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[DATARAM LOGO]
DATARAM CORPORATION
2011 ANNUAL REPORT
Table of Contents
1 President's Letter
3 Management's Discussion and Analysis
of Financial Condition and Results
of Operations
16 Financial Review
20 Selected Financial Data
[PICTURE OF JOHN FREEMAN]
President's Letter
To Our Shareholders:
Two years ago, I outlined our growth and diversification strategy for the
Company and the initiatives we put in place to implement that strategy. I am
pleased to report on our growth, progress and future plans.
We continued the implementation of our new go to market corporate strategy
instituted last fiscal year. As I stated last year, we changed our
traditional direct sales model. We focused a direct sales team on selling
solutions within industry verticals, opened web based e-sales, created an
inside sales team and increased our investment in our partner strategy. We
now have implemented Alliance Partners for corporations, Reseller and
Distributor Partners, Government Partners and Individual Partners. Each of
these changes made contributions to our growth.
In fiscal 2011, our memory solutions business grew by 6 percent to $46.8
million and we posted our second consecutive year of growth after five years
of negative growth. This business is now operating profitably.
On March 31, 2009, we acquired certain assets of Micro Memory Bank, Inc.
(MMB), a prominent memory module company offering legacy to advanced
solutions in laptop, desktop and server memory products. Both MMB and the
traditional Dataram memory business have benefited from leveraging each
other's skills, strategies, marketing, sales, engineering and purchasing
resources.
During fiscal 2011, we continued our integration of MMB and our traditional
memory business. In March, 2011, we completed the consolidation of our two
manufacturing facilities and reduced our expenses by approximately $1.2
million annually as a result.
In fiscal 2010, we developed and launched a new corporate website
incorporating new features, functions, content, and branding which reflects
and supports our new corporate mission and strategy.
The website's interactive e-commerce capabilities generated business leads
and sales representing over $1.7 million in revenues in fiscal 2011 compared
to approximately $1.0 million last year. Revenues generated through the
website are continuing to grow and are trending towards an annualized run
rate exceeding $2.0 million.
In fiscal 2011, we incorporated a quote and order application to facilitate
ease of quotation and order placement and further strengthen our business
relationship with our premier channel partners and select enterprise
clients.
During fiscal 2011, we continued to make significant investments in the
development of our XcelaSAN product line. XcelaSAN is a unique intelligent
Storage Area Network (SAN) optimization solution that delivers substantive
application performance improvement to applications such as Oracle, SQL and
VMware. XcelaSAN augments existing storage systems by transparently applying
intelligent caching algorithms that serve the most active block-level data
from high-speed storage, creating an intelligent, virtual solid state SAN.
This breakthrough solution allows 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.
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Our development team has successfully incorporated high availability
functionality into the product software and the first generation product is
now available for sale. The product is currently installed and being
evaluated for purchase at selected customer sites. XcelaSAN continues to
provide significant performance improvements over traditional solutions at
dramatically less cost.
Many clients are reconsidering traditional computing paradigms requiring
major technology refreshes every several years. Instead we have seen our
clients seek out solutions which optimize the performance and extend the
useful life of existing IT assets. By doing so, our clients realize
substantial reductions in computing costs, eliminate business risks
associated with the introduction of new technology, and avoid substantial
resource overhead required to implement these new IT assets. We believe the
timing of introducing XcelaSAN into the market is ideal as it provides
exponential optimization of storage assets while also extending their useful
life. In addition, as our clients deploy "tiered" storage architectures
designed to store data in the most logical and economical repository,
XcelaSAN represents a critical component in leveraging and supporting
that strategy.
We have completed the formation of a dedicated XcelaSAN lead generation and
sales team.
In May, 2011, we secured the financing we believe necessary to sustain the
Company through the period of the product launch.
We will continue to execute our new strategy and leverage the investments we
have made in sales, marketing and new product development to increase our
growth and profits in our memory solutions and XcelaSAN storage businesses.
These investments have also set the stage for Dataram to provide more
solutions and optimization benefits to our clients as we continue to
diversify and create a stronger foundation for growth.
On behalf of the Company's Board of Directors and management team, I would
like to thank our shareholders for their continued support and our employees
for their hard work and dedication.
July 17, 2011
John H. Freeman
President and Chief Executive Officer
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Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
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 provides
customized memory solutions for original equipment manufacturers ("OEMs")
and compatible memory for leading brands including Dell, HP, IBM and Sun
Microsystems. Additionally, the Company manufactures a line of memory
products for Intel and AMD motherboard based servers. The Company is also
a developer, manufacturer and marketer of a line of high performance storage
caching products.
The Company's products are sold worldwide to OEMs, 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 OEMs mentioned above. The primary raw
material used in producing memory boards is dynamic random access memory
(DRAM) chips. 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 DRAM chips.
On March 31, 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. The results of operations of MMB for the period from the acquisition
date through April 30, 2011 have been included in the consolidated results
of operations of the Company.
Results of Operations
The following table sets forth consolidated operating data expressed as a
percentage of revenues for the periods indicated.
Years Ended April 30, 2011 2010 2009
_________________________________________________________________
Revenues 100.0% 100.0% 100.0%
Cost of sales 76.4 73.6 67.4
_____ _____ _____
Gross profit 23.6 26.4 32.6
Engineering 2.2 2.3 4.7
Research and development 4.0 9.7 5.9
Selling, general and administrative 26.4 30.3 42.7
_____ _____ _____
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Loss from operations (9.0) (15.9) (20.7)
Other income (expense), net (0.9) (0.3) 0.9
_____ _____ _____
Loss before income tax
expense (benefit) (9.9) (16.2) (19.8)
Income tax expense (benefit) 0.0 8.2 (7.7)
_____ _____ _____
Net loss (9.9) (24.4) (12.1)
===== ===== =====
Fiscal 2011 Compared With Fiscal 2010
Revenues for fiscal 2011 were $46.8 million compared to $44.0 million in
fiscal 2010. The Company's revenues increased by approximately 6% in fiscal
2011 versus fiscal 2010.
Revenues for the fiscal years ended April 30, 2011 and 2010 by geographic
region were:
Year ended Year ended
April 30, 2011 April 30, 2010
________________ ________________
United States $ 37,400,000 $ 36,410,000
Europe 6,481,000 5,055,000
Other (principally Asia Pacific Region) 2,966,000 2,555,000
________________ ________________
Consolidated $ 46,847,000 $ 44,020,000
================ ================
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.
Management expects that cost of sales as a percentage of revenue will
generally be approximately 75%. Fluctuations either up or down of 3% or less
are not unusual and can result from many factors, some of which are rapid
changes in the price of DRAMs, a change in product mix possibly resulting
from a large order or series of orders for a particular product or a change
in customer mix.
Engineering expenses in each of fiscal 2011 and fiscal 2010 were $1.0 million.
Research and development expenses in fiscal 2011 were $1.9 million, versus
$4.3 million in fiscal 2010. Research and development expense includes
payroll, employee benefits, stock-based compensation expense and other
headcount-related expenses associated with product development. Research and
development expense also includes third-party development and programming
costs. In the first quarter of fiscal 2009, the Company implemented a
strategy to introduce new and complementary products into its offerings
portfolio. The Company is currently focusing on the development of a line of
high-performance storage caching products ("XcelaSAN"). XcelaSAN is a unique
intelligent Storage Area Network ("SAN") optimization solution that delivers
substantive application performance improvement to applications such as
Oracle, SQL and VMware. XcelaSAN augments existing storage systems by
transparently applying intelligent caching algorithms that serve the most
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active block-level data from high-speed storage, creating an intelligent,
virtual solid state SAN. As part of that strategy, in January 2009, the
Company entered into a software purchase and license agreement with another
company whereby the Company acquired the exclusive right to purchase
specified software for a price of $900,000 plus a contingent payment of
$100,000. Fiscal 2010's research and development expense includes $600,000
of expense related to this agreement, of which $300,000 was expensed in the
first fiscal quarter and $300,000 was expensed in the second fiscal quarter.
The Company exclusively owns the software. The software and the storage
products, which incorporate the software, are currently under development.
On November 4, 2011, the Company determined that technological feasibility
of the product was established. In fiscal 2011 the Company capitalized $1.5
million of research and development costs. We expect to make further
investments in this area.
Selling, general and administrative(S,G&A) expenses were $12.4 million in
fiscal 2011 versus $13.4 million in fiscal 2010. Stock-based compensation
expense was recorded as a component of S,G&A expense and totaled
approximately $482,000 in fiscal 2011, versus $918,000 in fiscal 2010. In
fiscal 2011, there were options granted to purchase 139,000 shares of the
Company's common stock compared to grants to purchase 899,500 shares in
fiscal 2010. Intangible asset amortization is recorded as a component of
S,G&A expense and totaled approximately $407,000 in fiscal 2011, versus
$637,000 in fiscal 2010.
