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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 10/31/03 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 Identification No.)
incorporation or organization)
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 December 9, 2003, there were 8,497,219 shares outstanding.
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Dataram Corporation and Subsidiaries
Consolidated Balance Sheets
October 31, 2003 and April 30, 2003
(Unaudited)
October 31, 2003 April 30, 2003
Assets
Current Assets:
Cash and cash equivalents $ 4,257,906 $ 2,500,497
Trade receivables, less allowance
for doubtful accounts and sales returns
of $320,000 5,611,176 6,292,059
Inventories 2,406,913 2,854,860
Income tax receivable 50,000 3,137,983
Deferred income taxes 822,202 723,000
Other current assets 380,845 110,720
__________ __________
Total current assets 13,529,042 15,619,119
Property and equipment, at cost:
Land (held for sale) 875,000 875,000
Machinery and equipment 12,049,522 12,576,271
__________ __________
12,924,522 13,451,271
Less: accumulated depreciation
and amortization 9,179,225 8,887,181
__________ __________
Net property and equipment 3,745,297 4,564,090
Other assets 50,011 24,126
__________ __________
$ 17,324,350 $ 20,207,335
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 2,693,894 $ 3,207,446
Accrued liabilities 600,531 2,978,258
__________ __________
Total current liabilities 3,294,425 6,185,704
Stockholders' Equity:
Common stock, par value $1.00 per share.
Authorized 54,000,000 shares; issued and
outstanding 8,497,219 at October 31, 2003
8,497,219 at April 30, 2003 8,497,219 8,497,219
Additional paid in capital 4,593,851 4,593,851
Retained earnings 938,855 930,561
__________ __________
Total stockholders' equity 14,029,925 14,021,631
__________ __________
$ 17,324,350 $ 20,207,335
========== ==========
See accompanying notes to consolidated financial statements.
Dataram Corporation and Subsidiaries
Consolidated Statements of Earnings
Three and Six Months Ended October 31, 2003 and 2002
(Unaudited)
2003 2002
2nd Quarter Six Months 2nd Quarter Six Months
Revenues $ 12,637,855 $ 24,904,651 $ 13,970,422 $ 28,251,500
Costs and expenses:
Cost of sales 9,632,303 18,450,052 9,770,315 20,509,833
Engineering and development 312,943 645,684 400,293 781,501
Selling, general and administrative 2,878,533 5,858,413 4,269,290 8,806,290
Restructuring charges 0 0 0 740,000
__________ __________ __________ __________
12,823,779 24,954,149 14,439,898 30,837,624
Loss from operations (185,924) (49,498) (469,476) (2,586,124)
Interest income (expense), net 6,727 8,206 (9,945) (53,821)
Currency gain 163 8,584 0 0
Other income (expense), net 1,408 41,002 0 0
__________ __________ __________ __________
Income (loss) before income taxes (177,626) 8,294 (479,421) (2,639,945)
Income tax provision (benefit) (15,000) 0 (226,000) (564,000)
__________ __________ __________ __________
Net income (loss) $ (162,626) $ 8,294 $ (253,421) $ (2,075,945)
========== ========== ========== ==========
Net earnings (loss) per share of common stock
Basic $ (.02) $ .00 $ (.03) $ (.24)
========== ========== ========== ==========
Diluted $ (.02) $ .00 $ (.03) $ (.24)
========== ========== ========== ==========
Weighted average number of common
shares outstanding
Basic 8,497,219 8,497,219 8,504,191 8,493,665
========== ========== ========= =========
Diluted 8,497,219 8,709,443 8,504,191 8,493,665
========== ========== ========= =========
See accompanying notes to consolidated financial statements.
