UNITED STATES 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, 2007. [ ] 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: Title of each class Name of exchange on which registered Common Stock, $1.00 Par Value NASDAQ Stock Market Securities registered pursuant to section 12(g) of the Act: NONE Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X] Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X] NOTE - Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections. 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 (Section 229.405 of this chapter) 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. Yes [X] No [ ] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X] Indicate by check mark whether the registrant is a shell-company (as defined in Rule 12b-2 of the Act). Yes [ ] No [X] The aggregate market value of the Common Stock held by non-affiliates of the registrant calculated on the basis of the closing price as of the last business day of the registrant's most recently completed second quarter, October 31, 2006, was $35,699,100. The number of shares of Common Stock outstanding on July 16, 2007 was 8,753,133 shares. DOCUMENTS INCORPORATED BY REFERENCE: (1) Definitive Proxy Statement for Annual Meeting of Shareholders to be held on September 27, 2007 (the "Definitive Proxy Statement") to be filed within 120 days of the end of the fiscal year. (2) 2007 Annual Report to Security Holders 1 DATARAM CORPORATION INDEX Part I Page Item 1. Business . . . . . . . . . . . . . . . . . . . . 3 Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . 8 Item 1B. Unresolved Staff Comments. . . . . . . . . . . . 10 Item 2. Properties . . . . . . . . . . . . . . . . . . . 10 Item 3. Legal Proceedings . . . . . . . . . . . . . . . 11 Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . 11 Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. . . . . . 11 Item 6. Selected Financial Data. . . . . . . . . . . . . 11 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation . . 11 Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . 11 Item 8. Financial Statements and Supplementary Data. . . 12 Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . 16 Item 9A. Controls and Procedures . . . . . . . . . . . . 16 Item 9A(T)Controls and Procedures . . . . . . . . . . . . 16 Item 9B. Other Information . . . . . . . . . . . . . . . 16 Part III Item 10. Directors, Executive Officers, and Corporate Governance . . . . . . . . . . . . . . 17 Item 11. Executive Compensation . . . . . . . . . . . . . 17 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. . . . . . . . . . . 17 Item 13. Certain Relationships and Related Transactions, and Director Independence. . . . . 17 Item 14. Principal Accounting Fees and Services . . . . . 17 Part IV Item 15. Exhibits, Financial Statement Schedules . . . . 17 Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . 18 2 PART I Item 1. BUSINESS (a) General development of business. Dataram Corporation (the "Company") is a developer, manufacturer and marketer of large capacity memory products primarily used in high performance network servers and workstations. The Company provides customized memory solutions for original equipment manufacturers ("OEMs") and compatible memory for computers manufactured by Hewlett-Packard Company ("HP"), Sun Microsystems, Inc. ("Sun"), International Business Machines Corporation ("IBM"), Silicon Graphics, Inc. ("SGI"), and Dell Corporation ("Dell"). The Company also manufactures a line of memory products for Intel and AMD motherboard based servers for sale to OEMs and channel assemblers. The Company's memory products are sold worldwide to OEMs, distributors, value-added resellers and end-users. The Company has a manufacturing facility in the United States with sales offices in the United States, Europe and Japan. The Company 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 chips ("DRAMs"). The purchase cost of DRAMs typically represents approximately 75% of the total cost of a finished memory board. Consequently, average selling prices for computer memory boards are significantly dependent on the pricing and availability of DRAMs. The Company's revenues for fiscal 2007 were $38.4 million compared to $41.8 million in fiscal 2006. The decline in revenue came primarily from reduced sales to one OEM customer, that had been experiencing financial difficulties. Revenues derived from sales to this customer were $7,000 in fiscal 2007 compared to $3.0 million in fiscal 2006. Fiscal 2007 sales to this customer occurred primarily in the Company's first fiscal quarter ended July 31, 2006. Revenues were also adversely impacted by a decline in average selling prices. The Company's average selling price per gigabyte declined by approximately 25% in fiscal 2007 compared to the prior year. However, the decrease in average selling price was offset by higher volume, measured as gigabytes shipped. The Company's gross margins in fiscal 2007 were 23 percent of revenue. This gross margin level is considered by management to be normal. Management expects that cost of sales as a percentage of revenue will generally be approximately 75%, which is in line with its historical norm. Fluctuations either up or down of 3% or less in any given period are not unusual and can result from many factors, some of which are a rapid change in the price of DRAMs, a change in product mix possibly resulting from a large order or series of orders for a particular product or a change in customer mix. The Company 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 (now the NASDAQ Stock 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. Proxy Statements, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and all amendments thereto are available on this website free of charge. 