10-K 1 kfinal.txt FORM 10-K APRIL 30, 2003 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended April 30, 2003. [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___ to ___. Commission file number: 1-8266 DATARAM CORPORATION --------------------------- (Exact name of registrant as specified in its charter) New Jersey 22-1831409 ---------------------- ---------------------------------- (State of Incorporation) (I.R.S. Employer Identification No.) P.O. Box 7528, Princeton, New Jersey 08543-7528 -------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (609) 799-0071 Securities registered pursuant to section 12(b) of the Act: NONE Securities registered pursuant to section 12(g) of the Act: Common Stock, $1.00 Par Value --------------------------------- (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in the definitive proxy or information statements incorporated by reference in Part III of this Form 10- K or any amendment to this Form 10-K. [x] Indicate by check mark whether registrant is an accelerated filer (as defined by Rule 12b-2 of the Act. Yes [ ] No [X] The aggregate market value of the Common Stock held by non-affiliates of the registrant on July 22, 2003 was $30,021,912. The number of shares of Common Stock outstanding on July 22, 2003 was 8,497,219 shares. DOCUMENTS INCORPORATED BY REFERENCE: (1) Definitive Proxy Statement for Annual Meeting of Shareholders to be held on September 17, 2003 (the "Definitive Proxy Statement") to be filed within 120 days of the end of the fiscal year. (2) 2003 Annual Report to Security Holders - 1 - DATARAM CORPORATION INDEX Part I Page Item 1. Business (including Risk Factors). . . . . . . . 3 Item 2. Properties . . . . . . . . . . . . . . . . . . . 10 Item 3. Legal Proceedings . . . . . . . . . . . . . . . 10 Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . 11 Part II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. . . . . . . . . 11 Item 6. Selected Financial Data. . . . . . . . . . . . . 11 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. . 11 Item 7A. Quantitative and Qualitative Disclosure About Market Risk . . . . . . . . . . . . . . . 11 Item 8. Financial Statements and Supplementary Data. . . 12 Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . 15 Part III Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . 15 Item 11. Executive Compensation . . . . . . . . . . . . . 15 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. . . . . . . . . . . 15 Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . 15 Item 14. Controls and Procedures. . . . . . . . . . . . . 15 Item 15. Principal Accountant Fees and Services . . . . . 15 Part IV Item 16. Exhibits, Financial Statement Schedules, and Reports on Form 8-K . . . . . . . 16 Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . 17 - 2 - PART I Item 1. BUSINESS (a) General Development of Business. Dataram develops, manufactures and markets memory products for use with workstations and enterprise servers. The Company's computer-related memory products expand the capacity and extend the economic useful life of computers manufactured by Sun Microsystems, Inc. ("Sun"), Hewlett-Packard Company ("HP"), Silicon Graphics, Inc. ("SGI"), International Business Machines Corporation ("IBM") and Dell Corporation ("Dell"). The Company also manufactures a line of memory products for Intel motherboard based servers for sale to original equipment manufacturers (OEMs)and channel assemblers. In fiscal 2003, the Company continued to be adversely effected by the worldwide retrenchment in computer sales. Capital spending on new information technology equipment remained soft in light of the general economic uncertainty. In part, the Company was able to offset this trend by the sale of upgrades to existing equipment. DRAM prices represent approximately 75% of the cost of the Company's final product. For the most part, competitive pressures require the Company to pass through decreases in DRAM prices to customers. As a result of these factors, volume measured as gigabytes shipped declined by approximately 30% and average selling prices declined by approximately 7% from the prior fiscal year. The Company responded to this business climate by reducing its staff, reductions which in the short run adversely affected the Company's earnings. In March of fiscal 2001, the Company acquired certain of the assets of Memory Card Technology A/S ("MCT"), a Danish manufacturer of memory boards for notebooks, desktop computers and other applications. The Company announced a restructuring of its operations in April 2003. As part of the restructuring, the Company closed its Denmark manufacturing operation and ceased production of memory for the PC market. The Company reduced its workforce by approximately 28% which coupled with other operating efficiencies is projected to save approximately $7 million in annual