UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q

(Mark One)

|☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|- | ----------------------------------------------------------------------------------------
|  |                                                                                         
|  | For the quarterly period ended July 31, 2012                                            
|  |                                                                                         
|  | or                                                                                      
|  |                                                                                         
|☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|  |                                                                                         
|  | For the transition period from _____________ to _____________                           



Commission file number: 1-8266





|DATARAM CORPORATION                                                               
|----------------------------------------------------------------------------------
|(Exact name of registrant as specified in its charter)                            
|                                                                                  
|New Jersey                                                                        
|(State or other jurisdiction of                                                   
|incorporation or organization)                                                    
|                                                                                  
|P.O. Box 7528, Princeton, NJ                                                      
|(Address of principal executive offices)                                          
|                                                                                  
|(609) 799-0071                                                                    
|(Registrant's telephone number, including area code)                              
|                                                                                  
|                                                                                  
|(Former name, former address and former fiscal year, if changed since last report)



Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. ☒ Yes ☐
No



Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files). ☒ Yes ☐
No







Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definitions of “accelerated filer and
large accelerated filer” in Rule 12b of the Exchange Act. (Check One):



Large accelerated filer ☐   Accelerated
filer ☐   Non-accelerated filer ☐   Smaller
reporting company ☒



Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒No



Indicate the number of shares outstanding of
each of the issuer's classes of common stock, as of the latest practicable date. Common Stock ($1.00 par value): As of September10, 2012, there were 10,703,309 shares outstanding.









PART I: FINANCIAL INFORMATION



ITEM 1. FINANCIAL STATEMENTS.



Dataram Corporation and Subsidiaries

Consolidated Balance Sheets

July 31, 2012 and April 30, 2012



|                                                                                                                            |  | July 31, 2012 |             |   | April 30, 2012 |  
|--------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ----------- | - | -------------- | -
|                                                                                                                            |  | (Unaudited)   |             |   | (Note 1)       |  
|Assets                                                                                                                      |  |               |             |   |                |  
|Current assets:                                                                                                             |  |               |             |   |                |  
|Cash and cash equivalents                                                                                                   |  | $             | 1,122,971   |   |                | $
|Accounts receivable, less allowance for doubtful accounts and sales returns of $200,000 at July 31, 2012 and April 30, 2012 |  |               | 3,015,096   |   |                |  
|Inventories                                                                                                                 |  |               | 3,801,321   |   |                |  
|Other current assets                                                                                                        |  |               | 500,585     |   |                |  
|Total current assets                                                                                                        |  |               | 8,439,973   |   |                |  
|                                                                                                                            |  |               |             |   |                |  
|Note receivable                                                                                                             |  |               | 375,000     |   |                |  
|                                                                                                                            |  |               |             |   |                |  
|Property and equipment, at cost:                                                                                            |  |               |             |   |                |  
|Machinery and equipment                                                                                                     |  |               | 11,975,980  |   |                |  
|Leasehold improvements                                                                                                      |  |               | 607,867     |   |                |  
|                                                                                                                            |  |               | 12,583,847  |   |                |  
|Less: accumulated depreciation and amortization                                                                             |  |               | 11,945,435  |   |                |  
|Net property and equipment                                                                                                  |  |               | 638,412     |   |                |  
|Other assets                                                                                                                |  |               | 81,449      |   |                |  
|Intangible assets, net of accumulated amortization                                                                          |  |               | 255,666     |   |                |  
|Goodwill                                                                                                                    |  |               | 1,453,034   |   |                |  
|                                                                                                                            |  | $             | 11,243,534  |   |                | $
|                                                                                                                            |  |               |             |   |                |  
|Liabilities and Stockholders' Equity                                                                                        |  |               |             |   |                |  
|Current liabilities:                                                                                                        |  |               |             |   |                |  
|Note payable-revolving credit line                                                                                          |  | $             | 951,383     |   |                | $
|Accounts payable                                                                                                            |  |               | 1,172,145   |   |                |  
|Accrued liabilities                                                                                                         |  |               | 645,720     |   |                |  
|Due to related party – current portion                                                                                      |  |               | 366,667     |   |                |  
|Total current liabilities                                                                                                   |  |               | 3,135,915   |   |                |  
|                                                                                                                            |  |               |             |   |                |  
|Due to related party – long term                                                                                            |  |               | 1,600,000   |   |                |  
|                                                                                                                            |  |               |             |   |                |  
|Total liabilities                                                                                                           |  |               | 4,735,915   |   |                |  
|                                                                                                                            |  |               |             |   |                |  
|Stockholders' equity:                                                                                                       |  |               |             |   |                |  
|Common stock, par value $1.00 per share.                                                                                    |  |               |             |   |                |  
|Authorized 54,000,000 shares; issued and outstanding 10,703,309 at July 31, 2012 and  April 30, 2012                        |  |               | 10,703,309  |   |                |  
|Treasury stock 181,554 shares as of July 31, 2012 and 43,900 shares as of April 30, 2012 at cost                            |  |               | (187,561    | ) |                |  
|Additional paid-in capital                                                                                                  |  |               | 10,395,217  |   |                |  
|Accumulated deficit                                                                                                         |  |               | (14,403,346 | ) |                |  
|                                                                                                                            |  |               |             |   |                |  
|Total stockholders' equity                                                                                                  |  |               | 6,507,619   |   |                |  
|                                                                                                                            |  | $             | 11,243,534  |   |                | $



See accompanying notes to consolidated financial
statements.