Dataram Corporation and Subsidiaries
Consolidated Statements of Cash Flows
Six Months Ended October 31,2003 and 2002
(Unaudited)
2003 2002
Cash flows from operating activities:
Net income (loss) $ 8,294 $ (2,075,945)
Adjustments to reconcile net income (loss)
to net cash provided by
operating activities:
Depreciation and amortization 893,267 2,004,002
Bad debt expense 4,095 78,237
Changes in assets and liabilities:
Decrease in trade receivables 676,788 4,517,581
Decrease in inventories 447,947 2,034,726
Increase in other current assets (270,125) (301,844)
Decrease(increase)in income tax receivable 3,087,983 (30,000)
Increase in other assets (25,885) (35,000)
Decrease in accounts payable (513,552) (4,080,677)
Decrease in accrued liabilities (2,377,727) (89,074)
(Increase) decrease in deferred income taxes (99,202) 75,000
__________ __________
Net cash provided by
operating activities 1,831,883 2,097,006
__________ __________
Cash flows from investing activities:
Additions to property and equipment (92,649) (254,275)
Proceeds from sale of property and equipment 18,175 0
__________ __________
Net cash used in investing activities (74,474) (254,275)
Cash flows from financing activities:
Payments under revolving credit line 0 (3,300,000)
Proceeds from sale of common shares under
stock option plan, (including tax benefits) 0 403,375
Purchase and subsequent cancellation
of common stock 0 (396,240)
__________ __________
Net cash used in financing 0 (3,292,865)
activities __________ __________
Effect of foreign currency translation
on cash and cash equivalents 0 385,357
__________ __________
Net increase (decrease) in cash
and cash equivalents 1,757,409 (1,064,777)
Cash and cash equivalents at
beginning of period 2,500,497 3,656,150
__________ __________
Cash and cash equivalents at
end of period $ 4,257,906 $ 2,591,373
========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 15,716 $ 74,821
Income taxes $ 2,250 $ 64,000
See accompanying notes to consolidated financial statements.
Notes to Consolidated Financial Statements
October 31, 2003 and 2002
(Unaudited)
Basis of Presentation
The information for the three and six months ended October 31, 2003 and 2002,
is unaudited but includes all adjustments (consisting only of normal recurring
adjustments) which, in the opinion of management, are necessary to state
fairly the financial information set forth therein in accordance with
accounting principles generally accepted in the United States of America. The
interim results are not necessarily indicative of results to be expected for
the full fiscal year. These financial statements should be read in conjunction
with the audited financial statements for the year ended April 30, 2003
included in the Company's Annual Report on Form 10-K filed with the Securities
and Exchange Commission.
Comprehensive Income (loss)
Statement of Financial Accounting Standards No. 130, Reporting Comprehensive
Income ("SFAS No. 130") requires that items defined as other comprehensive
income, such as unrealized investment gains and losses, be seperately
classified in the consolidated financial statements and that the accumulated
balance of other comprehensive income (loss) be reported separately from
retained earnings and additional paid in capital in the equity section of the
consolidated balance sheet. Comprehensive income (loss) for the three and six
months ended October 31, 2003 was the same as the reported net income (loss).
Comprehensive loss for the three and six months ended October 31, 2002 was
($248,000) and ($1,691,000) respectively.
Earnings Per Common Share
Basic earnings per share is computed by dividing the net income (loss)
available to common stockholders by the weighted average number of shares of
common stock issued and outstanding during the periods. For purposes of
calculating diluted loss per share for the second quarter ended October 31,
2003, the denominator excludes the number of dilutive common stock equivalents
as their affect would be anti-dilutive. For the purpose of calculating diluted
income per share for the six months ended October 31, 2003 the denominator
includes both the weighted average number of shares of common stock
outstanding and the number of dilutive common stock equivalents. The number of
dilutive common stock equivalents includes the effect of non-qualified stock
options calculated using the treasury stock method. For purposes of
calculating diluted loss per share for the three and six months ended October
31, 2002, the denominator excludes the number of dilutive common stock
equivalents as their affect would be anti-dilutive.
Stock Based Compensation
As permitted by SFAS No. 123, "Accounting for Stock Based Compensation", the
Company accounts for stock-based compensation arrangements in accordance with
provisions of Accounting Principles Board ("APB") Opinion No. 25 "Accounting
for Stock Issued to Employees". Compensation expense for stock options issued
to employees is based on the difference on the date of grant, between the fair
value of the Company's stock and the exercise price of the option. No stock-
based employee compensation cost is reflected in net income (loss), as all
options granted under those plans had exercise prices equal to the market
value of the underlying common stock at the date of grant.
