This Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities and Exchange Act of 1934, as amended. The information provided in this interim report may include forward-looking statements relating to future events, such as the development of new products, pricing and availability of raw materials or the future financial performance of the Company. Actual results may differ from such projections and are subject to certain risks including, without limitation, risks arising from: changes in the price of memory chips, changes in the demand for memory systems for workstations and servers, increased competition in the memory systems industry, delays in developing and commercializing new products and other factors described in the Company's most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission, which can be reviewed at http://www.sec.gov.

Executive Overview

Dataram is a developer, manufacturer and marketer of large capacity memory products primarily used in high performance network servers and workstations. The Company provides customized memory solutions for original equipment manufacturers (OEMs) and compatible memory for leading brands including Dell, HP, IBM and Sun Microsystems. The Company also manufactures a line of memory products for Intel and AMD motherboard based servers.

The Company's memory products are sold worldwide to OEMs, distributors, value-added resellers and end-users. The Company has a manufacturing facility in the United States with sales offices in the United States, Europe and Japan.

The Company 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.

Liquidity and Capital Resources

The Company's cash and working capital position remain strong. As of October 31, 2008, cash and cash equivalents amounted to $16.0 million and working capital amounted to $20.1 million, reflecting a current ratio of 11.1, compared to cash and cash equivalents of $17.6 million and working capital of $22.4 million and a current ratio of 10.0 as of April 30, 2008.

During the first six months of fiscal year 2009, net cash used in operating activities totaled approximately $1,281,000. Net loss in the six month period was approximately $999,000. Deferred income taxes increased by $532,000 and accounts payable decreased by $504,000. Other current assets increased by $274,000 primarily due to the prepayment of annual insurance premiums. Cash used in operating activities was partially offset by a decrease in accounts receivable of $380,000 and by depreciation expense recorded in the quarter of $167,000. Non-cash stock-based expense of approximately $377,000 was also recorded in the quarter.

Net cash used in investing activities totaled approximately $341,000 for the six months ended October 31, 2008. This was primarily the result of fixed asset additions. The bulk of these additions were for test equipment used in the Company's manufacturing process.

On June 21, 2004, the Company entered into a credit facility with a bank, which provides for up to a $5 million revolving credit line. Advances under the facility were limited to 75% of eligible receivables, as defined in the agreement. The agreement provides for LIBOR rate loans and base rate loans at an interest rate no higher than the bank's base commercial lending rate. The Company is required to pay a fee equal to one-eighth of one percent per annum on the unused commitment. The agreement contains certain restrictive covenants, specifically a trailing twelve month profitability requirement, a current asset to current liabilities ratio, a total liabilities to tangible net worth ratio and certain other covenants, as defined in the agreement. The agreement was amended on April 4, 2005. The effect of the amendment was to increase the limit of the Company's combined open market stock repurchases and dividend payments to $2.5 million per year from $1.0 million per year without prior waiver. The agreement was scheduled to expire on June 21, 2006. On June 20, 2006, the agreement was amended. The effect of the amendment was to extend the expiration date of the agreement to August 15, 2008 and remove the eligible accounts receivable limitation on advances under the facility. The amendment also modified the total liabilities to tangible net worth ratio covenant. The credit facility has been extended to September 15, 2009. The Company is in compliance with all covenants of the agreement and there have been no borrowings against the credit line.

Management believes that the Company's cash flows generated from operations will be sufficient to meet short-term liquidity needs. Management further believes that its working capital together with internally generated funds from its operations and its bank line of credit are adequate to finance the Company's long-term operating needs and future capital requirements.

Future minimum lease payments under noncancellable operating leases (with initial or remaining lease terms in excess of one year) as of April 30, 2008 are as follows:

                                        Operating leases
Year ending April 30:                   ________________
    2009                                 $      411,000
    2010                                        418,000
    2011                                        371,000
    2012                                         34,000
    Thereafter                                        0
                                        _______________
    Total minimum lease payments         $    1,234,000
                                         ==============

The Company has no other material commitments.

Results of Operations

Revenues for the three-month period ended October 31, 2008 were $7,059,000 compared to revenues of $8,556,000 for the comparable prior year period, a decrease of approximately 18%. Fiscal 2009 six-month revenues totaled $14,622,000 versus six-month revenues of $17,173,000 in the prior year, a decrease of approximately 15%. As previously stated, the Company's selling prices are significantly dependent on the pricing and availability of DRAM hips. The Company's products utilize DRAMs of varying capacities, organizations and package types. The changes in the purchase cost of specific DRAMs over time are not necessarily uniform or even move in the same direction. In fiscal 2008, the Company's purchase cost of the primary DRAMs used in its products declined by over 60 percent. This resulted in a larger than anticipated reduction in selling prices as the Company passed these cost savings through to its customers. Consequently, the Company's selling prices for similar products when compared on a year over year basis were lower than expected. During the first six months of the current fiscal year, that selling price pressure has lessened.