Other income (expense), net for fiscal year 2011 totaled $401,000 expense
versus $117,000 expense in fiscal 2010. Other income (expense) in fiscal
2011 includes $286,000 of interest expense. Other income in fiscal year 2011
also includes $135,000 of foreign currency transaction losses, primarily as
a result of the US dollar strengthening against the EURO. Additionally,
other income (expense) includes approximately $47,000 of income recorded
for the gain on sale of assets. Other income in fiscal 2010 includes
$85,000 of foreign currency transaction losses and approximately $42,000
of interest expense, net of interest income.
The Company's consolidated statements of operations for fiscal 2011 include
tax expense of approximately $5,000 that consists of state minimum tax
payments.
The Company's consolidated statements of operations for fiscal 2010 include
approximately $3.6 million of income tax expense. The Company utilizes the
asset and liability method of accounting for income taxes in accordance with
the provisions of the Expenses - Income Taxes Topic of the Financial
Accounting Standards Board (FASB) Accounting Standards Codification (ASC).
Under the asset and liability method, deferred income tax assets and
liabilities are recognized for the estimated future tax consequences
attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases. A
valuation allowance is provided when the Company determines that it is more
likely than not that some portion or all of the deferred income tax assets
will not be realized. The Company considers certain tax planning strategies
in its assessment as to the recoverability of its deferred income tax
assets. In each reporting period, the Company assesses, based on the weight
of all evidence, both positive and negative, whether a valuation allowance
on its deferred income tax assets is warranted. Based on the assessment
conducted in the Company's reporting period ended January 31, 2010, the
Company concluded that such an allowance was warranted and, accordingly,
recorded a valuation allowance of approximately $5.8 million in that
reporting period. Deferred income tax assets and liabilities are measured
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using enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in
earnings in the period that the tax rate changes. As of April 30, 2011 the
Company had Federal and State net operating loss (NOL) carry-forwards of
approximately $17.1 million and $15.1 million, respectively. These can be
used to offset future taxable income and expire between 2023 and 2031 for
Federal tax purposes and 2016 and 2031 for state tax purposes. The Company's
NOL carry-forwards are a component of its deferred income tax assets which
are reported net of a full valuation allowance in the Company's
consolidated financial statements at April 30, 2011 and at April 30, 2010.
Fiscal 2010 Compared With Fiscal 2009
Revenues for fiscal 2010 were $44.0 million compared to $25.9 million in
fiscal 2009. The Company's acquired MMB business unit generated revenues of
approximately $14.0 million in fiscal 2010 and $0.9 million in fiscal 2009.
Exclusive of the effect of the acquired MMB business units revenues, the
Company's revenues increased by approximately 20% in fiscal 2010 versus
fiscal 2009.
Cost of sales were $32.4 million in fiscal 2010 or 73.6 percent of revenues
compared to $17.4 million or 67.4 percent of revenues in fiscal 2009.
Fiscal year 2010 cost of sales as a percentage of revenue is considered by
management to be within the Company's normal range. Fiscal year 2009
percentages are considered by management to be unusually low and were the
result of a product mix skewed more heavily toward higher margin legacy
products as sales of lower margin mainstream products were negatively
impacted by the world financial crisis. 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.
Engineering expenses in fiscal 2010 were $1.0 million, versus $1.2 million
in fiscal 2009.
Research and development expenses in fiscal 2010 were $4.3 million, versus
$1.5 million in fiscal 2009. In the first quarter of the prior fiscal year,
the Company implemented a strategy to introduce new and complementary
products into its offerings portfolio. The Company is currently focusing on
the development of certain high performance storage products. As part of
that strategy, in January 2009, the Company entered into a software purchase
and license agreement with another company whereby the Company acquired the
exclusive right to purchase specified software for a price of $900,000 plus
a contingent payment of $100,000. Fiscal 2010's research and development
expense includes $600,000 of expense related to this agreement, of which
$300,000 was expensed in the first fiscal quarter and $300,000 was expensed
in the second fiscal quarter.
Selling, general and administrative(S,G&A) expenses were $13.4 million in
fiscal 2010 versus $11.1 million in fiscal 2009. The acquired MMB business
unit's S,G&A expense recorded in fiscal 2010 was approximately $2.1 million,
versus $161,000 in fiscal 2009. The prior fiscal year's expense included a
charge of approximately $716,000 related to a retirement agreement entered
into with the Company's former chief executive officer. Stock-based
compensation expense was recorded as a component of S,G&A expense and
totaled approximately $918,000 in fiscal 2010, versus $533,000 in fiscal
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2009. In fiscal 2010, the Company recorded marketing and sales expense
related to our new storage products of approximately $906,000 versus nil in
the comparable prior year. These expenses are mainly related to the addition
of sales personnel and sales engineers for the storage products.
Other income (expense), net for fiscal year 2010 totaled $117,000 expense
versus $223,000 income in fiscal 2009. Other income (expense) in fiscal 2010
includes $85,000 of foreign currency transaction losses, primarily as a
result of the EURO weakening against the US dollar. Additionally, other
income (expense) includes $42,000 of interest expense, net of interest
income. Approximately $10,000 of income was recorded for the gain on sale of
assets. Other income in fiscal 2009 includes $294,000 of interest income,
net of interest expense. Additionally, other income includes $68,000 of
foreign currency transaction losses, primarily as a result of the EURO
weakening against the US dollar.
The Company's consolidated statements of operations for fiscal 2010 include
approximately $3.6 million of income tax expense. The Company utilizes the
asset and liability method of accounting for income taxes in accordance with
the provisions of the Expenses - Income Taxes Topic of the Financial
Accounting Standards Board (FASB) Accounting Standards Codification (ASC)
(Codification). Under the asset and liability method, deferred tax assets
and liabilities are recognized for the estimated future tax consequences
attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases. A
valuation allowance is provided when the Company determines that it is more
likely than not that some portion or all of the deferred tax assets will not
be realized. The Company considers certain tax planning strategies in its
assessment as to the recoverability of its tax assets. In each reporting
period, the Company assesses, based on the weight of all evidence, both
positive and negative, whether a valuation allowance on its deferred tax
assets is warranted. Based on the assessment conducted in the Company's
reporting period ended January 31, 2010, the Company concluded that such
an allowance was warranted and accordingly, recorded a valuation allowance
of approximately, $5.8 million in that reporting period. Deferred tax
assets and liabilities are measured using enacted tax rates in effect for
the year in which those temporary differences or tax attributes are expected
to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in earnings in the period
that the tax rate changes. Income tax expense (benefit) for fiscal 2009 was
a benefit of $2.0 million. The Company's effective tax rate for financial
reporting purposes in fiscal 2009 was approximately 39%.
Liquidity and Capital Resources
Cash and cash equivalents at April 30, 2011 amounted to $345,000 and working
capital amounted to $3.1 million, reflecting a current ratio of 1.4 to 1,
compared to cash and cash equivalents of $2.5 million, working capital of
$8.5 million and a current ratio of 2.4 to 1 as of April 30, 2010.
Accounts receivable at the end of fiscal 2011 totaled $4.6 million compared
to fiscal 2010 year end accounts receivable of $5.3 million.
Net cash used in operating activities totaled $2.4 million and consisted
primarily of net losses totaling approximately $4.6 million, non-cash
depreciation and amortization expense of approximately $1.0 million and
non-cash stock-based compensation expense of $610,000. Net changes in
assets and liabilities reduced net cash used in operating activities by
$608,000. Of these, accrued liabilities decreased by approximately
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$898,000, primarily as a result of payments made for the accrued
contingently payable acquisition price for MMB recorded at April 30, 2010.
Accounts payable decreased by approximately $578,000, primarily as a result
of a reduction in inventories of approximately $1.4 million. The reduction
in inventory is attributable to higher availability of DRAMs resulting in
shorter lead times.
Cash used in investing activities totaled approximately $2.4 million and
consisted of a contingently payable purchase price of approximately
$488,000 for the MMB acquisition, more fully described below, capitalized
software development costs totaling approximately $1.5 million and additions
of property and equipment, totaling approximately $478,000.
Cash provided by financing activities totaled approximately $2.7 million and
consisted of borrowings under a revolving credit facility, more fully
described below, totaling approximately $2.2 million and net proceeds from a
loan from a related party totaling $500,000. Proceeds from the sale of
common shares under the Company's stock option plan totaling approximately
$13,000 were also received.
On July 27, 2010, the Company entered into an agreement with a financial
institution for formula-based secured debt financing of up to $5,000,000.
The amount of financing available to the Company under the agreement varies
with the level of the Company's eligible accounts receivable. At April 30,
2011 the Company had $28,000 of financing available to it under the terms of
the agreement.