In December 2002, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and
Disclosure, an amendment of FASB Statement No. 123." SFAS No. 148 amends SFAS
No. 123, "Accounting for Stock-Based Compensation," to provide alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, SFAS No. 148
amends the disclosure requirements of SFAS No. 123 to require prominent
disclosure in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the method
used on reported results. The provisions of SFAS No. 148 are effective for
fiscal years ending after December 15, 2002 and the interim disclosure
provisions are effective for interim periods beginning after December 15,
2002. The Company continues to apply the intrinsic-value based method to
account for stock options.
The following table illustrates the effect on net earnings (loss) and earnings
(loss) per share if the Company had applied the fair value recognition
provisions of SFAS No. 123 to stock based compensation:
Three Months Ended Six Months Ended
October 31, October 31,
----------------------- ----------------------
2003 2002 2003 2002
-------- -------- -------- --------
Net earnings (loss) as
reported $ (162,626) $ (253,421) $ 8,294 $(2,075,945)
Deduct: Total stock-based
employee compensation expense
determined under fair value
based method for all awards,
net of related tax effects (217,445) (104,895) (366,591) (359,276)
---------- ---------- -------- ----------
Pro forma net loss $ (380,071) $ (358,316) $(358,297) $(2,435,221)
========== ========== ========= ===========
Earnings (loss) per share:
Basic - as reported $ (0.02) $ (0.03) $ 0.00 $ (0.24)
========== ========== ========= ===========
Basic - pro forma $ (0.04) $ (0.04) $ (0.04) $ (0.29)
========== ========== ========= ===========
Diluted - as reported $ (0.02) $ (0.03) $ 0.00 $ (0.24)
========== ========== ========= ===========
Diluted - pro forma $ (0.04) $ (0.04) $ (0.04) $ (0.29)
========== ========== ========= ===========
Restructuring charges
In fiscal 2003's first quarter, the Company initiated a restructuring of its
operations. The Company recorded a restructuring charge of $740,000 in the
quarter ended July 31, 2002 which primarily related to severance payments. All
of the severance payments were paid during fiscal year 2003.
During the fourth quarter of fiscal 2003, the Company announced an additional
restructuring of its operations. As part of this restructuring, the Company
ceased production of memory for the PC market and closed its production
facility in Aarhus, Denmark. As part of the restructuring, the Company entered
into lease termination agreements totaling approximately $1,000,000 which were
paid in the first quarter of fiscal 2004. The Company also incurred severance
payments obligations totaling approximately $850,000. As of October 31, 2003,
payments totalling approximately $825,000 have been made and the balance of
approximately $25,000 was paid in the beginning of the Company's fiscal third
quarter.
Cash and cash equivalents
Cash and cash equivalents consist of unrestricted cash, money market preferred
stock and commercial paper with original maturities of three months or less.
Inventory valuation
Inventories are valued at the lower of cost or market, with costs determined
by the first-in, first-out method. Inventories at October 31, 2003 and April
30, 2003 consist of the following categories:
October 31, 2003 April 30, 2003
________________ ______________
Raw material $ 966,000 $ 1,972,000
Work in process 59,000 39,000
Finished goods 1,382,000 844,000
________________ ______________
$ 2,407,000 $ 2,855,000
================ ==============
Financial information by geographic location
The Company operates in one business segment and develops, manufactures and
markets a variety of memory systems for use with network servers and
workstations which are manufactured by various companies. The Company
manufactures all of its products in the United States and its sales to foreign
countries are export sales. Revenues for the three and six month periods ended
October 31, 2003 and 2002 by geographic region is as follows:
Three months ended Six months ended
October 31, 2003 October 31,
2003
________________ ________________
United States $ 8,416,000 $ 16,431,000
Europe 2,636,000 5,385,000
Other (prinicipally Asia Pacific Region) 1,586,000 3,089,000
________________ ________________
Consolidated $ 12,638,000 $ 24,905,000
================ ================
Three months ended Six months ended
October 31, 2002 October 31, 2002
________________ ________________
United States $ 7,978,000 $ 17,055,000
Europe 3,865,000 7,815,000
Other (prinicipally Asia Pacific Region) 2,127,000 3,381,000
________________ ________________
Consolidated $ 13,970,000 $ 28,251,000
================ ================
Long-lived assets which consist of property and equipment, and total assets by
geographic region as of October 31, 2003 is as follows:
October 31, 2003
Long-lived assets Total assets
_________________ ______________
United States $ 3,552,000 $ 16,292,000
Europe 193,000 1,018,000
Other 0 14,000
_________________ ______________
Consolidated $ 3,745,000 $ 17,324,000
================= ==============
Significant New Accounting Pronouncements
In January 2003, the FASB issued Interpretation No. 46 ("FIN 46"),
Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51.
