Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One) FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended April 30, 2011.
[ ] 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
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(Exact name of registrant as specified in its charter)
New Jersey 22-183140
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(State of Incorporation) (I.R.S. Employer Identification No.)
P.O. Box 7528, Princeton, New Jersey 08543-7528
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (609) 799-0071
Securities registered pursuant to section 12(b) of the Act:
Title of each class Name of exchange on which registered
Common Stock, $1.00 Par Value NASDAQ Stock Market
Securities registered pursuant to section 12(g) of the Act: NONE
Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
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 [ ]
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Website, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule
405 of Regulation S-T during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files).
Yes [ ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant's
knowledge, in the definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Yes [X] No []
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer or a smaller reporting
company.
See definition of "accelerated filer and large accelerated filer and smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ]
Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell-company (as
defined in Rule 12b-2 of the Act). Yes [ ] No [X]
The aggregate market value of the Common Stock held by non-affiliates
of the registrant calculated on the basis of the closing price as of the
last business day of the registrant's most recently completed second
quarter, October 31, 2010, was $21,760,674.
The number of shares of Common Stock outstanding on July 22, 2011 was
10,703,309 shares.
DOCUMENTS INCORPORATED BY REFERENCE:
(1) Definitive Proxy Statement for Annual Meeting of Shareholders to be
held on September 22, 2011 (the "Definitive Proxy Statement") to be filed
within 120 days of the end of the fiscal year.
(2) 2011 Annual Report to Security Holders
DATARAM CORPORATION
INDEX
Part I Page
Item 1. Business . . . . . . . . . . . . . . . . . . . . 5
Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . 11
Item 1B. Unresolved Staff Comments. . . . . . . . . . . . 14
Item 2. Properties . . . . . . . . . . . . . . . . . . . 14
Item 3. Legal Proceedings . . . . . . . . . . . . . . . 15
Part II
Item 5. Market for Registrant's Common Equity,
Related Stockholder Matters and
Issuer Purchases of Equity Securities. . . . . . 15
Item 6. Selected Financial Data. . . . . . . . . . . . . 15
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operation . . 15
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk . . . . . . . . . . . . . . . 15
Item 8. Financial Statements and Supplementary Data. . . 15
Item 9. Changes In and Disagreements with Accountants
on Accounting and Financial Disclosure . . . . . 16
Item 9A. Controls and Procedures . . . . . . . . . . . . 16
Item 9A(T)Controls and Procedures . . . . . . . . . . . . 16
Item 9B. Other Information . . . . . . . . . . . . . . . 17
Part III
Item 10. Directors, Executive Officers, and
Corporate Governance . . . . . . . . . . . . . . 17
Item 11. Executive Compensation . . . . . . . . . . . . . 17
Item 12. Security Ownership of Certain
Beneficial Owners and Management and
Related Stockholder Matters. . . . . . . . . . . 17
Item 13. Certain Relationships and Related
Transactions, and Director Independence. . . . . 18
Item 14. Principal Accounting Fees and Services . . . . . 18
Part IV
Item 15. Exhibits, Financial Statement Schedules. . . . . 18
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
PART I
Item 1. BUSINESS
(a) General development of business.
Dataram Corporation (the "Company") is a developer, manufacturer and
marketer of large capacity memory products primarily used in high
performance network servers and workstations. The Company is also a
developer, manufacturer and marketer of a line of high performance storage
caching products. The Company provides customized memory solutions for
original equipment manufacturers ("OEMs") and compatible memory for leading
brands including Dell, HP, IBM and Sun Microsystems. The Company also
manufactures a line of memory products for Intel and AMD motherboard based
servers for sale to OEMs and channel assemblers. The Company's memory
products are sold worldwide to OEMs, distributors, value-added resellers and
end-users. The Company has one leased manufacturing facility in the United
States with sales offices in the United States, Europe and Japan.
The Company is an independent memory manufacturer specializing in high
capacity memory and competes with several other large independent memory
manufacturers as well as the OEMs mentioned above. The primary raw material
used in producing memory boards is dynamic random access memory chips
("DRAMs"). The purchase cost of DRAMs is the largest single component of the
total cost of a finished memory board. Consequently, average selling prices
for computer memory boards are significantly dependent on the pricing and
availability of DRAMs.
In fiscal 2009, the Company acquired certain assets of Micro Memory
Bank, Inc. ("MMB"), a privately held corporation. MMB is a manufacturer of
legacy to advanced solutions in laptop, desktop and server memory products.
The acquisition expanded the Company's memory product offerings and routes
to market. Its products include memory upgrades for IBM, Sun, HP and Compaq
computer systems. MMB also markets and sells new and refurbished factory
original memory upgrades manufactured by IBM, Sun, HP and Compaq as well as
factory original modules manufactured by Micron, Hynix, Samsung, Elpida and
Nanya, and purchases excess memory inventory from other parties as well.]