1





Dataram Corporation and Subsidiaries

Consolidated Statements of Operations

Three Months Ended July 31, 2012 and 2011

(Unaudited)



|                                    |  | 2012 |           |   | 2011 |  
|----------------------------------- |  | ---- | --------- | - | ---- | -
|                                    |  |      |           |   |      |  
|Revenues                            |  | $    | 7,998,485 |   |      | $
|                                    |  |      |           |   |      |  
|Costs and expenses:                 |  |      |           |   |      |  
|Cost of sales                       |  |      | 6,304,447 |   |      |  
|Engineering                         |  |      | 206,108   |   |      |  
|Selling, general and administrative |  |      | 2,354,217 |   |      |  
|                                    |  |      | 8,864,772 |   |      |  
|                                    |  |      |           |   |      |  
|Loss from operations                |  |      | (866,287  | ) |      |  
|                                    |  |      |           |   |      |  
|Other income (expense):             |  |      |           |   |      |  
|Interest expense, net               |  |      | (71,382   | ) |      |  
|Currency loss                       |  |      | (38,048   | ) |      |  
|Total other expense, net            |  |      | (109,430  | ) |      |  
|                                    |  |      |           |   |      |  
|Loss before income taxes            |  |      | (975,717  | ) |      |  
|                                    |  |      |           |   |      |  
|Income tax expense                  |  |      | -         |   |      |  
|Net loss                            |  | $    | (975,717  | ) |      | $
|                                    |  |      |           |   |      |  
|Net loss per share of common stock  |  |      |           |   |      |  
|Basic                               |  | $    | (.09      | ) |      | $
|Diluted                             |  | $    | (.09      | ) |      | $



See accompanying notes to consolidated financial
statements.

2





Dataram Corporation and Subsidiaries

Consolidated Statements of Cash Flows

Three Months Ended July 31, 2012 and 2011

(Unaudited)



|                                                                            |  | 2012 |            |   | 2011 |  
|--------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | -
|Cash flows from operating activities:                                       |  |      |            |   |      |  
|Net loss                                                                    |  | $    | (975,717   | ) |      | $
|Adjustments to reconcile net loss to net cash used in operating activities: |  |      |            |   |      |  
|Depreciation and amortization                                               |  |      | 100,900    |   |      |  
|Bad debt expense                                                            |  |      | 3,296      |   |      |  
|Stock-based compensation expense                                            |  |      | 99,451     |   |      |  
|Changes in assets and liabilities:                                          |  |      |            |   |      |  
|Decrease (increase) in accounts receivable                                  |  |      | (413,617   | ) |      |  
|Decrease (increase) in inventories                                          |  |      | (869,249   | ) |      |  
|Increase in other current assets                                            |  |      | (384,933   | ) |      |  
|Decrease (increase) in other assets                                         |  |      | (26,617    | ) |      |  
|Increase (decrease) in accounts payable                                     |  |      | 154,817    |   |      |  
|Increase (decrease) in accrued liabilities                                  |  |      | (119,903   | ) |      |  
|Net cash used in operating activities                                       |  |      | (2,431,572 | ) |      |  
|Cash flows from investing activities:                                       |  |      |            |   |      |  
|Acquisition of business                                                     |  |      | -          |   |      |  
|Additions to property and equipment                                         |  |      | -          |   |      |  
|Software development costs                                                  |  |      | -          |   |      |  
|Issuance of note receivable                                                 |  |      | (375,000   | ) |      |  
|Net cash used in investing activities                                       |  |      | (375,000   | ) |      |  
|Cash flows from financing activities:                                       |  |      |            |   |      |  
|Net borrowings (payments) under revolving credit line                       |  |      | 830,397    |   |      |  
|Payments under related party note payable                                   |  |      | (33,333    | ) |      |  
|Net proceeds from sale of common shares                                     |  |      | -          |   |      |  
|Purchase of treasury stock                                                  |  |      | (142,262   | ) |      |  
|Net cash provided by financing activities                                   |  |      | 654,802    |   |      |  
|                                                                            |  |      |            |   |      |  
|Net increase (decrease) in cash and cash equivalents                        |  |      | (2,151,770 | ) |      |  
|                                                                            |  |      |            |   |      |  
|Cash and cash equivalents at beginning of period                            |  |      | 3,274,741  |   |      |  
|                                                                            |  |      |            |   |      |  
|Cash and cash equivalents at end of period                                  |  | $    | 1,122,971  |   |      | $
|                                                                            |  |      |            |   |      |  
|Supplemental disclosures of cash flow information:                          |  |      |            |   |      |  
|Cash paid during the period for:                                            |  |      |            |   |      |  
|Interest                                                                    |  | $    | 71,114     |   |      | $
|Income taxes                                                                |  | $    | -          |   |      | $



See accompanying notes to consolidated financial
statements.

3





Dataram Corporation and Subsidiaries

Notes to Consolidated Financial Statements

July 31, 2012 and 2011

(Unaudited)



(1) Basis of Presentation



The information for the three months ended
July 31, 2012 and 2011 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, 2012 included in the Company’s 2012 Annual Report on Form 10-K filed with the Securities and Exchange
Commission. The April 30, 2012 balance sheet has been derived from these statements.



The consolidated financial statements for the
three months ended July 31, 2012 and 2011 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.



Based on the cash provided by
a securities purchase agreement entered into in May 2011 and described in Note 11, and the cash flows provided from a sale of
the patents in March of 2012 along with the Company’s ability to borrow under its current agreement with a
financial institution, management has concluded that the Company’s short-term liquidity needs have been
satisfied.  There can be no assurance, however, that in the short-term, realized revenues will be in line with the
Company’s projections. Actual results may differ from such projections and are subject to certain risks including,
without limitation, risks arising from: an adverse change in general economic conditions, changes in the price of memory
chips, changes in the demand for memory systems for workstations and servers, changes in the demand for storage caching
subsystems, increased competition in the memory systems and storage industries and other factors described in the
Company’s most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission.Management
continues to evaluate the Company’s liquidity needs and expense structure and adjust its business plan as necessary.In
order to satisfy long-termliquidity needs, the Company will need to generate profitable operations and positive cash
flows.



