What changed in RICHARDSON ELECTRONICS, LTD.'s 2023 10-K compared to 2022?

Across the narrative sections we track, RICHARDSON ELECTRONICS, LTD. (RELL) added 222 paragraphs, removed 236, and edited 161 between the 2022 and 2023 10-K filings. The biggest movers are Item 7. Management's Discussion & Analysis (+119/−112), Item 1A. Risk Factors (+40/−62), Item 1. Business (+46/−47).

Did RICHARDSON ELECTRONICS, LTD. add new Risk Factors in the 2023 10-K?

Yes — Item 1A Risk Factors shows 40 new/edited paragraphs and 62 removed paragraphs versus the 2022 10-K.

What changed in RICHARDSON ELECTRONICS, LTD.'s MD&A (Item 7) in 2023?

Item 7 Management's Discussion & Analysis shows 119 new/edited paragraphs and 112 removed paragraphs year-over-year. Read the side-by-side diff to see exactly which revenue, margin, and outlook commentary was rewritten.

Where does this RELL 10-K diff come from?

The source filings are RICHARDSON ELECTRONICS, LTD.'s official 2022 and 2023 Form 10-K annual reports from SEC EDGAR. 10q10k.net parses each filing, aligns paragraphs by section (Item 1, 1A, 1C, 2, 3, 7, 7A), and highlights every added, removed and edited sentence side-by-side.

RICHARDSON ELECTRONICS, LTD.RELL财报

Nasdaq · 可选消费 · 电子零件及设备批发（未另分类）

The James Richardson Corporation, also going by the name James Richardson Group or JR/Group, is an Australian furniture, hospitality, real estate and retail corporation, headquartered in the Abbotsford suburb of Melbourne, Australia. It is privately owned and employs approximately 2,300 people worldwide. It is perhaps best known among consumers for its duty-free retail stores in airports and border crossings in Australasia and the Middle East. The company is a household name in Israel due to ...

What changed in RICHARDSON ELECTRONICS, LTD.'s 10-K — 2022 vs 2023

Top changes in RICHARDSON ELECTRONICS, LTD.'s 2023 10-K

222 paragraphs added · 236 removed · 161 edited across 7 sections

Item 7. Management's Discussion & Analysis+119 / −112 · 84 edited
Item 1A. Risk Factors+40 / −62 · 33 edited
Item 1. Business+46 / −47 · 32 edited
Item 5. Market for Registrant's Common Equity+8 / −5 · 5 edited
Item 7A. Quantitative and Qualitative Disclosures About Market Risk+5 / −5 · 5 edited

Item 1. Business

Business — how the company describes what it does

32 edited+14 added−15 removed20 unchanged

2022 filing

2023 filing

We establish credit limits for each customer and routinely review delinquent and aging accounts. 6 Distribution We maintain over 100,000 part numbers in our product inventory database and we estimate that more than 90% of orders received by 6:00 p.m. local time are shipped complete the same day for stock product.

We establish credit limits for each customer and routinely review delinquent and aging accounts. Distribution We maintain over 100,000 part numbers in our product inventory database and we estimate that more than 90% of orders received by 6:00 p.m. local time are shipped complete the same day for stock product.

PMT’s focus is on products for power, RF and microwave applications for customers in 5G, alternative energy, aviation, broadcast, communications, industrial, marine, medical, military, scientific and semiconductor markets. PMT focuses on various applications including broadcast transmission, CO2 laser cutting, diagnostic imaging, dielectric and induction heating, high energy transfer, high voltage switching, plasma, power conversion, radar and radiation oncology.

PMT’s focus is on products for power, RF and microwave applications for customers in 5G, aviation, broadcast, communications, industrial, marine, medical, military, scientific and semiconductor markets. PMT focuses on various applications including broadcast transmission, CO2 laser cutting, diagnostic imaging, dielectric and induction heating, high energy transfer, high voltage switching, plasma, power conversion, radar and radiation oncology.

These laws and regulations, which differ among jurisdictions, include, among others, those related to financial and other disclosures, accounting standards, privacy and data protection, cybersecurity, intellectual property, corporate governance, tax, trade, antitrust, 4 employment, import/export, anti-corruption, and environmental regulatory compliance.

These laws and regulations, which differ among jurisdictions, include, among others, those related to financial and other disclosures, accounting standards, privacy and data protection, cybersecurity, intellectual property, corporate governance, tax, trade, antitrust, employment, import/export, anti-corruption, and environmental regulatory compliance.

To date, DEI&B initiatives have focused on the following: • Expanded the Board of Directors to include a female director • Increased DEI&B awareness throughout the Company by education and involvement • Added socially responsible funds to our 401K Plan • Providing regular training, communication, activities, and surveys regarding DEI&B matters to our employees Website Access to SEC Reports We maintain an Internet website at www.rell.com.

To date, DEI&B initiatives have focused on the following: • Expanded the Board of Directors to include a female director • Increased DEI&B awareness throughout the Company through education and involvement • Added socially responsible funds to our 401K Plan • Providing regular training, communication, activities, and surveys regarding DEI&B matters to our employees Website Access to SEC Reports We maintain an Internet website at www.rell.com.

Customers can access our products on our web sites, www.rell.com, www.rellhealthcare.com, www.canvys.com, www.rellpower.com, www.relltubes.com and www.rellaser.com, through electronic data interchange, or by telephone. Customer orders are processed by our regional sales offices and supported primarily by one of our distribution facilities in LaFox, Illinois; Fort Mill, South Carolina; Amsterdam, Netherlands; Marlborough, Massachusetts; Donaueschingen, Germany; or Singapore, Singapore.

Customers can access our products on our websites, www.rell.com, www.rellhealthcare.com, www.canvys.com, www.rellpower.com, www.relltubes.com and www.rellaser.com, through electronic data interchange, or by telephone. Customer orders are processed by our regional sales offices and supported primarily by one of our distribution facilities in LaFox, Illinois; Fort Mill, South Carolina; Amsterdam, Netherlands; Marlborough, Massachusetts; Donaueschingen, Germany; or Singapore, Singapore.

More than 60% of our products are manufactured in LaFox, Illinois, Marlborough, Massachusetts, or Donaueschingen, Germany, or by one of our manufacturing partners throughout the world. All our partners manufacture to our strict specifications and per our supplier code of conduct. We serve customers in the alternative energy, healthcare, aviation, broadcast, communications, industrial, marine, medical, military, scientific, and semiconductor markets.

Nearly 60% of our products are manufactured in LaFox, Illinois, Marlborough, Massachusetts or Donaueschingen, Germany, or by one of our manufacturing partners throughout the world. All our partners manufacture to our strict specifications and per our supplier code of conduct. We serve customers in the alternative energy, healthcare, aviation, broadcast, communications, industrial, marine, medical, military, scientific and semiconductor markets.

Information on stock availability, pricing in local currency, cross-reference information, customers and market analyses are obtainable throughout the entire distribution network. The content of our websites are not deemed to be incorporated by reference in this report filed with the Securities and Exchange Commission. International Sales During fiscal 2022, we made approximately 57% of our sales outside the United States.

Information on stock availability, pricing in local currency, cross-reference information, customers and market analyses are obtainable throughout the entire distribution network. The content of our websites is not deemed to be incorporated by reference in this report filed with the Securities and Exchange Commission. International Sales During fiscal 2023, we made approximately 58% of our sales outside the United States.

The three operating and reportable segments for fiscal 2022, fiscal 2021 and fiscal 2020 are defined as follows: Power and Microwave Technologies Power and Microwave Technologies (“PMT”) combines our core engineered solutions capabilities, power grid and microwave tube business with new disruptive RF, Wireless and Power technologies.

The four operating and reportable segments for fiscal 2023, fiscal 2022 and fiscal 2021 are defined as follows: Power and Microwave Technologies Power and Microwave Technologies combines our core engineered solutions capabilities, power grid and microwave tube business with new disruptive RF, Wireless and Power technologies.

ITEM 1. Business General Richardson Electronics, Ltd. is a leading global manufacturer of engineered solutions, power grid and microwave tubes, and related consumables; power conversion and RF and microwave components; high-value replacement parts, tubes, and service training for diagnostic imaging equipment; and customized display solutions.

ITEM 1. B usiness General Richardson Electronics, Ltd. (the "Company", "we", "our") is a leading global manufacturer of engineered solutions, power grid and microwave tubes and related consumables; power conversion and RF and microwave components; high-value replacement parts, tubes and service training for diagnostic imaging equipment; and customized display solutions.

Selected financial data attributable to each segment and geographic region for fiscal 2022, fiscal 2021 and fiscal 2020 is set forth in Note 9, Segment and Geographic Information , of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K. We have three operating and reportable segments.

Selected financial data attributable to each segment and geographic region for fiscal 2023, fiscal 2022 and fiscal 2021 is set forth in Note 10, Segment and Geographic Information , of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K.

Expenditures relating to such regulations are made in the ordinary course of our business and do not represent material expenditures and we further do not currently expect that compliance with such laws will require us to make material additional expenditures, however, there is no assurance that existing or future laws and regulations applicable to our operations, products, and services will not have a material adverse effect on our business .

Our fiscal year 2022 began on May 30, 2021 and ended on May 28, 2022, our fiscal year 2021 began on May 31, 2020 and ended on May 29, 2021 and our fiscal year 2020 began on June 2, 2019 and ended on May 30, 2020.

Our fiscal year 2023 began on May 29, 2022 and ended on May 27, 2023, our fiscal year 2022 began on May 30, 2021 and ended on May 28, 2022 and our fiscal year 2021 began on May 31, 2020 and ended on May 29, 2021.

We continue to pursue new international sales to further expand our geographic reach. Major Customers During fiscal 2022, fiscal 2021 and fiscal 2020, no one customer accounted for more than 10 percent of the Company’s consolidated net sales.

We continue to pursue new international sales to further expand our geographic reach. Major Customers Sales to one customer in our PMT segment totaling $31.2 million accounted for 12 percent of the Company’s consolidated net sales in fiscal 2023. No one customer accounted for more than 10 percent of the Company’s consolidated net sales for fiscal 2022 and fiscal 2021.

We seek to embrace and encourage our employees’ differences in age, disability, ethnicity, family or marital status, gender identity or expression, language, national origin, physical and mental ability, political affiliation, race, religion, sexual orientation, socio-economic status, veteran status, and other characteristics that make our employees unique. 7 Management has identified Diversity, Equity, Inclusion, and Belonging (“DEI&B”) as a priority for our Company.

Among others, we are subject to a variety of data protection laws that change frequently and have requirements that vary from jurisdiction to jurisdiction. We are subject to significant compliance obligations under privacy laws such as the General Data Protection Regulation in the European Union and an expanding list of comprehensive state privacy and/or cybersecurity laws in the United States.

We are subject to significant compliance obligations under privacy laws such as the General Data Protection Regulation in the European Union and an expanding list of comprehensive state privacy and/or cybersecurity laws in the United States.

PMT also sells a number of products representing trailing edge technology. While the market for these trailing edge technology products is declining, 5 PMT is increasing its market share. PMT often buys products it knows it can sell ahead of any supplier price increases and extended lead times.

While the market for these trailing edge technology products is declining, PMT is increasing its market share. PMT often buys products it knows it can sell ahead of any supplier price increases and extended lead times. As manufacturers for these products exit the business, PMT has the option to purchase a substantial portion of their remaining inventory.

Competition for such personnel is intense and the salary, benefits and other costs to employ the right personnel may impact our results and performance. As of May 28, 2022, we employed 447 individuals, which included 411 full-time individuals and 36 part-time individuals.

The skills, experience and industry knowledge of our employees significantly benefit our operations and performance. Competition for such personnel is intense and the salary, benefits and other costs to employ the right personnel may impact our results and performance. As of May 27, 2023, we employed 485 individuals, which included 451 full-time individuals and 34 part-time individuals.

Our human capital is a critical asset that enables us to serve and support our global customer base. Our effectiveness in maximizing the talents of people of different backgrounds, experiences, and perspectives is key to our continued global success. Fostering, cultivating, and preserving a culture of diversity, equity, inclusion, and belonging is a key priority for the Company.

We understand, respect, and value the similarities as well as the differences of our employees. Our human capital is a critical asset that enables us to serve and support our global customer base. Our effectiveness in maximizing the talents of people of different backgrounds, experiences, and perspectives is key to our continued global success.

Of these, 287 full-time and 19 part-time were located in the United States and 124 full-time and 17 part-time were located internationally. All of our employees are non-union and we consider our relationships with our employees to be good.

Of these, 329 full-time and 15 part-time were in the United States and 122 full-time and 19 part-time were located internationally. All of our employees are non-union.

These materials are generally readily available, but some components may require long lead times for production, and some materials are subject to shortages or price fluctuations based on supply and demand. Canvys – Visual Technology Solutions Canvys provides customized display solutions serving the corporate enterprise, financial, healthcare, industrial and medical original equipment manufacturers markets.