Revenues for fiscal 2011 were $46.8 million compared to $44.0 million
in fiscal 2010, a 6.3 percent increase. This increase was primarily the
result of the Company's continued implementation of its revamped sales and
marketing strategy having a positive effect on demand for its products,
coupled with an increase in overall demand for IT infrastructure as the
economy continues its recovery.
Cost of sales was $35.8 million in fiscal 2011 or 76.4 percent of
revenues compared to $32.4 million or 73.6 percent of revenues in fiscal
2010. Current and prior fiscal year's cost of sales as a percent of revenue
is considered by management to be within the Company's normal range.
Fluctuations in cost of sales as a percentage of revenues are not unusual
and can result from many factors, including rapid changes in the price of
DRAMs, or changes in product mix possibly resulting from a large order or
series of orders for a particular product or a change in customer mix.
5
The Company was incorporated in New Jersey in 1967 and made its initial
public offering in 1968. Its common stock, $1 par value (the "Common
Stock") was listed for trading on the American Stock Exchange in 1981.
In 2000 the Company changed its listing to the NASDAQ National Market (now
the NASDAQ Stock Market) where its stock trades under the symbol "DRAM."
The Company's principal executive office is located at 777 Alexander Park,
Princeton, New Jersey 08543, its telephone number is (609) 799-0071, its fax
is (609) 799-6734 and its website is located at http://www.dataram.com.
Proxy Statements, Annual Reports on Form 10-K, Quarterly Reports on Form
10-Q and Current Reports on Form 8-K, and all amendments thereto, are
available on this website free of charge.
(b) Financial information about segments.
The Company operates in one industry segment.
(c) Narrative description of business.
Industry Background
The market for the Company's memory products is principally the buyers
and owners of workstations and network servers and the OEMs that manufacture
workstations, servers and other products that use embedded computers. These
systems have been important to the growth of the Internet.
A workstation, like a PC, is designed to provide computer resources to
individual users. A workstation differs from a PC by providing
substantially greater computational performance, input/output capability and
graphic display. Workstations are nearly always networked. As a result of
this networking capability of both workstations and PCs, the network server
has grown in importance.
Network servers are computer systems on a network which provide
dedicated functions accessible by all workstations and other systems on the
same network. Examples of different types of servers in use today are: file
servers, communication servers, computation servers, database servers, print
servers and storage servers.
The Company designs, produces and markets memory products for
workstations and computer servers sold by Sun, HP, IBM, SGI and Dell.
Additionally, the Company produces and markets memory for Intel and AMD
processor based motherboards for use by OEMs and channel assemblers.
The "open system" philosophy espoused by most of the general computer
industry has played a part in enlarging the market for third party vendors.
Under the "open system" philosophy, manufacturers adhere to industry design
standards, enabling users to "mix and match" hardware and software products
from a variety of vendors so that a system can be configured for the user's
application in the most economical manner with reduced concern for
compatibility and support. Memory products for workstations and servers
have become commodities with substantial competition from OEMs and a number
of independent memory manufacture suppliers.
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Generally, growth in the memory market closely follows both the growth
in unit shipments of system vendors and the growth of memory requirements
per system.
Management also estimates that in the compatibles market, sales by
system vendors constitute 80% of the memory market. To successfully compete
with system vendors, the Company must continue to respond to customers'
needs in a short time frame. To support customers' needs, the Company has a
dedicated and highly automated manufacturing facility that is designed to
produce and ship customer orders within twenty-four hours or less.
The OEM market is also an important part of the Company's business.
Management believes that increasingly cost conscious OEMs are looking to
independent memory suppliers such as the Company for the low-cost supply of
memory modules.
Products
The Company's principal business is the development, manufacture and
marketing of memory modules which can be added to various enterprise servers
and workstations to upgrade or expand the capabilities of such systems.
When vendors produce computer systems adhering to open system industry
standards, the development effort for the Company and other independent
memory manufacturers is straightforward and allows for the use of many
standard components. The Company is also continuing to develop its
XcelaSAN(r) product line. XcelaSAN is a unique intelligent Storage Area
Network ("SAN") optimization solution designed to deliver 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,
allowing organizations to dramatically increase the performance of their
business-critical applications without the costly hardware upgrades or over-
provisioning of storage typically found in current solutions for increased
performance. The Company has made and is continuing to make significant
investments in research and development in XcelaSAN. The product has been
released for sale and the Company expects to realize revenues from sale of
the product in its fiscal year ending April 30, 2012. The Company plans to
invest in ongoing development of the product for future releases.
Distribution
The Company sells its memory products to OEM's, distributors, value-
added resellers and larger end-users. The Company has sales and/or
marketing support offices in New Jersey, Denmark, the United Kingdom,
Germany and Japan.
