**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**








**ANNUAL
      REPORT**


**ON
      FORM 10-K/A**


**AMENDMENT
      NO. 1**




Annual
      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934





**For
                the fiscal year ended**
              **February
                28, 2007**
            
            **Commission
                file number**
              **1-8798**





**NU
      HORIZONS ELECTRONICS CORP.**


(Exact
                name of registrant as specified in its charter)Delaware
            
            11-2621097(State
                of other jurisdiction of
              incorporation
                or organization
            
            (I.R.S.
                Employer
              Identification
                No.)70
                Maxess Road, Melville, New York
            
            11747(Address
                of principal executive offices)
            
            (Zip
                Code)





(631)
      396-5000


(Registrant’s
                telephone number, including area code)Securities
                registered pursuant to Section 12(g) of the
                Act:





Common
                Stock Par Value $.0066 Per Share
            
            NASDAQ
                National Market System


(Title
      of
      class)





Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act.


Yes
oNo
x





Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Act.


Yes
oNo
x





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
xNo
o





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 o





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act). (Check
      one)


Large
      accelerated filer o Accelerated
      filer x Non-accelerated
      filer o





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).


Yes
oNo
x





Aggregate
      Market Value of Non-Affiliate Stock at August 31, 2006 - approximately
      $231,000,000





Indicate
      the number of shares outstanding of each of the registrant's classes of common
      stock, as of May 1, 2007.





Common
                Stock - Par Value $.0066
            
            18,158,034Class
            
            Outstanding
                Shares





Documents
      Incorporated by Reference: Part III of this annual report on Form 10-K
      incorporates information by reference from the registrant's definitive proxy
      statement as filed on June 22, 2007.








**NU
      HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES**


**TABLE
      OF CONTENTS**





**10-K/A
                - Amendment No. 1 to Form 10-K**
            
            PageExplanatory
                Note
            
            3
                -
                4Forward
                Looking Statements
            
            4PART
                I:ITEM
                1
            Business
            
            4
                -
                8ITEM
                1A
            Risk
                Factors
            
            8
                -
                12ITEM
                1B
            Unresolved
                Staff Comments
            
            12ITEM
                2
            Properties
            
            12
                - 13ITEM
                3
            Legal
                Proceedings
            
            13ITEM
                4
            Submission
                of Matters to a Vote of Security Holders
            
            13PART
                II:ITEM
                5
            Market
                for the Registrant’s Common Equity, Related Stockholder Matters and Issuer
                Purchases of Equity Securities
            
            14
                - 15ITEM
                6
            Selected
                Financial Data
            
            16ITEM
                7
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operation
            
            17
                - 22ITEM
                7A
            Quantitative
                and Qualitative Disclosures About Market Risk
            
            22
                - 23ITEM
                8
            Financial
                Statements and Supplementary Data
            
            F1
                - F28ITEM
                9
            Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure
            
            24ITEM
                9A
            Controls
                and Procedures
            
            24
                - 27ITEM
                9B
            Other
                Information
            
            27PART
                III:ITEM
                10
            Directors
                and Executive Officers of the Registrant
            
            28ITEM
                11
            Executive
                Compensation
            
            28ITEM
                12
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            
            28ITEM
                13
            Certain
                Relationships and Related Transactions
            
            28ITEM
                14
            Principal
                Accounting Fees and Services
            
            28PART
                IV:ITEM
                15
            Exhibits
                and Financial Statement Schedules
            
            29
                - 32Signatures
            
            
            33Schedule
                II
            
            34Exhibit
                Index
            
            
            35





2





**EXPLANATORY
      NOTE:**





Nu
      Horizons Electronics Corp. (the “Company,” “Nu Horizons,” “we” or “our”) is
      amending its Annual Report on Form 10-K for the fiscal year ended February
      28,
      2007 (the “Original 10-K”) to restate in this Amendment No. 1 on Form 10-K/A
      (“Form 10-K/A”) its Consolidated Balance Sheets at February 28, 2007 and 2006
      and its Consolidated Statements of Operations, and Cash Flows and Changes in
      Shareholders' Equity for fiscal years ended February 28, 2007, 2006 and 2005
      (see Note 2 to the Consolidated Financial Statements). The accompanying notes
      to
      the financial statements including quarterly data have been restated where
      appropriate for income taxes. The Form 10-K/A also includes the restatement
      of
      selected financial data as of and for each of the five years in the period
      ended
      February 28, 2007, as well as the restatement of quarterly results of operations
      for each of the two years in the period ended February 28, 2007. As to the
      selected financial data as of February 28, 2007 and 2006 and for the years
      ended
      February 28, 2007, 2006 and 2005, such amounts are derived from the audited
      financial statements included elsewhere in the Form 10-K/A. The restated
      selected financial data as of February 28, 2007 and 2006, and for the years
      ended February 28, 2007, 2006 and 2005 and the restated unaudited quarterly
      results of operations, have been prepared in accordance with U.S. generally
      accepted accounting principles and reflect all adjustments that are necessary
      for the fair presentation of the Company’s financial position and results of
      operations for these periods.





As
      previously reported in a current report on Form 8-K filed on October 3, 2007,
      the Audit Committee of the Company's Board of Directors, together with
      management, concluded that, due to the tax adjustments described below and
      in
      Note 2 of the Notes to the Consolidated Financial Statements included herein,
      (1) our previously issued financial statements and any related reports of our
      independent registered public accounting firm for the fiscal years ended
      February 28, 2002 through 2007 should no longer be relied upon because of such
      errors in those financial statements, (2) our earnings and press releases and
      similar communications should no longer be relied upon to the extent that they
      relate to these financial statements, and (3) our financial statements and
      Form
      10-K for the fiscal year ended February 28, 2007 should be restated to reflect
      the correct accounting for income taxes discussed below.





In
      preparing the fiscal 2007 tax returns, developing the fiscal 2008 tax provision,
      and reviewing our accounting for income taxes in connection with the application
      of the provision of Financial Accounting Standards Board ("FASB") Interpretation
      No. 48 (FIN 48), "Accounting for Uncertainty in Income Tax - an Interpretation
      of FASB Statement No. 109", we determined that there were errors in the prior
      years' tax returns and the application of FASB Statement No. 109 - Accounting
      for Income Taxes. Consequently, there was an understatement of our provision
      for
      income tax expense for prior periods and the related U.S. income tax
      obligations. See Note 2 to the Consolidated Financial Statements included herein
      in Part II Item 8.





Accordingly,
      adjustments have been made to the aforementioned consolidated financial
      statements and supplementary data (Item 8) contained in the Original 10-K,
      which
      are reflected in this Form 10-K/A to restate for income tax expense and the
      related obligations. The changes impacting the financial statements included
      in
      Item 8 are explained in further detail in Note 2 of the Notes to Consolidated
      Financial Statements included herein. The Form 10-K/A amends and restates only
      the information in Items 6, 7, 8 and 9A of Part II and Item 15 of Part IV of
      the
      Original 10-K, and no other information in the Original 10-K is amended hereby
      with the exception of certain minor typographical errors that have been
      corrected. In addition to the changes to our financial statements and financial
      data (Items 6, 8 and 15), Items 7 and 9A of Part II of the Original 10-K have
      been revised to reflect the following changes:





·
            We
                expanded our disclosure in Item 7 to explain the material variances
                from
                the same period of the prior year in reported income taxes;
                and





·
            We
                have updated Item 9A - Controls and Procedures to address management’s
                re-evaluation of disclosure controls and procedures and management’s
                report on internal control over financial reporting as of February
                28,
                2007 resulting from its reassessment and identification of a material
                weakness in internal control over financial reporting related to
                the facts
                and circumstances surrounding the errors that led to the restatement
                of
                our Original 10-K. See Item 9A (Controls and Procedures) for further
                discussion, as well as for the related attestation report of the
                Company’s
                Independent Registered Public Accountants. New certifications of
                the
                principal executive officer and principal financial officer are included
                as exhibits to this Form 10-K/A.





3





Except
      for the foregoing amended and restated information, the Company has not modified
      or updated the disclosures in the Original 10-K. As such, the Form 10-K/A
      continues to describe conditions as of the filing date of the Original 10-K,
      and
      does not reflect events, results or developments that have occurred after the
      date of the Original 10-K or modify or update those disclosures affected by
      subsequent events, except as specifically referenced to herein and as discussed
      in the Subsequent Events Note 16 of the financial statements contained in Item
      8.





The
      Company will file an amended Quarterly Report on Form 10-Q/A for the quarterly
      period ended May 31, 2007 to reflect changes resulting from the restatement
      of
      amounts in this Form 10-K/A, as well as to restate for income tax expense and
      the related obligations. This Form 10-K/A should be read in conjunction with
      our
      filings made with the SEC subsequent to the Original 10-K, including such
      amended Quarterly Report on Form 10-Q/A. We have not amended, and do not intend
      to amend, our previously filed Annual Reports on Form 10-K or our previously
      filed Quarterly Reports on Form 10-Q for any periods prior to February 28,
      2007.





The
      events resulting in the filing of the Form 10-K/A and the financial results
      reported in the Form 10-K/A had no impact on the calculations of our bank debt
      covenants for any quarterly or annual period. However, this restatement has,
      in
      fact, contributed to the delay in filing the fiscal 2008 quarterly report on
      Form 10-Q for the three months ended August 31, 2007, which required us to
      obtain waivers from our banks, which waivers were obtained October 25,
      2007.





**FORWARD
      LOOKING STATEMENTS:**





Statements
      in this Form 10-K annual report may be “forward-looking statements” within the
      meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking
      statements include, but are not limited to, statements that express our
      intentions, beliefs, expectations, strategies, predictions or any other
      statements relating to our future activities or other future events or
      conditions. These statements are based on current expectations, estimates and
      projections about our business based, in part, on assumptions made by
      management. These statements are not guarantees of future performance and
      involve risks, uncertainties and assumptions that are difficult to predict.
      Therefore, actual outcomes and results may differ materially from what is
      expressed or forecasted in the forward-looking statements due to numerous
      factors, including those risks discussed from time to time in this Form 10-K
      annual report for the year ended February 28, 2007, and in other documents
      which
      we file with the Securities and Exchange Commission. In addition, such
      statements could be affected by risks and uncertainties related to product
      demand, market and customer acceptance, competition, government regulations
      and
      requirements, pricing and development difficulties, as well as general industry
      and market conditions and growth rates, and general economic conditions. Any
      forward-looking statements speak only as of the date on which they are made,
      and
      we do not undertake any obligation to update any forward-looking statement
      to
      reflect events or circumstances after the date of this Form 10-K.





**PART
      I.**





**ITEM
      1.**  **BUSINESS:**





**GENERAL:**





Nu
      Horizons Electronics Corp. a Delaware corporation incorporated in 1987, (the
      “Company”) and its wholly owned subsidiaries, NIC Components Corp. (“NIC”), Nu
      Horizons International Corp. (“International”), NUHC Inc. (“NUC”), Nu Horizons
      Asia PTE LTD (“NUA”), Nu Horizons Electronics Pte Ltd (“NUZ”), Nu Horizons
      Electronics Asia Pte Ltd., Korea Branch (“NUK”), Nu Horizons Electronics Hong
      Kong Ltd. (“NUHK”), Nu Horizons Electronics (Shanghai) Co. Ltd. (“NUS”), Nu
      Horizons Europe Limited (“NUE”), DT Electronics Limited (“DT”), Titan Supply
      Chain Services Corp. (“Titan”), Titan Supply Chain Services PTE LTD (“TSC”),
      Titan Supply Chain Services Limited (“T..SE”), Razor Electronics (“RAZ”), Nu
      Exchange (“NUX”) and its majority owned subsidiaries, NIC Components Europe
      Limited (“NIE”), and NIC Components Asia PTE LTD. (“NIA”) are engaged in the
      distribution of, and supply chain services for, high technology active and
      passive electronic components.





All
      references in this report to “the Company,” “we,” “our” and “us” are to Nu
      Horizons Electronics Corp. and its subsidiaries unless the context indicates
      otherwise.





4





**ITEM
      1.**  **BUSINESS
      (Continued):**





Active
      components distributed by the Company, principally to original equipment
      manufacturers ("OEMs") in the United States, include mainly commercial
      semiconductor products such as memory chips, microprocessors, digital and linear
      circuits, microwave, RF and fiber-optic components, transistors and diodes.
      Passive components distributed by NIC, principally to OEMs and other
      distributors nationally, consist of a high technology line of chip and leaded
      components, including capacitors, resistors and related networks.





The
      active and passive components distributed by the Company are utilized by the
      electronics industry and other industries in the manufacture of sophisticated
      electronic products including: industrial instrumentation, computers and
      peripheral equipment, consumer electronics, telephone and telecommunications
      equipment, satellite communications equipment, cellular communications
      equipment, medical equipment, automotive electronics, and audio and video
      electronic equipment.





Manufacturers
      of electronic components augment their marketing programs through the use of
      independent distributors and supply chain service providers such as the Company,
      upon which the Company believes they rely to a considerable extent to market
      and
      deliver their products. The Company offers its customers the convenience of
      diverse inventories, rapid delivery, design and technical assistance, inventory
      management, forecasting and logistical services and the availability of product
      in smaller quantities than generally available directly from manufacturers.
      Generally, companies engaged in the distribution of active and passive
      electronic components, such as the Company, are required to maintain a
      relatively significant investment in inventories and accounts receivable. To
      meet these requirements, the Company, like other companies in the industry,
      typically depends on internally generated funds as well as external
      borrowings.





Management’s
      policy is to manage, maintain and control the bulk of its inventories from
      its
      principal headquarters and stocking facilities in Melville (Long Island), New
      York, Southaven, Mississippi, San Jose, California, Singapore, Coventry,
      England, and Buckingham, England. As additional franchise line opportunities
      become available to the Company, the need for branch level inventories may
      be
      necessary and desirable in order to better serve the specific needs of local
      markets.





**Semiconductor
      Products (Active Components):**





The
      Company is a distributor of a broad range of semiconductor products to
      commercial and military OEM’s, principally in the United States. The Company is
      a franchised distributor of active components for approximately 35 product
      lines. Significant franchised product lines include Allegro, Exar, IDT, Linear
      Technologies, Marvel, Pericom, Renesas, Sharp Microelectronics, ST
      Microelectronics, Sun Microsystems, TDK Semiconductor, Toshiba, Vitesse
      Semiconductor, Oki Semiconductor, ON Semiconductor and Xilinx, among
      others.





The
      Company’s franchise agreements authorize it to sell all or part of the product
      line of a manufacturer on a non-exclusive basis. Under these agreements, each
      manufacturer will generally grant credits for any subsequent price reduction
      by
      such manufacturer and inventory return privileges whereby the Company can return
      to each such manufacturer for credit or exchange a percentage, generally ranging
      from 5% to 20%, of the inventory purchased from said manufacturer during a
      semi-annual period. The franchise agreements generally may be cancelled by
      either party upon written notice. The Company anticipates, in the future,
      entering into additional franchise agreements and increasing its inventory
      levels in accordance with business demands.





Financial
      information regarding the Company’s reportable segments and foreign and domestic
      operations can be found in Note 14 of the Notes to the Company’s financial
      statements.





**Passive
      Components and Relationship with Nippon:**





NIC
      has
      been the exclusive outlet in North America for Nippon Industries Co. Ltd.’s
      (Japan) (“Nippon”) brand of passive components, with a license for the use of
      the Nippon brand. The Company has a License Agreement with Nippon dated as
      of
      September 1, 2000 under which the Company has been granted an exclusive license
      to use the Nippon brand in the United States, Mexico, Central and South America
      and the Caribbean. The License Agreement has an initial term of ten years and
      automatically renews for successive one-year periods unless the Company or
      Nippon terminates the License Agreement 90 days prior to the end of the initial
      or any renewal term.





5


**ITEM
      1.**  **BUSINESS
      (Continued):**





**Passive
      Components and Relationship with Nippon (Continued):**





Due
      to
      certain market situations, NIC, with Nippon’s consent, has also established
      several manufacturing associations with U.S. and Taiwan based manufacturers
      to
      supply NIC with a portion of its product requirements under the NIC brand.
      NIC
      intends to continue to give Nippon priority, however, in acquiring Nippon’s
      products whenever Nippon’s technology and pricing are commensurate with market
      requirements.





**Sales
      and Marketing:**





Management’s
      strategy for long-term success has been to focus the Company’s sales and
      marketing efforts towards the following industry segments, both domestically
      and
      abroad: industrial, telecom/datacom, medical instrumentation, microwave and
      RF,
      fiber-optic, consumer electronics, security and protection devices, office
      equipment, computers and computer peripherals, factory automation and robotics.
      In order to help achieve its goals, the Company may enter into new franchise
      agreements for a broad base of commodity semiconductor products, including
      those
      used in the key niche industries referred to above.





All
      sales
      are made through customers’ purchase orders. Semiconductors are sold primarily
      via telephone by the Company’s in-house staff of approximately 125 salespersons,
      and by a combined field sales force of approximately 279 salespersons and field
      application engineers. The Company maintains branch sales facilities located
      as
      follows:





**UNITED
                STATES:**
              
              **EAST
                COAST**
              Massachusetts
                - Boston
              New
                York - Melville (Long Island) and Rochester
              New
                Jersey - Mt. Laurel (Philadelphia) and Pine Brook
              Ohio
                - Cleveland
              Maryland
                - Columbia
              North
                Carolina - Raleigh
              Georgia
                - Atlanta
              Alabama
                - Huntsville
              Florida
                - Ft. Lauderdale and Orlando
              
              **MIDWEST**
              Arizona
                - Phoenix
              Colorado
                - Denver
              Illinois
                - Chicago
              Minnesota
                - Minneapolis
              Texas
                - Austin, Dallas
              
              **WEST
                COAST**
              California
                - Irvine, Los Angeles, San Diego and San Jose
              Oregon
                - Portland
              Washington
                State - Bellevue
            
            **FOREIGN:**
              
              **CANADA**
              Toronto
              
              **ASIA**
              Singapore
              Hong
                Kong, Beijing Wuhan,
              China
                - Chendu, Nanjing, Shanghai and Shenzhen
              Seoul,
                S. Korea
              India
                - Bangalore, Pune, New Delhi and Hyderabad
              Penang,
                Malaysia
              Taipei,
                Taiwan
              Bangkok,
                Thailand
              
              **AUSTRALIA**
              Melbourne
              Sydney
              
              **EUROPE**
              Buckingham,
                England
              Coventry,
                England
              Munich,
                Germany (April 2007)
              
              **MEXICO**
              Jalisco
              Chihuahua





NIC’s
      passive components are marketed through the services of a national network
      of
      approximately 20 independent sales representative organizations, employing
      over
      200 salespersons, as well as through NIC’s in-house sales and engineering
      personnel. The independent representative organizations do not represent
      competing product lines but sell other related products. Commissions to such
      organizations generally range from 2% to 3% of all sales in a representative’s
      exclusive territory.





6


**ITEM
      1.**  **BUSINESS
      (Continued):**





**Sales
      and Marketing (Continued):**





NIC
      has
      developed a national network of 3 global distributors and approximately 25
      regional distributor locations which market passive components on a
      non-exclusive basis. These distributors have entered into agreements with NIC
      whereby they are required to purchase from NIC a prescribed initial inventory.
      These distributors are protected by NIC against price reductions and are granted
      certain inventory return and other privileges, which to date have not been
      material. Due to the efforts of NIC and its distributors, NIC’s passive
      components have been tested and “designed in” as a prime source of qualified
      product by over 7,000 OEMs in the United States.





**Customer
      Concentration:**





No
      single
      customer accounted for more than 10% of the Company’s consolidated sales for the
      year ended February 28 **,** 2007.
      The
      Company’s sales practice is to require payment within thirty days of
      delivery.





**Source
      of Supply:**





The
      Company inventories an extensive stock of active and passive components;
      however, if the Company’s customers order products for which the Company does
      not maintain inventory, the Company’s marketing strategy is to obtain such
      products from its franchise manufacturers, or, if a product is unobtainable,
      to
      identify and recommend satisfactory interchangeable alternative components.
      For
      this purpose, the Company devotes considerable efforts to familiarizing itself
      with component product movement throughout the industry, as well as to constant
      monitoring of its own inventories.





As
      of
      February 28, 2007, there were three manufacturers that each represented more
      than 10% of the Company’s inventory on a consolidated basis. Those suppliers
      accounted for an aggregate of approximately $66,996,000 of total inventory.
      Electronic components distributed by the Company generally are presently readily
      available; however, from time to time the electronics industry has experienced
      a
      shortage or surplus of certain electronic products.





For
      the
      year ended February 28, 2007, the Company purchased inventory from each of
      three
      suppliers that was in excess of 10% of the Company’s total purchases. Purchases
      from these suppliers were approximately $121,160,000, $111,522,000 and
      $62,745,000 for the fiscal year.





**Competition
      and Regulation:**





The
      Company competes with many companies that distribute semiconductor and passive
      electronic components and, to a lesser extent, companies that manufacture such
      products and sell them directly to OEMs and other distributors. The Company
      also
      competes for customers with some of its own suppliers. Many of these companies
      have substantially greater assets and possess greater financial and personnel
      resources than those of the Company. In addition, certain of these companies
      possess independent franchise agreements to carry semiconductor product lines
      which the Company does not carry, but which it may desire to have. Competition
      is based primarily upon inventory availability, quality of service, knowledge
      of
      product and price. The Company believes that the distribution of passive
      electronic components under its own label is a competitive advantage.





The
      Company’s competitive ability to price its imported active and passive
      components could be adversely affected by increases in tariffs, duties, changes
      in the United States’ trade treaties with Japan, Taiwan or other foreign
      countries, transportation strikes and the adoption of Federal laws containing
      import restrictions. In addition, the cost of the Company’s imports could be
      subject to governmental controls and international currency fluctuations.
      Because imports are paid for with U.S. dollars, the decline in value of United
      States currency as against foreign currencies would cause increases in the
      dollar prices of the Company’s imports from Japan and other foreign countries.
      Although the Company has not experienced any material adverse effect to date
      in
      its ability to compete or maintain its profit margins as a result of any of
      the
      foregoing factors, no assurance can be given that such factors will not have
      a
      material adverse effect in the future.





