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 ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

As of January ~~5, 2021,~~4, 2022, there were outstanding ~~11,110,735~~11,424,585 shares of Common Stock, $0.05 par value and ~~2,096,919~~2,096,672 shares of Class B Common Stock, $0.05 par value, which are convertible into Common Stock of the registrant on a share for share basis.

	Unaudited		Audited		Unaudited		Audited
	November 28, 2020		May 30, 2020		November 27, 2021		May 29, 2021
Assets
Current assets:
Cash and cash equivalents	$	37,023	$	30,535	$	39,665	$	43,316
Accounts receivable, less allowance of $256 and $334, respectively		21,077		20,197
Accounts receivable, less allowance of $259 and $202, respectively						27,489		25,096
Inventories, net		59,538		57,492		70,741		63,508
Prepaid expenses and other assets		2,798		2,442		3,380		2,385
Investments - current		9,000		16,000
Total current assets		129,436		126,666		141,275		134,305
Non-current assets:
Property, plant and equipment, net		17,358		17,674		17,091		17,067
Intangible assets, net		2,388		2,505		2,139		2,270
Lease ROU asset		2,857		3,419		3,841		2,570
Non-current deferred income taxes		529		456		503		541
Total non-current assets		23,132		24,054		23,574		22,448
Total assets	$	152,568	$	150,720	$	164,849	$	156,753
Liabilities and Stockholders’ Equity
Liabilities
Current liabilities:
Accounts payable	$	15,089	$	17,372	$	18,871	$	16,979
Accrued liabilities		13,998		10,324		15,411		14,182
Lease liability current		1,280		1,485		1,252		1,066
Total current liabilities		30,367		29,181		35,534		32,227
Non-current liabilities:
Non-current deferred income tax liabilities		171		161		235		242
Lease liability non-current		1,512		1,941		2,388		1,358
Other non-current liabilities		884		777		1,279		1,366
Total non-current liabilities		2,567		2,879		3,902		2,966
Total liabilities		32,934		32,060		39,436		35,193
Stockholders’ equity
Common stock, $0.05 par value; issued and outstanding 11,111 shares on November 28, 2020 and 11,038 shares on May 30, 2020		556		552
Class B common stock, convertible, $0.05 par value; issued and outstanding 2,097 shares on November 28, 2020 and May 30, 2020		105		105
Stockholders’ Equity
Common stock, $0.05 par value; issued and outstanding 11,338 shares on November 27, 2021 and 11,160 shares on May 29, 2021						567		558
Class B common stock, convertible, $0.05 par value; issued and outstanding 2,097 shares on November 27, 2021 and May 29, 2021						105		105
Preferred stock, $1.00 par value, 0 shares issued		—		—		—		—
Additional paid-in-capital		62,124		61,749		63,794		62,707
Retained earnings		52,746		54,764		58,476		53,297
Accumulated other comprehensive income		4,103		1,490		2,471		4,893
Total stockholders’ equity		119,634		118,660		125,413		121,560
Total liabilities and stockholders’ equity	$	152,568	$	150,720	$	164,849	$	156,753

	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	November 28, 2020			November 30, 2019			November 28, 2020			November 30, 2019			November 27, 2021			November 28, 2020			November 27, 2021			November 28, 2020
Statements of Comprehensive Income (Loss)
Net sales	$	42,418		$	39,634		$	81,230		$	80,287		$	53,979		$	42,418		$	107,683		$	81,230
Cost of sales		28,075			26,954			54,528			54,656			36,322			28,075			73,729			54,528
Gross profit		14,343			12,680			26,702			25,631			17,657			14,343			33,954			26,702
Selling, general and administrative expenses		13,491			13,161			26,467			26,008			13,135			13,491			26,604			26,467
Loss on disposal of assets		—			—			—			1			2			—			2			—
Operating income (loss)		852			(481	)		235			(378	)
Operating income														4,520			852			7,348			235
Other expense (income):
Investment/interest income		(15	)		(123	)		(33	)		(243	)		(8	)		(15	)		(25	)		(33	)
Foreign exchange loss		143			199			585			89
Foreign exchange (gain) loss														(150	)		143			(123	)		585
Other, net		(18	)		(15	)		(36	)		(16	)		6			(18	)		22			(36	)
Total other expense (income)		110			61			516			(170	)
Total other (income) expense														(152	)		110			(126	)		516
Income (loss) before income taxes		742			(542	)		(281	)		(208	)		4,672			742			7,474			(281	)
Income tax provision		53			80			177			257			550			53			717			177
Net income (loss)		689			(622	)		(458	)		(465	)		4,122			689			6,757			(458	)
Foreign currency translation gain (loss), net of tax		477			222			2,613			(494	)
Comprehensive income (loss)	$	1,166		$	(400	)	$	2,155		$	(959	)
Net income (loss) per share
Foreign currency translation (loss) gain, net of tax														(1,420	)		477			(2,422	)		2,613
Comprehensive income													$	2,702		$	1,166		$	4,335		$	2,155

Net income (loss) per share:
Common shares - Basic	$	0.05		$	(0.05	)	$	(0.04	)	$	(0.04	)	$	0.31		$	0.05		$	0.52		$	(0.04	)
Class B common shares - Basic	$	0.05		$	(0.04	)	$	(0.03	)	$	(0.03	)		0.28			0.05			0.46			(0.03	)
Common shares - Diluted	$	0.05		$	(0.05	)	$	(0.04	)	$	(0.04	)		0.30			0.05			0.50			(0.04	)
Class B common shares - Diluted	$	0.05		$	(0.04	)	$	(0.03	)	$	(0.03	)		0.27			0.05			0.45			(0.03	)

Weighted average number of shares:
Common shares – Basic		11,111			11,038			11,090			11,014			11,270			11,111			11,232			11,090
Class B common shares – Basic		2,097			2,097			2,097			2,097			2,097			2,097			2,097			2,097
Common shares – Diluted		11,128			11,038			11,090			11,014			11,697			11,128			11,568			11,090
Class B common shares – Diluted		2,097			2,097			2,097			2,097			2,097			2,097			2,097			2,097
Dividends per common share	$	0.060		$	0.060		$	0.120		$	0.120
Dividends per Class B common share	$	0.054		$	0.054		$	0.108		$	0.108

Dividends per share:
Common share													$	0.060		$	0.060		$	0.120		$	0.120
Class B common share														0.054			0.054			0.108			0.108

	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	November 28, 2020			November 30, 2019			November 28, 2020			November 30, 2019			November 27, 2021			November 28, 2020			November 27, 2021			November 28, 2020
Operating activities:
Net income (loss)	$	689		$	(622	)	$	(458	)	$	(465	)	$	4,122		$	689		$	6,757		$	(458	)
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:
Depreciation and amortization		873			825			1,746			1,658			859			873			1,688			1,746
Inventory provisions		215			120			452			281			57			215			140			452
Share-based compensation expense														153			178			372			379
Loss on disposal of assets		—			—			—			1			2			—			2			—
Share-based compensation expense		178			182			379			370
Deferred income taxes		(55	)		23			(53	)		(25	)		(23	)		(55	)		12			(53	)
Change in assets and liabilities:
Accounts receivable		687			(335	)		(167	)		1,826			1,862			687			(3,146	)		(167	)
Inventories		613			(2,062	)		(1,008	)		(3,419	)		(4,225	)		613			(9,182	)		(1,008	)
Prepaid expenses and other assets		(381	)		(423	)		(272	)		202			(994	)		(381	)		(1,056	)		(272	)
Accounts payable		211			2,590			(2,523	)		(1,365	)		1,695			211			2,302			(2,523	)
Accrued liabilities		1,633			486			3,412			(390	)		1,032			1,633			1,512			3,412
Other		(236	)		(165	)		(438	)		(109	)		91			(236	)		357			(438	)
Net cash provided by (used in) operating activities		4,427			619			1,070			(1,435	)		4,631			4,427			(242	)		1,070
Investing activities:
Capital expenditures		(562	)		(475	)		(1,280	)		(814	)		(770	)		(562	)		(1,607	)		(1,280	)
Proceeds from maturity of investments		—			—			16,000			8,000			—			—			—			16,000
Purchases of investments		—			(13,000	)		(9,000	)		(13,000	)		—			—			—			(9,000	)
Net cash (used in) provided by investing activities		(562	)		(13,475	)		5,720			(5,814	)		(770	)		(562	)		(1,607	)		5,720
Financing activities:
Proceeds from issuance of common stock		—			59			—			59			672			—			724			—
Cash dividends paid		(780	)		(775	)		(1,560	)		(1,550	)		(792	)		(780	)		(1,578	)		(1,560	)
Payment of financing lease principal		(46	)		(45	)		(91	)		(75	)		(46	)		(46	)		(91	)		(91	)
Other		—			(4	)		—			—
Net cash used in financing activities		(826	)		(765	)		(1,651	)		(1,566	)		(166	)		(826	)		(945	)		(1,651	)
Effect of exchange rate changes on cash and cash equivalents		489			218			1,349			(150	)		(448	)		489			(857	)		1,349
Increase (decrease) in cash and cash equivalents		3,528			(13,403	)		6,488			(8,965	)		3,247			3,528			(3,651	)		6,488
Cash and cash equivalents at beginning of period		33,495			46,457			30,535			42,019			36,418			33,495			43,316			30,535
Cash and cash equivalents at end of period	$	37,023		$	33,054		$	37,023		$	33,054		$	39,665		$	37,023		$	39,665		$	37,023

	Common		Class B Common		Par Value		Additional Paid In Capital			Retained Earnings			Accumulated Other Comprehensive Income		Total			Common		Class B Common		Par Value		Additional Paid In Capital			Retained Earnings			Accumulated Other Comprehensive Income			Total
Balance May 30, 2020:		11,038		2,097	$	657	$	61,749		$	54,764		$	1,490	$	118,660
Comprehensive income
Net loss		—		—		—		—			(458	)		—		(458	)
Balance May 29, 2021:																			11,160		2,097	$	663	$	62,707		$	53,297		$	4,893		$	121,560
Comprehensive income:
Net income																			—		—		—		—			6,757			—			6,757
Foreign currency translation		—		—		—		—			—			2,613		2,613			—		—		—		—			—			(2,422	)		(2,422	)
Share-based compensation:
Restricted stock		—		—		—		259			—			—		259			—		—		—		234			—			—			234
Stock options		—		—		—		120			—			—		120			—		—		—		138			—			—			138
Common stock:
Options exercised																			105		—		5		719			—			—			724
Restricted stock issuance		73		—		4		(4	)		—			—		—			73		—		4		(4	)		—			—			—
Dividends paid to:
Common ($0.120 per share)		—		—		—		—			(1,333	)		—		(1,333	)		—		—		—		—			(1,352	)		—			(1,352	)
Class B ($0.108 per share)		—		—		—		—			(227	)		—		(227	)		—		—		—		—			(226	)		—			(226	)
Balance November 28, 2020:		11,111		2,097	$	661	$	62,124		$	52,746		$	4,103	$	119,634
Balance November 27, 2021																			11,338		2,097	$	672	$	63,794		$	58,476		$	2,471		$	125,413

