EXHIBIT 99.1
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS AND RISK FACTORS
In passing the Private Securities Litigation Reform Act of 1995 (the
"Reform Act"), Congress encouraged public companies to make "forward-looking
statements" by creating a safe harbor to protect companies from securities law
liability in connection with forward-looking statements. Radyne ComStream
intends to qualify both its written and oral forward-looking statements for
protection under the Reform Act and any other similar safe harbor provisions.
"Forward-looking statements" are defined by the Reform Act. Generally,
forward-looking statements include expressed expectations of future events and
the assumptions on which the expressed expectations are based. The words
"believe," "expect," "anticipate," "intends," "forecast," "project," and similar
expressions identify forward-looking statements. This Annual Report on Form 10-K
for the year ended December 31, 2001 contains forward-looking statements that
involve risks and uncertainties. Such statements may include, but are not
limited to: (i) continued growth in demand for satellite system ground-based
equipment and satellite-delivered communications services, (ii) continued global
deregulation and privatization of telecommunications carriers, (iii) continued
growth in worldwide demand for Internet over Satellite connectivity and
communications serves in general, (iv) an increase in total foreign sales, and
(v) sufficient cash reserves and cash from operations to fund planned future
operations and capital requirements through the end of 2001. Such
forward-looking statements are within the meaning of that term in Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. All forward-looking statements are inherently
uncertain as they are based on various expectations and assumptions concerning
future events and they are subject to numerous known and unknown risks and
uncertainties that could cause actual events or result to differ materially from
those projected. Due to those and other uncertainties and risks, the investment
community is urged not to place undue reliance on written or oral
forward-looking statements of Radyne ComStream. Radyne ComStream undertakes no
obligation to update or revise this Cautionary Statement Regarding
Forward-Looking Statements to reflect future developments. In addition, Radyne
ComStream undertakes no obligation to update or revise forward-looking
statements to reflect changed assumptions, the occurrence of unanticipated
events, or changes to future operating results over time.
Radyne ComStream provided the following risk factor disclosure in
connection with its continuing effort to qualify its written and oral
forward-looking statements under the safe harbor protection of the Reform Act
and any other similar safe harbor provisions. Important factors currently known
to management that could cause actual results to differ materially from those in
forward-looking statements include the disclosures contained in the Company's
Annual Report on Form 10-K to which this statement is appended as an exhibit and
also include the following:
RISK FACTORS
You should carefully consider the following risks before you decide to buy
our securities. If any of the following risks actually occur, our business,
financial condition or results of operations would likely suffer. As a result,
the trading price of our securities could decline, and you may lose all or part
of the money you paid to buy our securities.
We Have A History Of Operating Losses, Only Recently Became Profitable, And
Could Suffer Further Losses In The Future.
As a result of operating losses prior to 1999, we had an accumulated
deficit of $4.7 million at December 31, 2001. Although we have been profitable
over the past three years our earnings in fiscal 2001 deteriorated significantly
compared to the prior year. Furthermore, there can be no assurance that we will
remain profitable in the future. Future losses or reductions in our
profitability would adversely affect our stock price.
Our Quarterly Operating Results Have Fluctuated Significantly In The Past, And
We Anticipate That They Could Do So In The Future, Which Could Adversely Affect
Our Stock Price.
We may continue to experience significant quarter to quarter fluctuations
in our operating results, which may result in volatility in the price of our
common stock. These fluctuating operating results derive from a variety of
factors, including the following:
- timing of the initiation and completion of our purchase orders;
- demand for our products;
- introduction of new or enhanced products by us or our competitors;
- growth of demand for Internet-based products and services in developing
countries;
- timing of significant marketing programs we may implement;
- extent and timing of hiring additional personnel;
- competitive conditions in our industry; and
- general economic conditions in the United States and abroad.
The factors described above are difficult to forecast and could harm our
business, financial condition and results of operations. Furthermore, 2001 was a
challenging year for the telecommunication and Internet industries, thereby
resulting in longer sales cycles and delays in the purchase decision-making
process of existing and potential customers of our products and services.
Accordingly, we may have difficulty in accurately forecasting our revenues for
any future quarter.
