##### Table of Contents

---

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549



FORM 10-K



(Mark One)

|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------



For the fiscal year ended December 31, 2004



or



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------



For the transition period
from                    to



Commission File Number 0-23426



REPTRON ELECTRONICS, INC.

(Exact name of registrant as specified in its charter)



|                                                              |  |                                        
|------------------------------------------------------------- |  | ---------------------------------------
|Florida                                                       |  | 38-2081116                             
|(State or other jurisdictionof incorporation or organization) |  | (I.R.S. Employer Identification Number)
|                                                              | 
|13700 Reptron Boulevard, Tampa, Florida                       |  | 33626                                  
|(Address of principal executive offices)                      |  | (Zip Code)                             



Registrants
telephone number, including area code: (813) 854-2000



Securities registered pursuant to Section 12(b) of the Act: None



Securities registered pursuant to Section 12(g) of the Act:



|                              
|------------------------------
|Title of Each Class           
|Common Stock, $.01 par value  
|Senior Secured Notes, due 2009



Indicate by check
mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  x    No ̈



Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ̈



Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court.

Yes  x    No ̈



Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).

Yes ̈No  x



The aggregate market value of shares of the registrants common stock
held by non-affiliates of the registrant based upon the closing sale price of our common stock on June 30, 2004, the last day of our second fiscal quarter as reported on the Over-The-Counter Bulletin Board, was approximately $36,850,000.



The number of shares of the registrants common stock issued and
outstanding as of March 30, 2005 was 5,000,000.



Documents
Incorporated by Reference:



Portions of Reptrons
definitive proxy statement for the 2005 Annual Meeting of Reptrons Shareholders are incorporated by reference into Part III of this Form 10-K.



---



---

##### Table of Contents

REPTRON ELECTRONICS, INC.

FORM 10-K ANNUAL REPORT

Fiscal Year ended December 31, 2004



TABLE OF CONTENTS



|                        |  |                                                                                                             |  |     
|----------------------- |  | ----------------------------------------------------------------------------------------------------------- |  | ----
|Item Number inForm 10-K |  |                                                                                                             |  | Page
|                        |  | PART I                                                                                                      |  |     
|                        |  |                                                                                                            
|1.                      |  | Business                                                                                                    |  | 3   
|                        |  |                                                                                                            
|2.                      |  | Properties                                                                                                  |  | 13  
|                        |  |                                                                                                            
|3.                      |  | Legal Proceedings                                                                                           |  | 13  
|                        |  |                                                                                                            
|4.                      |  | Submission of Matters to a Vote of Security Holders                                                         |  | 13  
|                        |  |                                                                                                            
|                        |  | PART II                                                                                                     |  |     
|                        |  |                                                                                                            
|5.                      |  | Market For Registrants Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 14  
|                        |  |                                                                                                            
|6.                      |  | Selected Financial Data                                                                                     |  | 15  
|                        |  |                                                                                                            
|7.                      |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                       |  | 15  
|                        |  |                                                                                                            
|7A.                     |  | Quantitative and Qualitative Disclosures About Market Risk                                                  |  | 23  
|                        |  |                                                                                                            
|8.                      |  | Financial Statements and Supplementary Data                                                                 |  | 23  
|                        |  |                                                                                                            
|9.                      |  | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure                        |  | 23  
|                        |  |                                                                                                            
|9A.                     |  | Controls and Procedures                                                                                     |  | 23  
|                        |  |                                                                                                            
|9B.                     |  | Other Information                                                                                           |  | 23  
|                        |  |                                                                                                            
|                        |  | PART III                                                                                                    |  |     
|                        |  |                                                                                                            
|10.                     |  | Directors and Executive Officers of the Registrant                                                          |  | 24  
|                        |  |                                                                                                            
|11.                     |  | Executive Compensation                                                                                      |  | 24  
|                        |  |                                                                                                            
|12.                     |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters              |  | 24  
|                        |  |                                                                                                            
|13.                     |  | Certain Relationships and Related Transactions                                                              |  | 24  
|                        |  |                                                                                                            
|14.                     |  | Principal Accountant Fees and Services                                                                      |  | 24  
|                        |  |                                                                                                            
|15.                     |  | Exhibits and Financial Statement Schedules                                                                  |  | 25  
|                        | 
|Signatures              |  |                                                                                                            



2



---

##### Table of Contents

PART I



References to Reptron, the Company, we, us and our refer to Reptron Electronics, Inc.,
unless the context otherwise requires. This document contains certain forward-looking statements that involve a number of risks and uncertainties. Such forward-looking statements are within the meaning of that term in Section 27A of the Securities
Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended and are made in reliance on the safe harbor provisions of The Private Securities Litigation Reform Act of 1995. Factors that could cause or contribute to
actual results to differ materially include the following: business conditions and growth in Reptrons industry and in the general economy; competitive factors; risks due to shifts in market demand; the ability of Reptron to complete
acquisitions; the risks discussed in the section of this report titled Factors That Could Affect Future Results and the risk factors listed from time to time in Reptrons reports filed with the Securities and Exchange Commission as
well as assumptions regarding the foregoing. The words believe, plans, estimate, expect, intend, should, may, will, appear, hope,
anticipate, and similar expressions and variations thereof identify certain of such forward-looking statements, which speak only as of the dates on which they were made These statements are only predictions. Reptron undertakes no
obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and
involve risks and uncertainties, and that actual results may differ materially from those indicated in the forward-looking statements as a result of various factors. Readers are cautioned not to place undue reliance on these forward-looking
statements.



|Item 1. | Business
|------- | --------



General



We are an electronics manufacturing services (EMS) company
providing engineering services, display and systems integration services and electronic manufacturing services through our two divisions: Reptron Manufacturing Services (RMS) and Reptron Outsource Manufacturing and Design
(ROMD). RMS offers full electronics manufacturing services including complex circuit board assembly, complete supply chain services and manufacturing engineering services to OEMs in a wide variety of industries including medical,
industrial/instrumentation, banking, telecommunications, and semiconductor equipment. ROMD provides value-added display design engineering and system integration services to OEMs primarily in the medical, semiconductor equipment, and
industrial/instrumentation industries.



During 2003, we
divested two divisions enabling the Company to focus solely on our core competency as an EMS provider. In June, 2003, we sold certain assets and liabilities of our electronic components distribution business, Reptron Distribution Services
(RDS). In October, 2003, we sold substantially all of the assets and certain liabilities of our memory module division, Reptron Computer Products (RCP). RDS and RCP together comprised our electronic components distribution
(ECD) segment. Descriptions of the ECD segment and its operating results have been included in financial statements and various other documents previously prepared by the Company. However, this annual report and other future reports
filed with the Securities and Exchange Commission will focus primarily on our remaining operations in the EMS industry.



Reptron was incorporated under the laws of Michigan in 1973, reincorporated under the laws of Florida in 2003 and reorganized as a Florida corporation
under Chapter 11 of the U.S. Bankruptcy Code in 2004. Reptrons principle executive offices are located at 13700 Reptron Boulevard, Tampa, Florida 33626, and the telephone number is (813) 854-2000. Information about our Company is also
available at our website at www.reptron.com which includes links free of charge to reports and filings we have made with the Securities and Exchange Commission (SEC). The contents of our website are not incorporated by reference
in this Annual Report on Form 10-K.



3



---

##### Table of Contents

Reorganization



On February 3, 2004, Reptron implemented its previously announced financial restructuring when its pre-negotiated Plan of Reorganization under Chapter 11
of the U.S. Bankruptcy Code (the Plan or Plan of Reorganization) became effective. Events occurring during 2003 and through February 3, 2004 related to the Chapter 11 proceedings are summarized as follows.



In January 2003, we announced that we were seeking to restructure $76.3
million principal amount of our outstanding 63⁄4% Convertible Subordinated Notes (the Convertible Notes). As part of this initiative, we discontinued all interest payments on the Convertible Notes.



In February 2003, we commenced discussions with certain holders of the
Convertible Notes (Ad-hoc Committee) to discuss the financial condition of the Company and the proposed restructuring. We engaged in extensive, arms length negotiations with the Ad-hoc Committee regarding the terms of the
consensual restructuring of Reptron.



On October 28, 2003, we
filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Under the terms of the Plan, substantially all of our general unsecured creditors (except for holders of the Convertible Notes and certain other creditors)
received full payment for all prepetition claims within ninety days subsequent to the Plans effective date. The Plan was confirmed by the bankruptcy court on January 14, 2004 and became effective February 3, 2004, resulting in conversion of
the $76.3 million of Convertible Notes, $6.4 million of accrued interest and $0.8 million of other liabilities into $30 million of Senior Secured Notes due in 2009 (New Notes) and the issuance of 95% of the common stock of the
reorganized entity (New Common Stock). Previously outstanding common stock was exchanged for 5% of the New Common Stock. The New Notes carry an interest rate of seven percent per annum during the first two years and eight percent per
annum during the remaining three years.



In accordance with the
Plan, Reptron, among other matters:



| |  |  | Issued 5,000,000 shares of New Common Stock,
| | - |  | --------------------------------------------



| |  |  | Issued the New Notes;
| | - |  | ---------------------



| |  |  | Adopted a new stock option plan;
| | - |  | --------------------------------



| |  |  | Canceled the Convertible Notes, previously outstanding common stock, and previously outstanding stock options.
| | - |  | --------------------------------------------------------------------------------------------------------------



Our consolidated balance sheet at December 31, 2003 reflects $76.3 million
principal amount of Convertible Notes along with $6.4 million of accrued and unpaid interest thereon, $0.6 million of real property lease liabilities, and $0.2 million of severance liabilities as Liabilities subject to compromise. These
liabilities are reported at the amount allowed on pre-petition claims in the Chapter 11 proceedings.



Interest expense of approximately $4.3 million on the Convertible Notes was accrued through October 28, 2003, the Chapter 11 petition filing date, even
though we discontinued interest payments on such debt. Interest expense for 2003 excludes $0.9 million of stated contractual interest associated with the Convertible Notes between October 28, 2003 and December 31, 2003. No interest expense was
recorded on the Convertible Notes in 2004.



The Company
incurred $4.1 million of reorganization costs during 2003 and $1.0 million in 2004, which primarily includes professional fees of approximately $2.4 million, a write-off of debt issuance costs of approximately $1.5 million, and contract settlement
and other miscellaneous costs of approximately $1.2 million.



The Companys emergence from Chapter 11 bankruptcy proceedings on February 3, 2004 resulted in a new reporting entity and adoption of fresh start reporting, in accordance with Statement of Position No. 90-7 (SOP



4



---

##### Table of Contents

90-7), Financial Reporting by Entities in Reorganization Under the Bankruptcy Code. Although the effective date of the Plan was February 3,
2004, the Company has accounted for the consummation of the Plan as if it occurred on January 31, 2004. The balance sheet as of December 31, 2003 does not give effect to any adjustments in the carrying value of assets or the amounts or
classification of liabilities that were recorded upon adoption of fresh start accounting. As a result of the extinguishment of the liabilities subject to compromise, Reptron recognized a reorganization gain on debt discharge amounting to $3.5
million, representing the excess of the carrying value of those liabilities compared to managements estimate of the fair value of the New Common Stock and the New Notes. As provided for in the Companys Plan of Reorganization, the holders
of the liabilities subject to compromise would receive their ratable portion of the New Common Stock and New Notes in full satisfaction of those liabilities.



The following unaudited financial information reflects the implementation of the Plan as of the close of business on January 31, 2004. Reorganization
adjustments have been made to reflect the discharge of debt and adoption of fresh start reporting in accordance with SOP 90-7. Accordingly, the reorganization value of Reptron of $86 million, as disclosed in the Plan of Reorganization and related
Disclosure Statement, limited to the aggregate carrying value of the pre-emergence assets, has been used to allocate the value of the assets and liabilities of Reptron in conformity with Statement of Financial Accounting Standards No. 141
(SFAS 141), Business Combinations. Reptron determined that independent third party appraisals of its long-term tangible and intangible assets was necessary in order to allocate the reorganization value of the Company to its
various assets at January 31, 2004. The fresh-start adjustments included in the table which follows represent managements estimate of adjustments necessary to record assets and liabilities at fair value with consideration given to the
appraisal work that has been completed. Reptron is currently evaluating the effects the reorganization will have on its net operating loss carryforwards for income tax purposes. The amount of net operating losses available to the company may be
limited in total or be subject to annual limitations.



|                                           |  |                              |         |   |               |   |         |            |  |   |                    |      |  |   |       
|------------------------------------------ |  | ---------------------------- | ------- | - | ------------- | - | ------- | ---------- |  | - | ------------------ | ---- |  | - | ------
|                                           |  | January 31, 2004 (unaudited)
|(In Thousands)                             |  | PredecessorCompany           |         |   | DebtDischarge |   |         | FreshStart |  |   | ReorganizedCompany
|Cash and cash equivalents                  |  | $                            | 82      |   |               |   |         |            |  |   |                    |      |  | $ | 82    
|Restricted Cash                            |  |                              | 1,690   |   |               |   |         |            |  |   |                    |      |  |   | 1,690 
|Account receivabletrade, net              |  |                              | 13,083  |   |               |   |         |            |  |   |                    |      |  |   | 13,083
|Inventories, net                           |  |                              | 18,845  |   |               |   |         |            |  |   |                    |      |  |   | 18,845
|Prepaid expenses and other                 |  |                              | 3,831   |   |               |   |         |            |  |   | (178               | )(h) |  |   | 3,653 
|Property, plant & equipment                |  |                              | 19,737  |   |               |   |         |            |  |   | 2,808              | (f)  |  |   | 22,545
|Goodwill                                   |  |                              | 18,970  |   |               |   |         |            |  |   | (6,798             | )(i) |  |   | 12,172
|Other intangible assets                    |  |                              |        |   |               |   |         |            |  |   | 4,168              | (g)  |  |   | 4,168 
|Deferred income tax                        |  |                              | 1,843   |   |               |   |         |            |  |   |                    |      |  |   | 1,843 
|Other assets                               |  |                              | 52      |   |               |   |         |            |  |   |                    |      |  |   | 52    
|                                           |  |                              |         |   |               |   |         |            |  |   |                    |      |  |   |       
|Total assets                               |  | $                            | 78,133  |   |               | $ |        |            |  | $ |                   |      |  | $ | 78,133
|                                           |  |                              |         |   |               |   |         |            |  |   |                    |      |  |   |       
|Accounts payabletrade                     |  | $                            | 15,441  |   |               |   |         |            |  |   |                    |      |  | $ | 15,441
|Note payable to bank                       |  |                              | 4,854   |   |               |   |         |            |  |   |                    |      |  |   | 4,854 
|Current portion of long-term obligations   |  |                              | 450     |   |               |   |         |            |  |   |                    |      |  |   | 450   
|Accrued expenses                           |  |                              | 15,063  |   |               |   | (7,077  | )(a)       |  |   |                    |      |  |   | 7,986 
|Convertible subordinated notes due 2004    |  |                              | 76,315  |   |               |   | (76,315 | )(a)       |  |   |                    |      |  |   |      
|Senior secured notes due 2009              |  |                              |        |   |               |   | 30,000  | (b)        |  |   |                    |      |  |   | 30,000
|Long-term obligations                      |  |                              | 3,627   |   |               |   |         |            |  |   |                    |      |  |   | 3,627 
|                                           |  |                              |         |   |               |   |         |            |  |   |                    |      |  |   |       
|Total liabilities                          |  |                              | 115,750 |   |               |   | (53,392 | )          |  |   |                   |      |  |   | 62,358
|                                           |  |                              |         |   |               |   |         |            |  |   |                    |      |  |   |       
|Common stock                               |  |                              | 64      |   |               |   |         |            |  |   | (14                | )(e) |  |   | 50    
|Additional paid-in capital                 |  |                              | 23,146  |   |               |   | 49,875  | (c)        |  |   | (57,296            | )(e) |  |   | 15,725
|Accumulated deficit                        |  |                              | (60,827 | ) |               |   | 3,517   | (d)        |  |   | 57,310             | (e)  |  |   |      
|                                           |  |                              |         |   |               |   |         |            |  |   |                    |      |  |   |       
|Total liabilities and shareholders equity |  | $                            | 78,133  |   |               | $ |        |            |  | $ |                   |      |  | $ | 78,133
|                                           |  |                              |         |   |               |   |         |            |  |   |                    |      |  |   |       

---

|(a) | Reduction of Convertible Notes, accrued interest on the Convertible Notes, and other liabilities subject to compromise for the implementation of the Plan of $83.4 million.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



5



---

##### Table of Contents

|(b) | Increase in long-term obligations of $30.0 million associated with the issuance of the New Notes.
|--- | -------------------------------------------------------------------------------------------------



|(c) | Increase in additional paid-in capital of $49.9 million reflecting the reorganization and issuance of the New Common Stock.
|--- | ---------------------------------------------------------------------------------------------------------------------------



|(d) | Effect of the gain on the extinguishment of debt. The income tax effects are reflected in the predecessor historical information. As a result, the effect on accumulated deficit is
recognized excluding tax effects.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(e) | Elimination of accumulated deficit and issuance of New Common Stock reflecting the reorganized entity.
|--- | ------------------------------------------------------------------------------------------------------



|(f) | Increase in property, plant and equipment of $2.8 million reflecting the estimated fair market value of the assets on January 31, 2004 based primarily on third party appraisals.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(g) | Increase in other intangible assets of $4.2 million reflecting the value of the Companys customer relationships on January 31, 2004 based on a third party appraisal. This
asset was determined to have a 12 year life and will be amortized at rates such that 75% of the asset will be amortized in the first five years of the assets life and the remaining 25% of the asset will be amortized over the remaining seven
years of its life.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(h) | Decrease in other current assets based on managements assessment of fair value.
|--- | --------------------------------------------------------------------------------



|(i) | Net effect of the fresh start adjustments detailed in items (f), (g), and (h), above.
|--- | -------------------------------------------------------------------------------------



Background of the Electronic Manufacturing Services Industry



Electronics ManufacturingServices.    The EMS industry has experienced rapid changes over
the past several years as an increasing number of original equipment manufacturers (OEMs) have chosen to outsource printed circuit board assemblies, display product integration, and total product assembly to electronics manufacturing
specialists such as Reptron Manufacturing Services and Reptron Outsource Manufacturing and Design. Factors driving OEMs to favor outsourcing to electronics manufacturing specialists include:



| |  |  | Reduced Time to Market.    Because of the intense competitive pressures and rapidly progressing technology in the electronics industry, OEMs are faced
with increasingly short product life-cycles and therefore have a growing need to reduce the time required to bring a product to market. OEMs can reduce their time to market by using an electronics manufacturers established manufacturing
expertise, engineering capabilities, and other infrastructure.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Minimized Capital Investment.    As electronic products have become more technologically advanced, the manufacturing process has become increasingly
automated and highly intricate, and manufacturers have had to invest in new capital equipment at an accelerated rate. By outsourcing to electronics manufacturing specialists, OEMs are able to lower their investment in inventory, facilities and
equipment, thereby enabling them to allocate capital to other activities such as sales and marketing and research and development.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Focused Resources.    Because the electronics industry is experiencing greater levels of competition and more rapid technological change, many OEMs
increasingly seek to focus their resources on activities and technologies that add greater value. By offering turnkey manufacturing services and comprehensive electronic assembly, electronics manufacturing specialists permit OEMs to focus on their
core business activities, such as product development and marketing.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Access to Leading Edge Manufacturing Technology.    Electronic products and electronics manufacturing technology have become increasingly sophisticated
and complex. OEMs desire to work with electronics manufacturing specialists in order to gain access to their technological expertise.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Improved Inventory Management and Purchasing Power.    Electronics industry OEMs are faced with increasing difficulties in planning,
procuring and managing their inventories efficiently due to frequent design changes, short product life-cycles, large investments in electronic components, component price fluctuations and the need to achieve economies of scale in materials
procurement. Electronics
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



6



---

##### Table of Contents

| | manufacturing specialists are able to manage both procurement and inventory, and have demonstrated proficiency in purchasing components at improved pricing.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Access to Low Cost Manufacturing.    The rapid move towards globalization has rendered the electronics industry to be more competitive than ever before.
Therefore, OEMs require access to low cost manufacturing regions. Electronic manufacturing services providers have established facilities and supply chains in these low cost regions enabling access to low cost manufacturing and materials.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Strategy



Reptrons principal business objective is to expand its presence as an
electronics manufacturing services provider within specific market segments. Reptron has formed a strategy to achieve this objective based upon the following key elements:



| |  |  | Target Manufacturing Customers in Specific Market Segments.    Reptron Manufacturing Services follows a well-defined strategy which focuses on complex
assemblies in medium-to-high volumes for commercial and industrial customers. Additionally, Reptron Manufacturing Services seeks customers that will utilize its engineering expertise and its ability to assemble customers products by
integrating printed circuit board assemblies into other elements of the customers products (sometimes referred to as total box build). Reptron Manufacturing Services also seeks customer relationships in which Reptron Manufacturing
Services is the primary source and avoids engagements requiring an overflow supplier. Reptron Manufacturing Services targets customers in a variety of industries to establish diversity among the customers and industries served. Primary target
industry segments include medical and industrial instrumentation.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Leverage Investments Made in its Manufacturing Facilities and Other Infrastructures.    Reptron has invested in facilities and other infrastructures that
will allow it to expand its business. Reptron believes its manufacturing facilities can accommodate approximately $300 million in annual contract manufacturing net sales based on its current mix of business. Reptrons 2004 net sales totaled
approximately $142 million. Consequently, Reptron believes there is adequate capacity to support future sales growth.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Focus On Market Segments Seeking Domestic Manufacturing.    Reptron has four manufacturing facilities all located within the continental United States. In
recent years the global outsourcing trend to low cost labor regions has gained significant momentum. Reptron seeks to engage market segments and customers whose products cannot be efficiently produced in such low cost labor areas and whose
preference is to have their products manufactured in the United States. The Company seeks relationships where there is a good match between the customers requirements and our service offering. These characteristics often include: various forms
of engineering assistance, new product introduction and early stage production, difficulty in forecasting requiring flexible delivery schedules, concern over theft of intellectual property, heavy or bulky product which possesses a U.S. destination
creating significant shipping costs.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Factors That Could
Affect Future Results



Customer Effect from Bankruptcy
Filing.    During 2001 through 2004, the Company incurred significant financial losses. These losses combined with defaults incurred on our senior secured revolving credit facility (Credit Agreement) and
Convertible Notes culminated in filing a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code on October 28, 2003. Reptrons customers engage the Company to produce complex electronic products. These manufacturing engagements require
significant investment and planning by both our customers and Reptron. Our inability to perform for our customers for whatever reason would have a significant impact on their business operations. Although the Company has subsequently completed its
bankruptcy proceedings, it is possible that our major customers could suspend or terminate business activity with us due to their concerns about the long term financial stability of the Company. This action would have a material adverse effect on
the Company.



