As filed with the Securities and Exchange Commission on February 4, 2004
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
PNY TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 3674 11-2724278
(STATE OF INCORPORATION) (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION NO.)
CLASSIFICATION CODE NUMBER)

299 Webro Road
Parsippany, New Jersey 07054
(973) 515-9700

(Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices)

Gadi Cohen
Chief Executive Officer
PNY Technologies, Inc.
299 Webro Road
Parsippany, New Jersey 07054
(973) 515-9700

(Name, address, including zip code and telephone number, including area code, of agent for service)
Please address a copy of all communications to:

BARBARA L. BECKER, ESQ. JEREMY W. DICKENS, ESQ.
GIBSON, DUNN & CRUTCHER LLP WEIL, GOTSHAL & MANGES LLP
200 PARK AVENUE 767 FIFTH AVENUE
NEW YORK, NY 10166 NEW YORK, NY 10153
(212) 351-4000 (212) 310-8000

---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]

CALCULATION OF REGISTRATION FEE

======================================================================================================================
Title of Each Class of Securities Proposed Maximum Aggregate Amount of
to be Registered Offering Amount Registration Fee
- ----------------------------------------------------------------------- --------------------------- ------------------
Common Stock, par value $0.01 per share.............................. $100,000,000 $12,670.00
======================================================================================================================

The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

================================================================================

The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities, and we are not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED , 2004

PROSPECTUS

[PNY TECHNOLOGIES LOGO]

COMMON STOCK

- --------------------------------------------------------------------------------

This is our initial public offering of common stock. We are offering shares
of common stock. No public market currently exists for our shares.

We propose to list our common stock on the Nasdaq National Market under the
symbol "PNYT." We currently estimate that the initial public offering price will
be between $ and $ per share.

INVESTING IN THE SHARES INVOLVES RISKS. "RISK FACTORS" BEGIN ON PAGE 7.

Per Share Total
------------- ------------

Public Offering Price....................................... $ $
Underwriting Discount....................................... $ $
Proceeds to PNY Technologies (before expenses).............. $ $

We have granted the underwriters a 30-day option to purchase up to
additional shares of common stock on the same terms and conditions set forth
above solely to cover over-allotments.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

Lehman Brothers, on behalf of the underwriters, expects to deliver the
shares on or about ,2004.

- --------------------------------------------------------------------------------

LEHMAN BROTHERS

NEEDHAM & COMPANY, INC.

THOMAS WEISEL PARTNERS LLC

,2004

INSIDE FRONT COVER

The artwork depicts the PNY Technologies(R) logo in the center of the page.
Starting at the top left and going in a counter-clockwise direction are pictures
of the following: PNY in-store displays, PNY Verto and NVIDIA Quadro(R) graphics
cards, PNY consumer DRAM modules, PNY Flash products, a variety of PNY packages
and PNY OEM DRAM modules.

TABLE OF CONTENTS

PAGE
----

Prospectus Summary..................................1
Risk Factors........................................7
Forward-Looking Statements.........................14
Use of Proceeds....................................15
Dividend Policy....................................15
Capitalization.....................................16
Dilution...........................................17
Selected Financial Data............................18
Management's Discussion and Analysis of
Financial Condition and Results of Operations.....20
Business...........................................33
Management.........................................43
Related Party Transactions.........................49
Principal Stockholders.............................50
Description of Capital Stock.......................52
Shares Eligible for Future Sale....................55
United States Federal Income and Estate Tax
Consequences to Non-United States Holders.........57
Underwriting.......................................60
Legal Matters......................................64
Experts............................................64
Where You Can Find Additional Information..........64
Index to Consolidated Financial Statements........F-1

You should rely only on the information contained in this prospectus.
We have not authorized anyone to provide you with information different from
that contained in this prospectus. We are offering to sell, and seeking offers
to buy, shares of common stock only in jurisdictions where offers and sales are
permitted. The information in this prospectus is accurate only as of the date of
this prospectus regardless of the time of delivery of this prospectus or of any
sale of our common stock.

Through and including ,2004 (the 25th day after the date of this
prospectus), all dealers effecting transactions in our common stock, whether or
not participating in this offering, may be required to deliver a prospectus.
This requirement is in addition to a dealer's obligation to deliver a prospectus
when acting as an underwriter and with respect to its unsold allotment or
subscription.

ABOUT THIS PROSPECTUS

This prospectus includes statistical data regarding our company and the
markets in which we compete. We derived this data from our records or from
information published or prepared by the following independent sources for
market data: Gartner Dataquest, the research division of Gartner, Inc.; IDC
Technologies, Inc., an independent research firm; NPD Intelect Market
Tracking(R), the retail sales data collection division of NPD Intelect, L.L.C.;
and Semico Research Corporation, a marketing and engineering research firm. The
information regarding DRAM sales forecasts from Gartner Dataquest is derived
from its "DRAM Forecast Statistics: Worldwide, 1997-2007 (4Q 03) Update" report,
dated November 2003, written by Andrew Norwood. The USB Flash drive market data
from Gartner Dataquest is derived from its "Worldwide USB Flash Drive Market
Forecast Trends: 2001-2007" report, dated October 7, 2003, written by Joseph
Unsworth. All references to Gartner Dataquest are based on estimates. The data
from IDC's report was published in December 2003.

Unless otherwise indicated, the information in this prospectus assumes
that:

o the underwriters do not exercise their over-allotment option;

o the initial public offering price of our common stock will be $
per share, which is the midpoint of the range indicated on the cover
page of this prospectus; and

o the issued and outstanding 13,268 shares of our Series A preferred
stock are converted into 3,980,400 shares of common stock at an
effective conversion price of $3.97 per share.

To the best of our knowledge, we own or have rights to product names,
trade names and trademarks that we use in conjunction with the sale of our
products, including the PNY Technologies(R) name and the PNY Technologies(R)
logo. This prospectus also contains product names, trade names and trademarks
that belong to other organizations.

PROSPECTUS SUMMARY

This summary highlights key aspects of the information contained
elsewhere in this prospectus. This summary does not contain all of the
information you should consider before investing in our common stock. You should
read this entire prospectus carefully, especially the risks of investing in our
common stock discussed under "Risk Factors," before making an investment
decision.

PNY TECHNOLOGIES

We are a leading designer and marketer of Flash memory cards, USB Flash
drives, dynamic random access memory, or DRAM, modules, consumer and
professional graphics cards and other computer-related technology products. We
market these products to consumers through traditional retailers, such as Best
Buy Co., Inc., CompUSA, Inc. and Staples, Inc., through other retail and
distribution channels, and directly to professionals. We also design,
manufacture and market custom and standard DRAM modules for original equipment
manufacturers, or OEMs, and their designated contract manufacturers. These
customers include high-end computing, networking, storage and telecommunications
equipment manufacturers, such as LSI Logic Corporation and Network Appliance,
Inc. We currently market our products throughout the United States, as well as
in Canada, Western Europe and certain parts of the Asia Pacific region. For the
nine months ended September 30, 2003, we had net sales of $258.6 million.

We believe we are a value-added supplier for many of our customers, and
that our strong customer relationships are the result of our combination of the
following competitive strengths:

o Strong brand. We were one of the top ten overall sellers, as
measured in both dollars and units, at each of our four leading
retail customers for the 11 months ended November 30, 2003,
according to NPD Intelect. We believe that our well recognized PNY
Technologies(R) brand allows us to collaborate effectively with our
retail customers to introduce new products and product line
extensions.

o Broad portfolio of complementary products. Our broad product
portfolio allows our customers to consolidate their vendor
relationships and more efficiently manage their inventory. Our
comprehensive product line also allows us to work with our
traditional retail customers to provide a variety of
cross-promotional activities that we believe increases foot traffic
through their stores.

o Merchandising and marketing expertise. We work closely with our key
customers to create a variety of advertisements, promotions and
product bundles, which reduces our reliance on traditional consumer
incentives and increases our customers' sales.

o Strong supplier relationships. Many of our key supplier
relationships are more than a decade old. We believe our purchasing
history with these suppliers has enabled us to obtain adequate
supplies of our products during periods of industry shortage.

o Supply-chain management expertise. We believe our logistical
operations, supply-chain management expertise and operational
flexibility help our retail and OEM customers better manage their
inventory, thereby reducing their exposure to potential price
fluctuations and further strengthening our customer relationships.

We operate through two divisions: Consumer and OEM. We market our
complete line of products through our Consumer division, including:

o Flash memory cards. Flash memory cards are used to store data in
digital cameras, multimedia cell phones, MP3 players, personal
digital assistants, or PDAs, and other consumer electronic devices.
According to NPD Intelect, for the first 11 months of 2003, we had a
13.1% share of the U.S. retail market in Flash memory cards.

o USB Flash drives. USB Flash drives are self-contained, compact
computer drives with no moving parts. We introduced our Attache(TM)
line of USB Flash drives in June 2003, and according to NPD
Intelect, for the five-month period commencing July 1, 2003, we had
a 17.5% share of the U.S. retail market.

o DRAM modules. DRAM modules are compact circuit board assemblies of
DRAM semiconductors and related circuitry. DRAM upgrades provide a
cost-effective way of improving the speed and performance of desktop
and laptop computers. According to NPD Intelect, we have been the
leading supplier of DRAM modules to the U.S. retail market in each
of the last six years, and, for the first 11 months of 2003, we had
a 44.9% share and a 69.3% share of the U.S. retail market for
desktop and laptop DRAM upgrades, respectively.

o Graphics cards. Our consumer graphics cards are used to enhance the
performance of graphics-intensive applications on desktop computers.
According to NPD Intelect, for the first 11 months of 2003, we had a
26.7% share of the U.S. retail market for consumer graphics cards.
We are the exclusive provider of NVIDIA Corporation-based
professional graphics cards to the professional aftermarket in the
United States, Western Europe and other regions. These cards are
used by game developers, computer assisted design, or CAD,
engineers, digital animators and others who require advanced
graphics capabilities.

In our OEM division, our engineers work with OEMs or their designated
contract manufacturers to design and manufacture custom and standard DRAM
modules. Our OEM products include a broad range of DRAM modules that incorporate
leading-edge, mainstream and trailing-edge memory technologies. OEMs use these
modules in a variety of applications, including high-end computing products,
such as servers and workstations, as well as networking, storage and
telecommunications equipment products.

MARKET OPPORTUNITY

We believe that our strengths and our product offerings make us well
positioned to take advantage of the expected growth in the market for Flash
memory and related products. Semico Research forecasts that worldwide sales of
Flash memory cards will grow from $2.0 billion in 2002 to $11.9 billion in 2006,
a 56.4% compound annual growth rate. We believe this growth will be driven by
the continuing proliferation of consumer electronic products that use Flash
memory cards as their primary data storage device, such as digital cameras,
multimedia cell phones, MP3 players and PDAs. We believe that the market for USB
Flash drives, such as our Attache(TM) device, will grow at an even greater rate.
We believe USB Flash drives are beginning to replace floppy disk drives because
of their small size, ease of use, rewrite capability, speed and security.
Gartner Dataquest estimates that the worldwide market for USB Flash drives will
grow from $135.6 million in 2002 to $1.7 billion in 2007, a 66.3% compound
annual growth rate.

We believe consumer and OEM demand for DRAM will increase due to the
greater complexity of software enabled by increasing computer processing power,
the development of high-bandwidth and graphics-intensive applications, evolving
Internet and telecommunications infrastructure requirements, increased
information technology, or IT, spending and computer-related equipment upgrades.
Gartner Dataquest estimates that the worldwide market for DRAM will increase
from $15.5 billion in 2002 to $23.4 billion in 2007.

BUSINESS STRATEGY

Our goal is to enhance our competitive position as a leading designer
and marketer of computer-related technology products. We seek to accomplish this
goal through the following strategies:

o Capitalize on the growing demand for Flash products. We believe that
the Flash memory industry will experience significant growth, driven
by widespread adoption of consumer electronic devices with
increasing data storage requirements and the adoption of USB Flash
drives as a common storage device. We plan to capitalize on this
growth by continuing to aggressively market our comprehensive
offering of Flash memory products and by optimizing our
opportunities to introduce new Flash

memory products. For the nine months ended September 30, 2003, net
sales of our Flash products increased by 130.7% compared to the same
period in 2002.

o Introduce complementary product lines. We plan to capitalize on our
brand by further broadening our product portfolio with new products
that complement our existing offerings, as we did with our
Attache(TM) USB Flash drive introduced in June 2003. We plan to take
advantage of the growing computer, consumer electronics, storage and
networking markets by initially focusing on the product needs of our
existing customer base and expanding into new markets as
opportunities arise.

o Expand OEM market presence. As demand returns for networking,
storage and high-end computing products, we plan to maintain our
relationships with our existing customers and selectively add new
customers. One of our strengths in the OEM market is our ability to
access trailing-edge memory technologies not readily available to
other suppliers, which often offers us increased profit
opportunities.

o Further broaden our geographic presence. We intend to expand our
geographic presence by targeting emerging and growing markets, such
as the Far East, for both Consumer and OEM market expansion. Our
facility in Taiwan allows us to increase our operational flexibility
by establishing new supplier and contract manufacturing
relationships, strengthening our existing supplier relationships and
improving access to new technologies and products.

o Continue to focus on superior customer service. We intend to focus
our resources and expertise on providing superior quality and
service to a core group of market leaders. We plan to further
integrate our business with that of our existing retail customers,
while seeking new customers that we believe have the potential to
generate significant revenue.

o Pursue acquisitions of complementary technologies, products or
companies. We may make acquisitions to strengthen our position in
our target markets, enhance our technology base, increase our supply
capabilities or expand our geographic presence.

-------------------

PNY is a Delaware corporation, originally incorporated in 1985. Our
principal executive office is located at 299 Webro Road, Parsippany, New Jersey
07054. Our telephone number is (973) 515-9700. We maintain a website on the
Internet at www.pny.com. Our website and the information it contains are not a
part of this prospectus.

THE OFFERING

Common stock offered............................................................ shares

Common stock to be outstanding after this offering.............................. shares

Use of proceeds................................................................. We intend to use the net proceeds from
this offering to repay substantially all
of our existing indebtedness and for
working capital and general corporate
purposes.

Proposed Nasdaq National Market symbol.......................................... "PNYT"

The number of shares of common stock to be outstanding after this
offering is as of September 30, 2003, after giving effect to: (1) the automatic
conversion of all of our issued and outstanding Series A preferred stock into
shares of common stock upon the consummation of this offering, which will result
in the issuance of 3,980,400 shares of common stock with an effective conversion
price of $3.97 per share, and (2) the shares of common stock being sold by us in
this offering, and excludes:

o 2,562,840 shares of common stock issuable upon exercise of stock
options outstanding as of September 30, 2003, under our employee
stock option plan, with a weighted average exercise price of $3.05
per share;

o 49,500 shares of common stock issuable upon exercise of warrants
outstanding as of September 30, 2003, with an exercise price of
$0.03 per share;

o 4,932,410 additional shares of common stock reserved for issuance
under our employee stock option plan; and

o up to shares of common stock to be sold by us if the underwriters
exercise their over-allotment option in full.

You should read the discussion under "Management - Stock Option and
Other Benefit Plans" for additional information about our employee stock option
plan.

SUMMARY CONSOLIDATED FINANCIAL DATA

The following tables set forth summary consolidated financial
information and other data for our company as of and for the periods indicated.
You should read the summary data set forth below in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements and the related notes
appearing elsewhere in this prospectus. The pro forma net income per share for
the year ended December 31, 2002 and for the nine months ended September 30,
2003 reflect the automatic conversion of all of our Series A preferred stock
into shares of common stock, described under "Capitalization," as if it had
occurred on the first day of the period presented. The pro forma as adjusted
balance sheet data give effect to the conversion of all our shares of Series A
preferred stock and this offering and the application of the net proceeds
therefrom as though they had occurred at September 30, 2003.

NINE MONTHS ENDED
SEPTEMBER 30,
YEAR ENDED DECEMBER 31, (UNAUDITED)
----------------------------- -----------------------------
2001 2002 2002 2003
------------- ------------ ------------ ------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net sales........................................ $ 314,197 $ 334,603 $ 251,615 $ 258,564
Cost of sales (1)................................ 281,688 286,351 217,376 223,128
----------- ----------- ----------- -----------
Gross profit..................................... 32,509 48,252 34,239 35,436
Operating expenses (1)........................... 32,378 36,476 27,012 29,587
Restructuring and other charges (2) ............. - 10,387 9,658 1,745
----------- ----------- ----------- -----------
Operating income (loss).......................... 131 1,389 (2,431) 4,104

Interest and other (expense), net................ (1,576) (3,435) (2,839) (1,515)
----------- ----------- ----------- -----------
(Loss) income before income taxes ............... (1,445) (2,046) (5,270) 2,589
Income taxes..................................... 943 1,189 699 1,077
----------- ----------- ----------- -----------
Net (loss) income................................ (2,388) (3,235) (5,969) 1,512

Dividends (waiver of dividends) on Series A
preferred stock.................................. 1,147 650 488 (1,309)
----------- ----------- ----------- -----------
Net (loss) income available to common stockholders $ (3,535) $ (3,885) $ (6,457) $ 2,821
=========== =========== =========== ===========
Net (loss) income per common share:
Basic......................................... $ (0.14) $ (0.14) $ (0.24) $ 0.10
Diluted....................................... (0.14) (0.14) (0.24) 0.05

Shares used in computing net income per common share:
Basic......................................... 26,120,205 26,954,800 26,954,800 26,954,800
Diluted....................................... 26,120,205 26,954,800 26,954,800 32,454,471

Pro forma net (loss) income per common share
(unaudited):
Basic.......................................... $ (0.10) $ 0.05
Diluted........................................ (0.10) 0.05

Shares used in computing pro forma net income per
common share (unaudited):
Basic.......................................... 30,935,200 30,935,200
Diluted........................................ 30,935,200 32,454,471

SEPTEMBER 30, 2003
(UNAUDITED)
-------------------------
PRO FORMA
ACTUAL AS ADJUSTED
---------- ------------
(IN THOUSANDS)

CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents............................................................... $ 3,838 $
Working capital......................................................................... 15,970
Total assets............................................................................ 107,046
Total bank debt......................................................................... 25,995
Capital lease obligations and bank overdrafts, including current maturities............. 2,548
Note payable to related party........................................................... 4,971
Total stockholders' equity.............................................................. 13,257

- ------------
(1) Stock-based compensation is allocated as follows:

YEAR ENDED NINE MONTHS ENDED SEPTEMBER 30,
DECEMBER 31, (UNAUDITED)
-------------------- -------------------------------
2001 2002 2002 2003
-------- ------- --------- -------
(IN THOUSANDS)

Cost of sales................................. $ 1,073 $ (279) $ (324) $ 135
Operating expenses............................ 753 56 21 99
------- ------ ------ -----
Total..................................... $ 1,826 $ (223) $ (303) $ 234

(2) Represents charge for the impairment of long-lived assets and the shutdown
and closure of our manufacturing facility in Ireland and manufacturing
operations in California.

RISK FACTORS

You should carefully consider the risks described below, as well as the
other information in this prospectus, before making a decision to invest in our
common stock. The occurrence of any of the following risks could harm our
business and prospects and cause the trading price of our shares to decline,
perhaps significantly.

RISKS RELATED TO OUR BUSINESS

SALES TO A SMALL NUMBER OF CUSTOMERS REPRESENT A SIGNIFICANT PORTION OF OUR NET
SALES. IF WE WERE TO LOSE ONE OF OUR MAJOR CUSTOMERS OR EXPERIENCE ANY MATERIAL
REDUCTION IN ORDERS FROM ANY OF THEM, OUR NET SALES AND OPERATING RESULTS WOULD
SUFFER.

Sales to our five leading customers accounted for approximately 50% of
our net sales for each of 2002 and the nine months ended September 30, 2003. Our
sales are made by standard purchase orders rather than long-term contracts. In
addition, our exclusive relationship with NVIDIA to market their Quadro graphic
cards in the aftermarket is not formalized and, as a result, could be terminated
or altered by NVIDIA without notice to us. In 2001, when a larger portion of our
sales were to OEMs, we lost our largest customer due, in large part, to a
downturn in the technology market and vendor consolidation efforts by that
customer, which adversely affected our business. Due primarily to the loss of
that customer, our annual net sales declined by $234.1 million in 2001, compared
to 2000. While our customer base is significantly more diversified than in 2001,
our strategy is to continue to focus on a core group of customers. If we were to
lose one of our major customers or experience any material reduction in orders
from any of these customers, it could have a material adverse effect on our
business and results of operations.

THE PRODUCTS WE SELL ARE SUBJECT TO RAPIDLY CHANGING TECHNOLOGIES, WHICH WE
OFTEN MUST OBTAIN OR LICENSE FROM THIRD PARTIES. OUR FAILURE TO OBTAIN NEEDED
PRODUCTS, TECHNOLOGIES OR LICENSES COULD HARM OUR BUSINESS.

The products we market are subject to rapid technological change and
evolving industry standards. We rely on third parties for non-exclusive license
rights in the technologies that are necessary for the operation of our products.
Because we license the intellectual property that we use, competitive barriers
to entry may be lower than if we owned exclusive rights to that technology.
Moreover, if a competitor or potential competitor enters into an exclusive
arrangement with any of our key third-party technology providers, our ability to
develop and sell products containing that technology could be severely limited
or curtailed entirely. We currently market CompactFlash(R), Secure Digital,
MultiMedia Card and SmartMedia(R) Flash memory card formats. We do not currently
market certain other Flash memory card formats, whose percentages of the Flash
memory card market could increase and reduce demand for our products. Our
success depends in part on our continued ability to use the technologies for
which we do have licenses and our ability to obtain the licenses for other
technologies. We do not know whether we will continue to be able to license
these technologies on commercially reasonable terms, if at all. If we are unable
to license the necessary technology, we may be forced to acquire or develop
alternative technology, which may be more costly or of a lower quality or
performance standard. This could limit and delay our ability to offer
competitive products, increase our costs of production or harm our brands and
reputation. As a result, it could have a material adverse effect on our business
and results of operations.

IF WE DO NOT EFFECTIVELY MANAGE OUR INVENTORY AND PRODUCT MIX, WE MAY INCUR
COSTS ASSOCIATED WITH EXCESS INVENTORY OR LOSE SALES FROM NOT HAVING ENOUGH
INVENTORY.

If we are unable to properly monitor, control and manage our inventory
and maintain an appropriate level and mix of products with our customers, we may
incur increased and unexpected costs associated with this inventory. For
example, if our Consumer division customers are unable to sell their inventory
in a timely manner, we may choose or be required to lower the price of our
products or allow our customers to exchange the slow-moving products for newer
products. Similarly, if we improperly forecast demand for our products, we could
end up with excess inventory that we may be unable to sell in a timely manner,
if at all. As a result, we could incur increased expenses associated with
writing off excess or obsolete inventory. In addition, some of our inventory is
sold on a consignment basis, and we have very little ability to control or
manage that inventory. Alternatively, we

could end up with too little inventory and we may not be able to satisfy demand,
which could have a material adverse effect on our customer relationships. Our
risks related to inventory management are exacerbated by our strategy of closely
matching inventory levels with product demand, leaving limited margin for error.

THE AVERAGE SELLING PRICES OF OUR PRODUCTS OFTEN DECREASE, WHICH MAY NEGATIVELY
AFFECT OUR GROSS MARGINS.

Our products often experience price erosion over their life cycle. In
order to maintain gross profits for products that have a declining average
selling price, we must continuously reduce costs or increase sales volume. We
must also successfully manage our inventory to reduce our overall exposure to
price erosion. In the OEM DRAM market specifically, we must collaborate with our
contract manufacturers and suppliers to create the most cost-effective design
for our products in order to manage costs. If we are unable to manage the cost
of procuring trailing-edge memory products or if we are unsuccessful in
introducing new products with higher gross margins, our business will suffer. In
the consumer graphics card market, there is a constant demand for leading-edge
memory products, which can result in excess inventory of older products and
price erosion. Finally, the Flash memory industry is beginning to show signs of
price erosion, as rapid technological change causes the value of older products
to erode. If we are unable to properly manage our inventories of these products,
it could have a material adverse effect on our business and results of
operations.

WE OBTAIN MANY OF OUR PRODUCTS FROM LIMITED OR SOLE SUPPLIERS, AND IF THESE
SUPPLIERS FAIL TO MEET OUR SUPPLY REQUIREMENTS OR CEASE PRODUCTION OF OUR
PRODUCTS, WE MAY LOSE SALES AND EXPERIENCE INCREASED COSTS.

Our product inventory strategy is to maintain as little inventory as is
necessary for the efficient operation of our business, which creates the risk
that any shortage or delay in the supply of our products could harm our ability
to meet demand. We obtain many of our products from a limited number of
suppliers on a purchase order basis. None of our suppliers have a contractual
commitment to supply us with products. These products include our Flash memory
cards and related products and some of our DRAM modules. We obtain virtually all
of the graphics processors for our Verto(R) graphics cards and all of the NVIDIA
Quadro(R) graphics cards directly from NVIDIA. If demand for a specific product
or component increases, we may not be able to obtain an adequate supply of that
product or component in a timely manner, since our suppliers may fill other
orders before ours. It could be difficult, costly and time-consuming to obtain
alternative sources for these components, or to change product designs to make
use of alternative products or components. In addition, difficulties in
transitioning from an existing supplier to a new supplier could create delays in
product or component availability that would have a significant impact on our
ability to fulfill orders for our products. This would adversely impact our
ability to meet demand and damage our brand and reputation in the market, which
could have a material adverse effect on our business and results of operations.

WE ARE SUBJECT TO THE CYCLICAL NATURE OF THE SEMICONDUCTOR INDUSTRY AND ANY
FUTURE DOWNTURN COULD ADVERSELY AFFECT OUR BUSINESS.

The semiconductor industry is highly cyclical and characterized by
constant and rapid technological change, rapid product obsolescence and price
erosion, evolving standards, short product life cycles and wide fluctuations in
product supply and demand. The DRAM market has experienced significant downturns
often connected with, or in anticipation of, maturing product cycles and
declines in general economic conditions. These downturns have been characterized
by diminished product demand, production overcapacity, high inventory levels and
accelerated erosion of average sales prices. It is impossible to predict whether
demand for our products will diminish or costs for any of our products will
increase. The Flash memory market is a relatively new market. As more Flash
memory production capacity comes online, it is possible that supply could exceed
demand. Any future downturns could have a material adverse effect on our
business and results of operations.

OUR FAILURE TO EFFECTIVELY COMPETE BY FAILING TO RESPOND TO PRICE VOLATILITY,
MATCH COMPETITORS' PRICES OR SERVICES OR IMPROVE BRAND RECOGNITION COULD REDUCE
OUR PROFITABILITY. INCREASED COMPETITION FROM VERTICALLY INTEGRATED OR
BETTER-POSITIONED COMPANIES MAY RESULT IN DECREASED DEMAND OR LOWER PRICES FOR
OUR PRODUCTS.

We compete primarily on the basis of service, quality, brand and value.
Some of our competitors include large domestic and international companies that
have substantially greater financial, technical, marketing, distribution and
other resources, broader product lines, lower cost structures and long-term
contracts with customers

and suppliers. As a result, our competitors may be better able than we to
respond to volatile average sales prices, to deliver competitive products at a
lower price, to provide services we cannot and compete based on brand
recognition.

Some of our significant suppliers, such as Micron Technology, Inc. and
Panasonic Computer Solutions Company, as well as certain of our contract
manufacturers, are also our competitors. These suppliers may be able to market
competitive products at lower prices than ours due to lower underlying costs
because they are vertically integrated. We also face competition in the OEM
sales division from current and prospective customers that evaluate our
capabilities against the merits of manufacturing products internally. Our
inability to effectively compete in our markets could have a material adverse
effect on our business and results of operations.

THE SUCCESS OF OUR CONSUMER DIVISION STRATEGY DEPENDS ON OUR BRAND. IF OUR
MARKETING EFFORTS ARE NOT SUCCESSFUL OR IF WE EXPERIENCE QUALITY OR SUPPLY
PROBLEMS, THEN OUR CONSUMER DIVISION COULD SUFFER.

We believe that brand recognition is critical to our success. We plan
to increase our marketing expenditures to create and maintain prominent brand
awareness. If we fail to promote our brands successfully, or if the expenses
associated with doing so are disproportionate to any increased net sales we
achieve, it could have a material adverse effect on our business and results of
operations. In addition, if our products exhibit poor performance or other
defects, then it could have a material adverse effect on our brands.

WE MAY BECOME INVOLVED IN LITIGATION OVER INTELLECTUAL PROPERTY RIGHTS, WHICH
MAY ADVERSELY AFFECT OUR ABILITY TO MANUFACTURE AND SELL OUR PRODUCTS.

Our industry is characterized by vigorous protection and pursuit of
intellectual property rights. Third parties may bring suits against us or we may
be called upon to indemnify our customers for any intellectual property right
infringements by us. Litigation could result in significant expense to us and
divert the efforts of our technical and management personnel. In the event of an
adverse result in litigation, we could be required to pay substantial damages,
cease the manufacture, use and sale of some products, expend significant
resources to develop non-infringing technology, discontinue the use of some
processes or obtain licenses to use the infringed technology. Any of these
results could have a material adverse effect on our business and results of
operations.

OUR INDEMNIFICATION OBLIGATIONS TO OUR CUSTOMERS FOR PRODUCT DEFECTS COULD
REQUIRE US TO PAY SUBSTANTIAL DAMAGES.

A number of our product sales agreements provide that we will defend,
indemnify and hold harmless our customers from damages and costs that arise from
product warranty claims or claims for injury or damage resulting from defects in
our products. Our insurance coverage may not be adequate to cover all or any
part of the claims asserted against us. A successful claim brought against us
that is in excess of, or excluded from, our insurance coverage could have a
material adverse effect on our business and results of operations.

OUR INTERNATIONAL OPERATIONS SUBJECT US TO RISKS, SUCH AS FOREIGN CURRENCY
FLUCTUATIONS, WHICH COULD ADVERSELY AFFECT OUR OPERATING RESULTS.

General economic conditions and fluctuations in currency exchange rates
affect the prices of our products and certain of our costs. International sales
of our products accounted for approximately 33.4% of our net sales for the nine
months ended September 30, 2003. We sell a significant portion of our products
in western European markets, such as France, the United Kingdom and Germany. A
significant portion of our European sales is denominated in local currencies,
principally the euro and British pound. If there were a significant devaluation
of these currencies against the U.S. dollar, the operating results of our
European subsidiaries, when expressed in U.S. dollars, could be adversely
affected. In addition, because we manufacture products and have employees in
foreign countries, our costs and operations could be adversely impacted by
currency fluctuations. International operations are subject to a number of other
risks as well, including:

o political and economic instability, international terrorism and
anti-American sentiment, particularly in emerging markets;

o preference for locally-branded products, and laws and business
practices favoring local competition;

o unusual or burdensome foreign laws or regulations, and unexpected
changes to those laws or regulations;

o import and export license requirements, tariffs, taxes and other
barriers;

o costs of customizing products for foreign countries;

o increased difficulty in managing inventory;

o less effective protection of intellectual property; and

o difficulties and costs of staffing and managing foreign operations.

Any or all of these factors could adversely affect our ability to execute our
geographic expansion strategy or have a material adverse effect on our business
and results of operations.

OUR ABILITY TO OPERATE OUR COMPANY EFFECTIVELY COULD BE IMPAIRED IF WE LOSE KEY
PERSONNEL.

Our success depends on the continued contributions of our senior
management, particularly Gadi Cohen, our President, Chief Executive Officer and
Chairman of our Board of Directors. Although Mr. Cohen will remain our majority
shareholder following this offering, we do not have an employment agreement with
him. The loss of Mr. Cohen could have a material adverse effect on us.

Competition for employees in our industry is intense. We have had, and
may continue to have, difficulty hiring the necessary sales and marketing,
management and engineering personnel to support our growth. We cannot assure you
that key personnel will continue to be employed by us or that we will be able to
attract and retain qualified personnel in the future. We do not have "key
person" life insurance to cover our executive officers. Failure to retain or
attract key personnel could have a material adverse effect on us.

WE EXPECT OUR OPERATING RESULTS TO FLUCTUATE IN FUTURE PERIODS, CAUSING OUR
STOCK PRICE TO BE VOLATILE.

Our operating results have fluctuated in the past, and we believe they
will continue to do so in the future. Our future results of operations will
depend on many factors including:

o seasonal purchasing patterns for our products;

o our ability to procure our products or components or fluctuations in
the cost of such products or components;

o fluctuating market demand for, and changes in the average sales
prices of, our products;

o changes in our product and revenue mix;

o market acceptance of new and enhanced versions of our products;

o the timing of the introduction of new products or components and
enhancements to our existing products; and

o our ability to adequately support future growth.

Due to these and other factors, quarterly revenues and results of operations are
difficult to forecast, and period-to-period comparisons of our operating results
may not be meaningful or predictive of future performance. In one or

more future quarters, our results of operations may fall below our expectations
and those of our investors. In that event, the trading price of our common stock
would likely decline.

WE MAY MAKE ACQUISITIONS THAT ARE DILUTIVE TO EXISTING SHAREHOLDERS. IN
ADDITION, OUR LIMITED EXPERIENCE IN ACQUIRING OTHER BUSINESSES, PRODUCT LINES
AND TECHNOLOGIES MAY MAKE IT DIFFICULT FOR US TO OVERCOME PROBLEMS ENCOUNTERED
IN CONNECTION WITH ANY ACQUISITIONS WE MAY UNDERTAKE.

