##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the quarterly period ended July 1, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the transition period from  to
 Commission file number 000-31103
 LEXAR MEDIA, INC.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    33-0723123(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)47300 Bayside ParkwayFremont, California
    
    94538(Address of principal executive offices)
    
    (Zip Code)
 (510) 413-1200
(Registrants telephone number, including area code)
 
 þ o
 þ o




---



LEXAR MEDIA, INC.
 FORM 10-Q
FOR THE QUARTER ENDED JULY 1, 2005
 TABLE OF CONTENTS
 PagePART I FINANCIAL INFORMATIONItem 1.
    
    Financial Statements
    
    
    3Condensed Consolidated Balance Sheets as of July 1, 2005 and December 31, 2004 (unaudited)
    
    
    3Condensed Consolidated Statements of Operations for the Three-Month and Six-Month Periods Ended July 1, 2005 and June 30, 2004 (unaudited)
    
    
    4Condensed Consolidated Statements of Cash Flows for the Six-Month Periods Ended July 1, 2005 and June 30, 2004 (unaudited)
    
    
    5Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    17Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    49Item 4.
    
    Controls and Procedures
    
    
    50PART II OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    52Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    55Item 3.
    
    Defaults Upon Senior Securities
    
    
    55Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    55Item 5.
    
    Other Information
    
    
    56Item 6.
    
    Exhibits
    
    
    56SIGNATURE
    
    
    57EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1
   2




---



##### Table of Contents



PART IFINANCIAL INFORMATION
 
 ITEM 1. Financial Statements
 LEXAR MEDIA, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
(unaudited)
 July 1,
    
    December 31,2005
    
    2004ASSETSCurrent assets:Cash and cash equivalents
    
    $
    129,571
    
    
    $
    27,705Restricted cash
    
    
    5,000
    
    
    
    5,000Short-term investments
    
    
    1,000
    
    
    
    7,738Accounts receivable, net of allowances for sales returns,
discounts and doubtful accounts of $12,777 and $16,085,
respectively
    
    
    83,316
    
    
    
    170,365Inventories
    
    
    112,311
    
    
    
    177,655Prepaid expenses and other current assets
    
    
    10,113
    
    
    
    12,799Total current assets
    
    
    341,311
    
    
    
    401,262Property and equipment, net
    
    
    11,086
    
    
    
    10,305Intangible assets, net
    
    
    271
    
    
    
    347Other assets
    
    
    2,823
    
    
    
    82Total assets
    
    $
    355,491
    
    
    $
    411,996LIABILITIES AND STOCK HOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    81,567
    
    
    $
    163,341Accrued liabilities
    
    
    46,158
    
    
    
    70,029Deferred license revenue and product margin
    
    
    22,618
    
    
    
    23,759Notes payable to bank
    
    
    33,372
    
    
    
    40,000Total current liabilities
    
    
    183,715
    
    
    
    297,129Deferred license revenue, net of current portion
    
    
    
    
    
    
    173Senior convertible notes payable
    
    
    70,000
    
    
    
    Total liabilities
    
    
    253,715
    
    
    
    297,302Contingencies (Note 10)Stockholders equity:Preferred stock, $0.0001 par value: 10,000,000 shares
authorized; no shares issued and outstanding
    
    
    
    
    
    
    Common stock, $0.0001 par value: 200,000,000 shares authorized;
80,010,606 and 79,234,651 shares issued and outstanding
    
    
    8
    
    
    
    8Additional paid-in capital
    
    
    283,916
    
    
    
    282,501Accumulated deficit
    
    
    (181,977
    )
    
    
    (167,465
    )Accumulated other comprehensive loss
    
    
    (171
    )
    
    
    (350
    )Total stockholders equity
    
    
    101,776
    
    
    
    114,694Total liabilities and stockholders equity
    
    $
    355,491
    
    
    $
    411,996
  3




---



##### Table of Contents



LEXAR MEDIA, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
 Three Months Ended
    
    Six Months EndedJuly 1,
    
    June 30,
    
    July 1,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Net revenues:Product revenues
    
    $
    190,869
    
    
    $
    162,107
    
    
    $
    422,502
    
    
    $
    323,186License and royalty revenues
    
    
    954
    
    
    
    1,084
    
    
    
    1,763
    
    
    
    4,739Total net revenues
    
    
    191,823
    
    
    
    163,191
    
    
    
    424,265
    
    
    
    327,925Cost of product revenues
    
    
    165,919
    
    
    
    157,186
    
    
    
    368,979
    
    
    
    292,991Gross margin
    
    
    25,904
    
    
    
    6,005
    
    
    
    55,286
    
    
    
    34,934Operating expenses:Research and development
    
    
    2,953
    
    
    
    2,625
    
    
    
    6,346
    
    
    
    4,686Sales and marketing
    
    
    16,219
    
    
    
    14,416
    
    
    
    36,153
    
    
    
    25,168General and administrative
    
    
    8,808
    
    
    
    6,347
    
    
    
    23,971
    
    
    
    11,953Total operating expenses
    
    
    27,980
    
    
    
    23,388
    
    
    
    66,470
    
    
    
    41,807Loss from operations
    
    
    (2,076
    )
    
    
    (17,383
    )
    
    
    (11,184
    )
    
    
    (6,873
    )Other income (expense):Interest and other expense
    
    
    (1,369
    )
    
    
    (299
    )
    
    
    (1,853
    )
    
    
    (347
    )Interest and other income
    
    
    459
    
    
    
    285
    
    
    
    585
    
    
    
    428Foreign exchange gain (loss), net
    
    
    (236
    )
    
    
    (302
    )
    
    
    (338
    )
    
    
    (862
    )Total other income (expense)
    
    
    (1,146
    )
    
    
    (316
    )
    
    
    (1,606
    )
    
    
    (781
    )Loss before income taxes
    
    
    (3,222
    )
    
    
    (17,699
    )
    