7



---

##### Table of Contents

Supplier Effect from Bankruptcy Filing.    Reptron relies on a supply chain
comprised of approximately 900 different suppliers. Many of the materials delivered by this supply chain are custom or built to order requiring advanced planning, tooling and significant disengagement costs. Our Plan confirmed by the bankruptcy
court provided for the vast majority of the Companys suppliers to be paid in full for both pre-petition and post-petition shipments. Although our suppliers have been paid in full, it is possible that our bankruptcy filing could result in
several adverse actions including restricting our credit limit and the time allowed to pay outstanding obligations, elimination of all credit lines requiring cash in advance or cash on delivery terms, price increases to compensate for perceived
risks and choosing not to supply the Company altogether requiring additional time and investment to resource materials. These actions could have a material adverse effect on the Company.



Bankruptcy Effect on Adding New Customers.    Reptrons future success is greatly dependent
upon the Companys ability to increase sales. The Companys growth strategy includes maintaining and growing sales from current customers as well as adding new customers. Although the Plan has become effective, our ability to attract new
customers could be negatively impacted due to their concerns about the long term financial stability of the Company and the fact that the Company has recently emerged from bankruptcy. Our inability to add new customers could have a material adverse
effect on the Company.



Recent Adverse Economic
Environment.    During 2001 through 2003, the United States economy experienced little growth. Many companies in the electronics industry experienced significant contraction due to adverse market conditions. We have continued
cost cutting measures, initiated in 2001, that were directed at addressing these market conditions. We sold two unprofitable divisions during 2003. Additionally, we significantly reduced our debt level and related interest costs through a
pre-negotiated Chapter 11 filing. There can be no assurance, however, that these combined measures will be effective or adequate to compensate for the significant reductions in our sales and earnings. In addition, the default under our Convertible
Notes and our bankruptcy filing have caused some of our suppliers to limit the amount of overall credit extended to us and/or reduce the time for payment of credit putting additional pressure on our overall financial condition. Further weakening of
the economy, could have a material adverse effect on our operating results and financial condition.



Customer Concentration and Related Factors Effecting Operating Results.    Reptron has certain customers that account for a
significant part of total net sales. Our three largest customers accounted for approximately 13% (Datascope), 12% (Diebold), and 12% (Eastern Research) of total net sales in 2004, respectively, and 21% (Diebold), 12% (Datascope), and 6% of total net
sales in 2003, respectively. The loss of one or more of these major customers, or a reduction in their level of purchasing, could have a material adverse effect on Reptrons business, results of operations and financial condition. Some of our
customers have expressed concern over the large losses we have incurred and the bankruptcy filing. It is possible that our major customers could suspend or terminate business activity with us due to these concerns. This action would have a material
adverse effect on our business.



Reptrons operating
results are affected by a number of factors, including fixed plant utilization, price competition, ability to keep pace with technological developments, the degree of automation that can be used in an assembly process, efficiencies that can be
achieved by managing inventories and fixed assets, the timing of orders from major customers, the timing of capital expenditures in anticipation of increased sales, incurring substantial start-up costs on new assemblies, customer product delivery
requirements and costs and shortages of components and labor. In addition, because of the limited number of customers served and the corresponding concentration of its accounts receivable, the insolvency or other inability or unwillingness of
Reptrons customers to pay for manufacturing services could have a material adverse effect on Reptrons operating results.



The Volume and Timing of Customer Sales May Vary.    The volume and timing of purchase orders placed by our customers are
affected by a number of factors, including variation in demand for customers products, customer attempts to manage inventory, changes in product design or specifications and changes in the customers manufacturing strategies. Reptron
typically does not obtain long-term purchase orders or commitments but instead works with its customers to develop nonbinding forecasts of future requirements. Based



8



---

##### Table of Contents

on such nonbinding forecasts, we make commitments regarding the level of business that we will seek and accept, the timing of production schedules and the
levels and utilization of personnel and other resources. A variety of conditions, both specific to each individual customer and generally affecting each customers industry, may cause customers to cancel, reduce or delay orders that were either
previously made or anticipated. For example, voting equipment accounted for approximately 11% of Reptrons net sales in 2003, however, we received no sales orders for voting equipment in 2004. The timing and level of acceptance of the use of
voting equipment as opposed to current methods renders sales in this market segment to be very volatile. Generally, customers may cancel, reduce or delay purchase orders and commitments without penalty, except for payment for services rendered or
products completed and, in certain circumstances, payment for materials purchased and charges associated with such cancellation, reduction or delay. Significant or numerous cancellations, reductions or delays in orders by customers, or any inability
by customers to pay for services provided by us or to pay for components and materials purchased by us on such customers behalf, could have a material adverse effect on our operating results.



Competition.    We face substantial competition.
We believe that many of our competitors have international operations and significantly greater manufacturing, financial, marketing, research and development resources, and broader name recognition. Reptron competes in a highly fragmented market
composed of a diverse group of EMS providers. Reptron believes that the key competitive factors in its markets are manufacturing flexibility, price, manufacturing quality, advanced manufacturing technology and reliable delivery. Additionally,
Reptron faces the potential risk that its customers may elect to produce their products internally, thereby eliminating our manufacturing opportunities. There can be no assurance that Reptron will be able to continue to compete effectively with
existing or potential competitors.



Availability of
Components.    We rely on third-party suppliers for electronic components. We believe that component shortages would have a material adverse effect on Reptrons ability to service its customers. At various times, there
have been shortages of components in the electronics industry and from time to time the supply of certain electronic components is subject to limited allocations. If shortages of components should occur, we expect that we may be forced to delay
shipment or to purchase components at higher prices (that we may not be able to be pass on to our customers), which may have a material adverse effect on customer demand, our ability to service customer needs or our gross margins. We believe that
any of these events could have a material adverse effect on our operating results.



Dependence Upon Key Personnel.    Reptron is largely dependent on the efforts and abilities of its key managerial and technical employees. The Company has not offered consistent increases in
compensation for the last three years. Additionally, we have reduced medical and other benefits during this time frame in an effort to reduce operating expenses. The loss of the services of certain key employees or an inability to attract or retain
qualified employees could have a material adverse effect on Reptron.



Migration of Electronic Manufacturing to Asia.    A growing number of electronic manufacturing service providers have relocated a portion or all of their manufacturing operations to Asia. In
particular, the growth rate in China has been very strong in recent years to the detriment of other regions of the world. This trend is driven primarily by high availability of low cost labor. In order for us to remain competitive in the markets we
serve and have targeted, we may need to expand a portion of our manufacturing capability to Asia. If we are unable to develop a manufacturing presence in Asia, our ability to effectively compete may be materially and adversely affected. There can be
no assurance that we will develop a manufacturing presence in Asia.



Implementation of European RoHS Requirements and Other Environmental Regulations.    The European Union and the United Kingdom have developed additional manufacturing requirements aimed at the elimination of lead
and other substances from most products sold in this region. These regulations become effective in 2006 and will require the industry to significantly change its manufacturing process and materials used in producing electronic products. These
regulations will require Reptron to make additional capital investments in manufacturing equipment and introduce additional costs to the manufacturing and materials procurement



9



---

##### Table of Contents

process. There can be no assurance that Reptron will be able to comply with these new requirements in a timely fashion or that the additional costs
associated with compliance will not have a material adverse effect of the Companys operating results.



Expiration of Labor Union Contract.    The production workers in the Hibbing, Minnesota facility are organized and represented
by a labor union. The current labor agreement expires in September, 2006. There can be no assurance that the Company will be able to negotiate a new labor agreement with terms and conditions which will allow for profitable operating results or that
work stoppages will be avoided during the negotiation period.



Start-up Costs and Inefficiencies Related To New or Transferred Programs Can Adversely Affect Our Operating Results.    Start-up costs, the management of labor and equipment resources in connection with the
establishment of new programs and new customer relationships, and the need to estimate required resources in advance can adversely affect our gross margins and operating results. These factors are particularly prominent in the early stages of the
life cycle of new products and new programs. The effects of these start-up costs and inefficiencies can also occur when, and if, we open new facilities. These factors also affect our ability to efficiently use labor and equipment. Due to the
improved economy and more successful marketing efforts, we are currently managing a number of new programs and new customer relationships. Consequently, our exposure to these factors has increased. In addition, if any of these new programs or new
customer relationships were to be terminated, our operating results could be harmed, particularly in the near term.



Electronic Manufacturing Services (EMS)



Our operations include Reptron Manufacturing Services and Reptron Outsource Manufacturing and Design. Reptron Manufacturing Services currently operates
from three locations and represents approximately 87% of total 2004 net sales. Reptron Outsource Manufacturing and Design was acquired in 1999 and operates from a single facility. Reptron Outsource Manufacturing and Design represents approximately
13% of our total 2004 net sales.



Manufacturing
Operations.    Reptron Manufacturing Services provides turnkey manufacturing services, including the purchase of customer-specified components from its extensive network of component suppliers, assembly of components on
printed circuit boards, performance of post-production testing and in certain instances total box build assembly. Reptron Manufacturing Services attempts to perform as much of a given manufacturing process as is feasible and generally does not
perform labor-only, consignment assembly functions unless management believes that such engagements may provide a direct route to turnkey contracts. Typical manufacturing engagements include medium to high volume assembly of complex products.



Reptron Manufacturing Services provides
design-for-manufacturability engineering services as well as surface mount technology (SMT) conversion from pin through hole (PTH) interconnection technologies and printed circuit board layout services for existing products.
Reptron Manufacturing Services also provides test process design capabilities that include the design and development of test fixtures and procedures and software for both in-circuit tests and functional tests of circuit boards, components and
products.



Reptron Manufacturing Services is able to
efficiently manage its materials procurement and inventory management functions. The inherent scheduling and procurement challenges in medium volume production of a large number of different circuit board assemblies require a high level of expertise
in material procurement. Reptron Manufacturing Services obtains its electronic components from a wide variety of manufacturers and distributors.



Reptron Outsource Manufacturing and Design performs product assembly services primarily for customers in the medical, industrial and semiconductor
equipment market niches. This division also possesses specific expertise in flat panel display technology. We provide various forms of engineering, product burn-in, clean room environments and other services. This total service approach tends to
produce customer loyalty and higher margins.



10



---

##### Table of Contents

Marketing and Customers.    Reptron Manufacturing Services follows a
well-defined marketing strategy, which includes the following key elements:



| |  |  | Target Customers Requiring Complex Printed Circuit Board Assemblies Produced Domestically.Reptron Manufacturing Services focuses on complex
assemblies in medium-to-high volumes for customers primarily in the medical, industrial/instrumentation, banking and telecommunications industries. Reptron Manufacturing Services does not manufacture extremely high volume printed circuit board
assemblies for the personal computer, consumer products or automotive industries. We target complex assemblies that require engineering capabilities and are not easily produced in low labor cost regions of the world. Reptron Manufacturing Services
gains access to a significant number of these kinds of customers through its direct sales force and independent manufacturers representatives. Additionally, Reptron Manufacturing Services expands its market and customer development through its
participation in industry consortiums and targeted trade shows within its chosen market niches.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Target Customer Relationships where Reptron Manufacturing Services is the Primary Source.    Reptron Manufacturing Services seeks customers that have
decided to strategically outsource substantially all circuit board assembly. Consequently, Reptron Manufacturing Services markets its services as a partnership with the customer and encourages the customer to view Reptron Manufacturing
Services as an extension of its own manufacturing capabilities. Reptron Manufacturing Services attempts to avoid relationships where it is used as an overflow supplier to manage peak volume requirements.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Maintain a Diverse Customer and Industry Base.    Reptron Manufacturing Services targets customers primarily in the medical, industrial/instrumentation,
banking and telecommunications industries and seeks to maintain a diversity of customers among these industries and within each industry. In addition, Reptron Manufacturing Services believes that the industries that it targets make products that
generally have longer life cycles, more stable demand and less price pressure compared to consumer oriented products. Nevertheless, Reptron Manufacturing Services customers from time to time, experience downturns in their respective businesses
resulting in fluctuations in demand for Reptron Manufacturing Services services. See Factors That Could Affect Future Results.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Target Customers Seeking Value-Added Services.    Reptron Manufacturing Services offers a wide variety of services in addition to circuit board assembly
and total product assembly. Theses services include various forms of engineering and inventory control programs. Reptron Manufacturing Services seeks to include its services offering in customer engagements to avoid a commodity service business
model. We believe selling these value-added services promotes customer longevity and more profitable customer engagements and differentiates the Company from low cost global EMS solutions.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Our marketing cycle for customers meeting these criteria normally spans
six-to-twelve months. Additionally, the start-up phase for an engagement may run another six months. Typically, during this phase, significant investments are made by Reptron Manufacturing Services and the customer to successfully launch a high
number of different, complex circuit board assemblies. Reptron Manufacturing Services works closely with its customers in all phases of design, start-up and production, and through this cooperative effort develops a close working relationship with
the customer. These relationships, and the investments made both in time and financial resources by the customer and Reptron Manufacturing Services, management believes, promotes long-term customer loyalty.



11



---

##### Table of Contents

Reptron seeks to maintain diversity within its customer base and industries served. During 2004,
Reptrons largest three EMS customers represented 13%, 12%, and 12%, respectively, of total Reptron EMS net sales. During 2003, Reptrons largest three EMS customers represented 21%, 12%, and 6%, respectively, of total Reptron EMS net
sales. The following table sets forth the principle industries served and the percentage of Reptrons EMS net sales derived from these industries for 2004 and 2003.



|                           |  |                |   |  |                |  
|-------------------------- |  | -------------- | - |  | -------------- | -
|Industry                   |  | 2004% of Sales |   |  | 2003% of Sales |  
|Medical                    |  | 42             | % |  | 40             | %
|Semiconductor Equipment    |  | 8              | % |  | 6              | %
|Industrial/Instrumentation |  | 16             | % |  | 15             | %
|Telecommunications         |  | 15             | % |  | 11             | %
|Banking                    |  | 15             | % |  | 13             | %
|Government                 |  | 1              | % |  | 11             | %
|Office Products            |  | 0              | % |  | 1              | %
|Other                      |  | 3              | % |  | 3              | %



Manufacturing
Facilities.    Reptron Manufacturing Services operates three plants. These manufacturing facilities are equipped with advanced SMT assembly equipment and PTH insertion equipment. The Gaylord, Michigan 80,000 square foot
manufacturing facility is owned by us and was constructed in 1988. The Tampa, Florida 150,000 square foot manufacturing and corporate headquarters facility is owned by us and was completed in the first quarter of 1997. Reptron Manufacturing Services
currently leases five buildings in Hibbing, Minnesota, which total 100,000 square feet. These buildings are owned in part by four individuals on Reptron Manufacturings senior management team. Additionally, we own a 40,300 square foot building
in Hibbing, Minnesota which is occupied by Reptron Manufacturing Services. Reptron Outsource Manufacturing and Design operates from a 68,000 square foot leased facility in Fremont, California.



The Hibbing, Minnesota manufacturing plant accounted for approximately 35% of
Reptrons, 2004 net sales, with the Tampa, Florida manufacturing plant totaling approximately 27% of 2004 net sales, the Gaylord, Michigan plant totaling approximately 25% of 2004 net sales, and the Fremont, California facility producing the
remaining 13% of 2004 EMS net sales.



Competition



We face substantial competition. Many of our competitors have international
operations and significantly greater manufacturing, financial, marketing and research and development resources and broader name recognition than we do. Reptron competes in a highly fragmented market composed of a diverse group of EMS providers. We
believe that the key competitive factors in our markets are manufacturing flexibility, price, manufacturing quality, advanced manufacturing technology and reliable delivery. Many EMS providers operate extremely high-volume facilities and focus on
target markets, such as the computer industry, that Reptron does not seek to serve. Reptron considers its key competitive advantages to include its expertise in medium-to-high volume, flexible batch processing, its provision of value-added services
and its material management techniques. We believe that our expertise in flexible, batch processing differentiates us from high-volume competitors because of the relative complexity of economically fulfilling a large number of batch contracts. We
also believe that by focusing on medium-to-high volume production runs, Reptron competes effectively.



Reptron Outsource Manufacturing and Design competes in a highly fragmented market composed of a diverse group of EMS providers, display integration
companies and electronic component distributors that have strategic alliances with display integration companies. We believe that market reputation combined with a high degree of technical competency, has allowed Reptron Outsource Manufacturing and
Design to compete effectively in the marketplace.



12



---

##### Table of Contents

Management Information Systems



We have made significant investments in computer hardware, software and management information system (MIS)
personnel. We employ approximately 18 individuals who are responsible for hardware upgrades, maintenance of current software and related databases and augmenting software packages with custom programming. We currently maintain an internet web page
that provides a wide variety of information. Our expanded use of web based technologies include enhanced e-mail and interactive use of our intranet for data warehouse applications such as quality documentation, human resources documentation, MIS
systems documentation and interactive corporate forms.



We
operate Reptron Manufacturing Services with UNIX-based software packages written in a fourth generation language. The UNIX-based software packages used by Reptron Manufacturing Services may be operated on a variety of hardware platforms. Therefore,
the Company is not restricted to the use of computer hardware from any one supplier and does not have the constraints associated with proprietary hardware.



Reptron Manufacturing Services operates an integrated MRP II package which has also been greatly enhanced by its MIS staff through custom programming.
This system is used to operate and integrate Reptron Manufacturing Services manufacturing plants with central administrative functions.



Reptron Outsource Manufacturing and Design operates an integrated software package, MAS90. This client-server software has minimal hardware performance
requirements and interfaces with a number of database formats, allowing the flexibility of utilizing third-party reporting tools.



Employees



As of March 4, 2005, we employed 1,006 persons, of whom 942 were dedicated to Reptron Manufacturing Services, 58 were dedicated to Reptron Outsource
Manufacturing and Design and 6 were corporate employees. Hourly employees at the manufacturing plant in Hibbing, Minnesota are covered under a collective bargaining agreement with the International Brotherhood of Electrical Workers. The current term
of the collective bargaining agreement expires in September 2006.



|Item 2. | Properties
|------- | ----------



Owned
facilities.    We own a 150,000 square foot facility located in Tampa, Florida which is occupied by the Tampa Reptron Manufacturing Services plant and the corporate headquarters for the entire Company. We also own an 80,000
square foot Reptron Manufacturing Services facility in Gaylord, Michigan. Finally, we own a 40,300 square foot manufacturing building which is one of six buildings that forms our manufacturing campus in Hibbing, Minnesota.



Leased Facilities.    We currently lease a total
of 100,000 square feet of manufacturing and administrative offices for the Reptron Manufacturing Services operation in Hibbing, Minnesota. The lease on these buildings expires in December 2007.



We lease a total of 68,000 square feet of manufacturing and administrative
offices for the Reptron Outsource Manufacturing and Design operation in Fremont, California. The lease on the building expires in November 2008.



|Item 3. | Legal Proceedings
|------- | -----------------



We are, from time to time, involved in litigation relating to claims arising out of our operations in the ordinary course of business. We believe that none of these claims, which were outstanding as of December 31, 2004, should have a
material adverse impact on our financial condition or results of operations.



|Item 4. | Submission of Matters to a Vote of Security Holders
|------- | ---------------------------------------------------



None



13



---

##### Table of Contents

PART II



|Item 5. | Market For Registrants Common Stock and Related Stockholder Matters
|------- | --------------------------------------------------------------------



On October 28, 2003, the Company filed a petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Our Plan of Reorganization was
confirmed by the bankruptcy court on January 14, 2004 and became effective on February 3, 2004. The Companys common stock (Old Common Stock) was cancelled and 5,000,000 shares of new common stock (New Common Stock) were
issued pursuant to the Plan. The New Common Stock was distributed on March 22, 2004. The New Common Stock is traded on the Over the Counter Bulletin Board system (OTCBB) under the symbol RPRN.



Our Old Common Stock was traded on the OTCBB under the symbol
REPT, prior to its cancellation. The Old Common Stock began trading on the OTCBB on September 22, 2003. From January 27, 2003 through September 21, 2003 our common stock was trading on the NASDAQ SmallCap Market. Prior to that, our
common stock was traded on the NASDAQ National Market System. The following table sets forth, for the periods indicated, the high and low close prices of our common stock as reported by the NASDAQ National Market, the NASDAQ SmallCap Market and the
Over the Counter Bulletin Board system, as appropriate:



|                                    |  |      |       |     |   |      
|----------------------------------- |  | ---- | ----- | --- | - | -----
|Fiscal 2003 (Old Common StockREPT) |  | High |       | Low
|First Quarter                       |  | $    | 0.65  |     | $ | 0.16 
|Second Quarter                      |  | $    | 0.65  |     | $ | 0.22 
|Third Quarter                       |  | $    | 0.59  |     | $ | 0.25 
|Fourth Quarter                      |  | $    | 0.40  |     | $ | 0.15 
|                                    |  |     
|Fiscal 2004 (New Common StockRPRN) |  | High |       | Low
|First Quarter                       |  | $    | 13.00 |     | $ | 10.50
|Second Quarter                      |  | $    | 11.61 |     | $ | 6.75 
|Third Quarter                       |  | $    | 8.65  |     | $ | 6.25 
|Fourth Quarter                      |  | $    | 8.45  |     | $ | 6.98 



On March 9, 2005, the
last sale price of our New Common Stock, as reported by The OTCBB was $5.90 per share.



As of March 9, 2005, there were approximately 109 holders of record of our New Common Stock.



We have never declared or paid dividends on our common stock. We do not intend, for the foreseeable future, to declare or pay any cash dividends and
intend to retain earnings, if any, for the future operation and expansion of our business. Our current Credit Agreement prohibits the payment of dividends and our Senior Secured Notes contain a restrictive covenant which limits our ability to pay
cash dividends.



The following table sets forth certain
information relating to our equity compensation plans as of December 31, 2004.



