1052303--4/2/2007--TERAYON_COMMUNICATION

related topics

{customer, product, revenue}

{product, market, service}

{product, liability, claim}

{regulation, change, law}

{control, financial, internal}

{property, intellectual, protect}

{cost, operation, labor}

{personnel, key, retain}

{stock, price, operating}

{regulation, government, change}

{system, service, information}

{loss, insurance, financial}

{stock, price, share}

{condition, economic, financial}

{cost, regulation, environmental}

{operation, international, foreign}

{debt, indebtedness, cash}

{provision, law, control}

{competitive, industry, competition}

{operation, natural, condition}

{acquisition, growth, future}

{financial, litigation, operation}

{tax, income, asset}

Material weaknesses or deficiencies in our internal control over financial reporting could harm stockholder and business confidence in our financial reporting, our ability to obtain financing and other aspects of our business. Our revenue recognition policy on digital video products has been corrected. Our common stock has been de-listed from The NASDAQ Stock Market and trades on the Pink Sheets. If we are not able to remain current with our filings with the Commission, we will face several adverse consequences. Risks Related to Our Business We have a history of losses, may continue to incur losses in the future and may never achieve or maintain profitability. We depend on capital spending from the cable, satellite and telecommunications industries for our revenues, and any decrease or delay in capital spending in these industries would negatively impact our revenues, financial condition and cash flows. Due to the lengthy, complex and unpredictable sale cycle involved in the sale of our products, revenues forecasted for a particular period may not be realized, our financial results may vary and past results should not be relied on as an indication of future performance. Our operating results are likely to fluctuate significantly and may fail to meet or exceed the expectations of securities analysts or investors or our guidance, causing our stock price to decline. Our expenses for any given quarter are based on expected sales and if sales are below expectations, our operating results may be adversely impacted by our inability to adjust spending to compensate for the shortfall in revenue. Because our customer base is highly concentrated among a limited number of large customers, the loss of or reduced demand from these customers could have a material adverse effect on our business, financial condition and results of operations. Our continued growth will depend on our ability to diversify our customer base and deliver products that help enable telecom companies to provide video services. If the projected growth in demand for video services from telecom companies does not materialize or if these service providers find alternative methods of delivering video services, future sales of our digital video products will be adversely impacted. The reductions in workforce associated with any restructuring efforts could disrupt the operation of our business, distract our management from focusing on revenue-generating efforts, result in the erosion of employee morale, and impair our ability to respond rapidly to growth opportunities in the future. We are dependent on key personnel and we may face challenges in hiring and retaining qualified personnel due to the restatement. Our future growth depends on developments in the digital video industry, on the adoption of new technologies and on several other industry trends. The markets in which we operate are characterized by rapidly changing technology, and we need to develop and introduce new and enhanced products in a timely manner to remain competitive. Average selling prices of our digital video products may decline, which would materially and adversely affect our financial performance. We must achieve cost reductions or increase revenues to attain profitability. Our repayment of our Notes could adversely affect our financial condition, and we may not be able to raise additional funds to continue operating our business. Substantially all of our future revenue will be derived from the sale of our digital video products, and our operating results, financial conditions and cash flows will depend upon our ability to generate sufficient revenue from the sale of our digital video products. We may be unable to provide adequate customer support. The deployment process for our equipment may be lengthy and may delay the receipt of new orders and cause fluctuations in our revenues. We may have financial exposure to litigation. The loss of existing reseller and system integrator relationships or the failure to establish new relationships or strategic partnerships could have a material adverse effect on our business, financial conditions and results of operations. We may fail to accurately forecast customer demand for our products, which could have a negative impact on our customer relationships and our revenues. We may not be able to manage expenses and inventory risks associated with meeting the demand of our customers. We are dependent on a key third-party manufacturer and any failure of our manufacturer could materially adversely affect our financial condition and operating results. We are dependent upon international sales and there are many risks associated with international operations, any of which could harm our financial condition and results of operations. We are subject to regulation by U.S. and foreign governments and qualification requirements by non-governmental agencies. If we are unable to obtain and maintain regulatory qualifications for our existing and future products, our financial results may be adversely affected. The markets in which we operate are intensely competitive and many of our competitors are larger and more established. Our business is subject to the risks of warranty returns, product liability and product defects. We may be unable to adequately protect or enforce our intellectual property rights. Our use of open source and third-party software could impose limitations on our ability to commercialize our products. Third party claims of infringement or other claims against us could adversely affect our ability to market our products, require us to redesign our products or seek licenses from third parties, and seriously harm our operating results and disrupt our business. We are exposed to the credit risk of our customers and to credit exposures in weakened markets, which could result in material losses. We have and we may seek to expand our business through acquisitions which could disrupt our business operations and harm our operating results. Our products are subject to safety approvals and certifications. Compliance with current and future environmental regulations may be costly which could impact our future earnings. We are subject to import/export controls, and various import/export licensing requirements could materially and adversely affect our business or require us to significantly modify our current business practices. Changes in telecommunications legislation and regulations could harm our prospects and future sales. Compliance with changing laws and regulations relating to corporate governance and public disclosure has resulted, and will continue to result, in the incurrence of additional expenses. Recent and proposed regulations related to equity compensation could adversely affect earnings, our ability to raise capital and affect our ability to attract and retain key personnel. New privacy laws and regulations or changing interpretations of existing laws and regulations could harm our business. Our stock price has been and is likely to continue to be highly volatile. We have adopted a stockholder rights plan, which, together with provisions in our charter documents and Delaware law, may delay or prevent an acquisition of us, which could decrease the value of our stock. We rely on complex information technology systems and networks to operate our business. Any significant system or network disruption could have a material adverse impact on our operations, sales and financial performance. We, our sole manufacturer and our customers are vulnerable to earthquakes, disruptions to power supply, labor issues and other unexpected events.

Full 10-K form ▸

1052303--4/2/2007--TERAYON_COMMUNICATION_SYSTEMS