The
      Sarbanes-Oxley Act of 2002 and rules promulgated thereunder by the SEC and
      the
      Nasdaq Stock Market have imposed substantial new or enhanced regulations and
      disclosure requirements in the areas of corporate governance (including director
      independence, director selection and audit, corporate governance and
      compensation committee responsibilities), equity compensation plans, auditor
      independence, pre-approval of auditor fees and services and disclosure and
      internal control procedures. We are committed to industry best practices in
      these areas and believe we are in compliance with the relevant rules and
      regulations.




7


**ITEM
      1.**  **BUSINESS
      (Continued):**





**Backlog:**





The
      Company defines backlog as orders, believed to be firm, received from customers
      and scheduled for shipment, no later than 60 days for active components and
      no
      later than 90 days for passive components, from the date of the order. As of
      May
      1, 2007, the Company’s backlog was approximately $116,000,000 **** as
      compared to a backlog of approximately $75,000,000 at May 1, 2006.





**Employees:**





As
      of
      February 28, 2007, the Company employed approximately 748 persons: 67 in
      management, 413 in sales and sales support, 66 in product and purchasing, 58
      in
      finance, accounting and human resources, 21 in management information systems,
      19 in operations and 104 in quality control, shipping, receiving and
      warehousing. The Company believes that its employee relations are
      satisfactory.





**Available
      Information:**





We
      file
      reports with the SEC. The public may read and copy any materials filed by us
      with the SEC at the SEC’s public reference room at 100 F Street, N.E.,
      Washington D.C., 20549. The public may obtain information about the operation
      of
      the SEC’s public reference room by calling the SEC at 1-800-SEC-0330. The SEC
      also maintains a website at http://www.sec.gov that
      contains reports, proxy and information statements and other information about
      issuers such as us that file electronically with the SEC.





In
      addition, we make available free of charge on our website at http://www.nuhorizons.com our
      annual report on Form 10-K, quarterly reports on Form 10-Q, current reports
      on
      Form 8-K and amendments to those reports filed or furnished pursuant to Section
      13(a) or 15(d) under the Exchange Act as soon as reasonably practical after
      we
      electronically file such material with, or furnish it to, the SEC.





Our
      Board
      of Directors has adopted a Code of Business Conduct applicable to the Company’s
      officers and employees, and has also adopted a Code of Ethics for its senior
      financial officers. These codes of conduct and ethics are posted on the
      Company’s website at www.nuhorizons.com in the Investor Relations section. Any
      amendment of the codes of conduct and ethics or waiver thereof applicable to
      any
      director or executive officer of the Company, including the Chief Executive
      Officer or any senior financial officer, will be disclosed on the Company’s
      website within four business days of the date of such amendment or waiver.
      In
      the case of a waiver, the nature of the waiver, the name of the person to whom
      the waiver was granted and the date of the waiver will also be disclosed.





The
      Board
      of Directors has also adopted, and we have posted in the Investor Relations
      section of our website, written Charters for each of the Board’s standing
      committees. We will provide without charge, upon a stockholder’s request to 70
      Maxess Rd., Melville, NY 11747, Attention: Secretary, a copy of the Company's
      codes of ethics or the Charter of any standing committee of the Board.





**ITEM
      1A.**  **RISK
      FACTORS:**





**Risk
      Factors:**





***A
      large portion of the Company’s revenues come from sales of semiconductors, which
      is a highly cyclical industry, and an industry down-cycle could adversely affect
      its operating results.***





The
      semiconductor industry historically has experienced periodic fluctuations in
      product supply and demand, often associated with changes in technology and
      manufacturing capacity, and is generally considered to be highly cyclical.
      The
      Company’s revenue closely follows the strength or weakness of the semiconductor
      market. The Company’s total sales of electronic components in the last five
      fiscal years have increased from approximately $302,000,000 in fiscal year
      2003
      to $737,463,000 in fiscal year 2007. Although the Company’s and the industry’s
      sales have been on an upward trend, a technology industry downcycle,
      particularly in the semiconductor sector, could adversely affect the Company’s
      operating results in the future.




8


**ITEM
      1A.**  **RISK
      FACTORS (continued):**





***If
      the Company is unable to maintain its relationships with key suppliers, the
      Company’s sales could be adversely affected.***





In
      fiscal
      2007, purchases of products and services from each of three suppliers exceeded
      10% of the Company’s purchases on a consolidated basis. As a result, in the
      event that one or more of those suppliers experience financial difficulties
      or
      are not willing to do business with the Company in the future on terms
      acceptable to management, there could be a material adverse affect on the
      Company’s business, results of operations, financial condition or liquidity.
      Additionally, the Company’s relationships with its customers could be materially
      adversely affected because the Company’s customers depend on the Company’s
      distribution of electronic components and computer products from the industry’s
      leading suppliers.





***Declines
      in the value of the Company’s inventory could materially adversely affect the
      Company’s business, results of operations, financial condition or
      liquidity.***





The
      electronic components and computer products industry is subject to rapid
      technological change, new and enhanced products and evolving industry standards,
      which can contribute to decline in value or obsolescence of inventory. During
      an
      economic downturn it is possible that prices will decline due to an oversupply
      of product and, therefore, there may be greater risk of declines in inventory
      value. Although it is the policy of many of the Company’s suppliers to offer
      certain protections from the loss in value of inventory (such as price
      protection, limited rights of return, and rebates), the Company cannot assure
      you that that the vendors will choose to, or be able to, honor such agreements
      or that such return policies and rebates will fully compensate it for the loss
      in value. The Company cannot assure you that unforeseen new product developments
      or declines in the value of its inventory will not materially adversely affect
      the Company’s business, results of operations, financial condition or liquidity,
      or that the Company will successfully manage its existing and future
      inventories.





***The
      volume and timing of customer sales may vary and could materially affect the
      Company’s results of operations, financial condition or
      liquidity.***





The
      volume and timing of purchase orders placed by the Company’s 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. The
      Company often does not obtain long-term purchase orders or commitments but
      instead works with its customers to develop nonbinding forecasts of future
      requirements. Based on such nonbinding forecasts, the Company makes commitments
      regarding the level of business that it 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.
      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 the Company or to pay for components
      and materials purchased by it on such customers’ behalf, could have a material
      adverse effect on the Company’s results of operations, financial condition or
      liquidity.





***Substantial
      defaults by the Company’s customers on the Company’s accounts receivable could
      have a significant negative impact on the Company’s business, results of
      operations, financial condition or liquidity.***





A
      significant portion of the Company’s working capital consists of accounts
      receivable from customers. If customers responsible for a significant amount
      of
      accounts receivable were to become insolvent or otherwise unable to pay for
      products and services, or were to become unwilling or unable to make payments
      in
      a timely manner, the Company’s business, results of operations, financial
      condition or liquidity could be adversely affected.





***The
      electronics component and computer industries are highly competitive and if
      the
      Company cannot effectively compete, its revenue may decline.***





The
      market for the Company’s products and services is very competitive and subject
      to rapid technological advances. Not only does the Company compete with other
      distributors, it also competes for customers with some of its own suppliers.
      The
      Company’s failure to maintain and enhance its competitive position could
      adversely affect its business and prospects.




9


**ITEM
      1A.**  **RISK
      FACTORS (continued):**





Some
      of
      the Company’s competitors may have greater financial, personnel, capacity and
      other resources than it has. As a result, the Company’s competitors may be in a
      stronger position to respond quickly to potential acquisitions and other market
      opportunities, new or emerging technologies and changes in customer
      requirements. Additional competition has emerged from third party logistics
      providers, fulfillment companies, catalogue distributors and on-line
      distributors and brokers.





Additionally,
      prices for the Company’s products tend to decrease over their life cycle. Such
      decreases often result in decreased gross profit margins for the Company. There
      is also substantial and continuing pressure from customers to reduce their
      total
      cost for products. Suppliers may also seek to reduce the Company’s margins on
      the sale of their products in order to increase their own profitability. The
      Company expends substantial amounts on the value creation services required
      to
      remain competitive, retain existing business and gain new customers, and the
      Company must evaluate the expense of those efforts against the impact of price
      and margin reductions.





Further,
      the manufacturing of electronic components and computer products is increasingly
      shifting to lower-cost production facilities in Asia, most notably China.
      Suppliers in Asia have traditionally had lower gross profit margins than those
      in the United States and Europe, and typically charge lower prices in the Asian
      markets for their products, which places pressure on the Company to lower its
      prices to meet competition.





Thus,
      the
      Company’s consolidated gross profit margins have declined over time, from 18.3%
      in fiscal 2003, to 15.3% in fiscal 2007. If the Company is unable to effectively
      compete in its industry or is unable to maintain acceptable gross profit
      margins, its business could be materially adversely affected.





***The
      Company may not have adequate or cost-effective liquidity or capital resources.***





The
      Company needs cash to make interest payments on and to refinance indebtedness,
      and for general corporate purposes, such as funding its ongoing working capital
      and capital expenditure needs. At February 28, 2007, the Company had cash,
      cash
      equivalents, and short-term investments of approximately $5,000,000. In
      addition, the Company currently has access to credit lines of $180,000,000,
      of
      which $30,000,000 is currently being borrowed. The Company’s ability to satisfy
      its cash needs depends on its ability to generate cash from operations and
      to
      access the financial markets, both of which are subject to general economic,
      financial, competitive, legislative, regulatory and other factors that are
      beyond its control.





The
      Company may in the future need to access the financial markets to satisfy its
      cash needs. Under the terms of any external financing, the Company may incur
      higher than expected financing expenses and become subject to additional
      restrictions and covenants. For example, the Company’s existing debt agreements
      contain restrictive covenants, including covenants requiring compliance with
      specified financial ratios and a failure to comply with these or any other
      covenants may result in an event of default. An increase in the Company’s
      financing costs or a breach of debt instrument covenants could have a material
      adverse effect on the Company.





The
      agreements governing the Company’s financings contain various covenants and
      restrictions that, in certain circumstances, could limit its ability to:


·
            grant
                liens on assets;


·
            make
                restricted payments (including paying dividends on capital stock
                or
                redeeming or repurchasing capital
                stock);


·
            make
                investments;


·
            merge,
                consolidate or transfer all or substantially all of its
                assets;


·
            incur
                additional debt; or


·
            engage
                 in certain transactions with
                affiliates.





As
      a
      result of these covenants and restrictions, the Company may be limited in how
      it
      conducts its business and may be unable to raise additional debt, compete
      effectively, make investments, or engage in other activities that may be
      beneficial to its business.





10


**ITEM
      1A.**  **RISK
      FACTORS (continued):**





***Products
      sold by the Company may be found to be defective and, as a result, warranty
      and/or product liability claims may be asserted against the Company which may
      have a material adverse effect on the Company.***





Products
      sold by the Company are at prices that are significantly lower than the cost
      of
      the equipment or other goods in which they are incorporated. Since a defect
      or
      failure in a product could give rise to failures in the end products that
      incorporate them (and claims for consequential damages against the Company
      from
      its customers), the Company may face claims for damages that are
      disproportionate to the sales and profits it receives from the products
      involved. While the Company and its suppliers specifically exclude consequential
      damages in their standard terms and conditions, the Company’s ability to avoid
      such liabilities may be limited by the laws of some of the countries where
      it
      does business. The Company’s business could be materially adversely affected as
      a result of a significant quality or performance issue in the products sold
      by
      the Company, if it is required to pay for the damages that result. Although
      the
      Company currently has product liability insurance, such insurance is limited
      in
      coverage and amount.





***The
      Company’s non-U.S. locations represent a significant portion of the Company’s
      revenue, and consequently, we are increasingly exposed to risks associated
      with
      operating internationally.***





The
      Company's operations outside the United States generated approximately 25%
      of
      sales in fiscal years 2007, 2006, and 2005. As a result of the Company’s foreign
      sales and locations, the Company’s operations are subject to a variety of risks
      that are specific to international operations, including the
      following:





·
            potential
                restrictions on transfers of funds;


·
            foreign
                currency fluctuations;


·
            import
                and export duties and value added
                taxes;


·
            import
                and export regulation changes that could erode profit margins or
                restrict
                exports;


·
            changing
                foreign tax laws and regulations;


·
            potential
                military conflicts;


·
            inflexible
                employee contracts in the event of business downturns;
                and


·
            the
                burden and cost of compliance with foreign
                laws.





Manufacturing
      of electronic component and computer products is increasingly shifting to
      lower-cost production facilities in Asia, and most notably the People’s Republic
      of China. The Company’s business and prospects have been and could continue to
      be adversely affected by the shift to the Asian marketplace. In addition, we
      have operations in several locations in emerging or developing economies that
      have a potential for higher risk.





***The
      Company may not adequately manage its international
      operations.***





The
      Company anticipates that its foreign subsidiaries will engage in substantial
      regional operations. The Company currently manages its Asian and European
      subsidiaries, and plans to continue to manage future foreign subsidiaries,
      on a
      decentralized basis, with local and regional management retaining responsibility
      for day-to-day operations, profitability and the growth of these subsidiaries.
      If the Company fails to maintain or implement effective controls, it may
      experience inconsistencies in the operating and financial practices among its
      subsidiaries, which may harm its business, results of operations and
      liquidity.





***If
      the Company is unable to recruit and retain key personnel necessary to operate
      its businesses, its ability to compete successfully will be adversely
      affected.***





The
      Company is heavily dependent on its current executive officers, management
      and
      technical personnel. The loss of any key employee or the inability to attract
      and retain qualified personnel could adversely affect the Company’s ability to
      execute its current business plans. Competition for qualified personnel is
      intense, and the Company might not be able to retain its existing key employees
      or attract and retain any additional personnel.





11


**ITEM
      1A.**  **RISK
      FACTORS (continued):**





***If
      the Company fails to maintain an effective system of internal controls or
      discovers material weaknesses in its internal controls over financial reporting,
      it may not be able to report its financial results accurately or timely or
      detect fraud, which could have a material adverse effect on its business.***





An
      effective internal control environment is necessary for the Company to produce
      reliable financial reports and is important in its efforts to prevent financial
      fraud. The Company is required to periodically evaluate the effectiveness of
      the
      design and operation of its internal controls over financial reporting. These
      evaluations may result in the conclusion that enhancements, modifications or
      changes to internal controls are necessary or desirable. While management
      evaluates the effectiveness of the Company’s internal controls on a regular
      basis, these controls may not always be effective. There are inherent
      limitations on the effectiveness of internal controls including collusion,
      management override, and failure of human judgment. In addition, control
      procedures are designed to reduce rather than eliminate business risks. If
      the
      Company fails to maintain an effective system of internal controls or if
      management or the Company’s independent registered public accounting firm was to
      discover material weaknesses in the Company’s internal controls, it may be
      unable to produce reliable financial reports or prevent fraud and it could
      have
      a material adverse effect on the Company’s business. In addition, the Company
      may be subject to sanctions or investigation by regulatory authorities, such
      as
      the Securities and Exchange Commission or NASDAQ. Any such actions could result
      in an adverse reaction in the financial markets due to a loss of confidence
      in
      the reliability of the Company’s financial statements, which could cause the
      market price of its common stock to decline or limit the Company’s access to
      other forms of capital.





***The
      Company relies heavily on its internal information systems which, if not
      properly functioning, could materially adversely affect the Company’s business.***





The
      Company’s current global operations reside on the Company’s technology
      platforms. Any of these systems are subject to electrical or telecommunications
      outages, computer hacking or other general system failure. Failure of its
      internal information systems or material difficulties in upgrading its global
      financial system could have material adverse effects on the Company’s business.





***The
      Company’s response to the subpoenas received from the Securities Exchange
      Commission may require a significant amount of management time and attention
      and
      significant expenditure of funds, which may disrupt or have a negative impact
      on
      our business and adversely affect our results of
      operations.***




Both
      the
      Company and its wholly-owned subsidiary Titan Supply Chain Services received
      subpoenas from the SEC on April 13, 2007 in an action captioned “In the Matter
      of Vitesse Semiconductor Corp.” requiring them to produce documents related to
      their business relationship with Vitesse Semiconductor Corp. The Company and
      Titan are cooperating fully with the SEC which may require a significant amount
      of management time and attention, which could disrupt or have a negative impact
      on our business. In addition, the response to the subpoenas may require the
      Company to expend significant amounts for professional fees and related
      expenses, which expenditures may have an adverse effect on our results of
      operations, financial condition or liquidity. Further, the review of information
      by the SEC may result in additional inquiries.





**ITEM
      1B.**  **UNRESOLVED
      STAFF COMMENTS:**




None.





**ITEM
      2.**  **PROPERTIES:**





The
      Company leases an approximately 80,000 square foot facility in Melville, Long
      Island, New York to serve as its executive offices and main distribution center.
      The lease term is from December 17, 1996 to December 31, 2008 at an annual
      base
      rental of $601,290 and provides for a 4% annual escalation in each of the last
      ten years of the term. The lease is renewable for an additional six years with
      the same 4% annual escalation clause, at the option of the Company





The
      Company leases approximately 10,000 square feet of office space in Melville,
      Long Island, New York to serve as the executive offices of its NIC Components
      subsidiary. The lease term is from April 1, 2001 to December 31, 2008 at an
      annual base rental of $286,000 and provides for a 4% annual escalation in each
      subsequent year of the lease.





12


**ITEM
      2.**  **PROPERTIES
      (Continued):**





On
      November 1, 2006, the Company entered into a new warehouse lease in Southaven,
      Mississippi for approximately 48,000 square feet. The lease term is from
      November 1, 2006 to January 31, 2012 at an annual base rent of
      $205,000.





The
      Company also leases space for twenty-seven (27) branch sales offices in the
      United States, one (1) in Canada, seventeen (17) in Asia Pacific, two (2) in
      Australia and two (2) in England, which range in size from 1,000 square feet
      to
      14,000 square feet, with lease terms that expire between April 30, 2007 and
      January 31, 2012. Annual base rentals range from $9,000 to $877,000 with
      aggregate base rentals approximating $2,500,000. The Company believes it can
      obtain extensions of the leases scheduled to expire in fiscal 2007 on
      substantially similar terms to those currently in effect.





**ITEM
      3.**  **LEGAL
      PROCEEDINGS:**





No
      material legal proceeding is pending to which the Company is a party or to
      which
      any of its property is or may be subject.





**ITEM
      4.**  **SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS:**





During
      the fourth quarter of the fiscal year ended February 28, 2007, no matters were
      submitted to a vote of security holders through the solicitation of proxies
      or
      otherwise.





13


**PART
      II.**





**ITEM
              5.**
            **MARKET
                FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
                PURCHASES OF EQUITY
                SECURITIES:**





a)
            The
                Company’s common stock is traded on the NASDAQ National Market System
                under the symbol “NUHC”. The following table sets forth, for the periods
                indicated, the high and low trading prices for the Company’s common stock
                as reported by the NASDAQ National Market
                System.





FISCAL
                YEAR 2006:
            
            High
            
            LowFirst
                Quarter
            
            $
            7.36
            
            $
            5.79Second
                Quarter
            
            
            7.00
            
            
            5.73Third
                Quarter
            
            
            10.80
            
            
            5.89Fourth
                Quarter
            
            
            10.97
            
            
            8.47FISCAL
                YEAR 2007:First
                Quarter
            
            $
            9.75
            
            $
            7.95Second
                Quarter
            
            
            14.84
            
            
            7.18Third
                Quarter
            
            
            14.26
            
            
            10.33Fourth
                Quarter
            
            
            12.09
            
            
            8.61FISCAL
                YEAR 2008:First
                Quarter (Through May 1, 2007)
            
            $
            11.80
            
            $
            9.03





b)
            As
                of May 1, 2007, the Company’s common stock was owned by approximately 600
                holders of record and 6,750 beneficial
                holders.


c)
            The
                Company does not anticipate that it will pay any dividends in the
                foreseeable future. The Company currently intends to retain future
                earnings for use in the operation and development of its business
                and for
                potential acquisitions. In addition, the terms of the Company’s loan
                agreement limits the payment of dividends to no more than 25% of
                the
                Company’s consolidated net income.





The
      information required by Item 201(d) of Regulation S-K will be contained in
      the
      Registrant's definitive proxy statement to be filed with the Securities and
      Exchange Commission within 120 days after the end of the Registrant's fiscal
      year.





14


**ITEM
              5.**
            **MARKET
                FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
                PURCHASES OF EQUITY SECURITIES
                (Continued):**





**Performance
      Graph:**





The
      following graph compares the performance of the Company’s common stock for the
      periods indicated with the performance of the NASDAQ Composite Index and the
      average performance of a group consisting of the Company’s peer companies. The
      Peer Group includes Arrow Electronics, Inc., Avnet, Inc., Agilysys, Inc., All
      American Semiconductor, Inc., Bell Microproducts, Inc., and Jaco Electronics,
      Inc. The graph assumes $100 invested on February 28, 2002 in the Company,
      the NASDAQ Composite Index, and the Peer Group. Total return indices reflect
      reinvestment dividends and are weighted on the basis of market capitalization
      at
      the time of each reported data point.