EQUITY COMPENSATION PLAN INFORMATION



|                                                       |  |                                                                                            |  |                                                                              |       |                                                                                                                                           |       
|------------------------------------------------------ |  | ------------------------------------------------------------------------------------------ |  | ---------------------------------------------------------------------------- | ----- | ----------------------------------------------------------------------------------------------------------------------------------------- | ------
|Plan Category                                          |  | Number of Securitiesto be Issued UponExercise ofOutstandingOptions, Warrantsand Rights (a) |  | Weighted AverageExercise Priceof Outstanding Options,Warrants and Rights (b) |       | Number of SecuritiesRemaining Available forFuture Issuance UnderEquity CompensationPlans (ExcludingSecurities Reflected inColumn (a))
(c)
|Equity Compensation Plans Approved by Shareholders     |  | 441,666                                                                                    |  | $                                                                            | 10.05 |                                                                                                                                           | 58,334
|Equity Compensation Plans Not Approved by Shareholders |  |                                                                                           |  | $                                                                            |      |                                                                                                                                           |      
|                                                       |  |                                                                                            |  |                                                                              |       |                                                                                                                                           |       
|Total                                                  |  | 441,666                                                                                    |  | $                                                                            | 10.05 |                                                                                                                                           | 58,334



14



---

##### Table of Contents

The equity compensation plans which existed as of December 31, 2003 were cancelled in conjunction with
the Companys Plan of Reorganization filed under Chapter 11 of the U.S. Bankruptcy Code and subsequently confirmed by the bankruptcy court. The Plan allowed for a new stock option plan with a total of 500,000 options available for future
issuance as shown in the table above.



|Item 6. | Selected Financial Data
|------- | -----------------------



As discussed above, the Companys Plan of Reorganization became effective on February 3, 2004. As a result of the implementation of fresh start accounting as of January 31, 2004, the Companys results of operations after that date
are not comparable to results reported in prior periods because of differences in the bases of accounting and the capital structure for the Predecessor Company and the Reorganized Company. To facilitate comparisons to prior periods, the results of
operations for the year ended December 31, 2004, shown below, includes the one month period ended January 31, 2004 for the Predecessor Company and the eleven months ended December 31, 2004 for the Reorganized Company. The following table summarizes
selected financial data and should be read in conjunction with the Consolidated Financial Statements and Notes thereto and Managements Discussion and Analysis of Financial Condition and Results of Operations appearing elsewhere in
this Annual Report on Form 10-K.



|                                                                    |  |                         |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|------------------------------------------------------------------- |  | ----------------------- | --------- | - | ---- | - | --------- | ---- |  | - | --------- | - |  | ---- | --------- | - |  | - | --------- | -
|                                                                    |  | Year Ended December 31, |          
|(In thousands, except share data)                                   |  | 2000                    |           |   | 2001 |   |           | 2002 |  |   | 2003      |   |  | 2004 |          
|Operating Statement Data:                                           |  |                         |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|                                                                    |  |                         |           |   |     
|Net sales                                                           |  | $                       | 230,553   |   |      | $ | 171,388   |      |  | $ | 165,101   |   |  | $    | 150,067   |   |  | $ | 141,598   |  
|Gross Profit                                                        |  |                         | 30,535    |   |      |   | 14,982    |      |  |   | 17,096    |   |  |      | 18,932    |   |  |   | 16,484    |  
|Loss from continuing operations (1)                                 |  |                         | (106      | ) |      |   | (11,324   | )    |  |   | (12,119   | ) |  |      | (16,734   | ) |  |   | (845      | )
|Loss from continuing operations per common sharebasic              |  | $                       | (0.02     | ) |      | $ | (1.77     | )    |  | $ | (1.89     | ) |  | $    | (2.61     | ) |  | $ | (0.17     | )
|Weighted average Common Stock equivalent shares outstandingbasic   |  |                         | 6,252,938 |   |      |   | 6,389,474 |      |  |   | 6,416,319 |   |  |      | 6,417,196 |   |  |   | 5,000,000 |  
|Loss from continuing operations per common sharediluted            |  | $                       | (0.02     | ) |      | $ | (1.77     | )    |  | $ | (1.89     | ) |  | $    | (2.61     | ) |  | $ | (0.17     | )
|Weighted average Common Stock equivalent shares outstandingdiluted |  |                         | 6,252,938 |   |      |   | 6,389,474 |      |  |   | 6,416,319 |   |  |      | 6,417,196 |   |  |   | 5,000,000 |  
|                                                                    |  |                         |           |   |     
|(In thousands)                                                      |  |                         |           |   |      |   |           |      |  |   |           |   |  |      |          
|Balance Sheet Data:                                                 |  |                         |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Total assets                                                        |  | $                       | 294,606   |   |      | $ | 199,395   |      |  | $ | 156,974   |   |  | $    | 81,223    |   |  | $ | 76,192    |  
|Long-term obligationsincluding current portion                     |  | $                       | 162,461   |   |      | $ | 132,704   |      |  | $ | 81,487    |   |  | $    | 80,422    |   |  | $ | 33,741    |  

---

|(1) | Includes inventory write-down charge of approximately $0.7 million in the fourth quarter of 2003. Additionally, the Company recorded goodwill impairment of approximately $7.8
million in the fourth quarter of 2003.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------



References to Reptron, the Company, we, us and our refer to
Reptron Electronics, Inc., unless the context otherwise requires. This document contains certain forward-looking statements that involve a number of risks and uncertainties. Such forward-looking statements are within the meaning of that term in
Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended and are made in reliance on the safe harbor provisions of The Private Securities Litigation Reform Act of 1995. Factors that
could cause or contribute to actual results to differ materially include the following: business conditions and growth in Reptrons industry and in the general economy; competitive factors; risks due to shifts in market demand; the ability of
Reptron to complete acquisitions; the risks discussed in the section of this report titled Factors That Could Affect Future Results and the risk factors listed from time to time in Reptrons



15



---

##### Table of Contents

reports filed with the Securities and Exchange Commission as well as assumptions regarding the foregoing. The words believe,
plans, estimate, expect, intend, should, may, will, appear, hope anticipate, and similar expressions and variations thereof identify
certain of such forward-looking statements, which speak only as of the dates on which they were made These statements are only predictions Reptron undertakes no obligation to publicly update or revise any forward-looking statements, whether as a
result of new information, future events, or otherwise. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from
those indicated in the forward-looking statements as a result of various factors. Readers are cautioned not to place undue reliance on these forward-looking statements.



This Managements Discussion and Analysis of Financial Condition and Results of Operations should be read in
conjunction with the Consolidated Financial Statements and Notes thereto included elsewhere in this report.



2004 Compared to 2003



As previously discussed, the Companys Plan of Reorganization became effective on February 3, 2004. As a result of the implementation of fresh start
accounting as of January 31, 2004, the Companys results of operations after that date are not comparable to results reported in prior periods because of differences in the bases of accounting and the capital structure for the Predecessor
Company and the Reorganized Company. To facilitate comparisons to prior periods, the results of operations for the year ended December 31, 2004, discussed below, includes the one month period ended January 31, 2004 for the Predecessor Company and
the eleven months ended December 31, 2004 for the Reorganized Company.



Net Sales.    Net sales decreased $8.5 million, or 5.6%, from $150.1 million in 2003 to $141.6 million in 2004. This decrease is primarily attributable to continued weakness in the overall electronics industry and
decreased demand of electronic voting equipment from our customer in the governmental segment. During 2004 and 2003 we transacted business with approximately 50 customers. The three largest customers accounted for approximately 13%, 12% and 12%,
respectively, of 2004 net sales as compared to 21%, 12% and 6%, respectively, of 2003 net sales.



Gross Profit.    Gross profit decreased $2.4 million or 12.7%, from $18.9 million in 2003 to $16.5 million in 2004. The gross
margin decreased from 12.6% in 2003 to 11.6% in 2004. The decrease in gross margin is primarily attributable to a combination of lower fixed cost absorption rates at the lower sales levels experienced in 2004 and production inefficiencies due to
significant start-up costs associated with new customers and new circuit card assemblies. Start-up costs, the management of labor and equipment resources in connection with the establishment of new programs and new customer relationships, and the
need to estimate required resources in advance can adversely affect our gross margins and operating results. These factors are particularly prominent in the early stages of the life cycle of new products and new programs. These factors also affect
our ability to efficiently use labor and equipment. Due to an improving economy and more successful marketing efforts, we are currently managing a number of new programs and new customer relationships. Consequently, our exposure to these factors has
increased.



Selling, General, and Administrative Expenses
(SG&A).    Selling, general, and administrative expenses decreased $9.9 million, or 38.1%, from $26.1 million in 2003 to $16.2 million in 2004. The decrease in expense during 2004 is primarily attributable to
a non-cash goodwill impairment charge of approximately $7.8 million in 2003. Without the goodwill impairment charge, selling, general and administrative expenses decreased $2.1 million, or 8.0%, from 2003 to 2004. This decrease in selling, general
and administrative expenses is primarily attributable to reductions of these costs from prior periods as a result of our reorganization and the divesture of the distribution and computer products divisions. Additionally, certain operating expenses
are variable with sales and were reduced in conjunction with the 5.6% net sales reduction in 2004.



Interest Expense.    Net interest expense allocated to the continuing EMS operations, decreased $2.5 million, or 46.4%, from
$5.4 million in 2003 to $2.9 million in 2004. The decrease is primarily the result of the discharge of $76.3 million of Convertible Notes and the issuance of $30.0 million of Senior Secured Notes in accordance



16



---

##### Table of Contents

with the Plan of Reorganization. Approximately $4.3 million of interest expense was recorded in 2003 related to the Convertible Notes as compared to $2.1
million of interest expense for 2004 associated with the Senior Secured Notes. No interest expense was recorded for the two months ending December 31, 2003 and the one month ended January 31, 2004 related to the Convertible Notes. The remaining
decrease in net interest expense is the result of a decrease in average outstanding debt, excluding the Convertible Notes and Senior Secured Notes, of $12.3 million from $24.5 million in 2003 to $12.2 million in 2004. Interest expense of $0.9
million was allocated to the discontinued operations of our electronic component distribution business and computer products division in 2003. The basis for this allocation was interest expense which could reasonably have been expected to be avoided
through the collection of our distribution divisions trade receivables, proceeds from the sales of assets held for sale, and subsequent payment on our working capital credit facility.



Reorganization Costs.    On October 28, 2003, the
Company filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code. The Companys Plan of Reorganization was confirmed by the bankruptcy court on January 14, 2004 and became effective on February 3, 2004. The Company incurred costs
as a result of this reorganization totaling $4.1 million in 2003 and $1.0 million in 2004 for various items including legal and consulting fees, financing costs and severance payments.



Income Taxes.    The Company recorded income tax expense from continuing operations of $0.8
million and an income tax benefit from discontinued operations of $0.2 million for the month ended January 31, 2004. Also, the deferred tax asset was reduced by a corresponding amount. The income tax provision resulted primarily from the
reorganization gain on debt discharge that was partially offset by operating losses. During the eleven month period ended December 31, 2004, we incurred losses before income taxes of $2.1 million. As a result, we recognized a deferred tax asset and
an offsetting valuation allowance of $0.8 million, resulting in no income tax benefit. Realization of the tax loss carryforwards are contingent upon future taxable earnings in the appropriate jurisdiction. Each carryforward item is reviewed for
expected utilization, using a more likely than not approach, based on the character of the carryforward item (credit, loss, etc.), the associated taxing jurisdiction (federal or state), the relevant history for the particular item, the
applicable expiration dates, and identified actions under our control in realizing the associated carryforward benefits. We assess the available positive and negative evidence surrounding the recoverability of the deferred tax assets, including our
expected taxable income over the next one to two years, and apply judgement in estimating the amount of valuation allowance necessary under the circumstances. We continue to assess and evaluate strategies that will enable the carryforward, or a
greater portion thereof, to be utilized, and will reduce the valuation allowance appropriately for each item at such time when it is determined that the more likely than not criterion is satisfied. As noted above, the effect of the
reorganization may reduce the amount of net operating losses and/or limit the amount that may be available to the company in a given period.



Discontinued Operations.    The Company incurred a loss from discontinued operations in 2004 of approximately $0.1 million
excluding an income tax benefit of approximately $0.2 million. See additional discussion of discontinued operations contained elsewhere herein.



2003 Compared to 2002



Discontinued Operations.    During 2003, Reptron exited the ECD business segment through the June, 2003 sale of Reptron
Distribution Services and the October, 2003 sale of Reptron Computer Products. The operating results and loss incurred on the sale of these two divisions have been segregated and summarized as discontinued operations in 2003. Accordingly, the
discussion and analysis for fiscal year 2003 compared to fiscal year 2002 pertains to the Companys continuing operations in the EMS segment.



Net Sales.    Net sales decreased $15.0 million, or 9.1%, from $165.1 million in 2002 to $150.1 million in 2003. This decrease
is primarily attributable to continued weakness in the overall electronics industry. Additionally, the Company has experienced significant operating losses during the past two years and was in default on both its Credit Facility and its Convertible
Notes for the majority of the year. These defaults resulted



17



---

##### Table of Contents

in the Company filing a petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code on October 28, 2003. The Companys financial
difficulties and uncertainties made it difficult to attract new customers during 2003. The three largest customers accounted for approximately 21%, 12% and 6%, respectively, of 2003 net sales as compared to 20%, 9% and 8%, respectively, of 2002 net
sales.



Gross Profit.    Gross
profit increased $1.8 million or 10.5%, from $17.1 million in 2002 to $18.9 million in 2003. The gross margin increased from 10.4% in 2002 to 12.6% in 2003. The increase in gross profit and gross margin is primarily attributable to changes
implemented in materials procurement enabling the Company to leverage its overall purchasing needs as well as more effective manufacturing processes in 2003 versus 2002.



Selling, General, and Administrative Expenses.    Selling, general, and administrative expenses
increased $2.7 million, or 11.6%, from $23.4 million in 2002 to $26.1 million in 2003. The increase in expense during 2003 is attributable to a non-cash goodwill impairment charge of approximately $7.8 million in 2003. Without the goodwill
impairment charge, selling, general and administrative expenses decreased $5.1 million, or 21.8%, from 2002 to 2003. The overall decrease in selling, general and administrative expenses is primarily attributable to cost cutting measures initiated in
2001 and continued throughout 2003. The number of EMS employees declined by approximately 255 employees from 1,300 in 2002 to 1,045 in 2003, a 20% reduction in workforce. Additionally, certain operating expenses are variable with sales and reduced
in conjunction with the 9.1% net sales reduction in 2003.



Interest Expense.    Total net interest expense decreased $1.7 million, or 21.3%, from $8.0 million in 2002 to $6.3 million in 2003. Net interest expense allocated to the continuing EMS operations, decreased
$371,000, or 6.9%, from $5.8 million in 2002 to $5.4 million in 2003. Net interest allocated to the discontinued ECD segment totaled $2.2 million in 2002 and $0.9 million in 2003. The decrease in overall net interest expense is primarily attributed
to the decrease in average outstanding debt of $23.0 million, from $123.9 million during 2002 to $100.9 million during 2003, and a decrease in our overall average interest rate from 6.5% during 2002 to 6.2% during 2003.



In February, 2003, the Company defaulted on its Convertible Notes by failing
to pay interest when due. The Company eventually refinanced the Convertible Notes through its Plan of Reorganization filed under Chapter 11 of the U.S. Bankruptcy Code. Interest expense associated with the Convertible Notes was accrued but unpaid
during 2003. The Plan of Reorganization confirmed by the bankruptcy court on January 14, 2004, includes the cancellation of all accrued and unpaid interest on the Convertible Notes.



Reorganization Costs.    On October 28, 2003, the Company filed a voluntary petition under
Chapter 11 of the U.S. Bankruptcy Code. The Companys Plan of Reorganization was confirmed by the bankruptcy court on January 14, 2004 and became effective on February 3, 2004. The Company incurred costs as a result of this reorganization
totaling $4.1 million in 2003 for various items including legal and consulting fees, financing costs and severance payments.



Discontinued Operations.    During 2003, the Company exited its ECD segment through the June, 2003 sale of Reptron Distribution
Services and the October, 2003 sale of Reptron Computer Products. The operating results of the ECD segment as well as the loss incurred with the sale of the two divisions within the segment, have been segregated and summarized as discontinued
operations. The loss from discontinued operations, net of taxes, totaled $14.1 million and $24.3 million in 2002 and 2003, respectively.



Income Taxes.    During 2002 and 2003, we incurred losses, including those from discontinued operations, before income taxes of
$26.2 million and $41.1 million, respectively. As a result, we recognized a deferred tax asset and an offsetting valuation allowance of $8.7 million, in 2002 and $15.1 million in 2003, resulting in no income tax benefit. Realization of the tax loss
carry forwards is contingent upon future taxable earnings in the appropriate jurisdiction. Each carry forward item is reviewed for expected utilization, using a more likely than not approach, based on the character of the carry forward
item (credit, loss, etc.), the associated taxing



18



---

##### Table of Contents

jurisdiction (federal or state), the relevant history for the particular item, the applicable expiration dates, and identified actions under our control in
realizing the associated carry forward benefits. We assess the available positive and negative evidence surrounding the recoverability of the deferred tax assets and apply judgment in estimating the amount of valuation allowance necessary under the
circumstances. We continue to assess and evaluate strategies that will enable the carry forward, or a greater portion thereof, to be utilized, and will reduce the valuation allowance appropriately for each item at such time when it is determined
that the more likely than not criterion is satisfied.



The Companys Plan of Reorganization confirmed by the bankruptcy court on January 14, 2004, includes the cancellation of its Convertible Notes and the issuance of new notes (New Notes) resulting in a decrease of principle
balance of approximately $46.3 million. Additionally, under the terms of the Plan accrued but unpaid interest on the Convertible Notes totaling approximately $6.4 million will be eliminated. The Company is in the process of determining the amount of
taxable gain and the effect on its net operating loss carryforwards associated with this transaction.



Liquidity and Capital Resources



On October 28, 2003, we filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Under the terms of the Plan, substantially all of our general unsecured creditors (except for holders of the Convertible
Notes and certain other creditors) received full payment for all prepetition claims within ninety days subsequent to the Plans effective date. The Plan was confirmed by the bankruptcy court on January 14, 2004 and became effective February 3,
2004, resulting in conversion of the $76.3 million of Convertible Notes, $6.4 million of accrued interest and $0.8 million of other liabilities into $30 million of Senior Secured Notes due in 2009 (New Notes) and the issuance of 95% of
the common stock of the reorganized entity (New Common Stock). Previously outstanding common stock was exchanged for 5% of the New Common Stock. The New Notes carry an interest rate of seven percent per annum during the first two years
and eight percent per annum during the remaining three years.



As of December 31, 2004, we had cash and cash equivalents of $0.2 million, restricted cash of $1.0 million and working capital of $7.8 million. The current ratio at December 31, 2004 and 2003 was 1.27 to 1 and 0.35 to 1, respectively. We
primarily finance our operations through the New Notes, bank credit lines, operating cash flows, and short-term financing through supplier credit lines. Net cash used in or provided by operating activities has historically been provided by net
income (loss) levels combined with fluctuations in inventory, accounts receivable and accounts payable. Operating activities for 2004 consumed cash of approximately $1.2 million. This consisted primarily of $0.8 million of net loss from continuing
operations, $4.6 million of non-cash depreciation and amortization charges, $0.5 million reduction of deferred tax assets, $1.0 million reduction in prepaid expenses, $0.6 million reduction in other assets, $0.3 million increase in accrued
liabilities, offset by $3.5 million of reorganization gain on debt discharge, $1.6 million increase in accounts receivable, $0.2 million increase in inventory, and $2.1 million decrease in accounts payable. Days sales outstanding in accounts
receivable were approximately 37 days at December 31, 2004 compared to 32 days at December 31, 2003. Annualized inventory turns for 2004 were 6.6 times compared to 4.5 times for 2003.



Capital expenditures totaled approximately $3.3 million in 2004 and $2.1 million in 2003. These capital expenditures were
primarily for manufacturing equipment and were funded by the working capital credit facility, as defined below.



Credit Agreement.    The Company has a revolving credit facility with Congress Financial Corporation that provides up to $25
million (the Credit Agreement) to fund the Companys operations through February 2007. The Credit Agreement contains certain covenants including a minimum quarterly measure of earnings before interest, taxes, depreciation and
amortization (EBITDA) as defined by the Credit Agreement. The Company was in compliance with the covenants contained in the Credit Agreement as of December 31, 2004. The interest rate on the credit facility is based on the lenders
prime rate plus one percent. The Credit Agreement is



19



---

##### Table of Contents

collateralized by substantially all of the Companys assets. This credit facility, together with the Companys available cash reserves and cash
provided by operations, is expected to provide sufficient liquidity for the Company to pay for goods and services within standard terms. Under the advance rates contained in the Credit Agreement, there was approximately $6.9 million of unused
available credit on December 31, 2004. Amounts outstanding under the Credit Agreement were approximately $10.4 million as of December 31, 2004.



Senior Secured Notes due in 2009.As of December 31, 2003, there were outstanding approximately $76.3 million of Convertible
Notes. These Convertible Notes were cancelled as outlined in the Companys Plan of Reorganization which was confirmed by the bankruptcy court on January 14, 2004 and became effective February 3, 2004. The holders of the Convertible Notes
received their pro-rata share of New Notes which collectively total $30 million and their pro-rata share of 95% of the New Common Stock. The New Notes will become due in five years from the date of issuance. These notes carry a seven percent annual
interest rate in the first two years and an eight percent annual interest rate in the remaining three years. Distributions of the New Notes and New Common Stock were made on March 22, 2004.



Management believes that available credit facilities in addition to our
current cash and cash flows expected to be generated from operations will be sufficient to meet our known capital requirements and working capital needs of our operations through at least the next twelve months. However, future liquidity and cash
requirements will depend on a wide range of factors including the level of business in existing operations, credit lines extended by lenders and trade suppliers, the need for expansion of manufacturing operations in foreign countries (especially
China) and capital expenditure requirements. To the extent we pursue acquisitions or other strategic growth opportunities, we may need to raise additional capital through debt or equity financings to fund such opportunities. There can be no
assurance that financing will be available in amounts and on terms acceptable to management.



