Flash Memory, Inc.

Exhibit 1 Income Statements, 2007 - 2009 ($000s except earnings per share)

2007 2008 2009

Net sales $77,131 $80,953 $89,250

Cost of goods sold $62,519 $68,382 $72,424
Gross margin $14,612 $12,571 $16,826

Research and development $3,726 $4,133 $4,416

Selling, general and administrative $6,594 $7,536 $7,458
Operating income $4,292 $902 $4,952

Interest expense $480 $652 $735

Other income (expenses) -$39 -$27 -$35

Income before income taxes $3,773 $223 $4,182

Income taxes (a) $1,509 $89 $1,673

Net income $2,264 $134 $2,509

Earnings per share $1.52 $0.09 $1.68

(a) In years 2007 and after, Flash's effective combined federal and state income tax rate was 40%.
Flash Memory, Inc.

Exhibit 2 Balance Sheets, 2007 - 2009 ($000s except number of shares outstanding)

December 31,
2007 2008 2009

Cash $2,536 $2,218 $2,934

Accounts receivable $10,988 $12,864 $14,671 0.78447 0.8607 0.87295
Inventories $9,592 $11,072 $11,509
Prepaid expenses $309 $324 $357
Total current assets $23,425 $26,478 $29,471

Property, plant & equipment at cost $5,306 $6,116 $7,282

Less: Accumulated depreciation $792 $1,174 $1,633
Net property, plant & equipment $4,514 $4,942 $5,649

Total assets $27,939 $31,420 $35,120

Accounts payable $3,084 $4,268 $3,929

Notes payable (a) $6,620 $8,873 $10,132
Accrued expenses $563 $591 $652
Income taxes payable (b) $151 $9 $167
Other current liabilities $478 $502 $554
Total current liabilities $10,896 $14,243 $15,434

Common stock at par value $15 $15 $15

Paid in capital in excess of par value $7,980 $7,980 $7,980
Retained earnings $9,048 $9,182 $11,691
Total shareholders' equity $17,043 $17,177 $19,686

Total liabilities & shareholders' equity $27,939 $31,420 $35,120

Number of shares outstanding 1,491,662 1,491,662 1,491,662

(a) Secured by accounts receivable.

(b) To avoid a penalty for underpayment of income taxes, Flash made equal estimated tax payments quarterly on the 15th of
April, June, September, and December of each year. The total of these four quarterly payments was required to equal at
least the lesser of (a) 90% of the taxes that would actually be incurred in the same year, or (b) 100% of the taxes due
on income of the prior year.

For informational purposes only:

Notes payable / accounts receivable 60.2% 69.0% 69.1%

Notes payable / shareholders' equity 38.8% 51.7% 51.5%
Notes payable / total capital 28.0% 34.1% 34.0%
Flash Memory, Inc.

Exhibit 3 Key Forecasting Assumptions and Relationships for 2010 Through 2012

Line Item Assumption or Ratio

Cost of goods sold 81.10% of sales 81.10%

Research and development 5.0% of sales 5.00%
Selling, general and administrative 8.36% of sales 8.36%
Interest expense Beginning of year debt balance × interest rate
Other income (expenses) $50,000 of expense each year $50 ('000's)

Cash 3.3% of sales 3.30%

Accounts receivable 60 days sales outstanding 60
Inventories 52 days of cost of good sold 52
Prepaid expenses 0.4% of sales 0.40%
Property, plant & equipment at cost Beginning PP&E at cost + capital expenditures
Accumulated depreciation Beginning A/D + 7.5% of beginning PP&E at cost 7.50%

Accounts payable 30 days of purchases 30

Purchases 60% of cost of goods sold 60.00%
Accrued expenses 0.73% of sales 0.73%
Income taxes payable 10% of income taxes expense 10.00%
Other current liabilities 0.62% of sales 0.62%
Flash Memory, Inc.