operating costs. During the year, despite substantial losses, the Company had positive cash flow from operating activities and in fact repaid $3.8 million dollars in indebtedness, representing all of its outstanding indebtedness. Dataram was incorporated in New Jersey in 1967 and made its initial public offering in 1968. Its common stock, $1 par value (the "Common Stock") was listed for trading on the American Stock Exchange in 1981. In 2000 the Company changed its listing to the NASDAQ National Market where its stock trades under the symbol "DRAM." The Company's principal executive office is located at 186 Princeton Road (Route 571), West Windsor, New Jersey 08550, its telephone number is (609) 799-0071, its fax is (609) 799-6734 and its website is located at http://www.dataram.com. - 3 - RISK FACTORS WE MAY HAVE TO SUBSTANTIALLY INCREASE OUR WORKING CAPITAL REQUIREMENTS IN THE EVENT OF DRAM ALLOCATIONS. Over the past 20 years, availability of DRAMs has swung back and forth from oversupply to shortage. In times of shortage, Dataram has been forced to invest substantial working capital resources in building and maintaining inventory. At such times Dataram has bought DRAMs in excess of its customers' needs in order to ensure future allocations from DRAM manufacturers. Dataram believes that the market for DRAMs is presently out of balance and there is an oversupply of DRAMS, but there can be no assurance that conditions of shortage may not prevail in the future. In the event of a shortage, Dataram may not be able to obtain sufficient DRAMs to meet customers' needs in the short term, and Dataram may have to invest substantial working capital resources in order to meet long term customer needs. WE COULD SUFFER LOSSES IF DRAM PRICES DECLINE SUBSTANTIALLY. Dataram is often required to maintain substantial inventories during periods of shortage and allocation. During periods of increasing availability of DRAM and rapidly declining prices, Dataram has been forced to write down inventory. At the present time, the market is one of oversupply, and Dataram seeks to maintain a minimum inventory while meeting the needs of customers. But there can be no assurance that Dataram will not suffer losses in the future based upon high inventories and declining DRAM prices. OUR MEMORY PRODUCTS MAY VIOLATE OTHERS' PATENTS. Certain of Dataram's memory products are designed to be used with proprietary computer systems built by various OEM manufacturers. Dataram often has to comply with proprietary memory designs which may be patented, now or at some time in the future. OEMs have, at times, claimed that we have violated their patent rights by adapting our computer memory products to meet the requirements of their systems. It is the policy of Dataram to, in unclear cases, either obtain an opinion of patent counsel prior to marketing, or obtain a license from the patent holder. Dataram is presently licensed by Sun Microsystems and Silicon Graphics to sell memory products for their principal products. However, there can be no assurance that memory designs will not be created in the future which will, in fact, be patented and which patent holders will require the payment of substantial royalties as a condition for Dataram's continued presence in the segment of the market covered by the patent or they may not give us a license. Nor can there be any assurance that Dataram's existing products do not violate one or more existing patents. WE FACE COMPETITION FROM OEMs. Dataram sells its products at a lower price than OEMs. Customers will often pay some premium for the "name brand" product when buying additional memory and OEMs seek to exploit this tendency by having a high profit margin on memory products. However, individual OEMs can change their policy and price memory products competitively. While Dataram believes that with its manufacturing efficiency and low overhead it still would be able to compete favorably with OEMs, in such an event profit margins and earnings would be adversely affected. Also, OEM's can choose to use "free memory" as a promotional device in which case the Company's ability to compete is severely impaired. - 4 - WE MAY LOSE AN IMPORTANT CUSTOMER. During fiscal 2003, no single customer accounted for 10% of the Company's revenue. However, the largest ten customers accounted for approximately 33% of the Company's revenue. There can be no assurance that one or more of these customers will cease or materially decrease their business with the Company in the future and that Dataram's financial performance will not be adversely affected thereby. WE FACE COMPETITION FROM DRAM MANUFACTURERS. DRAM manufacturers not only sell their product as discreet devices, but also as finished memory modules. They primarily sell these modules directly to computer manufacturers and large distributors and as such compete with the