We intend to evaluate and explore strategic opportunities as they
arise, including business combinations, strategic partnerships, capital
investments and the purchase, licensing or sale of assets. In connection with
any such future transaction, we could issue dilutive equity securities, incur
substantial debt, reduce our cash reserves or assume contingent liabilities. In
addition, we may fund all or a portion of the purchase price of a future
acquisition with the proceeds from this offering.

Our experience in acquiring other businesses, product lines and
technologies is limited. Our inability to overcome problems encountered in
connection with any acquisitions could divert the attention of management,
utilize scarce corporate resources and otherwise harm our business. Any
potential future acquisitions also involve numerous risks, including:

o problems assimilating the purchased operations, technologies or
products;

o costs associated with the acquisition;

o adverse effects on existing business relationships with suppliers
and customers;

o risks associated with entering markets in which we have no or
limited prior experience;

o potential loss of key employees of purchased organizations; and

o potential litigation arising from the acquired company's operations
before the acquisition.

Furthermore, acquisitions may require material charges and could result
in adverse tax consequences, substantial depreciation, deferred compensation
charges, in-process research and development charges, the amortization of
amounts related to deferred compensation and identifiable purchased intangible
assets or impairment of goodwill, any of which could negatively affect our
results of operations.

IF WE ARE UNABLE TO OBTAIN ADDITIONAL FINANCING, WE MAY NOT BE ABLE TO SUPPORT
OUR FUTURE GROWTH.

We may need to raise additional capital through public or private
equity offerings or debt financings to support our growth strategy. We do not
know whether additional financing will be available when needed, or, if
available, whether the terms of any financing will be favorable to us. If we
cannot raise needed funds on acceptable terms, we may not be able to develop or
enhance our products, improve our manufacturing lines and testing equipment,
take advantage of future opportunities, including acquisitions, or respond to
competitive pressures or unanticipated events, all of which could harm our
business and results of operations. To the extent we raise additional capital by
issuing equity securities, our stockholders may experience substantial dilution
and the new equity securities may have rights, preferences or privileges senior
to those of our common stock.

RISKS RELATED TO THIS OFFERING

THE MARKET PRICE OF OUR COMMON STOCK MAY FLUCTUATE SIGNIFICANTLY, WHICH COULD
RESULT IN A DECLINE IN THE VALUE OF YOUR INVESTMENT.

We believe that the market price of our common stock, like that of
other technology companies, is likely to be volatile. The price of our common
stock that will prevail in the market after this offering may be higher or lower
than the price you pay, depending on many factors, including:

o actual or anticipated fluctuations in our quarterly results of
operations;

o changes in our or security analysts' estimates of our operating
results;

o announcements by us or our competitors of new products or strategic
partnerships;

o a loss of, or decrease in, sales to major customers;

o additions or departures of key personnel;

o future sales of our common stock, particularly by our officers; and

o commencement of or involvement in litigation.

In addition, the stock market in general, and the market for technology
companies in particular, have experienced extreme price and volume fluctuations
that have often been unrelated or disproportionate to the operating performance
of those companies. These broad market and industry factors may seriously harm
the market price of our common stock, regardless of our actual operating
performance. If our stock price were to experience a sudden and significant
decline, then we could face litigation and associated costs and disruption to
our business.

OUR MANAGEMENT WILL HAVE BROAD DISCRETION TO USE THE PROCEEDS FROM THIS
OFFERING, INCLUDING THE ABILITY TO APPLY THE PROCEEDS TO USES THAT DO NOT
INCREASE OUR OPERATING RESULTS OR MARKET VALUE.

Our management will have considerable discretion in the application of
the net proceeds of this offering. You will not have the opportunity, as part of
your investment decision, to assess whether the net proceeds are being used
appropriately. The net proceeds may be used for corporate purposes that do not
increase our operating results or market value. Prior to being used in our
business, the net proceeds of this offering may be placed in investments that do
not produce income or that lose value. The failure to apply these funds
effectively could impair our financial condition.

ANTI-TAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW COULD PREVENT
OR DELAY A CHANGE IN CONTROL AND, AS A RESULT, NEGATIVELY AFFECT OUR
STOCKHOLDERS.

We have taken a number of actions that could have the effect of
discouraging a takeover attempt. Our certificate of incorporation grants our
Board of Directors the authority to fix the rights, preferences and privileges
of and issue shares of preferred stock without stockholder action. Although we
have no present intention to issue shares of preferred stock, such an issuance
could have the effect of making it more difficult and less attractive for a
third-party to acquire a majority of our outstanding voting stock. Preferred
stock may also have other rights, including economic rights senior to our common
stock, which could have a material adverse effect on the market value of our
common stock. In addition, we are subject to the anti-takeover provisions of
Section 203 of the Delaware General Corporation Law. This section generally
provides that a corporation may not engage in any business combination with any
interested stockholder during the three-year period following the time that a
stockholder became an interested stockholder. This provision could have the
effect of delaying or preventing a change of control of our company.

THE LARGE NUMBER OF SHARES ELIGIBLE FOR PUBLIC SALE AFTER THIS OFFERING COULD
CAUSE OUR STOCK PRICE TO DECLINE.

Our current stockholders hold a substantial number of shares of our
common stock that they will be able to sell in the public market in the near
future. A significant portion of these shares are held by a small number of
stockholders. Sales by our current stockholders of a substantial number of
shares after this offering could significantly reduce the market price of our
common stock. In addition, the perception that our current stockholders might
sell common stock could depress the trading price of the common stock. Sales of
our shares and the possibility of these sales, could make it more difficult for
us to sell equity or equity-related securities in the future at a time and price
that we consider appropriate.

Upon the consummation of this offering, 13,268 shares of our Series A
preferred stock will be automatically converted into 3,980,400 shares of common
stock, and the holders of these shares will have the right, subject to some
conditions, to require us to file registration statements covering their shares
or to include their shares in registration statements that we may file for
ourselves or other stockholders. In addition, after this offering, we intend to
register all common stock that we may issue under our employee stock option
plan. Once we register these shares, they can be freely sold in the public
market upon issuance, subject to the lock-up agreements described in the section
entitled "Shares Eligible for Future Sale--Lock-up Agreements." If any of these
holders cause a large number of securities to be sold in the public market, the
sales could reduce the trading price of our common stock. These sales also could
impede our ability to raise future capital.

MAJORITY OWNERSHIP BY OUR PRINCIPAL STOCKHOLDER MAY PREVENT NEW INVESTORS FROM
INFLUENCING SIGNIFICANT CORPORATE DECISIONS.

Upon completion of this offering, Gadi Cohen, our Chief Executive
Officer, President and Chairman of our Board of Directors, will beneficially
own, in total, approximately % of our outstanding common stock, % if the
underwriters exercise their over-allotment option in full. As a result, Mr.
Cohen will have the ability to exert substantial influence over all matters
requiring approval by our stockholders, including the election and removal of
directors and any proposed merger, consolidation or sale of all or substantially
all of our assets and other corporate transactions. He could dictate the
management of our business and affairs. This control could be disadvantageous to
other stockholders with interests different from those of Mr. Cohen. For
example, Mr. Cohen could delay or prevent an acquisition or merger even if the
transaction would benefit other stockholders. In addition, this majority
ownership may adversely affect the trading price for our common stock because
investors often perceive disadvantages in owning stock in companies with
controlling stockholders. In addition, because we will be a "controlled
company," we will be exempt from many of the recently adopted Nasdaq Qualitative
Listing Standards. As a result, you will not have the benefit of certain
requirements, such as having a majority of independent directors on the Board,
which shareholders in non-controlled companies possess.

THE LIQUIDITY OF OUR COMMON STOCK IS UNCERTAIN BECAUSE IT HAS NEVER BEEN
PUBLICLY TRADED, AND YOU MAY NOT BE ABLE TO RESELL YOUR SHARES AT OR ABOVE THE
PRICE YOU PAID.

There is no existing public market for our common stock. As a result,
the initial public offering price will be determined by negotiations among the
underwriters and us, and may not be indicative of prices that will prevail in
the public trading markets. We also cannot predict the extent to which a trading
market for our common stock will develop or how liquid that market will be. You
may not be able to resell your shares at or above the initial public offering
price.

FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements, including
statements concerning conditions in the Flash memory, high performance
computing, networking and communications and consumer electronics industries,
and concerning our business, financial condition, operating strategies, and our
operational and legal risks. We use words like "believe," "expect,"
"anticipate," "intend," "future," "plan" and other similar expressions to
identify forward-looking statements. Purchasers of our common stock should not
place undue reliance on these forward-looking statements, which speak only as of
the date of this prospectus. These forward-looking statements are based on our
current expectations and are subject to a number of risks and uncertainties,
including those identified under "Risk Factors" and elsewhere in this
prospectus. Although we believe that the expectations reflected in these
forward-looking statements are reasonable, our actual results could differ
materially from those expressed in these forward-looking statements, and any
events anticipated in the forward-looking statements may not actually occur.
Except as required by law, we undertake no duty to update any forward-looking
statements after the date of this prospectus to conform those statements to
actual results or to reflect the occurrence of unanticipated events.

USE OF PROCEEDS

We estimate that the net proceeds from this offering will be
approximately $ million, or approximately $ million if the
underwriters exercise their over-allotment option in full, based on an assumed
initial public offering price of $ per share and after deducting the
underwriting discount and our estimated offering expenses.

We intend to use the net proceeds of this offering to repay
substantially all of our existing indebtedness, which was $31.0 million at
September 30, 2003. The remainder of the net proceeds, approximately
$ million, will be used for working capital and general corporate purposes.
If suitable opportunities are available, we may use a portion of the net
proceeds currently intended for working capital for the acquisition of, or
investment in, companies, manufacturing facilities, technologies or other assets
that complement our business. We have no present understandings, commitments or
agreements to enter into any potential acquisitions or investments.

Our revolving U.S. credit facility will be repaid in its entirety with
the net proceeds of this offering. As of September 30, 2003, we had $26.0
million outstanding under this facility. This facility matures on February 23,
2007, and had a blended interest rate of 3.7% at September 30, 2003. We
currently owe Ruth Cohen, our Chief Executive Officer's spouse, approximately
$5.0 million, which must be repaid with the net proceeds of this offering. The
note held by Mrs. Cohen has an interest rate of 4.25% per annum and matures on
December 31, 2004. See the discussion under the heading "Related Party
Transactions" for additional information relating to this obligation.

Pending use of the net proceeds as described above, we intend to invest
the net proceeds of this offering in short-term, interest-bearing securities.

DIVIDEND POLICY

We have never declared or paid dividends on our common stock and we do
not anticipate paying any dividends on our common stock in the foreseeable
future. We currently expect to retain all earnings, if any, for investment in
our business. In addition, the terms of our credit facility, which we plan to
repay with the net proceeds of this offering, prohibit us from paying dividends
without our lenders' consent.

We will pay dividends on our common stock only if and when declared by
our Board of Directors. The Board's ability to declare a dividend is subject to
limits imposed by Delaware corporate law. In determining whether to declare
dividends, the Board will consider these limits, our financial condition,
results of operations, working capital requirements, future prospects and other
factors it considers relevant.

CAPITALIZATION

The following table sets forth our cash and cash equivalents and
capitalization, as of September 30, 2003, on:

o an actual basis; and

o a pro forma as adjusted basis to reflect (1) the automatic
conversion of 13,268 shares of our Series A preferred stock into
3,980,400 shares of our common stock upon the consummation of this
offering with an effective conversion price of $3.97 per share, (2)
our proposed sale of shares of common stock in this offering at
an assumed initial public offering price of $ per share and (3)
our application of the estimated net proceeds of this offering after
deducting fees and expenses. See "Use of Proceeds" and "Description
of Capital Stock."

The capitalization information in the table below is qualified by, and
should be read in conjunction with, our consolidated financial statements and
related notes appearing elsewhere in this prospectus. The table does not include
2,562,840 shares of common stock issuable upon exercise of options outstanding
as of September 30, 2003 at a weighted average exercise price of $3.05 per share
or the 49,500 shares of common stock issuable upon the exercise of warrants
outstanding as of September 30, 2003 held by one of our former officers. The
following table also assumes that the underwriters do not exercise their
over-allotment option.

SEPTEMBER 30, 2003
(UNAUDITED)
-------------------------------------------------
ACTUAL PRO FORMA AS ADJUSTED
---------- ----------------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

Cash and cash equivalents......................................................... $ 3,838 $
========= ==========
Total bank debt................................................................... 25,995
Capital lease obligations......................................................... 183
Bank overdrafts................................................................... 2,365
Long-term obligations, net of current maturities:
Note payable to related party................................................... 4,971
--------- ----------
Total debt........................................................................ 33,514
Stockholders' equity:
Convertible Series A preferred stock, cumulative, participating, par value $0.01
per share; authorized 15,000 shares, issued and outstanding 13,268 shares on
an actual basis (preference in liquidation of $15,797); none on a pro forma
as adjusted basis............................................................. -
Common stock, $0.01 par value per share; authorized 125,000,000 shares; issued
and outstanding 26,954,800 shares on an actual basis; issued 31,270,300 shares
and outstanding 30,935,200 shares on a pro forma as adjusted basis............ 270
Deferred stock compensation....................................................... (239)
Additional paid-in capital........................................................ 5,195
Treasury stock, at cost - 1,117 shares of convertible Series A preferred stock,
at cost on an actual basis and 335,100 shares of common stock on a pro forma
as adjusted basis............................................................. (1,502)
Accumulated earnings.............................................................. 6,016
Accumulated other comprehensive................................................... 3,598
Notes receivable.................................................................. (81)
--------- ----------
Total stockholders' equity..................................................... 13,257
--------- ----------
Total capitalization........................................................ $ 46,771 $
========= ==========

DILUTION

Our pro forma net tangible book value, as of September 30, 2003, was
$13.3 million, or $0.43 per share of common stock. We calculate net tangible
book value per share by subtracting our total liabilities from our total
tangible assets, which equals total assets less intangible assets, and dividing
this amount by the number of shares of common stock outstanding on a pro forma
basis, as of September 30, 2003, after giving effect to the automatic conversion
of all of our outstanding Series A preferred stock into 3,980,400 shares of
common stock upon the consummation of this offering with an effective conversion
price of $3.97 per share. Assuming we sell shares of common stock in this
offering at an assumed initial public offering price of $ per share, and
assuming the application of the estimated net proceeds from this offering as set
forth in "Use of Proceeds," our pro forma net tangible book value, as of
September 30, 2003, would have been $ million, or $ per share of common
stock. On the basis of the foregoing assumptions, there will be an immediate
increase in pro forma net tangible book value of $ per share to our existing
stockholders and an immediate dilution in net tangible book value of $ per
share to new investors. The following table illustrates this per share dilution:

Assumed initial public offering price per share.................................
Pro forma net tangible book value per share at September 30, 2003..........
Increase per share attributable to this offering...........................
Pro forma net tangible book value per share after the offering..................
Pro forma net tangible book value dilution per share to new investors...........

The following table summarizes, on a pro forma as adjusted basis as of
September 30, 2003, the difference between our existing stockholders and new
investors with respect to the number of shares of common stock purchased from
us, the total consideration paid to us, and the average price per share paid.
The following table does not include shares subject to outstanding options,
outstanding warrants or options reserved for issuance under our employee stock
option plan as of September 30, 2003. To the extent that outstanding options or
warrants are exercised and shares of common stock are issued, there will be
further dilution to new investors.

SHARES PURCHASED TOTAL CONSIDERATION
---------------------- ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------ ------- ------ ------- --------------

Existing stockholders........................ % $ % $
New investors................................
Total..................................... % $ % $

If the underwriters exercise their over-allotment option in full, the
number of shares of common stock held by new investors will increase to
shares, or approximately % of the total number of shares of common stock to
be outstanding immediately after this offering.

SELECTED FINANCIAL DATA

We have derived the consolidated statement of operations data for the
years ended December 31, 2000, 2001 and 2002 and the consolidated balance sheet
data as of December 31, 2001 and 2002 from our audited consolidated financial
statements included elsewhere in this prospectus. We have derived the
consolidated statement of operations data for the years ended December 31, 1998
and 1999 and the consolidated balance sheet data as of December 31, 1998, 1999
and 2000 from our audited consolidated financial statements, although those
financial statements are not included in this prospectus. We have derived the
consolidated statement of operations data for the nine months ended September
30, 2002 and 2003 and the balance sheet data as of September 30, 2003, from our
unaudited consolidated financial statements included elsewhere in this
prospectus. In the opinion of our management, the unaudited consolidated
financial statements reflect all adjustments, consisting of only normal
recurring adjustments, necessary for a fair presentation of this information.
Results for an interim period are not necessarily indicative of our results to
be expected for the full year. The pro forma net income per common share for the
year ended December 31, 2002 and for the nine months ended September 30, 2003
reflect the conversion of all of our Series A preferred stock into shares of
common stock described under "Capitalization," which will result in the issuance
of an aggregate of 3,980,400 shares of common stock, as if the conversion had
occurred on the first day of each such period. You should read the following
selected consolidated financial data in conjunction with our consolidated
financial statements and related notes and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" appearing elsewhere in this
prospectus.

NINE MONTHS ENDED
SEPTEMBER 30,
YEAR ENDED DECEMBER 31, (UNAUDITED)
--------------------------------------------------------------- ------------------------
1998 1999 2000 2001 2002 2002 2003
----------- ----------- ----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Net sales............................. $ 204,576 $ 273,571 $ 548,341 $ 314,197 $ 334,603 $ 251,615 $ 258,564
Cost of sales(1)...................... 177,839 233,261 484,053 281,688 286,351 217,376 223,128
----------- ----------- ----------- ----------- ----------- ----------- -----------
Gross profit.......................... 26,737 40,310 64,288 32,509 48,252 34,239 35,436
Operating expenses:
Selling(1).......................... 13,491 15,082 21,328 21,184 26,228 19,566 21,765
Warehouse........................... 1,447 1,312 1,476 1,608 1,735 1,313 1,522
General and administrative(1)....... 7,247 7,701 13,086 9,586 8,513 6,133 6,300
Restructuring and other charges(2).. - - - - 10,387 9,658 1,745
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total operating expenses............ 22,185 24,095 35,890 32,378 46,863 36,670 31,332
----------- ----------- ----------- ----------- ----------- ----------- -----------
Operating income (loss)............... 4,552 16,215 28,398 131 1,389 (2,431) 4,104

Interest expense, net................. (2,443) (2,648) (4,319) (2,636) (1,618) (1,264) (1,213)
Foreign exchange gain (loss).......... (22) - (751) 899 (1,983) (1,828) (456)
Other income (expense), net........... 77 171 461 161 166 253 154
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income (loss) before income taxes..... 2,164 13,738 23,789 (1,445) (2,046) (5,270) 2,589
Income taxes.......................... 120 1,364 3,402 943 1,189 699 1,077
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income (loss)..................... 2,044 12,374 20,387 (2,388) (3,235) (5,969) 1,512
Dividends on Series A preferred stock - - - 1,147 650 488 (1,309)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income (loss) available to common
stockholders.......................... $ 2,044 $ 12,374 $ 20,387 $ (3,535) $ (3,885) $ (6,457) $ 2,821
=========== =========== =========== =========== =========== =========== ===========
Net income (loss) per common share:
Basic............................... $ 0.08 $ 0.48 $ 0.78 $ (0.14) $ (0.14) $ (0.24) $ 0.10
Diluted............................. 0.07 0.39 0.60 (0.14) (0.14) (0.24) 0.05

Shares used in computing net income
(loss) per common share:
Basic............................... 25,947,522 26,050,050 26,050,050 26,120,205 26,954,800 26,954,800 26,954,800
Diluted............................. 30,681,349 31,525,033 33,720,454 26,120,205 26,954,800 26,954,800 32,454,471

Unaudited pro forma net (loss) income
per common share:

Basic............................... $ (0.10) $ 0.05
Diluted............................. (0.10) 0.05

Shares used in computing unaudited
pro forma net (loss) income per
common share:
Basic............................... 30,935,200 30,935,200
Diluted............................. 30,935,200 32,454,471

DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------------- 2003
1998 1999 2000 2001 2002 (UNAUDITED)
---------- -------- -------- ---------- --------- -------------
(IN THOUSANDS)

CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents............. $ 1,675 $ 6,496 $ 10,311 $ 5,338 $ 7,480 $ 3,838
Working capital....................... (10,397) 260 12,558 10,034 10,873 15,970
Total assets.......................... 65,930 81,143 154,231 113,023 124,657 107,046
Total bank debt....................... 32,995 25,326 48,738 31,560 33,894 25,995
Capital lease obligations and bank
overdrafts, including current
maturities........................... 3,543 5,479 16,161 2,835 2,692 2,548
Note payable to related party......... - - 9,810 7,916 5,189 4,971
Redeemable preferred stock............ 18,060 18,060 - - - -
Total stockholders' equity ........... (20,559) (8,547) 12,497 10,102 8,506 13,257

- ---------------
(1) Stock-based compensation is allocated as follows:

NINE MONTHS ENDED
SEPTEMBER 30,
YEAR ENDED DECEMBER 31, (UNAUDITED)
-------------------------------------------------------- ---------------------
1998 1999 2000 2001 2002 2002 2003
--------- -------- -------- -------- -------- --------- --------
(IN THOUSANDS)

Cost of sales................ $ - $ - $ 814 $ 1,073 $ (279) $ (324) $ 135
Selling...................... - - 490 596 89 65 67
Warehouse.................... - - 1 7 5 4 4
General and administrative... - - 144 150 (38) (48) 28
-------- -------- ------- ------- ------- ------- -------
Total.................... $ - $ - $ 1,449 $ 1,826 $ (223) $ (303) $ 234

(2) Represents charge for the impairment of long-lived assets and the shutdown
and closure of our manufacturing facility in Ireland and manufacturing
operations in California.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion together with our consolidated
financial statements and related notes appearing elsewhere in this prospectus.
This discussion contains forward-looking statements regarding the electronics
industry and our expectations regarding our future performance, liquidity and
capital resources. Our actual results could differ materially from those
expressed in these forward-looking statements. See "Forward-Looking Statements."

OVERVIEW

Prior to 2000, we were primarily focused on marketing DRAM modules
through both our Consumer and OEM divisions. In 2000, we experienced significant
growth, resulting primarily from increased sales to one OEM customer. However,
by the end of 2000 and throughout 2001 and 2002, net sales of DRAM to our OEM
customers declined significantly as a result of the deteriorating economy and
excess inventory throughout the electronics supply chain.

Because of the volatile nature of the DRAM market, we made a strategic
decision in 2000 to diversify our business by marketing complementary consumer
products that capitalized on our existing customer and supplier relationships.
As a result of this strategy, we offered our first new consumer product in the
first quarter of 2000. Since then, we have introduced our consumer and
professional lines of graphics cards, a variety of Flash memory cards and
related products and, most recently, our USB Flash drives. Growth in sales of
these consumer products has been the primary factor in our increased net sales
since 2000. Our Consumer division net sales increased from $173.3 million for
the year ended December 31, 2000 to $255.0 million for the year ended December
31, 2002 and were $219.7 million for the nine months ended September 30, 2003.

SEGMENTS

We report results through two segments: our Consumer and OEM divisions.
Our Consumer division markets our products through traditional retailers,
web-based and mail-order retailers, distributors, value added resellers and
system integrators, as well as directly to certain professional end-users. Our
OEM division primarily markets our DRAM modules to OEMs and their contract
manufacturers. We track net sales and gross profit for each division, but do not
separately track operating expenses, interest or income taxes because those
items cannot be specifically allocated to either division.

The following table sets forth summary financial information for our
Consumer and OEM divisions:

NINE MONTHS ENDED
SEPTEMBER 30,
YEAR ENDED DECEMBER 31, (UNAUDITED)
--------------------------------------- ------------------------
2000 2001 2002 2002 2003
---------- --------- --------- --------- ----------
(DOLLARS IN THOUSANDS)

Net sales:
Consumer............................... $ 173,281 $ 189,861 $ 255,038 $ 183,847 $ 219,652
OEM.................................... 375,060 124,336 79,565 67,768 38,912
---------- --------- --------- --------- ----------
Total................................ 548,341 314,197 334,603 251,615 258,564

Cost of sales(1):
Consumer............................... 164,669 173,784 217,058 158,421 189,618
OEM.................................... 318,510 106,831 69,572 59,279 33,375
---------- --------- --------- --------- ----------
Total................................ 483,239 280,615 286,630 217,700 222,993

Gross profit(1):
Consumer............................... 8,612 16,077 37,980 25,426 30,034
OEM.................................... 56,490 17,505 9,993 8,489 5,537
---------- --------- --------- --------- ----------
Total................................ 65,102 33,582 47,973 33,915 35,571

Gross profit margin(1):
Consumer............................... 5.0% 8.5% 14.9% 13.8% 13.7%
OEM.................................... 15.1 14.1 12.6 12.5 14.2
Total................................ 11.9% 10.7% 14.3% 13.5% 13.8%

- ---------------
(1) Does not include stock-based compensation expense. For the years ended
December 31, 2000, 2001 and 2002, and the nine months ended September 30,
2002 and 2003 (unaudited), our stock-based compensation expense was (in
thousands) $814, $1,073, $(279), $(324) and $135.

CUSTOMERS

Historically, a limited number of customers in both our divisions have
accounted for a significant percentage of our net sales. For the years ended
December 31, 2001 and 2002 and the nine months ended September 30, 2003, our
five largest customers accounted for 64.8%, 54.1% and 51.5% of our net sales,
respectively. We expect that sales of our products to a limited number of
customers will continue to account for a majority of our sales in the
foreseeable future. We do not have long-term purchase agreements with any of our
customers. If we were to lose any of our major customers or experience any
material reduction in orders from any of them, it could have a material adverse
effect on our business and results of operations.

INTERNATIONAL

Net sales by region and as a percentage of total net sales are
presented in the table below. For the years ended December 31, 2000, 2001 and
2002, 90.3%, 85.3% and 78.8%, respectively, of our net sales were denominated in
U.S. dollars. For the nine months ended September 30, 2002 and 2003, 79.0% and
75.4%, respectively, of our net sales were denominated in U.S. dollars.

NINE MONTHS ENDED
SEPTEMBER 30,
YEAR ENDED DECEMBER 31, (UNAUDITED)
-------------------------------------------------------------- -----------------------------------------
2000 2001 2002 2002 2003
----------------- ------------------ ------------------- ------------------- ------------------
(DOLLARS IN THOUSANDS)

United States.... $ 492,354 89.8% $ 266,573 84.8% $ 255,281 76.3% $ 192,875 76.7% $ 172,148 66.6%
Western Europe... 55,503 10.1 46,974 15.0 71,153 21.3 53,231 21.1 56,206 21.7
Other............ 484 0.1 650 0.2 8,169 2.4 5,509 2.2 30,210 11.7
--------- ----- --------- ----- --------- ----- --------- ----- --------- -----
Total......... $ 548,341 100.0% $ 314,197 100.0% $ 334,603 100.0% $ 251,615 100.0% $ 258,564 100.0%
========= ===== ========= ===== ========= ===== ========= ===== ========= =====

SEASONALITY

Products sold through our Consumer division have historically been
affected by seasonal purchasing patterns. Our Flash memory cards and related
products tend to have higher unit sales in the second and fourth

quarters. These sales generally follow seasonal purchasing patterns of the
consumer electronic devices that utilize Flash memory. Our DRAM products have
generally shown lower unit sales in the second quarter. These sales tend to
follow the purchasing patterns of software and new computers. Products sold
through our OEM division do not show significant seasonal trends. The impact of
seasonality on our future results will be affected by our product mix, which
will vary from quarter to quarter.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements requires
us to make estimates and judgments that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amount of net sales and expenses for
each period. The following represents a summary of our critical accounting
policies, defined as those policies that we believe are the most important to
the portrayal of our financial condition and results of operations and that
require management's most difficult, subjective or complex judgments, often as a
result of the need to make estimates about the effects of matters that are
inherently uncertain.

Revenue recognition. The majority of our net sales in both our Consumer
and OEM divisions are non-consignment and are recognized upon shipment to
customers. Less than 10% of our net sales for the years ended December 31, 2001
and 2002 and for the nine months ended September 30, 2003 were consignment
sales. A substantial portion of sales through our Consumer division include
limited rights to return unsold inventory. We provide for estimated future
returns of inventory based on historical experience. However, if certain returns
in excess of our estimates occur, those amounts are accrued at the time we
become aware of them, which may not be in the same period in which we book the
initial sale. In addition, some customers have limited price protection rights
for inventories of our products held by them. If we reduce the list price of
these previously purchased products, these customers may be entitled to receive
credits from us. We accrue for estimated cost for these limited price protection
arrangements when the customer is notified of the price change. We also offer to
both consumers and customers certain rebate arrangements. We accrue for the
estimated cost of these rebate arrangements using actual sell through data
supplied by our customers and historical redemption percentages. Our net sales
are defined as our gross sales less these estimated future returns, limited
price protection arrangements and rebate arrangements.

Reserves for inventory excess and obsolescence. We generally purchase
raw materials in quantities that we anticipate will be fully used within a short
time of purchase. Changes in our operating strategy, customer demand and
unpredictable fluctuations in market values of our finished goods can limit our
ability to effectively sell through our existing inventory at a profit. We
account for our inventory on a first-in, first-out basis and regularly monitor
potential inventory excess, obsolescence and assess market values relative to
costs. When necessary, we reduce the carrying amount of our inventory to market
value, if lower than cost.

Sales and marketing incentives. Sales and marketing incentives offset
net sales or are charged to operations in accordance with the Financial
Accounting Standards Board, or FASB, Emerging Issues Task Force Issue No. 01-09.
For the year ended December 31, 2002 and for the nine months ended September 30,
2003, our sales and marketing incentives were $16.7 million and $14.1 million,
respectively. For those respective periods, $0.7 million and $1.1 million were
offset against net sales.

Stock-based compensation. As permitted by SFAS No. 123, "Accounting for
Stock-Based Compensation," which establishes a fair value based method of
accounting for stock-based compensation plans, we have elected to follow
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," for recognizing stock-based compensation expense for financial
statement purposes. We recognize stock-based compensation upon vesting.
Throughout this section, stock-based compensation is treated a separate
line-item within operating expenses and is not allocated to Cost of sales,
Selling, Warehouse and General and administrative as required by generally
accepted accounting principles in the United States of America. We present this
information in this manner because, when analyzing our performance, this is how
our management looks at our results. Where appropriate, reconciliations are
provided in footnotes so that the affected line items can be compared with our
Summary Consolidated Financial Data, Selected Financial Data and Financial
Statements.

Income taxes. As part of the process of preparing our consolidated
financial statements, we are required to estimate our income taxes in each of
the jurisdictions in which we operate. This process incorporates an assessment
of the current tax exposure together with temporary differences resulting from
different treatment of transactions for tax and financial statement purposes.
Such differences result in deferred tax assets and liabilities, which are
included within our consolidated balance sheet. The recovery of deferred tax
assets from future taxable income

must be assessed and, to the extent that recovery is not likely, we establish a
valuation allowance. Increases in valuation allowances result in the recording
of additional tax expense. Further, if our ultimate tax liability differs from
the periodic tax provision reflected in our consolidated statements of
operations, then additional tax expense may be recorded. At September 30, 2003,
we had net operating loss carry-forwards for the states of New Jersey and
California of approximately $4.5 million and $1.7 million, respectively. Both
states enacted legislation that suspended the use of net operating loss
carry-forwards during the 2002 and 2003 tax years.

Valuation of long-lived assets and restructuring estimates. We assess
the potential impairment of long-lived tangible and intangible assets whenever
events or changes in circumstances indicate that their carrying value may not be
recoverable. Changes in our operating strategy can significantly reduce the
estimated useful life of our assets. During 2002, we recorded a pre-tax charge
of $8.9 million associated with the shutdown of our facility in Ireland and
manufacturing operations in California. This charge included an accrual for
equipment and building lease payments of $5.0 million. Also during 2002, we
recorded a pre-tax charge of $1.4 million associated with the impairment of
capitalized equipment located at our facilities in New Jersey and France.

In the third quarter of 2003, we recorded an additional restructuring
charge of $1.7 million related to the building lease associated with our
manufacturing operations in California. When we incurred the restructuring
charge related to this facility in 2002, we estimated that we would have been
able to secure a sublease by January 1, 2004. However, due to the continued
deteriorating real estate market in that area, we have now fully reserved for
the remaining lease payments on the facility, since we do not expect to sublease
it in the near future.

RESULTS OF OPERATIONS

The tables presented below, which compare our results of operations
from one period to another, present the results for each period, the change in
those results from one period to another in both dollars and percentage change
and the results for each period as a percentage of net sales. The columns
present the following:

o The first two data columns in each table show the absolute results
for each period presented.

o The columns entitled "Period Over Period Change" and "Period Over
Period Percentage Change" show the change in results, both in
dollars and percentages. These two columns show favorable changes as
a positive and unfavorable changes as negative. For example, when
our net sales increase from one period to the next, that change is
shown as a positive number in both columns. Conversely, when
expenses increase from one period to the next, that change is shown
as a negative number in both columns.

o The last two columns in each table show the results for each period
as a percentage of net sales. In these two columns, the cost of
sales and gross profit for each are given as a percentage of that
division's net sales. These amounts are shown in italics.