We Depend On International Sales, Which Could Cause Our Sales Levels To Be
Volatile.
We are dependent on sales to customers outside the United States. We
expect that international sales will continue to account for a significant
portion of our revenues for the foreseeable future. For example, sales to our
foreign customers were approximately 56% of our net sales for the year ended
December 31, 1999, 44% for the year ended December 31, 2000 and 46% for the year
ended December 31, 2001. Additionally, we estimate that approximately 60% of our
domestic sales are eventually exported. Moreover, the growth in the use of
satellites for Internet traffic in recent years has been centered on connecting
Internet service providers, or ISPs, with Internet servers. U.S. based ISPs
rarely use satellites to provide point-to-point infrastructure for the Internet.
Accordingly, we expect that our sales to the Internet Service Provider market
will be primarily to customers located outside the United States. As a result of
our dependence on foreign markets, the occurrence of any negative international
political, economic or geographic events could result in significant revenue
shortfalls. These shortfalls could cause our business, financial condition and
results of operations to be harmed. Some of the risks of doing business
internationally include:
- changing regulatory requirements;
- fluctuations in the exchange rate for the United States dollar;
- the availability of export licenses;
- political and economic instability;
- difficulties in staffing and managing foreign operations, tariffs and
other trade barriers;
- changes in diplomatic and trade relationships;
- complex foreign laws and treaties;
- acts of terrorism; and
- difficulty of collecting foreign account receivables.
In addition, we are subject to the Foreign Corrupt Practices Act, which
prohibits us from making payments to government officials and others in order to
influence the granting of contracts we may be seeking. Our non-U.S. competitors
are not subject to this law and this may give them a competitive advantage over
us.
Fluctuations in the Valuations of Foreign Currencies Could Decrease the
Purchasing Power of our Foreign Customers, Reduce Sales and Decrease our
Earnings.
Our foreign sales are denominated in United States dollars. As a result,
any decrease in the value of foreign currencies relative to the United States
dollar may materially adversely affect the demand for our products by increasing
their costs in the currency of those countries. For example, the value or the
Euro and the Argentina Peso have deteriorated against the Dollar over the last 2
years and these markets have experienced decreased bookings and adversely
affected our results of operations in 2001.
We Depend On Developing Markets And Their Uncertain Growth Potential Could
Result In A Reduction In Revenues And Even Losses.
We believe a substantial portion of the growth in demand for our products
will depend upon customers in developing countries. We cannot provide assurance
that such increases in demand will occur or that prospective customers will
accept our products. The degree to which we are able to penetrate potential
markets in developing countries will be affected to a large extent by the speed
with which other competing elements of the communications infrastructure, such
as other satellite-delivered solutions, telephone lines, television cable, and
land-based solutions, are installed in these developing countries.
The Sales And Implementation Cycles for our Products are Long And Have Recently
Increased, and We May Incur Substantial, Non-Recoverable Expenses or Devote
Significant Resources To Sales That May Not Occur When Anticipated, If At All.
A customer's decision to purchase our products involves a significant
commitment of its resources and a lengthy evaluation and product qualification
process. After a customer decides to purchase our products, the timing of their
deployment and implementation depends on a variety of factors specific to each
customer. Further, prospective customers may delay purchasing our products in
order to evaluate new technologies and develop and implement new wireless
systems. Throughout the sales cycle, we spend considerable resources educating
and providing information to prospective customers regarding the use and
benefits of our products. Our sales cycle for new customers is lengthy,
typically from four to five months, which is an increase from the two to three
months we experienced in the past couple of years.
The Recent Downturn In The Rapidly Evolving Telecommunications And Internet
Industries Could Harm Our Business.
Our success depends upon the continued growth of the telecommunications
industry, particularly with regard to the Internet. The rapid growth and
evolution in the global telecommunications and Internet industries and the need
for high-speed or enhanced telecommunications products has been slowed by recent
economic conditions in the United States and elsewhere. The potential growth in
these areas is unpredictable. We cannot provide assurance that the deregulation,
privatization and economic globalization of the worldwide telecommunications
market that has resulted in historical demand for technologies and services will
resume in a manner favorable to us or our business strategies.
Competition In Our Industry Is Intense And Can Lead To Reduced Sales And Market
Share.
