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15th day of each month
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<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><b>Principles of Consolidation</b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0">The consolidated financial
statements have been prepared in conformity with accounting principles generally accepted in the United States of America and include
the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been
eliminated in consolidation.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><b>Use of Estimates</b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, including deferred tax asset valuation allowances and
certain other reserves and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Estimates and assumptions are reviewed periodically and the effects
of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary. Some of
the more significant estimates made by management include the allowance for doubtful accounts and sales returns, the deferred income tax asset valuation allowance and other operating allowances and accruals. Actual results
could differ from those estimates.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><b>(1) Description of Business and Significant
Accounting Policies</b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0">Dataram Corporation (the
“Company”) is a developer, manufacturer and marketer of large capacity memory products primarily used in
high-performance network servers and workstations. The Company provides customized memory solutions for original equipment
manufacturers (OEMs) and compatible memory for leading brands including Dell, HP, IBM and Sun Microsystems. Additionally, the
Company manufactures a line of memory products for Intel and AMD motherboard based servers. The Company has developed and
currently markets a line of high-performance storage caching products.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0">The Company’s memory products are sold
worldwide to OEMs, distributors, value-added resellers and end-users. The Company has one leased manufacturing facility in the
United States with sales offices in the United States, Europe and Japan.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0">The Company is an independent memory manufacturer
specializing in high-capacity memory and competes with several other large independent memory manufacturers as well as the OEMs
mentioned above. The primary raw material used in producing memory boards is dynamic random access memory (DRAM) chips. The purchase
cost of DRAMs is the largest single component of the total cost of a finished memory board. Consequently, average selling prices
for computer memory boards are significantly dependent on the pricing and availability of DRAM chips.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><b>Liquidity and Basis of Presentation </b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0">The information for
the three months ended July 31, 2014 and 2013 is unaudited, but includes all adjustments (consisting of normal recurring adjustments)
which, in the opinion of management, are necessary to state fairly the financial information set forth therein in accordance with
accounting principles generally accepted in the United States of America. The interim results are not necessarily indicative of
results to be expected for the full fiscal year. These financial statements should be read in conjunction with the audited financial
statements for the year ended April 30, 2014 included in the Company’s 2014 Annual Report on Form 10-K filed with the Securities
and Exchange Commission. The April 30, 2014 balance sheet has been derived from these statements</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0; background-color: white"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0">The Company's financial
statements are prepared using the accrual method of accounting in accordance with accounting principles generally accepted in the
United States of America and have been prepared on a going concern basis, which contemplates the realization of assets and the
settlement of liabilities in the normal course of business. For the fiscal years ended April 30, 2014, 2013 and 2012, the Company
incurred losses in the amounts of approximately $2,609,000, $4,625,000 and $3,259,000, respectively. Net cash used in operating
activities totaled approximately $1,554,000, $3,882,000 and $1,218,000 for the fiscal years ended April 30, 2014, 2013 and 2012,
respectively. In the first quarter of the current fiscal year ended July 31, 2014 the Company incurred losses of approximately
$760,000, and used net cash in operations totaled approximately $166,000.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0">On
July 15, 2014, the Company entered into a Subordinated Secured Convertible Bridge Note and Warrant Purchase Agreement (the “Purchase
Agreement”) governing the issuance of $750,000 aggregate principal amount of Subordinated Secured Convertible Bridge Notes
(the “Bridge Notes”) and Warrants (the “Warrants”).  The Bridge Notes and Warrants were issued on
July 15, 2014.  The Company issued $600,000 aggregate principal amount of the Bridge Notes to certain institutional investors
(“Institutional Investors”) and $150,000 aggregate principal amount of the Bridge Notes to certain members of management,
officers and directors of the Company (“Management”). The Bridge Notes, which mature on October 15, 2014 (subject
to a three-month extension at the option of the holders), are convertible into shares of the Company’s common stock. The
initial conversion price for Institutional Investors is $2.50 per share, and the initial conversion price for Management is equal
to the closing price of the Company’s common stock on the closing date of the Purchase Agreement, $2.94. The Bridge Notes
are secured obligations of the Company and bear interest at a rate of 8% per year. The Warrants are exercisable for five years
after the closing date of the Purchase Agreement. For each $1,000 of principal amount of Bridge Notes, the holder received 1,200
Warrants to purchase the Company’s common stock. Each holder is entitled to exercise one-third of all warrants received
at an exercise price of $3.00, one-third of all warrants received at an exercise price of $3.50, and one-third of all warrants
received at an exercise price that is equal to the closing price on the closing date of the Purchase Agreement, $2.94. Pursuant
to the terms of the Purchase Agreement, the Company has agreed to register the shares underlying the Bridge Notes and the Warrants.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0">The Company has come
to terms with multiple investors for the sale of 1,000,000 shares of Series A Preferred Stock (“Preferred Shares”)
at $5.00 per share. This transaction is subject to stockholders approval at the Company’s Annual Meeting currently scheduled
for October 15, 2014. The closing is to take place as soon as practicable therefore with a minimum purchase of 400,000 shares.
The balance is callable by the Company on an as needed basis. The Preferred Shares are convertible into Common Stock at the rate
of 2.5 shares of common stock for every 1 share of Preferred Stock. There is no assurance that the stockholders will approve this
transaction and a closing will take place.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0">Our continuation as
a going concern is dependent upon obtaining the additional working capital necessary to sustain our operations. Management projects
the Company currently has sufficient cash and borrowing availability to last into fiscal quarter ending January 31, 2015. Our future
is dependent upon our ability to obtain financing, raise capital through the sales of equity and or debt securities and upon future
profitable operations. There is no assurance that our current operations will be profitable or we will raise sufficient funds to
continue operating. The Company continues to seek out opportunities to trim overhead expenses to meet revenues.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0"><font style="font-size: 11pt">If
current and projected revenue growth does not meet estimates, the Company may continue to choose to raise additional capital through
debt and/or equity transactions, reduce certain overhead costs through the deferral of salaries and other means, and settle liabilities
through negotiation. The Company cannot provide assurances that additional financing will be available to it on favorable terms,
or at all. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial
statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts
of and classification of liabilities that might be necessary in the event we cannot continue in existence</font>.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0; background-color: white"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><b>Principles of Consolidation</b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0">The consolidated financial statements have
been prepared in conformity with accounting principles generally accepted in the United States of America and include the accounts
of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in
consolidation.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><b>Use of Estimates</b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, including deferred tax asset valuation allowances and
certain other reserves and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Estimates and assumptions are reviewed periodically and the effects
of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary. Some of
the more significant estimates made by management include the allowance for doubtful accounts and sales returns, the deferred income
tax asset valuation allowance and other operating allowances and accruals. Actual results could differ from those estimates.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Engineering and Research and Development</b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Research and development costs are expensed
as incurred, including Company-sponsored research and development and costs of patents and other intellectual property that have
no alternative future use when acquired and in which we had an uncertainty in receiving future economic benefits. Development costs
of a computer software product to be sold, leased, or otherwise marketed are subject to capitalization beginning when a product’s
technological feasibility has been established and ending when a product is available for general release to customers. Technological
feasibility of a computer software product is established when all planning, designing, coding and testing activities that are
necessary to establish that the product can be produced to meet its design specifications (including functions, features and technical
performance requirements) are completed.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has been developing computer software
for its storage caching product line. On May 1, 2014, the Company determined that technological feasibility for the product was
established, and development costs subsequent to that date totaling approximately $142,000 have been capitalized. Prior to May
1, 2014, the Company expensed all development costs related to this product line.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Advertising</b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Advertising is expensed as incurred and amounted
to approximately $12,000 in the three months ended July 31, 2014 compared to approximately $45,000 in the comparable prior year
period.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Income Taxes</b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 11pt">The Company utilizes
the asset and liability method of accounting for income taxes in accordance with the provisions of the “Expenses –
Income Taxes Topic” of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”).