(2) Summary of Significant Accounting Policies



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 collectability
of note receivable, the deferred income tax asset valuation allowance and other operating allowances and accruals. Actual results
could differ from those estimates.



4





Engineering and Research and Development



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. The Company had been developing computer software for
its XcelaSAN storage caching product line. On November 4, 2010, the Company determined that technological feasibility of the product
was established, and development costs subsequent to that date have been capitalized. Prior to November 4, 2010, the Company expensed
all development costs related to this product line. In the third quarter of fiscal 2012 when the product was made available for
general release to customers, the Company discontinued capitalizing development costs.



During the third quarter of fiscal 2012, the
XcelaSAN product was available for general release and generated approximately $8,000 of revenue, which was significantly lower
than expected. The Company capitalized approximately $907,000 of XcelaSAN development cost in
the first six months of fiscal 2012. The Company capitalized approximately $1,480,000 of XcelaSAN research and development costs
in fiscal 2011. The Company determined in fiscal 2012’s third quarter based on the estimated future
net realizable value for the expected periods of benefit that the carrying value of capitalized software development cost was impaired.
As such, approximately $2,387,000 of capitalized software development cost was written down to zero.



Advertising



Advertising is expensed as incurred and amounted
to approximately $25,000 in fiscal 2013’s first quarter compared to approximately $98,000 in the comparable prior year period.



Income Taxes



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, 2012,
the Company had Federal and state net operating loss (“NOL”) carry-forwards of approximately $19.0 million and $17.1
million, respectively. These can be used to offset future taxable income and expire between 2023 and 2032 for Federal tax purposes
and 2016 and 2032 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, 2012
and April 30, 2012.



Net Loss Per Share



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, 2012 and 2011 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.



5





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,
2012 and 2011:



|                                                                                                                           |  | Three Months ended July 31, 2012 |         
|-------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | --------
|                                                                                                                           |  | Loss                             |         
|                                                                                                                           |  | (numerator)                      |         
|                                                                                                                           |  |                                  |         
|Basic net loss per share – net loss and weighted average common shares outstanding                                         |  | $                                | (975,717
|                                                                                                                           |  |                                  |         
|Effect of dilutive securities – stock options                                                                              |  |                                  | —       
|Effect of dilutive securities – warrants                                                                                   |  |                                  | —       
|                                                                                                                           |  |                                  |         
|Diluted net loss per share – net loss, weighted average common shares outstanding and effect of stock options and warrants |  | $                                | (975,717



|                                                                                                                           |  |                                  |            
|-------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | -----------
|                                                                                                                           |  | Three Months ended July 31, 2011 |            
|                                                                                                                           |  | Loss                             |            
|                                                                                                                           |  |                                  | (numerator)
|                                                                                                                           |  |                                  |            
|Basic net loss per share – net loss and weighted average common shares outstanding                                         |  | $                                | (853,957   
|                                                                                                                           |  |                                  |            
|Effect of dilutive securities – stock options                                                                              |  |                                  | —          
|Effect of dilutive securities – warrants                                                                                   |  |                                  | —          
|                                                                                                                           |  |                                  |            
|Diluted net loss per share – net loss, weighted average common shares outstanding and effect of stock options and warrants |  | $                                | (853,957   



Diluted net loss per common share for the three
month periods ended July 31, 2012 and 2011 do not include the effect of options to purchase 1,895,900 and 1,899,200 shares, respectively,
of common stock because they are anti-dilutive. Diluted net loss per common share for the three month periods ended July 31, 2012
and 2011 do not include the effect of warrants to purchase 1,331,250 and nil shares, respectively, of common stock because they
are anti-dilutive.



Common Stock Repurchases



On December 4, 2002, the Company announced
an open market repurchase plan providing for the repurchase of up to 500,000 shares of the Company’s common stock. On April
10, 2012, the Company announced the additional authorization to repurchase up to 828,000 shares of the Company’s common stock
which at that time made the total available for purchase of up to 1,000,000 shares. In fiscal 2013’s first quarter ended
July 31, 2012 the Company repurchased 137,664 shares for a total cost of $142,262, versus nil in the prior year first quarter.
As of July 31, 2012, the total number of shares authorized for purchase under the program is 818,436 shares.



6





Stock Option Expense



a. Stock-Based
Compensation



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 1,800,000
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.



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 200,000 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. There have been nil shares granted under this
plan.



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.



On September 23, 2010, the Company
granted Mr. Sheerr, who is employed by the Company as the General Manager of the acquired MMB business unit described in Note
4  and is an executive officer of the Company, nonqualified stock options to purchase 100,000 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 100,000 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 100,000 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 vest in one
year.



New shares of the Company's common stock are
issued upon exercise of stock options.



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.



Our consolidated statements of operations for
the three months ended July 31, 2012 and July 31, 2011 include approximately $99,000 and $148,000 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.