Exhibit 4 Selected Financial Information for Flash Memory, Inc., and Selected Competitors, 2007 through 2009

Flash Memory, Inc. Micron Technology

2007 2008 2009 30-Apr-10 (a) 2007 2008 2009 30-Apr-10 (a)

Sales ($ millions) 77 81 89 5,688 5,841 4,803

EPS ($) 1.52 0.09 1.68 -0.42 -2.10 -2.29 1.46
Dividend per share ($) -- -- -- -- -- --
Closing stock price ($) n/a n/a n/a 7.25 2.64 10.56 9.35
Shares outstanding (millions) 1.492 1.492 1.492 769.1 772.5 800.7 847.6
Book Value per share ($) 11.43 11.52 13.20 10.08 8.00 5.81 6.61
ROE 13.28% 0.78% 12.75% -4.13% -26.21% -39.43% 21.00%
Capitalization (book value)
Debt 28% 34% 34% 24% 31% 40% 33%
Equity 72% 66% 66% 76% 69% 60% 67%
Beta coefficient n/a 1.25

SanDisk Corporation STEC, Inc.

Sales ($ millions) 3,986 3,351 3,567 189 227 354

EPS ($) 0.84 -8.82 1.83 3.71 0.20 0.09 1.47 1.29
Dividend per share ($) -- -- -- -- -- --
Closing stock price ($) 33.17 9.60 28.99 39.84 8.74 4.26 16.34 13.90
Shares outstanding (millions) 227.7 225.3 227.4 229.3 49.8 50.0 49.4 50.3
Book Value per share ($) 22.64 15.27 17.18 18.13 3.72 3.63 5.65 5.48
ROE 3.70% -57.74% 10.63% 17.87% 5.40% 2.36% 26.06% 18.90%
Capitalization (book value)
Debt 15% 22% 21% 19% 0% 0% 0% 0%
Equity 85% 78% 79% 81% 100% 100% 100% 100%
Beta coefficient 1.36 1.00

(a) Security analyst estimates for year-end EPS $ and Return on Equity; actual data on April 30, 2010, for all other items.
 Projected Income Statements, 2010 - 2012 ($000s except earnings per share)

Year 2010 2011 2012

Net sales $120,000 $144,000 $144,000

Cost of goods sold $97,320 $116,784 $116,784
Gross margin $22,680 $27,216 $27,216

Research and development $6,000 $7,200 $7,200

Selling, general and administrative $10,032 $12,038 $12,038
Operating income $6,648 $7,978 $7,978

EBIT $6,648.00 $7,977.60 $7,977.60

Interest expense $937 $1,317 $1,552

Other income (expenses) $50 $50 $50
PBT $5,660.79 $6,610.59 $6,375.93

Income taxes (a) $2,264 $2,644 $2,550

Net income $3,396 $3,966 $3,826

Earnings per share $2.28 $2.66 $2.56

Additional capital Expenditures reqd $900 $900 $900

Interest Rate 9.25% 9.25% 9.25%
Income Tax 40.00%
Purchases 58392 70070.4 70070.4

Projected Income Statements new product line (standalone), 2010 - 2015

2010 2011 2012

Net sales $21,600 $28,000

Cost of goods sold $17,064 $22,120
Gross margin $4,536 $5,880

Selling, general and administrative $1,806 $2,341

Additional expense on promotions $300 $0
EBIT $2,430 $3,539
EBIT*(1-t) $1,458 $2,124
Working Capital Required $5,648 $7,322
Change in working capital $5,648 $1,674 $0
Initial Investment $2,200
Depreciation $440 $440

Net cash flows -$7,848 $225 $2,564

IRR 21.94%
0 1 2
Discount factor with WACC through Debt 1 0.90507014 0.81915196
Discount factor with WACC through equity 1 0.90184822 0.81333022

WACC Calculations (through debt) Beta calculations

Cost of debt 9.25% Company beta
Rf 3.70% Micron 1.25
Rm-Rf 6.00% Sandisk 1.36
D/E 0.64 STEC 1.00
Levered Beta 1.47
Cost of Equity 12.54%
D/V 0.29 Unlevered beta for Flash
E/V 0.71 Effective share price
WACC 10.49% Market capitalization

