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Annual Report and Financial Statementsfor the 14 months ended 29 February 2008

Page

2 Highlights

3 Chairman’s Statement

6 Directors and Advisers

7 Board of Directors

8 Directors’ Report

11 Directors’ Responsibilities

12 Report on Corporate Governance

14 Directors’ Remuneration Report

16 Independent Auditor’s Report

17 Consolidated Income Statement

18 Consolidated Balance Sheet

19 Consolidated Statement of Cash Flow

20 Consolidated Statement of Changes in Stockholder’s Equity

21 Notes to the Financial Statements

35 Notice of Annual General Meeting

OCZ Technology Group, Inc.

1

Highlightsfor the 14 months ended 29 February 2008

14 months to 29 February 2008 versus 12 months to 31 December 2006

l Revenues up 100 per cent. to $134.7 million (2006 12 months: $67.8 million)

l EMEA revenues up 175 per cent. to $63 million (2006: $23 million)

l Non-memory revenues up 280 per cent to $19 million (2006: $5 million)

l Gross Profit up 192 per cent to $26.1 million with margins at 19.4 per cent. (2006: 13.2 per cent.)

l Fully diluted EPS of $0.036 (2006: loss of $0.048)

Pro forma 12 months to 29 February 2008 versus 12 months to 28 February 2007

l Revenues up 56 per cent. to $118 million (2007: $76 million)

l Gross Profit up 110 per cent to $23 million with margins at 19.4 per cent. (2007: 14.4 per cent.)

l Underlying pre-tax profit of $1.579 million (2007: loss of $0.95 million)

General

l Completed two acquisitions allowing for accelerated diversification of products.

l Successfully launched the Neural Impulse Actuator and several new product initiatives with industry partnersIntel, NVIDIA and AMD

l Established and then rapidly expanded the manufacturing capacity in Taiwan, resulting in lower unitmanufacturing costs and increased capacity

l Management team strengthened with experienced executives in manufacturing and sales

l Record revenues achieved in April 2008

“Our continued rapid growth in both revenue and earnings is the result of successfully executing our strategy ofdriving market share growth, expanding our sales channels and maintaining a technology leadership position.Overall, we are pleased with our trading performance against the backdrop of challenging industry conditions in thesecond half of 2007.

“In April we recorded record revenues and have had strong growth year to date, both in the US and worldwide. Weremain confident that our strategy will continue to deliver substantial growth and increased profits”.

Ryan PetersenChief Executive

12 June 2008


2

Chairman’s Statementfor the 14 months ended 29 February 2008

OverviewIn the past 14 months, the Group has achieved rapid organic growth and completed two acquisitions. As reportedin March 2008, demand for OCZ’s innovative products continues to increase, as evidenced by the substantialgrowth of the Group’s client base and the subsequent revenue growth. The Group has increased its manufacturingoperations in Taiwan, reduced manufacturing costs and established a local sales presence in Asia.

The Group has moved into profitability for the 14-month period ended 29 February 2008. Revenues increased by100 per cent. to $134.7 million (12 months ended December 2006: $67.8 million) which resulted in an underlyingprofit before taxation for the period of $2.2 million (2006: loss $1.7 million) despite the backdrop of difficult industryconditions during the latter part of 2007. In response to these conditions the Group has strengthened itsmanagement team, expanded its manufacturing capacity and introduced cost saving measures.

Financial reviewAs reported in March 2008, OCZ achieved record revenues of $111.4 million for the 12 months ended 31 December 2007 and now reports 14-month revenues of $134.7 million. Acquisitions contributed approximately$6 million of revenue in the 14-month period. Unaudited revenue extracted from the management accounts for thetwo months ended 29 February 2008 was $23.3 million, up 45 per cent. (January and February 2007 (unaudited):$16 million).

Gross profit increased by 192 per cent. as margins increased to 19.4 per cent. (2006: 12.5 per cent.) driven by theincrease in purchasing power provided by the fundraising in 2007, the establishment of a purchasing organisationin Taiwan and economies of scale.

The Group’s unaudited underlying pretax profit for the 12 months ended 31 December 2007, before non-cashexpenses for stock based compensation, amortisation of intangibles and exceptional expenses related to executiverestructuring, was $2.1 million (2006: loss $1.7 million). This has now increased to $2.2 million for the 14 monthsended 29 February 2008.

Pretax profit for the 14 months ended 29 February 2008 was $1.1 million (2006: loss $2.0 million).

Underlying earnings per share for the 14 months ended February 2008 were 6.1 cents (2006: loss per share 4.2 cents). Earnings per share for the 14 months ended February 2008 were 3.7 cents (2006: loss per share 4.8 cents).

During the second half of 2007, the Group concluded a new $10 million line of credit with Silicon Valley Bank,replacing a $4.5 million facility. As at 29 February 2008, approximately $6.9 million of the line was drawn down ofwhich approximately $5.1 million was used for working capital needs and $1.8 million for acquisition relatedfinancing. In the current financial year, the Group has introduced additional credit control procedures designed toreduce debtor collection periods and shorten the working capital cycle. The Board is encouraged by the earlyresults from this initiative and will be introducing additional measures to shorten the cycle further.

In order to provide a comparative figure for the current year’s trading, an unaudited proforma income statement hasbeen included in the notes below which shows the Group’s financial performance for the 12 months ended 29 February 2008 compared with the results for the 12 months ended 28 February 2007. Revenues for the 12months were $118.4 million (2006: $76 million), gross profit was $22.9 million (2006: $10.9 million), underlyingpretax profit was $1.6 million (2006: loss $1 million) and underlying earnings per share were 5.1 cents (2006: lossper share 2.6 cents).


3

Chairman’s Statementcontinued

Operational reviewMemory productsOCZ’s channel expansion strategy resulted in the continued growth of its customer base worldwide, which nowincludes Dell, Circuit City, Play, Dabs, Amazon, DSG International, CompUSA, Ecost and RDC. This resulted in anincrease in revenues for the 14-month period ended 29 February 2008 in its core memory products division of 85per cent. to $116 million (2006: $63 million). Unit sales increased 200 per cent. to 1.8 million units (2006: 0.6 millionunits).

In line with its strategy, the Group continued to release premium products targeted at user groups, which havespecific requirements, and which pay a premium for enhanced feature sets, capacity and data transfer speeds.Significant premium product launches included 2Ghz low latency DDR 3, the world’s first 1.15Ghz 4GB memorymodule kits and 32GB high speed USB drives.

The Group intends to continue pursuing growth in this core business segment to accelerate its channel expansionstrategy and continue the rapid release of significant products, which meet the needs of discerning end users.

PSU and thermal productsSales of OCZ’s non-memory (power supply and thermal) products increased by 280 per cent. to $19 million for the14 months ended 29 February 2008 (2006: $5 million). This excellent performance is a direct result of OCZ’s longerterm strategy to diversify its product range and take advantage of its strong branding and consistently expandingsales channels

The Group has launched several notable power supply products including units launched jointly with nVIDIA aswell as environmentally friendly high-efficiency PSUs.

OCZ also won numerous awards in the second half for new power supply products including the Anandtech’s“Editor’s Choice” for both ‘PC Power and Cooling’ and ‘OCZ’ branded offerings.

Mobile computers and platformsThe Group seeks to take advantage of the significant industry growth in mobile computers to promote newlydeveloped OCZ technology. The Group’s strategy includes using the Hypersonic brand as a showcase for newtechnology to drive adoption of OCZ products, such as its new solid state drives, among boutique systemintegrators.

The Group has launched a number of high-speed mobile computing platforms since the acquisition of Hypersonicand intends to expand Hypersonic’s presence worldwide. OCZ has secured long-term sourcing relationships withkey suppliers such as Intel, allowing Hypersonic to become price competitive post acquisition.

The Group has developed “Build your own” notebook computer kits which are aimed at technology-aware end usergroups who wish to purchase laptop components for assembly in their own home and who wish to upgrade theirnotebook computers. These products offer reduced costs to end users and longer computer lifecycles.

The Group has also received positive industry comment on its line of ultra mobile 12 inch mobile computers, whichwere recently launched.

Input devices The Group has expanded its product lines to encompass innovative new product areas such as ‘Brain to Computer’interface technology with the OCZ ‘Neural Impulse Actuator’ which controls the computer cursor via ocular andhead movement. At its launch at CeBit in March 2008, the Group experienced considerable interest in the productand received orders for an initial production run of 3,000 units, which exceeded the management team’sexpectations.

Acquisitions The Group completed two acquisitions during the 14-month period under review, both of which have been fullyintegrated into the business and are making a contribution to the growth of the Group as a whole.