Revenues for the three and six month periods ended October 31, 2008 and 2007 by geographic region are as follows:

                                    Three months ended       Six months ended
                                    October 31, 2008         October 31, 2008
                                    ________________         ________________
United States                       $      5,581,000         $     11,155,000
Europe                                     1,074,000                2,521,000
Other (principally Asia Pacific Region)      404,000                  946,000
                                    ________________         ________________
Consolidated                        $      7,059,000         $     14,622,000
                                    ================         ================


                                  Three months ended          Six months ended
                                    October 31, 2007          October 31, 2007
                                    ________________          ________________
United States                       $      5,850,000          $     12,239,000
Europe                                     1,970,000                 3,492,000
Other (principally Asia Pacific Region)      736,000                 1,442,000
                                    ________________          ________________
Consolidated                        $      8,556,000          $     17,173,000
                                    ================          ================

Cost of sales for the second quarter and six months were 66% of revenues, versus 62% and 63% for the same respective prior year periods. Fluctuations in cost of sales as a percentage of revenues in any given quarter are not unusual and can result from many factors, some of which are a rapid change in the price of DRAMs, or a change in product mix possibly resulting from a large order or series of orders for a particular product or a change in customer mix. Cost of sales in the second quarter and six months were $4,660,000 and $9,596,000, respectively, compared to $5,314,000 and $10,893,000 in the prior year comparable periods.

Engineering expense in fiscal 2009's second quarter and six months were $302,000 and $634,000, respectively, versus $286,000 and $587,000 for the same respective prior year periods. Engineering expense excludes expenses incurred for research and development into new product areas.

Research and development expense in fiscal 2009's second quarter and six months were $254,000 and $456,000, respectively, versus nil in the same prior year periods. In the current fiscal year, the Company has implemented a strategy to introduce new and complementary products into its offerings portfolio. The Company is currently focusing on the development of certain high performance storage products. Of the total research and development expense incurred in this fiscal year, approximately $121,000 represented a non-cash expense for the fair value of stock options issued to a privately held company to acquire certain patents and other intellectual property. These patents and other intellectual property were deemed to have no alternative future use when acquired and we had an uncertainty in receiving future economic benefits from them. We expect to make further investments in this area.

Selling, general and administrative (S,G&A) expense in fiscal 2009's second quarter and six months increased by $214,000 and $1,083,000 respectively, from the comparable prior year periods. The current fiscal year's six months expense includes a charge of approximately $716,000 related to a retirement agreement entered into with the Company's former chief executive officer. Of this amount, approximately $660,000 relates to payments defined in the agreement and the balance consists primarily of legal fees incurred by the Company associated with this matter. Current fiscal year S,G&A expense includes a $138,000 charge as a result of one of the Company's foreign customers entering receivership. Additionally, the Company has charged S,G&A expense and increased its reserve for doubtful accounts by $50,000 in the second quarter of the current fiscal year. Management concluded that the increase in the reserve was warranted given the inherent increase in risk level of carrying accounts receivable, generally due to the recent, well publicized increase in economic uncertainty. Stock-based compensation expense is recorded as a component of S,G&A expense and totaled $130,000 and $256,000, respectively, in the second quarter and six months, compared to $73,000 and $166,000 in the comparable prior year periods.

Other income, net for the second quarter and six months totaled $16,000 and $125,000, respectively, for fiscal 2009 and $229,000 and $448,000, for the same respective periods in fiscal 2008. Other income in fiscal 2009's second quarter consisted primarily of $79,000 of net interest income received. Additionally, other income included $63,000 of foreign currency loss, primarily as a result of the EURO weakening relative to the US dollar. Fiscal 2009's six months other income consisted primarily of $188,000 of net interest income received and $63,000 of foreign currency loss, primarily as a result of the EURO weakening relative to the US dollar. Other income in fiscal 2008's second quarter consisted primarily of $201,000 of net interest income. Additionally, there was $28,000 of foreign currency gain, primarily as a result of the EURO strengthening relative to the US dollar. Other income in fiscal 2008's six months consisted primarily of $402,000 of net interest income. Additionally, there was $45,000 of foreign currency gain, primarily as a result of the EURO strengthening relative to the US dollar.