The materials used in the manufacturing process consist of glass bulbs and tubing, nickel, stainless steel and other metals, plastic and metal bases, ceramics and a wide variety of fabricated metal components.

Our proprietary products include thyratrons and rectifiers, power tubes, ignitrons, magnetrons, phototubes, microwave generators, Ultracapacitor modules and liquid crystal display monitors. The materials used in the manufacturing process consist of glass bulbs and tubing, nickel, stainless steel and other metals, plastic and metal bases, ceramics and a wide variety of fabricated metal components.

The Company offers employees a competitive compensation program, designed to recognize and reward both individual and company performance, which includes a base pay, variable compensation programs, and health, wellbeing and retirement programs to meet the needs of our employees. The health, safety and wellness of our employees is a priority.

The Company offers employees a competitive compensation program, designed to recognize and reward both individual and company performance, which includes a base pay, variable compensation programs, and health, well being and retirement programs to meet the needs of our employees. Diversity, Equity, Inclusion & Belonging We are an international company with offices and personnel located around the world.

PMT’s suppliers provide warranty coverage for the products and allow return of defective products, including those returned to PMT by its customers. For information regarding the warranty reserves, see Note 3, Significant Accounting Policies and Disclosures , of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K.

For information regarding the warranty reserves, see Note 3, Significant Accounting Policies and Disclosures , of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K. In addition to third party products, we sell proprietary products principally under certain trade names we own including Amperex ®, Cetron ® and National® .

Significant positive change requires careful planning, leadership, resources, and coordination. The Company established a DEI&B committee to plan and implement changes to achieve our goal of being a more diverse and inclusive organization. The DEI&B committee has been charged with making recommendations about how we, as a company, can promote and act upon the Company’s initiatives in this area.

Management has identified Diversity, Equity, Inclusion, and Belonging (“DEI&B”) as a priority for our Company. Significant positive change requires careful planning, leadership, resources, and coordination. The Company established a DEI&B committee to plan and implement changes to achieve our goal of being a more diverse and inclusive organization.

We believe supplier relationships, combined with our engineering design and manufacturing capabilities and private label partnerships, allow us to maintain a well-balanced and technologically advanced offering of customer specific display solutions. 6 Healthcare Healthcare manufactures, repairs, refurbishes and distributes high value replacement parts and equipment for the healthcare market including hospitals, medical centers, asset management companies, independent service organizations and multi-vendor service providers.

See Note 9, Segment and Geographic Information , of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for further information.

See Note 10, Segment and Geographic Information , of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for further information. 7 Human Capital Resources Recruitment & Staffing The future success of our Company depends on our ability to attract, hire, motivate, retain and further develop top talent, including highly skilled technical, management and sales personnel.

Unless otherwise noted, all references to a particular year in this document shall mean our fiscal year. COVID-19 Update The impact of the COVID-19 pandemic and its effects continue to evolve.

Unless otherwise noted, all references to a particular year in this document shall mean the fiscal year for such period.

Government Regulations We are subject to a variety of federal, state, local and foreign laws and regulatory requirements relating to our operations.

As we cannot predict the duration, scope or severity of the Covid pandemic, the negative financial impact to our results cannot be reasonably estimated and could be material. Government Regulations We are subject to a variety of federal, state, local and foreign laws and regulatory requirements relating to our operations.

Among the suppliers PMT supports are Amperex, CDE, CPI, Draloric, Eimac, General Electric, Hitachi, Jennings, L3, MACOM, National, NJRC, Ohmite, Qorvo, Thales, Toshiba and Vishay. PMT’s inventory levels reflect our commitment to maintain an inventory of a broad range of products for customers who are buying products for replacement of components used in critical equipment and designing in new technologies.

PMT’s inventory levels reflect our commitment to maintain an inventory of a broad range of products for customers who are buying products for replacement of components used in critical equipment and designing in new technologies. PMT also sells a number of products representing trailing edge technology.

The agreements are typically long term, and usually contain provisions permitting termination by either party if there are significant breaches that are not cured within a reasonable period. Although some of these agreements allow PMT to return inventory periodically, others do not, in which case PMT may have obsolete inventory that they cannot return to the supplier.

PMT has distribution agreements with many of its suppliers; most of these agreements provide exclusive distribution rights that often include global coverage. The agreements are typically long term, and usually contain provisions permitting termination by either party if there are significant breaches that are not cured within a reasonable period.

While the Company did not experience sales declines during fiscal year 2022 as a result of the pandemic, the impacts from the pandemic negatively impacted our gross margins as a percentage of net sales in our Canvys and Healthcare segments. As a result of COVID-19 and its effects, we experienced some COVID-19 related component delays impacting new product development schedules.

While the Company did not experience sales declines during fiscal year 2023 as a direct result of the pandemic, the residual economic impact from the pandemic continued to negatively impact our gross margins as a percentage of net sales in our Canvys segment.

Starting with our first quarter earnings release in October for fiscal 2023, we will introduce our new Green Energy Solutions (“GES”) segment. This segment is carved out of our existing PMT segment as we continue to focus on power management applications that support the green energy market globally.

Business Segments The Company began reporting the results for its new Green Energy Solutions ("GES") segment in the first quarter of fiscal 2023 due to its focus on power applications that support the green energy market. The GES segment has been carved out of our existing Power and Microwave Technologies (“PMT”) segment.

Removed

As such, the full magnitude that the pandemic, and the steps taken to prevent, mitigate and/or respond to its spread, will have on the Company’s financial condition, liquidity and future results of operations is uncertain.

Added

COVID-19 Update While the immediate impacts of the COVID-19 pandemic have been assessed, the long-term effects of the disruption, including supply chain disruption, and resulting impact on the global economy and capital markets remain unpredictable, and depend on future developments, such as the possible resurgence of the virus, variant strains of the virus, vaccine availability and effectiveness, and future government actions in response to the crisis.

Removed

The extent of the impact of the COVID-19 pandemic depends on future developments that cannot be accurately predicted at this time, such as the duration and spread of the pandemic, the extent, speed and effectiveness of continued worldwide containment efforts, and other actions taken by governments, businesses and individuals in response to abatement and resurgence of the disease.

Added

The residual impact of the COVID-19 pandemic and its effects on supply chains and general economic conditions continues to evolve.

Removed

Our ability to meet customer demands for products may be impaired or, similarly, our customers may experience adverse business consequences due to the continued impact of COVID-19 and its effects.

Added

The COVID-19 pandemic and its residual negative impact on general economic conditions has had and continues to have a negative effect on our business, results of operations, cash flows, gross margins as a percentage of net sales (particularly within our Canvys segment).

Removed

Reduced demand for products or impaired ability to meet customer demand (including disruptions at our transportation service providers or vendors) could have a material adverse effect on our business, operations and financial performance. There were sales declines during fiscal year 2021, the majority of which were related to the COVID-19 global pandemic.

Added

It is likely that the pandemic will continue to affect our business for an indeterminable period of time due to the impact on the global economy, including with respect to transportation networks and supply chains, the availability of raw materials, production efforts and customer demand for our products.

Removed

The global markets have generally suffered, and are continuing to suffer, from material disruptions in the supply chain. Management continues to monitor the global situation on its financial condition, liquidity, operations, suppliers, industry and workforce.

Added

We have experienced and continue to experience component delays which negatively impact our product development schedule. Management continues to monitor the impact of global economic factors on its financial condition, liquidity, operations, suppliers, industry and workforce. Our ability to predict and respond to future changes resulting from the Covid pandemic is uncertain.

Removed

Given the ever-evolving nature of the pandemic and the continued global responses to the ongoing impact of the pandemic as well the cycle of recurrences and the after-effects, the Company is not presently able to fully estimate the effects of COVID-19 on its results of operations, financial condition or liquidity going forward.

Added

Even after the Covid pandemic fully subsides, there may be continued long-term effects on our business practices and customers in economies in which we operate that could severely disrupt our operations and could have a material adverse effect on our business, results of operations, cash flows and financial condition.

Removed

Company Response to CARES Act On March 27, 2020, Congress enacted the Coronavirus Aid, Relief and Economic Security (“CARES”) Act to provide certain relief as a result of the COVID-19 outbreak.

Added

Accordingly, the Company is reporting its financial performance based on four operating and reportable segments for fiscal 2023. The results for fiscal 2022 and fiscal 2021 presented herein were adjusted to reflect the presentation of the new GES segment separately from the PMT segment.

Removed

The CARES Act included provisions relating to refundable payroll tax credits, deferral of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, increased limitations on qualified charitable contributions and technical corrections to tax depreciation methods for qualified, improvement property.

Added

Among the suppliers 5 PMT supports are Amperex, CDE, CPI, Draloric, Eimac, General Electric, Hitachi, Jennings, L3, MACOM, National, NJRC, Ohmite, Qorvo, Thales, Toshiba and Vishay.

Removed

As of May 28, 2022, the Company deferred $0.4 million of employer-side social security tax payments, which will be made by December 31, 2022. The Company has estimated and recorded the overall effects of the CARES Act and does not anticipate a material change.

Added

Although some of these agreements allow PMT to return inventory periodically, others do not, in which case PMT may have obsolete inventory that they cannot return to the supplier. PMT’s suppliers provide warranty coverage for the products and allow return of defective products, including those returned to PMT by its customers.

Removed

Accordingly, in the first quarter of fiscal 2023, we will begin reporting on four segments.

Added

Green Energy Solutions Green Energy Solutions combines our key technology partners and engineered solutions capabilities to design and manufacture innovative products for the fast-growing energy storage market and power management applications.

Removed

As manufacturers for these products exit the business, PMT has the option to purchase a substantial portion of their remaining inventory. PMT has distribution agreements with many of its suppliers; most of these agreements provide exclusive distribution rights that often include global coverage.

Added

As a designer, manufacturer, technology partner and authorized distributor, GES’s strategy is to provide specialized technical expertise and engineered solutions using our core design engineering and manufacturing capabilities on a global basis. We provide solutions and add value through design-in support, systems integration, prototype design and manufacturing, testing, logistics and aftermarket technical service and repair—all through our existing global infrastructure.

Removed

In addition to third party products, we sell proprietary products principally under certain trade names we own including Amperex ®, Cetron ® and National® . Our proprietary products include thyratrons and rectifiers, power tubes, ignitrons, magnetrons, phototubes, microwave generators, Ultracapacitor modules and liquid crystal display monitors.

Added

GES’s focus is on products for numerous green energy applications such as wind, solar, hydrogen and Electric Vehicles, and other power management applications that support green solutions such as synthetic diamond manufacturing. Canvys Canvys provides customized display solutions serving the corporate enterprise, financial, healthcare, industrial and medical original equipment manufacturers markets.

Removed

Healthcare Healthcare manufactures, repairs, refurbishes and distributes high value replacement parts and equipment for the healthcare market including hospitals, medical centers, asset management companies, independent service organizations and multi-vendor service providers.

Added

Fostering, cultivating, and preserving a culture of diversity, equity, inclusion, and belonging is a key priority for the Company.

Removed

Human Capital Management Recruitment & Staffing The future success of our Company depends on our ability to attract, hire, motivate, retain and further develop top talent, including highly skilled technical, management and sales personnel. The skills, experience and industry knowledge of our employees significantly benefit our operations and performance.

Added

The DEI&B committee has been charged with making recommendations about how we, as a company, can promote and act upon the Company’s initiatives in this area.

Removed

In light of COVID-19, many of our employees work from home whenever possible and additional safety measures were implemented for employees continuing critical on-site work. Diversity, Equity, Inclusion & Belonging We are an international company with offices and personnel located around the world. We understand, respect, and value the similarities as well as the differences of our employees.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

33 edited+7 added−29 removed85 unchanged

2022 filing

2023 filing

Many factors may cause the market price for our common stock to change, including: (i) our operating results as compared to investors’ expectations in any period, (ii) market perceptions concerning our future earnings prospects, (iii) adverse changes in general market conditions or economic trends and (iv) changes or events in our industry or the world, such as market reactions to public health issues (including the COVID-19 pandemic), 16 natural disasters, changes in global, national, or regional economies, inflation , governmental policies, political unrest, military action and armed conflicts (such as the 2022 Russian invasion of Ukraine), terrorist activities, political and social turmoil, civil unrest and other crises.

Many factors may cause the market price for our common stock to change, including: (i) our operating results as compared to investors’ expectations in any period, (ii) market perceptions concerning our future earnings prospects, (iii) adverse changes in general market conditions or economic trends and (iv) changes or events in our industry or the world, such as market reactions to public health issues (including the COVID-19 pandemic), natural disasters, changes in global, national, or regional economies, inflation, governmental policies, political unrest, military action and armed conflicts (such as the 2022 Russian invasion of Ukraine), terrorist activities, political and social turmoil, civil unrest and other crises.

If any of these risks materialize, they may result in disruptions to our business and the diversion of management time and attention, which could increase the costs of operating our existing or acquired businesses or negate the expected benefits of the acquisitions. Economic weakness and uncertainty and other challenges could adversely affect our revenues and gross margins.