**2/02**
            
            **2/03**
            
            **2/04**
            
            **2/05**
            
            **2/06**
            
            **2/07****Nu
                Horizons Electronics Corp.**
            
            
            **100.00**
            
            
            **61.67**
            
            
            **109.95**
            
            
            **79.75**
            
            
            **99.89**
            
            
            **113.04****NASDAQ
                Composite**
            
            
            **100.00**
            
            
            **77.36**
            
            
            **118.86**
            
            
            **122.40**
            
            
            **137.91**
            
            
            **148.37****Peer
                Group**
            
            
            **100.00**
            
            
            **47.75**
            
            
            **92.13**
            
            
            **90.94**
            
            
            **111.07**
            
            
            **141.38**





15


**ITEM
      6.**  **SELECTED
      FINANCIAL DATA:**





For
                the Years EndedFebruary
                28, 2007
            
            February
                28, 2006
            
            February
                28, 2005
            
            February
                29, 2004
            
            February
                28, 2003(As
                Restated)
            
            (As
                Restated)
            
            (As
                Restated)
            
            (As
                Restated)
            
            (As
                Restated)**INCOME
                STATEMENT DATA****(1)****:****Continuing
                Operations:**Net
                sales
            
            $
            737,463,000
            
            $
            561,291,000
            
            $
            467,849,000
            
            $
            345,864,000
            
            $
            302,081,000Gross
                profit on sales
            
            
            112,945,000
            
            
            88,749,000
            
            
            77,581,000
            
            
            60,961,000
            
            
            55,228,000Gross
                profit percentage
            
            
            15.3
            %
            
            15.8
            %
            
            16.6
            %
            
            17.6
            %
            
            18.3
            %**Operating
                Income (loss)**
            
            
            19,434,000
            
            
            10,658,000
            
            
            7,443,000
            
            
            (1,475,000
            )
            
            (2,212,000
            )**Net
                income (loss)**
            
            $
            7,717,000
            
            $
            3,413,000
            
            $
            2,584,000
            
            $
            (413,000
            )
            $
            (1,715,000
            )Earnings
                (loss) per common share:Basic
            
            $
            .43
            
            $
            .20
            
            $
            .15
            
            $
            (.02
            )
            $
            (.10
            )Diluted
            
            $
            .41
            
            $
            .19
            
            $
            .15
            
            $
            (.02
            )
            $
            (.10
            )








As
                of February 28, 2007
            
            As
                ofFebruary 28, 2006
            
            As
                of
              February28,
                2005
            
            As
                of February 29, 2004
            
            As
                of February 28, 2003(As
                Restated)
            
            (As
                Restated)
            
            (As
                Restated)
            
            (As
                Restated)
            
            (As
                Restated)**BALANCE
                SHEET DATA****(1)****:**Working
                capital
            
            $
            166,948,000
            
            $
            179,417,000
            
            $
            144,243,000
            
            $
            122,216,000
            
            $
            117,100,000Total
                assets
            
            
            267,479,000
            
            
            247,055,000
            
            
            181,125,000
            
            
            163,760,000
            
            
            151,241,000Long-term
                liabilities
            
            
            36,103,000
            
            
            53,455,000
            
            
            26,266,000
            
            
            9,785,000
            
            
            4,846,000Shareholders’
                equity
            
            
            147,747,000
            
            
            135,138,000
            
            
            127,688,000
            
            
            124,607,000
            
            
            122,849,000





(1) See Note
      2 of the Financial Statements contained in Item 8.





16


**ITEM
              7.**
            **MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                OPERATIONS**





For
      an
      understanding of the Company and the significant factors that influenced the
      Company's performance during the past three fiscal years, the following
      discussion should be read in conjunction with the description of the business
      appearing in Item 1 of this Report and the consolidated financial statements,
      including the related notes, and other information appearing in Item 15 of
      this
      Report. The Company operates on a fiscal year ending February 28.





**Overview:**





Nu
      Horizons Electronics Corp. and its wholly-owned subsidiaries are engaged in
      the
      distribution of high technology active and passive electronic components to
      a
      wide variety of original equipment manufacturers (“OEMs”) of electronic
      products. Active components distributed by the Company include semiconductor
      products such as memory chips, microprocessors, digital and linear circuits,
      microwave/RF and fiberoptic components, transistors and diodes. Passive
      components distributed by NIC, NIA and NIE, principally to OEMs and other
      distributors nationally, consist of a high technology line of chip and leaded
      components including capacitors, resistors and related networks.





The
      electronics manufacturing and the electronics distribution
      industries in which
      the Company operates has experienced double digit increases in sales dollar
      volume for several years. Additionally, there have been recent consolidations
      in
      the electronics distribution industry, resulting in greater market share for
      certain of the remaining companies. The increase in sales volume has been
      accompanied by continued downward margin pressures, primarily due to the
      industry shift to production in Asia.





The
      Company recognized the industry shift to overseas production and the need to
      serve its suppliers on a global basis. As a result, the Company adopted a
      strategy of expanding its Asian and European operations by investing in human
      resources and expanding its sales force and engineering personnel. In prior
      years, we invested in Asia and currently we are staffed with 144 employees
      in 19
      offices, with a warehouse in Singapore. In fiscal 2007, we continued our growth
      strategy of expanding our European presence by acquiring DT Electronics Limited
      on August 29, 2006 (see footnote 3 to the consolidated financial statements)
      with 37 employees and a warehouse in Coventry, England. Most recently, we opened
      our first office in Munich, Germany.





The
      Company also took advantage of the recent industry consolidation by hiring
      a
      significant number of additional sales and engineering personnel domestically
      in
      2006 and adding to its line card (franchise suppliers). This strategy has
      yielded positive results to date. Sales in Asia increased 18.2% for the fiscal
      year 2007 over 2006, while sales in the U.S. increased by 32.5%. Additionally,
      the Company’s book to bill ratio, company wide, remains positive. Our sales in
      Europe have increased 98.5% over the prior year due to the acquisition of DT
      Electronics. The Company has increased market share with all of its major
      suppliers for both the semiconductor and passive component businesses in
      2007.





It
      is
      difficult for the Company, as a distributor, to forecast the material trends
      of
      the electronic component and computer products industry, aside from some of
      the
      normal seasonality discussed herein, because the Company does not typically
      have
      material forward-looking information available from its customers and suppliers
      beyond approximately three to four months. As such, management relies on the
      publicly available information published by certain industry groups and other
      related analyses to evaluate its longer term prospects.





The
      table
      below provides a year-over-year summary of sales for the Company:





**Three-Year
      Analysis of Sales: By Geography**





Years
                Ended February 28
            
            Percentage
                Change2007
            
            %
                of Total
            
            2006
            
            %
                of Total
            
            2005
            
            %
                of Total
            
            2007
                to 2006
            
            2006
                to 2005(Dollars
                in thousands)**Sales
                by Geographic Area:**North
                America
            
            $
            554,794
            
            
            75.2
            %
            $
            418,578
            
            
            74.6
            %
            $
            352,778
            
            
            75.4
            %
            
            32.5
            %
            
            18.7
            %Asia
            
            
            148,137
            
            
            20.1
            
            
            125,313
            
            
            22.3
            
            
            100,912
            
            
            21.6
            
            
            18.2
            
            
            24.2Europe
            
            
            34,532
            
            
            4.7
            
            
            17,400
            
            
            3.1
            
            
            14,159
            
            
            3.0
            
            
            98.5
            
            
            22.9$
            737,463
            
            
            100.0
            %
            $
            561,291
            
            
            100.0
            %
            $
            467,849
            
            
            100.0
            %
            
            31.4
            %
            
            20.0
            %




17


**ITEM
              7.**
            **MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                (Continued):**





**Overview
      (continued):**





For
      the
      year ended February 28, 2007, net sales increased to $737,463,000 from
      $561,291,000 for the prior year with net income of $7,717,000 or $.43 per basic
      share and $.41 per diluted share as compared to a net income of $3,413,000
      or
      $.20 per basic and $.19 per diluted share in the prior fiscal year.





The
      following table sets forth for the years ended February 2007, 2006 and 2005,
      certain items in the Company’s consolidated statements of operations expressed
      as a percentage of net sales.





Years
                Ended February 28 (As Restated)2007
            
            2006
            
            2005Net
                sales
            
            
            100.0
            %
            
            100.0
            %
            
            100.0
            %Cost
                of sales
            
            
            84.7
            
            
            84.2
            
            
            83.4Gross
                profit
            
            
            15.3
            
            
            15.8
            
            
            16.6Operating
                expenses
            
            
            12.7
            
            
            13.9
            
            
            15.0Interest
                expense
            
            
            0.5
            
            
            0.6
            
            
            0.4Interest
                (income)
            
            
            (0.1
            )
            
            (0.1
            )
            
            0.0Income
                before taxes
            
            
            2.2
            
            
            1.4
            
            
            1.2Income
                tax provision
            
            
            1.1
            
            
            0.7
            
            
            0.5Income
                after taxes, before minority interests
            
            
            1.1
            
            
            0.7
            
            
            0.7Minority
                interests
            
            
            0.1
            
            
            0.1
            
            
            0.1Net
                income
            
            
            1.0
            
            
            0.6
            
            
            0.6





The
      Company’s business, financial condition, operating results and cash flows can be
      impacted by a number of factors, including but not limited to those set forth
      below in “Management’s Discussion and Analysis of Financial Condition and
      Results of Operations,” any one of which could cause our actual results to vary
      materially from recent results or from our anticipated future results. For
      a
      discussion identifying additional risk factors and important factors that could
      cause actual results to differ materially from those anticipated, also see
      the
      discussions in “Forward-Looking Statements,” “Risk Factors” and “Notes to
      Consolidated Financial Statements” in this Form 10-K.





**Fiscal
      Year 2007 versus 2006**




**Results
      of Operations:**





Net
      sales
      for the year ended February 28, 2007 aggregated $737,463,000 as compared to
      $561,291,000 for the year ended February 28, 2006, an increase of $176,172,000
      or 31.4%. Management believes that this sales increase is due to increased
      market share resulting from the industry consolidation, its increased sales
      personnel, the expansion of its line card (franchised suppliers) and its global
      customer base, and its purchase of DT Electronics, a distributor in
      England.





Gross
      profit margin as a percentage of net sales was 15.3% for the year ended February
      28, 2007 as compared to 15.8% for the year ended February 28, 2006. The
      decreased margin is due to product mix, and increased order size coupled with
      increased sales in the Asian market, which requires lower selling prices due
      to
      volume demand from large Asian contract manufacturers. Management believes
      that
      margin pressures should stabilize in fiscal 2008, however, no assurances can
      be
      given in this regard.





As
      a
      percentage of sales, operating expenses decreased to 12.7% as compared to 13.9%
      in the prior year. Operating expenses increased to $93,511,000 for the year
      ended February 28, 2007 from $78,091,000 for the year ended February 28, 2006,
      an increase of $15,420,000 or 19.7%. The dollar increase in operating expenses
      was primarily due to increases in the following expense categories:
      Approximately $12,800,000 or 83.0% of the increase was for personnel related
      costs resulting from increased staffing levels and related commissions to
      support increased sales. Approximately $2,500,000 or 16.0% of the increase
      was a
      result of net increases in various other expenses and fees such as rent,
      utilities, telephone, insurance, and computer expenses, among others, which
      represent an aggregate 2.9% of the Company’s total overhead.





18


**ITEM
              7.**
            **MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                (Continued):**





**Fiscal
      Year 2007 versus 2006 (Continued):**




**Results
      of Operations (Continued):**





Interest
      expense increased to $3,850,000 for the year ended February 28, 2007 as compared
      to $3,298,000 for the year ended February 28, 2006. This increase in interest
      expense resulted from higher levels of bank borrowings during the fiscal year
      to
      support the increase in accounts receivable and inventory levels, as well as
      the
      effect of increased interest rates on those borrowings during the fiscal
      year.





Income
      tax expense as a percentage of income before provision for income tax and
      minority interest ("effective tax rate") is 49.4% and 50.3% in fiscal 2007
      and
      2006 respectively and is higher than the statutory income tax rates principally
      due to the correction of errors in our United States Federal and state tax
      returns, a majority of which related to our foreign operations, which resulted
      in additional tax expense of approximately $2,165,000 in fiscal 2007 and
      $1,328,000 in fiscal 2006, including interest and penalties of $745,000 and
      $14,800 for fiscal 2007 and 2006 respectively. The remaining rate difference
      is
      primarily due to a foreign tax rate differential on foreign losses and other
      non-deductible expenses.





Net
      income for the year ended February 28, 2007 was $7,717,000 or $.43 per basic
      share and $.41 per diluted share as compared to $3,413,000 or $.20 per basic
      and
      $.19 per diluted share for the year ended February 28, 2006.





Management
      attributes the increase in earnings in fiscal 2007 to the increase in sales
      providing increased gross margin dollars exceeding the increase in operating
      and
      interest expense.





**Fiscal
      Year 2006 versus 2005**




**Results
      of Operations:**





Net
      sales
      for the year ended February 28, 2006 aggregated $561,291,000 as compared to
      $467,849,000 for the year ended February 28, 2005, an increase of $93,442,000
      or
      20.0%. Management believes that this sales increase is primarily due to
      increased market share resulting from the industry consolidation, its increased
      sales personnel and the expansion of its line card and customer base, both
      domestically and in Asia.





Gross
      profit margin as a percentage of net sales was 15.8% for the year ended February
      28, 2006 as compared to 16.6% for the year ended February 28, 2005. Management
      believes that this continuing gross margin pressure resulted from a change
      in
      the Company’s product mix and increased order size, coupled with increased sales
      in the Asian market, which required lower selling prices due to volume demand
      from large Asian contract manufacturers.





As
      a
      percentage of sales, operating expenses decreased to 13.9% as compared to 15.0%
      in the prior year. Operating expenses increased to $78,091,000 for the year
      ended February 28, 2006 from $70,138,000 for the year ended February 28, 2005,
      an increase of $7,953,000 or 11.3%. The dollar increase in operating expenses
      was due to increases in the following expense categories: Approximately
      $6,996,000 or 88.0% of the increase was for personnel related costs resulting
      from increased staffing levels in connection with the expansion of the Company’s
      Asian and U.S. operational capability
      during the fiscal year. Management made a strategic decision to invest in
      expanding the Company’s personnel during the phase of market consolidation,
      which resulted in increased personnel-related operating expenses. Approximately
      $957,000 or 12.0% of the increase was a result of net increases in various
      other
      expenses and fees such as rent, utilities, telephone, insurance, and computer
      expenses, among others, which represent an aggregate 1.2% of the Company’s total
      overhead.





Interest
      expense increased to $3,298,000 for the year ended February 28, 2006 as compared
      to $1,920,000 for the year ended February 28, 2005. This increase in interest
      expense resulted from greater bank borrowings incurred to support the increase
      in accounts receivable and inventory levels, as well as the effect of increased
      interest rates on those borrowings during the fiscal year.





The
      effective tax rate is 50.3% and 43.6% in fiscal 2006 and 2005 respectively
      and
      is higher than the statutory income tax rates principally due to the correction
      of errors in our United States Federal and state tax returns, a majority of
      which related to our foreign operations, which resulted in additional tax
      expense of approximately $1,328,000 in fiscal 2006 and $409,000 in fiscal 2005,
      including interest and penalties of $14,800 and $0 for fiscal 2006 and 2005
      respectively. The remaining rate difference is primarily due to a foreign tax
      rate differential on foreign losses and other non-deductible
      expenses.




19


**ITEM
              7.**
            **MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                (Continued):**





**Fiscal
      Year 2006 versus 2005**




**Results
      of Operations Continued:**





Net
      income for the year ended February 28, 2006 was $3,413,000 or $.20 per basic
      share and $.19 per diluted share as compared to $2,584,000 or $.15 per basic
      and
      diluted share for the year ended February 28, 2005. Management attributes the
      increase in earnings in fiscal 2006 to the increase in sales providing increased
      gross margin dollars exceeding the increase in operating and interest
      expense.





**Critical
      Accounting Policies and Estimates:**





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 expenses and related disclosure of contingent assets and liabilities. The
      Company evaluates its estimates, including those related to bad debts,
      inventories, intangible assets, income taxes and contingencies and litigation,
      on an ongoing basis. The Company bases its estimates on historical experience
      and on various other assumptions that are believed to be reasonable under the
      circumstances, the results of which form the basis for making judgments about
      the carrying values of assets and liabilities that are not readily apparent
      from
      other sources. Actual results may differ from these estimates under different
      assumptions or conditions.





The
      Company believes the following critical accounting policies, among others,
      involve the more significant judgments and estimates used in the preparation
      of
      its consolidated financial statements:





Revenue
      Recognition - The
      Company recognizes revenue in accordance with SEC Staff Accounting Bulletin
      No.
      104, “Revenue Recognition in Financial Statements” (“SAB 104”). Under SAB 104,
      revenue is recognized when the title and risk of loss have passed to the
      customer, there is persuasive evidence of an arrangement, delivery has occurred
      or services have been rendered, the sales price is determinable and
      collectibility is reasonably assured. The Company recognizes revenues at time
      of
      shipment of its products and sales are recorded net of discounts and
      returns.





Allowance
      for Doubtful Accounts - The
      Company maintains allowances for doubtful accounts for estimated bad debts.
      Our
      estimate of the allowances needed is based on our past history of collections
      of
      accounts receivable from our customers. This history has shown that we have
      always provided sufficient allowances in prior periods. If the financial
      condition of the Company’s customers were to deteriorate, resulting in an
      impairment of their ability to make payments, additional allowances might be
      required thereby reducing our operating income. For example, at fiscal year
      end,
      each additional 1% accounts receivable allowance would reduce operating income
      by approximately $1,250,000 for the year ended February 28, 2007.





Inventory
      Valuation -
      Inventories are recorded at the lower of cost or market. Write-downs of
      inventories to market value are based upon product franchise agreements
      governing price protection, stock rotation and obsolescence, as well as
      assumptions about future demand market conditions and the ability to return
      inventory pursuant to our distributor franchise agreements. In prior periods,
      reserves required for obsolescence were not material to our financial
      statements. If assumptions about future demand or actual market conditions
      are
      less favorable than those projected by management, additional write-downs of
      inventories could be required. For example, at fiscal year end, each additional
      1% of obsolete inventory or inventory that the Company was unable to return
      pursuant to its distributor or related agreements, would reduce operating income
      by approximately $1,250,000 for the year ended February 28, 2007.





Accounting
      for Income Taxes -
      Management's judgment is required in determining the provision for income taxes,
      deferred tax assets and liabilities and the valuation allowance recorded against
      net deferred tax assets. The carrying value of the Company's deferred tax assets
      is dependent upon its ability to generate sufficient, if any, future taxable
      income in certain tax jurisdictions. In addition, the Company considers historic
      levels of income expectations and risk associated with estimates of future
      taxable income and ongoing prudent and feasible tax planning strategies in
      assessing a tax valuation allowance. Should the Company determine that it is
      not
      able to realize all or part of its deferred tax assets in the future, a
      valuation allowance may be recorded against the deferred tax assets with a
      corresponding charge to income in the period such determination is
      made.





20


**ITEM
              7.**
            **MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                (Continued):**





**Critical
      Accounting Policies and Estimates (Continued):**





In
      addition, the Company establishes reserves for potentially unfavorable outcomes
      for positions taken on certain tax matters. These reserves are based on
      management's judgments and estimates of probable future tax liabilities. As
      these estimates are highly judgmental, there may be differences between the
      anticipated and actual outcomes of these matters that may result in reversals
      of
      reserves or additional tax liabilities in excess of the reserved amounts. To
      the
      extent such adjustments are warranted, the Company's effective tax rate may
      potentially fluctuate as a result.





Goodwill
      and Other Indefinite-Lived Intangibles - The
      Company will perform an annual impairment test on or near the acquisition date,
      or earlier, if indicators of potential impairment exist, to evaluate goodwill
      and other indefinite-lived intangibles. Such intangible assets are considered
      impaired if the carrying amount of the reporting unit exceeds its estimated
      fair
      value. In assessing the recoverability of such intangible assets, the Company
      reviews both quantitative and qualitative factors to support its assumptions
      with regard to fair value. In determining the fair value, the Company will
      make
      certain judgments, including the identification of reporting units and the
      selection of comparable companies. If these estimates or their related
      assumptions change in the future as a result of changes in strategy and/or
      market conditions, the Company may be required to record an impairment
      charge.





**Liquidity
      and Capital Resources:**




**Fiscal
      Year 2007 versus 2006**





The
      Company ended its 2007 fiscal year with working capital and cash aggregating
      approximately $166,948,000 and $4,747,000, respectively, as compared to
      approximately $179,417,000 and $10,873,000, respectively, at February 28, 2006.
      The Company’s current ratio at February 28, 2007, was 3.0:1 as compared to 4.1:1
      at February 28, 2006. The Company utilized excess cash at February 28, 2007
      to
      pay down its Revolving Credit line which was $30,000,000 at February 28, 2007
      and $50,600,000 at February 28, 2006.





In
      fiscal
      2007, approximately $16,000,000 of cash flow was provided by operations. Cash
      generated from operations together with existing cash in banks was primarily
      used to purchase DT Electronics ($6,100,000), make capital expenditures
      ($1,100,000) and pay down debt ($21,000,000).





On
      January 31, 2007, the Company entered into an amended and restated secured
      revolving line of credit agreement, as amended, with eight banks, which
      currently provides for maximum borrowings of $150,000,000 (the "Revolving Credit
      Line"). The Revolving Credit Line provides for borrowings utilizing an asset
      based formula predicated on a certain percentage of outstanding domestic
      accounts receivable and inventory levels at any given month end. Based on the
      asset based formula, the Company may not be able to borrow the maximum amount
      available under its Revolving Credit Line at all times. Borrowings under the
      Revolving Credit Line bear interest at either (i) the lead bank’s prime rate or
      (ii) LIBOR plus 150 basis points, at the option of the Company, through
      September 30, 2011, the due date of the loan. Direct borrowings under the
      Revolving Credit Line were $30,000,000 at February 28, 2007 and $50,600,000
      at
      February 28, 2006. As of the end of each of the fiscal periods, the Company
      was
      in compliance with all of the required bank covenants.





On
      August
      29, 2006, the Company acquired DT Electronics, a company engaged in the
      electronics components business in the United Kingdom. The initial purchase
      price for DT Electronics as of the acquisition date was $5,731,000. The
      transaction also provides for potential additional payments to the seller in
      three installments through 2009 from a guaranteed minimum of approximately
      $1,611,000 to a maximum of approximately $4,989,000, which amounts are
      calculated using current exchange rates. Payments of any amounts above the
      minimum are contingent upon the attainment of certain earnings milestones by
      DT
      Electronics during the three year period. The Company has accrued the maximum
      estimated payment currently since DT Electronics is expected to achieve the
      earnings milestones established by the agreement. The DT Electronics acquisition
      was funded from existing cash on hand.





The
      Company also has a receivable financing agreement (the "Bank Credit Line")
      with
      a bank in England which provides for maximum borrowings of £2.5 million
      (approximately $4.6 million) which bear interest at the bank's base rate plus
      1.75%. The interest rate at February 28, 2007 was 7%.