Company on a limited basis. There can be no assurance that DRAM manufacturers will not continue to expand their market and customer base. In such a case, they would become a more direct competitor to the Company and the Company's profit margins and earnings could be adversely affected. THE MARKET FOR OUR PRODUCTS MAY NARROW OVER TIME. The principal market of Dataram is the buyers and owners of workstations and servers, classes of machines lying between large mainframe computers and personal computers. The trend has been observed that personal computers are increasing in their power and sophistication and, as a result, are now filling some of the computational needs traditionally filled by workstations. The competition for the supply of after-market memory products in the PC industry is very competitive and to the extent Dataram competes in this market we can be expected to have lower profit margins. There can be no assurance that this trend will not continue in the future, and that Dataram's financial performance will not be adversely affected thereby. WE MAY MAKE UNPROFITABLE ACQUISITIONS. While the Company is not currently engaged in discussions which could lead to an acquisition, the possibility exists that an acquisition will be made at some time in the future. Uncertainty surrounds all acquisitions and it is possible that a particular acquisition may not result in a benefit to shareholders, particularly in the short term. WE MAY BE SUBJECT TO UNKNOWN LIABILITIES ARISING FROM THE ACQUISITION OF MCT'S ASSETS. While the Company purchased assets and assumed only a limited and discrete liability in connection with the MCT transaction, and while the Company believes that it had conducted adequate due diligence, there can be no assurance that the Company will not be held liable for liabilities of MCT which at the present are unknown and unforeseen. The Company believes that it has made reservations for all known risks that could have a material impact upon the Company. A PORTION OF OUR OPERATIONS ARE DESIGNED TO MEET THE NEEDS OF THE VERY COMPETITIVE INTEL PROCESSOR-BASED MOTHERBOARD MARKET. In addition to selling server memory systems, we develop, manufacturer and market a variety of memory products for motherboards that are Intel processor based. Many of these products are sold to OEMs and incorporated into computers and other equipment. This is an intensely competitive market with high volumes but lower margins. WE MAY BE ADVERSELY AFFECTED BY EXCHANGE RATE FLUCTUATIONS. A portion of our accounts receivable and a portion of our expenses are denominated in foreign currencies. These proportions change over time. As a result, the Company's revenues and expenses may be adversely affected, from time to time, by changes in the relationship of the dollar to various foreign currencies on foreign exchange markets. The Company does not currently hedge its foreign currency risks. - 5 - OUR STOCK HAS LIMITED LIQUIDITY. Although the stock of Dataram is publicly traded, it has been observed that this market is "thin." As a result, Dataram's common stock may trade at a discount to what would be its value if the stock enjoyed greater liquidity. WE ARE SUBJECT TO THE NEW JERSEY SHAREHOLDERS PROTECTION ACT. This statute has the effect of prohibiting any "business combination" - a very broadly defined term - with any "interested shareholder" unless the transaction is approved by the Board of Directors at a time before the interested shareholder had acquired a 10% ownership interest. This prohibition of "business combinations" is for five years after the shareholder became an "interested shareholder" and continues after that time period subject to certain exceptions. A practical consequence of this statute is that a hostile acquisition of Dataram is unlikely to occur. As a result, hostile transactions which might be of benefit to shareholders may not occur because of this statute. (b) Financial Information about Industry Segments. The Company operates in one industry segment. (c) Narrative Description of Business. Dataram develops, manufactures and markets a variety of memory products for use with workstations and enterprise servers, including those sold by Sun, HP (including Compaq), SGI, IBM and Dell. The Company sells memory products both for new machines and for the installed base of these classes of computers at prices less than the computer manufacturer. The Company also develops, manufactures and markets memory boards for Intel processor based motherboards, principally based on sales to OEMs and distributors. Industry Background The market for the Company's memory products is principally buyers and owners of workstations and enterprise servers. These systems have been important to the growth of the Internet. A workstation, like a PC, is designed to provide computer resources to individual users. A workstation