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TWST: Could we start with a brief introduction to M-Systems (Nasdaq:FLSH)?

Mr. Moran: M-Systems is an Israeli company that designs, develops, manufactures and markets flash data storage products. Flash data storage products are devices that are used to store data just like hard drives in the computer industry. However, we do not make hard drives. We make something that is solid state, i.e. with no moving parts, that functions like a hard drive, allowing fast data storage with low power consumption, very small size and weight and very reliable. These devices, which we call Flash Disks, are used in cell phones, organizers, set-top boxes and in all kinds of devices that do not need huge amounts of storage capacity. We are looking at devices with a capacity of 16 megabytes, 64 megabytes, 128 megabytes and more.

TWST: Tell us about DiskOnKey?

Mr. Moran: DiskOnKey is a product that we invented. We began the concept about three years ago, brought the product to the market about a year and half ago, and began shipping the first units about a year ago. It is a small device, slightly larger than a large key, which you can plug into a USB connector that exists in all computers manufactured today. Once you have plugged it into the USB connector it automatically behaves as a hard disk, which means that if you have a new computer with drive C and drive D you will plug in DiskOnKey and get drive E. You can then copy any files you want into drive E -- pictures, music files, presentations, what ever is important to you. You can then unplug the device, put it into your pocket and take the important information with you. It’s a new concept of data storage that we brought to the market and we are seeing huge interest and great success for this product line. A year ago in the first quarter of introduction we sold about $300,000 of this device. In the last quarter of 2001 the number went up to the $2.5 million. In the first quarter of 2002 that number went up to 3.7, which is about a 43% increase quarter to quarter. Due to our backlog and billings to date for this device, we have assurance that we will continue to see such a growth from the first quarter of 2002 to the second quarter. And of course the numbers are just growing and we are only just scratching the potential of the market. We have companies such as HP, Dell, Compaq offering the product to their customers. And we have great retailers selling it such as Targus, IO DATA, Dixon in UK, Data Media in France. DiskOnKey has great potential and will grow very fast, but it’s really difficult to predict which product line is going to be larger because I believe that the Mobile DiskOnChip also has large potential.

TWST: How has the downturn in the telecom space affected the company and what impact is the overall condition of the economy having?

Mr. Moran: M-Systems did a great job in the years 1997 to 2000. We had an increase in sales from $16 million in 1998 to $30 million in 1999, to $93 million with a nice profit in year 2000. This was done mainly because of our focus in Internet appliances and in the telecom market. Both of these markets collapsed or suffered significantly in the year 2001. We actually changed our focus in the beginning of 2001 out of recognition and understanding that the situation might stay for a long time; that’s the reason we went to the mobile, PC and notebook market with DiskOnChip and DiskOnKey.