If any of these risks materialize, they may result in disruptions to our business and the diversion of management time and attention, which could increase the costs of operating our existing or acquired businesses or negate the expected benefits of the acquisitions. 11 Economic weakness and uncertainty and other challenges could adversely affect our revenues and gross margins.

If we are deemed to be subject to the Investment Company Act, compliance with required additional regulatory burdens would increase our operating expenses. Evolving expectations around corporate responsibility practices, specifically related to environmental, social and governance (“ESG”) matters, may expose us to reputational and other risks.

If we are deemed to be subject to the Investment Company Act, compliance with required additional regulatory burdens would increase our operating expenses. 16 Evolving expectations around corporate responsibility practices, specifically related to environmental, social and governance (“ESG”) matters, may expose us to reputational and other risks.

While we have employment contracts in place with several of our executive officers, we nevertheless cannot be assured that we will retain our key employees and the loss of service of any of these officers or key management personnel could have a material adverse effect on our business growth and operating results.

Richardson. While we have employment contracts in place with several of our executive officers, we nevertheless cannot be assured that we will retain our key employees and the loss of service of any of these officers or key management personnel could have a material adverse effect on our business growth and operating results.

Our failure to maintain and enhance our competitive position could have a material adverse effect on our business. We are dependent on a limited number of vendors to supply us with essential products. Disruptions to the supply chain could adversely impact our business. The products we supply are currently produced by a relatively small number of manufacturers.

Our failure to maintain and enhance our competitive position could have a material adverse effect on our business. 9 We are dependent on a limited number of vendors to supply us with essential products. Disruptions to the supply chain could adversely impact our business. The products we supply are currently produced by a relatively small number of manufacturers.

Further, as a result of COVID-19 and its effects, we experienced some COVID-19 related component delays impacting new product development schedules. The global markets have generally suffered, and are continuing to suffer, from material disruptions to certain supply chains.

Further, as a result of COVID-19 and its effects, we experienced some residual COVID-19 related component delays impacting new product development schedules. The global markets have generally suffered, and are continuing to suffer, from material disruptions to certain supply chains.

See Note 10, Risks and Uncertainties , of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for further information regarding specific legal matters related to our patents.

See Note 11, Risks and Uncertainties , of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for further information regarding specific legal matters related to our patents.

There can be no assurance, however, that the Company will be able to prevent or remediate all future cybersecurity incidents or that the cost associated with responding to any such incident or impact of such incident will not be significant or material.

There can be no assurance, however, that the Company will be able to prevent or remediate all future cybersecurity incidents or that the cost associated with responding to any such incident or impact 10 of such incident will not be significant or material.

These disruptions have been further exacerbated by other events and conditions, including the conflict between Russia and Ukraine and collectively adversely affected our ability to receive goods on a timely basis and increased our material costs. Short-term or sustained increases in market demand may exceed our suppliers’ production capacity or otherwise strain our supply chain.

These disruptions have been further exacerbated by other events and conditions, including the conflict between Russia and Ukraine, which have adversely affected our ability to receive goods on a timely basis and increased our material costs. Short-term or sustained increases in market demand may exceed our suppliers’ production capacity or otherwise strain our supply chain.

An impairment charge on intangible assets would be incurred in the event that the fair value of the intangible assets are less than their current carrying values. We evaluate whether events have occurred that indicate all, or a portion, of the carrying amount of intangible assets may no longer be recoverable.

An impairment charge on intangible assets would be incurred in the event that the fair value of the intangible assets is less than their current carrying values. We evaluate whether events have occurred that indicate all, or a portion, of the carrying amount of intangible assets may no longer be recoverable.

ITEM 1A. Risk Factors Investors should carefully consider the following risk factors in addition to the other information included and incorporated by reference in this Annual Report on Form 10-K that we believe are applicable to our businesses and the industries in which we operate.

ITEM 1A. R isk Factors Investors should carefully consider the following risk factors in addition to the other information included and incorporated by reference in this Annual Report on Form 10-K that we believe are applicable to our businesses and the industries in which we operate.

Our failure, or our suppliers’ failure, to meet the demand for raw materials and components could adversely affect our business and results of operations. Further disruptions to the supply chain because of the COVID-19 pandemic and its impact, or other world or domestic events could materially adversely impact our operations and business.

Our failure, or our suppliers’ failure, to meet the demand for raw materials and components could adversely affect our business and results of operations. Further disruptions to the supply chain because of the COVID-19 pandemic and its continuing residual impact, or other world or domestic events could materially adversely impact our operations and business.

Spending and the timing thereof by our customers may have a significant impact on our results and, where such spending is delayed or cancelled, it could have a material negative impact on our operating results. Current global economic conditions remain uncertain and challenging.

Spending and the timing thereof by our customers may have a significant impact on our results and, where such spending is delayed or canceled, it could have a material negative impact on our operating results. Current global economic conditions remain uncertain and challenging.

Richardson, our Chairman, Chief Executive Officer and President, beneficially owned approximately 98% of the outstanding shares of our Class B common stock, representing approximately 63% of the voting power of the outstanding common stock. This share ownership permits Mr.

Richardson, our Chairman, Chief Executive Officer and President, beneficially owned approximately 98% of the outstanding shares of our Class B common stock, representing approximately 62% of the voting power of the outstanding common stock. This share ownership permits Mr.

Failure to successfully implement our growth initiatives, or failure to realize the benefits expected from these initiatives if implemented, may create ongoing operating losses or otherwise adversely affect our business, operating results and financial condition. Our growth strategy focuses on expanding our healthcare and our power conversion businesses.

One of our suppliers represented 11% of our total cost of sales. Our success depends, in large part, on maintaining current vendor relationships and developing new relationships.

One of our suppliers represented 11% of our total cost of sales during fiscal year 2023. Our success depends, in large part, on maintaining current vendor relationships and developing new relationships.

We maintain significant inventories in an effort to ensure that customers have a reliable source of supply. Our products generally support industrial machinery powered by tube technology. As technology evolves and companies replace this capital equipment, the market for our products potentially declines.

We have historically incurred significant charges for inventory obsolescence and may incur similar charges in the future. We maintain significant inventories in an effort to ensure that customers have a reliable source of supply. Our products generally support industrial machinery powered by tube technology. As technology evolves and companies replace this capital equipment, the market for our products potentially declines.

Our stock price has fluctuated in the past and may experience declines in the future as a result of the volatile nature of the stock market, developments in our business and/or factors outside of our control.

To the extent that our supply chain, costs, sales or profitability are negatively affected by the tariffs or other trade actions, our business, financial condition and results of operations may be materially adversely affected. Ownership Risks A single stockholder has voting control over us. As of July 25, 2022, Edward J.

To the extent that our supply chain, costs, sales or profitability are negatively affected by the tariffs or other trade actions, our business, financial condition and results of operations may be materially adversely affected. 15 Ownership Risks A single stockholder controls a majority of the Company's voting stock. As of July 25, 2023, Edward J.

Changes in our relationships with suppliers, shortages in availability of materials, production delays, regulatory 9 restrictions, public health crises, or other supply chain disruptions, whether due to our suppliers or customers, could have a material adverse effect on our operations and results.

Changes in our relationships with suppliers, shortages in availability of materials, production delays, regulatory restrictions, public health crises, or other supply chain disruptions, whether due to our suppliers or customers, could have a material adverse effect on our operations and results. Increases in the costs of supplies could result in manufacturing interruptions, delays, inefficiencies or our inability to market products.

Richardson to exert control over the outcome of stockholder votes, including votes concerning the election of directors, by-law amendments, possible mergers, corporate control contests and other significant corporate transactions. 15 General Risk Factors Failure to attract and retain key skilled personnel could hurt operations.

Richardson to exert control over the outcome of stockholder votes, including votes concerning the election of directors, by-law amendments, possible mergers, corporate control contests and other significant corporate transactions. General Risk Factors Failure to attract and retain key skilled personnel could hurt operations. Our success depends to a large extent upon the continued services of key management personnel, particularly Mr.

Our business could be adversely affected as a result of a significant quality or performance issues in the components sold by us if we are required to pay for the damages.

Our business could be adversely affected as a result of a significant quality or performance issues in the components sold by us if we are required to pay for the damages. Although we have product liability insurance, such insurance is limited in coverage and amount.

Major disruptions to our logistics capability or to the operations of our key vendors or customers could have a material adverse impact on our operations. We operate our global logistics services through specialized and centralized distribution centers. We depend on third party transportation service providers for the delivery of products to our customers.

We operate our global logistics services through specialized and centralized distribution centers. We depend on third party transportation service providers for the delivery of products to our customers.

Although we have product liability insurance, such insurance is limited in coverage and amount. 10 Substantial defaults by our customers on our accounts receivable or the loss of significant customers could have a significant negative impact on our business. We extend credit to our customers.

Substantial defaults by our customers on our accounts receivable or the loss of significant customers could have a significant negative impact on our business. We extend credit to our customers.

If this is the case, an impairment charge to earnings would be necessary. Legal and Regulatory Risks We may be subject to intellectual property rights claims, which are costly to defend, could require payment of damages or licensing fees, and/or could limit our ability to use certain technologies in the future.

Legal and Regulatory Risks We may be subject to intellectual property rights claims, which are costly to defend, could require payment of damages or licensing fees, and/or could limit our ability to use certain technologies in the future. Substantial litigation and threats of litigation regarding intellectual property rights exist in the display systems and electronics industries.

Inflation and government efforts to combat inflation, such as raising the benchmark interest rate, could increase market volatility and have an adverse effect on the financial market and general economic conditions. Such adverse conditions could negatively impact demand for our products, which could adversely affect our profitability, results of operations and cash flow.

We may also experience an increase in order cancellations if any such pricing actions are not accepted by our customers. Risks Related to International Operations A significant portion of our cash, cash equivalents and investments is held by our foreign subsidiaries and could affect future liquidity needs.

We may also experience an increase in order cancellations if any such pricing actions are not accepted by our customers. Risks Related to International Operations International operations represent a significant percentage of our business and present a variety of risks that could impact our results.

In any such case, our business, operating results or financial condition could be adversely impacted. 13 There is a possible risk of identifiable intangible asset impairment, which could reduce the value of our assets and reduce our net income in the year in which the write-off occurs.

Negative or uncertain financial and macroeconomic conditions may have a significant adverse impact on our sales, profitability and results of operations. Financial Risks There is a possible risk of identifiable intangible asset impairment, which could reduce the value of our assets and reduce our net income in the year in which the write-off occurs.

See “We are dependent on a limited number of vendors to supply us with essential products.

Further, challenges in the supply chain and disruptions in our logistics capability could further negatively impact our gross profit margins. See “We are dependent on a limited number of vendors to supply us with essential products.

Increases in the costs of supplies could result in manufacturing interruptions, delays, inefficiencies or our inability to market products. In addition, our profit margins would decrease if prices of purchased raw materials, component parts or finished goods increase and we are unable to pass on those increases to our customers.

In addition, our profit margins would decrease if prices of purchased raw materials, component parts or finished goods increase and we are unable to pass on those increases to our customers. As various locations have seen recovery from COVID-19, there have been increases in demand, which have, in turn, created significant disruption to the global supply chain.

There can be no assurance that we will continue recovery in the near future; nor is there any assurance that worldwide economic volatility will not continue or worsen. Further, challenges in the supply chain and disruptions in our logistics capability could further negatively impact our gross profit margins.

Weakness in the markets in which we operate could negatively impact our revenue and operating expenses, and consequently have a material adverse effect on our business, financial condition and results of operations. There can be no assurance that we will continue recovery in the near future; nor is there any assurance that worldwide economic volatility will not continue or worsen.

Such adverse conditions could negatively impact demand for our products, which could adversely affect our profitability, results of operations and cash flow. 11 Our business and results of operations are subject to a broad range of uncertainties arising out of world and domestic events. Our business and results of operations are subject to uncertainties arising from world and domestic events.

Our business and results of operations are subject to a broad range of uncertainties arising out of world and domestic events. Global and regional economic uncertainty continues to exist, including uncertainty relating to the Covid pandemic and the Russian invasion of Ukraine.

Some of these subsidiaries are located in jurisdictions that require foreign government approval before a cash repatriation can occur. 12 International operations represent a significant percentage of our business and present a variety of risks that could impact our results. Because we source and sell our products worldwide, our business is subject to risks associated with doing business internationally.

Because we source and sell our products worldwide, our business is subject to risks associated with doing business internationally.

Removed

The impact of the COVID-19 pandemic and its effects negatively impacted our sales results in certain prior periods. The situation continues to evolve and the effects of the pandemic could adversely affect the Company’s revenues, earnings, liquidity and cash flows. We have historically incurred significant charges for inventory obsolescence and may incur similar charges in the future.

