355948--8/16/2007--RICHARDSON_ELECTRONICS

related topics

{debt, indebtedness, cash}

{customer, product, revenue}

{operation, international, foreign}

{control, financial, internal}

{competitive, industry, competition}

{tax, income, asset}

{personnel, key, retain}

{interest, director, officer}

{condition, economic, financial}

{product, market, service}

Investors should consider carefully the following risk factors, in addition to the other information included and incorporated by reference in this Annual Report on Form 10-K. While the Company believes it has identified and discussed below the key risk factors affecting its business, there may be additional risks and uncertainties that are not presently known or that are not currently believed to be significant that may adversely affect its results of operations. The Company has had significant operating and net losses from continuing operations in the past and may have future losses. The Company has exposure to economic downturns and operates in cyclical markets. Because the Company derives a significant portion of its revenue by distributing products designed and manufactured by third parties, it may be unable to anticipate changes in the marketplace and, as a result, could lose market share. The Company faces intense competition in the markets it serves and, if it does not compete effectively, it could significantly harm its operating results. If the Company does not continue to reduce its costs, it may not be able to compete effectively in its markets. Because the Company generally does not have long-term contracts with its vendors, it may experience shortages of products that could harm its business and customer relationships. The Company s EDG is dependent on a limited number of vendors to supply it with essential products. The Company maintains a significant investment in inventory and has incurred significant charges for inventory obsolescence and overstock, and may incur similar charges in the future. Economic, political, and other risks associated with international sales and operations could adversely affect the Company s business. The Company s success depends on its executive officers and other key personnel. The Company s ability to service its debt and meet its other obligations depends on a number of factors beyond its control. The Company s credit agreement and the indentures for its outstanding notes impose restrictions with respect to various business matters. The Company was not in compliance with certain financial covenants of the Company s credit agreement in the past, and may not be able to comply with these financial covenants in the future. The Company is exposed to foreign currency risk. If the Company does not maintain effective internal controls over financial reporting, it could be unable to provide timely and reliable financial information.

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355948--8/16/2007--RICHARDSON_ELECTRONICS_LTD/DE