4

Chairman’s Statementcontinued

Strengthening of the management teamAs the Group has continued its rapid development, the sales and manufacturing management teams have beenstrengthened, although the Group has sustained some one-off management restructuring costs. The Group hireda new Vice-President of Sales in January 2008 and a new Manufacturing Operations Manager for its Taiwan facilityin March 2008. These new hires have already made a very positive impact upon their respective teams, which hasresulted in an increase in productivity in the sales and manufacturing functions.

Although restructuring costs relating to these changes were incurred, the Group is now beginning to see the benefitof these changes in increased sales levels, lower unit manufacturing costs and improvements in product grossmargins. These improvements are expected to continue for the remainder of the year.

Current trading and prospectsThe first two months of the 2008/2009 financial year have begun well with the Group achieving record revenues inApril 2008. Retail and online sales from the Group’s key clients have increased significantly during a traditionallyslow season, which leads the Board to believe that OCZ has continued to increase its market share.

The Group has continued to focus on supply chain efficiencies and expects its increasing scale to lower the cost ofmaterials in relation to commodity “market price” in the medium term. This will also enable the Group to use tradeterms as opposed to traditional bank lines to fund inventory growth in the long term.

The benefits of an efficient offshore manufacturing operation continue to deliver reduced operating costs as apercentage of revenue. OCZ expects to continue to make the necessary investments in both human resources andoperational infrastructure to support both lower overall operating costs as well as maintain the current growth.

The Directors are confident that execution of the Group’s growth strategy will provide long-term performanceabove that of its peer-group and long-term earnings growth.

George KynochChairman

12 June 2008


5

Directors and Advisersfor the 14 months ended 29 February 2008

Directors George Alexander Bryson Kynoch Non-executive ChairmanQuentin-Colin Maxwell Solt Non-executive DirectorRyan Maurice Petersen Chief Executive OfficerArthur Frederick Knapp Chief Financial OfficerAlex Mei Chief Marketing Officer

Company Secretary Arthur Knapp

Nominated Adviser John East & Partners Limited10 Finsbury Square, London EC2A 1AD

Brokers Canaccord Adams7th Floor, 80 Victoria Street, London SW1E 5JL

Landsbanki Securities (UK) LimitedBeaufort House,15 St Botolph Street, London EC3A 7QR

UK Legal Counsel to the company DLA Piper UK LLPVictoria Square House, Victoria Square, Birmingham B2 4DL

US Legal Counsel to the company DLA Piper US LLP2000 University Avenue, East Palo Alto, CA 94303, USA

Bankers Silicon Valley Bank3979 Freedom Circle, Santa Clara, CA 95054, USA

Auditors Horwath Clark Whitehill LLPSt Bride’s House, 10 Salisbury Square, London EC4Y 8EH

Registrars Capita IRG (CI) Limited2nd Floor, No 1 Le Truchot, St. Peter Port, Guernsey GY1 4AE

UK Transfer Agent Capita RegistrarsThe Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU

Principal place of business 860 E. Arques Avenue, Sunnyvale, CA 94085, USA

UK address for service documents The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU


6

Board of Directorsfor the 14 months ended 29 February 2008

OCZ’s senior executive management team has over 50 years of cumulative industry experience and nearly 100years of overall business background with companies larger than OCZ. The directors of the Company (“Directors”)believe that this level of business experience is vital to maintaining profitability and control, as the Companyprogresses through the various stages associated with rapid growth.

George Kynoch, (Non-executive Chairman) aged 61, has over 30 years’ experience in industry and was chiefexecutive of G & G Kynoch plc, the predecessor of Kynoch Group plc, now called Bioquell PLC, a design andmanufacture company listed on the Official List, until 1990. He continued as an executive director until 1992 and anon-executive director until 1995. Mr Kynoch was the Scottish Office Industry and Local Government Minister from1995 to 1997, while serving as a Member of Parliament for Kincardine and Deeside between 1992 and 1997. He isnon-executive chairman of ToLuna plc, Mercury Group plc, and TEP Exchange Group plc, all of which arecompanies which are listed on AIM. He is a non-executive director of Talent Group plc, which is also listed on AIM.

Ryan Petersen, (Chief Executive Officer) aged 32, has held the post of CEO since founding OCZ in 2002 and is theinventor or co-inventor of much of OCZ’s proprietary technology. Prior to founding OCZ, Mr. Petersen wasengaged in various entrepreneurial activities. He is an active member of the semiconductor engineering community.

Arthur Knapp, (Chief Financial Officer) aged 59, has over 30 years of business and financial experience. He joinedOCZ in 2005 and is responsible for all finance related operations at OCZ. Mr. Knapp previously served as ChiefFinancial Officer with a number of publicly listed high-tech companies in the United States such as DuquesneSystems, LEGENT Corporation, Boole & Babbage and Calico Commerce. Mr. Knapp also spent 10 years in publicaccounting, is a Certified Public Accountant and Certified Management Accountant. He holds a B.S in Accountingfrom Penn State University.

Quentin Solt, (Non-executive Director) aged 43, is an English solicitor. He trained as a solicitor with Pinsent & Co.in Birmingham, joined major London law firm Berwin Leighton Paisner in 1990 and subsequently went on tobecome a partner and head of the technology corporate finance team. A graduate of Birmingham University andthe College of Law, Guildford, Mr Solt was one of the founders and is currently a non-executive director ofEurovestech plc, a technology investment company which is admitted to trading on AIM. He is actively involvedin a number of technology businesses.

Alex Mei, (Chief Marketing Officer) aged 32, is responsible for branding, product launches, channel support, andPR. He joined OCZ in 2004 and brought a decade of experience in brand and product marketing, focused onconsumer and component solutions in the channel, system integration and retail sectors. Mr. Mei has held severalsenior level marketing management positions in high-tech firms, most recently serving for five years as globalmarketing manager of First International Computer Inc. Mr. Mei holds a B.S. in Marketing Management fromCalifornia Polytechnic State University, San Luis Obispo.


7

Directors’ Reportfor the 14 months ended 29 February 2008

The Directors present their annual report on the affairs of the Company and its subsidiaries (“Group”), together withthe financial statements and auditors’ report, for the 14 months ended 29 February 2008.

Principal activities and business reviewOCZ develops, produces and distributes high-performance computer components including flash memory storage,memory modules, thermal management solutions and computer power supplies. It has an established brand and isrecognised as a leading provider of computer components, which are designed to make computers run faster, morereliably and more efficiently.

OCZ has its headquarters at Sunnyvale, California in the heart of Silicon Valley. It currently employs approximately250 full and part-time staff and has an international presence through offices in Canada, Holland and Taiwan as wellas a worldwide distribution network.

The business review is included in the Chairman’s Statement.

DividendsThe Directors will not be recommending payment of a dividend for the 14 months ended 29 February 2008.

Key financial and operational risksThe Group’s activities expose it to a number of financial risks including price risk, credit risk, cash flow risk andliquidity risk. The use of financial derivatives, where relevant, is governed by the group’s policies approved by theboard of directors (“Board”), which provide written principles on the use of financial derivatives to manage theserisks. The Group does not use derivative financial instruments for speculative purposes. The Group presently doesnot have any financial derivatives.

Cash flow riskInterest bearing assets and liabilities are held at fixed rate to ensure certainty of cash flows.

Credit riskThe Group’s principal financial assets are bank balances and cash and trade and other receivables.

The Group’s credit risk is primarily attributable to its trade receivables. The amounts presented in the balance sheetare net of allowances for doubtful receivables. An allowance for impairment is made where there is an identifiedloss event which, based on previous experience, is evidence of a reduction in the recoverability of the cash flows.

The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are bankswith high credit-ratings assigned by international credit-rating agencies.

The Group has no significant concentration of credit risk, with exposure spread over a large number ofcounterparties and customers.

Liquidity riskIn order to maintain liquidity to ensure that sufficient funds are available for ongoing operations and futuredevelopments, the Company uses a mixture of long-term and short-term debt finance.

Price riskThe Company is exposed to commodity price risk. The Company does not manage its exposure to commodity pricerisk due to cost benefit considerations.

Research and developmentResearch and development is undertaken on an ongoing basis in order to further develop and enhance the Group’sproducts.


8

Directors’ Reportcontinued

Key performance indicators (‘KPIs’)In this section the Board have set out the key performance indicators based on calendar years that we use to monitorprogress against strategy. These will be adjusted for the change in year end.