Product Warranty and Service
Management believes that the Company's reputation for the reliability
of its memory products and the confidence of prospective purchasers in the
Company's ability to provide service over the life of the product are
important factors in making sales. As a consequence, the Company adopted
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many years ago a Lifetime Warranty program for its memory products. The
economic useful life of the computer systems to which the Company's memory
modules are attached is almost always substantially less than the physical
useful life of the Company's memory products. Thus, memory products are
unlikely to "wear out." The Company's experience is that less than 1% of
all the products it sells are returned under the Lifetime Warranty.
Working Capital Requirements
On July 27, 2010, the Company entered into an agreement with a
financial institution for secured debt financing of up to $5.0 million. We
have also entered into an agreement with a vendor, which is wholly owned by
an executive officer of the Company and who is also employed by the Company
as the General Manager of the Company's MMB division, to consign up $3.0
million of certain inventory into our manufacturing facilities. In addition,
May 11, 2011, the Company and certain investors entered into a securities
purchase agreement (the "Purchase Agreement") in connection with the
Offering, pursuant to which the Company agreed to sell an aggregate of
1,775,000 shares of its common stock and warrants to purchase a total of
1,331,250 shares of its common stock to such investors for aggregate gross
proceeds, before deducting fees to the Placement Agent and other estimated
offering expenses payable by the Company, of approximately $3.34 million.
Management believes that the Company's cash flows generated from operations
together with cash generated through these agreements will be sufficient to
meet the Company's liquidity needs through April 30, 2012.
The memory product business is heavily dependent upon the price of
DRAMs. Producers of DRAM are required to invest substantial capital
resources to produce their end product. Their marginal cost is low as a
percentage of the total cost of the product. As a result, the world-wide
market for DRAMs has swung in the past from period to period from oversupply
to shortage. During periods of substantial oversupply, the Company has seen
falling prices for DRAMs and wide availability of DRAMs allowing the Company
to have minimum inventories to meet the needs of customers. During periods
of shortage, DRAMs are allocated to customers and the Company must invest
heavily in inventory in order to continue to be assured of the supply of
DRAMs from vendors. At the present time, the market for DRAMs is balanced,
but with spot shortages of certain DRAM configurations.
Memory Product Complexity
DRAM memory products for workstations and enterprise servers have, for
many years, been undergoing a process of simplification with a corresponding
decline in profit margins for current generation memory products as
competitors' entry into the market becomes easier. Memory products for prior
generations of workstations and servers are sold with higher margins as few
competitors continue to supply memory for those computers.
Engineering
The Company's ability to compete successfully depends upon its ability
to identify new memory needs of its customers. To achieve this goal, the
Company's engineering group continually monitors computer system vendors'
new product developments, and the Company evaluates and tests major
8
components as they become available. The Company designs prototype memory
modules and subjects them to reliability testing procedures. During its
fiscal year ended April 30, 2011, the Company incurred costs of $1,033,000
for engineering, $998,000 in fiscal 2010 and $1,219,000 in fiscal 2009.
Research and Development
Research and development expense in fiscal 2011 was $1,894,000 versus
$4,265,000 in fiscal 2010 and $1,531,000 in fiscal 2009. In the current
fiscal year, the Company has continued to implement its strategy to
introduce new and complementary products into its offerings portfolio. The
Company is currently focusing on the development of its XcelaSAN product.
The Company has been developing computer software for its XcelaSAN storage
caching product line. On November 4, 2010, the Company determined that
technological feasibility of the product was established and development
costs subsequent to that date have been capitalized. In fiscal 2011 the
Company capitalized $1.5 million of development costs. Prior to November 4,
2010, the Company expensed all development costs.
Raw Materials
The Company purchases industry standard DRAMs. The Company also
purchases finished modules from the DRAM manufacturers. In either case, the
cost of DRAM chips is the largest single component of the total cost of
memory products. Fluctuations in the availability or prices of DRAMs can
have a significant impact on the Company's profit.
The Company has created close relationships with a number of primary
suppliers while qualifying and developing alternate sources as a back up.
The qualification program consists of extensive evaluation of process
capabilities, on-time delivery performance and financial stability of each
supplier. Alternative sources are qualified to normally assure supply in
the event of a problem with the primary source or to handle surges in demand.
Manufacturing
The Company assembles its memory boards at its manufacturing facility
in Pennsylvania.
Backlog
The Company expects that all backlog on hand will be filled during the
current fiscal year and most in a matter of days. The Company's backlog at
April 30, 2011 was $245,000, at April 30, 2010 it was $1,185,000 and at
April 30, 2009 it was $936,000.
Seasonality
The Company's business can be seasonal with December and January being
the slowest months.
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Competition
The intensely competitive computer industry is characterized by rapid
technological change and constant pricing pressures. These characteristics
are equally applicable to the third party memory market, where pricing is a
major consideration in the buying decision. The Company competes with HP,
Sun, IBM, and Dell, as well as with a number of third party memory
suppliers, including Kingston Technology.
