Flash Memory, Inc.

Exhibit TN-1 Actual and Forecasted Financial Statements Assuming No Investment in New Product Line, No Sale of New
Common Stock, and All Borrowings at 9.25%
Income Statement ($000s except EPS)
Actual

Forecast

2007

2008

2009

2010

2011

2012

$77,131
$62,519
$14,612

$80,953
$68,382
$12,571

$89,250
$72,424
$16,826

$120,000
$97,320
$22,680

$144,000
$116,784
$27,216

$144,000
$116,784
$27,216

$3,726
$6,594
$4,292

$4,133
$7,536
$902

$4,416
$7,458
$4,952

$6,000
$10,032
$6,648

$7,200
$12,038
$7,978

$7,200
$12,038
$7,978

$480
-$39

$652
-$27

$735
-$35

$818
$50

$1,015
$50

$1,189
$50

Income before income taxes

$3,773

$223

$4,182

$5,780

$6,913

$6,739

Income taxes
Net income

$1,509
$2,264

$89
$134

$1,673
$2,509

$2,312
$3,468

$2,765
$4,148

$2,695
$4,043

$1.52

$0.09

$1.68

Sales
Cost of goods sold
Gross margin
Research and development
Selling, general and administrative
Operating income
Interest expense
Other income (expenses)

Earnings per share

Exhibit TN-1 (continued)

Balance Sheet ($000s except shares outstanding and book value per share)
Actual

Forecast

2007

2008

2009

2010

2011

2012

$2,536
$10,988
$9,592
$309
$23,425

$2,218
$12,864
$11,072
$324
$26,478

$2,934
$14,671
$11,509
$357
$29,471

$3,960
$19,726
$13,865
$480
$38,031

$4,752
$23,671
$16,638
$576
$45,637

$4,752
$23,671
$16,638
$576
$45,637

$5,306
$792
$4,514

$6,116
$1,174
$4,942

$7,282
$1,633
$5,649

$7,282
$1,755
$5,527

$7,283
$1,887
$5,396

$7,284
$2,028
$5,256

$27,939

$31,420

$35,120

$43,558

$51,033

$50,893

Accounts payable
Notes payable
Accrued expenses
Income taxes payable
Other current liabilities
Total current liabilities

$3,084
$6,620
$563
$151
$478
$10,896

$4,268
$8,873
$591
$9
$502
$14,243

$3,929
$10,132
$652
$167
$554
$15,434

$4,799
$17,753
$876
$231
$744
$24,404

$5,759
$21,304
$1,051
$277
$893
$29,284

$5,759
$21,304
$1,051
$270
$893
$29,277

Common stock at $0.01 per share par value

Paid in capital in excess of par value
Retained earnings
Total shareholders' equity

$15
$7,980
$9,048
$17,043

$15
$7,980
$9,182
$17,177

$15
$7,980
$11,691
$19,686

$14,880
$4,274
$19,154

$14,880
$6,869
$21,749

$14,880
$6,736
$21,616

Total liabilities & shareholders' equity

$27,939

$31,420

$35,120

$43,558

$51,033

$50,893

1,491,662

1,491,662

1,491,662

Book value per share

$11.43

$11.52

$13.20

Return on equity
Interest coverage ratio (times)
Notes payable / accounts receivable
Notes payable / shareholders' equity
Total liabilities / shareholders' equity

13.3%
8.9
60.2%
38.8%
63.9%

0.8%
1.4
69.0%
51.7%
82.9%

12.7%
6.7
69.1%
51.5%
78.4%

Cash
Accounts receivable
Inventories
Prepaid expenses
Total current assets
Property, plant & equipment at cost
Less: Accumulated depreciation
Net property, plant & equipment
Total assets

Number of shares outstanding

Flash Memory, Inc.