    
    (12,790
    )
    
    
    (7,654
    )Income taxes
    
    
    1,704
    
    
    
    395
    
    
    
    1,722
    
    
    
    1,014Net loss
    
    $
    (4,926
    )
    
    $
    (18,094
    )
    
    $
    (14,512
    )
    
    $
    (8,668
    )Net loss per
common share  basic and diluted:
    
    $
    (0.06
    )
    
    $
    (0.23
    )
    
    $
    (0.18
    )
    
    $
    (0.11
    )Shares used in computing net loss per common share  basic and diluted:
    
    
    79,837
    
    
    
    78,836
    
    
    
    79,678
    
    
    
    78,576
  4




---



##### Table of Contents



LEXAR MEDIA, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 Six months EndedJuly 1,
    
    June 30,2005
    
    2004Cash flows from operating activities:Net loss
    
    $
    (14,512
    )
    
    $
    (8,668
    )Adjustments to reconcile net loss to net cash provided by (used in) operating activities:Depreciation and amortization
    
    
    2,034
    
    
    
    970Provision to record inventory at net realizable value
    
    
    6,767
    
    
    
    1,025Amortization of deferred financing costs
    
    
    249
    
    
    
    Change in operating assets and liabilities:Accounts receivable, net
    
    
    85,355
    
    
    
    (17,978
    )Inventories
    
    
    56,658
    
    
    
    5,152Prepaid expenses and other assets
    
    
    3,500
    
    
    
    (1,338
    )Accounts payable and accrued liabilities
    
    
    (101,170
    )
    
    
    23,891Deferred license revenue and product margin
    
    
    (1,348
    )
    
    
    (9,676
    )Net cash provided by (used in) operating activities
    
    
    37,533
    
    
    
    (6,622
    )Cash flows from investing activities:Purchase of property and equipment
    
    
    (2,806
    )
    
    
    (2,572
    )Proceeds from sale or maturity of short-term investments
    
    
    7,738
    
    
    
    Purchase of short-term investments
    
    
    (1,000
    )
    
    
    (21,881
    )Net cash provided by (used in) in investing activities
    
    
    3,932
    
    
    
    (24,453
    )Cash flows from financing activities:Issuance of stock under employee stock purchase plan
    
    
    888
    
    
    
    609Exercise of stock options
    
    
    583
    
    
    
    1,692Proceeds
from issuance of convertible promissory notes net of issuance costs
    
    
    66,338
    
    
    
    Proceeds from asset-based notes payable to bank, net of issuance costs
    
    
    32,792
    
    
    
    Repayment of revolving credit notes payable to bank
    
    
    (40,000
    )
    
    
    Repayment of notes receivable from stockholders
    
    
    
    
    
    
    412Net cash provided by financing activities
    
    
    60,601
    
    
    
    2,713Effect of foreign currency exchange rates on cash and cash equivalents
    
    
    (200
    )
    
    
    155Net increase (decrease) in cash and cash equivalents
    
    
    101,866
    
    
    
    (28,207
    )Cash and cash equivalents at beginning of period
    
    
    27,705
    
    
    
    115,698Cash and cash equivalents at end of period
    
    $
    129,571
    
    
    $
    87,491
  5




---



##### Table of Contents



LEXAR MEDIA, INC. AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Note 1Basis of Presentation
    Note 2Summary of Selected Accounting Policies
 Revenue Recognition
      6




---



##### Table of Contents



LEXAR MEDIA, INC. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 License and Royalty Revenues
   Deferred Taxes
  Short-Term Investments
     Shipping and Handling Costs
  Accounting for Stock-based Compensation
  7




---



##### Table of Contents



LEXAR MEDIA, INC. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
    Three Months
    
    Three Months
    
    Six Months
    
    Six Monthsended
    
    ended
    
    ended
    
    endedJuly 1,
    
    June 30,
    
    July 1,
    
    June 30,2005
    
    2004
    
    2005
    
    2004As reported:Net loss
    
    $
    (4,926
    )
    
    $
    (18,094
    )
    
    $
    (14,512
    )
    
    $
    (8,668
    )Add: Compensation reversal included in reported net income (loss), net of tax
    
    
    
    
    
    
    
    
    
    
    (56
    )
    
    
    Less: Pro forma compensation expense determined based on fair value, net of
tax
    
    
    (3,046
    )
    
    
    (6,789
    )
    
    
    (7,294
    )
    
    
    (11,903
    )Pro forma net loss
    
    $
    (7,972
    )
    
    $
    (24,883
    )
    
    $
    (21,862
    )
    
    $
    (20,571
    )Net loss per common sharebasic and diluted, as reported
    
    $
    (0.06
    )
    
    $
    (0.23
    )
    
    $
    (0.18
    )
    
    $
    (0.11
    )Net loss per common sharebasic and diluted, pro forma
    
    $
    (0.10
    )
    
    $
    (0.32
    )
    
    $
    (0.27
    )
    
    $
    (0.26
    )
  Three Months
    
    Three Months
    
    Six Months
    
    Six Months
    
    Six Months
    
    Six Monthsended
    
    ended
    
    ended
    
    ended
    
    ended
    
    endedJuly 1, 2005
    
    June 30, 2004
    
    July 1, 2005
    
    July 1, 2005
    
    June 30, 2004
    
    June 30, 2004Options
    
    Options
    
    Options
    
    ESPP
    
    Options
    
    ESPPWeighted average fair value
    
    $
    3.63
    
    
    $
    6.47
    
    
    $
    3.61
    
    
    $
    1.49
    
    
    $
    7.27
    
    
    $
    5.04Risk free interest rate
    
    
    3.68
    %
    
    
    3.83
    %
    
    
    3.68
    %
    
    
    2.71
    %
    
    
    3.59
    %
    
    
    1.48
    %Expected life (years)
    
    
    4.03
    
    
    
    4.14
    
    
    
    4.03
    
    
    