Added

Our operations could be adversely affected by global or regional economic conditions if markets decline in the future, whether related to the Covid pandemic, the Russian invasion of Ukraine, higher inflation or interest rates, recession, natural disasters, impacts of and issues related to climate change, business disruptions, our ability to adequately staff operations or otherwise.

Removed

As various locations have seen recovery from COVID-1 9, there have been increases in demand, which have, in turn, created significant disruption to the global supply chain .

Added

Any future economic declines may result in decreased revenue, gross margins, earnings or growth rates or difficulty in managing inventory levels or collecting customer receivables. We also have experienced, and expect to continue to experience, increased competitive pricing pressure, raw material inflation and availability issues resulting in difficulties meeting customer demand.

Removed

Weakness in the markets in which we operate could negatively impact our revenue and operating expenses, and consequently have a material adverse effect on our business, financial condition and results of operations. Our operating results produced net income for fiscal 2022 and fiscal 2021, but operating results in prior years (including fiscal 2020 and fiscal 2019) reflected a net loss.

Added

In addition, customer difficulties in the future could result from economic declines, the Covid pandemic, the cyclical nature of their respective businesses, such as in the oil and gas industry, or otherwise and, in turn, result in decreases in product demand, increases in bad debt write-offs, decreases in timely collection of accounts receivable and adjustments to our allowance for credit losses, resulting in material reductions to our revenues and net earnings. 12 Major disruptions to our logistics capability or to the operations of our key vendors or customers could have a material adverse impact on our operations.

Removed

These uncertainties may include a global economic slowdown, pandemics and other public health issues (including the COVID-19 pandemic), natural disasters, changes in global, national, or regional economies, inflation, governmental policies, political unrest, military action and armed conflicts (such as the 2022 Russian invasion of Ukraine), terrorist activities, political and social turmoil, civil unrest and other crises.

Added

If this is the case, an impairment charge to earnings would be necessary. 13 Our indebtedness and restrictive covenants under our credit facility could limit our operational and financial flexibility. We may incur indebtedness in the future under our credit facility with PNC Bank NA.

Removed

Such conditions have impacted and may continue to impact customer demand as well as our suppliers’ ability to supply us with necessary materials and, ultimately, may have an impact on our business, financial condition, results and stock price. The ongoing impact of the COVID-19 outbreak and responses to the pandemic continue to evolve.

Added

Our ability to make interest and scheduled principal payments on any such indebtedness and operate within restrictive covenants could be adversely impacted by changes in the availability, terms and cost of capital, changes in interest rates or changes in our credit ratings or our outlook.

Removed

The COVID-19 crisis has caused disruptions in global economies, financial markets and rapid shifts in governmental and public health policies in the countries where we operate, or our customers are located or the industries in which we and our customers compete.

Added

These changes could increase our cost of business, limiting our ability to pursue acquisition opportunities, react to market conditions and meet operational and capital needs, thereby placing us at a competitive disadvantage.

Removed

The COVID-19 crisis and the actions taken by governments, businesses and individuals to curtail the spread, abatement and resurgence of the disease have negatively impacted, and could continue to negatively impact our business, results of operations, cash flows and financial condition.

Added

ITEM 1B. Unresolve d Staff Comments None. 17

Removed

During fiscal 2021, the Company experienced decreases in demand for certain products as a result of the impact of COVID-19 on certain customers and in certain regions.

Removed

A significant reduced demand for products or impaired ability to meet customer demand (including disruptions at our transportation service providers or vendors) as a result of resurgences of the COVID-19 pandemic and/or in response to the pandemic’s continued effects or the reactions to the pandemic and its effects could cause a material adverse effect on our business, operations and financial performance.

Removed

Various regions of the world continue to be affected by the COVID-19 pandemic and certain areas have undertaken renewed disease control measures. The extent to which our business will continue to be impacted by the COVID-19 pandemic and its effects will depend on future developments which are highly uncertain and cannot be predicted.

Removed

These include but not limited to the continued duration and spread of the pandemic, its severity, the effectiveness of actions to vaccinate populations, contain the virus or treat its impact and how quickly and to what extent normal economic and operating conditions resume or are further disrupted.

Removed

The potential effects of COVID-19, the responses to the pandemic and the various recovery initiatives may also impact many of our risk factors described herein; however, as this is an unprecedented and changing situation, the potential impacts to such risk factors remain uncertain.

Removed

We may continue to experience adverse impacts to our business and financial results due to any economic recession or depression that has occurred, and due to any major public health crises that may occur in the future.

Removed

This is a very dynamic situation, and we cannot at this time reasonably estimate the scope of its impact on our employees, operations, suppliers or customers, or the full extent to which COVID-19 or its impact and effects could continue to affect the global economy and our results.

Removed

As of May 28, 2022, $15.0 million, or approximately 42% of our cash and cash equivalents was held by our foreign subsidiaries.

Removed

While we intend to use some of the cash held outside the United States to fund our international operations and growth, when we encounter a significant need for liquidity domestically or at a particular location that we cannot fulfill through other internal or external sources, our liquidity requirements could necessitate transfers of existing cash balances between our subsidiaries or to the United States.

Removed

Negative or uncertain financial and macroeconomic conditions may have a significant adverse impact on our sales, profitability and results of operations. The withdrawal by the United Kingdom from the European Union could have a material adverse effect on our business, financial position, liquidity and results of operations.

Removed

We conduct a significant portion of our business in the European Union (“EU”) and the withdrawal of the United Kingdom (“U.K.”) from the EU (also referred to as “Brexit”) could have a material adverse effect on our business, financial position, liquidity and results of operations.

Removed

In connection with the U.K.’s exit from the EU, the U.K. and the EU struck a bilateral trade and cooperation deal governing the future relationship between the U.K. and the EU, which took effect on May 1, 2021.

Removed

However, there remains uncertainties and risks to our business related to Brexit and the new relationship between the U.K. and EU, which will continue to be developed and defined, as well as any resulting political and economic instability created by Brexit.

Removed

The political and economic impact of Brexit has caused and may continue to cause significant volatility in global markets as well as greater restrictions on imports and exports between the U.K. and EU countries, a fluctuation in currency exchange rates and increased regulatory complexities.

Removed

The impact of the withdrawal of the U.K. may adversely affect business activity, political stability and economic conditions in the U.K., the EU and elsewhere.

Removed

Such developments and their ultimate impact, or the perception that any of these developments are likely to occur, could have a material adverse effect on economic growth or business activity in the U.K., the Eurozone or the EU, and could result in the relocation of businesses, cause business interruptions, lead to economic recession or depression, inhibit the growth of the European economy, cause greater volatility in the global currencies that we currently use to transact business and impact the stability of the financial markets, availability of credit, political systems or financial institutions and the financial and monetary system.

Removed

Such developments could have a material adverse effect on our business, financial position, liquidity and results of operations. Financial Risks We may need to raise additional funds through debt or equity financings in the future to fund our domestic operations and our broader corporate initiatives , which would dilute the ownership of our existing shareholders.

Removed

If the cash generated by our domestic operations is not sufficient to fund our domestic operations and our broader corporate initiatives, such as stock repurchases, dividends, acquisitions and other strategic opportunities, we may need to raise additional funds through public or private debt or equity financings, or we may need to obtain new credit facilities to the extent we are unable to, or choose not to, repatriate our overseas cash.

Removed

Such additional financing may not be available on terms favorable to us, or at all, and any new equity financings or offerings would dilute our current stockholders’ ownership interests in us. Furthermore, lenders may not agree to extend us new, additional or continuing credit.

Removed

Economic uncertainty or adverse economic conditions resulting from the impacts of and responses to pandemics and other public health issues (including the COVID-19 pandemic), natural disasters, changes in global, national, or regional economies, inflation, governmental policies, political unrest, military action and armed conflicts (such as the 2022 Russian invasion of Ukraine), terrorist activities, political and social turmoil, civil unrest and other crises could result in significant or sustained disruption of global financial markets, thereby reducing our ability to access capital.

Removed

Substantial litigation and threats of litigation regarding intellectual property rights exist in the display systems and electronics industries.

Removed

Our success depends to a large extent upon the continued services of key management personnel, particularly Mr. Richardson.

Item 2. Properties

Properties — owned and leased real estate

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Our facility locations, their primary use and segments served are as follows: Location Leased/Owned Use Segment Woodland Hills, California Leased Sales PMT LaFox, Illinois * Owned Corporate/Sales/Distribution/Manufacturing PMT/Canvys/Healthcare Marlborough, Massachusetts Leased Sales/Distribution/Manufacturing Canvys Fort Mill, South Carolina Leased Sales/Distribution/Testing/Repair Healthcare Murray, Utah Leased Sales/Testing/Repair Healthcare Sao Paulo, Brazil Leased Sales/Distribution PMT Beijing, China Leased Sales PMT Nanjing, China Leased Sales PMT Shanghai, China Leased Sales/Distribution PMT Shenzhen, China Leased Sales PMT Brive, France Leased Manufacturing Support/Testing PMT Paris, France Leased Sales PMT Donaueschingen, Germany Leased Sales/Distribution/Manufacturing Canvys Puchheim, Germany Leased Sales PMT Mumbai, India Leased Sales PMT Florence, Italy Leased Sales PMT Milan, Italy Leased Sales PMT Tokyo, Japan Leased Sales PMT Mexico City, Mexico Leased Sales PMT Amsterdam, Netherlands Leased Sales/Distribution/Manufacturing PMT/Healthcare Singapore, Singapore Leased Sales/Distribution PMT Gyeonggi-do, South Korea Leased Sales PMT Taipei, Taiwan Leased Sales PMT/Canvys Bangkok, Thailand Leased Sales/Distribution PMT Dubai, United Arab Emirates Leased Sales/Testing PMT Hook, United Kingdom Leased Sales/Distribution/Testing/Repair PMT Lincoln, United Kingdom Leased Sales PMT/Canvys * LaFox, Illinois is also the location of our corporate headquarters.

Our facility locations, their primary use and segments served are as follows: Location Leased/Owned Use Segment LaFox, Illinois * Owned Corporate/Sales/Distribution/Manufacturing PMT/Canvys/Healthcare Woodland Hills, California Leased Sales PMT Marlborough, Massachusetts Leased Sales/Distribution/Manufacturing Canvys Fort Mill, South Carolina Leased Sales/Distribution/Testing/Repair Healthcare Sao Paulo, Brazil Leased Sales/Distribution PMT Beijing, China Leased Sales PMT Nanjing, China Leased Sales PMT Shanghai, China Leased Sales/Distribution PMT Shenzhen, China Leased Sales PMT Brive, France Leased Sales PMT Paris, France Leased Sales PMT Donaueschingen, Germany Leased Sales/Distribution/Manufacturing Canvys Puchheim, Germany Leased Sales PMT Mumbai, India Leased Sales PMT Florence, Italy Leased Sales PMT Milan, Italy Leased Sales PMT Tokyo, Japan Leased Sales PMT Mexico City, Mexico Leased Sales PMT Amsterdam, Netherlands Leased Sales/Distribution/Manufacturing PMT/Healthcare Singapore, Singapore Leased Sales/Distribution PMT Seoul, South Korea Leased Sales PMT Taipei, Taiwan Leased Sales PMT/Canvys Bangkok, Thailand Leased Sales/Distribution PMT Dubai, United Arab Emirates Leased Sales/Testing PMT Hook, United Kingdom Leased Sales/Distribution/Testing/Repair PMT Lincoln, United Kingdom Leased Sales PMT/Canvys * LaFox, Illinois is also the location of our corporate headquarters.

ITEM 2. Properties The Company owns one facility and leases 26 facilities. We own our corporate facility and largest distribution center, which is located on approximately 100 acres in LaFox, Illinois and consists of approximately 224,000 square feet of manufacturing, warehouse and office space.

ITEM 2. P roperties The Company owns one facility and leases 25 facilities. We own our corporate facility and largest distribution center, which is located on approximately 100 acres in LaFox, Illinois and consists of approximately 224,000 square feet of manufacturing, warehouse and office space.

Added

ITEM 3. Legal Proceedings None. 18 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Annual dividend payments were approximately $3.2 million for fiscal 2022 and $3.1 million for fiscal 2021. All future payments of dividends are at the discretion of the Board of Directors. Dividend payments will depend on earnings, capital requirements, operating conditions and such other factors that the Board may deem relevant.

Annual dividend payments were approximately $3.3 million for fiscal 2023 and $3.2 million for fiscal 2022. All future payments of dividends are at the discretion of the Board of Directors. Dividend payments will depend on earnings, capital requirements, operating conditions and such other factors that the Board may deem relevant.

ITEM 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Unregistered Sales of Equity Securities None. Share Repurchases There were no share repurchases in fiscal 2022. Dividends Our quarterly dividend was $0.06 per common share and $0.054 per Class B common share.