21


**ITEM
              7.**
            **MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                (Continued):**





**Liquidity
      and Capital Resources:**




**Fiscal
      Year 2007 versus 2006 (Continued)**





On
      November 20, 2006, the Company entered a revolving credit agreement with a
      Singapore bank to provide a $30,000,000 secured line of credit to the Company’s
      Asian subsidiaries and thereby finance the Company’s Asian operations.
      Borrowings under the agreement utilize an asset based formula based on a certain
      percentage of outstanding accounts receivable and inventory levels at any given
      month end. Borrowings under the Singapore credit line bear interest at SIBOR
      plus 1.5 percent. At February 28, 2007, there were no borrowings under this
      credit line.





The
      Company anticipates that its resources provided by its cash flow from operations
      and its current borrowing agreements, will be sufficient to meet its financing
      requirements for at least the next twelve-month period.





**Off-Balance
      Sheet Arrangements:**





As
      of
      February 28, 2007, the Company had no off-balance sheet
      arrangements.





**Contractual
      Obligations:**





**Contractual
                Obligations**
            
            **Total**
            
            **Less
                than**
              **1
                year**
            
            **1-3**
              **years**
            
            **3-5**
              **Years**
            
            **More
                than**
              **5
                years**Revolving
                Credit Line
            
            $
            30,000,000
            
            $
            -
            
            $
            -
            
            $
            30,000,000
            
            $
            -Equipment
                Leases
            
            
            926,000
            
            
            327,000
            
            
            599,000
            
            
            -
            
            
            -Operating
                Leases
            
            
            9,107,000
            
            
            3,794,000
            
            
            3,986,000
            
            
            1,306,000
            
            
            21,000Employment
                Agreements(i)
            
            
            7,839,000
            
            
            2,180,000
            
            
            4,519,000
            
            
            1,140,000
            
            
            -Minority
                Interest
            
            
            1,948,000
            
            
            -
            
            
            -
            
            
            -
            
            
            1,948,000**Total**
            
            $
            49,820,000
            
            $
            6,301,000
            
            $
            9,104,000
            
            $
            32,446,000
            
            $
            1,969,000




(i)
      Base
      salary excluding potential bonuses





**Inflationary
      Impact:**





Since
      the
      inception of operations, inflation has not significantly affected the Company’s
      operating results. However, inflation and changing interest rates have had
      a
      significant effect on the economy in general and therefore could affect the
      operating results of the Company in the future.





**ITEM
      7A.**  **QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK:**





***Interest
      Rate Risk:***





All
      of
      the Company’s bank debt and the associated interest expense are sensitive to
      changes in the level of interest rates. The Company’s credit facilities bear
      interest based on fluctuating interest rates. The interest rate under its U.S.
      credit agreement is tied to the prime or LIBOR rate, the interest rate under
      its
      U.K. receivable financing is tied to the bank's base rate, and the interest
      rate
      under the Singapore credit agreement is tied to SIBOR; all of these interest
      rates may fluctuate over time based on economic conditions. A hypothetical
      100
      basis point (one percentage point) increase in interest rates would have
      resulted in incremental interest expense of approximately $601,000 for the
      year
      ended February 28, 2007 and $400,000 for the year ended February 28, 2006.
      As a
      result, the Company is subject to market risk for changes in interest rates
      and
      could be subjected to increased or decreased interest payments if market rates
      fluctuate and the Company is in a borrowing mode. The Company has not entered
      into any instruments in an effort to manage its interest rate risk.





***Foreign
      Exchange Rate Risk:***





The
      Company has several foreign subsidiaries in Asia, the United Kingdom and Canada.
      The Company does business in more than one dozen countries and currently
      generates approximately 25% of its revenues from outside North America. The
      Company’s ability to sell its products in foreign markets may be affected by
      changes in economic, political or market conditions in the foreign markets
      in
      which the Company does business.





22


**ITEM
      7A.**  **QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (Continued):**





***Foreign
      Exchange Rate Risk (Continued):***





The
      Company’s total assets in its foreign subsidiaries was $80,200,000 and
      $76,100,000 at February 28, 2007 and 2006 respectively, translated into US
      dollars at the closing exchange rates. The Company also acquires certain
      inventory from foreign suppliers and, as such, faces risk due to adverse
      movements in foreign currency exchange rates. These risks could have a material
      impact on the Company’s results in future periods. The potential loss based on
      end of period balances and prevailing exchange rates resulting from a
      hypothetical 10% strengthening of the dollar against foreign currencies was
      not
      material in the quarter or year ended February 28, 2007. The Company does not
      currently employ any currency derivative instruments, futures contracts or
      other
      currency hedging techniques to mitigate its risks in this regard.





***Industry
      Risk:***





The
      electronic component industry is cyclical which can cause significant
      fluctuations in sales, gross profit margins and profits, from year to year.
      For
      example, during calendar 2001, the industry experienced a severe decline in
      the
      demand for electronic components, which caused sales to decrease by 56%. The
      prior year reflected a 74% increase in net sales. It is difficult to predict
      the
      timing of the changing cycles in the electronic component industry.




23


**ITEM
      8.****FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA**




**NU
      HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**




For
                The Years EndedFebruary
                28, 2007
            
            February
                28, 2006
            
            February
                28, 2005(As
                Restated,
              see
                Note 2)
            
            (As
                Restated,
              see
                Note 2)
            
            (As
                Restated,
              see
                Note 2)**NET
                SALES**
            
            $
            737,463,000
            
            $
            561,291,000
            
            $
            467,849,000**COSTS
                AND EXPENSES:**Cost
                of sales
            
            
            624,518,000
            
            
            472,542,000
            
            
            390,268,000Operating
                expenses
            
            
            93,511,000
            
            
            78,091,000
            
            
            70,138,000718,029,000
            
            
            550,633,000
            
            
            460,406,000**INCOME
                FROM OPERATIONS**
            
            
            19,434,000
            
            
            10,658,000
            
            
            7,443,000**OTHER
                (INCOME) EXPENSE:**Interest
                expense
            
            
            3,850,000
            
            
            3,298,000
            
            
            1,920,000Interest
                income
            
            
            (580,000
            )
            
            (371,000
            )
            
            (57,000
            )3,270,000
            
            
            2,927,000
            
            
            1,863,000**INCOME
                BEFORE PROVISION FOR INCOME TAXES AND MINORITY
                INTERESTS**
            
            
            16,164,000
            
            
            7,731,000
            
            
            5,580,000Provision
                for income taxes
            
            
            7,991,000
            
            
            3,888,000
            
            
            2,432,000**INCOME
                BEFORE MINORITY INTERESTS**
            
            
            8,173,000
            
            
            3,843,000
            
            
            3,148,000Minority
                interest in earnings of subsidiaries
            
            
            456,000
            
            
            430,000
            
            
            564,000**NET
                INCOME**
            
            $
            7,717,000
            
            $
            3,413,000
            
            $
            2,584,000**NET
                INCOME PER COMMON SHARE**Basic
            
            $
            .43
            
            $
            .20
            
            $
            .15Diluted
            
            $
            .41
            
            $
            .19
            
            $
            .15**WEIGHTED
                AVERAGE COMMON SHARES OUTSTANDING**Basic
            
            
            17,871,671
            
            
            17,111,102
            
            
            16,877,147Diluted
            
            
            18,641,475
            
            
            17,704,373
            
            
            17,768,649





See
      accompanying notes





F-1


**NU
      HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES**


**CONSOLIDATED
      BALANCE SHEETS**





February
                28, 2007
            
            February
                28, 2006(As
                Restated,
              see
                Note 2)
            
            (As
                Restated,
              see
                Note 2)**-****ASSETS****-****CURRENT
                ASSETS:**Cash
            
            $
            4,747,000
            
            $
            10,873,000Accounts
                receivable - less allowances of $4,985,000 and $4,702,000,
                respectively
            
            
            119,946,000
            
            
            98,418,000Inventories
            
            
            119,311,000
            
            
            125,178,000Prepaid
                expenses and other current assets
            
            
            4,625,000
            
            
            1,917,000**TOTAL
                CURRENT ASSETS**
            
            
            248,629,000
            
            
            236,386,000**PROPERTY,
                PLANT AND EQUIPMENT - NET**
            
            
            3,381,000
            
            
            3,614,000**OTHER
                ASSETS:**Cost
                in excess of net assets acquired
            
            
            8,332,000
            
            
            -Deferred
                tax asset
            
            
            3,082,000
            
            
            3,410,000Subordinated
                note receivable
            
            
            -
            
            
            2,000,000Other
                assets
            
            
            4,055,000
            
            
            1,645,000**TOTAL
                ASSETS**
            
            $
            267,479,000
            
            $
            247,055,000




**-LIABILITIES
                AND SHAREHOLDERS' EQUITY-****CURRENT
                LIABILITIES:**Accounts
                payable
            
            $
            62,410,000
            
            $
            48,352,000Accrued
                expenses
            
            
            8,765,000
            
            
            4,941,000Bank
                credit line - accounts receivable financing
            
            
            2,327,000
            
            
            -Income
                taxes payable
            
            
            8,179,000
            
            
            3,676,000**TOTAL
                CURRENT LIABILITIES**
            
            
            81,681,000
            
            
            56,969,000**LONG-TERM
                LIABILITIES:**Revolving
                credit line
            
            
            30,000,000
            
            
            50,600,000Due
                to seller
            
            
            3,378,000
            
            
            -Deferred
                tax liability
            
            
            2,725,000
            
            
            2,855,000**TOTAL
                LONG-TERM LIABILITIES**
            
            
            36,103,000
            
            
            53,455,000**MINORITY
                INTERESTS IN SUBSIDIARIES**
            
            
            1,948,000
            
            
            1,493,000**COMMITMENTS
                AND CONTINGENCIES****SHAREHOLDERS’
                EQUITY:**Preferred
                stock, $1 par value, 1,000,000 shares authorized; none issued or
                outstanding
            
            
            -
            
            
            -Common
                stock, $.0066 par value, 50,000,000 shares authorized;
              18,158,034
                and 17,431,482 shares issued and outstanding for 2007 and 2006,
                respectively
            
            
            120,000
            
            
            115,000Additional
                paid-in capital
            
            
            53,512,000
            
            
            48,629,000Retained
                earnings
            
            
            94,102,000
            
            
            86,385,000Other
                accumulated comprehensive income (foreign currency
                translation)
            
            
            13,000
            
            
            9,000**TOTAL
                SHAREHOLDERS’ EQUITY**
            
            
            147,747,000
            
            
            135,138,000**TOTAL
                LIABILITIES AND SHAREHOLDERS' EQUITY**
            
            $
            267,479,000
            
            $
            247,055,000See
                accompanying notes





F-2


**NU
      HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY**


(As
      Restated, See Note 2)




Shares
            
            Common
              Stock
            
            Additional
              Paid-in
              Capital
            
            Retained
              Earnings
            
            Accumulated
              Other
              Comprehensive
              Income
                (Loss)
            
            Total
              Shareholders’
              EquityBalance
                at February 28, 2004 previouslyreported
            
            
            16,859,766
            
            $
            111,000
            
            $
            43,935,000
            
            $
            80,651,000
            
            $
            (295,000
            )
            $
            124,402,000Prior
                period adjustments
            
            
            -
            
            
            -
            
            
            468,000
            
            
            (263,000
            )
            
            
            
            
            205,000Balance
                at February 28, 2004 (as restated,see
                Note 2)
            
            
            16,859,766
            
            
            111,000
            
            
            44,403,000
            
            
            80,388,000
            
            
            (295,000
            )
            
            124,607,000Exercise
                of stock options
            
            
            31,881
            
            
            -
            
            
            155,000
            
            
            -
            
            
            -
            
            
            155,000Income
                tax benefit from stock options exercised
            
            
            -
            
            
            -
            
            
            40,000
            
            
            
            
            
            -
            
            
            40,000Foreign
                currency translation
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            302,000
            
            
            302,000Net
                income (as restated, see Note 2)
            
            
            -
            
            
            -
            
            
            
            
            
            2,584,000
            
            
            -
            
            
            2,584,000Balance
                at February 28, 2005 (as restated,see
                Note 2)
            
            
            16,891,647
            
            
            111,000
            
            
            44,598,000
            
            
            82,972,000
            
            
            7,000
            
            
            127,688,000Exercise
                of stock options
            
            
            539,835
            
            
            4,000
            
            
            2,632,000
            
            
            -
            
            
            -
            
            
            2,636,000Income
                tax benefit from stock options exercised
            
            
            -
            
            
            -
            
            
            1,399,000
            
            
            -
            
            
            -
            
            
            1,399,000Foreign
                currency translation
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            2,000
            
            
            2,000Net
                income (as restated, see Note 2)
            
            
            -
            
            
            -
            
            
            -
            
            
            3,413,000
            
            
            -
            
            
            3,413,000Balance
                at February 28, 2006 (as restated,see
                Note 2)
            
            
            17,431,482
            
            
            115,000
            
            
            48,629,000
            
            
            86,385,000
            
            
            9,000
            
            
            135,138,000Exercise
                of stock options
            
            
            463,552
            
            
            3,000
            
            
            2,723,000
            
            
            -
            
            
            -
            
            
            2,726,000Income
                tax benefit from stock options exercised
            
            
            -
            
            
            -
            
            
            1,413,000
            
            
            -
            
            
            -
            
            
            1,413,000Stock
                option expense
            
            
            -
            
            
            -
            
            
            443,000
            
            
            -
            
            
            -
            
            
            443,000Issuance
                of restricted stock
            
            
            263,000
            
            
            2,000
            
            
            304,000
            
            
            -
            
            
            -
            
            
            306,000Foreign
                currency translation
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            4,000
            
            
            4,000Net
                income (as restated, see Note 2)
            
            
            -
            
            
            -
            
            
            -
            
            
            7,717,000
            
            
            -
            
            
            7,717,000Balance
                at February 28, 2007 (as restated,see
                Note 2)
            
            
            18,158,034
            
            $
            120,000
            
            $
            53,512,000
            
            $
            94,102,000
            
            $
            13,000
            
            $
            147,747,000





See
      accompanying notes




F-3


**NU
      HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**




Page
      1
      of 2





For
                The Years EndedFebruary
                28, 2007
            
            February
                28, 2006
            
            February
                28, 2005(As
                Restated,
              see
                Note 2)
            
            (As
                Restated,
              see
                Note 2)
            
            (As
                Restated,
              see
                Note 2)**INCREASE
                (DECREASE) IN CASH AND CASH EQUIVALENTS:****Cash
                flows from operating activities:**Cash
                received from customers
            
            $
            722,922,000
            
            $
            542,550,000
            
            $
            456,115,000Cash
                paid to suppliers and employees
            
            
            (700,393,000
            )
            
            (564,692,000
            )
            
            (476,629,000
            )Interest
                paid
            
            
            (4,129,000
            )
            
            (3,299,000
            )
            
            (1,920,000
            )Interest
                received
            
            
            580,000
            
            
            371,000
            
            
            57,000Income
                taxes paid
            
            
            (2,701,000
            )
            
            (1,863,000
            )
            
            (232,000
            )**Net
                cash provided by (used in) operating activities**
            
            
            16,279,000
            
            
            (26,933,000
            )
            
            (22,609,000
            )**Cash
                flows from investing activities:**Capital
                expenditures
            
            
            (1,069,000
            )
            
            (1,055,000
            )
            
            (834,000
            )Acquisition
                of DT Electronics
            
            
            (6,098,000
            )
            
            -
            
            
            -**Net
                cash (used in) investing activities**
            
            
            (7,167,000
            )
            
            (1,055,000
            )
            
            (834,000
            )**Cash
                flows from financing activities:**Borrowings
                under revolving credit line
            
            
            214,933,000
            
            
            218,645,000
            
            
            142,000,000(Repayments)
                under revolving credit line
            
            
            (236,305,000
            )
            
            (190,845,000
            )
            
            (124,500,000
            )Proceeds
                from exercise of stock options
            
            
            2,726,000
            
            
            2,636,000
            
            
            155,000Realized
                tax benefit of compensation expense
            
            
            1,413,000
            
            
            1,399,000
            
            
            40,000Proceeds
                from settlement of subordinated note
            
            
            2,000,000
            
            
            -
            
            
            -**Net
                cash (used in) provided by financing activities**
            
            
            (15,233,000
            )
            
            31,835,000
            
            
            17,695,000**Effect
                of exchange rate changes**
            
            
            (5,000
            )
            
            2,000
            
            
            302,000**Net
                (decrease) increase in cash and cash equivalents**
            
            
            (6,126,000
            )
            
            3,849,000
            
            
            (5,446,000
            )Cash
                and cash equivalents, beginning of year
            
            
            10,873,000
            
            
            7,024,000
            
            
            12,470,000**Cash
                and cash equivalents, end of year**
            
            $
            4,747,000
            
            $
            10,873,000
            
            $
            7,024,000





See
      accompanying notes




F-4


**NU
      HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS (CONTINUED)**




Page
      2
      of 2





For
                The Years EndedFebruary
                28, 2007
            
            February
                28, 2006
            
            February
                28, 2005(As
                Restated,
              see
                Note 2)
            
            (As
                Restated,
              see
                Note 2)
            
            (As
                Restated,
              see
                Note 2)**RECONCILIATION
                OF NET INCOME TO NET CASH FROM OPERATING
                ACTIVITIES****NET
                INCOME**
            
            $
            7,717,000
            
            $
            3,413,000
            
            $
            2,584,000Adjustments:Depreciation
                and amortization
            
            
            1,392,000
            
            
            1,369,000
            
            
            1,308,000Bad
                debt reserve
            
            
            447,000
            
            
            -
            
            
            285,000Deferred
                income tax
            
            
            198,000
            
            
            (864,000
            )
            
            1,224,000Minority
                interest
            
            
            456,000
            
            
            430,000
            
            
            (186,000
            )Stock
                based compensation
            
            
            749,000
            
            
            -
            
            
            -Changes
                in assets and liabilities - net of effect ofacquisition:Accounts
                receivable
            
            
            (14,541,000
            )
            
            (18,738,000
            )
            
            (11,735,000
            )Inventories
            
            
            9,009,000
            
            
            (43,482,000
            )
            
            (12,967,000
            )Prepaid
                expenses and other current assets
            
            
            (2,697,000
            )
            
            37,000
            
            
            (1,048,000
            )Other
                assets
            
            
            (2,410,000
            )
            
            43,000
            
            
            (135,000
            )Accounts
                payable and accrued expenses
            
            
            11,781,000
            
            
            28,830,000
            
            
            (2,266,000
            )Income
                taxes
            
            
            4,178,000
            
            
            2,029,000
            
            
            327,000**Net
                cash provided by (used in) operating activities**
            
            $
            16,279,000
            
            $
            (26,933,000
            )
            $
            (22,609,000
            )**Supplemental
                Disclosures of Cash Flow****Information**:Non-cash
                transactions:Issuance
                of restricted stock
            
            $
            306,000
            
            $
            -
            
            $
            -





See
      accompanying notes





F-5


**NU
      HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (AS RESTATED)**





1.  ORGANIZATION
      AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:





a. Organization:





Nu
      Horizons Electronics Corp. and its subsidiaries (collectively, the "Company"),
      (both wholly and majority owned) are wholesale and export distributors of
      semiconductor and passive electronic components throughout the United States,
      Asia and Europe.





b. Principles
      of Consolidation:





The
      consolidated financial statements include the accounts of Nu Horizons
      Electronics Corp. and its wholly-owned subsidiaries, NIC Components Corp.
      (“NIC”), Nu Horizons International Corp. (“International”), NUHC Inc. (“NUC”),
      Nu Horizons Asia PTE LTD (“NUA”), Nu Horizons Electronics Pty Ltd (“NUZ”), Nu
      Horizons Electronics Asia Pte Ltd.,, Nu Horizons Electronics Hong Kong Ltd
      (“NUHK”), Nu Horizons Electronics (Shanghai) Co Ltd. (“NUS”), Nu Horizons
      Electronics Europe Limited (“NUE”), DT Electronics Limited (“DT”), Titan Supply
      Chain Services Corp. (“Titan”), Titan Supply Chain Services PTE LTD (“TSC”),
      Titan Supply Chain Services Limited (“TSE”), Nu Horizons Electronics GmbH, Razor
      Electronics (“RAZ”), Nu Exchange (“NUX”) and its majority owned subsidiaries,
      NIC Components Europe Limited (“NIE”), and NIC Components Asia PTE LTD (“NIA”).
      All material intercompany balances and transactions have been
      eliminated.





c. Use
      of
      Estimates:





In
      preparing financial statements in accordance with accounting principles
      generally accepted in the United States of America, management makes certain
      estimates and assumptions, where applicable, that affect the reported amounts
      of
      assets, liabilities and disclosures of contingent assets and liabilities at
      the
      date of the financial statements, as well as reported amounts of revenues and
      expenses during the reporting period. While actual results could differ from
      those estimates, management does not expect such variances, if any, to have
      a
      material effect on the financial statements.





d. Concentration
      of Credit Risk/Fair Value:





Financial
      instruments that potentially subject the Company to concentrations of credit
      risk consist principally of cash and accounts receivable.





The
      Company maintains, at times, deposits in federally insured financial
      institutions in excess of federally insured limits. Management attempts to
      monitor the soundness of the financial institutions and believes the Company’s
      risk is negligible. Concentrations with regard to accounts receivable are
      limited due to the Company’s large customer base.





The
      carrying amounts of cash, accounts receivable, accounts payable and accrued
      expenses approximate fair value due to the short-term nature of these items.
      The
      carrying amount of long-term debt also approximates fair value since the
      interest rates on these instruments approximate market interest
      rates.





e. Cash
      and
      Cash Equivalents:





For
      purposes of the statements of cash flows, the Company considers all highly
      liquid investments purchased with a remaining maturity of three months or less
      to be cash equivalents.





f.    
      Allowance for Doubtful Accounts:





The
      Company maintains allowances for doubtful accounts for estimated losses
      resulting from the inability of its customers to make required payments. The
      allowances for doubtful accounts are determined using a combination of factors,
      including the length of time the receivables are outstanding, the current
      business environment, and historical experience.