differs from a PC by providing substantially greater computational performance, input/output capability and graphic display. Workstations are nearly always networked. As a result of this networking capability, a new class of computer system, the enterprise server, has emerged. Enterprise servers are computer systems on a network which provide dedicated functions accessible by all workstations and other systems on the same network. Examples of different types of servers in use today are: file servers, communication servers, computation servers, database servers, print servers and storage servers. Dataram designs, produces and markets memory products for workstations and servers sold by Sun, HP (including Compaq), Silicon Graphics, IBM and Dell. Additionally, the Company produces and markets memory for Intel processor based motherboards for use by OEMs and channel assemblers. The "open system" philosophy espoused by most of the general computer industry has played a part in enlarging the market for third party vendors. Under the "open system" philosophy, manufacturers adhere to industry design standards, enabling users to "mix and match" hardware and software products from a variety of vendors so that a system can be configured for the user's application in the most economical manner with reduced concern for compatibility and support. Memory products for workstations and servers have become commodities with substantial competition from OEMs and a number of independent memory manufacture suppliers. - 6 - Business Strategy Market Growth Generally, growth in the memory market closely follows both the growth in unit shipments of system vendors and the growth of memory requirements per system. While the past two fiscal years have resulted in negative growth as measured by revenue for memory, management estimates that long-term growth measured by revenue in the market for its products will resume as demand for information technology products recovers. Market Penetration In addition to the growth in the market, management estimates that sales by system vendors constitute 80% of the memory market. Thus, there is an opportunity for growth through penetration of the system vendor's market share. To successfully compete with system vendors, Dataram must continue to respond to customers' needs in a short time frame. To support customers' needs, the Company has a dedicated and highly automated manufacturing facility that is designed to produce and ship customer orders within twenty- four hours or less. Products The Company's principal business is the development, manufacture and marketing of memory products which can be added to enterprise servers and workstations to upgrade or expand the capabilities of such systems. When vendors produce computer systems adhering to open system industry standards, the development effort for Dataram and other independent memory manufacturers is straightforward and allows for the use of many standard components. Distribution Channels Dataram sells its memory products to OEM's, distributors, value-added resellers and larger end-users. The Company has sales offices in New Jersey, Denmark, The United Kingdom, Germany and Japan. Product Warranty and Service Management believes that the Company's reputation for the reliability of its memory products and the confidence of prospective purchasers in Dataram's ability to provide service over the life of the product are important factors in making sales. As a consequence, the Company adopted many years ago a Lifetime Warranty program for its memory products. The economic useful life of the computer systems to which Dataram's memory equipment is attached is almost always substantially less than the physical useful life of the equipment itself. Thus, memory systems are unlikely to "wear out." The Company's experience is that less than 1% of all the products it sells are returned under the Lifetime Warranty. - 7 - Working Capital Requirements The memory product business is heavily dependent upon the price of DRAMs. Producers of DRAM are required to invest substantial capital resources to produce their end product. Their marginal cost is low as a percentage of the total cost of the product. As a result, the world-wide market for DRAMs has swung in the past from period to period from oversupply to shortage. During periods of substantial oversupply, the Company has seen falling prices for DRAMs and wide availability of DRAMs allowing the Company to have minimum inventories to meet the needs of customers. During periods of shortage, DRAMs are allocated and the Company must invest heavily in inventory in order to continue to be assured of the supply of DRAMs from vendors. During a period of shortage, the Company must maintain larger cash reserves than it would in a period of oversupply. At the present time, the market for DRAMs is one of oversupply. At