Income tax expense (benefit) for the second quarter and six months of fiscal 2009 was a benefit of $248,000 and $633,000 respectively, verses expense of $331,000 and $566,000 for the same prior year periods. The Company's effective tax rate for financial reporting purposes in fiscal 2009 is approximately 38.8%. However, the Company has federal NOL carry-forwards totaling approximately $1.5 million and therefore will continue to make cash payments for income taxes at an approximate rate of 8.0% of pretax earnings until it utilizes all of its NOL carry-forwards.

Critical Accounting Policies

During December 2001, the Securities and Exchange Commission (SEC) published a Commission Statement in the form of Financial Reporting Release No. 60 which encouraged that all registrants discuss their most "critical accounting policies" in management's discussion and analysis of financial condition and results of operations. The SEC has defined critical accounting policies as those that are both important to the portrayal of a company's financial condition and results, and that require management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. While the Company's significant accounting policies are summarized in Note 1 to the consolidated financial statements included in the Company's Form 10-K for the fiscal year ended April 30, 2008, the Company believes the following accounting policies to be critical:

Revenue Recognition - Revenue is recognized when title passes upon shipment of goods to customers. The Company's revenue earning activities involve delivering or producing goods. The following criteria are met before revenue is recognized: persuasive evidence of an arrangement exists, shipment has occurred, selling price is fixed or determinable and collection is reasonably assured. The Company does experience a minimal level of sales returns and allowances for which the Company accrues a reserve at the time of sale in accordance with SFAS No. 48, "Revenue Recognition When Right of Return Exists". Estimated warranty costs are accrued by management upon product shipment based on an estimate of future warranty claims.

Stock Option Expense - In December 2004, SFAS No. 123 (revised 2004), "Share-Based Payment"("SFAS 123(R)") was issued. SFAS 123(R) revises SFAS 123 and supersedes APB No. 25, "Accounting for Stock Issued to Employees" ("APB 25"). SFAS 123, as originally issued in 1995, established as preferable a fair value-based method of accounting for share-based payment transactions with employees. However, SFAS 123 as amended permitted entities the option of continuing to apply the intrinsic value method under APB 25 that the Company had been using, as long as the footnotes to the financial statements disclosed what net income would have been had the preferable fair value-based method been used. SFAS 123(R) requires that the compensation cost relating to all share-based payment transactions, including employee stock options, be recognized in the historical financial statements. That cost is measured based on the fair value of the equity or liability instrument issued and amortized over the related service period. The Company adopted the guidance in SFAS 123(R) effective May 1, 2006. As such, the accompanying consolidated statement of operations for fiscal 2009's second quarter and six months ended October 31, 2008 includes approximately $130,000 and $256,000, of compensation expense, respectively, in the selling, general and administrative expense line item related to the fair value of options granted to employees and directors under the Company's stock-based employee compensation plans which is being amortized over the service period in the financial statements, as required by SFAS 123(R). These awards have been classified as equity instruments, and as such, a corresponding increase of approximately, $256,000 has been reflected in additional paid-in capital in the accompanying consolidated balance sheet as of October 31, 2008. Fiscal 2008's second quarter and six months ended October 31, 2007 includes approximately $73,000 and $166,000 of compensation expense, respectively in the selling, general and administrative expense line and as such, a corresponding increase of approximately, $166,000 has been reflected in additional paid-in capital in the accompanying consolidated balance sheet as of October 31, 2007. The fair value of each stock option granted is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:
Expected life is based on the Company's historical experience of option exercises relative to option contractual lives; Expected volatility is based on the historical volatility of the Company's share price; Expected dividend yield assumes the current dividend rate remains unchanged; Risk free interest rate approximates United States government debt rates at the time of option grants.

Research and Development Expense - All research and development costs are expensed as incurred, including Company-sponsored research and development and costs of patents and other intellectual property that have no alternative future use when acquired and in which we had an uncertainty in receiving future economic benefits.

Income Taxes - The Company utilizes the asset and liability method of accounting for income taxes in accordance with the provisions of SFAS No. 109, "Accounting for Income Taxes". Under the asset and liability method of SFAS No. 109, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company considers certain tax planning strategies in its assessment as to the recoverability of its tax assets. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Under SFAS No. 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period that the tax rate changes.

Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, including deferred tax asset valuation allowances and certain other reserves and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary. Some of the more significant estimates made by management include the allowance for doubtful accounts and sales returns, the deferred tax asset valuation allowance and other operating allowances and accruals. Actual results could differ from those estimates.