Exhibit 13(a)
[DATARAM
LOGO]
DATARAM
CORPORATION
2010
ANNUAL REPORT
Table
of Contents
1
President’s Letter
2
Management's Discussion and Analysis of
Financial Condition
and Results of
Operations
11 Financial
Review
29
Selected Financial Data
[PICTURE
OF JOHN FREEMAN]
President’s
Letter
To
Our Shareholders:
In
last year’s annual report 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 plans to return to
profitability.
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Our
traditional memory business grew 20 percent to $30 million and posted its
first growth in five years.
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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. The
MMB Unit’s revenues grew to $14 million and the Unit exceeded its
financial performance expectations. Both MMB and the
traditional Dataram memory business have benefited from leveraging each
other’s skills, strategies, marketing, sales, engineering and purchasing
resources.
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We
implemented our new go to market corporate strategy. Our
traditional direct sales model has changed. 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. The results were growth and a doubling
of Channel Partner revenues, establishing momentum with these partners and
having greater visibility for Dataram products and branding through these
new relationships.
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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
million in revenues. We expect continued growth in e-sales via
the web site through our current search engine optimization, pay per click
and social networking initiatives.
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IT
spending is growing as the worldwide economy improves. As a result of the
many initiatives we have implemented and the gradual economic recovery,
we set the stage for our memory business’ return to cash
profitability in the second half of fiscal 2010. We expect continued
growth and profitability in our traditional memory
business.
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We
have continued to make significant investments as well as steady progress
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. Additional financing has been
obtained to support our continued investments in XcelaSAN. In August 2010,
we are releasing enhanced features to support sales initiatives. These
changes incorporate feedback from our customers and increase the products’
ease of use, ease of installation and interoperability. High availability
systems are expected to be available for sale in December. Based on
customer feedback and their excitement about the benefits of XcelaSAN, we
anticipate that both our enhancements and the shipment of high
availability systems will accelerate product sales and broaden market
adoption.
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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.
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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
28, 2010
John
H. Freeman
President
and Chief Executive Officer
Management's
Discussion and Analysis of Financial Condition and Results
of Operations
Overview
Dataram
is a developer, manufacturer and marketer of large capacity memory products
primarily used in high performance network servers and workstations. The Company
provides customized memory solutions for original equipment manufacturers (OEMs)
and compatible memory for 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, 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, 2010 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, 2010 2009 2008
_________________________________________________________________
Revenues 100.0% 100.0% 100.0%
Cost
of
sales 73.6 67.4 61.6
_____ _____ _____
Gross
profit 26.4 32.6 38.4
Engineering 2.3 4.7 4.1
Research
and
development 9.7 5.9 0
Selling,
general and
administrative 30.3 42.7 28.6
_____ _____ _____
Earnings
(loss) from
operations (15.9) (20.7) 5.7
Other
income (expense),
net (0.3) 0.9 2.8
_____ _____ _____
Earnings
(loss) before income
tax
expense (16.2) (19.8) 8.5
Income
tax expense
(benefit) 8.2 (7.7) 3.3
_____ _____ _____
Net
earnings
(loss) (24.4) (12.1) 5.2
=====
===== =====
Fiscal
2010 Compared With Fiscal 2009
Revenues
for fiscal 2010 were $44.0 million compared to $25.9 million in fiscal 2009. The
recently 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. This was primarily the
result of the Company’s implementation of its revamped sales and marketing
strategy having a positive effect on demand for its products, coupled with an
increase in overall demand for IT infrastructure as the economy recovers from
last year’s financial crises.
Revenues
for the fiscal years ended April 30, 2010 and 2009 by geographic region
were:
Year
ended Year
ended
April 30,
2010 April 30,
2009
________________ ________________
United
States
$ 35,566,000 $ 19,088,000
Europe
4,484,000 4,793,000
Other
(principally Asia Pacific Region)
3,970,000
2,016,000
________________ ________________
Consolidated
$ 44,020,000 $ 25,897,000
================ ================
Cost
of sales was $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. Current fiscal year’s cost
of sales as a percent of revenue is considered by management to be within the
Company’s normal range. The prior fiscal year 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
(Agreement) with another company whereby the Company acquired the exclusive
right to purchase specified software for a price of $900,000 plus a contingent
payment of $100,000. Fiscal 2010’s research and development expense includes
$600,000 of expense related to the Agreement, of which $300,000 was expensed in
the first fiscal quarter and $300,000 was expensed in the second fiscal quarter.
The Company now owns the software. The software and the storage products, which
incorporate the software, are currently under development. We expect to make
further investments in this area.
Selling,
general and administrative(S,G&A) 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 is recorded as a component of S,G&A expense and totaled
approximately $918,000 in fiscal 2010, versus $533,000 in fiscal 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 $43,000 of interest expense. Approximately $10,000 of income was
recorded for the gain on sale of assets. Other income in fiscal 2009 includes
$294,000 of net interest income. 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%. The Company
has Federal and State net operating loss (NOL) carry-forwards of approximately
$11.5 million and $9.7 million, respectively. These can be used to offset future
taxable income and expire between 2023 and 2030 for Federal tax purposes and
2016 and 2030 for state tax purposes.
Fiscal
2009 Compared With Fiscal 2008
Revenues
for fiscal 2009 were $25.9 million compared to $30.9 million in fiscal 2008. The
decline in revenues came primarily from a softening in demand due to the
weakening economy. Many of our customers curtailed their capital spending while
they adapted their business plans. In response to these conditions, the Company
instituted a reduction in workforce in the fourth quarter of fiscal
2009.