April 30, 2003, the Company had cash and cash equivalents of $2.5 million and had no debt. Memory Product Complexity DRAM memory products for workstations and servers had, for many years, been undergoing a process of simplification with a corresponding decline in profit margins as competitors' entry into the market became easier. However, recent trends in the market have seen the development by OEMs of more complex memory designs. This has enabled Dataram to increase its margins somewhat. Memory products for PC desktop and notebook computers are much simpler, and gross margins are lower and market competition is more intense. Engineering and Development The Company's ability to compete successfully depends upon its ability to identify new memory needs of its customers. To achieve this goal, the Company's engineering group continually monitors computer system vendors' new product developments, and the Company evaluates and tests major components as they become available. Dataram designs prototype memory products and subjects them to reliability testing procedures. During its fiscal year ended April 30, 2003, the Company incurred costs of $1,539,000 for engineering and product development compared to $1,839,000 in fiscal 2002 and $1,673,000 in fiscal 2001. Raw Materials The Company purchases standard dynamic random access memory ("DRAM") chips. The costs of such chips is approximately 75% of the total cost of memory products. Fluctuations in the availability or prices of memory chips can have a significant impact on the Company's profit. Dataram has created close relationships with a number of primary suppliers while qualifying and developing alternate sources as a back up. The qualification program consists of extensive evaluation of process capabilities, on-time delivery performance and financial stability of each supplier. Alternative sources are qualified to normally assure supply in the event of a problem with the primary source or to handle surges in demand. Manufacturing The Company assembles its memory boards at its manufacturing facility in Bucks County, Pennsylvania. Backlog The Company expects that all backlog on hand will be filled during the current fiscal year. The Company believes that backlog is generally not material to its business since the Company usually ships its memory products on the same day an order is received. - 8 - Seasonality The Company's business can be seasonal with December and January being the slowest months. Competition The intensely competitive computer industry is characterized by rapid technological change and constant pricing pressures. These characteristics are equally applicable to the third party memory market, where pricing is a major consideration in the buying decision. Dataram competes with Sun, HP (including Compaq), Silicon Graphics, IBM and Dell, as well as with a number of third party memory suppliers, including Kingston Technology. Although many of Dataram's competitors possess significantly greater financial, marketing and technological resources, the Company competes favorably based on the buying criteria of price/performance, time-to-market, product quality, reliability, service/support, breadth of product line and compatibility with computer system vendors' technology. Dataram's objective is to continue to remain strong in all of these areas with particular focus on price/performance and time-to-market, which management believes are two of the more important criteria in the selection of third party memory product suppliers. Market research and analysis capability by the Company is necessary to ensure timely information on new products and technologies coming from the computer system vendors and from the overall memory market. Dataram must continue low cost, high volume production while remaining flexible to satisfy the time-to-market requirement. The Company believes that its 36-year reputation for providing quality products is an important factor to its customers when making a purchase decision. To strengthen this reputation, the Company has a comprehensive lifetime warranty and service program which provides customers with added confidence in buying from Dataram. See "Business-Product Warranty and Service." Patents, Trademarks and Licenses The Company believes that its success depends primarily upon the price and performance of its products rather than on ownership of copyrights or patents. Sale of memory products for systems that use proprietary memory design can from time to time give rise to claims of copyright or patent infringement. In most such instances the Company has either obtained the opinion of patent counsel that its products do not violate such patents or copyrights or obtained a license from the original equipment manufacturer. To the best of the Company's knowledge and belief, no Company product infringes any valid copyright or