Under the asset and liability method, deferred income tax assets and liabilities are recognized for the estimated future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective
tax bases. A valuation allowance is provided when it is more likely than not that some portion or all of the deferred income tax
assets will not be realized. The Company considers certain tax planning strategies in its assessment as to the recoverability of
its tax assets. Deferred income tax assets and liabilities are measured using enacted tax rates in effect for the year in which
those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of
a change in tax rates is recognized in earnings in the period that the tax rate changes. The Company recognizes, in its consolidated
financial statements, the impact of a tax position, if that position is more likely than not to be sustained on audit, based on
technical merits of the position.  There are no material unrecognized tax positions in the financial statements. As of July
31, 2014, the Company had Federal and state net operating loss (“NOL”) carry-forwards of approximately $25,600,000
and $24,000,000, respectively. These can be used to offset future taxable income and expire between 2023 and 2034 for Federal tax
purposes and 2016 and 2034 for state tax purposes. The Company’s NOL carry-forwards are a component of its deferred income
tax assets which are reported net of a full valuation allowance in the Company’s consolidated financial statements at July
31, 2014 and April 30, 2014</font>.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Net Loss per Share</b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Basic net loss per share is computed by dividing
the net loss by the weighted average number of shares of common stock issued and outstanding during the period. The calculation
of diluted loss per share for the three months ended July 31, 2014 and 2013 includes only the weighted average number of shares
of common stock outstanding. The denominator excludes the dilutive effect of stock options and warrants outstanding as their effect
would be anti-dilutive.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following presents a reconciliation of
the numerator and denominator used in computing basic and diluted net loss per share for the three month periods ended July 31,
2014 and 2013:</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 11pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td style="font-weight: bold"> </td>
<td colspan="10" style="font-weight: bold; text-align: center">Three Months ended July 31, 2014</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Loss</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Shares</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Per share</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">(numerator)</td><td style="padding-bottom: 1pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">(denominator)</td><td style="padding-bottom: 1pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">amount</td><td style="padding-bottom: 1pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="width: 58%; text-align: left">Basic net loss per share – net loss and weighted average common shares outstanding</td><td style="width: 2%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 10%; text-align: right">(759,767</td><td style="width: 1%; text-align: left">)</td><td style="width: 2%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 10%; text-align: right">2,410,512</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 10%; text-align: right">(.32</td><td style="width: 1%; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="text-align: left">Effect of dilutive securities – stock options</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—  </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—  </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—  </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1pt">Effect of dilutive securities – warrants</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">—  </td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">—  </td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">—  </td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 2.5pt">Diluted net loss per share – net loss, weighted average common shares outstanding and effect of stock options and warrants</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(759,767</td><td style="padding-bottom: 2.5pt; text-align: left">)</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">2,410,512</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(.32</td><td style="padding-bottom: 2.5pt; text-align: left">)</td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 11pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td style="font-weight: bold"> </td>
<td colspan="10" style="font-weight: bold; text-align: center">Three Months ended July 31, 2013</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Loss</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Shares</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Per share</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">(numerator)</td><td style="padding-bottom: 1pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">(denominator)</td><td style="padding-bottom: 1pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">amount</td><td style="padding-bottom: 1pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="width: 58%; text-align: left">Basic net loss per share – net loss and weighted average common shares outstanding</td><td style="width: 2%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 10%; text-align: right">(881,630</td><td style="width: 1%; text-align: left">)</td><td style="width: 2%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 10%; text-align: right">1,754,662</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 10%; text-align: right">(.50</td><td style="width: 1%; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="text-align: left">Effect of dilutive securities – stock options</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—  </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—  </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—  </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1pt">Effect of dilutive securities – warrants</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">—  </td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">—  </td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">—  </td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 2.5pt">Diluted net loss per share – net loss, weighted average common shares outstanding and effect of stock options and warrants</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(881,630</td><td style="padding-bottom: 2.5pt; text-align: left">)</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">1,754,662</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(.50</td><td style="padding-bottom: 2.5pt; text-align: left">)</td></tr>
</table>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Diluted net loss per common share for the three
month periods ended July 31, 2014 and 2013 do not include the effect of options to purchase 272,580 and 319,908 shares, respectively,
of common stock because they are anti-dilutive. Diluted net loss per common share for the three month periods ended July 31, 2014
and 2013 also do not include the effect of warrants to purchase 1,385,775 and 221,875 shares, respectively, because they are anti-dilutive.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Common Stock Repurchases</b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On December 4, 2002,
the Company announced an open market repurchase plan providing for the repurchase of up to 83,333 shares of the Company’s
common stock. On April 10, 2012, the Company announced the additional authorization to repurchase up to 138,000 shares of the Company’s
common stock which at that time made the total available for purchase of up to 166,667 shares. The Company did not purchase shares
in the first quarter of fiscal 2015 or fiscal 2014. As of July 31, 2014, the total number of shares authorized for purchase under
the program is 136,408 shares.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Stock Option Expense</b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-weight: normal"><u>a. Stock-Based
Compensation</u></font></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has a 2001 incentive and non-statutory
stock option plan for the purpose of permitting certain key employees to acquire equity in the Company and to promote the growth
and profitability of the Company by attracting and retaining key employees. In general, the plan allows granting of up to 300,000
shares of the Company’s common stock at an option price to be no less than the fair market value of the Company’s common
stock on the date such options are granted. Options granted under the plan vest ratably on the annual anniversary date of the grants.
Vesting periods for options currently granted under the plan range from one to five years. No further options may be granted under
this plan.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company also has a 2011 incentive and non-statutory
stock option plan for the purpose of permitting certain key employees and consultants to acquire equity in the Company and to promote
the growth and profitability of the Company by attracting and retaining key employees. No executive officer or director of the
Company is eligible to receive options under the 2011 plan. In general, the plan allows granting of up to 33,333 shares of the
Company’s common stock at an option price to be no less than the fair market value of the Company’s common stock on
the date such options are granted. Options granted under the plan vest ratably on the annual anniversary date of the grants. Vesting
periods for options currently granted under the plan range from one to five years. There have been 25,000 shares granted under
this plan.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company periodically grants nonqualified
stock options to non-employee directors of the Company. These options are granted for the purpose of retaining the services of
directors who are not employees of the Company and to provide additional incentive for such directors to work to further the best
interests of the Company and its shareholders. The options granted to these non-employee directors are exercisable at a price representing
the fair value at the date of grant and expire either five or ten years after date of grant. Vesting periods for options currently
granted range from one to two years.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On September 23, 2010, the Company granted
Mr. Sheerr, who is employed by the Company as the General Manager of the acquired Micro Memory Bank, Inc. (“MMB”) business
unit described in Note 2 and is an executive officer of the Company, nonqualified stock options to purchase 16,667 shares of the
Company’s common stock pursuant to his employment agreement. On September 22, 2011, the Company granted Mr. Sheerr additional
nonqualified stock options to purchase 16,667 shares of the Company’s common stock, pursuant to his employment agreement.
On July 19, 2012, the Company granted Mr. Sheerr additional nonqualified stock options to purchase 16,667 shares of the Company’s
common stock, also pursuant to his employment agreement. The options granted are exercisable at a price representing the fair value
at the date of grant and expire five years after date of grant. The options vested in one year.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">New shares of the Company's common stock are
issued upon exercise of stock options.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As required by the “Compensation - Stock
Compensation” Topic of the FASB, the accounting for transactions in which an enterprise receives employee services in exchange
for (a) equity instruments of the enterprise or (b) liabilities that are based on the fair value of the enterprise’s equity
instruments or that may be settled by the issuance of such equity instruments are accounted for using a fair value-based method
with a recognition of an expense for compensation cost related to share-based payment arrangements, including stock options and
employee stock purchase plans.</p>
<p style="font: 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our consolidated statements of operations for
the three months ended July 31, 2014 and 2013 include approximately $5,000 and $21,000 of stock-based compensation expense, respectively.
These stock option grants have been classified as equity instruments and, as such, a corresponding increase has been reflected
in additional paid-in capital in the accompanying consolidated balance sheets. The fair value of each stock option granted is estimated
on the date of grant using the Black-Scholes option pricing model.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">A summary of option activity for the three
months ended July 31, 2014 is as follows:</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 11pt Arial Unicode MS">
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="2" style="font-family: Times New Roman, Times, Serif; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Shares</td><td style="padding-bottom: 1pt; font-family: Times New Roman, Times, Serif; font-weight: bold"> </td><td style="font-family: Times New Roman, Times, Serif; font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="2" style="font-family: Times New Roman, Times, Serif; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Weighted<br />
average<br /> exercise<br /> price</td><td style="padding-bottom: 1pt; font-family: Times New Roman, Times, Serif; font-weight: bold"> </td><td style="font-family: Times New Roman, Times, Serif; font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="2" style="font-family: Times New Roman, Times, Serif; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Weighted <br /> average<br /> remaining<br /> contractual<br /> life (1)</td><td style="padding-bottom: 1pt; font-family: Times New Roman, Times, Serif; font-weight: bold"> </td><td style="font-family: Times New Roman, Times, Serif; font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="2" style="font-family: Times New Roman, Times, Serif; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Aggregate <br />intrinsic <br />value (2)</td><td style="padding-bottom: 1pt; font-family: Times New Roman, Times, Serif; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="width: 44%; font-family: Times New Roman, Times, Serif; text-align: left">Balance April 30, 2014</td><td style="width: 2%; font-family: Times New Roman, Times, Serif"> </td>
<td style="width: 1%; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="width: 10%; font-family: Times New Roman, Times, Serif; text-align: right">264,244</td><td style="width: 1%; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="width: 2%; font-family: Times New Roman, Times, Serif"> </td>
<td style="width: 1%; font-family: Times New Roman, Times, Serif; text-align: left">$</td><td style="width: 10%; font-family: Times New Roman, Times, Serif; text-align: right">12.42</td><td style="width: 1%; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="width: 2%; font-family: Times New Roman, Times, Serif"> </td>
<td style="width: 1%; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="width: 10%; font-family: Times New Roman, Times, Serif; text-align: right">4.46</td><td style="width: 1%; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="width: 2%; font-family: Times New Roman, Times, Serif"> </td>
