1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One) FORM 10-K
(Amendment No. 1)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended April 30, 1997.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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:
Title of each class Name of each exchange on which registered
Common Stock, $1.00 Par Value American Stock Exchange
Securities registered pursuant to section 12(g) of the Act: None
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. [ ]
The aggregate market value of the Common Stock held by non-affiliates of
the registrant on July 23, 1997 was $27,953,272.
The number of shares of Common Stock outstanding on July 25, 1997:
3,050,405 shares.
DOCUMENTS INCORPORATED BY REFERENCE:
(1) Definitive Proxy Statement for Annual Meeting of Shareholders to be
held on September 10, 1997 (the "Definitive Proxy Statement") to be filed
within 120 days of the end of the fiscal year.
(2) 1997 Annual Report.
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DATARAM CORPORATION
INDEX
Part I Page
Item 1. Business . . . . . . . . . . . . . . . . . . . . 3
Item 2. Properties . . . . . . . . . . . . . . . . . . . 8
Item 3. Legal Proceedings . . . . . . . . . . . . . . . 9
Item 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . . . . 9
Part II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters. . . . . . . . . 9
Item 6. Selected Financial Data. . . . . . . . . . . . . 9
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations. .10
Item 8. Financial Statements and Supplementary Data. . .10
Item 9. Changes In and Disagreements with Accountants
on Accounting and Financial Disclosure . . . . .13
Part III
Item 10. Directors and Executive Officers of
the Registrant . . . . . . . . . . . . . . . . .13
Item 11. Executive Compensation . . . . . . . . . . . . .13
Item 12. Security Ownership of Certain
Beneficial Owners and Management . . . . . . . .13
Item 13. Certain Relationships and Related
Transactions . . . . . . . . . . . . . . . . . .13
Part IV
Item 14. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K . . . . . . .14
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . .15
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PART I
Item 1. BUSINESS
(a) General Development of Business.
Dataram develops, manufactures and markets computer add-in
memory products for use with workstations, servers and
minicomputers. The Company's add-in memory products expand the
capacity and extend the economic useful life of the installed
base of computers manufactured by Sun Microsystems, Inc. ("Sun"),
Hewlett-Packard Company ("HP"), Digital Equipment Corporation
("DEC"), Silicon Graphics, Compaq Computer and International
Business Machines Corporation ("IBM") (RS/6000 line). Dataram
products are not intended for use with high end mainframe
computers.
In fiscal 1997 the Company saw a continuing decline in the
price it pays for random access memory ("RAM"), which is the
principal component of the memory boards it sells. As a direct
consequence, the prices for the memory boards the Company sells
also declined. Thus, notwithstanding substantial increases in
units shipped, Company revenues declined. As in 1996, but unlike
prior years, RAM has been available in large quantities from
various manufacturers on a rapid basis. Consequently, the
Company does not need to maintain large inventory levels to
service its customers.
The Company was incorporated in New Jersey in 1967 and made
an initial public offering in 1968. Its Common Stock has been
listed for trading on the American Stock Exchange since 1981.
The Company's principal executive office is located at P.O. Box
7528, Princeton, New Jersey 08543-7528 and its telephone number
is (609) 799-0071, its fax is (609) 936-1689 and its website is
http://www.dataram.com.
(b) Financial Information about Industry Segments.
The Company operates in one industry segment. For
information concerning revenues, net revenues, net earnings, and
identifiable assets, see Note 9 of Notes to Consolidated
Financial Statements, under the heading "Segment Information -
Operations and Assets by Geographic Locations."
(c) Narrative Description of Business.
Dataram develops, manufactures and markets a variety of
add-in memory products for use with workstations and servers,
including those sold by Sun, HP, DEC, Silicon Graphics, Compaq
and the RS/6000 line of workstations sold by IBM. The Company
sells add-in 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's customers are primarily
distributors, value added resellers and larger end-users.
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Industry Background
The market for independently manufactured add-in memory
began in the early 1970's with the introduction of core memory
expansions for DEC computers. During the late 1970's
semiconductor technology emerged as the dominant technology for
use in computer memories, displacing magnetic core memories.
The minicomputer was pioneered by DEC in the late 1960's and
early 1970's as a lower cost, localized system which could be
used to service a small department of a company and provide
independence from centralized mainframes. This decentralized
approach to satisfying computing needs gained immediate
popularity with the engineering and scientific community and
later with the general business community. A large installed
base of minicomputer systems remains in place, although this base
is now declining.
The workstation, like the PC, is designed to provide
computer resources to individual users. The workstation differs
from the PC in providing substantially greater computational
performance, input/output capability and graphic display. An
important use of workstations today is as a host of web sites on
the Internet. As workstation technology has matured, the
capabilities for multiple users per workstation and multiple
workstations networked together have developed. As a result of
this networking capability, a new class of computer system, the
server, has emerged.