F-6


**NU
      HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (AS RESTATED)**


**(CONTINUED)**





1.  ORGANIZATION
      AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):





g. Inventories:





Inventories,
      which consist primarily of goods held for resale, are stated at the lower of
      cost (first-in, first-out method) or market. In excess of 90% of our total
      inventories are covered by product line distributor agreements whereby the
      Company has the right to return slow-moving and obsolete inventory to our
      suppliers. Obsolescence charges for inventory not covered by such agreements
      have not been material to date.





h. Depreciation:





Depreciation
      is provided using the straight-line method as follows:





Office
                equipment
            
            
            5
                yearsFurniture
                and fixtures
            
            
            5
                - 12 yearsComputer
                equipment
            
            
            5
                years





Leasehold
      improvements are amortized over the term of the lease. Maintenance and repairs
      are charged to operations and major improvements are capitalized. Upon
      retirement, sale or other disposition, the associated cost and accumulated
      depreciation are eliminated from the accounts and any resulting gain or loss
      is
      included in operations.





i. Income
      Taxes:





The
      Company follows the asset and liability method of accounting for income taxes.
      Deferred income tax assets and liabilities are recognized for the estimated
      future tax impact of differences between the financial statement carrying
      amounts of assets and liabilities and their respective tax bases. Deferred
      income tax assets and liabilities are measured considering all expected future
      events other than enactments of changes in tax laws or rates. Based upon
      historical and projected levels of taxable income and analysis of other key
      factors, the Company records a valuation allowance against its deferred tax
      assets, as deemed necessary, to state such assets at their net realizable value.
      The effect on deferred income tax assets and liabilities of a change in tax
      rates is recognized in earnings in the period in which the new rate is
      enacted.





Effective
      March 1, 2007, we adopted the Financial Accounting Standards Board (“FASB”)
      Interpretation No. 48, ** *Accounting
      for Uncertainty in Income Taxes, an* ** *interpretation
      of FASB Statement No. 109*  (“FIN
      48”).  FIN 48 clarifies the accounting for uncertainty in income taxes
      recognized in a company’s financial statements and prescribes a recognition
      threshold and measurement attribute for the financial statement recognition
      and
      measurement of tax positions taken or expected to be taken in a tax
      return.  For benefits to be recognized in the financial statements, a tax
      position must be more-likely-than-not to be sustained upon examination by the
      taxing authorities based on the technical merits of the position. The amount
      recognized is measured as the largest amount of benefit that is greater than
      50
      percent likely of being realized upon ultimate settlement. The interpretation
      also provides guidance on de-recognition, classification, interest and
      penalties, accounting in interim periods, disclosure and
      transition.





In
      preparing the fiscal 2007 tax returns, developing the fiscal 2008 tax provision,
      and reviewing our accounting for income taxes in connection with the application
      of FIN 48, we determined that there were errors in the prior years' tax returns
      and the application of FASB Statement No. 109 - Accounting for Income Taxes.
      Consequently, there was an understatement of our provision for income tax
      expense for prior periods and the related U.S. income tax obligations, requiring
      the restatement of our financial statements in this Form 10-K/A for the fiscal
      years ended February 28, 2005, 2006 and 2007, as well as similar prior period
      adjustments (see Note 2). After giving effect to the restatement, the subsequent
      adoption of FIN 48 did not have a material effect on our financial statements. In
      addition, we do not anticipate material changes to this liability for the next
      twelve months, other than additional accruals for interest.





F-7


**NU
      HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (AS RESTATED)**


**(CONTINUED)**





1.  ORGANIZATION
      AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):





i. Income
      Taxes (Continued):





With
      few
      exceptions, the Company is no longer subject to U.S. federal, state or local
      income tax examinations by tax authorities for years prior to fiscal 2005.
      Earlier years related to certain foreign jurisdictions remain subject to
      examination. Various state and foreign income tax returns are currently under
      examination. While we intend to contest any future tax assessments for potential
      audit issues, no assurance can be provided that we would ultimately
      prevail.





j. Revenue
      Recognition/Shipping and Handling Costs:





The
      Company recognizes revenue in accordance with the Securities and Exchange
      Commission Staff Accounting Bulletin No. 104, "Revenue Recognition" ("SAB 104").
      Under SAB 104, revenue is recognized when there is persuasive evidence of an
      arrangement, delivery has occurred or services have been rendered, the sales
      price is determinable, and collectibility is reasonably assured. Revenue
      typically is recognized at time of shipment. Sales are recorded net of
      discounts, rebates, and returns in accordance with EITF 01-09.





Amounts
      related to shipping and handling that are billed to customers as part of sales
      transactions are reflected as a reduction of operating expenses and aggregated
      $1,709,000, $1,235,000 and $1,285,000 for the fiscal years ended 2007, 2006
      and
      2005, respectively. Shipping and handling costs incurred by the Company are
      included in costs of sales and aggregated $932,000, $926,000 and $1,314,000
      for
      the fiscal years ended 2007, 2006 and 2005, respectively.





k. Advertising
      and Promotion Costs:





Advertising
      and promotion costs, which are included in general and administrative expenses,
      are expensed as incurred. For the fiscal years ended 2007, 2006 and 2005, such
      costs aggregated $385,000, $203,000 and $189,000, respectively.





l. Earnings
      Per Common Share:





The
      Company utilizes Statement of Financial Accounting Standards No. 128, "Earnings
      Per Share". Basic earnings per share is calculated on the weighted effect of
      all
      common shares issued and outstanding, and is calculated by dividing net income
      available to common stockholders by the weighted average shares outstanding
      during the period. Diluted earnings per share, which is calculated by dividing
      net income available to common stockholders by the weighted average number
      of
      common shares used in the basic earnings per share calculation, plus the number
      of common shares that would be issued assuming conversion of all potentially
      dilutive securities outstanding. Such securities, shown below, presented on
      a
      common share equivalent basis and outstanding as of February 28, 2007, 2006
      and
      2005 have been included in the per share computations:





Years
                Ended February 282007
            
            2006
            
            2005Weighted
                average number ofshares
                outstanding
            
            
            17,871,671
            
            
            17,111,102
            
            
            16,877,147Assumed
                conversion of stockoptions
            
            
            769,804
            
            
            593,271
            
            
            891,50218,641,475
            
            
            17,704,373
            
            
            17,768,649




F-8


**NU
      HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (AS RESTATED)**


**(CONTINUED)**





1.  ORGANIZATION
      AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):





m. Stock-Based
      Compensation:





Effective
      March 1, 2006, the Company adopted the provisions of FASB Statement No. 123
      (revised 2004), "Share-Based Payment" and the Securities and Exchange Commission
      Staff Accounting Bulletin No. 107 (collectively "Statement No. 123R"), which
      requires share-based payment ("SBP") awards exchanged for employee services
      to
      be measured at fair value and expensed in the consolidated statements of
      operations over the requisite employee service period.





Prior
      to
      March 1, 2006, the Company accounted for SBP awards under Accounting Principles
      Board Opinion No. 25, "Accounting for Stock Issued to Employees", which utilized
      the intrinsic value method and did not require any expense to be recorded in
      the
      consolidated financial statements if the exercise price of the award was not
      less than the market price of the underlying stock on the date of grant. The
      Company elected to adopt, for periods prior to March 1, 2006, the disclosure
      requirements of FASB Statement No. 123, "Accounting for Stock-Based
      Compensation", as amended by FASB Statement No. 148, "Accounting for Stock-Based
      Compensation - Transition and Disclosure" (collectively, "Statement No. 123")
      which used a fair value based method of accounting for SBP awards.





Statement
      No. 123R requires companies to record compensation expense for stock options
      measured at fair value, on the date of grant, using an option-pricing model.
      The
      fair value of the Company's stock options is determined using the Black-Scholes
      valuation model, which is consistent with the Company's valuation techniques
      previously utilized under Statement No. 123.





The
      Company adopted the modified prospective transition method provided for under
      Statement No. 123R and, accordingly, did not restate prior period amounts.
      Under
      this transition method, compensation expense for the year ended February 28,
      2007 includes compensation expense for all SBP awards granted prior to, but
      not
      yet vested as of, March 1, 2006 based on the grant date fair value estimated
      in
      accordance with the original provisions of Statement No. 123. Stock-based
      compensation expense for all SBP awards granted after March 1, 2006 is based
      on
      the grant date fair value estimated in accordance with the provisions of
      Statement No. 123R. Stock-based compensation expense includes an estimate for
      forfeitures and is recognized over the expected term of the award on a
      straight-line basis upon adoption of Statement No. 123R. Upon adoption of
      Statement No. 123R, the Company evaluated the need to record a cumulative effect
      adjustment relating to estimated forfeitures for unvested previously issued
      awards and concluded the impact was not material.





As
      a
      result of adopting Statement No. 123R, the Company recorded, as a component
      of
      selling, general and administrative expenses, a charge of $749,000 ($473,000
      net
      of related taxes or $.03 per share on a basic and diluted basis) for the year
      ended February 28, 2007, relating to the expensing of stock options and
      restricted stock.





Statement
      No. 123R requires that the realized tax benefit related to the excess of the
      deductible amount over the compensation expense recognized be reported as a
      financing cash flow rather than as an operating cash flow, as required under
      previous accounting guidance. As a result, the related excess tax benefits
      for
      the year ended February 28, 2007 of $1,413,000 is classified as a reduction
      in
      cash flows from operating activities and as a cash inflow from financing
      activities.




F-9


**NU
      HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (AS RESTATED)**


**(CONTINUED)**





1.  ORGANIZATION
      AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):





m. Stock-Based
      Compensation (Continued):





If
      compensation cost for the Company’s stock-based compensation plans had been
      determined in a manner consistent with the fair value approach described in
      SFAS
      No. 123R, the Company’s net income and net income per share as reported would
      have been reduced to the pro forma amounts indicated below.





2006
            
            2005Net
                income:As
                reported
            
            $
            3,413,000
            
            $
            2,584,000Stock-based
                compensationcost
                - net of tax
            
            
            188,000
            
            
            520,000Pro
                forma
            
            $
            3,225,000
            
            $
            2,064,000Basic
                earnings per share:As
                reported
            
            $
            .20
            
            $
            .15Pro
                forma
            
            $
            .19
            
            $
            .12Diluted
                earnings per share:As
                reported
            
            $
            .19
            
            $
            .15Pro
                forma
            
            $
            .18
            
            $
            .12





Options
      vest over several years and new options are generally granted each year. Because
      of these factors, the pro forma effect shown above may not be representative
      of
      the effect of SFAS No. 123R in future years.





In
      November 2005, the FASB issued FASB Staff Position FAS123R-3, Transition
      Election Related to Accounting for the Tax Effects of Share-Based Payment Awards
      ("FSP"). We have elected to follow the alternative transition method as
      described in the FSP for computing our additional paid-in capital pool. In
      addition, we treat the tax deductions from stock options as being realized
      when
      they reduce taxes payable in accordance with the principles and timing under
      the
      relevant tax law. Under this transition method, compensation cost is recognized
      on or after the required effective date for the portion of outstanding awards
      for which the requisite service has not yet been rendered, based on the
      grant-date fair value of those awards previously calculated under SFAS No.
      123
      for pro forma disclosure purposes. The financial statements for periods prior
      to
      the date of adoption have not been restated in accordance with the modified
      prospective application.





The
      fair
      value of each option was estimated on the date of grant using the Black-Scholes
      method with the following weighted average assumptions.





2007
            
            2006
            
            2005**Option
                Plans:**Dividends
            
            
            -
            
            
            -
            
            
            -Expected
                term
            
            
            2
                - 7 years
            
            
            2
                - 7 years
            
            
            2
                -7 yearsRisk
                free interest rate
            
            
            4.0
            %
            
            4.0
            %
            
            2.7
            %Volatility
                rate
            
            
            55.6
            %
            
            52.3
            %
            
            37.5
            %





F-10


**NU
      HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (AS RESTATED)**


**(CONTINUED)**





1.  ORGANIZATION
      AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):





m. Stock-Based
      Compensation (Continued):





The
      following table shows the weighted average fair value of options using the
      fair
      value approach under SFAS 123:





2007
            
            2006
            
            2005Weighted
                average fair value of options granted during the period
            
            $
            7.11
            
            $
            3.89
            
            $
            3.72





n. Cost
      in
      Excess of Net Assets Acquired ("Goodwill") and Other Indefinite-Lived
      Intangibles:





All
      intangible assets resulted from the acquisition of DT Electronics on August
      29,
      2006 as discussed in Note 3. The Company will perform an annual impairment
      test
      each year on or near the acquisition date for DT Electronics, or earlier if
      indicators of potential impairment exist, to evaluate such intangibles. Such
      intangibles are considered impaired if the carrying amount of the reporting
      unit
      exceeds its estimated fair value. In assessing the recoverability of such
      intangibles, the Company will review both quantitative and qualitative factors
      to support its assumptions with regard to fair value. The fair value of a
      reporting unit is estimated using a weighted average multiple of earnings before
      interest and taxes from comparable companies. In determining the fair value,
      the
      Company will make certain judgments, including the identification of reporting
      units and the selection of comparable companies. If these estimates or their
      related assumptions change in the future as a result of changes in strategy
      and/or market conditions, the Company may be required to record an impairment
      charge. Management does not believe that there is any impairment at February
      28,
      2007.





o. Foreign
      Currency Translation/Other Comprehensive Income:





Assets
      and liabilities of the Company’s foreign subsidiaries are translated at the
      balance sheet exchange rates, while income and expenses are translated at
      average rates for the period. Translation gains and losses are reported as
      a
      component of accumulated other comprehensive income on the statement of
      shareholders’ equity in accordance with SFAS No. 130, “Reporting Comprehensive
      Income”.





p. Reclassifications:





Certain
      prior years’ information has been reclassified to conform to the current year’s
      reporting presentation.





q. Recent
      Accounting Pronouncements Affecting the Company:





In
      September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" (SFAS
      No. 157). SFAS No. 157 defines fair value, establishes a framework for measuring
      fair value in generally accepted accounting principles and expands disclosures
      about fair value measurements. Specifically, this Statement sets forth a
      definition of fair value, and establishes a hierarchy prioritizing the inputs
      to
      valuation techniques, giving the highest priority to quoted prices in active
      markets for identical assets and liabilities and the lowest priority to
      unobservable inputs. The provisions of SFAS No. 157 are generally required
      to be
      applied on a prospective basis, except to certain financial instruments
      accounted for under SFAS No. 133, "Accounting for Derivative Instruments and
      Hedging Activities", for which the provisions of SFAS No. 157 should be applied
      retrospectively. The Statement is effective for financial statement issued
      for
      fiscal years beginning after November 15, 2007 and interim periods within those
      fiscal years. The Company will adopt SFAS No. 157 in the first quarter of fiscal
      2009 and is still evaluating the effect, if any, on its financial position
      or
      results or operations.





F-11


**NU
      HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (AS RESTATED)**


**(CONTINUED)**





1.  ORGANIZATION
      AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):





q. Recent
      Accounting Pronouncements Affecting the Company:





In
      September 2006, the FASB issued SFAS No. 158, "Employers' Accounting for Defined
      Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements
      No. 87, 88, 106 and 132R" (SFAS No. 158). SFAS No. 158 requires an employer
      to
      recognize the funded status of its defined benefit pension and postretirement
      plans as an asset or liability in its statement of financial position and to
      recognize changes in that funded status in the year in which the changes occur
      through comprehensive income. In addition, SFAS No. 158 requires an employer
      to
      measure the funded status of a plan as of the date of the employer's fiscal
      year-end statement of financial position, which is consistent with the
      measurement date for the Company's defined benefit plans. SFAS No. 158 is
      effective as of the end of the fiscal year ending after December 15, 2006.
      The
      Company has adopted this standard for the fiscal year ending February 28,
      2007.





In
      February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
      Financial Assets and Financial Liabilities" (SFAS No. 159). SFAS No. 159 permits
      entities to choose to measure, on an item-by-item basis, specified financial
      instruments and certain other items at fair value. Unrealized gains and losses
      on items for which the fair value option has been elected are required to be
      reported in earnings at each reporting date. SFAS No. 159 is effective for
      fiscal years beginning after November 15, 2007, the provisions of which are
      required to be applied prospectively. The Company expects to adopt SFAS No.
      159
      in the first quarter of fiscal 2009.





In
      September 2006, the SEC staff issued Accounting Bulletin No. 108, "Considering
      the Effects of Prior Year Misstatements when Quantifying Misstatements in
      Current Year Financial Statements" (SAB No. 108). SAB No. 108 was issued in
      order to eliminate the diversity in practice surrounding how public companies
      quantify financial statement misstatements. SAB No. 108 requires that
      registrants quantify errors using both a balance sheet and income statement
      approach and evaluate whether either approach results in a misstated amount
      that, when all relevant quantitative factors are considered, is
      material.





2.  RESTATEMENT
      OF FINANCIAL STATEMENTS:





In
      preparing the fiscal 2007 tax returns, developing the fiscal 2008 tax provision,
      and reviewing our accounting for income taxes in connection with the application
      of the provision of Financial Accounting Standards Board ("FASB") Interpretation
      No. 48 (FIN 48), "Accounting for Uncertainty in Income Tax - an Interpretation
      of FASB Statement No. 109", we determined that there were errors in the prior
      years' tax returns and the application of FASB Statement No. 109 - Accounting
      for Income Taxes. Consequently, there was an understatement of our provision
      for
      income tax expense for prior periods and the related U.S. income tax
      obligations, a majority of which related to our foreign operations, requiring
      the restatement of our financial statements for the fiscal years ended February
      28, 2005 through February 28, 2007, in this Form 10-K/A and in certain prior
      years, treated as prior period adjustments.





As
      a
      result of the tax adjustments described above and noted below, our management
      concluded, and informed the Audit Committee of the Company's Board of Directors
      and in a current report on Form 8-K filed on October 3, 2007, that (1) our
      previously issued financial statements and any related reports of our
      independent registered public accounting firm for the fiscal years ended
      February 28, 2002 through 2007 should no longer be relied upon because of the
      aforementioned errors in those financial statements, (2) our earnings and press
      releases and similar communications should no longer be relied upon to the
      extent that they relate to these financial statements, and (3) our financial
      statements and Original Form 10-K for the fiscal year ended February 28, 2007
      should be restated to reflect the correct accounting for income taxes discussed
      above.





F-12




**NU
      HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (AS RESTATED)**


**(CONTINUED)**





2.  RESTATEMENT
      OF FINANCIAL STATEMENTS (Continued):





The
      following table summarizes the impact of the restatement discussed above on
      the
      previously issued Consolidated Financial Statements as of February 28, 2007
      and
      2006 and for the years ended February 28, 2007, 2006 and 2005 and the prior
      period adjustment as of February 28, 2004. The adjustments below include
      interest and penalties associated with filing amended tax returns related to
      this restatement.





**As
                of February 28, 2007****As
                Previously Reported**
            
            **Adjustment**
            
            **As
                Restated****Consolidated
                Balance Sheet**Prepaid
                expenses and other current assets
            
            $
            4,454,000
            
            $
            171,000
            
            $
            4,625,000Deferred
                tax asset
            
            
            -
            
            
            3,082,000
            
            
            3,082,000Accrued
                expenses
            
            
            8,579,000
            
            
            186,000
            
            
            8,765,000Income
                taxes payable
            
            
            3,927,000
            
            
            4,252,000
            
            
            8,179,000Deferred
                tax liability
            
            
            2,369,000
            
            
            356,000
            
            
            2,725,000Minority
                Interest
            
            
            1,912,000
            
            
            36,000
            
            
            1,948,000Additional
                paid-in capital
            
            
            50,670,000
            
            
            2,842,000
            
            
            53,512,000Retained
                earnings
            
            
            98,521,000
            
            
            (4,419,000
            )
            
            94,102,000





**As
                of February 28, 2006****As
                Previously Reported**
            
            **Adjustment**
            
            **As
                Restated****Consolidated
                Balance Sheet**Prepaid
                expenses and other current assets
            
            $
            1,746,000
            
            $
            171,000
            
            $
            1,917,000Deferred
                tax asset
            
            
            -
            
            
            3,410,000
            
            
            3,410,000Accrued
                expenses
            
            
            4,515,000
            
            
            426,000
            
            
            4,941,000Income
                taxes payable
            
            
            1,525,000
            
            
            2,151,000
            
            
            3,676,000Deferred
                tax liability
            
            
            1,339,000
            
            
            1,516,000
            
            
            2,855,000Minority
                Interest
            
            
            1,487,000
            
            
            6,000
            
            
            1,493,000Additional
                paid-in capital
            
            
            46,924,000
            
            
            1,705,000
            
            
            48,629,000Retained
                earnings
            
            
            88,608,000
            
            
            (2,223,000
            )
            
            86,385,000





**As
                of February 28, 2004****As
                Previously Reported**
            
            **Adjustment**
            
            **As
                Restated****Prior
                period adjustments - Statement of Changes in Shareholders'
                Equity**Additional
                paid-in capital
            
            $
            43,935,000
            
            $
            468,000
            
            $
            44,403,000Retained
                earnings
            
            
            80,651,000
            
            
            (263,000
            )
            
            80,388,000Total
                shareholders' equity
            
            
            124,402,000
            
            
            205,000
            
            
            124,607,000





**For
                the Year Ended February 28, 2007****As
                Previously Reported**
            
            **Adjustment**
            
            **As
                Restated****Consolidated
                Statement of Operations**Provision
                for income taxes
            
            $
            5,826,000
            
            $
            2,165,000
            
            $
            7,991,000Minority
                interest in earnings of subsidiaries
            
            
            425,000
            
            
            31,000
            
            
            456,000Net
                income
            
            
            9,913,000
            
            
            (2,196,000
            )
            
            7,717,000Net
                income per common share:Basic
            
            $
            .55
            
            $
            (.12
            )
            $
            .43Diluted
            
            $
            .53
            
            $
            (.12
            )
            $
            .41





F-13


**NU
      HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (AS RESTATED)**


**(CONTINUED)**





2.  RESTATEMENT
      OF FINANCIAL STATEMENTS (Continued):





**For
                the Year Ended February 28, 2006****As
                Previously Reported**
            
            **Adjustment**
            
            **As
                Restated****Consolidated
                Statement of Operations**Provision
                for income taxes
            
            $
            2,560,000
            
            $
            1,328,000
            
            $
            3,888,000Minority
                interest in earnings of subsidiaries
            
            
            287,000
            
            
            143,000
            
            
            430,000Net
                income
            
            
            4,884,000
            
            
            (1,471,000
            )
            
