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EXHIBIT 99.1
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Important Factors Regarding Future Results of IPL Systems, Inc.
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Information provided by IPL Systems, Inc. ("IPL" or the "Company") or its
spokespersons from time to time may contain forward-looking statements
concerning projected financial performance, product development or other aspects
of future operations. Such statements will be based on the assumptions and
expectations of the Company's management at the time such statements are made.
The Company cautions investors that any forward-looking statements made by the
Company are not guarantees of future performance. Various factors, including but
not limited to the following, have affected the Company's results in the past
and may cause its future results to differ materially from those projected in
the forward-looking statements.
Rapid Technological and Market Changes. The market for the Company's
products is characterized by rapidly changing technology and evolving customer
needs which shorten the life cycles of existing products and require ongoing
development and introduction of new products. The Company's ability to realize
its expectations will depend on its success at enhancing its current offerings,
developing new products that keep pace with developments in technology and meet
evolving customer requirements for performance and price, and delivering those
products through distribution channels with appropriate customer service and
support. This will require, among other things, correctly anticipating customer
needs, hiring and retaining personnel with the necessary skills and creativity,
providing adequate resources for product development, and managing distribution
channels effectively. Failure by the Company to anticipate or respond adequately
to technological developments and customer requirements, significant delays in
the development, production, testing, or availability of new or enhanced
products, or the failure of customers to accept such products, could adversely
affect the Company's technological position and operating results. Furthermore,
there can be no assurance that the Company's competitors will not succeed in
developing products or technologies that have superior price/performance
characteristics compared to any products being offered or developed by the
Company.
Competition. The computer data storage industry is intensely competitive
and is characterized by rapid technological change and constant pricing
pressure. IPL competes with a number of companies offering computer data
storage, back-up and recovery systems, including International Business
Machines ("IBM"), EMC Corporation ("EMC") and others, which have substantially
greater financial, product development, marketing and distribution resources
than the Company. In the open systems storage market, EMC Corporation, Data
General Corporation and the host systems manufacturers are the major
competitors, but the Company believes that to date no dominant suppliers have
emerged in the very large data base ("VLDB") segment of the open systems
storage market. In the AS/400 market, IBM is the major competitor. Because
IPL's systems have to be compatible with the AS/400 computer systems or with
the systems of the principal manufacturers of Unix-based open systems computers
and the relational database software programs, IPL's competitive position and
operating results may be adversely affected by, among other factors,
modifications in the design of such systems or programs, the introduction of
new products by such manufacturers
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or other competitors, reductions in the pricing of storage solutions in these
markets, or the implementation of new marketing strategies by any of its
principal competitors.
Fluctuations in Operating Results; Recent Losses. The Company has recently
experienced losses from operations and may in the future experience further
losses and significant period-to-period fluctuations in operating results. The
Company's revenues in any quarter are substantially dependent on the timing of
product shipments (sales of which made outside the United States through third
party distributors are often difficult to forecast), the Company's ability to
close significant sales in that quarter, and the status of competing product
introductions. Like many other high technology companies, a disproportionately
large percentage of quarterly sales occur in the closing weeks of each quarter.
Any forward-looking statements about operating results made by members of
management will be based on assumptions about the likelihood of closing sales
then in the pipeline and other factors management considers reasonable based in
part on knowledge of performance in prior periods. The failure to consummate any
of those sales may have a disproportionately negative impact on operating
results, given the Company's relatively fixed costs, and may thus prevent
management's projections from being realized.
Other factors that affect the Company's operating results and that
management takes into account include competitive pricing trends and changes in
the revenue and gross margin mix among open systems and AS/400 disk systems and
tape systems for computer data storage. Changes in the factors underlying
management's assumptions may result in a material variation between actual
results and those forecast in any forward-looking statements made during a
particular period.
Patents and Protection of Proprietary Technology. The Company believes that
its success in developing new products depends primarily upon the technical
competence and creative skills of its personnel rather than on the ownership of
copyrights or patents. The Company has no patents on its current products, but
in 1995 the Company filed applications for patents in the United States and
foreign countries with respect to new products scheduled to be introduced in
1996. The status of patents involves complex legal and factual questions and the
breadth of claims allowed is uncertain. There can be no assurance as to the
likelihood that pending patents will be issued or that any such patents will
afford protection against competitors with similar technology. In addition,
patent applications filed in foreign countries may provide significantly less
patent protection than the United States. No assurances can be given that
patents issued to the Company will not be infringed upon or designed around by
others.
In addition, due to the rapid technological development of the computer
data storage industry with concurrent extensive patent coverage and with the
rapid rate of issuance of new patents, certain aspects of the Company's products
may infringe patents unknown to the Company. Patent protection may also be
obtained in the future on new inventions and designs for peripheral storage
subsystems or the computers to which the Company's subsystems attach. Although
the Company believes that its products and other proprietary rights do not
infringe the proprietary rights of third parties, there can be no assurance that
other third parties will not assert infringement claims against the Company or
that such claims will not be successful. If any infringement exists or any such
patents are issued, the
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Company would seek, based upon industry practice, licenses to such patents, but
there can be no assurance that the Company will be able to obtain any such
licenses on terms which would not have a material adverse effect on its
business.
The Company also relies on unpatented proprietary technology, and there can
be no assurance that others may not independently develop the same or similar
technology or otherwise obtain access to the Company's proprietary technology.
To protect its rights in these areas, the Company requires all employees to
enter into confidentiality agreements. There can be no assurance that these
agreements will provide meaningful protection for the Company's trade secrets,
know-how or other proprietary information in the event of any unauthorized use,
misappropriation or disclosure of such trade secrets, know-how or other
proprietary information. If the Company is unable to maintain the proprietary
nature of its technologies, the Company's business could be adversely affected.
Dependence on Key Personnel. The success of the Company's operations
depends on its ability to attract and retain experienced technical, sales,
marketing and management personnel. Such personnel are in great demand and the
Company must compete for their services. Management's projections necessarily
assume that the Company will continue to attract and retain such personnel, so
the failure to do so could have a material adverse effect on the Company's
ability to develop and market competitive products.
Dependence on Suppliers. The Company has and will continue to rely on
outside vendors to manufacture certain electronic components and subassemblies
used in the production of the Company's products. Certain components,
subassemblies, materials and equipment necessary for the manufacture of the
Company's products are obtained from a sole supplier or a limited group of
suppliers. The Company's reliance on sole suppliers or a limited group of
suppliers involves several risks, including a potential inability to obtain an
adequate supply of required products and reduced control over the price, timely
delivery, reliability and quality of finished products. The Company does not
have any long-term supply agreements with its suppliers. Certain of the
Company's suppliers have relatively limited financial and other resources. Any
inability to obtain timely deliveries of products and services having acceptable
qualities or any other circumstance that could require the Company to seek
alternative sources of supply or to manufacture its own electronic components,
subassemblies and manufacturing equipment internally, could delay the Company's
ability to ship its products. Any such delay could damage relationships with
customers and could have a material adverse effect on the Company's business and
operating results.
Future Capital Needs; Availability of Capital. Management believes that the
Company's cash and cash equivalents are sufficient to meet the operating
requirements for its existing business. Nonetheless, changes in technology or a
substantial growth of sales beyond the Company's current plans could require
additional capital resources. To the extent that internally generated funds are
insufficient to fund the Company's operating requirements, it may be necessary
for the Company to seek additional funding either through debt financing or
public or private equity financing. There can be no assurance that any such
additional financing will be available on acceptable terms or at all. If
adequate funds are not available, the Company's business would be adversely
affected.
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