<td style="width: 1%; font-family: Times New Roman, Times, Serif; text-align: left">$</td><td style="width: 10%; font-family: Times New Roman, Times, Serif; text-align: right">14,750</td><td style="width: 1%; font-family: Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font-family: Times New Roman, Times, Serif; text-align: left">Granted</td><td style="font-family: Times New Roman, Times, Serif"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; text-align: right">0</td><td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; text-align: right">—  </td><td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; text-align: right">—  </td><td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; text-align: right">—  </td><td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="font-family: Times New Roman, Times, Serif; text-align: left">Exercised</td><td style="font-family: Times New Roman, Times, Serif"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; text-align: right">0</td><td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; text-align: right">—  </td><td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; text-align: right">—  </td><td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; text-align: right">—  </td><td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font-family: Times New Roman, Times, Serif; text-align: left; padding-bottom: 1pt">Expired</td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="border-bottom: Black 1pt solid; font-family: Times New Roman, Times, Serif; text-align: right">0</td><td style="padding-bottom: 1pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 1pt"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; text-align: right">—  </td><td style="padding-bottom: 1pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 1pt"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; text-align: right">—  </td><td style="padding-bottom: 1pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 1pt"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; text-align: right">—  </td><td style="padding-bottom: 1pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="font-family: Times New Roman, Times, Serif; text-align: left; padding-bottom: 2.5pt">Balance July 31, 2014</td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; font-family: Times New Roman, Times, Serif; text-align: right">264,244</td><td style="padding-bottom: 2.5pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 2.5pt"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left">$</td><td style="font-family: Times New Roman, Times, Serif; text-align: right">12.42</td><td style="padding-bottom: 2.5pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 2.5pt"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; text-align: right">4.21</td><td style="padding-bottom: 2.5pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 2.5pt"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left">$</td><td style="font-family: Times New Roman, Times, Serif; text-align: right">14,750</td><td style="padding-bottom: 2.5pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font-family: Times New Roman, Times, Serif; text-align: left; padding-bottom: 2.5pt">Exercisable July 31, 2014</td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; font-family: Times New Roman, Times, Serif; text-align: right">251,744</td><td style="padding-bottom: 2.5pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 2.5pt"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left">$</td><td style="font-family: Times New Roman, Times, Serif; text-align: right">12.92</td><td style="padding-bottom: 2.5pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 2.5pt"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; text-align: right">3.98</td><td style="padding-bottom: 2.5pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 2.5pt"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left">$</td><td style="font-family: Times New Roman, Times, Serif; text-align: right">7,375</td><td style="padding-bottom: 2.5pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="font-family: Times New Roman, Times, Serif; text-align: left; padding-bottom: 2.5pt">Expected to vest July 31, 2014</td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; font-family: Times New Roman, Times, Serif; text-align: right">251,744</td><td style="padding-bottom: 2.5pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 2.5pt"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left">$</td><td style="font-family: Times New Roman, Times, Serif; text-align: right">12.42</td><td style="padding-bottom: 2.5pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 2.5pt"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; text-align: right">3.98</td><td style="padding-bottom: 2.5pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 2.5pt"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left">$</td><td style="font-family: Times New Roman, Times, Serif; text-align: right">7,375</td><td style="padding-bottom: 2.5pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td></tr>
</table>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 11pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 0.4in">(1)</td><td style="text-align: justify">This amount represents the weighted average remaining contractual life of stock options in years.</td></tr></table>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 11pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 0.4in">(2)</td><td style="text-align: justify">This amount represents the difference between the exercise price and $3.03, the closing price of
Dataram common stock on July 31, 2014 as reported on the NASDAQ Stock Market, for all in-the-money options outstanding and all
the in-the-money shares exercisable.</td></tr></table>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0 0 0 0.4in; text-align: justify; text-indent: -0.4in"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: left">As of July 31, 2014, there was approximately $9,000
of total unrecognized compensation costs related to stock options. These costs are expected to be recognized over a weighted average
period of approximately nine months.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>b. Other Stock Options</u></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On June 30, 2008, the Company granted options
to purchase 8,333 shares of the Company’s common stock to a privately held company in exchange for certain patents and other
intellectual property. The options granted are exercisable at a price of $15.60 per share, which was the fair value at the date
of grant, were 100% exercisable on the date of grant and expire ten years after the date of grant.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>(2) Related Party Transactions</b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the three month periods ended July 31,
2014 and 2013, the Company purchased inventories for resale totaling approximately $474,000 and $858,000, respectively, from Sheerr
Memory, LLC (“Sheerr Memory”). Sheerr Memory’s owner (“Mr. Sheerr”) is employed by the Company as
the general manager of its Micro Memory business unit and is an executive officer of the Company. Approximately $192,000 and $271,000
of accounts payable in the Company’s consolidated balance sheets as of July 31, 2014 and April 30, 2014, respectively, is
payable to Sheerr Memory. Sheerr Memory offers the Company trade terms of net 30 days and all invoices are settled in the normal
course of business. No interest is paid. The Company has made further purchases from Sheerr Memory subsequent to July 31, 2014
and management anticipates that the Company will continue to do so, although the Company has no obligation to do so.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the three month periods ended July 31,
2014 and 2013, the Company purchased inventories for resale totaling approximately $256,000, and $172,000 respectively, from Keystone
Memory Group (“Keystone Memory”). Keystone Memory’s owner is a relative of Mr. Sheerr. Approximately $33,000
and $27,000 of accounts payable in the Company’s consolidated balance sheets as of July 31, 2014 and April 30, 2014 is payable
to Keystone Memory. Keystone Memory offers the Company trade terms of net due and all invoices are settled in the normal course
of business. No interest is paid. The Company has made further purchases from Keystone Memory subsequent to July 31, 2014 and management
anticipates that the Company will continue to do so, although the Company has no obligation to do so.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On December 14, 2011, the Company entered
into a Note and Security Agreement with Mr. Sheerr. The agreement provided for secured financing of up to $2,000,000. The Company
was obligated to pay monthly interest equal to 10% per annum calculated on a 360 day year of the outstanding loan balance. Principal
was payable in sixty equal monthly installments, beginning on July 15, 2012. The Company had borrowed the full $2,000,000 available
under this agreement. Principal amounts due under this obligation were $33,333 per month which began on July 15, 2012.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company amended and restated its Note and
Security Agreement with Mr. Sheerr as of October 31, 2013; the Company sold certain equipment and furniture for a purchase price
of $500,000 under a sale leaseback transaction to Mr. Sheerr. The Company used the proceeds of the purchase price received from
Mr. Sheerr to reduce the remaining principal amount of the original loan by an amount equal to $500,000. The principal amount was
reduced to approximately $966,667 at October 31, 2013. The Company was obligated to pay monthly, interest equal to 10% per annum
calculated on a 360 day year of the outstanding loan balance. Principal was payable in 29 equal monthly installments of $33,333,
beginning on November 15, 2013 and subsequently on the 15th day of each month thereafter, until paid in full. On April 30, 2014,
the note was paid in full.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of October 31, 2013, the Company also entered
into an agreement with Mr. Sheerr to leaseback the aforementioned equipment and furniture that was sold to Mr. Sheerr on October
31, 2013. The lease is for a term of 60 months and the Company is obligated to pay approximately $7,500 per month for the term
of the lease. The Company has an option to extend the lease for an additional two year period. The transactions described have
been accounted for as a sale-leaseback transaction. Accordingly, the Company recognized a gain on the sale of assets of approximately
$139,000, which is the amount of the gain on sale in excess of present value of the future lease payments and will recognize the
remaining approximately $322,000 in proportion to the related gross rental charged to expense over the term of the lease, 60 months.
The current portion of $72,000 deferred gain was reflected in accrued liabilities and the long-term portion of $250,000 is reflected
in other liabilities – long-term in the consolidated balance sheet as of April 30, 2014. The current portion of $72,000 deferred
gain is reflected in accrued liabilities and the long-term portion of $233,000 is reflected in other liabilities – long-term
in the consolidated balance sheet as of July 31, 2014.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>(3) Cash and Cash Equivalents</b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Cash and cash equivalents consist of unrestricted
cash and money market accounts.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>(4) Accounts Receivable</b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Accounts receivable consists of the following
categories:</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" align="center" style="border-collapse: collapse; width: 80%; font: 11pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">July 31,<br /> 2014</td><td style="padding-bottom: 1pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">April 30,<br /> 2014</td><td style="padding-bottom: 1pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="width: 55%; text-align: left">Trade receivables</td><td style="width: 2%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 10%; text-align: right">3,390,272</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 10%; text-align: right">3,757,408</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">VAT receivable</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">144,610</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">125,490</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="text-align: left; padding-bottom: 1pt">Allowance for doubtful accounts and sales returns</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">(220,000</td><td style="padding-bottom: 1pt; text-align: left">)</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">(220,000</td><td style="padding-bottom: 1pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">3,314,882</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">3,662,898</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>(5) Inventories</b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Inventories are valued at the lower of cost
or market, with costs determined by the first-in, first-out method. Inventories at July 31, 2014 and April 30, 2014 consist of
the following categories:</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" align="center" style="border-collapse: collapse; width: 80%; font: 11pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="text-align: justify"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">July 31,<br /> 2014</td><td style="padding-bottom: 1pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">April 30,<br /> 2014</td><td style="padding-bottom: 1pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="width: 55%; text-align: justify">Raw materials</td><td style="width: 2%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 10%; text-align: right">1,007,359</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 10%; text-align: right">1,576,238</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify">Work in process</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">80,052</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">63,631</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="text-align: justify; padding-bottom: 1pt">Finished goods</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">933,341</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">651,169</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">2,020,752</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">2,291,038</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
</table>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>(6) Note Receivable</b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On July 30, 2012, a Convertible Senior Promissory
Note was executed by and between Shoreline Memory, Inc. (“Shoreline”) and the Company whereby the Company could lend
up to $1,500,000 to Shoreline in exchange for interest payments at prime plus 3.0% and the right to convert the amount outstanding
into Common Stock of Shoreline on or before its maturity date. Each time the Company advanced money under the note, the Company
was granted 1% of the outstanding Common Stock of Shoreline for every $100,000 advanced up to a maximum of 15%. This was in addition
to the 15% allowable under the conversion of the note and the warrant to acquire 30% of Shoreline Common Stock. The conversion
is at the rate of 1% of the outstanding Common Stock for each $100,000 converted up to a maximum of 15%. This note had a maturity
date of three years and at such time Shoreline would have had to repay the note or the Company would have had to convert the note
into Common Stock. The note was secured by all of the assets of Shoreline and Shoreline Capital Management Ltd. (“Shoreline
Capital”) as guarantor. Also executed with the note was a warrant to purchase 30% of the outstanding Common Stock of Shoreline
at the time of exercise and the warrant expires sixty days after the third anniversary of the closing of the transaction. The warrant
prescribed a formula to determine the price per share at the time of exercise. If all the amounts under the note were advanced
and converted and the full warrant was exercised, the Company would have owned 60% of the outstanding Common Stock of Shoreline.