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 add-in memory products
to end users of the installed base of workstations and servers
sold by Sun, HP, DEC, Silicon Graphics, Compaq and the RS/6000
line of workstations sold by IBM.
The "open system" philosophy espoused by 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. As a result memory margins are small.
Generally, growth in add-in memory markets closely follows
both the growth in unit shipments of system vendors and the
growth of memory requirements per system.
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Business Strategy
In addition to taking advantage of the growing market for
workstations and servers, Dataram has a two pronged strategy to
increase sales.
Market Penetration
Management estimates that sales by system vendors constitute
75% of the add-in 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 established a
dedicated and highly automated manufacturing facility that is
designed to produce and ship customer orders within twenty four
hours or less.
Geographic Expansion
Approximately 73% of Dataram's fiscal 1997 revenues were
derived from sales in the United States with the remainder
principally in Western Europe, Canada and the Asian Pacific
region. The Company intends to capitalize on the system vendors'
growth of business in Europe and Asia by providing add-in memory
for the systems being sold in these markets.
Products
The Company's principal business is the development,
manufacture and marketing of memory boards and modules which can
be added to workstations and servers 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 add-in memory products in the United
States to distributors, value added resellers and larger
end-users principally through its telesales staff located in
Princeton, New Jersey. The Company also markets its add-in
memory products in Canada, Western Europe and the Asian Pacific
region through a network of independent distributors supported by
marketing offices in the U.K. and Singapore.
Product Warranty and Service
Management believes that the Company's reputation for the
reliability of its add-in 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
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useful life of the computer systems to which Dataram's add-in
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.
Engineering and Development
The Company's ability to compete successfully depends upon
its ability to identify new add-in 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 add-in memory products and
subjects them to reliability testing procedures. During its
fiscal year ended April 30, 1997, the Company incurred costs of
$1,030,000 for engineering and product development compared to
$1,584,000 in fiscal 1996 and $2,484,000 in fiscal 1995.
Manufacturing
The Company purchases standard dynamic random access memory
("DRAM") chips. The costs of such chips is approximately 95% of
the total manufacturing cost of add-in 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 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. The
availability of parts within hours of a manufacturing release is
normally assured by means of blanket procurements for items such
as printed circuit boards and DRAM chips.
The Company assembles its memory boards at a leased site
staffed by an independent contractor. Memory boards are then
rigorously tested in the Company's quality assurance program.
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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 add-in memory products on the same day
an order is received.
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, DEC, Silicon
Graphics, Compaq and IBM, 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 in 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 30 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 add-in memory products for systems which use
proprietary memory design can from time to time give rise to
claims of copyright or patent infringement. In such instances
the Company has obtained the opinion of patent counsel that its
products do not violate such patents or copyrights.
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8
To the best of the Company's knowledge and belief, no
Company product infringes any valid copyright or patent.
However, the Company is presently in litigation on that issue
(See "Legal Proceedings"). 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, 1997, the Company had 60 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.
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 1998) or the succeeding fiscal year (fiscal 1999).
(d) Financial Information about Foreign and Domestic
Operations and Export Sales.
For information regarding each of the past three fiscal
years with respect to net revenues to unaffiliated customers in
the United States and foreign countries, net earnings, and
identifiable assets located in the United States, see Note 9 of
Notes to Consolidated Financial Statements under the heading
"Segment Information - Operations and Assets by Geographic Loca-
tions."
Item 2. Properties
The Company leases approximately 48,050 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, 2001.
The Company leases an assembly plant in Northampton
Township, Pennsylvania. The lease expires on January 31, 2000
but the Company has a one-year renewal option.
The Company also leases one sales office located in
California, a marketing office in England and a marketing office
in Singapore.
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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. This property is approximately five miles from the
Company's current leased facilities. The Company does not expect
to use this property in its business and it is currently for
sale.
Item 3. Legal Proceedings
SUN MICROSYSTEMS, INC. V. DATARAM CORPORATION, United
States District Court for the Northern District of California,
San Jose Division. In August of 1996 the plaintiff filed suit
alleging infringement of five U.S. Patents allegedly infringed by
Dataram in the manufacture of single in-line memory modules
("SIMM's") for use in workstations and servers manufactured by
Sun Microsystems, Inc. The plaintiff seeks both an injunction
and damages. The Company has answered this complaint denying the
infringement as a matter of fact and also alleging the invalidity
of the patents both in light of prior art in the field and for
fraud upon the U.S. Patent Office by the plaintiff. The Company
also has filed counterclaims against the plaintiff alleging among
other matters antitrust violations, intentional interference with
contractual relationships, and product disparagement by the
Plaintiff. The matter is in the discovery stage.
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 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 1997 Annual Report 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 1997 Annual Report under the caption "Selected
Financial Data" at page 16.
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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 1997 Annual Report under the caption "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" at page 3 through page 5.