Although many of the Company's competitors possess significantly
greater financial, marketing and technological resources, the Company
competes favorably based on the buying criteria of price/performance, time-
to-market, product quality, reliability, service/support, breadth of product
line and compatibility with computer system vendors' technology. The
Company's objective is to continue to remain strong in all of these areas
with particular focus on price/performance and time-to-market, which
management believes are two of the more important criteria in the selection
of third party memory product suppliers. Market research and analysis
capability by the Company is necessary to ensure timely information on new
products and technologies coming from the computer system vendors and from
the overall memory market. The Company must continue low cost, high volume
production while remaining flexible to satisfy the time-to-market
requirement.
The Company believes that its 44-year reputation for providing quality
products is an important factor to its customers when making a purchase
decision. To strengthen this reputation, the Company has a comprehensive
lifetime warranty program which provides customers with added confidence in
buying from the Company. See "Business-Product Warranty and Service."
Patents, Trademarks and Licenses
The Company believes that its success depends primarily upon the price
and performance of its products rather than on ownership of copyrights or
patents.
Sale of memory products for systems that use proprietary memory design
can from time to time give rise to claims of copyright or patent
infringement. In most such instances the Company has either obtained the
opinion of patent counsel that its products do not violate such patents or
copyrights or obtained a license from the original equipment manufacturer.
To the best of the Company's knowledge and belief, no Company product
infringes any valid copyright or patent. However, because of rapid
technological development in the computer industry with concurrent extensive
patent coverage and the rapid rate of issuance of new patents, questions of
infringement may continue to arise in the future. If such patents or
copyrights are perfected in the future, the Company believes, based upon
industry practice, that any necessary licenses would be obtainable upon the
payment of reasonable royalties.
10
Employees
As of April 30, 2011, the Company had 91 full-time employees. The
Company believes it has satisfactory relationships with its employees. None
of the Company's employees are covered by a collective bargaining agreement.
Environmental
Compliance with federal, state and local provisions which have been
enacted or adopted to regulate the protection of the environment does not
have a material effect upon the capital expenditures, earnings and
competitive position of the Company. The Company does not expect to make
any material expenditures for environmental control facilities in either
the current fiscal year (fiscal 2012) or the succeeding fiscal year (fiscal
2013).
(d) Financial information about geographic area sales.
REVENUES (000's)
Export
Fiscal U.S. Europe Other* Consolidated
------ ----- ------ ------ ------------
2011 $37,400 $6,481 $2,966 $46,847
2010 $35,566 $4,484 $3,970 $44,020
2009 $19,088 $4,793 $2,016 $25,897
PERCENTAGES
Export
Fiscal U.S. Europe Other* Consolidated
------ ----- ------ ------ ------------
2011 79.9% 13.8% 6.3% 100.0%
2010 80.8% 10.2% 9.0% 100.0%
2009 73.7% 18.5% 7.8% 100.0%
*Principally Asia Pacific Region
Item 1A. RISK FACTORS
WE MAY NEED TO OBTAIN ADDITIONAL WORKING CAPITAL FOR CONTINUED RESEARCH
AND DEVELOPMENT. The development of the XcelaSAN product line has required
and will continue to require substantial capital investment. The Company
believes that it has obtained sufficient financing for the continued
development of the products. There can be no assurance, however, that such
financing will be sufficient for the Company's purposes or that additional
sources of financing will be available if needed. If we require and are
unable to raise additional funds, we may need to delay, scale-back or
eliminate some or all of our research and product development programs
and/or license third parties to develop and commercialize products or
technologies that we would otherwise seek to develop and commercialize
ourselves.
11
WE MAY HAVE TO SUBSTANTIALLY INCREASE OUR WORKING CAPITAL REQUIREMENTS
IN THE EVENT OF DRAM ALLOCATIONS. Over the past 20 years, availability of
DRAMs has swung back and forth from oversupply to shortage. In times of
shortage, we have been forced to invest substantial working capital
resources in building and maintaining inventory. At such times we have
bought DRAMs in excess of our customers' needs in order to ensure future
allocations from DRAM manufacturers. In the event of a shortage, we may not
be able to obtain sufficient DRAMs to meet customers' needs in the short
term, and we may have to invest substantial working capital resources in
order to meet long-term customer needs.
WE COULD SUFFER LOSSES IF DRAM PRICES DECLINE SUBSTANTIALLY. We are at
times required to maintain substantial inventories during periods of
shortage and allocation. Thereafter, during periods of increasing
availability of DRAMs and rapidly declining prices, we have been forced to
write down inventory. There can be no assurance that we will not suffer
losses in the future based upon high inventories and declining DRAM prices.
