1108185--3/11/2008--OCCAM_NETWORKS

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{product, market, service}

{property, intellectual, protect}

{competitive, industry, competition}

{stock, price, operating}

{acquisition, growth, future}

{regulation, government, change}

{cost, operation, labor}

{financial, litigation, operation}

{stock, price, share}

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{operation, international, foreign}

Risks Related to Our Restatement Matters relating to or arising from the restatement, errors in our historic revenue recognition practices, and weaknesses in our internal controls, including adverse publicity and potential concerns from our customers and prospective customers, regulatory inquiries, and litigation matters, could have a material adverse effect on our business, revenues, operating results, or financial condition. If we fail to establish and maintain proper and effective internal controls, our ability to produce accurate financial statements on a timely basis could be impaired, which would adversely affect our consolidated operating results, our ability to operate our business and our stock price. Risks Related to Our Business and Industry Our focus on independent telephone operating companies limits our sales volume with individual customers and makes our future operating results difficult to predict. Fluctuations in our quarterly and annual operating results may adversely affect our business and prospects. We have a history of losses and negative cash flow, and we may not be able to generate positive operating income and cash flows in the future to support the expansion of our operations. Because our markets are highly competitive and dominated by large, well-financed participants, we may be unable to compete effectively. We have relied, and expect to continue to rely, on our BLC 6000 product line for the substantial majority of our sales, and a decline in sales of our BLC 6000 line would cause our overall sales to decline proportionally. If we fail to enhance our existing products and develop new products and features that meet changing customer requirements and support new technological advances, our sales would be materially and adversely affected. Our efforts to increase our sales and marketing efforts to larger telecom operators, which may require us to broaden our reseller relationships, may be unsuccessful. Our strategic relationship with Tellabs has not resulted and may never result in a material increase in our sales. We may be unable to successfully expand our international operations. In addition, our international expansion plans, if implemented, will subject us to a variety of risks that may adversely affect our business. If we lose any of our key personnel, or are unable to attract, train and retain qualified personnel, our ability to manage our business and continue our growth would be negatively impacted. We may have difficulty managing our growth, which could limit our ability to increase sales and cash flow. Because we depend upon a small number of outside contractors to manufacture our products, our operations could be disrupted if we encounter problems with any of these contractors. We depend on sole source and limited source suppliers for key components and license technology from third parties. If we are unable to source these components and technologies on a timely basis, we will not be able to deliver our products to our customers. If we fail to accurately predict our manufacturing requirements and manage our inventory, we could incur additional costs, experience manufacturing delays, or lose revenue. If our products contain undetected defects, including errors and interoperability issues, we could incur significant unexpected expenses to remedy the defects, which could have a material adverse effect on our sales, results of operations or financial condition. Our business is dependent on the capital spending patterns of telecom operators, and any decrease or delay in capital spending by our customers, such as recently appears to have occurred among IOCs evaluating their capital expenditures and investment decisions in light of the industry transition from copper wire to fiber, would adversely affect our consolidated operating results and consolidated financial condition. Demand for our products is dependent on the willingness of our customers to deploy new services, the success of our customers in selling new services to their subscribers, and the willingness of our customers to utilize IP and Ethernet technologies in local access networks. Changes in existing accounting or taxation rules or practices may adversely affect our consolidated results of operations. We may pursue acquisitions, which may involve a number of risks. If we are unable to address and resolve these risks successfully, such acquisitions could have a material adverse impact to our business, consolidated results of operations and consolidated financial condition. Business combinations and other financial restructurings by telecom service providers or our competitors could adversely affect our business. Our customers are subject to government regulation, and changes in current or future laws or regulations that negatively impact our customers could harm our business. If we fail to comply with regulations and evolving industry standards, sales of our existing and future products could be adversely affected. We may not be able to protect our intellectual property, which could adversely affect our ability to compete effectively. We could become subject to litigation regarding intellectual property rights that could materially harm our business. Our business could be shut down or severely impacted if a natural disaster or other unforeseen catastrophe occurs, particularly in California. Risks Related to Our Common Stock Our executive officers, directors and their affiliates hold a large percentage of our stock and their interests may differ from other stockholders. Our stock price may be volatile, and you may not be able to resell shares of our common stock at or above the price you paid. Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable. We may be unable to raise additional capital to fund our future operations, and any future financings or acquisitions could result in substantial dilution to existing stockholders.

Full 10-K form ▸

1108185--3/11/2008--OCCAM_NETWORKS_INC/DE