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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, 2004.
[ ] 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 22-1831409
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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: NONE
Securities registered pursuant to section 12(g) of the Act:
Common Stock, $1.00 Par Value
---------------------------------
(Title of Class)
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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K 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. [x]
Indicate by check mark whether registrant is an accelerated filer (as
defined by Rule 12b-2 of the Act). Yes [ ] No [X]
The aggregate market value of the Common Stock held by non-affiliates of
the registrant on July 23, 2004 was $54,169,042.
The number of shares of Common Stock outstanding on July 23, 2004 was
7,861,980 shares.
DOCUMENTS INCORPORATED BY REFERENCE:
(1) Definitive Proxy Statement for Annual Meeting of Shareholders to be
held on September 14, 2004 (the "Definitive Proxy Statement") to be filed
within 120 days of the end of the fiscal year.
(2) 2004 Annual Report to Security Holders
- 1 -
DATARAM CORPORATION
INDEX
Part I Page
Item 1. Business (including Risk Factors). . . . . . . . 3
Item 2. Properties . . . . . . . . . . . . . . . . . . . 10
Item 3. Legal Proceedings . . . . . . . . . . . . . . . 10
Item 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . . . . 11
Part II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters. . . . . . . . . 11
Item 6. Selected Financial Data. . . . . . . . . . . . . 11
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . 11
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk . . . . . . . . . . . . . . . 11
Item 8. Financial Statements and Supplementary Data. . . 12
Item 9. Changes In and Disagreements with Accountants
on Accounting and Financial Disclosure . . . . . 15
Item 9A. Controls and Procedures . . . . . . . . . . . . 15
Item 9B. Other Information . . . . . . . . . . . . . . . 15
Part III
Item 10. Directors and Executive Officers of
the Registrant . . . . . . . . . . . . . . . . . 15
Item 11. Executive Compensation . . . . . . . . . . . . . 15
Item 12. Security Ownership of Certain
Beneficial Owners and Management and
Related Stockholder Matters. . . . . . . . . . . 15
Item 13. Certain Relationships and Related
Transactions . . . . . . . . . . . . . . . . . . 15
Item 14. Principal Accountant Fees and Services . . . . . 16
Part IV
Item 16. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K . . . . . . . 16
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
- 2 -
PART I
Item 1. BUSINESS
(a) General Development of Business.
Dataram is a developer, manufacturer and marketer of large capacity
memory products primarily used in high performance network servers and
workstations. The Company provides customized memory solutions for original
equipment manufacturers (OEMs) and compatible memory for computers
manufactured by Sun Microsystems, Inc. ("Sun"), Hewlett-Packard Company
("HP"), Silicon Graphics, Inc. ("SGI"), International Business Machines
Corporation ("IBM") and Dell Corporation ("Dell"). The Company also
manufactures a line of memory products for Intel motherboard based servers
for sale to OEMs and channel assemblers.
The Company's memory products are sold worldwide to original equipment
manufacturers, distributors, value-added resellers and end users. The Company
has a 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 original equipment manufacturers mentioned
above. The primary raw material used in producing memory boards is dynamic
random access memory ("DRAM") chips. The purchase cost of DRAM chips
typically represents approximately 75% 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 DRAM chips.
At the end of fiscal 2003, the Company exited the market for desktop,
notebook and flash memory (PC memory) and closed its manufacturing facility
in Aarhus, Denmark. In fiscal 2004, the Company's revenues were derived
solely from sales of compatible memory for high performance servers and
workstations and from sales of customized memory for OEMs. Revenues for
fiscal 2004 were $62.0 million compared to $53.5 million in fiscal 2003. The
growth in revenue came primarily from sales to OEMs, which accounted for
approximately 36% of revenue in fiscal 2004, compared to approximately 16% in
fiscal 2003. Revenues from the sale of memory for the compatibles market grew
by approximately 5% to approximately $39.7 million in fiscal 2004 from fiscal
2003. Overall volume as measured by gigabytes shipped increased by
approximately 25% in fiscal 2004 from fiscal 2003. Average selling price per
gigabyte declined by approximately 8% in fiscal 2004 compared to the prior
year.
During the year, the Company had positive cash flow from operating
activities and remained debt free. After the close of the fiscal year, the
Company established a $5,000,000 line of credit with a major bank.
Dataram 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 where its stock
trades under the symbol "DRAM." The Company's principal executive office is
located at 186 Princeton Road (Route 571), West Windsor, New Jersey 08550,
its telephone number is (609) 799-0071, its fax is (609) 799-6734 and its
website is located at http://www.dataram.com.