The following table summarizes our known contractual obligations, excluding interest:



|                            |  |                        |        |                |   |          |  |          |       |                 |   |        |  |   |      
|--------------------------- |  | ---------------------- | ------ | -------------- | - | -------- |  | -------- | ----- | --------------- | - | ------ |  | - | -----
|                            |  | Payments Due By Period
|Contractual Obligations     |  | Total                  |        | LessThan 1Year |   | 1-3Years |  | 3-5Years |       | MoreThan 5Years
|Long-Term Debt Obligations  |  | $                      | 44,104 |                | $ | 10,743   |  | $        | 1,083 |                 | $ | 30,406 |  | $ | 1,872
|Capital Lease Obligations   |  |                        | 68     |                |   | 68       |  |          |      |                 |   |       |  |   |     
|Operating Lease Obligations |  |                        | 3,172  |                |   | 921      |  |          | 2,251 |                 |   |       |  |   |     
|Purchase Obligations        |  |                        |       |                |   |         |  |          |      |                 |   |       |  |   |     
|                            |  |                        |        |                |   |          |  |          |       |                 |   |        |  |   |      
|                            |  | $                      | 47,344 |                | $ | 11,732   |  | $        | 3,334 |                 | $ | 30,406 |  | $ | 1,872
|                            |  |                        |        |                |   |          |  |          |       |                 |   |        |  |   |      



Critical Accounting Policies and
Estimates



The Companys emergence from Chapter 11
bankruptcy proceedings on February 3, 2004 resulted in a new reporting entity and adoption of fresh start reporting, in accordance with Statement of Position No. 90-7 (SOP 90-7), Financial Reporting by Entities in Reorganization Under
the Bankruptcy Code. Although the effective date of the Plan was February 3, 2004, the Company has accounted for the consummation of the Plan as if it occurred on the close of business on January 31, 2004. The financial statements as of
December 31, 2003 do not give effect to any adjustments in the carrying value of assets or the amounts or classification of liabilities that were recorded upon implementation of the Plan of Reorganization. The adoption of SOP 90-7 creates, in
substance, a new reporting entity. SOP 90-7 also requires that changes in accounting principles required in the financial statements of the emerging entity within twelve months of fresh start reporting to be adopted at the time fresh start reporting
is adopted, of which there were none.



The Companys
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the Company to make significant estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and



20



---

##### Table of Contents

expenses during the reporting period and related disclosure of contingent assets and liabilities. These estimates and assumptions are based upon the
Companys evaluation of historical results and anticipated future events. Actual results may differ from these estimates under different assumptions or conditions.



The Securities and Exchange Commission (the SEC) defines critical accounting polices as those that are, in
managements view, most important to the portrayal of the Companys financial condition and results of operations and those that require significant judgments and estimates. The Company believes the following critical accounting policies
involve the more significant judgments and estimates used in the preparation of its consolidated financial statements:



Valuation of Receivables.    The Company maintains an allowance for doubtful accounts for estimated losses resulting from
customer defaults. The Company performs ongoing credit evaluations of its customers considering among other things, the customers payment history and current ability to pay. A provision for uncollectible amounts is adjusted based on these
evaluations and historical experience. If the financial condition of a customer were to deteriorate, resulting in an impairment of that customers ability to make payments to the Company, additional reserves may be required. Generally, accounts
are written-off upon the exhaustion of all reasonable collection efforts.



Valuation of Inventories.    Inventories are recorded at the lower of cost or estimated market value. Cost is determined using the first-in, first-out and average cost methods. The
Companys inventories are comprised, in part, of high technology components used in assemblies produced under contract with our customers. Inventories in excess of demand may be subject to technological obsolescence.



The Company evaluates inventories for excess, obsolescence or other factors
that may render inventories unmarketable at normal margins. Write-downs are recorded so that inventories reflect the approximate net realizable value and take into consideration the Companys contractual provisions with its customers and
suppliers. If assumptions about future demand change or the financial strength of customers diminish significantly or actual market conditions are less favorable than those projected by management, additional write-downs of inventories may be
required. In any case, actual amounts could be different from those estimated.



Impairment of Assets.    Reptrons policy is to periodically review and evaluate whether there has been a permanent impairment in the value of long-lived assets. Factors considered in
the evaluation include current operating results, trends and anticipated undiscounted future cash flows. An impairment loss is recognized to the extent that fair value of the assets measured as the sum of discounted estimated future cash flows
(using the Companys incremental borrowing rate over a period of less than 30 years) that is expected to result from the use of the asset or other measure of fair value, is less than the carrying value. There have been no impairment losses from
continuing operations in 2004, 2003, or 2002.



Goodwill.    In assessing the Companys goodwill for impairment in accordance with the Financial Accounting Standards Boards (FASB) Statement of Financial Accounting Standards No. 142
(SFAS 142), Goodwill and Other Intangible Assets, the Company is required to assess the valuation of its reporting units, which involves making significant assumptions about the future cash flows and overall performance of
its reporting units. Should these assumptions or the structure of the reporting units change in the future based upon market conditions or changes in business strategy, the Company may be required to record impairment charges to its goodwill. In
2003, goodwill of approximately $3.3 million which was recorded in conjunction with a prior business acquisition by our Reptron Distribution Services division, was expensed and included in the loss from discontinued operations. The Company updated
its analysis in response to filing a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code in the fourth quarter of 2003. This discounted cash flow analysis indicated that the goodwill recorded as a result
of the purchase of a flat panel display business was fully impaired. Accordingly, the Company recorded an impairment charge of approximately $7.8 million in 2003, which is included in selling, general and administrative expenses. As previously
discussed, the Company applied fresh start accounting during the first quarter of 2004 and has allocated the reorganization



21



---

##### Table of Contents

value among the companys assets. This allocation resulted in recognition of goodwill totaling approximately $12.2 million, which is $6.8 million less
than the amount recognized prior to adoption of fresh start accounting.



Deferred Income Taxes.    The carrying value of the Companys deferred income tax assets is dependent upon the Companys ability to generate sufficient future taxable income in certain tax jurisdictions.
Should the Company determine that it would not be able to realize all or part of its deferred tax assets in the future, an adjustment to the deferred tax assets would be expensed in the period such determination was made. The Company presently
records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not expected to be realized. While the Company has considered future taxable income expected to be earned over the next one to two years and
ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, in the event that the Company were not able to achieve these objectives additional valuation allowances and corresponding costs would be
recorded. To the extent that deferred tax assets are realized in excess of those recorded, net of the valuation allowance, goodwill will be reduced and no tax benefit will be recognized in those periods.



Contingencies.    The Company is the subject of
various threatened or pending legal actions and contingencies in the normal course of conduction its business. The Company provides for costs related to these matters when a loss is probable and the amount can be reasonably estimated. The Company
assesses the likelihood of adverse judgements or outcomes to these matters, as well as the range of potential losses. A determination of the reserves required, if any, is made after careful analysis. The required reserves may change in the future
due to new developments.



New Accounting Pronouncements



In November 2004, the Financial Accounting Standards Board issued Statement
151,Inventory Costs, an amendment of ARB No. 43, Chapter 4, which is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The amendments made by Statement 151 will improve financial reporting by
clarifying that abnormal amounts of idle facility expense, freight, handling costs, and wasted materials (spoilage) should be recognized as current-period charges and by requiring the allocation of fixed production overheads to inventory based on
the normal capacity of the production facilities. The Company does not believe that the adoption of Statement 151 will have a significant effect on its financial statements.



In December 2004, the Financial Accounting Standards Board issued Statement 123 (revised 2004),Share-Based Payment
(Statement 123(R)). This Statement, effective on July 1, 2005, requires that the costs of employee share-based payments be measured at fair value on the awards grant date using an option-pricing model and recognized in the financial statements
over the requisite service period. This Statement does not change the accounting for stock ownership plans, which are subject to American Institute of Certified Public Accountants SOP 93-6, Employers Accounting for Employee Stock
Ownership Plans. Statement 123(R) supersedes Opinion 25,Accounting for Stock Issued to Employees and its related interpretations, and eliminates the alternative to use Opinion 25s intrinsic value method of accounting, which the
Company is currently using.



Statement 123(R) allows for two
alternative transition methods. The first method is the modified prospective application whereby compensation cost for the portion of awards for which the requisite service has not yet been rendered that are outstanding as of the adoption date will
be recognized over the remaining service period. The compensation cost for that portion of awards will be based on the grant-date fair value of those awards as calculated for pro forma disclosures under Statement 123, as originally issued. All new
awards and awards that are modified, repurchased, or cancelled after the adoption date will be accounted for under the provisions of Statement 123(R). The second method is the modified retrospective application, which requires that the Company
restates prior period financial statements. The modified retrospective application may be applied either to all prior periods or only to prior interim periods in the year of adoption of this statement. The Company is currently determining which
transition method it will adopt and is evaluating the impact Statement 123(R) will have on its financial position, results of operations, EPS and cash flows when the Statement is adopted.



22



---

##### Table of Contents

|Item 7a. | Quantitative and Qualitative Disclosures about Market Risk
|-------- | ----------------------------------------------------------



While Reptron had no holdings of derivative financial or commodity instruments at December 31, 2004, we are exposed to financial market risks, including
changes in interest rates. Approximately 76% of our interest bearing borrowings have a fixed interest rate. However, borrowings under the working capital Credit Agreement bear interest at a variable rate based on the Domestic Rate Loan (6% at
December 31, 2004). Based on the average floating rate borrowings outstanding throughout 2004, a 90 basis point change in the interest rate would have caused Reptrons interest expense, net of the income tax effect, to change by approximately
$75,000. Reptron believes that this amount is not significant to its 2004 results of operations.



|Item 8. | Financial Statements and Supplementary Data
|------- | -------------------------------------------



The financial statements required by this Item are contained in pages F-1 through F-24 of this Report and are incorporated into this Item by reference.



|Item 9. | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
|------- | ------------------------------------------------------------------------------------



None



|Item 9A. | Controls and Procedures
|-------- | -----------------------



Evaluation of disclosure controls and procedures.    Our management evaluated, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our
disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act of 1934, as amended) as of the end of the period covered by this Annual Report on Form 10-K. Based on this evaluation, our Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and procedures are effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission rules and forms, and (2) accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow
timely decisions regarding required disclosure.



Our
management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our Disclosure Controls and internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can
provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered
relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These
inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by
collusion of two or more people, or by management override of the control.



The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under
all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and not be detected.



Changes in internal control over financial reporting.    There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that
occurred during the period covered by this Annual Report on Form 10-K that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



|Item 9B. | Other Information
|-------- | -----------------



None



23



---

##### Table of Contents

PART III



|Item 10. | Directors and Executive Officers of the Registrant
|-------- | --------------------------------------------------



Information required by this Item is included under the captions Executive Officers, Section 16(a) Beneficial Ownership Reporting Compliance, and Election of Directors, in our definitive Proxy Statement for our 2005
Annual Meeting of Shareholders and is incorporated herein by this reference.



|Item 11. | Executive Compensation
|-------- | ----------------------



Information required by this Item is included under the caption Executive Compensation and other matters, Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-end Option Values, Employment Contracts and Termination of Employment
and Change-of-Control Arrangements, Compensation Committee Interlocks and Insider Participation in our definitive Proxy Statement for our 2005 Annual Meeting of Shareholders and is incorporated herein by this reference.



|Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|-------- | ----------------------------------------------------------------------------------------------



Information required by this Item is included under the caption Security Ownership of Certain Beneficial Owners in our definitive Proxy Statement for our
2005 Annual Meeting of Shareholders and is incorporated herein by this reference.



|Item 13. | Certain Relationships and Related Transactions
|-------- | ----------------------------------------------



Information required by this Item is included under the caption Certain Relationships and Related Transactions in our definitive Proxy Statement for our 2005 Annual Meeting of Shareholders and is incorporated herein
by this reference.



|Item 14. | Principal Accountant Fees and Services
|-------- | --------------------------------------



Information required by this Item is included under the caption Ratification of Appointment of Independent Auditors Fees and Services in our definitive Proxy Statement for our 2005 Annual Meeting of
Shareholders and is incorporated herein by this reference.



24



---

##### Table of Contents

PART IV



|Item 15. | Exhibits and Financial Statement Schedules
|-------- | ------------------------------------------



Financial Statements and Schedules



|                                                                                                                                                                                                                                                          |  |     
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                                                                                                                                                                          |  | Page
|Report of Grant Thornton LLP, Independent Registered Public Accounting Firm                                                                                                                                                                               |  | F-2 
|Consolidated Balance Sheets as of December 31, 2004 (Reorganized Company) and December 31, 2003 (Predecessor Company)                                                                                                                                     |  | F-3 
|Consolidated Statements of Operations for the eleven months ended December 31, 2004 (Reorganized Company), one month ended January 31, 2004
(Predecessor Company) and the years ended December 31, 2003 and 2002 (Predecessor Company)                    |  | F-4 
|Consolidated Statements of Shareholders Equity (Deficit) for the eleven months ended December 31, 2004 (Reorganized Company), one month ended
January 31, 2004 (Predecessor Company) and the years ended December 31, 2003 and 2002 (Predecessor Company) |  | F-5 
|Consolidated Statements of Cash Flows for the eleven months ended December 31, 2004 (Reorganized Company), one month ended January 31, 2004
(Predecessor Company) and the years ended December 31, 2003 and 2002 (Predecessor Company)                    |  | F-6 
|Notes to Consolidated Financial Statements                                                                                                                                                                                                                |  | F-7 
|Report of Grant Thornton LLP, Independent Registered Public Accounting Firm                                                                                                                                                                               |  | F-23
|Schedule II Valuation and Qualifying Accounts                                                                                                                                                                                                             |  | F-24



Exhibits



The following exhibits are filed herewith
and this list is intended to constitute the exhibit index. An asterisk (*) beside the exhibit number indicates the exhibits containing a management contract, compensatory plan or arrangement, which are required to be identified in this report.



|            |  |                                                                                                                                                                                                                                                                     
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                         
|3.1         |  | Articles of IncorporationIncorporated by reference to Exhibit 3.1 to Form 10-K dated December 31, 2003, as filed with the Securities and Exchange Commission on March 30,
2004.                                                                                    
|            | 
|3.2         |  | BylawsIncorporated by reference to Exhibit 3.2 to Form 10-K dated December 31, 2003, as filed with the Securities and Exchange Commission on March 30, 2004.                                                                                                       
|            | 
|4.1         |  | Specimen Certificate for the Common Stock of RegistrantIncorporated by reference to Exhibit 4.1 to Form 10-K dated December 31, 2003, as filed with the Securities and Exchange
Commission on March 30, 2004.                                                      
|            | 
|4.2         |  | Form of IndentureIncorporated by reference to Exhibit 4.2 to Form T-3, as filed with the Securities and Exchange Commission.                                                                                                                                       
|            | 
|4.3         |  | Form of Senior Secured NoteIncorporated by reference to Exhibit 4.3 to Form T-3, as filed with the Securities and Exchange Commission.                                                                                                                             
|            | 
|10.1*       |  | Employment Agreement between Paul Plante and Reptron Electronics, Inc., dated February 3, 2004Incorporated by reference to Exhibit 10.1 to Form 10-K dated December 31, 2003, as filed
with the Securities and Exchange Commission on March 30, 2004.              
|            | 
|10.2        |  | Loan and Security Agreement between Congress Financial and Reptron Electronics, Inc., dated February 3, 2004Incorporated by reference to Exhibit 10.2 to Form 10-K dated December 31,
2003, as filed with the Securities and Exchange Commission on March 30, 2004.
|            | 
|10.3*       |  | Reptron Electronics, Inc. Stock Option Plan                                                                                                                                                                                                                         
|            | 
|10.4*       |  | Amendment No. 1 to the Reptron Electronics, Inc. Stock Option Plan                                                                                                                                                                                                  
|            | 
|10.5        |  | Lease agreement between North Bay Trail and Reptron Electronics, Inc.                                                                                                                                                                                               
|            | 
|10.6        |  | Lease agreement between Nor-Tec Properties, et al, and Reptron Electronics, Inc.                                                                                                                                                                                    
|            | 
|10.7        |  | Lease agreement between Nor-Tec Properties, et al, and Reptron Electronics, Inc.                                                                                                                                                                                    



25



---

##### Table of Contents

|            |  |                                                                                                             
|----------- |  | ------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                 
|            | 
|10.8        |  | Agreement between International Brotherhood of Electrical Workers and Reptron Electronics, Inc.             
|            | 
|10.9        |  | Amendment to Agreement between International Brotherhood of Electrical Workers and Reptron Electronics, Inc.
|            | 
|24.1        |  | Power of Attorney (See Signature Page)                                                                      
|            | 
|31.1        |  | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Paul J. Plante                   
|            | 
|32.1        |  | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Paul J. Plante                   
|            | 
|31.2        |  | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Charles L. Pope                  
|            | 
|32.2        |  | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Charles L. Pope                  



26



---

##### Table of Contents

SIGNATURES



Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereto duly authorized, in the City of Tampa, State of Florida, on March 31, 2005.



REPTRON ELECTRONICS, INC.By:

/s/    PAUL J. PLANTEPaul J. Plante,Chief Executive Officer and President(Principal Executive Officer)By:

/s/    CHARLES L. POPECharles L. Pope,Chief Financial Officer(Principal Financial and Accounting Officer)




Power of
Attorney



Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Each person whose signature appears below constitutes and appoints Paul J. Plante, his
true and lawful attorney-in-fact and agent, with full power of substitution and revocation, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this report and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite
and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, may lawfully do or cause to be
done by virtue hereof.



|                                        |  |                                                                                |  |               
|--------------------------------------- |  | ------------------------------------------------------------------------------ |  | --------------
|SIGNATURES                              |  | TITLE                                                                          |  | DATE          
|                                        |  |                                                                               
|/s/    PAUL J. PLANTEPaul J. Plante     |  | Chief Executive Officer, President, and Director (Principal Executive Officer) |  | March 31, 2005
|                                        |  |                                                                               
|/s/    CHARLES L. POPECharles L. Pope   |  | Chief Financial Officer (Principal Financial and Accounting Officer)           |  | March 31, 2005
|                                        |  |                                                                               
|/s/    MARK HOLLIDAYMark Holliday       |  | Chairman of the Board of Directors                                             |  | March 31, 2005
|                                        |  |                                                                               
|/s/    MICHAEL L.
MUSTOMichael L.
Musto |  | Director                                                                       |  | March 31, 2005
|                                        |  |                                                                               
|/s/    STEVEN SCHEIWESteven Scheiwe     |  | Director                                                                       |  | March 31, 2005
|                                        |  |                                                                               
|/s/    HAROLD L.
PURKEYHarold L.
Purkey |  | Director                                                                       |  | March 31, 2005
|                                        |  |                                                                               
|/s/    CARL R. VERTUCACarl R. Vertuca   |  | Director                                                                       |  | March 31, 2005



27



---

##### Table of Contents

REPTRON ELECTRONICS, INC.



INDEX TO
FINANCIAL STATEMENTS AND SCHEDULE



|                                                                                                                                                                                                                                              |  |           
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------
|                                                                                                                                                                                                                                              |  | PageNumber
|REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                                                                                                                                                                                       |  | F-2       
|                                                                                                                                                                                                                                              | 
|CONSOLIDATED FINANCIAL STATEMENTS                                                                                                                                                                                                             |  |           
|                                                                                                                                                                                                                                              | 
|Consolidated Balance SheetsDecember 31, 2004 (Reorganized Company) and December 31, 2003 (Predecessor Company)                                                                                                                               |  | F-3       
|                                                                                                                                                                                                                                              | 
|Consolidated Statements of OperationsEleven months ended December 31, 2004 (Reorganized Company), one month ended January 31, 2004 (Predecessor Company) and years ended December 31, 2003 and 2002 (Predecessor
Company)                    |  | F-4       
|                                                                                                                                                                                                                                              | 
|Consolidated Statements of Shareholders Equity (Deficit)Eleven months ended December 31, 2004 (Reorganized Company), one month ended January 31, 2004 (Predecessor Company) and years ended December 31, 2003 and 2002
(Predecessor Company) |  | F-5       
|                                                                                                                                                                                                                                              | 
|Consolidated Statements of Cash FlowsEleven months ended December 31, 2004 (Reorganized Company), one month ended January 31, 2004 (Predecessor Company) and years ended December 31, 2003 and 2002 (Predecessor
Company)                    |  | F-6       
|                                                                                                                                                                                                                                              | 
|Notes to Consolidated Financial Statements                                                                                                                                                                                                    |  | F-7       
|                                                                                                                                                                                                                                              | 
|REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                                                                                                                                                                                       |  | F-26      
|                                                                                                                                                                                                                                              | 
|Schedule IIValuation and Qualifying Accounts for the years ended December 31, 2002, 2003, and 2004                                                                                                                                           |  | F-27      





---

##### Table of Contents

Report Of Independent Registered Public Accounting Firm



Board of Directors and Shareholders

Reptron Electronics, Inc.



We have audited the accompanying consolidated balance sheets of Reptron Electronics, Inc. and its wholly owned subsidiaries
as of December 31, 2004 (Reorganized Company) and 2003 (Predecessor Company), and the related consolidated statements of operations, shareholders equity, and cash flows for the eleven months ended December 31, 2004 (Reorganized Company), the
one month ended January 31, 2004 (Predecessor Company) and the two years ended December 31, 2003 (Predecessor Company). These financial statements are the responsibility of Reptrons management. Our responsibility is to express an opinion on
these financial statements based on our audits.



We conducted
our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free
of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not for expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe our audits provide a reasonable basis for our opinion.



In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Reptron Electronics, Inc. and subsidiaries as of December 31, 2004
(Reorganized Company) and 2003 (Predecessor Company), and the consolidated results of their operations and cash flows for the eleven month period ended December 31, 2004 (Reorganized Company), the one month period ended January 31, 2004 (Predecessor
Company) and the two years ended December 31, 2003 (Predecessor Company), in conformity with accounting principles generally accepted in the United States of America.



As discussed in Note A to the consolidated financial statements, effective February 3, 2004, the Company was reorganized
under a plan of reorganization confirmed by the United States Bankruptcy Court for the Southern District of Florida. In connection with its reorganization, the Company applied fresh start accounting as of February 1, 2004.