Balance August 29, 2020:		11,111		2,097	$	661	$	61,946		$	52,837		$	3,626	$	119,070
Comprehensive income
Balance August 28, 2021:																			11,241		2,097	$	667	$	62,974		$	55,146		$	3,891		$	122,678
Comprehensive income:
Net income		—		—		—		—			689			—		689			—		—		—		—			4,122			—			4,122
Foreign currency translation		—		—		—		—			—			477		477			—		—		—		—			—			(1,420	)		(1,420	)
Share-based compensation:
Restricted stock		—		—		—		128			—			—		128			—		—		—		106			—			—			106
Stock options		—		—		—		50			—			—		50			—		—		—		47			—			—			47
Common stock:
Options exercised																			97		—		5		667			—			—			672
Dividends paid to:
Common ($0.060 per share)		—		—		—		—			(666	)		—		(666	)		—		—		—		—			(679	)		—			(679	)
Class B ($0.054 per share)		—		—		—		—			(114	)		—		(114	)		—		—		—		—			(113	)		—			(113	)
Balance November 28, 2020:		11,111		2,097	$	661	$	62,124		$	52,746		$	4,103	$	119,634
Balance November 27, 2021																			11,338		2,097	$	672	$	63,794		$	58,476		$	2,471		$	125,413

	Common			Class B Common		Par Value		Additional Paid In Capital			Retained Earnings			Accumulated Other Comprehensive Income			Total			Common		Class B Common		Par Value		Additional Paid In Capital			Retained Earnings			Accumulated Other Comprehensive Income		Total
Balance June 1, 2019:		10,957			2,097	$	652	$	61,012		$	59,703		$	2,390		$	123,757
Comprehensive loss
Balance May 30, 2020:																					11,038		2,097	$	657	$	61,749		$	54,764		$	1,490	$	118,660
Comprehensive income:
Net loss		—			—		—		—			(465	)		—			(465	)		—		—		—		—			(458	)		—		(458	)
Foreign currency translation		—			—		—		—			—			(494	)		(494	)		—		—		—		—			—			2,613		2,613
Share-based compensation:
Restricted stock		—			—		—		214			—			—			214			—		—		—		259			—			—		259
Stock options		—			—		—		156			—			—			156			—		—		—		120			—			—		120
Common stock:
Options exercised		10			—		1		58			—			—			59
Restricted stock issuance		71			—		4		(4	)		—			—			—			73		—		4		(4	)		—			—		—
Dividends paid to:
Common ($0.120 per share)		—			—		—		—			(1,324	)		—			(1,324	)		—		—		—		—			(1,333	)		—		(1,333	)
Class B ($0.108 per share)		—			—		—		—			(226	)		—			(226	)		—		—		—		—			(227	)		—		(227	)
Balance November 30, 2019:		11,038			2,097	$	657	$	61,436		$	57,688		$	1,896		$	121,677
Balance November 28, 2020																					11,111		2,097	$	661	$	62,124		$	52,746		$	4,103	$	119,634

Balance August 31, 2019:		11,029			2,097	$	656	$	61,200		$	59,085		$	1,674		$	122,615
Comprehensive (loss) income
Net loss		—			—		—		—			(622	)		—			(622	)
Balance August 29, 2020:																					11,111		2,097	$	661	$	61,946		$	52,837		$	3,626	$	119,070
Comprehensive income:
Net income																					—		—		—		—			689			—		689
Foreign currency translation		—			—		—		—			—			222			222			—		—		—		—			—			477		477
Share-based compensation:
Restricted stock		—			—		—		115			—			—			115			—		—		—		128			—			—		128
Stock options		—			—		—		67			—			—			67			—		—		—		50			—			—		50
Common stock:
Options exercised		10			—		1		58			—			—			59
Restricted stock issuance		(1	)		—		—		(4	)		—			—			(4	)
Dividends paid to:
Common ($0.060 per share)		—			—		—		—			(662	)		—			(662	)		—		—		—		—			(666	)		—		(666	)
Class B ($0.054 per share)		—			—		—		—			(113	)		—			(113	)		—		—		—		—			(114	)		—		(114	)
Balance November 30, 2019:		11,038			2,097	$	657	$	61,436		$	57,688		$	1,896		$	121,677
Balance November 28, 2020																					11,111		2,097	$	661	$	62,124		$	52,746		$	4,103	$	119,634

Richardson Electronics, Ltd. is a leading global provider of engineered solutions, power grid and microwave tubes and related consumables; power conversion and RF and microwave components; high value flat panel detector solutions, replacement parts, tubes and service training for diagnostic imaging equipment; and customized display solutions. We serve customers in the alternative energy, healthcare, aviation, broadcast, communications, industrial, marine, medical, military, scientific and semiconductor markets. The Company’s strategy is to provide specialized technical expertise and “engineered solutions” based on our core engineering and manufacturing capabilities. The Company provides solutions and adds value through design-in support, systems integration, prototype design and manufacturing, testing, logistics and aftermarket technical service and repair through its global infrastructure.

Our products include electron tubes and related components, microwave generators, subsystems used in semiconductor manufacturing and visual technology solutions. These products are used to control, switch or amplify electrical power signals, or are used as display devices in a variety of industrial, commercial, medical and communication applications.

Power and Microwave Technologies Group (“PMT”) combines our core engineered solutions capabilities, power grid and microwave tube business with new disruptive RF, Wireless and Power technologies. As a designer, manufacturer, technology partner and authorized distributor, PMT’s strategy is to provide specialized technical expertise and engineered solutions based on our core engineering and manufacturing capabilities on a global basis. We provide solutions and add value through design-in support, systems integration, prototype design and manufacturing, testing, logistics and aftermarket technical service and repair—all through our existing global infrastructure. PMT’s focus is on products for power, RF and microwave applications for customers in 5G, alternative energy, aviation, broadcast, communications, industrial, marine, medical, military, scientific and semiconductor markets. PMT focuses on various applications including broadcast transmission, CO2 laser cutting, diagnostic imaging, dielectric and induction heating, high energy transfer, high voltage switching, plasma, power conversion, radar and radiation oncology. PMT also offers its customers technical services for both microwave and industrial equipment.

Canvys provides customized display solutions serving the corporate enterprise, financial, healthcare, industrial and medical original equipment manufacturers markets. Our engineers design, manufacture, source and support a full spectrum of solutions to match the needs of our customers. We offer long term availability and proven custom display solutions that include touch screens, protective panels, custom enclosures, All-In-One computers, specialized cabinet finishes and application specific software packages and certification services. We partner with both private label manufacturing companies and leading branded hardware vendors to offer the highest quality display and touch solutions and customized computing platforms.

Healthcare manufactures, repairs, refurbishes and distributes high value replacement parts and equipment for the healthcare market including hospitals, medical centers, asset management companies, independent service organizations and multi-vendor service providers. Products include diagnostic imaging replacement parts for CT and MRI systems; replacement CT and MRI tubes; CT service training; MRI coils, cold heads and RF amplifiers; hydrogen thyratrons, klystrons, magnetrons; flat panel detector upgrades; pre-owned CT systems; and additional replacement solutions currently under development for the diagnostic imaging service market. Through a combination of newly developed products and partnerships, service offerings and training programs, we believe we can help our customers improve efficiency and deliver better clinical outcomes while lowering the cost of healthcare delivery.

We currently have operations in the following major geographic regions: North America, Asia/Pacific, Europe and Latin America.

The accompanying unaudited consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and notes required by GAAP for complete financial statements.

Our fiscal quarter ends on the Saturday nearest the end of the quarter-ending month. The second quarter of fiscal ~~2021~~2022 and fiscal ~~2020~~2021 both contained 13 weeks. The first six months of fiscal ~~2021~~2022 and fiscal ~~2020~~2021 both contained 26 weeks.

In the opinion of management, all adjustments, which are of a normal and recurring nature, necessary for a fair presentation of the results of interim periods have been made. All inter-company transactions and balances have been eliminated. The unaudited consolidated financial statements presented herein include the accounts of our wholly owned subsidiaries. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted

pursuant to such rules and regulations. The results of our operations for the three months and six months ended November ~~28, 2020~~27, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending May ~~29, 2021.~~28, 2022.

The financial information contained in this report should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended May ~~30, 2020, that we~~29, 2021, which was filed on August ~~3, 2020.~~2, 2021.

Inventories, net: Our consolidated inventories were stated at the lower of cost and net realizable value, generally using a weighted-average cost method. Our net inventories include approximately ~~$53.0~~$61.4 million of finished goods, ~~$4.0~~$5.5 million of raw materials and ~~$2.5~~$3.8 million of work-in-progress as of November ~~28, 2020,~~27, 2021, as compared to approximately ~~$51.8~~$57.0 million of finished goods, ~~$3.6~~$3.9 million of raw materials and ~~$2.1~~$2.6 million of work-in-progress as of May ~~30, 2020.~~29, 2021.

At this time, we do not anticipate any material risks or uncertainties related to possible future inventory write-downs. Provisions for obsolete or ~~slow moving~~slow-moving inventories are recorded based upon regular analysis of stock rotation privileges, obsolescence, the exiting of certain markets and assumptions about future demand and market conditions. If future demand changes in the industry, or market conditions differ from management’s estimates, additional provisions may be necessary. Inventory reserves were approximately ~~$5.7~~$5.9 million as of November ~~28, 2020~~27, 2021 and ~~$5.4~~$5.9 million as of May ~~30, 2020.~~29, 2021.

Revenue Recognition:The Company has a number of defined revenue streams across our reportable segments. Distribution is the Company’s largest revenue stream. The distribution business does not include a separate service bundled with the product sold or sold on top of the product. Distribution typically includes products purchased from our suppliers, stocked in our warehouses and then sold to our customers. Revenue is recognized when control of the promised goods is transferred to our customers, which is simultaneous with the title transferring to the customer, in an amount that reflects the transaction price consideration that we expect to receive in exchange for those goods. Control refers to the ability of the customer to direct the use of, and obtain substantially all of, the remaining benefits from the goods. Our transaction price consideration is fixed, unless otherwise disclosed below as variable consideration. Generally, our contracts require our customers to pay for goods after we deliver products to them. Terms are generally on open account, payable net 30 days in North America, and vary throughout Asia/Pacific, Europe and Latin America subject to customary credit checks.

The Company also sells products that are manufactured or assembled in our manufacturing facility. These products ~~are~~can either be built to the customer’s prints/designs or are products that we stock in our warehouse to sell to any customer that places an order. The manufacturing business does not include a separate service bundled with the product sold or sold in addition to the product.

The Company recognizes services revenue when the repair, installation or training is performed.~~Based on our analysis of services revenue under GAAP, there is an immaterial impact on the timing, amount or characterization of services revenue recognized by the Company.~~ The services we provide are relatively short in duration and typically completed in one toor two weeks. Therefore, at each reporting date, the amount of unbilled work ~~performed~~ is insignificant. The services revenue has consistently accounted for less than 5% of the Company’s total revenues and is expected to continue at that level.

We also record discounts taken and ~~estimated~~estimate returns based on ~~our~~ historical experience. Our products are often manufactured to meet the specific design needs of our customers’ applications. Our engineers work closely with customers to ensure that our products will meet their needs. Our customers are under no obligation to compensate us for designing the products we sell.

A revenue contract exists once a customer purchase order is received, reviewed and accepted. Prior to accepting a customer purchase order, we review the credit worthiness of the customer. Purchase orders are deemed to meet the collectability criterion once the customer’s credit is approved.