Percentage increase$’000 compared to previous year

Turnover2007 (12 months) 111,434 64.4 2006 67,772 89.7 2005 35,718 77.3 2004 20,148 142.5

$’000 Percentage of turnover

Gross margin2007 (12 months) 21,584 19.42006 8,946 13.2 2005 6,225 17.4 2004 4,418 21.9

Operating income/(loss)2007 (12 months) 1,420 1.3 2006 (1,247) (1.8) 2005 (133) (0.4)2004 529 2.6

Directors’ interestsThe Directors who served during the period and their interests in the shares of the Company were as follows:

29 February 31 December2008 2006

Number Number

Non-ExecutiveGeorge Kynoch 23,000 16,000Quentin Solt 366,145 329,145

ExecutiveRyan Petersen 12,500,000 14,238,000Arthur Knapp (1) 852,794 976,344Alex Mei 175,000 –

(1) Mr Knapp increased his holdings to 1,117,794 shares by open market purchases totalling 265,000 shares in March and June of 2008.

In addition to the above the Directors held the following interests in options in the shares of the Company:

29 February 31 December2008 2006

Number Number

George Kynoch 150,000 60,000Quentin Solt 150,000 60,000Ryan Petersen – –Arthur Knapp 405,000 225,000Alex Mei 620,000 440,000


9

Directors’ Reportcontinued

Directors remuneration policyInformation is set out in the Report on Corporate Governance.

Substantial shareholdingsAs of the date of this report the following shareholders had been notified to the Company as being interested in3 per cent. or more of the Company’s common shares outstanding:

Number Percentage

Mr Arthur Armagast 10,172,000 19.5Cim Investment Management 3,725,000 7.1Odey Asset Management 2,400,000 4.6Hargreave Hale & Co 2,027,447 3.9Rathbone Investment Management 1,720,256 3.3Jo Hambro Investment Management 1,661,300 3.2

Creditor payment policyThe Company’s policy, which is also applied by the Group, is to settle terms of payment with suppliers whenagreeing the terms of each transaction, ensure that suppliers are made aware of the terms of payment and abide bythe terms of payment. Accounts payable of the Company at 29 February 2008 were equivalent to 41 (2006 – 30)days’ purchases, based on the average daily amount invoiced by suppliers during the year.

Information to auditorsEach of the persons who is a Director at the date of approval of this report confirms that so far as the director isaware, there is no relevant audit information of which the Company’s auditors are unaware; and the director hastaken all the steps that he/she ought to have taken as a Director in order to make himself/herself aware of anyrelevant audit information and to establish that the Company’s auditors are aware of that information.

Auditors Horwath Clark Whitehill LLP have expressed their willingness to continue in office as auditors and a resolution toreappoint them will be proposed at the forthcoming annual general meeting.

Approved by the Board and signed on its behalf by:

A KnappChief Financial Officer and Secretary

12 June 2008


10

Directors’ Responsibilitiesfor the 14 months ended 29 February 2008

The Directors are, among other things, responsible for preparing the annual report and the financial statements inaccordance with applicable law and regulations.

The Directors are required to prepare financial statements for each financial year. The Directors have elected toprepare the financial statements in accordance with United States of America Generally Accepted AccountingPractice (“US GAAP”). The financial statements are required to give a true and fair view of the state of affairs of thegroup and of the profit or loss and cash flows of the Group for that period. In preparing these financial statements,the Directors are required to:

l select suitable accounting policies and then apply them consistently;

l make judgments and estimates that are reasonable and prudent;

l state whether applicable US GAAP have been followed, subject to any material departures disclosed andexplained in the financial statements;

l prepare the financial statements on the going concern basis unless it is inappropriate to presume that theCompany will continue in business.

The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at anytime the financial position of the Group and enable them to ensure that the financial statements can be appropriatelyprepared. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable stepsfor the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information includedon the Group’s website. Legislation in the UK governing the preparation and dissemination of financial statementsmay differ from legislation in other jurisdictions.


11

Report on Corporate Governancefor the 14 months ended 29 February 2008

The Board recognises the importance of sound corporate governance and its policy is to ensure that the Companyadopts policies and procedures which reflect such of the principles of Good Governance and Code of Best Practiceas published by the Committee on Corporate Governance (commonly known as the Combined Code) as areappropriate to the Company’s size on AIM.

The Board of DirectorsThe Board, comprising three Executive Directors, a Non-Executive Chairman and a further Non-Executive, isresponsible for the overall strategy and direction of OCZ Technology Group, Inc as well as for approving potentialacquisitions, major capital expenditure and financing matters. The Board has a formal schedule of business reservedto it and meets regularly during the year. The Board is supplied in a timely manner with information in a form andof a suitable quality appropriate to enable it to discharge its duties. Advice from independent sources is available ifrequired. The Board monitors exposure to key business risks, key performance indicators and reviews the strategicdirection of the Group, the annual budgets as well as their progress against those budgets.

The Board members and their roles are described on page 7.

Internal control and risk managementThe Company has voluntarily complied with the Combined Code provisions on internal control having establishedthe procedures necessary to implement the guidance issued in June 2006 and by reporting in accordance with thatguidance.

The Board takes overall responsibility for establishing and maintaining reliable systems of control in all areas of theGroup’s operations. These systems of control, especially financial control, is designed to manage rather thaneliminate the risk of failure to the achievement of business objectives. In pursuing these objectives, internal controlscan only provide reasonable and not absolute, assurances against material loss or misstatement.

The Board’s policy has been determined by reference to:

(a) “Combined Code”: the principles of good corporate governance and code of best practice prepared by theCommittee on Corporate Governance issued in June 2006.

(b) “Internal Control”: Guidance for Directors on the Combined Code.

Since admission to the AIM Market of the London Stock Exchange (“AIM”), and up to the date of this report, theBoard has applied various processes for identifying, evaluating and managing the risks faced by the Group.

The key features of the system of internal control are set out below:

l OCZ Technology Group, Inc has established an operational management structure with clearly definedresponsibilities and regular performance reviews

l The Group operates a financial reporting system, where actual results are monitored against budgets,forecasts and other performance indicators with action dictated accordingly at least monthly

l A structured approval process based on assessment of risk and value delivered

l Sufficient resource is focused to maintain and develop internal control procedures and information systems,especially in financial management

l The Group has an ongoing process for identifying, evaluating and managing the significant risks that it faces

l During the year the Board considers reports from management and external audit on the system of internalcontrol and any material control weaknesses and discusses with management the actions taken on problemareas identified by the Board members and the auditors.

The Board considers that there have been no substantial weaknesses in internal financial controls that have resultedin any material losses, contingencies or uncertainties, which need to be disclosed in the accounts. The Board hasconsidered the need for an internal audit function and concluded that there is no current need for such a functionwithin the Group. The Board confirms that there is an ongoing process for identifying, evaluating and managing thesignificant risks faced by the Group, and that this process has been in place for the year under review and up to thedate of approval of the Annual Report and Accounts. This process is regularly reviewed by the Board.


12

Report on Corporate Governancecontinued

Audit CommitteeThe audit committee, chaired by George Kynoch, determines the terms of engagement of the Company’s auditorsand determines, in consultation with the auditors, the scope of the audit. The audit committee will receive andreview reports from management and the Company’s auditors relating to the interim and annual accounts and theaccounting and internal control systems in use throughout the Group. The audit committee has unrestricted accessto the Company’s auditors.

In order to safeguard the objectivity and independence of the Group’s external auditors, the Audit Committeereviews and monitors the nature and extent of any non-audit services undertaken by the external auditors.

Accounting policiesThe Board considers the appropriateness of its accounting policies on an annual basis. The Board believes that itsaccounting policies and estimation techniques are appropriate in particular in relation to income recognition andresearch and development.

Communication with shareholdersOCZ Technology Group, Inc is committed to open communications with all its shareholders. The Directors holdregular meetings with institutional shareholders to discuss and review the Group’s activities and objectives.Communication with private shareholders is principally through the Annual General Meeting, where participationis encouraged and where the Board is available to answer questions.

Every shareholder is sent a full annual report each year-end and at the half year they are sent an interim report. Careis taken to ensure that any price sensitive information is released to all shareholders, institutional and private, at thesame time in accordance with London Stock Exchange requirements.

OCZ Technology Group, Inc strives to give a full, timely and realistic assessment of its business in a balanced way,in all price-sensitive reports and presentations.

Going concernThe Directors have reviewed the Group’s budget and cash flows for fiscal 2009 and the medium term plan,produced for the remainder of calendar 2009 and have a reasonable expectation that the Group has adequateresources to continue in operational existence for the foreseeable future. For this reason, The Directors continue toprepare the accounts on a going concern basis.


G KynochChairman

12 June 2008


13

Directors’ Remuneration Report for the 14 months ended 29 February 2008

The Remuneration CommitteeThe remuneration committee, chaired by Quentin Solt, reviews the scale and structure of the executive directors’and senior employees’ remuneration and the terms of their service or employment contracts, including share optionschemes and other bonus arrangements. The remuneration and terms and conditions of appointment of the non-executive directors will be set by the entire Board.

