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Dataram Corp. Reports Operating Results (10-Q)

December 13, 2010 | About:

Dataram Corp. (DRAM) filed Quarterly Report for the period ended 2010-10-31.

Dataram Corp. has a market cap of $15.87 million; its shares were traded at around $1.78 with and P/S ratio of 0.36. DRAM is in the portfolios of Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

During the first six months of fiscal 2011, net cash used in operating

activities totaled approximately $3,029,000. Net loss in the period was

approximately $2,954,000. Accounts payable decreased by approximately

$2,172,000, mainly the result of decreased inventories of approximately

$1,577,000. Accrued expense decreased by approximately $651,000, which was

primarily the result of the payment of an accrued contingently payable

acquisition price for MMB. Depreciation and amortization of approximately

$530,000 was recorded in fiscal 2011's first six months. Trade receivables

decreased by approximately $461,000. Non-cash stock-based compensation

expense of approximately $313,000 was also recorded.

Three months ended Six months ended

October 31, 2009 October 31, 2009

________________ ________________

United States $ 9,035,000 $ 16,280,000

Europe 919,000 2,376,000

Other (principally Asia Pacific Region) 719,000 1,207,000

________________ ________________

Consolidated $ 10,673,000 $ 19,863,000

= =

Research and development expense in fiscal 2011's second quarter and six

months was $865,000 and $1,760,000, respectively, versus $1,621,000 and

$2,495,000 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 a line of high performance storage

caching products ("XcelaSAN"). XcelaSAN is a unique intelligent Storage Area

Network (SAN) optimization solution that delivers substantive application

performance improvement to applications such as Oracle, SQL and VMware.

XcelaSAN augments existing storage systems by transparently applying

intelligent caching algorithms that serve the most active block-level data

from high-speed storage, creating an intelligent, virtual solid state SAN.

As part of that strategy, in January 2009, the Company entered into a

software purchase and license agreement with another company whereby the

Company acquired 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 owns

the software. The software and the storage products, which incorporate the

software, are currently under development. We expect to make further

investments in this area.

Selling, general and administrative (S,G&A) expense in fiscal 2011's second

quarter and six months decreased by approximately $529,000 and $493,000

respectively, from the comparable prior year periods. The reduction in this

year's second quarter is the result of reduced compensation related expenses

of approximately $106,000. Stock option expense recorded as a component of

S,G&A expense was approximately $121,000 in the current fiscal year's

second quarter compared to $225,000 in the same prior year period.

Additionally, marketing expense for our traditional memory business were

approximately $94,000 less than the prior year second quarter.

Other income (expense), net for the second quarter and six months totaled

$51,000 and $160,000 of expense, respectively, for fiscal 2011, and

expense of $12,000 and $22,000, of income for the same respective periods in

fiscal 2010. Other expense in fiscal 2010's second quarter consisted

primarily of interest expense of $62,000 and $11,000 of foreign currency

transaction gains, primarily as a result of the EURO strengthening relative

to the US dollar. Six month other expense of $160,000 consisted of $79,000

of interest expense and $85,000 of foreign currency transaction losses,

primarily as a result of the EURO weakening relative to the US dollar. 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.

Income tax benefit for the second quarter and six months of 2011 was nil

versus a benefit of $1,042,000 and $1,670,000, respectively, for the same

prior year periods. The Company utilizes the asset and liability method of

accounting for income taxes in accordance with the provisions of the

Expenses - Income Taxes Topic of the Financial Accounting Standards Board

(FASB) Accounting Standards Codification (ASC)(Codification). Under the

asset and liability method, 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. A valuation allowance

is provided when the Company determines that it is more likely than not that

some portion or all of the deferred tax assets will not be realized. The

Company considers certain tax planning strategies in its assessment as to

the recoverability of its tax assets. In each reporting period, the Company

assesses, based on the weight of all evidence, both positive and negative,

whether a valuation allowance on its deferred tax assets is warranted. Based

on the assessment conducted in the Company's reporting period ended

January 31, 2010, the Company concluded that such an allowance was

warranted, and accordingly recorded a valuation allowance of approximately

$5.8 million in that reporting period. Deferred tax assets and liabilities

are measured using enacted tax rates in effect for the year in which those

temporary differences or tax attributes are expected to be recovered or

settled. 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.

As of April 30, 2010 the Company had Federal and State net operating loss

(NOL) carry-forwards of approximately $11.5 million and $9.7 million,

respectively. These can be used to offset future taxable income and expire

between 2023 and 2030 for Federal tax purposes and 2016 and 2030 for state

tax purposes. As a result, the Company does not expect to record any income

tax expense (benefit) in fiscal 2011. The Company's NOL carry-forwards are a

component of its deferred tax assets which are reported net of a full

valuation allowance in the Company's consolidated financial statements at

October 31, 2010 and at April 30, 2010.

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