3 (b) Financial information about segments. The Company operates in one industry segment. (c) Narrative description of business. Industry Background The market for the Company's memory products is principally the buyers and owners of workstations and network servers and the OEMs that manufacture workstations, servers and other products that use embedded computers. 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 of both workstations and PCs, the network server has grown in importance. Network 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. The Company designs, produces and markets memory products for workstations and computer servers sold by Sun, HP, IBM, SGI and Dell. Additionally, the Company produces and markets memory for Intel and AMD 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. 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. Management estimates that long-term growth trends measured by revenue in the market for its products is increasing. Management also estimates that in the compatibles market, sales by system vendors constitute 80% of the memory market. To successfully compete with system vendors, the Company 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. The OEM market is also an important part of the Company's business. Management believes that increasingly cost conscious OEMs are looking to independent memory suppliers such as the Company for the low-cost supply of memory modules. 4 Products The Company's principal business is the development, manufacture and marketing of memory modules which can be added to various 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 the Company and other independent memory manufacturers is straightforward and allows for the use of many standard components. Distribution The Company sells its memory products to OEM's, distributors, value- added resellers and larger end-users. The Company has sales offices in New Jersey, Denmark, France, 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 the Company'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 the Company's memory modules are attached is almost always substantially less than the physical useful life of the Company's memory products. Thus, memory products 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. 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. Thus, the Company must maintain large cash reserves. At the present time, the market for DRAMs is one of oversupply. At April 30, 2007, the Company had cash and cash equivalents of $14.1 million and had no debt. Memory Product Complexity DRAM memory products for workstations and enterprise servers had, for many years, been undergoing a process of simplification with a corresponding decline in profit margins as competitors' entry into the market became easier. However, recent trends in the market have seen the development by OEMs of more complex memory designs. This has enabled the Company to increase its margins somewhat. Engineering and Development The Company's ability to compete successfully depends upon its ability to identify new memory needs of its customers. To achieve this goal, the Company's engineering group continually monitors computer system vendors' new product developments, and the Company evaluates and tests major components as 5 they become available. The Company designs prototype memory modules and subjects them to reliability testing procedures. During its fiscal year ended April 30, 2007, the Company incurred costs of $1,243,000 for engineering and product development, $1,136,000 in fiscal 2006 and $1,300,000 in fiscal 2005. Raw Materials The Company purchases standard DRAMs. The cost of such chips is approximately 75% of the total cost of memory products. Fluctuations in the availability or prices of DRAMs can have a significant impact on the Company's profit. The Company 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 and most in a matter of days. The Company's backlog at April 30, 2007 was $579,000, at April 30, 2006 it was $964,000, and at April 30, 2005 it was $3,735,000. 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. The Company competes with HP, Sun, IBM, SGI, and Dell, as well as with a number of third party memory suppliers, including Kingston Technology. Although many of the Company'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. The Company'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. The Company must continue low cost, high volume production while remaining flexible to satisfy the time-to-market requirement. 6 The Company believes that its 40-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 program which provides customers with added confidence in buying from the Company. 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, 2007, the Company had 95 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. Environmental 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 2008) or the succeeding fiscal year (fiscal 2009). 7 (d) Financial information about geographic area sales. REVENUES (000's) Export Fiscal U.S. Europe Other* Consolidated ------ ----- ------ ------ ------------ 2007 $27,583 6,484 4,337 $38,404 2006 $29,321 9,151 3,323 $41,795 2005 $50,210 8,716 6,758 $65,684 PERCENTAGES Export Fiscal U.S. Europe Other* Consolidated ------ ----- ------ ------ ------------ 2007 71.8% 16.9% 11.3% 100.0% 2006 70.1% 21.9% 8.0% 100.0% 2005 76.4% 13.3% 10.3% 100.0% *Principally Asia Pacific Region Item 1A. 