In addition, as used in these tables, "NM" means "not meaningful."

COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 2002 TO THE NINE MONTHS ENDED
SEPTEMBER 30, 2003

PERIOD OVER
PERIOD OVER PERIOD
NINE MONTHS ENDED PERIOD PERCENTAGE RESULTS AS PERCENTAGE OF NET
SEPTEMBER 30, CHANGE CHANGE SALES FOR THE NINE MONTHS
(UNAUDITED) ------------- ------------- ENDED SEPTEMBER 30,
--------------------- FAVORABLE FAVORABLE ----------------------------
2002 2003 (UNFAVORABLE) (UNFAVORABLE) 2002 2003
-------- -------- ------------- ------------- ----------- ------------
(DOLLARS IN THOUSANDS)

Net sales:
Consumer....................... $183,847 $219,652 $ 35,805 19.5% 73.1% 85.0%
OEM............................ 67,768 38,912 (28,856) (42.6) 26.9 15.0
-------- -------- --------- ----- -----
Total........................ 251,615 258,564 6,949 2.8 100.0 100.0

Cost of sales(1):
Consumer....................... 158,421 189,618 (31,197) (19.7) 86.2 86.3
OEM............................ 59,279 33,375 25,904 43.7 87.5 85.8
-------- -------- ---------
Total........................ 217,700 222,993 (5,293) (2.4) 86.5 86.2

Gross profit:
Consumer....................... 25,426 30,034 4,608 18.1 13.8 13.7
OEM............................ 8,489 5,537 (2,952) (34.8) 12.5 14.2
-------- -------- --------- -----
Total........................ 33,915 35,571 1,656 4.9 13.5 13.8

Operating expenses:
Selling(1)..................... 19,501 21,698 (2,197) (11.3) 7.8 8.4
Warehouse(1)................... 1,309 1,518 (209) (16.0) 0.5 0.6
General and administrative(1).. 6,181 6,272 (91) (1.5) 2.5 2.4
Restructuring charge........... 9,658 1,745 7,913 NM 3.8 0.7
Stock-based compensation(1).... (303) 234 (537) NM (0.1) 0.1
-------- -------- --------- ----- -----
Total operating expense...... 36,346 31,467 4,879 13.4 14.5 12.2
-------- -------- --------- ----- -----
Operating income (expense)....... (2,431) 4,104 6,535 NM (1.0) 1.6

Interest expense, net............ (1,264) (1,213) 51 4.0 (0.5) (0.5)
Other (expense) income, net...... (1,575) (302) 1,273 80.5 (0.6) (0.1)
-------- -------- --------- ----- -----
(Loss) income before taxes....... (5,270) 2,589 7,859 NM (2.1) 1.0
Income taxes..................... 699 1,077 (378) (54.1) 0.3 0.4
-------- -------- --------- ----- -----
Net income (loss)................ $ (5,969) $ 1,512 $ 7,481 NM (2.4)% 0.6%
======== ======== ========= ===== =====

- ---------------
(1) Stock-based compensation is allocated in the "Summary Consolidated
Financial Data" and "Selected Financial Data" as follows:

NINE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
-------------------------------
2002 2003
------------- -----------
(IN THOUSANDS)

Cost of sales................................................................ $ (324) $ 135
Selling...................................................................... 65 67
Warehouse.................................................................... 4 4
General and administrative................................................... (48) 28
-------- ---------
Total.................................................................... $ (303) $ 234
======== =========

Net sales. The growth of net sales in our Consumer division was driven
by a 130.7% growth in sales of our Flash memory cards and related products. This
increase was due to a 75.6% growth in the number of units sold. In June 2003, we
also began marketing our USB Flash drives, which contributed to the growth in
net sales for this period. In addition, net sales of our NVIDIA Quadro(R)
graphics cards increased by 223.0%. These gains were partially offset by
declines in pricing of our DRAM modules and our strategic shift to lower-priced
consumer graphics cards based on our assessment of the current market. The
decrease in our OEM net sales was primarily due to an overall decline in that
business. In addition, DRAM module prices, which make up the bulk of our OEM
sales, decreased.

Gross profit. The increase resulted from increased sales of our Flash
memory cards, NVIDIA Quadro(R) graphics cards and USB Flash drives. These gains
were partially offset by decreases in gross profit resulting from

decreased sales of our DRAM modules company-wide and our shift to lower-priced
consumer graphics cards in our Consumer division.

Selling. Advertising expense represents the largest component of
selling expense and is incurred almost entirely in connection with our Consumer
division. The majority of our advertising expense is incurred as cooperative
payments to our traditional retail customers for participation in their
advertising circulars. These cooperative payments are calculated as a certain
percentage of our net sales to these customers and are consistent with the
benefit received. Therefore, as our net sales increase, so do our advertising
costs on an absolute basis. The increase in selling expense in the nine months
ended September 30, 2003 is attributable to an increase in advertising expenses
totaling $2.3 million, resulting from increased sales volumes in our Consumer
division, and higher royalty payments related to certain new features on our
consumer graphic cards.

Warehouse. Warehouse expense consists primarily of shipping supplies
and overhead. Overhead consists primarily of salaries and benefits and temporary
labor costs of shipping and warehouse personnel. Our temporary labor cost
generally increases and decreases with net sales, which was the primary driver
of the increase in our shipping and warehouse expense.

General and administrative. The increase in general and administrative
expense was attributable to the opening of our facility in Taiwan and slightly
higher expenses associated with our facilities in New Jersey and France. These
increases were partially offset by the benefit derived from the closure of our
facility in Ireland and manufacturing operations in California and the effect of
reducing our allowance for doubtful accounts in the first three quarters of
2002.

Restructuring charge. During the second quarter of 2002, we recorded a
pre-tax charge of $2.8 million associated with the shutdown of our facility in
Ireland. During the third quarter, we recorded a pre-tax charge of $0.7 million
associated with the impairment of long-lived assets in New Jersey, and a pre-tax
charge of $6.2 million associated with the shutdown of our manufacturing
operations in California, which included an accrual of $5.0 million for
equipment and building lease payments to be made over the next several years. In
the third quarter of 2003, we recorded a pre-tax charge of $1.7 million related
to the remaining lease payments on our manufacturing facility in California.

Stock-based compensation. Stock-based compensation was negative in 2002
due to the reversal of previously expensed charges. This reversal occurred
because employees left our company before their options vested.

Interest expense. Interest expense consists of interest related to our
U.S. revolving credit facility and a note payable to a related party. Interest
expense decreased as a result of a combination of decreased interest rates and
lower outstanding debt balances.

Other expense. Other expense consists primarily of foreign currency
losses due to unfavorable fluctuations in the value of the euro. In the first
half of 2002, our European operations had significant U.S. dollar receivables;
during this period the euro strengthened by 10.4% relative to the U.S. dollar.
In the past, we have not hedged our exposure to these types of foreign currency
risks.

Income taxes. For the nine months ended September 30, 2002, we accrued
income tax expense because our foreign subsidiary earned a profit. Our effective
tax rate for the nine months ended September 30, 2003 was approximately 41.6% as
a result of an adjustment in our deferred tax valuation allowance.

COMPARISON OF THE YEAR ENDED DECEMBER 31, 2001 TO THE YEAR ENDED DECEMBER 31,
2002

PERIOD OVER
PERIOD OVER PERIOD
PERIOD PERCENTAGE RESULTS AS PERCENTAGE OF
CHANGE CHANGE NET SALES FOR THE YEAR
YEAR ENDED DECEMBER 31, --------------------------- ENDED DECEMBER 31,
------------------------ FAVORABLE FAVORABLE ------------------------
2001 2002 (UNFAVORABLE) (UNFAVORABLE) 2001 2002
-------- -------- ------------- ------------ ------- -------
(DOLLARS IN THOUSANDS)

Net sales:
Consumer......................... 189,861 255,038 65,177 34.3% 60.4% 76.2%
OEM.............................. 124,336 79,565 (44,771) (36.0) 39.6 23.8
-------- -------- ------- ----- -----
Total.......................... 314,197 334,603 20,406 6.5 100.0 100.0

Cost of sales(1):
Consumer......................... 173,784 217,058 (43,274) (24.9) 91.5 85.1
OEM.............................. 106,831 69,572 37,259 34.9 85.9 87.4
-------- -------- -------
Total.......................... 280,615 286,630 (6,015) (2.1) 89.3 85.7

Gross profit:
Consumer......................... 16,077 37,980 21,903 136.2 8.5 14.9
OEM.............................. 17,505 9,993 (7,512) (42.9) 14.1 12.6
-------- -------- -------
Total.......................... 33,582 47,973 14,391 42.9 10.7 14.3

Operating expenses:
Selling(1)....................... 20,588 26,139 (5,551) (27.0) 6.6 7.8
Warehouse(1)..................... 1,601 1,730 (129) (8.1) 0.5 0.5
General and administrative(1).... 9,436 8,551 885 9.4 3.0 2.6
Restructuring charge............. - 10,387 (10,387) NM - 3.1
Stock-based compensation(1)..... 1,826 (223) 2,049 NM 0.6 (0.1)
-------- -------- ------- ----- -----
Total operating expense........ 33,451 46,584 (13,133) (39.3) 10.7 13.9
-------- -------- ------- ----- -----

Operating income................... 131 1,389 1,258 960.3 0.0 0.4

Interest expense, net.............. (2,636) (1,618) 1,018 38.6 (0.8) (0.5)
Other income (expense), net........ 1,060 (1,817) (2,877) NM 0.3 (0.5)
-------- -------- ------- ----- -----
Income (loss) before taxes......... (1,445) (2,046) (601) (41.6) (0.5) (0.6)
Income taxes....................... 943 1,189 (246) (26.1) 0.3 0.4
-------- -------- ------- ----- -----
Net (loss) income.................. $ (2,388) $ (3,235) $(847) (35.5) (0.8)% (1.0)%
======== ======== ======= ===== =====

- ---------------
(1) Stock-based compensation is allocated in the "Summary Consolidated
Financial Data" and "Selected Financial Data" as follows:

YEAR ENDED DECEMBER 31,
--------------------------
2001 2002
--------- -----------
(IN THOUSANDS)

Cost of sales................................................................... $ 1,073 $ (279)
Selling......................................................................... 596 89
Warehouse....................................................................... 7 5
General and administrative...................................................... 150 (38)
-------- ---------
Total......................................................................... $ 1,826 $ (223)
======== =========

Net sales. The increase in net sales was due to the growth in our
Consumer division. The growth in this division was driven by a 312.5% increase
in net sales of our Flash memory cards and a full year's sales of our Verto(R)
graphics cards. These gains were offset by decreased sales resulting from our
exiting the recordable compact disc, or CD-R, market in 2001. The decline in OEM
sales was primarily due to the loss of our largest OEM customer. The remaining
decrease was due to the overall decline in that business.

Gross profit. Gross profit as a percentage of net sales improved
significantly from 2001 to 2002. This 3.6% growth as a percentage of net sales
is primarily due to the benefit derived from our higher margin Flash memory
cards and related products and NVIDIA Quadro(R) graphics cards. Gross profit
also improved because we exited the CD-R market, which was a low margin
business. In addition, prices in the DRAM market began to stabilize and both
divisions saw a shift to higher density products, which have higher margins.

Selling. The increase in selling expense in 2002 is attributable to an
increase in some of our variable expenses, such as sales commissions, which
increased by 45.4% for the year ended December 31, 2002. The majority of our
commissions are paid to our manufacturer representatives. Advertising expenses
for the same period increased 33.8%, resulting from increased sales volumes in
our Consumer division.

Warehouse. Although net sales improved from 2001, our shipping and
warehouse expense remained relatively flat due to improved efficiencies in our
shipping department.

General and administrative. The decease in general and administrative
expense was primarily attributable to a reduction in employee-related expenses
from the closure of our facility in Ireland and our manufacturing operations in
California.

Restructuring charge. During 2002, we recorded a pre-tax charge of $2.8
million associated with the shutdown of our facility in Ireland. In addition, we
recorded a pre-tax charge of $6.2 million associated with the shutdown of our
manufacturing operations in California, which included an accrual of $5.0
million for equipment and building lease payments to be made over the next
several years. Also during 2002, we recorded a pre-tax charge of $1.4 million
associated with the impairment of capitalized equipment located at our New
Jersey and France manufacturing facilities.

Interest expense. Interest expense decreased due to lower interest
rates. The blended interest rate on our U.S. revolving credit facility went from
9.3% at December 31, 2000 to 4.1% at December 31, 2002. In addition, the
interest rate on a note payable to a related party decreased from 7.0% to 4.25%
per annum.

Income taxes. For the years ended December 31, 2001 and 2002, although
we had a loss before taxes on a consolidated basis, our European subsidiary paid
income taxes on its earnings in France.

COMPARISON OF THE YEAR ENDED DECEMBER 31, 2000 TO THE YEAR ENDED DECEMBER 31,
2001

PERIOD OVER
PERIOD OVER PERIOD
PERIOD PERCENTAGE RESULTS AS PERCENTAGE OF
CHANGE CHANGE NET SALES FOR THE YEAR
YEAR ENDED DECEMBER 31, ------------- ------------- ENDED DECEMBER 31,
------------------------ FAVORABLE FAVORABLE ------------------
2000 2001 (UNFAVORABLE) (UNFAVORABLE) 2000 2001
---------- --------- ------------- ------------- ------ --------
(DOLLARS IN THOUSANDS)

Net sales:
Consumer.......................... $ 173,281 $ 189,861 $16,580 9.6% 31.6% 60.4%
OEM............................... 375,060 124,230 (250,924) (66.8) 68.4 39.6
---------- --------- -------- ---- -----
Total........................... 548,341 314,197 (234,144) (42.7) 100.0 100.0

Cost of sales:
Consumer(1)....................... 164,669 173,724 (9,115) (5.5) 95.0 91.5
OEM............................... 318,570 106,831 211,749 66.5 84.9 85.9
---------- --------- --------
Total........................... 483,239 280,615 202,624 41.9 88.1 89.3

Gross profit:
Consumer.......................... 8,612 16,077 7,465 86.7 5.0 8.5
OEM............................... 56,490 17,505 (38,985) (69.0) 15.1 14.1
---------- --------- --------
Total........................... 65,102 33,582 (31,520) (48.4) 11.9 10.7

Operating expenses:
Selling(1)........................ 20,838 20,588 251 1.2 3.8 6.6
Warehouse(1)...................... 1,475 1,601 (126) (8.5) 0.3 0.5
General and administrative(1)..... 12,942 9,436 3,505 27.1 2.4 3.0
Stock-based compensation(1)....... 1,449 1,826 (377) (26.0) 0.2 0.6
---------- --------- -------- ---- -----
Total operating expense......... 36,704 33,451 3,253 8.9 6.7 10.7
---------- --------- -------- ---- -----
Operating income.................... 28,398 131 (28,267) (99.5) 5.2 0.0
Interest expense, net............... (4,319) (2,636) 1,683 39.0 (0.8) (0.8)
Other (expense) income, net......... (290) 1,060 1,350 NM (0.1) 0.3
---------- --------- -------- ---- -----
Income (loss) before taxes.......... 23,789 (1,445) (25,234) NM (4.3) (0.5)
Income taxes........................ 3,402 943 2,459 72.3 0.6 0.3
---------- --------- -------- ---- -----
Net income (loss)................... $ 20,387 $ (2,388) $ (22,775) (111.7) 3.7% (0.8)%
========== ========= ======== ---- -----

- ---------------
(1) Stock-based compensation is allocated in the "Summary Consolidated
Financial Data" and "Selected Financial Data" as follows:

YEAR ENDED DECEMBER 31,
------------------------
2000 2001
---------- --------
(IN THOUSANDS)

Cost of sales...................................................................... $ 814 $ 1,073
Selling............................................................................ 490 596
Warehouse.......................................................................... 1 7
General and administrative......................................................... 144 150
--------- -------
Total.......................................................................... $ 1,449 $ 1,826
========= =======

Net sales. By the end of 2000 and throughout 2001, our net sales were
negatively impacted by the deteriorating economy and excess DRAM inventory
throughout the electronics supply chain. These conditions were particularly
severe in the communications and networking markets, which included our
then-largest customer. In addition, average selling prices for our DRAM modules
decreased by more than 60% during 2001. In our Consumer division, this decrease
was partially offset by our entrance into the consumer graphics card market.

Gross profit. The decline in gross profit percentage resulted from the
depressed DRAM market in 2001. Average selling prices for most of our DRAM
modules decreased by more than 60% during 2001. Gross profit in 2001 was
impacted by inventory losses due to devaluation because of these declines in the
DRAM market.

Selling. The decrease in selling expense was due to a 51.2% decline in
commissions related to reduced OEM sales and other employee-related costs
resulting from reduced headcount. These decreases were partially offset by an
increase in advertising expenses due to our shift from an OEM focus to a
consumer focus.

Warehouse. The increase in shipping and warehouse expense was primarily
the result of sales of new products in our Consumer division in 2001.

General and administrative. The decrease in general and administrative
expense was attributable to a decrease in employee-related costs due to reduced
headcount and the recognition of $1.8 million of professional fees in 2000
related to a withdrawn initial public offering of our common stock.

Interest expense. Reduced interest expense was primarily related to a
reduction in our U.S. revolving credit facility balance in 2001.

QUARTERLY RESULTS OF OPERATIONS

The following table sets forth our unaudited quarterly consolidated
statement of operations data. In the opinion of management, this information has
been prepared on a basis substantially consistent with our audited consolidated
financial statements appearing elsewhere in this prospectus, and reflects all
adjustments, consisting of normal recurring adjustments, necessary for a fair
presentation of the data. The quarterly data should be read together with our
consolidated financial statements and related notes appearing elsewhere in this
prospectus. The operating results for any one quarter are not necessarily
indicative of the results to be expected for any future period.

QUARTER ENDED (UNAUDITED)
--------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30,
2002 2002 2002 2002 2003 2003 2003
------- --------- --------- --------- --------- ---------- ---------
(DOLLARS IN THOUSANDS)

STATEMENT OF OPERATIONS DATA:
Net sales:
Consumer....................... $67,394 $ 52,369 $ 64,084 $ 71,191 $ 63,794 $ 71,708 $ 84,150
OEM............................ 24,956 24,593 18,219 11,797 15,366 11,768 11,778
------- -------- -------- -------- -------- -------- --------
Total........................ 92,350 76,962 82,303 82,988 79,160 83,476 95,928

Cost of sales(1):
Consumer....................... 56,851 44,384 57,186 58,637 54,197 63,556 71,865
OEM............................ 19,960 23,009 16,309 10,293 13,047 10,163 10,165
------- -------- -------- -------- -------- -------- --------
Total 76,811 67,393 73,495 68,930 67,244 73,719 82,030
------- -------- -------- -------- -------- -------- --------
Gross profit..................... 15,539 9,569 8,808 14,058 11,916 9,757 13,898

Operating expenses:
Selling(1)..................... 7,184 6,802 5,515 6,638 6,641 8,123 6,934
Warehouse(1)................... 456 418 435 421 514 506 498
General and administrative(1).. 2,439 2,173 1,570 2,370 2,099 1,919 2,254
Restructuring and other charges - 2,766 6,892 729 - - 1,745
Stock-based compensation(1).... (462) 80 79 80 77 78 79
------- -------- -------- -------- -------- -------- --------
Total operating expenses....... 9,617 12,239 14,491 10,238 9,331 10,626 11,510
------- -------- -------- -------- -------- -------- --------
Operating income (loss).......... $ 5,922 $ (2,670) $(5,683) $ 3,820 $ 2,585 $ (869) $ 2,388
======= ======== ======== ======== ======== ======== ========
AS A PERCENTAGE OF NET SALES:
Net sales........................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales.................... 83.2 87.6 89.3 83.1 84.9 88.3 85.5
------- -------- -------- -------- -------- -------- --------
Gross profit..................... 16.8 12.4 10.7 16.9 15.1 11.7 14.5

Operating expenses:
Selling........................ 7.8 8.8 6.7 8.0 8.4 9.7 7.2
Warehouse...................... 0.5 0.5 0.5 0.5 0.6 0.6 0.5
General and administrative..... 2.6 2.8 1.9 2.9 2.7 2.3 2.3
Restructuring and other charges - 3.6 8.4 0.9 - - 1.8
Stock-based compensation....... (0.5) 0.1 0.1 0.1 0.1 0.1 0.1
------- -------- -------- -------- -------- -------- --------
Total operating expenses....... 10.4 15.8 17.6 12.4 11.8 12.7 11.9
------- -------- -------- -------- -------- -------- --------
Operating income (loss).......... 6.4% (3.4)% (6.9)% 4.5% 3.3% (1.0)% 2.6%
======= ======== ======== ======== ======== ======== ========

- ---------------
(1) Stock-based compensation is allocated as follows:

Cost of Sales.................... $ (417) $ 47 $ 46 $ 45 $ 44 $ 45 $ 46
Selling.......................... 21 22 22 24 22 22 23
Warehouse........................ 1 2 1 1 1 2 1
General and administrative....... (67) 9 10 10 10 9 9
------- -------- -------- -------- -------- -------- --------
Total.......................... $ (462) $ 80 $ 79 $ 80 $ 77 $ 78 $ 79
======= ======== ======== ======== ======== ======== ========

LIQUIDITY AND CAPITAL RESOURCES

Our principal sources of liquidity have been cash provided by
operations and borrowings under our various credit facilities. Our principal
uses of cash have been to finance working capital, facility expansions, capital
expenditures and debt service requirements. We anticipate these uses will
continue to be our principal uses of cash in the future.

The following table sets forth, for the periods indicated, our net cash
flows provided by operating, investing and financing activities and our
period-end cash and cash equivalents:

NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, (UNAUDITED)
---------------------------------- ---------------------
2000 2001 2002 2002 2003
-------- --------- --------- --------- ---------
(IN THOUSANDS)

Cash flow from operating activities........................... $(13,605) $ 27,863 $ 5,554 $ 13,160 $ 4,992
Cash flow from investing activities........................... (7,564) (2,751) (1,308) (1,691) (455)
Cash flow from financing activities........................... 25,168 (29,718) (2,751) (9,268) (8,501)
Effect of exchange rate changes on cash and cash equivalents (184) (367) 647 316 322
Cash and cash equivalents at period end....................... $ 10,311 $ 5,338 $ 7,480 $ 7,855 $ 3,838

Fluctuations in net cash provided by, or used in, operating activities
is generally due to increases and decreases in our net income and increased
working capital needs. For the nine months ended September 30, 2003, cash was
provided by net income of $1.5 million, lower inventory levels of $10.1 million
and higher levels of accounts payable of $4.8 million. Cash inflows were offset
by cash outflows needed for increases in working capital assets, including
accounts receivable of $6.1 million, and decreases in accrued expense and
customer allowance liabilities of $5.9 million.

For the years ended December 31, 2001 and 2002 and the nine months
ended September 30, 2003, accounts receivable days sales outstanding, based on
trailing three-month net sales, were approximately 75, 61 and 50, respectively.
Our receivable days at the end of 2001 were higher due to our decision to offer
"seasonal dating" to certain customers, which extended payment terms up to 30
days more than their standard terms for purchases made in the fourth quarter of
2001. The further reduction in receivable days sales outstanding from December
31, 2002 to September 30, 2003 was due to a shift to customers with shorter
payment terms.

The decrease in net cash used by investing activities for the nine
months ended September 30, 2003, was primarily due to lower capital
expenditures. For the years ended December 31, 2000, 2001 and 2002, we purchased
property and equipment for $6.5 million, $2.9 million and $1.9 million,
respectively. In 2000, we advanced $1.0 million to one of our stockholders.

The following table sets forth a summary of the payments due by period
of our contractual obligations at December 31, 2002:

PAYMENT DUE BY PERIOD
------------------------------------------------------------------------
LESS THAN 1 MORE THAN 5
CONTRACTUAL OBLIGATIONS TOTAL YEAR 1 TO 3 YEARS 3 TO 5 YEARS YEARS
--------- ----------- ------------ ------------ ------------
(IN THOUSANDS)

Long-term debt obligations............. $ 33,894 $ 33,894 $ - $ - $ -
Capital lease obligations.............. 454 331 123 - -
Operating lease obligations............ 11,721 4,502 6,557 662 -
Purchase obligations................... - - - - -
Note payable to related party.......... 5,189 - 5,189 - -
-------- -------- -------- ----- ------
Total................................ $ 51,258 $ 38,727 $ 11,869 $ 662 $ -
======== ======== ======== ===== ======

Our operating leases typically provide for the option to buy at fair market
value, renew the lease or return the equipment at lease end.

In 2000, we borrowed $24.9 million to fund operating activities. In
that year, we also redeemed our outstanding Series B and Series C preferred
stock. In connection with that redemption, we paid $6.0 million in cash,

forgave $2.3 million of indebtedness to us and issued a $9.8 million note. See
"Related Party Transactions." We repaid $1.9 million and $2.7 million on that
note in 2001 and 2002, respectively.

At December 31, 2001 and 2002 and September 30, 2003, we had
outstanding borrowings under our U.S. revolving credit facility of $31.6
million, $33.9 million and $26.0 million, respectively. We may borrow a maximum
of $50.0 million under this facility. Availability under the facility is based
on specified percentages of accounts receivable and inventories. Interest is
payable on average amounts outstanding under the revolving credit facility at a
rate of either the prime rate plus 0.25% or the eurodollar rate plus 2.25%, at
our option. The blended interest rate under the loan agreement relating to the
revolving credit agreement was 3.7% at September 30, 2003. The loan agreement
contains a number of restrictive covenants, including a prohibition on related
party transactions, additional indebtedness and dividend payments, as well as a
requirement to maintain a minimum adjusted tangible net worth and a minimum
fixed charge coverage ratio requirements. This facility is secured by
substantially all of our assets. We intend to repay this facility in full with a
portion of the net proceeds of this offering.

PNY Technologies Europe, one of our wholly-owned subsidiaries, has
available lines of credit with foreign banks totaling $15.8 million, which
expire September 30, 2004. There were no amounts outstanding under these lines
at September 30, 2003.

We made capital expenditures of $0.5 million in the nine months ended
September 30, 2003. Our capital expenditures budget for 2003 is approximately
$1.1 million. Capital expenditures for the current year are primarily for
upgrades in our shipping capabilities. Our capital requirements depend on a
number of factors, including changes in product technology, demand and volume.

We believe that our current cash balances, together with existing
credit lines and expected cash flow from operations will be sufficient to fund
our current operations for at least the next 12 months. However, we may need
additional funding in connection with possible future acquisitions or other
investments. Additional funds, if needed, may not be available at all or on
terms acceptable to us.

BACKLOG

We sell our memory products under short-term cancelable purchase
orders. We do not consider backlog to be a meaningful indicator of our future
financial performance. We include in our backlog only those customer orders for
which we have accepted purchase orders and to which we have assigned shipment
dates within the upcoming three to six months. At September 30, 2002 and 2003,
our backlog was $5.8 million and $8.1 million, respectively. Orders constituting
our backlog are subject to change due to, among other things, customer
cancellations and reschedulings and our ability to procure necessary components.

IMPACT OF INFLATION

We do not believe that general price inflation has a material adverse
effect on our financial condition or results of operations.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest rate risk. Our exposure to interest rate risk arises
principally from the variable rates associated with our credit facilities. At
September 30, 2003, we had total borrowings of $26.0 million under our credit
facilities, with a blended rate of 3.7%. An adverse change of 1% in the interest
rate of all borrowings outstanding at September 30, 2003 that bear interest at
variable rates would cause us to incur an increase in interest expense of
approximately $0.3 million on an annual basis.

Foreign currency rate fluctuations. Fluctuations in the rate of
exchange between the U.S. dollar and foreign currencies, principally the euro,
could adversely affect our financial results. Except for sales in Western
Europe, our sales are principally denominated in U.S. dollars. Costs related to
these sales are largely denominated in their respective currencies, thereby
limiting our transaction risk exposures. However, for sales not denominated in
U.S. dollars, if there is an increase in the rate at which a foreign currency is
exchanged for U.S. dollars, it will

require more of the foreign currency to equal a specified amount of U.S. dollars
than before the rate increase. In such cases, and if we price our products and
services in the foreign currency, we will receive less in U.S. dollars than we
did before the rate increase went into effect. If we price our products in U.S.
dollars and competitors price their products in local currency, an increase in
the relative strength of the U.S. dollar could result in our prices being
uncompetitive in a market where business is transacted in the local currency. We
currently do not hedge our exposure to foreign currency exchange rate
fluctuations; we may, however, hedge such exposures in the future.

RECENT ACCOUNTING PRONOUNCEMENTS

Guarantor's accounting and disclosure requirements for guarantees,
including guarantees of indebtedness of others. In November 2002, the FASB
issued Interpretation No. 45, "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Guarantees of Indebtedness of Others."
This interpretation elaborates on the existing disclosure requirements for most
guarantees, including loan guarantees such as standby letters of credit and
non-performance guarantees. It also requires that at the time a company issues a
guarantee, the company must recognize an initial liability for the fair market
value of the obligations it assumes under that guarantee and must disclose that
information in its financial statements. The initial recognition and measurement
provisions of this interpretation apply on a prospective basis to guarantees
issued or modified after December 31, 2002. The adoption of this statement has
not had a significant impact on our consolidated financial statements.

Consolidation of variable interest entities. In January 2003, the FASB
issued Interpretation No. 46, "Consolidation of Variable Interest Entities-an
interpretation of ARB No. 51," or FIN 46. The objective of FIN 46 is to improve
financial reporting by companies involved with variable interest entities. This
new model for consolidation applies to an entity in which either (1) the powers
or rights of the equity holders do not give them sufficient decision-making
powers or (2) the equity investment at risk is insufficient to finance that
entity's activities without receiving additional subordinated financial support
from other parties. FIN 46 requires a variable interest entity to be
consolidated into the company that is subject to a majority of the risk of loss
from the variable interest entity's activities or that is entitled to receive a
majority of the entity's residual returns or both. The consolidation
requirements of FIN 46 apply immediately to variable interest entities created
after January 31, 2003. For entities created before February 1, 2003, the
consolidation requirements apply in the first fiscal year or interim period
beginning after December 15, 2003. The adoption of this statement will not have
a significant impact on our consolidated financial statements.

Accounting for certain financial instruments with characteristics of
both liabilities and equity. In May 2003, the FASB issued SFAS 150, "Accounting
for Certain Financial Instruments with Characteristics of both Liabilities and
Equity," or SFAS 150. SFAS 150 establishes standards for how an issuer
classifies and measures certain financial instruments with characteristics of
both liabilities and equity. It requires that an issuer classify a financial
instrument that is within its scope as a liability (or an asset in some
circumstances). SFAS 150 applies to financial instruments entered into or
modified after May 31, 2003 (except for mandatorily redeemable noncontrolling
interests). For all instruments that existed prior to May 31, 2003, the standard
is effective at the beginning of the first interim period beginning after June
15, 2003 (except for mandatorily redeemable noncontrolling interests). For
mandatorily redeemable noncontrolling interests, the FASB has deferred the
provisions of SFAS 150 until further notice. The provisions of SFAS 150 adopted
thus far did not have a material effect on our consolidated financial statements
and the adoption of the remaining provision of SFAS 150 will not have a
significant impact on our consolidated financial statements.

BUSINESS

COMPANY OVERVIEW

We are a leading designer and marketer of Flash memory cards, USB Flash
drives, DRAM modules, consumer and professional graphics cards and other
computer-related technology products. We market these products to consumers
through traditional retailers, such as Best Buy, CompUSA and Staples, through
other retail and distribution channels, and directly to professionals. We also
design, manufacture and market custom and standard DRAM modules for OEMs and
their designated contract manufacturers. These customers include high-end
computing, networking, storage and telecommunications equipment manufacturers,
such as LSI Logic and Network Appliance. We currently market our products
throughout the United States, as well as in Canada, Western Europe and certain
parts of the Asia Pacific region.

INDUSTRY OVERVIEW

We compete in three primary segments of technology products: Flash,
DRAM, and graphics cards. Flash is considered a non-volatile memory since it is
able to retain data without a power source. As a result, Flash memory is used in
devices that require data mobility, such as digital cameras. DRAM, on the other
hand, requires a constant power supply to retain data and therefore it is most
useful in devices that also require constant power to operate, such as computers
and printers. Graphics cards are the devices within a computer that enhance the
visual display of information and images. We market a wide variety of products
in each of these categories.

FLASH

Flash memory, like traditional storage media such as floppy disks or
CD-ROMs, allows data to be easily transported from one device to another.
However, unlike traditional disk drives, Flash data storage products have no
moving or mechanical parts and are considerably smaller, lighter and more
rugged, and consume substantially less power than traditional disk drives,
making Flash a preferred storage alternative for many applications. The
development of Flash memory has led to the proliferation of consumer electronic
devices designed to take advantage of these characteristics. In turn, the growth
in shipments of these consumer electronic devices and their unique and expanding
storage requirements have led to increasing demand for Flash data storage
products.

Currently, there are two basic types of Flash data storage products:
Flash memory cards and USB Flash drives. Flash memory cards are available in a
variety of formats, including CompactFlash(R), SmartMedia(R), xD, Memory Stick,
MultiMedia Card and Secure Digital. Flash memory cards are primarily used to
store digital content, such as pictures, digital music, video clips and files in
consumer electronic devices, such as digital cameras, MP3 players, PDAs, digital
camcorders and multimedia cell phones. The growth in popularity of these
consumer electronic devices is driving the demand for small-sized, high-capacity
Flash memory cards. Semico Research estimates that the Flash memory card market
will grow from $2.0 billion in 2002 to $11.9 billion in 2006, a 56.4% compound
annual growth rate.