Also, on July 27, 2010, the Company entered into an agreement with a vendor,
which is wholly owned by an employee and executive officer of the Company,
to consign a formula-based amount of up to $3,000,000 of certain inventory
into the Company's manufacturing facilities. As of April 30, 2011, the
Company has received financing totaling $1,500,000 under this agreement, of
which $1,000,000 was used to repay in full a Note payable to the employee
arising from an agreement entered into with the employee in February, 2010
and which expired in August, 2010. At April 30, 2011 no further financing
was available to the Company under the formulas contained in the consignment
agreement, although the formulas provide for additional possible financing
in the future.
The weighted average interest rate on amounts borrowed under these
agreements at April 30, 2011 and 2010 was 11.4% and 5.25%, respectively. The
average dollar amounts borrowed under these agreements for the fiscal years
ended April 30, 2011, 2010 and 2009 was $2,263,000, $250,000 and nil,
respectively.
On May 11, 2011, the Company and certain investors entered into a securities
purchase agreement 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. The aggregate net
proceeds of such offering and sale, after deducting fees to the Placement
Agent and other estimated offering expenses payable by the Company, was
approximately $3.0 million. The transaction closed on May 17,2011.
Based on the cash received from the Purchase Agreement and on the cash flows
expected to be provided from the two financing agreements above along with
the cash flows projected to result from the Company's operations, management
has concluded that the Company's liquidity needs will be satisfied. The
Company's short-term cash flow projections include cash flow generated from
its traditional memory solutions business as well as from revenues generated
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by sales of its recently developed XcelaSAN product line. There can be no
assurance, however, that in the short-term, realized revenues will be in
line with the Company's projections. Management continues to evaluate the
Company's liquidity needs and expense structure as it executes its business
plan.
On December 4, 2002, the Company announced an open market repurchase plan
providing for the repurchase of up to 500,000 shares of the Company's common
stock. As of April 30, 2011, the total number of shares authorized for
purchase under the program is 172,196 shares. In fiscal 2011 and 2010, the
Company did not repurchase any shares of its common stock.
On March 31, 2009, the Company acquired certain assets of MMB. The Company
purchased the assets from MMB for total consideration of approximately $2.3
million, of which approximately $912,000 was paid in cash. The Company also
assumed certain accounts payable totaling approximately $190,000 and certain
accrued liabilities totaling approximately $122,000. The net assets acquired
by the Company were recorded at their respective fair values under the
purchase accounting guidance existing at the date of acquisition. Under the
terms of the agreement with MMB, the remaining portion of the purchase price
is contingently payable based upon the performance of the new Dataram
business unit to be operated as a result of the acquisition (the Unit).
Through April 30, 2011, the Company has paid or accrued approximately $2.2
million of the contingently payable purchase price which is recorded as a
component of Goodwill in the Company's consolidated financial statements.
The remaining contingently payable purchase price consists of a percentage,
averaging approximately 55%, payable quarterly, over the next twenty-three
months of earnings before interest, taxes, depreciation and amortization of
the Unit and will be recorded as a component of Goodwill in the Company's
consolidated financial statements.
Contractual Obligations
Future minimum lease payments under non-cancelable operating leases (with
initial or remaining lease terms in excess of one year) as of April 30, 2011
are as follows:
Year ending April 30:
2012 $ 272,000
2013 352,000
2014 365,000
2015 374,000
2016 368,000
Thereafter 147,000
_____________
$ 1,878,000
============
Purchases
At April 30, 2011, the Company had open purchase orders outstanding totaling
$3.1 million primarily for inventory items to be delivered in the first six
months of fiscal 2012. These purchase orders are cancelable.
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Recently Adopted Accounting Guidance
We have adopted the authoritative guidance issued by the FASB on the
consolidation of variable interest entities. The new guidance requires
revised evaluations of whether entities represent variable interest
entities, ongoing assessments of control over such entities and additional
disclosures for variable interests. The adoption of the FASB authoritative
guidance did not have a material impact on our consolidated financial
statements.
We have adopted the authoritative guidance on revenue recognition issued by
the FASB. Under the new guidance on arrangements that include software
elements, tangible products that have software components that are essential
to the functionality of the tangible product are no longer within the scope
of the software revenue recognition guidance, and software-enabled products
are now subject to other relevant revenue recognition guidance.
Additionally, the FASB issued authoritative guidance on revenue arrangements
with multiple deliverables that are outside the scope of the software
revenue recognition guidance. Under the new guidance, when vendor specific
objective evidence or third party evidence for deliverables in an
arrangement cannot be determined, a best estimate of the selling price is
required to separate deliverables and allocate arrangement consideration
using the relative selling price method. The new guidance includes new
disclosure requirements on how the application of the relative selling price
method affects the timing and amount of revenue recognition. The adoption of
the FASB authoritative guidance on revenue recognition did not have a
material impact on our consolidated financial statements.
Recent Accounting Guidance Not Yet Adopted
There are no new pronouncements which affect the Company.
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 this Annual
Report, management believes the following accounting policies to be
critical:
Revenue Recognition - Revenue is recognized when title passes upon shipment
of goods to customers. The Company's revenue earning activities involve
delivering or producing goods. The following criteria are met before revenue
is recognized: persuasive evidence of an arrangement exists, shipment has
occurred, selling price is fixed or determinable and collection is
reasonably assured. The Company does experience a minimal level of sales
returns and allowances for which the Company accrues a reserve at the time
of sale in accordance with the Revenue Recognition - Right of Return Topic
of the FASB ASC. Estimated warranty costs are accrued by management upon
product shipment based on an estimate of future warranty claims.
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Stock Option Expense - As required by the Compensation - Stock Compensation
Topic of FASB ASC, the accounting for transactions in which an entity
receives employee services in exchange for (a) equity instruments of the
enterprise or (b) liabilities that are based on the fair value of the
entity's equity instruments or that may be settled by the issuance of such
equity instruments are accounted for using a fair value-based method with a
recognition of an expense for compensation cost related to share-based
payment arrangements, including stock options and employee stock purchase
plans. The consolidated statements of operations for fiscal 2011 and fiscal
2010 include approximately $610,000 and $918,000, respectively, of
stock-based compensation expense. Stock-based compensation expense is
recognized in the operating expenses line item of the accompanying
consolidated statements of operations on a ratable basis over the vesting
periods. These stock option grants have been classified as equity
instruments and, as such, a corresponding increase, net of the reversal of
the previously recorded income tax benefit for options which expired during
the reporting period, has been reflected in additional paid-in capital in
the accompanying consolidated balance sheet. The fair value of each stock
option granted is estimated on the date of grant using the Black-Scholes
option pricing model with the following assumptions: The expected life in
fiscal year 2011 and 2010 represents the period that the Company's
stock-based awards are expected to be outstanding and was calculated using
the simplified method pursuant to SEC Staff Accounting Bulletin (SAB) No.
107 (SAB 107) and SAB No. 110. Expected life for fiscal years 2009 is based
on the Company's historical experience of option exercises relative to
option contractual lives. Expected volatility is based on the historical
volatility of the Company's common stock using the daily closing price of
the Company's common stock, pursuant to SAB 107. Expected dividend yield
assumes the current dividend rate remains unchanged. Expected forfeiture
rate is based on the Company's historical experience. The risk-free rate is
based on the rate of U.S Treasury zero-coupon issues with a remaining term
equal to the expected life of the option grants.
Research and Development Expense - All research and development costs are
expensed as incurred, including Company-sponsored research and development
and costs of patents and other intellectual property that have no
alternative future use when acquired and in which we had an uncertainty in
receiving future economic benefits. Development costs of a computer software
product to be sold, leased, or otherwise marketed are subject to
capitalization beginning when a product's technological feasibility has been
established and ending when a product is available for general release to
customers. Technological feasibility of a computer software product is
established when all planning, designing, coding and testing activities that
are necessary to establish that the product can be produced to meet its
design specifications including functions, features and technical
performance requirements are completed. 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. Prior to November 4, 2010, the Company expensed all
development costs related to this product line. At the time the product is
made available for general release to customers the capitalized costs will
be amortized to cost of sales over the estimated useful life of the
underlying technology.
Income Taxes - The Company utilizes the asset and liability method of
accounting for income taxes in accordance with the provisions of the
Expenses - Income Taxes Topic of the FASB ASC. Under the asset and liability
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method, deferred income tax assets and liabilities are recognized for the
estimated future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. A valuation allowance is provided when it is
more likely than not that some portion or all of the deferred income tax
assets will not be realized. The Company considers certain tax planning
strategies in its assessment as to the recoverability of its tax assets.
Deferred income 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. The effect on deferred income tax
assets and liabilities of a change in tax rates is recognized in earnings
in the period that the tax rate changes. The Company recognizes, in its
consolidated financial statements, the impact of a tax position, if that
position is more likely than not to be sustained on audit, based on
technical merits of the position. There are no material unrecognized tax
positions in the financial statements.