OUR PRODUCTS MAY VIOLATE OTHERS' PATENTS. Certain of our products are
designed to be used with proprietary computer systems built by various OEM
manufacturers. We often have to comply with the OEM's proprietary designs
which may be patented, now or at some time in the future. OEMs have, at
times, claimed that we have violated their patent rights by adapting our
products to meet the requirements of their systems. It is our policy to, in
unclear cases, either obtain an opinion of patent counsel prior to
marketing, or obtain a license from the patent holder. We are presently
licensed by Sun Microsystems and Silicon Graphics to sell memory products
for certain of their products. However, there can be no assurance that
product designs will not be created in the future which will, in fact, be
patented and which patent holders will require the payment of substantial
royalties as a condition for our continued presence in the segment of the
market covered by the patent or they may not give us a license. Nor can
there be any assurance that our existing products do not violate one or more
existing patents.
WE MAY LOSE AN IMPORTANT CUSTOMER. During fiscal 2011, the largest ten
customers accounted for approximately 38% of the Company's revenues and one
customer accounted for 11% of the Company's revenues. There can be no
assurance that one or more of these customers will not cease or materially
decrease their business with the Company in the future and that our
financial performance will not be adversely affected thereby.
SALES DIRECTLY TO OEM'S AND CONTRACT MANUFACTURERS CAN MAKE OUR
REVENUES, EARNINGS, BACKLOG AND INVENTORY LEVELS UNEVEN. Revenue and
earnings from OEM sales may become uneven as order sizes are typically large
and often a completed order cannot be shipped until released by the OEM,
e.g., to meet a "just in time" inventory requirement. This may occur at or
near the end of an accounting period. In such case, revenues and earnings
could decline for the period and inventory and backlog could increase.
WE FACE COMPETITION FROM OEMs. In the compatibles market we sell our
products at a lower price than OEMs. Customers will often pay some premium
for the "name brand" product when buying additional memory and OEMs seek to
12
exploit this tendency by having a high profit margin on memory products.
However, individual OEMs can change their policy and price memory products
competitively. While we believe that with our manufacturing efficiency and
low overhead we still would be able to compete favorably with OEMs, in such
an event profit margins and earnings would be adversely affected. Also,
OEMs could choose to use "free memory" as a promotional device in which case
our ability to compete would be severely impaired.
WE FACE COMPETITION FROM DRAM MANUFACTURERS. DRAM manufacturers not
only sell their product as discreet devices, but also as finished memory
modules. They primarily sell these modules directly to OEMs and large
distributors and as such compete with us. There can be no assurance that
DRAM manufacturers will not expand their market and customer base, and our
profit margins and earnings could be adversely affected.
THE MARKET FOR OUR PRODUCTS MAY NARROW OVER TIME. The principal market
for our memory products consists of the manufacturers, buyers and owners of
workstations and enterprise servers, classes of machines lying between large
mainframe computers and personal computers. Personal computers are
increasing in their power and sophistication and, as a result, are now
filling some of the computational needs traditionally filled by
workstations. The competition for the supply of after-market memory products
in the PC industry is very competitive and to the extent we compete in this
market we can be expected to have lower profit margins. There can be no
assurance that this trend will not continue in the future, and that our
financial performance will not be adversely affected.
A PORTION OF OUR OPERATIONS IS DESIGNED TO MEET THE NEEDS OF THE VERY
COMPETITIVE INTEL AND AMD PROCESSOR-BASED MOTHERBOARD MARKET. In addition
to selling server memory systems, we develop, manufacture and market a
variety of memory products for motherboards that are Intel or AMD processor
based. Many of these products are sold to OEMs and incorporated into
computers and other equipment. This is an intensely competitive market with
high volumes but lower margins.
WE MAY MAKE UNPROFITABLE ACQUISITIONS. The Company is actively looking
at acquiring complementary products and related intellectual property. The
possibility exists that an acquisition will be made at some time in the
future. Uncertainty surrounds all acquisitions and it is possible that a
particular acquisition may not result in a benefit to shareholders,
particularly in the short-term. In addition, there can be no assurance that
the business of MMB acquired by the Company will remain a profitable
operating unit of the Company or that savings from having a larger
consolidated business operation will continue.
THE INVESTMENTS WE MAKE IN RESEARCH AND DEVELOPMENT MAY NOT LEAD TO
PROFITABLE NEW PRODUCTS. The Company has implemented a strategy to
introduce new and complementary products into its offerings portfolio, and
expects to spend substantial sums of money on research and development of
such possible new products. Specifically, the Company has made and
continues to make considerable investments in research and development of
the XcelaSAN product line. There can be no assurance, however, that these
research and development expenditures will result in the identification or
exploitation of any products that can be profitably sold by the Company.