Remuneration policyThe objective of the committee is to ensure that the employment conditions and remuneration packages offered toexecutive directors are sufficient to attract and retain individuals of the required quality and encourage and rewardimproved performance in a manner consistent with the interests of the shareholders. Salaries are reviewed annuallyin the context of both business and individual performance and comparisons are made with other companies, toensure that the Company’s pay and benefits are competitive.

Bonus schemeDiscretionary bonuses are included in the table below.

Directors’ remuneration tableThis part of the Directors’ Remuneration report is subject to audit.

Directors’ remuneration is made up of base salary and other benefits. The emoluments of the directors of theCompany for the 14 months were as follows (in US $):

Salary Taxable 2008 2006and Fees Bonus Benefits Total Total

Director (14 months) (14 months)

Non-ExecutiveGeorge Kynoch 92,400 – – 92,400 38,000Quentin Solt 57,750 – – 57,750 23,750

ExecutiveRyan Petersen 291,667 3,000 – 294,667 192,620Arthur Knapp 175,000 4,500 – 179,500 120,000Alex Mei 180,800 106,000 – 286,800 140,000

Directors’ service contractsThe executive directors have service contracts with the Company, which have notice periods of three months or less.


14

Directors’ Remuneration Report continued

Directors’ Options GrantedAt start during At end of Exercise

of period period Exercised Lapsed period PriceNumber Number Number Number Number $

George Kynoch 45,000 – – – 45,000 1.2015,000 – – – 15,000 2.07

– 90,000 – – 90,000 3.31

Quentin Solt 45,000 – – – 45,000 1.2015,000 – – – 15,000 2.07

– 90,000 – – 90,000 3.31

Ryan Petersen – – – – – –

Arthur Knapp 225,000 – – – 225,000 1.20– 180,000 – – 180,000 3.31

Alex Mei 275,000 – (150,000) – 125,000 0.25165,000 – – – 165,000 1.20

– 330,000 – – 330,000 3.31

The mid market price at the close of business on 29 February 2008 was 38p and the high and low share price duringthe period were 178p and 30p, respectively.

Directors’ share interestsIn addition to the share ownership shown above, relatives of Quentin Solt owned 51,281 shares of common shares.

Interest in contractsThere are no contracts of significance to which the Company or one of its subsidiaries was a party and which adirector of the Company was materially interested in.

Approval at AGMA resolution to approve this report will be put to the shareholders at the Annual General Meeting.


Q SoltChairman of the Remuneration Committee

12 June 2008


15

Independent Auditor’s Reportto the members of OCZ Technology Group, Inc.

We have audited the group financial statements (the “financial statements”) of OCZ Technology Group, Inc. for the 14 months ended 29 February 2008 which comprise the Consolidated Income Statement, the Consolidated Balance Sheet,the Consolidated Statement of Cash Flow, the Consolidated Statement of Changes in Stockholder’s Equity, and the relatednotes numbered 1 to 15. These financial statements have been prepared under the accounting policies set out therein.

We have not audited the pro forma financial information included in note 16 to the financial statements which has beenprovided by the Group for comparative purposes and our audit opinion does not extend to items included in this note.

This report is made solely to the Company’s members, as a body. Our audit work has been undertaken so that we mightstate to the Company’s members those matters we are required to state to them in an auditors’ report and for no otherpurpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than theCompany and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditorsThe Directors’ responsibilities for preparing the Annual Report and financial statements in accordance with applicable lawand US GAAP.

Our responsibility is to audit the financial statements in accordance with our terms of engagement and InternationalStandards on Auditing (UK and Ireland).

We report to you our opinion as to whether the financial statements give a true and fair view and whether the financialstatements have been properly prepared in accordance with the US GAAP. We also report to you whether in our opinionthe information given in the Directors’ Report is consistent with the financial statements.

In addition we report to you if, in our opinion, the Company has not kept proper accounting records, if we have notreceived all the information and explanations we require for our audit.

We read other information contained in the Annual Report and consider whether it is consistent with the audited financialstatements. The other information comprises only the Directors’ Report, the Chairman’s Statement, the Chief ExecutiveOfficer’s Review, and the Corporate Governance Statement. We consider the implications for our report if we becomeaware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do notextend to any other information.

Basis of audit opinionWe conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the AuditingPractices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in thefinancial statements. It also includes an assessment of the significant estimates and judgments made by the Directors inthe preparation of the financial statements, and of whether the accounting policies are appropriate to the group’scircumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessaryin order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free frommaterial misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluatedthe overall adequacy of the presentation of information in the financial statements.

OpinionIn our opinion the Group financial statements (including notes 1 to 15) give a true and fair view, in accordance with USGAAP of the state of the Group’s affairs as at 29 February 2008 and of the Group’s profit and cash flow for the 14 monthsthen ended, and, the information given in the Directors’ Report is consistent with the financial statements.

We have not expressed an audit opinion on the pro forma financial information provided in note 16 to the financialstatements which has been provided by the group for comparative purposes.

Horwath Clark Whitehill LLPChartered Accountants and Registered Auditors London

12 June 2008


16

Consolidated Income Statementfor the 14 months ended 29 February 2008

14 months ended 12 months ended29 February 31 December

2008 2006US$’000 US$’000

RevenueSales – net 134,687 67,772Cost of sales 108,572 58,826

Gross profit 26,115 8,946

ExpensesSales and marketing 10,261 4,735General, administrative and operations 12,916 5,006Research and development 1,772 452

Total operating expenses 24,949 10,193

Operating profits/(loss) 1,166 (1,247)

Other income/(expense)Other income – net 251 (30)Interest and financing costs (340) (682)

(89) (712)

Profit/(loss) before tax 1,077 (1,959)Tax benefit 740 120

Retained profit/(loss) 1,817 (1,839)

Earnings/(loss) per share – basicEarning/(loss) per share – cents 3.7 (4.8)

Weighted average number of shares (‘000) 48,600 38,575

Earnings per share – dilutedEarning/(loss) per share – cents 3.6 (4.8)



17

The notes on pages 21 to 34 form an integral part of these financial statements.

Consolidated Balance Sheetas at 29 February 2008

As at As at29 February 31 December

2008 2006US$’000 US$’000

AssetsCurrent assetsCash and cash equivalents 1,544 1,423Accounts receivable, net 20,480 13,012Inventory 14,827 3,232Deferred tax asset, net 836 120Prepaid expenses and other assets 3,086 459

Total current assets 40,773 18,246

Property and equipment, net 1,940 867

Other assetsGoodwill and acquisition intangible assets 9,789 165Other intangible assets 380 –Deposits and other assets 65 80

10,234 245

Total assets 52,947 19,358

Liabilities and stockholders’ equityCurrent liabilitiesNotes payable 75 –Bank loan payable 6,899 3,830Accounts payable 13,033 5,213Accrued taxes 1 214Accrued wages and payroll taxes 38 136Accrued expense 2,414 804Accrued warranties 97 46Deferred revenue 92 89

Total current liabilities 22,649 10,332

Other long term liabilities 500 –

Stockholders’ equityCommon stock 52 44Additional paid in capital 29,796 11,026Retained deficit (205) (2,022)Cumulative translation adjustment 155 (22)

Total stockholders’ equity 29,798 9,026

Total liabilities and stockholders’ equity 52,947 19,358

The financial statements were approved and authorised for issue by the Board on 12 June 2008.