/s/ GRANT THORNTON LLP



Tampa, Florida

February 11, 2005



F-2



---

##### Table of Contents

REPTRON ELECTRONICS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)



|                                                                                                                                  |  |                                     |        |   |                                     |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------- | ------ | - | ----------------------------------- | - | ------- | -
|                                                                                                                                  |  | ReorganizedCompanyDecember 31, 2004 |        |   | PredecessorCompanyDecember 31, 2003 |  
|ASSETS                                                                                                                            |  |                                     |        |   |                                     |   |         |  
|CURRENT ASSETS                                                                                                                    |  |                                     |        |   |                                     |   |         |  
|Cash and cash equivalents                                                                                                         |  | $                                   | 227    |   |                                     | $ | 311     |  
|Restricted cash                                                                                                                   |  |                                     | 1,014  |   |                                     |   | 2,640   |  
|Account receivabletrade, net                                                                                                     |  |                                     | 14,569 |   |                                     |   | 12,974  |  
|Inventories, net                                                                                                                  |  |                                     | 19,774 |   |                                     |   | 19,546  |  
|Prepaid expenses and other                                                                                                        |  |                                     | 826    |   |                                     |   | 3,516   |  
|                                                                                                                                  |  |                                     |        |   |                                     |   |         |  
|Total current assets                                                                                                              |  |                                     | 36,410 |   |                                     |   | 38,987  |  
|                                                                                                                                  |  |                                    
|PROPERTY, PLANT & EQUIPMENTNET                                                                                                   |  |                                     | 21,770 |   |                                     |   | 20,098  |  
|GOODWILL                                                                                                                          |  |                                     | 12,172 |   |                                     |   | 18,970  |  
|OTHER INTANGIBLE ASSETS, NET                                                                                                      |  |                                     | 3,855  |   |                                     |   |        |  
|DEFERRED INCOME TAX                                                                                                               |  |                                     | 1,902  |   |                                     |   | 2,449   |  
|OTHER ASSETS                                                                                                                      |  |                                     | 83     |   |                                     |   | 719     |  
|                                                                                                                                  |  |                                     |        |   |                                     |   |         |  
|TOTAL ASSETS                                                                                                                      |  | $                                   | 76,192 |   |                                     | $ | 81,223  |  
|                                                                                                                                  |  |                                     |        |   |                                     |   |         |  
|                                                                                                                                  |  |                                    
|LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT)                                                                                    |  |                                     |        |   |                                     |   |         |  
|                                                                                                                                  |  |                                    
|CURRENT LIABILITIES                                                                                                               |  |                                     |        |   |                                     |   |         |  
|Accounts payabletrade                                                                                                            |  | $                                   | 12,885 |   |                                     | $ | 15,167  |  
|Accrued expenses                                                                                                                  |  |                                     | 5,049  |   |                                     |   | 7,333   |  
|Note payable to bank                                                                                                              |  |                                     | 10,431 |   |                                     |   | 6,214   |  
|Current portion of long-term obligations                                                                                          |  |                                     | 380    |   |                                     |   | 437     |  
|Liabilities subject to compromise                                                                                                 |  |                                     |       |   |                                     |   | 83,456  |  
|                                                                                                                                  |  |                                     |        |   |                                     |   |         |  
|Total current liabilities                                                                                                         |  |                                     | 28,745 |   |                                     |   | 112,607 |  
|LONG-TERM NOTES PAYABLE, less current portion                                                                                     |  |                                     | 33,361 |   |                                     |   | 3,670   |  
|                                                                                                                                  |  |                                    
|SHAREHOLDERS EQUITY                                                                                                              |  |                                     |        |   |                                     |   |         |  
|Preferred Stockauthorized 15,000,000 shares of $.10 par value; no shares issued                                                  |  |                                     |       |   |                                     |   |        |  
|Common Stockauthorized 50,000,000 shares of $.01 par value; issued and outstanding, 5,000,000 and 6,417,196 shares,
respectively |  |                                     | 50     |   |                                     |   | 64      |  
|Additional paid-in capital                                                                                                        |  |                                     | 15,725 |   |                                     |   | 23,146  |  
|Accumulated deficit                                                                                                               |  |                                     | (1,689 | ) |                                     |   | (58,264 | )
|                                                                                                                                  |  |                                     |        |   |                                     |   |         |  
|TOTAL SHAREHOLDERS EQUITY (DEFICIT)                                                                                              |  |                                     | 14,086 |   |                                     |   | (35,054 | )
|                                                                                                                                  |  |                                     |        |   |                                     |   |         |  
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT)                                                                              |  | $                                   | 76,192 |   |                                     | $ | 81,223  |  
|                                                                                                                                  |  |                                     |        |   |                                     |   |         |  



The accompanying notes
are an integral part of these statements.



F-3



---

##### Table of Contents

REPTRON ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)



|                                                                                     |  |                                                       |                               |      |                     |                         |           |   |  |   |           |   |  |   |           |  
|------------------------------------------------------------------------------------ |  | ----------------------------------------------------- | ----------------------------- | ---- | ------------------- | ----------------------- | --------- | - |  | - | --------- | - |  | - | --------- | -
|                                                                                     |  | ReorganizedCompany Eleven MonthsEndedDecember 31,2004 |                               |      | Predecessor Company |                        
|                                                                                     |  |                                                       | One MonthEndedJanuary 31,2004 |      |                     | Year Ended December 31, |          
|                                                                                     |  |                                                       |                               | 2003 |                     |                         | 2002      |  
|Net Sales                                                                            |  | $                                                     | 129,230                       |      |                     | $                       | 12,368    |   |  | $ | 150,067   |   |  | $ | 165,101   |  
|Cost of goods sold                                                                   |  |                                                       | 113,635                       |      |                     |                         | 11,479    |   |  |   | 131,135   |   |  |   | 148,005   |  
|                                                                                     |  |                                                       |                               |      |                     |                         |           |   |  |   |           |   |  |   |           |  
|Gross profit                                                                         |  |                                                       | 15,595                        |      |                     |                         | 889       |   |  |   | 18,932    |   |  |   | 17,096    |  
|                                                                                     |  |                                                       |                               |     
|Selling, general and administrative expenses                                         |  |                                                       | 14,758                        |      |                     |                         | 1,447     |   |  |   | 26,128    |   |  |   | 23,411    |  
|                                                                                     |  |                                                       |                               |      |                     |                         |           |   |  |   |           |   |  |   |           |  
|Operating income (loss)                                                              |  |                                                       | 837                           |      |                     |                         | (558      | ) |  |   | (7,196    | ) |  |   | (6,315    | )
|                                                                                     |  |                                                       |                               |     
|Other income (expense):                                                              |  |                                                       |                               |      |                     |                         |           |   |  |   |           |   |  |   |           |  
|Interest expense, net                                                                |  |                                                       | (2,850                        | )    |                     |                         | (61       | ) |  |   | (5,433    | ) |  |   | (5,804    | )
|Gain on debt discharge                                                               |  |                                                       |                              |      |                     |                         | 3,517     |   |  |   |          |   |  |   |          |  
|Reorganization costs (Note A)                                                        |  |                                                       | (100                          | )    |                     |                         | (853      | ) |  |   | (4,105    | ) |  |   |          |  
|                                                                                     |  |                                                       |                               |      |                     |                         |           |   |  |   |           |   |  |   |           |  
|Total other income (expense)                                                         |  |                                                       | (2,950                        | )    |                     |                         | 2,603     |   |  |   | (9,538    | ) |  |   | (5,804    | )
|                                                                                     |  |                                                       |                               |      |                     |                         |           |   |  |   |           |   |  |   |           |  
|Earnings (loss) before income taxes                                                  |  |                                                       | (2,113                        | )    |                     |                         | 2,045     |   |  |   | (16,734   | ) |  |   | (12,119   | )
|                                                                                     |  |                                                       |                               |     
|Income tax provision                                                                 |  |                                                       |                              |      |                     |                         | 777       |   |  |   |          |   |  |   |          |  
|                                                                                     |  |                                                       |                               |      |                     |                         |           |   |  |   |           |   |  |   |           |  
|Income (loss) from continuing operations                                             |  |                                                       | (2,113                        | )    |                     |                         | 1,268     |   |  |   | (16,734   | ) |  |   | (12,119   | )
|                                                                                     |  |                                                       |                               |     
|Discontinued operations (Note B)                                                     |  |                                                       |                               |      |                     |                         |           |   |  |   |           |   |  |   |           |  
|Income (loss) from discontinued operations                                           |  |                                                       | 424                           |      |                     |                         | (507      | ) |  |   | (24,348   | ) |  |   | (14,088   | )
|Income tax benefit                                                                   |  |                                                       |                              |      |                     |                         | 193       |   |  |   |          |   |  |   |          |  
|                                                                                     |  |                                                       |                               |      |                     |                         |           |   |  |   |           |   |  |   |           |  
|Income (loss) on discontinued operations                                             |  |                                                       | 424                           |      |                     |                         | (314      | ) |  |   | (24,348   | ) |  |   | (14,088   | )
|                                                                                     |  |                                                       |                               |      |                     |                         |           |   |  |   |           |   |  |   |           |  
|Net earnings (loss)                                                                  |  | $                                                     | (1,689                        | )    |                     | $                       | 954       |   |  | $ | (41,082   | ) |  | $ | (26,207   | )
|                                                                                     |  |                                                       |                               |      |                     |                         |           |   |  |   |           |   |  |   |           |  
|Net earnings (loss) from continuing operations per common sharebasic and diluted:   |  | $                                                     | (0.42                         | )    |                     | $                       | 0.20      |   |  | $ | (2.61     | ) |  | $ | (1.89     | )
|Net earnings (loss) from discontinued operations per common sharebasic and diluted: |  | $                                                     | 0.08                          |      |                     | $                       | (0.05     | ) |  | $ | (3.79     | ) |  | $ | (2.19     | )
|                                                                                     |  |                                                       |                               |      |                     |                         |           |   |  |   |           |   |  |   |           |  
|Net earnings (loss) per common sharebasic and diluted                               |  | $                                                     | (0.34                         | )    |                     | $                       | 0.15      |   |  | $ | (6.40     | ) |  | $ | (4.08     | )
|                                                                                     |  |                                                       |                               |      |                     |                         |           |   |  |   |           |   |  |   |           |  
|Weighted average Common Stock equivalent shares outstandingbasic and diluted        |  |                                                       | 5,000,000                     |      |                     |                         | 6,417,196 |   |  |   | 6,417,196 |   |  |   | 6,416,319 |  
|                                                                                     |  |                                                       |                               |      |                     |                         |           |   |  |   |           |   |  |   |           |  



The accompanying notes
are an integral part of these statements.



F-4



---

##### Table of Contents

REPTRON ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY (DEFICIT)

(in thousands, except share data)



|                                                                                                                           |  |                   |   |  |                          |     |   |                           |   |         |                                   |  |   |         |   |  |   |         |  
|-------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | - |  | ------------------------ | --- | - | ------------------------- | - | ------- | --------------------------------- |  | - | ------- | - |  | - | ------- | -
|                                                                                                                           |  | Common Stock      |   |  | AdditionalPaid-InCapital |     |   | RetainedEarnings(Deficit) |   |         | TotalShareholdersEquity(Deficit) | 
|                                                                                                                           |  | SharesOutstanding |   |  | ParValue                 |     |   |                           |  
|Predecessor Company                                                                                                        |  |                   |   |  |                          |     |   |                           |   |         |                                   |  |   |         |   |  |   |         |  
|Balance at December 31, 2001                                                                                               |  | 6,397,196         |   |  | $                        | 64  |   |                           | $ | 23,083  |                                   |  | $ | 9,025   |   |  | $ | 32,172  |  
|Exercise of stock options                                                                                                  |  | 20,000            |   |  |                          |    |   |                           |   | 63      |                                   |  |   |        |   |  |   | 63      |  
|Net Loss                                                                                                                   |  |                  |   |  |                          |    |   |                           |   |        |                                   |  |   | (26,207 | ) |  |   | (26,207 | )
|                                                                                                                           |  |                   |   |  |                          |     |   |                           |   |         |                                   |  |   |         |   |  |   |         |  
|Balance at December 31, 2002                                                                                               |  | 6,417,196         |   |  |                          | 64  |   |                           |   | 23,146  |                                   |  |   | (17,182 | ) |  |   | 6,028   |  
|Net Loss                                                                                                                   |  |                  |   |  |                          |    |   |                           |   |        |                                   |  |   | (41,082 | ) |  |   | (41,082 | )
|                                                                                                                           |  |                   |   |  |                          |     |   |                           |   |         |                                   |  |   |         |   |  |   |         |  
|Balance at December 31, 2003                                                                                               |  | 6,417,196         |   |  |                          | 64  |   |                           |   | 23,146  |                                   |  |   | (58,264 | ) |  |   | (35,054 | )
|Net Income Month Ended January 31, 2004                                                                                    |  |                  |   |  |                          |    |   |                           |   |        |                                   |  |   | 954     |   |  |   | 954     |  
|                                                                                                                           |  |                   |   |  |                          |     |   |                           |   |         |                                   |  |   |         |   |  |   |         |  
|Balance at January 31, 2004                                                                                                |  | 6,417,196         |   |  |                          | 64  |   |                           |   | 23,146  |                                   |  |   | (57,310 | ) |  |   | (34,100 | )
|Cancellation of predecessor common stock, additional paid-in capital, and accumulated deficit under Plan of Reorganization |  | (6,417,196        | ) |  |                          | (64 | ) |                           |   | (23,146 | )                                 |  |   | 57,310  |   |  |   | 34,100  |  
|                                                                                                                           |  |                   |   |  |                          |     |   |                           |   |         |                                   |  |   |         |   |  |   |         |  
|Balance at January 31, 2004                                                                                                |  |                  |   |  |                          |    |   |                           |   |        |                                   |  |   |        |   |  |   |        |  
|                                                                                                                           |  |                   |   |  |                          |     |   |                           |   |         |                                   |  |   |         |   |  |   |         |  
|Reorganized Company                                                                                                        |  |                   |   |  |                          |     |   |                           |   |         |                                   |  |   |         |   |  |   |         |  
|Balance at January 31, 2004                                                                                                |  |                  |   |  | $                        |    |   |                           | $ |        |                                   |  | $ |        |   |  | $ |        |  
|Issuance of common stock under Plan of Reorganization                                                                      |  | 5,000,000         |   |  |                          | 50  |   |                           |   | 15,725  |                                   |  |   |        |   |  |   | 15,775  |  
|Net Loss                                                                                                                   |  |                  |   |  |                          |    |   |                           |   |        |                                   |  |   | (1,689  | ) |  |   | (1,689  | )
|                                                                                                                           |  |                   |   |  |                          |     |   |                           |   |         |                                   |  |   |         |   |  |   |         |  
|Balance at December 31, 2002                                                                                               |  | 5,000,000         |   |  | $                        | 50  |   |                           | $ | 15,725  |                                   |  | $ | (1,689  | ) |  | $ | 14,086  |  
|                                                                                                                           |  |                   |   |  |                          |     |   |                           |   |         |                                   |  |   |         |   |  |   |         |  



The accompanying notes
are an integral part of this statement.



F-5



---

##### Table of Contents

REPTRON ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)



|                                                                                                                              |  |                                                         |                                 |      |                     |                        |        |   |  |   |         |   |  |   |         |  
|----------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------- | ------------------------------- | ---- | ------------------- | ---------------------- | ------ | - |  | - | ------- | - |  | - | ------- | -
|                                                                                                                              |  | ReorganizedCompany Eleven MonthsEnded December 31, 2004 |                                 |      | Predecessor Company |                       
|                                                                                                                              |  |                                                         | One MonthEnded January 31, 2004 |      |                     | Year EndedDecember 31, |       
|                                                                                                                              |  |                                                         |                                 | 2003 |                     |                        | 2002   |  
|Increase (decrease) in cash and cash equivalents:                                                                             |  |                                                         |                                 |      |                     |                        |        |   |  |   |         |   |  |   |         |  
|Cash flows from operating activities of continuing operations:                                                                |  |                                                         |                                 |      |                     |                        |        |   |  |   |         |   |  |   |         |  
|Net earnings (loss)                                                                                                           |  | $                                                       | (1,689                          | )    |                     | $                      | 954    |   |  | $ | (41,082 | ) |  | $ | (26,207 | )
|Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities of continuing operations: |  |                                                         |                                 |      |                     |                        |        |   |  |   |         |   |  |   |         |  
|Net (earnings) loss from discontinued operations                                                                              |  |                                                         | (424                            | )    |                     |                        | 314    |   |  |   | 24,348  |   |  |   | 14,088  |  
|Depreciation                                                                                                                  |  |                                                         | 3,923                           |      |                     |                        | 412    |   |  |   | 5,268   |   |  |   | 5,821   |  
|Amortization                                                                                                                  |  |                                                         | 313                             |      |                     |                        |       |   |  |   | 1,430   |   |  |   | 1,329   |  
|Goodwill impairment                                                                                                           |  |                                                         |                                |      |                     |                        |       |   |  |   | 7,808   |   |  |   |        |  
|Deferred income taxes                                                                                                         |  |                                                         | (59                             | )    |                     |                        | 606    |   |  |   |        |   |  |   | 1,102   |  
|Reorganization gain on debt discharge                                                                                         |  |                                                         |                                |      |                     |                        | (3,517 | ) |  |   |        |   |  |   |        |  
|Change in assets and liabilities:                                                                                             |  |                                                         |                                 |      |                     |                        |        |   |  |   |         |   |  |   |         |  
|Accounts receivable                                                                                                           |  |                                                         | (1,618                          | )    |                     |                        | 23     |   |  |   | 7,913   |   |  |   | 7,813   |  
|Inventories                                                                                                                   |  |                                                         | (929                            | )    |                     |                        | 701    |   |  |   | 6,601   |   |  |   | 6,375   |  
|Prepaid expenses and other current assets                                                                                     |  |                                                         | 2,028                           |      |                     |                        | (1,024 | ) |  |   | (656    | ) |  |   | 326     |  
|Other assets                                                                                                                  |  |                                                         | (35                             | )    |                     |                        | 666    |   |  |   | (674    | ) |  |   | (1,017  | )
|Accounts payable                                                                                                              |  |                                                         | (2,366                          | )    |                     |                        | 281    |   |  |   | (3,272  | ) |  |   | 4,605   |  
|Accrued expenses                                                                                                              |  |                                                         | (983                            | )    |                     |                        | 1,238  |   |  |   | 6,197   |   |  |   | 634     |  
|Income taxes payable/receivable                                                                                               |  |                                                         |                                |      |                     |                        |       |   |  |   |        |   |  |   | 5,900   |  
|                                                                                                                              |  |                                                         |                                 |      |                     |                        |        |   |  |   |         |   |  |   |         |  
|Net cash provided by (used in) operating activities of continuing operations                                                  |  |                                                         | (1,839                          | )    |                     |                        | 654    |   |  |   | 13,881  |   |  |   | 20,769  |  
|                                                                                                                              |  |                                                         |                                 |      |                     |                        |        |   |  |   |         |   |  |   |         |  
|Cash flows from investing activities of continuing operations:                                                                |  |                                                         |                                 |      |                     |                        |        |   |  |   |         |   |  |   |         |  
|(Increase) decrease in restricted cash                                                                                        |  |                                                         | 676                             |      |                     |                        | 950    |   |  |   | (2,640  | ) |  |   |        |  
|Purchases of property, plant & equipment                                                                                      |  |                                                         | (3,280                          | )    |                     |                        | (51    | ) |  |   | (2,074  | ) |  |   | (4,087  | )
|                                                                                                                              |  |                                                         |                                 |      |                     |                        |        |   |  |   |         |   |  |   |         |  
|Net cash provided by (used in) investing activities of continuing operations                                                  |  |                                                         | (2,604                          | )    |                     |                        | 899    |   |  |   | (4,714  | ) |  |   | (4,087  | )
|                                                                                                                              |  |                                                         |                                 |      |                     |                        |        |   |  |   |         |   |  |   |         |  
|Cash flows from financing activities of continuing operations:                                                                |  |                                                         |                                 |      |                     |                        |        |   |  |   |         |   |  |   |         |  
|Net proceeds (payments) on notes payable to banks                                                                             |  |                                                         | 5,577                           |      |                     |                        | (1,360 | ) |  |   | (27,392 | ) |  |   | (16,990 | )
|Payments on long-term obligations                                                                                             |  |                                                         | (336                            | )    |                     |                        | (30    | ) |  |   | (1,064  | ) |  |   | (1,160  | )
|Proceeds from exercise of stock options                                                                                       |  |                                                         |                                |      |                     |                        |       |   |  |   |        |   |  |   | 63      |  
|                                                                                                                              |  |                                                         |                                 |      |                     |                        |        |   |  |   |         |   |  |   |         |  
|Net cash provided by (used in) financing activities of continuing operations                                                  |  |                                                         | 5,241                           |      |                     |                        | (1,390 | ) |  |   | (28,456 | ) |  |   | (18,087 | )
|                                                                                                                              |  |                                                         |                                 |      |                     |                        |        |   |  |   |         |   |  |   |         |  
|Net increase (decrease) in cash and cash equivalents                                                                          |  |                                                         | 798                             |      |                     |                        | 163    |   |  |   | (19,289 | ) |  |   | (1,405  | )
|                                                                                                                              |  |                                                         |                                 |     
|Net increase in cash and cash equivalents from discontinued operations (see Note D)                                           |  |                                                         | (653                            | )    |                     |                        | (392   | ) |  |   | 19,230  |   |  |   | 1,578   |  
|                                                                                                                              |  |                                                         |                                 |     
|Cash and cash equivalents at the beginning of the period                                                                      |  |                                                         | 82                              |      |                     |                        | 311    |   |  |   | 370     |   |  |   | 197     |  
|                                                                                                                              |  |                                                         |                                 |      |                     |                        |        |   |  |   |         |   |  |   |         |  
|Cash and cash equivalents at the end of the period                                                                            |  | $                                                       | 227                             |      |                     | $                      | 82     |   |  | $ | 311     |   |  | $ | 370     |  
|                                                                                                                              |  |                                                         |                                 |      |                     |                        |        |   |  |   |         |   |  |   |         |  



The accompanying notes
are an integral part of these statements.



F-6



---

##### Table of Contents

REPTRON ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2004, 2003 and 2002



NOTE AORGANIZATION AND DESCRIPTION OF BUSINESS



Reptron Electronics, Inc. (Reptron) is an electronics manufacturing services company providing engineering
services, electronics manufacturing services and display integration services. Reptron Manufacturing Services offers full electronics manufacturing services including complex circuit board assembly, complete supply chain services and manufacturing
engineering services to OEMs in a wide variety of industries including medical, industrial/instrumentation, banking, telecommunications, and office products. Reptron Outsource Manufacturing and Design provides value-added display design engineering
and system integration services to OEMs.



On February 3, 2004,
Reptron implemented its previously announced financial restructuring when its pre-negotiated Plan of Reorganization under Chapter 11 of the U.S. Bankruptcy Code (the Plan or Plan of Reorganization) became effective. Events
occurring during 2003 and through February 3, 2004 related to the Chapter 11 proceedings are summarized below.



In January 2003, the Company announced that it was seeking to restructure $76.3 million principal amount of Reptrons outstanding 63/4% Convertible Subordinated Notes (the Convertible Notes). As part of this initiative, Reptron
discontinued all interest payments on the Convertible Notes.



In February 2003, the Company commenced discussions with certain holders of the Convertible Notes (Ad-hoc Committee) to discuss the financial condition of the Company and the proposed restructuring. The Company engaged in
extensive, arms length negotiations with the Ad-hoc Committee regarding the terms of the consensual restructuring of Reptron.