13
WE MAY BE ADVERSELY AFFECTED BY EXCHANGE RATE FLUCTUATIONS. A portion
of our accounts receivable and a portion of our expenses are denominated in
foreign currencies. These proportions change over time. As a result, the
Company's revenues and expenses may be adversely affected, from time to
time, by changes in the relationship of the dollar to various foreign
currencies on foreign exchange markets. The Company does not currently
hedge its foreign currency risks.
WE MAY INCUR INTANGIBLE ASSET AND GOODWILL IMPAIRMENT CHARGES WHICH
COULD HARM OUR PROFITABILITY. We periodically review the carrying values of
our intangible assets and goodwill to determine whether such carrying values
exceed the fair market value. Our goodwill is subject to an annual review
for goodwill impairment. If impairment testing indicates that the carrying
value exceeds its fair value, the intangible assets or goodwill is deemed
impaired. Accordingly, an impairment charge would be recognized in the
period identified, which could reduce our profitability.
OUR STOCK HAS LIMITED LIQUIDITY. Although our stock is publicly
traded, it has been observed that this market is "thin." As a result, the
common stock may trade at a discount to what would be its value if the stock
enjoyed greater liquidity.
WE ARE SUBJECT TO THE NEW JERSEY SHAREHOLDERS PROTECTION ACT. This
statute has the effect of prohibiting any "business combination" - a very
broadly defined term - with any "interested shareholder" unless the
transaction is approved by the Board of Directors at a time before the
interested shareholder had acquired a 10% ownership interest. This
prohibition of "business combinations" is for five years after the
shareholder became an "interested shareholder" and continues after that time
period subject to certain exceptions. A practical consequence of this
statute is that a hostile acquisition of our company is unlikely to occur
and hostile transactions which might be of benefit to our shareholders are
unlikely to occur.
Item 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
Item 2. PROPERTIES
The Company occupies 11,056 square feet of space for administrative,
sales, research and development and manufacturing support in Princeton, New
Jersey under a lease expiring on September 1, 2016.
The Company leases 17,500 square feet of assembly plant and office
space in Montgomery County, Pennsylvania. The lease expires on March 31,
2016.
The Company also leases research and development facilities in
Bellevue, WA and marketing facilities in Denmark, Germany, and Japan.
14
Item 3. LEGAL PROCEEDINGS
None.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
Incorporated by reference herein is the information set forth in the
Company's 2011 Annual Report to Security Holders under the caption "Common
Stock Information" and the information from the Definitive Proxy
Statement under the caption "Equity Plan Compensation Information." No
shares were sold other than pursuant to a registered offering during fiscal
2011. In the fourth quarter of fiscal 2011, the Company purchased no shares
of its common stock.
Item 6. SELECTED FINANCIAL DATA
Incorporated by reference herein is the information set forth in the
2011 Annual Report to Security Holders under the caption "Selected Financial
Data".
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
Incorporated by reference herein is the information set forth in the
2011 Annual Report to Security Holders under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operation".
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Incorporated by reference herein is the information set forth in the
2011 Annual Report to Security Holders under the caption "Quantitative and
Qualitative Disclosure about Market Risk".
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements and Schedule Page in
Annual
Report*
Consolidated Financial Statements:
Consolidated Balance Sheets as of April 30, 2011 and 2010. . . 16
Consolidated Statements of Operations - Years ended
April 30, 2011, 2010 and 2009 . . . . . . . . . . . . . . 17
15
Consolidated Statements of Cash Flows -
Years ended April 30, 2011, 2010 and 2009 . . . . . . . . 18
Consolidated Statements of Stockholders' Equity -
Years ended April 30, 2011, 2010 and 2009 . . . . . . . . 20
Notes to Consolidated Financial Statements -
Years ended April 30, 2011, 2010 and 2009 . . . . . . . . 21
Report of Independent Registered Public Accounting
Firm on Consolidated Financial Statements . . . . . . . . 38
All schedules are omitted as the required information is not
applicable or because the required information is included in the
consolidated financial statements or notes thereto.
*Incorporated herein by reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable.
Item 9A. CONTROLS AND PROCEDURES
Not Applicable.
Item 9A(T). CONTROLS AND PROCEDURES
The Chief Executive Officer and Chief Financial Officer of the Company have
evaluated the effectiveness of our disclosure controls and procedures as
required by Exchange Act Rule 13a-15(b) as of the end of the period covered
by this report. Based on that evaluation, the Chief Executive Officer and
Chief Financial Officer have concluded that these disclosure controls and
procedures are effective. There were no changes in our internal control over
financial reporting during the quarter ended April 30, 2011 that have
materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate
internal control over financial reporting for the Company. Internal control
over financial reporting is a process to provide reasonable assurance
regarding the reliability of our financial reporting for external purposes
in accordance with accounting principles generally accepted in the United
States of America. Internal control over financial reporting includes
maintaining records that in reasonable detail accurately and fairly reflect
16
our transactions; providing reasonable assurance that transactions are
recorded as necessary for preparation of our financial statements; providing
reasonable assurance that receipts and expenditures of Company assets are
made in accordance with management authorization; and providing reasonable
assurance that unauthorized acquisition, use or disposition of Company
assets that could have a material effect on our financial statements would
be prevented or detected on a timely basis. Because of its inherent
limitations, internal control over financial reporting is not intended to
provide absolute assurance that a misstatement of our financial statements
would be prevented or detected.