7





A summary of option activity for the three
months ended July 31, 2012 is as follows:





|                               |  |  | Shares |           |  | Weighted
 average exercise price |   |      | Weighted  average remaining contractual life (1) |  |  | Aggregate intrinsic value (2) | 
|------------------------------ |  |  | ------ | --------- |  | -------------------------------- | - | ---- | ------------------------------------------------ |  |  | ----------------------------- | 
|                               |  |  |        |           |  |                                  |   |      |                                                  |  |  |                               | 
|Balance April 30, 2012         |  |  |        | 1,745,900 |  |                                  | $ | 2.34 |                                                  |  |  | 5.29                          | 
|                               |  |  |        |           |  |                                  |   |      |                                                  |  |  |                               | 
|Granted                        |  |  |        | 100,000   |  |                                  | $ | 0.69 |                                                  |  |  | –                             | 
|Exercised                      |  |  |        | 0         |  |                                  |   | –    |                                                  |  |  | –                             | 
|Expired                        |  |  |        | 0         |  |                                  |   | –    |                                                  |  |  | –                             | 
|Balance July 31, 2012          |  |  |        | 1,845,900 |  |                                  | $ | 2.25 |                                                  |  |  | 5.05                          | 
|Exercisable July 31, 2012      |  |  |        | 1,397,400 |  |                                  | $ | 2.51 |                                                  |  |  | 5.01                          | 
|Expected to vest July 31, 2012 |  |  |        | 1,754,000 |  |                                  | $ | 2.25 |                                                  |  |  | 5.05                          | 





| | (1) | This amount represents the weighted average remaining contractual life of stock options in years.
| | --- | -------------------------------------------------------------------------------------------------



| | (2) | This amount represents the difference between the exercise price and $0.64, the closing price of
Dataram common stock on July 31, 2012 as reported on the NASDAQ Stock Market, for all in-the-money options outstanding and all
the in-the-money shares exercisable. There were nil in-the-money options at July 31, 2012.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



As of July 31, 2012, there was approximately $141,000
of total unrecognized compensation costs related to stock options. These costs are expected to be recognized over a weighted average
period of approximately six months.



b. Other Stock Options



On June 30, 2008, the Company granted options
to purchase 50,000 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 $2.60 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.



(3) Acquisition



On March 31, 2009, the Company acquired certain assets of Micro Memory Bank, Inc. (“MMB”), a privately
held corporation. MMB is a manufacturer of legacy to advanced solutions in laptop, desktop and server memory products. Under the
terms of the agreement with MMB, the remaining portion of the purchase price
is contingently payable based upon the performance of the new Company business unit to be operated as a result of the acquisition
of the (”MMB business unit”) and consists of a percentage, averaging 65%, payable quarterly, over the subsequent four
years from acquisition date of earnings before interest, taxes, depreciation and amortization of the MMB business unit. For the
three month period ended July 31, 2012, this amount totaled nil, in the comparable prior year period the amount totaled $57,364.
The net assets acquired by the Company were recorded at their respective fair values under the purchase method of accounting. The
results of operations of MMB for the period from the acquisition date, March 31, 2009, through July 31, 2012 have been included
in the consolidated results of operations of the Company.



8





(4) Related Party Transactions



During the three month periods ending July
31, 2012 and 2011, the Company purchased inventories for resale totaling approximately $1,225,000 and $1,350,000, respectively,
from Sheerr Memory, LLC (“Sheerr Memory”). Sheerr Memory’s owner (“Mr. Sheerr”) is employed by the
Company as the general manager of the acquired MMB business unit described in Note 3 and is an executive officer of the Company.
When the Company acquired certain assets of MMB, it did not acquire any of its inventories. However, the Company informally agreed
to purchase such inventory on an as needed basis, provided that the offering price was a fair market value price. The inventory
acquired was purchased subsequent to the acquisition of MMB at varying times and consisted primarily of raw materials and finished
goods used to produce products sold by the MMB business unit. Approximately $438,000 and $557,000 of accounts payable in the Company’s
consolidated balance sheets as of July 31, 2012 and 2011, 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, 2012 and management anticipates that the Company will continue
to do so, although the Company has no obligation to do so.



On December 14, 2011, the Company entered into
a Note and Security Agreement with Mr. Sheerr. The agreement provides for secured financing of up to $2,000,000. The Company is
obligated to pay monthly, interest equalto 10% per annum calculated on a 360 day year of the outstanding
loan balance.Principal is payable in sixty equal monthly installments, beginning on July 15, 2012. The Company may prepay
any or all sums due under this agreement at any time without penalty. On closing, the Company borrowed $1,500,000 under the agreement
and repaid in full the $1,500,000 due under a previous Note. The Company has borrowed the full $2,000,000 available under this
agreement. Principal amounts due under this obligation are $33,333 per month beginning on July 15, 2012. For the next fiscal year
following April 30, 2012, the principal amount due under this obligation is $333,333. In each of four fiscal periods from May 1,
2013 thru April 30, 2017, the principal amounts due under this obligation are $400,000. In the fiscal period from May 1, 2017 thru
June 30, 2017, the principal amount due on this obligation is $66,667. Interest payable to Mr. Sheerr on July 31, 2012 was $16,935.
Interest expense recorded for Mr. Sheerr in the first quarter of fiscal 2013 was $50,824. Interest expense
recorded for Sheerr Memory in the first quarter of fiscal 2012 was $35,389. Interest payable to Sheerr Memory at July 31, 2011
was $12,495.



(5) Cash and Cash Equivalents



Cash and cash equivalents consist of unrestricted
cash and money market accounts.



(6) Accounts Receivable



Accounts receivable consists of the following
categories:



|                                                  |  | July 31, 2012 |           |   | April 30, 2012 |  
|------------------------------------------------- |  | ------------- | --------- | - | -------------- | -
|Trade receivables                                 |  | $             | 3,133,755 |   |                | $
|VAT receivable                                    |  |               | 81,341    |   |                |  
|Allowance for doubtful accounts and sales returns |  |               | (200,000  | ) |                |  
|                                                  |  | $             | 3,015,096 |   |                | $



9





(7) Inventories



Inventories are valued at the lower of cost
or market, with costs determined by the first-in, first-out method. Inventories at July 31, 2012 and April 30, 2012 consist of
the following categories:



|                |  | July 31, 2012 |           |  | April 30, 2012 |  
|--------------- |  | ------------- | --------- |  | -------------- | -
|Raw materials   |  | $             | 2,484,142 |  |                | $
|Work in process |  |               | 28,404    |  |                |  
|Finished goods  |  |               | 1,288,775 |  |                |  
|                |  | $             | 3,801,321 |  |                | $