- 3 -
RISK FACTORS
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, Dataram has been forced to invest substantial working capital
resources in building and maintaining inventory. At such times Dataram has
bought DRAMs in excess of its customers' needs in order to ensure future
allocations from DRAM manufacturers. Dataram believes that the market for
DRAMs is presently out of balance and there is an oversupply of DRAMS, but
there can be no assurance that conditions of shortage may not prevail in the
future. In the event of a shortage, Dataram may not be able to obtain
sufficient DRAMs to meet customers' needs in the short term, and Dataram 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. Dataram is
often required to maintain substantial inventories during periods of shortage
and allocation. During periods of increasing availability of DRAM and
rapidly declining prices, Dataram has been forced to write down inventory.
At the present time, the market is one of oversupply, and Dataram seeks to
maintain a minimum inventory while meeting the needs of customers. But there
can be no assurance that Dataram will not suffer losses in the future based
upon high inventories and declining DRAM prices.
OUR MEMORY PRODUCTS MAY VIOLATE OTHERS' PATENTS. Certain of Dataram's
memory products are designed to be used with proprietary computer systems
built by various OEM manufacturers. Dataram often has to comply with
proprietary memory 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 computer memory products to meet the requirements of
their systems. It is the policy of Dataram to, in unclear cases, either
obtain an opinion of patent counsel prior to marketing, or obtain a license
from the patent holder. Dataram is presently licensed by Sun Microsystems
and Silicon Graphics to sell memory products for their principal products.
However, there can be no assurance that memory 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 Dataram's
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 Dataram's
existing products do not violate one or more existing patents.
WE FACE COMPETITION FROM OEMs. Dataram sells its 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 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
Dataram believes that with its manufacturing efficiency and low overhead it
still would be able to compete favorably with OEMs, in such an event profit
margins and earnings would be adversely affected. Also, OEM's can choose to
use "free memory" as a promotional device in which case the Company's ability
to compete is severely impaired.
- 4 -
WE MAY LOSE AN IMPORTANT CUSTOMER. During fiscal 2004, one customer,
SGI, accounted for approximately 22% of the Company's revenue and the largest
ten customers accounted for approximately 52% of the Company's revenue.
There can be no assurance that one or more of these customers will cease or
materially decrease their business with the Company in the future and that
Dataram's financial performance will not be adversely affected thereby.
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 computer manufacturers
and large distributors and as such compete with the Company on a limited
basis. There can be no assurance that DRAM manufacturers will not continue to
expand their market and customer base. In such a case, they would become a
more direct competitor to the Company and our profit margins and earnings
could be adversely affected.
THE MARKET FOR OUR PRODUCTS MAY NARROW OVER TIME. A principal market of
Dataram is the manufacturers, buyers and owners of workstations and
enterprise servers, classes of machines lying between large mainframe
computers and personal computers. The trend has been observed that 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 Dataram competes 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.
WE MAY MAKE UNPROFITABLE ACQUISITIONS. While the Company is not
currently engaged in discussions which could lead to an acquisition, 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.
A PORTION OF OUR OPERATIONS ARE DESIGNED TO MEET THE NEEDS OF THE VERY
COMPETITIVE INTEL PROCESSOR-BASED MOTHERBOARD MARKET. In addition to selling
server memory systems, we develop, manufacturer and market a variety of
memory products for motherboards that are Intel 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 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.
- 5 -
OUR STOCK HAS LIMITED LIQUIDITY. Although the stock of Dataram is
publicly traded, it has been observed that this market is "thin." As a
result, Dataram's 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 Dataram is unlikely to occur. As a
result, hostile transactions which might be of benefit to shareholders may
not occur because of this statute.
(b) Financial Information about Industry Segments.
The Company operates in one industry segment.
(c) Narrative Description of Business.
Dataram develops, manufactures and markets a variety of memory products
for use with workstations and enterprise servers, including those sold by
Sun, HP (including Compaq), SGI, IBM and Dell. The Company sells memory
products both for new machines and for the installed base of these classes of
computers at prices less than the computer manufacturer. The Company also
develops, manufactures and markets memory boards for Intel processor based
motherboards, principally based on sales to OEMs and distributors.
Industry Background
The market for the Company's memory products is principally OEMs, buyers
and owners of workstations and enterprise servers. 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, a new class of computer system, the enterprise server,
has emerged.
Enterprise 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.
Dataram designs, produces and markets memory products for workstations
and servers sold by Sun, HP (including Compaq), Silicon Graphics, IBM and
Dell. Additionally, the Company produces and markets memory for Intel
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.