    0.5
    
    
    
    4.13
    
    
    
    1.19Expected stock price volatility
    
    
    90
    %
    
    
    92
    %
    
    
    90
    %
    
    
    87
    %
    
    
    92
    %
    
    
    84
    %Dividend yield
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 Product Warranties
  8




---



##### Table of Contents



LEXAR MEDIA, INC. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
  Product
Revenues
   Three Months
    
    Three Months
    
    Six Months
    
    Six Monthsended
    
    ended
    
    ended
    
    endedJuly 1,
    
    June 30,
    
    July 1,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Digital media
    
    $
    150,880
    
    
    $
    157,845
    
    
    $
    355,303
    
    
    $
    314,196Controller, digital media accessories and other components
    
    
    39,989
    
    
    
    4,262
    
    
    
    67,199
    
    
    
    8,990Product revenues
    
    $
    190,869
    
    
    $
    162,107
    
    
    $
    422,502
    
    
    $
    323,186
 Note 3Restricted Cash
  Note 4Balance Sheet Disclosures (in thousands):
  July 1,
    
    December 31,2005
    
    2004Inventories:Raw materials
    
    $
    30,116
    
    
    $
    16,981Controllers
    
    
    10,069
    
    
    
    9,848Digital media products
    
    
    70,669
    
    
    
    147,909Ancillary products
    
    
    1,457
    
    
    
    2,917$
    112,311
    
    
    $
    177,655
 Note 5Net Loss Per Common Share (in thousands, except per share data):
  9




---



##### Table of Contents



LEXAR MEDIA, INC. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 Three Months
    
    Three Months
    
    Six Months
    
    Six Monthsended
    
    ended
    
    ended
    
    endedJuly 1,
    
    June 30,
    
    July 1,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Numerator for basic and diluted loss per common share:Net loss
    
    $
    (4,926
    )
    
    $
    (18,094
    )
    
    $
    (14,512
    )
    
    $
    (8,668
    )Denominator for basic and diluted net loss per common share:Weighted average common shares outstanding
    
    
    79,837
    
    
    
    78,836
    
    
    
    79,678
    
    
    
    78,576Net loss per common sharebasic and diluted
    
    $
    (0.06
    )
    
    $
    (0.23
    )
    
    $
    (0.18
    )
    
    $
    (0.11
    )
 Anti-dilutive Securities
  Three Months
    
    Three Months
    
    Six Months
    
    Six Monthsended
    
    ended
    
    ended
    
    endedJuly 1,
    
    June 30,
    
    July 1,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Weighted average shares under warrants for common stock
    
    
    23
    
    
    
    41
    
    
    
    32
    
    
    
    41Weighted average shares under options for common stock
    
    
    19,624
    
    
    
    17,686
    
    
    
    19,543
    
    
    
    17,308Weighted average shares under convertible notes
    
    
    9,555
    
    
    
    
    
    
    
    4,925
    
    
    
    
 Note 6Notes Payable:
     10




---



##### Table of Contents



LEXAR MEDIA, INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
   Note 7
 Senior Convertible Notes Payable
     
    
    the option to receive, if and only to the extent the
holders convert their Notes into our common stock, a
make-whole premium of additional shares of common
stock equal to the approximate lost option time value,
if any, plus accrued but unpaid interest, if any, up
to but excluding the conversion date; or
    
    the right to require us to purchase for cash any or
all of its Notes at a repurchase price equal to the
principal amount of the Notes being repurchased plus
accrued but unpaid interest, if any, up to but
excluding the repurchase date.
  
    
    We declare certain dividends or distributions;
    
    We effect a stock split or combination;
    
    We offer certain rights or warrants to all or substantially all our stockholders; and
    
    We purchase shares of our common stock pursuant to a tender or exchange offer under certain circumstances.
  11




---



##### Table of Contents



LEXAR MEDIA, INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
   Note 8Comprehensive Loss:
  Three Months
    
    Three Months
    
    Six Months
    
    Six MonthsEnded
    
    Ended
    
    Ended
    
    EndedJuly 1,
    
    June 30,
    
    July 1,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Net loss
    
    $
    (4,926
    )
    
    $
    (18,094
    )
    
    $
    (14,512
    )
    
    $
    (8,668
    )Other comprehensive income (loss):Effect of foreign currency translation
    
    
    45
    
    
    
    10
    
    
    
    165
    
    
    
    (16
    )Unrealized gains on available for sale securities
    
    
    1
    
    
    
    0
    
    
    
    14
    
    
    
    0Total other comprehensive income (loss):
    
    
    46
    
    
    
    10
    
    
    
    179
    
    
    
    (16
    )Comprehensive loss
    
    $
    (4,880
    )
    
    $
    (18,084
    )
    
    $
    (14,333
    )
    
    $
    (8,684
    )
  Note 9Hedging:
   Note 10Contingencies
 Indemnifications
   12




---



##### Table of Contents



LEXAR MEDIA, INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
  Litigation with Toshiba
  Lexar Media, Inc. v. Toshiba Corporation, Toshiba America, Inc. and Toshiba America
Electronics Corporation
     Toshiba Corporation v. Lexar Media, Inc.; Lexar Media, Inc. v. Toshiba Corporation
       13




---



##### Table of Contents



LEXAR MEDIA, INC. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
    Toshiba Corporation v. Lexar Media, Inc.
    Litigation Against Fuji, Memtek and PNY
     14




---



##### Table of Contents



LEXAR MEDIA, INC. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
  Litigation Against Pretec, PNY, Memtek and C-One
    Litigation With Willem Vroegh
   Stockholder Litigation
    15




---



##### Table of Contents



LEXAR MEDIA, INC. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
   Note 11Recent Accounting Pronouncements
     16