USB Flash drives are self-contained products that use Flash memory as
their data storage medium. We believe USB Flash drives are beginning to replace
floppy disk drives because of their small size, data storage capacity, ease of
use, rewrite capability, speed and security. The USB Flash drive market is
expected to grow at an even faster rate than the Flash memory card market.
Gartner Dataquest estimates that the market for USB Flash drives will grow from
$135.6 million in 2002 to $1.7 billion in 2007, a 66.3% compound annual growth
rate.

DRAM

DRAM is a key component in determining the speed and efficiency of many
desktop computers, laptops, high-performance workstations and printers, because
increased memory capacity shortens processing times and allows multiple
applications to run efficiently at the same time. DRAM can be divided into
several architectures. Synchronous DRAM, or SDRAM, which includes double data
rate synchronous DRAM, or DDR, represents the

technology currently used in most new computers. DDR II represents the
leading-edge DRAM technology. Extended data output, or EDO, and fast page mode,
or FPM, are trailing-edge technologies.

We believe that consumer and OEM demand for DRAM will increase due to
greater complexity of software enabled by increasing computer processing power,
the development of high-bandwidth and graphics-intensive applications, evolving
Internet and telecommunications infrastructure requirements, increased IT
spending and computer-related equipment upgrades. These factors result in the
need for faster, more powerful memory products to meet demand for greater
capabilities in the storage, manipulation, transfer and management of digital
data. Gartner Dataquest estimates that the worldwide market for DRAM will
increase from an estimated $15.5 billion in 2002 to $23.4 billion in 2007.

DRAM modules are compact circuit board assemblies of DRAM
semiconductors and related circuitry. DRAM module upgrades, which we typically
sell to consumers through our traditional retail customers, are a cost-effective
way for consumers to improve computer performance. We expect sales of DRAM
modules to grow as demand for DRAM increases. We also expect OEM demand for DRAM
modules to increase based on increasing memory requirements, computer-related
equipment upgrades and increasing IT spending. In the OEM market, major memory
semiconductor manufacturers focus primarily on large-volume opportunities,
manufacturing open-standard modules as base-level memory for leading
manufacturers. Independent memory module manufacturers, including us, typically
are smaller in size and seek to distinguish themselves by being more responsive
and flexible in the types of products and services they provide. Independent
memory module manufacturers are also able to provide open-standard modifications
and upgrades used by OEMs and contract electronics manufacturers for which
open-standard modules are not adequate.

GRAPHICS

Graphics cards are required components of most desktop computers and
workstations, and enable the communication and visualization of information. The
graphics processor unit, or GPU, and memory architecture of a graphics card
dictate the speed and resolution of the images it produces. Features of graphics
cards may include the ability to visualize information in 3D or the ability to
support the use of multiple monitors on one computer. Consumer graphics cards
are generally marketed toward individuals seeking to enhance the performance of
graphics-intensive applications, such as video games on desktop computers, while
our professional graphics card customers include users who require advanced
graphics capabilities, such as game developers, CAD engineers, digital
animators, as well as users who require the simultaneous use of multiple
computer monitors.

In the consumer graphics card market, we believe that graphics cards
compete within their respective price ranges based on their performance and
features. In the professional graphics card market, users such as game
developers, CAD engineers and digital animators require high-performance, 3D
graphics cards to develop their products. Other professional users, such as
finance professionals, require the visualization of information on multiple
monitors simultaneously. Competition in this market segment is based largely on
the results of certification programs and benchmark testing done by software
providers. There are two primary competitors designing GPUs: NVIDIA and ATI
Technologies Inc. According to IDC, for the third quarter of 2003, NVIDIA held a
57% market share in the professional 3D graphics market, as well as a majority
of unit share in the entry, midrange and high-end consumer markets. All of our
consumer and professional graphics cards use NVIDIA processors.

COMPETITIVE STRENGTHS

We believe that we have successfully positioned our company as a
leading supplier of our products to our Consumer and OEM division customers.
Because of our capabilities as a value-added supplier, we have developed
long-standing relationships with many industry-leading consumer electronics and
office supply retailers and OEMs. The table below sets forth certain or our
leading Consumer and OEM customers with whom we have had long-standing
relationships, and the year in which we first did business with them.

CUSTOMER CUSTOMER
CONSUMER CUSTOMERS SINCE OEM CUSTOMERS SINCE
- --------------------------------------- -------- -------------------------------------- --------

Best Buy............................... 1993 LSI Logic............................. 1992
CompUSA................................ 1991 Network Appliance..................... 1997
Dixons Group PLC....................... 1998 Sanmina-SCI Corporation............... 1992
Ingram & Co., Inc...................... 1992
Office Depot, Inc. .................... 1999
Staples................................ 1995

Our Consumer division customers rely on our marketing and merchandising
expertise, product quality, capabilities and experience in logistics and
supply-chain management. Our OEM division customers rely on us because of our
design and manufacturing expertise, our logistics and supply-chain management
capabilities and our ability to design and manufacture difficult-to-find
products. We believe that our strong customer relationships are the result of
our combination of the following competitive strengths:

Strong brand. According to NPD Intelect, for the 11 months
ended November 30, 2003, we were one of the top ten overall sellers, as
measured in both dollars and units, at each of our four leading retail
customers. We promote our brand through our retail customers' circulars
and are increasing our advertising presence in other media targeted at
the primary users of our products. We utilize consistent packaging
images across product categories, which we believe allows us to
effectively cross-promote our products. We believe that our well
recognized PNY Technologies(R) brand allows us to collaborate
effectively with our retail customers to introduce new products and
product line extensions.

The following table sets forth our market share of the U.S.
retail market for the first 11 months of 2003:

PERCENT
PRODUCT LINE MARKET SHARE
--------------------------------------- ------------

Flash memory cards..................... 13.1%
USB Flash drives (1)................... 17.5
Desktop DRAM modules................... 44.9
Laptop DRAM modules.................... 69.3
Consumer graphics cards................ 26.7

---------------
(1) This data is for the five-month period commencing
July 1, 2003.

Broad portfolio of complementary products. Our broad product
portfolio lets our customers consolidate their vendor relationships and
more efficiently manage their inventory. We believe our retail
customers prefer to consolidate purchases with a smaller number of
vendors, where possible, lowering their cost of doing business.
Therefore, by providing a more comprehensive product line within our
markets, we are a more valuable supplier to those customers. These
complementary product lines allow us to work with our traditional
retail customers to provide a variety of cross-promotional activities
that we believe increases foot traffic through their stores.

Merchandising and marketing expertise. We work closely with
our key customers to create a variety of advertisements, promotions and
product bundles, which reduces our reliance on traditional consumer
incentives and improves our customers sales. In addition, we help our
customers assess how best to position our products. At times, we also
design, develop and produce point-of-sale materials for our customers
to use.

Strong supplier relationships. We maintain strong
relationships with our key suppliers, including Infineon Technologies
AG, Micron, NVIDIA, Samsung Electronics America, Inc., Toshiba America,
Inc. and Vanguard International Semiconductor, Inc. Many of these
relationships are more than a decade old. Our key suppliers take into
consideration the purchasing history of their customers when they make
product allocation decisions. We believe our purchasing history with
these suppliers has enabled us to obtain adequate supplies of our
products during periods of industry shortage. We believe that our
purchasing practices also increase vendor loyalty and assist us in
reducing our exposure to price volatility. These

strong supplier relationships are particularly valuable to our OEM
customers, who often rely on our ability to procure DRAM architectures
that are difficult to obtain.

Supply-chain management expertise. We believe our logistical
operations, supply-chain management expertise and operational
flexibility help our retail and OEM customers to better manage their
inventory, thereby reducing their exposure to potential price
fluctuations and further strengthening our customer relationships. Our
merchandizing and inventory management capabilities also permit us to
consult with our major customers to develop purchasing programs that
seek to satisfy their product requirements, while limiting inventory
risk for us and our major customers. We receive in-store and
in-warehouse data on a regular basis from our major customers relating
to their sales data and on-hand product inventory. As a result, we are
able to minimize our exposure to customer allowances, optimize
inventory mix and maximize inventory turnover. Additionally, our
automated module assembly lines and semi-automated packaging lines have
sufficient capacity to meet our customers' demands, even during peak
seasons. These systems, along with our workforce flexibility, give us
the ability to meet fluctuating customer demand while minimizing
overtime.

Experienced management team. Many of our senior managers have
over fifteen years of operating expertise in our industry. Their
experience with the business cycles affecting our products benefits our
customers and enables us to respond effectively to industry challenges.
Gadi Cohen has 18 years of experience in this industry.

OUR STRATEGY

Our goal is to enhance our competitive position as a leading designer
and marketer of computer-related technology products. We seek to accomplish this
goal through the following strategies:

Capitalize on the growing demand for Flash products. We
believe that the Flash memory industry will experience significant
growth, driven by widespread adoption of consumer electronic devices
with increasing data storage requirements and the adoption of USB Flash
drives as a common storage device. We have developed a comprehensive
offering of Flash memory cards, USB Flash drives and a variety of Flash
memory card readers and adapters. We plan to capitalize on this growth
by continuing to aggressively market our comprehensive offering of
Flash memory products. We also plan to monitor developments in the
Flash memory market to optimize our opportunities to introduce new
products. For the nine months ended September 30, 2003, our net sales
of Flash-related products increased by 130.7% compared to the same
period in 2002.

Introduce complementary product lines. We plan to capitalize
on our brand by further broadening our product portfolio with new
products that complement our existing offerings. We have successfully
taken advantage of our long-standing leadership position in DRAM to
expand into Flash memory cards, USB Flash drives and graphics cards. We
plan to take advantage of the growing computer, consumer electronics,
storage and networking markets by initially focusing on the product
needs of our existing customer base and expanding into new markets as
opportunities arise. Because of our experience, capabilities and
relationships, we have a demonstrated ability to introduce new products
in short time periods, at times in as little as twelve weeks, as was
the case with our consumer graphics cards and USB Flash drives.

Expand OEM market presence. We have a diverse group of leading
customers in our OEM division, including LSI Logic and Network
Appliance. As demand returns for networking, storage and high-end
computing products, we plan to maintain our relationships with existing
customers and selectively add new customers. We offer our OEM customers
a variety of customized and standard solutions, including leading-edge,
mainstream and trailing-edge products, to meet their needs. One of our
strengths in the OEM market is our ability to access trailing-edge
technologies not readily available to other suppliers, which often
offers superior profit opportunities. We believe that our OEM customers
rely on us for superior service, flexibility and responsiveness, as
well as our engineering and logistics expertise.

Further broaden our geographic presence. We intend to expand
our geographic presence by targeting emerging and growing markets, such
as the Far East, for both Consumer and OEM markets. Our facility in
Taiwan allows us to increase our operational flexibility by
establishing new supplier and contract manufacturing relationships,
strengthening our existing supplier relationships and improving access
to new technologies and products.

Continue to focus on superior customer service. We intend to
focus our resources and expertise on providing superior quality and
service to a core group of market leaders. By doing so, we believe that
we can become their preferred source for Flash memory, DRAM modules and
graphics card solutions and become deeply integrated with their
businesses at all levels. We plan to further integrate our business
with that of our existing retail customers, while seeking new customers
that we believe have the potential to generate significant revenue. In
our OEM business, we intend to focus on serving our customers' memory
needs through our logistics, design and engineering capabilities.

Pursue acquisitions of complementary technologies, products or
companies. We may make acquisitions to strengthen our position in our
target markets, enhance our technology base, increase our supply
capabilities or expand our geographic presence. We currently have no
commitments or agreements and are not involved in any negotiations to
acquire any technologies, products or companies.

PRODUCTS

We are a leading designer and marketer of Flash memory cards and
related products, DRAM modules and consumer and professional graphics card
products.

FLASH PRODUCTS

We market a variety of Flash memory cards, USB Flash drives and Flash
memory card readers and adapters.

Flash memory cards. Our Flash memory cards are used primarily in
consumer electronic devices, such as digital cameras, MP3 players and PDAs. We
offer a broad assortment of the currently available Flash memory card form
factors, including:

CompactFlash(R). CompactFlash(R)'s small size, durability and
low power consumption make it well suited for a range of current and
next generation, small-size consumer applications, such as digital
cameras and PDAs. Canon Inc., Creative Labs, Inc., Nikon Inc. and
Toshiba are among the manufacturers whose devices use CompactFlash(R).

Secure Digital and MultiMedia Cards. Secure Digital cards and
MultiMedia Cards are used in storage, data backup and data logging
applications and are about the size of a postage stamp. Their slim,
compact design makes them an ideal removable storage solution for
smaller consumer electronic devices including multimedia mobile phones,
MP3 players and digital cameras. Hewlett Packard Company, Eastman Kodak
Company, Minolta Co., Ltd., palmOne, Inc., Panasonic, SONICblue
Incorporated and Toshiba are among the manufacturers whose devices use
Secure Digital and MultiMedia Cards.

SmartMedia(R). We offer SmartMedia(R) cards, another format of
removable Flash memory used to store music, images and data. Creative
Labs and Olympus America Inc. are among the manufacturers who market
consumer electronic devices that use SmartMedia(R).

The following table sets forth our Flash memory card offerings as of
December 31, 2003:

FLASH MEMORY CARD DENSITIES
- --------------------------------------------------- ------------------------------------

CompactFlash(R).................................... 32MB, 64MB, 128MB, 256MB, 512MB, 1GB
Secure Digital..................................... 32MB, 64MB, 128MB, 256MB
MultiMedia Card.................................... 32MB, 64MB, 128MB
SmartMedia(R)...................................... 32MB, 64MB, 128MB

USB Flash drives. USB Flash drives are self-contained computer drives.
These are portable, pocket-sized storage devices used to store, transfer and
carry data and allow access to that data via any desktop computers, laptop or
other device with a USB port. Our USB Flash drives are marketed under the
Attache(TM) brand and are available in densities of 64MB, 128MB, 256MB and
512MB.

Flash readers. We offer Flash memory card readers and adapters for each
of the Flash memory card form factors we market, as well as a reader for Memory
Stick products. We also offer multi-slot readers, which allow consumers to
access data from a variety of Flash memory cards via one reader.

DRAM MODULES

We offer a variety of DRAM modules including a wide range of single
in-line memory modules, or SIMMs, dual in-line memory modules, or DIMMs, and
small outline DIMMS, or SO DIMMs. Our DRAM modules are used in desktop PCs,
laptops, workstations, servers and telecommunications and Internet
infrastructure equipment. Our standard DRAM modules are available in various
densities up to 4GB. We also offer many configurations utilizing different DRAM
architectures, such as SDRAM, DDR, Rambus, EDO and FPM. We also offer stacked
DRAM modules.

To consumers, we market our DRAM products under the PNY
Technologies(R), Verto(R), Optima(TM) and Bravo(TM) brands. Our Verto(R) branded
DRAM products include a high-performance DDR-based DRAM memory module and a
separate DRAM cooling device. These products are similarly packaged with our
other Verto(R) products and are marketed to the same target audience. Our
Optima(TM) branded DRAM modules are also high-performance DDR-based DRAM
targeted at high-end users. Our Bravo(TM) branded DRAM modules are sold in the
Far East.

The following table describes certain of our DRAM products as of
December 31, 2003:

DRAM MODULE TYPE DENSITY SPEED
- -------------------------------------------------------------- ---------- ------------

184-pin DDR SDRAM DIMM........................................ 64MB-4GB 200-400 MHz
184-pin Registered DDR
SDRAM DIMM................................................ 64MB-2GB 200-333 MHz
200-pin DDR SDRAM SODIMM...................................... 64MB-1GB 200-400 MHz
168-pin SDR SDRAM DIMM........................................ 64MB-1GB 100-133 MHz
168-pin Registered SDR
SDRAM DIMM................................................ 64MB-1GB 100-133 MHz
144-pin SDR SDRAM SODIMM...................................... 16MB-512MB 100-133 MHz
168-pin EDO, FPM DIMM......................................... 16MB-256MB 50-70 nS
100-pin SDR SDRAM DIMM........................................ 32MB-256MB 66 MHz
100-pin EDO DIMM.............................................. 16MB-64MB 50-70 nS
72-pin EDO, FPM SIMM.......................................... 16MB-128MB 50-70 nS
72-pin EDO, FPM SODIMM........................................ 16MB-64MB 50-70 nS

In our OEM division, our engineers work with OEMs or their designated
contract manufacturers to engineer and manufacture custom and standard DRAM
modules. In addition to our ability to design and manufacture most leading-edge
technology products, we are able to supply memory modules incorporating
trailing-edge technologies, which our OEM customers often find difficult to
procure from other sources. These products are

necessary purchases for OEMs who have made commitments to support their older
product lines through their life cycles.

GRAPHICS

We market graphics cards with a wide range of performance
characteristics to the consumer and professional user. These cards, co-branded
with NVIDIA, are sold through our Consumer division as upgrades to a user's
existing graphics card.

Verto(R) graphics cards. Our Verto(R) brand graphics cards utilize
NVIDIA's GeForce family of desktop graphics processors. These include the
GeForce FX, GeForce4 and GeForce2. The GeForce FX family represents NVIDIA's
leading-edge consumer technology, designed for the enthusiast consumer market.
Each product within the GeForce family is designed to deliver the highest speed,
sharpest resolution and most features available of any graphics card in its
respective price range.

NVIDIA Quadro(R) Professional graphics cards. We are the exclusive
marketing partner for NVIDIA's professional Quadro graphics cards in the
Americas, Europe, the Middle East and Africa. NVIDIA's Quadro(R) branded
graphics cards are robust, high-performance solutions for the professional user
that are available for the leading-edge, mid-range, entry-level and
multi-display product lines. The Quadro family of products, which consists of
the Quadro FX, Quadro4 XGL and Quadro NVS workstation solutions, is designed to
meet the needs of a number of applications, such as industrial product design,
digital content creation, non-linear video editing, scientific and financial
visualization, general purpose business and financial trading. Quadro products
are certified for a multitude of professional applications, and are designed to
deliver the graphics performance and resolution required by professional
applications.

CUSTOMERS

We market our products through our Consumer and OEM divisions utilizing
a combination of our own sales force and manufacturer representatives. In both
divisions, sales are generally made by purchase order. We have no long-term
sales contracts with any of our customers.

To generate consumer sales, we market to traditional retailers,
mail-order and web-based retailers, distributors, specialized photography
retailers, system integrators and value-added resellers. In the case of our
Quadro graphics cards, we also sell directly to the professional consumer. Our
products are sold in over 10,000 traditional retail locations worldwide. Based
on net sales, our four leading Consumer customers for the nine months ended
September 30, 2003 were Best Buy, CompUSA, Ingram, and Staples.

We seek to have integrated relationships with all our primary Consumer
division customers across our entire enterprise, from our sales force through
our inventory management personnel. We have developed comprehensive, integrated
inventory management systems and assist our retail customers in monitoring their
inventory levels, reducing the volatility of their inventory costs. We also
advise them on optimum inventory levels based on our market forecasts. We
typically receive weekly, and in some cases daily, on-hand inventory reports
from our largest customers. We also receive critical order data, as well as
sales and inventory information, via electronic data interchange systems. We can
either ship to a customer's warehouse or directly to its stores to reduce
turnaround time and storage costs.

Our OEM division sells our products directly to OEMs, contract
electronics manufacturers and electronics component distributors. Based on net
sales, our four leading OEM customers for the nine-months ended September 30,
2003 were LSI Logic, Network Appliance, Sanmina-SCI and Solectron Corporation.

For our OEM customers, we provide quick turnaround solutions and
just-in-time delivery, which allows them to maximize production efficiencies. We
consult with our OEM customers, sharing our DRAM market insights and forecasts,
so they can more efficiently manage their memory module inventories. We also
assist our OEM customers in obtaining trailing-edge memory technology that
otherwise may be difficult to procure.

SALES AND MARKETING

Our Consumer division utilizes a variety of advertisements,
cross-promotions, in-package promotions and product bundles to generate sales.
In the traditional retail market, in particular, these also add value to our
customers by driving traffic to and within each store. Generally, we advertise
weekly in our traditional retail customers' advertising circulars, which we
believe improves our sales, creates brand loyalty and generates additional
traffic for that customer. Based on the circulation data provided by each
retailer, we believe our advertising generates an average of 150 million brand
impressions weekly in the United States across all of our product categories.

We utilize cross-promotions, in-package promotions and product bundles
to improve our product sales at traditional retail locations. For example:

o We occasionally provide discounts to consumers on the purchase of
our Verto(R)-branded DRAM modules with the purchase of a Verto(R)
graphics card. Cross-promotions such as these improve our sales and
generate additional in-store traffic for our customers.

o We recently included a free copy of a popular video game, Tom
Clancy's Splinter Cell(R), with one model of our Verto(R) graphics
cards. This type of in-package promotion represents significantly
greater value to the consumer than our cost.

o We regularly bundle our Flash memory cards with one of our Flash
readers or adapters. Like our in-package promotions, these represent
a greater value to the consumer than cost to us.

We also use our website to promote our products. The website describes
each product in detail, offers technical support and directs consumers to our
retail customers for purchases. Our website also contains our memory
configurator software, which helps customers select the appropriate DRAM memory
module for their needs. In addition, we expect to participate in various
educational programs, such as CyberScholar, designed to educate our customers'
employees, making them more aware of our products and, at the same time, better
able to serve their customers. We also participate in major industry trade
shows.

The breadth of our offerings across product lines and the depth of our
offerings within each specific line provide an additional benefit to our
Consumer division customers by reducing the number of vendors from whom they
must purchase their inventory, which we believe reduces their costs.

We market to OEM customers based on our engineering and design
capabilities, and our logistics and supply-chain management services. In
addition, our OEM customers rely on our ability to access trailing-edge
technology. We believe this combination of abilities sets us apart from our
competitors in the OEM market.

Our Consumer division uses our own sales force, as well as
manufacturers' representatives. We also have a separate internal Quadro sales
force who sell directly to the professional user. Our internal OEM sales force
is also complemented by manufacturers' representatives. We believe these
combined sales forces have the local presence, market knowledge and strategic
insight to allow us to effectively market our products to our Consumer and OEM
customers.

SUPPLIERS

We purchase the majority of our Flash memory products from a small
number of suppliers based on their supply capabilities and intellectual
property. These include Infineon, Panasonic, Samsung and Toshiba. Our DRAM
module products and component parts are also sourced from a small number of
suppliers: Micron, Infineon, Samsung, and Powerchip Group Pty Ltd. These
suppliers also provide us with DRAM components for use in our Verto(R) graphics
cards. Collectively, our suppliers provide us with a full range of technologies.
We purchase graphics processors used on our Verto(R) graphics cards almost
exclusively from NVIDIA, and all the Quadro graphics cards we market are
purchased solely from NVIDIA.

We utilize contract manufacturers for the production of all our
Verto(R) graphics cards and our USB Flash drives. In addition to their
responsibility for the manufacturing of these products, our manufacturers also
purchase many of the parts necessary to produce complete, finished goods.

As with our customers, we maintain close working relationships with our
suppliers in the United States, Europe and the Far East. Our vendor base
represents a cross-section of price leaders and leading-edge, mainstream and
trailing-edge product suppliers. We believe that our relationships and our
retail market share position help us secure allocations in times of product
shortages. In addition to purchases from our traditional memory semiconductor
suppliers, we also purchase a limited amount of products through the spot
market. While we prefer to purchase from our suppliers, these spot market
purchases increase our flexibility and allow us to meet our customers' needs
more readily. Our procurement organization operates from offices in the United
States, Western Europe and the Far East located near many of our suppliers to
help ensure competitive pricing and a dependable supply of materials for our
products. We opened our facility in Taiwan primarily for this reason.

MANUFACTURING, DESIGN AND TESTING

Manufacturing. For the production of memory modules, we employ highly
automated manufacturing processes that involve the use of surface mount
equipment. Due to our flexible manufacturing setup, we can offer our customers
rapid manufacturing and test cycles on projects of all sizes. We employ rigorous
quality control procedures in each facility and perform statistical process
controls at various steps of the manufacturing process. In addition, we conduct
quality assurance through audits to ensure that the final product meets required
specifications. We believe that we adhere to the highest quality control
standards in every aspect of our operations.

We received ISO 9001 certification to the 2000 standards at our
facility in New Jersey. ISO is an international series of quality standards that
can improve quality, productivity and customer satisfaction, and reduce waste.
To comply with ISO registration requirements, we continuously monitor and work
to improve our product quality and customer satisfaction.

Design. We provide comprehensive design and engineering services to our
OEM customers for our DRAM modules. In consultation with a customer, we review
its requirements and recommend cost-effective and efficient module solutions. We
often provide our OEM customers with design assistance, either helping them to
develop new DRAM interfaces to work with existing memory modules or to design
new memory modules to work with existing memory interfaces. Our engineers also
work closely with our suppliers, performing product design reviews,
qualifications and testing prior to the release of new products into the market.
Although we may receive additional compensation for providing our engineering,
manufacturing and testing services, it is not significant and is provided as a
means to increase sales.

As a member of the Joint Electronic Device Engineering Council and as a
participant in two of its key standard-setting committees, we participate in the
industry design and standard-setting processes for memory modules.

Testing. We test 100% of the products that we manufacture. We use
sophisticated test systems to confirm that our memory modules function properly
and meet or exceed our customers' requirements.

COMPETITION

We conduct business in markets characterized by intense competition,
rapid technological change, evolving industry standards and price volatility. We
compete in these markets on the basis of product depth and breadth, service,
quality and value. Some of our significant suppliers, such as Micron and
Panasonic, are also our competitors. Many have the ability to manufacture
competitive products at lower costs as a result of their vertical integration.

We compete in Flash memory cards largely based on marketing techniques
and value. Because our inventory strategy allows us to move relatively
high-priced inventory through our sales channels quickly, we are able to rapidly
adjust to decreasing prices in this market. We believe that our primary
competitors in our Flash

memory markets are Fuji Photo Film Co. Ltd., Lexar Media, Inc. and SanDisk
Corporation. We believe that our primary competitors in the consumer DRAM
modules market are Centon Electronics, Inc., K-Byte, a division of All
Components, Inc., Kingston Technology Company, Inc., and Micron.

Competition in the consumer graphics card market is based on product
performance and price. While we only offer graphics cards based on NVIDIA
technology, we believe that these cards offer competitive performance at their
respective prices. In the consumer graphics card market, we compete with ATI,
BFG Technologies Inc. and eVGA Corporation. ATI competes using its own graphics
processors and cards; however, BFG and eVGA also use NVIDIA technology. In the
professional graphics card market, we compete with ATI, 3DLabs, a wholly-owned
subsidiary of Creative Labs, and Matrox Electronic Systems Ltd.

We also face competition from current and prospective OEM customers
that evaluate our capabilities against the merits of manufacturing products
internally. We compete for OEM business with independent manufacturers such as
Celestica, Inc., Kingston, Solectron, and Sanmina-SCI.

FACILITIES

Our six facilities are located in: Parsippany, New Jersey, which is our
corporate headquarters; Santa Clara, California; London, United Kingdom;
Wurselen, Germany; Bordeaux, France; and Hsin Chu, Taiwan. We conduct sales,
procurement and manufacturing from our facilities in New Jersey and France. We
conduct sales and procurement from our facilities in California and Taiwan and
sales from our other facilities. Both of our divisions use each of our
facilities. We believe these facilities are strategically positioned to best
serve both our customers and supply needs, while providing the geographic
platform to carry out our strategy.

EMPLOYEES

As of September 30, 2003, we had 352 full-time employees. In addition
to our full-time employees, we regularly employ temporary and part-time
employees. Our employees in the United States are not represented by any
collective bargaining agreements. Two employees in France are represented by
unions. We have never experienced a work stoppage at any of our facilities. We
consider our relationship with our employees to be good.

LEGAL PROCEEDINGS

We received notice on or about August 7, 2000 that Lemelson Medical,
Education & Research Foundation, LLP filed a complaint against us and other
defendants on June 30, 2000. The complaint was filed in the United States
District Court in the District of Arizona and alleges that our manufacturing
processes infringe several patents that the Lemelson Foundation allegedly owns.
The case has been stayed pending the outcome of another case challenging the
validity and enforceability of the patents at issue. We accrued $0.3 million in
2000 based in part on settlement discussions with Lemelson, which have since
been abandoned. However, because of the preliminary stage of this case, any
revised estimate of potential damages would be speculative, and we have not made
any such revised estimate at this time.

We are not currently involved in any other material legal proceedings.
We are not aware of any other material legal proceedings threatened or pending
against us. From time to time, however, we may become subject to additional
legal proceedings, claims, and litigation arising in the ordinary course of
business, including, but not limited to, employee, customer and vendor disputes.
In addition, in the past we have received, and we may continue to receive in the
future, letters alleging infringement of patents or other intellectual property
rights. Our management believes that these letters generally are without merit
and intends to contest them vigorously.

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

Set forth below is information concerning our executive officers and
directors.

NAME AGE POSITION
- ---- --- --------

Gadi Cohen.......................... 44 Chairman of the Board, President and Chief Executive Officer
Jean-Pierre Pucheu.................. 57 President of PNY Technologies Europe and Director
John P. Hughes...................... 45 Senior Vice President of New Business Development
Robert J. Stone..................... 40 Senior Vice President of Operations
Mark J. Ciano....................... 36 Vice President of Finance and Administrative Services
Anthony G. Gomez.................... 40 Vice President of Sales and Marketing, Consumer division
John A. Unland...................... 50 Vice President of World Wide Procurement
Luke M. Beshar...................... 45 Director

Gadi Cohen has served as our Chairman of the Board, President and Chief
Executive Officer since he founded PNY in 1985. Prior to founding PNY, Mr. Cohen
served for seven years as an officer in the Israeli army.

Jean-Pierre Pucheu has served as President of PNY Technologies Europe
since 1994 and as a Director since 1998. Mr. Pucheu supervises our European
operations from our manufacturing, sales and procurement facility in Bordeaux,
France. Prior to joining us, Mr. Pucheu spent 23 years with IBM, where he
attained the position of Director of European Component Purchasing. Mr. Pucheu
earned the equivalent of an M.B.A. from L'Ecole Superieure de Commerce et
D'Administration.

John P. Hughes has served as our Senior Vice President of New Business
Development since 2002. Mr. Hughes is responsible for implementing and
overseeing new business opportunities. Prior to holding his current position,
Mr. Hughes was Vice President of Operations and Procurement. Formerly Product
Manager at Quad Systems Corporation, a machine manufacturing company, Mr. Hughes
joined us in 1991 as Director of Manufacturing. He has approximately 15 years of
technology product manufacturing experience and earned a B.S. in Electrical
Engineering from Lehigh University.

Robert J. Stone has served as our Senior Vice President of Operations
since 2002. Mr. Stone is responsible for manufacturing, engineering, packaging
and warehouse operations. Prior to holding his current positions, Mr. Stone was
Vice President of Manufacturing and Engineering. Formerly Vice President of
Product Development and Integration at Quad Systems Corporation, Mr. Stone
joined us in 1994 as Manufacturing Manager. He has over 18 years of experience
in surface mount technology manufacturing and holds a B.S. in Electrical
Engineering from the University of Rhode Island.

Mark J. Ciano has served as our Vice President of Finance and
Administrative Services since 2000. Mr. Ciano is responsible for overseeing all
our financial and administrative affairs. Formerly a Senior Auditor with KPMG
Peat Marwick, Mr. Ciano joined us in 1995 as Assistant Controller and became
Controller in 1997. He has 13 years of finance experience and holds a B.A. in
Accounting from William Patterson University.

Anthony G. Gomez has served as our Vice President of Sales and
Marketing, Consumer division since 2000. Mr. Gomez is responsible for managing
and directing PNY's Consumer division sales. From April 1999 to June 2000, Mr.
Gomez was the Vice President of Sales, Media Solutions at Sony Electronics Inc.,
with primary responsibility for managing the sale of consumer analog audio,
video and camcorder media. From 1996 to 1999, Mr. Gomez was a director in this
division at Sony. Mr. Gomez has an M.B.A. in Finance from Fairleigh Dickinson
University.

John A. Unland has served as our Vice President of Worldwide
Procurement since 2001. Mr. Unland is responsible for managing and directing our
global procurement operations and for managing our activities and growth in the
Asia Pacific region. Prior to joining us, Mr. Unland held the position of
Director, Strategic Alliances, with Hewlett Packard where he was responsible for
establishing and managing strategic alliances with industry leading technology
providers for Hewlett Packard's Personal Computer Organization. During his more
than twenty years at Hewlett Packard, Mr. Unland led procurement and materials
teams with global responsibility in support of server, printer and test and
measurement product lines. Mr. Unland has a B.S. in Business Management from San
Jose State University.

Luke M. Beshar has served as one of our directors since December 31,
2003. He has served as Senior Vice President and Chief Financial Officer of
Cambrex Corporation, a biotechnology, pharmaceutical chemicals, and
pharmaceutical research products company, since December 2002. From January 2002
to December 2002, Mr. Beshar served as Senior Vice President and Chief Financial
Officer for Dendrite International, a Nasdaq listed company specializing in
sales force effectiveness and CRM software, solutions and support services to
the pharmaceutical industry. From November 1998 to January 2002, he was
Executive Vice President, Finance and Chief Financial Officer for Expanets,
Inc., a provider of advanced voice and data communication solutions. Mr. Beshar
served as our Executive Vice President and Chief Financial Officer from 1996
through 1998. Mr. Beshar has a B.A. in Accounting from Michigan State
University, is a graduate of The Executive Program of The Darden Graduate
Business School at the University of Virginia and is a member of the New York
Society of Certified Public Accountants.