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, we have been forced to invest substantial working capital resources in building and maintaining inventory. At such times we have bought DRAMs in excess of our customers' needs in order to ensure future allocations from DRAM manufacturers. We believe 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, we may not be able to obtain sufficient DRAMs to meet customers' needs in the short term, and we 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. We are at times required to maintain substantial inventories during periods of shortage and allocation. Thereafter, during periods of increasing availability of DRAMs and rapidly declining prices, we have been forced to write down inventory. At the present time, the market is one of oversupply, and we seek to maintain a minimum inventory while meeting the needs of customers. But there can be no assurance that we will not suffer losses in the future based upon high inventories and declining DRAM prices. OUR MEMORY PRODUCTS MAY VIOLATE OTHERS' PATENTS. Certain of our memory products are designed to be used with proprietary computer systems built by various OEM manufacturers. We often have to comply with the OEM's 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 our policy to, in unclear cases, either obtain an opinion of patent counsel prior to marketing, or obtain a license from the patent holder. We are presently licensed by Sun Microsystems and Silicon Graphics to sell memory products for certain of their 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 our continued 8 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 our existing products do not violate one or more existing patents. WE MAY LOSE AN IMPORTANT CUSTOMER. During fiscal 2007, the largest ten customers accounted for approximately 41% of the Company's revenues, with no one customer accounting for 10% or more of the Company's revenues. 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 our financial performance will not be adversely affected thereby. WE MAY DISCONTINUE PAYING DIVIDENDS. In the most recent quarter we paid a dividend of $0.06 a share and it is our present intention to continue to pay that dividend each quarter into the future. However, our ability to continue paying dividends in this or any other amount is dependent upon our continued ability to generate profits and positive cash flow. While a failure to produce profits and positive cash flow in any particular quarter may not result in the Company discontinuing paying dividends, a succession of small quarterly earnings and cash flows could result in the Board of Directors taking that step. Our statement of intention that we will continue to pay dividends each quarter is not a guarantee. SALES DIRECTLY TO OEM'S CAN MAKE OUR REVENUES, EARNINGS, BACKLOG AND INVENTORY LEVELS UNEVEN. Revenue and earnings from OEM sales may become uneven as order sizes are typically large and often a completed order cannot be shipped until released by the OEM, e.g., to meet a "just in time" inventory requirement. This may occur at or near the end of an accounting period. In such case, revenues and earnings could decline for the period and inventory and backlog could increase. WE FACE COMPETITION FROM OEMs. In the compatibles market we sell our 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 we believe that with our manufacturing efficiency and low overhead we still would be able to compete favorably with OEMs, in such an event profit margins and earnings would be adversely affected. Also, OEMs can choose to use "free memory" as a promotional device in which case our ability to compete is severely impaired. 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 OEMs and large distributors and as such compete with us. There can be no assurance that DRAM manufacturers will not expand their market and customer base, and our profit margins and earnings could be adversely affected. THE MARKET FOR OUR PRODUCTS MAY NARROW OVER TIME. The principal market for our memory products is the manufacturers, buyers and owners of workstations and enterprise servers, classes of machines lying between large mainframe computers and personal computers. 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 we compete in this market we can be expected to have lower profit margins. There can be no assurance that this trend will not continue in the future, and that our financial performance will not be adversely affected. 9 A PORTION OF OUR OPERATIONS ARE DESIGNED TO MEET THE NEEDS OF THE VERY COMPETITIVE INTEL AND AMD 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 or AMD 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 MAKE UNPROFITABLE ACQUISITIONS. While we are 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 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. OUR STOCK HAS LIMITED LIQUIDITY. Although our stock is publicly traded, it has been observed that this market is "thin." As a result, the 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 our company is unlikely to occur and hostile transactions which might be of benefit to our shareholders are unlikely to occur. Item 1B. UNRESOLVED STAFF COMMENTS Not applicable. Item 2. PROPERTIES The Company occupies 15,200 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, 2011. The Company leases 32,000 square feet of assembly plant and office space in Bucks County, Pennsylvania. The lease expires on January 31, 2011. In the event the Lessor enters into a bona fide agreement for sale of the premises, the Lessor can terminate this lease on two (2) years notice. The Company also leases marketing facilities in the United Kingdom, Denmark, Germany, and Japan. 