ITEM 5. Market for the Registrant’s Common Equity, Related S tockholder Matters and Issuer Purchases of Equity Securities Unregistered Sales of Equity Securities None. Share Repurchases There were no share repurchases in fiscal 2023. Dividends Our quarterly dividend was $0.06 per common share and $0.054 per Class B common share.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* Among Richardson Electronics, Ltd., the NASDAQ Composite Index and the NASDAQ Electronic Components Index $250 $200 $150 $100 $50 $0 5/30/15 5/28/16 5/27/17 6/2/18 6/1/19 5/30/20 Richardson Electronics, Ltd. NASDAQ Composite NASDAQ Electronic Components *$100 invested on 5/30/15 in stock or 5/31/15 in index, including reinvestment of dividends.

Total return indices reflect reinvestment of dividends at the closing stock prices at the date of the dividend declaration. COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* Among Richardson Electronics, Ltd., the NASDAQ Composite Index and the NASDAQ Electronic Components Index $250 $200 $150 $100 $50 $0 5/30/15 5/28/16 5/27/17 6/2/18 6/1/19 5/30/20 Richardson Electronics, Ltd.

The graph assumes $100 invested on the last day of our fiscal year 2017, in our common stock, the NASDAQ Composite Index and NASDAQ Electronic Components Index. Total return indices reflect reinvestment of dividends at the closing stock prices at the date of the dividend declaration.

The Russell Microcap Technology Index is a published industry index comprised of over 150 companies. Next year's performance graph will exclude the NASDAQ Electronic Components Index. The graph assumes $100 invested on the last day of our fiscal year 2018, in our common stock, the NASDAQ Composite Index, NASDAQ Electronic Components Index and the Russell Microcap Technology Index.

As of July 25, 2022, there were approximately 437 stockholders of record for the common stock and approximately 14 stockholders of record for the Class B common stock. 18 Performance Graph The following graph compares the performance of our common stock for the periods indicated with the performance of the NASDAQ Composite Index and NASDAQ Electronic Components Index.

As of July 25, 2023, there were approximately 419 stockholders of record for the common stock and approximately 13 stockholders of record for the Class B common stock. Effective June 26, 2023, the Company joined the 2023 Russell 3000® Index.

Added

Membership in the U.S. all-cap Russell 3000® Index remains in place for one year and includes the Company in the large-cap Russell 1000® Index and the small-cap Russell 2000® Index. 19 Performance Graph The following graph compares the performance of our common stock for the periods indicated with the performance of the NASDAQ Composite Index, NASDAQ Electronic Components Index and the Russell Microcap Technology Index.

Added

The NASDAQ Electronic Components Index will not be available for fiscal 2024 and accordingly is being replaced by the Russell Microcap Technology Index. This year's performance graph includes both the NASDAQ Electronic Components Index and the Russell Microcap Technology Index to facilitate the transition to the replacement index.

Added

NASDAQ Composite NASDAQ Electronic Components *$100 invested on 5/30/15 in stock or 5/31/15 in index, including reinvestment of dividends. Indexes calculated on month-end basis. ITEM 6. R eserved 20

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Removed

ITEM 6. Selected Financial Data Five-Year Financial Review This information should be read in conjunction with our consolidated financial statements, accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included elsewhere herein.

Added

Item 6. Reserved 20 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 21 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 33 Item 8. Financial Statements and Supplementary Data 33 Item 9A. Controls and Procedures 62

Removed

Fiscal Year Ended (1) (in thousands, except per share amounts) May 28, 2022 May 29, 2021 May 30, 2020 June 1, 2019 June 2, 2018 Statements of Income (Loss) Net sales $ 224,620 $ 176,937 $ 155,898 $ 166,652 $ 163,212 Continuing Operations Income (loss) from continuing operations before tax $ 15,759 $ 2,308 $ (1,214 ) $ (6,311 ) $ 3,860 Income tax (benefit) provision (2,168 ) 653 624 1,017 1,534 Income (loss) from continuing operations 17,927 1,655 (1,838 ) (7,328 ) 2,326 Discontinued Operations Income from discontinued operations — — — — 1,496 Net income (loss) $ 17,927 $ 1,655 $ (1,838 ) $ (7,328 ) $ 3,822 Per Share Data Net income (loss) per Common share - Basic: Income (loss) from continuing operations $ 1.35 $ 0.13 $ (0.14 ) $ (0.57 ) $ 0.18 Income from discontinued operations — — — — 0.12 Total net income (loss) per Common share - Basic $ 1.35 $ 0.13 $ (0.14 ) $ (0.57 ) $ 0.30 Net income (loss) per Class B common share - Basic: Income (loss) from continuing operations $ 1.21 $ 0.11 $ (0.13 ) $ (0.51 ) $ 0.16 Income from discontinued operations — — — — 0.11 Total net income (loss) per Class B common share - Basic $ 1.21 $ 0.11 $ (0.13 ) $ (0.51 ) $ 0.27 Net income (loss) per Common share - Diluted: Income (loss) from continuing operations $ 1.31 $ 0.13 $ (0.14 ) $ (0.57 ) $ 0.18 Income from discontinued operations — — — — 0.12 Total net income (loss) per Common share - Diluted $ 1.31 $ 0.13 $ (0.14 ) $ (0.57 ) $ 0.30 Net income (loss) per Class B common share - Diluted: Income (loss) from continuing operations $ 1.18 $ 0.11 $ (0.13 ) $ (0.51 ) $ 0.16 Income from discontinued operations — — — — 0.11 Total net income (loss) per Class B common share - Diluted $ 1.18 $ 0.11 $ (0.13 ) $ (0.51 ) $ 0.27 Cash Dividend Data Dividends per common share $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.24 Dividends per Class B common share (2) 0.22 0.22 0.22 0.22 0.22 Balance Sheet Data Total assets $ 179,819 $ 156,753 $ 150,720 $ 153,017 $ 166,329 Stockholders’ equity 135,847 121,560 118,660 123,757 135,181 (1) Our fiscal year ends on the Saturday nearest the end of May.

Removed

Each of the fiscal years presented contain 52/53 weeks. (2) The dividend per Class B common share is 90% of the dividend per Class A common share. 20

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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2023 filing

The weight of this positive evidence is sufficient to outweigh other negative evidence in evaluating our need for a valuation allowance in the U.S. federal jurisdiction. As a result of the positive evidence outweighing the negative evidence for the year ended May 28, 2022, we have released the full valuation allowance on the U.S. federal and state deferred tax items.

The weight of this positive evidence is sufficient to outweigh other negative evidence in evaluating our need for a valuation allowance in the U.S. federal jurisdiction. As a result of the positive evidence outweighing the negative evidence for the year ended May 28, 2022, we released the full valuation allowance on the U.S. federal and state deferred tax items.

If we determine that there is at least a reasonable possibility that a loss may have been incurred, we will include a disclosure describing the contingency. 29 Income Taxes We recognize deferred tax assets and liabilities based on the differences between financial statement carrying amounts and the tax bases of assets and liabilities.

If we determine that there is at least a reasonable possibility that a loss may have been incurred, we will include a disclosure describing the contingency. Income Taxes We recognize deferred tax assets and liabilities based on the differences between financial statement carrying amounts and the tax bases of assets and liabilities.

These uses of cash were partially offset by the increase in our accounts payable and accrued liabilities of $10.1 million. The majority of the inventory increase was to support our 26 manufacturing, Canvys and PMG businesses. The increase in accounts receivable was primarily due to the sales increase in fiscal 2022.

These uses of cash were partially offset by the increase in our accounts payable and accrued liabilities of $10.1 million. The majority of the inventory increase was to support our manufacturing, Canvys and PMG businesses. The increase in accounts receivable was primarily due to the sales increase in fiscal 2022.

The difference between the effective income tax rates as compared to the U.S. federal statutory rate of 21.0% during fiscal 2022, fiscal 2021 and fiscal 2020 was primarily driven by the impact of valuation allowance changes related to the realizability of our U.S. state and federal net deferred tax assets and changes in our geographical distribution of income (loss).

The difference between the effective income tax rates as compared to the U.S. federal statutory rate of 21.0% during fiscal 2023, fiscal 2022 and fiscal 2021 was primarily driven by the impact of valuation allowance changes related to the realizability of our U.S. state and federal net deferred tax assets and changes in our geographical distribution of income (loss).

Our contracts for customized products generally include termination provisions if a customer cancels its order. However, we recognize revenue at a point in time because the termination provisions normally do not require, upon cancelation, the customer to pay fees that are commensurate with the work performed.

Our contracts for customized products generally include termination provisions if a customer cancels its order. However, we recognize revenue at a point in time because the termination provisions normally do not require, upon cancellation, the customer to pay fees that are commensurate with the work performed.

The increase in PMT was mainly due to strong growth from our Power and Microwave Group (PMG) new technology partners in various applications including power management, green energy, and 5G infrastructure, and increased revenue from our Semiconductor Wafer Fabrication Equipment customers buying engineered solutions. We also had growth in various Electron Device (EDG) product lines.

The increase in PMT was mainly due to strong growth from our Power and Microwave Group (PMG) technology partners in various applications including power management and 5G infrastructure, and increased revenue from our Semiconductor Wafer Fabrication Equipment customers buying engineered solutions. We also had strong growth in various Electron Device (EDG) product lines.

Control refers to the ability of the customer to direct the use of, and obtain substantially all of, the remaining benefits from the goods. Our transaction price consideration is fixed, unless otherwise disclosed below as variable consideration. G enerally, our contracts require our customers to pay for goods after we deliver products to them.

Control refers to the ability of the customer to direct the use of, and obtain substantially all of, the remaining benefits from the goods. Our transaction price consideration is fixed, unless otherwise disclosed below as variable consideration. Generally, our contracts require our customers to pay for goods after we deliver products to them.

Based on past performance and current expectations, w e believe that the existing sources of liquidity, including current cash, will provide sufficient resources to meet known capital requirements and working capital needs through the next twelve months.

Based on past performance and current expectations, we believe that the existing sources of liquidity, including current cash, will provide sufficient resources to meet known capital requirements and working capital needs through the next twelve months.

This section is organized as follows: • Business Overview • Results of Operations - an analysis and comparison of our consolidated results of operations for the fiscal years ended May 28, 2022, May 29, 2021 and May 30, 2020, as reflected in our consolidated statements of comprehensive income (loss). • Liquidity, Financial Position and Capital Resources - a discussion of our primary sources and uses of cash for the fiscal years ended May 28, 2022, May 29, 2021 and May 30, 2020, and a discussion of changes in our financial position.

This section is organized as follows: • Business Overview • Results of Operations - an analysis and comparison of our consolidated results of operations for the fiscal years ended May 27, 2023, May 28, 2022 and May 29, 2021, as reflected in our Consolidated Statements of Comprehensive Income. • Liquidity, Financial Position and Capital Resources - a discussion of our primary sources and uses of cash for the fiscal years ended May 27, 2023, May 28, 2022 and May 29, 2021, and a discussion of changes in our financial position.

Cash used in financing activities of $3.0 million during fiscal 2021 resulted primarily from cash used to pay dividends, partially offset by proceeds from the issuance of common stock from stock option exercises. All future payments of dividends are at the discretion of the Board of Directors.

Cash used in financing activities of $0.4 million during fiscal 2022 resulted primarily from the $3.2 million used to pay dividends to shareholders, partially offset by proceeds from the issuance of common stock from stock option exercises. All future payments of dividends are at the discretion of the Board of Directors.

However, if the Company is unable to successfully pass through the additional cost of these tariffs, or if the higher prices reduce demand for the Company's products, it will have a negative effect on the Company's sales and gross margins. We have three operating and reportable segments.

The remaining valuation allowance relates to foreign tax credits ($1.8 million), state NOLs ($0.2 million) and deferred tax assets in foreign jurisdictions where historical taxable losses have been incurred ($1.5 million).

The remaining valuation allowance relates to state NOLs ($0.2 million) and deferred tax assets in foreign jurisdictions where historical taxable losses have been incurred ($1.3 million).

This settlement was recorded in selling, general and administrative expenses within the Consolidated Statements of Comprehensive Income for the third quarter of fiscal 2021. Other Income/Expense Other income/expense was an expense of $0.2 million during fiscal 2022, compared to an expense of $0.6 million during fiscal 2021.

This settlement was recorded in selling, general and administrative expenses within the Consolidated Statements of Comprehensive Income for the third quarter of fiscal 2021. Other Income/Expense Other income was less than $0.1 million during fiscal 2023, compared to an expense of $0.2 million during fiscal 2022.

Fiscal 2022 had $0.1 million of investment income compared to $0.1 million of investment income for fiscal 2021. Our foreign exchange gains and losses are primarily due to the translation of U.S. dollars held in non-U.S. entities. The foreign exchange loss reported for fiscal 2022 totaled $0.3 million, compared to a $0.8 million loss for fiscal 2021.

Fiscal 2023 had $0.3 million of investment income compared to $0.1 million of investment income for fiscal 2022. Our foreign exchange gains and losses are primarily due to the translation of U.S. dollars held in non-U.S. entities. The foreign exchange loss reported for fiscal 2023 totaled $0.3 million, unchanged from fiscal 2022.