BOARD OF DIRECTORS

Following the completion of this offering, our Board of Directors will
have seven members, including three directors who are not employees and who are
otherwise independent. Our directors will be divided into three classes. Each
class will be elected for terms of three years. The initial terms of the Class
I, Class II and Class III directors are expected to end at our annual
stockholders' meeting held in 2004, 2005 and 2006, respectively.

COMMITTEES OF THE BOARD OF DIRECTORS

Following completion of this offering, our Board of Directors will have
an audit committee. The Board may also establish other committees to assist in
the discharge of its responsibilities.

The functions of the audit committee, which is expected to consist of
Messrs. Beshar, and , each a non-employee director, include:

o reviewing the adequacy of our system of internal accounting
controls;

o reviewing the results of the independent auditor's annual audit,
including any significant adjustments, management judgments and
estimates, new accounting policies and disagreements with
management;

o reviewing our audited financial statements and discussing them with
management;

o reviewing the audit reports submitted by the independent auditors;

o reviewing the disclosures by independent auditors concerning the
relationships with our company and the performance of our
independent auditors and annually recommending independent auditors;

o adopting and annually assessing its charter; and

o preparing such reports or statements as may be required by the
Nasdaq National Market and applicable securities laws.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

We do not have a compensation committee. Gadi Cohen was primarily
responsible for all compensation decisions regarding our executive officers
during the last fiscal year.

BOARD COMPENSATION

Directors who are not our employees will receive as compensation
for their service on the Board. Directors who are our employees are not
separately compensated for serving on the Board of Directors.

EMPLOYMENT AGREEMENTS

We currently do not have employment agreements with any of our
executive officers. Each of our executive officers has entered into a severance
agreement that provides for the payment of six months of salary upon termination
of employment and contains a one-year non-competition provision.

EXECUTIVE COMPENSATION

The following table sets forth information concerning the compensation
for the year ended December 31, 2002 for our Chief Executive Officer and our
four other most highly compensated executive officers at such date. Annual
compensation amounts set forth on the table exclude perquisites and other
personal benefits because such compensation did not exceed either $50,000, or
10%, of the total annual salary and bonus for any of the named executive
officers. All other compensation consists of discretionary matching
contributions to our 401(k) plan on behalf of each named executive officer and
applicable car allowances.

2002 SUMMARY COMPENSATION TABLE

ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------- -------------------------
ALL OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING ALL OTHER
SALARY BONUS COMPENSATION AWARDS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION ($) ($) ($) ($) (#) ($)
- --------------------------------- ---------- -------- ------------- ---------- ------------ -------------

Gadi Cohen....................... 58,969(1) - 10,467(2) - 6,699(3)
President and Chief
Executive Officer
Jean-Pierre Pucheu............... 174,329(4) 42,073(5) - - - -
President of PNY
Technologies Europe
John P. Hughes................... 175,000 35,000 - - - 8,900(3)
Senior Vice President of New
Business Development
Robert J. Stone.................. 175,000 35,000 - - - 6,689(3)
Senior Vice President of
Operations
Anthony G. Gomez................. 175,000 35,000 - - 150,000 8,900(3)
Vice President of Sales and
Marketing

- ---------------
(1) Represents a salary of $35,000 and a directors fee of 15,000 pounds
for service on the Board of Directors of PNY Technologies (UK) Limited, a
wholly-owned subsidiary of PNY Technologies Europe, converted at the
December 31, 2002 exchange rate of 1.5979 pounds per U.S. dollar.

(2) Represents the perquisites, including health, dental, disability and life
insurance, paid for by us on behalf of the executive.

(3) Represents 401(k) contributions made by us.

(4) Represents a salary of 146,351 euros converted at the December 31, 2002
exchange rate of 1.0492 euros per U.S. dollar and a directors fee of 13,000
pounds for service on the Board of Directors of PNY Technologies (UK)
Limited, a wholly-owned subsidiary of PNY Technologies Europe, converted at
the December 31, 2002 exchange rate of 1.5979 pounds per U.S. dollar.

(5) Represents a bonus of 40,100 euros converted at the December 31, 2002
exchange rate of 1.0492 euros per U.S. dollar.

All executive officers are eligible to participate in our employee
stock option plan and may participate in other employee benefit plans and
programs, such as health insurance plans, that we offer to our other employees.

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth information regarding grants of stock
options to purchase shares of our common stock made to the named executive
officers during the year ended December 31, 2002. These options were granted
with an exercise price equal to the fair market value of our common stock on the
date of grant, as determined by our Board of Directors on the date of grant, and
were fully vested at September 30, 2003. Potential realizable values are net of
the exercise price, but before taxes associated with the exercise. Amounts
representing hypothetical gains are those that could be achieved for the options
if exercised at the end of the option term.

Potential realizable value amounts represent hypothetical gains that
could be achieved for the respective options if exercised at the end of the
option term. These gains are based on assumed rates of stock price appreciation
of 5% and 10% compounded annually from the date the respective options were
granted to their expiration dates based upon an assumed initial public offering
price of $ per share, the midpoint of the offering price range on the cover
of this prospectus. These assumptions are not intended to forecast future
appreciation of our stock price. The potential realizable value computation does
not take into account federal or state income tax consequences of option
exercises or sales of appreciated stock.

INDIVIDUAL GRANTS
-------------------------------------------------------- POTENTIAL POTENTIAL REALIZABLE
PERCENT OF REALIZABLE VALUE AT ASSUMED
TOTAL VALUE AT ANNUAL RATES OF STOCK
NUMBER OF OPTIONS EXERCISE ASSUMED PRICE APPRECIATION FOR
SECURITIES GRANTED TO PRICE PER IPO PRICE OPTION TERM
UNDERLYING EMPLOYEES SHARE ---------- -----------------------
OPTIONS IN FISCAL BASE EXPIRATION
NAME GRANTED YEAR (%) PRICE ($) DATE 0% ($) 5% ($) 10% ($)
- ---------------------- ------------ ----------- ---------- ------------ ---------- --------- ------------

Gadi Cohen - - - -
Jean-Pierre Pucheu - - - -
John P. Hughes - - - -
Robert J. Stone - - - -
Anthony G. Gomez 150,000 100 2.50 June 3, 2012

AGGREGATE YEAR-END OPTION VALUES

The table below sets forth the value and number of shares of common
stock subject to exercisable and unexercisable options held as of December 31,
2002 by each of the executive officers named in the 2002 Summary Compensation
Table. No named executive officer exercised any options in 2002. The value of
the unexercised in-the-money options at year end assumes a deemed value for
financial reporting purposes at year end of $ per share less the exercise
price.

AGGREGATE FISCAL YEAR-END OPTION VALUES

NUMBER OF SHARES OF COMMON
STOCK UNDERLYING UNEXERCISED OPTIONS AT VALUE OF UNEXERCISED IN-THE-
YEAR-END MONEY OPTIONS AT YEAR-END
--------------------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------------------------- ----------------- ---------------- ----------- --------------

Gadi Cohen......................................... - -
Jean-Pierre Pucheu................................. - -
John P. Hughes..................................... 300,000 -
Robert J. Stone.................................... 330,000 -
Anthony G. Gomez................................... 150,000 -

STOCK OPTION AND OTHER BENEFIT PLANS

STOCK OPTION PLAN

In June 1999, we adopted our employee stock option plan, which was
amended and restated in October 2000, for directors, officers, employees,
consultants and other individuals or entities selected by our Board of Directors
or compensation committee, which provides for nonqualified stock option and
incentive stock option grants to our employees and directors. As of September
30, 2003, options for 2,562,840 shares were issued, 4,750 were exercised,
1,761,400 were cancelled and 4,932,410 shares were available for future grants
under the plan. Options granted under our plan currently vest over four years.
In connection with the consummation of this offering, we intend to grant options
to purchase up to shares at an exercise price equal to $ per share to
existing employees who currently do not hold stock options. We expect to incur a
stock-based compensation charge of $ million in connection with this option
grant over their four-year vesting period. We also intend to grant options to
purchase up to shares to new employees at an exercise price equal to the
public offering price.

Options under the plan generally expire ten years from the date of
grant. If a participant's employment or provision of services is terminated for
a reason other than as a result of death, disability or retirement, the options
expire 30 days after termination, unless extended in accordance with the plan.
If a participant's employment is terminated as a result of death, disability or
retirement, the options expire 90 days from the date of termination. All shares
issued pursuant to the plan are subject to transfer restrictions.

401(k) PROFIT SHARING PLAN

We adopted a tax-deferred 401(k) profit sharing plan in September 1996.
The plan covers substantially all full-time U.S. employees on our payroll who
are at least 21 years of age. Employees become eligible to participate in the
first quarterly enrollment date after hire. The plan provides for voluntary
employee contributions up to 60% of their annual pre-tax compensation, subject
to the maximum limit allowed by the Internal Revenue Service guidelines, which
is currently $13,500 annually. The plan is intended to qualify under Section 401
of the Internal Revenue Code so that contributions to the plan, and income
earned on the plan contributions, are not taxable to employees until withdrawn
from the plan, and contributions by us will be deductible by us when made. The
trustee under the plan, at the discretion of each participant, invests the
employee contributions to the plan in selected investment options.

At our discretion, we make matching contributions to each participating
employee based on his or her voluntary contributions to the plan. We currently
match one-half of an employee's matchable contributions to the plan, which
cannot exceed 3% of their compensation. We may also make, in our discretion,
annual profit sharing contributions on behalf of eligible employees. Each
employee who is a plan participant on the last day of the plan year and has
completed at least 1,000 hours of service during the year is entitled to a share
of any profit sharing contribution we make for the plan year. Our matching
contribution and profit sharing contributions vest at the rate of 20% per year
beginning after the employee's second year of employment with us.

RESTRICTED STOCK AWARDS

During 1997 and 1998, we granted to specified employees and in one case
to a former employee for no consideration the right to receive 1,335,300 shares
of common stock, which will be delivered to them when the restriction period
described below terminates. These stock awards are subject to a ten-year cliff
vesting schedule, based on continued employment. These shares are also subject
to certain restrictions on transfer which terminate in part at the end of a
restriction period that ends on the earliest to occur of (1) 180 days following
the consummation of our initial public offering, (2) immediately prior to a
change in control, and (3) ten years after the date of grant. Gadi Cohen has
agreed to transfer to us as a contribution of capital, upon the termination of
the restriction period, a number of shares of common stock equal to the number
of shares of common stock that we have agreed to deliver to the specified
employees. As of September 30, 2003, and after giving effect to shares to be
issued and shares forfeited during the period beginning in 1997 and ending on
September 30, 2003, we expect Gadi Cohen to deliver 532,800 shares to us, and we
will in turn deliver those to the specified employees upon the termination of
the restriction period.

LIMITATION OF DIRECTORS AND OFFICERS LIABILITY

Our certificate of incorporation provides that no director will be
liable for monetary damages for breach of the director's fiduciary duty to us or
our stockholders, except for liability arising from:

o breach of the director's duty of loyalty to us or our stockholders;

o acts or omissions not in good faith or involving intentional
misconduct or knowing violations of law;

o improper distributions to stockholders and improper purchases or
redemptions of stock; and

o transactions from which the director derived an improper personal
benefit.

This provision of our certificate of incorporation does not eliminate
the directors' fiduciary duties, and in appropriate circumstances, equitable
remedies including an injunction or other forms of non-monetary relief would
remain available under Delaware law. This provision also does not affect a
director's responsibilities under any other laws, including federal securities
laws or state or federal environmental laws.

In addition, our bylaws provide that we will indemnify our directors
and officers to the fullest extent permitted by Delaware law. We are also
empowered under our bylaws to enter into indemnification contracts with our
directors and officers and to purchase insurance on behalf of any person we are
required or permitted to indemnify. We have obtained directors and officers
liability insurance coverage, which covers, among other things, liabilities
arising under the Securities Act of 1933, as amended, or the Securities Act.

RELATED PARTY TRANSACTIONS

In August 1995, we entered into a Preferred Stock and Warrant Purchase
Agreement with certain affiliates of Goldman, Sachs & Co. and Gadi Cohen. As
part of that agreement, we sold 13,000 shares of Series A preferred stock,
convertible into 3,900,000 shares of common stock, and warrants to purchase
1,462,500 shares of common stock for an aggregate purchase price of $15.0
million, to affiliates of Goldman, Sachs & Co. The warrants expired in August
2002, and were not exercised. Assuming an offering price of $ per share of
common stock, the value of the Series A preferred stock held by certain
affiliates of Goldman, Sachs & Co. would be $ million. Upon the automatic
conversion of the Series A preferred stock upon consummation of this offering,
the affiliates of Goldman, Sachs & Co. will be the beneficial owners of more
than 5% of our outstanding shares of common stock. See "Principal Stockholders"
for information relating to the beneficial ownership of shares and
identification of affiliates of Goldman, Sachs & Co.

In connection with the redemption of our formerly outstanding Series B
and C Preferred Stock, the holders of the Series A Preferred Stock became
entitled to 7% dividends paid semi-annually. Effective January 1, 2002, the
dividend rate was changed to 4.25%. On April 1, 2003, holders of more than 50%
of the shares of Series A Preferred Stock waived their rights to dividends
through January 1, 2003. Therefore, all rights of the holders of the Series A
Preferred Stock to receive any dividends which had accrued prior to January 1,
2003 were cancelled.

In consideration for the redemption of our formerly outstanding Series
B and Series C Preferred Stock held by Ruth Cohen, Gadi Cohen's spouse, on
December 5, 2000, we paid her $6.0 million in cash, forgave $2.3 million she
owed us, and issued a note to her in the amount of $9.8 million. There is
currently $5.0 million outstanding on the note, which must be repaid with
proceeds from this offering.

We believe that each of the transactions described above was made on
terms that were no less favorable to us than could be obtained from unaffiliated
parties.

PRINCIPAL STOCKHOLDERS

The table below sets forth information known to us regarding the
beneficial ownership of our common stock as of September 30, 2003, as adjusted
to reflect the automatic conversion of outstanding shares of Series A preferred
stock into common stock, resulting in the issuance of 3,980,400 shares of our
common stock, with an effective conversion price of $3.97 per share, and to
reflect the sale of the common stock offered by this prospectus, by:

o each stockholder known by us to be the beneficial owner of more than
5% of our outstanding common stock;

o each named executive officer;

o each of our directors; and

o all executive officers and directors as a group.

Beneficial ownership is determined in accordance with rules of the
Securities and Exchange Commission, or the Commission, and generally includes
voting power and/or investment power with respect to securities. Shares of
common stock subject to options currently exercisable or exercisable within
sixty days of the date of this prospectus are deemed outstanding for purposes of
computing the beneficial ownership by the person holding such options, but are
not deemed outstanding for purposes of computing the percentage beneficially
owned by any other person. Except as otherwise noted, the persons or entities
named have sole voting and investment power with respect to all shares shown as
beneficially owned by them. Unless otherwise indicated, the principal address of
each of the stockholders below is c/o PNY Technologies, Inc., 299 Webro Road,
Parsippany, New Jersey 07054.

PERCENTAGE OF SHARES
NUMBER OF BENEFICIALLY OWNED
SHARES --------------------------
BENEFICIALLY BEFORE AFTER
BENEFICIAL OWNER OWNED OFFERING OFFERING
- ------------------------------------------------------------- ------------- -------- ----------

EXECUTIVE OFFICERS AND DIRECTORS:
Gadi Cohen(1)................................................ 25,800,000 83.4%
Jean-Pierre Pucheu(2)........................................ 944,100 3.1
Mark J. Ciano(3)............................................. 150,000 0.5
Anthony G. Gomez(4).......................................... 150,000 0.5
John Unland(5)............................................... 67,500 0.2
John P. Hughes(6)........................................... 323,700 1.0
Robert J. Stone(7)........................................... 337,800 1.1
Luke M. Beshar(8)............................................ 427,950 1.4
All executive officers and directors as a group (8 persons).. 28,201,050 91.2

OTHER STOCKHOLDERS:
The Goldman Sachs Group, Inc. and affiliates(9).............. 3,783,000 12.2
85 Broad Street
New York, NY 10004

- ---------------
(1) Includes 532,800 shares of common stock that will be transferred to certain
employees 180 days following the consummation of this offering.

(2) Includes 147 shares of Series A preferred stock, which will automatically
convert into 44,100 shares of common stock, with an effective conversion
price of $3.97 per share, upon consummation of this offering and 900,000
shares of common stock that can be acquired upon the exercise of
outstanding options.

(3) Includes 150,000 shares of common stock that can be acquired upon the
exercise of outstanding options.

(4) Includes 150,000 shares of common stock that can be acquired upon the
exercise of outstanding options.

(5) Includes 67,500 shares of common stock that can be acquired upon the
exercise of outstanding options.

(6) Includes 79 shares of Series A preferred stock, which will automatically
convert into 23,700 shares of common stock, with an effective conversion
price of $3.97 per share, upon consummation of this offering, and 300,000
shares of common stock that can be acquired upon the exercise of
outstanding options.

(7) Includes 26 shares of Series A preferred stock, which will automatically
convert into 7,800 shares of common stock, with an effective conversion
price of $3.97 per share, upon consummation of this offering, and 330,000
shares of common stock that can be acquired upon the exercise of
outstanding options.

(8) Includes 113 shares of Series A preferred stock, which will automatically
convert into 33,900 shares of common stock with an effective conversion
price of $3.97 per share, upon consummation of this offering, and 144,000
shares of common stock that can be acquired upon the exercise of
outstanding options and 250,050 of common stock.

(9) 7,912 shares of Series A preferred stock, which will automatically convert
into 2,373,600 shares of common stock, with an effective conversion price
of $3.97 per share, upon consummation of this offering held by GS Capital
Partners II, L.P.; 3,145 shares of Series A preferred stock, which will
automatically convert into 943,500 shares of common stock upon consummation
of this offering held by GS Capital Partners II Offshore, L.P.; 292 shares
of Series A preferred stock, which will automatically convert into 87,600
shares of common stock upon consummation of this offering held by Goldman,
Sachs & Co. Verwaltungs GmbH; 594 shares of Series A preferred stock, which
will automatically convert into 178,200 shares of common stock upon
consummation of this offering held by Stone Street Fund 1995, L.P.; 667
shares of Series A preferred stock, which will automatically convert into
200,100 shares of common stock upon consummation of this offering held by
Bridge Street Fund 1995, L.P. Goldman, Sachs and Co. is an indirect
wholly-owned subsidiary of The Goldman Sachs Group, Inc. The Goldman Sachs
Group, Inc. and Goldman, Sachs & Co. may be deemed to own beneficially and
indirectly an aggregate of 3,783,000 shares held by the limited
partnerships listed above. Affiliates of Goldman, Sachs & Co. and The
Goldman Sachs Group, Inc. are the general partner, managing general partner
or investment manager of those partnerships. Each of the limited
partnerships shares voting and investment power with certain of its
respective affiliates. The Goldman Sachs Group, Inc. and Goldman, Sachs &
Co. each disclaim beneficial ownership of the shares owned by the limited
partnerships to the extent that those shares are attributable to
partnership interests therein held by persons other than The Goldman Sachs
Group, Inc. and its affiliates.

DESCRIPTION OF CAPITAL STOCK

GENERAL

The total amount of our authorized capital stock consists of
125,000,000 shares of common stock, par value $0.01 per share, and 10,000,000
shares of preferred stock.

After giving effect to this offering and the conversion of our Series A
preferred stock described below, assuming an initial public offering price of
$ per share and no exercise of the underwriters' over-allotment option, we
will have shares of common stock outstanding. At the closing of this
offering, all of our currently outstanding shares of Series A preferred stock
will automatically convert into 3,980,400 shares of common stock with an
effective conversion price of $3.97 per share. After giving effect to these
transactions, we will have no shares of any series of preferred stock
outstanding.

The following summary of provisions of our capital stock describes all
material provisions of, but does not purport to be complete and is subject to,
and qualified in its entirety by, our amended and restated certificate of
incorporation and our bylaws (both of which will be amended at or prior to the
consummation of this offering to reflect the following description), and by the
provisions of applicable law.

COMMON STOCK

The holders of our common stock are entitled to:

o one vote per share on all matters submitted to a vote of our
stockholders;

o the payment of any dividends declared by the Board of Directors out
of legally available funds, after the superior rights of any
preferred stock holders have been satisfied; and

o share ratably in company assets available for distribution to them
in the event of our liquidation, dissolution, distribution of assets
or winding up.

The holders of common stock do not have cumulative voting rights. As a
result, the holders of a majority of the outstanding common stock can elect all
our directors. The remaining common stockholders will not be able to elect any
directors. The holders of common stock have no preemptive or other subscription
rights, and there are no conversion, redemption or sinking fund provisions with
respect to the common stock. All outstanding shares of common stock are, and all
shares of common stock to be outstanding upon completion of this offering will
be, fully paid and non-assessable. There are provisions in our certificate of
incorporation and bylaws that would have the effect of delaying, deterring or
preventing a change in control of our management in the case of a hostile
takeover or other acquisition. See "--Anti-Takeover Provisions of Delaware Law
and Our Charter."

PREFERRED STOCK

Our Board of Directors will have the authority, without action by the
stockholders, to designate and issue preferred stock in one or more series and
to designate the rights, preferences and privileges of each series, any of which
may be greater than the rights of the common stock. It is not possible to state
the actual effect of the issuance of any shares of preferred stock on the rights
of holders of common stock until the Board of Directors determines the specific
rights of the preferred stock. However, the effects might include, among other
things, restricting dividends on the common stock, diluting the power of the
common stock, impairing liquidation rights of the common stock and delaying or
preventing a change of control or the removal of our existing management without
further action by the shareholders. We have no present plans to issue any shares
of preferred stock.

WARRANTS

There are currently 49,500 warrants outstanding. Each of these warrants
provides for the purchase of one share of common stock and has an exercise price
of $0.03. These warrants expire May 1, 2008.

REGISTRATION RIGHTS

As of the completion of this offering, the holders of an aggregate of
30,935,200 shares of common stock will be entitled to registration rights. These
rights are provided under the terms of a registration rights agreement,
management stockholders agreement and employee stock option plan between us and
the holders of registrable securities, who include the affiliates of Goldman
Sachs mentioned above, Gadi Cohen and current and former members of management
and employees who purchased stock under the option plan. This agreement provides
demand registration rights to the holders of registrable securities. In
addition, the holders of all of the registrable securities are entitled under
these agreements, subject to limitations, to require us to include their
registrable securities in future registration statements filed by us.

The demand registration rights provide that stockholders may request
registration of their shares at our expense 180 days after the effective date of
the registration statement of which this prospectus is a part, subject to a
minimum amount of the requesting stockholder's shares per requested
registration, and subject to our right to register our own shares or shares of
other requesting stockholders, which may limit the total number of shares that
may be sold in a single offering. These rights are being waived in connection
with this offering for a period of 180 days after the date of the final
prospectus relating to this offering.

Holders of registrable securities are entitled to request us to
register their securities when we propose or are required to register equity
securities under the Securities Act. We are obligated to provide notice of the
registration and the holders of registrable securities may request registration
of their shares within 15 days of receipt of the notice. These rights are being
waived in connection with this offering for a period of 180 days after the date
of the final prospectus relating to this offering.

Registration of shares of common stock pursuant to the rights granted
in these agreements will result in such shares becoming freely tradable without
restriction under the Securities Act. All registration expenses incurred in
connection with the above registrations will be borne by us.

ANTI-TAKEOVER PROVISIONS OF DELAWARE LAW AND OUR CHARTER

Delaware Law. In general, Section 203 of the Delaware General
Corporation Law prohibits a publicly held Delaware corporation from engaging in
any business combination with any interested stockholder for a period of three
years following the date that the stockholder became an interested stockholder,
unless:

o before that date, the Board of Directors of the corporation approved
either the business combination or the transaction that resulted in
the stockholder becoming an interested stockholder;

o on consummation of the transaction that resulted in the
stockholder's becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced,
excluding those shares owned by persons who are directors and also
officers, and employee stock plans in which employee participants do
not have the right to determine confidentially whether shares held
under the plan will be tendered in a tender or exchange offer; or

o on or after that date, the business combination is approved by the
Board of Directors and authorized at a meeting of stockholders, and
not by written consent, by the affirmative vote of at least
two-thirds of the outstanding voting stock not owned by the
interested stockholder.

Section 203 defines "business combination" to include:

o any merger or consolidation involving the corporation and the
interested stockholder;

o any sale, transfer, pledge or other disposition involving the
interested stockholder of 10% or more of the assets of the
corporation;

o in general, any transaction that results in the issuance or transfer
by the corporation of any stock of the corporation to the interested
stockholder; or

o the receipt by the interested stockholder of the benefit of any
loans, advances, guarantees, pledges or other financial benefits
provided by or through the corporation.

In general, Section 203 defines an interested stockholder as any entity
or person beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by the entity or person.

Charter provisions. Our certificate of incorporation and bylaws include
a number of provisions that may have the effect of deterring hostile takeovers
or delaying or preventing changes in control of our management. First, our
certificate of incorporation provides that all stockholder actions upon
completion of this offering must be effected at a duly called meeting of holders
and not by a consent in writing. Second, our bylaws provide that special
meetings of the holders may be called only by the chairman of the Board of
Directors or shall be called by our Secretary at the request of our Board of
Directors under a resolution adopted by a majority of the total number of
authorized directors. Third, our certificate of incorporation and bylaws provide
for a classified Board of Directors in which approximately one-third of the
directors would be elected each year. Consequently, any potential acquirer would
need to successfully complete two proxy contests in order to take control of the
Board of Directors. As a result of the provisions of the certificate of
incorporation and Delaware law, stockholders will not be able to cumulate votes
for directors. Finally, our bylaws establish procedures, including advance
notice procedures, with regard to the nomination of candidates for election as
directors and stockholder proposals. These provisions of our certificate of
incorporation and bylaws could discourage potential acquisition proposals and
could delay or prevent a change in control of our management.

TRANSFER AGENT AND REGISTRAR

has been appointed as the transfer agent and registrar for our
common stock.

SHARES ELIGIBLE FOR FUTURE SALE

The sale of a substantial amount of our shares in the public market
after this offering could adversely affect the prevailing market price of our
shares. Furthermore, the sale of a substantial amount of shares in the public
market after the contractual and legal restrictions on resale described below
lapse could adversely affect the prevailing market price of our shares and our
ability to raise equity capital in the future.

Upon completion of this offering, we will have outstanding an aggregate
of shares, assuming no exercise of the underwriters' over-allotment option.
Of these shares, all of the shares sold in this offering will be freely tradable
without restriction or further registration under the Securities Act, unless the
shares are purchased by our "affiliates" as that term is defined in Rule 144
under the Securities Act. Any shares purchased by an affiliate may not be resold
except pursuant to an effective registration statement or an applicable
exemption from registration, including an exemption under Rule 144 of the
Securities Act. The remaining shares of common stock held by existing
stockholders are "restricted securities" as that term is defined in Rule 144
under the Securities Act. These restricted securities may be sold in the public
market only if they are registered or if they qualify for an exemption from
registration under Rule 144 or Rule 701 under the Securities Act. These rules
are summarized below.

Assuming the conversion of the Series A preferred stock and the
exercise of all outstanding and vested options, upon the expiration of the
lock-up agreements described below and subject to the provisions of Rule 144 and
Rule 701, restricted shares totaling 30,935,200 will be available for sale in
the public market 180 days after the date of this prospectus. The sale of these
restricted securities is subject to the volume restrictions contained in those
rules. Some of these restricted shares, described as not being eligible for sale
until 180 days after the date of this prospectus, may become eligible for sale
at an earlier date, as described in "Underwriting."

LOCK-UP AGREEMENTS

We, our directors and executive officers and substantially all of our
stockholders, who own or have the right to purchase in the aggregate 30,935,200
shares of our common stock, have entered into lock-up agreements with the
underwriters. Under those agreements, subject to limited exceptions, neither we
nor any of our directors or executive officers nor any of those stockholders may
dispose of or hedge any shares of common stock or securities convertible into or
exchangeable for shares of common stock. These restrictions will be in effect
for a period of 180 days after the date of this prospectus. At any time and
without notice, Lehman Brothers may release all or some of the securities from
these lock-up agreements. See "Underwriting."

RULE 144

In general, under Rule 144 as currently in effect, beginning 90 days
after the date of this prospectus, a person who has beneficially owned shares of
our common stock for at least one year from the later of the date those shares
of common stock were acquired from us or from an affiliate of ours would be
entitled to sell within any three-month period a number of shares that does not
exceed the greater of:

o one percent of the number of shares of common stock then
outstanding, which will equal approximately shares immediately
after this offering; or

o the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing
of a notice on Form 144 with respect to the sale of any shares of
common stock.

The sales of any shares of common stock under Rule 144 are also subject
to manner of sale provisions and notice requirements and to the availability of
current public information about us.

RULE 144(k)

Under Rule 144(k), a person who is not one of our affiliates at any
time during the three months preceding a sale, and who has beneficially owned
the shares proposed to be sold for at least two years from the later of the date
such shares of common stock were acquired from us or from an affiliate of ours,
including the holding period of any prior owner other than an affiliate, is
entitled to sell those shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144. Immediately
upon completion of this offering, shares will be eligible for sale under
Rule 144(k).

RULE 701

In general, under Rule 701 of the Securities Act as currently in
effect, each of our employees, consultants or advisors who purchased shares from
us in connection with a compensatory stock plan or other written agreement is
eligible to resell those shares 90 days after the effective date of this
offering in reliance on Rule 144, but without compliance with some of the
restrictions, including the holding period, contained in Rule 144.

No precise prediction can be made as to the effect, if any, that market
sales of shares or the availability of shares for sale will have on the market
price of our common stock prevailing from time to time. We are unable to
estimate the number of our shares that may be sold in the public market pursuant
to Rule 144 or Rule 701 because this will depend on the market price of our
common stock, the personal circumstances of the sellers and other factors. After
this offering, there will be shares available for sale under Rule 701.
Nevertheless, sales of significant amounts of our common stock in the public
market could adversely affect the market price of our common stock.

STOCK PLANS

We intend to file a registration statement under the Securities Act
covering shares of common stock reserved for issuance under our employee
stock option plan. This registration statement is expected to be filed as soon
as practicable after the effective date of this offering.

As of September 30, 2003, there are options to purchase 2,562,840
shares of our common stock outstanding under our employee stock option plan. In
connection with the consummation of this offering, we intend to grant options to
purchase up to shares at an exercise price equal to $ per share to
existing employees who currently do not hold stock options. Also, in connection
with the consummation of this offering, we intend to grant options to purchase
an additional shares of our common stock to new employees at an exercise
price equal to the public offering price. All of these shares will be eligible
for sale in the public market from time to time, subject to vesting provisions,
Rule 144 volume limitations applicable to our affiliates and, in the case of
some of the options, the expiration of lock-up agreements.

UNITED STATES FEDERAL INCOME AND ESTATE TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS

The following is a general discussion of the material U.S. federal
income and estate tax consequences of the ownership and disposition of our
common stock to a non-U.S. holder. For the purpose of this discussion, a
non-U.S. holder is any holder that for U.S. federal income tax purposes is not a
U.S. person. For purposes of this discussion, the term U.S. person means:

o an individual citizen or resident of the United States;

o a corporation or other entity taxable as a corporation created or
organized in the United States or under the laws of the United
States, any state or the District of Columbia;

o an estate whose income is subject to U.S. federal income tax
regardless of its source; or

o a trust (x) whose administration is subject to the primary
supervision of a U.S. court and which has one or more U.S. persons
that have the authority to control all substantial decisions of the
trust or (y) which has made an election to be treated as a U.S.
person.

If a partnership holds common stock, the tax treatment of a partner
will generally depend on the status of the partner and upon the activities of
the partnership. Accordingly, partnerships which hold our common stock and
partners in such partnerships should consult their tax advisors.

This discussion assumes that non-U.S. holders will hold our common
stock issued pursuant to this offering as a capital asset (generally, property
held for investment). This discussion does not address all aspects of U.S.
federal income taxation that may be relevant in light of a non-U.S. holder's
special tax status or special tax situation. U.S. expatriates or former
long-term residents, life insurance companies, tax-exempt organizations, dealers
in securities or currency, banks or other financial institutions, investors
whose functional currency is other than the U.S. dollar, that have elected
market-to-market accounting, who acquired our common stock as compensation, or
that hold our common stock as part of a hedge, straddle, constructive sale,
conversion, or other risk reduction transaction, and special status corporations
(such as "controlled foreign corporations," "foreign investment companies,"
"foreign passive investment companies," "foreign personal holding companies,"
and corporations that accumulate earnings to avoid U.S. income tax) are among
those categories of potential investors that are subject to special rules not
covered in this discussion. This discussion does not address any tax
consequences arising under the laws of any state, local or non-U.S. taxing
jurisdiction. Furthermore, the following discussion is based on current
provisions of the Internal Revenue Code of 1986, as amended, and Treasury
Regulations and administrative and judicial interpretations thereof, all as in
effect on the date hereof, and all of which are subject to change, possibly with
retroactive effect. Accordingly, each non-U.S. holder should consult a tax
advisor regarding the U.S. federal, state, local and non-U.S. income and other
tax consequences of acquiring, holding and disposing of shares of our common
stock.