Cost
of sales was $17.4 million in fiscal 2009 or 67.4 percent of revenues compared
to $19.0 million or 61.6 percent of revenues in fiscal 2008. Fluctuations in
cost of sales as a percentage of revenues are not unusual and can result from
many factors, some of which are a rapid change in the price of DRAMs, or 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 fiscal 2009 were $1.2 million, versus $1.3 million in fiscal
2008.
Research
and development expenses in fiscal 2009 were $1.5 million, versus nil in fiscal
2008. In fiscal 2009, the Company implemented a strategy to introduce new and
complementary products into its offerings portfolio. The Company began to
develop 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. Research and
development expense in fiscal 2009 includes $300,000 of expense related to the
initial payment for the software purchase and license. Additionally,
approximately $121,000 of research and development expense recorded in fiscal
2009 represented a non-cash expense for the fair value of stock options issued
to a privately held company to acquire certain patents and other intellectual
property. These patents and other intellectual property were deemed to have no
alternative future use when acquired and we had an uncertainty in receiving
future economic benefits from them.
Selling,
general and administrative(S,G&A) expenses were $11.1 million in fiscal 2009
versus $8.8 million in fiscal 2008. S,G&A expense in fiscal 2009 includes a
charge of approximately $716,000 related to a retirement agreement entered into
with the Company’s former chief executive officer. Of this amount, approximately
$660,000 relates to payments defined in the agreement and the balance consists
primarily of legal fees incurred by the Company associated with this matter.
Fiscal 2009 expense also includes $418,000 of severance for terminated employees
and a $138,000 charge as a result of one of the Company’s foreign customers
entering receivership. Fiscal 2009 S,G&A expense includes approximately
$161,000 associated with the operations of the acquired MMB business unit. The
remaining increase in S,G&A expense is primarily attributable to planned
increases in the Company’s sales and marketing infrastructure which occurred
prior to the economic downturn. In the fourth quarter of fiscal 2009, the
Company took actions to reduce its S,G&A expenses in response to the changed
economic environment. Stock-based compensation expense is recorded as a
component of S,G&A expense and totaled $533,000 in fiscal 2009 versus
$297,000 in fiscal 2008.
Other
income, net for fiscal year 2009 totaled $223,000 versus $868,000 in fiscal
2008. Other income in fiscal 2009 includes $294,000 of net interest income.
Additionally, other income includes $68,000 of foreign currency transaction
losses, primarily as a result of the EURO weakening against the US
dollar. Other income in Fiscal 2008 includes $748,000 of net interest
income and $120,000 of foreign currency transaction gains, primarily as a result
of the EURO strengthening relative to the US dollar.
Income
tax expense (benefit) for fiscal 2009 was a benefit of $2.0 million versus $1.0
million of tax expense in fiscal 2008. 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 the end of fiscal 2010 amounted to $2.5 million and
working capital amounted to $8.5 million, reflecting a current ratio of 2.4 to
1, compared to cash and cash equivalents of $12.5 million, working capital of
$15.5 million and a current ratio of 6.0 to 1 as of April 30, 2009.
Accounts
receivable at the end of fiscal 2010 were $5.3 million compared to fiscal 2009
year end accounts receivable of $3.4 million.
The
Company used $8.8 million of cash flows in operating activities primarily the
result of net losses of $10.7 million. The net loss was partially offset by the
reversal of deferred tax asset of $3.6 million. Inventories increased by
approximately $4.7 million. The MMB business unit described in Note 2 to the
consolidated financial statements increased its inventory levels by
approximately $2.8 million to properly support normal sales levels. At April 30,
2009, the MMB business unit inventory totaled approximately $170,000. Inventory
was maintained at an unsustainably low level during the first month subsequent
to the acquisition as part of the Company’s transition and integration plan. The
balance of the inventories increase was primarily the result of a management
decision to purchase certain inventories at favorable pricing levels. Accounts
receivable increased approximately $2.0 million as a result of increased
revenues. Cash used in operating activities was partially offset by an increase
in accounts payable of approximately $2.1 million. Depreciation and amortization
expense of approximately $1.2 million and non-cash stock-based expense of
approximately $918,000 were also recorded. Accrued liabilities increased by
approximately $650,000.
Cash
used in investing activities totaled approximately $2.3 million and consisted of
the acquisition of a business, more fully described below, totaling
approximately $1.7 million and additions of property and equipment totaling
approximately $574,000.
Cash
provided by financing activities totaled approximately $1.1 million and
consisted of proceeds from a loan from a related party totaling $1.0 million and
proceeds from the sale of common shares under the Company’s stock option plan
totaling approximately $118,000.
Capital
expenditures were $574,000 in fiscal 2010 compared to $617,000 in fiscal 2009.
Fiscal 2011 capital expenditures are expected to total approximately $600,000.
At the end of fiscal 2010, contractual commitments for capital purchases were
zero.
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, 2010, the total number of shares authorized for purchase under
the program is 172,196 shares. In fiscal 2010 and 2009, the Company did not
repurchase any shares of its common stock.
On
February 24, 2010, the Company entered into a Note and Security Agreement
(“Agreement”) with an employee who is also an executive officer of the
Company. Under the Agreement, the Company borrowed the principal sum
of $1,000,000 for a period of six months, which the Company can extend for an
additional three months without penalty. The loan bears interest at
the rate of 5.25%. Interest is payable monthly, and the entire principal amount
is payable in the event of the employee’s termination of employment by the
Company. The loan is collateralized by a security interest in all
machinery, equipment and inventory of Dataram at its Montgomeryville, PA
location. Also, as a subsequent event, on July 27, 2010, the Company entered
into an agreement with a financial institution for secured debt financing of up
to $5.0 million. Also, on July 27, 2010, the Company entered into an agreement
with a vendor, which is wholly owned by the employee and executive officer
referred to above, to consign a formula based amount of up to $3.0 million of
certain inventory into our manufacturing facilities. This will allow us to
substantially reduce our inventory carrying requirements while still maintaining
our ability to service our customers. Management believes that the Company’s
cash flows generated from operations together with cash generated through these
agreements will be sufficient to meet the Company’s short-term liquidity needs.