Goodwill - Goodwill is tested for impairment on an annual basis and between
annual tests if indicators of potential impairment exist, using a
fair-value-based approach. The date of our annual impairment test is March 1.
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.
Quantitative and Qualitative Disclosure about Market Risk
The Company does not invest in market risk sensitive instruments. At times,
the Company's cash equivalents consist of overnight deposits with banks and
money market accounts. The Company's rate of return on its investment
portfolio changes with short-term interest rates, although such changes will
not affect the value of its portfolio. The Company's objective 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
5 to 10 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 could do so as
circumstances warrant.
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
14
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.
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
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. There were no changes in our
internal control over financial reporting during fiscal 2011 that have
materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting. Management has 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.
Common Stock Information
The Common Stock of the Company is traded on the NASDAQ National Market with
the symbol "DRAM". The following table sets forth, for the periods
indicated, the high and low prices for the Common Stock.
2011 2010
___________________ __________________
High Low High Low
___________________ __________________
First Quarter $ 2.40 $ 1.19 $ 1.75 $ 1.27
Second Quarter 2.63 1.52 4.49 1.39
Third Quarter 2.54 1.42 5.49 2.50
Fourth Quarter 2.65 1.91 3.51 2.22
At April 30, 2011, there were approximately 5,000 shareholders.
15
DATARAM CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
April 30, 2011 and 2010
(In thousands, except share and per share amounts)
2011 2010
______ ______
Assets
Current assets:
Cash and cash equivalents $ 345 $ 2,507
Accounts receivable, less allowance for
doubtful accounts and sales returns
of $225 in 2011 and $250 in 2010 4,630 5,344
Inventories:
Raw materials 3,229 3,919
Work in process 36 32
Finished goods 2,197 2,921
______ ______
5,462 6,872
Other current assets 127 87
______ ______
Total current assets 10,564 14,810
Property and equipment:
Machinery and equipment 11,931 12,300
Leasehold improvements 1,239 2,235
______ ______
13,170 14,535
Less accumulated depreciation
and amortization 12,207 13,418
______ ______
Net property and equipment 963 1,117
Other assets 111 105
Intangible assets, less accumulated
amortization of $1,099 in 2011 and
$692 in 2010 1,940 867
Goodwill 1,242 754
______ ______
$14,820 $17,653
====== ======
Liabilities and Stockholders' Equity
Current liabilities:
Note payable-revolving credit line $ 2,154 $ 0
Accounts payable 2,945 3,523
Accrued liabilities 840 1,738
Due to related party 1,500 1,000
______ ______
Total current liabilities 7,439 6,261
16
Commitments and contingencies
Stockholders' equity:
Common stock, par value $1.00 per share.
Authorized 54,000,000 shares; issued
and outstanding 8,928,309 at April 30,
2011 and 8,918,309 on April 30, 2010 8,929 8,919
Additional paid-in capital 8,622 8,009
Accumulated deficit (10,170) (5,536)
______ ______
Total stockholders' equity 7,381 11,392
______ ______
$14,820 $17,653
====== ======
See accompanying notes to consolidated financial statements.
DATARAM CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended April 30, 2011, 2010 and 2009
(In thousands, except per share amounts)
2011 2010 2009
_______ _______ _______
Revenues $ 46,847 $ 44,020 $ 25,897
Costs and expenses:
Cost of sales 35,777 32,408 17,443
Engineering 1,033 997 1,219
Research and development 1,894 4,265 1,531
Selling, general and administrative 12,371 13,365 11,064
_______ _______ _______
51,075 51,035 31,257
_______ _______ _______
Loss from operations (4,228) (7,015) (5,360)
Other income (expense):
Interest income 0 12 300
Interest expense (286) (54) (6)
Currency loss (135) (85) (68)
Other income (expense) 20 10 (3)
_______ _______ _______
(401) (117) 223
_______ _______ _______
Loss before income tax
expense (benefit) (4,629) (7,132) (5,137)
Income tax expense (benefit) 5 3,611 (2,002)
_______ _______ _______
Net loss $ (4,634)$(10,743) $(3,135)
======= ======= =======
Net loss per common share:
Basic $ (0.52)$ (1.21) $ (0.35)
======= ======= =======
17
Diluted $ (0.52)$ (1.21) $ (0.35)
======= ======= =======
See accompanying notes to consolidated financial statements.
DATARAM CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended April 30, 2011, 2010 and 2009
(In thousands)
2011 2010 2009
______ ______ ______
Cash flows from operating activities:
Net loss $ (4,634)$(10,743) $(3,135)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization 1,039 1,193 456
Bad debt expense (recovery) (6) 32 204
Stock-based compensation expense 610 918 533
Other stock option expense - - 121
Loss (gain) on sale of property
and equipment (47) (10) 2
Deferred income tax expense
(benefit) - 3,582 (2,040)
Changes in assets and liabilities
(net of effect of acquisition
of business):
Decrease (increase) in
accounts receivable 720 (1,994) 940
Decrease (increase) in
inventories 1,410 (4,672) (223)
Decrease (increase) in
other current assets (40) 39 (28)
Decrease (increase) in
other assets (6) 31 (41)
Increase (decrease) in
accounts payable (578) 2,137 (594)
Increase (decrease) in
accrued liabilities (898) 650 217
_____ _____ _____
Net cash used in operating activities (2,430) (8,837) (3,588)
_____ _____ _____
Cash flows from investing activities:
Acquisition of business (488) (1,736) (912)
Additions to property and
equipment (478) (573) (617)
Software development costs (1,480) - -
Proceeds from sale of property and
equipment 47 10 -
_____ _____ _____
Net cash used in investing activities (2,399) (2,299) (1,529)
_____ _____ _____
18
Cash flows from financing activities:
Net proceeds from borrowings under
Revolving credit line 2,154 - -
Proceeds from related party
note payable 500 1,000 -
Proceeds from sale of common shares
under stock option plan 13 118 -
_____ _____ _____
Net cash provided by financing
activities 2,667 1,118 -
_____ _____ _____
Net decrease in cash and
cash equivalents (2,162) (10,018) (5,117)
Cash and cash equivalents at
beginning of year 2,507 12,525 17,642
_____ _____ _____
Cash and cash equivalents at end
of year $ 345 $ 2,507 $ 12,525
===== ===== ======
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 275 $ 54 $ 6
===== ===== =====
Income taxes $ 5 $ 35 $ 20
===== ===== =====
See accompanying notes to consolidated financial statements.
19
DATARAM CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended April 30, 2011, 2010 and 2009
(In thousands, except share amounts)
Number Retained Total
of Additional paid-in stock-
Common Common paid-in (accumulated) holders'
Shares stock capital (deficit) equity
_______ _______ _________ ___________ ________
Balance at April 30, 2008 8,869 $ 8,869 $ 6,408 $ 8,342 $23,619
Net loss - - (3,135) (3,135)
Stock-based compensation expense
Net of tax effect of
expired options of $39 - 494 - 494
Other stock option expense - 121 - 121
_______ ________ _________ _________ _______
Balance at April 30, 2009 8,869 $ 8,869 $ 7,023 $ 5,207 $21,099
Issuance of shares under
stock option plans 50 50 68 - 118
Net loss - - (10,743) (10,743)
Stock-based compensation
expense - 918 - 918
_______ ________ ________ _________ _______
Balance at April 30, 2010 8,919 $ 8,919 $ 8,009 $ (5,536) $11,392
Issuance of shares under
stock option plans 10 10 3 - 13
Net loss - - (4,634) (4,634)
Stock-based compensation
expense - 610 - 610
_______ ________ ________ ________ ________
Balance at April 30, 2011 8,929 $ 8,929 $ 8,622 $(10,170) $ 7,381
===== ===== ===== ====== =====
See accompanying notes to consolidated financial statements.
20
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
(1) Description of Business and Significant Accounting Policies
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 provides
customized memory solutions for original equipment manufacturers (OEMs)
and compatible memory for leading brands including Dell, HP, IBM and Sun
Microsystems. Additionally, the Company manufactures a line of memory
products for Intel and AMD motherboard based servers. The Company is also
developing a line of high-performance storage caching products.
The Company's memory products are sold worldwide to OEMs, distributors,
value-added resellers and end-users. The Company has two manufacturing
facilities in the United States with sales offices in the United States
and Europe.
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
(DRAM) chips. 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 DRAM chips.
Principles of Consolidation
The consolidated financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America and
include the accounts of the Company and its wholly-owned subsidiaries. All
significant intercompany transactions and balances have been eliminated in
consolidation.
