351298--12/1/2006--HEI

related topics

{customer, product, revenue}

{stock, price, share}

{control, financial, internal}

{debt, indebtedness, cash}

{cost, operation, labor}

{acquisition, growth, future}

{product, market, service}

The price of our stock has been volatile and we could be delisted from the NADSAQ Global Market. Our costs may increase significantly if we are unable to forecast customer orders and production schedules. We may fail to adequately adjust our expenses to predicted revenue in any given period or we may experience significant fluctuations in quarterly net sales because the sales cycle for our products and services is lengthy and unpredictable. Failure to comply with our debt covenants may require us to immediately repay our outstanding balances and/or may affect our ability to borrow funds in the future, either of which may adversely affect our future operating results. If we are unable to develop new products and services our revenue could decrease. We may pursue future significant corporate transactions, such as acquisitions, divestitures or investments that may adversely affect our financial position or cause our net sales to decline or loss per share to increase. Inventory management is critical to maximizing our cash flow. We have issued numerous options to acquire our common stock that could have a dilutive effect on our common stock. If we are not able to establish an effective control environment in Fiscal 2007, we will not comply with Section 404 of the Sarbanes-Oxley Act relating to internal controls over financial reporting.

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351298--12/1/2006--HEI_INC