Management also believes that in order to satisfy long-term liquidity needs, the
Company will need to generate profitable operations and positive cash
flows.
On
March 31, 2009, the Company acquired certain assets of MMB. The Company
purchased the assets from MMB for total consideration of approximately
$2,253,000, 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) and consists of a percentage, averaging 60%, payable
quarterly, over the next three years 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, 2010 are as
follows:
Operating
leases
Year
ending April
30: ________________
2011 $ 387,000
2012
34,000
Thereafter
0
________________
$
421,000
================
Purchases
At
April 30, 2010, the Company had open purchase orders outstanding totaling $5.5
million primarily for inventory items to be delivered in the first six months of
fiscal 2011. These purchase orders are cancelable.
Recently
Adopted Accounting Guidance
We
have adopted the authoritative guidance issued by the FASB ASC as the source of
authoritative accounting and reporting standards to be applied by
nongovernmental entities to financial statements that are presented in
conformity with generally accepted accounting principles (GAAP) in the United
States (the GAAP hierarchy). The FASB ASC is effective for financial
statements issued for interim and annual periods ending after September 15,
2009. The adoption of the FASB Codification did not have a material impact on
our consolidated financial statements. The GAAP references in the accompanying
consolidated financial statements reflect the FASB Codification.
On
May 1, 2009, we adopted authoritative guidance issued by the FASB on business
combinations. The guidance retains the fundamental requirements that the
acquisition method of accounting (previously referred to as the purchase method
of accounting) be used for all business combinations, but requires a number of
changes, including changes in the way assets and liabilities are recognized and
measured as a result of business combinations. It also requires the
capitalization of in-process research and development at fair value and requires
the expensing of acquisition-related costs as incurred. We have not completed
any business combinations since May 1, 2009.
On
May 1, 2009, we adopted the authoritative guidance issued that changes the
accounting and reporting for non-controlling interests. Non-controlling
interests are to be reported as a component of equity separate from the parent’s
equity, and purchases or sales of equity interests that do not result in a
change in control are to be accounted for as equity transactions. In addition,
net income attributable to a non-controlling interest is to be included in net
income and, upon a loss of control, the interest sold, as well as any interest
retained, is to be recorded at fair value with any gain or loss recognized in
net income. Adoption of the new guidance did not have a material impact on our
financial statements because we do not have a noncontrolling interest in our
consolidated financial statements.
On
May 1, 2009, we adopted the authoritative guidance on fair value
measurement for nonfinancial assets and liabilities, except for items that are
recognized or disclosed at fair value in the financial statements on a recurring
basis (at least annually). Adoption of the new guidance did not have a material
impact on our financial statements.
The
Subsequent Events Topic of the FASB ASC, effective May 1, 2009, established
general standards of accounting for and disclosure of events that occur after
the balance sheet date but before financial statements are issued or are
available to be issued. The Company has evaluated subsequent events and
transactions for potential recognition or disclosure in the consolidated
financial statements through the filing date and has determined that other than
the Agreements more fully described in Note 5 to the consolidated financial
statements, no subsequent event or transaction meets the requirements for
disclosure.
Recent
Accounting Guidance Not Yet Adopted
In
June 2009, the FASB issued authoritative guidance on the consolidation of
variable interest entities, which is effective for us beginning May 1,
2010. 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. We believe adoption
of this new guidance will not have a material impact on our financial
statements.
In
October 2009, the FASB issued authoritative guidance on revenue recognition
which is effective for us beginning on May 1, 2010, with earlier adoption
permitted. 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. We believe adoption of this new guidance will not have a material
impact on our financial statements.
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.
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 2010 and fiscal 2009 include approximately $918,000 and
$533,000, respectively, of stock-based compensation expense. Stock-based
compensation expense is recognized in the selling, general and administrative
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 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 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 and 2008 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.
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 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 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. Deferred tax assets and liabilities are measured using enacted tax rates
in effect for the year in which those temporary differences are expected to be
recovered or settled. 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. The Company recognizes, in its 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.
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,
assumptions for valuing stock based compensation awards, estimating the fair
value and/or impairment of our goodwill 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
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.
The
Chief Executive Officer and Chief Financial Officer of the Company disclosed a
material weakness in our financial reporting in the quarter ended January 31,
2010. This weakness was comprised of a financial accounting deficiency relating
to the initial non-recording during the third quarter ended January 31, 2010 of
a deferred tax asset valuation allowance, which was subsequently recorded in the
financial statements. The Chief Executive Officer and Chief Financial
Officer of the Company have corrected the weakness. The Company’s tax
provision and related accounts are independently reviewed.
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. With the exception of the rectification of aforementioned material
weakness, there were no changes in our internal control over financial reporting
during fiscal 2010 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, 2010. 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.
2010 2009
___________________ __________________
High Low High Low
___________________ __________________
First
Quarter $
1.75 $
1.27 $ 3.35 $
2.21
Second
Quarter 4.49 1.39 2.50 1.13
Third
Quarter 5.49 2.50 1.88 1.08
Fourth
Quarter 3.51 2.22 1.40 1.11
At
April 30, 2010, there were approximately 5,000 shareholders.