Net Sales and Gross Profit Analysis Net sales by segment and percent change for fiscal 2022, fiscal 2021 and fiscal 2020 were as follows ( in thousands ): Net Sales FY 2022 FY 2021 FY 2020 FY22 vs. FY21 % Change FY21 vs.

Net Sales and Gross Profit Analysis Net sales by segment and percent change for fiscal 2023, fiscal 2022 and fiscal 2021 were as follows ( in thousands ): Net Sales FY 2023 FY 2022 FY 2021 FY23 vs. FY22 % Change FY22 vs.

We had net income of $1.7 million during fiscal 2021, which included non-cash stock-based compensation expense of $0.7 million associated with the issuance of stock option awards and restricted stock awards, $1.0 million of inventory provisions and depreciation and amortization expense of $3.4 million associated with our property and equipment as well as amortization of our intangible assets.

We had net income of $22.3 million during fiscal 2023, which included non-cash stock-based compensation expense of $0.9 million associated with the issuance of stock option awards and restricted stock awards, $0.5 million of inventory provisions and depreciation and amortization expense of $3.7 million associated with our property and equipment as well as amortization of our intangible assets.

We currently do not utilize derivative instruments to manage our exposure to foreign currency. Income Tax Provision Our income tax (benefit) provision during fiscal 2022, fiscal 2021 and fiscal 2020 was ($2.2 million), $0.7 million and $0.6 million, respectively. The effective income tax rates during fiscal 2022, fiscal 2021 and fiscal 2020 were (13.7%), 28.3% and (51.4%), respectively.

We currently do not utilize derivative instruments to manage our exposure to foreign currency. Income Tax Provision Our income tax provision (benefit) during fiscal 2023, fiscal 2022 and fiscal 2021 was $2.7 million, ($2.2 million) and $0.7 million, respectively. The effective income tax rates during fiscal 2023, fiscal 2022 and fiscal 2021 were 10.8%, (13.7%) and 28.3%, respectively.

In addition, we partially released the valuation allowance on the state NOL deferred tax item, based on the amount of the NOLs that management believes it is more likely than not to realize.

In addition, in the year ended May 28, 2022, we partially released the valuation allowance on the state NOL deferred tax item, based on the amount of the NOLs that management believed it is more likely than not to realize.

As of May 28, 2022, a valuation allowance of $3.5 million was recorded, representing the portion of the deferred tax asset that management does not believe is more likely than not to be realized. The valuation allowance as of May 29, 2021 was $12.2 million.

As of May 27, 2023, a valuation allowance of $1.4 million was recorded, representing the portion of the deferred tax asset that management does not believe is more likely than not to be realized. The valuation allowance as of May 28, 2022 was $3.5 million.

Gross margin during fiscal 2022 included expense related to inventory provisions for PMT of $0.4 million and $0.1 million for Healthcare. Consolidated gross profit was $58.8 million during fiscal 2021, compared to $49.7 million during fiscal 2020.

Gross margin during fiscal 2023 included expense related to inventory provisions of $0.3 million for PMT, $0.1 million for Canvys and $0.1 million for Healthcare. Consolidated gross profit was $71.7 million during fiscal 2022, compared to $58.8 million during fiscal 2021.

The increase in sales was primarily due to strong parts sales and an increase in demand for the ALTA 750D TM tubes. Gross margin as a percentage of net sales was 21.2% during fiscal 2022, compared to 25.1% during fiscal 2021.

Net sales for Healthcare increased 10.1% to $11.4 million during fiscal 2022, from $10.3 million during fiscal 2021. The increase in sales was primarily due to strong parts sales and an increase in demand for the ALTA 750D TM tubes. Gross margin as a percentage of net sales decreased to 21.2% during fiscal 2022, compared to 25.1% during fiscal 2021.

SG&A as a percentage of sales decreased to 31.6% during fiscal 2021 as compared to 32.9% during fiscal 2020. 24 Legal Settlement – Fiscal 2021 On April 2, 2021, as part of a settlement where the Company did not admit liability, Richardson agreed to pay Varex Imaging Corporation (“Varex”) $1.6 million to settle alleged counts of patent infringement and claims of trade secret misappropriation.

Legal Settlement – Fiscal 2021 On April 2, 2021, as part of a settlement where the Company did not admit liability, Richardson agreed to pay Varex Imaging Corporation (“Varex”) $1.6 million to settle alleged counts of patent infringement and claims of trade secret misappropriation.

See Note 7, Income Taxes , of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for further information. Cash and cash equivalents were $43.3 million at May 29, 2021.

See Note 8, Income Taxes , of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for further information. Cash, cash equivalents and investments were $40.5 million at May 28, 2022.

As of May 28, 2022, we have utilized all net deferred tax assets related to federal net operating loss (“NOL”) carryforwards, compared to $3.0 million as of May 29, 2021. Net deferred tax assets related to domestic state NOL carryforwards at May 28, 2022 amounted to approximately $2.4 million, compared to $3.9 million at May 29, 2021.

As of May 27, 2023 and May 28, 2022 we have utilized all net deferred tax assets related to federal net operating loss (“NOL”) carryforwards. Net deferred tax assets related to domestic state NOL carryforwards at May 27, 2023 amounted to approximately $2.1 million, compared to $2.4 million at May 28, 2022.

If adverse events do occur, our impairment review is based on an undiscounted cash flow analysis at the lowest level at which cash flows of the long-lived assets are largely independent of other groups of our assets and liabilities.

We conduct annual reviews for idle and underutilized equipment and review business plans for possible impairment. If adverse events do occur, our impairment review is based on an undiscounted cash flow analysis at the lowest level at which cash flows of the long-lived assets are largely independent of other groups of our assets and liabilities.

Cash provided by financing activities of $0.4 million during fiscal 2023 resulted primarily from the $3.8 million of proceeds from the issuance of common stock from stock option exercises and the $3.3 million used to pay dividends to shareholders.

The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are increased, or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as our projections for growth . 25 Income taxes paid, including foreign estimated tax payments, were $1.5 million, $0.1 million and $1.0 million, during fiscal 2022, fiscal 2021 and fiscal 2020, respectively.

Allowance for Doubtful Accounts Our allowance for doubtful accounts includes estimated losses that result from uncollectible receivables. The estimates are influenced by the following: continuing credit evaluation of customers’ financial conditions; aging of receivables, individually and in the aggregate; a large number of customers which are widely dispersed across geographic areas; and collectability and delinquency history by geographic area.

The estimates are influenced by the following: continuing credit evaluation of customers’ financial conditions; aging of receivables, individually and in the aggregate; a large number of customers which are widely dispersed across geographic areas; and collectability and delinquency history by geographic area.

Cash Flows from Investing Activities The cash flow from investing activities consisted primarily of purchases and maturities of investments and capital expenditures. Cash used by investing activities of $8.1 million during fiscal 2022 was mainly attributed to the $5.0 million purchase of a Certificate of Deposit (CD) and $3.1 million in capital expenditures.

Cash Flows from Investing Activities The cash flow from investing activities consisted primarily of purchases and maturities of investments and capital expenditures. Cash used by investing activities of $2.2 million during fiscal 2023 was mainly attributed to $7.4 million in capital expenditures with a $5.0 million offset for the maturities of a Certificate of Deposit (CD).

The increase in our accounts payable was due to higher inventory levels to support sales growth, and the increase in accrued liabilities was due to the higher employee compensation expenses and payroll taxes as well as increased deferred revenue . Operating activities provided $0.8 million of cash during fiscal 2021.

We sell our products to customers in diversified industries and perform periodic credit evaluations of our customers’ financial condition. Terms are generally on open account, payable net 30 days in North America, and vary throughout Asia/Pacific, Europe and Latin America. Estimates of credit losses are recorded in the financial statements based on monthly reviews of outstanding accounts.

Terms are generally on open account, payable net 30 days in North America, and vary throughout Asia/Pacific, Europe and Latin America. Estimates of credit losses are recorded in the financial statements based on monthly reviews of outstanding accounts.

Consolidated gross profit was $71.7 million during fiscal 2022, compared to $58.8 million during fiscal 2021. Consolidated gross margin as a percentage of net sales decreased to 31.9% during fiscal 2022, from 33.2% during fiscal 2021, primarily due to PMT’s product mix, higher freight costs and foreign exchange effects in Canvys and increased component scrap expenses in Healthcare.

Consolidated gross margin as a percentage of net sales decreased to 31.9% during fiscal 2022, from 33.2% during fiscal 2021, primarily due to unfavorable product mix for PMT, favorable product mix for GES, higher freight costs and foreign exchange effects for Canvys and increased component scrap expenses for Healthcare.

The new standard is effective for smaller reporting companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. Early adoption is permitted. The Company is currently in the process of evaluating the impact of adoption on its consolidated financial statements. 30

The new standard is effective for smaller reporting companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. Early adoption is permitted. The Company will adopt in the first quarter of fiscal 2024 and the expected impact on the consolidated financial statements is not material. 32

Sales increased primarily due to strong sales in the European and North American markets. Gross margin as a percentage of net sales decreased to 32.0% during fiscal 2022 as compared to 35.0% during fiscal 2021 mainly due to increasing freight costs resulting from the COVID-19 pandemic and foreign currency effects.

Gross margin as a percentage of net sales decreased to 32.0% during fiscal 2022 as compared to 35.0% during fiscal 2021 mainly due to increasing freight costs resulting from the COVID-19 pandemic and foreign currency effects. Healthcare Net sales for Healthcare increased 0.5% to $11.4 million during fiscal 2023, essentially unchanged from fiscal 2022.

We record penalties and interest related to uncertain tax positions in the income tax expense line item within the Consolidated Statements of Comprehensive Income (Loss). Accrued interest and penalties were included within the related tax liability line in the Consolidated Balance Sheets.

We record penalties and interest related to uncertain tax positions in the income tax expense line item within the Consolidated Statements of Comprehensive Income. Accrued interest and penalties were included within the related tax liability line in the Consolidated Balance Sheets. We have not recorded a liability for interest and penalties as of May 27, 2023 or May 28, 2022.

Through a combination of newly developed products and partnerships, service offerings and training programs, we believe we can help our customers improve efficiency while lowering the cost of healthcare delivery. We currently have operations in the following major geographic regions: North America, Asia/Pacific, Europe and Latin America.

FY20 % Change North America $ 98,527 $ 73,625 $ 65,259 33.8 % 12.8 % Asia/Pacific 49,235 40,839 32,979 20.6 % 23.8 % Europe 64,435 52,549 49,394 22.6 % 6.4 % Latin America 12,439 9,651 8,308 28.9 % 16.2 % Other (1) (16 ) 273 (42 ) (105.9 %) 750.0 % Total $ 224,620 $ 176,937 $ 155,898 26.9 % 13.5 % Gross profit by geographic area and percent of geographic net sales for fiscal 2022, fiscal 2021 and fiscal 2020 were as follows ( in thousands ): FY 2022 FY 2021 FY 2020 Gross Profit (Loss) Amount % of Net Sales Amount % of Net Sales Amount % of Net Sales North America $ 36,548 37.1 % $ 28,639 38.9 % $ 24,494 37.5 % Asia/Pacific 15,728 31.9 % 13,520 33.1 % 10,629 32.2 % Europe 19,215 29.8 % 16,958 32.3 % 15,483 31.3 % Latin America 4,340 34.9 % 3,405 35.3 % 2,804 33.8 % Other (1) (4,131 ) (3,697 ) (3,737 ) Total $ 71,700 31.9 % $ 58,825 33.2 % $ 49,673 31.9 % (1) Other primarily includes net sales not allocated to a specific geographical region, unabsorbed value-add costs and other unallocated expenses.

FY21 % Change North America $ 112,214 $ 98,527 $ 73,625 13.9 % 33.8 % Asia/Pacific 59,557 49,235 40,839 21.0 % 20.6 % Europe 62,017 64,435 52,549 (3.8 %) 22.6 % Latin America 28,924 12,439 9,651 132.5 % 28.9 % Other (1) (54 ) (16 ) 273 (237.5 %) (105.9 %) Total $ 262,658 $ 224,620 $ 176,937 16.9 % 26.9 % Gross profit by geographic area and percent of geographic net sales for fiscal 2023, fiscal 2022 and fiscal 2021 were as follows ( in thousands ): FY 2023 FY 2022 FY 2021 Gross Profit (Loss) Amount % of Net Sales Amount % of Net Sales Amount % of Net Sales North America $ 43,580 38.8 % $ 36,548 37.1 % $ 28,639 38.9 % Asia/Pacific 18,775 31.5 % 15,728 31.9 % 13,520 33.1 % Europe 18,760 30.2 % 19,215 29.8 % 16,958 32.3 % Latin America 7,735 26.7 % 4,340 34.9 % 3,405 35.3 % Other (1) (5,161 ) (4,131 ) (3,697 ) Total $ 83,689 31.9 % $ 71,700 31.9 % $ 58,825 33.2 % (1) Other primarily includes net sales not allocated to a specific geographical region, unabsorbed value-add costs and other unallocated expenses. 25 We sell our products to customers in diversified industries and perform periodic credit evaluations of our customers’ financial condition.