Liquidity
As discussed in Note 3, the Company entered into financing agreements to
address short-term liquidity needs. Also, as discussed in Note 5, on May 11,
2011, the Company entered into a securities purchase agreement with certain
investors and received approximately $3.0 million in net proceeds in
connection with the agreement on May 17, 2011. Based on the cash provided by
the securities purchase agreement and the cash flows expected to be provided
from the financing agreements along with the cash flows projected to result
from the Company's operations, management has concluded that the Company's
short-term liquidity needs have been satisfied. The Company's short-term
cash flow projections include cash flow generated from its traditional
memory solutions business as well as from revenues generated by sales of
its recently developed XcelaSAN product line. There can be no assurance,
however, that in the short-term, realized revenues will be in line with the
Company's projections. In order to satisfy long-term liquidity needs, the
Company will need to generate profitable operations and positive cash flows.
Cash and Cash Equivalents
Cash and cash equivalents consist of unrestricted cash and money market
accounts.
21
Accounts Receivable
Accounts receivable consist of the following categories:
April 30, 2011 April 30, 2010
________________ ______________
Trade receivables $ 4,643 $ 5,000
VAT receivable 212 594
Allowance for doubtful accounts
and sales returns (225) (250)
________________ ______________
$ 4,630 $ 5,344
================ ==============
Inventories
Inventories, consisting of materials, labor and manufacturing overhead, are
stated at the lower of cost or market, with cost determined by the first-in,
first-out method.
Property and Equipment
Property and equipment is recorded at cost. Depreciation is computed on the
straight-line basis. Depreciation and amortization rates are based on the
estimated useful lives, which range from two to five years for machinery and
equipment and five to six years for leasehold improvements. When property or
equipment is retired or otherwise disposed of, related costs and accumulated
depreciation and amortization are removed from the accounts. Depreciation
and amortization expense related to property and equipment for the fiscal
years ended April 30, 2011, 2010 and 2009 totaled $632, $556, and $407,
respectively.
Repair and maintenance costs are charged to operations as incurred.
Long-Lived Assets
Long-lived assets, such as property, plant and equipment, are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets
to be held and used is measured by a comparison of the carrying amount of an
asset to the estimated undiscounted future cash flows expected to be
generated by the asset. If the carrying amount of an asset exceeds its
estimated future cash flows, an impairment charge is recognized by the
amount by which the carrying amount of the asset exceeds the estimated fair
value of the asset. Assets to be disposed of would be separately presented
in the consolidated balance sheets and reported at the lower of the carrying
amount or fair value less cost to sell, and no longer depreciated. The
Company considers various valuation factors, principally undiscounted cash
flows, to assess the fair values of long-lived assets.
Intangible Assets and Goodwill
Intangible assets with determinable lives, other than customer relationships
and research and development, are amortized on a straight-line basis over
their estimated period of benefit, ranging from four to five years. Research
and development and customer relationships are amortized over a two-year
period at a rate of 65% of the gross value acquired in the first year
22
subsequent to their acquisition and 35% of the gross value acquired in the
second year. The Company evaluates the recoverability of intangible assets
periodically and takes into account events or circumstances that warrant
revised estimates of useful lives or that indicate that impairment exists.
All of the Company's intangible assets with definitive lives are subject to
amortization. No impairments of intangible assets have been identified
during any of the periods presented. Goodwill is tested for impairment on
an annual basis and between annual tests if indicators of potential
impairment exist, using a fair-value-based approach. The date of the annual
impairment test is March 1. There has been no impairment of Goodwill in any
of the periods presented.
The Company estimates that it has no significant residual value related to
its intangible assets. Acquired intangibles generally are amortized on a
straight-line basis over weighted average lives. Intangible assets
amortization expense was $407 for fiscal year 2011, $637 for fiscal year
2010 and $55 for fiscal year 2009. The components of finite-lived intangible
assets acquired are as follows:
Gross Weighted Net
Carrying Average Accumulated Carrying
Amount Life Amortization Amount
________ _______ ____________ _________
Customer relationships $ 758 2 Years $ 758 $ 0
Trade names 733 5 Years 305 428
Non-compete agreement 68 4 Years 36 32
Software development costs (a) 1,480 1,480
------- ------ -------
$ 3,039 $1,099 $ 1,940
======= ====== =======
The following table outlines the estimated future amortization expense
related to intangible assets:
Year ending April 30:
2012 $ 164
2013 162
2014 134
-------
$ 460
=======
(a) At the time XcelaSAN is made available for general release to customers
the capitalized costs will be amortized to cost of sales over the estimated
useful life of the underlying technology.
Revenue Recognition
Revenue is recognized when title passes upon shipment of goods to customers.
The Company's revenue earning activities involve delivering or producing
goods. The following criteria are met before revenue is recognized:
persuasive evidence of an arrangement exists, shipment has occurred, selling
price is fixed or determinable and collection is reasonably assured. The
Company does experience a minimal level of sales returns and allowances for
which the Company accrues a reserve at the time of sale. Estimated warranty
costs are accrued by management upon product shipment based on an estimate
of future warranty claims.
23
Engineering and Research and Development
Research and development costs are expensed as incurred. Development costs
of a computer software product to be sold, leased, or otherwise marketed are
subject to capitalization beginning when a product's technological
feasibility has been established and ending when a product is available for
general release to customers. Technological feasibility of a computer
software product is established when all planning, designing, coding and
testing activities that are necessary to establish that the product can be
produced to meet its design specifications including functions, features and
technical performance requirements are completed. 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 totaling $1,480 have been capitalized. Prior to November 4, 2010, the
Company expensed all development costs related to this product line.
At the time the product is made available for general release to customers
the capitalized costs will be amortized to cost of sales over the estimated
useful life of the underlying technology.
Income Taxes
The Company utilizes the asset and liability method of accounting for income
taxes. Under the asset and liability method, deferred income tax assets and
liabilities are recognized for the estimated future tax consequences
attributable to temporary differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. A valuation allowance is provided when it is more likely than not
that some portion or all of the deferred income tax assets will not be
realized. The Company considers certain tax planning strategies in its
assessment as to the recoverability of its deferred income tax assets.
Deferred income 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. 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.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations
of credit risk consist primarily of cash and cash equivalents and accounts
receivable. 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. At April 30, 2011 and 2010, amounts due from one
customer totaled approximately 22% and 14%, respectively of accounts
receivable.
In fiscal 2011, fiscal 2010 and fiscal 2009, the Company had sales to one
customer that accounted for approximately 11%, 11% and 17%, respectively of
revenues.
Net income (loss) per share
Basic net income per share is calculated by dividing net income by the
weighted average number of common shares outstanding during the period.
Diluted net income per share was calculated in a manner consistent with
24
basic net income per share except that the weighted average number of common
shares outstanding also includes the dilutive effect of stock options
outstanding (using the treasury stock method).
The following presents a reconciliation of the numerator and denominator
used in computing basic and diluted net loss per share.
Year ended April 30, 2011
Loss Shares Per share
(numerator) (denominator) amount
_________ ___________ _________
Basic net loss per share
-net loss and weighted
average common shares
outstanding $(4,634) 8,923,268 $ (.52)
Effect of dilutive securities
-stock options - - -
_______ _________ ______
Diluted net loss per share
-net loss weighted average
common shares outstanding
and effect of
stock options $(4,634) 8,923,268 $ (.52)
======= ========= ======
Year ended April 30, 2010
Loss Shares Per share
(numerator) (denominator) amount
_________ ___________ _________
Basic net loss per share
-net loss and weighted
average common shares
outstanding $(10,743) 8,890,914 $(1.21)
Effect of dilutive securities
-stock options - - -
_______ _________ ______
Diluted net loss per share
-net loss weighted average
common shares outstanding
and effect of
stock options $(10,743) 8,890,914 $(1.21)
======= ========= ======
Year ended April 30, 2009
Earnings Shares Per share
(numerator) (denominator) amount
_________ ___________ _________
Basic net earnings per share
-net earnings and weighted
average common shares
outstanding $(3,135) 8,869,184 $ (.35)
Effect of dilutive securities
-stock options - - -
_______ _________ ______
Diluted net earnings per share
-net earnings, weighted
average common shares
outstanding and effect of
stock options $(3,135) 8,869,184 $ (.35)
======= ========= ======
25
Diluted net loss per common share does not include the effect of options
to purchase 1,899,200, 1,996,800 and 1,307,675 shares of common stock for
the years ended April 30, 2011, 2010 and 2009, respectively, because they
are anti-dilutive.
Product Warranty
The majority of the Company's products are intended for single use;
therefore, the Company requires limited product warranty accruals. The
Company accrues estimated product warranty cost at the time of sale and any
additional amounts are recorded when such costs are probable and can be
reasonably estimated.
Balance Charges to Balance
Beginning Costs and End
of Year Expenses Other Deductions of Year
_________ _________ _____ __________ ________
Year Ended
April 30, 2011 $ 79 1 - (1) $ 79
Year Ended
April 30, 2010 $ 79 6 - (6) $ 79
Year Ended
April 30, 2009 $ 54 5 25(1) (5) $ 79
(1) Includes a warranty obligation of an acquired business (See Note 2).