(8) Note Receivable



On July 30, 2012, a Convertible Senior Promissory
Note was executed by and between Shoreline Memory, Inc. (Shoreline) and the Company whereby the Company will lend up to $1.5 million
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 advances money under the note, the Company is granted 1% of
the common stock for every $100,000 advanced up to a maximum of 15%. This is 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 matures in three years and at that time Shoreline must repay
the note or the Company must convert the note into common stock. The note is 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 Shoreline at the time of exercise and the warrant expires sixty days after the third anniversary.
The warrant prescribes a formula to determine the price per share at the time of exercise. If all the amounts under the note are
advanced and converted and the full warrant is exercised, the Company will own 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 will fulfill 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.
The additional monies which may be borrowed is to continue to fund purchases for orders received. Simultaneously with the issuance
of the Note, the Company acquired for $176, 15% of the equity ownership of Shoreline. The Company has placed no value on its investment
in Shoreline, as it is a startup operation, with no equity as of July 31, 2012.



10





(9) Intangible Assets and Goodwill



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.
Goodwill is tested for impairment on an annual basis and between annual tests if indicators of potential impairment exist, using
a fair-value-based approach. The date of our annual impairment test is March 1.



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, 2012 and 2011 totaled approximately $41,000
in each period. Intangible asset amortization is included in selling, general and administrative expense. The components of finite-lived
intangible assets acquired are as follows:





|                                      |  | Weighted |         |  |          |   |           |           | 
|------------------------------------- |  | -------- | ------- |  | -------- | - | --------- | --------- | 
|                                      |  | Average  |         |  | July 31, |   |           | April 30, | 
|                                      |  | Life     |         |  | 2012     |   |           | 2012      | 
|Trade names                           |  |          | 5 Years |  |          | $ | 733,000   |           | 
|Customer relationships                |  |          | 2 Years |  |          |   | 758,000   |           | 
|Non-compete agreement                 |  |          | 4 Years |  |          |   | 68,000    |           | 
|Total gross carrying amount           |  |          |         |  |          |   | 1,559,000 |           | 
|                                      |  |          |         |  |          |   |           |           | 
|Less accumulated amortization expense |  |          |         |  |          |   | 1,303,334 |           | 
|Net intangible assets                 |  |          |         |  |          | $ | 255,666   |           | 



The following table outlines the estimated
future amortization expense related to intangible assets:



|Year ending April 30: |  |   |        
|--------------------- |  | - | -------
|2013                  |  | $ | 162,566
|2014                  |  |   | 134,000
|                      |  | $ | 296,566



(10) Financing Agreements



On July 27, 2010, the Company entered into
an agreement with a financial institution for formula-based secured debt financing of up to $5,000,000. Borrowings are secured
by substantially all assets. On March 2, 2012, the agreement was amended to reduce the amount available under the credit facility
to $3,500,000 which, according to the Company’s projections, will be sufficient to allow for maximum borrowing under the
formulas provided for in the agreement.On May 17, 2012, the agreement was amended and restated. The amended and restated
documents reduced the interest rate to prime plus 6%, subject to a minimum of 9.25% and also not less than $8,000 per month. The
loan facility allows borrowing of 90% of eligible domestic receivables. In addition, the loan facility now allows borrowing of
90% of eligible foreign receivables to a maximum of $500,000 and 25% of eligible inventory to a maximum of 20% of the amount available
on receivables. The total credit line remains at $3,500,000 and the tangible net worth covenant is $2,000,000, measured quarterly.
The Company agreed to pay an exit fee if it terminates the agreement more than 30 days prior to the one year anniversary of the
amended and restated agreement. The amount of financing available to the Company under the agreement varies with the Company’s
eligible accounts receivable and inventory. At July 31, 2012, the Company had approximately $1,518,000 of additional financing
available to it under the terms of the agreement.



11





On May 11, 2011, the Company and certain investors
entered into a securities purchase agreement pursuant to which the Company agreed to sell an aggregate of 1,775,000 shares of its
common stock and warrants to purchase a total of 1,331,250 shares of its common stock to such investors. The aggregate net proceeds
of such offering and sale, after deducting fees to the Placement Agent and other estimated offering expenses payable by the Company,
was approximately $2,998,000. The transaction closed on May 17, 2011.



On December 14, 2011, the Company entered
into a Note and Security Agreement with Mr. Sheerr. The agreement provides for secured financing of up to $2,000,000. The Company
is obligated to pay monthly, interest equalto 10% per annum calculated on a 360 day year of the outstanding
loan balance.Principal is payable in sixty equal monthly installments, beginning on July 15, 2012. The Company may prepay
any or all sums due under this agreement at any time without penalty. On closing, the Company borrowed $1,500,000 under the agreement
and repaid in full the $1,500,000 due under a previous Note. The Company has borrowed the full $2,000,000 available under this
agreement. Principal amounts due under this obligation are $33,333 per month beginning on July 15, 2012. For the next fiscal year
following April 30, 2012, the principal amount due under this obligation is $333,333. In each of four fiscal periods from May
1, 2013 thru April 30, 2017, the principal amounts due under this obligation are $400,000. In the fiscal period from May 1, 2017
thru June 30, 2017, the principal amount due on this obligation is $66,667. Interest payable to Mr. Sheerr on July 31, 2012 was
$16,935. Interest expense recorded for Mr. Sheerr in the first quarter of fiscal 2013 was $50,824.