Contract Liabilities: Contract liabilities and revenue recognized were as follows (in thousands):

The Company receives advance payments or deposits from our customers before revenue is recognized resulting in contract liabilities. Contract liabilities are included in accrued liabilities in the consolidated balance sheets.

Performance obligations and satisfaction of performance obligation in the contract

that were produced by the Company and resale of goods that we purchase from our suppliers. Our shipping and handling activities for destination shipments are performed prior to the customer obtaining control. As such, they are not a separate promised service. For shipping point, the Company is making the election under ASC 606-10-25-18B to account for shipping and handling as activities to fulfill the promise to transfer the goods. The goods we provide to our customers are distinct in that our customers benefit from the goods we sell them through use in their own processes. Our customers are generally not resellers, but rather businesses that incorporate our products into their processes from which they generate an economic benefit. The goods are also distinct in that each item sold to the customer is clearly identified on both the purchase order and resulting invoice. Each product we sell benefits the customer independently of the other products. Each item on each purchase order from the customer can be used by the customer unrelated to any other products we provide to the customer.

The transaction price for each product is the amount invoiced to the customer. Each product on a purchase order is a separate performance obligation with an observable standalone selling price. The transaction price is a fixed price per unit, except for the variable consideration. The Company elects to exclude sales tax from the transaction price.

We recognize revenue at a point in time when title transfers to the customer, at the shipping point for FOB shipping contracts and at the customer’s delivery location for FOB destination contracts. We believe that the transfer of title best represents when the customer obtains control of the goods. Prior to that date, we do not have right to payment, and the significant risks and rewards remain with us. The significant risks and rewards of ownership of the inventory transfer simultaneously with the transfer of title. The customer’s acceptance of the goods is based on objective measurements, not subjective.

Our return policy is available to customers in our terms and conditions found on our website www.rell.com. The policy varies by business unit. The Company allows returns with prior written authorization and we allow returns within ten days of shipment for replacement parts.

The Company maintains a reserve for returns based on historical trends that covers all contracts and revenue streamsusing the expected value method because we have a large number of contracts with similar characteristics, which is considered variable consideration. The reserve for returns creates a refund liability on our balance sheet as a contra Trade Accounts Receivable as well as an asset in inventory. We value the inventory at cost due to there being minimal or no costs to the Company as we generally require the customer to pay freight and we typically do not have costs associated with activities such as relabeling or repackaging.

The reserve is considered immaterial at each balance sheet date for further consideration. Returns for defective product are typically covered by our suppliers’ warranty, thus, returns for defective product are not factored into our reserve.

We offer warranties for the limited number of specific products we manufacture. For further information regarding the impact of warranties see the Warranties discussion elsewhere in Note 3.

Principal versus agent guidance was considered for customized products that are provided by our suppliers versus manufactured by the Company. The Company acts as the principal as we are responsible for satisfying the performance obligation. We have primary responsibility for fulfilling the contract, we have inventory risk prior to delivery to our customer, we establish prices, our consideration is not in the form of a commission and we bear the credit risk. The Company recognizes revenue in the gross amount of consideration.

See Note 7, Segment Reporting, for a disaggregation of revenue by reportable segment and geographic region, which represents how our chief operating decision maker reviews information internally to evaluate our financial performance and to make resource allocation and other decisions for the Company.

Loss Contingencies: We accrue a liability for loss contingencies when it is probable that a liability has been incurred and the amount can be reasonably estimated. When only a range of possible loss can be established, the most probable amount in the range is accrued. If no amount within this range is a better estimate than any other amount within the range, the minimum amount in the range is accrued. If we determine that there is at least a reasonable possibility that a loss may have been incurred, we will include a disclosure describing the contingency.

Intangible Assets:Intangible assets are initially recorded at their fair market values determined onby quoted market prices in active markets, if available, or recognized valuation models. Intangible assets that have finite useful lives are amortized over their useful lives either on a straight-line basis or over their projected future cash flows and are tested for impairment when events or changes in circumstances occur that indicate possible impairment. Our intangible assets represent the fair value for trade name, customer relationships, non-compete agreements and technology acquired in connection with ~~our~~the acquisitions. Intangible assets subject to amortization were as follows (in thousands):

The amortization expense associated with the intangible assets subject to amortization for the next five years is presented in the following table (in thousands):

The weighted average number of years of amortization expense remaining is 12.5 years.

Income Taxes: We recognize deferred tax assets and liabilities based on the differences between financial statement carrying amounts and the tax bases of assets and liabilities. We regularly review our deferred tax assets for recoverability and determine the need for a valuation allowance based on a number of factors, including both positive and negative evidence. These factors include historical taxable income or loss, projected future taxable income or loss, the expected timing of the reversals of existing temporary differences and the implementation of tax planning strategies. In circumstances where we, or any of our affiliates, have incurred three years of cumulative losses which constitute significant negative evidence, positive evidence of equal or greater significance is needed to overcome the negative evidence before a tax benefit is recognized for deductible temporary differences and loss carryforwards.

Accrued Liabilities: Accrued liabilities consisted of the following (in thousands):

The Company has a number of defined revenue streams across our reportable segments. For each of these revenue streams, all products are typically sold directly by the Company to the end customer. Distribution is the Company’s largest revenue stream. The distribution business does not include a separate service bundled with the product sold or sold on top of the product. Distribution typically includes products purchased from our suppliers, stocked in our warehouses and then sold to our customers. Revenue is recognized when control of the promised goods is transferred to our customers, which is simultaneous with the title transferring to the customer, in an amount that reflects the transaction price consideration that we expect to receive in exchange for those goods. Control refers to the ability of the customer to direct the use of, and obtain substantially all of, the remaining benefits from the goods. Our transaction price consideration is fixed, unless otherwise disclosed below as variable consideration. Generally, our contracts require our customers to pay for goods after we deliver products to them. Terms are generally on open account, payable net 30 days in North America, and vary throughout Asia/Pacific, Europe and Latin America subject to customary credit checks.

The Company also sells products that are manufactured or assembled in our manufacturing facility. These products can either be built to the customer’s prints/designs or are products that we stock in our warehouse to sell to any customer that places an order. The manufacturing business does not include a separate service bundled with the product sold or sold in addition to the product.

~~The Company recognizes services revenue when the repair, installation or training is performed.~~ Based on our analysis of services revenue, ASU 2014-09 has an immaterial impact on the timing, amount or characterization of services revenue recognized by the Company. The services we provide are relatively short in duration and typically completed in one to two weeks. Therefore, at each reporting date, the amount of unbilled work performed is insignificant. The services revenue has consistently accounted for less than 5% of the Company’s total revenues and is expected to continue at that level.

~~A contract is an agreement between two or more parties that creates enforceable rights and obligations.~~ A revenue contract exists for us once a customer purchase order is received, reviewed and accepted. Prior to accepting a customer purchase order, we review the credit worthiness of the customer. Purchase orders are deemed to meet the collectability criterion once the customer’s credit is approved. Contract assets arise when the Company transfers a good or performs a service in advance of receiving consideration from the customer and contract liabilities arise when the Company receives consideration from its customer in advance of performance.

~~Contract Liabilities:~~ ~~Contract liabilities and revenue recognized were as follows (in thousands~~):

The Company receives advance payments or deposits from our customers before revenue is recognized, resulting in contract liabilities. Contract liabilities are included in accrued liabilities in the consolidated balance sheets.

~~Performance obligations and satisfaction of performance obligation in the contract~~

Each accepted purchase order identifies a distinct good or service as the performance obligation. The goods are generally standard products we purchased from a supplier and stocked on our shelves. They can also be customized products purchased from a supplier or products that are customized or have value added to them in-house prior to shipping to the customer. Our contracts for customized products generally include termination provisions if a customer cancels its order. However, we recognize revenue at a point in time because the termination provisions do not require, upon cancelation, the customer to pay fees that are commensurate with the work performed. Each purchase order explicitly states the goods or service that we promise to transfer to the customer. The promises to the customer are limited only to those goods or service. The performance obligation is our promise to deliver both goods that were produced by the Company and resale of goods that we purchase from our suppliers. Our shipping and handling activities for destination shipments are performed prior to the customer obtaining control. As such, they are not a separate promised service. For shipping point, the Company is making the election under ASC 606-10-25-18B toWarranties: account for shipping and handling as activities to fulfill the promise to transfer the goods. The goods we provide to our customers are distinct in that our customers benefit from the goods we sell them through use in their own processes. Our customers are generally not resellers, but rather businesses that incorporate our products into their processes from which they generate an economic benefit. The goods are also distinct in that each item sold to the customer is clearly identified on both the purchase order and resulting invoice. Each product we sell benefits the customer independently of the other products. Each item on each purchase order from the customer can be used by the customer unrelated to any other products we provide to the customer.

~~The transaction price for each product is the amount invoiced to the customer.~~ ~~Each product on a purchase order is a separate performance obligation with an observable standalone selling price.~~ The transaction price is a fixed price per unit, except for the variable consideration. The Company elects to exclude sales tax from the transaction price. With the exception of sale with right of return, variable consideration has been identified only in the form of customer early payment discounts, which are immaterial to the Company’s financial statements. As there is not a material impact on our financial statements, we will continue to account for customer discounts when they are taken by the customer and address further if they grow.

We recognize revenue when title transfers to the customer, at the shipping point for FOB shipping contracts and at the customer’s delivery location for FOB destination contracts. We believe that the transfer of title best represents when the customer obtains control of the goods. Prior to that date, we do not have right to payment, and the significant risks and rewards remain with us. The significant risks and rewards of ownership of the inventory transfer simultaneously with the transfer of title. The customer’s acceptance of the goods is based on objective measurements, not subjective.

~~The Company maintains a reserve for returns based on historical trends that covers all contracts and revenue streams~~using the expected value method because we have a large number of contracts with similar characteristics, which is considered variable consideration. The reserve for returns creates a refund liability on our balance sheet as a contra Trade Accounts Receivable as well as an asset in inventory. We value the inventory at cost due to there being minimal or no costs to the Company as we generally require the customer to pay freight and we typically do not have costs associated with activities such as relabeling or repackaging.

The reserve is considered immaterial at each balance sheet date for further consideration. Returns for defective product are typically covered by our supplier’s warranty, thus, returns for defective product are not factored into our reserve.

We offer warranties for the limited number of specific products we manufacture. ~~Our warranty terms generally range from one to three years.~~ We estimate the cost to perform under the warranty obligation and recognize this estimated cost at the time of the related product sale. Each quarter, we assess actual warranty costs incurred on a product-by-product basis and compare the warranty costs to our estimated warranty reserve. With respect to new products, estimates are based generally on knowledge of the products and warranty experience. ~~See Note 7,~~ ~~Warranties,~~ ~~for further information regarding the impact of warranties.~~

~~See Note 11,~~ ~~Segment Reporting,~~ for a disaggregation of revenue by reportable segment and geographic region, which represents how our chief operating decision maker reviews information internally to evaluate our financial performance and to make resource allocation and other decisions for the Company.

Intangible assets are initially recorded at their fair market values determined by quoted market prices in active markets, if available, or recognized valuation models. Intangible assets that have finite useful lives are amortized over their useful lives and are tested for impairment when events or changes in circumstances occur that indicate possible impairment.