---



##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
  Overview
      17




---



##### Table of Contents



Revenues.
  18




---



##### Table of Contents



Cost of Product Revenues.
  19




---



##### Table of Contents



Research and Development.
 Sales and Marketing
 General and Administrative.
 20




---



##### Table of Contents



Critical Accounting Policies and Estimates
    
    
    Revenue recognition, including price protection, rebates and other customer
programs; and
    
    Valuation allowances and accrued liabilities, including sales returns and other
allowances, inventory valuation reserves, warranty accruals, the allowance for doubtful
accounts and deferred tax asset valuation allowances.
 Revenue Recognition
 Product Revenues
     21




---



##### Table of Contents



License and Royalty Revenues
   Valuation Allowances and Accrued Liabilities
 Valuation of Inventory
     Deferred Tax Valuation Allowance
  22




---



##### Table of Contents



Other Valuation Allowances, Accrued Liabilities and Warranty
   Allowance for Doubtful Accounts
  Results of Operations
  Revenues, Cost of Product Revenues and Gross Margin
  Three Months ended
    
    Three Months ended
    
    % Change
    
    Six Months ended
    
    Six Months ended
    
    % ChangeJuly 1, 2005
    
    June 30, 2004
    
    2004 to 2005
    
    July 1, 2005
    
    June 30, 2004
    
    2004 to 2005Digital media
    
    $
    150,880
    
    
    $
    157,845
    
    
    
    (4.4
    )%
    
    $
    355,303
    
    
    $
    314,196
    
    
    
    13.1
    %Controller, digital
media accessories and
other components
    
    
    39,989
    
    
    
    4,262
    
    
    
    838.3
    %
    
    
    67,199
    
    
    
    8,990
    
    
    
    647.5
    %Product revenues
    
    
    190,869
    
    
    
    162,107
    
    
    
    17.7
    %
    
    
    422,502
    
    
    
    323,186
    
    
    
    30.7
    %License and royalty revenues
    
    
    954
    
    
    
    1,084
    
    
    
    (12.0
    )%
    
    
    1,763
    
    
    
    4,739
    
    
    
    (62.8
    )%Total net revenues
    
    
    191,823
    
    
    
    163,191
    
    
    
    17.5
    %
    
    
    424,265
    
    
    
    327,925
    
    
    
    29.4
    %Cost of product revenues
    
    
    165,919
    
    
    
    157,186
    
    
    
    5.6
    %
    
    
    368,979
    
    
    
    292,991
    
    
    
    25.9
    %Gross margin
    
    $
    25,904
    
    
    $
    6,005
    
    
    
    331.4
    %
    
    $
    55,286
    
    
    $
    34,934
    
    
    
    58.3
    %Product gross margin
    
    $
    24,950
    
    
    $
    4,921
    
    
    
    407.0
    %
    
    $
    53,523
    
    
    $
    30,195
    
    
    
    77.3
    %
 23




---



##### Table of Contents



Three Months
    
    Three Months
    
    Six Months
    
    Six Monthsended
    
    ended
    
    ended
    
    endedJuly 1,
    
    June 30,
    
    July 1,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Digital media
    
    
    78.7
    %
    
    
    96.7
    %
    
    
    83.7
    %
    
    
    95.8
    %Controller, digital media accessories and other components
    
    
    20.8
    %
    
    
    2.6
    %
    
    
    15.9
    %
    
    
    2.8
    %Product revenues
    
    
    99.5
    %
    
    
    99.3
    %
    
    
    99.6
    %
    
    
    98.6
    %License and royalty revenues
    
    
    0.5
    %
    
    
    0.7
    %
    
    
    0.4
    %
    
    
    1.4
    %Total net revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of product revenues
    
    
    86.5
    %
    
    
    96.3
    %
    
    
    87.0
    %
    
    
    89.3
    %Gross margin
    
    
    13.5
    %
    
    
    3.7
    %
    
    
    13.0
    %
    
    
    10.7
    %
  Three Months
    
    Three Months
    
    Six Months
    
    Six Monthsended
    
    ended
    
    ended
    
    endedJuly 1,
    
    June 30,
    
    July 1,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Digital media
    
    
    79.0
    %
    
    
    97.4
    %
    
    
    84.1
    %
    
    
    97.2
    %Controller, digital media accessories and other components
    
    
    21.0
    %
    
    
    2.6
    
    
    
    15.9
    %
    
    
    2.8
    %Product revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of product revenues
    
    
    86.9
    %
    
    
    97.0
    %
    
    
    87.3
    %
    
    
    90.7
    %Product gross margin
    
    
    13.1
    %
    
    
    3.0
    %
    
    
    12.7
    %
    
    
    9.3
    %
 Revenues
      24




---



##### Table of Contents



Cost of Product Revenues
      Gross Margin
   25




---



##### Table of Contents



Operating Expenses
  % Change
    
    
    
    
    
    
    
    
    
    % ChangeThree Months
    
    Three Months
    
    Three Months
    
    Six Months
    
    Six Months
    
    Six Monthsended
    
    ended
    
    ended July 1,
    
    ended
    
    ended
    
    ended July 1,July 1,
    
    June 30,
    
    2005 to June 30,
    
    July 1,
    
    June 30,
    
    2005 to June 30,2005
    
    2004
    
    2004
    
    2005
    
    2004
    
    2004Research and development
    
    $
    2,953
    
    
    $
    2,625
    
    
    
    12.5
    %
    
    $
    6,346
    
    
    $
    4,686
    
    
    
    35.4
    %Sales and marketing
    
    
    16,219
    
    
    
    14,416
    
    
    
    12.5
    %
    
    
    36,153
    
    
    
    25,168
    
    
    
    43.6
    %General and administrative
    
    
    8,808
    
    
    
    6,347
    
    
    
    38.8
    %
    
    
    23,971
    
    
    
    11,953
    
    
    
    100.5
    %Total operating expenses
    
    $
    27,980
    
    
    $
    23,388
    
    
    
    19.6
    %
    
    $
    66,470
    
    
    $
    41,807
    
    
    