On October 28, 2003, Reptron filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Under the terms of the Plan,
substantially all of Reptrons general unsecured creditors (except for holders of the Convertible Notes and certain other creditors) received full payment for all prepetition claims within ninety days subsequent to the Plans effective
date. The Plan was confirmed by the bankruptcy court on January 14, 2004 and became effective February 3, 2004, resulting in conversion of the $76.3 million of Convertible Notes, $6.4 million of accrued interest and $0.8 million of other liabilities
into $30 million of Senior Secured Notes due in 2009 (New Notes) and the issuance of 95% of the common stock of the reorganized entity (New Common Stock). Previously outstanding common stock was exchanged for 5% of the New
Common Stock. The New Notes carry an interest rate of seven percent per annum during the first two years and eight percent per annum during the remaining three years.



In accordance with the Plan, in the first quarter of 2004 the Company, among other matters:



| |  |  | Issued 5,000,000 shares of New Common Stock,
| | - |  | --------------------------------------------



| |  |  | Issued the New Notes;
| | - |  | ---------------------



| |  |  | Adopted a new stock option plan;
| | - |  | --------------------------------



| |  |  | Canceled the Convertible Notes, previously outstanding common stock, and previously outstanding stock options.
| | - |  | --------------------------------------------------------------------------------------------------------------



The consolidated balance sheet at December 31, 2003 reflects $76.3 million
principal amount of Convertible Notes along with $6.4 million of accrued and unpaid interest thereon, $0.6 million of real property lease liabilities, and $0.2 million of severance liabilities as Liabilities subject to compromise. These
liabilities are reported at the amount allowed on pre-petition claims in the Chapter 11 proceedings.



F-7



---

##### Table of Contents

REPTRON ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31,
2004, 2003 and 2002



Interest expense of approximately $4.3 million on the Convertible Notes was accrued through October
28, 2003, the Companys Chapter 11 petition filing date, even though the Company discontinued interest payments on such debt. Interest expense for 2003 excludes $0.9 million of stated contractual interest associated with the Convertible Notes
between October 28, 2003 and December 31, 2003. No interest expense was recorded on the Convertible Notes in 2004.



The Company incurred $1.0 million of reorganization costs during 2004, which primarily includes professional fees of approximately $0.4 million, debt
issuance costs of approximately $0.2 million, and contract settlement and other miscellaneous costs of approximately $0.4 million. The Company incurred $4.1 million of reorganization costs during 2003, which primarily includes professional fees of
approximately $2.0 million, a write-off of debt issuance costs of approximately $1.5 million, and contract settlement and other miscellaneous costs of approximately $0.6 million.



The Companys emergence from Chapter 11 bankruptcy proceedings on February 3, 2004 resulted in a new reporting entity
and adoption of fresh start reporting, in accordance with Statement of Position No. 90-7 (SOP 90-7), Financial Reporting by Entities in Reorganization Under the Bankruptcy Code. Although the effective date of the Plan was February
3, 2004, the Company has accounted for the consummation of the Plan as if it occurred at the close of business on January 31, 2004. The balance sheet as of December 31, 2003 does not give effect to any adjustments in the carrying value of assets or
the amounts or classification of liabilities that were recorded upon adoption of fresh start accounting. As a result of the extinguishment of the liabilities subject to compromise, the Company recognized a reorganization gain on debt discharge
amounting to $3.5 million, representing the excess of the carrying value of those liabilities compared to managements estimate of the fair value of the New Common Stock and the New Notes. As provided for in the Companys Plan of
Reorganization, the holders of the liabilities subject to compromise would receive their ratable portion of the New Common Stock and New Notes in full satisfaction of those liabilities.



F-8



---

##### Table of Contents

REPTRON ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31,
2004, 2003 and 2002



The following unaudited financial information reflects the implementation of the Plan as of the close
of business on January 31, 2004. Reorganization adjustments have been made to reflect the discharge of debt and adoption of fresh start reporting in accordance with SOP 90-7. Accordingly, the reorganization value of the Company of $86 million, as
disclosed in the Plan of Reorganization and related Disclosure Statement, limited to the aggregate carrying value of the pre-emergence assets, has been used to allocate the value of the assets and liabilities of the Company in conformity with
Statement of Financial Accounting Standards No. 141 (SFAS 141), Business Combinations. The Company determined that independent third party appraisals of its long-term tangible and intangible assets was necessary in order to
allocate the reorganization value of the Company to its various assets at January 31, 2004. The fresh-start adjustments included in the table which follows represent managements estimate of adjustments necessary to record assets and
liabilities at fair value with consideration given to appraisals. The Company is currently evaluating the effects the reorganization will have on its net operating loss carryforwards for income tax purposes. The amount of net operating losses
available to the company may be limited in total or be subject to annual limitations.



|                                           |  |                              |         |   |               |   |         |            |  |   |                    |      |  |   |       
|------------------------------------------ |  | ---------------------------- | ------- | - | ------------- | - | ------- | ---------- |  | - | ------------------ | ---- |  | - | ------
|                                           |  | January 31, 2004 (unaudited)
|(In Thousands)                             |  | PredecessorCompany           |         |   | DebtDischarge |   |         | FreshStart |  |   | ReorganizedCompany
|Cash and cash equivalents                  |  | $                            | 82      |   |               |   |         |            |  |   |                    |      |  | $ | 82    
|Restricted Cash                            |  |                              | 1,690   |   |               |   |         |            |  |   |                    |      |  |   | 1,690 
|Account receivabletrade, net              |  |                              | 13,083  |   |               |   |         |            |  |   |                    |      |  |   | 13,083
|Inventories, net                           |  |                              | 18,845  |   |               |   |         |            |  |   |                    |      |  |   | 18,845
|Prepaid expenses and other                 |  |                              | 3,831   |   |               |   |         |            |  |   | (178               | )(h) |  |   | 3,653 
|Property, plant & equipment                |  |                              | 19,737  |   |               |   |         |            |  |   | 2,808              | (f)  |  |   | 22,545
|Goodwill                                   |  |                              | 18,970  |   |               |   |         |            |  |   | (6,798             | )(i) |  |   | 12,172
|Other intangible assets                    |  |                              |        |   |               |   |         |            |  |   | 4,168              | (g)  |  |   | 4,168 
|Deferred income tax                        |  |                              | 1,843   |   |               |   |         |            |  |   |                    |      |  |   | 1,843 
|Other assets                               |  |                              | 52      |   |               |   |         |            |  |   |                    |      |  |   | 52    
|                                           |  |                              |         |   |               |   |         |            |  |   |                    |      |  |   |       
|Total assets                               |  | $                            | 78,133  |   |               | $ |        |            |  | $ |                   |      |  | $ | 78,133
|                                           |  |                              |         |   |               |   |         |            |  |   |                    |      |  |   |       
|Accounts payabletrade                     |  | $                            | 15,441  |   |               |   |         |            |  |   |                    |      |  | $ | 15,441
|Note payable to bank                       |  |                              | 4,854   |   |               |   |         |            |  |   |                    |      |  |   | 4,854 
|Current portion of long-term obligations   |  |                              | 450     |   |               |   |         |            |  |   |                    |      |  |   | 450   
|Accrued expenses                           |  |                              | 15,063  |   |               |   | (7,077  | )(a)       |  |   |                    |      |  |   | 7,986 
|Convertible subordinated notes due 2004    |  |                              | 76,315  |   |               |   | (76,315 | )(a)       |  |   |                    |      |  |   |      
|Senior secured notes due 2009              |  |                              |        |   |               |   | 30,000  | (b)        |  |   |                    |      |  |   | 30,000
|Long-term obligations                      |  |                              | 3,627   |   |               |   |         |            |  |   |                    |      |  |   | 3,627 
|                                           |  |                              |         |   |               |   |         |            |  |   |                    |      |  |   |       
|Total liabilities                          |  |                              | 115,750 |   |               |   | (53,392 | )          |  |   |                   |      |  |   | 62,358
|                                           |  |                              |         |   |               |   |         |            |  |   |                    |      |  |   |       
|Common stock                               |  |                              | 64      |   |               |   |         |            |  |   | (14                | )(e) |  |   | 50    
|Additional paid-in capital                 |  |                              | 23,146  |   |               |   | 49,875  | (c)        |  |   | (57,296            | )(e) |  |   | 15,725
|Accumulated deficit                        |  |                              | (60,827 | ) |               |   | 3,517   | (d)        |  |   | 57,310             | (e)  |  |   |      
|                                           |  |                              |         |   |               |   |         |            |  |   |                    |      |  |   |       
|Total liabilities and shareholders equity |  | $                            | 78,133  |   |               | $ |        |            |  | $ |                   |      |  | $ | 78,133
|                                           |  |                              |         |   |               |   |         |            |  |   |                    |      |  |   |       

---

|(a) | Reduction of Convertible Notes, accrued interest on the Convertible Notes, and other liabilities subject to compromise for the implementation of the Plan of $83.4 million.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | Increase in long-term obligations of $30.0 million associated with the issuance of the New Notes.
|--- | -------------------------------------------------------------------------------------------------



|(c) | Increase in additional paid-in capital of $49.9 million reflecting the reorganization and issuance of the New Common Stock.
|--- | ---------------------------------------------------------------------------------------------------------------------------



F-9



---

##### Table of Contents

REPTRON ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31,
2004, 2003 and 2002



|(d) | Effect of the gain on the extinguishment of debt. The income tax effects are reflected in the predecessor historical information. As a result, the effect on accumulated deficit is
recognized excluding tax effects.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(e) | Elimination of accumulated deficit and issuance of New Common Stock reflecting the reorganized entity.
|--- | ------------------------------------------------------------------------------------------------------



|(f) | Increase in property, plant and equipment of $2.8 million reflecting the estimated fair market value of the assets on January 31, 2004 based primarily on third party appraisals.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(g) | Increase in other intangible assets of $4.2 million reflecting the value of the Companys customer relationships on January 31, 2004 based on a third party appraisal. This
asset was determined to have a 12 year life and will be amortized at rates such that 75% of the asset will be amortized in the first five years of the assets life and the remaining 25% of the asset will be amortized over the remaining seven years of
its life.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(h) | Decrease in other current assets based on managements assessment of fair value.
|--- | --------------------------------------------------------------------------------



|(i) | Net effect of the fresh start adjustments detailed in items (f), (g), and (h), above.
|--- | -------------------------------------------------------------------------------------



NOTE BSUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



A summary of the significant accounting policies consistently applied in the
preparation of the accompanying consolidated financial statements follows.



|1. | Principles of Consolidation
|-- | ---------------------------



The financial statements include the accounts of Reptron Electronics, Inc. and its wholly-owned subsidiaries. All significant inter-company balances and
transactions have been eliminated.



|2. | Cash and Cash Equivalents
|-- | -------------------------



For purposes of the statement of cash flows, Reptron considers all highly liquid debt instruments purchased with a maturity of three months or less to be
cash equivalents. Restricted cash represents funds set aside pursuant to the requirements of certain letters of credit outstanding at December 31, 2004 and 2003.



|3. | Inventories
|-- | -----------



Inventories are stated at the lower of cost or market determined using the first-in, first-out method (FIFO). The Company evaluates inventories for
excess, obsolescence or other factors that may render inventories unmarketable at normal margins. Write-downs are recorded so that inventories reflect the approximate net realizable value and take into consideration the Companys contractual
provisions with its customers and suppliers governing return privileges.



|4. | Property, Plant and Equipment
|-- | -----------------------------



Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is provided for, using the straight-line method, in
amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives (buildings 391/2years, most other asset categories 5 years). Leasehold improvements are amortized using the straight-line method over the lives of the respective leases or the service lives of the improvements, whichever is shorter. Leased
equipment under capital leases is amortized using the straight-line method over the lives of the respective leases or over the service lives of the assets for those leases which substantially transfer ownership. Accelerated methods are used for tax
depreciation. Repairs



F-10



---

##### Table of Contents

REPTRON ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31,
2004, 2003 and 2002



and maintenance costs are expensed as incurred. As discussed in Note A, the Company applied fresh start accounting during the first quarter of 2004 which
resulted in an adjustment of $2.8 million of additional value assigned to property and equipment based primarily on third party appraisals.



|5. | Goodwill
|-- | --------



On January 1, 2002, the Company adopted the provisions of the Financial Accounting Standards Boards (FASB) Financial Accounting
Standards No. 142 (SFAS 142), Goodwill and Other Intangible Assets. SFAS 142 requires that ratable amortization of goodwill be replaced with periodic tests for goodwill impairment. A third party valuation consultant was
engaged to assist the Company in preparing valuations on certain business units of the Company for the purpose of evaluating the impact of the adoption of SFAS 142. Based primarily on the methodology included in a report dated May 13, 2002 from the
valuation consultant and as updated by the Companys internal analysis, as of January 1, 2004 and 2003, there was no impairment of goodwill. In addition, the Company updated its analysis in response to filing a voluntary petition for
reorganization under Chapter 11 of the United States Bankruptcy Code in the fourth quarter of 2003. This discounted cash flow analysis indicated that the goodwill recorded as a result of the purchase of a flat panel display business was fully
impaired. Accordingly, the Company recorded an impairment charge of approximately $7.8 million in 2003, which is included in selling, general and administrative expenses. As discussed in Note A, the Company applied fresh start accounting during the
first quarter of 2004 which resulted in decreased value assigned to goodwill of approximately $6.8 million.



|6. | Customer List
|-- | -------------



Upon the adoption of fresh start accounting, the Company recognized an intangible asset that reflects the value of the Companys customer
relationships based on a third party appraisal. This asset was determined to have a value of $4.2 million and a twelve year life. Amortization expense will be recorded in amounts such that 75% of the asset value will be amortized in the first five
years of the assets life and the remaining 25% of the asset value will be amortized over the remaining seven years of its life. The Company recorded approximately $0.3 million of amortization expense related to this asset in the eleven months
ending December 31, 2004. The Company expects to record amortization expense of $625,000 annually in 2005 through 2008, and $387,000 in 2009.



|7. | Impairment of Assets
|-- | --------------------



Reptrons policy is to periodically review and evaluate whether there has been a permanent impairment in the value of long-lived assets. Factors
considered in the evaluation include current operating results, trends and anticipated undiscounted future cash flows. An impairment loss is recognized to the extent that fair value of the assets measured as the sum of discounted estimated future
cash flows (using the Companys incremental borrowing rate over a period of less than 30 years) that is expected to result from the use of the asset or other measure of fair value, is less than the carrying value. There have been no impairment
losses in 2004, 2003, or 2002.



|8. | Income Taxes
|-- | ------------



Reptron accounts for income taxes on the liability method, as provided by Statement of Financial Accounting Standards (SFAS) No. 109, Accounting For
Income Taxes. Under the liability method specified by



F-11



---

##### Table of Contents

REPTRON ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31,
2004, 2003 and 2002



SFAS 109, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities
as measured by the enacted tax rates which will be in effect when these differences reverse. Deferred tax expense is the result of changes in deferred tax assets and liabilities.



|9. | Earnings Per Common Share
|-- | -------------------------



Earnings per share are computed using the basic and diluted calculations, as provided by SFAS No. 128 Earnings per Share. SFAS No. 128
eliminates primary and fully diluted earnings per share and requires presentation of basic and diluted earnings per share together with disclosure of how the per share amounts were computed.



As discussed in Note A, the Company emerged from bankruptcy on February 3,
2004 and has a reorganized equity structure. In particular, implementation of the Companys Plan of Reorganization resulted in the cancellation of all of the shares of the Companys common stock and stock options that were outstanding
prior to the Petition Date.



|10. | Use of Estimates
|--- | ----------------



In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting
period. These accounts and estimates include, but are not limited to, the valuation of accounts receivable, inventories, goodwill, deferred income taxes, restructuring costs and contingent liabilities. Actual results could differ from those
estimates.



|11. | Revenue Recognition
|--- | -------------------



Revenues are recognized upon shipment of product, at which time title to goods has transferred to the buyer. The Company performs periodic credit
evaluations of its customers financial condition and does not require collateral on its accounts receivable. Credit losses are provided for in the financial statements based on managements assessment of specific customer balances,
considering the age of receivables and financial stability of the customer and consistently have been within managements expectations. Accounts receivable are presented net of an allowance for doubtful accounts of $37,000 and $953,000 in 2004
and 2003, respectively. Generally, accounts are written-off upon the exhaustion of all reasonable collection efforts. During 2004, the Company recovered approximately $172,000 of accounts written off in prior years that were primarily associated
with discontinued operations. The Company incurred $0, $521,000, and $1,447,000 of bad debt expense during 2004, 2003, and 2002, respectively, including bad debt expense included in loss from discontinued operations.



The Companys three largest customers accounted for approximately 13%,
12%, and 12%, respectively, of net sales for the year ended December 31, 2004. No other customers accounted for sales of 10% or more during 2004. The Companys two largest customers accounted for approximately 21% and 12%, respectively, of net
sales for the year ended December 31, 2003. No other customers accounted for sales of 10% or more during 2003.



|12. | Stock Based Compensation
|--- | ------------------------



The Company follows Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation(SFAS 123), which
establishes a fair value based method of accounting for stock-based



F-12



---

##### Table of Contents

REPTRON ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31,
2004, 2003 and 2002



employee compensation plans; however, the Company has elected to account for its employee stock compensation plans using the intrinsic value method under
Accounting Principles Board Opinion No. 25 with pro forma disclosures of net earnings and earnings per share, as if the fair value based method of accounting defined in SFAS 123 had been applied.



Had compensation cost for the Companys stock option plan been
determined on the fair value at the grant dates for stock-based employee compensation arrangements consistent with the method required by SFAS 123, the Companys net loss and net loss per common share would have been the pro forma amounts
indicated below (see also Note L):



|                                                                                                                                                                      |  |                                                      |        |                        |                     |      |      |  |   |         |   |  |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------- | ------ | ---------------------- | ------------------- | ---- | ---- |  | - | ------- | - |  | - | ------- | -
|(In thousands except per share data)                                                                                                                                  |  | ReorganizedCompanyEleven MonthsEndedDecember 31,2004 |        |                        | Predecessor Company |     
|                                                                                                                                                                      |  | One MonthEndedJanuary 31,2004                        |        | Year EndedDecember 31, |                    
|                                                                                                                                                                      |  |                                                      | 2003   |                        |                     | 2002 |     
|Reported net income (loss)                                                                                                                                            |  | $                                                    | (1,689 | )                      |                     | $    | 954  |  | $ | (41,082 | ) |  | $ | (26,207 | )
|                                                                                                                                                                      |  |                                                      |        |                       
|Add: Stock-based employee compensation expense included in reported net loss, net of related tax effects                                                              |  |                                                      |       |                        |                     |      |     |  |   |        |   |  |   |        |  
|                                                                                                                                                                      |  |                                                      |        |                       
|Deduct: Total stock-based employee compensation expense determined under fair value based method for awards granted, modified, or settled, net
of related tax effects |  |                                                      | 626    |                        |                     |      |     |  |   | 38      |   |  |   | 96      |  
|                                                                                                                                                                      |  |                                                      |        |                        |                     |      |      |  |   |         |   |  |   |         |  
|Pro forma net income                                                                                                                                                  |  | $                                                    | (2,315 | )                      |                     | $    | 954  |  | $ | (41,120 | ) |  | $ | (26,303 | )
|                                                                                                                                                                      |  |                                                      |        |                        |                     |      |      |  |   |         |   |  |   |         |  
|Net loss per common sharebasic:                                                                                                                                      |  |                                                      |        |                        |                     |      |      |  |   |         |   |  |   |         |  
|As reported                                                                                                                                                           |  | $                                                    | (0.34  | )                      |                     | $    | 0.15 |  | $ | (6.40   | ) |  | $ | (4.08   | )
|Pro forma                                                                                                                                                             |  | $                                                    | (0.46  | )                      |                     | $    | 0.15 |  | $ | (6.41   | ) |  | $ | (4.10   | )
|                                                                                                                                                                      |  |                                                      |        |                       
|Net loss per common sharediluted:                                                                                                                                    |  |                                                      |        |                        |                     |      |      |  |   |         |   |  |   |         |  
|As reported                                                                                                                                                           |  | $                                                    | (0.34  | )                      |                     | $    | 0.15 |  | $ | (6.40   | ) |  | $ | (4.08   | )
|Pro forma                                                                                                                                                             |  | $                                                    | (0.46  | )                      |                     | $    | 0.15 |  | $ | (6.41   | ) |  | $ | (4.10   | )



|13. | Recent Accounting Pronouncements
|--- | --------------------------------



In November 2004, the Financial Accounting Standards Board issued Statement 151,Inventory Costs, an amendment of ARB No. 43, Chapter 4, which is
effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The amendments made by Statement 151 will improve financial reporting by clarifying that abnormal amounts of idle facility expense, freight, handling costs,
and wasted materials (spoilage) should be recognized as current-period charges and by requiring the allocation of fixed production overheads to inventory based on the normal capacity of the production facilities. The Company does not believe that
the adoption of Statement 151 will have a significant effect on its financial statements.



In December 2004, the Financial Accounting Standards Board issued Statement 123 (revised 2004),Share-Based Payment (Statement 123(R)). This Statement, effective on July 1, 2005, requires that the costs of
employee share-based payments be measured at fair value on the awards grant date using an option-pricing model and recognized in the financial statements over the requisite service period. This Statement does not change the accounting for
stock ownership plans, which are subject to American Institute of Certified Public Accountants SOP 93-6, Employers Accounting for Employee Stock Ownership Plans. Statement 123(R) supersedes Opinion 25,Accounting for Stock
Issued to Employees and its related interpretations, and eliminates the alternative to use Opinion 25s intrinsic value method of accounting, which the Company is currently using.



F-13



---

##### Table of Contents

REPTRON ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31,
2004, 2003 and 2002



Statement 123(R) allows for two alternative transition methods. The first method is the modified
prospective application whereby compensation cost for the portion of awards for which the requisite service has not yet been rendered that are outstanding as of the adoption date will be recognized over the remaining service period. The compensation
cost for that portion of awards will be based on the grant-date fair value of those awards as calculated for pro forma disclosures under Statement 123, as originally issued. All new awards and awards that are modified, repurchased, or cancelled
after the adoption date will be accounted for under the provisions of Statement 123(R). The second method is the modified retrospective application, which requires that the Company restates prior period financial statements. The modified
retrospective application may be applied either to all prior periods or only to prior interim periods in the year of adoption of this statement. The Company is currently determining which transition method it will adopt and is evaluating the impact
Statement 123(R) will have on its financial position, results of operations, EPS and cash flows when the Statement is adopted.



|14. | Fresh Start Accounting
|--- | ----------------------



As discussed in Note A, the Company adopted fresh start accounting during the first quarter of 2004, creating, in substance, per SOP 90-7 a new reporting
entity. SOP 90-7 also requires that changes in accounting principles required in the financial statements of the emerging entity within twelve months of fresh start reporting should be adopted at the time fresh start reporting is adopted. No such
changes occurred.