Exhibit TN-3 Net Present Value of Investment in New Product Line ($000s)
2010
Investment in equipment
Net working capital required to support sales
Investment in net working capital (the year-on-year change)

-$2,200
$0
$0

Sales
Cost of goods sold (includes equipment depreciation)
Research & development
Selling, general & administrative
Launch promotion
Income before income taxes
Income taxes
Net income
Depreciation of equipment
Cash flow from operations
Total cash flow

-$2,200

NPV @ 10.05% cost of capital

IRR

-$2,200

2011

2012

2013

2014

2015

Total

Flash Memory, Inc.

Exhibit TN-4 Change in Forecasted Financial Statements due to Acceptance of Investment in New Product Line
Financial Statement Account ($000s)

2007

Actual
2008

2009

2010

Sales
Cost of goods sold (includes equipment depreciation)
Research and development
Selling, general and administrative (includes launch)
Increase in operating income
Cash (3.3% of sales)
Accounts receivable (60 DSO)
Inventories (52 days of COGS)
Prepaid expenses (0.4% of sales)
Net property, plant & equipment
Accounts payable (60 days of purchases)
Accrued expenses (0.73% of sales)
Other current liabilities (0.62% of sales)

For informational purposes only:

NWC % of sales

$2,200

Forecast
2011

2012

$0
$0
$0
$0
$0

$0
$0
$0
$0
$0

$0
$0
$0
$0
$2,200

$0
$0
$0
$0
$2,200

$0
$0
$0

$0
$0
$0

Flash Memory, Inc.

Exhibit TN-5 Actual and Forecasted Financial Statements Assuming Acceptance of Investment in New Product Line, No Sale
of New Common Stock, and All Borrowings at 9.25%
Income Statement ($000s except earnings per share)

2007

Actual
2008

2009

$77,131
$62,519
$14,612

$80,953
$68,382
$12,571

$89,250
$72,424
$16,826

$3,726
$6,594
$4,292

$4,133
$7,536
$902

$4,416
$7,458
$4,952

$480
-$39

$652
-$27

$735
-$35

Income before income taxes

$3,773

$223

$4,182

Income taxes
Net income

$1,509
$2,264

$89
$134

$1,673
$2,509

$1.52

$0.09

$1.68

Sales
Cost of goods sold
Gross margin
Research and development
Selling, general and administrative
Operating income
Interest expense
Other income (expenses)

Earnings per share

2010

Forecast
2011

2012

2010

Forecast
2011

2012

Exhibit TN-5 (continued)

Balance Sheet ($000s except shares outstanding and book value per share)

2007

Actual
2008

2009

$2,536
$10,988
$9,592
$309
$23,425

$2,218
$12,864
$11,072
$324
$26,478

$2,934
$14,671
$11,509
$357
$29,471

$5,306
$792
$4,514

$6,116
$1,174
$4,942

$7,282
$1,633
$5,649

$27,939

$31,420

$35,120

Accounts payable
Notes payable
Accrued expenses
Income taxes payable
Other current liabilities
Total current liabilities

$3,084
$6,620
$563
$151
$478
$10,896

$4,268
$8,873
$591
$9
$502
$14,243

$3,929
$10,132
$652
$167
$554
$15,434

Common stock at $0.01 per share par value

Paid in capital in excess of par value
Retained earnings
Total shareholders' equity

$15
$7,980
$9,048
$17,043

$15
$7,980
$9,182
$17,177

$15
$7,980
$11,691
$19,686

Total liabilities & shareholders' equity

$27,939

$31,420

$35,120

1,491,662

1,491,662

1,491,662

Book value per share

$11.43

$11.52

$13.20

Return on equity
Interest coverage ratio (times)
Notes payable / accounts receivable
Notes payable / shareholders' equity
Total liabilities / shareholders' equity

13.3%
8.9
60.2%
38.8%
63.9%

0.8%
1.4
69.0%
51.7%
82.9%

12.7%
6.7
69.1%
51.5%
78.4%

Cash
Accounts receivable
Inventories
Prepaid expenses
Total current assets
Property, plant & equipment at cost
Less: Accumulated depreciation
Net property, plant & equipment
Total assets

Number of shares outstanding

Flash Memory, Inc.