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, 1997 and 1996. 6
Consolidated Statements of Operations - Years ended
April 30, 1997, 1996 and 1995. . . . . . . . . . . . 7
Consolidated Statements of Cash Flows -
Years ended April 30, 1997, 1996 and 1995. . . . . . 8
Consolidated Statements of Stockholders' Equity -
Years ended April 30, 1997, 1996 and 1995. . . . . . 9
Notes to Consolidated Financial Statements -
April 30, 1997, 1996 and 1995. . . . . . . . . . . . 10
Independent Auditors' Report on Financial Statements. . . 15
Page in
Financial Statement Schedule: 10-K
Valuation and Qualifying Accounts -
Years ended April 30, 1997, 1996 and 1995 . . . . . 11
Independent Auditors' Report on
Financial Statement Schedule . . . . . . . . . . . 12
All other schedules are omitted as the required information
is inapplicable or because the required information is shown in
the financial statements or notes thereto.
- --------------
*Incorporated herein by reference.
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Schedule VIII
DATARAM CORPORATION AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years ended April 30, 1997, 1996 and 1995
Additions
charged Deduc-
Balance at to costs tions Balance
beginning and from at close
Description of period expenses reserves* ofperiod
___________ _________ ________ _________ _________
Year ended April 30, 1995:
Allowance for doubtful accounts $ 630,000 422,207 357,207 695,000
Reserve for inventory obsolescence $ 330,000 -- 30,000 300,000
Year ended April 30, 1996:
Allowance for doubtful accounts $ 695,000 485,000 380,000 800,000
Reserve for inventory obsolescence $ 300,000 - 300,000 --
Year ended April 30, 1997:
Allowance for doubtful accounts $ 800,000 263,000 263,000 800,000
Reserve for inventory obsolescence $ -- -- -- --
___________________________
*Represents write-offs of specifically identifiable amounts.
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INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Dataram Corporation:
Under date of May 22, 1997, we reported on the consolidated
balance sheets of Dataram Corporation and subsidiaries as of
April 30, 1997 and 1996, 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, 1997, as
contained in the 1997 annual report to stockholders. These
consolidated financial statements and our report thereon are
incorporated by reference in the annual report on Form 10-K for
the year 1997. In connection with our audits of the
aforementioned consolidated financial statements, we also have
audited the related 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 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.
KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Princeton, New Jersey
May 22, 1997
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Item 9. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
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
Incorporated by reference herein is the information set
forth in the Definitive Proxy Statement under the caption
"Security Ownership of Certain Beneficial Owners and Management."
Item 13. Certain Relationships and Related Transactions
Incorporated by reference herein is the information set
forth in the Definitive Proxy Statement under the captions
"Executive Compensation" and "Board of Directors."
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PART IV
Item 14. 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:
No reports on Form 8-K were filed during the last
quarter of the year covered by this report.
(c) Exhibits:
The Exhibit Index appears on page 16.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this
report to be signed on its behalf by the undersigned, thereunto
duly authorized.
DATARAM CORPORATION
(Registrant)
Date: July 26, 1997 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 26, 1997 By: ROBERT V. TARANTINO
________________________________
Robert V. Tarantino, President
Chief Executive Officer and
Director (Principal Executive
Officer)
Date: July 26, 1997 By: RICHARD HOLZMAN
________________________________
Richard Holzman, Director
Date: July 26, 1997 By: THOMAS A. MAJEWSKI
________________________________
Thomas A. Majewski,
Director
Date: July 26, 1997 By: BERNARD L. RILEY
________________________________
Bernard L. Riley, Director
Date: July 26, 1997 By: ROGER C. CADY
________________________________
Roger C. Cady, Director
Date: July 26, 1997 By: MARK E. MADDOCKS
________________________________
Mark E. Maddocks
Vice President, Finance
(Principal Financial
and Accounting Officer)
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EXHIBIT INDEX
Page Page Page Page
of this of 1996 of 1995 of 1994
Report 10-K 10-K 10-K
_______ _______ _______ _______
3(a) Certificate of Incorporation 27
3(b) By-Laws 70
4(a) Loan Agreement with New Jersey 23
National Bank
4(b) 1995 Letter Amendments to Loan 93
Agreement
4(c) 1996 Letter Amendments to Loan
Agreement 18
10(a) 1992 Incentive and Non-Statutory 127
Stock Option Plan
10(b) Lease 133
10(c) Savings and Investment Retirement Plan 146
10(d) Employment Agreement of 227
Robert V. Tarantino
11(a) Computation of Earnings per Share 17
13(a) 1996 Annual Report to Shareholders 27
24(a) Independent Auditors' Consent for 18
S-8 Registration No. 33-56282
27 Financial Data Schedule 26
28(a) Earnings Press Release 20
28(b) Stock Repurchase Plan Press Release 24
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