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 income tax asset valuation allowance and other operating
allowances and accruals. Actual results could differ from those estimates.
Fair Value of Financial Instruments
The fair value of financial instruments is determined by reference to market
data and other valuation techniques as appropriate. The Company believes
that there is no material difference between the fair value and the reported
amounts of financial instruments in the consolidated balance sheets.
Stock-Based Compensation
At April 30, 2011, the Company has stock-based employee and director
compensation plans, which are described more fully in Note 7. New shares
of the Company's common stock are issued upon exercise of stock options.
26
The accounting for transactions in which an enterprise receives employee
services in exchange for (a) equity instruments of the enterprise or (b)
liabilities that are based on the fair value of the enterprise's equity
instruments or that may be settled by the issuance of such equity
instruments are accounted for using a fair value-based method with a
recognition of an expense for compensation cost related to share-based
payment arrangements, including stock options and employee stock purchase
plans.
The Company's consolidated statement of operations for fiscal year ended
April 30, 2011 includes $610 of stock based compensation expense. Stock
based compensation expense is recognized in the results of operations on a
ratable basis over the vesting periods. These stock option grants have been
classified as equity instruments, and as such, a corresponding increase has
been reflected in additional paid-in capital in the accompanying balance
sheet as of April 30, 2011. In fiscal 2010 and fiscal 2009, stock-based
compensation expense totaled $918 and $533, respectively. A corresponding
increase of $918 is reflected in additional paid-in capital in fiscal 2010's
consolidated balance sheet. The fair value of each stock option granted is
estimated on the date of grant using the Black-Scholes option pricing model.
A summary of option activity for the fiscal year ended April 30, 2011 is as
follows:
Weighted Weighted average Aggregate
average remaining intrinsic
Shares exercise price contractual life value(1)
__________ __________ __________ __________
Balance
April 30, 2010 1,946,800 $3.25 6.38 $ 175
Granted 139,000 $1.76 - -
Exercised (10,000) $1.28 - -
Expired (226,600) $5.72 - -
Balance
April 30, 2011 1,849,200 $2.88 5.91 $ 88
Exercisable
April 30, 2011 1,229,200 $3.10 5.09 $ 65
Expected to vest
April 30, 2011 1,757,000 $2.88 5.91 -
(1) These amounts represent the difference between the exercise price and
$1.92, the closing price of Dataram common stock on April 29, 2011 as
reported on the NASDAQ Stock Market, for all in-the-money options
outstanding. For exercised options, intrinsic value represents the
difference between the exercise price and the closing price of Dataram
common stock on the date of exercise.
Total cash received from the exercise of options in fiscal 2011 was $13.
During fiscal 2011, 139,500 options completed vesting. As of April 30, 2011,
there was $554 of total unrecognized compensation expense related to stock
options. This expense is expected to be recognized over a weighted average
period of approximately twelve months. At April 30, 2011, an aggregate of
88,527 shares were authorized for future grant under the Company's stock
option plans.
27
The fair value of each stock option granted during the year is estimated on
the date of grant using the Black-Scholes option pricing model with the
following assumptions:
2011 2010 2009
------- ------- -------
Expected life (years) 3.0 to 6.0 3.0 to 6.0 5.0 to 10.0
Expected volatility 56% to 79% 56% 110%
Expected dividend yield - - -
Expected forfeiture rate 5.0% 5.0% 5.0%
Risk-free interest rate 0.7% to 2.9% 1.6% to 2.8% 4.0%
Weighted average fair value of options
granted during the year $ 1.07 $ 2.55 $ 2.36
The expected life in fiscal years 2011 and 2010 represents the period that
the Company's stock-based awards are expected to be outstanding and was
calculated using the simplified method pursuant to SEC Staff Accounting
Bulletin (SAB) Nos. 107 and 110. Expected life for fiscal year 2009, is
based on the Company's historical experience of option exercises relative
to option contractual lives. Expected volatility is based on the historical
volatility of the Company's common stock using the daily closing price of
the Company's common stock, pursuant to SAB 107. Expected dividend yield
assumes the current dividend rate remains unchanged. Expected forfeiture
rate is based on the Company's historical experience. The risk-free
interest rate is based on the rate of U.S Treasury zero-coupon issues with
a remaining term equal to the expected life of the option grants.
(2) Acquisition
On March 31, 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 expands the Company's memory product offerings and routes to
market. The Company purchased the assets from MMB for total consideration of
approximately $2,253 of which approximately $912 was paid in cash. The
Company also assumed certain accounts payable totaling approximately $190
and certain accrued liabilities totaling approximately $122. Under the terms
of the agreement with MMB, the remaining portion of the purchase price is
contingently payable based upon the performance of the MMB business unit
operating as a result of the acquisition ("the Unit") and consists of a
percentage, averaging 65%, payable quarterly, over the four year period from
date of acquisition, of earnings before interest, taxes, depreciation and
amortization of the Unit. The net assets acquired by the Company were
recorded at their respective fair values under the purchase method of
accounting. The results of operations of MMB for the period from the
acquisition date, March 31, 2009, through April 30, 2011 have been included
in the consolidated results of operations of the Company.
The following unaudited pro forma financial information presents the
combined results of operations of the Company and MMB for the year ended
April 30, 2009 as if the acquisition had occurred at May 1, 2008. The pro
forma financial information does not necessarily reflect the results of
operations that would have occurred had the Company been a single entity
during this period.
28
Fiscal year
ended
April 30, 2009
______________
Revenues $37,814
Net loss ($2,929)
Basic and diluted loss per share ($0.33)
The total consideration of the acquisition has been allocated to the fair
value of the assets of MMB as follows:
Accounts receivable $ 478
Machinery and equipment 200
Deposits 16
Trade names 733
Customer relationships 758
Non-compete agreement 68
--------
Gross assets acquired 2,253
Liabilities assumed 312
--------
Net assets acquired $ 1,941
========
The contingent purchase price amount for the acquisition in the fiscal year
ended April 30, 2011 totaled $488 and is recorded as an addition to
goodwill. The cumulative contingent purchase amount for the acquisition
through April 30, 2011 totaled $2,224.
Following are details of the changes in our goodwill balances during the
fiscal years ended April 30, 2011 and 2010:
Fiscal year Fiscal year
ended ended
April 30, 2011 April 30, 2010
______________ ______________
Beginning balance $ 754 $ -
Contingently payable
acquisition purchase price 488 754
----- -----
Ending balance $1,242 $ 754
===== =====
We test goodwill for impairment annually on March 1, using a fair value
approach.
(3) Financing Agreements
On February 24, 2010, the Company entered into a Note and Security Agreement
with Sheerr Memory's, LLC ("Sheerr Memory") owner (See Note 4). Under the
agreement, the Company borrowed the principal sum of $1,000 for a period of
six months, which the Company could extend for an additional three months
without penalty. The loan bore interest at the rate of 5.25%. Interest was
payable monthly, and the entire principal amount was payable in the event of
the employee's termination of employment by the Company. The loan was
secured by a security interest in all machinery, equipment and inventory of
Dataram at its Montgomeryville, PA location. The loan was paid in full on
August 13, 2010. No further financing is available to the Company under this
agreement.
29
On July 27, 2010, the Company entered into a secured credit facility with a
bank, which provides for up to a $5,000 revolving credit line. Advances
under the facility are limited to 80% of eligible receivables, as defined
in the agreement. The agreement does not have a fixed term. The agreement
provides for Prime Rate loans at an interest rate equal to the Prime Rate
plus two percent, subject to minimum interest rate of five and one quarter
percent. The Company is required to pay a monthly maintenance fee equal to
six-tenths of one percent (0.6%) of the monthly average principal balance of
any borrowings under the facility in the prior month. Advances under the
facility are secured by substantially all assets of the Company. The
agreement contains certain restrictive covenants, specifically a minimum
tangible net worth covenant and certain other covenants, as defined in the
agreement. At April 30, 2011, the Company is in compliance with all
covenants of the agreement. The amount of financing available to the
Company under the agreement varies with the level of the Company's eligible
accounts receivable as defined in the agreement. At April 30, 2011 the
Company had $28 of financing available to it under the terms of the
agreement.
On July 27, 2010, the Company entered into an agreement with Sheerr Memory,
(See Note 4) to consign a formula based amount of up to $3,000 of certain
inventory into the Company's manufacturing facilities. At April 30, 2011 no
further financing was available to the Company under the formulas contained
in the agreement, although the formulas defined in the agreement provide for
additional possible financing in the future.
The weighted average interest rate on amounts borrowed under these
agreements at April 30, 2011 and 2010 was 11.4% and 5.25%, respectively. The
average dollar amount borrowed under these agreements for the fiscal years
ended April 30, 2011, 2010 and 2009 was $2,263, $250 and nil, respectively.