    59.0
    %
  Three
    
    ThreeMonths
    
    Months
    
    Six Months
    
    Six Monthsended
    
    ended
    
    ended
    
    endedJuly 1,
    
    June 30,
    
    July 1,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Research and development
    
    
    1.5
    %
    
    
    1.6
    %
    
    
    1.5
    %
    
    
    1.4
    %Sales and marketing
    
    
    8.5
    %
    
    
    8.8
    %
    
    
    8.5
    %
    
    
    7.7
    %General and administrative
    
    
    4.6
    %
    
    
    3.9
    %
    
    
    5.7
    %
    
    
    3.6
    %Total operating expenses
    
    
    14.6
    %
    
    
    14.3
    %
    
    
    15.7
    %
    
    
    12.7
    %
 Research and Development
   Sales and Marketing
  26




---



##### Table of Contents



General and Administrative
   Income Taxes
  % Change
    
    
    
    
    
    
    
    
    
    % ChangeThree Months
    
    Three Months
    
    Three Months
    
    Six Months
    
    Six Months
    
    Six Monthsended
    
    ended
    
    ended June 30,
    
    ended
    
    ended
    
    ended June 30,July 1,
    
    June 30,
    
    2004 to July 1,
    
    July 1,
    
    June 30,
    
    2004 to July 1,2005
    
    2004
    
    2005
    
    2005
    
    2004
    
    2005Income taxes
    
    $
    1,704
    
    
    $
    395
    
    
    
    331
    %
    
    $
    1,722
    
    
    $
    1,014
    
    
    
    70
    %Income taxes as a percentage of total net revenues
    
    
    0.9
    %
    
    
    0.2
    %
    
    
    350
    %
    
    
    0.4
    %
    
    
    0.3
    %
    
    
    33
    %Effective tax rate
    
    
    *
    
    
    
    *
    
    
    
    *
    
    
    
    *
    
    
    
    *
    
    
    
    *
 
 *
    
    percentage is not meaningful  Other Income and Expense
     27




---



##### Table of Contents



Liquidity and Capital Resources
 Liquidity and Capital Resources
  Six Months
    
    Six Monthsended
    
    endedJuly 1,
    
    June 30,2005
    
    2004Net cash provided by (used in) operating activities
    
    $
    37,533
    
    
    $
    (6,622
    )Net cash provided by (used in) investing activities
    
    
    3,932
    
    
    
    (24,453
    )Net cash provided by financing activities
    
    
    60,601
    
    
    
    2,713
  Quarter
    
    Quarterended
    
    endedJuly 1,
    
    June 30,2005
    
    2004Days sales outstanding (net of change in deferred revenue)
    
    
    38
    
    
    
    54Inventory turns per year
    
    
    5
    
    
    
    7
    28




---



##### Table of Contents




    
    the option to receive, if and only to the extent the
holders convert their Notes into our common stock, a
make-whole premium of additional shares of common
stock equal to the approximate lost option time value,
if any, plus accrued but
 29




---



##### Table of Contents



unpaid interest, if any, up
to but excluding the conversion date; or
    
    the right to require us to purchase for cash any or
all of its Notes at a repurchase price equal to the
principal amount of the Notes being repurchased plus
accrued but unpaid interest, if any, up to but
excluding the repurchase date.
  
    
    We declare certain dividends or distributions;
    
    We effect a stock split or combination;
    
    We offer certain rights or warrants to all or substantially all our stockholders; and
    
    We purchase shares of our common stock pursuant to a tender or exchange offer under certain circumstances.
    Commitments
     30




---



##### Table of Contents



Payments due by period (in thousands)Totalamount
    
    Less than
    
    
    
    
    
    
    
    
    
    Aftercommitted
    
    1 year
    
    13 years
    
    35 years
    
    5 yearsContractual obligations and commercial commitments:Senior convertible notes payable:Principal
    
    $
    70,000
    
    
    $
    
    
    
    $
    
    
    
    $
    70,000
    
    
    $
    Interest
    
    
    19,716
    
    
    
    4,950
    
    
    
    7,875
    
    
    
    6,891
    
    
    
    Open purchase orders with vendors and suppliers*
    
    
    23,573
    
    
    
    23,573
    
    
    
    
    
    
    
    
    
    
    
    Operating leases
    
    
    5,728
    
    
    
    1,230
    
    
    
    2,096
    
    
    
    1,146
    
    
    
    1,256Standby letters of credit
    
    
    5,000
    
    
    
    5,000
    
    
    
    
    
    
    
    
    
    
    
    Total contractual obligations and commercial commitments
    
    $
    124,017
    
    
    $
    34,753
    
    
    $
    9,971
    
    
    $
    78,037
    
    
    $
    1,256
 
 *
    
    At any given point in time, in the normal course of business, we place cancelable purchase orders
with our vendors and suppliers. Off Balance Sheet Arrangements
  Indemnifications
   Warranties
  Recent Accounting Developments
  31




---



##### Table of Contents



RISKS THAT COULD AFFECT FUTURE RESULTS
  Risks Related to Our Business
 We have a history of losses and may not be able to return to or sustain profitability.
  Our operating results and gross margins have fluctuated in the past, may fluctuate significantly
in the future and are difficult to predict. If our future results are below the financial
guidance provided by us or the expectations of investors or securities analysts, the market price
of our common stock could decline significantly.
 32




---



##### Table of Contents




    
    increases in the price of flash memory that we buy or the failure
of cost decreases to keep up with price decreases for our
products;
    
    the inability of new NAND flash memory suppliers to fully indemnify us should we be subjected to litigation;
    
    the decision of our customers to return products or rotate their stock;
    
    the amount of price protection, volume incentive rebates,
discounts, market development funds, cooperative advertising
payments and other concessions and discounts that we may need to
provide to some of our customers due to competitive pricing
pressures;
    
    fluctuation in demand for our products, including seasonal demand
for our products and the volume and timing of potential retail
customer and distributor orders;
    
    competitive pricing pressures for the products we sell;
    
    the rate of growth of the market for digital cameras, digital
media, cell phones with card slots, USB flash drives and MP3
players;
    
    the mix of business between retail, OEM and licensing;
    
    whether we can sell controllers, digital media
accessories and other components in the volumes
and at the prices we anticipate.
    