Our intangible assets represent the fair value for trade name, customer relationships, non-compete agreements and technology acquired in connection with our acquisitions. Intangible assets subject to amortization were as follows ~~(in thousands)~~:

~~The amortization expense associated with the intangible assets subject to amortization for the next five years is presented in the following table~~ ~~(in thousands)~~:

~~The weighted average number of years of amortization expense remaining is 13.3 years.~~

~~As of November 28, 2020, we had $9.0 million invested in a CD which matures in less than twelve months. The fair value of the investment was equal to the face value of the CD.~~

~~As of May 30, 2020, we had $16.0 million invested in CDs which mature in less than twelve months. The fair value of these investments was equal to the face value of the CDs.~~

~~We offer warranties for the limited number of specific products we manufacture.~~ Our warranty terms generally range from one to three years.

We estimate the cost to perform under the warranty obligation and recognize this estimated cost at the time of the related product sale. We record expense related to our warranty obligations as cost of sales in our consolidated statements of comprehensive ~~income (loss).~~income. Each quarter, we assess actual warranty costs incurred on a product-by-product basis and compare the warranty costs to our estimated warranty obligation. With respect to new products, estimates are based generally on knowledge of the products and warranty experience, if a sufficient history exists.

Warranty reserves are established for costs that are expected to be incurred after the sale and delivery of products under warranty. Warranty reserves are included in accrued liabilities on our consolidated balance sheets. The warranty reserves are determined based on known product failures, historical experience and other available evidence. Warranty reserves were approximately $~~0.4~~$0.6 million as of November ~~28, 2020~~27, 2021 and $0.5 million as of May ~~30, 2020.~~29, 2021.

The Company leases real and personal property in the normal course of business under various operating leases and financing leases. The Company has two types of operating leases: leases for facility space and leases for automobiles. Most of the leased facility space is for sales and general office use. Automobile leases are used throughout the Company. The financing lease is for our computer servers.

The gross amounts of assets and liabilities related to both operating and financing leases were as follows (in thousands):

Lease Type	November 28, 2020		May 30, 2020		November 27, 2021		May 29, 2021
Operating lease ROU asset	$	2,503	$	3,018	$	3,579	$	2,262
Financing lease ROU asset		354		401		262		308
Total Lease ROU asset	$	2,857	$	3,419
Total lease ROU asset					$	3,841	$	2,570

Operating lease liability current	$	1,121	$	1,329	$	1,192	$	918
Financing lease liability current		159		156		60		148
Total lease liability current	$	1,280	$	1,485	$	1,252	$	1,066

Operating lease liability non-current	$	1,437	$	1,778	$	2,388	$	1,358
Financing lease liability non-current		75		163
Total lease liability non-current	$	1,512	$	1,941	$	2,388	$	1,358

		Six Months Ended					Three Months Ended
		November 28, 2020		November 30, 2019			November 27, 2021		November 28, 2020
Consolidated operating lease expense	Operating expenses	$	990	$	946	Operating expenses	$	446	$	502

Consolidated financing lease amortization	Operating expenses		46		16	Operating expenses		23		23
Consolidated financing lease interest	Interest expense		7		14	Interest expense		1		3
Consolidated financing lease expense			53		30			24		26

Net lease cost		$	1,043	$	976		$	470	$	528

The approximate future minimum lease payments under operating and financing leases at November ~~28, 2020~~27, 2021 were as follows (in thousands):

Fiscal Year	Operating Leases		Financing Leases		Total		Operating Leases		Financing Leases		Total
Remaining 2021	$	703	$	91	$	794
2022		796		151		947
Remaining 2022							$	692	$	60	$	752
2023		542		—		542		1,221		—		1,221
2024		367		—		367		837		—		837
2025		222		—		222		583		—		583
2026								401		—		401
Thereafter		125		—		125		94		—		94
Total lease payments		2,755		242		2,997		3,828		60		3,888
Less imputed interest		197		8		205		248		1		249
Net minimum lease payments	$	2,558	$	234	$	2,792	$	3,580	$	59	$	3,639

The weighted average remaining lease terms and interest rates of leases held by the Company as of November ~~28, 2020~~27, 2021 were as follows:

Lease Type

Weighted Average Remaining

Lease Term in Years

Weighted Average Interest Rate

Weighted Average Remaining

Lease Term in Years

Weighted Average Interest Rate

Operating leases

3.3

4.6%

3.6

4.5%

Financing leases

1.4

4.6%

0.4

4.6%

The cash outflows of the leasing activity of the Company as lessee for the six months ending November 27, 2021 and November 28, 2020 were as follows (in thousands):

					Six Months Ended
Cash Flow Source	Classification	Amount		Classification	November 27, 2021		November 28, 2020
Operating cash flows from operating leases	Operating activities	$	549	Operating activities	$	1,303	$	549
Operating cash flows from financing leases	Operating activities		84	Operating activities		88		84
Finance cash flows from financing leases	Financing activities		91	Financing activities		91		91

We recorded an income tax provision of ~~$0.2~~$0.7 million and ~~$0.3~~$0.2 million for the first six months of fiscal ~~2021~~2022 and the first six months of fiscal ~~2020,~~2021, respectively. The effective income tax rate during the first six months of fiscal ~~2021~~2022 was a tax provision of ~~(63.0)%~~9.6% as compared to a tax provision of ~~(123.6)%~~(63.0%) during the first six months of fiscal ~~2020.~~2021. The difference in rate during the first six months of fiscal ~~2021~~2022 as compared to the first six months of fiscal ~~2020~~2021 reflects changes in our geographical distribution of income (loss). and state income tax provision due to temporary suspension of net operating loss utilization in Illinois and California. The ~~(63.0)%~~9.6% effective income tax rate differs from the federal statutory rate of 21% as a result of our geographical distribution of income (loss) ~~and~~, the movement of the valuation allowance against our U.S. state and federal net deferred tax ~~assets.~~assets and state income tax provision due to temporary suspension of net operating loss utilization in Illinois and California.

In the normal course of business, we are subject to examination by taxing authorities throughout the world. Generally, years prior to fiscal 2015 are closed for examination under the statute of limitation for U.S. federal, U.S. state and local or non-U.S. tax jurisdictions. We are currently under examination in Thailand (fiscal 2008 through 2011) and Germany (fiscal 2015 through 2018). Our primary foreign tax jurisdictions are Germany and the Netherlands. We have tax years open in Germany beginning in fiscal 2015 and the Netherlands beginning in fiscal 2018.

We have historically determined that certain undistributed earnings of our foreign subsidiaries, to the extent of cash available, will be repatriated to the U.S. The deferred tax liability on the outside basis difference is now primarily withholding tax on future dividend distributions. We have provided a deferred tax liability of less than $0.1 million as of both November ~~28, 2020~~27, 2021 and as of May ~~30, 2020.~~29, 2021.

As of November ~~28, 2020~~27, 2021 and as of May ~~30, 2020,~~29, 2021, our worldwide liability for uncertain tax positions related to continuing operations was $0.1 million, excluding interest and penalties. We record penalties and interest related to uncertain tax positions in the income tax expense line item within the consolidated statements of comprehensive ~~income (loss).~~income.

The valuation allowance against the net deferred tax assets that will more likely than not be realized was ~~$12.5~~$10.4 million as of November ~~28, 2020.~~27, 2021. The valuation allowance against the net deferred tax assets was ~~$12.3~~$12.2 million as of May ~~30, 2020 as no material additional domestic federal~~29, 2021 and ~~state net deferred tax assets were generated during~~ the ~~first six months of fiscal 2021 from~~Company is utilizing prior losses in the ~~U.S. jurisdiction.~~first two quarters of fiscal 2022 against its income. A full valuation allowance on the U.S. and state deferred tax assets will be maintained until sufficient positive evidence related to sources of future taxable income exists to support a reversal of the valuation allowance. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are increased, or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as our projections for growth.

We have authorized 17,000,000 shares of common stock and 3,000,000 shares of Class B common stock. The Class B common stock has 10 votes per share and has transferability restrictions; however, Class B common stock may be converted into common stock on a share-for-share basis at any time. With respect to dividends and distributions, shares of common stock and Class B common stock rank equally and have the same rights, except that Class B common stock cash dividends are limited to 90% of the amount of ~~Class A~~ common stock cash dividends.

~~In accordance with ASC 260-10,~~ ~~Earnings Per Share~~ ~~(“ASC 260”), our~~Our Class B common stock is considered a participating security requiring the use of the two-class method for the computation of basic and diluted earnings per share. The two-class computation method for each period reflects the cash dividends paid per share for each class of stock, plus the amount of allocated undistributed earnings per share computed using the participation percentage which reflects the dividend rights of each class of stock. Basic and diluted earnings per share were computed using the two-class ~~method as prescribed in ASC 260.~~method. The shares of Class B common stock are considered to be participating convertible securities since the shares of Class B common stock are convertible on a share-for-share basis into shares of common stock and may participate in dividends with common stock according to a predetermined formula which is 90% of the amount of ~~Class A~~ common stock cash dividends.

The earnings per share (“EPS”) presented in our unaudited consolidated statements of comprehensive income ~~(loss)~~ were based on the following amounts (in thousands, except per share amounts):

	Three Months Ended
	November 27, 2021				November 28, 2020
	Basic		Diluted		Basic			Diluted
Numerator for Basic and Diluted EPS:
Net income	$	4,122	$	4,122	$	689		$	689
Less dividends:
Common stock		679		679		666			666
Class B common stock		113		113		114			114
Undistributed earnings (loss)	$	3,330	$	3,330	$	(91	)	$	(91	)
Common stock undistributed earnings (loss)	$	2,852	$	2,867	$	(78	)	$	(78	)
Class B common stock undistributed earnings (loss)		478		463		(13	)		(13	)
Total undistributed earnings (loss)	$	3,330	$	3,330	$	(91	)	$	(91	)

Denominator for Basic and Diluted EPS:
Common stock weighted average shares		11,270		11,270		11,111			11,111
Effect of dilutive securities
Dilutive stock options				427					17
Denominator for diluted EPS adjusted for weighted average shares and assumed conversion				11,697					11,128
Class B commons stock weighted average shares and shares under if-converted method for diluted EPS		2,097		2,097		2,097			2,097

Net income per share:
Common stock	$	0.31	$	0.30	$	0.05		$	0.05
Class B common stock	$	0.28	$	0.27	$	0.05		$	0.05

Note: There were 0 common stock options that were antidilutive in the second quarter of fiscal 2022 and fiscal 2021.