Exhibit TN-6 Actual and Forecasted Financial Statements Assuming Acceptance of Investment in New Product Line, Sale
of 300,000 Shares of Common Stock Receiving Net Proceeds of $23 per share, and All Borrowings at 7.25%
Income Statement ($000s except earnings per share)

2007

Actual
2008

2009

$77,131
$62,519
$14,612

$80,953
$68,382
$12,571

$89,250
$72,424
$16,826

$3,726
$6,594
$4,292

$4,133
$7,536
$902

$4,416
$7,458
$4,952

$480
-$39

$652
-$27

$735
-$35

Income before income taxes

$3,773

$223

$4,182

Income taxes
Net income

$1,509
$2,264

$89
$134

$1,673
$2,509

$1.52

$0.09

$1.68

Sales
Cost of goods sold
Gross margin
Research and development
Selling, general and administrative
Operating income
Interest expense
Other income (expenses)

Earnings per share

2010

Forecast
2011

2012

2010

Forecast
2011

2012

Exhibit TN-6 (continued)

Balance Sheet ($000s except shares outstanding and book value per share)

2007

Actual
2008

2009

$2,536
$10,988
$9,592
$309
$23,425

$2,218
$12,864
$11,072
$324
$26,478

$2,934
$14,671
$11,509
$357
$29,471

$5,306
$792
$4,514

$6,116
$1,174
$4,942

$7,282
$1,633
$5,649

$27,939

$31,420

$35,120

Accounts payable
Notes payable
Accrued expenses
Income taxes payable
Other current liabilities
Total current liabilities

$3,084
$6,620
$563
$151
$478
$10,896

$4,268
$8,873
$591
$9
$502
$14,243

$3,929
$10,132
$652
$167
$554
$15,434

Common stock at $0.01 per share par value

Paid in capital in excess of par value
Retained earnings
Total shareholders' equity

$15
$7,980
$9,048
$17,043

$15
$7,980
$9,182
$17,177

$15
$7,980
$11,691
$19,686

Total liabilities & shareholders' equity

$27,939

$31,420

$35,120

1,491,662

1,491,662

1,491,662

Book value per share

$11.43

$11.52

$13.20

Return on equity
Interest coverage ratio (times)
Notes payable / accounts receivable
Notes payable / shareholders' equity
Total liabilities / shareholders' equity

13.3%
8.9
60.2%
38.8%
63.9%

0.8%
1.4
69.0%
51.7%
82.9%

12.7%
6.7
69.1%
51.5%
78.4%

Cash
Accounts receivable
Inventories
Prepaid expenses
Total current assets
Property, plant & equipment at cost
Less: Accumulated depreciation
Net property, plant & equipment
Total assets

Number of shares outstanding

Flash Memory, Inc.

Exhibit TN-7 Summary Statistics

No Investment in New Product Line

Sell No New Stock
Borrow at 9.25%
2010
2011
2012
Earnings per share
Interest coverage ratio (times)
Return on equity
Notes payable / accounts receivable
Notes payable / shareholders' equity
Total liabilities / shareholders' equity
Notes payable (000s)

Invest in the New Product Line

Sell No New Stock
Borrow at 9.25%
2010
2011
2012
Earnings per share
Interest coverage ratio (times)
Return on equity
Notes payable / accounts receivable
Notes payable / shareholders' equity
Total liabilities / shareholders' equity
Notes payable (000s)

Invest in the New Product Line

Sell 300,000 Shares of Common Stock
Borrow at 7.25%
2010
2011
2012
Earnings per share
Interest coverage ratio (times)
Return on equity
Notes payable / accounts receivable
Notes payable / shareholders' equity
Total liabilities / shareholders' equity
Notes payable (000s)