The note was executed simultaneously with a Master Services Agreement which details the parameters under which the Company and
Shoreline would have fulfilled orders from Shoreline’s primary customer. On July 31, 2012, the Company advanced $375,000
under the note and an additional $375,000 on August 1, 2012. The purpose of the loan was to fund startup expenses and to prepay
initial orders. On February 19, 2013, the Company received $50,000 from Shoreline and, on February 22, 2013, the Company received
an additional $200,000 from Shoreline as a partial repayment of their loan. On March 27, 2013, the Company reached an agreement
to terminate its relationship with Shoreline. At closing, the Company received an additional $225,000 as a partial repayment of
the loan in connection with the termination of all agreements with Shoreline. The promissory note bears interest at the rate of
6% and is guaranteed by Shoreline Memory, Inc., Shoreline Capital Management Ltd and Trevor Folk. All agreements with Shoreline
have been terminated with the exception of the amended and restated promissory note. The remaining $275,000 was scheduled to be
repaid in accordance with the amended and restated promissory note on July 31, 2013. Shoreline Memory defaulted on the note. The
Company fully reserved the $275,000 balance on the amended and restated promissory note at July 31, 2013. During fiscal 2014’s
second quarter, the Company agreed to settle the amount due on the defaulted note for approximately $162,000. The funds were received
in escrow on October 31, 2013 and forwarded to the Company on November 1, 2013.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>(7) Goodwill and Intangible Assets</b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Goodwill:</b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The carrying value of goodwill of approximately
$1,084,000 is not amortized, but is tested annually as of March 31 as well as whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable using a two-step process. As of July 31, 2014 and April 30, 2014, management has
concluded that no impairment of goodwill is required.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Intangible Assets:</b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Intangible assets with determinable lives,
other than customer relationships and research and development are amortized on a straight-line basis over their estimated period
of benefit, ranging from four to five years. Research and development and customer relationships are amortized over a two-year
period at a rate of 65% of the gross value acquired in the first year subsequent to their acquisition and 35% of the gross value
acquired in the second year. We evaluate the recoverability of intangible assets periodically and take into account events or circumstances
that warrant revised estimates of useful lives or that indicate that impairment exists. All of our intangible assets with definitive
lives are subject to amortization. No impairments of intangible assets have been identified during any of the periods presented.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company estimates that it has no significant
residual value related to its intangible assets. Acquired intangibles generally are amortized on a straight-line basis over weighted
average lives. Intangible assets amortization expense for the three months ended July 31, 2013 totaled approximately $41,000. Intangible
asset amortization was included in selling, general and administrative expense. The intangible assets were fully amortized in the
fiscal year ended April 30, 2014.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>(8) Financing Agreements</b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company amended and restated its Note and
Security Agreement with Mr. Sheerr as of October 31, 2013; the Company sold certain equipment and furniture for a purchase price
of $500,000 under a sale leaseback transaction to Mr. Sheerr. The Company used the proceeds of the purchase price received from
Mr. Sheerr to reduce the remaining principal amount of the original loan by an amount equal to $500,000. The principal amount was
reduced to approximately $966,667 at October 31, 2013. The Company was obligated to pay monthly interest equal to 10% per annum
calculated on a 360 day year of the outstanding loan balance. Principal was payable in 29 equal monthly installments of $33,333,
beginning on November 15, 2013 and subsequently on the 15th day of each month thereafter, until paid in full. On April 30, 2014,
the note was paid in full.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of October 31, 2013, the Company entered
into an agreement with Mr. Sheerr to leaseback the equipment and furniture that was sold by the Company to Mr. Sheerr on October
31, 2013. The lease is for a term of 60 months and the Company is obligated to pay approximately $7,500 per month for the term
of the lease. The Company has an option to extend the lease for an additional two year period. The transactions described have
been accounted for as a sale-leaseback transaction. Accordingly, the Company recognized a gain on the sale of assets of approximately
$139,000, which is the amount of the gain on sale in excess of present value of the future lease payments and will recognize the
remaining approximately $322,000 in proportion to the related gross rental charged to expense over the term of the lease, 60 months.
The current portion of $72,000 deferred gain was reflected in accrued liabilities and the long-term portion of $250,000 is reflected
in other liabilities – long-term in the consolidated balance sheet as of April 30, 2014. The current portion of $72,000 deferred
gain is reflected in accrued liabilities and the long-term portion of $233,000 is reflected in other liabilities – long-term
in the consolidated balance sheet as of July 31, 2014.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On July 30, 2012, a Convertible Senior Promissory
Note was executed by and between Shoreline Memory and the Company whereby the Company could lend up to $1,500,000 to Shoreline
in exchange for interest payments at prime plus 3.0% and the right to convert the amount outstanding into Common Stock of Shoreline
on or before its maturity date. Each time the Company advanced money under the note, the Company was granted 1% of the outstanding
Common Stock of Shoreline for every $100,000 advanced up to a maximum of 15%. This was in addition to the 15% allowable under the
conversion of the note and the warrant to acquire 30% of Shoreline Common Stock. The conversion is at the rate of 1% of the outstanding
Common Stock for each $100,000 converted up to a maximum of 15%. This note had a maturity date of three years and at such time
Shoreline would have had to repay the note or the Company would have had to convert the note into Common Stock. The note was secured
by all the assets of Shoreline and Shoreline Capital Management Ltd. (“Shoreline Capital”) as guarantor. Also executed
with the note was a warrant to purchase 30% of the outstanding Common Stock of</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Shoreline at the time of exercise and the
warrant expires sixty days after the third anniversary of the closing of the transaction. The warrant prescribed a formula to
determine the price per share at the time of exercise. If all the amounts under the note were advanced and converted and the full
warrant was exercised, the Company would have owned 60% of the outstanding Common Stock of Shoreline. The note was executed simultaneously
with a Master Services Agreement which details the parameters under which the Company and Shoreline would have fulfilled orders
from Shoreline’s primary customer. On July 31, 2012, the Company advanced $375,000 under the note and an additional $375,000
on August 1, 2012. The purpose of the loan was to fund startup expenses and to prepay initial orders. On February 19, 2013, the
Company received $50,000 from Shoreline and, on February 22, 2013, the Company received an additional $200,000 from Shoreline
as a partial repayment of their loan. On March 27, 2013, the Company reached an agreement to terminate its relationship with Shoreline.
At closing, the Company received an additional $225,000 as a partial repayment of the loan in connection with the termination
of all agreements with Shoreline. The promissory note bears interest at the rate of 6% and is guaranteed by Shoreline Memory,
Inc., Shoreline Capital Management Ltd and Trevor Folk. All agreements with Shoreline have been terminated with the exception
of the amended and restated promissory note. The remaining $275,000 was scheduled to be repaid in accordance with the amended
and restated promissory note on July 31, 2013. Shoreline Memory defaulted on the note. The Company fully reserved the $275,000
balance on the amended and restated promissory note at July 31, 2013. During fiscal 2014’s second quarter, the Company agreed
to settle the amount due on the defaulted note for approximately $162,000. The funds were received in escrow on October 31, 2013
and forwarded to the Company on November 1, 2013.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify"></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On November 6, 2013, the Company entered
into a new financing agreement (the “Financing Agreement”) with Rosenthal & Rosenthal, Inc. to replace an existing
loan agreement. The Financing Agreement provides for a revolving loan with a maximum borrowing capacity of $3,500,000. The loans
under the Financing Agreement mature on November 30, 2016 unless such Financing Agreement is either earlier terminated or renewed.
Loans outstanding under the Financing Agreement bear interest at a rate of the Prime Rate (as defined in the Financing Agreement)
plus 3.25% (the “Effective Rate”) or on Over-advances (as defined in the Financing Agreement), if any, at a rate of
the Effective Rate plus 3%. The Financing Agreement contains other financial and restrictive covenants, including, among others,
covenants limiting our ability to incur indebtedness, guarantee obligations, sell assets, make loans, enter into mergers and acquisition
transactions and declare or make dividends. Borrowings under the Financing Agreement are collateralized by substantially all the
assets of the Company. On April 29, 2014, the Company entered into an amendment (the "Amendment") to the Financing Agreement.
The Amendment provides for advances against inventory balances based on prescribed formulas of raw materials and finished goods.
The maximum borrowing capacity remains at $3,500,000. Borrowings at July 31, 2014 totaled approximately $2,424,000 and there was
approximately $60,000 of additional availability on that date.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On July 15, 2014, the Company entered
into a Subordinated Secured Convertible Bridge Note and Warrant Purchase Agreement (the “Purchase Agreement”) governing
the issuance of $750,000 aggregate principal amount of Subordinated Secured Convertible Bridge Notes (the “Bridge Notes”)
and Warrants (the “Warrants”).  The Bridge Notes and Warrants were issued on July 15, 2014.  The Company
issued $600,000 aggregate principal amount of the Bridge Notes to certain institutional investors (“Institutional Investors”)
and $150,000 aggregate principal amount of the Bridge Notes to certain members of management, officers and directors of the Company
(“Management”). The Bridge Notes, which mature on October 15, 2014 (subject to a three-month extension at the option
of the holders), are convertible into shares of the Company’s common stock. The initial conversion price for Institutional
Investors is $2.50 per share, and the initial conversion price for Management is equal to the closing price of the Company’s
common stock on the closing date of the Purchase Agreement, $2.94 per share. The Bridge Notes are secured obligations of the Company
and bear interest at a rate of 8% per year. The Warrants are exercisable for five years after the closing date of the Purchase
Agreement. For each $1,000 of principal amount of Bridge Notes, the holder received 1,200 Warrants to purchase the Company’s
common stock. Each holder is entitled to exercise one-third of all warrants received at an exercise price of $3.00 per share, one-third
of all warrants received at an exercise price of $3.50 per share, and one-third of all warrants received at an exercise price that
is equal to the closing price on the closing date of the Purchase Agreement, $2.94 per share. Pursuant to the terms of the Purchase
Agreement, the Company has agreed to register the shares underlying the Bridge Notes and the Warrants.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The pricing model the Company used for determining
fair values of the Warrants is the Black-Scholes Pricing Model. The model uses market-sourced inputs such as interest rates, dividend
yields, market prices and volatilities. The risk-free interest rate used of 1.26% is based on the rate of U.S Treasury zero-coupon
issues with a remaining term equal to the expected life of the Warrants. Expected dividend yield assumes the current dividend
rate of zero. Expected volatility of approximately 100% was calculated using the daily closing price over a five year period of
the Company’s Common Stock.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0; text-indent: 0; text-align: justify">The
value of the Warrants was derived and used as a basis to allocate the proceeds received between the Warrants and Bridge Notes.
The proportionate value ascribed to the Warrants amounted to approximately $562,000 and was reflected as a discount on notes payable.