	Three Months Ended												Six Months Ended
	November 28, 2020						November 30, 2019						November 27, 2021				November 28, 2020
	Basic			Diluted			Basic			Diluted			Basic		Diluted		Basic			Diluted
Numerator for Basic and Diluted EPS:
Net income (loss)	$	689		$	689		$	(622	)	$	(622	)	$	6,757	$	6,757	$	(458	)	$	(458	)
Less dividends:
Common stock		666			666			662			662			1,352		1,352		1,333			1,333
Class B common stock		114			114			113			113			226		226		227			227
Undistributed losses	$	(91	)	$	(91	)	$	(1,397	)	$	(1,397	)
Common stock undistributed losses	$	(78	)	$	(78	)	$	(1,193	)	$	(1,193	)
Class B common stock undistributed losses		(13	)		(13	)		(204	)		(204	)
Total undistributed losses	$	(91	)	$	(91	)	$	(1,397	)	$	(1,397	)
Undistributed earnings (loss)													$	5,179	$	5,179	$	(2,018	)	$	(2,018	)
Common stock undistributed earnings (loss)													$	4,434	$	4,453	$	(1,725	)	$	(1,725	)
Class B common stock undistributed earnings (loss)														745		726		(293	)		(293	)
Total undistributed earnings (loss)													$	5,179	$	5,179	$	(2,018	)	$	(2,018	)

Denominator for Basic and Diluted EPS:
Common stock weighted average shares		11,111			11,111			11,038			11,038			11,232		11,232		11,090			11,090
Class B common stock weighted average shares and shares under if-converted method for diluted EPS		2,097			2,097			2,097			2,097
Effect of dilutive securities
Dilutive stock options					17						—					336					—
Denominator for diluted EPS adjusted for weighted average shares and assumed conversions					13,225						13,135
Denominator for diluted EPS adjusted for weighted average shares and assumed conversion																11,568					11,090
Class B commons stock weighted average shares and shares unde if-converted method for diluted EPS														2,097		2,097		2,097			2,097

Net income (loss) per share:
Common stock	$	0.05		$	0.05		$	(0.05	)	$	(0.05	)	$	0.52	$	0.50	$	(0.04	)	$	(0.04	)
Class B common stock	$	0.05		$	0.05		$	(0.04	)	$	(0.04	)	$	0.46	$	0.45	$	(0.03	)	$	(0.03	)

Note: There were 0 common stock options that were antidilutive in the first six month of fiscal 2022. Common stock options that were anti-dilutive and not included in ~~diluted earnings per common share for~~ the ~~second quarter of fiscal 2020 were 860.~~

Six Months Ended

November 28, 2020

November 30, 2019

Basic

Diluted

Basic

Diluted

Numerator for Basic and Diluted EPS:

Net loss

$
(458
)

$
(458
)

$
(465
)

$
(465
)
Less dividends:

Common stock

1,333

1,333

1,324

1,324

Class B common stock

227

227

226

226

Undistributed losses

$
(2,018
)

$
(2,018
)

$
(2,015
)

$
(2,015
)
Common stock undistributed losses

$
(1,725
)

$
(1,725
)

$
(1,720
)

$
(1,720
)
Class B common stock undistributed losses

(293
)

(293
)

(295
)

(295
)
Total undistributed losses

$
(2,018
)

$
(2,018
)

$
(2,015
)

$
(2,015
)
Denominator for Basic and Diluted EPS:

Common stock weighted average shares

11,090

11,090

11,014

11,014

Class B common stock weighted average shares and
shares under if-converted method for diluted EPS

2,097

2,097

2,097

2,097

Effect of dilutive securities

Dilutive stock options

—

—

Denominator for diluted EPS adjusted for weighted
average shares and assumed conversions

13,187

13,111

Net loss per share:

Common stock

$
(0.04
)

$
(0.04
)

$
(0.04
)

$
(0.04
)
Class B common stock

$
(0.03
)

$
(0.03
)

$
(0.03
)

$
(0.03
)

~~Note: Common stock options that were anti-dilutive and not included in~~ diluted earnings per common share for the first six months of fiscal 2021 ~~and fiscal 2020~~ were ~~1,600 and 916, respectively.~~1,600.

~~In accordance with ASC 280-10, Segment Reporting, we~~We have identified 3 reportable segments as follows:

PMT combines our core engineered solutions capabilities, power grid and microwave tube business with new disruptive RF, Wireless and Power technologies. As a designer, manufacturer, technology partner and authorized distributor, PMT’s strategy is to provide specialized technical expertise and engineered solutions based on our core engineering and manufacturing capabilities on a global basis. We provide solutions and add value through design-in support, systems integration, prototype design and manufacturing, testing, logistics and aftermarket technical service and repair—all through our existing global infrastructure. PMT’s focus is on products for power, RF and microwave applications for customers in 5G, alternative energy, aviation, broadcast, communications, industrial, marine, medical, military, scientific and semiconductor markets. PMT focuses on various applications including broadcast transmission, CO2 laser cutting, diagnostic imaging, dielectric and induction heating, high energy transfer, high voltage switching, plasma, power conversion, radar and radiation oncology. PMT also offers its customers technical services for both microwave and industrial equipment.

The CEO, who is the chief operating decision maker, evaluates performance and allocates resources primarily based on the gross profit of each segment.

Operating results by segment are summarized in the following table (in thousands):

	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
	November 28, 2020		November 30, 2019		November 28, 2020		November 30, 2019		November 27, 2021		November 28, 2020		November 27, 2021		November 28, 2020
PMT
Net Sales	$	32,929	$	29,603	$	63,181	$	60,170	$	41,737	$	32,929	$	84,746	$	63,181
Gross Profit		11,251		9,349		21,222		19,028		13,986		11,251		26,917		21,222
Canvys
Net Sales	$	6,701	$	7,856	$	13,413	$	15,133		9,150		6,701		17,591		13,413
Gross Profit		2,379		2,585		4,663		4,906		2,912		2,379		5,730		4,663
Healthcare
Net Sales	$	2,788	$	2,175	$	4,636	$	4,984		3,092		2,788		5,346		4,636
Gross Profit		713		746		817		1,697		759		713		1,307		817

Geographic net sales information is primarily grouped by customer destination into five areas: North America; Asia/Pacific; Europe; Latin America; and Other.

Net sales and gross profit by geographic region are summarized in the following table (in thousands):

	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	November 28, 2020			November 30, 2019			November 28, 2020			November 30, 2019			November 27, 2021			November 28, 2020			November 27, 2021			November 28, 2020
Net Sales
North America	$	17,730		$	15,306		$	33,859		$	32,540		$	24,440		$	17,730		$	44,968		$	33,859
Asia/Pacific		9,114			9,277			19,149			17,800			11,699			9,114			24,945			19,149
Europe		13,305			13,210			23,992			26,134			15,114			13,305			32,164			23,992
Latin America		2,218			1,859			4,145			3,837			2,721			2,218			5,596			4,145
Other (1)		51			(18	)		85			(24	)		5			51			10			85
Total	$	42,418		$	39,634		$	81,230		$	80,287		$	53,979		$	42,418		$	107,683		$	81,230
Gross Profit
North America	$	7,001		$	5,797		$	13,018		$	12,104		$	8,658		$	7,001		$	16,038		$	13,018
Asia/Pacific		2,997			3,056			6,075			5,649			3,919			2,997			8,065			6,075
Europe		4,441			4,015			7,797			8,146			4,834			4,441			9,623			7,797
Latin America		787			644			1,449			1,344			1,000			787			2,081			1,449
Other (1)		(883	)		(832	)		(1,637	)		(1,612	)		(754	)		(883	)		(1,853	)		(1,637	)
Total	$	14,343		$	12,680		$	26,702		$	25,631		$	17,657		$	14,343		$	33,954		$	26,702

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

On October 15, 2018, Varex Imaging Corporation (“Varex”) filed its original Complaint (Case No. 1:18-cv-06911) against Richardson Electronics Ltd. (“Richardson”) in the Northern District of Illinois, which was subsequently amended on November 27, 2018. Varex alleged counts of infringement of U.S. Patent Nos. 6,456,692 and 6,519,317. Subsequently, on October 24, 2018, Varex~~filed a motion for preliminary injunction to stop the sale of Richardson’s ALTA750~~^TM product. Richardson filed an opposition to the preliminary injunction. In January 2019, the Court took evidence on the preliminary injunction issue. On September 30, 2019, the Court denied Varex’s Motion for Preliminary Injunction. On August 6, 2020, Varex amended its Complaint to add claims of trade secret misappropriation and Richardson moved to dismiss that Amended Complaint on September 9, 2020. Richardson believes the lawsuit to be without merit and a loss is not probable or estimable based on the information at the time the financial statements were issued.

~~On January 30,~~In March 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the “COVID-19 outbreak”) and the risks to the international community as the virus spreads globally.

~~In March 2020, the WHO~~ classified the outbreak of COVID-19 ~~outbreak~~ as a ~~pandemic based on the rapid increase in global exposure.~~pandemic. Thereafter, most U.S. states imposed “shelter in place” or similar directives on their populations to stem the spread of ~~COVID-19. Of specific interest to~~COVID-19 and similar restrictive measures were taken by governments across the ~~Company, shelter in place directives were imposed in the states of Illinois, Massachusetts and South Carolina.~~world.

~~The~~During their duration, the shelter in place directives generally required the closure of businesses that did not provide essential functions. The Company was considered a critical supplier of products to healthcare and critical infrastructure businesses. ~~Several~~Further, several of our largest customers mandated that we continue to supply parts so as not to disrupt the supply chain and their ability to serve critical industries. As such, the Company qualified as an “Essential Business”~~. Essential Businesses were allowed to continue to operate during shelter in place directives. We~~ and the Company continued our manufacturing and distribution operations ~~even when a shelter~~throughout the implementation of the various “shelter in ~~place directive~~place” or other restrictions placing limits on operations in our fiscal 2021 and beyond. Our top priority was ~~issued. We limited~~ensuring the health and safety of our employees and, accordingly, we undertook measures such as limiting the number of people in any one of our facilities by requiring only employees who could not perform their work remotely to physically work in a Company US-based facility. The Company advised all other employees that could perform their job functions remotely to do so. As such, the Company’s operations have remained ~~operational.~~operational during the pandemic.

The impact of the COVID-19 outbreak ~~continues~~and its effects continue to evolve. As such, the full magnitude that the pandemic, and the steps taken to prevent and/or mitigate its spread, will have on the Company’s financial condition, liquidity and future results of operations is uncertain. ~~Management is actively monitoring~~The extent of the ~~global situation~~impact of the COVID-19 pandemic depends on ~~its financial condition, liquidity, operations, suppliers, industry~~future developments that cannot be accurately predicted at this time, such as the duration and ~~workforce. As the~~ spread of ~~COVID-19 continues,~~the pandemic, the extent, speed and effectiveness of worldwide containment and vaccination effort, any subsequent wave or waves of outbreaks, and the impact of these and other factors on our employees, customers and suppliers. Our ability to meet customer demands for products may be impaired or, similarly, our customers may experience adverse business consequences due to ~~COVID-19.~~COVID-19 and its effects. Reduced demand for products or impaired ability to meet customer demand (including disruptions at our transportation service providers or vendors) could have a material adverse effect on our business, operations and financial performance. There was a decline in PMT sales during the first three months of fiscal 2021 as well as a decline in Canvys and Healthcare sales during the first six months of fiscal 2021. Some of these declines in sales were related to the COVID-19 global pandemic. While we had some COVID-19 related component delays impacting new product development schedules, we did not experience a major interruption in our supply chain. Management continues to monitor the global situation on its financial condition, liquidity, operations, suppliers, industry and workforce. Given the ~~daily evolution~~ever-evolving nature of the ~~COVID-19 outbreak~~pandemic and the continued global responses to curb its spread, the Company is not presently able to fully estimate the effects of COVID-19 on its results of operations, financial condition or liquidity for fiscal year ~~2021.~~2022.