A Knapp R PetersenChief Financial Officer and Secretary Chief Executive Officer


18


Consolidated Statements of Cash Flowfor the 14 months ended 29 February 2008

14 months ended 12 months ended29 February 31 December

2008 2006US$’000 US$’000

Cash flows from operating activitiesNet income/(loss) 1,817 (1,839)

Adjustments to reconcile net income/(loss) to net cash provided/(used) by operating activities:Depreciation 518 172Amortisation of intangibles 66 –Stock based compensation 848 227

Changes in current assets and current liabilities:Accounts receivable (7,468) (11,574)Inventory (11,595) (1,932)Prepaid expenses and other assets (2,627) (267)Accounts payable 7,820 2,896Accrued taxes (213) 214Accrued wages and payroll taxes (98) 55Accrued expenses 1,610 674Accrued warranties 51 28Deferred tax asset, net (284) (120)Deferred revenue 3 28

Net cash used by operating activities (9,552) (11,438)

Cash flows from investing activitiesPurchases of fixed assets (1,604) (780)Increase in deposits 15 (26)Cash payment for acquisition (7,779) –

Net cash used by investing activities (9,368) (806)

Cash flows from financing activitiesSale of common stock 15,499 10,104Bank loan 3,069 3,830Notes payable 500 (365)

Net cash provided in financing activities 19,068 13,569

Foreign currency effect on cash (27) (22)

Movement in cash and cash equivalents 121 1,303Cash and cash equivalents at beginning of period 1,423 120

Cash and cash equivalents at end of period 1,544 1,423

Supplemental disclosures:Cash paid for interest expense 332 654Cash paid for income taxes 0 0


19


Consolidated Statement of Changes in Stockholders’ Equityfor the 14 months ended 29 February 2008

Additional Cumulative paid in translation Retained

Shares Amount capital adjustment earnings TotalNo ‘000 $’000 $’000 $’000 $’000 $’000

As at 31 December 2005 33,084 34 705 – (183) 556

Issuance of common stock 8,840 9 8,880 – – 8,889Conversion of CULS upon admission to AIM 1,210 1 1,042 – – 1,043Exercise of stock options and warrants 355 – 171 – – 171Increase in Cumulative translation adjustment – – – (22) – (22)Stock based compensation – – 228 – – 228Net loss – – – – (1,839) (1,839)

As at 31 December 2006 43,489 44 11,026 (22) (2,022) 9,026

Issuance of common stock for acquisition 623 1 1,975 – – 1,976Issuance of common stock 6,620 6 15,251 – – 15,257Capitalisation of promissory note 579 – 500 – – 500Exercise of stock options and warrants 853 1 241 – – 242Increase in Cumulative translation adjustment – – – 177 – 177Stock based compensation – – 848 – – 848Tax effect of stock based compensation – – (45) – – (45)Net income – – – – 1,817 1,817

As at 29 February 2008 52,164 52 29,796 155 (205) 29,798


20


Notes to the Financial Statementsfor the 14 months ended 29 February 2008

1. Responsibility The Directors are responsible for preparing the financial information set out below on the basis of preparationset out in note 3 to the financial information and in accordance with US GAAP.

2. HistoryOCZ develops, produces, and distributes high-performance computer components including flash memorystorage, memory modules, thermal management solutions and computer power supplies, designed to makecomputers run faster, more reliably and more efficiently. During 2007 it acquired the assets of two companiesin order to further diversify its product offerings: PC Power & Cooling, a leading brand of power supplies andHypersonic PC, a maker of high performance laptop and desktop computer systems.

The Company was incorporated in April 2002 in the state of Indiana as OCZ Technology Group, Inc. InDecember 2004 the Company formed OCZ Technology Group, Inc. a Delaware corporation and on 28 December 2004 effected a merger between the Indiana and Delaware companies.

OCZ Canada, Inc. (“OCZ Canada”) was incorporated on 25 July 2003 under the national laws of Canada. Onincorporation 70 shares of common stock were issued to OCZ Technology Group Inc. with the remaining 30 shares of common stock being issued to a minority stockholder.

On 1 January 2005, OCZ Technology Group, Inc. entered into a stock purchase agreement under which itagreed to acquire the 30 per cent. minority shareholding in return for 1,200,000 shares in the Companyvalued at approximately $0.17 per share.

3. Summary of significant accounting policies

Basis of preparationThe financial information of the Group has been prepared in accordance with US GAAP. The significantaccounting policies used in the preparation of the financial information are summarised below.

Change of year endThe Group changed its financial year end to 28/29 February in order to provide a more accurate managementof budgets and a more consistent, transparent report of the peak selling season as well as to smooth outvariances in the sales cycle over the Christmas and New Year period. The previous 31 December financial yearend for the Group split the holiday season into two different fiscal years, possibly distorting the impact of thebusiest period to the market.

The previous financial year was extended to a 14 month period; running from 1 January 2007 to 29 February2008. The new financial year runs from 1 March to 28/29 February.

Principles of consolidationThe consolidated financial information includes the financial information of OCZ Technology Group, Inc. andits subsidiary, OCZ Canada, after elimination of all material intercompany balances and transactions.

Use of estimatesThe preparation of these financial statements requires us to make estimates and judgments that affect thereported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent liabilities.On an ongoing basis, we evaluate our estimates, including, among others, those related to customer programsand incentives, product returns, bad debts, inventories and related reserves, investments, income taxes,warranty obligations, stock compensation, contingencies and litigation. We base our estimates on historicalexperience and on other assumptions that we believe are reasonable under the circumstances, the results ofwhich form the basis for our judgments about the carrying values of assets and liabilities when those valuesare not readily apparent from other sources. Estimates have historically approximated actual results. However,future results will differ from these estimates under different assumptions and conditions.


21

Notes to the Financial Statementscontinued

3. Summary of significant accounting policies (continued)Business combinationsIn accordance with the provisions of Statement of Financial Accounting Standards No. 141, or SFAS 141,Business Combinations, we allocate the purchase price to the tangible and intangible assets acquired, liabilitiesassumed, and in-process research and development based on their estimated fair values. Management makessignificant estimates and assumptions, which are believed to be reasonable, in determining the fair values ofcertain assets acquired and liabilities assumed, especially with respect to intangible assets. These estimates arebased on historical experience and information obtained from the management of the acquired companies andare inherently uncertain. Critical estimates in valuing certain of the intangible assets include but are not limitedto future expected cash flows from product sales, customer relationships, acquired developed technologiesand patents, expected costs to develop the in-process research and development into commercially viableproducts and estimated cash flows from the projects when completed, expected life of the core technology anddiscount rates. Unanticipated events and circumstances may occur which may affect the accuracy or validity ofsuch assumptions, estimates or actual results.

Cash equivalentsFor the purposes of the statement of cash flows, the Group considers all short-term debt securities and highlyliquid investments with an original maturity of three months or less to be cash equivalents.

Concentration of credit risksFinancial instruments which potentially subject the Group to concentrations of credit risk consist of cash andcash equivalents and accounts receivable. The Group maintains credit insurance on the majority of itsreceivables. During the periods presented herein the Group had deposits in banks in excess of the FederalDeposit Insurance Corporation insurance limit of $100,000. The Group has not experienced any losses in suchaccounts and believes it is not exposed to any significant risk on trade receivables, cash and cash equivalents.

Comprehensive incomeThe Group utilises Statement of Financial Accounting Standards (“SFAS”) No. 130, “ReportingComprehensive Income” issued in the United States of America. This statement establishes standards forreporting comprehensive income and its components in financial information. Comprehensive income asdefined includes all changes in equity (net assets) during a period from non-owner sources. Examples of itemsto be included in comprehensive income, which are excluded from net income, include foreign currencytranslation adjustments, minimum pension liability adjustments and unrealised gains and losses on available-for-sale securities. Comprehensive income is not presented in the Group’s consolidated financial informationsince the Group did not have any changes in equity from non-owner sources.

Trade accounts receivable and allowance for doubtful accountsAccounts receivable is stated at the amount which management expects to collect after providing anallowance for doubtful accounts based on an evaluation of a customer’s specific financial situation. Thisallowance amounted to approximately $330,000 as at 29 February 2008 (2006: $378,000).

Receivable factoringHistorically, the Group entered into factoring agreements with a financial company the last of which expiredon 20 January 2006 but was renewed on a short-term basis to 30 June 2006. The Group also had a factoringagreement with another financial company under similar financial terms but with no minimum commitments.Both of these agreements were terminated in the second half of 2006.

InventoryInventory is valued at the lower of cost or market value with cost being valued using the average cost method.Inventory consists of raw materials, work in progress and finished goods.

The Group writes down inventory for slow moving and obsolete inventory based on assessments of futuredemands and market conditions.


22


3. Summary of significant accounting policies (continued)Property and equipmentProperty and equipment assets are carried at cost, net of accumulated depreciation. Maintenance, repairs andrenewals are expensed as incurred. Depreciation of property and equipment is provided for on a straight linebasis over their estimated useful lives as follows:

Vehicles 4 yearsFurniture and fixtures 3-5 yearsEquipment 3-5 years

Impairment of long-lived assetsThe Group reviews long-lived assets for impairment whenever events or changes in circumstances indicatethat the carrying amount of the asset may not become recoverable. If the sum of the expected future cashflows, undiscounted and without interest charges is less than the carrying amount of the asset, the Grouprecognises an impairment loss based on the estimated fair value of the asset.

Income taxesThe Group accounts for income taxes under the provisions of Statements of Financial Accounting StandardsNumber 109 “Accounting for Income Taxes”, which requires a company to recognise deferred tax assets andliabilities for the expected future tax consequences of events that have been recognised in a company’s financialinformation or tax returns. Under this method, deferred tax assets and liabilities are determined based on thedifference between the financial information’s carrying amounts and tax basis of assets and liabilities using theenacted tax rates. In addition, a valuation allowance is established to reduce any deferred tax asset for which itis determined that it is more likely than not that some portion of the deferred tax asset will not be realized.