Further the Company estimated a value of beneficial conversion feature of approximately $188,000 (limited to the amount of proceeds
allocated to the notes payable) and reflected such as an additional discount on the Bridge Notes. The discount on notes payable
is being amortized using the straight-line amortization over ninety days. This resulted in a non-cash interest charge of approximately
$133,000 in the quarter ended July 31, 2014.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><b>(9) Sales of Securities</b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><b> </b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0">On May 11, 2011, the Company and certain investors
entered into a securities purchase agreement in connection with a registered direct offering, pursuant to which the Company agreed
to sell an aggregate of 295,833 shares of its Common Stock and warrants to purchase a total of 221,875 shares of its Common Stock
to such investors for aggregate net proceeds of approximately $2,998,000. The Common Stock and warrants were sold in fixed combinations,
with each combination consisting of one share of Common Stock and 0.75 of one warrant, with each whole warrant exercisable for
one share of Common Stock. The purchase price was $11.28 per fixed combination. The warrants became exercisable six months and
one day following the closing date of the offering and will remain exercisable for five years thereafter at an exercise price of
$13.56 per share. The exercise price of the warrants is subject to adjustment in the case of stock splits, stock dividends, combinations
of shares and similar recapitalization transactions. The exercisability of the warrants may be limited if, upon exercise, the holder
or any of its affiliates would beneficially own more than 4.99% of the Common Stock. After the one year anniversary of the initial
exercise date of the warrants, the Company had the right to call the warrants for cancellation for $.006 per share in the event
that the volume weighted average price of the Common Stock for 20 consecutive trading days exceeds $27.12.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0">On September 18, 2013, the Company and
certain investors entered into a securities purchase agreement in connection with the offering, pursuant to which the Company agreed
to sell an aggregate of 350,931 shares of its common stock and warrants to purchase a total of 350,931 shares of its common stock
to such investors for aggregate net proceeds, after deducting fees to the Placement Agent and other estimated offering expenses
payable by the Company, of approximately $807,000. The common stock and warrants were sold in fixed combinations, with each combination
consisting of one share of common stock and one warrant, with each warrant exercisable for one share of common stock. The purchase
price was $2.30 per fixed combination. On September 23, 2013 the offering of 350,000 shares and warrants was closed with net proceeds
to the Company of approximately $695,491 after accounting for all expenses of the offering. The exercise price of the warrants
is subject to adjustment in the case of stock splits, stock dividends, combinations of shares and similar recapitalization transactions.<b>
</b>The exercisability of the warrants may be limited if, upon exercise, the holder or any of its affiliates would beneficially
own more than 4.99% of the Common Stock. After the one year anniversary of the initial exercise date of the warrants, the Company
had the right to call the warrants for cancellation for $.001 per share in the event that the volume weighted average price of
the Common Stock for 20 consecutive trading days exceeds $10.00.<b> </b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0">On March 20, 2014, the Company
and certain investors entered into a common stock purchase agreement in connection with the offering, pursuant to which the Company
agreed to sell an aggregate of 219,754 shares of its common stock to such investors for aggregate proceeds, after deducting fees
to the Placement Agent and other estimated offering expenses payable by the Company, of approximately $559,000. The purchase price
was $3.00 per share.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0">On March 20, 2014, holders of warrants
issued in connection with the sale of common stock on September 18, 2013, exercised 86,100 of those warrants at the exercise price
of $3.50 per share resulting in net proceeds of approximately $306,350. The exercise of these warrants resulted in the issuance
of 86,100 shares of the Company’s common stock.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><b>(10) Financial Information by Geographic
Location</b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company currently operates in one business
segment that develops, manufactures and markets a variety of memory systems for use with network servers and workstations which
are manufactured by various companies. Revenues for the three months ended July 31, 2014 and 2013 by geographic region are as follows:</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<table cellpadding="0" cellspacing="0" align="center" style="border-collapse: collapse; width: 80%; font: 11pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="font-family: Courier New, Courier, Monospace; font-weight: bold; text-align: left"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Three months <br /> ended<br /> July 31,<br /> 2014</td><td style="padding-bottom: 1pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Three months <br /> ended<br /> July 31,<br /> 2013</td><td style="padding-bottom: 1pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="width: 55%; text-align: left">United States</td><td style="width: 2%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 10%; text-align: right">6,630,728</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 10%; text-align: right">6,182,801</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font-weight: normal; font-style: normal; text-align: left">Europe</td><td style="font-weight: normal; font-style: normal"> </td>
<td style="font-weight: normal; font-style: normal; text-align: left"> </td><td style="font-weight: normal; font-style: normal; text-align: right">938,767</td><td style="font-weight: normal; font-style: normal; text-align: left"> </td><td style="font-weight: normal; font-style: normal"> </td>
<td style="font-weight: normal; font-style: normal; text-align: left"> </td><td style="font-weight: normal; font-style: normal; text-align: right">870,627</td><td style="font-weight: normal; font-style: normal; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt">Other (principally Asia Pacific Region)</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left"> </td><td style="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">155,542</td><td style="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left"> </td><td style="font-weight: normal; font-style: normal; padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left"> </td><td style="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">313,302</td><td style="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 2.5pt">Consolidated</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">7,725,037</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">7,366,730</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
</table>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>(11) Recently Adopted Accounting Guidance</b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In May 2014, the Financial Accounting Standards
Board issued Accounting Standards Update (ASU) No. 2014-09, “Revenue from Contracts with Customers”.  The purpose
of this new standard is to clarify the principles for recognizing revenue so that it can be applied consistently across various
transactions, industries and capital markets.  We have not completed our assessment of ASU No. 2014-09.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>(12) Concentration of Credit Risk</b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Financial instruments that potentially subject
the Company to concentration of credit risk consist primarily of cash and cash equivalents, trade receivables and note receivable.
The Company maintains its cash and cash equivalents in financial institutions and brokerage accounts. To the extent that such deposits
exceed the maximum insurance levels, they are uninsured. In regard to trade receivables, the Company performs ongoing evaluations
of its customers' financial condition as well as general economic conditions and, generally, requires no collateral from its customers.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>(13) Subsequent Events</b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On September 11, 2014, the Company was notified
by NASDAQ that in its determination the Company will not be able to cure its shareholder equity deficiency to maintain the Company’s
listing on NASDAQ prior to the expiration of its granted extension of September 24, 2014. The Company intends to request a hearing
to present its current plan to sell Preferred Stock and cure the deficiency. The application for a hearing will stay the delisting
of the Company’s stock until the hearing takes place and the panel makes a determination.</p>
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-122385
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><b>Liquidity and Basis of Presentation </b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0">The information for
the three months ended July 31, 2014 and 2013 is unaudited, but includes all adjustments (consisting of normal recurring adjustments)
which, in the opinion of management, are necessary to state fairly the financial information set forth therein in accordance with
accounting principles generally accepted in the United States of America. The interim results are not necessarily indicative of
results to be expected for the full fiscal year. These financial statements should be read in conjunction with the audited financial
statements for the year ended April 30, 2014 included in the Company’s 2014 Annual Report on Form 10-K filed with the Securities
and Exchange Commission. The April 30, 2014 balance sheet has been derived from these statements</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0; background-color: white"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0">The Company's financial
statements are prepared using the accrual method of accounting in accordance with accounting principles generally accepted in the
United States of America and have been prepared on a going concern basis, which contemplates the realization of assets and the
settlement of liabilities in the normal course of business. For the fiscal years ended April 30, 2014, 2013 and 2012, the Company
incurred losses in the amounts of approximately $2,609,000, $4,625,000 and $3,259,000, respectively. Net cash used in operating
activities totaled approximately $1,554,000, $3,882,000 and $1,218,000 for the fiscal years ended April 30, 2014, 2013 and 2012,
respectively. In the first quarter of the current fiscal year ended July 31, 2014 the Company incurred losses of approximately
$760,000, and used net cash in operations totaled approximately $166,000.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0">On
July 15, 2014, the Company entered into a Subordinated Secured Convertible Bridge Note and Warrant Purchase Agreement (the “Purchase
Agreement”) governing the issuance of $750,000 aggregate principal amount of Subordinated Secured Convertible Bridge Notes
(the “Bridge Notes”) and Warrants (the “Warrants”).  The Bridge Notes and Warrants were issued on
July 15, 2014.  The Company issued $600,000 aggregate principal amount of the Bridge Notes to certain institutional investors
(“Institutional Investors”) and $150,000 aggregate principal amount of the Bridge Notes to certain members of management,
officers and directors of the Company (“Management”). The Bridge Notes, which mature on October 15, 2014 (subject
to a three-month extension at the option of the holders), are convertible into shares of the Company’s common stock. The
initial conversion price for Institutional Investors is $2.50 per share, and the initial conversion price for Management is equal
to the closing price of the Company’s common stock on the closing date of the Purchase Agreement, $2.94. The Bridge Notes
are secured obligations of the Company and bear interest at a rate of 8% per year. The Warrants are exercisable for five years
after the closing date of the Purchase Agreement. For each $1,000 of principal amount of Bridge Notes, the holder received 1,200
Warrants to purchase the Company’s common stock. Each holder is entitled to exercise one-third of all warrants received
at an exercise price of $3.00, one-third of all warrants received at an exercise price of $3.50, and one-third of all warrants
received at an exercise price that is equal to the closing price on the closing date of the Purchase Agreement, $2.94. Pursuant
to the terms of the Purchase Agreement, the Company has agreed to register the shares underlying the Bridge Notes and the Warrants.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0">The Company has come
to terms with multiple investors for the sale of 1,000,000 shares of Series A Preferred Stock (“Preferred Shares”)
at $5.00 per share. This transaction is subject to stockholders approval at the Company’s Annual Meeting currently scheduled
for October 15, 2014. The closing is to take place as soon as practicable therefore with a minimum purchase of 400,000 shares.