On March 27, 2020, Congress enacted the Coronavirus Aid, Relief and Economic Security (“CARES”) Act to provide certain relief as a result of the COVID-19 outbreak. The CARES Act ~~includes~~included provisions relating to refundable payroll tax credits, deferral of ~~employer-side~~employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, increased limitations on qualified charitable contributions and technical corrections to tax depreciation methods for qualified, improvement property. As of November ~~28, 2020,~~27, 2021, the Company deferred ~~$0.8~~$0.9 million of employer-side social security tax payments. The Company has estimated and recorded the overall effects of the CARES Act and does not anticipate a material change.

~~ASC 820,~~ ~~Fair Value Measurements and Disclosures~~ (“ASC 820”), defines fair value, establishes a framework for measuring fair value in accordance with accounting principles generally accepted in the United States and expands disclosures about fair value measurements.

ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets thatInvestments are ~~either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists; therefore, an entity is required to develop its own assumptions.~~

~~As of November 28, 2020, we held an investment that was required to be measured at fair value on a recurring basis. Our investment consisted of a CD where face value was equal to fair value.~~

~~Investments~~ measured at fair value on a recurring basis subject to the disclosure requirements of ASC ~~820~~820. The Company had 0 investments as of November ~~28, 2020~~27, 2021 and May ~~30, 2020 were as follows (in thousands~~):29, 2021.

On June 15, 2015, the Company entered into a lease agreement for the IMES facility with LDL, LLC. That lease agreement was extended for five years in fiscal 2021. The Company shall be entitled to extend the term of the lease for a period of an additional five years by notifying the landlord in writing of its intention to do so within six months of the expiration of the term. The Executive Vice President of IMES, Lee A. McIntyre III (former owner of IMES), has an ownership interest in LDL, LLC. The lease agreement ~~has been extended as detailed in Exhibit 10.2, filed with our Annual Report on Form 10-K for the year ended May 30, 2020, filed August 3, 2020. The lease agreement~~ provides for monthly payments over five years with total future minimum lease payments of ~~$0.7~~$0.6 million. Rental expense related to this lease amounted to $0.1 million for the six months ended November 27, 2021 and November 28, ~~2020 and for the six months ended November 30, 2019.~~2020.

Certain statements in this report may constitute “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. The terms “may,” “should,” “could,” “anticipate,” “believe,” “continues,” “estimate,” “expect,” “intend,” “objective,” “plan,” “potential,” “project” and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. These statements are based on management’s current expectations, intentions or beliefs and are subject to a number of factors, assumptions and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Factors that could cause or contribute to such differences or that might otherwise impact the business include the risk factors set forth in ~~Item 1A of this quarterly report on Form 10Q for the quarter ended November 28, 2020 as well as~~ our Annual Report on Form 10-K filed on August ~~3, 2020.~~2, 2021. We undertake no obligation to update any such factor or to publicly announce the results of any revisions to any forward-looking statements contained herein whether as a result of new information, future events or otherwise.

In addition, while we do, from time to time, communicate with securities analysts, it is against our policy to disclose to them any material non-public information or other confidential commercial information. Accordingly, stockholders should not assume that we agree with any statement or report issued by any analyst irrespective of the content of the statement or report. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not our responsibility.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to assist the reader in better understanding our business, results of operations, financial condition, changes in financial condition, critical accounting policies and estimates and significant developments. MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the accompanying notes appearing elsewhere in this filing. This section is organized as follows:

~~Our products include electron tubes and related components, microwave generators, subsystems used in semiconductor manufacturing and visual technology solutions. These~~

Some of the Company's products are ~~used~~manufactured in China and are imported into the United States. The Office of the United States Trade Representative ("USTR") instituted additional 10% to ~~control, switch~~25% tariffs on the importation of a number of products into the United States from China effective July 6, 2018, with additional products added August 23, 2018 and September 24, 2018. These additional tariffs are a response to what the USTR considers to be certain unfair trade practices by China. A number of the Company's products manufactured in China are now subject to these additional duties of 25% when imported into the United States.

Management continues to work with its suppliers as well as its customers to mitigate the impact of the tariffs on our customers’ markets. However, if the Company is unable to successfully pass through the additional cost of these tariffs, or ~~amplify electrical power signals, or are used as display devices in~~if the higher prices reduce demand for the Company's products, it will have a ~~variety of industrial, commercial, medical~~negative effect on the Company's sales and ~~communication applications.~~gross margins.

Canvys provides customized display solutions serving the corporate enterprise, financial, healthcare, industrial and medical original equipment manufacturers markets. Our engineers design, manufacture, source and support a full spectrum of solutions to match the needs of our customers. We offer long term availability and proven custom display solutions that include touch screens, protective panels, custom enclosures, All-In-One computers, specialized cabinet finishes and application specific software packages and certification services. Our volume commitments are lower than the large display manufacturers, making us the ideal choice for companies with very specific design requirements. We partner with both private label manufacturing companies and leading branded hardware vendors to offer the highest quality display and touch solutions and customized computing platforms.

We currently have operations in the following major geographic regions: North America, Asia/Pacific, Europe and Latin America.

Net sales by segment and percent change during the second quarter and first six months of fiscal ~~2021~~2022 and fiscal ~~2020~~2021 were as follows (in thousands):

Net Sales	Three Months Ended				FY21 vs. FY20			Three Months Ended				FY22 vs. FY21
	November 28, 2020		November 30, 2019		% Change			November 27, 2021		November 28, 2020		% Change
PMT	$	32,929	$	29,603		11.2	%	$	41,737	$	32,929		26.7	%
Canvys		6,701		7,856		-14.7	%		9,150		6,701		36.5	%
Healthcare		2,788		2,175		28.2	%		3,092		2,788		10.9	%
Total	$	42,418	$	39,634		7.0	%	$	53,979	$	42,418		27.3	%

	Six Months Ended				FY21 vs. FY20			Six Months Ended				FY22 vs. FY21
	November 28, 2020		November 30, 2019		% Change			November 27, 2021		November 28, 2020		% Change
PMT	$	63,181	$	60,170		5.0	%	$	84,746	$	63,181		34.1	%
Canvys		13,413		15,133		-11.4	%		17,591		13,413		31.1	%
Healthcare		4,636		4,984		-7.0	%		5,346		4,636		15.3	%
Total	$	81,230	$	80,287		1.2	%	$	107,683	$	81,230		32.6	%

During the second quarter of fiscal ~~2021,~~2022, consolidated net sales increased ~~7.0%~~27.3% compared to the second quarter of fiscal ~~2020.~~2021. Sales for PMT increased ~~11.2%~~26.7%, sales for Canvys ~~decreased 14.7%~~increased 36.5% and sales for Healthcare increased ~~28.2%~~10.9%. The increase in PMT was mainly due to ~~growth in various power grid tube product lines,~~ strong growth from our Power and Microwave new technology partners in various applications including Power Management and 5G infrastructure as well as increased shipments of our ULTRA3000. We also had growth in various Electron Device product lines. The increase in Canvys was primarily due to strong sales in the North American and European markets. The increase in Healthcare was primarily due to an increase in demand for the ALTA750^TM tubes.

During the first six months of fiscal 2022, consolidated net sales increased 32.6% compared to the first six months of fiscal 2021. Sales for PMT increased 34.1%, sales for Canvys increased 31.1% and sales for Healthcare increased 15.3%. The increase in PMT was mainly due to strong growth from our Power and Microwave new technology partners in various applications including Power Management and 5G infrastructure and increased revenue from our Semiconductor Wafer Fabrication customers buying engineered solutions. We also had growth in various Electron Device product lines. The ~~decrease~~increase in Canvys was primarily due to ~~temporarily decreased customer demand globally related to COVID-19. The increase in Healthcare was due to a significant increase in demand for the ALTA 750D~~^TM ~~tubes coupled with increased equipment sales in Latin America.~~

During the first six months of fiscal 2021, consolidated net sales increased 1.2% compared to the first six months of fiscal 2020. Sales for PMT increased 5.0%, sales for Canvys decreased 11.4% and sales for Healthcare decreased 7.0%. The increase in PMT was mainly due to growth in the power grid tube business, strong growth in bookings and billings from our power conversion and RF and microwave components and continued growth in the Semiconductor Wafer Fab market. The decrease in Canvys was due to continuing struggles in the European market related to the COVID-19 impact on demand for equipment partially offset by strong sales in the North American ~~market.~~and European markets. The ~~decrease~~increase in Healthcare was primarily due to an increase in demand for the ~~impact of the global pandemic as well as ongoing economic issues in Latin America in the first quarter of fiscal 2021.~~ALTA750^TM tubes.

Gross profit by segment and percent of net sales for the second quarter and first six months of fiscal ~~2021~~2022 and fiscal ~~2020~~2021 were as follows (in thousands):

Gross Profit	Three Months Ended										Three Months Ended
	November 28, 2020		% of Net Sales			November 30, 2019		% of Net Sales			November 27, 2021		% of Net Sales			November 28, 2020		% of Net Sales
PMT	$	11,251		34.2	%	$	9,349		31.6	%	$	13,986		33.5	%	$	11,251		34.2	%
Canvys		2,379		35.5	%		2,585		32.9	%		2,912		31.8	%		2,379		35.5	%
Healthcare		713		25.6	%		746		34.3	%		759		24.5	%		713		25.6	%
Total	$	14,343		33.8	%	$	12,680		32.0	%	$	17,657		32.7	%	$	14,343		33.8	%

	Six Months Ended										Six Months Ended
	November 28, 2020		% of Net Sales			November 30, 2019		% of Net Sales			November 27, 2021		% of Net Sales			November 28, 2020		% of Net Sales
PMT	$	21,222		33.6	%	$	19,028		31.6	%	$	26,917		31.8	%	$	21,222		33.6	%
Canvys		4,663		34.8	%		4,906		32.4	%		5,730		32.6	%		4,663		34.8	%
Healthcare		817		17.6	%		1,697		34.0	%		1,307		24.4	%		817		17.6	%
Total	$	26,702		32.9	%	$	25,631		31.9	%	$	33,954		31.5	%	$	26,702		32.9	%

Gross profit reflects the distribution and manufacturing product margin less manufacturing variances, inventory obsolescence charges, customer returns, scrap and cycle count adjustments, engineering costs and other provisions.

Consolidated gross profit increased to $17.7 million during the second quarter of fiscal 2022 compared to $14.3 million during the second quarter of fiscal ~~2021 compared to $12.7 million during the second quarter of fiscal 2020.~~2021. Consolidated gross margin as a percentage of net sales ~~increased~~decreased to 32.7% during the second quarter of fiscal 2022 from 33.8% during the second quarter of fiscal 2021, ~~from 32.0% during the second quarter of fiscal 2020,~~ primarily due to ~~improved manufacturing efficiencies~~product mix in PMT and ~~favorable product mix~~higher global freight costs in ~~both PMT and Canvys, partially offset by under absorbed manufacturing expenses in Healthcare.~~Canvys.

Consolidated gross profit increased to $34.0 million during the first six months of fiscal 2022 compared to $26.7 million during the first six months of fiscal ~~2021 compared to $25.6 million during the first six months of fiscal 2020.~~2021. Consolidated gross margin as a percentage of net sales ~~increased~~decreased to 31.5% during the first six months of fiscal 2022 from 32.9% during the first six months of fiscal 2021, ~~from 31.9% during the first six months of fiscal 2020,~~ primarily due to ~~improved manufacturing efficiencies~~product mix in PMT and ~~favorable product mix in both PMT and Canvys as well as foreign currency change impact~~higher freight costs in Canvys, partially offset by ~~under absorbed~~improved manufacturing ~~expenses in~~efficiencies for Healthcare.