patent. However, because of rapid technological development in the computer industry with concurrent extensive patent coverage and the rapid rate of issuance of new patents, questions of infringement may continue to arise in the future. If such patents or copyrights are perfected in the future, the Company believes, based upon industry practice, that any necessary licenses would be obtainable upon the payment of reasonable royalties. Employees As of April 30, 2003, the Company had 178 full-time employees; however at that date the Company was in the process of reducing staff. As of July 1, 2003 the Company had 134 full time employees. The Company believes it has satisfactory relationships with its employees. None of the Company's employees are covered by a collective bargaining agreement. - 9 - Environment Compliance with federal, state and local provisions which have been enacted or adopted to regulate the protection of the environment does not have a material effect upon the capital expenditures, earnings and competitive position of the Company. The Company does not expect to make any material expenditures for environmental control facilities in either the current fiscal year (fiscal 2004) or the succeeding fiscal year (fiscal 2005). (d) Financial Information about Foreign and Domestic Operations and Export Sales. REVENUES (000's) Export Fiscal U.S. Europe Other Consolidated 2003 29,495 13,180 10,854 53,529 2002 39,296 27,131 14,763 81,190 2001 93,557 24,273 12,747 130,577 PERCENTAGES Export Fiscal U.S. Europe Other Consolidated 2003 55.1% 24.6% 20.0% 100.0% 2002 48.4% 33.4% 18.2% 100.0% 2001 71.6% 18.6% 9.8% 100.0% The Company's acquisition of MCT's assets occurred in March of fiscal 2001. This resulted in significantly more of Dataram's revenue in fiscal 2002 and 2003 arising from sources outside of the United States than in prior years. Item 2. Properties The Company occupies approximately 24,000 square feet of space for administrative, sales, research and development and manufacturing support in West Windsor Township, New Jersey under a lease expiring on June 30, 2006. The Company leases a 32,000 square foot assembly plant in Bucks County, Pennsylvania. The lease expires on January 31, 2006 and the Company has a two-year renewal option. The Company also leases marketing facilities in The United Kingdom, Denmark, Germany, and Japan. The Company's subsidiary, Dataram International ApS, leases a 90,000 square foot facility in Aarhus, Denmark. The lease was scheduled to expire on July 1, 2009. On July 10, 2003, the Company entered into an early termination agreement of the lease with the landlord and all costs associated with the early termination have been accrued as of April 30, 2003. On September 29, 1980, the Company purchased approximately 81 acres of undeveloped property in West Windsor Township, New Jersey. The purchase price of $875,000 was paid in cash. The Company has entered into a contract to sell this property for $3,000,000. Closing of the sale is subject to several material contingencies and no assurance can be given that this sale will, in fact, close. Item 3. Legal Proceedings Lemelson Medical, Education & Research Foundation, Limited Partnership vs. Dataram et al., United States District Court for the District of Arizona; Docket No. CV-01-1440-PHX-HRH. - 10 - This is a patent infringement case in which a holder of certain "Lemelson" patents brought an action in the Federal District Court for the District of Arizona against numerous defendants in the electronics industry, including the Company in November of 2001. Dataram has acknowledged service of the complaint but has not answered the complaint because the Court has stayed its further prosecution pending the results of a similar Nevada case involving the same patents. The case is in its very early stages. The alleged patent infringement does not implicate the Company's products, but rather the machinery that manufactures them, and if the case resumes it is anticipated that the sellers of that machinery would be joined by the Company. Item 4. Submission of Matters to a Vote of Security Holders No matter was submitted to a vote of Security Holders in the fourth quarter of the fiscal year covered by this report. PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters Incorporated by reference herein is the information set forth in the Company's 2003 Annual Report to Security Holders under the caption "Common Stock Information" at page 5. Item 6. Selected Financial Data Incorporated by reference herein is the information set forth in the 2003 Annual Report to Security Holders under the caption "Selected Financial Data" at page 20. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Incorporated by reference herein is the information set forth in the 2003 Annual Report to Security Holders under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" at page 2 through page 5. Item 7A. Quantitative and Qualitative Disclosures About Market Risk Incorporated by reference herein is the information set forth in the 2003 Annual Report to Security Holders under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" at page 5. - 11 - Item 8. Financial Statements and Supplementary Data Index to Consolidated Financial Statements and Schedule Page in Annual Report* Consolidated Financial Statements: Consolidated Balance Sheets as of April 30, 2003 and 2002. . . 6 Consolidated Statements of Operations - Years ended April 30, 2003, 2002 and 2001 . . . . . . . . . . . . . . 7 Consolidated Statements of Cash Flows - Years ended April 30, 2003, 2002 and 2001 . . . . . . . . 8 Consolidated Statements of Stockholders' Equity and Comprehensive Income (Loss) - Years ended April 30, 2003, 2002 and 2001 . . . . . . . . 9 Notes to Consolidated Financial Statements - April 30, 2003, 2002 and 2001 . . . . . . . . . . . . 10-19 Independent Auditors' Report on Consolidated Financial Statements . . . . . . . . . . . . . . . . .20 Page in Financial Statement Schedule: 10-K Valuation and Qualifying Accounts - Years ended April 30, 2003, 2002 and 2001 . . . . . . . 13 Independent Auditors' Report on Financial Statement Schedule . . . . . . . . . . . . . 14 All other schedules are omitted as the required information is not applicable or because the required information is included in the consolidated financial statements or notes thereto. -------------- *Incorporated herein by reference. - 12 - Schedule II DATARAM CORPORATION AND SUBSIDIARIES Valuation and Qualifying Accounts Years ended April 30, 2003, 2002 and 2001 Additions charged Deduc- Balance at to costs tions Balance beginning and from at close Description of period expenses reserves of period ___________ _________ ________ _________ _________ Year ended April 30, 2003: Allowance for doubtful accounts and sales returns $ 320,000 152,000 152,000* 320,000 Year ended April 30, 2002: Allowance for doubtful accounts and sales returns $ 450,000 (65,000) 65,000* 320,000 Year ended April 30, 2001: Allowance for doubtful accounts and sales returns $ 450,000 163,000 163,000* 450,000 ___________________________ *Represents write-offs and recoveries of accounts receivable.
- 13 - INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders Dataram Corporation: Under date of June 18, 2003, we reported on the consolidated balance sheets of Dataram Corporation and subsidiaries as of April 30, 2003 and 2002, and the related consolidated statements of operations, stockholders' equity and comprehensive income (loss), and cash flows for each of the years in the three-year period ended April 30, 2003, as contained in the April 30, 2003 Annual Report to Security Holders. These consolidated financial statements and our report thereon are incorporated by reference in the annual report on Form 10-K for the year ended April 30, 2003. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related consolidated financial statement schedule as listed in the accompanying index. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statement schedule based on our audits. In our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. As discussed in note 1 to the consolidated financial statements, the Company adopted the provisions of Statement of Financial Accounting Standards No. 141, "Business Combinations" for all business combinations consummated after June 30, 2001, and the provisions of Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" effective May 1, 2001. KPMG LLP KPMG LLP Short Hills, New Jersey June 18, 2003 - 14 - Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure Not Applicable. PART III Item 10. Directors and Executive Officers of the Registrant Incorporated by reference herein is the information set forth in the Definitive Proxy Statement under the captions "Executive Officers of the Company," "Nominees for Director" and "Section 16 Compliance." Item 11. Executive Compensation Incorporated by reference herein is the information set forth in the Definitive Proxy Statement under the caption "Executive Compensation." Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Incorporated by reference herein is the information set forth in the Definitive Proxy Statement under the captions "Security Ownership of Certain Beneficial Owners and Management" and "Equity Plan Compensation Information." Item 13. Certain Relationships and Related Transactions Incorporated by reference herein is the information set forth in the Definitive Proxy Statement under the captions "Executive Compensation" and "Board of Directors." Item 14. Controls and Procedures Dataram's management is responsible for establishing and maintaining adequate internal controls and procedures to permit accurate financial reporting. During the past 90 days, Mr. Tarantino and Mr. Maddocks, in conjunction with the Company's accountants and acting under the supervision of the Audit Committee, reviewed and evaluated these controls. Based upon this evaluation of the controls now in place, management believes that these internal controls and procedures are effective and there are no material weaknesses in those financial controls. There have been no significant changes in these controls since the date of this evaluation. Item 15. Principal Accountant Fees and Services Incorporated by reference herein is the information set forth in the Definitive Proxy Statement under the caption "Principal Accountant Fees and Services." - 15 - PART IV Item 16. Exhibits, Financial Statement Schedule, and Reports on Form 8-K (a) The following documents are filed as part of this report: 1. Financial Statements incorporated by reference into Part II of this Report. 2. Financial Statement Schedule included in Part II of this Report. (b) Reports on Form 8-K: 1. Report filed on April 28, 2003 regarding restructure and closing of Denmark operations. 2. Report filed on June 18, 2003 regarding annual earnings. (c) Exhibits: The Exhibit Index appears on page 20. - 16 - SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DATARAM CORPORATION (Registrant) Date: July 23, 2003 By: ROBERT V. TARANTINO ________________________________ Robert V. Tarantino, President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Company and in the capacities and on the dates indicated. Date: July 23, 2003 By: ROBERT V. TARANTINO ________________________________ Robert V. Tarantino, President Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer) Date: July 21, 2003 By: RICHARD HOLZMAN ________________________________ Richard Holzman, Director Date: July 21, 2003 By: THOMAS A. MAJEWSKI ________________________________ Thomas A. Majewski, Director Date: July 17, 2003 By: BERNARD L. RILEY ________________________________ Bernard L. Riley, Director Date: July 17, 2003 By: ROGER C. CADY ________________________________ Roger C. Cady, Director Date: July 23, 2003 By: MARK E. MADDOCKS ________________________________ Mark E. Maddocks Vice President, Finance (Principal Financial & Accounting Officer) - 17 - CERTIFICATIONS I, Robert V. Tarantino, certify that: 1. I have reviewed this annual report on Form 10-K of Dataram Corporation; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: July 23, 2003 ROBERT V. TARANTINO ______________________________ Robert V. Tarantino, President Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer) - 18 - CERTIFICATIONS I, Mark E. Maddocks, certify that: 1. I have reviewed this annual report on Form 10-K of Dataram Corporation; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: July 23, 2003 MARK E. MADDOCKS ______________________________ Mark E. Maddocks Vice President, Finance (Principal Financial & Accounting Officer) - 19 - EXHIBIT INDEX 3(a) Restated Certificate of Incorporation. Incorporated by reference from Exhibits to a Quarterly Report on Form 10-Q for the quarter ended July 31, 2000 and filed on September 13, 2000. 3(b) By-Laws. Incorporated by reference from Exhibits to an Annual Report on Form 10-K for the year ended April 30, 2003 and filed on July 26, 2003. 10(a) 2001 Stock Option Plan. Incorporated by reference from Exhibits to a Definitive Proxy Statement for an Annual Meeting of Shareholders held on September 12, 2001 and filed on July 26, 2001. 10(b) Savings and Investment Retirement Plan, January 1, 2001 Restatement. Incorporated by reference from Exhibits to an Annual Report on Form 10-K for the year ended April 30, 2003 and filed on July 26, 2003. 10(c) West Windsor, New Jersey Lease dated September 19, 2000. Incorporated by reference from Exhibits to an Annual Report on Form 10-K for the year ended April 30, 2001 and filed on July 26, 2001. 10(d) Bucks County, Pennsylvania Lease dated January 31, 1995. Incorporated by reference from Exhibits to an Annual Report on Form 10-K for the year ended April 30, 2003 and filed on July 26, 2003. 10(e) Aarhus, Denmark Lease dated July 1, 1997. Incorporated by reference from Exhibits to an Annual Report on Form 10-K for the year ended April 30, 2003 and filed on July 26, 2003. 10(f) Employment Agreement of Robert V. Tarantino dated May 1, 1997. Incorporated by reference from Exhibits to an Annual Report on Form 10-K for the year ended April 30, 2003 and filed on July 26, 2003. 10(g) Service Agreement of Lars Marcher. Incorporated by reference from Exhibits to an Annual Report on Form 10-K for the year ended April 30, 2003 and filed on July 26, 2003. 13(a) 2003 Annual Report to Shareholders 24(a) KPMG LLP Independent Accountants' Consent for S-8 Registration No. 33-56282 99(a) Section 906 Certification of Robert V. Tarantino (Furnished not Filed) 99(b) Section 906 Certification of Mark Maddocks (Furnished not Filed) - 20 -