FIN 46 requires certain variable interest entities to be consolidated by the
primary beneficiary of the entity if the equity investors in the entity do not
have the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. FIN 46 is
effective for all new variable interest entities created or acquired after
January 31, 2003. For variable interest entities created or acquired prior to
February 1, 2003, the provisions of FIN 46 must be applied for the first
interim or annual period beginning after June 15, 2003. The Company does not
expect FIN 46 to have a material effect on its consolidated financial
statements.
Concentration of credit risk
Financial instruments that potentially subject the Company to concentration of
credit risk consist primarily of cash and cash equivalents. The Company
maintains its cash and cash equivalents in financial institutions and
brokerage accounts. To the extent that such deposits exceed the maximum
insurance levels, they are uninsured. The Company performs ongoing evaluations
of its customers' financial condition, as well as general economic conditions
and, generally, requires no collateral from its customers.
Use of estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and section 21E of
the Securities and Exchange Act of 1934, as amended. Actual results could
differ materially from those projected in the forward looking statements and
are subject to certain risks including, without limitation, risks arising
from: changes in the price of memory chips, changes in the demand for memory
systems for workstations and servers,
increased competition in the memory systems industry, order cancellations,
delays in developing and commercializing new products and other factors
described in the Company's most recent Annual Report on Form 10-K filed with
the Securities and Exchange Commission which can be reviewed at
http://www.sec.gov.
Liquidity and Capital Resources
The Company's cash and working capital position remain strong. As of
October 31, 2003, cash and equivalents amounted to $4.3 million and working
capital amounted to $10.2 million, reflecting a current ratio of 4.1 compared
to cash and equivalents of $2.5 million and working capital of $9.4 million
and a current ratio of 2.5 as of April 30, 2003.
On June 15, 1999 the Company announced an open market repurchase plan
providing for the repurchase of up to 500,000 shares of the Company's common
stock. On December 4, 2002, the Company announced a second plan providing for
the repurchase of up to an additional 500,000 shares. As of October 31, 2003,
the total number of shares authorized for purchase under the program is
535,150 shares. The Company did not purchase any shares during the first six
months of Fiscal 2004.
As a result of the restructuring initiated in April 2003, the Company
entered into lease termination agreements totaling approximately $1 million
and had severance obligations totaling approximately $850,000 as of April 30,
2003. The lease termination obligations were paid in the first quarter of
fiscal 2004. Approximately $825,000 of the severance obligations were paid by
October 31, 2003. The balance of approximately $25,000 was paid in the
beginning of the Company's fiscal third quarter.
Management believes that the Company's operating cash flows will be
sufficient to meet short term liquidity needs as the Company does not expect
any unforeseen demands beyond general operating requirements. Management
further believes that its working capital together with internally generated
funds from its operations are adequate to finance the Company's long term
operating needs and future capital requirements.
On July 29, 2002, the Company entered into an agreement to sell its
undeveloped land for a price of $3.0 million. The agreement provides for
closing to occur no later than 30 months from the date of the contract.
Additionally, the agreement is subject to certain contingencies and as such
may be terminated prior to closing. The land is carried at cost on the
Company's balance sheet at a value of $875,000 and is shown as an asset held
for sale. The resulting gain on the sale will be recorded upon consummation of
the transaction and when all contingencies have been satisfied.