DIVIDENDS

We have not paid any dividends on our common stock and we do not plan
to pay any dividends for the foreseeable future. However, if we do pay dividends
on our common stock, those payments will constitute dividends for U.S. tax
purposes to the extent paid from our current or accumulated earnings and
profits, as determined under U.S. federal income tax principles. To the extent
those dividends exceed our current and accumulated earnings and profits, the
dividends will constitute a return of capital and will first reduce a holder's
tax basis, but not below zero, and then will be treated as gain from the sale of
stock.

Any dividend (out of earnings and profits) paid to a non-U.S. holder of
common stock generally will be subject to U.S. withholding tax at a rate of 30%
of the gross amount of the dividend or such lower rate as may be specified by an
applicable tax treaty. In order to receive a reduced treaty rate, a non-U.S.
holder must provide us with an Internal Revenue Service ("IRS") Form W-8BEN (or
successor form) or an appropriate substitute form

certifying qualification for the reduced rate. The non-U.S. holder must
periodically update the information on such forms. Such non-U.S. holder may also
be required to obtain and provide a U.S. taxpayer identification number and/or
demonstrate residence in the applicable foreign jurisdiction by providing
documentation issued by the government of such jurisdiction. Furthermore,
Treasury Regulations require special procedures for payments through qualified
intermediaries. A non-U.S. holder of common stock that is eligible for a reduced
rate of withholding tax pursuant to a tax treaty may obtain a refund of any
excess amounts currently withheld if an appropriate claim for refund is filed
with the IRS.

Dividends received by a non-U.S. holder that are effectively connected
with a U.S. trade or business conducted by the non-U.S. holder are exempt from
such withholding tax. In order to obtain this exemption, a non-U.S. holder must
provide us with an IRS Form W-8ECI (or successor form) or an appropriate
substitute form properly certifying such exemption. "Effectively connected"
dividends, although not subject to withholding tax, are taxed at the same
graduated rates applicable to U.S. persons, net of certain deductions and
credits. If the non-U.S. holder is eligible for the benefits of a tax treaty
between the United States and the holder's country of residence, any effectively
connected dividends or gain would generally be subject to U.S. federal income
tax only if it is also attributable to a permanent establishment or fixed base
maintained by the holder in the United States.

In addition to the graduated tax described above, dividends received by
a corporate non-U.S. holder that are effectively connected with a U.S. trade or
business of the corporate non-U.S. holder may be subject to a branch profits tax
at a rate of 30% or such lower rate as may be specified by an applicable tax
treaty.

GAIN ON DISPOSITION OF COMMON STOCK

A non-U.S. holder generally will not be subject to U.S. federal income
tax on any gain realized upon the sale or other disposition of our common stock
unless:

o the gain is effectively connected with a U.S. trade or business of
the non-U.S. holder (which gain, in the case of a corporate non-U.S.
holder, must also be taken into account for branch profits tax
purposes);

o the non-U.S. holder is an individual who is present in the United
States for a period or periods aggregating 183 days or more during
the calendar year in which the sale or disposition occurs and
certain other conditions are met; or

o our common stock constitutes a U.S. real property interest by reason
of our status as a "U.S. real property holding corporation" for U.S.
federal income tax purposes at any time within the shorter of the
five-year period preceding the disposition or the holder's holding
period for our common stock, and the non-U.S. holder does not fall
within a de minimis exception. We have determined that we are not
and do not believe that we will become a U.S. real property holding
corporation for U.S. federal income tax purposes. However, we can
give no assurance that we will not become a U.S. real property
holding corporation. Accordingly, non-U.S. holders are urged to
consult their tax advisors to determine the application of these
rules to their disposition of our common stock.

FEDERAL ESTATE TAXES

Common stock owned or treated as owned by an individual who is a
non-U.S. holder at the time of death will be included in the individual's gross
estate for U.S. federal estate tax purposes and may be subject to U.S. federal
estate tax, unless an applicable tax treaty provides otherwise. An individual
may be subject to U.S. federal estate tax but not U.S. federal income tax as a
resident or may be subject to U.S. federal income tax as a resident but not U.S.
federal estate tax.

INFORMATION REPORTING AND BACKUP WITHHOLDING

Generally, we must report annually to the IRS the amount of dividends
paid, the name and address of the recipient, and the amount, if any, of tax
withheld in the case of each non-U.S. holder. A similar report is sent to the

holder. Tax treaties or other agreements may require the IRS to make its reports
available to tax authorities in the recipient's country of residence.

Payments of dividends or of proceeds on the disposition of stock made
to a non-U.S. holder may be subject to backup withholding (currently at a rate
of 28%) unless the non-U.S. holder establishes an exemption, for example by
properly certifying its non-U.S. status on a Form W-8BEN (or successor form) or
an appropriate substitute form. Notwithstanding the foregoing, backup
withholding may apply if either we or our paying agent has actual knowledge, or
reason to know, that the holder is a U.S. person or that any other condition of
exemption is not satisfied.

The payment of the gross proceeds of the sale, exchange or other
disposition of our common stock to or through the U.S. office of any broker,
U.S. or foreign, will be subject to information reporting and possible backup
withholding unless the non-U.S. holder, prior to payment, certifies as to its
non-U.S. status under penalties of perjury or otherwise establishes an
exemption, and provided that the broker does not have actual knowledge, or
reason to know, that the purported non-U.S. holder is actually a U.S. person or
that the conditions of any other exemption are not in fact satisfied. The
payment of the gross proceeds of the sale, exchange or other disposition of our
common stock to or through a non-U.S. office of a non-U.S. broker will not be
subject to information reporting or backup withholding unless the non-U.S.
broker has certain types of relationships with the United States (a
"U.S.-related person"). In the case of the payment of the gross proceeds of the
sale, exchange or other disposition of our common stock to or through a non-U.S.
office of a broker that is either a U.S. person or a U.S.-related person,
Treasury Regulations do not require backup withholding but do require
information reporting on the payment unless the broker, prior to payment, (a)
has documentary evidence in its files that the owner is a non-U.S. holder, and
(b) has no knowledge, or reason to know, to the contrary.

Backup withholding is not an additional tax. Rather, the U.S. income
tax liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained, provided that the required information is furnished to
the IRS.

THE PRECEDING DISCUSSION OF MATERIAL U.S. FEDERAL INCOME AND ESTATE TAX
CONSEQUENCES IS GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY,
EACH INVESTOR SHOULD CONSULT THAT INVESTOR'S OWN TAX ADVISOR AS TO THE
PARTICULAR TAX CONSEQUENCES TO IT OF PURCHASING, HOLDING AND DISPOSING OF OUR
COMMON STOCK, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR
NON-U.S. TAX LAWS AND OF ANY CHANGES OR PROPOSED CHANGES IN APPLICABLE LAW.

UNDERWRITING

Under the terms of an underwriting agreement, which has been filed as
an exhibit to the registration statement relating to this prospectus, each of
the underwriters named below, for whom Lehman Brothers Inc., Needham & Company,
Inc. and Thomas Weisel Partners LLC are acting as representatives, have
severally agreed to purchase from us the respective number of shares of common
stock opposite its name below:

NUMBER
UNDERWRITERS OF SHARES
- ------------- ---------

Lehman Brothers Inc..............................................................................
Needham & Company, Inc...........................................................................
Thomas Weisel Partners LLC.......................................................................

---------

Total............................................................................................ =========

The underwriting agreement provides that the underwriters' obligations
to purchase shares of our common stock depends on the satisfaction of the
conditions contained in the underwriting agreement, including:

o the obligation to purchase all of the shares of our common stock, if
any of the shares are purchased (other than those shares subject to
the underwriters' over-allotment option, until that option is
exercised);

o if an underwriter defaults, purchase commitments of the
non-defaulting underwriters may be increased or the underwriting
agreement may be terminated;

o the representations and warranties made by us to the underwriters
are true;

o there is no material change in the financial markets; and

o we deliver customary closing documents to the underwriters.

OVER-ALLOTMENT OPTION

We have granted the underwriters a 30-day option to purchase up
to shares at the public offering price less underwriting discounts and
commissions. This option may be exercised to cover over-allotments. To the
extent that the option is exercised, each underwriter will be obligated, subject
to certain conditions, to purchase a number of additional shares proportionate
to the underwriter's initial commitment as indicated in the preceding table, and
we will be obligated, pursuant to the option, to sell these shares to the
underwriters.

COMMISSIONS AND EXPENSES

The representatives have advised us that the underwriters propose to
offer shares of common stock directly to the public at the public offering price
on the cover of this prospectus and to selected dealers, who may include the
underwriters, at such offering price less a selling concession not in excess of
$ per share. The underwriters may allow, and the selected dealers may
re-allow, a discount from the concession not in excess of $ per share to
other dealers. After the offering, the underwriters may change the public
offering price and other offering terms.

The following table summarizes the underwriting discounts and
commissions we will pay to the underwriters in connection with the offering.
These amounts are shown assuming both no exercise and full exercise of the
underwriters' over-allotment option to purchase up to additional shares. The
underwriting fee is the difference between the initial price to the public and
the amount the underwriters pay us for the shares.

NO EXERCISE FULL EXERCISE
----------- -------------

Per Share................................. $ $
Total..................................... $ $

We estimate that the total expenses of this offering, excluding
underwriting discounts and commissions paid by us, will be approximately $ .

LISTING

We propose to list our common stock on the Nasdaq National Market under
the symbol "PNYT." In connection with that listing, the underwriters have
undertaken to sell the minimum number of shares to the minimum number of
beneficial owners necessary to meet the Nasdaq National Market listing
requirements.

OFFERING PRICE DETERMINATION

Prior to this offering, there has been no public market for our common
stock. The initial public offering price will be determined by negotiation
between us and the underwriters. The factors that the representatives will
consider in determining the public offering price include:

o the history and prospects for the industry in which we compete;

o the ability of our management and our business potential and earning
prospects;

o the prevailing securities markets at the time of this offering; and

o the recent market prices of, and the demand for, publicly traded
shares of generally comparable companies.

STABILIZATION, SHORT POSITIONS AND PENALTY BIDS

The underwriters may engage in over-allotment, stabilizing
transactions, syndicate covering transactions, and penalty bids or purchases for
the purpose of pegging, fixing or maintaining the price of the common stock, in
accordance with Regulation M under the Securities Exchange Act of 1934, as
amended:

o Over-allotment involves sales by the underwriter of shares in excess
of the number of shares the underwriter is obligated to purchase,
which creates a syndicate short position. The short position may be
either a covered short position or a naked short position. In a
covered short position, the number of shares over-allotted by the
underwriter is not greater than the number of shares that they may
purchase in the over-allotment option. In a naked short position,
the number of shares involved is greater than the number of shares
in the over-allotment option. The underwriter may close out any
short position by either exercising its over-allotment option and/or
purchasing shares in the open market.

o Stabilizing transactions permit bids to purchase the underlying
security so long as the stabilizing bids do not exceed a specified
maximum.

o Syndicate covering transactions involve purchases of the common
stock in the open market after the distribution has been completed
in order to cover syndicate short positions. In determining the
source of shares to close out the short position, the underwriter
will consider, among other things, the price of shares available for
purchase in the open market as compared to the price at which they
may purchase shares through the over-allotment option. If the
underwriter sells more shares than could be covered by the
over-allotment option, which is called a naked short position, the
position can only be closed out by buying shares in the open market.
A naked short position is more likely to be created if the
underwriter is concerned that there could be downward pressure on
the price of the shares in the open market after pricing that could
adversely affect investors who purchase shares in the offering.

o Penalty bids permit the underwriters to reclaim a selling concession
from a syndicate member when the common stock originally sold by the
syndicate member is purchased in a stabilizing or syndicate covering
transaction to cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and
penalty bids may have the effect of raising or maintaining the market price of
the common stock or preventing or retarding a decline in the market price of the
common stock. As a result, the price of the common stock may be higher than the
price that might otherwise exist in the open market. These transactions may be
effected on the Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.

Neither we nor any of the underwriters make any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the common stock. In addition, neither
we nor the underwriters make any representation that the underwriters will
engage in these stabilizing transactions or that any transaction, once
commenced, will not be discontinued without notice.

LOCK-UP AGREEMENTS

We have agreed that we will not offer, sell, contract to sell, pledge
or otherwise dispose of, directly or indirectly, or file with the Commission a
registration statement under the Securities Act relating to, any shares of our
common stock or securities convertible into or exchangeable or exercisable for
any shares of our common stock, or publicly disclose the intention to make any
such offer, sale, pledge, disposition or filing, without the prior written
consent of Lehman Brothers Inc., on behalf of the underwriters, for a period of
180 days after the date of this prospectus, except pursuant to the exercise of
options outstanding on the date hereof, grants of employee stock options
pursuant to the terms of a plan in effect on the date hereof, issuances pursuant
to the exercise of such options, the filing of registration statements on Form
S-8 and amendments thereto in connection with those stock options or our
employee stock purchase plans in existence on the date hereof.

Our executive officers and directors and stockholders holding
substantially all of our common stock have entered into lock-up agreements under
which they agreed not to transfer or dispose of, directly or indirectly,
including by way of any hedging or derivatives transaction, any shares of our
common stock or any securities convertible into or exercisable or exchangeable
for shares of our common stock for a period of 180 days after the date of this
prospectus without the prior written consent of Lehman Brothers Inc., on behalf
of the underwriters.

INDEMNIFICATION

We have agreed to indemnify the underwriters against liabilities
relating to the offering including liabilities under the Securities Act and
liabilities arising from breaches of the representations and warranties
contained in the underwriting agreement, and to contribute to payments that the
underwriters may be required to make for these liabilities.

DIRECTED SHARE PROGRAM

At our request, the underwriters have reserved for sale at the initial
public offering price up to shares offered hereby to certain persons as
directed by us. The number of shares available for sale to the general public
will be reduced to the extent such persons purchase such reserved shares. Any
reserved shares not so purchased will be offered by the underwriters to the
general public on the same basis as the other shares offered hereby.

DISCRETIONARY ACCOUNTS

The representatives have informed us that they will not intend to
confirm the sales of shares of common stock offered by this prospectus to any
accounts over which they exercise discretionary authority in excess of 5% of
shares offered by them.

STAMP TAXES

Purchasers of the shares of our common stock offered by this prospectus
may be required to pay stamp taxes and other charges under the laws and
practices of the country of purchase, in addition to the offering price listed
on the cover of this prospectus. Accordingly, we urge you to consult a tax
advisor with respect to whether you may be required to pay those taxes or
charges, as well as any other tax consequences that may arise under the laws of
the country of purchase.

OFFERS AND SALES IN CANADA

Any offers in Canada will be made only under an exemption from the
requirements to file a prospectus in the relevant province of Canada where the
sale is made.

ELECTRONIC DISTRIBUTION

A prospectus in electronic format may be made available on the Internet
sites or through other online services maintained by the underwriters
participating in this offering, or by their affiliates. In those cases,
prospective investors may view offering terms online and, depending upon the
underwriter, prospective investors may be allowed to place orders online. The
underwriters may agree with us to allocate a specific number of shares for sale
to online brokerage account holders. Any such allocation for online
distributions will be made by the underwriters on the same basis as other
allocations.

Other than the prospectus in electronic format, the information on the
underwriters' web site and any information contained in any other web site
maintained by the underwriter is not part of this prospectus or the registration
statement of which this prospectus and the accompanying prospectus form a part,
has not been approved and/or endorsed by us or the underwriters in its capacity
as underwriter and should not be relied upon by investors.

OUR RELATIONSHIPS WITH THE UNDERWRITERS

Certain of the underwriters and their respective affiliates have
performed and expect to continue to perform financial advisory and investment
and commercial banking services for us for which they have received and will
receive compensatory compensation.

LEGAL MATTERS

The validity of the common stock offered hereby will be passed upon for
us by Gibson, Dunn & Crutcher LLP, New York, New York. Weil, Gotshal & Manges
LLP advised the underwriters in connection with this offering.

EXPERTS

Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule as of December 31, 2001 and for the years
ended December 31, 2000 and 2001, as set forth in their reports. We have
included our financial statements and schedule in this prospectus and elsewhere
in the registration statement in reliance on Ernst & Young LLP's reports given
on their authority as experts in accounting and auditing.

The consolidated financial statements and schedule of PNY Technologies,
Inc. and subsidiaries as of December 31, 2002 and for the year ended December
31, 2002 have been included herein and in the registration statement in reliance
upon the reports of KPMG LLP, independent accountants, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing.

In 2002, with the approval of our Board of Directors, we decided to
engage KPMG LLP as our independent auditors. We did not have any disagreement
with Ernst & Young LLP on any matters of accounting principle or practice,
financial statement disclosure or auditing scope or procedure. Ernst & Young
LLP's report on our consolidated financial statements as of December 31, 2001
and for the years ended December 31, 2000 and 2001 expressed unqualified
opinions as to those financial statements.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the Commission a registration statement on Form S-1
under the Securities Act with respect to the common stock offered by this
prospectus. While the information contained in this prospectus is materially
complete, this prospectus does not contain all the information set forth in the
registration statement and its exhibits and schedules. For further information
with respect to us and the common stock offered by this prospectus, we refer you
to the registration statement and to the exhibits. The exhibits to the
registration statement include the full text of contracts, agreements and other
documents described in this prospectus. You should refer to these exhibits when
reading the descriptions of these documents contained in this prospectus. You
should be aware that when we discuss these contracts or documents in this
prospectus we are assuming that you will read the exhibits to the registration
statement for a more complete understanding of the contract or document.

Following the offering we will become subject to the reporting
requirements of the Securities Act. In accordance with that law, we will be
required to file reports and other information with the Commission. The
registration statement and exhibits, as well as those reports and other
information when so filed, may be inspected without charge at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the Commission at 1-800-SEC-0330 for further
information on the operation of the public reference facilities. Copies of all
or any part of the registration statement may be obtained from the Commission's
offices on payment of fees prescribed by the Commission. The Commission
maintains a World Wide Website that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. The address of the site is http://www.sec.gov.

We will furnish our shareholders annual reports and unaudited quarterly
reports for the first three quarters of each fiscal year. Annual reports will
include audited consolidated financial statements prepared in accordance with
generally accepted accounting principles. The consolidated financial statements
included in the annual reports will be examined and reported on, with an opinion
expressed, by our independent auditors.

PNY TECHNOLOGIES, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page
----

Independent Auditors' Report - KPMG LLP............................................................ F-2
Independent Auditors' Report - Ernst & Young LLP................................................... F-3
Consolidated Balance Sheets........................................................................ F-4
Consolidated Statements of Operations.............................................................. F-5
Consolidated Statements of Stockholders' Equity and
Accumulated Other Comprehensive Income (Loss)................................................ F-6
Consolidated Statements of Cash Flows.............................................................. F-7
Notes to Consolidated Financial Statements......................................................... F-8

F-1

INDEPENDENT AUDITORS' REPORT

To the Stockholders and Board of Directors
PNY Technologies, Inc.

We have audited the accompanying consolidated balance sheet of PNY Technologies,
Inc. and subsidiaries (the "Company") as of December 31, 2002, and the related
consolidated statements of operations, stockholders' equity and accumulated
other comprehensive income (loss) and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of PNY Technologies,
Inc. and subsidiaries as of December 31, 2002, and the results of their
operations and their cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of America.

/s/ KPMG LLP

May 16, 2003, except for the third paragraph of
Note 6 - Long-term Debt and Capital Leases,
as to which the date is August 6, 2003

F-2

INDEPENDENT AUDITORS' REPORT

F-3

PNY TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

PRO FORMA
STOCKHOLDERS'
EQUITY DATA AT
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
------------------------------ 2003 2003
2001 2002 (UNAUDITED) (UNAUDITED)
------------ ------------- ------------- ---------------

ASSETS
Current assets:
Cash and cash equivalents................................. $ 5,338 $ 7,480 $ 3,838
Accounts receivable, less allowance for doubtful
accounts of $1,261, $1,060 and $1,095 at December 31,
2001 and 2002 and September 30, 2003 (unaudited),
respectively............................................. 51,858 55,257 51,495
Inventories............................................... 33,774 48,285 38,874
Income taxes receivable................................... 2,557 - 225
Deferred income taxes..................................... 2,627 1,838 2,384
Prepaid expenses and other................................ 4,261 3,967 3,139
Assets held for sale...................................... - - 512
----------- ----------- -----------
Total current assets................................ 100,415 116,827 100,467
----------- ----------- -----------
Property, plant and equipment, net........................... 12,172 6,615 5,622
Deferred income taxes........................................ 18 1,029 760
Deposits and other........................................... 418 186 197
----------- ----------- -----------
Total assets........................................ $ 113,023 $ 124,657 $ 107,046
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt......................... $ 31,560 $ 33,894 $ 25,995
Current portion of capital lease obligations.............. 843 331 183
Accounts payable.......................................... 29,545 38,839 32,700
Bank overdrafts........................................... 1,389 2,238 2,365
Accrued expenses.......................................... 9,326 10,778 8,778
Customer allowances....................................... 17,150 17,205 13,260
Income taxes payable...................................... 298 1,555 282
Interest payable to related party......................... 73 46 78
Other..................................................... 197 1,068 856
----------- ----------- -----------
Total current liabilities........................... 90,381 105,954 84,497

Capital lease obligations.................................... 603 123 -
Note payable to related party................................ 7,916 5,189 4,971
Note payable - acquisition of business....................... 1,608 - -
Dividends payable to convertible Series A preferred
stockholders............................................... 1,147 1,797 488
Other long-term liabilities.................................. 1,266 3,088 3,833
----------- ----------- -----------
Total liabilities................................... 102,921 116,151 93,789
----------- ----------- -----------
Commitment and contingencies

Stockholders' equity:
Convertible Series A preferred stock cumulative,
participating: par value $.01 per share; authorized
15,000 shares; issued and outstanding 13,268 shares
in 2001, 2002, and 2003 (unaudited), and none on a
pro forma basis (liquidation preference of $15,797 at
September 30, 2003) (unaudited)......................... - - - -
Common stock: par value $0.01 per share; authorized
125,000,000 shares; issued and outstanding
26,954,800 shares in 2001, 2002 and 2003 (unaudited),
and issued 31,270,300 shares (unaudited) and outstanding
30,935,200 shares (unaudited) on a pro forma basis...... 270 270 270 313
Deferred stock compensation............................... (2,804) (477) (239) (239)
Additional paid-in capital................................ 7,749 5,199 5,195 5,152
Treasury stock, at cost: 1,117 shares of Series A
preferred stock in 2001, 2002 and 2003 (unaudited),
335,100 shares of common stock on a pro forma basis
(unaudited)............................................. (1,502) (1,502) (1,502) (1,502)
Accumulated earnings...................................... 7,080 3,195 6,016 6,016
Accumulated other comprehensive income (loss)............. (610) 1,902 3,598 3,598
Notes receivable from employees........................... (81) (81) (81) (81)
----------- ----------- ----------- --------
Total stockholders' equity.......................... 10,102 8,506 13,257 13,257
----------- ----------- ----------- --------
Total liabilities and stockholders' equity.......... $ 113,023 $ 124,657 $ 107,046
=========== =========== ===========

See accompanying notes to consolidated financial statements.

F-4

PNY TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, (UNAUDITED)
-------------------------------------------- --------------------------
2000 2001 2002 2002 2003
------------ ----------- ---------- ---------- ------------

Net sales.................................... $ 548,341 $ 314,197 $ 334,603 $ 251,615 $ 258,564
Cost of sales................................ 484,053 281,688 286,351 217,376 223,128
---------- ---------- ---------- ---------- ----------
Gross profit................................. 64,288 32,509 48,252 34,239 35,436
---------- ---------- ---------- ---------- ----------
Operating expenses:
Selling................................... 21,328 21,184 26,228 19,566 21,765
Warehouse................................. 1,476 1,608 1,735 1,313 1,522
General and administrative................ 13,086 9,586 8,513 6,133 6,300
Restructuring and other charges........... - - 10,387 9,658 1,745
---------- ---------- ---------- ---------- ----------
Total operating expenses................ 35,890 32,378 46,863 36,670 31,332
---------- ---------- ---------- ---------- ----------
Operating income (loss)...................... 28,398 131 1,389 (2,431) 4,104

Other income (expense):
Interest income........................... 152 177 164 118 109
Interest expense.......................... (4,424) (2,182) (1,477) (1,141) (1,158)
Interest expense to related party......... (47) (631) (305) (241) (164)
Foreign exchange (loss) gain.............. (751) 899 (1,983) (1,828) (456)
Other income, net......................... 461 161 166 253 154
---------- ---------- ---------- ---------- ----------
Total other expense..................... (4,609) (1,576) (3,435) (2,839) (1,515)
---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes............ 23,789 (1,445) (2,046) (5,270) 2,589

Provision for income taxes................... 3,402 943 1,189 699 1,077
---------- ---------- ---------- ---------- ----------
Net income (loss)............................ 20,387 (2,388) (3,235) (5,969) 1,512

Dividends (waiver of dividends) on
Convertible Series A preferred stock......... - 1,147 650 488 (1,309)
---------- ---------- ---------- ---------- ----------
Net income (loss) available to common
stockholders................................. $ 20,387 $ (3,535) $ (3,885) $ (6,457) $ 2,821
========== ========== ========== ========== ==========
Net income (loss) per common share:

Basic..................................... $ 0.78 $ (0.14) $ (0.14) $ (0.24) $ 0.10
Diluted................................... 0.60 (0.14) (0.14) (0.24) 0.05

Shares used in computing net income (loss) per
common share
Basic..................................... 26,050,050 26,120,205 26,954,800 26,954,800 26,954,800
Diluted................................... 33,720,454 26,120,205 26,954,800 26,954,800 32,454,471

See accompanying notes to consolidated financial statements.

F-5

PNY TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

CONVERTIBLE
SERIES A
PREFERRED STOCK COMMON STOCK DEFERRED ADDITIONAL
--------------------- ---------------------- STOCK PAID-IN
SHARES AMOUNT SHARES AMOUNT COMPENSATION CAPITAL
-------- -------- ---------- -------- ------------ ----------

Balance at December 31, 1999....... 13,658 $ - 26,050,050 $ 261 $ - $ 1,644
Repurchase of preferred stock.... (390)
Compensatory stock option
grants......................... (10,748) 10,748
Stock-based compensation......... 1,407 42
Net income.......................
Currency translation
adjustment.....................
Comprehensive income.............
------ ------ ---------- ------- -------- -------
Balance at December 31, 2000....... 13,268 - 26,050,050 261 (9,341) 12,434
Exercise of employee stock
options........................ 4,750 - 5
Exercise of warrants............. 900,000 9 21
Cancellation of notes
receivable charged to
compensation expense...........
Cancellation of compensatory
stock option grants upon
termination of employment...... 4,669 (4,669)
Stock-based compensation......... 1,868 (42)
Dividends on Series A preferred
stock..........................
Net loss.........................
Currency translation adjustment..
Comprehensive loss...............
------ ------ ---------- ------- -------- -------
Balance at December 31, 2001....... 13,268 - 26,954,800 270 (2,804) 7,749
Cancellation of compensatory
stock option grants upon
termination of employment...... 2,550 (2,550)
Stock-based compensation......... (223)
Dividends on Series A preferred
stock..........................
Net loss.........................
Currency translation adjustment..
Comprehensive loss...............
------ ------ ---------- ------- -------- -------
Balance at December 31, 2002....... 13,268 - 26,954,800 270 (477) 5,199
Cancellation of compensatory
stock option grants upon
termination of employment
(unaudited).................... 238 (238)
Stock-based compensation
(unaudited).................... 234
Waiver of dividends on Series A
preferred stock (unaudited)....
Dividends on Series A preferred
stock (unaudited)..............
Net income (unaudited)...........
Currency translation adjustment
(unaudited)....................
Comprehensive income
(unaudited)....................
------ ------ ---------- ------- -------- -------
Balance at September 30, 2003
(unaudited)........... 13,268 $ - 26,954,800 $ 270 $ (239) $ 5,195
====== ====== ========== ======= ======== =======

TREASURY STOCK
SERIES A ACCUMULATED NOTES
PREFERRED STOCK ACCUMULATED OTHER RECEIVABLE TOTAL
------------------- EARNINGS COMPREHENSIVE FROM STOCKHOLDERS'
SHARES AMOUNT (DEFICIT) INCOME (LOSS) EMPLOYEES EQUITY
------ -------- ----------- ------------- ---------- -------------

Balance at December 31, 1999....... 727 $ (683) $ (9,772) $ 96 $ (93) $ (8,547)
Repurchase of preferred stock.... 390 (819) (819)
Compensatory stock option
grants......................... -
Stock-based compensation......... 1,449
Net income....................... 20,387 20,387
Currency translation
adjustment..................... 27 27
--------
Comprehensive income............. 20,414
------ ------- --------- -------- ----- --------
Balance at December 31, 2000....... 1,117 (1,502) 10,615 123 (93) 12,497
Exercise of employee stock
options........................ 5
Exercise of warrants............. 30
Cancellation of notes
receivable charged to
compensation expense........... 12 12
Cancellation of compensatory
stock option grants upon
termination of employment...... -
Stock-based compensation......... 1,826
Dividends on Series A preferred
stock.......................... (1,147) (1,147)
Net loss......................... (2,388) (2,388)
Currency translation adjustment.. (733) (733)
--------
Comprehensive loss............... (3,121)
------ ------- --------- -------- ----- --------
Balance at December 31, 2001....... 1,117 (1,502) 7,080 (610) (81) 10,102
Cancellation of compensatory
stock option grants upon
termination of employment...... -
Stock-based compensation......... (223)
Dividends on Series A preferred
stock.......................... (650) (650)
Net loss......................... (3,235) (3,235)
Currency translation adjustment.. 2,512 2,512
Comprehensive loss............... (723)
------ ------- --------- -------- ----- --------
Balance at December 31, 2002....... 1,117 (1,502) 3,195 1,902 (81) 8,506
Cancellation of compensatory
stock option grants upon
termination of employment
(unaudited).................... -
Stock-based compensation
(unaudited).................... 234
Waiver of dividends on Series A
preferred stock (unaudited).... 1,797 1,797
Dividends on Series A preferred
stock (unaudited).............. (488) (488)
Net income (unaudited)........... 1,512 1,512
Currency translation adjustment
(unaudited).................... 1,696 1,696
--------
Comprehensive income
(unaudited).................... 3,208
------ ------- --------- -------- ----- --------
Balance at September 30, 2003
(unaudited)........... 1,117 $(1,502) $ 6,016 $ 3,598 $ (81) $ 13,257
====== ======= ========= ======== ===== ========

See accompanying notes to consolidated financial statements.

F-6

PNY TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, (UNAUDITED)
----------------------------------------- ------------------------
2000 2001 2002 2002 2003
--------- ---------- ---------- ----------- -----------

Cash flows from operating activities:
Net income (loss)......................................... $ 20,387 $ (2,388) $ (3,235) $ (5,969) $ 1,512
Adjustments to reconcile net income (loss)
to net cash (used in) provided by operating activities:
Depreciation and amortization........................... 3,384 3,897 3,316 2,623 1,750
Non-cash restructuring and other charges................ - - 3,859 3,738 -
Stock-based compensation................................ 1,449 1,826 (223) (303) 234
Loss (gain) on sale of assets........................... (66) 441 (70) (41) (33)
Interest payable to related party....................... 47 631 305 241 164
Deferred income taxes................................... (2,779) 134 (130) (150) (259)
Loss on writedown of investments........................ - 286 - - -
Non-cash compensation .................................. - 12 - - -
Interest receivable from stockholder.................... (105) - - - -
Purchases of marketable securities...................... (3,619) - - - -
Proceeds from sales of marketable securities............ 3,900 - - - -
Gain on sales of marketable securities.................. (281) - - - -
Changes in operating assets and liabilities:
Accounts receivable.................................... (44,235) 32,561 (4,046) 7,405 (6,135)
Inventories............................................ (10,305) 10,541 (13,813) 3,295 10,110
Income taxes receivable................................ (3,405) 3,027 416 (230) -
Prepaid expenses and other............................. (1,002) (4,227) 1,641 4,151 1,224
Accounts payable....................................... 5,805 (10,704) 9,924 (4,603) 4,756
Accrued expenses....................................... 5,816 (2,117) 1,293 3,921 (1,927)
Customer allowances.................................... 7,125 1,699 55 (4,231) (3,944)
Income taxes payable................................... 3,816 (6,518) 3,294 2,986 (1,579)
Other current liabilities.............................. 463 (1,238) 2,968 327 (881)
--------- --------- --------- ---------- ----------
Net cash (used in) provided by operating activities (13,605) 27,863 5,554 13,160 4,992
--------- --------- --------- ---------- ----------
Cash flows from investing activities:
Acquisition of property and equipment.................... (6,494) (2,947) (1,935) (1,761) (495)
Proceeds from disposal of assets......................... 131 296 627 70 40
Investment in third parties.............................. (201) (100) - - -
Advances to stockholder.................................. (1,000) - - - -
--------- --------- --------- ---------- ----------
Net cash used in investing activities............... (7,564) (2,751) (1,308) (1,691) (455)
--------- --------- --------- ---------- ----------
Cash flows from financing activities:

Proceeds (repayment) of loans payable.................... 24,899 (16,080) 20 (10,312) (7,906)
Change in bank overdrafts................................ 8,011 (10,801) 849 2,586 127
Paydown of capital lease obligations..................... (923) (977) (893) (698) (504)
Proceeds from common stock issued........................ - 5 - - -
Exercise of warrants..................................... - 30 - - -
Payment of note payable.................................. - (1,895) (2,727) (844) (218)
Redemption of Series B and C preferred stock............. (6,000) - - - -
Purchase of Series A preferred stock..................... (819) - - - -
--------- --------- --------- ---------- ----------
Net cash provided by (used in) financing activities 25,168 (29,718) (2,751) (9,268) (8,501)
--------- --------- --------- ---------- ----------
Effect of exchange rate changes on cash and cash equivalents (184) (367) 647 316 322
--------- --------- --------- ---------- ----------
Net increase (decrease) in cash and cash equivalents 3,815 (4,973) 2,142 2,517 (3,642)
Cash and cash equivalents at beginning of period............. 6,496 10,311 5,338 5,338 7,480
--------- --------- --------- ---------- ----------
Cash and cash equivalents at end of period................... $ 10,311 $ 5,338 $ 7,480 $ 7,855 $ 3,838
========= ========= ========= ========== ==========
Supplemental disclosures of cash flow information
Cash paid for:
Interest to third parties.................................. $ 4,373 $ 2,181 $ 1,471 $ 1,122 $ 1,158
========= ========= ========= ========== ==========
Interest to related party.................................. $ - $ 605 $ 332 $ 215 $ 132
========= ========= ========= ========== ==========
Income taxes............................................... $ 5,982 $ 4,263 $ 168 $ 75 $ 3,148
========= ========= ========= ========== ==========
Noncash financing activities
Acquisition of equipment under capital leases.............. $ 2,053 $ 172 $ - $ - $ -
Dividends (waiver of dividends) on Convertible Series A
preferred stock............................................ - 1,147 650 488 (1,309)
Redemption of Convertible Series B and C preferred stock
for note payable........................................... $ 9,810 $ - $ - $ - $ -

See accompanying notes to consolidated financial statements.