If no amount within this range is a better estimate than any other amount within the range, the minimum amount in the range is accrued.

When only a range of possible loss can be established, the most probable amount in the range is accrued. If no amount within this range is a better estimate than any other amount within the range, the minimum amount in the range is accrued.

Gross margin as a percentage of net sales increased to 33.5% during fiscal 2021 as compared to 32.3% during fiscal 2020, primarily due to improved product mix and manufacturing efficiencies. Canvys – Visual Technology Solutions Net sales for Canvys increased 20.0% to $35.2 million during fiscal 2022, from $29.3 million during fiscal 2021.

Gross margin as a percentage of net sales decreased to 31.5% during fiscal 2023 as compared to 32.0% during fiscal 2022 mainly due to product mix. Net sales for Canvys increased 20.0% to $35.2 million during fiscal 2022, from $29.3 million during fiscal 2021. Sales increased primarily due to strong sales in the European and North American markets.

Cash and cash equivalents by geographic area at May 29, 2021 consisted of $26.1 million in North America, $8.8 million in Europe, $1.2 million in Latin America and $7.2 million in Asia/Pacific. We repatriated a total of $0.9 million to the United States in fiscal 2021 from several of our foreign entities.

Cash and cash equivalents by geographic area at May 27, 2023 consisted of $8.1 million in North America, $8.6 million in Europe, $1.5 million in Latin America and $6.8 million in Asia/Pacific. No funds were repatriated to the United States in fiscal 2023 from our foreign entities.

Changes in our operating assets and liabilities resulted in a use of cash of $6.0 million during fiscal 2021, primarily due to the increase in inventories of $4.9 million, an increase in accounts receivable of $4.2 million and a decrease in accounts payable of $0.6 million.

Changes in our operating assets and liabilities resulted in a use of cash of $35.5 million during fiscal 2023, mainly due to an increase in inventories of $30.5 million, a decrease in accounts payable and accrued liabilities of $4.4 million and an increase in prepaid expenses of $0.5 million.

Results of Operations Overview - Fiscal Year Ended May 28, 2022 • Fiscal 2022 and fiscal 2021 both contained 52 weeks. • Net sales during fiscal 2022 were $224.6 million, up 26.9%, compared to net sales of $176.9 million during fiscal 2021. • Gross margin was 31.9% of net sales during fiscal 2022, compared to 33.2% of net sales during fiscal 2021. • Selling, general and administrative expenses were $55.7 million, or 24.8% of net sales, during fiscal 2022, compared to $55.9 million, or 31.6% of net sales, during fiscal 2021. • Operating income during fiscal 2022 was $16.0 million, compared to an operating income of $2.9 million during fiscal 2021. • Other expense during fiscal 2022 was $0.2 million, compared to other expense of $0.6 million during fiscal 2021. • Net income during fiscal 2022 was $17.9 million, compared to a net income of $1.7 million during fiscal 2021.

We currently have operations in the following major geographic regions: North America, Asia/Pacific, Europe and Latin America. 22 Results of Operations Overview - Fiscal Year Ended May 27, 2023 • Fiscal 2023 and fiscal 2022 both contained 52 weeks. • Net sales during fiscal 2023 were $262.7 million, up 16.9%, compared to net sales of $224.6 million during fiscal 2022. • Gross margin was 31.9% of net sales during fiscal 2023, compared to 31.9% of net sales during fiscal 2022. • Selling, general and administrative expenses were $58.7 million, or 22.4% of net sales, during fiscal 2023, compared to $55.7 million, or 24.8% of net sales, during fiscal 2022. • Operating income during fiscal 2023 was $25.0 million, compared to an operating income of $16.0 million during fiscal 2022. • Other income during fiscal 2023 was less than $0.1 million, compared to other expense of $0.2 million during fiscal 2022. • Net income during fiscal 2023 was $22.3 million, compared to a net income of $17.9 million during fiscal 2022.

Capital expenditures were primarily related to our Healthcare business and IT systems. Our purchases and proceeds from investments consist of time deposits and CDs. Purchasing of future investments may vary from period to period due to interest and foreign currency exchange rates. Cash Flows from Financing Activities The cash flow from financing activities primarily consists of cash dividends paid.

Purchasing of future investments may vary from period to period due to interest and foreign currency exchange rates. 29 Cash Flows from Financing Activities The cash flow from financing activities primarily consists of cash dividends paid.

In the normal course of business, we are subject to examination by taxing authorities throughout the world. Generally, years prior to fiscal 2016 are closed for examination under the statute of limitation for U.S. federal, U.S. state and local or non-U.S. tax jurisdictions. We are currently under examination in Germany for fiscal 2015 through fiscal 2018.

Generally, years prior to fiscal 2017 are closed for examination under the statute of limitation for U.S. federal, U.S. state and local or non-U.S. tax jurisdictions. We were under examination for fiscal 2015 through fiscal 2018 in Germany. The audit was settled in the fourth quarter of fiscal 2022.

Gross profit by segment and percent of segment net sales for fiscal 2022, fiscal 2021 and fiscal 2020 were as follows ( in thousands ): Gross Profit FY 2022 FY 2021 FY 2020 PMT $ 58,041 32.6 % $ 45,951 33.5 % $ 38,288 32.3 % Canvys 11,252 32.0 % 10,274 35.0 % 9,313 32.2 % Healthcare 2,407 21.2 % 2,600 25.1 % 2,072 24.4 % Total $ 71,700 31.9 % $ 58,825 33.2 % $ 49,673 31.9 % Gross profit reflects the distribution and manufacturing product margin less manufacturing variances, inventory obsolescence charges, customer returns, scrap and cycle count adjustments, engineering costs and other provisions.

The increase in Healthcare was primarily due to strong part sales and increase in demand for the ALTA750 TM tubes. 23 Gross profit by segment and percent of segment net sales for fiscal 2023, fiscal 2022 and fiscal 2021 were as follows ( in thousands ): Gross Profit FY 2023 FY 2022 FY 2021 PMT $ 54,089 32.9 % $ 50,810 32.7 % $ 43,546 33.8 % GES 13,719 28.8 % 7,231 32.0 % 2,405 29.0 % Canvys 12,375 31.5 % 11,252 32.0 % 10,274 35.0 % Healthcare 3,506 30.7 % 2,407 21.2 % 2,600 25.1 % Total $ 83,689 31.9 % $ 71,700 31.9 % $ 58,825 33.2 % Gross profit reflects the distribution and manufacturing product margin less manufacturing variances, inventory obsolescence charges, customer returns, scrap and cycle count adjustments, engineering costs and other provisions.

This amount includes $0.7 million in the first quarter from our entity in China, $0.3 million in the second quarter from our entity in Taiwan and $0.5 million in the third quarter from our entity in Japan. Management continues to monitor the global situation on its financial condition, liquidity, operations, suppliers, industry and workforce.

The increase was mainly due to strong growth from our Power and Microwave Group (PMG) technology partners in various applications including power management, green energy, and 5G infrastructure, and increased revenue from our Semiconductor Wafer Fabrication Equipment customers buying engineered solutions. We also had strong growth in various Electron Device (EDG) product lines.

Net sales for PMT increased 20.5% to $155.4 million during fiscal 2022 from $129.0 million during fiscal 2021. The increase was mainly due to strong growth from our Power and Microwave Group (PMG) technology partners in various applications including power management and 5G infrastructure, and increased revenue from our Semiconductor Wafer Fabrication Equipment customers buying engineered solutions.

Gross margin as a percentage of net sales increased to 35.0% during fiscal 2021 as compared to 32.2% during fiscal 2020, primarily due to product mix and foreign currency effects. Healthcare Net sales for Healthcare increased 10.1% to $11.4 million during fiscal 2022, from $10.3 million during fiscal 2021.

Gross margin as a percentage of net sales increased to 32.0% during fiscal 2022 as compared to 29.0% during fiscal 2021, primarily due to product mix. 24 Canvys Net sales for Canvys increased 11.8% to $39.3 million during fiscal 2023, from $35.2 million during fiscal 2022. Sales increased primarily due to strong sales in the North American market.

We partner with both private label manufacturing companies and leading branded hardware vendors to offer the highest quality display and touch solutions and customized computing platforms. Healthcare manufactures, repairs, refurbishes and distributes high value replacement parts and equipment for the healthcare market including hospitals, medical centers, asset management companies, independent service organizations and multi-vendor service providers.

Healthcare manufactures, repairs, refurbishes and distributes high value replacement parts and equipment for the healthcare market including hospitals, medical centers, asset management companies, independent service organizations and multi-vendor service providers.

Accordingly, in the first quarter of fiscal 2023, we will begin reporting on four segments. The three operating and reportable segments for fiscal 2022, fiscal 2021 and fiscal 2020 are defined as follows: Power and Microwave Technologies (“PMT”) combines our core engineered solutions capabilities, power grid and microwave tube business with new disruptive RF, Wireless and Power technologies.

The results for fiscal 2022 and fiscal 2021 presented herein were adjusted to reflect the presentation of the new GES segment separately from the PMT segment. 21 The Company's four operating and reportable segments for fiscal 2023, fiscal 2022 and fiscal 2021 are defined as follows: Power and Microwave Technologies combines our core engineered solutions capabilities, power grid and microwave tube business with new disruptive RF, Wireless and Power technologies.

This increase in SG&A expense from fiscal 2021 was mainly due to higher employee compensation expenses including incentive expense, partially offset by lower legal fees. SG&A as a percentage of sales decreased to 24.8% during fiscal 2022 as compared to 31.6% during fiscal 2021.

However, when considering the non-recurrence of the $1.6 million legal settlement in fiscal 2021, the SG&A expense for fiscal 2022 was $1.4 million or 2.6% higher than fiscal 2021. This increase in SG&A expense from fiscal 2021 was mainly due to higher employee compensation expenses including incentive expense, partially offset by lower legal fees.

Net deferred tax assets related to foreign NOL carryforwards as of May 28, 2022 totaled approximately $0.4 million with various or indefinite expiration dates. The amount of net deferred tax assets related to foreign NOL carryforwards was $0.4 million as of May 29, 2021.

Net deferred tax assets related to foreign NOL carryforwards was $0.2 million as of May 27, 2023 compared to $0.4 million as of May 28, 2022, with various or indefinite expiration dates. We released the valuation allowance and have utilized $1.8 million of domestic net deferred tax asset related to foreign tax credit carryforwards as of May 27, 2023.

We offer long term availability and proven custom display solutions that include touch screens, protective panels, custom enclosures, All-In-One computers, specialized cabinet finishes and application specific software packages and certification services. Our volume commitments are lower than the large display manufacturers, making us the ideal choice for companies with very specific design requirements.

Our engineers design, manufacture, source and support a full spectrum of solutions to match the needs of our customers. We offer long term availability and proven custom display solutions that include touch screens, protective panels, custom enclosures, All-In-One computers, specialized cabinet finishes and application specific software packages and certification services.

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to support a more likely than not assertion that its deferred tax assets will be realized. A significant component of objective evidence evaluated was the cumulative income or loss incurred in each jurisdiction over the three-year period ended May 28, 2022.

The deferred tax liability related to undistributed earnings of our foreign subsidiaries was less than $0.1 million in both fiscal 2023 and fiscal 2022. Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to support a more likely than not assertion that its deferred tax assets will be realized.

Terms are generally on open account, payable net 30 days in North America, and vary throughout Asia/Pacific, Europe and Latin America subject to customary credit checks. Manufacturing/assembly typically includes the products that are manufactured or assembled in our manufacturing facility.

Terms are generally on open account, payable net 30 days in North America, and vary throughout Asia/Pacific, Europe and Latin America subject to customary credit checks. Repair, installation or training activities generate services revenue. The services we provide are relatively short in duration and are typically completed in one or two weeks.

Sales by Geographic Area On a geographic basis, our sales are categorized by destination: North America; Asia/Pacific; Europe; Latin America; and Other. Net sales by geographic area and percent change for fiscal 2022, fiscal 2021 and fiscal 2020 were as follows ( in thousands ): Net Sales FY 2022 FY 2021 FY 2020 FY22 vs. FY21 % Change FY21 vs.

Net sales by geographic area and percent change for fiscal 2023, fiscal 2022 and fiscal 2021 were as follows ( in thousands ): Net Sales FY 2023 FY 2022 FY 2021 FY23 vs. FY22 % Change FY22 vs.

We have not recorded a liability for interest and penalties as of May 28, 2022 or May 29, 2021. Liquidity, Financial Position and Capital Resources Our operations and cash needs have been primarily financed through income from operations and cash on hand. Cash, cash equivalents and investments were $40.5 million at May 28, 2022.