(4) Related Party Transactions
During fiscal 2011 and 2010, the Company purchased inventories for resale
totaling approximately $2,623 and $4,976, respectively from Sheerr Memory.
Sheerr Memory's owner is employed by the Company as the general manager of
the acquired MMB business unit described in Note 2 and is an executive
officer of the Company. When the Company acquired certain assets of MMB, it
did not acquire any of its inventory. However, the Company informally agreed
to purchase such inventory on an as needed basis, provided that the offering
price was a fair market value price. The inventory acquired was purchased
subsequent to the acquisition of MMB at varying times and consisted
primarily of raw materials and finished goods used to produce products
sold by the MMB business unit. Approximately $1,131 and $400, respectively,
of accounts payable in the Company's consolidated balance sheets as of
April 30, 2011 and 2010 is payable to Sheerr Memory. Sheerr Memory offers
the Company trade terms of net 30 days and all invoices are settled in the
normal course of business. No interest is paid. The Company has made
further purchases from Sheerr Memory subsequent to April 30, 2011 and
management anticipates that the Company will continue to do so, although
the Company has no obligation to do so.
On February 24, 2010, the Company entered into a Note and Security Agreement
(See Note 3) with Sheerr Memory's owner. Under the agreement, the Company
borrowed the principal sum of $1,000 for a period of six months, which the
Company could extend for an additional three months without penalty.
Interest paid to Sheerr Memory under this agreement in the fiscal year ended
April 30, 2011 was $19.
30
On July 27, 2010, the Company entered into an agreement with Sheerr Memory
to consign a formula based amount of up to $3,000 of certain inventory into
the Company's manufacturing facilities (see Note 3). The agreement has a
two-year term and the Company is obligated to pay monthly a fee equal to
0.833% of the average daily balance of the purchase cost of the consigned
products held by Sheerr Memory under the agreement. The Company is obligated
to purchase any consigned products acquired by Sheerr Memory under the
agreement within ninety days of the acquisition date of the product. The
Company and Sheerr Memory must jointly agree to the products to be held in
consignment under the agreement. As of April 30, 2011, the Company has
received financing totaling $1,500 under the agreement which is recorded as
a liability in the accompanying consolidated balance sheets. Interest paid
to Sheerr Memory in fiscal 2011 under this agreement was $23. Interest
payable to Sheerr Memory at April 30, 2011 was $10.
(5) Subsequent Event
On May 11, 2011, the Company and certain investors entered into a securities
purchase agreement in connection with a registered direct 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 net proceeds, after deducting
fees to the Placement Agent and other estimated offering expenses payable
by the Company, of approximately $3,000. On May 17, 2011, this transaction
closed.
(6) Income Taxes
Income (loss) before provision for income taxes for the years ended
April 30 is as follows:
2011 2010 2009
_____ _____ _____
Current:
Federal $ (4,629) $ (7,132) $ (5,137)
Income tax expense (benefit) for the years ended April 30 consists
of the following:
2011 2010 2009
_____ _____ _____
Current:
Federal $ - $ - $ -
State 5 29 -
_____ _____ _____
5 29 -
Deferred:
Federal - 3,216 (1,595)
State - 366 (407)
_____ _____ _____
- 3,582 (2,002)
_____ _____ _____
Total income tax expense (benefit) $ 5 $ 3,611 $(2,002)
===== ===== =====
31
Income tax expense (benefit) differs from "expected" tax expense (benefit)
(computed by applying the applicable U. S. statutory Federal income tax rate
to earnings before income taxes) as follows:
2011 2010 2009
_____ _____ _____
Federal income tax at
statutory rates $ (1,574) $(2,425) $(1,798)
State income taxes(net
of Federal income tax
benefit) (319) 395 (269)
Other (259) (138) 65
Total income tax expense (benefit)
before provision for valuation
allowance _____ _____ _____
(2,152) (2,168) (2,002)
Changes in valuation allowance (2,157) 5,779 -
_____ _____ _____
Total income tax expense (benefit) $ 5 $ 3,611 $(2,002)
===== ===== =====
The tax effect of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are
presented below:
2011 2010
____ ____
Deferred tax assets:
Compensated absences and severance,
principally due to accruals for
financial reporting purposes $ 121 $ 96
Stock-based compensation expense 1,026 838
Accounts receivable, principally due
to allowance for doubtful accounts
and sales returns 88 98
Property and equipment, principally
due to differences in depreciation 289 (27)
Intangible assets 390 288
Inventories 183 217
Foreign tax credit 0 53
Domestic net operating losses 6,703 4,488
Software development costs (577) -
Alternative minimum tax 438 438
Other 58 73
_____ _____
Net deferred tax assets 8,719 6,562
Valuation allowance (8,719) (6,562)
_____ _____
Net deferred tax assets $ 0 $ 0
===== =====
32
The Company recorded a valuation allowance of $2,157 and $6,562 for the
fiscal years ended April 30, 2011 and 2010, respectively. Management
believes sufficient uncertainty exists regarding the realizability of the
deferred tax asset items and that a valuation allowance is required.
Management considers projected future taxable income and tax planning
strategies in making this assessment. The amount of deferred tax assets
considered realizable could materially change in the future if estimates
of future taxable income change.
The Company has Federal and State net operating loss carryforwards of
approximately $17,053 and $15,091, respectively. These can be used to offset
future taxable income and expire between 2023 and 2031 for Federal tax
purposes and 2016 and 2031 for State tax purposes.
The Company adopted FASB guidance for accounting for uncertainty in income
taxes on May 1, 2008. The implementation of this guidance did not result in
a material adjustment to the Company's liability for unrecognized income tax
benefits. At the time of adoption and as of April 30, 2011, the Company
currently was not and is not engaged in an income tax examination by any tax
authority. The Company recognizes interest and penalties on unpaid taxes in
its income tax expense. No interest or penalties were recognized during the
Company's fiscal years ended April 30, 2011, nor were any amounts accrued as
of April 30, 2011.
The Company files income tax returns in the United States and in various
states. The Company's significant tax jurisdictions are the U.S. Federal,
New Jersey and Pennsylvania. The tax years subsequent to 2007 remain open
to examination by the taxing authorities.
(7) Stock Options
The Company has a 2001 incentive and non-statutory stock option plan for the
purpose of permitting certain key employees to acquire equity in the Company
and to promote the growth and profitability of the Company by attracting and
retaining key employees. In general, the plan allows granting of up to
1,800,000 shares of the Company's common stock at an option price to be no
less than the fair market value of the Company's common stock on the date
such options are granted. Currently, options granted under the plan vest
ratably on the annual anniversary date of the grants. Vesting periods for
options currently granted under the plan range from one to five years. At
April 30, 2011, 1,015,200 of the outstanding options are exercisable.
The status of the plan for the three years ended April 30, 2011,
is as follows:
Options Outstanding
___________________________________________________
Exercise price Weighted average
Shares per share exercise price
_________ ______________ ___________
Balance April 30, 2008 663,000 $ 2.813-24.250 $ 5.828
Granted 412,000 1.280-3.200 2.405
Exercised - - -
Expired (109,325) 1.990-7.9800 4.738
_________ ____________ ____________
Balance April 30, 2009 965,675 $ 1.280-24.250 $ 4.491
33
Granted 899,500 1.530-2.650 2.549
Exercised (17,125) 1.990-4.090 2.576
Expired (221,250) 1.990-24.250 6.303
_________ ____________ ____________
Balance April 30, 2010 1,626,800 $ 1.280-24.250 $ 3.191
Granted 139,000 1.580-2.160 1.758
Exercised (10,000) 1.280 1.280
Expired (190,600) 1.580-24.250 5.566
_________ ____________ ____________
Balance April 30, 2011 1,565,200 $ 1.280-7.980 $ 2.786
========= ============ ==========
The Company periodically grants nonqualified stock options to non-employee
directors of the Company. These options are granted for the purpose of
retaining the services of directors who are not employees of the Company and
to provide additional incentive for such directors to work to further the
best interests of the Company and its shareholders. The options granted to
these non-employee directors are exercisable at a price representing the
fair value at the date of grant, and expire either five or ten years after
date of grant. Vesting periods for options currently granted under the plan
range from one to two years. At April 30, 2011, 214,000 of the outstanding
options are exercisable.