- 6 -
Business Strategy
Market Growth
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. While the past several fiscal years had resulted in negative growth
as measured by revenue for memory, management estimates that long-term growth
trends measured by revenue in the market for its products has resumed. That
trend changed in the current fiscal year as demand for information technology
products recovered.
Market Penetration
In addition to the growth in the market, management estimates that sales
by system vendors constitute 80% of the memory market. Thus, there is an
opportunity for growth through penetration of the system vendor's market
share. To successfully compete with system vendors, Dataram 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.
Products
The Company's principal business is the development, manufacture and
marketing of memory products which can be added to 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 Dataram and other independent memory manufacturers
is straightforward and allows for the use of many standard components.
Distribution Channels
Dataram sells its memory products to OEM's, distributors, value-added
resellers and larger end-users. The Company has sales 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 Dataram's
ability to provide service over the life of the product are important factors
in making sales. As a consequence, the Company adopted many years ago a
Lifetime Warranty program for its memory products. The economic useful life
of the computer systems to which Dataram's memory equipment is attached is
almost always substantially less than the physical useful life of the
equipment itself. Thus, memory systems 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.
- 7 -
Working Capital Requirements
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 and the Company must invest heavily in
inventory in order to continue to be assured of the supply of DRAMs from
vendors. During a period of shortage, the Company must maintain larger cash
reserves than it would in a period of oversupply. At the present time, the
market for DRAMs is one of oversupply. At April 30, 2004, the Company had
cash and cash equivalents of $6.8 million and had no debt.
Memory Product Complexity
DRAM memory products for workstations and enterprise servers had, for
many years, been undergoing a process of simplification with a corresponding
decline in profit margins as competitors' entry into the market became
easier. However, recent trends in the market have seen the development by
OEMs of more complex memory designs. This has enabled Dataram to increase
its margins somewhat.
Engineering and Development
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 components as
they become available. Dataram designs prototype memory products and
subjects them to reliability testing procedures. During its fiscal year
ended April 30, 2004, the Company incurred costs of $1,284,000 for
engineering and product development, $1,539,000 in fiscal 2003 and $1,839,000
in fiscal 2002.
Raw Materials
The Company purchases standard dynamic random access memory ("DRAM")
chips. The costs of such chips is approximately 75% of the total cost of
memory products. Fluctuations in the availability or prices of memory chips
can have a significant impact on the Company's profit.
Dataram 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
Bucks County, Pennsylvania.
Backlog
The Company expects that all backlog on hand will be filled during the
current fiscal year. The Company's backlog at April 30, 2004 was $4,682,000
and at April 30, 2003 was $665,000.
- 8 -
Seasonality
The Company's business can be seasonal with December and January being
the slowest months.
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. Dataram competes with Sun, HP
(including Compaq), Silicon Graphics, IBM and Dell, as well as with a number
of third party memory suppliers, including Kingston Technology.
Although many of Dataram'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. Dataram'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.
Dataram must continue low cost, high volume production while remaining
flexible to satisfy the time-to-market requirement.
The Company believes that its 37-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 and service program which provides customers with added
confidence in buying from Dataram. 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.
Employees
As of April 30, 2004, the Company had 122 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.
- 9 -
Environment
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 2005) or the succeeding fiscal year (fiscal
2006).
(d) Financial Information about Foreign and Domestic Operations
and Export Sales.
REVENUES (000's)
Export
Fiscal U.S. Europe Other Consolidated
______ _____ ______ ______ ____________
2004 $43,780 10,994 7,210 $61,984
2003 $29,495 13,180 10,854 $53,529
2002 $39,296 27,131 14,763 $81,190
PERCENTAGES
Export
Fiscal U.S. Europe Other Consolidated
______ _____ ______ ______ ____________
2004 70.6% 17.8% 11.6% 100.0%
2003 55.1% 24.6% 20.0% 100.0%
2002 48.4% 33.4% 18.2% 100.0%
Item 2. Properties
The Company occupies approximately 24,000 square feet of space for
administrative, sales, research and development and manufacturing support in
West Windsor Township, New Jersey under a lease expiring on June 30, 2006.
The Company leases a 32,000 square foot assembly plant in Bucks County,
Pennsylvania. The lease expires on January 31, 2006 and the Company has a
two-year renewal option.
The Company also leases marketing facilities in The United Kingdom,
Denmark, Germany, and Japan.
On September 29, 1980, the Company purchased approximately 81 acres of
undeveloped property in West Windsor Township, New Jersey. The purchase
price of $875,000 was paid in cash. The Company has entered into a contract
to sell this property for $3,000,000. Closing of the sale is subject to
several material contingencies and no assurance can be given that this sale
will, in fact, close.