10 Item 3. LEGAL PROCEEDINGS None. 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, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Incorporated by reference herein is the information set forth in the Company's 2007 Annual Report to Security Holders under the caption "Common Stock Information" at page 5 and the information from the Definitive Proxy Statement under the caption "Equity Plan Compensation Information." No shares were sold other than pursuant to a registered offering during fiscal 2007. In the fourth quarter of fiscal 2007, the Company purchased no shares of its common stock. Item 6. SELECTED FINANCIAL DATA Incorporated by reference herein is the information set forth in the 2007 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 OPERATION Incorporated by reference herein is the information set forth in the 2007 Annual Report to Security Holders under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operation" 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 2007 Annual Report to Security Holders under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operation" 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, 2007 and 2006. . . 6 Consolidated Statements of Earnings - Years ended April 30, 2007, 2006 and 2005 . . . . . . . . . . . . . . 7 Consolidated Statements of Cash Flows - Years ended April 30, 2007, 2006 and 2005 . . . . . . . . 8 Consolidated Statements of Stockholders' Equity - Years ended April 30, 2007, 2006 and 2005 . . . . . . . . 9 Notes to Consolidated Financial Statements - Years ended April 30, 2007, 2006 and 2005 . . . . . . . . 10-18 Reports of Independent Registered Public Accounting Firms on Consolidated Financial Statements. . . . . . . . 19 Financial Statement Schedule: Valuation and Qualifying Accounts - Years ended April 30, 2007, 2006 and 2005 . . . . . . . . 13 Reports of Independent Registered Public Accounting Firms on Financial Statement Schedule . . . . . . . . . . 14-15 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 <TABLE> Schedule II DATARAM CORPORATION AND SUBSIDIARIES Valuation and Qualifying Accounts Years ended April 30, 2007, 2006 and 2005 Additions charged Deduc- Balance at to costs tions Balance beginning and from at close Description of period expenses reserves of period ___________ _________ ________ _________ _________ <S> <C> <C> <C> <C> Year ended April 30, 2007: Allowance for doubtful accounts $ 60,000 40,000 30,000* 70,000 Allowance for sales returns $ 240,000 393,000 403,000 230,000 Year ended April 30, 2006: Allowance for doubtful accounts $ 75,000 (92,000) (77,000)* 60,000 Allowance for sales returns $ 250,000 678,000 688,000 240,000 Year ended April 30, 2005: Allowance for doubtful accounts $ 100,000 8,000 33,000* 75,000 Allowance for sales returns $ 220,000 843,000 813,000 250,000 *Represents write-offs and recoveries of accounts receivable. </TABLE> 13 REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS The Board of Directors and Stockholders Dataram Corporation: Under date of July 3, 2007, we reported on the consolidated balance sheets of Dataram Corporation and Subsidiaries as of April 30, 2007 and 2006, and the related consolidated statements of earnings, stockholders' equity and cash flows for the years then ended, as contained in the April 30, 2007 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, 2007. 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 at Item 8. 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 referred to above, 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. /s/ J.H. COHN LLP J.H. Cohn LLP Lawrenceville, New Jersey July 3, 2007 14 The Board of Directors and Stockholders Dataram Corporation: Under date of July 8, 2005, we reported on the consolidated statements of earnings, stockholders' equity and cash flows of Dataram Corporation and subsidiaries for the year ended April 30, 2005, as contained in the April 30, 2007 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, 2007. In connection with our audit of the aforementioned consolidated financial statements, we also audited the related consolidated financial statement schedule for the year ended April 30, 2005 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 audit. 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. /s/ KPMG LLP Short Hills, New Jersey July 8, 2005 15 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE On October 6, 2005, Dataram Corporation ("the Company") engaged J.H. Cohn LLP as its independent registered public accounting firm to perform the Company's annual audit for its fiscal year ending April 30, 2006, and review of the Company's interim quarterly financial statements. The Company had previously engaged KPMG LLP as its principal accountants. On October 6, 2005 the Company dismissed KPMG LLP as its principal accountants. The decision to dismiss KPMG LLP and engage J.H. Cohn LLP was made by the Audit Committee of the Board of Directors. In connection with the audits of the two fiscal years ended April 30, 2005 and 2004, and the subsequent interim period through October 6, 2005, there were no: (1)disagreements with KPMG LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements if not resolved to their satisfaction would have caused them to make reference in connection with their opinion to the subject matter of the disagreement or (2) reportable events as described by Item 304(a)(1)(v) of Regulation S-K. The audit reports of KPMG LLP on the consolidated financial statements of the Company and subsidiaries as of and for the years ended April 30, 2005 and 2004 did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles. Item 9A. CONTROLS AND PROCEDURES The Company's management acting under the supervision of the Audit Committee is responsible for establishing and maintaining adequate internal controls and procedures to permit accurate financial reporting. Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(e) 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. There were no changes in our internal control over financial reporting during the quarter ended April 30, 2007 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. This annual report does not include a report of management's assessment regarding internal control over financial reporting or an attestation report of the Company's registered public accounting firm due to a transition period established by the Securities and Exchange Commission for non-accelerated filers. Item 9A(T). Controls and Procedures Not Applicable. Item 9B. OTHER INFORMATION None. 16 PART III Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 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." The Company's "Code of Ethics", within the meaning of Item 406 of Registered S-K, is posted on the Company's web site at www.dataram.com 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. PRINCIPAL ACCOUNTANT FEES AND SERVICES Incorporated by reference herein is the information set forth in the Definitive Proxy Statement under the caption "Principal Accountant Fees and Services." PART IV Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES 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. 3. The documents identified in the Exhibit Index which appears on page 19. 17 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, 2007 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, 2007 By: ROBERT V. TARANTINO -------------------------------- Robert V. Tarantino, President Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer) Date: July 23, 2007 By: THOMAS A. MAJEWSKI -------------------------------- Thomas A. Majewski, Director Date: July 23, 2007 By: BERNARD L. RILEY -------------------------------- Bernard L. Riley, Director Date: July 23, 2007 By: ROGER C. CADY -------------------------------- Roger C. Cady, Director Date: July 23, 2007 By: ROSE ANN GIORDANO -------------------------------- Rose Ann Giordano, Director Date: July 23, 2007 By: JOHN H. FREEMAN -------------------------------- John H. Freeman, Director Date: July 23, 2007 By: MARK E. MADDOCKS -------------------------------- Mark E. Maddocks Vice President, Finance (Principal Financial & Accounting Officer) 18 EXHIBIT INDEX 3(a) Restated Certificate of Incorporation. Incorporated by reference from Exhibits to a Quarterly Report on Form 10-Q for the quarter ended July 31, 2000 and filed on September 13, 2000. 3(b) By-Laws. Incorporated by reference from Exhibits to an Annual Report on Form 10-K for the year ended April 30, 2003 and filed on July 26, 2003. 4(a) Loan Agreement dated as of June 21, 2004. Incorporated by reference from Exhibits to an Annual Report on Form 10-K for the year ended April 30, 2004 and filed on July 28, 2004. 4(b) Committed Line of Credit Note dated as of June 21, 2005. Incorporated by reference from Exhibits to an Annual Report on Form 10-K for the year ended April 30, 2004 and filed on July 28, 2004. 4(c) Amendment to Loan Documents Dated as of April 4, 2005. Incorporated by reference from Exhibits to an Annual Report on Form 10-K for the year ended April 30, 2005 and filed on July 28, 2005. 4(d) Amendment to Loan Agreement dated as of June 20, 2006. Incorporated by reference from Exhibits to an Annual Report on Form 8-K filed on July 7, 2006. 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) Addendum "D" to West Windsor, New Jersey Lease dated February 13, 2006. Incorporated by reference from Exhibits to a Current Report on Form 8-K filed on February 14, 2006. 10(e) Bucks County, Pennsylvania Lease dated January 11, 2006. Incorporated by reference from Exhibits to a Current Report on Form 8-K filed on January 26, 2006. 10(f) Employment Agreement of Robert V. Tarantino dated as of February 1, 2005.* Incorporated by reference from Exhibits to an Annual Report on Form 10-K for the year ended April 30, 2005 and filed on July 28, 2005. 10(g) Employment Agreement of Jeffrey H. Duncan dated as of February 1, 2005.* Incorporated by reference from Exhibits to an Annual Report on Form 10-K for the year ended April 30, 2005 and filed on July 28, 2005. 10(h) Employment Agreement of Mark E. Maddocks dated as of February 1, 2005.* Incorporated by reference from Exhibits to an Annual Report on Form 10-K for the year ended April 30, 2005 and filed July 28, 2005. 19 13(a) 2007 Annual Report to Shareholders 14(a) Code of Ethics. Incorporated by reference from Exhibits to a Current Report on Form 8-K filed on June 30, 2005. 23(a) Consent of KPMG LLP, Independent Registered Public Accounting Firm. 23(b) Consent of J.H. Cohn LLP, Independent Registered Public Accounting Firm. 31(a) Rule 13a-14(a) Certification of Robert V. Tarantino 31(b) Rule 13a-14(a) Certification of Mark E. Maddocks 32(a) Section 1350 Certification of Robert V. Tarantino (Furnished not Filed) 32(b) Section 1350 Certification of Mark E. Maddocks (Furnished not Filed) *Management Contract or Compensatory Plan or Arrangement 20