DATARAM
CORPORATION AND SUBSIDIARIES
Consolidated
Balance Sheets
April
30, 2010 and 2009
(In
thousands, except share and per share amounts)
|
2010 2009
|
|
______ ______
|
|
Assets
|
|
Current
assets:
|
|
Cash
and cash
equivalents $
2,507 $12,525
|
|
Accounts
receivable, less allowance for
|
|
doubtful
accounts and sales returns
|
|
of
$250 in 2010 and $290 in
2009 5,344 3,381
|
|
Inventories:
|
|
Raw
materials 3,919 1,345
|
|
Work
in
process 32 15
|
|
Finished
goods 2,921 841
|
|
______ ______
|
|
6,872 2,201
|
|
|
|
Deferred
income
taxes - 300
|
|
Other
current
assets 87 126
|
|
______ ______
|
|
Total
current
assets 14,810 18,533
|
|
|
|
Deferred
income
taxes - 3,282
|
|
|
|
Property
and equipment:
|
|
Machinery
and
equipment 12,300 11,761
|
|
Leasehold
improvements 2,235 2,225
|
|
______ ______
|
|
14,535 13,986
|
|
Less
accumulated depreciation
|
|
and
amortization 13,418 12,886
|
|
______ ______
|
|
Net
property and
equipment 1,117 1,100
|
|
|
|
Other
assets 105 136
|
|
|
|
Intangible
assets, less accumulated
|
|
amortization
of $692 in 2010 and
|
|
$55
in
2009 867 1,504
|
|
|
|
Goodwill 754 -
|
|
______ ______
|
|
|
|
$17,653 $24,555
|
|
====== ======
|
|
Liabilities
and Stockholders' Equity
|
|
Current
liabilities:
|
|
Accounts
payable $
3,523 $ 1,386
|
|
Accrued
liabilities 1,738 1,689
|
|
Note
payable to related
party 1,000 -
|
|
______ ______
|
|
Total
current
liabilities 6,261 3,075
|
|
|
|
Accrued
liabilities - 381
|
|
______ ______
|
|
Total
liabilities 6,261 3,456
|
|
|
|
Commitments
and contingencies
|
|
|
|
Stockholders'
equity:
|
|
Common
stock, par value $1.00 per share.
|
|
Authorized
54,000,000 shares; issued
|
|
and
outstanding 8,918,309 at April 30,
|
|
2010
and 8,869,184 on April 30,
2009 8,918 8,869
|
|
Additional
paid-in
capital 8,009 7,023
|
|
Retained
earnings (accumulated
deficit) (5,535) 5,207
|
|
______ ______
|
|
Total
stockholders'
equity 11,392 21,099
|
|
|
|
______ ______
|
|
|
|
$17,653 $24,555
|
|
====== ======
|
|
|
|
See
accompanying notes to consolidated financial
statements.
|
DATARAM
CORPORATION AND SUBSIDIARIES
Consolidated
Statements of Operations
Years
ended April 30, 2010, 2009 and 2008
(In
thousands, except per share amounts)
|
2010 2009 2008
|
|
_______ _______ _______
|
|
|
|
Revenues $
44,020 $ 25,897 $ 30,893
|
|
|
|
Costs
and expenses:
|
|
Cost
of
sales 32,408 17,443 19,016
|
|
Engineering 997 1,219 1,267
|
|
Research
and
development 4,265 1,531 -
|
|
Selling,
general and
administrative 13,365 11,064 8,837
|
|
_______ _______ _______
|
|
51,035 31,257 29,120
|
|
_______ _______ _______
|
|
Earnings
(loss) from
operations (7,015) (5,360) 1,773
|
|
|
|
Other
income (expense):
|
|
Interest
income 12 300 754
|
|
Interest
expense (54) (6) (6)
|
|
Currency
gain
(loss) (85) (68) 120
|
|
Other
income
(expense) 10 (3) -
|
|
_______ _______ _______
|
|
(117) 223 868
|
|
_______ _______ _______
|
|
|
|
Earnings
(loss) before income tax
|
|
expense
(benefit) (7,132) (5,137) 2,641
|
|
|
|
Income
tax expense
(benefit) 3,611 (2,002) 1,033
|
|
_______ _______ _______
|
|
Net
earnings
(loss) $(10,743)
$(3,135) $ 1,608
|
|
=======
======= =======
|
|
Net
earnings (loss) per common share:
|
|
Basic $
(1.21) $ (0.35) $ 0.18
|
|
=======
======= =======
|
|
|
|
|
|
Diluted $
(1.21) $ (0.35) $ 0.18
|
|
=======
======= =======
|
|
|
|
See
accompanying notes to consolidated financial
statements.