The status of the non-employee director options for the three
years ended April 30, 2011, is as follows:
Options Outstanding
__________________________________________________
Exercise price Weighted average
Shares per share exercise price
_________ _____________ ____________
Balance April 30, 2008 236,000 $ 2.990-7.980 $ 5.304
Granted 56,000 1.990 1.990
Exercised - - -
Expired - - -
________ ____________ ____________
Balance April 30, 2009 292,000 $ 1.990-7.980 $ 4.668
Granted 140,000 2.570 2.570
Exercised (32,000) 1.990-3.330 2.325
Expired (80,000) 2.990-7.980 5.672
________ ____________ ____________
Balance April 30, 2010 320,000 $ 1.990-7.980 $ 3.734
Granted - - -
Exercised - - -
Expired (36,000) 6.420-6.630 6.560
________ ____________ ____________
Balance April 30, 2011 284,000 $ 1.990-7.980 $ 3.375
======== ============ ============
Other Stock Option Expense
During fiscal 2009's first quarter, the Company granted options to purchase
50,000 shares of the Company's common stock to a privately held company in
exchange for certain patents and other intellectual property. The options
34
granted are exercisable at a price representing the fair value at the date
of grant, were 100% exercisable on the date of grant and expire ten years
after the date of grant. The calculated fair value of these options is
approximately $121 and was determined using the Black-Scholes option-pricing
model based upon the market price of the underlying common stock as of the
date of grant, reduced by the present value of estimated future dividends,
using an expected quarterly dividend rate of zero, an expected forfeiture
rate of zero, a calculated volatility factor of 110% and a risk-free
interest rate of 4.0%. Such calculated fair value has been charged in its
entirety to the research and development expense line item in the
accompanying consolidated statement of operations for this grant as of
April 30, 2009. These stock option grants have been classified as equity
instruments, and as such, a corresponding increase of $121 has been
reflected in additional paid-in capital in the accompanying consolidated
balance sheet as of April 30, 2009.
(8) Accrued Liabilities
Accrued liabilities consist of the following at April 30:
2011 2010
-------- --------
Contingently payable acquisition
purchase price (See Note 2) $ 56 $ 788
Payroll, including vacation 331 334
Commissions 125 130
Bonuses 148 275
Other 180 211
-------- --------
$ 840 $ 1,738
======== ========
(9) Commitments and contingencies
Leases
The Company and its subsidiaries occupy various facilities and operate
various equipment under operating lease arrangements. Rent charged to
operations pursuant to such operating leases amounted to approximately
$655 in 2011, $654 in 2010 and $561 in 2009.
Future minimum lease payments under non-cancelable operating leases (with
initial or remaining lease terms in excess of one year) as of April 30, 2011
are as follows:
Year ending April 30:
2012 $ 272
2013 352
2014 365
2015 374
2016 368
Thereafter 147
___________
$ 1,878
=======
35
Purchases
At April 30, 2011, the Company had open purchase orders outstanding
totaling $3.1 million primarily for inventory items to be delivered in
the first six months of fiscal 2012. These purchase orders are cancelable.
License Agreements
The Company has entered into certain licensing agreements with varying terms
and conditions. The Company is obligated to pay royalties on certain of
these agreements. Royalties charged to operations pursuant to such
agreements amounted to approximately $93 in 2011, $131 in 2010 and
$160 in 2009.
Legal Proceedings
The Company is not involved in any claim or legal action.
(10) Employee Benefit Plan
The Company has a defined contribution plan (the Plan) which is available to
all qualified employees. Employees may elect to contribute a portion of
their compensation to the Plan, subject to certain limitations. The Company
contributes a percentage of the employee's contribution, subject to a
maximum of 4.5 percent. The Company's matching contributions aggregated
approximately $301, $307 and $249 in 2011, 2010 and 2009, respectively.
(11) Revenues by Geographic Location
The Company operates in one business segment and develops, manufactures and
markets a variety of memory systems for use with servers and workstations
which are manufactured by various companies. Revenues, total assets and
long lived assets for 2011, 2010 and 2009 by geographic region is as follows:
United Europe Other* Consolidated
States
_______ _______ ______ ____________
April 30, 2011
Revenues $ 37,400 $ 6,481 $ 2,966 $ 46,847
Total assets $ 14,783 $ 37 $ 0 $ 14,820
Long lived assets $ 4,256 $ 0 $ 0 $ 4,256
April 30, 2010
Revenues $ 35,566 $ 4,484 $ 3,970 $ 44,020
Total assets $ 17,511 $ 133 $ 9 $ 17,653
Long lived assets $ 2,738 $ 0 $ 0 $ 2,738
April 30, 2009
Revenues $ 19,088 $ 4,793 $ 2,016 $ 25,897
Total assets $ 24,416 $ 106 $ 33 $ 24,555
Long lived assets $ 2,604 $ 0 $ 0 $ 2,604
*Principally Asia Pacific Region
36
(12) Quarterly Financial Data (Unaudited)
Quarter Ended
____________________________________________
Fiscal 2011 July 31 October 31 January 31 April 30
___________ _______ __________ __________ ________
Revenues $12,744 $10,949 $11,873 $11,281
Gross profit 3,123 2,413 2,903 2,631
Net loss (1,239) (1,715) (839) (841)
Net loss per basic and
diluted common share (.14) (.19) (.09) (.09)
Quarter Ended
____________________________________________
Fiscal 2010 July 31 October 31 January 31 April 30
___________ _______ __________ __________ ________
Revenues $ 9,190 $10,673 $12,284 $11,873
Gross profit 2,535 2,737 3,385 2,955
Net loss (978) (1,616) (6,538) (1,611)
Net loss per basic and
diluted common share (.11) (.18) (.74) (.18)
____________________________________________
Earnings (loss) per share is calculated independently for each quarter and,
therefore, may not equal the total for the year.
37
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
Dataram Corporation
We have audited the accompanying consolidated balance sheets of Dataram
Corporation and Subsidiaries as of April 30, 2011 and 2010, and the related
consolidated statements of operations, stockholders' equity and cash flows
for each of the years in the three-year period ended April 30, 2011. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Dataram
Corporation and Subsidiaries as of April 30, 2011 and 2010, and their
results of operations and cash flows for each of the years in the
three-year period ended April 30, 2011 in conformity with accounting
principles generally accepted in the United States of America.
J.H. Cohn LLP
Roseland, New Jersey
July 28, 2011
Selected Financial Data
(Not covered by Independent Registered Public Accounting Firm's Reports)
(In thousands, except per share amounts)
Years Ended April 30, 2011 2010 2009 2008 2007
______________________ ____ ____ ____ ____ ____
Revenues $ 46,847 $ 44,020 $ 25,897 $ 30,893 $ 38,404
Net earnings (loss) (4,634) (10,743) (3,135) 1,608 770
Basic earnings (loss)
per share (.52) (1.21) (.35) .18 .09
Diluted earnings (loss)
per share (.52) (1.21) (.35) .18 .09
Current assets 10,564 14,810 18,533 24,865 23,893
Total assets 14,820 17,653 24,555 26,110 25,905
Current liabilities 7,439 6,261 3,075 2,491 2,573
Total stockholders'
equity 7,381 11,392 21,099 23,619 23,332
Cash dividends paid - - - 2,114 2,055
38
DIRECTORS AND CORPORATE OFFICERS
Directors
John H. Freeman
President and Chief Executive Officer
of Dataram Corporation
Thomas A. Majewski*
Principal, Walden Inc.
Roger C. Cady*
Principal, Arcadia Associates
Rose Ann Giordano*
President, Thomis Partners
*Member of audit committee
Corporate Officers
John H. Freeman
President and Chief Executive Officer
Mark E. Maddocks
Vice President, Finance and
Chief Financial Officer
Jeffrey H. Duncan
Vice President of Manufacturing
and Engineering
David A. Sheerr
General Manager, Micro Memory Bank
Anthony M. Lougee
Controller
Thomas J. Bitar
Secretary
Member, Dillon, Bitar & Luther, L.L.C.
Corporate Headquarters
Dataram Corporation
777 Alexander Park
Princeton, NJ 08540
609-799-0071
Auditors
J.H. COHN LLP
Roseland, NJ
General Counsel
Dillon, Bitar & Luther, L.L.C.
Morristown, NJ
39
Transfer Agent and Registrar
American Stock Transfer and Trust Company
10150 Mallard Creek Drive
Suite 307
Charlotte, NC 28262
Stock Listing
Dataram's common stock is listed on
the NASDAQ with the trading symbol DRAM.
Annual Meeting
The annual meeting of shareholders
will be held on Thursday, September 22,
2011, at 2:00 p.m. at Dataram's
corporate headquarters at:
777 Alexander Park
Princeton, NJ 08540
Form 10-K
A copy of the Company's Annual Report
on Form 10-K filed with the Securities
& Exchange Commission is available
without charge to shareholders.
Address requests to:
Vice President, Finance
Dataram Corporation
777 Alexander Park
Princeton, NJ 08543
Corporate Headquarters
Dataram Corporation
777 Alexander Park
Princeton, NJ 08540
Toll Free: 800-DATARAM
Phone: 609-799-0071
Fax: 609-799-6734
www.dataram.com
40