WACC Calculations (through equity) NPV (when raised through debt)

Cost of debt 9.25% NPV (when raised through Equity)
Rf (10 year treasury bond) 3.70%
Rm-Rf 6.00%
D/E 0.37
Levered Beta 1.30
Cost of Equity 11.49%
D/V 0.27
E/V 0.73
WACC 10.88%
 Projected balance Statements, 2010 - 2012

year 2010

Cash $3,960
Accounts receivable $19,726
Inventories $13,865
Prepaid expenses $480
Total current assets $38,031

Property, plant & equipment at cost $8,182

Less: Accumulated depreciation $2,247
Net property, plant & equipment $5,935

Total assets $43,966

profit will be retained
Accounts payable $4,799
Notes payable (a) $14,238
Accrued expenses $876
Income taxes payable (b) $226
Other current liabilities $744
Total current liabilities $20,884

Common stock at par value $15

Paid in capital in excess of par value $7,980
Retained earnings $15,087
Total shareholders' equity $23,082

Total liabilities & shareholders' equity $43,966

tandalone), 2010 - 2015

2013 2014 2015

$28,000 $11,000 $5,000

$22,120 $8,690 $3,950
$5,880 $2,310 $1,050

$2,341 $920 $418

$0 $0 $0
$3,539 $1,390 $632
$2,124 $834 $379
 $7,322 $2,877 $1,308
-$4,446 -$1,569 -$1,308

$440 $440 $440

$7,009 $2,843 $2,127

21.94%
3 4 5
0.741389984 0.6710099385 0.60731106
0.7335004112 0.6615060424 0.59657805

Beta calculations
D/E Unlevered Beta Sales
0.49 0.97 4,803
0.23 1.20 3,567
0.00 1.00 354
8,724

ered beta for Flash 1.06

ective share price $23
ket capitalization $34,308.23

aised through debt) $2,850.57

aised through Equity) $2,729.77
, 2010 - 2012 balance sheet with new product line (equity), 2010

2011 2012 year 2010

$4,752 $4,752 Cash $9,608

$23,671 $23,671 Accounts receivable $19,726
$16,638 $16,638 Inventories $13,865
$576 $576 Prepaid expenses $480
$45,637 $45,637 Total current assets $43,679

$9,082 $9,982 Property, plant & equipment at cost $10,382

$2,928 $3,676 Less: Accumulated depreciation $2,247
$6,154 $6,306 Net property, plant & equipment $8,135

$51,791 $51,943 Total assets $51,815

$5,759 $5,759 Accounts payable $4,799

$16,775 $13,110 Notes payable (a) $15,186
$1,051 $1,051 Accrued expenses $876
$264 $255 Income taxes payable (b) $226
$893 $893 Other current liabilities $744
$24,742 $21,068 Total current liabilities $21,832

$15 $15 Common stock at par value $15

$7,980 $7,980 Paid in capital in excess of par value $7,980
$19,054 $22,879 New Common Stock $6,900
$27,049 $30,874 Retained earnings $15,087
Total shareholders' equity $29,982
$51,791 $51,943
Total liabilities & shareholders' equity $51,815
 balance sheet with new product line (Debt), 2010

year 2010

Cash $9,608
Accounts receivable $19,726
Inventories $13,865
Prepaid expenses $480
Total current assets $43,679

Property, plant & equipment at cost $10,382

Less: Accumulated depreciation $2,247
Net property, plant & equipment $8,135

Total assets $51,815

Accounts payable $4,799

Notes payable (a) $22,086
Accrued expenses $876
Income taxes payable (b) $226
Other current liabilities $744
Total current liabilities $28,732

Common stock at par value $15

Paid in capital in excess of par value $7,980
Retained earnings $15,087
Total shareholders' equity $23,082

Total liabilities & shareholders' equity $51,815