The balance is callable by the Company on an as needed basis. The Preferred Shares are convertible into Common Stock at the rate
of 2.5 shares of common stock for every 1 share of Preferred Stock. There is no assurance that the stockholders will approve this
transaction and a closing will take place.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0">Our continuation as
a going concern is dependent upon obtaining the additional working capital necessary to sustain our operations. Management projects
the Company currently has sufficient cash and borrowing availability to last into fiscal quarter ending January 31, 2015. Our future
is dependent upon our ability to obtain financing, raise capital through the sales of equity and or debt securities and upon future
profitable operations. There is no assurance that our current operations will be profitable or we will raise sufficient funds to
continue operating. The Company continues to seek out opportunities to trim overhead expenses to meet revenues.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0"><font style="font-size: 11pt">If
current and projected revenue growth does not meet estimates, the Company may continue to choose to raise additional capital through
debt and/or equity transactions, reduce certain overhead costs through the deferral of salaries and other means, and settle liabilities
through negotiation. The Company cannot provide assurances that additional financing will be available to it on favorable terms,
or at all. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial
statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts
of and classification of liabilities that might be necessary in the event we cannot continue in existence</font>.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Engineering and Research and Development</b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Research and development costs are expensed
as incurred, including Company-sponsored research and development and costs of patents and other intellectual property that have
no alternative future use when acquired and in which we had an uncertainty in receiving future economic benefits. Development costs
of a computer software product to be sold, leased, or otherwise marketed are subject to capitalization beginning when a product’s
technological feasibility has been established and ending when a product is available for general release to customers. Technological
feasibility of a computer software product is established when all planning, designing, coding and testing activities that are
necessary to establish that the product can be produced to meet its design specifications (including functions, features and technical
performance requirements) are completed.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has been developing computer software
for its storage caching product line. On May 1, 2014, the Company determined that technological feasibility for the product was
established, and development costs subsequent to that date totaling approximately $142,000 have been capitalized. Prior to May
1, 2014, the Company expensed all development costs related to this product line.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Advertising</b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Advertising is expensed as incurred and amounted
to approximately $12,000 in the three months ended July 31, 2014 compared to approximately $45,000 in the comparable prior year
period.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Income Taxes</b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 11pt">The Company utilizes
the asset and liability method of accounting for income taxes in accordance with the provisions of the “Expenses –
Income Taxes Topic” of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”).
Under the asset and liability method, deferred income tax assets and liabilities are recognized for the estimated future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective
tax bases. A valuation allowance is provided when it is more likely than not that some portion or all of the deferred income tax
assets will not be realized. The Company considers certain tax planning strategies in its assessment as to the recoverability of
its tax assets. Deferred income tax assets and liabilities are measured using enacted tax rates in effect for the year in which
those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of
a change in tax rates is recognized in earnings in the period that the tax rate changes. The Company recognizes, in its consolidated
financial statements, the impact of a tax position, if that position is more likely than not to be sustained on audit, based on
technical merits of the position.  There are no material unrecognized tax positions in the financial statements. As of July
31, 2014, the Company had Federal and state net operating loss (“NOL”) carry-forwards of approximately $25,600,000
and $24,000,000, respectively. These can be used to offset future taxable income and expire between 2023 and 2034 for Federal tax
purposes and 2016 and 2034 for state tax purposes. The Company’s NOL carry-forwards are a component of its deferred income
tax assets which are reported net of a full valuation allowance in the Company’s consolidated financial statements at July
31, 2014 and April 30, 2014</font>.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Net Loss per Share</b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Basic net loss per share is computed by dividing
the net loss by the weighted average number of shares of common stock issued and outstanding during the period. The calculation
of diluted loss per share for the three months ended July 31, 2014 and 2013 includes only the weighted average number of shares
of common stock outstanding. The denominator excludes the dilutive effect of stock options and warrants outstanding as their effect
would be anti-dilutive.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following presents a reconciliation of
the numerator and denominator used in computing basic and diluted net loss per share for the three month periods ended July 31,
2014 and 2013:</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 11pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td style="font-weight: bold"> </td>
<td colspan="10" style="font-weight: bold; text-align: center">Three Months ended July 31, 2014</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Loss</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Shares</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Per share</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">(numerator)</td><td style="padding-bottom: 1pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">(denominator)</td><td style="padding-bottom: 1pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">amount</td><td style="padding-bottom: 1pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="width: 58%; text-align: left">Basic net loss per share – net loss and weighted average common shares outstanding</td><td style="width: 2%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 10%; text-align: right">(759,767</td><td style="width: 1%; text-align: left">)</td><td style="width: 2%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 10%; text-align: right">2,410,512</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 10%; text-align: right">(.32</td><td style="width: 1%; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="text-align: left">Effect of dilutive securities – stock options</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—  </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—  </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—  </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1pt">Effect of dilutive securities – warrants</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">—  </td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">—  </td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">—  </td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 2.5pt">Diluted net loss per share – net loss, weighted average common shares outstanding and effect of stock options and warrants</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(759,767</td><td style="padding-bottom: 2.5pt; text-align: left">)</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">2,410,512</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(.32</td><td style="padding-bottom: 2.5pt; text-align: left">)</td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 11pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td style="font-weight: bold"> </td>
<td colspan="10" style="font-weight: bold; text-align: center">Three Months ended July 31, 2013</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Loss</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Shares</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Per share</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">(numerator)</td><td style="padding-bottom: 1pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">(denominator)</td><td style="padding-bottom: 1pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">amount</td><td style="padding-bottom: 1pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="width: 58%; text-align: left">Basic net loss per share – net loss and weighted average common shares outstanding</td><td style="width: 2%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 10%; text-align: right">(881,630</td><td style="width: 1%; text-align: left">)</td><td style="width: 2%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 10%; text-align: right">1,754,662</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 10%; text-align: right">(.50</td><td style="width: 1%; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="text-align: left">Effect of dilutive securities – stock options</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—  </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—  </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—  </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1pt">Effect of dilutive securities – warrants</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">—  </td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">—  </td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">—  </td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 2.5pt">Diluted net loss per share – net loss, weighted average common shares outstanding and effect of stock options and warrants</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(881,630</td><td style="padding-bottom: 2.5pt; text-align: left">)</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">1,754,662</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(.50</td><td style="padding-bottom: 2.5pt; text-align: left">)</td></tr>
</table>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Diluted net loss per common share for the three
month periods ended July 31, 2014 and 2013 do not include the effect of options to purchase 272,580 and 319,908 shares, respectively,
of common stock because they are anti-dilutive. Diluted net loss per common share for the three month periods ended July 31, 2014
and 2013 also do not include the effect of warrants to purchase 1,385,775 and 221,875 shares, respectively, because they are anti-dilutive.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Common Stock Repurchases</b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On December 4, 2002,
the Company announced an open market repurchase plan providing for the repurchase of up to 83,333 shares of the Company’s
common stock. On April 10, 2012, the Company announced the additional authorization to repurchase up to 138,000 shares of the Company’s
common stock which at that time made the total available for purchase of up to 166,667 shares. The Company did not purchase shares
in the first quarter of fiscal 2015 or fiscal 2014. As of July 31, 2014, the total number of shares authorized for purchase under
the program is 136,408 shares.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Stock Option Expense</b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-weight: normal"><u>a. Stock-Based
Compensation</u></font></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has a 2001 incentive and non-statutory
stock option plan for the purpose of permitting certain key employees to acquire equity in the Company and to promote the growth
and profitability of the Company by attracting and retaining key employees. In general, the plan allows granting of up to 300,000
shares of the Company’s common stock at an option price to be no less than the fair market value of the Company’s common
stock on the date such options are granted. Options granted under the plan vest ratably on the annual anniversary date of the grants.
Vesting periods for options currently granted under the plan range from one to five years. No further options may be granted under
this plan.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company also has a 2011 incentive and non-statutory
stock option plan for the purpose of permitting certain key employees and consultants to acquire equity in the Company and to promote
the growth and profitability of the Company by attracting and retaining key employees. No executive officer or director of the
Company is eligible to receive options under the 2011 plan. In general, the plan allows granting of up to 33,333 shares of the
Company’s common stock at an option price to be no less than the fair market value of the Company’s common stock on
the date such options are granted. Options granted under the plan vest ratably on the annual anniversary date of the grants. Vesting
periods for options currently granted under the plan range from one to five years. There have been 25,000 shares granted under
this plan.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company periodically grants nonqualified
stock options to non-employee directors of the Company. These options are granted for the purpose of retaining the services of
directors who are not employees of the Company and to provide additional incentive for such directors to work to further the best
interests of the Company and its shareholders. The options granted to these non-employee directors are exercisable at a price representing
the fair value at the date of grant and expire either five or ten years after date of grant. Vesting periods for options currently
granted range from one to two years.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On September 23, 2010, the Company granted
Mr. Sheerr, who is employed by the Company as the General Manager of the acquired Micro Memory Bank, Inc. (“MMB”) business
unit described in Note 2 and is an executive officer of the Company, nonqualified stock options to purchase 16,667 shares of the
Company’s common stock pursuant to his employment agreement. On September 22, 2011, the Company granted Mr. Sheerr additional
nonqualified stock options to purchase 16,667 shares of the Company’s common stock, pursuant to his employment agreement.
On July 19, 2012, the Company granted Mr. Sheerr additional nonqualified stock options to purchase 16,667 shares of the Company’s
common stock, also pursuant to his employment agreement. The options granted are exercisable at a price representing the fair value
at the date of grant and expire five years after date of grant. The options vested in one year.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">New shares of the Company's common stock are
issued upon exercise of stock options.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As required by the “Compensation - Stock
Compensation” Topic of the FASB, the accounting for transactions in which an enterprise receives employee services in exchange
for (a) equity instruments of the enterprise or (b) liabilities that are based on the fair value of the enterprise’s equity
instruments or that may be settled by the issuance of such equity instruments are accounted for using a fair value-based method
with a recognition of an expense for compensation cost related to share-based payment arrangements, including stock options and
employee stock purchase plans.</p>
<p style="font: 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our consolidated statements of operations for
the three months ended July 31, 2014 and 2013 include approximately $5,000 and $21,000 of stock-based compensation expense, respectively.