The Group’s subsidiary pays taxes in Canada. The Group does not file consolidated tax returns.

Fair value of financial instrumentsThe Group’s financial instruments consist primarily of cash, marketable securities, accounts receivable andaccounts payable. The carrying values of financial instruments are representative of their fair values due totheir short-term maturities.

Revenue recognitionThe Group records all of its product sales net of allowances for returns and product rebates, sales credits, andmarket development funds. Revenues are recognised upon shipment by a common carrier when risk of losspasses, and when terms are fixed and collection is probable. If the customer is a general distributor, the salesand cost of sales are removed from the financial information and the income is shown as deferred revenue onthe balance sheet. These items are then recognised on the income statement on a sell-through basis.

Deferred revenueAt 31 December 2006 and 29 February 2008, the Group had shipped merchandise totalling $300,000 and$325,000, respectively, to customers whose revenues were deferred. The sales and related cost of sales havebeen removed from the financial information and the income shown as deferred revenue. Deferred revenueas at 31 December 2006 and 29 February 2008 was $89,000 and $92,000, respectively.

The Group recognises sales, cost of sales and income from these shipments as the merchandise is sold by itscustomers.

Research and development costsCosts of researching and developing new technology or significantly altering existing technology areexpensed as incurred.

Shipping and handlingAmounts billed to customers for shipping and handling costs are included as a component of revenue and thecorresponding costs are included in cost of sales in accordance with EITF Issue No. 00-10, “Accounting forShipping and Handling Fees and Costs”.


23


3. Summary of significant accounting policies (continued)AdvertisingTotal advertising costs in the periods ended 31 December 2006 and 29 February 2008 were $1,059,000 and$2,426,000, respectively. Advertising costs are included in sales and marketing expenses.

Foreign currency translationAll of the Group’s sales are invoiced in US dollars.

The accounts of the Group’s operations in Canada and Europe are maintained in Canadian dollars and Euro,respectively. Assets and liabilities are translated into US dollars at rates in effect at the balance sheet date.Revenues, cost of sales and expenses are translated at weighted average rates during the reporting period.Gains and losses resulting from foreign currency transactions are included in income. Transactiongains/(losses) of approximately ($10,000) and $57,000 were included in operating expenses on the incomestatement for the periods ended 31 December 2006 and 29 February 2008 respectively.

Accrued warrantiesThe Group offers its customers warranties on certain products sold to them. These warranties typicallyprovide for the replacement of its products if they are found to be faulty within a specified period. Concurrentwith the sale of products, a provision for estimated warranty expenses is recorded with a correspondingincrease in cost of goods sold. The provision is adjusted periodically based on historical and anticipatedexperience. Actual expense of replacing faulty products under warranty, including parts and labour, arecharged to this provision when incurred.

Stock-based compensationOn 1 January 2006 the Group adopted SFAS 123R using the modified prospective application method. Underthis method, compensation cost recognized for the periods ended 31 December 2006 and 29 February 2008,includes: (a) compensation cost for all share-based payments granted prior to, but not yet vested as of 1 January 2006, based on the grant-date fair value estimated in accordance with the original provisions ofSFAS 123, and (b) compensation cost for all share-based payments granted subsequent to 1 January 2006,based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R. In addition,deferred stock compensation related to non-vested options is required to be eliminated against additionalpaid-in capital upon adoption of SFAS 123R.

Since the Group’s stock-based compensation plan was established in December 2004 all options have beenissued at or above the estimated fair market value so that there is no intrinsic value to be expensed. Stockbased compensation charged to expenses was $228,000 and $848,000 for the periods ending 31 December2006 and 29 February 2008, respectively. As at 29 February 2008, compensation costs related to non vestedawards amounted to approximately $1.9 million and will be recognised in the periods to 28/29 February 2012over a weighted average term of 19.5 months.

The fair value of options grants is determined using the Black-Scholes option pricing model with the followingweighted average assumptions:


2008 2006

Expected dividend 0% 0%Risk free interest rate 4.7% 4.8%Expected volatility 0.37% 0.41%Expected life (in years) 4.28 4.28


24


3. Summary of significant accounting policies (continued)Net income/(loss) per shareBasic income/(loss) per share is computed by dividing net income/(loss) by the weighted-average number ofcommon shares outstanding for the year as shown below. Diluted income per share reflects the potentialdilution from the incremental impact of the exercise of options and warrants into common stock using thetreasury stock method whereby the proceeds from the assumed exercise are then assumed to be used torepurchase common stock. The calculation of diluted net income/(loss) per share excludes potential shares iftheir effect is anti-dilutive; that is, when there is a net loss or the exercise price of the option or warrantexceeds the market price. Potential shares for the 14 months consist of approximately 1.4 million incrementalcommon shares issuable upon the exercise of stock options and warrants.

14 months ended Year ended29 February 31 December

2008 2006‘000 ‘000

Shares outstanding, beginning 43,489 33,085Weighted-average shares issued 5,111 5,490

Weighted-average shares, basic 48,600 38,575Effect of dilutive stock options and warrants 1,400 –

Weighted-average shares, diluted 50,000 38,575

4. Recent accounting pronouncementsRecent accounting pronouncements which are deemed relevant to the Group’s operations included:

In July 2006, the FASB issued FIN 48, Accounting for Uncertainty in Income Taxes, an Interpretation of SFASno. 109. FIN 48 prescribes guidance to address inconsistencies among entities with the measurement andrecognition in accounting for income tax positions for financial statement purposes. Specifically FIN 48requires companies to determine whether it is more likely than not that a tax position will be sustained uponexamination by the appropriate taxing authorities before any part of the benefit can be recorded in thefinancial statements. FIN 48 is effective for years beginning after 15 December 2006. Because the Group hasbeen in tax loss situation, the adoption of FIN 48 did not have a material effect on the financial statements. Asat the balance sheet date the Group did not have any examinations by an appropriate taxing authority ongoingand they were not aware of any uncertain tax positions in any of the jurisdictions in which they operate.

SFAS No. 141 (revised). In December 2007, the FASB issued Statement of Financial Accounting StandardsNo. 141 (revised) (“SFAS 141R”), Business Combinations. The standard changes the accounting for businesscombinations by requiring that an acquiring entity measure and recognize identifiable assets acquired andliabilities assumed at the acquisition date fair value with limited exceptions. The changes include thetreatment of acquisition-related transaction costs, the valuation of any noncontrolling interest at acquisitiondate fair value, the recording of acquired contingent liabilities at acquisition date fair value and the subsequentre-measurement of such liabilities after the acquisition date, the recognition of capitalized in-process researchand development, the accounting for acquisition-related restructuring cost accruals subsequent to theacquisition date, and the recognition of changes in the acquirer’s income tax valuation allowance. SFAS141(R) is effective for fiscal years beginning after 15 December 2008, with early adoption prohibited. Theaccounting treatment related to pre-acquisition uncertain tax positions will change when SFAS 141(R)becomes effective, which will be in the first quarter of the Company’s fiscal year 2009. At such time, anychanges to the recognition or measurement of uncertain tax positions related to pre-acquisition periods willbe recorded through income tax expense, whereas currently the accounting treatment would require anyadjustment to be recognized through the purchase price. The Company is assessing the impact of SFAS141(R) to its future consolidated financial statements.


25


4. Recent accounting pronouncements (continued)SFAS No. 157. In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157(“SFAS 157”), Fair Value Measurements. SFAS 157 defines fair value, establishes a market-based frameworkor hierarchy for measuring fair value, and expands disclosures about fair value measurements. SFAS 157 isapplicable whenever another accounting pronouncement requires or permits assets and liabilities to bemeasured at fair value. SFAS 157 does not expand or require any new fair value measures. The provisions ofSFAS 157 are to be applied prospectively and are effective for financial statements issued for fiscal yearsbeginning after 15 November 2007. The Company will adopt SFAS 157 beginning in fiscal year 2009 and doesnot expect the adoption of SFAS 157 to have a material impact to its consolidated results of operations andfinancial position.

5. InventoryInventory consists of the following:


2008 2006$’000 $’000

Raw materials 5,133 2,238Work in progress 3,908 104Finished goods 5,786 890

14,827 3,232

6. Property and equipmentNet property and equipment consists of the following:


2008 2006$’000 $’000

Vehicles 142 58Furniture and fixtures 572 298Equipment 1,832 736Leasehold Improvement 326 154

2,872 1,246Less: accumulated depreciation (932) (379)

1,940 867

Depreciation and amortisation expense for the periods ended 31 December 2006 and 29 February 2008amounted to $172,000 and $518,000, respectively. No assets were held under capital lease arrangementsduring these periods.