    the timely availability of flash memory, particularly flash memory that meets our technological requirements;
    
    the availability of sufficient silicon wafer foundry capacity and product components to meet customer demand;
    
    the difficulty of forecasting sell-through rates
of our products and their impact on inventory
levels at our resellers if sell-through data is
not timely reported to us, which may result in
additional orders being delayed or reduced and
inventory being returned;
    
    the timing and amount of expenses related to
obsolescence and disposal of excess inventory and
the difficulty of forecasting and managing our
inventory levels, including inventories on
consignment and at contract manufacturers;
    
    the timing and amount of any reductions in the average selling prices of our products and services;
    
    price reductions in key components, such as flash
memory, could result in reduced margins when
selling products that include previously
purchased components held in inventory;
    
    increases in costs charged by our component or
card suppliers or the failure of our suppliers to
decrease the prices they charge to us when
industry prices decline;
    
    the timing and amount of orders, cancellations
from existing and new customers and penalties
imposed by customers for failure to meet their
requirements;
    
    the commencement of, involvement in or the expansion, appeal or settlement of our litigation;
    
    any changes in the trend of declining average selling prices per unit sold of digital storage media;
 33




---



##### Table of Contents




    
    competing flash card standards, which displace the standards used in our products;
    
    shortages of components such as capacitors and printed circuit boards required for the manufacturing of our products;
    
    exchange rate fluctuations, particularly the U.S.
dollar to British pound and Japanese yen and the
British pound to Euro exchange rates;
    
    the announcement or introduction of products and technologies by competitors; and
    
    potential product quality problems which could raise return or rework costs.
  We expect that Toshiba and Toshiba America Electronics Components, Inc. will appeal a jurys
award to us of over $465 million in damages, and an unfavorable outcome could lead to a decline
in our stock price and have a negative impact on our ability to increase our licensing revenues.
  If
we are unable to continue our sales of controllers, digital media
accessories or other components or
continue to develop, competitively market and sell our JumpDrive portable flash storage product
line, our revenues, gross margins and results of operations would be negatively impacted.
    34




---



##### Table of Contents



We depend on a few key customers and the loss of any of them could significantly reduce our
revenues.
    We are substantially leveraged, which could adversely affect our ability to adjust our business,
to develop or enhance our products, expand our operations, respond to competitive pressures or
obtain additional financing.
   
    
    our ability to obtain additional financing in the
future for working capital, capital expenditures,
acquisitions, general corporate or other purposes
may be limited;
    
    a substantial portion of our cash flow from
operations will be dedicated to the payment of
the principal and interest on our indebtedness;
    
    if we elect to pay any premium on the senior
convertible notes with shares of our common stock
or we are required to pay a make-whole premium
with our shares of common stock, our existing
stockholders interest in us would be diluted;
and
    
    we may be more vulnerable to economic downturns,
less able to withstand competitive pressures and
less flexible in responding to changing business
and economic conditions.
   35




---



##### Table of Contents



Our products are characterized by average selling prices that have historically declined over
relatively short time periods. If we are unable to effectively manage our inventories and channel
inventories, reduce our costs, introduce new products with higher average selling prices or
increase our sales volumes, our revenues and gross margins will be negatively impacted.
   A lack of effective internal control over financial reporting could result in an inability to
accurately report our financial results that could lead to a loss of investor confidence in our
financial reports and have an adverse effect on our stock price.
  
    
    revenue recognition with respect to certain
customers (primarily our resellers), including
adequate consideration of our estimates regarding
offsets to or discounts from revenue such as
price protection and promotional activities; and
    
    the accounting for inventory valuation reserves.
  Because we protect many of our retail customers and distributors against the effects of price
decreases on their inventories of our products, we have in the past and may in the future incur
large price protection charges if we reduce our prices when there are large quantities of our
products in our distribution channel.
 36




---



##### Table of Contents



We may need to write-down our inventory if our sales levels do not match our expectations or if
pricing declines more than we anticipate, which could adversely impact our revenues and gross
margins.
   We primarily depend upon Samsung for our flash memory. If Samsung is unable to provide us with
sufficient quantities of flash memory when we need it at prices and sales terms that allow us to
be competitive in the marketplace, if Samsung is unable to remain technologically competitive, or
if Samsung were to reduce or eliminate our credit terms, we would not be able to manufacture and
deliver digital media to our customers in accordance with their volume, price and schedule
requirements, which would have a serious negative impact on our revenues and margins.
    37




---



##### Table of Contents



In the first half of 2005, we modified our pricing strategy and significantly reduced our
promotional programs. In the first quarter of 2005, we also increased prices on certain products
to most of our customers to better align our selling prices with our cost structure. Many of our
retail customers and distributors have rights of return, and we may be required to take back
large quantities of unsold customer inventory if as a result of our recent actions or otherwise,
they decide to terminate their relationship with us and purchase from other vendors.
   Our strategic partnership with Kodak and our ongoing relationships with OEM customers pose
significant challenges for us, and if we are unable to manage these relationships, our business
and operating results will be adversely affected.
 38




---



##### Table of Contents




    
    properly manage the distribution and use of the KODAK brand;
    
    control the sales and marketing expenses associated with launching the brand in new channels;
    
    plan for anticipated changes in demand;
    
    effectively leverage the KODAK brand to achieve premium pricing and grow market share;
    
    maintain the market share position of the Lexar brand; and
    
    appropriately allocate resources to support a dual branding strategy.
   We depend on single suppliers for key components and products. We do not have long-term supply
contracts with many of these suppliers and we are therefore exposed to certain risks, including
price increases, late deliveries, poor component quality and a potential inability to obtain an
adequate supply of components. In addition, there is a risk that we will have inadequate or
incomplete indemnification from these suppliers, so we also face the risk that our margins and
operating results would be severely negatively impacted if such components or products infringe
the intellectual property rights of a third party or if we are found to owe license fees or
royalties relating to these products.
    39




