900708--12/30/2008--BELL_MICROPRODUCTS

related topics

{financial, litigation, operation}

{customer, product, revenue}

{acquisition, growth, future}

{condition, economic, financial}

{debt, indebtedness, cash}

{operation, international, foreign}

{competitive, industry, competition}

{operation, natural, condition}

{product, market, service}

{personnel, key, retain}

{loss, insurance, financial}

{system, service, information}

{stock, price, share}

{control, financial, internal}

{regulation, change, law}

The investigations by our Board of Directors into some of our historical accounting practices and the determination of the various other accounting adjustments, which resulted in the restatement of our previously-issued financial statements, have been time consuming and expensive and have had a material adverse effect on our financial condition, results of operations and cash flows. We are the subject of an ongoing SEC non-public fact-finding inquiry relating to our historical accounting practices. This inquiry could result in penalties that could have a material adverse effect on our financial condition and results of operations. We believe the delisting of our common stock from the NASDAQ Global Market has had an adverse effect on the liquidity and market price of our common stock. We cannot assure you when we will be able to relist our common stock on a national securities exchange. We may be the subject of litigation relating to the restatement of our consolidated financial statements, which could adversely affect our business and results of operations. Our failure to comply with SEC reporting obligations may have an adverse effect on our business. Risks Related to Our Business We rely on a small number of suppliers for products that represent a significant portion of our inventory purchases. Any change in our relationships with these suppliers could have an adverse effect on our results of operations. A reduction in the vendor allowances we collect from the manufacturers of the products we sell could adversely affect our results of operations. We operate in an industry with significant pricing and margin pressure. Our international operations trade in local currencies which subject us to risks related to the fluctuation of foreign currencies against the US dollar. The products we sell may not satisfy shifting customer demand or compete successfully with our competitors products. The value of our inventory may decline, which could have an adverse effect on our financial condition and results of operations. Supply shortages could adversely affect our operating results and cash flows. If we do not control our operating expenses, we may not be able to successfully implement our strategy. Our ability to operate effectively could be impaired if we fail to attract and retain key personnel and qualified managers. Our international operations subject us to additional risks which may adversely affect our results of operations. We are subject to a proposed tax assessment in France, which could have a material adverse effect on our results of operations. Our inability to adequately assess and monitor credit risks of our customers could have a material adverse effect on our financial condition, results of operations and liquidity. If we are unable to effectively compete in our industry, our operating results may suffer. Our lack of long-term agreements with our customers could have a material adverse effect on our business. Failure to identify acquisition opportunities or to successfully integrate acquired businesses into our operations could reduce our revenues and profits, and limit our growth. Our reliance on legacy information systems that are supported by a few individuals as well as a lack of a fully-integrated information system could materially adversely affect our business. If we cannot effectively manage our growth, our business may suffer. The current economic environment has adversely affected business spending patterns, which may have an adverse effect on our business. Some of our operations are located in areas that are subject to natural disasters, which could result in a business stoppage and adversely affect our results of operations. Our business model requires us to hold inventory in a number of different locations, both internationally and domestically, and is subject to inventory theft. Risks Related to Our Financial Condition Our consolidated financial statements are presented on a going concern basis. Given our existing financial condition and current conditions in the global credit markets, if we are unable to comply with one or more of the financial covenants in our credits agreements, there would likely be uncertainties regarding our ability to continue as a going concern. Restrictions in our debt agreements limit our operating and strategic flexibility. Our substantial leverage and related debt service obligations could adversely affect our cash flows and business. In addition, we have not consistently generated historical net income or positive cash flows from operations. Our failure to generate positive cash flows from operations in the future would materially adversely affect our ability to meet our debt service obligations. As a result of our failure to comply with SEC reporting obligations, we were required to obtain waivers in connection with the delivery of financial statements and related matters under our debt agreements. We may need to obtain additional waivers in the future. The failure to obtain the necessary waivers could have a material adverse effect on our business, liquidity and financial condition. We may need additional funding to support our operations following the completion of our restatement of consolidated financial statements; sufficient funding is subject to conditions and may not be available to us, and the unavailability of funding could adversely affect our business. If the global credit market crisis continues, it may impact our ability to obtain debt financing for our operations and the unavailability of funding could adversely affect our business.

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900708--12/30/2008--BELL_MICROPRODUCTS_INC