26


7. Goodwill on acquisition and other intangible assets Goodwill represents the excess of the purchase price over the estimated fair value of the net assets acquired.The Group values goodwill in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets.”Goodwill is carried at fair value and reviewed at least annually for impairment as of 31 December or morefrequently if events and circumstances indicate that the asset might be impaired, in accordance with SFAS No.142. The brand name intangible assets are being amortized over a 4-year period. Subsequent payments madefor the contingent consideration are charged to goodwill. For tax purposes, goodwill is deductible over a 15-year period.

The Group has determined that it has one reporting unit as defined by SFAS 142. An impairment loss wouldbe recognised to the extent that the carrying amount exceeds the fair value of the Group (the reporting unit).There are two steps in the determination. The first step compares the carrying amount of the net assets to thefair value of the Group. The second step, if necessary, recognises an impairment loss to the extent the carryingamount of the Group’s net assets exceed the fair value of the Group. The implied fair value of goodwill isdetermined by allocating the fair value of the Group in a manner similar to a purchase price allocation, inaccordance with SFAS No. 141, “Business Combinations.” The residual fair value after this allocation is theimplied fair value of the Group’s goodwill. The Group has not recorded an impairment of goodwill.

The movement in goodwill on acquisition and other intangible assets can be summarised as follows:

Otherintangible

Goodwill assets$’000 $’000

CostAs at 1 January 2006 and 31 December 2006 165 –Additions during the period 9,624 446

As at 29 February 2008 9,789 446

AmortisationAs at 1 January 2006 and 31 December 2006 – –Charge for the period – 66

As at 29 February 2008 – 66

Net carrying valueAs at 1 January 2006 and 31 December 2006 165 –

As at 29 February 2008 9,789 380

GoodwillOn 1 January 2005, OCZ Technology Group, Inc. entered into a stock purchase agreement under which itagreed to acquire the 30 per cent. minority shareholding of OCZ Canada in return for 1,200,000 shares in theCompany valued at approximately $0.17 per share. After offsetting the minority interest balance of $35,000,this purchase resulted in $165,000 of goodwill on the Group’s balance sheet at that date.

On 25 May 2007 the Group acquired the assets of PC Power & Cooling, a supplier of computer powersupplies, for an initial consideration of $10 million consisting of $6 million cash, $2 million stock, two $1 million6 per cent. notes payable due in one and two years, and contingent consideration of up to $3 million basedon product sales.

On 25 October 2007 the Group acquired the assets of Hypersonic PC, a supplier of laptop and desktopcomputers, for an initial consideration of $692,000 consisting of $617,000 cash and $75,000 of a 6 per cent.note payable due in one year; additionally there is contingent consideration of up to $200,000 based onproduct sales.


27


7. Goodwill on acquisition and other intangible assets (continued) Both of these 2007 acquisitions, made to diversify and extend the Group’s product offerings, have beenincluded in the accounts from the date of acquisition. Any contingent consideration that is paid will becharged to goodwill. The first $1 million note payable from the PC Power acquisition was repaid in December2007 at a $150,000 discount, which has been included in other income. The second $1 million note due May2009 has been reduced to $500,000 resulting from the conversion of the other $500,000 into 578,570 sharesof common stock using a notional conversion price of 43.5p and a pre-agreed currency exchange rate.

The allocation of the initial purchase consideration was as follows ($000):

PC Power Hypersonic

Accounts receivable 534 –Inventory 1,034 61Equipment 160 33Brand name 280 166Goodwill 8,355 792Other assets 14 –Liabilities assumed (377) (360)

10,000 692

Since the acquisitions, additional amounts have been recognised in respect of the PC Power acquisition inrelation to additional contingent consideration for product sales up to 29 February 2008 totalling $310,000and acquisition costs capitalised totalling $121,000. Additional amounts have also been recognised in respectof the acquisition costs of Hypersonic totalling $46,000.

Other intangible assets Intangible assets totalling $446,000 ($280,000 PC Power, $166,000 Hypersonic) allocated to brand name andtrade marks from the above acquisitions are being amortized over 48 months on a straight-line basis. Expenseduring the 14 months ended 29 February 2008 was $66,000.

8. Accrued expensesAccrued expenses consist of the following:


2008 2006$’000 $’000

Audit fees 128 154Interest expense 24 28Mail in rebate provision 230 184Sales marketing program 697 133Employee related payments 633 84Customer repair provision 76 72Uninvoiced goods and services 626 149

2,414 804


28


9. Accrued warrantyAccrued warranty expenses consist of the following:


2008 2006$’000 $’000

Balance at beginning of year 46 18Liability assumed from acquisition 22 –Provision for warranty expense 390 302Warranty replacements/repairs (361) (274)

97 46

10. Commitments and contingenciesThe Company and its subsidiary leases office and warehouse facilities under lease terms of approximately twoto five years expiring mostly in 2010. Rent expense amounted to $895,000 in the 14 months ended 29 February 2008 and $425,000 in calendar 2006.

Future minimum payments due under these non cancellable lease agreements are as follows:$’000

Fiscal years ending 28 February2009 1,0302010 9952011 175

2,200

11. Bank Line of Credit In November 2007 the Company obtained a new bank line of credit facility in the amount of $10 million. Theagreement has a one-year term, an annual commitment fee, and bears interest at prime plus 0.75 per cent.with a floor of 6.25 per cent.. The bank has essentially all the Company’s assets as collateral and requiresperiodic operational reporting in lieu of any financial covenants other than tangible net worth as defined. Asat 29 February 2008 the Company borrowed approximately $6.9 million under this line and is in compliancewith the terms of the agreement.


29


12. Stockholders’ equityAs at 31 December 2004 and 2005 the Company had 37,500,000 shares of $0.001 par value common stockauthorised of which 30,483,000 and 33,085,326 shares were outstanding.

As outlined in note 2, on 1 January 2005, the Company purchased the 30 per cent. minority interest in itsCanadian subsidiary by the issuance of 1,200,000 shares of common stock valued at approximately $0.17 pershare.

During the year ended 31 December 2005, the Company sold 18,000 shares of common stock valued atapproximately $0.17 and 1,029,144 shares of common stock valued at $0.25 which equalled the estimatedfair market value at the time of sale.

During the remainder of 2005, the Company engaged in routine stock option and stock sale transactions asfurther described in the Consolidated Statement of Changes in Stockholder Equity.

In June 2006, the Company issued 7,550,000 common shares as part of its Initial Public Offering (“IPO”) onAIM on the London Stock Exchange at 65 pence ($1.20). In October 2006 the Company did an additionalplacing of 1,290,000 Common Shares at 85 pence ($1.66). Additionally, in conjunction with the IPO,1,210,000 shares were issued upon conversion of certain Convertible Unsecured Loan Stock (CULS) at a priceof 48.75 pence ($.90).

During the remainder of 2006, approximately 354,000 Common Shares were issued from the exercise ofstock options and warrants.

During May 2007, the Company completed a secondary placing of 6,620,000 shares at 125 pence ($2.47)which raised approximately $15.3 million after costs. In connection with the May 2007 acquisition of PCPower & Cooling, the Company issued 623,000 Common Shares and in February 2008 issued 579,000 sharesas part of a capitalisation of $500,000 of an acquisition related note.

During the remainder of the 14 month period ended 29 February 2008, approximately 853,000 CommonShares were issued from the exercise of stock options.

Stock incentive planIn December 2004, the Company adopted a stock incentive plan with options to 4,500,000 shares of commonstock authorised for issuance. The shares to be purchased are subject to forfeiture conditions, rights of repurchase,rights of first refusal and other transfer restrictions as the Board may determine. The options granted will expire ina term not to exceed 10 years.

The following table summarises option activity for the year ended 31 December 2006 and the 14 monthsended 29 February 2008.

Number Weighted Shares of shares average

available under Exercise Total exercisefor grant option price $ price

Balance at 31 December 2005 655,686 3,087,132 – 771,783 $0.25

New Authorised 1,582,182 – – – –Options granted (1,911,000) 1,911,000 $1.20-$2.07 2,564,650 $1.34Options exercised – (196,875) $0.25 (49,219) $0.25Options forfeited 668,593 (668,593) $0.25 (167,148) $0.25

Balance at 31 December 2006 995,461 4,132,664 – 3,120,066 $0.75

New Authorised 2,000,000 – – – –Options granted (2,999,000) 2,999,000 $1.03-3.41 8,893,320 $2.97Options exercised – (846,321) $0.25-$1.20 (214,549) $0.25Options forfeited 1,166,186 (1,166,186) $0.25-$3.41 (1,732,978) $1.49

Balance at 29 February 2008 1,162,647 5,119,157 – 10,065,859 $1.97

At 31 December 2006 and 29 February 2008 there were 1,279,898 and 1,780,468 fully vested options,respectively.