---



##### Table of Contents



If we are unable to generate increased revenue from licensing our intellectual property, our
gross margins and results of operations would be negatively impacted.
  Our unit volume continues to increase and has strained our operations infrastructure and our
supply chain.
     The solid-state storage market is evolving and we may not have rights to manufacture and sell
certain types of flash card formats or we may be forced to pay a royalty to sell digital media in
these formats. Future digital media formats may not use our core technology.
  40




---



##### Table of Contents



We market our digital media primarily on the basis of its superior technology. If we are unable
to achieve or maintain technological leadership or gain commercial acceptance of the performance
and technology advantages of our products, our revenues and gross margins would likely decline
significantly.
  TM TM
  Increased competition in the digital media market may lead to a decrease in our revenues and
market share.
    41




---



##### Table of Contents



If we are unable to develop and introduce, on a timely basis, new products or services that are
accepted by our customers and consumers, we will not be able to compete effectively in our
market.
  42




---



##### Table of Contents



If we are unable to develop or maintain the strategic relationships necessary to develop, sell
and market products that are commercially viable and widely accepted, the growth and success of
our business may be limited.
  We rely to a significant degree on retailers to sell our digital media products and our inability
to control the activities of such retailers could cause our operating results and gross margins
to fluctuate significantly.
  
    
    continued downward pricing pressure in the retail
channel has necessitated, and we expect will
continue to necessitate price protection of the
inventories of our products that many of our
customers carry;
    
    retailers may emphasize our competitors products
over our products or decline to carry our
products or we may lose our exclusive
relationship with certain retailers;
    
    loss of market share if the retailers that carry
our products do not grow as quickly and sell as
many digital media products as the retailers that
carry the digital media products of our
competitors;
    
    loss of business or monetary penalties if we are
unable to satisfy the product needs of these
customers or fulfill their orders on a timely
basis;
    
    increased sales and marketing expenses if we are
unable to accurately forecast our customers
orders, including, among other items, increased
freight and fulfillment costs if faster shipping
methods are required to meet customer demand;
    
    product returns could increase as a result of our strategic interest in assisting retailers in balancing their inventories;
    
    reduced ability to forecast sales; and
    
    reduced gross margins, delays in collecting
receivables and increased inventory levels due to
the increasing tendency for some retailers to
require products on a consignment basis.
  We depend primarily on United Microelectronics Corporation, or UMC, to manufacture our
controllers, and if we are unable to obtain from UMC sufficient quantities of controllers at
acceptable quality, yields and prices, and in a timely manner, we may not be able to meet
customer demand for our products, which could limit the growth and success of our business.
  
    
    reduced control over delivery schedules, quality assurance, manufacturing yields and production costs; and
    
    unavailability of, or delayed access to, next-generation or key process technologies.
 43




---



##### Table of Contents



We depend solely on third-party subcontractors for assembly and testing of our digital media
products, which could result in product shortages or delays or increase our costs of
manufacturing, assembling or testing our products.
  If our efforts to optimize our supply chain are unsuccessful and we are unable to meet our
customers requirements, our business could be negatively impacted.
  Our failure to successfully promote our brand and achieve strong brand recognition in target
markets could limit or reduce the demand for our products and services.
  If we encounter difficulties in attracting and retaining qualified personnel, we may not be able
to successfully execute our business strategy, we may need to grant large stock-based incentives
that could be dilutive to our stockholders and we may be required to pay significant salaries
which would increase our general and administrative costs.
 44




---



##### Table of Contents



We are currently involved in stockholder litigation, and could be involved in additional
litigation in the future, which could have a negative impact on our business, operating results,
financial position and liquidity.
   If our products contain defects, we may incur unexpected and significant operating expenses to
correct the defects, we may be required to pay damages to third parties and our reputation may
suffer serious harm.
  Our significant sales outside the United States subject us to increasing foreign political and
economic risks, including foreign currency fluctuations, and it may be difficult for us to
anticipate demand and pricing in those regions or effectively manage the distributor channels and
relationships in those regions.
  45




---



##### Table of Contents




    
    foreign currency exchange fluctuations;
    
    political and economic instability;
    
    delays in meeting customer commitments due to
difficulties associated with managing an
international distribution system;
    
    increased time to collect receivables caused by
slower payment practices that are common in many
international markets;
    
    difficulties associated with managing export
licenses, tariffs and other regulatory issues
pertaining to international trade;
    
    increased effort and costs associated with the protection of our intellectual property in foreign countries;
    
    natural disasters, political uncertainties and changing regulatory environments in foreign countries; and
    
    difficulties in hiring and managing employees in foreign countries.
   If our suppliers or customers elect to compete with us in the digital media market, our revenues
and gross margins would likely decline.
  Our financial results may be affected by mandated changes in accounting and financial reporting.
   Changes in securities laws and regulations have increased our costs; further, in the event we are
unable to satisfy regulatory requirements relating to internal control over financial reporting,
or if our internal control over financial reporting is not effective, our business could suffer.
  46




---



##### Table of Contents



Our stock price and those of other technology companies have experienced extreme price and volume
fluctuations, and, accordingly, our stock price may continue to be volatile.
  
    
    variations in our quarterly operating results;
    
    announcements of technological innovations by us or by our competitors;
    
    introductions of new products or new pricing policies by us or by our competitors;
    
    departure of key personnel;
    
    the gain or loss of significant orders or customers;
    
    sales of common stock by our officers and directors;
    
    changes in the estimates of our operating performance or changes in recommendations by securities analysts;
    
    announcements related to our outstanding litigation; and
    
    market conditions in our industry and the economy as a whole.
  Risks Related to Our Industry
 Our business will not succeed unless the digital photography market and other markets that use
flash media continue to grow and are accepted by consumers.
  