PMT net sales increased ~~11.2%~~26.7% to $41.7 million during the second quarter of fiscal 2022 from $32.9 million during the second quarter of fiscal ~~2021 from $29.6 million during the second quarter of fiscal 2020.~~2021. The increase was mainly due to ~~growth in various power grid tube product lines,~~ strong growth from our Power and Microwave new technology partners in various applications including Power Management and 5G infrastructure as well as increased shipments of our ULTRA3000. We also had growth in various Electron Device product lines. Gross margin as a percentage of net sales decreased to 33.5% during the second quarter of fiscal 2022 as compared to 34.2% during the second quarter of fiscal 2021 due to product mix.

PMT net sales increased 34.1% to $84.7 million during the first six months of fiscal 2022 from $63.2 million during the first six months of fiscal 2021. The increase was mainly due to strong growth from our Power and Microwave new technology partners in various applications including Power Management and 5G infrastructure and increased revenue from our Semiconductor Wafer Fabrication customers buying engineered solutions. We also had growth in various Electron Device product lines. Gross margin as a percentage of net sales decreased to 31.8% during the first six months of fiscal 2022 as compared to 33.6% during the first six months of fiscal 2021 due to product mix.

Canvys net sales increased 36.5% to $9.2 million during the second quarter of fiscal 2022 from $6.7 million during the second quarter of fiscal 2021 primarily due to strong sales in North America as well as the European market. Gross margin as a percentage of net sales decreased to 31.8% during the second quarter of fiscal 2022 from 35.5% during the second quarter of fiscal 2021 due to the increasing freight costs resulting from the COVID-19 pandemic.

Canvys net sales increased 31.1% to $17.6 million during the first six months of fiscal 2022 from $13.4 million during the first six months of fiscal 2021 primarily due to strong sales in North America as well as the European market. Gross margin as a percentage of net sales decreased to 32.6% during the first six months of fiscal 2022 from 34.8% during the first six months of fiscal 2021 due to the increasing freight costs resulting from the COVID-19 pandemic.

Healthcare net sales increased 10.9% to $3.1 million during the second quarter of fiscal 2022 from $2.8 million during the second quarter of fiscal 2021. The increase in sales was primarily due to an increase in demand for the ALTA750^TM tubes. Gross margin as a percentage of net sales decreased to 24.5% during the second quarter of fiscal 2022 as compared to 25.6% during the second quarter of fiscal 2021 primarily due to increased component scrap expense.

Healthcare net sales increased 15.3% to $5.3 million during the first six months of fiscal 2022 from $4.6 million during the first six months of fiscal 2021. The increase in sales was primarily due to an increase in demand for the ALTA750^TM tubes. Gross margin as a percentage of net sales increased to ~~34.2% during the second quarter of fiscal 2021 as compared to 31.6% during the second quarter of fiscal 2020 primarily due to favorable product mix and improved manufacturing efficiencies.~~

~~PMT net sales increased 5.0% to $63.2 million~~24.4% during the first six months of fiscal 2021 from $60.2 million during the first six months of fiscal 2020. The increase was mainly due to growth in the power grid tube business, strong growth in bookings and billings from our power conversion and RF and microwave components and continued growth in the Semiconductor Wafer Fab market. Gross margin2022 as ~~a percentage of net sales increased to 33.6% during the first six months of fiscal 2021 as~~ compared ~~to 31.6% during the first six months of fiscal 2020 due to favorable product mix and improved manufacturing efficiencies.~~

Canvys net sales decreased 14.7% to $6.7 million during the second quarter of fiscal 2021 from $7.9 million during the second quarter of fiscal 2020 due to temporarily decreased customer demand globally related to COVID-19. Gross margin as a percentage of net sales increased to 35.5% during the second quarter of fiscal 2021 from 32.9% during the second quarter of fiscal 2020 due to favorable product mix.

Canvys net sales decreased 11.4% to $13.4 million during the first six months of fiscal 2021 from $15.1 million during the first six months of fiscal 2020 primarily due to continuing struggles in the European market related to the COVID-19 impact on demand for equipment partially offset by strong sales in the North American market. Gross margin as a percentage of net sales increased to 34.8% during the first six months of fiscal 2021 as compared to 32.4% during the first six months of fiscal 2020 due to favorable product mix and foreign currency change impact.

Healthcare net sales increased 28.2% to $2.8 million during the second quarter of fiscal 2021 from $2.2 million during the second quarter of fiscal 2020. The increase in sales was primarily due to a significant increase in demand for the ALTA 750D^TM tubes coupled with increased equipment sales in Latin America. Gross margin as a percentage of net sales decreased to 25.6% during the second quarter of fiscal 2021 as compared to 34.3% during the second quarter of fiscal 2020 primarily due to under absorbed manufacturing expenses.

Healthcare net sales decreased 7.0% to $4.6 million during the first six months of fiscal 2021 from $5.0 million during the first six months of fiscal 2020 due to the impact of the global pandemic as well as ongoing economic issues in Latin America in the first quarter of fiscal 2021. Gross margin as a percentage of net sales decreased to 17.6% during the first six months of fiscal 2021 ~~as compared to 34.0% during the first six months of fiscal 2020~~primarily due to ~~under absorbed~~favorable product mix, increased ALTA 750D^TM tube production and improved manufacturing ~~expenses.~~efficiencies.

Selling, general and administrative expenses ~~increased~~decreased to ~~$13.5~~$13.1 million during the second quarter of fiscal ~~2021~~2022 from ~~$13.2~~$13.5 million in the second quarter of fiscal ~~2020, primarily due to~~2021. The decrease resulted from lower legal fees partially offset by higher employee compensation ~~and legal expenses, partially offset by lower travel and consulting expenses.~~expense.

Selling, general and administrative expenses increased to ~~$26.5~~$26.6 million during the first six months of fiscal ~~2021~~2022 from ~~$26.0~~$26.5 million in the first six months of fiscal ~~2020, primarily due to~~2021. The increase resulted from higher employee compensation expense and ~~legal expenses,~~travel costs partially offset by lower ~~travel and consulting expenses.~~legal fees.

Other ~~income/expense~~income was ~~expense of $0.1~~$0.2 million during the second quarter of fiscal ~~2021,~~2022, compared to other expense of $0.1 million for the second quarter of fiscal 2021. Other income during the second quarter of fiscal ~~2020. Other income/expense during the second quarter of fiscal 2021 included $0.1 million of~~2022 was mainly a foreign exchange ~~losses. Other income/expense during the second quarter of fiscal 2020 included $0.1 million of investment/interest~~gain, as investment income was offset by ~~$0.2 million of foreign exchange losses.~~other expenses. Our foreign exchange gains and losses are primarily due to the translation of U.S. dollars held in non-U.S. entities. We currently do not utilize derivative instruments to manage our exposure to foreign currency.

Other ~~income/expense~~income was ~~expense of $0.5~~$0.1 million during the first six months of fiscal ~~2021,~~2022, compared to ~~income~~other expense of ~~$0.2~~$0.5 million for the first six months of fiscal 2021. Other income during the first six months of fiscal ~~2020. Other income/expense during the first six months of fiscal 2021 included $0.6 million of~~2022 was mainly a foreign exchange ~~losses partially~~gain, as investment income was offset by ~~less than $0.1 million~~other expenses. Our foreign exchange gains and losses are primarily due to the translation of ~~investment/interest income. Other income/expense during the first six months of fiscal 2020 included $0.2 million of investment/interest income.~~U.S. dollars held in non-U.S. entities. We currently do not utilize derivative instruments to manage our exposure to foreign currency.

The income tax provision was $0.6 million and $0.1 million for ~~both~~the second quarter of fiscal 2022 and for the second quarter of fiscal 2021, ~~and the second quarter of fiscal 2020.~~respectively. The effective income tax rate during the second quarter of fiscal ~~2021~~2022 was a tax provision of ~~7.1%~~11.8% as compared to a tax provision of ~~(14.8)%~~7.1% during the second quarter of fiscal ~~2020.~~2021. The difference in rate during the second quarter of fiscal ~~2021~~2022 as compared to the second quarter of fiscal ~~2020~~2021 reflects changes in our geographical distribution of income (loss). and state income tax provision due to temporary suspension of net operating loss utilization in Illinois and California. The ~~7.1%~~11.8% effective income tax rate differs from the federal statutory rate of 21% as a result of our geographical distribution of income (loss) ~~and~~, the movement of the valuation allowance against our U.S. state and federal net deferred tax ~~assets.~~

assets and state income tax provision due to temporary suspension of net operating loss utilization in Illinois and California.

Net income during the second quarter of fiscal ~~2021~~2022 was $4.1 million, or $0.30 per diluted common share and $0.27 per Class B diluted common share as compared to $0.7 million during the second quarter of fiscal 2021 or $0.05 per diluted common share and $0.05 per Class B diluted common ~~share as compared to net loss of $0.6 million during the second quarter of fiscal 2020 or ($0.05) per diluted common share and ($0.04) per Class B diluted common~~ share.

Net ~~loss~~income during the first six months of fiscal ~~2021~~2022 was ~~$0.5~~$6.8 million, or ~~($0.04)~~$0.50 per diluted common share and ~~($0.03)~~$0.45 per Class B diluted common share as compared to net loss of $0.5 million during the first six months of fiscal ~~2020~~2021 or ($0.04) per diluted common share and ($0.03) per Class B diluted common share.

Our operations and cash needs have been primarily financed through income from operations and cash on ~~hand and investments.~~hand.

Cash and cash equivalents were ~~$37.0~~$39.7 million at November ~~28, 2020. Investments included a CD classified as short-term investment of $9.0 million. Total~~27, 2021. Cash and cash ~~and investments were $46.0 million~~equivalents at November ~~28, 2020. Cash, cash equivalents and investment at November 28, 2020~~27, 2021 consisted of ~~$26.8~~$23.5 million in North America, ~~$9.1~~$8.1 million in Europe, ~~$1.1~~$1.2 million in Latin America and ~~$9.0 million in Asia/Pacific.~~

Cash, cash equivalents and investments were $46.5 million at May 30, 2020. Cash, cash equivalents and investments at May 30, 2020, consisted of $30.6 million in North America, $8.3 million in Europe, $0.9 million in Latin America and $6.7$6.9 million in Asia/Pacific. We repatriated ~~a total of $8.5~~$0.7 million to the United States in the first quarter of fiscal ~~2020 from several of our foreign entities. This amount includes $4.4 million~~2022, from our ~~entities~~entity in ~~Germany~~China and we repatriated $0.3 million to the ~~Netherlands~~United States in the second quarter of fiscal ~~2020, $1.5 million~~2022 from our entity in ~~Japan in the third quarter of fiscal 2020 and $1.0 million from our entity in Italy in the fourth quarter of fiscal 2020.~~Taiwan. Although the Tax Cuts and Jobs Act generally eliminated federal income tax on future cash repatriation to the United States, cash repatriation may be subject to state and local taxes, withholding or similar taxes. See Note ~~9 “Income Taxes”~~7, Income Taxes of the notes to our consolidated financial statements in Part II, Item 8 of our Annual Report on Form 10-K for the fiscal year ended May ~~30, 2020,~~29, 2021, filed August ~~3, 2020~~2, 2021 for further information.