F-7

PNY TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES

DESCRIPTION OF BUSINESS

PNY Technologies, Inc. (the "Company"), incorporated in 1985, is a
designer and marketer of Flash memory cards, DRAM modules, consumer and
professional graphics cards, USB Flash drives and other computer-related
technology products. The Company markets these products to consumers through
traditional retailers, such as Best Buy, CompUSA and Staples, through other
retail and distribution channels, and directly to professionals. The Company
also designs, manufactures and markets custom and standard DRAM modules for
original equipment manufacturers, or OEMs, and their designated contract
manufacturers. These customers include high-end computing, networking, storage
and telecommunications equipment manufacturers, such as LSI Logic Corporation
and Network Appliance, Inc. The Company currently markets its products
throughout the United States, as well as in Canada, Western Europe and certain
parts of the Asia Pacific region.

OWNERSHIP

At December 31, 2001 and 2002 and September 30, 2003 (unaudited), a
majority of the issued and outstanding common stock was owned by one individual,
who was also the Chairman, President and Chief Executive Officer of the Company.

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts
of the Company and its wholly-owned subsidiary, PNY Technologies Europe, S.A.S.
("PNY Europe"). Prior to May 2002, the Company also consolidated its former
wholly-owned subsidiary, PNY Technologies Ireland Limited ("PNY Ireland"), which
has since been dissolved. The Company also consolidates a Taiwan branch office
("PNY Taiwan"). PNY Europe has two wholly-owned subsidiaries, PNY Technologies
GmbH ("PNY Germany") and PNY Technologies (UK) Limited ("PNY UK"). PNY Europe,
PNY Germany and PNY UK, and for the applicable years, PNY Ireland, are referred
to collectively as the "Subsidiaries." All intercompany balances and
transactions have been eliminated in consolidation.

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 amounts reported in
the financial statements and accompanying notes. Significant items subject to
such estimates and assumptions include the carrying amount of property, plant
and equipment; valuation allowances for receivables, inventories and deferred
tax assets; and valuation of customer allowances. Actual results could differ
from those estimates.

INTERIM FINANCIAL STATEMENTS

The consolidated financial information and information in the notes to
consolidated financial statements as of September 30, 2003 and for the nine
months ended September 30, 2002 and 2003, are unaudited but in management's
opinion, include all adjustments, consisting of normal and recurring
adjustments, that the Company considers necessary for a fair presentation, in
all material respects, of its consolidated financial position, operating
results, and cash flows for the interim date and periods presented. The results
of operations for the nine months ended September 30, 2003 are not necessarily
indicative of the results to be expected for the full year or future periods.

F-8

PNY TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES - (CONTINUED)

REVENUE RECOGNITION

Non-consignment sales are recognized upon shipment of goods to
customers. Consignment sales are recognized upon customer notification that the
goods have been sold. A substantial portion of the Company's sales include
limited rights to return unsold inventory. The Company provides for estimated
future returns of inventory based on historical experience. However, if certain
returns in excess of estimates occur, those amounts are accrued at the time the
Company becomes aware of them, which may not be in the same period in which the
initial sale is booked. In addition, some customers have limited price
protection rights for inventories of the Company's products held by them. If the
Company reduces the list price of these previously purchased products, these
customers may be entitled to receive credits. The Company accrues for these
limited price protection arrangements when the customer is notified of the price
change. The Company offers various rebate arrangements to both customers and
end-user consumers. The Company accrues for the estimated cost of these rebate
arrangements using actual sell through data supplied by customers and historical
redemption percentages. Net sales are defined as gross sales less these
estimated future returns, limited price protection arrangements and rebate
arrangements.

PRODUCT WARRANTIES

The Company sells products to customers with a warranty that provides,
at the sole option of the Company, either repairs at no cost to the customer or
replacement of the product. The length of the warranty term depends on the
product being sold, but ranges from 90 days to the lifecycle of the product. The
Company defines the lifecycle of a product as the time during which the product
is manufactured for the Company. The costs incurred to provide for these
warranty obligations are estimated and recorded as an accrued liability and
added to cost of sales at the time of sale. Actual costs have been within
managements' expectations.

GUARANTEES

The Company has historically agreed to indemnify suppliers and
customers for alleged patent infringements. The scope of such indemnity varies,
but may, in some instances, include indemnification for damages and expenses,
including attorneys' fees. The Company may periodically engage in litigation as
a result of these indemnification obligations. The Company's insurance policies
exclude coverage for third-party claims for patent infringement. The nature of
the patent infringement indemnification obligations prevents the Company from
making a reasonable estimate of the maximum potential amount it could be
required to pay to its suppliers and customers. Historically, the Company has
not made any significant indemnification payments under any such agreements and
no amount has been accrued in the accompanying consolidated financial statements
with respect to these indemnification guarantees.

The Company has issued a guarantee for the performance of obligations
by one of its subsidiaries. The guarantee could require the Company to make
future payments in the event the subsidiary does not make its required payments.
The liability of the Company is continuous until payment of every obligation is
made. The Company has not recorded a liability for this guarantee.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments consist mainly of cash, accounts
receivable and accounts payable. The carrying amounts of these financial
instruments approximate fair value due to their short-term nature. The carrying
amounts of long-term debt, capital lease obligations and notes payable are
estimated to approximate their fair values as the stated rates approximate
current rates.

F-9

PNY TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES - (CONTINUED)

CASH EQUIVALENTS

The Company considers all liquid investments with original maturities
of three months or less to be cash equivalents. The carrying amount of cash and
cash equivalents approximates its fair value due to its short-term and liquid
nature.

INVENTORIES

Inventories are stated at the lower of cost (first-in, first-out
method) or market but not in excess of net realizable value. The Company
provides reserves for excess and obsolete inventories in the period in which
excess and obsolescence is determined.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost. Depreciation and
amortization is computed using the straight-line method over the estimated
useful lives of the related assets. Expenditures for maintenance and repair
costs are charged to expense as incurred. The estimated useful lives by asset
category are as follows:

Building and improvements....................... 20 years
Machinery and equipment......................... 3-7 years
Computer equipment and software................. 3-5 years
Furniture and fixtures.......................... 7 years

LONG-LIVED ASSETS

In accordance with SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets ("SFAS No. 144"), which the Company adopted on
January 1, 2002, the Company monitors events or changes in circumstance that may
indicate the carrying amounts of its long-lived assets may not be recoverable.
When such events or changes in circumstances are present, the Company assesses
the recoverability of its assets by determining whether the carrying amount of
its assets will be recovered through undiscounted, expected future cash flows.
Should the company determine that the carrying values of specific long-lived
assets are not recoverable, the Company would record a charge to operations to
reduce the carrying value of such assets to their fair values. The Company
considers various valuation factors, principally discounted cash flows, to
assess the fair values of long-lived assets. Prior to adoption of SFAS No. 144,
the Company accounted for long-lived assets in accordance with SFAS No. 121,
Accounting for Impairment of Long-Lived Assets and for the Long-Lived Assets to
be Disposed of ("SFAS No. 121").

FOREIGN CURRENCY TRANSLATION

The financial statements of the Company's foreign subsidiaries have
been translated in accordance with SFAS No. 52, Foreign Currency Translation
("SFAS No. 52"). The functional currency of the Company's foreign subsidiaries
is the applicable local currency. The translation from the applicable foreign
currency to U.S. dollars is performed for the balance sheet accounts using
current exchange rates in effect at the balance sheet date and for revenue and
expense accounts using a weighted-average exchange rate during the period. The
resulting translation adjustments are recorded as a component of stockholders'
equity. Gains and losses resulting from foreign currency transactions are
included in other income in the accompanying statements of operations.

F-10

PNY TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES - (CONTINUED)

INCOME TAXES

In accordance with SFAS No. 109, Accounting for Income Taxes, ("SFAS
No. 109"), the Company recognizes deferred income taxes for the tax consequences
in future years of differences between the tax basis of assets and liabilities
and their financial reporting amounts at each period end, based on enacted tax
laws and statutory tax rates applicable to the periods in which the differences
are expected to affect taxable income. The effect in deferred tax assets and
liabilities of a change in tax rates is recognized in operations in the period
that includes the enacted date. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount that is more likely than
not to be realized.

STOCK-BASED COMPENSATION

As permitted by SFAS No. 123, Accounting for Stock-Based Compensation
("SFAS No. 123"), which establishes a fair value based method of accounting for
stock-based compensation plans, the Company has elected to follow Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees ("APB
25"), for recognizing stock-based compensation expense for financial statement
purposes. The Company recognizes stock-based compensation resulting from vesting
on a pro rata basis.

If the Company had recognized compensation expense based on the fair
value of the options as calculated using the Black-Scholes option-pricing model
at the grant date as prescribed by SFAS No. 123, net income (loss) would have
changed to the pro forma amounts indicated in the table below.

NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, (UNAUDITED)
--------------------------------------- -------------------------
2000 2001 2002 2002 2003
---------- ---------- ---------- ---------- ---------

Net income (loss) available to common
stockholders, as reported ................... $ 20,387 $ (3,535) $ (3,885) $ (6,457) $ 2,821
Plus: Stock-based compensation expense
(income) determined under APB 25, included
in reported net income (loss) available to
common.stockholders, net of related taxes.... 1,344 1,826 (207) (288) 199
Less: Stock-based compensation expense
determined under fair value based method,
net of.related taxes ........................ 1,906 2,965 959 670 715
---------- ---------- ---------- ---------- ---------
Net income (loss) attributable to common
stock,.as adjusted .......................... $ 19,825 $ (4,674) $ (5,051) $ (7,415) $ 2,305
========== ========== ========== ========== =========
Net income (loss) per common share, as
reported

Basic ....................................... $ 0.78 $ (0.14) $ (0.14) $ (0.24) $ 0.10
Diluted ..................................... 0.60 (0.14) (0.14) (0.24) 0.05
Net income (loss) per common share, as
adjusted

Basic ....................................... $ 0.76 $ (0.18) $ (0.19) $ (0.28) $ 0.09
Diluted ..................................... 0.59 (0.18) (0.19) (0.28) 0.03

ADVERTISING COSTS

Effective January 1, 2002, sales and marketing incentives offset net
sales or are charged to operations in accordance with FASB's Emerging Issues
Task Force Issue No. 01-09. In 2002, sales and marketing costs were $16,745 of
which $750 offset revenues. For the nine months ended September 30, 2002 and
2003 (unaudited), sales

F-11

PNY TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES - (CONTINUED)

and marketing costs were $11,844 and $14,099, respectively, of which $452 and
$1,123 offset revenues, respectively. In 2000 and 2001, advertising costs were
$8,515 and $11,528, respectively.

COMPREHENSIVE INCOME

The Company follows the provisions of SFAS No. 130, Reporting
Comprehensive Income ("SFAS No. 130"), which established standards for reporting
and display of comprehensive income and its components. Comprehensive income
reflects the change in equity of a business enterprise during a period from
transactions and other events and circumstances from non-owner sources. For the
Company, comprehensive income (loss) represents net income (loss) adjusted for
foreign currency translation adjustments. In accordance with SFAS No. 130, the
Company has chosen to disclose comprehensive income (loss) in the consolidated
statements of stockholders' equity.

STOCK SPLIT AND RECAPITALIZATION

In October 2000, the Company's stockholders approved a 3-for-1 common
stock split and increased the authorized shares of the common stock to
125,000,000 shares and preferred stock to 10,000,000 shares. All shares and per
share information presented have been retroactively restated to give effect to
this stock split.

PRO FORMA STOCKHOLDERS' EQUITY DATA (UNAUDITED)

Upon the consummation of the initial public offering contemplated
herein, all of the Company's Series A Preferred Stock, including 13,268 issued
and outstanding shares and 1,117 treasury shares, automatically convert into
3,980,400 shares and 335,100 shares, respectively, of common stock (see Note 9).
The effective conversion price is $3.97. The September 30, 2003 unaudited pro
forma stockholders' equity data has been prepared assuming the conversion of the
Company's Series A Preferred Stock as of September 30, 2003, into common stock
as of September 30, 2003.

PRO FORMA NET INCOME PER SHARE (UNAUDITED)

Pro forma basic net income per share (unaudited) is computed using the
weighted-average number of common shares outstanding, adjusted to include the
unaudited pro forma effects of the automatic conversion of the Company's Series
A Preferred Stock into shares of the Company's common stock (see Note 9) as if
such conversion occurred on the first day of each such period. The resulting pro
forma adjustment is an increase in the weighted-average shares used to compute
basic earnings per share of 3,980,400 shares for the periods ended December 31,
2002 and September 30, 2003 (unaudited).

F-12

PNY TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES - (CONTINUED)

NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30, 2003
DECEMBER 31, 2002 (UNAUDITED)
----------------- -------------------

Net income (loss) available to common stockholders ............ $ (3,885) $ 2,821
Add: Dividends (waiver of dividends) on Convertible Series
A preferred stock ............................................. 650 (1,309)
------------ ------------
Pro forma net income (loss) available to common stockholders... $ (3,235) $ 1,512
============ ============
Weighted average common shares outstanding .................... 26,954,800 26,954,800
Add: Conversion of 13,268 shares of Convertible Series A
Preferred Stock ............................................ 3,980,400 3,980,400
------------ ------------
Pro forma weighted average common shares outstanding .......... 30,935,200 30,935,200
Net effect of dilutive warrants and employee stock-based
options on treasury stock method using average fair value
Warrants ................................................... -- 49,212
Employee stock options ..................................... -- 1,470,059
------------ ------------
Pro forma weighted average common shares and common share
equivalents used to calculate pro forma diluted earnings
per share .................................................. 30,935,200 32,454,471
============ ============
Pro forma earnings per share
Basic ...................................................... $ (0.10) $ 0.05
Diluted .................................................... $ (0.10) $ 0.05

RECLASSIFICATIONS

Certain prior year amounts have been reclassified to conform with the
current year's presentation.

RECENTLY ISSUED ACCOUNTING STANDARDS

In November 2002, the FASB issued Interpretation No. 45, Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Guarantees of
Indebtedness of Others ("FIN 45"). FIN 45 elaborates on the existing disclosure
requirements for most guarantees, including loan guarantees such as standby
letters of credit and non-performance guarantees. It also requires that at the
time a company issues a guarantee, the company must recognize an initial
liability for the fair market value of the obligations it assumes under that
guarantee and must disclose that information in its financial statements. The
initial recognition and measurement provisions of FIN 45 apply on a prospective
basis to guarantees issued or modified after December 31, 2002. The adoption of
this statement has not had a significant impact on the Company's consolidated
financial statements.

In January 2003, the FASB issued Interpretation No. 46, Consolidation
of Variable Interest Entities-an interpretation of ARB No. 51 ("FIN 46"). The
objective of FIN 46 is to improve financial reporting by companies involved with
variable interest entities. This new model for consolidation applies to an
entity in which either (1) the powers or rights of the equity holders do not
give them sufficient decision making powers or (2) the equity investment at risk
is insufficient to finance that entity's activities without receiving additional
subordinated financial support from other parties. FIN 46 requires a variable
interest entity to be consolidated into the company that is subject to a
majority of the risk of loss from the variable interest entity's activities or
that is entitled to receive a majority of the entity's residual returns or both.
The consolidation requirements of FIN 46 apply immediately to variable interest
entities created after January 31, 2003. For entities created before February 1,
2003, the consolidation requirements generally apply in the first fiscal year or
interim period beginning after December 15, 2003. The adoption of this statement
will not have a significant impact on the Company's consolidated financial
statements.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity ("SFAS
No. 150"). SFAS No. 150 revised the accounting for certain financial instruments
that, under previous guidance, issuers could account for as equity. SFAS No. 150
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability (or

F-13

PNY TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES - (CONTINUED)

an asset in some circumstances). This Statement is effective for financial
instruments entered into or modified after May 31, 2003 (except for mandatorily
redeemable noncontrolling interests). For all instruments that existed prior to
May 31, 2003, the Standard is effective at the beginning of the first interim
period beginning after June 15, 2003 (except for mandatorily redeemable
noncontrolling interests). For mandatorily redeemable noncontrolling interests,
the FASB has deferred the provisions of SFAS No. 150 until further notice. The
provisions of SFAS No. 150 adopted thus far did not have a material effect on
the Company's consolidated financial statements and the adoption of the
remaining provision of SFAS No. 150 is not expected to have a material effect on
the Company's financial statements.

NOTE 2 - ACCOUNTS RECEIVABLE AND CONCENTRATIONS OF CREDIT RISK

Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of trade receivables. Sales of
the Company's products are concentrated among specific customers. The Company
generally does not require collateral or other security with regard to balances
due from customers. The Company extends credit to its customers in the normal
course of business and performs periodic credit evaluations of its customers,
maintaining allowances for potential credit losses. The Company considers
concentrations of credit risk in establishing the allowance for doubtful
accounts and believes the recorded amount is adequate.

Certain customers accounted for more than 10% of consolidated net sales
as follows:

NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, (UNAUDITED)
---------------------- -----------------
2000 2001 2002 2002 2003
---- ---- ---- ---- ----

Customer A - Consumer division.. 8% 13% 21% 21% 21%
Customer B - Consumer division.. 7 18 14 15 16
Customer C - OEM division ...... 53 24 5 7 --
--- --- --- --- ---
68% 55% 40% 43% 37%
=== === === === ===

Accounts receivable from these customers represented 52%, 39% and 37%
of total accounts receivable as of December 31, 2001 and 2002, and September 30,
2003 (unaudited), respectively.

NOTE 3 - INVENTORIES

Inventories consist of:

DECEMBER 31, SEPTEMBER 30,
----------------------- 2003
2001 2002 (UNAUDITED)
-------- -------- --------------

Raw materials and components ........ $ 12,981 $ 7,879 $ 8,378
Work in process ..................... 2,949 4,846 3,091
Finished goods ...................... 20,221 37,371 30,250
-------- -------- --------
Total inventories before reserves $ 36,151 $ 50,096 $ 41,719
Reserves ............................ (2,377) (1,811) (2,845)
-------- -------- --------
Total ........................... $ 33,774 $ 48,285 $ 38,874
======== ======== ========

Changes in market conditions required management to make estimates
regarding the reduction of the carrying value of inventory on hand at December
31, 2001 and 2002 and September 30, 2003 (unaudited), to record inventory at the
lower of cost or market.

At December 31, 2001 and 2002 and September 30, 2003 (unaudited),
finished goods inventory includes $3,769, $5,678 and $6,266, respectively, which
represents the amount of inventory that the Company estimates will be returned
from its customers.

F-14

PNY TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 3 - INVENTORIES - (CONTINUED)

At December 31, 2001 and 2002 and September 30, 2003 (unaudited), the
Company had $2,457, $6,193 and $2,065, respectively, of consigned inventory at
certain of its customers. Such amounts were included within finished goods and
will be recognized as revenue when the customer notifies the Company that the
goods have been sold through.

NOTE 4 - PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net consists of:

DECEMBER 31, SEPTEMBER 30,
-------- -------- 2003
2001 2002 (UNAUDITED)
-------- -------- ----------

Land ......................................... $ 38 $ 45 $ 50
Building and improvements .................... 4,637 3,843 3,705
Machinery and equipment ...................... 14,197 7,063 6,397
Machinery and equipment under capital lease .. 4,064 2,591 3,087
Computer equipment and software .............. 3,355 2,025 2,121
Furniture and fixtures ....................... 999 1,377 1,617
-------- -------- --------
27,290 16,944 16,977
Less accumulated depreciation and amortization (15,118) (10,329) (11,355)
-------- -------- --------
Total .................................... $ 12,172 $ 6,615 $ 5,622
======== ======== ========

Accumulated depreciation and amortization above includes amortization
of property under capital leases of $2,618, $2,137 and $2,904 at December 31,
2001 and 2002, and September 30, 2003 (unaudited), respectively.

NOTE 5 - GOVERNMENT GRANTS

The French government provided monetary grants totaling approximately
$1,100 to PNY Europe based on employment and investment requirements. At
December 31, 2001 and 2002, approximately $133 and $143 of the grants,
respectively, have been deferred and will be recognized as income over the
useful lives of the related assets. In 2000, 2001 and 2002, grant income was
approximately $42, $12 and $12, respectively. For the nine months ended
September 30, 2002 and 2003 (unaudited), grant income was approximately $9 and
$9, respectively.

NOTE 6 - LONG-TERM DEBT AND CAPITAL LEASES

The Company has a U.S. bank financing agreement originally dated
February 23, 1996, as amended through November 7, 2003 (the "Agreement")
(unaudited). The maximum amount available under the Agreement is $50,000. The
term of the Agreement extends to February 23, 2007. The Agreement specifies that
interest is due monthly at an interest rate, at the option of the Company, of
prime rate plus 0.25% or euro dollar rate plus 2.25%. The blended interest rate
under the Agreement was 4.61%, 4.05% and 3.65% at December 31, 2001 and 2002 and
September 30, 2003 (unaudited), respectively. At December 31, 2001 and 2002, and
September 30, 2003 (unaudited), $31,558, $33,894 and $25,995, respectively, were
outstanding under the Agreement and have been classified as a short-term
borrowing due to withdrawal restrictions within the agreement on a related bank
account in which customer receipts must be deposited. These restrictions
prohibit disbursement of funds in the related bank account to anyone other than
the bank for direct repayment of the outstanding liability. Availability under
the Agreement is based on defined percentages of eligible accounts receivable
and inventories. Amounts outstanding under the Agreement are collateralized by
accounts receivable and inventories.

The Agreement contains certain restrictive covenants, including a
prohibition of related party transactions, additional indebtedness and dividend
payments, as well as a requirement to maintain a minimum net worth and fixed
charge ratio requirements.

F-15

PNY TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 6 - LONG-TERM DEBT AND CAPITAL LEASES - (CONTINUED)

On August 6, 2003, the Agreement was amended whereby one of the
Company's covenant requirements was deleted, a Fixed Charge Ratio covenant was
added and other restrictive covenants were amended.

PNY Europe also has available lines of credit as of September 30, 2003
(unaudited) with various foreign banks totaling approximately $15,817 that
expire through September 30, 2004. There were no borrowings outstanding under
these lines at December 31, 2001 or 2002, or September 30, 2003 (unaudited). In
addition, PNY Europe had a loan payable to a foreign bank of $2 at December 31,
2001, at an interest rate of Euribor plus 1.20% (5.782% at December 31, 2001),
which matured on February 5, 2002.

The following is a schedule as of December 31, 2002 of future minimum
lease payments under capital leases together with the present value of net
minimum lease payments:

2003 .................................. $ 383
2004 .................................. 132
-----
Total minimum lease payments ........ 515
Less: Amounts representing interest ... (61)
-----
Present value of minimum lease payments $ 454
=====

NOTE 7 - EMPLOYEE BENEFIT PLAN

The Company has a tax deferred savings plan covering substantially all
U.S. employees of the Company under Section 401(k) of the Internal Revenue Code.
The Company matches one-half of the first 6% of employee contributions and makes
additional contributions to the plan annually at the discretion of the Board of
Directors. Company contributions to the tax deferred savings plan were $504,
$522 and $402 for the years ended December 31, 2000, 2001 and 2002,
respectively.

NOTE 8 - REDEEMABLE PREFERRED STOCK

On December 5, 2000, the Company redeemed all of its outstanding Series
B and C preferred stock shares at their aggregate liquidation preference of
$18,060. The Series B and C preferred stock was owned by the spouse of the
principal stockholder. The holder of all the outstanding shares of Series B and
C preferred stock had irrevocably waived the rights to all dividends. In lieu of
a cash payment for the total liquidation preference, cash of $6,000 was paid and
a note payable of $12,060 (the "Note") was issued. The Note was reduced by an
outstanding loan receivable from the same individual in the amount of $2,250. At
September 30, 2003 (unaudited), the outstanding balance of the Note was $4,971
(see Note 10).

NOTE 9 - STOCKHOLDERS' EQUITY

CAPITAL STOCK

The Company is authorized to issue 135,000,000 shares of all classes of
capital stock, 125,000,000 as common and 10,000,000 shares of preferred stock.

Each share of common stock is entitled to one vote and each share of
Convertible Series A preferred stock entitles the stockholder to votes equal to
the number of shares of common stock into which the shares of Convertible Series
A preferred stock is convertible. Each share of Convertible Series A preferred
stock is convertible at the option of the holder, at any time, into fully paid
and nonassessable shares of common stock, at a 300-to-1 conversion ratio,
subject to anti-dilution adjustments. One such anti-dilution adjustment requires
the conversion price to be reduced if the Company issues any shares of common
stock (or common stock equivalents) at a price per share more than 1% less than
the current conversion price of $3.85. In the event the Company completes a
public offering for at least $15,000 in common stock, the Series A preferred
stock automatically converts into common stock at the then

F-16

PNY TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 9 - STOCKHOLDERS' EQUITY - (CONTINUED)

existing conversion ratio. Each share of Series A preferred stock has a
preference in liquidation equal to the original price per share ($1,153.85 per
share), plus accrued and unpaid dividends, if any.

The Convertible Series A preferred stock stockholders are entitled to
participate in dividends declared and paid to common stockholders, on the basis
of the number of shares of common stock into which the Convertible Series A
preferred stock is convertible.

In connection with the redemption of all shares of Series B and C
preferred stock (see Note B), the holders of Convertible Series A preferred
stock became entitled to 7% dividends paid semi-annually. Effective January 1,
2002, the dividend rate was changed to 4.25%.

TREASURY STOCK

On December 5, 2000, the Company purchased 390 shares of Convertible
Series A preferred stock from stockholders at a price of $2,100 per share,
representing the approximate fair market value of the shares on the date of
purchase. See Note 11 for a discussion of additional treasury stock
transactions.

WARRANTS

In connection with the issuance of Convertible Series A preferred stock
to certain investors, the Company issued warrants that expired on August 4,
2002. The holders of the Series A Preferred Stock and related warrants have
certain registration rights.

Certain members of senior management and the Board of Directors have
been issued warrants to purchase shares of common stock of the Company. The
first such warrant was issued on November 1, 1995, and provided for the purchase
of 240,000 shares of common stock at an exercise price of $6.25 per share (whose
price automatically increases by 10% as of November 1, 1996, and on each
November 1 thereafter), was subject to pro rata vesting over a five year period
and was exercisable through November 1, 2005. This warrant to purchase common
stock was exchanged on March 4, 1997, for a new warrant to purchase 150,000
shares of common stock at an exercise price of $3.85 per share (whose price
automatically increases by 10% as of April 22, 2000, and on each April 22
thereafter). A second such warrant was issued as of April 22, 1996, and provides
for the purchase of 360,000 shares of common stock at an exercise price of $3.85
per share (whose price automatically increases by 10% as of April 22, 2000, and
on each April 22 thereafter), is subject to pro rata vesting over a five year
period and is exercisable through April 22, 2006. Under APB No. 25, these
warrants required variable accounting treatment, thus compensation expense was
recorded for an amount equal to the difference between the exercise price and
fair market value at each reporting period-end. A $42 reduction of compensation
expense was recorded during the year ended December 31, 2001, in connection with
these warrants due to declines in the fair value market value of the underlying
shares. During 1998, upon the resignation of a member of senior management, a
portion of the second warrant, representing 216,000 shares of common stock (100%
of non-vested shares under the warrant) was forfeited. On January 2, 2002, both
holders elected to forfeit their remaining warrants to the Company. The Company
subsequently issued stock options to these holders to purchase common stock,
which qualified as a fixed award under SFAS No. 123. The charge to compensation
expense was not material to the financial statements.

In May 1998, a member of senior management and a member of the Board of
Directors were issued warrants to purchase 949,500 shares of common stock of the
Company. The first such warrant provides for the purchase of 49,500 shares of
common stock at an exercise price of $0.03 per share. Shares under this warrant
were immediately vested. The second such warrant provides for the purchase of
900,000 shares of common stock at an exercise price of $0.03 per share and is
subject to pro rata vesting over two and one-half years. Both warrants issued in
1998 are exercisable through May 1, 2008. On December 5, 2001, the warrant to
purchase 900,000 shares of common stock was exercised by the member of senior
management.

F-17

PNY TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 9 - STOCKHOLDERS' EQUITY - (CONTINUED)

RESTRICTED STOCK AWARDS

During 1997 and 1998, the Company granted 1,335,300 shares of common
stock for no consideration to certain employees. At the time these awards were
made, the Company's principal stockholder agreed to transfer to the Company the
number of shares of common stock equal to the number of shares of common stock
that are no longer subject to restrictions. Compensation expense was recorded in
connection with these stock awards in accordance with Staff Accounting Bulletin
Topic 5T. The compensation recorded and the increase to stockholders' equity was
not material. These awards are subject to a ten-year cliff-vesting schedule,
based upon continued employment. The shares are also subject to certain
restrictions on transfer during a defined restriction period. The restriction
period terminates on the earliest to occur of (1) 180 days following the
consummation of an IPO, (2) immediately prior to a change in control and (3) ten
years after the date of grant.

The following table summarizes the activity related to these employee
stock grants:

NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER
------------------------------------- 30, 2003
2000 2001 2002 (UNAUDITED)
------- ------- ------- -----------

Beginning of period 609,300 580,800 546,300 532,800
Shares granted .... -- -- -- --
Shares forfeited .. (28,500) (34,500) (13,500) --
------- ------- ------- -------
End of period ..... 580,800 546,300 532,800 532,800
======= ======= ======= =======

COMMON STOCK RESERVED

At December 31, 2002, the Company has reserved shares of common stock
as follows:

Series A preferred stock.. 4,500,000
Exercise of warrants ..... 49,500
Employee stock options ... 7,495,250
----------
Total ................ 12,044,750
==========

NOTE 10 - RELATED PARTY TRANSACTIONS

Notes receivable from employees are due on demand with interest at 8.0%
per annum and represent loans to purchase Convertible Series A preferred stock.
The underlying stock has been pledged as collateral for each outstanding note.
The portions of such notes not repaid are reflected as a component of
stockholders' equity.

The note payable to related party is partial consideration for the
liquidation of Series B and C preferred stock (see Note 8). This note is due
December 2004 with Company options for three possible extensions. Interest is
due semi-annually, and the current rate is 4.25% per annum.

NOTE 11 - MANAGEMENT STOCK PURCHASE PLAN

In 1996, the Company adopted a Management Stock Purchase Plan (the
"1996 Plan"), whereby certain officers and key employees (e.g., "management
stockholders") of the Company were provided an opportunity to purchase shares of
the Company's Series A preferred stock at pre-determined prices. The shares
owned by the participants in the 1996 Plan have certain registration rights and
are subject to certain transfer restrictions (including a three year mandatory
holding period) and certain put and call rights that become effective in
connection with the participants' termination of employment.

F-18

PNY TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 11 - MANAGEMENT STOCK PURCHASE PLAN - (CONTINUED)

All sales of stock are subject to the Company's right of first refusal.
Should the Company's stock be publicly traded subsequent to the expiration of
the mandatory holding period, all transfer restrictions and put and call rights
cease to be effective.

In May 2001, the Company forgave $12 of outstanding promissory notes
due from a Series A preferred stockholder. This note was originally issued in
1996 in exchange for the stockholders' preferred shares. The $12 was included in
compensation expense.

NOTE 12 - EMPLOYEE STOCK OPTION PLAN

In June 1999, the Company adopted a Stock Option Plan for Directors,
Officers and Employees (the "1999 Plan") that provides for nonqualified stock
option grants. Options granted in June 1999 have an exercise price of $1.00 per
share and vested ratably over three years, provided the participant remained
employed by the Company. Subsequent grants have an exercise price ranging from
$1.33 to $14.00 per share and vest ratably over four years. In the event of
death, disability or retirement of a participant, all shares immediately vest.
At September 30, 2003 (unaudited), shares available for future grants under the
1999 Plan were 4,932,410.

