventory

was maintained at an unsustainably low level during the first month

subsequent to the acquisition as part of the Company's transition and

integration plan. The balance of the inventories increase was primarily the

result of management's decision to purchase inventories at favorable pricing

levels. Accounts receivable increased by approximately $1,661,000,

primarily as a result of increased revenues. Deferred income taxes

increased by $628,000 and accrued liabilities decreased by approximately

$190,000. Cash used in operating activities was partially offset by an

increase in accounts payable of approximately $341,000. Depreciation and

amortization expense of approximately $283,000 and non-cash stock-based

expense of approximately $156,000 were also recorded.



Three months ended Three months ended

July 31, 2009 July 31, 2008

________________ ________________

United States $ 7,245,000 $ 5,574,000

Europe 1,457,000 1,447,000

Other (principally Asia Pacific Region) 488,000 542,000

________________ ________________

Consolidated $ 9,190,000 $ 7,563,000

= =



Research and development expense in fiscal 2010's first quarter were

$874,000 versus $212,000 in the same prior year period. In the first quarter

of the prior fiscal year, the Company 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. Fiscal 2010's first

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 the final $300,000 payment, at which point the Company will own the

software. We expect to make further investments in this area.



Selling, general and administrative (S,G&A) expense in the first fiscal

quarter ended July 31, 2010 decreased by approximately $135,000 from the

comparable prior year period. The acquired MMB business unit's S,G&A expense

recorded in fiscal 2010's first quarter was approximately $602,000 versus

nil in the comparable prior year period. The prior fiscal year's first

quarter expense included a charge of approximately $716,000 related to a

retirement agreement entered into with the Company's former chief executive

officer. Stock-based compensation expense is recorded as a component of

S,G&A expense and totaled approximately $156,000 and $126,000, respectively,

for the first quarter of fiscal 2010 and 2009.



Other income, net for the first quarter of fiscal 2010 totaled $34,000,

versus $109,000 for the same prior year period. Other income in fiscal

2010's first quarter consisted primarily of $10,000 of interest income and

approximately $24,000 of foreign currency transaction gains, primarily as a

result of the EURO strengthening relative to the US dollar. Fiscal 2009's

first quarter other income, net consisted of approximately $111,000 of

net interest income offset by approximately a $2,000 loss on disposal of

assets.



Income tax benefit for the first quarter of fiscal 2010 and 2009 was

$628,000 and $385,000, respectively. The Company's effective tax rate for

financial reporting purposes in fiscal 2010 is approximately 39.0%. The

Company has Federal and State net operating loss (NOL) carry-forwards of

approximately $5.6 million and $4.0 million, respectively. These can be used

to offset future taxable income and expire between 2023 and 2029 for Federal

tax purposes and 2016 and 2029 for state tax purposes.



Read the The complete ReportDRAM is in the portfolios of Kenneth Fisher of Fisher Asset Management, LLC.

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