Item 3. Legal Proceedings
Lemelson Medical, Education & Research Foundation, Limited Partnership
vs. Dataram et al., United States District Court for the District of Arizona;
Docket No. CV-01-1440-PHX-HRH.
- 10 -
This is a patent infringement case in which a holder of certain
"Lemelson" patents brought an action in the Federal District Court for the
District of Arizona against numerous defendants in the electronics industry,
including the Company in November of 2001. Dataram has acknowledged service
of the complaint but has not answered the complaint because the Court has
stayed its further prosecution pending the results of a similar Nevada case
involving the same patents. The case is in its very early stages. The
alleged patent infringement does not implicate the Company's products, but
rather the machinery that manufactures them, and if the case resumes it is
anticipated that the sellers of that machinery would be joined by the
Company.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of Security Holders in the fourth
quarter of the fiscal year covered by this report.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
Incorporated by reference herein is the information set forth in the
Company's 2004 Annual Report to Security Holders under the caption "Common
Stock Information" at page 5 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 stock offering during
the fourth quarter and no shares were repurchased during the fourth quarter.
Item 6. Selected Financial Data
Incorporated by reference herein is the information set forth in the
2004 Annual Report to Security Holders under the caption "Selected Financial
Data" at page 20.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Incorporated by reference herein is the information set forth in the
2004 Annual Report to Security Holders under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations" at
page 2 through page 5.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Incorporated by reference herein is the information set forth in the
2004 Annual Report to Security Holders under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations" at
page 5.
- 11 -
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, 2004 and 2003. . . 6
Consolidated Statements of Operations - Years ended
April 30, 2004, 2003 and 2002 . . . . . . . . . . . . . . 7
Consolidated Statements of Cash Flows -
Years ended April 30, 2004, 2003 and 2002 . . . . . . . . 8
Consolidated Statements of Stockholders' Equity
and Comprehensive Income (Loss) -
Years ended April 30, 2004, 2003 and 2002 . . . . . . . . 9
Notes to Consolidated Financial Statements -
April 30, 2004, 2003 and 2002 . . . . . . . . . . . . 10-19
Report of Independent Registered Public Accounting
Firm on Consolidated Financial Statements . . . . . . . 20
Page in
Financial Statement Schedule: 10-K
Valuation and Qualifying Accounts -
Years ended April 30, 2004, 2003 and 2002 . . . . . . . 13
Report of Independent Registered Public Accounting
Firm on Financial Statement Schedule . . . . . . . . . 14
All other 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.
- 12 -
Schedule II
DATARAM CORPORATION AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years ended April 30, 2004, 2003 and 2002
Additions
charged Deduc-
Balance at to costs tions Balance
beginning and from at close
Description of period expenses reserves of period
___________ _________ ________ _________ _________
Year ended April 30, 2004:
Allowance for doubtful accounts $ 100,000 7,000 7,000* 100,000
Allowance for sales returns $ 220,000 584,000 584,000 220,000
Year ended April 30, 2003:
Allowance for doubtful accounts $ 100,000 152,000 152,000* 100,000
Allowance for sales returns $ 220,000 405,000 405,000 220,000
Year ended April 30, 2002:
Allowance for doubtful accounts $ 230,000 (65,000) 65,000* 100,000
Allowance for sales returns $ 220,000 657,000 657,000 220,000
___________________________
*Represents write-offs and recoveries of accounts receivable.
- 13 -
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
Dataram Corporation:
Under date of June 3, 2004, we reported on the consolidated balance sheets of
Dataram Corporation and subsidiaries as of April 30, 2004 and 2003, and the
related consolidated statements of operations, stockholders' equity and
comprehensive income (loss), and cash flows for each of the years in the
three-year period ended April 30, 2004, as contained in the April 30, 2004
Annual Report to Security Holders. These consolidated financial statements
and our report thereon are incorporated by reference in the annual report on
Form 10-K for the year ended April 30, 2004. In connection with our audits of
the aforementioned consolidated financial statements, we also audited the
related consolidated financial statement schedule as listed in the
accompanying index. This financial statement schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion on
the financial statement schedule based on our audits.
In our opinion, such consolidated financial statement schedule, when
considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly, in all material respects, the information set
forth therein.
As discussed in note 1 to the consolidated financial statements, the Company
adopted the provisions of Statement of Financial Accounting Standards No.
141, "Business Combinations" for all business combinations consummated after
June 30, 2001, and the provisions of Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets" effective May 1,
2001.
KPMG LLP
Short Hills, New Jersey
June 3, 2004
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Item 9. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure
Not Applicable.