Future minimum lease payments under noncancellable operating leases (with
initial or remaining lease terms in excess of one year) as of April 30, 2003
are as follows:
Operating leases
Year ending April 30: ________________
2004 $ 552,000
2005 572,000
2006 486,000
2007 48,000
Thereafter 0
Total minimum lease payments $ 1,658,000
The Company has no other material commitments.
Results of Operations
Revenues for the three month period ending October 31, 2003 were
$12,638,000 compared to revenues of $13,970,000 for the comparable prior year
period. Fiscal 2004 six month revenues totaled $24,905,000 versus six month
revenues of $28,252,000 in the prior year. Volume measured as gigabytes
shipped increased by 6% for the second quarter of fiscal 2004 compared to the
same prior year quarter. Average selling price per gigabyte declined by
approximately 15% in fiscal 2004's second quarter compared to the prior year
period. The decrease in average selling price was the result of product mix.
Fiscal 2004 second quarter sales to OEM customers was approximately 19% of
overall revenues as compared to approximately 14% in the prior year second
quarter. OEM business is usually higher volume business with lower average
selling prices. Six month volume decreased 7% in fiscal 2004 as compared to
the same prior year period. Average selling price for the first six months of
fiscal 2004 decreased by approximately 5% compared to the same prior year
period.
Revenues for the three and six month periods ended October 31, 2003 and 2002
by geographic region is as follows:
Three months ended Six months ended
October 31, 2003 October 31, 2003
________________ ________________
United States $ 8,416,000 $ 16,431,000
Europe 2,636,000 5,385,000
Other (prinicipally Asia Pacific Region) 1,586,000 3,089,000
________________ ________________
Consolidated $ 12,638,000 $ 24,905,000
================ ================
Three months ended Six months ended
October 31, 2002 October 31, 2002
________________ ________________
United States $ 7,978,000 $ 17,055,000
Europe 3,865,000 7,815,000
Other (prinicipally Asia Pacific Region) 2,127,000 3,381,000
_______________ ________________
Consolidated $ 13,970,000 $ 28,251,000
=============== ================
Cost of sales for the second quarter and six months were 76% and 74% of
revenues, respectively, versus 70% and 73% for the same respective prior year
periods. Cost of sales as a percentage of revenues for the second quarter was
impacted by a rapid rise in the price of certain DRAMs, the primary raw
material in the Company's products. The price rise resulted in an increase in
cost of sales in the second quarter by approximately 2% from what it would
otherwise have been, as selling prices for certain orders were locked in
before raw materials could be obtained. The balance of the change is primarily
attributable to product mix. Shipments to OEM customers, which generally carry
lower gross margins constituted a higher percentage of overall revenues in the
second quarter and six months of fiscal 2004 compared to the same prior year
periods.
Engineering and development costs in fiscal 2004's second quarter and six
months were $313,000 and $646,000, respectively, versus $400,000 and $782,000
for the same respective prior year periods. The decrease in expense is
primarily attributable to the reduced number of employees as a result of
restructurings implemented in the prior fiscal year. The Company intends to
maintain its commitment to the timely introduction of new memory products as
new computers are introduced.
Selling, general and administrative costs in fiscal 2004's second quarter
and six months decreased to 23% and 24% of revenues, respectively versus 31%
for the same prior year periods. Second quarter and six month total expenses
decreased by $1,390,000 and $2,948,000 from the comparable prior year periods.
The reduction of total expenses is primarily the result of the aforementioned
restructurings.
Other income (expense), net for the second quarter and six months totaled
$8,000 and $57,000, respectively, for fiscal 2004 and ($10,000) and ($54,000)
for the same respective periods in fiscal 2003. Other income in fiscal 2004's
second quarter consisted primarily of interest income. Other income in fiscal
2004's six months consisted of interest income and a gain on sale of assets of
approximately $49,000. Fiscal 2003's three and six months other income
(expense), net consisted of interest expense of ($18,000) and ($75,000)
partially offset by interest income of $8,000 and $21,000. The Company had no
interest expense in the first quarter and six months of fiscal 2004 as it had
no debt.