    
    the availability of digital cameras at prices and with performance characteristics comparable to traditional cameras;
    
    the availability of digital media that meet
users requirements with respect to price, speed,
connectivity, capacity and compatibility;
    
    the speed at which digital cameras are able to take successive photographs;
    
    the ease with which digital files can be transferred to a personal computer or printer;
    
    the availability of digital image prints comparable in quality and price to traditional photographs; and
    
    market conditions in the industry and the economy as a whole.
  47




---



##### Table of Contents




    
    marketing campaigns that increase brand awareness in end-user markets, both domestically and internationally;
    
    increased association between brand names and attractive price and performance characteristics; and
    
    heightened consumer confidence in digital photography technology.
   General economic conditions, political and military conditions associated with current worldwide
conflicts and similar events may prevent consumers from purchasing our products, and reduced
demand for digital media and related products may prevent us from achieving targeted revenues and
profitability.
  If digital camera manufacturers do not develop and promote products that are able to take
advantage of our fastest digital media products, the growth and success of our business may be
limited.
  The manufacturing of our products is complex and subject to yield problems, which could decrease
available supply and increase costs.
  48




---



##### Table of Contents



Risks Related to Our Intellectual Property
 If we are unable to adequately protect our intellectual property, our competitors may gain access
to our technology, which could harm our ability to successfully compete in our market.
   
    
    any of our existing or future patents will not be invalidated;
    
    patents will be issued for any of our pending applications;
    
    any claims allowed from existing or pending patents will have sufficient scope or strength; or
    
    our patents will be issued in the primary
countries where our products are sold in order to
protect our rights and potential commercial
advantage.
  We are involved in intellectual property litigation, and expect to become involved in additional
litigation that could divert managements time and attention, be time-consuming and expensive to
defend and limit our access to important technology.
  
    
    pay damages on products that were found to infringe the other partys intellectual property;
    
    stop selling products or using technology that contain the allegedly infringing intellectual property;
    
    attempt to obtain a license to the relevant
intellectual property, which license may not be
available on reasonable terms or at all; and
    
    attempt to redesign those products that contain the allegedly infringing intellectual property.
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Foreign Currency Risk.
 49




---



##### Table of Contents



Interest Rate Risk. ,
  
 ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures.
  50




---



##### Table of Contents



Changes in Internal Control Over Financial Reporting.
 
    
    Revenue recognition. During the first half of
2005, we began taking steps toward remediation of
the material weakness described above with
respect to revenue recognition by taking the
following actions:
 
    
    Hiring additional personnel to review the effects
of each price movement on our customers
inventory and the impact on price protection
accruals;
    
    Instituting more rigorous policies and procedures
regarding the approvals that must be obtained
from management personnel before reducing prices
to either a specific customer or on a national
level;
    
    Recording revenue from all of our retail
customers on a sell-through basis to ensure that
at the time revenue is recognized for financial
reporting purposes the effects of offsets or
discounts to revenue, including the impact of
price moves we implemented in response to price
moves by competitors, are accurately reflected in
our statement of operations;
    
    Increasing training and awareness to sales and marketing representatives on our processes and procedures; and
    
    Instituting more rigorous procedures regarding
the approvals that must be obtained from
management personnel before promotional
activities can be accepted.
 
    
    Inventory valuation reserves. During the first
half of 2005, we took the following remediation
actions to improve our internal control over
accounting for inventory valuation reserves:
 
    
    Performing a more detailed review of our inventory to identify all excess and slow moving products;
    
    Increased management oversight on the analysis or
review of inventory valuation reserves and their
changes from period to period;
    
    Enhancing review of inventory valuation reserves
to ensure that all price reductions are
considered to identify write-downs to net
realizable value; and
    
    Evaluating responsibilities within our finance
organization to improve our controls and increase
the level of management oversight of the process.
    51




---



##### Table of Contents



PART IIOTHER INFORMATION
 
 Item 1. Legal Proceedings.
 Litigation with Toshiba
  Lexar Media, Inc. v. Toshiba Corporation, Toshiba America, Inc. and Toshiba America
Electronics Corporation
     Toshiba Corporation v. Lexar Media, Inc.; Lexar Media, Inc. v. Toshiba Corporation
       52




---



##### Table of Contents



Toshiba Corporation v. Lexar Media, Inc.
    Litigation Against Fuji, Memtek and PNY
    53




---



##### Table of Contents



Litigation Against Pretec, PNY, Memtek and C-One
    Litigation With Willem Vroegh
   Stockholder Litigation
    54




---



##### Table of Contents



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
 Notes
 
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
   For
    
    WithheldWilliam T. Dodds
    
    
    70,439,858
    
    
    
    1,592,861Brian D. Jacobs
    
    
    70,426,303
    
    
    
    1,606,416Eric B. Stang
    
    
    70,590,039
    
    
    
    1,442,680
  VotesFor
    
    
    23,604,294Against
    
    
    2,316,622Abstain
    
    
    269,444Broker Non-Votes
    
    
    45,842,359
 55




---



##### Table of Contents



VotesFor
    
    
    71,463,097Against
    
    
    472,724Abstain
    
    
    96,898
 
 Item 5. Other Information.
  
 Item 6. Exhibits.
 ExhibitNumber
    
    Exhibit31.1
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 56




---



##### Table of Contents



SIGNATURE
  LEXAR MEDIA, INC./s/
Brian T. McgeeBrian T. McGeeChief Financial Officer
(Principal Financial Officer and
Duly Authorized Officer)  57




---



##### Table of Contents



INDEX TO EXHIBITS
 ExhibitNumber
    
    Exhibit31.1
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C Section
1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.