            3,413,000Net
                income per common share:Basic
            
            $
            .29
            
            $
            (.09
            )
            $
            .20Diluted
            
            $
            .28
            
            $
            (.09
            )
            $
            .19





**For
                the Year Ended February 28, 2005****As
                Previously Reported**
            
            **Adjustment**
            
            **As
                Restated****Consolidated
                Statement of Operations**Provision
                for income taxes
            
            $
            2,023,000
            
            $
            409,000
            
            $
            2,432,000Minority
                interest in earnings of subsidiaries
            
            
            484,000
            
            
            80,000
            
            
            564,000Net
                income
            
            
            3,073,000
            
            
            (489,000
            )
            
            2,584,000Net
                income per common share:Basic
            
            $
            .18
            
            $
            (.03
            )
            $
            .15Diluted
            
            $
            .17
            
            $
            (.02
            )
            $
            .15





**For
                the Year Ended February 28, 2007****As
                Previously Reported**
            
            **Adjustment**
            
            **As
                Restated****Consolidated
                Statement of Cash Flows**Income
                taxes paid
            
            $
            (1,564,000
            )
            $
            (1,137,000
            )
            $
            (2,701,000
            )Realized
                tax benefit of compensation expense
            
            
            276,000
            
            
            1,137,000
            
            
            1,413,000Net
                income
            
            
            9,913,000
            
            
            (2,196,000
            )
            
            7,717,000Deferred
                income tax
            
            
            1,030,000
            
            
            (832,000
            )
            
            198,000Minority
                interest
            
            
            425,000
            
            
            31,000
            
            
            456,000Accounts
                payable and accrued expenses
            
            
            12,022,000
            
            
            (241,000
            )
            
            11,781,000Income
                taxes
            
            
            2,077,000
            
            
            2,101,000
            
            
            4,178,000





**For
                the Year Ended February 28, 2006****As
                Previously Reported**
            
            **Adjustment**
            
            **As
                Restated****Consolidated
                Statement of Cash Flows**Income
                taxes paid
            
            $
            (464,000
            )
            $
            (1,399,000
            )
            $
            (1,863,000
            )Realized
                tax benefit of compensation expense
            
            
            -
            
            
            1,399,000
            
            
            1,399,000Net
                income
            
            
            4,884,000
            
            
            (1,471,000
            )
            
            3,413,000Deferred
                income tax
            
            
            372,000
            
            
            (1,236,000
            )
            
            (864,000
            )Minority
                interest
            
            
            287,000
            
            
            143,000
            
            
            430,000Accounts
                payable and accrued expenses
            
            
            28,169,000
            
            
            661,000
            
            
            28,830,000Income
                taxes
            
            
            1,525,000
            
            
            504,000
            
            
            2,029,000





**For
                the Year Ended February 28, 2005****As
                Previously Reported**
            
            **Adjustment**
            
            **As
                Restated****Consolidated
                Statement of Cash Flows**Income
                taxes paid
            
            $
            (192,000
            )
            $
            (40,000
            )
            $
            (232,000
            )Realized
                tax benefit of compensation expense
            
            
            -
            
            
            40,000
            
            
            40,000Net
                income
            
            
            3,073,000
            
            
            (489,000
            )
            
            2,584,000Deferred
                income tax
            
            
            1,888,000
            
            
            (664,000
            )
            
            1,224,000Minority
                interest
            
            
            (266,000
            )
            
            80,000
            
            
            (186,000
            )Prepaid
                expenses and other current assets
            
            
            (989,000
            )
            
            (59,000
            )
            
            (1,048,000
            )Accounts
                payable and accrued expenses
            
            
            (3,031,000
            )
            
            765,000
            
            
            (2,266,000
            )Income
                taxes
            
            
            -
            
            
            327,000
            
            
            327,000





F-14


**NU
      HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (AS RESTATED)**


**(CONTINUED)**





3.  ACQUISITION:





On
      August
      29, 2006, the Company acquired the outstanding shares of DT Electronics, an
      entity engaged in the electronic components distribution business in the United
      Kingdom. The operating results of DT are reflected in the accompanying financial
      statements since the date of acquisition.





The
      initial purchase price for DT as of the acquisition date was $5,731,000. The
      transaction also provides for potential additional payments to the sellers
      in
      three installments through 2009 from a guaranteed minimum of £850,000
      (approximately $1,611,000) to a maximum of £2,549,000 (approximately
      $5,000,000), which amounts are calculated using current exchange rates. Payments
      of any amounts above the minimum are contingent upon the attainment of certain
      earnings milestones by DT during the three year period. The Company has accrued
      the maximum estimated payment since DT is expected to achieve the earnings
      milestones established by the agreement. During the fourth quarter of fiscal
      2007, an additional $75,000 of transaction costs (related to legal and
      accounting services) were recorded, thus increasing the value of
      Goodwill.





The
      acquisition has been accounted for using the purchase method of accounting
      in
      accordance with SFAS No. 141, "Business Combinations." The purchase price was
      first allocated to tangible and any material identifiable intangible assets.
      The
      excess purchase price was allocated to goodwill.





The
      following table summarizes the estimated fair values of assets acquired and
      liabilities assumed at the date of acquisition:





Purchase
                price (including guaranteed
              future
                payments of approximately $4,989,000)
            
            $
            10,720,000Direct
                acquisition costs
            
            
            367,000Total
                purchase price
            
            $
            11,087,000Allocation
                of purchase price:Accounts
                receivable
            
            $
            7,434,000Inventory
            
            
            3,142,000Other
                current assets
            
            
            11,000Fixed
                assets
            
            
            91,000Accounts
                payable/accrued expenses
            
            
            (4,490,000
            )Bank
                credit line
            
            
            (3,099,000
            )Taxes
                payable
            
            
            (325,000
            )Comprehensive
                income
            
            
            (9,000
            )Cost
                in excess of net assets acquired (Goodwill and other Indefinite-Lived
                Intangibles)
            
            
            8,332,000Total
                purchase price
            
            $
            11,087,000





The
      following unaudited pro forma information of the Company is provided to give
      effect to the DT acquisition assuming it occurred as of March 1, 2004, the
      beginning of the earliest period presented:





Years
                EndedFebruary
                28, 2007
            
            February
                28, 2006
            
            February
                28, 2005(As
                Restated,
              see
                Note 2)
            
            (As
                Restated,
              see
                Note 2)
            
            (As
                Restated,
              see
                Note 2)Net
                sales
            
            $
            755,279,000
            
            $
            584,315,000
            
            $
            486,736,000Net
                income
            
            $
            8,516,000
            
            $
            4,119,000
            
            $
            2,896,000Net
                income per share:Basic
            
            $
            .48
            
            $
            .24
            
            $
            .17Diluted
            
            $
            .46
            
            $
            .23
            
            $
            .16





F-15





**NU
      HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (AS RESTATED)**


**(CONTINUED)**





3.  ACQUISITION
      (Continued):





The
      pro
      forma amounts above reflect interest on the purchase price assuming the
      acquisition occurred as of March 1, 2004, with interest calculated at the
      Company's borrowing rate under its credit facility for the respective period.
      The pro forma net earnings above assumes an income tax provision at the
      Company's consolidated tax rate for the respective year. The information
      presented above is for illustrative purposes only and is not indicative of
      results that may have been achieved if the acquisition had occurred as of the
      beginning of the Company's 2005 fiscal year or of future operating
      performance.





4.  PROPERTY,
      PLANT AND EQUIPMENT:





Property,
      plant and equipment, which is recorded at cost, consists of the
      following:




February
                282007
            
            2006Furniture,
                fixtures and equipment
            
            $
            8,895,000
            
            $
            8,652,000Computer
                equipment
            
            
            8,204,000
            
            
            7,321,000Leasehold
                improvements
            
            
            1,255,000
            
            
            1,255,00018,354,000
            
            
            17,228,000Less:
                accumulated depreciation and amortization
            
            
            14,973,000
            
            
            13,614,000$
            3,381,000
            
            $
            3,614,000





Depreciation
      expense for the 2007, 2006 and 2005 years aggregated $1,392,000, $1,369,000
      and
      $1,308,000, respectively.





5.  SUBORDINATED
      NOTE RECEIVABLE:





On
      August
      23, 2001, the Company completed the sale of the assets of its
      contract-manufacturing subsidiary, Nu Visions Manufacturing, Inc. (“Nu
      Visions”). The selling price of $31,563,000 consisted of $2,000,000 in a
      subordinated note and $29,563,000 in cash. Pursuant to the sale of this
      subsidiary, the Company received a $2,000,000 Junior Subordinated Note, dated
      August 23, 2001 issued by the buyer as part of the purchase price. The note
      had
      a maturity date of May 14, 2007 and was subordinate in right of payment to
      all
      existing and future indebtedness of the issuer with interest on the principal
      amount from the issue date to and including the maturity date, at a rate of
      8%
      per annum. On August 29, 2006, this note was fully paid, including accrued
      interest of $350,000.





6.  ACCRUED
      EXPENSES:





Accrued
      expenses consist of the following:




February
                282007
            
            2006(As
                Restated)
            
            (As
                Restated)Commissions
            
            $
            1,662,000
            
            $
            -Due
                to seller - current (see Note 3)
            
            
            1,611,000
            
            
            1,629,000Executive
                bonuses
            
            
            1,246,000
            
            
            538,000Retirement
                plan (see Note 12)
            
            
            1,200,000
            
            
            600,000Payroll
                and related benefits
            
            
            864,000
            
            
            274,000Other
                miscellaneous expenses
            
            
            2,182,000
            
            
            1,900,000Total
            
            $
            8,765,000
            
            $
            4,941,000





F-16


**NU
      HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (AS RESTATED)**


**(CONTINUED)**





7.  DEBT:





On
      January 31, 2007, the Company entered into an amended and restated secured
      revolving line of credit agreement with eight banks, which currently provides
      for maximum borrowings of $150,000,000 (the "Revolving Credit Line"). The Credit
      Agreement provides for borrowings utilizing an asset based formula predicated
      on
      a certain percentage of outstanding domestic accounts receivable and inventory
      levels at any given month end. Borrowings under the Credit Agreement bear
      interest at either (i) the lead bank’s prime rate or (ii) LIBOR plus 150 basis
      points, at the option of the Company, through September 30, 2011, the due date
      of the loan. Direct borrowings under the Credit Agreement were $30,000,000
      at
      February 28, 2007 and $50,600,000 at February 28, 2006. LIBOR rates ranged
      from
      6.49% to 6.90% at February 28, 2007. There were no notes outstanding bearing
      interest at the prime rate at February 28, 2007. As of the end of each of the
      fiscal periods, the Company was in compliance with all of the required bank
      covenants under the Credit Agreement.





The
      Company also has a receivables financing agreement with a bank in England (the
      "Bank Credit Line"), which provides for maximum borrowings of £2.5 million
      (approximately $4.6 million) with interest at the bank's base rate plus 1.75%
      (7% at February 28, 2007). Borrowings under the Bank Credit Line were £1,181,000
      ($2,327,000) at February 28, 2007.





On
      November 20, 2006, the Company entered a revolving credit agreement with a
      Singapore bank to provide a $30,000,000 secured line of credit to the Company’s
      Asian subsidiaries and thereby finance the Company’s Asian operations.
      Borrowings under the agreement utilize an asset based formula based on a certain
      percentage of outstanding accounts receivables and inventory levels at any
      given
      month end. Borrowings under the Singapore credit line bear interest at SIBOR
      plus 1.5%. As part of this agreement, the Company must maintain a compensating
      balance of $2,250,000, which amount is included in other assets. At February
      28,
      2007, there were no borrowings under this credit line.





F-17


**NU
      HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (AS RESTATED)**


**(CONTINUED)**





8.  STOCK-BASED
      COMPENSATION PLANS:





a. Stock
      Options:





Stock
      options granted to date under each of the Company’s 1998 and 2000 Stock Option
      Plans and 2000 and 2002 Key Employee Stock Option Plans generally expire ten
      years after the date of grant and become exercisable in two equal annual
      installments commencing one year from date of grant. Stock options granted
      under
      the Company’s Outside Director Stock Option Plan and 2000 and 2002 Outside
      Directors’ Stock Option Plans expire ten years after the date of grant and
      become exercisable in three equal annual installments on the date of grant
      and
      the succeeding two anniversaries thereof.





A
      summary
      of options granted and related information for the three years ended February
      28, 2007 is as follows:




Options
            
            Weighted
                AverageExercise
                PriceOutstanding
                February 29, 2004
            
            
            3,341,262Granted
            
            
            121,000
            
            $
            7.83Exercised
            
            
            (31,981
            )
            
            4.85Cancelled
            
            
            (56,788
            )
            
            9.39Outstanding
                February 28, 2005
            
            
            3,373,493
            
            
            6.69Granted
            
            
            135,500
            
            $
            8.55Exercised
            
            
            (539,835
            )
            
            4.88Cancelled
            
            
            (405,750
            )
            
            10.57Outstanding
                February 28, 2006
            
            
            2,563,408
            
            
            6.56Granted
            
            
            60,000
            
            $
            12.46Exercised
            
            
            (463,552
            )
            
            5.86Cancelled
            
            
            (33,038
            )
            
            7.92Outstanding
                February 28, 2007
            
            
            2,126,818
            
            
            6.85Aggregate
                intrinsic value of outstanding options
              at
                February 28, 2007
            
            $
            7,007,000Options
                exercisable at the end of each fiscal year:February
                29, 2005
            
            
            3,230,243
            
            $
            6.65February
                28, 2006
            
            
            2,414,908
            
            
            6.35February
                28, 2007
            
            
            2,045,693
            
            
            6.70Aggregate
                intrinsic value of options exercisable
              at
                February 28, 2007
            
            $
            6,963,000





F-18


**NU
      HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (AS RESTATED)**


**(CONTINUED)**





8.  STOCK-BASED
      COMPENSATION PLANS (Continued):





a. Stock
      Options (continued):





The
      following table summarizes information about stock options outstanding as of
      February 28, 2007:





Outstanding
            
            ExercisableRange
                of exercise prices
            
            Number
                of shares
            
            Weighted
                average remaining contractual life
            
            Weighted
                average exercise price
            
            Number
                exercisable
            
            Weighted
                average exercise price$2.93
                to $6.44
            
            
            1,315,818
            
            
            3.75
                years
            
            $
            4.93
            
            
            1,308,818
            
            $
            4.92$7.31
                to $14.62
            
            
            799,000
            
            
            5.79
                years
            
            $
            9.86
            
            
            724,875
            
            $
            9.73$18.33
            
            
            12,000
            
            
            3.53
                years
            
            $
            18.33
            
            
            12,000
            
            $
            18.332,126,818
            
            
            
            
            
            
            
            
            2,045,693





The
      aggregate intrinsic value above of $6,963,000 represents the total pre-tax
      intrinsic value (the difference between the Company’s closing stock price on the
      last trading day of fiscal 2007 and the exercise price, multiplied by the number
      of in-the-money options) that would have been received by the option holders
      had
      all option holders exercised their options on February 28, 2007. This amount
      changes based on the fair market value of the Company’s common stock. The total
      intrinsic value of options exercised for fiscal 2007 was
      $1,861,000.





Cash
      received from option exercises during the 2007, 2006 and 2005 fiscal years
      was
      $2,726,000, $2,636,000 and $155,000, respectively and is included within the
      financing activities section in the accompanying consolidated statements of
      cash
      flows.





b. Restricted
      Common Stock:





Subject
      to the terms and conditions of the 2002 Key Employee Stock Incentive Plan,
      as
      amended, the compensation committee may grant shares of restricted common stock.
      Shares of restricted stock awarded may not be sold, transferred, pledged,
      assigned, or otherwise alienated or hypothecated until the end of the applicable
      period of restriction established by the compensation committee and specified
      in
      the award agreement. Compensation expense is recognized on a straight-line
      basis
      as shares become free of forfeiture restrictions (i.e., vest), which is a five
      or seven year period from the date of grant. For fiscal 2007, the Company
      recorded compensation expense aggregating $306,000 relating to the issuance
      of
      restricted stock.





Summary
      of Non-Vested Shares:





The
      following information summarizes the changes in non-vested restricted stock
      for
      the year ended February 28, 2007:





**Shares**
            
            **Weighted
                Average**
              **Grant
                Date**
              **Fair
                Value**Non-vested
                shares at March 1, 2006
            
            
            -
            
            $
            -Granted
            
            
            263,000
            
            
            9.98Vested
            
            
            -
            
            
            -Non-vested
                shares at February 28, 2007
            
            
            263,000
            
            $
            9.98





9.  MINORITY
      INTERESTS IN SUBSIDIARIES:





Minority
      interests at February 28, 2007 and 2006 represents the liability related to
      a
      15% minority interest in NIC Components Asia PTE. LTD, (NIA) and a 20% minority
      interest in NIC Components Europe Limited (NIE).




F-19


**NU
      HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (AS RESTATED)**


**(CONTINUED)**





10.  INCOME
      TAXES (RESTATED):





Components
      of income (loss) before income taxes are as follows:





2007
            
            2006
            
            2005(As
                Restated)
            
            (As
                Restated)
            
            (As
                Restated)Domestic
            
            $
            7,464,000
            
            $
            584,000
            
            $
            (2,962,000
            )Foreign
            
            
            8,700,000
            
            
            7,147,000
            
            
            8,542,000$
            16,164,000
            
            $
            7,731,000
            
            $
            5,580,000





The
      provision for income taxes is comprised of the following:





2007
            
            2006
            
            2005**Current:**
            
            (As
                Restated)
            
            (As
                Restated)
            
            (As
                Restated)Federal
            
            $
            4,907,000
            
            $
            2,942,000
            
            $
            28,000State
                and local
            
            
            1,269,000
            
            
            106,000
            
            
            -Foreign
            
            
            1,521,000
            
            
            1,491,000
            
            
            1,755,000**Deferred**:Federal
            
            
            (197,000
            )
            
            (864,000
            )
            
            501,000State
            
            
            (7,000
            )
            
            299,000
            
            
            188,000Foreign
            
            
            498,000
            
            
            (86,000
            )
            
            (40,000
            )$
            7,991,000
            
            $
            3,888,000
            
            $
            2,432,000





The
      following is a reconciliation of the maximum statutory federal tax rate to
      the
      Company’s effective tax rate:





2007
            
            2006
            
            2005(As
                Restated)
            
            (As
                Restated)
            
            (As
                Restated)Provision
                at statutory rate
            
            
            35.0
            %
            
            35.0
            %
            
            35.0
            %State
                tax provided
            
            
            5.5
            %
            
            8.3
            %
            
            4.4
            %Other
                non-deductible expenses
            
            
            0.8
            %
            
            3.1
            %
            
            3.0
            %Rate
                difference on foreign losses
            
            
            3.7
            %
            
            3.8
            %
            
            2.6
            %United
                States tax rates differential
            
            
            (0.2
            )%
            
            (0.1
            )%
            
            (1.4
            )%Federal
                interest and penalties
            
            
            4.6
            %
            
            0.2
            %
            
            0.0
            %**Provision
                for income taxes**
            
            
            **49.4**
            **%**
            
            **50.3**
            **%**
            
            **43.6**
            **%**





Provision
      has been made for additional U.S. taxes on undistributed earnings of foreign
      subsidiaries. As of February 28, 2007, the cumulative amount of unremitted
      earnings was approximately $14,607,000.





F-20


**NU
      HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (AS RESTATED)**


**(CONTINUED)**





10.  INCOME
      TAXES (Continued):





We
      provide for deferred taxes in accordance with SFAS No. 109, "Accounting for
      Income Taxes" (SFAS 109), which requires the asset and liability approach for
      measuring deferred tax assets and liabilities due to temporary differences
      existing at year-end using currently enacted tax rates. We assess the
      recoverability of the deferred tax assets and determine if a valuation allowance
      is necessary under a "more likely than not" approach. We analyze our ability
      to
      utilize deferred tax assets by considering future taxable income, reversal
      of
      tangible temporary differences and available tax planning
      strategies.





The
      significant components of deferred assets and liabilities are as
      follows:





2007
            
            2006**Deferred
                tax assets:**
            
            (As
                Restated)
            
            (As
                Restated)Accounts
                receivable
            
            $
            1,524,000
            
            $
            1,495,000Inventory
            
            
            779,000
            
            
            952,000Accrued
                expenses
            
            
            480,000
            
            
            240,000Foreign
                net operating loss carryforward
            
            
            293,000
            
            
            695,000State
                net operating loss carryforward
            
            
            -
            
            
            21,000Other
            
            
            6,000
            
            
            7,000**Total
                deferred tax assets**
            
            **$**
            **3,082,000**
            
            **$**
            **3,410,000****Deferred
                tax liabilities:**Fixed
                assets
            
            $
            (1,307,000
            )
            $
            (1,497,000
            )Income
                on DISC
            
            
            (730,000
            )
            
            (824,000
            )Unremitted
                foreign earnings
            
            
            (481,000
            )
            
            (327,000
            )Goodwill
            
            
            (105,000
            )
            
            (105,000
            )Inventory
                valuation adjustment
            
            
            (64,000
            )
            
            (64,000
            )Other
            
            
            (38,000
            )
            
            (38,000
            )**Total
                deferred tax liabilities**
            
            **$**
            **(2,725,000**
            **)**
            **$**
            **(2,855,000**
            **)****Net
                deferred tax asset**
            
            **$**
            **357,000**
            
            **$**
            **555,000**





As
      of
      February 28, 2007, the Company had no U.S. Federal net operating loss
      carryforwards and approximately $990,000 foreign (Canada and United Kingdom)
      operating loss carryforwards available.





11.  EMPLOYEE
      BENEFIT PLANS:





On
      January 13, 1987, the Company’s Board of Directors approved the adoption of an
      employee stock ownership plan (ESOP). The ESOP covers all eligible employees
      and
      contributions are determined by the Board of Directors. The ESOP purchases
      shares of the Company’s common stock using loan proceeds. As the loan is repaid,
      a pro rata amount of common stock is released for allocation to eligible
      employees. The Company makes cash contributions to the ESOP to meet its
      obligations. No contributions have been made to the ESOP for the three years
      ended February 28, 2007. At February 28, 2007, the ESOP owned 439,418 shares
      of
      the Company’s common stock at an average price of approximately $3.45 per
      share.