|
DATARAM
CORPORATION AND SUBSIDIARIES
Consolidated
Statements of Cash Flows
Years
ended April 30, 2010, 2009 and 2008
(In
thousands)
|
2010 2009 2008
|
|
______ ______ ______
|
|
|
|
Cash flows from operating activities:
|
|
|
|
Net earnings (loss) $(10,743) $(3,135) $ 1,608
|
|
|
|
Adjustments to reconcile net earnings
|
|
(loss)to net cash provided by
|
|
(used in)operating activities:
|
|
Depreciation and amortization 1,193 456 312
|
|
Bad debt expense (recovery) 32 204 (18)
|
|
Stock-based compensation expense 918 533 297
|
|
Other stock option expense - 121 -
|
|
Loss (gain) on sale of property
|
|
and equipment (10) 2 -
|
|
Deferred income tax expense (benefit) 3,582 (2,040) 691
|
|
Excess tax benefits from sale of
|
|
common shares under stock
|
|
option plan - - (81)
|
|
Changes in assets and liabilities
|
|
(net of effect of acquisition
|
|
of business):
|
|
Decrease (increase) in
|
|
accounts receivable (1,994) 940 688
|
|
Decrease (increase) in
|
|
inventories (4,672) (223) 144
|
|
Decrease (increase) in
|
|
other current assets 39 (28) 133
|
|
Decrease (increase) in
|
|
other assets 31 (41) 26
|
|
Increase (decrease) in
|
|
accounts payable 2,137 (594) 192
|
|
Increase (decrease) in
|
|
accrued liabilities 650 217 (274)
|
|
_____ _____ _____
|
|
Net cash provided by (used in)
|
|
operating activities (8,837) (3,588) 3,718
|
|
_____ _____ _____
|
|
Cash flows from investing activities:
|
|
Acquisition of business (1,736) (912) -
|
|
Collection of note receivable - - 1,537
|
|
Additions to property and equipment (573) (617) (235)
|
|
Proceeds from sale of property and
|
|
equipment 10 - 21
|
|
_____ _____ _____
|
|
Net cash provided by (used in)
|
|
investing activities (2,299) (1,529) 1,323
|
|
_____ _____ _____
|
|
|
|
Cash flows from financing activities:
|
|
Proceeds from related party note payable 1,000 - -
|
|
Proceeds from sale of common shares
|
|
under stock option
|
|
plan (including tax benefits) 118 - 496
|
|
Excess tax benefits from sale of
|
|
common shares under stock
|
|
option plan - - 81
|
|
Dividends paid - - (2,114)
|
|
_____ _____ _____
|
|
Net cash provided by (used in)
|
|
financing activities 1,118 - (1,537)
|
|
_____ _____ _____
|
|
Net increase (decrease) in cash
|
|
and cash equivalents (10,018) (5,117) 3,504
|
|
Cash and cash equivalents at
|
|
beginning of year 12,525 17,642 14,138
|
|
_____ _____ _____
|
|
Cash and cash equivalents at end of year $ 2,507 $ 12,525 $ 17,642
|
|
===== ===== =====
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
Cash paid during the year for:
|
|
Interest
$ 54 $ 6 $ 6
|
|
===== ===== =====
|
|
Income taxes
$ 35 $ 20 $ 134
|
|
===== ===== =====
|
|
|
|
See accompanying notes to consolidated financial statements.
|
DATARAM
CORPORATION AND SUBSIDIARIES
Consolidated
Statements of Stockholders' Equity
Years
ended April 30, 2010, 2009 and 2008
(In
thousands, except share amounts)
|
|
|
Retained Total
|
|
Additional
earnings stock-
|
|
Common paid-in
(accumulated holders’
|
|
stock capital
(deficit) equity
|
|
______ ________
________ ________
|
|
|
|
|
|
Balance
at April 30, 2007 $
8,688 $ 5,796 $
8,848 $23,332
|
|
|
|
|
|
Issuance
of 181,429 shares
|
|
under
stock option plans,
|
|
including
income tax
|
|
benefit
of
$81 181 315
-
496
|
|
|
|
Net
earnings - -
1,608
1,608
|
|
|
|
Stock-based
compensation
expense
- 297
-
297
|
|
|
|
Dividends
paid
(1) - -
(2,114) (2,114)
|
|
|
|
______ _______
_______ _______
|
|
Balance
at April 30, 2008 $
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 $ 7,023 $ 5,207
$21,099
|
|
|
|
|
|
Issuance
of 49,125 shares
|
|
under
stock option
plans 50 68
-
118
|
|
|
|
|
|
Net
loss - -
(10,743) (10,743)
|
|
|
|
Stock-based
compensation
|
|
expense - 918
-
918
|
|
______ _______
_______ _______
|
|
|
|
Balance
at April 30, 2010 $
8,919 $ 8,009
$(5,536) $11,392
|
|
====== ======
====== ======
|
|
(1) Dividends
paid in the fiscal year ended April 30, 2008 totaled $0.24
per common
share and were paid quarterly at the rate of $0.06 per common
share.
|
|
|
|
See
accompanying notes to consolidated financial
statements.
|
Notes
to Consolidated Financial Statements
(Dollars
in thousands, except per share amounts)
(1)
Significant Accounting Policies
Description
of Business
Dataram
is a developer, manufacturer and marketer of large capacity memory products
primarily used in high performance network servers and workstations. The Company
provides customized memory solutions for original equipment manufacturers (OEMs)
and compatible memory for 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.
Liquidity
As
discussed in Note 5, the Company entered into an accounts receivable financing
agreement and an inventory consignment agreement to address short-term liquidity
needs. Based on the cash flows expected to be provided from these
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. 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.
Accounts
Receivable
Accounts
receivable consists of the following categories:
April
30, 2010 April 30, 2009
________________ ______________
Trade
receivables $ 5,000 $ 3,599
VAT
receivable 594 72
Allowance
for doubtful accounts
and
sales
returns (250) (290)
________________ ______________
$ 5,344 $ 3,381
================ ==============
The
VAT receivable was collected in the first quarter of the Company’s fiscal year
ending April 30, 2011.
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.
Note
Receivable
On
December 29, 2005, the Company closed on an agreement to sell its undeveloped
land. The purchase price was $3,075 of which half, or $1,537, was paid in the
form of a note that accrued interest, payable monthly, at 5% per annum for a
period of one year and 7.5% per annum thereafter. In fiscal 2008, the note was
paid in full.
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 three 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.
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 balance sheet 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 are amortized using the straight-line method over
their estimated period of benefit, ranging from two to five years. We evaluate
the recoverability of intangible assets periodically and take into account
events or circumstances that warrant revised estimates of useful lives or that
indicate that impairment exists. All of our intangible assets with definitive
lives are subject to amortization. No material 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 our
annual impairment test is March 1.
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.