(11) Securities Purchase Agreement



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 1,775,000 shares of its common stock and warrants to purchase a total of 1,331,250 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 $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 $1.88 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 $2.26 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 Company’s common stock. After the one year anniversary of the initial exercise
date of the warrants, the Company has the right to call the warrants for cancellation for $.001 per share in the event that the
volume weighted average price of the Company’s common stock for 20 consecutive trading days exceeds $4.52. On May 17, 2011,
this transaction closed.



12





(12) Financial Information by Geographic
Location



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, 2012 and 2011 by geographic region are as follows:



|                                        |  | Three months  ended July 31, 2012 |           |  | Three months  ended July 31, 2011 |  
|--------------------------------------- |  | --------------------------------- | --------- |  | --------------------------------- | -
|United States                           |  | $                                 | 5,975,204 |  |                                   | $
|Europe                                  |  |                                   | 1,321,922 |  |                                   |  
|Other (principally Asia Pacific Region) |  |                                   | 701,359   |  |                                   |  
|Consolidated                            |  | $                                 | 7,998,485 |  |                                   | $



(13) Recently Adopted Accounting Guidance



There are no new pronouncements which affect
the Company.



(14) Concentration of Credit Risk



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.



(15) Subsequent Events



On August 1, 2012, Shoreline borrowed an additional
$375,000 from the Company, aggregating total indebtedness pursuant to the Note of $750,000. Outstanding indebtedness under the
Note bears interest at Prime plus 3.0% (See Note 8).



On August 20, 2012, the Company executed an agreement
to sell Advanced Micro Devices, Inc. ("AMD") licensed and branded versions of the Company's product, RAMDisk. The agreement
provides for a three year term and may be terminated by either party on sixty (60) days written notice.



13





ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



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 Corporation 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.



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.



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.



The Company has entered into two agreements,
one with Shoreline Memory Inc. ("Shoreline") and the other with Advanced Micro Devices, Inc. ("AMD") for the
purpose of expanding its customer base and product offerings. The Master Services Agreement with Shoreline provides for the Company
to fulfill 50% of the orders Shoreline receives from its primary customer. In addition, Shoreline has the ability to borrow up
to $1,500,000 from the Company pursuant to a Convertible Senior Promissory Note ("Note"). The Note bears interest at
Prime plus 3.0% and is convertible by the Company into equity ownership of Shoreline (See Note 8). The agreement with AMD provides
for the Company to sell AMD licensed and branded versions of its RAMDisk software. Management is unable to determine the amount
of revenue to be generated in fiscal 2013 from these agreements. However, these agreements, as well as other similar agreements,
the Company believes will provide new revenue sources and expanded markets for the Company's products.



RAMDisk was acquired by Dataram in 2008. For
the most part, the software was downloadable as freeware for personal use. Since the Company was able to track the number of downloads,
it realized the popularity of the software and created a larger capacity version and commercial version for purchase. In fiscal
2012, approximately 2,580 were purchased for total revenue of $41,000. For the quarter ended July 31, 2012, approximately 860 were
purchased for total revenues of approximately $22,000. The Company believes that the AMD branding of the product will increase
its visibility and potential for increased revenue despite the free versions which will remain available.



14





Liquidity and Capital Resources



As of July 31, 2012, cash and cash equivalents
amounted to approximately $1,123,000 and working capital amounted to approximately $5,304,000, reflecting a current ratio of 2.7.
This compares to cash and cash equivalents of approximately $3,275,000 and working capital of approximately $6,690,000, reflecting
a current ratio of 4.0 as of April 30, 2012.



During the three month period ended July 31,
2012, net cash used in operating activities totaled approximately $2,432,000. Net loss in the period totaled approximately $976,000
and included stock-based compensation expense of approximately $99,000 and depreciation and amortization expense of approximately
$101,000. Inventories increased by approximately $869,000. The increase in inventories was a management decision to take advantage
of favorable buying opportunities. Trade receivable increased by approximately $414,000. Other current assets increased by approximately
$385,000. Most of the increase in other current assets was the result of accounts payable deposits to DRAM manufactures required
to secure raw material. Accrued liabilities decreased by approximately $120,000. Accounts payable increased by approximately $155,000.



Net cash used in investing activities totaled
approximately $375,000 for the three month period ended July 31, 2012 and was the result of the issuance of a note receivable to
Shoreline Memory described in Note 8 to the consolidated financial statements.



Net cash provided by financing activities totaled
approximately $655,000 for the three month period ended July 31, 2012 and consisted primarily of proceeds from borrowings under
a revolving credit facility of approximately $830,000, more fully described in Note 11 to the consolidated
financial statements. The Company also purchased approximately $142,000 of treasury stock. The Company also made the first
principal payment of $33,333 to Mr. Scheerr under the Note and Security agreement, more fully described in Note 4 to the Consolidated
Financial Statements.



On July 27, 2010, the Company entered into
an agreement with a financial institution for formula-based secured debt financing of up to $5,000,000. Borrowings are secured
by substantially all assets. On March 2, 2012, the agreement was amended to reduce the amount available under the credit facility
to $3,500,000 which, according to the Company’s projections, will be sufficient to allow for maximum borrowing under the
formulas provided for in the agreement.On May 17, 2012, the agreement was amended and restated. The amended and restated
documents reduced the interest rate to prime plus 6%, subject to a minimum of 9.25% and also not less than $8,000 per month. The
loan facility allows borrowing of 90% of eligible domestic receivables. In addition, the loan facility now allows borrowing of
90% of eligible foreign receivables to a maximum of $500,000 and 25% of eligible inventory to a maximum of 20% of the amount available
on receivables. The total credit line remains at $3,500,000 and the tangible net worth covenant is $2,000,000, measured quarterly.
The Company agreed to pay an exit fee if it terminates the agreement more than 30 days prior to the one year anniversary of the
amended and restated agreement. The amount of financing available to the Company under the agreement varies with the Company’s
eligible accounts receivable and inventory. At July 31, 2012, the Company had approximately $1,518,000 of additional financing
available to it under the terms of the agreement



On May 11, 2011, the Company and certain investors
entered into a securities purchase agreement pursuant to which the Company agreed to sell an aggregate of 1,775,000 shares of its
common stock and warrants to purchase a total of 1,331,250 shares of its common stock to such investors. The aggregate net proceeds
of such offering and sale, after deducting fees to the Placement Agent and other estimated offering expenses payable by the Company,
was approximately $2,998,000. The transaction closed on May 17, 2011.