Liquidity, Financial Position and Capital Resources Our operations and cash needs have been primarily financed through income from operations and cash on hand. Cash and cash equivalents were $25.0 million at May 27, 2023.

Cash Flows from Operating Activities Cash flow from operating activities primarily resulted from our net income adjusted for non-cash items and changes in our operating assets and liabilities. Operating activities provided $1.9 million of cash during fiscal 2022.

As of the date of this report, no amounts were outstanding under the Revolving Credit Facility. 28 Cash Flows from Operating Activities Cash flow from operating activities primarily resulted from our net income adjusted for non-cash items and changes in our operating assets and liabilities. Operating activities utilized $8.2 million of cash during fiscal 2023.

Intangible and Long-Lived Assets Intangible assets are initially recorded at their fair market values determined by quoted market prices in active markets, if available, or recognized valuation models.

Intangible assets are initially recorded at their fair market values determined by quoted market prices in active markets, if available, or recognized valuation models. We review property and equipment, definite-lived intangible assets and other long-lived assets for impairment whenever adverse events or changes in circumstances indicate that the carrying amounts of such assets may not be recoverable.

FY20 % Change PMT $ 178,056 $ 137,280 $ 118,480 29.7 % 15.9 % Canvys 35,187 29,319 28,926 20.0 % 1.4 % Healthcare 11,377 10,338 8,492 10.1 % 21.7 % Total $ 224,620 $ 176,937 $ 155,898 26.9 % 13.5 % During fiscal 2022, consolidated net sales increased by 26.9% compared to fiscal 2021.

FY21 % Change PMT $ 164,299 $ 155,445 $ 128,980 5.7 % 20.5 % GES 47,596 22,611 8,300 110.5 % 172.4 % Canvys 39,331 35,187 29,319 11.8 % 20.0 % Healthcare 11,432 11,377 10,338 0.5 % 10.1 % Total $ 262,658 $ 224,620 $ 176,937 16.9 % 26.9 % During fiscal 2023, consolidated net sales increased by 16.9% compared to fiscal 2022.

Gross margin as a percentage of net sales decreased to 32.6% during fiscal 2022 as compared to 33.5% during fiscal 2021, primarily due to product mix. Net sales for PMT increased 15.9% to $137.3 million during fiscal 2021, from $118.5 million during fiscal 2020.

We also had strong growth in various Electron Device (EDG) product lines. Gross margin as a percentage of net sales decreased to 32.7% during fiscal 2022 as compared to 33.8% during fiscal 2021, primarily due to product mix. Green Energy Solutions Net sales for GES increased 110.5% to $47.6 million during fiscal 2023 from $22.6 million during fiscal 2022.

Power and Microwave Technologies Net sales for PMT increased 29.7% to $178.1 million during fiscal 2022 from $137.3 million during fiscal 2021.

Gross margin during fiscal 2022 included expense related to inventory provisions for PMT of $0.4 million and $0.1 million for Healthcare. Power and Microwave Technologies Net sales for PMT increased 5.7% to $164.3 million during fiscal 2023 from $155.4 million during fiscal 2022.

Loss Contingencies We accrue a liability for loss contingencies when it is probable that a liability has been incurred and the amount can be reasonably estimated. When only a range of possible loss can be established, the most probable amount in the range is accrued.

This analysis requires management judgment with respect to changes in technology, the continued success of product lines and future volume, revenue and expense growth rates. Loss Contingencies We accrue a liability for loss contingencies when it is probable that a liability has been incurred and the amount can be reasonably estimated.

The goods we provide to our customers are distinct in that our customers benefit from the goods we sell them through use in their own processes. Repair, installation or training activities generate services revenue. The services we provide are relatively short in duration and typically completed in one or two weeks.

The goods we provide to our customers are distinct in that our customers benefit from the goods we sell them through use in their own processes. Distribution typically includes products purchased from our suppliers, stocked in our warehouses and then sold to our customers.

This audit is expected to be closed in the first quarter of fiscal 2023. Our primary foreign tax jurisdictions are Germany and the Netherlands. We have tax years open in Germany beginning in fiscal 2019 and the Netherlands beginning in fiscal 2018. The uncertain tax positions as of both May 28, 2022 and May 29, 2021 were $0.1 million.

We have tax years open in Germany beginning in fiscal 2019 and the Netherlands beginning in fiscal 2021. 27 The Company did not record any uncertain tax positions as of May 27, 2023 as compared to $0.1 million as of May 28, 2022. The reserve for the German audits was reversed in fiscal 2023.

The Company began reporting the results for its new Green Energy Solutions ("GES") segment in the first quarter of fiscal 2023 due to its focus on power applications that support the green energy market. The GES segment has been carved out of our existing Power and Microwave Technologies (“PMT”) segment.

Provisions for obsolete or slow-moving inventories are recorded based upon regular analysis of stock rotation privileges, obsolescence, the exiting of certain markets and assumptions about future demand and market conditions. If future demand changes in an industry or market conditions differ from management’s estimates, additional provisions may be necessary.

Our net inventories include finished goods, raw materials and work-in-progress. We do not anticipate any material risks or uncertainties related to possible future inventory write-downs. Provisions for obsolete or slow-moving inventories are recorded based upon regular analysis of stock rotation privileges, obsolescence, the exiting of certain markets and assumptions about future demand and market conditions.

The deferred tax liability on the outside basis difference is now primarily withholding tax on future dividend distributions. The deferred tax liability related to undistributed earnings of our foreign subsidiaries was less than $0.1 million in both fiscal 2022 and fiscal 2021.

We have historically determined that undistributed earnings of our foreign subsidiaries, to the extent of cash available, will be repatriated to the U.S. The deferred tax liability on the outside basis difference is now primarily withholding tax on future dividend distributions.

Each product we sell benefits the customer independently of the other products. Each item on each purchase order from the customer can be used by the customer unrelated to any other products we provide to the customer.

Each item on each purchase order from the customer can be used by the customer unrelated to any other products we provide to the customer. The Company’s revenue includes the following streams: • Manufacturing/assembly • Distribution • Services revenue Manufacturing/assembly typically includes the products that are manufactured or assembled in our manufacturing facility.

Our intangible assets represent the fair value for trade name, customer relationships, non-compete agreements and technology acquired in connection with the acquisitions. We review property and equipment, definite-lived intangible assets and other long-lived assets for impairment whenever adverse events or changes in circumstances indicate that the carrying amounts of such assets may not be recoverable.

If future demand changes in an industry or market conditions differ from management’s estimates, additional provisions may be necessary. 31 Intangible and Long-Lived Assets Our intangible assets represent the fair value for trade name, customer relationships, non-compete agreements and technology acquired in connection with the acquisitions.

Revenue Recognition Our customers are generally not resellers, but rather businesses that incorporate our products into their processes from which they generate an economic benefit. The goods are also distinct in that each item sold to the customer is clearly identified on both the purchase order and resulting invoice.

The goods are also distinct in that each item sold to the customer is clearly identified on both the purchase order and resulting invoice. Each product we sell benefits the customer independently of the other products.

Therefore, at each reporting date, the amount of unbilled work is insignificant. The services revenue has consistently accounted for less than 5% of the Company’s total revenues and is expected to continue at that level. 28 We record discounts taken based on historical experience . The policy varies by business unit. The Company allows returns with prior written authorization .

Therefore, at each reporting date, the amount of unbilled work is insignificant. The services revenue has consistently accounted for less than 5% of the Company’s total revenues and is expected to continue at that level. Inventories, net Our consolidated inventories are stated at the lower of cost and net realizable value, generally using a weighted-average cost method.

The Company’s revenue includes the following streams: • Distribution • Manufacturing/assembly • Services revenue Distribution typically includes products purchased from our suppliers, stocked in our warehouses and then sold to our customers. The distribution business does not include a separate service bundled with the product sold or sold on top of the product.

The distribution business does not include a separate service bundled with the product sold or sold on top of the product.

Contractual Obligations Contractual obligations are presented in the table below as of May 28, 2022 ( in thousands ): Less than 1 year 1 - 3 years 4 - 5 years More than 5 years Less Interest Total Lease obligations (1) $ 1,244 1,870 75 17 (182 ) $ 3,024 (1) Lease obligations are related to certain warehouse and office facilities under non-cancelable operating leases as well as financing leases. 27 Critical Accounting Policies and Estimates The preparation of financial statements in conformity with United States Generally Accepted Accounting Principles (“GAAP”) requires management to make significant estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Contractual Obligations Contractual obligations are presented in the table below as of May 27, 2023 ( in thousands ): Less than 1 year 1 - 3 years 4 - 5 years More than 5 years Less Interest Total Lease obligations (1) $ 1,147 $ 1,393 $ 35 $ — $ (118 ) $ 2,457 (1) Lease obligations are related to certain warehouse and office facilities under non-cancelable operating leases as well as financing leases.

Sales for PMT increased by 29.7%, Canvys sales increased by 20.0% and Healthcare sales increased by 10.1%.

During fiscal 2022, consolidated net sales increased by 26.9% compared to fiscal 2021. Sales for PMT increased by 20.5%, GES sales increased by 172.4%, Canvys sales increased by 20.0% and Healthcare sales increased by 10.1%.

In addition to the $1.6 million legal settlement, SG&A expenses increased due to higher employee compensation expenses and higher legal fees, partially offset by lower travel and consulting expenses.

Selling, General and Administrative Expenses Selling, general and administrative expenses (“SG&A”) increased during fiscal 2023 to $58.7 million from $55.7 million during fiscal 2022. This increase in SG&A expense from fiscal 2022 was mainly due to higher employee compensation and travel expenses, partially offset by lower legal fees and a lower bad debt expense.

Consolidated gross margin as a percentage of net sales increased to 33.2% during fiscal 2021, from 31.9% during fiscal 2020, primarily due to improved product mix in all business units. Gross margin during fiscal 2021 included expense related to inventory provisions for PMT of $0.6 million, $0.1 million for Canvys and $0.4 million for Healthcare.

Consolidated gross margin as a percentage of net sales was 31.9 % for fiscal 2023, the same as the 31.9% during fiscal 2022, primarily due to favorable product mix for PMT, unfavorable product mix for GES, unfavorable product mix for Canvys and improved manufacturing absorption and decreased component scrap for Healthcare.

These uses of cash were partially offset by the increase in our accrued liabilities of $3.6 million and the decrease in prepaid expenses and other assets of $0.1 million. The majority of the inventory increase was to support our electron tube and PMG businesses. The increase in accounts receivable was primarily due to the sales increase in fiscal 2021.

The majority of the inventory increase was to support our Electron tube, PMG, Green Energy Solutions, LaFox manufacturing and Healthcare businesses. The decrease in accounts payable and accrued liabilities was due to revenue recognition and timing. Operating activities provided $1.9 million of cash during fiscal 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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2022 filing

2023 filing

We do manage foreign exchange exposures by using currency clauses in certain sales contracts and we also have local debt to offset asset exposures. We have not used any derivative instruments nor entered into any forward contracts in fiscal 2022, fiscal 2021 or fiscal 2020.

ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk Risk Management and Market Sensitive Financial Instruments We are exposed to many different market risks with the various industries we serve. The primary financial risk we are exposed to is foreign currency exchange, as certain operations, assets and liabilities of ours are denominated in foreign currencies.

ITEM 7A. Quantitative and Qualitat ive Disclosures about Market Risk Risk Management and Market Sensitive Financial Instruments We are exposed to many different market risks with the various industries we serve. The primary financial risk we are exposed to is foreign currency exchange, as certain operations, assets and liabilities of ours are denominated in foreign currencies.

Additional disclosure regarding various market risks are set forth in Part I, Item 1A , Risk Factors , of our Annual Report on this Form 10-K.

Additional disclosure regarding various market risks is set forth in Part I, Item 1A , Risk Factors , of our Annual Report on this Form 10-K.

Had the U.S. dollar changed unfavorably 10% against various foreign currencies, foreign denominated net sales would have been lower by an estimated $12.1 million during fiscal 2022, an estimated $10.0 million during fiscal 2021 and an estimated $9.3 million during fiscal 2020.

Had the U.S. dollar changed unfavorably 10% against various foreign currencies, foreign denominated net sales would have been lower by an estimated $12.2 million during fiscal 2023, an estimated $12.1 million during fiscal 2022 and an estimated $10.0 million during fiscal 2021.

Total assets would have declined by an estimated $4.2 million as of the fiscal year ended May 28, 2022 and an estimated $4.2 million as of the fiscal year ended May 29, 2021, while the total liabilities would have decreased by an estimated $1.0 million as of the fiscal year ended May 28, 2022 and an estimated $1.1 million as of the fiscal year ended May 29, 2021.

Total assets would have declined by an estimated $4.3 million as of the fiscal year ended May 27, 2023 and an estimated $4.2 million as of the fiscal year ended May 28, 2022, while the total liabilities would have decreased by an estimated $1.1 million as of the fiscal year ended May 27, 2023 and an estimated $1.0 million as of the fiscal year ended May 28, 2022.