Engineering
and Research and Development
The
Company expenses engineering costs as incurred. Engineering effort is directed
to the development of new or improved computer memory products as well as
ongoing support for existing products. 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.
Income
Taxes
The
Company utilizes the asset and liability method of accounting for income taxes.
Under the asset and liability method, deferred 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 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 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. The Company recognizes, in its 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. The Company's Federal tax returns for
fiscal 2007 through fiscal 2009 remain open for examination. There are no
material unrecognized tax positions in the financial statements.
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentration of credit risk
consist primarily of cash and cash equivalents 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, 2010, amounts due from one customer totaled approximately 14% of accounts
receivable. At April 30, 2009, amounts due from one customer totaled
approximately 21% of accounts receivable.
In
fiscal 2010, the Company had sales to one customer that accounted for
approximately 11% revenues. In fiscal 2009, the Company had sales to one
customer that accounted for approximately 17% of revenues. In fiscal 2008, the
Company had sales to one customer that accounted for 14% of
revenues.
Net
earnings (loss) per share
Basic
net earnings per share is calculated by dividing net earnings by the weighted
average number of common shares outstanding during the period. Diluted net
earnings per share was calculated in a manner consistent with basic net earnings
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 earnings per share.
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
Loss
Shares Per share
(numerator)
(denominator) amount
_________ ___________ _________
Basic
net loss per share
-net
loss and weighted
average
common shares
outstanding $(3,135) 8,869,184 $
(.35)
Effect
of dilutive securities
-stock
options - - -
_______ _________ ______
Diluted
net loss per share
-net
loss weighted
average
common shares
outstanding
and effect of
stock
options $(3,135) 8,869,184 $
(.35)
=======
========= ======
Year
ended April 30, 2008
Earnings Shares Per
share
(numerator)
(denominator) amount
_________ ___________ _________
Basic
net earnings per share
-net
earnings and weighted
average
common shares
outstanding $
1,608 8,825,000 $ .18
Effect
of dilutive securities
-stock
options - 29,000 -
_______ _________ ______
Diluted
net earnings per share
-net
earnings, weighted
average
common shares
outstanding
and effect of
stock
options $
1,608 8,854,000 $ .18
=======
========= ======
Diluted
net loss per common share does not include the effect of options to purchase
1,996,800 shares of common stock for the year ended April 30, 2010 because they
are anti-dilutive.
Diluted
net loss per common share does not include the effect of options to purchase
1,307,675 shares of common stock for the year ended April 30, 2009 because they
are anti-dilutive.
Diluted
net earnings per common share does not include the effect of options to purchase
756,135 shares of common stock for the year ended April 30, 2008 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,
2010 $ 79 6 - (6) $ 79
Year
Ended
April
30,
2009 $ 54 5 25(1) (5) $ 79
Year
Ended
April
30,
2008 $ 54 20 - (20) $ 54
(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 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, 2010, 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.
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.
Our
consolidated statement of operations for fiscal year ended April 30, 2010
includes $918 of compensation expense. Compensation expense is recognized in the
selling, general and administrative 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 has been reflected in additional paid-in
capital in the accompanying balance sheet as of April 30, 2010. In fiscal 2009
and fiscal 2008, stock-based compensation expense totaled $533 and $297,
respectively. A corresponding increase of $533 is reflected in additional
paid-in capital in fiscal 2009’s balance sheet. The fair value of each stock
option granted is estimated on the date of grant using the Black-Scholes option
pricing model.
Excess
tax benefits are reported as a financing cash inflow. The Company had $81 of
excess tax benefits in fiscal 2008.
A
summary of option activity under the plans for the fiscal year ended April 30,
2010 is as follows:
Weighted Weighted
average Aggregate
average remaining intrinsic
Shares exercise
price contractual
life value(1)
__________ ______________ ________________ _________
Balance
April
30,
2009 1,257,675 $4.53 4.37 $ 4
Granted 1,039,500 $2.55 - -
Exercised (49,125) $2.41 - -
Expired (301,250) $6.14 - -
Balance
April
30,
2010 1,946,800 $3.25 6.38 $ 175
Exercisable
April
30,
2010 801,800 $4.23 3.56 $ 158
(1)
These amounts represent the difference between the exercise price and $2.38, the
closing price of Dataram common stock on April 30, 2010 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 2010 was $118. During
fiscal 2010, 346,500 options completed vesting. As of April 30, 2010, there was
$1.0 million of total unrecognized compensation expense related to stock
options. This expense is expected to be recognized over a weighted average
period of approximately twenty-two months. At April 30, 2010, an aggregate of
12,927 shares were authorized for future grant under the Company’s stock option
plans.
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:
2010 2009 2008
------- ------- -------
Expected
life
(years) 3.0
to 6.0 5.0 to 10.0 4.0
Expected
volatility 56% 110% 110%
Expected
dividend
yield - - 7.2%
Expected
forfeiture
rate 5.0% 5.0% 5.0%
Risk-free
interest
rate 1.6%
to
2.8% 4.0% 5.0%
Weighted
average fair value of options
granted
during the
year
$ 2.55 $
2.36 $ 1.81
The
expected life in fiscal year 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 years 2009 and 2008, 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.
(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 new Dataram business unit to be operated 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, 2010
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 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.