30


12. Stockholders’ equity (continued)The following table summarises information about stock options outstanding:


2008 2006

Exercise price $0.25-$3.41 $0.25-$2.07Number of shares 5,119,157 4,132,664Weighted average contractual life 8.5 years 8.4 yearsWeighted average exercise price $1.97 $0.75

On 30 April 2008 options for 753,000 shares with exercise prices ranging from $1.67 to $3.41 were cancelled.These options, for non-senior management employees, were then regranted with a three year vesting periodand an exercise price of $0.42 which was the fair market value at date of grant.

WarrantsThe following table summarises warrant activity for the year ended 31 December 2006 and the 14 monthsended 29 February 2008.

Weightedaverage

Number Exercise Total exerciseof shares price $ price

Balance at 31 December 2005 – – – –Warrants granted 473,870 $0.90-$1.56 504,143 $1.06Warrants exercised (117,461) $0.90 (105,715) $0.90Warrants forfeited – – – –

Balance at 31 December 2006 356,409 $0.90-$1.56 398,428 $1.12

Warrants granted – – – –Warrants exercised – – – –Warrants forfeited – – – –

Balance at 29 February 2008 356,409 $0.90-$1.56 398,428 $1.12

13. Employee savings and retirement planThe Group has a 401(k) plan, known as the “OCZ Pension Plan.” Eligibility to participate in the plan is subjectto certain minimum service requirements. Employees may voluntarily contribute up to $15,000 per annum,being the IRS maximum and the Group may make matching contributions as determined by the Board in aresolution on or before the end of the fiscal year. Employees are 100 per cent. vested immediately in anycontributions by the Group. For the periods ended 29 February 2008 and 31 December 2006 , the Group madeno contributions.


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14. Income taxesIncome/(loss) before income tax provision/(benefit) consists of the following:


2008 2006$’000 $’000

Domestic 927 (2,454)International 150 495

1,077 (1,959)

The primary components of deferred income tax assets at 29 February were as follows:As at As at

29 February 31 December2008 2006$’000 $’000

Intangibles from acquisitions 210 –Accrual temporary timing differences 370 300Stock based compensation 450 100Net operating loss carry forwards 690 510State deferred tax effect on federal (125) (70)

Gross deferred tax asset 1,595 840Valuation allowance (759) (720)

Net deferred tax asset 836 120

The Group’s (provision for)/benefit from income taxes consist of the following: As at As at

29 February 31 December2008 2006$’000 $’000

Current:Federal (provision)/benefit 570 120State (provision)/benefit 170 –

740 120

The Group evaluates the need for tax contingency reserves at the end of each financial reporting period.

For Federal and State income tax purposes, the Group has approximately $1,600,000 and $1,700,000,respectively, of net operating loss carry-overs available to offset future taxable income.

The Group’s effective tax rate differed from the statutory federal income tax rate as shown in the followingtable:


2008 2006Percentage Percentage

Statutory federal income tax/(benefit) rate 34.0 34.0State taxes, net of federal tax benefit 5.8 –Accrual temporary timing differences (12.3) –Stock based compensation (38.9) –NOL not utilised (59.1) (27.9)Other-net 1.8 –

Effective tax rate (68.7) 6.1


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15. Segment and geographic informationThe Group operates in a single industry segment and has three product groups comprised of memoryprocessing, power supplies, and flash memory storage.

The following table sets forth the revenues for each of the Group’s product groups for the periods ended 29 February 2008 and 31 December 2006:


2008 2006$’000 $’000

Memory processing 109,317 57,610Power supplies 18,118 5,420Flash memory storage 7,252 4,742

Total 134,687 67,772

As a result of the October 2007 acquisition of Hypersonic, computer systems may in the future represent afourth category but the results were immaterial during the period ended 29 February 2008 and are thereforeincluded within “Memory processing” above.

The Group’s revenues by major geographic area (based on destination) were as follows:


2008 2006$’000 $’000

United States 51,800 31,000Canada 13,600 10,800Europe/Middle East/Africa 63,000 22,900Rest of World 6,287 3,072

Total 134,687 67,772

During the 14 months ended February 2008, sales to one customer represented 12 per cent. of net revenues(2006: 20 per cent.) and sales to another customer represented 8 per cent. of net revenues (2006: 8 per cent.).

The Group’s foreign operations consist of those of its subsidiary, OCZ Canada in Ontario, Canada. Thefollowing table summarises the net revenues, net income/(loss) and long-lived assets of the Group’s US andCanadian operations:


2008 2006$’000 $’000

Net revenuesOCZ Canada 10,274 8,948OCZ US 124,413 58,824

134,687 67,772

Net income/(loss)OCZ Canada 117 (54)OCZ US 1,700 (1,785)

1,817 (1,839)

Long-lived assetsOCZ Canada 11 13OCZ US 1,929 854

1,940 867


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16. Unaudited pro forma financial informationIn order to provide a comparative figure for the current financial year’s trading, an unaudited proforma incomestatement has been included in the note below which, shows the Group’s financial performance for the 12 months ended 29 February 2008 compared with the results for the 12 months ended 28 February 2007.

12 months ended 12 months ended29 February 28 February

2008 2007 US$’000 US$’000

RevenueSales – net 118,352 75,797Cost of sales 95,419 64,863

Gross profit 22,933 10,934

ExpensesSales and marketing 9,125 5,378General, administrative and operations 11,704 5,686Research and development 1,570 513

Total operating expenses 22,399 11,577

Operating profits/(loss) 534 (643)

Other income/(expense)Other income – net 256 (38)Interest and financing costs (289) (563)

(33) (601)

Profit/(Loss) before tax 501 (1,244)Tax benefit/(expense) 936 (120)

Retained profit/(loss) 1,437 (1,364)

Earnings/(Loss) per share – basicEarning/(Loss) per share – cents 2.9 (3.3)


Earnings/(Loss) per share – dilutedEarning/(Loss) per share – cents 2.8 (3.3)



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Notice of Annual General Meetingfor the year ended 31 December 2006

The Annual Meeting of Stockholders of OCZ Technology Group, Inc. (the “Company”) will be held at the offices ofthe Company’s counsel on Tuesday, 8 July 2008 at DLA Piper US LLP, 2000 University Avenue, East Palo Alto,California, United States at 8:30 a.m. California, United States time and at DLA Piper UK LLP, 3 Noble Street,London EC2V 7EE at 4:30 p.m. London, United Kingdom time, for the following purposes:

1. To reappoint Arthur Knapp as a director of the Company who is retiring by rotation under the company’sbylaws and offers himself for re-election as a director.

2. To ratify the appointment of Horwath Clark Whitehill LLP as auditors of the Company until the conclusion of thenext annual meeting of the stockholders at which the accounts are laid before the Company and to authorizethe Directors of the Company to determine the remuneration of the auditors for the ensuing year.

3. To receive and approve the Directors’ Report and the accounts of the Company for the fourteen month periodended 29 February 2008 and the report of the auditors thereon.

4. To approve the Directors’ Remuneration Report for the fourteen month period ended 29 February 2008.

5. To transact such other business as may properly come before the meeting, or any adjournment thereof.

Stockholders of record at the close of business on 11 June 2008 (“Record Date”) shall be entitled to vote at themeeting. The holders of no less than one-third of the Common Stock of the Company issued and outstanding onthe Record Date will constitute a quorum at the Annual Meeting of Stockholders.

The Annual Meeting of Stockholders will take place at DLA Piper US LLP, 2000 University Avenue, East Palo Alto,California, United States and those stockholders attending the annual meeting of stockholders at DLA Piper UK LLP,3 Noble Street, London will be deemed present, in person and entitled to vote at the meeting due to teleconferencebetween the two locations.

By order of the board of directors

George KynochChairman of the board of directors

Sunnyvale, California

18 June 2008

IMPORTANT: Enclosed is a proxy for OCZ Technology Group, Inc. Please date, sign and mail promptlyyour proxy to assure that your shares are represented at the meeting. If you attend the meeting inperson, you may vote in person if you wish to do so even though you have sent in your proxy.


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Printed by Michael Searle & Son Limited

OCZ Technology Group, Inc., 860 E. Arques Ave., Sunnyvale, CA 94085 USAPhone: (408) 733-8400 Fax: (408) 733-5200 Email: [email protected]

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