The options generally expire 10 years from the date of grant. However,
in the event a participant's employment is terminated without cause or for good
reason, as defined, the options expire 30 days after termination. If a
participant's employment is terminated as a result of death, disability or
retirement, the options expire 90 days from the date of termination. All shares
issued pursuant to the 1999 Plan are subject to transfer restrictions and
certain put and call rights that become effective in connection with the
participant's termination of employment. These rights cease to be effective if
the Company's stock becomes publicly traded.

During the nine months ended September 30, 2003 (unaudited), no options
were granted. In accordance with APB No. 25, the company recorded compensation
(income) expense of approximately $1,407, $1,868 and $(223) for the years ended
December 31, 2000, 2001 and 2002, respectively, because the fair market value of
the underlying common stock on the date of grant exceeded the exercise price of
the options granted. For the nine months ended September 30, 2002 and 2003
(unaudited), $(303) and $234, respectively, were recognized as compensation
(income) expense. In 2002, the income resulted from non-vested options being
forfeited due to employee terminations. Based on the vesting schedules of these
grants, the Company will recognize additional compensation expense of $315 and
$162 in 2003 and 2004, respectively.

In accordance with APB No. 25, no compensation expense was recognized
related to grants issued during 2002 and 2001 because the exercise price of the
stock options granted were equal to or greater than the fair market value of the
underlying common stock on the date of grant.

The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted-average
assumptions:

YEAR ENDED DECEMBER 31,
-----------------------------------------
2000 2001 2002
------- ------- ----------

Expected dividend yield................................ 0.0% 0.0% 0.0%
Expected stock price volatility........................ 0.78 0.78 0.7
Risk-free interest rate................................ 5.9% 4.6% 1.7%
Expected life of options............................... 4 years 4 years 2-5 years

F-19

PNY TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 12 - EMPLOYEE STOCK OPTION PLAN - (CONTINUED)

Activity under the 1999 Plan is as follows:

YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------
2000 2001 2002
------------------------- ------------------------ --------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
--------- --------- --------- -------- --------- --------

Outstanding, beginning of year.. 1,751,250 $ 1.00 2,926,580 $ 3.59 2,567,230 $ 3.11
Granted....................... 1,548,960 6.19 554,780 4.50 444,000 2.83
Exercised..................... -- -- (4,750) 1.00 -- --
Cancelled..................... (373,630) 2.20 (909,380) 5.52 (426,100) 3.17
--------- -------- --------- -------- --------- --------
Outstanding, end of year........ 2,926,580 $ 3.59 2,567,230 $ 3.11 2,585,130 $ 3.05
========= ======== ========= ======== ========= ========
Exercisable, end of year........ 512,750 $ 1.00 1,084,890 $ 1.81 2,015,133 $ 2.27
========= ======== ========= ======== ========= ========

The weighted average fair value of options granted during 2000, 2001
and 2002 were $11.10, $2.71 and $0.93, respectively.

At December 31, 2002, for each of the following classes of options as
determined by exercise price, the information regarding weighted-average
exercise prices and weighted-average remaining contractual lives of each such
class is as follows:

OPTIONS OUTSTANDING
-------------------------------------------------------------------------------------
WEIGHTED-AVERAGE
REMAINING
OPTION PRICE NUMBER OF OPTIONS CONTRACTUAL LIFE OPTIONS EXERCISABLE
------------ ----------------- ---------------- -------------------

$ 1.00 1,344,000 6.5 1,344,000
1.33 42,000 7.2 21,000
2.50 150,000 9.4 100,000
3.00 294,000 9.0 294,000
3.84 30,000 7.6 15,000
4.50 485,730 8.2 121,433
7.00 60,540 7.8 30,270
14.00 178,860 7.9 89,430
--------- ---------
2,585,130 2,015,133
========= =========

NOTE 13 - RESTRUCTURING AND OTHER CHARGES

During 2002, the Company recorded a pre-tax charge of $8,990 associated
with the shutdown of its facilities in Ireland and manufacturing facilities in
California. The charge included an accrual of $5,016 for equipment and building
lease payments to be made over the next several years, $2,825 for the write-down
of capitalized equipment and leasehold improvements, $904 for severance payments
and $245 for the write-off of goodwill recognized. The severance payments were
for approximately 58 employees of PNY Ireland and 35 employees in the Company's
manufacturing operations in California.

Also during 2002, the Company recorded a pre-tax charge of $1,397
associated with the impairment of capitalized equipment located facilities in
New Jersey and PNY Europe. The charge included accruals of $608 for equipment
lease payments to be made over the next year and $789 for the write-down of
capitalized equipment.

F-20

PNY TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 13 - RESTRUCTURING AND OTHER CHARGES - (CONTINUED)

In September 2003 (unaudited), the Company recorded a pre-tax charge of
$1,745 associated with the remaining building lease payments on its
manufacturing facility in California. In September 2003 (unaudited), the Company
reclassified $512 of assets that were previously used in the manufacturing
facility in California from property, plant and equipment to assets held for
sale.

The following is a detail of the restructuring charges:

BALANCE AT
RESTRUCTURING BALANCE AT 2003 2003 SEPTEMBER
CHARGE 2002 DECEMBER 31, ADDITIONS USAGE 30, 2003
RECOGNIZED USAGE 2002 (UNAUDITED) (UNAUDITED) (UNAUDITED)
-------------- -------- ----------- ----------- --------- -----------

Severance ........ $ 904 (904) $ -- $ -- -- $ --
Building and
equipment lease
arrangements .. 5,624 (868) 4,756 1,745 (1,918) 4,583
Asset write-offs . 3,859 (3,859) -- -- -- --
-------- ------ -------- ----- ------ --------
$ 10,387 (5,631) $ 4,756 1,745 (1,918) $ 4,583
======== ====== ======== ===== ====== ========

At December 31, 2002, an accrual for the future payments under
non-cancelable operating leases was $4,756 and is included in the accompanying
consolidated balance sheet in accrued expenses and other long-term liabilities.
The estimated future payments are as follows:

2003 ...................... $2,535
2004 ...................... 917
2005 ...................... 566
2006 ...................... 589
2007 ...................... 149
------
Total future payments.. $4,756
======

NOTE 14 - INCOME TAXES

Income (loss) before income taxes consists of:

NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, (UNAUDITED)
-------------------------------------- -----------------------
2000 2001 2002 2002 2003
-------- -------- -------- -------- --------

United States ............... $ 8,402 $ (6,828) $ (4,110) $ (6,523) $ (166)
Foreign ..................... 16,419 4,351 2,064 1,253 2,755
Eliminations ................ (1,032) 1,032 -- -- --
-------- -------- -------- -------- --------
Total income (loss) before
income taxes ............. $ 23,789 $ (1,445) $ (2,046) $ (5,270) $ 2,589
======== ======== ======== ======== ========

F-21

PNY TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 14 - INCOME TAXES - (CONTINUED)

The provision for income taxes consists of:

Current:
Federal...................... $ 203 $ - $ (408) $ (408) $ 476
State........................ 363 - 107 81 126
Foreign...................... 5,615 809 1,620 1,176 734
-------- ------ -------- -------- --------
Total current taxes....... 6,181 809 1,319 849 1,336
Deferred taxes:
Federal...................... (1,507) 19 (7) (7) (365)
State........................ (1,167) 10 - - -
Foreign...................... (105) 105 (123) (143) 106
-------- ------ -------- -------- --------
Total deferred taxes...... (2,779) 134 (130) (150) (259)
-------- ------ -------- -------- --------
$ 3,402 $ 943 $ 1,189 $ 699 $ 1,077
======== ====== ======== ======== ========

Income taxes reconciled to the amount computed at federal statutory tax
rates are as follows:

Computed expected tax
expense (benefit)........... $ 8,157 $ (491) $ (696) $ (1,793) $ 880
Increase (decrease):
State income tax expense
(benefit), net of federal
benefit...................... 405 (7) (134) (300) (8)
Difference in Federal taxes
vs. foreign rates............ (10) (649) 822 750 104
Tax on earnings of foreign
subsidiary................... - 3,702 600 600 -
Change in valuation allowance. (5,210) (1,629) 621 1,357 331
Other........................ 60 17 (24) 85 (230)
--------- ---------- -------- --------- -------
Provision for income taxes. $ 3,402 $ 943 $ 1,189 $ 699 $ 1,077
========= ========== ======== ========= =======

F-22

PNY TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 14 - INCOME TAXES - (CONTINUED)

Significant components of the Company's deferred tax assets and
liabilities are as follows:

DECEMBER 31, SEPTEMBER 30,
------------------------- 2003
2001 2002 (UNAUDITED)
--------- ---------- -------------

Current deferred tax assets:
Net operating loss carry-forwards..................... $ 2,380 $ - $ -
Inventory reserves.................................... 192 444 680
Price protection and sales allowances................. 1,022 1,837 1,694
Employee bonuses...................................... 413 193 -
Charitable contributions carryover.................... - - 28
Allowance for doubtful accounts....................... 402 304 304
Inventory capitalization.............................. 47 52 17
Restructuring reserve................................. - 1,601 1,738
Unrealized foreign exchange gain...................... - - 187
Other................................................. 788 482 379
-------- --------- --------
Total current deferred tax assets................... 5,244 4,913 5,027
Valuation allowance...................................... (617) (3,075) (2,643)
-------- --------- --------
Total current tax asset............................. 4,627 1,838 2,384
Current deferred tax liability:
Tax on repatriated earnings........................... 2,000 - -
-------- --------- --------
Net current deferred tax assets..................... $ 2,627 $ 1,838 $ 2,384
======== ========= ========
Noncurrent deferred tax assets:
Net operating loss carry-forwards..................... $ 697 $ 399 $ 440
Stock based compensation.............................. 724 309 483
Tax credits........................................... 1,164 1,120 1,020
Fixed assets.......................................... - - 239
Other................................................. 28 19 30
-------- --------- --------
Total noncurrent deferred tax assets................ 2,613 1,847 2,212
Valuation allowance...................................... (2,494) (657) (1,420)
-------- --------- --------
Total noncurrent tax assets......................... 119 1,190 792

Noncurrent deferred tax liabilities:
Fixed assets.......................................... 69 129 -
Other................................................. 32 32 32
-------- --------- --------
Total noncurrent deferred tax liabilities........... 101 161 32
-------- --------- --------
Net noncurrent deferred tax assets.................. $ 18 $ 1,029 $ 760
======== ========= ========

The Company has established a valuation allowance against its deferred
tax assets based upon an assessment that it is more likely than not that it will
not realize the benefits of all these tax deductions in the near future. The
assessment is based upon the Company's forecasted taxable income. The change in
the Company's valuation allowance for the years ended December 31, 2000, 2001
and 2002 was $(5,210), $(1,629) and $621, respectively.

F-23

PNY TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 15 - COMMITMENTS AND CONTINGENCIES

LEASES

The Company has entered into operating leases for equipment,
manufacturing and office facilities that expire on various dates through March
2007. The future minimum annual rental commitments under non-cancelable
operating facilities leases, net of rental income at December 31, 2002, are as
follows:

2003..................................... $ 4,502
2004..................................... 3,019
2005..................................... 1,624
2006..................................... 1,914
2007..................................... 662
--------
Total future minimum annual rental
commitments........................... $11,721
========

Rent expense, net of rental income, for the years ended December 31,
2000, 2001 and 2002 was approximately $2,432, $4,448 and $5,100, respectively.

In February 1999, the Company entered into a non-cancelable sublease
agreement for office facilities. Rental income for the years ended December 31,
2000, 2001 and 2002 was $330, $330 and $330, respectively. The lease expires
February 28, 2005 and provides for monthly rental payments of $27. The lease may
be extended through February 28, 2007 at the lessee's option at terms comparable
to the initial term of the lease.

LEGAL MATTERS

In the ordinary course of business, the Company becomes involved in
lawsuits, administrative and other proceedings. Some of these proceedings may
result in fines, penalties or judgments being assessed against the Company. The
Company received notice on or about August 7, 2000 that Lemelson Medical,
Education & Research Foundation, LLP filed a complaint against the Company and
other defendants on June 30, 2000. The complaint was filed in the United States
District Court in the District of Arizona and alleges that the Company's
manufacturing processes infringe several patents that the Lemelson Foundation
allegedly owns. The case has been stayed pending the outcome of another case
challenging the validity and enforceability of the patents at issue. The Company
accrued $340 in 2000 based in part on settlement discussions with the plaintiff,
which have since been abandoned. However, because of the preliminary stage of
this case, any revised estimate of potential damages would be speculative, and
the Company has not made any such revised estimate at this time.

The Company is not currently involved in any other material legal
proceedings. The Company is not aware of any other material legal proceedings
threatened against it.

NOTE 16 - SEGMENT INFORMATION

The Company has two reportable segments: Consumer and OEM. The
accounting policies of the segments are the same as those described in the
summary of significant accounting policies and reflect the information used by
the Company's management to evaluate the performance of its segments. Certain
expenses reported within cost of sales are allocated between the divisions. The
Company only tracks separately net sales and gross profit, but does not track
separately operating expenses, interest or income taxes by segment. The Company
does not maintain separate records to identify assets by operating segment.

F-24

PNY TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 16 - SEGMENT INFORMATION - (CONTINUED)

The following is a summary of financial information concerning each of
the Company's reportable segments:

YEAR ENDED DECEMBER 31, 2000
---------------------------------------------------------
CONSUMER OEM CONSOLIDATED
------------- ------------- -------------

Net sales..................................... $173,281 $375,060 $548,341
Cost of sales................................. 165,069 318,984 483,053
------------- ------------- -------------
Gross profit.................................. 8,212 56,076 64,288

Operating expenses............................ 35,890
--------
Operating income.............................. $ 28,398
========

YEAR ENDED DECEMBER 31, 2001
---------------------------------------------------------
CONSUMER OEM CONSOLIDATED
------------- ------------- -------------

Net sales..................................... $189,861 $124,336 $314,197
Cost of sales................................. 174,284 107,404 281,688
------------- ------------- -------------
Gross profit.................................. 15,577 16,932 32,509

Operating expenses............................ 32,378
--------
Operating income.............................. $ 131
========

YEAR ENDED DECEMBER 31, 2002
---------------------------------------------------------
CONSUMER OEM CONSOLIDATED
------------- ------------- -------------

Net sales......................................... $255,038 $79,565 $334,603
Cost of sales..................................... 216,779 69,572 286,351
------------- ------------- -------------
Gross profit...................................... 38,259 9,993 48,252

Operating expenses................................ 46,863
--------
Operating income.................................. $ 1,389
========

NINE MONTHS ENDED SEPTEMBER 30, 2002
(UNAUDITED)
---------------------------------------------------------
CONSUMER OEM CONSOLIDATED
------------- ------------- -------------

Net sales......................................... $183,847 $67,768 $251,615
Cost of sales..................................... 158,098 59,278 217,376
------------- ------------- -------------
Gross profit...................................... 25,749 8,490 34,239

Operating expenses................................ 36,670
--------
Operating (loss).................................. $(2,431)
========

NINE MONTHS ENDED SEPTEMBER 30, 2003
(UNAUDITED)
---------------------------------------------------------
CONSUMER OEM CONSOLIDATED
------------- ------------- -------------

Net sales......................................... $219,652 $38,912 $258,564
Cost of sales..................................... 189,688 33,440 223,128
------------- ------------- -------------
Gross profit...................................... 29,964 5,472 35,436
------------- ------------- -------------

Operating expenses................................ 31,332
--------
Operating income.................................. $ 4,104
========

F-25

PNY TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 16 - SEGMENT INFORMATION - (CONTINUED)

For the years ended December 31, 2000, 2001 and 2002, international
sales comprised approximately 10.2%, 15.2% and 23.7% of the Company's revenues,
respectively. During these years, no single foreign country accounted for more
than 10% of total revenues. Foreign sales are shipped directly from the
Company's foreign subsidiaries, while export sales are shipped from the United
States to the Company's foreign customers. Financial information regarding the
Company's international revenues is shown in the following table:

NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, (UNAUDITED)
------------------------------------------- -------------------------
2000 2001 2002 2002 2003
--------- --------- --------- --------- ---------

Export.................. $ 2,834 $ 1,437 $ 8,231 $ 5,801 $13,817
Foreign................. 53,153 46,187 71,091 52,939 72,599
------- ------- ------- ------- -------
Total.............. $55,987 $47,624 $79,322 $58,740 $86,416
======= ======= ======= ======= =======

The following table shows financial information regarding the Company's
property, plant and equipment, net:

DECEMBER 31,
-------------------------------
2001 2002
------- ------

United States................................................. $ 6,750 $4,820
Europe, principally France.................................... 5,422 1,795
------- ------
Total property, plant and equipment, net................... $12,172 $6,615
======= ======

NOTE 17 - DILUTED EARNINGS PER SHARE

The reconciliation of shares used to calculate basic and diluted
earnings per share consists of the following:

SEPTEMBER 30,
DECEMBER 31, (UNAUDITED)
------------------------------------- -------------------------
2000 2001 2002 2002 2003
--------- ---------- ---------- ---------- ----------

Weighted-average common shares
outstanding used to calculate
basic earnings per share.................... 26,050,050 26,120,205 26,954,800 26,954,800 26,954,800
Conversion of Series A preferred stock........ 4,062,669 - - - 3,980,400
Net effect of dilutive warrants and
employee stock-based options
on treasury stock method using
average fair value:
Warrants................................... 1,799,899 - - - 49,212
Employee stock options..................... 1,807,836 - - - 1,470,059
---------- ---------- ---------- ---------- ----------
Weighted-average common shares and common
share equivalents used to calculate
diluted earnings per common share........... 33,720,454 26,120,205 26,954,800 26,954,800 32,454,471
========== ========== ========== ========== ==========

For the nine months ended September 30, 2003 (unaudited), the waiver of
dividends has been added back to net income available to common stockholders,
the numerator, for the calculation of diluted earnings per share, as the
calculation for weighted-average common shares and common share equivalents
assumes the conversion of the Convertible A Preferred stock as of the first day
of each such period.

For 2001 and 2002 and the nine months ended September 30, 2002
(unaudited), the numerator for the calculation of basic and dilutive earnings
per share was the same because the Company sustained a loss of the year and
therefore, the effect would be anti-dilutive. For 2000, no dividends were
payable to the Convertible Series A

F-26

PNY TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 17 - DILUTED EARNINGS PER SHARE - (CONTINUED)

Preferred Stockholders, therefore no adjustment needs to be made to net income
(loss) available to common stockholders.

During the year 2002, the conversion of 13,268 shares of Series A
preferred stock, warrants to purchase 49,500 common shares and employee stock
options to purchase 2,585,130 shares of common stock were not included in the
computation of diluted loss per common share because the Company sustained a
loss for the year ended December 31, 2002, and, therefore, the effect would be
anti-dilutive.

During the year 2001, the conversion of 13,268 shares of Series A
preferred stock, warrants to purchase 1,806,000 common shares and employee stock
options to purchase 2,567,230 shares of common stock were not included in the
computation of diluted loss per common share because the Company sustained a
loss for the year ended December 31, 2001, and, therefore, the effect would be
anti-dilutive.

During the year 2000, warrants to purchase 1,756,500 common shares at a
weighted-average price of $4.06, were not included in the computation of diluted
earnings per common share because the exercise price of the warrants was greater
than the estimated fair value of the common shares and, therefore, the effect
would be anti-dilutive.

NOTE 18 - SUBSEQUENT EVENTS (UNAUDITED)

On April 1, 2003, holders of more than 50% of each class of issued and
outstanding stock, by unanimous consent, approved a restated certification of
incorporation where as the dividends that were payable to the holders of shares
of Series A Preferred Stock, which have been accrued since December 6, 2000,
were waived. As such, no dividends shall accrue or be payable in respect of any
periods prior to January 1, 2003 and all rights of the holders of the Series A
Preferred Stock to receive any dividends which had been accrued prior to January
1, 2003 and which have not been declared were cancelled. Accordingly, the
Company recognized a waiver of dividends in the amount of $1,797 for the nine
months ended September 30, 2003 (unaudited). At December 31, 2001 and 2002, the
Company had a payable for the amount of dividends that have not been declared of
$1,147 and $1,797, respectively.

On December 31, 2003, by unanimous consent, holders of issued and
outstanding stock approved an Amendment to the Company's Certification of
Incorporation whereby the dividends that were payable to the holders of shares
of Series A Preferred Stock, which had accrued since January 1, 2003, were
waived. As such, any dividends which had accrued prior to December 31, 2003,
were cancelled. At and for the nine month period ended September 30, 2003
(unaudited), the Company recognized dividends and a related payable of $488 for
dividends on the Series A Preferred Stock that had accrued but had not been
declared. This amount will be recognized as a waiver of dividends during the
quarter ended December 31, 2003.

F-27

[PNY TECHNOLOGIES LOGO]

COMMON STOCK

- -----------------------------------------------------------------------

PROSPECTUS

, 2004

- -----------------------------------------------------------------------

LEHMAN BROTHERS

NEEDHAM & COMPANY, INC.

THOMAS WEISEL PARTNERS LLC

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the expenses (other than the
underwriting discount and commissions) expected to be incurred by the Registrant
while issuing and distributing the securities registered pursuant to this
Registration Statement. All amounts other than the SEC registration fee, NASD
filing fee and Nasdaq National Market listing fee are estimates.

Registration fee......................................................... $ 12,670
NASD filing fee.......................................................... 10,500
NASDAQ National Market listing fee....................................... 5,000
Legal fees and expenses.................................................. *
Accounting fees and expenses............................................. *
Printing and engraving................................................... *
Blue sky fees and expenses (including legal fees)........................ *
Transfer agent fees...................................................... *
Miscellaneous............................................................ *
-------------
Total........................................................... $ *
=============

* To be provided by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 145 of the Delaware General Corporation Law permits
indemnification of the Registrant's officers and directors under certain
conditions and subject to certain limitations. Section 145 of the Delaware
General Corporation Law also provides that a corporation has the power to
purchase and maintain insurance on behalf of its officers and directors against
any liability asserted against such person and incurred by him or her in such
capacity, or arising out of his or her status as such, whether or not the
corporation would have the power to indemnify him or her against such liability
under the provisions of Section 145 of the Delaware General Corporation Law.

Article V of the Registrant's Amended and Restated Bylaws provides that
the Registrant shall indemnify its directors and officers to the fullest extent
authorized by the Delaware General Corporation Law. The rights to indemnity
thereunder continue as to a person who has ceased to be a director, officer,
employee or agent and inure to the benefit of the heirs, executors and
administrators of the person. In addition, expenses incurred by a director or
executive officer in defending any civil, criminal, administrative or
investigative action, suit or proceeding by reason of the fact that he or she is
or was a director or officer of the Registrant (or was serving at the
Registrant's request as a director or officer of another corporation) shall be
paid by the Registrant in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he or she
is not entitled to be indemnified by the Registrant as authorized by the
relevant section of the Delaware General Corporation Law.

As permitted by Section 102(b)(7) of the Delaware General Corporation
Law, Article VIII of the Registrant's Restated Certificate of Incorporation, as
amended, provides that a director of the Registrant shall not be personally
liable for monetary damages for breach of fiduciary duty as a director, except
for liability (i) for any breach of the director's duty of loyalty to the
Registrant or its stockholders, (ii) for acts or omissions not in good faith or
acts or omissions that involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation Law or (iv) for
any transaction from which the director derived an improper personal benefit.

The Registrant has purchased directors' and officers' liability
insurance.

II-1

The underwriting agreement (Exhibit 1.1 hereto) contains provisions by
which the underwriters have agreed to indemnify the Registrant, each person, if
any, who controls the Registrant within the meaning of Section 15 of the
Securities Act, each director of the Registrant, and each officer of the
Registrant who signs this registration statement, with respect to information
furnished in writing by or on behalf of the underwriters for use in the
registration statement.

ITEM 15: RECENT SALES OF UNREGISTERED SECURITIES

The following is a summary of transactions by the Registrant during the
past three years involving sales and issuances of securities that were not
registered under the Securities Act of 1933.

On March 1, 2001, the Registrant granted options to purchase an
aggregate of 554,780 shares of common stock to a number of its employees at an
exercise price of $4.50 per share. None of these shares have been exercised.
However, 69,050 were forfeited and retired when certain employees resigned from
the Registrant.

In December 2001, a key employee exercised warrants that were granted
to him by the Registrant, for no consideration, in May 1998. Upon exercise of
these warrants, the Registrant issued 900,000 shares of common stock to this
individual.

In January 2002, two of the Registrant's directors exchanged variable
priced warrants, which were issued while both directors were officers of the
company, for fixed price options to purchase an aggregate of 294,000 shares of
its common stock with an exercise price of $3.00 per share. These options have
not been exercised.

In June 2002, an officer of the Registrant was granted options to
purchase 150,000 shares of its common stock, at an exercise price of $2.50 per
share. These options have not been exercised.

The sale and issuance of securities in the above transactions were
deemed to be exempt from registration under the Securities Act of 1933 by virtue
of Section 4(2) or Rule 701 thereof, as transactions by an issuer not involving
a public offering under the Securities Act of 1933. Appropriate legends have
been or will be affixed to the certificates issued in such transactions.

ITEM 16: EXHIBITS AND FINANCIAL STATEMENTS; SCHEDULES

(a) Exhibit Index

EXHIBIT NO. DESCRIPTION
- ----------- -----------

1.1 Form of Underwriting Agreement.*
3.1.1 Restated Certificate of Incorporation of the Registrant.
3.1.2 Certificate of Amendment to the Restated Certificate of Incorporation of the
Registrant, dated January 17, 1996.
3.1.3 Certificate of Amendment to the Restated Certificate of Incorporation of the
Registrant, dated June 13, 1996.
3.1.4 Certificate of Amendment to the Restated Certificate of Incorporation of the
Registrant, dated January 27, 1997.
3.1.5 Certificate of Amendment to the Restated Certificate of Incorporation of the
Registrant, dated February 28, 1997.
3.1.6 Certificate of Amendment to the Restated Certificate of Incorporation of the
Registrant, dated December 18, 1997.
3.1.7 Certificate of Amendment to the Restated Certificate of Incorporation of the
Registrant, dated August 8, 1997.
3.1.8 Certificate of Amendment to the Restated Certificate of Incorporation of the
Registrant, dated August 20, 1998.
3.1.9 Certificate of Amendment to the Restated Certificate of Incorporation of the
Registrant, dated October 26, 2000.

II-2

EXHIBIT NO. DESCRIPTION
- ----------- -----------

3.1.10 Certificate of Amendment to the Restated Certificate of Incorporation of the
Registrant, dated April 30, 2003.
3.2 Amended and Restated Bylaws of the Registrant.
4.1 Specimen stock certificate representing the Registrant's common stock, $0.01 par
value.*
5.1 Opinion of Gibson, Dunn & Crutcher LLP with respect to the validity of the
securities offered.*
10.1.1 Amended and Restated Loan Agreement, dated February 23, 1996, among Corestates
Bank, N.A., Congress Financial Corporation and the Registrant.
10.1.2 Amendment No. 1 to Financing Agreements, dated July 3, 1996.
10.1.3 Amendment No. 2 to Financing Agreements, dated April 15, 1997.
10.1.4 Amendment No. 3 to Financing Agreements, dated June 2, 1997.
10.1.5 Amendment No. 4 to Financing Agreements, dated April 20, 1998.
10.1.6 Amendment No. 5 to Financing Agreements, dated April 5, 1999.
10.1.7 Amendment No. 6 to Financing Agreements, dated September 29, 1999.
10.1.8 Amendment No. 7 to Financing Agreements, dated March 17, 2000.
10.1.9 Amendment No. 8 to Financing Agreements, dated June 13, 2000.
10.1.10 Amendment No. 9 to Financing Agreements, dated July 24, 2000.
10.1.11 Amendment No. 10 to Financing Agreements, dated August 21, 2000.
10.1.12 Amendment No. 11 to Financing Agreements, dated September 5, 2000.
10.1.13 Amendment No. 12 to Financing Agreements, dated October 16, 2000.
10.1.14 Amendment No. 13 to Financing Agreements, dated December 5, 2000.
10.1.15 Amendment No. 14 to Financing Agreements, dated December 5, 2000.
10.1.16 Amendment No. 15 to Financing Agreements, dated January 15, 2001.
10.1.17 Amendment No. 16 to Financing Agreements, dated November 6, 2001.
10.1.18 Amendment No. 17 to Financing Agreements, dated July 31, 2002.
10.1.19 Amendment No. 18 to Financing Agreements, dated March 20, 2003.
10.1.20 Amendment No. 19 to Financing Agreements, dated August 6, 2003.
10.1.21 Amendment No. 20 to Financing Agreements, dated November 7, 2003.
10.2 Security Agreement, dated as of January 29, 1998, by the Registrant and Congress
Financial Corporation.
10.3 Preferred Stock and Warrant Purchase Agreement, dated as of August 4, 1995, among
the Registrant, GS Capital Partners II, L.P. and certain of its affiliates, and
Gadi Cohen.
10.4 Registration Rights Agreement, dated as of August 4, 1995, among the Registrant,
GS Capital Partners II, L.P. and certain of its affiliates, and Gadi Cohen.
10.5 Stockholder Agreement, dated as of August 4, 1995 among the Registrant, GS
Capital Partners II, L.P. and certain of its affiliates, and Gadi Cohen.
10.6 Subordinated Note payable to Ruth Cohen, dated December 5, 2000.
10.7 Amended and Restated 1999 Stock Option Plan, dated October 27, 2000.
15.1 Letter re change in certifying accountant.*
21.1 List of subsidiaries of the Registrant.
23.1 Consent of Ernst & Young LLP.*
23.2 Independent Accountants' Report and Consent of KPMG LLP.

II-3

EXHIBIT NO. DESCRIPTION
- ----------- -----------

23.3 Consent of Counsel (included in Exhibit 5.1).*
24.1 Power of Attorney (see page II-6).

* To be filed by amendment.

(b) Schedule II--Consolidated Valuation and Qualifying Accounts and Reserves

PNY TECHNOLOGIES, INC. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS

(IN THOUSANDS)

Valuation and Qualifying Accounts, which are Deducted in

the Balance Sheet from the Assets to Which They Apply

CHARGED CHARGED
BALANCE AT (CREDITED) (CREDITED) BALANCE AT
BEGINNING TO COST AND TO OTHER (DEDUCTIONS) END OF
OF PERIOD EXPENSES ACCOUNTS ADDITIONS PERIOD
---------- ----------- ---------- ----------- ----------

Allowance for bad debts:
Year ended December 31, 2000 $ 1,059 167 3 (a) 233 (b) $ 1,462
Year ended December 31, 2001 $ 1,462 (80) (12)(a) (109)(c) $ 1,261
Year ended December 31, 2002 $ 1,261 (232) 38 (a) (7)(c) $ 1,060

Allowance for excess and obsolete inventory:

Year ended December 31, 2000 $ 2,095 6,878 47 (a) (1,182)(d) $ 7,838
Year ended December 31, 2001 $ 7,838 (882) (186)(a) (4,393)(d) $ 2,377
Year ended December 31, 2002 $ 2,377 1,281 315 (a) (2,162)(d) $ 1,811

- ----------

(a) Represents currency translation adjustments.

(b) Represents recoveries of $237 and a bad-debt write-offs of $4.

(d) Represents inventory write-offs.

Schedules other than those referred to above have been omitted because
they are not applicable, are not required or because the information is included
elsewhere in the Consolidated Financial Statements or the notes thereto.

ITEM 17: UNDERTAKINGS

The following undertakings correspond to the specified paragraph
designation from Item 512 of Regulation S-K.

(a) Equity offering of nonreporting registrant. The undersigned
Registrant hereby undertakes to provide to the underwriter at the closing
specified in the underwriting agreements, certificates in such denominations and
registered in such names as required by the underwriters to permit prompt
delivery to each purchaser.

(b) Acceleration of effectiveness. Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been advised that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or

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proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part
of this registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Parsippany,
and State of New Jersey, on the fourth day of February, 2004.

PNY TECHNOLOGIES, INC.

By: /s/ Mark J. Ciano
----------------------------------------
Mark J. Ciano
Vice President of Finance and
Administrative Services

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Gadi Cohen and Mark J. Ciano, or either
of them, as his or her true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him or her and in his or her name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement and any
registration statement related to this Registration Statement and filed pursuant
to Rule 462 under the Securities Act of 1933, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Commission, granting unto said attorneys-in-fact and agents, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in connection therewith as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitute or substitutes may lawfully do
or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated as of the fourth day of February, 2004.

SIGNATURE TITLE DATE
- --------- ----- ----

/s/ Gadi Cohen
- ------------------------------------ Chairman of the Board, Director, President 2/04/04
Gadi Cohen and Chief Executive Officer
(Principal Executive Officer)

/s/ Mark J. Ciano Vice President of Finance and Administrative 2/04/04
- ------------------------------------ Services
Mark J. Ciano (Principal Financial Officer and Principal
Accounting Officer)
/s/ Jean Pierre Pucheu
- ------------------------------------ Director 2/04/04
Jean Pierre Pucheu

/s/ Luke M. Beshar
- ------------------------------------ Director 2/04/04
Luke M. Beshar

II-6