Management has conducted an evaluation of the effectiveness of our internal
control over financial reporting based on the framework in Internal
Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on this evaluation,
management concluded that the Company's internal control over financial
reporting was effective as of April 30, 2011. This Annual Report does not
include an attestation report of the Company's independent registered public
accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by the Company's
independent registered public accounting firm.
Item 9B. OTHER INFORMATION
None.
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Incorporated by reference herein is the information set forth in the
Definitive Proxy Statement under the captions "Executive Officers of the
Company", "Nominees for Director" and "Section 16 Compliance." The
Company's "Code of Ethics", within the meaning of Item 406 of Registered
S-K, is posted on the Company's web site at www.dataram.com
Item 11. EXECUTIVE COMPENSATION
Incorporated by reference herein is the information set forth in the
Definitive Proxy Statement under the caption "Executive Compensation."
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Incorporated by reference herein is the information set forth in the
Definitive Proxy Statement under the captions "Security Ownership of Certain
Beneficial Owners and Management" and "Equity Plan Compensation Information."
17
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
Incorporated by reference herein is the information set forth in the
Definitive Proxy Statement under the captions "Executive Compensation,"
"Board of Directors" And "Related Party Transactions."
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Incorporated by reference herein is the information set forth in the
Definitive Proxy Statement under the caption "Principal Accountant Fees and
Services."
PART IV
Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
The following documents are filed as part of this report:
1. Financial Statements incorporated by
reference into Part II of this Report.
2. The documents identified in the Exhibit Index which
appears on page 20.
18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
DATARAM CORPORATION
(Registrant)
Date: July 28, 2011 By: /s/ JOHN H. FREEMAN
------------------------------------
John H. Freeman, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the
Company and in the capacities and on the dates indicated.
Date: July 28, 2011 By: /s/ THOMAS A. MAJEWSKI
------------------------------------
Thomas A. Majewski, Chairman of the
Board of Directors
Date: July 28, 2011 By: /s/ JOHN H. FREEMAN
------------------------------------
John H. Freeman, President
Chief Executive Officer and
Director
Date: July 28, 2010 By: /s/ ROGER C. CADY
------------------------------------
Roger C. Cady, Director
Date: July 28, 2011 By: /s/ ROSE ANN GIORDANO
------------------------------------
Rose Ann Giordano, Director
Date: July 28, 2011 By: /s/ MARK E. MADDOCKS
------------------------------------
Mark E. Maddocks
Vice President, Finance
(Principal Financial & Accounting Officer)
19
EXHIBIT INDEX
3(a) Restated Certificate of Incorporation. Incorporated by reference
from Exhibits to an Annual Report on Form 10-K for the year ended
April 30, 2008, filed with the Securities and Exchange Commission, SEC
file number 001-08266, on July 25, 2008.
3(b) By-Laws. Incorporated by reference from Exhibits to an Annual Report
on Form 10-K for the year ended April 30, 2008, filed with the
Securities and Exchange Commission, SEC file number 001-08266, on July
25, 2008.
4(a) Specimen certificate for shares of common stock. Incorporated by
reference from Exhibits to a registration statement on Form S-3 filed
with the Securities and Exchange Commission, SEC file number 333-
173212, on March 31, 2011.
4(b) Form of Indenture. Incorporated by reference from Exhibits to a
registration statement on Form S-3 filed with the Securities and
Exchange Commission, SEC file number 333-173212, on March 31, 2011.
4(c) Form of Debt Security (included in Exhibit 4(b)). Incorporated by
reference from Exhibits to a registration statement on Form S-3 filed
with the Securities and Exchange Commission, SEC file number 333-
173212, on March 31, 2011.
4(d) Form of Common Stock Purchase Warrant. Incorporated by reference from
Exhibits to a Current Report on Form 8-K with the Securities and
Exchange Commission, SEC file number 001-08266, filed on May 12, 2011.
10(a) 2001 Stock Option Plan.* Incorporated by reference from Exhibits to a
Definitive Proxy Statement for an Annual Meeting of Shareholders held
on September 12, 2001, filed with the Securities and Exchange
Commission, SEC file number 001-08266, on July 26, 2001.
10(b) Savings and Investment Retirement Plan, January 1, 2001 Restatement.*
Incorporated by reference from Exhibits to an Annual Report
on Form 10-K for the year ended April 30, 2003, filed with the
Securities and Exchange Commission, SEC file number 001-08266, on July
29, 2003.