These stock option grants have been classified as equity instruments and, as such, a corresponding increase has been reflected
in additional paid-in capital in the accompanying consolidated balance sheets. The fair value of each stock option granted is estimated
on the date of grant using the Black-Scholes option pricing model.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">A summary of option activity for the three
months ended July 31, 2014 is as follows:</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 11pt Arial Unicode MS">
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="2" style="font-family: Times New Roman, Times, Serif; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Shares</td><td style="padding-bottom: 1pt; font-family: Times New Roman, Times, Serif; font-weight: bold"> </td><td style="font-family: Times New Roman, Times, Serif; font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="2" style="font-family: Times New Roman, Times, Serif; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Weighted<br />
average<br /> exercise<br /> price</td><td style="padding-bottom: 1pt; font-family: Times New Roman, Times, Serif; font-weight: bold"> </td><td style="font-family: Times New Roman, Times, Serif; font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="2" style="font-family: Times New Roman, Times, Serif; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Weighted <br /> average<br /> remaining<br /> contractual<br /> life (1)</td><td style="padding-bottom: 1pt; font-family: Times New Roman, Times, Serif; font-weight: bold"> </td><td style="font-family: Times New Roman, Times, Serif; font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="2" style="font-family: Times New Roman, Times, Serif; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Aggregate <br />intrinsic <br />value (2)</td><td style="padding-bottom: 1pt; font-family: Times New Roman, Times, Serif; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="width: 44%; font-family: Times New Roman, Times, Serif; text-align: left">Balance April 30, 2014</td><td style="width: 2%; font-family: Times New Roman, Times, Serif"> </td>
<td style="width: 1%; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="width: 10%; font-family: Times New Roman, Times, Serif; text-align: right">264,244</td><td style="width: 1%; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="width: 2%; font-family: Times New Roman, Times, Serif"> </td>
<td style="width: 1%; font-family: Times New Roman, Times, Serif; text-align: left">$</td><td style="width: 10%; font-family: Times New Roman, Times, Serif; text-align: right">12.42</td><td style="width: 1%; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="width: 2%; font-family: Times New Roman, Times, Serif"> </td>
<td style="width: 1%; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="width: 10%; font-family: Times New Roman, Times, Serif; text-align: right">4.46</td><td style="width: 1%; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="width: 2%; font-family: Times New Roman, Times, Serif"> </td>
<td style="width: 1%; font-family: Times New Roman, Times, Serif; text-align: left">$</td><td style="width: 10%; font-family: Times New Roman, Times, Serif; text-align: right">14,750</td><td style="width: 1%; font-family: Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font-family: Times New Roman, Times, Serif; text-align: left">Granted</td><td style="font-family: Times New Roman, Times, Serif"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; text-align: right">0</td><td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; text-align: right">—  </td><td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; text-align: right">—  </td><td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; text-align: right">—  </td><td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="font-family: Times New Roman, Times, Serif; text-align: left">Exercised</td><td style="font-family: Times New Roman, Times, Serif"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; text-align: right">0</td><td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; text-align: right">—  </td><td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; text-align: right">—  </td><td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; text-align: right">—  </td><td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font-family: Times New Roman, Times, Serif; text-align: left; padding-bottom: 1pt">Expired</td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="border-bottom: Black 1pt solid; font-family: Times New Roman, Times, Serif; text-align: right">0</td><td style="padding-bottom: 1pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 1pt"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; text-align: right">—  </td><td style="padding-bottom: 1pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 1pt"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; text-align: right">—  </td><td style="padding-bottom: 1pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 1pt"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; text-align: right">—  </td><td style="padding-bottom: 1pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="font-family: Times New Roman, Times, Serif; text-align: left; padding-bottom: 2.5pt">Balance July 31, 2014</td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; font-family: Times New Roman, Times, Serif; text-align: right">264,244</td><td style="padding-bottom: 2.5pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 2.5pt"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left">$</td><td style="font-family: Times New Roman, Times, Serif; text-align: right">12.42</td><td style="padding-bottom: 2.5pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 2.5pt"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; text-align: right">4.21</td><td style="padding-bottom: 2.5pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 2.5pt"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left">$</td><td style="font-family: Times New Roman, Times, Serif; text-align: right">14,750</td><td style="padding-bottom: 2.5pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font-family: Times New Roman, Times, Serif; text-align: left; padding-bottom: 2.5pt">Exercisable July 31, 2014</td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; font-family: Times New Roman, Times, Serif; text-align: right">251,744</td><td style="padding-bottom: 2.5pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 2.5pt"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left">$</td><td style="font-family: Times New Roman, Times, Serif; text-align: right">12.92</td><td style="padding-bottom: 2.5pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 2.5pt"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; text-align: right">3.98</td><td style="padding-bottom: 2.5pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 2.5pt"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left">$</td><td style="font-family: Times New Roman, Times, Serif; text-align: right">7,375</td><td style="padding-bottom: 2.5pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="font-family: Times New Roman, Times, Serif; text-align: left; padding-bottom: 2.5pt">Expected to vest July 31, 2014</td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; font-family: Times New Roman, Times, Serif; text-align: right">251,744</td><td style="padding-bottom: 2.5pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 2.5pt"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left">$</td><td style="font-family: Times New Roman, Times, Serif; text-align: right">12.42</td><td style="padding-bottom: 2.5pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 2.5pt"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; text-align: right">3.98</td><td style="padding-bottom: 2.5pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 2.5pt"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left">$</td><td style="font-family: Times New Roman, Times, Serif; text-align: right">7,375</td><td style="padding-bottom: 2.5pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td></tr>
</table>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 11pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 0.4in">(1)</td><td style="text-align: justify">This amount represents the weighted average remaining contractual life of stock options in years.</td></tr></table>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 11pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 0.4in">(2)</td><td style="text-align: justify">This amount represents the difference between the exercise price and $3.03, the closing price of
Dataram common stock on July 31, 2014 as reported on the NASDAQ Stock Market, for all in-the-money options outstanding and all
the in-the-money shares exercisable.</td></tr></table>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0 0 0 0.4in; text-align: justify; text-indent: -0.4in"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: left">As of July 31, 2014, there was approximately $9,000
of total unrecognized compensation costs related to stock options. These costs are expected to be recognized over a weighted average
period of approximately nine months.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>b. Other Stock Options</u></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On June 30, 2008, the Company granted options
to purchase 8,333 shares of the Company’s common stock to a privately held company in exchange for certain patents and other
intellectual property. The options granted are exercisable at a price of $15.60 per share, which was the fair value at the date
of grant, were 100% exercisable on the date of grant and expire ten years after the date of grant.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 11pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td style="font-weight: bold"> </td>
<td colspan="10" style="font-weight: bold; text-align: center">Three Months ended July 31, 2014</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Loss</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Shares</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Per share</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">(numerator)</td><td style="padding-bottom: 1pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">(denominator)</td><td style="padding-bottom: 1pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">amount</td><td style="padding-bottom: 1pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="width: 58%; text-align: left">Basic net loss per share – net loss and weighted average common shares outstanding</td><td style="width: 2%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 10%; text-align: right">(759,767</td><td style="width: 1%; text-align: left">)</td><td style="width: 2%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 10%; text-align: right">2,410,512</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 10%; text-align: right">(.32</td><td style="width: 1%; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="text-align: left">Effect of dilutive securities – stock options</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—  </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—  </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—  </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1pt">Effect of dilutive securities – warrants</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">—  </td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">—  </td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">—  </td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 2.5pt">Diluted net loss per share – net loss, weighted average common shares outstanding and effect of stock options and warrants</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(759,767</td><td style="padding-bottom: 2.5pt; text-align: left">)</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">2,410,512</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(.32</td><td style="padding-bottom: 2.5pt; text-align: left">)</td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 11pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td style="font-weight: bold"> </td>
<td colspan="10" style="font-weight: bold; text-align: center">Three Months ended July 31, 2013</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Loss</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Shares</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Per share</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">(numerator)</td><td style="padding-bottom: 1pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">(denominator)</td><td style="padding-bottom: 1pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">amount</td><td style="padding-bottom: 1pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="width: 58%; text-align: left">Basic net loss per share – net loss and weighted average common shares outstanding</td><td style="width: 2%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 10%; text-align: right">(881,630</td><td style="width: 1%; text-align: left">)</td><td style="width: 2%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 10%; text-align: right">1,754,662</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 10%; text-align: right">(.50</td><td style="width: 1%; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="text-align: left">Effect of dilutive securities – stock options</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—  </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—  </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—  </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1pt">Effect of dilutive securities – warrants</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">—  </td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">—  </td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">—  </td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 2.5pt">Diluted net loss per share – net loss, weighted average common shares outstanding and effect of stock options and warrants</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(881,630</td><td style="padding-bottom: 2.5pt; text-align: left">)</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">1,754,662</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(.50</td><td style="padding-bottom: 2.5pt; text-align: left">)</td></tr></table>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 11pt Arial Unicode MS">
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="2" style="font-family: Times New Roman, Times, Serif; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Shares</td><td style="padding-bottom: 1pt; font-family: Times New Roman, Times, Serif; font-weight: bold"> </td><td style="font-family: Times New Roman, Times, Serif; font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="2" style="font-family: Times New Roman, Times, Serif; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Weighted<br />
average<br /> exercise<br /> price</td><td style="padding-bottom: 1pt; font-family: Times New Roman, Times, Serif; font-weight: bold"> </td><td style="font-family: Times New Roman, Times, Serif; font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="2" style="font-family: Times New Roman, Times, Serif; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Weighted <br /> average<br /> remaining<br /> contractual<br /> life (1)</td><td style="padding-bottom: 1pt; font-family: Times New Roman, Times, Serif; font-weight: bold"> </td><td style="font-family: Times New Roman, Times, Serif; font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="2" style="font-family: Times New Roman, Times, Serif; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Aggregate <br />intrinsic <br />value (2)</td><td style="padding-bottom: 1pt; font-family: Times New Roman, Times, Serif; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="width: 44%; font-family: Times New Roman, Times, Serif; text-align: left">Balance April 30, 2014</td><td style="width: 2%; font-family: Times New Roman, Times, Serif"> </td>