On December 14, 2011, the Company entered into
a Note and Security Agreement with Mr. Sheerr. The agreement provides for secured financing of up to $2,000,000. The Company is
obligated to pay monthly, interest equalto 10% per annum calculated on a 360 day year of the outstanding
loan balance.Principal is payable in sixty equal monthly installments, beginning on July 15, 2012. The Company may prepay
any or all sums due under this agreement at any time without penalty. On closing, the Company borrowed $1,500,000 under the agreement
and repaid in full the $1,500,000 due under a previous agreement that the Company entered into with Sheerr Memory on July 27, 2010.
The Company has borrowed the full $2,000,000 available under this agreement. Principal amounts due under this obligation are $33,333
per month beginning on July 15, 2012. For the next fiscal year following April 30, 2012, the principal amount due under this obligation
is $333,333. In each of four fiscal periods from May 1, 2013 thru April 30, 2017, the principal amounts due under this obligation
are $400,000. In the fiscal period from May 1, 2017 thru June 30, 2017, the principal amount due on this obligation is $66,667.
Interest payable to Mr. Sheerr on July 31, 2012 was $16,935.



15





On July 30, 2012, a Convertible Senior Promissory
Note was executed by and between Shoreline and the Company whereby the Company will 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 advances money under the note, the Company is granted 1% of the common stock for every
$100,000 advanced up to a maximum of 15%. This is 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 matures in three years and at that time Shoreline must repay the note or the Company
must convert the note into common stock. The note is 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 Shoreline at the time of exercise and the warrant expires sixty days after the third anniversary. The warrant prescribes
a formula to determine the price per share at the time of exercise. If all the amounts under the note are advanced and converted
and the full warrant is exercised, the Company will own 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 will fulfill
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. The additional monies
which may be borrowed are to continue to fund purchases for orders received. The note receivable is guaranteed by Shoreline Capital
which has the same ownership as Shoreline. The company monitors the financial condition of Shoreline Capital on a quarterly basis
and evaluates the collectability of the note receivable should the guarantee be needed to repay the loan.



Based on the cash provided by a securities purchase agreement entered into in May 2011 and described in Note 11, and the cash
flows provided from a sale of the patents in March of 2012 along with the Company's ability to borrow under its current agreement
with a financial institution, management has concluded that the Company's short-term liquidity needs have been satisfied.



Future minimum lease payments under non-cancellable
operating leases (with initial or remaining lease terms in excess of one year) as of April 30, 2012 are as follows:



|Year ending April 30 |                              |  |  |  
|-------------------- | ---------------------------- |  |  | -
|                     | 2013                         |  |  | $
|                     | 2014                         |  |  |  
|                     | 2015                         |  |  |  
|                     | 2016                         |  |  |  
|                     | 2017                         |  |  |  
|                     | Thereafter                   |  |  |  
|                     | Total minimum lease payments |  |  | $



The Company has no other material commitments.



Results of Operations



Revenues for the three month period ended July
31, 2011 were $7,998,000 compared to revenues of $10,270,000 for the comparable prior year period. The decrease in revenues from
the prior year’s first quarter was primarily a result of a decrease in average selling prices attributable to a decline in
the price of DRAM chips, the primary raw material used in the Company’s products. The average purchase price of DRAM chips
that the Company uses in its products declined by approximately 43% year over year.



16





Revenues for the three months ended July 31,
2012 and 2011 by geographic region are as follows:



|                                        |  | Three months  ended  July 31, 2012 |           |  | Three months ended July 31, 2011 |  
|--------------------------------------- |  | ---------------------------------- | --------- |  | -------------------------------- | -
|United States                           |  | $                                  | 5,975,000 |  |                                  | $
|Europe                                  |  |                                    | 1,322,000 |  |                                  |  
|Other (principally Asia Pacific Region) |  |                                    | 701,000   |  |                                  |  
|Consolidated                            |  | $                                  | 7,998,000 |  |                                  | $



Cost of sales for the three month period ended
July 31, 2012 was $6,304,000 versus $7,375,000 in the prior year comparable period. Cost of sales as a percentage of revenues for
the fiscal quarters ended July 31, 2012 and 2011 were 79% and 72%, respectively. The increase in cost of sales as a percentage
of revenues in the current fiscal year period was primarily the result of reduced average selling prices. Fluctuations in cost
of sales as a percentage of revenues 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.



Engineering expense in fiscal 2013's first
quarter was $206,000 versus $181,000 for the same respective prior year period.



Research and development expense in fiscal
2013’s and 2012’s first quarter was nil. In fiscal 2012’s first quarter ended July 31, 2011, the Company capitalized
$633,000 of costs related to the XcelaSAN . During the third quarter of fiscal 2012, the XcelaSAN product was available for general
release and generated approximately $8,000 of revenue, which was significantly lower than expected. The
Company capitalized approximately $907,000 of XcelaSAN development cost in the first six months of fiscal 2012. The Company
capitalized approximately $1,480,000 of XcelaSAN research and development costs in fiscal 2011. The Company determined in fiscal
2012’s third quarter based on the estimated future net realizable value for the expected periods
of benefit that the carrying value of capitalized software development cost was impaired. As such, approximately $2,387,000 of
capitalized software development cost was written off.