NOTE CDISCONTINUED
OPERATIONS



Electronic Component Distribution



As a result of significant losses incurred by the Companys Electronic
Component Distribution (ECD) segment during 2001 and 2002, the Company decided to exit the component distribution business either through a sale of the business or by discontinuance of its operations in 2003. Management completed a sale
of identified assets of this division on June 13, 2003. Accordingly, the results of this division have been reported as a discontinued operation for all periods presented.



Revenue for the ECD division was approximately $109.0 million, and $36.2 million for the years ended December 31, 2002, and
2003, respectively. The ECD divisions loss from operations before income taxes was $15.7 million in 2002. Its combined loss from operations and the loss on the sale of identified assets of this division was $19.2 million in 2003. Included in
the loss from discontinued operations in 2003 is an impairment writedown of $3.3 million of goodwill, an $8.1 million writedown of inventory, a $1.7 million impairment of fixed assets, and other costs of $0.8 million. The inventory writedown was
determined with consideration given to the sale proceeds for the inventory included in the sale. The goodwill impairment was also recognized in response to the near term expectations established by the board of directors in March 2003 to either sell
or otherwise discontinue these operations. As a result, the long-term turnaround previously estimated by management for this segment was no longer feasible and recovery of these assets was not expected in the near term. Also included in the pre-tax
loss in 2003 and 2002 is interest expense of $0.5 million and $1.6 million, respectively, that was allocated to the electronic component distribution business. The basis for this allocation considered interest expense which can reasonably be
expected to be avoided through the collection of the electronic component distribution divisions trade receivables, proceeds from the sales of assets held for sale, and subsequent payment on the working capital credit facility. Included in the
loss from discontinued operations in January 2004 is $0.2 million representing an increase in estimated workers compensation costs. During the eleven months ended December 31, 2004, the discontinued operations generated earnings of approximately
$0.4 million. These earnings resulted primarily from the realization of assets that had previously been written down and liabilities that were ultimately discharged in amounts less than accrued.



Computer Products Division



The Company exited the Computer Products (CP) business through a
sale of identified assets of the division that was completed on October 27, 2003. Accordingly, the results of this division have been reported as



F-14



---

##### Table of Contents

REPTRON ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31,
2004, 2003 and 2002



a discontinued operation for all periods presented. Revenue for the CP division was $45.6 million, $24.9 million, and $0 for the years 2002, 2003, and 2004,
respectively. The CP divisions loss from operations before income taxes was $5.1 million in 2003 compared to income from operations before income taxes of $1.6 million in 2002. Included in the pre-tax operations in 2002 and 2003 is interest
expense of $0.7 million and $0.3 million, respectively, that was allocated to the CP division. The basis for this allocation considered interest expense which can reasonably be expected to be avoided through the proceeds from the sales of assets
held for sale, and subsequent payment on the working capital credit facility.



NOTE DSTATEMENTS OF CASH FLOWS



Supplemental disclosures of cash flow information (in thousands):



|                                                                                               |  |                                                      |                               |      |                     |                        |      |   |  |   |         |   |  |   |         |  
|---------------------------------------------------------------------------------------------- |  | ---------------------------------------------------- | ----------------------------- | ---- | ------------------- | ---------------------- | ---- | - |  | - | ------- | - |  | - | ------- | -
|                                                                                               |  | ReorganizedCompanyEleven MonthsEndedDecember 31,2004 |                               |      | Predecessor Company |                       
|                                                                                               |  |                                                      | One MonthEndedJanuary 31,2004 |      |                     | Year EndedDecember 31, |     
|                                                                                               |  |                                                      |                               | 2003 |                     |                        | 2002 |  
|Cash paid for:                                                                                 |  |                                                      |                               |      |                     |                        |      |   |  |   |         |   |  |   |         |  
|Interest                                                                                       |  | $                                                    | 1,625                         |      |                     | $                      | 61   |   |  | $ | 1,990   |   |  | $ | 8,211   |  
|Income taxes (refunded)                                                                        |  | $                                                    |                              |      |                     | $                      |     |   |  | $ |        |   |  | $ | (7,002  | )
|                                                                                               |  |                                                      |                               |     
|Supplemental disclosures of cash flow information from discontinued operations (in thousands): |  |                                                      |                               |      |                     |                        |      |   |  |   |         |   |  |   |         |  
|                                                                                               |  |                                                      |                               |     
|Net earnings (loss) from discontinued operations                                               |  | $                                                    | 424                           |      |                     | $                      | (314 | ) |  | $ | (24,348 | ) |  | $ | (14,088 | )
|Depreciation and amortization                                                                  |  |                                                      |                              |      |                     |                        |     |   |  |   | 301     |   |  |   | 919     |  
|Goodwill impairment                                                                            |  |                                                      |                              |      |                     |                        |     |   |  |   | 3,294   |   |  |   |        |  
|Fixed asset impairment                                                                         |  |                                                      |                              |      |                     |                        |     |   |  |   | 1,800   |   |  |   |        |  
|Fixed asset purchases                                                                          |  |                                                      |                              |      |                     |                        |     |   |  |   |        |   |  |   | (69     | )
|Reduction in inventories, including LCM adjustment and sale to buyer                           |  |                                                      |                              |      |                     |                        |     |   |  |   | 27,201  |   |  |   | 15,910  |  
|Reduction in accounts receivable                                                               |  |                                                      | 132                           |      |                     |                        | (132 | ) |  |   | 20,856  |   |  |   | 3,462   |  
|Prepaid expenses and other current assets                                                      |  |                                                      | 799                           |      |                     |                        | 709  |   |  |   | (701    | ) |  |   | (485    | )
|Other assets                                                                                   |  |                                                      | 5                             |      |                     |                        | 1    |   |  |   | 270     |   |  |   | (166    | )
|Reduction in accounts payable, including accounts assumed by the buyer                         |  |                                                      | (1,561                        | )    |                     |                        | (7   | ) |  |   | (7,310  | ) |  |   | (4,485  | )
|Accrued expenses                                                                               |  |                                                      | (452                          | )    |                     |                        | (649 | ) |  |   | (2,133  | ) |  |   | 580     |  
|                                                                                               |  |                                                      |                               |      |                     |                        |      |   |  |   |         |   |  |   |         |  
|Net cash provided by (used in) discontinued operations                                         |  | $                                                    | (653                          | )    |                     | $                      | (392 | ) |  | $ | 19,230  |   |  | $ | 1,578   |  
|                                                                                               |  |                                                      |                               |      |                     |                        |      |   |  |   |         |   |  |   |         |  



Reptron incurred
approximately $0, $0, and $187,000 of obligations under capital leases for the acquisition of equipment during 2004, 2003, and 2002, respectively.



F-15



---

##### Table of Contents

REPTRON ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31,
2004, 2003 and 2002



NOTE EINVENTORIES



Inventories consist of the following (in thousands):



|                                               |  |                                    |        |   |                                    |   |        |  
|---------------------------------------------- |  | ---------------------------------- | ------ | - | ---------------------------------- | - | ------ | -
|                                               |  | ReorganizedCompanyDecember 31,2004 |        |   | PredecessorCompanyDecember 31,2003 |  
|Raw materials                                  |  | $                                  | 13,324 |   |                                    | $ | 12,802 |  
|Work in process                                |  |                                    | 4,799  |   |                                    |   | 6,612  |  
|Finished goods                                 |  |                                    | 2,349  |   |                                    |   | 1,836  |  
|                                               |  |                                    |        |   |                                    |   |        |  
|                                               |  |                                    | 20,472 |   |                                    |   | 21,250 |  
|Less reserve for excess and obsolete inventory |  |                                    | (698   | ) |                                    |   | (1,704 | )
|                                               |  |                                    |        |   |                                    |   |        |  
|                                               |  | $                                  | 19,774 |   |                                    | $ | 19,546 |  
|                                               |  |                                    |        |   |                                    |   |        |  



The Company recorded
expenses of $0.2 and $0.7 million, included in cost of goods sold, to writedown inventories to the lower of cost or market during the fourth quarter of 2004 and 2003, respectively. The 2004 writedown was necessitated by excess labor costs due to
start-up activities associated with a new customer. The 2003 writedown was necessitated by excess components due to significant reductions in customer demands.



NOTE FPROPERTY, PLANT AND EQUIPMENT



Property, plant and equipment consist of the following (in thousands):



|                                               |  |                                    |        |   |                                    |   |         |  
|---------------------------------------------- |  | ---------------------------------- | ------ | - | ---------------------------------- | - | ------- | -
|                                               |  | ReorganizedCompanyDecember 31,2004 |        |   | PredecessorCompanyDecember 31,2003 |  
|Land and buildings                             |  | $                                  | 11,482 |   |                                    | $ | 12,681  |  
|Furniture, fixtures and equipment              |  |                                    | 13,900 |   |                                    |   | 47,665  |  
|Leashold improvements                          |  |                                    | 471    |   |                                    |   | 4,900   |  
|                                               |  |                                    |        |   |                                    |   |         |  
|                                               |  |                                    | 25,853 |   |                                    |   | 65,246  |  
|Less accumulated depreciation and amortization |  |                                    | (4,083 | ) |                                    |   | (45,148 | )
|                                               |  |                                    |        |   |                                    |   |         |  
|                                               |  | $                                  | 21,770 |   |                                    | $ | 20,098  |  
|                                               |  |                                    |        |   |                                    |   |         |  



NOTE
GNOTE PAYABLE TO BANK



The Company has a revolving
credit facility with Congress Financial Corporation that provides up to $25 million (the Credit Agreement) to fund the Companys operations through February 2007. The Credit Agreement contains certain covenants including a minimum
quarterly measure of earnings before interest, taxes, depreciation and amortization (EBITDA) as defined by the Credit Agreement. The Company was in compliance with the covenants contained in the Credit Agreement as of December 31, 2004.
The interest rate on the credit facility is based on the lenders prime rate plus one percent. The Credit Agreement is collateralized by substantially all of the Companys assets. This credit facility, together with the Companys
available cash reserves and cash provided by operations, is expected to provide sufficient liquidity for the Company to pay for goods and services within standard terms. Under the advance rates contained in the Credit Agreement, there was
approximately $6.9 million of unused available credit on December 31, 2004. Amounts outstanding under the Credit Agreement were approximately $10.4 million as of December 31, 2004.



F-16



---

##### Table of Contents

REPTRON ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31,
2004, 2003 and 2002



NOTE HLONG-TERM NOTES PAYABLE



Long-term obligations consist of the following (in thousands):



|                                                                                                                                                                               |  |                                    |        |   |                                    |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---------------------------------- | ------ | - | ---------------------------------- | - | ------- | -
|                                                                                                                                                                               |  | ReorganizedCompanyDecember 31,2004 |        |   | PredecessorCompanyDecember 31,2003 |  
|Senior Secured Notes due 2009, with semi-annual interest installments at a rate of 7.0% through February 2006, and 8.0%
thereafter                                             |  | $                                  | 30,000 |   |                                    | $ |        |  
|                                                                                                                                                                               |  |                                   
|Convertible Subordinated Notes due 2004, with semi-annual interest installments at a rate of 6.75%                                                                             |  |                                    |       |   |                                    |   | 76,315  |  
|                                                                                                                                                                               |  |                                   
|Notes payable collateralized by the Tampa manufacturing facility, due in monthly principal and interest installments of $39.6, through March
2015, at an interest rate of 8.6% |  |                                    | 3,215  |   |                                    |   | 3,405   |  
|                                                                                                                                                                               |  |                                   
|Others                                                                                                                                                                         |  |                                    | 526    |   |                                    |   | 702     |  
|                                                                                                                                                                               |  |                                    |        |   |                                    |   |         |  
|                                                                                                                                                                               |  |                                    | 33,741 |   |                                    |   | 80,422  |  
|                                                                                                                                                                               |  |                                   
|Less amount included with liabilities subject to compromise                                                                                                                    |  |                                    |       |   |                                    |   | (76,315 | )
|                                                                                                                                                                               |  |                                   
|Less current maturities                                                                                                                                                        |  |                                    | (380   | ) |                                    |   | (437    | )
|                                                                                                                                                                               |  |                                    |        |   |                                    |   |         |  
|                                                                                                                                                                               |  | $                                  | 33,361 |   |                                    | $ | 3,670   |  
|                                                                                                                                                                               |  |                                    |        |   |                                    |   |         |  



The $76.3 million
63/4% Convertible Subordinated Notes (the Convertible Notes) outstanding as of December 31, 2003
were to pay interest semi-annually on February 1 and August 1. The holders of the Convertible Notes had the right to convert any portion of the principal amount of the outstanding Convertible Notes, at the date of conversion, into shares of common
stock at any time prior to the close of business on August 1, 2004, at a conversion rate of 35.0877 shares of common stock per $1,000 principal amount of the Convertible Notes (equivalent to a conversion price of approximately $28.50 per share).
There was no requirement that the holders of the Convertible Notes convert on or before August 1, 2004. Additionally, the Company had the right to require the redemption of the Convertible Notes under certain circumstances.



The Company failed to make the February 1, 2003 interest payment due to
holders of the Convertible Notes. Because Reptron was unable to cure this default on or before March 5, 2003, under identified conditions described in the Notes and under that certain Trust Indenture between Reptron and Reliance Trust Company (whose
successor in interest is US Bank), dated August 5, 1997 pursuant to which the Notes were issued, the outstanding principal indebtedness of the Convertible Notes could have been accelerated and become immediately due and payable.



On October 28, 2003, the Company filed a voluntary petition for
reorganization under Chapter 11 of the United States Bankruptcy Code to implement a pre-negotiated plan to restructure the Convertible Notes. Under the plan of reorganization, the existing Convertible Notes along with all related accrued and unpaid
interest, were exchanged for new notes with a total principal balance of $30 million. The term of the new notes is five years and carries a seven percent annual interest rate during the first two years and an eight percent annual interest rate
during the remaining three years. The new notes are secured by a second security position, behind the security position on the Credit Agreement, in all assets of the Company. The noteholders also received ninety-five percent of the Companys
new common shares outstanding. The Bankruptcy Court confirmed the pre-negotiated plan of reorganization on January 14, 2004 and the Plan became effective on February 3, 2004.



F-17



---

##### Table of Contents

REPTRON ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31,
2004, 2003 and 2002



At December 31, 2004, aggregate maturities of long-term obligations, excluding the Credit Agreement,
are as follows (in thousands):



|                         |  |   |       
|------------------------ |  | - | ------
|Year ending December 31, |  |  
|2005                     |  | $ | 380   
|2006                     |  |   | 332   
|2007                     |  |   | 487   
|2008                     |  |   | 266   
|2009                     |  |   | 30,206
|Thereafter               |  |   | 2,070 
|                         |  |   |       
|                         |  | $ | 33,741
|                         |  |   |       



At December 31, 2004,
the net book value of equipment under capital leases is approximately $0. The related capital lease obligations are included with long-term obligations.



Interest payable was $1,225,000 and $6,439,000 at December 31, 2004 and 2003, respectively. Interest payable at December 31, 2004 consists primarily of
accrued interest on the Senior Secured Notes which have interest payment dates of January 1 and July 1. Interest payable at December 31, 2003 consists primarily of accrued interest on the Convertible Notes which have interest payment dates of
February 1 and August 1. The interest payment had not been made on these notes since August 1, 2002. Interest due as of December 31, 2003 was exchanged for a combination of new notes and new common stock in accordance with the Companys plan of
reorganization that was effective on February 3, 2004.



NOTE IINCOME TAXES



The income tax provision
(benefit) for the eleven months ended December 31, 2004, the one month ended January 31, 2004, and the years ended December 31, 2003 and 2002, respectively, is as follows (in thousands):



|         |  |                                                      |                               |      |                     |                        |     |   |  |   |   |  |   |        |  
|-------- |  | ---------------------------------------------------- | ----------------------------- | ---- | ------------------- | ---------------------- | --- | - |  | - | - |  | - | ------ | -
|         |  | ReorganizedCompanyEleven MonthsEndedDecember 31,2004 |                               |      | Predecessor Company |                       
|         |  |                                                      | One MonthEndedJanuary 31,2004 |      |                     | Year EndedDecember 31, |    
|         |  |                                                      |                               | 2003 |                     | 2002                   |    
|Current  |  | $                                                    | 59                            |      |                     | $                      | (22 | ) |  | $ |  |  | $ | 1,102  |  
|Deferred |  |                                                      | (59                           | )    |                     |                        | 606 |   |  |   |  |  |   | (1,102 | )
|         |  |                                                      |                               |      |                     |                        |     |   |  |   |   |  |   |        |  
|         |  | $                                                    |                              |      |                     | $                      | 584 |   |  | $ |  |  | $ |       |  
|         |  |                                                      |                               |      |                     |                        |     |   |  |   |   |  |   |        |  



Reptrons
effective tax rate differs from the statutory U. S. federal income tax rate as a result of the following:



|                                                                                     |  |                                                      |                               |      |                     |                        |      |       |   |  |       |  
|------------------------------------------------------------------------------------ |  | ---------------------------------------------------- | ----------------------------- | ---- | ------------------- | ---------------------- | ---- | ----- | - |  | ----- | -
|                                                                                     |  | ReorganizedCompanyEleven MonthsEndedDecember 31,2004 |                               |      | Predecessor Company |                       
|                                                                                     |  |                                                      | One MonthEndedJanuary 31,2004 |      |                     | Year EndedDecember 31, |     
|                                                                                     |  |                                                      |                               | 2003 |                     |                        | 2002 |      
|Statutory federal tax rate                                                           |  | 34.0                                                 | %                             |      | 34.0                | %                      |      | 34.0  | % |  | 34.0  | %
|State income taxes of approximately 7.4% for all periods, net of federal tax benefit |  | 5.0                                                  |                               |      | 5.0                 |                        |      | 5.0   |   |  | 5.0   |  
|Meals and entertainment                                                              |  | (1.0                                                 | )                             |      | 0.0                 |                        |      | 0.0   |   |  | (0.4  | )
|Reorganization expenses                                                              |  | (2.0                                                 | )                             |      | 19.0                |                        |      | 0.0   |   |  | 0.0   |  
|Other                                                                                |  | 0.0                                                  |                               |      | 0.0                 |                        |      | 0.0   |   |  | 0.0   |  
|Deferred tax valuation allowance                                                     |  | (36.0                                                | )                             |      | (20.0               | )                      |      | (39.0 | ) |  | (38.6 | )
|                                                                                     |  |                                                      |                               |      |                     |                        |      |       |   |  |       |  
|Effective tax rate                                                                   |  | 0.0                                                  | %                             |      | 38.0                | %                      |      | 0.0   | % |  | 0.0   | %
|                                                                                     |  |                                                      |                               |      |                     |                        |      |       |   |  |       |  



F-18



---

##### Table of Contents

REPTRON ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31,
2004, 2003 and 2002



Deferred income tax assets and liabilities resulting from differences between accounting for
financial statement purposes and tax purposes pursuant to SFAS No. 109, are summarized as follows (in thousands):



|                                      |  |                                    |         |   |                                    |   |         |  
|------------------------------------- |  | ---------------------------------- | ------- | - | ---------------------------------- | - | ------- | -
|                                      |  | ReorganizedCompanyDecember 31,2004 |         |   | PredecessorCompanyDecember 31,2003 |  
|Deferred tax assets                   |  |                                    |         |   |                                    |   |         |  
|Net operating loss carryforward       |  | $                                  | 24,701  |   |                                    | $ | 25,332  |  
|AMT and other tax credit carryforward |  |                                    | 200     |   |                                    |   | 200     |  
|Inventory reserves                    |  |                                    | 280     |   |                                    |   | 682     |  
|Accrued expenses                      |  |                                    |        |   |                                    |   | 276     |  
|Accrued vacation                      |  |                                    | 166     |   |                                    |   | 165     |  
|Allowance for bad debts               |  |                                    | 15      |   |                                    |   | 381     |  
|Goodwill                              |  |                                    | 2,348   |   |                                    |   | 3,374   |  
|Other                                 |  |                                    | 3       |   |                                    |   |        |  
|                                      |  |                                    |         |   |                                    |   |         |  
|                                      |  |                                    | 27,713  |   |                                    |   | 30,410  |  
|                                      |  |                                    |         |   |                                    |   |         |  
|Deferred tax liabilities              |  |                                    |         |   |                                    |   |         |  
|Depreciation                          |  |                                    | 697     |   |                                    |   | 533     |  
|Other intangible assets               |  |                                    | 1,542   |   |                                    |   |        |  
|                                      |  |                                    |         |   |                                    |   |         |  
|                                      |  |                                    | 2,239   |   |                                    |   | 533     |  
|                                      |  |                                    |         |   |                                    |   |         |  
|Net deferred tax asset (liability)    |  |                                    | 25,474  |   |                                    |   | 29,877  |  
|Less: valuation allowance             |  |                                    | (23,572 | ) |                                    |   | (27,428 | )
|                                      |  |                                    |         |   |                                    |   |         |  
|                                      |  | $                                  | 1,902   |   |                                    | $ | 2,449   |  
|                                      |  |                                    |         |   |                                    |   |         |  



Reptron has net
operating loss carryforwards of approximately $63.8 million for Federal and $78.1 million for state income tax purposes, which expire in the years 2018 through 2023. Realization of the tax loss and credit carryforwards is contingent upon future
taxable earnings in the appropriate jurisdictions. Valuation allowances have been recorded in 2002, 2003, and 2004 for deferred tax assets which may not be realized. Each carryforward item is reviewed for expected utilization, using a more
likely than not approach, based on the character of the carryforward item (credit, loss, etc.), the associated taxing jurisdiction (federal or state), the relevant history for the particular item, the applicable expiration dates, and
identified actions under the control of the Company in realizing the associated carryforward benefits. The Company assesses the available positive and negative evidence surrounding the recoverability of the deferred tax assets, including estimated
taxable income for a limited forecast period of one to two years, and applies its judgement in estimating the amount of valuation allowance necessary under the circumstances. The Company continues to assess and evaluate strategies that will enable
the carryforward, or a greater portion thereof, to be utilized, and will reduce the valuation allowance appropriately for each item at such time when it is determined that the more likely than not criterion is satisfied. To the extent
that deferred tax assets are realized in excess of those recorded, net of the valuation allowance, goodwill will be reduced and no tax benefit will be recognized in those periods.



The Companys plan of reorganization (see Note A) may also significantly reduce the amount of net operating loss
carryforwards that are available to offset future taxable income or limit the amount of losses that can be utilized in each year.



