706864--3/28/2008--MERRIMAC_INDUSTRIES

related topics

{customer, product, revenue}

{product, market, service}

{control, financial, internal}

{regulation, change, law}

{product, liability, claim}

{personnel, key, retain}

{operation, international, foreign}

{property, intellectual, protect}

{debt, indebtedness, cash}

{regulation, government, change}

{competitive, industry, competition}

The market for our products, in particular our Multi-Mix products, is new and rapidly evolving. If we are not able to develop or enhance our products, or to respond to customer needs, our net sales will suffer. We have incurred losses each of the past two fiscal years and may incur losses in the future. Multi-Mix Microtechnology and Multi-Mix PICO Products. We rely on a small number of customers for a substantial portion of our net sales, and declines in sales to these customers could adversely affect our operating results. Our products are intended for use in various sectors of the satellite, defense and telecommunications industries, which produces technologically advanced products with short life cycles. The expenses relating to our products might increase, which could reduce our gross margins. We carry inventory and there is a risk we may be unable to dispose of certain items. We depend on a limited number of suppliers. We generally do not obtain long-term volume purchase commitments from customers, and, therefore, cancellations, reductions in production quantities and delays in production by our customers could adversely affect our operating results. Products we manufacture may contain design or manufacturing defects that could result in reduced demand for our services and liability claims against us. Variations in our quarterly operating results could occur due to factors including changes in demand for our products, the timing of shipments and changes in our mix of net sales. Recent changes in accounting for equity-related compensation could impact our financial statements. Accounting for Stock Issued to Employees Our revolving line of credit expires in October 2008 and the failure to renew the revolving line of credit or a renewal or refinancing on less favorable terms could have a material adverse effect on our business operations. We have significant competition in our industry. Intellectual property rights in our industry are commonly subject to challenge. Our executive officers, engineers, research and development and technical personnel are critical to our business, and without them we might not be able to execute our business strategy. Our industry is subject to numerous government regulations. Some of our operations are outside the United States, which poses risks to our business operations. If we receive other than an unqualified opinion on the adequacy of our internal control over financial reporting as of January 3, 2009 (or January 2, 2010 if proposed SEC rules delaying such requirement are adopted) and future year-ends as required by Section 404 of the Sarbanes-Oxley Act, investors could lose confidence in the reliability of our financial statements, which could result in a decrease in the value of our common stock.

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706864--3/28/2008--MERRIMAC_INDUSTRIES_INC