In
      January 1991, the Company also established a 401(k) profit sharing plan to
      cover
      all eligible employees. The Company’s contributions to the plan are
      discretionary, but may not exceed 1% of compensation. Contributions to the
      plan
      for the three years ended February 28, 2007 were $307,000, $262,000 and
      $284,000, respectively.





F-21


**NU
      HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (AS RESTATED)**


**(CONTINUED)**





12.  COMMITMENTS
      AND CONTINGENCIES:





Employment
      Contracts:





On
      September 13, 1996, the Company signed employment contracts (the “Contracts”),
      as amended, with two of its senior executives for a continually renewing
      five-year term. The Contracts specified a base salary of $226,545 for each
      officer, which shall be increased each year by the change in the consumer price
      index, and also entitle those officers to an annual bonus equal to 3.33% (6.7%
      in the aggregate) of the Company’s consolidated earnings before income taxes. On
      the termination of his employment agreement, each executive is entitled to
      certain payments, as follows:





·
            Due
                to death or Disability (as defined in the employment agreement),
                salary
                and benefits for a five (5) year
                period.


·
            For
                Cause (as defined in the employment agreement), solely base salary
                through
                the date of termination.


·
            Termination
                other than for death, disability or cause, shall be deemed to be
                a
                "Retirement" under the Retirement Plan discussed
                below.


·
            Following
                a Change in Control (as defined in the employment agreement), a lump
                sum
                equal to three times the average total compensation paid to the applicable
                employee with respect to the five fiscal years of the Company prior
                to the
                Change of Control, minus $100.





Executive
      Retirement Plan:





On
      December 1, 2004, the Board of Directors approved the adoption of the Nu
      Horizons Executive Retirement Plan (the "Retirement Plan"). Pursuant to the
      terms of the Retirement Plan, the Company will provide an unfunded retirement
      benefit to certain executive employees of the Company and its subsidiaries
      upon
      such executive's retirement (as defined in the Retirement Plan). At the time
      the
      Board of Directors approved the Retirement Plan, they determined that the
      participation of Mr. Nadata, Chairman of the Board and Chief Executive Officer,
      and Mr. Schuster, President, each a Founder (as defined in the Retirement Plan),
      would be contingent upon the execution and delivery by each of them of an
      amendment to their respective employment agreements, which amendment would
      provide that a termination of employment other than for death, disability or
      cause would be a "Retirement" under the Retirement Plan. As a result the
      "Effective Date” of the Retirement Plan is March 28, 2005, the date of such
      execution and delivery. Upon his Retirement, each executive will be entitled
      to
      receive an annual benefit in an amount determined by the number of years of
      service the executive has provided to the Company, ranging from a minimum of
      $310,000 for 20 years of service to a maximum of $393,000 for 25 years of
      service. The Company has accrued $1,200,000 at fiscal year end February 28,
      2007.





Leases:





In
      December 1996, the Company leased an approximately 80,000 square foot facility
      in Melville, Long Island, New York to serve as its executive offices and main
      distribution center. In mid- 1997, the Company moved its executive offices
      and
      distribution operation to the facility. The lease term is from December 17,
      1996
      to December 31, 2008 at an annual base rental of $601,290 and provides for
      a 4%
      annual escalation in each of the last ten years of the term. On November 1,
      2006, the Company entered into a new warehouse lease in Southaven, Mississippi
      for approximately 48,000 square feet. The lease term is from November 1, 2006
      to
      January 31, 2012 at an annual base rent of $205,000. The Company also leases
      certain other sales offices, warehouses and other properties which leases
      include various escalation clauses, renewal options, and other provisions.
      Aggregate minimum rental commitments under non-cancelable operating leases
      are
      as follows:





Fiscal
                2008
            
            $
            3,794,000Fiscal
                2009
            
            
            2,806,000Fiscal
                2010
            
            
            1,180,000Fiscal
                2011
            
            
            735,000Fiscal
                2012
            
            
            571,000Thereafter
            
            
            21,000





Rent
      and
      real estate tax expense was $3,559,000, $3,429,000 and $3,539,000, for the
      years
      ended February 28, 2007, 2006, and 2005, respectively.





F-22


**NU
      HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (AS RESTATED)**


**(CONTINUED)**





12.  COMMITMENTS
      AND CONTINGENCIES (Continued):





Litigation:





At
      times
      the Company is involved in various lawsuits incidental to its business. At
      February 28, 2007, management does not believe that any litigation matter is
      material to its financial statements.





13.  MAJOR
      SUPPLIERS/CUSTOMERS:





Suppliers:





For
      the
      year ended February 28, 2007, the Company purchased inventory from three
      suppliers that was in excess of 10% of the Company’s total purchases. Purchases
      from these suppliers were approximately $121,160,000, $111,522,000 and
      $62,745,000 for the fiscal year. 53% of total accounts payable as of February
      28, 2007 related to these suppliers.





For
      the
      year ended February 28, 2006, the Company purchased inventory from three
      suppliers that was in excess of 10% of the Company’s total purchases. Purchases
      from these suppliers were approximately $104,644,000, $78,586,000 and
      $75,522,000 for the fiscal year. 63% of total accounts payable as of February
      28, 2006 related to these suppliers.





For
      the
      year ended February 28, 2005, the Company purchased inventory from three
      suppliers that was in excess of 10% of the Company’s total purchases. Purchases
      from these suppliers were approximately $97,360,000, $60,197,000 and $48,334,000
      for the fiscal year. 56% of total accounts payable as of February 28, 2005
      related to these suppliers.





Customers:





For
      the
      years ended February 28, 2007, 2006 and 2005, no one customer accounted for
      more
      than 10% of the Company's total sales.





14.  BUSINESS
      SEGMENT AND GEOGRAPHIC INFORMATION:





The
      Company is operating in a single business segment, distribution of electronic
      components, in accordance with the rules of SFAS No. 131 (“Disclosure About
      Segments of an Enterprise and Related Information”).





Although
      the Company’s business is primarily conducted in the United States, operations
      are also carried out overseas through our foreign subsidiaries in different
      geographic areas.





The
      net
      book value of long-lived assets, by geographic area, as at the end of the fiscal
      years are as follows:





2007
            
            2006
            
            2005Americas
            
            $
            2,721,000
            
            $
            3,038,000
            
            $
            3,590,000Europe
            
            
            161,000
            
            
            25,000
            
            
            33,000Asia/Pacific
            
            
            499,000
            
            
            551,000
            
            
            305,000$
            3,381,000
            
            $
            3,614,000
            
            $
            3,928,000





Revenues,
      by geographic area, for the fiscal years are as follows:





2007
            
            2006
            
            2005Americas
            
            $
            554,794,000
            
            $
            418,578,000
            
            $
            352,778,000Europe
            
            
            34,532,000
            
            
            17,400,000
            
            
            14,159,000Asia/Pacific
            
            
            148,137,000
            
            
            125,313,000
            
            
            100,912,000$
            737,463,000
            
            $
            561,291,000
            
            $
            467,849,000





F-23





**NU
      HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (AS RESTATED)**


**(CONTINUED)**





14.  BUSINESS
      SEGMENT AND GEOGRAPHIC INFORMATION (Continued):





Total
      assets, by geographic area, at the end of the fiscal years are as
      follows:





2007
            
            2006
            
            2005(As
                Previously
              Reported)
            
            (As
                Previously
              Reported)
            
            (As
                Previously
              Reported)Americas
            
            $
            184,056,000
            
            $
            167,330,000
            
            $
            95,934,000Europe
            
            
            18,973,000
            
            
            7,932,000
            
            
            13,920,000Asia/Pacific
            
            
            61,197,000
            
            
            68,212,000
            
            
            67,945,000$
            264,226,000
            
            $
            243,474,000
            
            $
            177,799,000




2007
              
              2006
              
              2005(As
                    Restated)
              
              (As
                    Restated)
              
              (As
                    Restated)Americas
              
              $
              187,309,000
              
              $
              170,911,000
              
              $
              99,260,000Europe
              
              
              18,973,000
              
              
              7,932,000
              
              
              13,920,000Asia/Pacific
              
              
              61,197,000
              
              
              68,212,000
              
              
              67,945,000$
              267,479,000
              
              $
              247,055,000
              
              $
              181,125,000


F-24


**NU
      HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (AS RESTATED)**


**(CONTINUED)**





15.  SELECTED
      QUARTERLY FINANCIAL DATA (Unaudited):





Three
                Month Period EndedFebruary
                28, 2007
            
            November
                30, 2006
            
            August
                31, 2006
            
            May
                31,2006(As
                Previously Reported)
            
            (As
                Previously Reported)
            
            (As
                Previously Reported)
            
            (As
                Previously Reported)Net
                sales
            
            $
            170,101,000
            
            $
            186,080,000
            
            $
            193,522,000
            
            $
            187,760,000Cost
                of sales
            
            
            143,605,000
            
            
            157,025,000
            
            
            164,418,000
            
            
            159,470,000Operating
                expenses
            
            
            24,524,000
            
            
            23,994,000
            
            
            22,870,000
            
            
            22,123,000Interest
                expense, net
            
            
            876,000
            
            
            1,012,000
            
            
            481,000
            
            
            901,000Provision
                for income taxes
            
            
            77,000
            
            
            1,565,000
            
            
            2,228,000
            
            
            1,956,000Minority
                interest
            
            
            157,000
            
            
            93,000
            
            
            40,000
            
            
            135,000**Net
                income**
            
            $
            862,000
            
            $
            2,391,000
            
            $
            3,485,000
            
            $
            3,175,000**Net
                Income per Common Share**Basic
            
            $
            .05
            
            $
            .13
            
            $
            .20
            
            $
            .18Diluted
            
            $
            .05
            
            $
            .13
            
            $
            .19
            
            $
            .17**Weighted
                Average per Common Shares Outstanding**Basic
            
            
            18,158,034
            
            
            18,059,849
            
            
            17,697,958
            
            
            17,596,232Diluted
            
            
            18,926,647
            
            
            19,018,687
            
            
            18,655,852
            
            
            18,293,721








Three
                Month Period EndedFebruary
                28,
              2007
            
            November
                30, 2006
            
            August
                31, 2006
            
            May
                31,2006(As
                Restated)
            
            (As
                Restated)
            
            (As
                Restated)
            
            (As
                Restated)Net
                sales
            
            $
            170,101,000
            
            $
            186,080,000
            
            $
            193,522,000
            
            $
            187,760,000Cost
                of sales
            
            
            143,605,000
            
            
            157,025,000
            
            
            164,418,000
            
            
            159,470,000Operating
                expenses
            
            
            24,524,000
            
            
            23,994,000
            
            
            22,870,000
            
            
            22,123,000Interest
                expense, net
            
            
            876,000
            
            
            1,012,000
            
            
            481,000
            
            
            901,000Provision
                for income taxes
            
            
            542,000
            
            
            2,002,000
            
            
            2,844,000
            
            
            2,603,000Minority
                interest
            
            
            31,000
            
            
            114,000
            
            
            162,000
            
            
            149,000**Net
                income**
            
            $
            523,000
            
            $
            1,933,000
            
            $
            2,747,000
            
            $
            2,514,000**Net
                Income per Common Share**Basic
            
            $
            .03
            
            $
            .11
            
            $
            .16
            
            $
            .14Diluted
            
            $
            .03
            
            $
            .10
            
            $
            .15
            
            $
            .14**Weighted
                Average per Common Shares Outstanding**Basic
            
            
            18,158,034
            
            
            18,059,849
            
            
            17,697,958
            
            
            17,596,232Diluted
            
            
            18,926,647
            
            
            19,018,687
            
            
            18,655,852
            
            
            18,293,721





F-25


**NU
      HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (AS RESTATED)**


**(CONTINUED)**





15.  SELECTED
      QUARTERLY FINANCIAL DATA (Unaudited) (Continued):





Three
                Month Period EndedFebruary
                28, 2006
            
            November
                30, 2005
            
            August
                31, 2005
            
            May
                31,2005(As
                Previously Reported)
            
            (As
                Previously Reported)
            
            (As
                Previously Reported)
            
            (As
                Previously Reported)Net
                sales
            
            $
            164,091,000
            
            $
            147,515,000
            
            $
            128,265,000
            
            $
            121,420,000Cost
                of sales
            
            
            138,700,000
            
            
            124,271,000
            
            
            107,564,000
            
            
            102,007,000Operating
                expenses
            
            
            21,483,000
            
            
            20,054,000
            
            
            18,600,000
            
            
            17,954,000Interest
                expense, net
            
            
            1,067,000
            
            
            642,000
            
            
            618,000
            
            
            600,000Provision
                for income taxes
            
            
            735,000
            
            
            992,000
            
            
            503,000
            
            
            330,000Minority
                interest
            
            
            18,000
            
            
            55,000
            
            
            160,000
            
            
            54,000**Net
                income**
            
            $
            2,088,000
            
            $
            1,501,000
            
            $
            820,000
            
            $
            475,000**Net
                Income per Common Share**Basic
            
            $
            .12
            
            $
            .09
            
            $
            .05
            
            $
            .03Diluted
            
            $
            .11
            
            $
            .08
            
            $
            .05
            
            $
            .03**Weighted
                Average per Common**
              **Shares
                Outstanding**Basic
            
            
            17,431,482
            
            
            17,198,133
            
            
            16,907,397
            
            
            16,907,397Diluted
            
            
            18,276,162
            
            
            17,760,196
            
            
            17,367,115
            
            
            17,449,570





Three
                Month Period EndedFebruary
                28, 2006
            
            November
                30, 2005
            
            August
                31, 2005
            
            May
                31,
              2005(As
                Restated)
            
            (As
                Restated)
            
            (As
                Restated)
            
            (As
                Restated)Net
                sales
            
            $
            164,091,000
            
            $
            147,515,000
            
            $
            128,265,000
            
            $
            121,420,000Cost
                of sales
            
            
            138,700,000
            
            
            124,271,000
            
            
            107,564,000
            
            
            102,007,000Operating
                expenses
            
            
            21,483,000
            
            
            20,054,000
            
            
            18,600,000
            
            
            17,954,000Interest
                expense, net
            
            
            1,067,000
            
            
            642,000
            
            
            618,000
            
            
            600,000Provision
                for income taxes
            
            
            1,429,000
            
            
            1,281,000
            
            
            746,000
            
            
            432,000Minority
                interest
            
            
            158,000
            
            
            142,000
            
            
            82,000
            
            
            48,000**Net
                income**
            
            $
            1,254,000
            
            $
            1,125,000
            
            $
            655,000
            
            $
            379,000**Net
                Income per Common Share**Basic
            
            $
            .07
            
            $
            .07
            
            $
            .04
            
            $
            .02Diluted
            
            $
            .07
            
            $
            .06
            
            $
            .04
            
            $
            .02**Weighted
                Average per Common**
              **Shares
                Outstanding**Basic
            
            
            17,431,482
            
            
            17,198,133
            
            
            16,907,397
            
            
            16,907,397Diluted
            
            
            18,276,162
            
            
            17,760,196
            
            
            17,367,115
            
            
            17,449,570





F-26


**NU
      HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (AS RESTATED)**


**(CONTINUED)**





16.  SUBSEQUENT
      EVENTS:





a. Litigation:





On
      or
      about October 4, 2007, a Consolidated Amended Class Action Complaint for
      Securities Fraud ("Amended Complaint") was filed in the United States District
      Court for the District of California in the matter entitled *Louis Grasso, individually and on behalf of all others similarly situated,
      Plaintiff, v. Vitesse Semiconductor Corporation, Louis Tomasetta, Yatin Mody,
      Eugene F. Hovanec, Silicon Valley Bank, Nu Horizons Electronics Corp, Titan
      Supply Chain Services, Corp. (Formerly Known as Titan Logistics Corp.), and
      KPMG
      LLP* , *Defendants.* Pursuant
      to the Amended Complaint, Nu Horizons, Titan, Silicon Valley Bank, and KPMG
      LLP
      were added as defendants to the putative class action which had been commenced
      by certain purchasers of Vitesse common stock. In the Amended Complaint,
      plaintiff alleges that Nu Horizons and Titan violated Section 10(b) of the
      Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder and seeks
      rescission or unspecified damages on behalf of a purported class which purchased
      Vitesse common stock during the period from January 27, 2003 to and including
      April 27, 2006. As of November 21, 2007, a class has not been certified. Nu
      Horizons believes that the plaintiff’s claims are without merit and intends to
      defend vigorously against the plaintiff’s allegations.





b. DT
      Electronics Limited - Allocation of Intangible Assets:





The
      final
      allocation of the purchase price for the DT Electronics acquisition (see Note
      3)
      resulted in an identifiable intangible asset - customer list of $3,764,000
      based
      on an independent valuation of fair value completed in the second quarter of
      fiscal 2008. The customer list will be amortized over its estimated useful
      life
      of 17 years.





As
      a
      result of the segregation of the cost in excess of net assets acquired, a
      deferred tax liability of approximately $1,000,000 will be reflected in the
      next
      fiscal year.





F-27


**Report
      of Independent Registered Public Accounting Firm**




The
      Board
      of Directors and Stockholders


Nu
      Horizons Electronics Corp.


Melville,
      New York





We
      have
      audited the accompanying consolidated balance sheets of Nu Horizons Electronics
      Corp. and subsidiaries (the Company) as of February 28, 2007 and 2006, and
      the
      related consolidated statements of operations, shareholders’ equity and cash
      flows for each of the years in the three-year period ended February 28, 2007.
      Our audits also included the financial statement schedule listed in the Index
      at
      Item 15(a). These consolidated financial statements are the responsibility
      of
      the Company’s management. Our responsibility is to express an opinion on these
      consolidated 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 audits to obtain reasonable assurance about whether the
      financial statements are free of material misstatement. An audit includes
      examining, on a test basis, evidence supporting the amounts and disclosures
      in
      the financial statements. An audit also includes assessing the accounting
      principles used and significant estimates made by management, as well as
      evaluating the overall financial statement presentation. We believe that our
      audits provide a reasonable basis for our opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of Nu Horizons Electronics
      Corp. and subsidiaries as of February 28, 2007 and 2006, and the results of
      their operations and their cash flows for each of the years in the three-year
      period ended February 28, 2007 in conformity with accounting principles
      generally accepted in the United States of America. Also in our opinion, the
      related financial statement schedule, when considered in relation to the basic
      financial statements taken as a whole, presents fairly, in all material respects
      the information set forth therein.





As
      discussed in Note 1 to the consolidated financial statements, the Company
      adopted Statement of Financial Accounting Standards No. 123(R) - "Share-Based
      Payments", as revised, effective March 1, 2006.





As
      discussed in Note 2 to the consolidated financial statements, the Company has
      restated its consolidated financial statements for the years ended February
      28,
      2007, 2006 and 2005 and in certain prior years, treated as a prior period
      adjustment.





We
      have
      also audited, in accordance with the standards of the Public Company Accounting
      Oversight Board (United States), the effectiveness of the internal control
      over
      financial reporting of Nu Horizons Electronics Corp. and subsidiaries as of
      February 28, 2007, based on criteria established in Internal Control —
Integrated Framework issued by the Committee of Sponsoring Organizations of
      the
      Treadway Commission (COSO), and our report dated May 7, 2007 (November 21,
      2007
      as to the effects of the material weaknesses discussed in Management’s Report on
      Internal Control, as revised) expressed an unqualified opinion on management’s
      assessment of, and the effective operation of, internal control over financial
      reporting.


/s/
                Lazar
                Levine & Felix LLPLazar Levine & Felix
                LLP





New
      York,
      New York


May
      7,
      2007


(November
      21, 2007, as to the effects


of
      the
      restatement discussed in Note 2


and
      the
      subsequent events discussed


in
      Note
      16)





F-28


**ITEM
              9.**
            **CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                DISCLOSURE**





The
      Company had no disagreements on accounting or financial disclosure matters
      with
      its accountants, nor did it change accountants, during the three-year period
      ended February 28, 2007.





**ITEM
      9A.**  **CONTROLS
      AND PROCEDURES  (Revised)**




**Evaluation
      of Disclosure Controls and Procedures**




We
      maintain disclosure controls and procedures (as defined in Exchange Act Rule
      13a-15(e) and 15d-15(e))that are designed to ensure that information required
      to
      be disclosed by us in the reports that we file or submit to the Securities
      and
      Exchange Commission under the Securities Exchange Act of 1934, as amended,
      is
      recorded, processed, summarized and reported within the time periods specified
      by the Commission’s rules and forms, and that information is 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.




In
      connection with the restatement of its financial statements related to income
      tax expense and the related obligations, the Company reevaluated its disclosure
      controls and procedures as of the end of the period covered by this report.
      Based upon the reevaluation that was conducted, management, including our Chief
      Executive Officer and Chief Financial Officer have concluded that as of the
      end
      of the period covered by this Annual Report on Form 10-K/A, the Company’s
      disclosure controls and procedures were not effective as of February 28, 2007
      because of a material weakness in its internal controls over financial reporting
      regarding the accounting for income taxes due to the existence of errors in
      the
      Company’s income tax returns and the application of FASB Statement No. 109 -
      Accounting for Income Taxes, causing an understatement of the Company’s
      provision for income tax expense for prior periods and the related U.S. income
      tax obligations, which resulted in the Company having to restate its
      consolidated financial statements as described in Note 2 to the consolidated
      financial statements included elsewhere herein. Notwithstanding the existence
      of
      such material weakness, management has concluded that the consolidated financial
      statements included in this Form 10-K/A fairly present in all material respects
      the Company's financial condition as of February 28, 2007 and 2006, the results
      of operations and cash flows for each of the three years ended February 28,
      2007, 2006 and 2005.




**Changes
      in Internal Controls**




There
      were no changes made in our internal controls over financial reporting that
      occurred during our most recently completed fiscal quarter that have materially
      affected, or are reasonably likely to materially affect our internal controls
      over financial reporting.





As
      a
      result of the DT acquisition, the Company is currently evaluating the internal
      controls for DT's operations. The Company is in the process of integrating
      DT's
      operations, including its inventory management systems, sales order system
      and
      other controls.





