811240--3/16/2006--BIOLASE_TECHNOLOGY

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Risks Relating to Our Business Dentists and patients may be slow to adopt laser technologies, which could limit the market acceptance of our products. Fluctuations in our revenue and operating results on a quarterly and annual basis could cause the market price of our common stock to decline. We may have difficulty achieving profitability and may experience additional losses. Any failure to significantly expand sales of our products will negatively impact our business. Components used in our products are complex in design and any defects may not be discovered prior to shipment to customers, which could result in warranty obligations, reducing our revenue and increasing our cost. Our distributors may cancel, reduce or delay orders of our products, any of which could reduce our revenue. We must continue to procure materials and components on commercially reasonable terms and on a timely basis to manufacture our products profitably. We have some single-source suppliers. We may not be able to compete successfully, which will cause our revenue and market share to decline. Rapidly changing standards and competing technologies could harm demand for our products or result in significant additional costs. If we are unable to attract and retain personnel necessary to operate our business, our ability to develop and market our products successfully could be harmed. Any problems that we experience with our manufacturing operations may harm our business. Changes in government regulation or the inability to obtain or maintain necessary government approvals could harm our business. Regulatory proceedings relating to the restatement of our consolidated financial statements could divert management s attention and resources. We may have difficulty managing any growth that we might experience. If we fail to secure or protect our intellectual property rights, competitors may be able to use our technologies, which could weaken our competitive position, reduce our revenue or increase our costs. We may be sued by third parties for alleged infringement of their proprietary rights. We have significant international sales and are subject to risks associated with operating in international markets. Our products are subject to recall even after receiving FDA clearance or approval, which would harm our reputation, business and financial results. We may not successfully address problems encountered in connection with any future acquisition. If our customers cannot obtain third party reimbursement for their use of our products, they may be less inclined to purchase our products. We are party to securities and derivative litigation that distracts our management, is expensive to conduct and seeks a damage award against us. Material increases in interest rates may harm our sales. Product liability claims against us could be costly and could harm our reputation. Our operations are consolidated primarily in one facility. A disaster at this facility is possible and could result in a prolonged interruption of our business. Our ability to use net operating loss carryforwards may be limited. Our business is capital intensive and the failure to obtain capital could require that we curtail capital expenditures. Our charter documents and Delaware law may inhibit a takeover that our stockholders consider favorable and could also limit the price of our stock. Our common stock could be diluted by the conversion of outstanding convertible securities. Our financial outlook could be affected by changes in the accounting rules which govern the recognition of stock-based compensation expenses. Our internal controls and procedures need to be improved. Our failure to comply with certain conditions required for our common stock to be listed on the NASDAQ National Market could result in the delisting of our common stock from the NASDAQ National Market. Changes in government regulation or the inability to obtain or maintain necessary government approvals could harm our business. We lack published long-term randomized trial data comparing the efficacy of our Waterlase systems with traditional dental procedures. If future data proves to be inconsistent with our clinical results, our revenues may decline. Any failure in our efforts to train dental practitioners could reduce the market acceptance of our Waterlase system and reduce our revenues. We spend considerable time and money complying with federal, state and foreign regulations and, if we are unable to fully comply with such regulations, we could face substantial penalties. Product sales or introductions may be delayed or canceled as a result of the FDA regulatory process, which could cause our sales or profitability to decline.

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811240--3/16/2006--BIOLASE_TECHNOLOGY_INC