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
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 $637 and $55 for fiscal 2010 and fiscal year 2009, respectively, and
nil for fiscal year 2008. The components of finite-lived intangible assets
acquired during fiscal year 2009 are as follows:
Gross Weighted Net
Carrying Average Accumulated Carrying
Amount Life Amortization Amount
________ _______ ____________ ________
Customer
relationships $ 758 2
Years $
515 $ 243
Trade
names 733 5
Years 158 575
Non-compete
agreement 68 4
Years 19 49
------- ---- -------
$
1,559 $
692 $ 867
======= ==== =======
The
following table outlines the estimated future amortization expense related to
intangible assets:
Year
ending April 30:
2011 $ 407
2012 164
2013 162
2014 134
-------
$ 867
=======
The
contingent purchase price amount for the acquisition in the fiscal year ended
April 30, 2010 totaled $1,736 of which $754 is recorded as an addition to
goodwill in the fiscal year ended April 30, 2010. Following are details of the
changes in our goodwill balances during the fiscal years ended April 30, 2010
and 2009:
Fiscal
year Fiscal
year
ended ended
April
30, 2010 April 30, 2009
______________ ______________
Beginning
balance $ - $ -
Contingently
payable
acquisition
purchase
price 754 -
----- -----
Ending
balance $
754 $ -
=====
=====
None
of the amounts recorded as goodwill are expected to be deductible for tax
purposes. We test goodwill for impairment annually on March 1, using a fair
value approach.
(3)
Long-Term Debt
On
June 21, 2004, the Company entered into a credit facility with a bank, which
provided for up to a $5 million revolving credit line. The Company was required
to pay a fee equal to one-eighth of one percent per annum on the unused
commitment. There have been no borrowings against the credit line. On February
23, 2009, the Company canceled this agreement.
(4)
Related Party Transactions
During
fiscal 2010 and 2009, the Company purchased inventories for resale totaling
approximately $4,976 and $727, respectively from Sheerr Memory, LLC (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 $400 and $560, respectively, of accounts payable in the
Company’s consolidated balance sheets as of April 30, 2010 and 2009 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, 2010 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
(“Agreement”) with Sheerr Memory’s owner. Under the Agreement, the
Company borrowed the principal sum of $1,000,000 for a period of six months,
which the Company can extend for an additional three months without
penalty. The loan bears interest at the rate of 5.25%. Interest is
payable monthly, and the entire principal amount is payable in the event of the
employee’s termination of employment by the Company. The loan is
secured by a security interest in all machinery, equipment and inventory of
Dataram at its Montgomeryville, PA location.
(5)
Subsequent Event
On
July 27, 2010, the Company entered into a credit facility with a bank, which
provides for up to a $5,000 revolving credit line. Advances under the facility
are due on demand and 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. The agreement contains certain
restrictive covenants, specifically a minimum tangible net worth covenant and
certain other covenants, as defined in 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.
(6)
Income Taxes
Income
tax expense (benefit) for the years ended April 30 consists of the
following:
2010 2009 2008
_____ _____ _____
Current:
Federal $ - $ - $ 75
State 29 - 267
_____ _____ _____
29 342
Deferred:
Federal 3,216 (1,595) 678
State 366 (407) 13
_____ _____ _____
3,582 (2,002) 691
_____ _____ _____
Total
income tax expense
(benefit) $ 3,611 $(2,002) $
1,033
=====
=====
=====
The
actual income tax expense (benefit) differs from "expected" tax expense
(benefit) (computed by applying the U. S. corporate tax rate of 34% in 2010 and
35% in 2009 and 2008 to earnings before income taxes) as follows:
2010 2009 2008
_____ _____ _____
Computed
"expected" tax
expense
(benefit) $(2,425) $
(1,798) $ 924
State
income taxes(net
of
Federal income tax
benefit) 395 (269) 173
Other
(138) 65 (64)
Total
income tax expense (benefit)
before
provision for valuation
allowance (2,168) (2,002) 1,033
Provision
for valuation
allowance 5,779 - -
Total
income tax expense (benefit) $
3,611 $(2,002) $
1,033
=====
=====
=====
The
tax effect of temporary differences that give rise to significant portions of
the deferred tax assets and deferred tax liabilities are presented
below:
2010 2009
____ ____
Deferred
tax assets:
Compensated
absences and severance,
principally
due to accruals for
financial
reporting
purposes $ 96 $ 139
Stock-based
compensation
expense 838 493
Accounts
receivable, principally due
to
allowance for doubtful accounts
and
sales
returns 98 113
Property
and equipment, principally
due
to differences in
depreciation (27) (40)
Intangible
assets 288 63
Inventories 217 94
Foreign
tax
credit 53 53
Domestic
net operating
losses 4,488 2,142
Alternative
minimum
tax 438 438
Other 73 87
_____ _____
Net
deferred tax
assets 6,562 3,582
Valuation
allowance (6,562) -
_____ _____
Net
deferred tax
assets $ 0 $
3,582
=====
=====
The
Company recorded a valuation allowance of $6,562 and $0,for the fiscal years
ended April 30, 2010 and April 30, 2009.
The
Company has Federal and State net operating loss carryforwards of approximately
$11,491 and $9,685, respectively. These can be used to offset future taxable
income and expire between 2023 and 2030 for Federal tax purposes and 2016 and
2030 for State tax purposes. The tax benefit of net operating loss carryforwards
utilized in each of the three years ended April 30, 2010 is as
follows:
Federal State Total
2010 $
- - $
- - $ -
2009 $
- - $
- - $ -
2008 $2,208 $
- - $2,208
(7)
Stock Option Plans
The
Company has a 1992 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 allowed granting of up to 2,850,000 shares,
adjusted for stock splits, of the Company's common stock at an option price to
be no less than the fair market value of the stock on the date such options are
granted. Under option agreements granted under the plan, the holder of the
option may purchase 20% of the common stock with respect to which the option has
been granted on or after the first anniversary of the date of the grant and an
additional 20% of such shares on or after each of the four succeeding
anniversary dates. At April 30, 2010, 12,000 of the outstanding options are
exercisable. No further options may be granted under this plan.