<td style="width: 1%; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="width: 10%; font-family: Times New Roman, Times, Serif; text-align: right">264,244</td><td style="width: 1%; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="width: 2%; font-family: Times New Roman, Times, Serif"> </td>
<td style="width: 1%; font-family: Times New Roman, Times, Serif; text-align: left">$</td><td style="width: 10%; font-family: Times New Roman, Times, Serif; text-align: right">12.42</td><td style="width: 1%; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="width: 2%; font-family: Times New Roman, Times, Serif"> </td>
<td style="width: 1%; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="width: 10%; font-family: Times New Roman, Times, Serif; text-align: right">4.46</td><td style="width: 1%; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="width: 2%; font-family: Times New Roman, Times, Serif"> </td>
<td style="width: 1%; font-family: Times New Roman, Times, Serif; text-align: left">$</td><td style="width: 10%; font-family: Times New Roman, Times, Serif; text-align: right">14,750</td><td style="width: 1%; font-family: Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font-family: Times New Roman, Times, Serif; text-align: left">Granted</td><td style="font-family: Times New Roman, Times, Serif"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; text-align: right">0</td><td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; text-align: right">—  </td><td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; text-align: right">—  </td><td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; text-align: right">—  </td><td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="font-family: Times New Roman, Times, Serif; text-align: left">Exercised</td><td style="font-family: Times New Roman, Times, Serif"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; text-align: right">0</td><td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; text-align: right">—  </td><td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; text-align: right">—  </td><td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; text-align: right">—  </td><td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font-family: Times New Roman, Times, Serif; text-align: left; padding-bottom: 1pt">Expired</td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="border-bottom: Black 1pt solid; font-family: Times New Roman, Times, Serif; text-align: right">0</td><td style="padding-bottom: 1pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 1pt"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; text-align: right">—  </td><td style="padding-bottom: 1pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 1pt"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; text-align: right">—  </td><td style="padding-bottom: 1pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 1pt"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; text-align: right">—  </td><td style="padding-bottom: 1pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="font-family: Times New Roman, Times, Serif; text-align: left; padding-bottom: 2.5pt">Balance July 31, 2014</td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; font-family: Times New Roman, Times, Serif; text-align: right">264,244</td><td style="padding-bottom: 2.5pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 2.5pt"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left">$</td><td style="font-family: Times New Roman, Times, Serif; text-align: right">12.42</td><td style="padding-bottom: 2.5pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 2.5pt"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; text-align: right">4.21</td><td style="padding-bottom: 2.5pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 2.5pt"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left">$</td><td style="font-family: Times New Roman, Times, Serif; text-align: right">14,750</td><td style="padding-bottom: 2.5pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font-family: Times New Roman, Times, Serif; text-align: left; padding-bottom: 2.5pt">Exercisable July 31, 2014</td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; font-family: Times New Roman, Times, Serif; text-align: right">251,744</td><td style="padding-bottom: 2.5pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 2.5pt"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left">$</td><td style="font-family: Times New Roman, Times, Serif; text-align: right">12.92</td><td style="padding-bottom: 2.5pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 2.5pt"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; text-align: right">3.98</td><td style="padding-bottom: 2.5pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 2.5pt"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left">$</td><td style="font-family: Times New Roman, Times, Serif; text-align: right">7,375</td><td style="padding-bottom: 2.5pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="font-family: Times New Roman, Times, Serif; text-align: left; padding-bottom: 2.5pt">Expected to vest July 31, 2014</td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; font-family: Times New Roman, Times, Serif; text-align: right">251,744</td><td style="padding-bottom: 2.5pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 2.5pt"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left">$</td><td style="font-family: Times New Roman, Times, Serif; text-align: right">12.42</td><td style="padding-bottom: 2.5pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 2.5pt"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; text-align: right">3.98</td><td style="padding-bottom: 2.5pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td><td style="font-family: Times New Roman, Times, Serif; padding-bottom: 2.5pt"> </td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left">$</td><td style="font-family: Times New Roman, Times, Serif; text-align: right">7,375</td><td style="padding-bottom: 2.5pt; font-family: Times New Roman, Times, Serif; text-align: left"> </td></tr>
</table>
<table cellpadding="0" cellspacing="0" align="center" style="border-collapse: collapse; width: 80%; font: 11pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">July 31,<br /> 2014</td><td style="padding-bottom: 1pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">April 30,<br /> 2014</td><td style="padding-bottom: 1pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="width: 55%; text-align: left">Trade receivables</td><td style="width: 2%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 10%; text-align: right">3,390,272</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 10%; text-align: right">3,757,408</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">VAT receivable</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">144,610</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">125,490</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="text-align: left; padding-bottom: 1pt">Allowance for doubtful accounts and sales returns</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">(220,000</td><td style="padding-bottom: 1pt; text-align: left">)</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">(220,000</td><td style="padding-bottom: 1pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">3,314,882</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">3,662,898</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
</table>
<table cellpadding="0" cellspacing="0" align="center" style="border-collapse: collapse; width: 80%; font: 11pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="text-align: justify"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">July 31,<br /> 2014</td><td style="padding-bottom: 1pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">April 30,<br /> 2014</td><td style="padding-bottom: 1pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="width: 55%; text-align: justify">Raw materials</td><td style="width: 2%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 10%; text-align: right">1,007,359</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 10%; text-align: right">1,576,238</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify">Work in process</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">80,052</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">63,631</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="text-align: justify; padding-bottom: 1pt">Finished goods</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">933,341</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">651,169</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">2,020,752</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">2,291,038</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
</table>
<table cellpadding="0" cellspacing="0" align="center" style="border-collapse: collapse; width: 80%; font: 11pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="font-family: Courier New, Courier, Monospace; font-weight: bold; text-align: left"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Three months <br /> ended<br /> July 31,<br /> 2014</td><td style="padding-bottom: 1pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Three months <br /> ended<br /> July 31,<br /> 2013</td><td style="padding-bottom: 1pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="width: 55%; text-align: left">United States</td><td style="width: 2%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 10%; text-align: right">6,630,728</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 10%; text-align: right">6,182,801</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font-weight: normal; font-style: normal; text-align: left">Europe</td><td style="font-weight: normal; font-style: normal"> </td>
<td style="font-weight: normal; font-style: normal; text-align: left"> </td><td style="font-weight: normal; font-style: normal; text-align: right">938,767</td><td style="font-weight: normal; font-style: normal; text-align: left"> </td><td style="font-weight: normal; font-style: normal"> </td>
<td style="font-weight: normal; font-style: normal; text-align: left"> </td><td style="font-weight: normal; font-style: normal; text-align: right">870,627</td><td style="font-weight: normal; font-style: normal; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(230,239,255)">
<td style="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt">Other (principally Asia Pacific Region)</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left"> </td><td style="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">155,542</td><td style="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left"> </td><td style="font-weight: normal; font-style: normal; padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left"> </td><td style="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">313,302</td><td style="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 2.5pt">Consolidated</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">7,725,037</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">7,366,730</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
</table>
1754662
2410512
0
0
0
0
-881630
-759767
1754662
2410512
264244
264244
0
0
251744
251744
12.42
12.42
0
0
0
12.92
12.42
0
0
0
3390272
3757408
144610
125490
220000
220000
1007359
1576238
80052
63631
933341
651169
750000
600000
150000
2.50
2.94
2014-10-15
2014-10-15
The Warrants are exercisable for five years after the closing date of the Purchase Agreement. For each $1,000 of principal amount of Bridge Notes, the holder received 1,200 Warrants to purchase the Company’s common stock. Each holder is entitled to exercise one-third of all warrants received at an exercise price of $3.00, one-third of all warrants received at an exercise price of $3.50, and one-third of all warrants received at an exercise price that is equal to the closing price on the closing date of the Purchase Agreement, $2.94. Pursuant to the terms of the Purchase Agreement, the Company has agreed to register the shares underlying the Bridge Notes and the Warrants.
The Company has come to terms with multiple investors for the sale of 1,000,000 shares of Series A Preferred Stock at $5.00 per share. This transaction is subject to stockholders approval at the Company's Annual Meeting currently scheduled for October 15, 2014. The closing is to take place as soon as practicable therefore with a minimum purchase of 400,000 shares. The balance is callable by the Company on an as needed basis. The Preferred Shares are convertible into Common Stock at the rate of 2.5 shares of common stock for every 1 share of Preferred Stock. There is no assurance that the stockholders will approve this transaction and a closing will take place.
142000
45000
12000
272580
319908
1385775
221875
300000
33333
P1Y
P1Y
P1Y
P1Y
P2Y
P5Y
P1Y
Expire five years after date of grant.
Expire five years after date of grant.
Expire five years after date of grant.
Expire either five or ten years after date of grant.
Ten years after date of grant.
15.60
1.00
966667
2016-11-30
60000
2424000
0.0126
1.00
562000
188000
133000
1500000
Prime plus 3.0%
Each time the Company advanced money under the note, the Company was granted 1% of the outstanding Common Stock of Shoreline for every $100,000 advanced up to a maximum of 15%. This was in addition to the 15% allowable under the conversion of the note and the warrant to acquire 30% of Shoreline Common Stock. The conversion is at the rate of 1% of the outstanding Common Stock for each $100,000 converted up to a maximum of 15%.
P3Y
The note is secured by all the assets of Shoreline and Shoreline Capital Management Ltd. ("Shoreline Capital") as guarantor.
0.3
Also executed with the note was a warrant to purchase 30% of the outstanding Common Stock of Shoreline at the time of exercise and the warrant expires sixty days after the third anniversary of the closing of the transaction. The warrant prescribed a formula to determine the price per share at the time of exercise. If all the amounts under the note were advanced and converted and the full warrant is exercised, the Company would have owned 60% of the outstanding Common Stock of Shoreline.
375000
375000
50000
200000
On March 27, 2013, the Company reached an agreement to terminate its relationship with Shoreline. At closing, the Company received an additional $225,000 as a partial repayment of the loan in connection with the termination of all agreements with Shoreline.
The remaining $275,000 was scheduled to be repaid in accordance with the amended and restated promissory note on July 31, 2013.
275000
During the quarter ended October 31, 2013 the Company agreed to settle the amount due on the defaulted note for approximately $162,000. The funds were received in escrow on October 31, 2013 and forwarded to the Company on November 1, 2013.
3.00
86100
306350
86100
13.56
3.50
9000
2000000
2000000
142191
106666
26667
133333
142191
17915
750000
2410512
4716
4716
188000
188000
562000
562000
750000
This amount represents the weighted average remaining contractual life of stock options in years.
This amount represents the difference between the exercise price and $3.03, the closing price of Dataram common stock on July 31, 2014 as reported on the NASDAQ Stock Market, for all in-the-money options outstanding and all the in-the-money shares exercisable.