Selling, general and administrative expense
in fiscal 2012’s first quarter totaled $2,354,000 versus $3,453,000 in the same prior year period, a decrease of approximately
$1,100,000. The decrease in this year’s first quarter expense is primarily the result of decreased selling and marketing
expenses related to the Company’s XcelaSAN product totaling approximately $1,000,000. The balance of the decrease in selling,
general and administrative expense was related to the traditional memory business for employee related cost, from reduced head
count.



Other income (expense), net for the first quarter
of fiscal 2013 totaled expense of $109,000 versus $114,000 of expense for the same prior year period. Other expense in fiscal 2013’s
first quarter consisted primarily of interest expense of $71,000 and $38,000 of foreign currency transaction losses, primarily
as a result of the EURO weakening relative to the US dollar. Prior year three month other expense totaled $114,000 and consisted
of $103,000 of interest expense and $11,000 of foreign currency transaction losses, primarily as a result of the EURO weakening
relative to the US dollar.





17





Income tax expense
for the first quarter of fiscal 2013 and 2012 were nil. 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 FASB 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, 2012,
the Company had Federal and state net operating loss (“NOL”) carry-forwards of approximately $19.0 million and $17.1
million, respectively. These can be used to offset future taxable income and expire between 2023 and 2032 for Federal tax purposes
and 2016 and 2032 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, 2012
and April 30, 2012.



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, 2012, 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. Estimated warranty costs are accrued
by management upon product shipment based on an estimate of future warrantyclaims.



Research and Development - 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.



Long-Lived Assets
-Long-lived assets, such as property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison
of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the
carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which
the carrying amount of the asset exceeds the estimated fair value of the asset. Assets to be disposed of would be separately presented
in the consolidated balance sheets and reported at the lower of the carrying amount or fair value less cost to sell, and no longer
depreciated. The Company considers various valuation factors, principally undiscounted cash flows, to assess the fair values of
long-lived assets.



18





Income Taxes - 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 FASB 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.



Goodwill - Goodwill is tested for impairment
on an annual basis and between annual tests if indicators of potential impairment exist, using a fair-value-based approach. The
date of our annual impairment test is March 1.



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 income 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, the collectability of note receivable and other operating allowances and accruals. Actual
results could differ from those estimates.





ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK



The Company does not invest in market risk
sensitive instruments. At times, the Company's cash equivalents consist of overnight deposits with banks and money market accounts.
The Company's objective in connection with its investment strategy is to maintain the security of its cash reserves without taking
market risk with principal.



The Company purchases and sells primarily in
U.S. dollars. The Company sells in foreign currency (primarily Euros) to a limited number of customers and as such incurs some
foreign currency risk. At any given time, approximately 5% to 10% of the Company’s accounts receivable are denominated
in currencies other than U.S. dollars. At present, the Company does not purchase forward contracts as hedging instruments, but
could do so as circumstances warrant.





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ITEM 4. CONTROLS AND PROCEDURES



The Chief Executive Officer and Chief Financial
Officer of the Company have evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule
13a-15(b) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial
Officer have concluded that these disclosure controls and procedures are effective. There were no changes in our internal control
over financial reporting during the quarter ended July 31, 2012 that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.













20





PART II: OTHER INFORMATION





Item 1. Legal
ProceEdinGS



In connection with
the consolidation of the Company’s manufacturing facilities the Company’s lease expired in Ivyland, PA. The landlord
has filed suit against the Company claiming damages related to restoring the demised premises to its original condition and unpaid
rent. The Company believes the amounts claimed for the restoration of the demised premises is without merit and plans to defend
its position aggressively. The Company believes that any amounts paid in this matter will not have a material effect on the Company’s
financial condition.





Item 1A. Risk
Factors.



No material changes from
Annual Report on Form 10-K.



Item 2. Unregistered
Sales of Equity Securities and Use of Proceeds.



No reportable event.



Item 3. Defaults
upon Senior Securities.



No reportable event.



Item 4. MINE SAFETY DISCLOSURES



No reportable event.



Item 5. Other
Information.



No reportable event.



21







Item 6. Exhibits.



|Exhibit No | Description                                                         
|---------- | --------------------------------------------------------------------
|           |                                                                     
|10.1       | Dataram Corporation CONVERTIBLE SENIORPROMISSORY NOTE               
|           |                                                                     
|10.2       | Dataram Corporation Security Agreement                              
|           |                                                                     
|31(a)      | Rule 13a-14(a) Certification of John H. Freeman.                    
|           |                                                                     
|31(b)      | Rule 13a-14(a) Certification of Marc P. Palker.                     
|           |                                                                     
|32(a)      | Section 1350 Certification of John H. Freeman (furnished not filed).
|           |                                                                     
|32(b)      | Section 1350 Certification of Marc P. Palker (furnished not filed). 
|           |                                                                     
|101.INS(1) | XBRL Instance Document.                                             
|           |                                                                     
|101.SCH(1) | XBRL Taxonomy Extension Schema Document                             
|           |                                                                     
|101.CAL(1) | XBRL Taxonomy Extension Calculation Linkbase Document               
|           |                                                                     
|101.DEF(1) | XBRL Taxonomy Extension Definition Linkbase Document                
|           |                                                                     
|101.LAB(1) | XBRL Taxonomy Extension Label Linkbase Document                     
|           |                                                                     
|101.PRE(1) | XBRL Taxonomy Extension Presentation Linkbase Document              










(1) To be filed by amendment pursuant to
Section 405(a)(2)(ii) of Regulation S-T.





22





Signatures



Pursuant to the requirements
of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.





|                         | DATARAM CORPORATION
|------------------------ | -------------------
|                         |                    
|Date: September 14, 2012 | By:                
|                         |                    
|                         |                    
|                         |                    





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