Dataram Corp. Reports Operating Results (10-Q)
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 $29.36 million; its shares were traded at around $3.31 with and P/S ratio of 1.13. Highlight of Business Operations:During the first six months of fiscal 2010, net cash used in operating
activities totaled approximately $7,408,000. Net loss in the period was
approximately $2,594,000. Inventories increased by approximately $3,387,000.
In the first six months ended October 31, 2009, the MMB business unit
described in Note 2 increased their inventory levels by approximately
$1,900,000 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 $1,665,000, primarily as a
result of increased revenues. Deferred income taxes increased by
$1,690,000 and accrued liabilities decreased by approximately $65,000.
Cash used in operating activities was partially offset by an increase in
accounts payable of approximately $1,111,000. Depreciation and
amortization expense of approximately $604,000 and non-cash stock-based
expense of approximately $380,000 were also recorded.
Revenues for the three month period ended October 31, 2009 were $10,673,000
compared to revenues of $7,059,000 for the comparable prior year period. The
recently acquired MMB business unit described in Note 2 generated revenues
of approximately $3,587,000 in 2010's fiscal second quarter and nil in the
comparable prior year period. Revenues for the first six months of the
current fiscal year were $19,863,000 compared to revenues of $14,622,000 for
the comparable prior year period. The MMB business unit generated revenues
of approximately $6,499,000 in fiscal 2010's first six months and nil in the
comparable prior year period.
Research and development expense in fiscal 2010's second quarter and six
months were $1,621,000 and $2,495,000, respectively, versus $254,000 and
$466,000 in the same prior year periods. 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 (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 research and development expense includes $600,000 of expense
related to the Agreement, of which $300,000 was expensed in the first
fiscal quarter and $300,000 was expensed in the second fiscal quarter. The
Company now owns the software. The software and the storage product, which
incorporates the software, are currently under development and are not
deemed saleable at the present time. We expect to make further investments
in this area.
Selling, general and administrative (S,G&A) expense in fiscal 2010's second
quarter and six months increased by $1,002,000 and $867,000 respectively,
from the comparable prior year periods. The acquired MMB business unit's
S,G&A expense recorded in fiscal 2010's second quarter and six months was
approximately $572,000 and $1,180,000, respectively, versus nil in the
comparable prior year periods. 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 $225,000 and $380,000, respectively,
versus $130,000 and $256,000, respectively, for the comparable prior year
periods. The Company recorded second quarter and year to date marketing
and sales expense related to our new storage products of approximately
$260,000 and $358,000 respectively, versus nil in the comparable prior year
periods. These expenses are mainly related to the acquisition of sales and
sales engineers for the storage products.
Other income (expense), net for the second quarter and six months totaled
$12,000 of expense and $22,000 income, respectively, for fiscal 2010 and
income of $16,000 and $125,000, for the same respective periods in fiscal
2009. Other expense in fiscal 2010's second quarter consisted primarily of
$19,000 of foreign currency transaction losses, primarily as a result of the
EURO weakening relative to the US dollar. There was also approximately
$10,000 of other income recorded related to a gain on an asset disposal.
Six month other income of $22,000 consisted primarily of $7,000 of net
interest income and $5,000 of foreign currency transaction gains, primarily
as a result of the EURO strengthening relative to the US dollar, and the
aforementioned gain on asset disposal. Other income in fiscal 2009's second
quarter consisted primarily of $79,000 of net interest income received,
offset by $63,000 of foreign currency loss, primarily as a result of the
EURO weakening relative to the US dollar. Fiscal 2009's six months other
income consisted primarily of $188,000 of net interest income received and
$63,000 of foreign currency loss, primarily as a result of the EURO
weakening relative to the US dollar.
Income tax benefit for the second quarter and six months of fiscal 2010 was
a benefit of $1,042,000 and $1,670,000, respectively, versus benefit of
$248,000 and $633,000 for the same prior year periods. The Company's
effective tax rate for financial reporting purposes in fiscal 2010 is
approximately 39.2%. 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
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