854852--4/15/2010--Emrise

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Risks Related to Our Business Actions taken by the Securities and Exchange Commission (Commission) in 2009 against an affiliate of our Lender may adversely affect our ability to continue to borrow funds under the terms of our revolving credit facility with our Lender. If our Lender limits or terminates our ability to borrow funds under the revolving credit facility, our cash position and our ability to continue day to day operations would be adversely affected, almost immediately. We have a significant amount of debt outstanding under our Credit Facility with our Lender which has had negative consequences for us. In the event of a default under our credit facility, our Lender may limit future availability under our revolving line of credit and/or may accelerate payment of all principal balances under this facility. Any of these conditions would have a material adverse effect on our operations and /or our ability to conduct business after that date. Our planned asset sales may materially adversely affect our current operations, our future financial results, our future ability to meet cash flow demands and operate profitably. The values and terms of such sales may not be as favorable to us as we anticipate which may result in additional asset sales. We rely heavily on our management, and the loss of their services could adversely affect our business. We incurred a net loss from continuing operations in 2009 and 2008 and may incur losses in the future. If we continue to incur losses, we will experience negative cash flow, which may hamper our operations, may prevent us from expanding our business and may cause our stock price to decline. There is substantial doubt as to our ability to continue as a going concern. If we are unable to restructure our indebtedness, raise additional capital or sell assets in a timely manner, we may forced to seek, protection under the U.S. Bankruptcy Code or be forced into liquidation or to substantially restructure or alter our business operations and/or debt obligations We have material weaknesses in our internal control over financial reporting structure, which, until remedied, may cause errors in our financial statements that could require restatements of our financial statements and investors may lose confidence in our reported financial information, which could lead to a decline in our stock price. We are not in compliance with the continued listing requirements of the NYSE Arca because our Common Stock is trading at less than $1 per share. While NYSE Arca Regulation staff has allowed us approximately six months to seek to improve our stock price by selling assets and paying down the debt owed to our Lender, we may ultimately be delisted and begin trading on the Over the Counter market. The current global financial crisis a) has had and may continue to have significant negative effects on our customers and our suppliers b) has had and may continue to have significant negative effects on our access to credit and our ability to raise capital, c) may prevent us from accurately forecasting demand for our product, d) increase the risk that we could suffer unrecoverable losses on our customers accounts receivable , or e) may increase the risk that we cannot sell inventory that is on hand resulting in excess inventory levels and may therefore affect our business market share, results of operations, and financial condition. Our defense and aerospace programs are highly dependent on economic and political factors which are outside of our control. Changes in defense budgets in countries around the world and/or changes in priorities on such spending could materially adversely affect our business. Our lack of long-term purchase orders or commitments may materially adversely affect our business if demand is reduced. The unpredictability of our quarterly and annual operating results may cause the price of our common stock to fluctuate or decline. The sales cycles of some of our products are lengthy, exposing us to the risks of delays, foregone orders and fluctuations in operating results. Most of our competitors have greater resources than we do. In order to compete successfully, we must keep pace with our competitors in anticipating and responding to the rapid changes involving the electronic devices and communications equipment industries. Our results of operations could be materially adversely affected if we lose ITT Corporation as a customer or if our sales to ITT Corporation were to decline. Our results of operations could be materially adversely affected as a result of impairments of goodwill and other intangible assets which may cause the price of our common stock to fluctuate or decline. Our acquisition strategy may result in unanticipated accounting charges or otherwise materially adversely affect our results of operations, and result in difficulties in assimilating and integrating the operations, personnel, technologies, products and information systems of acquired companies or businesses, or be dilutive to existing shareholders. Due to our international operating units, we are exposed to various legal, business, political and economic risks associated with our international operations. These risks may substantially increase or decrease if we sell assets as we are required to do by our Lender. If we are unable to fulfill backlog orders due to circumstances involving us or one or more of our suppliers or customers, our anticipated results of operations will suffer If our products fail to comply with evolving government and industry standards and regulations, we may have difficulty selling our products and/or we may incur significant warranty liabilities associated with existing products. Financial statements of our foreign subsidiaries are prepared using the relevant foreign currency that must be converted into U.S. dollars for inclusion in our consolidated financial statements. As a result, exchange rate fluctuations have historically and may in the future materially adversely affect our reported results of operations. These risks may substantially increase or decrease if we sell assets as we are required by our Lender. Because we believe that proprietary rights are material to our success, misappropriation of these rights could materially adversely affect our financial condition. Risks Related to Our Common Stock Our common stock price has been volatile, which has resulted in substantial losses for investors purchasing shares of our common stock and could result in further losses or litigation against us. Future sales of shares of our common stock by our stockholders could cause our stock price to decline. The Company could be a target for a hostile takeover, which could result in a change of the Company s management and directors.

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854852--4/15/2010--Emrise_CORP