F-19



---

##### Table of Contents

REPTRON ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31,
2004, 2003 and 2002



NOTE JCOMMITMENTS AND CONTINGENCIES



Operating Leases



Reptron has operating leases for facilities and certain machinery and equipment which expire at various dates through 2008.
Certain leases provide for payment by Reptron of any increases in property taxes and insurance over a base amount and others provide for payment of all property taxes and insurance by Reptron. See Note M for leases with related parties.



Future minimum payments, by year and in the aggregate, under
noncancellable operating leases consist of the following at December 31, 2004 (in thousands):



|                         |  |   |    
|------------------------ |  | - | ---
|Year ending December 31, |  |  
|2005                     |  | $ | 921
|2006                     |  |   | 911
|2007                     |  |   | 919
|2008                     |  |   | 421
|2009                     |  |   |   
|Thereafter               |  |   |   



Total rent expense for
the eleven months ended December 31, 2004 and the one month ended January 31, 2004 was approximately $1,127,000 and $100,000, respectively. Total rent expense for the years ended December 31, 2003 and 2002 was approximately, $1,821,000, and
$2,810,000, respectively, including rent expenses included in loss from discontinued operations.



The Company does not have any variable interests in variable interest entities as defined by FIN 46R, Consolidation of Variable Interest Entities.



Litigation



Reptron was one of ninety-one defendants in a patent infringement action
commenced by the Lemelson Medical, Education & Research Foundation, Limited Partnership (Lemelson). Lemelson alleged that Reptron and the other co-defendants have infringed various patents that purportedly cover the use of
machine vision and bar code scanning equipment. Lemelson has asserted similar claims against other companies in Reptrons industry, as well as against companies in other industries. However, the Lemelson claim against
the Company was stricken by the Bankruptcy Court.



Reptron is,
from time to time, involved in litigation relating to claims arising out of its operations in the ordinary course of business. Reptron believes that none of these claims, which were outstanding as of December 31, 2004, should have a material adverse
impact on its financial condition or results of operations.



Indemnifications



The Company indemnified its
officers and directors against costs and expenses related to shareholder and other claims (i.e., only actions taken in their capacity as officers and directors) that are not covered by the Companys directors and officers insurance policy. This
indemnification is ongoing and does not include a limit on the maximum potential future payments, nor are there any recourse provisions or collateral that may offset the cost. As of December 31, 2004, the Company has not recorded a liability for any
obligations arising as a result of these indemnifications.



F-20



---

##### Table of Contents

REPTRON ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31,
2004, 2003 and 2002



Restructuring



The Company recognized restructuring costs of approximately $1,246,000 during the fourth quarter of 2002 primarily for ECD employee separation and
facility consolidation costs. Substantially all of these costs were paid during 2003 and the remainder were paid in February 2004.



NOTE KSHAREHOLDERS EQUITY



The Board of Directors is authorized, without further shareholder action, to divide any or all shares of the authorized Preferred Stock into series and to
fix and determine the designations, preferences, relative rights, qualifications, limitations or restrictions thereon, of any series so established, including voting powers, dividend rights, liquidation preferences, redemption rights and conversion
privileges. The Board of Directors has not authorized any issuance of Preferred Stock and there are no plans, agreements, or understandings for the authorization or issuance of any shares of Preferred Stock. As a result of the Plan of
reorganization, there is no Preferred Stock outstanding following the effective date of the Plan. The Company is restricted from paying dividends by the terms of its notes payable.



NOTE LEMPLOYEE BENEFITS



Stock Option Plans



Prior to the effective date of the Plan of Reorganization of February 3, 2004, the Company provided for three stock option plans (the Old Stock
Option Plans), which plans were terminated in February 2004. Reptrons Incentive Stock Option Plan (the ISO Plan) was adopted in November, 1993 and provided for the grant to employees of incentive stock options within the
meaning of Section 422 of the Internal Revenue Code. A total of 2,000,000 shares of Common Stock was reserved for issuance under the ISO Plan. In May 2001, Reptrons shareholders approved the establishment of the Reptron 2002 Incentive Stock
Option Plan (the 2002 Plan). The 2002 Plan had essentially the same terms and conditions and was administered identically to the ISO Plan. A total of 1,000,000 shares of Common Stock had been reserved for issuance under the 2002 Plan.
Reptron also offered a Directors Stock Option Plan (the DSO Plan) that had a total of 450,000 shares of Common Stock reserved for issuance under this plan. Both the ISO Plan and DSO Plan were intended to provide incentives to
directors, officers, and other key employees and to enhance Reptrons ability to attract and retain qualified employees. Stock options were granted for the purchase of Common Stock at a price not less than the fair market value on the date of
grant.



The Plan of Reorganization provides for the adoption of
a new stock option plan (New Stock Option Plan or New Plan) whereby up to 10% of the Companys new common stock may be issued in connection with options granted under the New Plan. The New Plan was adopted in February
2004 as the Reptron Electronics, Inc. Stock Option Plan and provides for the issuance of options to purchase up to 500,000 shares of the Companys common stock. As of December 31, 2004, a total of 441,666 options has been granted under the New
Plan.



F-21



---

##### Table of Contents

REPTRON ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31,
2004, 2003 and 2002



The following table summarizes the activity in the Old Stock Option Plans subject to options for the
three years ended December 31, 2003, the one month ending January 31, 2004 and the New Stock Option Plan for the eleven months ending December 31, 2004:



|                                 |  |           |   |  |                        |               |                              |   |      
|-------------------------------- |  | --------- | - |  | ---------------------- | ------------- | ---------------------------- | - | -----
|                                 |  | Shares    |   |  | Range ofExercise Price |               | WeightedAverageExercisePrice
|Outstanding at December 31, 2001 |  | 1,425,431 |   |  | $                      | 2.94  15.97  |                              | $ | 6.63 
|Granted                          |  | 42,250    |   |  | $                      | 3.15    3.15 |                              | $ | 3.15 
|Exercised                        |  | (20,000   | ) |  | $                      | 3.19    3.19 |                              | $ | 3.19 
|Forfeited                        |  | (320,243  | ) |  | $                      | 3.15  15.97  |                              | $ | 7.11 
|                                 |  |           |   |  |                        |               |                              |   |      
|Outstanding at December 31, 2002 |  | 1,127,438 |   |  | $                      | 2.94  13.48  |                              | $ | 6.42 
|Granted                          |  |          |   |  | $                      | 0.00    0.00 |                              | $ | 0.00 
|Exercised                        |  |          |   |  | $                      | 0.00    0.00 |                              | $ | 0.00 
|Forfeited                        |  | (227,863  | ) |  | $                      | 2.94    8.81 |                              | $ | 6.46 
|                                 |  |           |   |  |                        |               |                              |   |      
|Outstanding at December 31, 2003 |  | 899,575   |   |  | $                      | 3.15  13.48  |                              | $ | 6.42 
|Granted                          |  |          |   |  | $                      | 0.00    0.00 |                              | $ | 0.00 
|Exercised                        |  |          |   |  | $                      | 0.00    0.00 |                              | $ | 0.00 
|Canceled                         |  | (899,575  | ) |  | $                      | 3.15  13.48  |                              | $ | 6.46 
|                                 |  |           |   |  |                        |               |                              |   |      
|Outstanding at January 31, 2004  |  |          |   |  | $                      | 0.00    0.00 |                              | $ | 0.00 
|                                 |  |           |   |  |                        |               |                              |   |      
|Outstanding at February 1, 2004  |  |          |   |  | $                      | 0.00    0.00 |                              | $ | 0.00 
|Granted                          |  | 441,666   |   |  | $                      | 7.50  10.38  |                              | $ | 10.05
|Exercised                        |  |          |   |  | $                      | 0.00    0.00 |                              | $ | 0.00 
|Forfeited                        |  |          |   |  | $                      | 0.00    0.00 |                              | $ | 0.00 
|                                 |  |           |   |  |                        |               |                              |   |      
|Outstanding at December 31, 2004 |  | 441,666   |   |  | $                      | 7.50  10.38  |                              | $ | 10.05
|                                 |  |           |   |  |                        |               |                              |   |      



The following table
summarizes information about Common Stock options outstanding at December 31, 2004:



|                    |  |                              |  |                                           |  |                                |       |                              |   |                                |    
|------------------- |  | ---------------------------- |  | ----------------------------------------- |  | ------------------------------ | ----- | ---------------------------- | - | ------------------------------ | ---
|Options Outstanding |  | Options Exercisable         
|Exercise Prices     |  | NumberOutstanding at12/31/04 |  | Weighted AverageRemainingContractual Life |  | Weighted AverageExercise Price |       | NumberExercisable at12/31/04 |   | Weighted AverageExercise Price
|                    |  |                              |  | (In Years)                                |  |                                |       |                              |   |                               
|$ 7.50              |  | 50,000                       |  | 9.9                                       |  | $                              | 7.50  |                              |  |                                | N/A
|$10.38              |  | 391,666                      |  | 9.8                                       |  | $                              | 10.38 |                              |  |                                | N/A
|                    |  |                              |  |                                           |  |                                |       |                              |   |                                |    
|                    |  | 441,666                      |  | 9.8                                       |  | $                              | 10.05 |                              |  |                                | N/A
|                    |  |                              |  |                                           |  |                                |       |                              |   |                                |    



The duration of
options granted under the ISO Plan is ten years from the date of grant, or such other date as determined by the Board of Directors. In general, the options must be exercised while employed by Reptron or 30 days thereafter. The options generally vest
in three equal annual increments, cumulatively, beginning one year after the date of grant, and all such options may be exercised in full three years after the date of grant. The options are non-transferable other than by will or by the laws of
descent and distribution.



The fair value of each option grant
is estimated on the date of grant using the Binomial options pricing model with the following weighted average assumptions used for grants in 2004 and 2002 (no options were



F-22



---

##### Table of Contents

REPTRON ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31,
2004, 2003 and 2002



granted in 2003), respectively, no dividend yields for all years; expected volatility of approximately 45.0% and 100.0%; risk free interest rates of
approximately 4.75% and 5.0%; and expected lives of 5.75 and 4.5 years. The weighted average fair value of options granted in 2004 and 2002 are $3.41 and $2.31, respectively.



401(k) Plans



In 1993, Reptron established a deferred compensation plan (the Plan) under section 401(a) of the Code. Substantially all of the officers and
employees of Reptron are eligible to participate in the Plan. Employees are eligible to participate in the Plan after ninety days of service and after attaining age 18. At its discretion, Reptron may make matching contributions to the Plan.
Employees are always vested in their contributions and are fully vested in the employer contributions after five years of service. Reptron contributed approximately $0, $0 and $216,000 to the Plan in 2004, 2003 and 2002, respectively.



NOTE MRELATED PARTY TRANSACTIONS



A former director of Reptron served as its general counsel through the
effective date of the Plan of Reorganization and received approximately $72,000 for services rendered through January 2004, and $333,000 and $218,000 for services rendered during 2003 and 2002, respectively.



Reptron leased one of its distribution sales offices (Detroit, Michigan) from
the former CEO of Reptron. The building includes office and warehouse space and totals approximately 10,000 square feet. Rent expenses on this facility totaled $72,000 in 2002 and $12,000 in 2003. The lease was terminated in February 2003. Reptron
also leases a total of 127,000 square feet of manufacturing and administrative offices for the Hibbing, Minnesota manufacturing operation. These properties are owned, in part, by four individuals on the Companys senior management team. Rent
expense on these properties totaled approximately $49,000 for the one month ended January 31, 2004 and approximately $536,000 for the eleven months ended December 31, 2004 and approximately $585,000, and $562,000 for the years ended December 31,
2003, and 2002, respectively. In the first quarter of 2005, one of the related party leases on a building in Hibbing, Minnesota was terminated.



During 1999, Reptrons CEO beneficially acquired a portion of Reptrons convertible subordinated 6.75% notes with a face value of $8.0 million.
Contractual interest on these notes was approximately $540,000 in 2003 and 2002. Also in 1999, Reptrons President and COO beneficially acquired a portion of Reptrons convertible subordinated 6.75% notes with a face value of $117,000.
Interest on these notes was approximately $8,000 in 2003 and 2002. These parties sold their interests in these notes in January 2004.



The Company occasionally leased an airplane from a company controlled by Reptrons CEO as of December 31, 2003. The lease was based on a per hour use
charge. Payments for the use of the airplane were $0, $5,000 and $120,000 during 2004, 2003, and 2002, respectively.



Reptron purchased approximately $1,014,000 and $904,000 of inventory during 2004 and 2003, respectively, from a company controlled by the children of a
Reptron board member.



During the eleven months ended December
31, 2004, the Company paid approximately $134,000 to a consultant who is a family member of a member of Reptrons Board of Directors.



NOTE NFAIR VALUE OF FINANCIAL INSTRUMENTS



At December 31, 2004, the carrying amount of cash, accounts receivable, accounts payable and accrued expenses approximate fair value because of the
short-term maturities of these items.



The fair market value of
Reptrons Senior Secured Notes was approximately $27,450,000, based on the average prices of the notes from various pricing sources on December 31, 2004. The fair market value of



F-23



---

##### Table of Contents

REPTRON ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31,
2004, 2003 and 2002



Reptrons convertible subordinated 6.75% notes was approximately $7,822,000 and $76,315,000, based on the average prices of the notes from various
pricing sources on December 31, 2002 and 2003, respectively. The carrying amounts of all other current and long-term portions of notes payable, and long-term obligations approximate fair market value since the interest rates on most of these
instruments change with market interest rates.



NOTE OEARNINGS (LOSS) FROM CONTINUING OPERATIONS PER SHARE



The following table sets forth the computation of basic and diluted earnings (loss) from continuing operations per common share:



|                                               |  |                                                         |                                |      |                         |   |           |  |   |           |   |  |   |           |  
|---------------------------------------------- |  | ------------------------------------------------------- | ------------------------------ | ---- | ----------------------- | - | --------- |  | - | --------- | - |  | - | --------- | -
|                                               |  | ReorganizedCompany Eleven MonthsEnded December 31, 2004 |                                |      | Predecessor Company     |  
|                                               |  |                                                         | One MonthEnded January 31,2004 |      | Year Ended December 31, |  
|                                               |  |                                                         |                                | 2003 |                         |   | 2002      | 
|Numerator:                                     |  |                                                         |                                |      |                         |   |           |  |   |           |   |  |   |           |  
|Net earnings (loss) from continuing operations |  | $                                                       | (2,113                         | )    |                         | $ | 1,268     |  | $ | (16,734   | ) |  | $ | (12,119   | )
|                                               |  |                                                         |                                |      |                         |   |           |  |   |           |   |  |   |           |  
|Denominator:                                   |  |                                                         |                                |      |                         |   |           |  |   |           |   |  |   |           |  
|For basic earnings (loss) per share           |  |                                                         |                                |      |                         |   |           |  |   |           |   |  |   |           |  
|Weighted average shares                        |  |                                                         | 5,000,000                      |      |                         |   | 6,417,196 |  |   | 6,417,196 |   |  |   | 6,416,319 |  
|                                               |  |                                                         |                                |     
|Effect of dilutive securities:                 |  |                                                         |                                |      |                         |   |           |  |   |           |   |  |   |           |  
|Employee stock options                         |  |                                                         |                               |      |                         |   |          |  |   |          |   |  |   |          |  
|                                               |  |                                                         |                                |      |                         |   |           |  |   |           |   |  |   |           |  
|For diluted earnings (loss) per share          |  |                                                         | 5,000,000                      |      |                         |   | 6,417,196 |  |   | 6,417,196 |   |  |   | 6,416,319 |  
|                                               |  |                                                         |                                |      |                         |   |           |  |   |           |   |  |   |           |  
|Net earnings (loss) per common sharebasic     |  | $                                                       | (0.42                          | )    |                         | $ | 0.20      |  | $ | (2.61     | ) |  | $ | (1.89     | )
|                                               |  |                                                         |                                |      |                         |   |           |  |   |           |   |  |   |           |  
|Net earnings (loss) per common sharediluted   |  | $                                                       | (0.42                          | )    |                         | $ | 0.20      |  | $ | (2.61     | ) |  | $ | (1.89     | )
|                                               |  |                                                         |                                |      |                         |   |           |  |   |           |   |  |   |           |  



The pro forma shares
and pro forma loss from continuing operations is based on the 5,000,000 shares of New Common Stock issued following the effective date of the Plan of Reorganization.



All options have been excluded from the computation of diluted earnings per share for all periods presented because their
effect on earnings per share would be anti-dilutive.



The
Convertible Notes were not included in the computation of earnings per share for the year ended December 31, 2003 and 2002, and the one month period ended January 31, 2004 because the conversion price of $28.50 exceeded the average market price of
the common stock. Therefore, the effect would be anti-dilutive. The Convertible Notes were not included in the computation of earnings per share for the eleven month period ended December 31, 2004 because the notes were cancelled effective January
31, 2004.



F-24



---

##### Table of Contents

REPTRON ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31,
2004, 2003 and 2002



NOTE PSUPPLEMENTAL SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)



The following is a summary of the quarterly results of operations for the
quarterly periods of 2004 and 2003, (in thousands, except per share data):



|                                  |  |                    |         |   |         |   |        |              |  |   |             |   |  |   |         |  
|--------------------------------- |  | ------------------ | ------- | - | ------- | - | ------ | ------------ |  | - | ----------- | - |  | - | ------- | -
|                                  |  | Three Months Ended |        
|                                  |  | March 31(1)        |         |   | June 30 |   |        | September 30 |  |   | December 31 |  
|2004                              |  |                    |         |   |         |   |        |              |  |   |             |   |  |   |         |  
|                                  |  |                    |         |  
|Net sales                         |  | $                  | 35,555  |   |         | $ | 35,590 |              |  | $ | 34,378      |   |  | $ | 36,075  |  
|Gross profit                      |  | $                  | 3,531   |   |         | $ | 4,497  |              |  | $ | 4,765       |   |  | $ | 3,691   |  
|Operating income (loss)           |  | $                  | (468    | ) |         | $ | 547    |              |  | $ | 655         |   |  | $ | (455    | )
|Net earnings (loss)               |  | $                  | 587     |   |         | $ | (147   | )            |  | $ | (45         | ) |  | $ | (1,130  | )
|Net loss per common sharebasic   |  | $                  | 0.12    |   |         | $ | (0.03  | )            |  | $ | (0.01       | ) |  | $ | (0.23   | )
|Net loss per common sharediluted |  | $                  | 0.12    |   |         | $ | (0.03  | )            |  | $ | (0.01       | ) |  | $ | (0.23   | )
|                                  |  |                    |         |  
|2003                              |  |                    |         |   |         |   |        |              |  |   |             |   |  |   |         |  
|                                  |  |                    |         |  
|Net sales                         |  | $                  | 34,524  |   |         | $ | 39,681 |              |  | $ | 38,963      |   |  | $ | 36,899  |  
|Gross profit                      |  | $                  | 4,301   |   |         | $ | 5,452  |              |  | $ | 5,250       |   |  | $ | 3,929   |  
|Operating income (loss)           |  | $                  | (644    | ) |         | $ | 929    |              |  | $ | 706         |   |  | $ | (8,187  | )
|Net loss                          |  | $                  | (19,616 | ) |         | $ | (2,015 | )            |  | $ | (4,074      | ) |  | $ | (15,377 | )
|Net loss per common sharebasic   |  | $                  | (3.06   | ) |         | $ | (0.31  | )            |  | $ | (0.63       | ) |  | $ | (2.41   | )
|Net loss per common sharediluted |  | $                  | (3.06   | ) |         | $ | (0.31  | )            |  | $ | (0.63       | ) |  | $ | (2.41   | )

---

|(1) | The financial information for the one month ended January 31, 2004 (Predecessor Company) and the two months ended March 31, 2004 (Reorganized Company) have been presented
together for comparative purposes.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-25



---

##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



Board of Directors and

Shareholders of Reptron Electronics, Inc.



We have audited in accordance with the standards of the Public Company Accounting Oversight Board (United States) the
financial statements of Reptron Electronics, Inc. referred to in our report dated February 11, 2005, which includes an emphasis paragraph for a plan of reorganization matter and which is included in Part II of this Annual Report on SEC Form 10-K.
Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The Schedule II listed in the index of the financial statements is presented for purposes of additional analysis and is not a required
part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.



/s/
GRANT THORNTON LLP



Tampa, Florida

February 11, 2005



F-26



---

##### Table of Contents

SCHEDULE II



REPTRON ELECTRONICS, INC.



Valuation and Qualifying Accounts

For the Years Ended December 31, 2002, 2003, and 2004

(in thousands)



|                                          |  |                            |       |                             |   |                         |  |   |                      |   |  |   |      
|----------------------------------------- |  | -------------------------- | ----- | --------------------------- | - | ----------------------- |  | - | -------------------- | - |  | - | -----
|Column A                                  |  | Column B                   |       | Column C                    |   | Column D                |  |   | Column E            
|Description                               |  | Balance atBeginningOf Year |       | Charged toCosts andExpenses |   | AccountsWritten Off,Net |  |   | Balance atEnd ofYear
|Allowance for Doubtful Accounts           |  |                            |       |                             |   |                         |  |   |                      |   |  |   |      
|Year Ended December 31, 2002              |  | $                          | 1,000 |                             | $ | 1,447                   |  | $ | (1,383               | ) |  | $ | 1,064
|Year Ended December 31, 2003              |  | $                          | 1,064 |                             | $ | 521                     |  | $ | (632                 | ) |  | $ | 953  
|One Month Ended January 31, 2004          |  | $                          | 953   |                             | $ | 38                      |  | $ | (103                 | ) |  | $ | 888  
|Eleven Months Ended December 31, 2004     |  | $                          | 888   |                             | $ |                        |  | $ | (851                 | ) |  | $ | 37   
|                                          |  |                            |       |                            
|Reserve for Excess and Obsolete Inventory |  |                            |       |                             |   |                         |  |   |                      |   |  |   |      
|Year Ended December 31, 2002 (a)          |  | $                          | 2,834 |                             | $ | 6,424                   |  | $ | (3,192               | ) |  | $ | 6,066
|Year Ended December 31, 2003 (a)          |  | $                          | 6,066 |                             | $ | 849                     |  | $ | (5,211               | ) |  | $ | 1,704
|One Month Ended January 31, 2004          |  | $                          | 1,704 |                             | $ | 28                      |  | $ |                     |   |  | $ | 1,732
|Eleven Months Ended December 31, 2004     |  | $                          | 1,732 |                             | $ | 163                     |  | $ | (1,197               | ) |  | $ | 698  

---

|(a) | Including amounts held for sale.
|--- | --------------------------------



F-27