10(c) Lease Agreement dated as of April 4, 2011, between Hillier Properties,
L.L.C., and Dataram Corporation.
10(d) Asset Purchase Agreement, dated March 20, 2009, by and among Dataram
Corporation, Micro Memory Bank, Inc. and Mr. David Sheerr.
Incorporated by reference from Exhibits to a Current Report on
Form 8-K/A with the Securities and Exchange Commission, SEC file
number 001-08266, filed on May 26, 2009.
10(e) Lease Agreement, dated December 31, 2000, between Nappen & Associates
and Micro Memory Bank, Inc. and assigned to Dataram Corporation.
Incorporated by reference from Exhibits to an Annual Report
on Form 10-K for the year ended April 30, 2009, filed with the
Securities and Exchange Commission, SEC file number 001-08266, on July
28, 2009.
20
10(f) Lease Renewal Agreement, dated February 13, 2006, between Nappen &
Associates and Micro Memory Bank, Inc. and assigned to Dataram
Corporation. Incorporated by reference from Exhibits to an
Annual Report on Form 10-K for the year ended April 30, 2009, filed
with the Securities and Exchange Commission, SEC file number 001-
08266, on July 28, 2009.
10(g) Lease Renewal Agreement, dated February 10, 2011, between Nappen &
Associates and Dataram Corporation.
10(h) Employment Agreement of Jeffrey H. Duncan dated as of February 1,
2005.* Incorporated by reference from Exhibits to an Annual Report on
Form 10-K for the year ended April 30, 2005, filed with the Securities
and Exchange Commission, SEC file number 001-08266, on July 28, 2005.
10(i) Employment Agreement of Mark E. Maddocks dated as of February 1, 2005.*
Incorporated by reference from Exhibits to an Annual Report on
Form 10-K for the year ended April 30, 2005, filed with the Securities
and Exchange Commission, SEC file number 001-08266, July 28, 2005.
10(j) Employment Agreement of David Sheerr dated as of March 31, 2009.*
Incorporated by reference from Exhibits to an Annual Report on
Form 10-K for the year ended April 30, 2010, filed with the Securities
and Exchange Commission, SEC file number 001-08266, July 29, 2010.
10(k) Product Consignment And Sale Agreement, dated as of July 27, 2010,
Between Sheerr Memory, Inc. and Dataram Corporation. Incorporated by
reference from Exhibits to a Current Report on Form 8-K filed with
the Securities and Exchange Commission, SEC file number 001-08266,
on July 29, 2010.
10(l) Loan and Security Agreement, dated as of July 27, 2010, between
Crestmark Capital Lending LLC and Dataram Corporation. Incorporated by
reference from Exhibits to a Current Report on Form 8-K filed with the
Securities and Exchange Commission, SEC file number 001-08266, on
July 29, 2010.
10(m) Schedule to Loan and Security Agreement, dated as of July 27, 2010,
between Crestmark Capital Lending LLC and Dataram Corporation.
Incorporated by reference from Exhibits to a Current Report on
Form 8-K filed with the Securities and Exchange Commission,
SEC file number 001-08266, on July 29, 2010.
10(n) Promissory Note, dated as of July 27, 2010, from Dataram Corporation
to Crestmark Capital Lending LLC. Incorporated by reference from
Exhibits to a Current Report on Form 8-K filed with the
Securities and Exchange Commission, SEC file number 001-08266, on
July 29, 2010.
10(o) Placement Agency Agreement, dated as of May 11, 2011, by and between
Dataram Corporation and Aegis Capital. Incorporated by reference from
Exhibits to a Current Report on Form 8-K with the Securities and
Exchange Commission, SEC file number 001-08266, filed on May 12, 2011.
21
10(p) Form of Securities Purchase Agreement, dated as of May 11, 2011, by
and between Dataram Corporation and each of the purchasers identified
on the signature pages thereto. Incorporated by reference from
Exhibits to a Current Report on Form 8-K with the Securities and
Exchange Commission, SEC file number 001-08266, filed on May 12, 2011.
13(a) 2011 Annual Report to Shareholders
14(a) Code of Ethics. Incorporated by reference from Exhibits to a Current
Report on Form 8-K filed with the Securities and Exchange Commission,
SEC file number 001-08266, on June 20, 2005.
23(a) Consent of J.H. Cohn LLP, Independent Registered Public Accounting
Firm.
31(a) Rule 13a-14(a) Certification of John H. Freeman
31(b) Rule 13a-14(a) Certification of Mark E. Maddocks
32(a) Section 1350 Certification of John H. Freeman (Furnished not Filed)
32(b) Section 1350 Certification of Mark E. Maddocks (Furnished not Filed
*Management Contract or Compensatory Plan or Arrangement
22