Cash and cash equivalents were $43.3 million at May 29, 2021. Cash and cash equivalents at May 29, 2021, consisted of $26.1 million in North America, $8.8 million in Europe, $1.2 million in Latin America and $7.2 million in Asia/Pacific. We repatriated a total of $0.9 million to the United States in fiscal 2021 from several of our foreign entities. This amount includes $0.7 million from our entities in Italy and South Korea in the third quarter of fiscal 2021 and $0.2 million from our entity in France in the fourth quarter of fiscal 2021.

The Company continues to monitor the impact of COVID-19, including the ~~COVID-19 outbreak~~extent, duration and effectiveness of containment actions taken, the speed and extent of vaccination programs, the impact of the pandemic on its supply chain, manufacturing and distribution operations, customers and employees, as well as the U.S. economy in general. However, due to the ~~uncertainty as to when governmental restrictions on business will be fully lifted, the impact thereof,~~uncertain and ~~the duration and widespread nature~~constantly evolving impacts of the COVID-19 ~~outbreak,~~pandemic across the globe, the Company cannot currently predict the long-term impact on its operations and financial results. The uncertainties associated with the COVID-19 ~~outbreak~~pandemic and its effects include potential adverse effects on the overall economy, the Company’s supply chain, transportation services, employees and customers. The COVID-19 ~~outbreak~~pandemic and its effects could adversely affect the Company’s revenues, earnings, liquidity and cash flows and may require significant actions in response, including expense reductions. Conditions surrounding COVID-19 change rapidly and additional impacts of which the Company is not currently aware may arise. Based on past performance and current expectations, we believe that the existing sources of liquidity, including current cash, will provide sufficient resources to meet known capital requirements and working capital needs through the next twelve months.

~~The cash provided by (used in)~~Cash flows from operating activities primarily resulted from our net income (loss) adjusted for non-cash items and changes in our operating assets and liabilities.

Operating activities used $0.2 million of cash during the first six months of fiscal 2022. We had a net income of $6.8 million during the first half of fiscal 2022, which included non-cash stock-based compensation expense of $0.4 million associated with the issuance of stock option and restricted stock awards, $0.1 million for inventory reserve provisions and depreciation and amortization expense of $1.7 million associated with our property and equipment as well as amortization of our intangible assets. Changes in our operating assets and liabilities used $9.2 million in cash during the first six months of fiscal 2022, net of foreign currency exchange gains and losses, included an increase in accounts receivable of $3.1 million, an increase in inventory of $9.2 million and an increase in prepaid expenses of $1.1 million. Partially offsetting the cash utilization for accounts receivable, inventory and prepaid expenses was an increase in accounts payable and accrued liabilities of $3.8 million. The increase in accounts receivable was primarily due to increased sales revenue. The majority of the inventory increase was to support the growth in LaFox manufacturing and the RF and microwave components business. The increase in accounts payable was related to the inventory increase and the increase in accrued liabilities was timing related.

Operating activities provided $1.1 million of cash during the first six months of fiscal 2021. We had a net loss of $0.5 million during the first six months of fiscal 2021, which included non-cash stock-based compensation expense of $0.4 million associated with the issuance of stock option and restricted stock awards, $0.5 million for inventory reserve provisions and depreciation and amortization expense of $1.7 million associated with our property and equipment as well as amortization of our intangible assets. Changes in our operating assets and liabilities resulted in a use of cash of $1.0 million during the first six months of fiscal 2021, net of foreign currency exchange gains and losses, included a decrease of $2.5 million in accounts payable, an increase in inventory of $1.0 million and an increase in accounts receivable of $0.2 million, partially offset by an increase in accrued liabilities of $3.4 million. The decrease in our accounts payable was due to timing of payments for some of our larger vendors for both inventory and services. The majority of the inventory increase was to support the electron tube and semi-conductor wafer fab equipment business. The increase in accounts receivable was primarily due to the increased sales ~~increase compared to~~for the first ~~quarter~~six months of fiscal 2021. The increase in accrued liabilities is mainly due to timing of employee compensation and payroll tax payments as well as the timing of other payments.

Cash flows from investing activities consisted primarily of capital expenditures and purchases and maturities of investments. Our purchases and proceeds from investments consist of time deposits and CDs. The purchasing of future investments varies from period to period due to interest and foreign currency exchange rates.

Cash used ~~$1.4 million~~in investing activities of ~~cash during the first six months of fiscal 2020. We had a net loss of $0.5~~$1.6 million during the first six months of fiscal 2020, which included non-cash stock-based compensation expense of $0.4 million associated with the issuance of stock option and restricted stock awards, $0.3 million for inventory reserve provisions and depreciation and amortization expense of $1.7 million associated with our property and equipment as well as amortization of our intangible assets. Changes in our operating assets and liabilities resulted in a use of cash of $3.3 million during the first six months of fiscal 2020, net of foreign currency exchange gains and losses, included an increase in inventory of $3.4 million, a decrease of $1.4 million in accounts payable and a decrease in accrued liabilities of $0.4 million partially offset by a decrease in accounts receivable of $1.8 million and a decrease of $0.2 million in prepaid expenses and other assets. The decrease in our accounts payable2022 was due to ~~timing~~capital expenditures. Capital expenditures related primarily to capital used for our Healthcare business, IT system and manufacturing facilities. The Company did not have any investment purchases or maturities in the first half of payments for some of our larger vendors for both inventory and services. The majority of the inventory increase was to support the continued growth of our electron tube and RF and Power Technologies groups.

~~The cash flow provided by and used in investing activities consisted primarily of purchases of investments and capital expenditures partially offset by proceeds from the maturities of investments.~~fiscal 2022.

Cash provided by investing activities of $5.7 million during the first six months of fiscal 2021 included proceeds from the maturities of investments of $16.0 million, partially offset by purchases of investments of $9.0 million and $1.3 million in capital expenditures. Capital expenditures related primarily to capital used for our Healthcare business and ~~our~~ IT system.

Cash used in investing activities of $5.8 million during the first six months of fiscal 2020 included purchases of investments of $13.0 million and $0.8 million in capital expenditures, partially offset by proceeds from the maturities of investments of $8.0 million. Capital expenditures related primarily to capital used for our IT system and Healthcare and LaFox manufacturing businesses.

~~Our purchases of investments consisted of CDs. Purchasing of future investments may vary from period to period due to interest and foreign currency exchange rates.~~

~~The cash flow~~Cash flows used in financing activities consisted primarily of cash dividends paid.

Cash used in financing activities of $0.9 million during the first six months of fiscal 2022 were due to dividend payments of $1.6 million with a partial offset for the proceeds from the issuance of stock of $0.7 million.

Cash used in financing activities of $1.7 million during the first six months of fiscal 2021 primarily resulted from cash used to pay dividends.

~~Cash used in financing activities of $1.6 million during the first six months of fiscal 2020 primarily resulted from cash used to pay dividends.~~

All future payments of dividends are at the discretion of the Board of Directors. Dividend payments will depend on earnings, capital requirements, operating conditions and such other factors that the Board may deem relevant.

We are exposed to many different market risks with the various industries we serve. The primary financial risk we are exposed to is foreign currency exchange, as certain operations, assets and liabilities of ours are denominated in foreign currencies. We manage these risks through normal operating and financing activities.

The interpretation and analysis of these disclosures should not be considered in isolation since such variances in exchange rates would likely influence other economic factors. Such factors, which are not readily quantifiable, would likely also affect our operations. Additional disclosure regarding various market risks are set forth in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended May ~~30, 2020,~~29, 2021, filed August ~~3, 2020.~~2, 2021.

Management of the Company, with the participation of the Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of November ~~28, 2020.~~27, 2021.

Disclosure controls and procedures are intended to provide reasonable assurance that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report.

There were no changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the second quarter of fiscal ~~2021~~2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

There have been no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended May ~~30, 2020,~~29, 2021, filed August ~~3, 2020.~~2, 2021.

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

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common stock, $0.05 Par Value		RELL		NASDAQ Global Select Market

Large Accelerated Filer	☐	Accelerated Filer	☒☐
Non-Accelerated Filer	☐☒	Smaller Reporting Company	☒
Emerging Growth Company	☐

		Page

Part I.	Financial Information

Item 1.	Financial Statements	2
	Consolidated Balance Sheets	2
	Unaudited Consolidated Statements of Comprehensive Income ~~(Loss)~~	3
	Unaudited Consolidated Statements of Cash Flows	4
	Unaudited Consolidated Statement of Stockholders’ Equity	5
	Notes to Unaudited Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1918
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	25

Part II.	Other Information

Item 1.	Legal Proceedings	26
Item 1A.	Risk Factors	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 5.	Other Information	26
Item 6.	Exhibits	27
Exhibit Index		27
Signatures		28

	November 27, 2021		May 29, 2021
Gross Amounts:
Trade Name	$	659	$	659
Customer Relationships⁽¹⁾		3,408		3,426
Non-compete Agreements		177		177
Technology		230		230
Total Gross Amounts	$	4,474	$	4,492

Accumulated Amortization:
Trade Name	$	659	$	659
Customer Relationships		1,350		1,249
Non-compete Agreements		177		177
Technology		149		137
Total Accumulated Amortization	$	2,335	$	2,222

Net Intangible Assets	$	2,139	$	2,270

	November 28, 2020		May 30, 2020
Compensation and payroll taxes	$	4,816	$	3,469
Accrued severance		664		650
Professional fees		873		471
Deferred revenue		2,771		1,671
Other accrued expenses		4,874		4,063
Accrued Liabilities	$	13,998	$	10,324

Fiscal Year	Amortization Expense
Remaining 2022	$	126
2023		246
2024		232
2025		219
2026		185
Thereafter		1,131
Total amortization	$	2,139

	Level 1
November 28, 2020
CD	$	9,000
Total	$	9,000
May 30, 2020
CDs	$	16,000
Total	$	16,000

Exhibit Number		Description

3.1		Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Annex III of the Proxy Statement dated August 22, 2014).

3.2		Amended and Restated By-Laws of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on June 15, 2017).

31.1		Certification of Edward J. Richardson pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Robert J. Ben pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32		Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101 ~~104~~		The following financial information from our Quarterly Report on Form 10-Q for the second quarter of fiscal ~~2021,~~2022, filed with the SEC on January ~~7, 2021,~~6, 2022, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) the Consolidated Balance Sheets, (ii) the Unaudited Consolidated Statements of Comprehensive Income, ~~(Loss),~~ (iii) the Unaudited Consolidated Statements of Cash Flows, (iv) the Unaudited Consolidated Statement of Stockholders’ Equity and (v) Notes to Unaudited Consolidated Financial Statements. ~~Cover Page Interactive Data File (embedded within the Inline XBRL document)~~

104		Cover Page Interactive Data File (embedded within the Inline XBRL document).

	RICHARDSON ELECTRONICS, LTD.

Date: January ~~7, 2021~~6, 2022	By:	/s/ Robert J. Ben
		Robert J. Ben Chief Financial Officer and Chief Accounting Officer (on behalf of the Registrant and as Principal Financial Officer)