The
Company also 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, 2010,
609,800 of the outstanding options are exercisable.
The
status of the plans for the three years ended April 30, 2010,
is as follows:
Options
Outstanding
________________________________________________
Exercise
price Weighted average
Shares per
share exercise price
_________ ______________ ___________
Balance
April 30,
2007 1,012,066 2.813-24.250 5.150
Granted 95,000 3.330 3.330
Exercised (292,464) 2.813 2.813
Expired (151,602) 2.813-24.250 5.553
_________ ____________ ____________
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
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
=========
============ ==========
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, 2010, 180,000 of the outstanding options are
exercisable.
The
status of the non-employee director options for the three years ended April 30,
2010, is as follows:
Options
Outstanding
________________________________________________
Exercise
price Weighted average
Shares per
share exercise price
_________ _____________ ____________
Balance
April 30,
2007 196,000 2.990-7.980 5.965
Granted 40,000 3.330 3.330
Exercised - - -
Expired - - -
________ ____________ ____________
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
======== ============ ============
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 granted are
exercisable at a price representing the fair value at the date of grant, are
100% exercisable on the date of grant and expire ten years after 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:
2010 2009
-------- --------
Contingently
payable acquisition
purchase
price (See Note
2) $ 788 $ 648
Payroll,
including
vacation 334 490
Severance
costs - 174
Commissions 130 42
Bonuses 275 -
Other 211 335
-------- --------
$ 1,738 $ 1,689
======== ========
(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 $654 in
2010, $561 in 2009 and $655 in 2008.
Future
minimum lease payments under non-cancelable operating leases (with initial or
remaining lease terms in excess of one year) as of April 30, 2010 are as
follows:
Operating
leases
________________
Year
ending April 30:
2011
$ 387
2012
34
Thereafter
-
_______
$ 421
=======
Purchases
At
April 30, 2010, the Company had open purchase orders outstanding totaling $5.5
million primarily for inventory items to be delivered in the first six months of
fiscal 2011. 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 $131 in 2010, $160 in 2009 and $171 in 2008.
Legal
Proceedings
The
Company is involved in a patent infringement action claiming the Company
utilized an allegedly patented part. Should the case continue, management
intends to contest the matter vigorously, and, in the opinion of management, the
outcome of the action will not have a material effect on the Company’s
consolidated financial position, results of operations or liquidity. The Company
is not involved in any other 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 effective January 1, 2008. In prior years the Company contributed up
to 6 percent of the employee's eligible compensation, based on the employee's
years of service. The Company's matching contributions aggregated approximately
$307, $249 and $239 in 2010, 2009 and 2008, 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 2010, 2009 and 2008 by geographic region is as
follows:
United Europe Other* Consolidated
States
_______ _______ ______ ____________
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
April
30, 2008
Revenues $ 22,270 $ 5,875 $
2,748 $ 30,893
Total
assets $ 26,030 $ 78 $ 2 $ 26,110
Long
lived
assets $ 686 $ 0 $ 0 $ 686
*Principally
Asia Pacific Region
(12)
Quarterly Financial Data (Unaudited)
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 diluted
common
share (.11) (.18) (.74) (.18)
Quarter
Ended
____________________________________________
Fiscal
2009 July
31 October 31 January
31 April 30
___________ _______ __________ __________ ________
Revenues $
7,563 $
7,059 $ 5,635 $
5,639
Gross
profit 2,628 2,399 1,739 1,688
Net
loss (606) (393) (1,024) (1,112)
Net
loss per diluted
common
share (.07) (.04) (.12) (.13)
Earnings
(loss) per share is calculated independently for each quarter and, therefore,
may not equal the total for the year.
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, 2010 and 2009, 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, 2010. 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, 2010 and 2009, and their results of operations
and cash flows for each of the years in the three-year period ended April 30,
2010 in conformity with accounting principles generally accepted in the United
States of America.
J.H.
Cohn LLP
Lawrenceville,
New Jersey
July
29, 2010
Selected
Financial Data
(Not
covered by Independent Registered Public Accounting Firm’s Reports)
(In
thousands, except per share amounts)
Years
Ended April
30, 2010 2009 2008 2007 2006
______________________ ____ ____ ____ ____ ____
Revenues $ 44,020 $
25,897 $ 30,893 $ 38,404 $
41,795
Net
earnings
(loss) (10,743) (3,135) 1.608 770 2,772
Basic
earnings (loss)
per
share (1.21) (.35) .18 .09 .33
Diluted
earnings (loss)
per
share (1.21) (.35) .18 .09 .31
Current
assets 14,810 18,533 24,865 23,893 24,108
Total
assets 17,653 24,555 26,110 25,905 26,236
Current
liabilities 6,261 3,075 2,491 2,573 2,710
Total
stockholders'
equity 11,392 21,099 23,619 23,332 23,526
Cash
dividends
paid - - 2,114 2,055 1,773
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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
186
Princeton Road (Route 571)
West
Windsor, NJ 08550
609-799-0071
|
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Auditors
J.H.
COHN LLP
Lawrenceville,
NJ
General
Counsel
Dillon,
Bitar & Luther, L.L.C.
Morristown,
NJ
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 23,
2010,
at 11:00 a.m. at Dataram's
corporate
headquarters at:
186
Princeton Road (Route 571)
West
Windsor, NJ 08550
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
186
Princeton Road (Route 571)
West
Windsor, NJ 08550
Corporate
Headquarters
Dataram
Corporation
186
Princeton Road (Route 571)
West
Windsor, NJ 08550
Toll
Free: 800-DATARAM
Phone:
609-799-0071
Fax:
609-799-6734
www.dataram.com
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