**Management’s
      Annual Report on Internal Control Over Financial Reporting**





Our
      management is responsible for establishing and maintaining an adequate system
      of
      internal control over financial reporting. Our internal control over financial
      reporting includes those policies and procedures that:





·
            pertain
                to the maintenance of records that, in reasonable detail, accurately
                and
                fairly reflect the transactions and dispositions of our
                assets;


·
            provide
                reasonable assurance that transactions are recorded as necessary
                to permit
                preparation of our financial statements in accordance with generally
                accepted accounting principles in the United States, and that our
                receipts
                and expenditures are being made only in accordance with authorizations
                of
                our management and directors; and


·
            provide
                reasonable assurance regarding prevention or timely detection of
                unauthorized acquisition, use or disposition of our assets that could
                have
                a material effect on the financial statements.





In
      connection with the restatement of its financial statements related to income
      taxes expense and the related obligations, our management has reassessed the
      effectiveness of our system of internal control over financial reporting as
      of
      February 28, 2007. In making this reassessment, management used the framework
      in *Internal
      Control — Integrated Framework* issued
      by
      the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
      Based on our reassessment and the criteria set forth by COSO, management
      believes that Nu Horizons did not maintain effective internal control
      over financial reporting as of February 28, 2007. Our reassessment of the
      effectiveness of our internal control over financial reporting has been audited
      by Lazar Levine & Felix LLP, an independent registered public accounting
      firm, as stated in their report which is included herein.




24


**ITEM
      9A.**  **CONTROLS
      AND PROCEDURES (Continued)**





After
      the
      Company filed its Original Form 10-K for the year ended February 28, 2007,
      the
      Company identified an error in the Company’s previously issued consolidated
      financial statements and concluded that the financial statements included in
      the
      Original Form 10-K should be restated, as discussed in Note 2 to the
      consolidated financial statements included elsewhere in this Form
      10-K/A.





The
      Company determined that this error resulted from a material weakness in the
      operating effectiveness of the Company’s internal controls over financial
      reporting relative to its accounting for income taxes. As a result, the Company
      has restated its original assessment of the effectiveness of internal controls
      over financial reporting relative to its accounting for income taxes in this
      Form 10-K/A. The Company did not have the appropriate procedures and
      documentation in place to properly evaluate its liability for income taxes
      and
      calculate its income tax provision. As a result, the amounts recorded by the
      Company were inaccurate.





The
      certifications of our principal executive officer and principal financial
      officer required in accordance with Rule 13a-14(a) under the Exchange Act are
      attached as exhibits to this Form 10-K/A. The disclosures set forth in this
      Item
      9A contain information concerning the evaluation of our disclosure controls
      and
      procedures, and changes in our internal control over financial reporting,
      referred to in paragraph 4 of those certifications. Those certifications should
      be read in conjunction with this Item 9A for a more complete understanding
      of
      the matters covered by the certifications.





Our
      management’s assessment of the effectiveness of the Company’s internal control
      over financial reporting as of February 28, 2007 has been audited by Lazar,
      Levine & Felix, LLP, an independent registered public accounting firm, as
      stated in their report which appears herein on Form 10-K/A.





After
      the
      period covered by this Annual Report on Form 10-K/A, in order to remediate
      the
      material weakness in internal controls over the Company's accounting for income
      taxes, the Company engaged an independent registered public accounting firm
      (other than its auditors, Lazar Levine & Felix LLP) to prepare its tax
      returns and review and advise Company personnel on the preparation of the
      quarterly tax provision in accordance with FASB Statement No. 109 - Accounting
      for Income Taxes.





**Inherent
      Limitations on Effectiveness of Controls**





Our
      system of internal control over financial reporting was designed to provide
      reasonable assurance regarding the reliability of financial reporting and the
      preparation of financial statements for external purposes in accordance with
      accounting principles generally accepted in the United States.





All
      internal control systems, no matter how well designed and operated, can provide
      only reasonable assurance with respect to financial statement preparation and
      presentation. Our management does not expect that our disclosure controls and
      procedures will prevent all errors and fraud. 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 within the company have
      been
      detected, even with respect to those systems of internal control that are
      determined to be effective. These inherent limitations include the realities
      that judgments in decision-making can be faulty, and that breakdowns can occur
      because of simple errors or mistakes. 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 these inherent
      limitations in a cost-effective control system, misstatements due to error
      or
      fraud may occur and not be detected. Our system contains self monitoring
      mechanisms, and actions are taken to correct deficiencies as they are
      identified.





25


**ITEM
      9A.**  **CONTROLS
      AND PROCEDURES (Continued)**





**Report
      of Independent Registered Public Accounting Firm On Internal Control Over
      Financial Reporting**





The
      Board
      of Directors and Stockholders of


Nu
      Horizons Electronics Corp.


Melville,
      New York





We
      have
      audited management’s assessment, included in the accompanying Management’s
      Annual Report on Internal Control Over Financial Reporting, that Nu Horizons
      Electronics Corp. (“Nu Horizons” or the “Company”)
      maintained
      effective internal control over financial reporting as of February 28, 2007,
      based on criteria established in Internal Control - Integrated Framework issued
      by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
      Nu Horizons’ management is responsible for maintaining effective internal
      control over financial reporting and for its assessment of the effectiveness
      of
      internal control over financial reporting. Our responsibility is to express
      an
      opinion on management’s assessment and an opinion on the effectiveness of Nu
      Horizons’ internal control over financial reporting based on our
      audit.





We
      conducted our audit 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 effective
      internal control over financial reporting was maintained in all material
      respects. Our audit included obtaining an understanding of internal control
      over
      financial reporting, evaluating management’s assessment, testing and evaluating
      the design and operating effectiveness of internal control, and performing
      such
      other procedures as we considered necessary in the circumstances. We believe
      that our audit provides a reasonable basis for our opinion.





A
      company’s internal control over financial reporting is a process designed to
      provide reasonable assurance regarding the reliability of financial reporting
      and the preparation of financial statements for external purposes in accordance
      with generally accepted accounting principles. A company’s internal control over
      financial reporting includes those policies and procedures that (1) pertain
      to
      the maintenance of records that, in reasonable detail, accurately and fairly
      reflect the transactions and dispositions of the assets of the company; (2)
      provide reasonable assurance that transactions are recorded as necessary to
      permit preparation of financial statements in accordance with generally accepted
      accounting principles, and that receipts and expenditures of the company are
      being made only in accordance with authorizations of management and directors
      of
      the company; and (3) provide reasonable assurance regarding prevention or timely
      detection of unauthorized acquisition, use, or disposition of the company’s
      assets that could have a material effect on the financial
      statements.





Because
      of its inherent limitations, internal control over financial reporting may
      not
      prevent or detect misstatements. Also, projections of any evaluation of
      effectiveness to future periods are subject to the risk that controls may become
      inadequate because of changes in conditions or that the degree of compliance
      with the policies or procedures may deteriorate.




In
      our
      report dated May 7, 2007, we expressed an unqualified opinion on management’s
      assessment that the Company maintained effective internal control over financial
      reporting and an unqualified opinion on the effectiveness of internal control
      over financial reporting. As described in the following paragraph, the Company
      subsequently identified a material weakness, which caused the annual and interim
      consolidated financial statements to be restated, as described in Note 2.
      Accordingly, management subsequently revised its assessment about the
      effectiveness of the Company’s internal control over financial reporting and our
      present opinion, dated November 21, 2007, on the effectiveness of the Company’s
      internal control over financial reporting as of February 28, 2007 expressed
      herein is different from that expressed in our previous report.





A
      material weakness is a deficiency, or a combination of deficiencies, in internal
      control over financial reporting, such that there is a reasonable possibility
      that a material misstatement of the Company’s annual or interim financial
      statements will not be prevented or detected on a timely basis. The following
      material weakness has been identified and included in management’s revised
      assessment:




·
            There
                were ineffective controls over the accounting for income taxes primarily
                related to the Company’s foreign
                operations.




26


**ITEM
      9A.**  **CONTROLS
      AND PROCEDURES (Continued)**





**Report
      of Independent Registered Public Accounting Firm On Internal Control Over
      Financial Reporting**




In
      our
      opinion, management’s revised assessment that the Company did not maintain
      effective internal control over financial reporting as of February 28, 2007,
      is
      fairly stated, in all material respects, based on the criteria established
      in
      Internal Control - Integrated Framework issued by the Committee of Sponsoring
      Organizations of the Treadway Commission. Also in our opinion, because of the
      effects of the material weakness discussed above on the achievement of the
      control objectives of the control criteria, the Company has not maintained
      effective internal control over financial reporting as of February 28, 2007,
      based on the criteria established in Internal Control - Integrated Framework
      issued by the Committee of Sponsoring Organizations of the Treadway
      Commission.




We
      have
      also audited, in accordance with the standards of the Public Company Accounting
      Oversight Board (United States), the consolidated financial statements and
      financial statement schedule as of and for the year ended February 28, 2007
      of
      the Company and our report, dated May 7, 2007 (November 21, 2007 as to the
      effects of the restatement discussed in Note 2 and the subsequent events
      discussed in Note 16), expressed an unqualified opinion on those consolidated
      financial statements and financial statement schedule and included an
      explanatory paragraph relating to the restatement discussed in Note
      2.




**/s/
              Lazar Levine & Felix LLP**Lazar Levine & Felix
              LLP


New
      York,
      New York


May
      7,
      2007


(November
      21, 2007


as
      to the
      effects of the material weakness discussed


in
      Management’s Report on Internal Control Over Financial


Reporting,
      as revised)





**ITEM
      9B.****OTHER
      INFORMATION:**





None





27


**PART
      III**





**ITEM
      10.**  **DIRECTORS
      AND EXECUTIVE OFFICERS OF THE REGISTRANT:**





Reference
      is made to the Registrant's definitive proxy statement to be filed with the
      Securities and Exchange Commission within 120 days after the end of the
      Registrant's fiscal year for information concerning directors and executive
      officers of the Registrant.





**Code
      of Conduct**





The
      Board
      of Directors has adopted a code of conduct that applies to all of our employees,
      officers and directors and a code of ethics that applies to our Chief Executive
      Officer and senior financial officers. You can find links to these materials
      in
      the Investor Relations section of our website at: www.nuhorizons.com and we
      will provide copies of these materials, free of charge, if a request is sent
      to:
      Nu Horizons Electronics Corp., 70 Maxess Road, Melville, New York 11747,
      attention: Secretary. The Company intends to satisfy the disclosure requirement
      under Item 10 of Form 8-K regarding an amendment to, or a waiver from, a
      provision of its code of ethics that applies to the registrant’s principal
      executive officer, principal financial officer, principal accounting officer
      or
      controller, or persons performing similar functions and that relates to any
      element of its codes of ethics by posting such information on its
      website.





**ITEM
      11** . **EXECUTIVE
      COMPENSATION:**





Reference
      is made to the Registrant's definitive proxy statement to be filed with the
      Securities and Exchange Commission within 120 days after the end of the
      Registrant's fiscal year for information concerning executive
      compensation.





**ITEM
              12.**
            **SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED****STOCKHOLDER
                MATTERS:**





Reference
      is made to the Registrant's definitive proxy statement to be filed with the
      Securities and Exchange Commission within 120 days after the end of the
      Registrant's fiscal year for information concerning security ownership of each
      person known by the Company to own beneficially more than 5% of the outstanding
      shares of common stock, of each director of the Company and all executive
      officers and directors as a group.





**ITEM
      13.**  **CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE:**





Reference
      is made to the Registrant's definitive proxy statement to be filed with the
      Securities and Exchange Commission within 120 days after the end of the
      Registrant's fiscal year for information concerning relationships and related
      transactions.





**ITEM
      14.****PRINCIPAL
      ACCOUNTANT FEES AND SERVICES:**





Reference
      is made to the Registrant's definitive proxy statement to be filed with the
      Securities and Exchange Commission within 120 days after the end of the
      Registrant's fiscal year for information concerning principal accounting fees
      and services.





28


**PART
      IV.**





**ITEM
      15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES:**





(a)
                (1)
            The
                following consolidated financial statements of the registrant and
                its
                subsidiaries are filed as a part of this
                report:





PageReport
                of Independent Registered Public Accounting Firm
            
            
            F-28Consolidated
                Statements of Operations for the three years in the period ended
                February
                28, 2007 (as restated)
            
            
            F-1Consolidated
                Balance Sheets as of February 28, 2007 and February 28, 2006 (as
                restated)
            
            
            F-2Consolidated
                Statements of Changes in Shareholders’ Equity for the three years in the
                period ended February 28, 2007 (as restated)
            
            
            F-3Consolidated
                Statements of Cash Flows for the three years in the period ended
                February
                28, 2007 (as restated)
            
            
            F4
                - F-5Notes
                to Consolidated Financial Statements (as restated)
            
            
            F-6
                - F27(a) (2)Schedule
              II - Valuation and Qualifying Accounts and Reserves
            
            
            34(a) (3)See
              exhibits required - Item (c) below(b) Exhibits




29




**(c)**
            **ITEM
                15. EXHIBITS AND FINANCIAL STATEMENT
                SCHEDULES:**




EXHIBIT
              NUMBER
            
            DESCRIPTION3.1
            
            Certificate
                of Incorporation, as amended (Incorporated by Reference to Exhibit
                3.1 to
                the Company’s Quarterly Report on Form 10-Q for the Quarter ended November
                30, 2000).3.2
            
            By-laws,
                as amended (Incorporated by Reference to Exhibit 3.2 to the Company’s
                Annual Report on Form 10-K for the year ended February 29,
                1988)4.1
            
            Specimen
                Common Stock Certificate (Incorporated by Reference as Exhibit 4.1
                to the
                Company’s Registration Statement on Form S-1, Registration No.
                2-89176).10.1
            
            Agreement
                between the Company and Trustees relating to the Company’s Employee Stock
                Ownership Plan (Incorporated by Reference to Exhibit 10.5 to the
                Company’s
                Annual Report on Form 10-K for the year ended February 28,
                1987).




10.2
            
            1994
                Stock Option Plan (Incorporated by Reference to Exhibit 10.3 to the
                Company’s Quarterly Report on Form 10-Q for the quarter ended August 31,
                1994).10.3
            
            Outside
                Director Stock Option Plan (Incorporated by Reference to Exhibit
                10.4 to
                the Company’s Quarterly Report on Form 10-Q for the quarter ended August
                31, 1994).10.4
            
            Employment
                and Change of Control Agreements dated September 13, 1996, between
                Company
                and Arthur Nadata (Incorporated by Reference to Exhibit 10.16 to
                the
                Company’s Quarterly Report on Form 10-Q for the quarter ended August 31,
                1996).10.5
            
            Employment
                and Change of Control Agreements dated September 13, 1996, between
                Company
                and Richard Schuster (Incorporated by Reference to Exhibit 10.17
                to the
                Company’s Quarterly Report on Form 10-Q for the quarter ended August 31,
                1996).10.6
            
            Form
                of Indemnity Agreements between the Company and Messrs. Gardner,
                Nadata,
                Polimeni, Schuster, Siegel, Novick and Freudenberg (Incorporated
                by
                Reference to Exhibit 10.19 to Form 10-Q for the quarter ended May
                31,
                1997).10.7
            
            1998
                Stock Option Plan, as amended (Incorporated by Reference to Exhibit
                4.1 to
                the Company’s Registration Statement on Form S-8,
                No.333-82805).10.8
            
            2000
                Stock Option Plan (Incorporated by Reference to Exhibit 4.1 to the
                Company’s Registration Statement on Form S-8,
                No.333-51188).




30




**ITEM
      15. EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES**





(c)
            Exhibits
                (continued):




EXHIBIT
              NUMBER
            
            DESCRIPTION10.9
            
            2000
                Key Employee Stock Option Plan (Incorporated by reference to Exhibit
                4.1
                to the Company’s Registration Statement on Form S-8 No.
                333-51192).10.10
            
            2000
                Outside Directors’ Stock Option Plan (Incorporated by reference to Exhibit
                4.1 to the Company’s Registration Statement on Form S-8
                No.333-51190).10.11
            
            Amended
                and Restated Credit Agreement dated as of January 31, 2007 between
                the
                Company and eight banks (Incorporated by Reference to Exhibit 10.1
                to Form
                8-K dated January 31, 2007).10.12
            
            2002
                Key Employee Stock Incentive Plan (Incorporated by Reference to Exhibit
                A
                to the Company’s Proxy Statement filed on September 27,
                2005).10.13
            
            2002
                Outside Directors Stock Option Plan (Incorporated by Reference to
                Exhibit
                4.1 to the Company’s Registration Statement on Form S-8 No.
                333-103626).10.14
            
            Nu
                Horizons Executive Retirement Plan (Incorporated by Reference to
                Exhibit
                10.1 to Form 8K dated March 28, 2005).10.15
            
            Amendment
                to Employment between the Company and Arthur Nadata dated as of March
                28,
                2005. (Incorporated by Reference to Exhibit 10.2 to Form 8-K dated
                March
                28, 2005).10.16
            
            Amendment
                to Employment between the Company and Richard Schuster dated as of
                March
                28, 2005. (Incorporated by Reference to Exhibit 10.3 to Form 8-K
                dated
                March 28, 2005).10.17
            
            Employment
                Agreement between the Company and Kurt Freudenberg dated as of May
                25,
                2006 (Incorporated by Reference to Exhibit 10.2 to Form 8-K dated
                May 24,
                2006).10.18
            
            Share
                Purchase Agreement dated as of August 29, 2006 by and among Nu Horizons
                Electronics Europe, Anthony Frere, Geoffrey Rose, David Zelkha and
                others
                (Incorporated by Reference to Exhibit 10.1 to Form 8-K dated August
                29,
                2006).10.19
            
            Guaranty
                dated as of November 20, 2006 by the Company in favor of The Hong
                Kong and
                Shanghai Banking Corporation Limited (Incorporated by Reference to
                Exhibit
                10.1 to Form 8-K dated November 20,
                2006).





31


**ITEM
      15. EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES**





13.
            
            Annual
                Report to Security holders.21.
            
            Nu
                Horizons Electronics Corp. & Subsidiaries Organizational (Legal
                Entity) Structure as of February 28, 200723.
            
            Accountants’
                Consent31.1
            
            Certification
                of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
                Act of 200231.2
            
            Certification
                of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
                Act of 200232.1
            
            Certification
                of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley
                Act of 200232.2
            
            Certification
                of the Chief Executive Officer Pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002




32


SIGNATURES





Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the Company has duly caused this report to be signed on its behalf by
      the
      undersigned, thereunto duly authorized.


NU
                HORIZONS ELECTRONICS CORP.(Registrant)By:
            /s/
                ARTHUR NADATAArthur
                Nadata,CEO
                (Principal Operating Officer)


By:
            /s/
                KURT FREUDENBERGKurt
                FreudenbergExecutive
                Vice President, Treasurer and
              Chief
                Financial Officer(Principal
                Financial andAccounting
                Officer)





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 date indicated:





SIGNATURE
            
            CAPACITY
            
            DATEBy:
            /s/
                ARTHUR NADATA
            
            Chairman
                of The Board,
            
            November
                21, 2007Arthur
                Nadata
            
            Chief
                  Executive Officer and DirectorBy:
            /s/
                RICHARD SCHUSTER
            
            President,
                  Chief Operating Officer,
            
            November
                21, 2007Richard
                Schuster
            
            Secretary
                and DirectorBy:
            /s/
                KURT FREUDENBERG
            
            Executive
                Vice President,
            
            November
                21, 2007Kurt
                Freudenberg
            
            Treasurer,
                  Chief Financial Officer and DirectorBy:
            /s/
                HERBERT M.GARDNER
            
            Director
            
            November
                21, 2007Herbert
                M. GardnerBy:
            /s/
                MARTIN NOVICK
            
            Director
            
            November
                21, 2007Martin
                NovickBy:
            /s/
                DOMINIC A. POLIMENI
            
            Director
            
            November
                21, 2007Dominic
                A. PolimeniBy:
            /s/
                DAVID SIEGEL
            
            Director
            
            November
                21, 2007David
                Siegel





33




SCHEDULE
      II





NU
      HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES





SCHEDULE
      II—VALUATION AND QUALIFYING


ACCOUNTS
      AND RESERVES





Three
      Years Ended February 28, 2007





Description
            
            Balance
                at
              Beginning
              of
                period
            
            Additions
              charged
                to costsand
                expenses
            
            Deductions(A)
            
            Balance
                at end
              of
                periodValuation
                accountdeducted
                in thebalance
                sheet fromthe
                asset to whichit
                applies:**Allowance
                for**
              **doubtful
                accounts-**
              **accounts
                receivable**2007
            
            $
            4,702,000
            
            $
            447,000
            
            $
            164,000
            
            $
            4,985,0002006
            
            $
            4,582,000
            
            
            -
            
            $
            (120,000
            )
            $
            4,702,0002005
            
            $
            4,090,000
            
            $
            285,000
            
            $
            (207,000
            )
            $
            4,582,000





(A) Accounts
      written off.





Description
            
            Balance
                at
              Beginning
              of
                period
            
            Additions
              charged
                to costsand
                expenses
            
            Deductions
            
            Balance
                at end
              of
                periodValuation
                accountdeducted
                in thebalance
                sheet fromthe
                asset to whichit
                applies:**Inventory
                Reserve**2007
            
            $
            4,268,000
            
            
            -
            
            $
            68,000
            
            $
            4,200,0002006
            
            $
            3,847,000
            
            $
            421,000
            
            
            -
            
            $
            4,268,0002005
            
            $
            3,978,000
            
            
            -
            
            $
            131,000
            
            $
            3,847,000





34


SECURITIES
      AND EXCHANGE COMMISSION





Washington,
      D.C. 20549










EXHIBIT
      INDEX





to





FORM
      10-K





FOR
      THE
      FISCAL YEAR ENDED FEBRUARY 28, 2007





ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15 (d)


OF
      THE
      SECURITIES EXCHANGE ACT OF 1934










NU
      HORIZONS ELECTONICS CORP.





(Exact
      Name of Registrant as Specified in Its Charter)





EXHIBIT
              NUMBER
            
            DESCRIPTION21
            
            Organizational
                (Legal Entity) Structure As of February 28, 200723
            
            Consent
                of Independent Registered Public Accounting Firms31.1
            
            Certification
                of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
                Act of 200231.2
            
            Certification
                of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
                Act of 200232.1
            
            Certification
                of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley
                Act of 200232.2
            
            Certification
                of the Chief Executive Officer Pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002





35