Income tax provision (benefit) for fiscal 2004's second quarter and six
months was ($15,000) and nil versus ($226,000) and ($564,000) benefit in the
comparable prior year periods. Fiscal 2004's income tax provision (benefit) is
a provision for state tax only as the Company has a net operating loss carry
forward of approximately $16.0 million which can be used to offset future
taxable income for federal income tax.
Critical Accounting Policies
During December 2001, the Securities and Exchange Commission ("SEC") published
a Commission Statement in the form of Financial Reporting Release No. 60 which
encouraged that all registrants discuss their most "critical accounting
policies" in management's discussion and analysis of financial condition and
results of operations. The SEC has defined critical accounting policies as
those that are both important to the portrayal of a company's financial
condition and results, and that require management's most difficult,
subjective or complex judgments, often as a result of the need to make
estimates about the effect of matters that are inherently uncertain. While the
Company's significant accounting policies are summarized in Note 1 to the
consolidated financial statements included in the Company's Form 10-K for the
fiscal year ended April 30, 2003, the Company believes the following
accounting policies to be critical:
Revenue Recognition-Revenue is recognized upon shipment of goods to customers.
The Company's revenue earning activities involve delivering or producing
goods, and revenues are considered to be earned when the Company has completed
the process by which it is entitled to such revenues. The following criteria
are used for revenue recognition: persuasive evidence of an arrangement
exists, delivery has occurred, selling price is fixed or determinable and
collection is reasonably assured. Estimated warranty costs are accrued by
management upon product shipment based on an estimate of future warranty
claims.
Income Taxes-The Company utilizes the asset and liability method of accounting
for income taxes in accordance with the provisions of SFAS No. 109,
"Accounting for Income Taxes". Under the asset and liability method of SFAS
No. 109, 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. Deferred
tax assets and liabilities are measured using enacted tax rates in effect for
the year in which those temporary differences are expected to be recovered or
settled. Under SFAS No. 109, 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.
Use of Estimates- The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, including deferred tax asset valuation
allowances and certain other reserves and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Estimates and
assumptions are reviewed periodically and the effects of revisions are
reflected in the consolidated financial statements in the period they are
determined to be necessary. Some of the more significant estimates made by
management include the allowance for doubtful accounts and sales returns, the
deferred tax asset valuation allowance and other operating allowances and
accruals. Actual results could differ from those estimates.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company does not invest in market risk sensitive instruments. The
Company's investments during the past fiscal year have consisted of overnight
deposits with banks. The Company's rate of return on its investment portfolio
changes with short-term interest rates, although such changes will not effect
the value of its portfolio. The Company's objectives in connection with its
investment strategy is to maintain the security of its cash reserves without
taking market risk with principal.
The Company purchases and sells primarily in U.S. dollars. The Company
sells in foreign currency (primarily Euros) to a limited number of customers
and as such incurs some foreign currency risk. At any given time,
approximately 15 to 20 percent of the Company's accounts receivable are
denominated in currencies other than
U.S. dollars. At present, the Company does not purchase forward contracts as
hedging instruments, but may do so as circumstances warrant.
ITEM 4. CONTROLS AND PROCEDURES
During the period covered by this interim report, the Company's chief
executive officer and its chief financial officer have evaluated the
effectiveness of the Company's disclosure controls and procedures and have
determined that they are adequate to insure a fair presentation, in all
material respects, of the financial position, results of operations and
statements of cash flows of the Company and there have been no material
changes to such controls and procedures.
PART II: OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
31(a) Certification of Robert V. Tarantino.
31(b) Certification of Mark E. Maddocks
32(a) Section 906 Certification of Robert V. Tarantino (furnished not
filed)
32(b) Section 906 Certification of Mark E. Maddocks (furnished not
filed)
B. Reports on Form 8-K
Report filed on November 20, 2003 regarding Company's operating results
for the Second Quarter, Fiscal Year 2004.
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
MARK E. MADDOCKS
Date: December 9, 2003 By: ________________________
Mark E. Maddocks
Vice President, Finance
(Principal Financial Officer)