Item 9A. Controls and Procedures
Dataram's management acting under the supervision of the Audit
Committee is responsible for establishing and maintaining adequate internal
controls and procedures to permit accurate financial reporting. During the
past 90 days, Mr. Tarantino and Mr. Maddocks have evaluated those controls
and procedures. Based upon this evaluation of the controls now in place,
management believes that these internal controls and procedures are effective
and there are no material weaknesses in those financial controls. There have
been no significant changes in these controls since the date of this
evaluation.
Item 9B. Other Information
New Line of Credit. As of June 21, 2004 the Company entered into a
Loan Agreement with PNC Bank through June 21, 2006. The Company has not as
of this date borrowed any money under this Agreement. Pursuant to the
Agreement, the Company can borrow up to 75% of qualified accounts receivables
(generally consisting of U.S. and Canadian accounts receivable less than 90
days old) up to a maximum amount of $5,000,000. At the election of the
Company, the interest rate is the bank's prime rate or LIBOR plus 2.5%. As
security for any loans made under this Agreement, the Company has given a
security interest in all of its personal property, including its accounts.
Without the consent of the bank, the Company may not pay dividends nor expend
more than $1,000,000 a year in repurchasing its common stock. The Company
pays an annual commitment fee of .25% on the unused line.
PART III
Item 10. Directors and Executive Officers of the Registrant
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."
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 caption "Security Ownership of
Certain Beneficial Owners and Management."
Item 13. Certain Relationships and Related Transactions
Incorporated by reference herein is the information set forth in
the Definitive Proxy Statement under the captions "Executive Compensation"
and "Board of Directors."
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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 Schedule, and Reports on
Form 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements incorporated by
reference into Part II of this Report.
2. Financial Statement Schedule included in
Part II of this Report.
(b) Reports on Form 8-K:
1. Report filed on June 6, 2004 regarding annual earnings.
(c) Exhibits:
The Exhibit Index appears on page 18.
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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 22, 2004 By: ROBERT V. TARANTINO
________________________________
Robert V. Tarantino, 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 22, 2004 By: ROBERT V. TARANTINO
________________________________
Robert V. Tarantino, President
Chief Executive Officer and
Chairman of the Board of Directors
(Principal Executive Officer)
Date: July 22, 2004 By: RICHARD HOLZMAN
________________________________
Richard Holzman, Director
Date: July 22, 2004 By: THOMAS A. MAJEWSKI
________________________________
Thomas A. Majewski,
Director
Date: July 21, 2004 By: BERNARD L. RILEY
________________________________
Bernard L. Riley, Director
Date: July 22, 2004 By: ROGER C. CADY
________________________________
Roger C. Cady, Director
Date: July 22, 2004 By: MARK E. MADDOCKS
________________________________
Mark E. Maddocks
Vice President, Finance
(Principal Financial & Accounting Officer)
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EXHIBIT INDEX
3(a) Restated Certificate of Incorporation. Incorporated by reference
from Exhibits to a Quarterly Report on Form 10-Q for the quarter ended
July 31, 2000 and filed on September 13, 2000.
3(b) By-Laws. Incorporated by reference from Exhibits to an Annual Report
on Form 10-K for the year ended April 30, 2003 and filed on July 26,
2003.
4(a) Loan Agreement with PNC Bank dated as of June 21, 2004
4(b) Committed Line of Credit Note with PNC Bank dated as of June 21, 2005.
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 and filed 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 and filed on July 26,
2003.
10(c) West Windsor, New Jersey Lease dated September 19, 2000. Incorporated
by reference from Exhibits to an Annual Report on Form 10-K for the
year ended April 30, 2001 and filed on July 26, 2001.
10(d) Bucks County, Pennsylvania Lease dated January 31, 1995. Incorporated
by reference from Exhibits to an Annual Report on Form 10-K for the
year ended April 30, 2003 and filed on July 26, 2003.
10(e) Employment Agreement of Robert V. Tarantino dated May 1, 1997.
Incorporated by reference from Exhibits to an Annual Report
on Form 10-K for the year ended April 30, 2003 and filed on July 26,
2003.
10(f) Offer of Employment made to Lars Marcher dated July 12, 2002.
13(a) 2004 Annual Report to Shareholders
23(a) KPMG LLP Independent Accountants' Consent for S-8 Registration
No. 33-56282
31(a) Section 906 Certification of Robert V. Tarantino (Furnished not Filed)
31(b) Section 906 Certification of Mark Maddocks (Furnished not Filed)
31(c) Section 1350 Certification of Robert V. Tarantino
31(d) Section 1350 Certification of Mark Maddocks
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