The markets for ground segment systems are highly competitive. We have a
number of major competitors in the satellite communications equipment field.
These include large companies, such as Hughes Network Systems, Inc., NEC, and
Comtech Telecommunications Corp., which have significantly larger and more
diversified operations and greater financial, marketing, personnel and other
resources than we possess. As a result, these competitors may develop and expand
their products more quickly, adapt more quickly to new or emerging technologies
and changes in customer requirements, take advantage of acquisition and other
opportunities more readily, and devote greater resources to the marketing and
sale of their products than we can.
Competition from current competitors or future entrants in the markets in
which we compete could cause us to lose orders or customers or could force us to
lower the prices we charge for our products, all of which would have a material
adverse impact on our business, financial condition, and results of operations.
Our Products May Become Obsolete Due To Rapid Technological Change.
The telecommunications industry, including the ground-based satellite
communications systems business, is characterized by rapid and continuous
technological change. Future technological advances in the telecommunications
industry may result in the introduction of new products or services that compete
with our products or render them obsolete. Our success depends in part on our
ability to respond quickly to technological changes through the improvement of
our current products and the development of new products. Accordingly, we
believe that we will need to allocate a substantial amount of capital to
research and development activities in the future. We may not generate cash flow
from operations or have access to outside financing in amounts that are
sufficient to adequately fund the development of new products. Even if we are
able to obtain the required funding to develop new products, we cannot assure
you that we will be able to develop products that we will be able to sell
successfully. Our inability to improve our existing products and develop new
products could have a material adverse effect on our business, financial
condition, and results of operations.
Our Research And Development Efforts Are Costly And The Results Are Uncertain,
Which May Reduce Our Profitability And Could Result In Losses.
Our continued growth depends on penetrating new markets, adapting existing
satellite communications products to new applications, and introducing new
communications products that achieve market acceptance and benefit from our
established international distribution channels. Accordingly, we are actively
applying our communications expertise to design and develop new hardware and
software products and enhance existing products. These efforts are costly. We
expended $10.8 million, or 16% of our net sales, in fiscal 2001 on research and
development activities. This was an increase from the prior year in which we
spent $9.3 million, or 13% of our net sales for the year. Additionally, our
research and development program may not produce successful results, which would
have a material adverse effect on our business, financial condition, and results
of operations.
Continued Growth Through Acquisition Could Prove Unsuccessful And Strain Our
Personnel And Systems And Divert Our Resources.
We have pursued, and will continue to pursue, growth opportunities through
internal development and acquisition of complementary businesses, products and
technologies. Our operations have expanded significantly as a result of our
acquisitions of ComStream, Armer, and Tiernan. We are unable to predict whether
or when any other prospective acquisition will be completed. However, in order
to pursue successfully the opportunities presented by the ground segment and
emerging satellite-delivered communications and Internet/intranet-infrastructure
markets, we will be required to continue to expand our operations. This
expansion could entail various risks, including the following:
- difficulty of assimilating the operations and personnel of acquired
businesses or products due to unforeseen circumstances;
- the necessity to attract, train, motivate, and manage a significantly
larger number of employees;
- the use of a disproportionate amount of our management's attention or
our resources;
- substantial cash expenditures, potentially dilutive issuances of equity
securities, the incurrence of additional debt and contingent
liabilities, and amortization expenses related to goodwill and other
intangible assets;
- potential disruption of our ongoing business;
- our inability, once integrated, to achieve comparable levels of
revenues, profitability or productivity as our existing business or
otherwise perform as expected; and
- our potential inability to obtain the desired financial and strategic
benefits from the acquisition or investment.
Moreover, we cannot assure you that we will be able to successfully
identify suitable acquisition candidates, complete acquisitions, or expand into
new markets. The occurrence of any of the risks described above or any failure
to manage further growth in an efficient manner and at a pace consistent with
our business could have a material adverse effect on our growth and our
business, financial condition, and results of operations.
Our Competitive Position Relies Heavily On Our Proprietary Technology And
Intellectual Property.
We rely on our proprietary technology and intellectual property to
maintain our competitive position. Unauthorized parties could attempt to copy
aspects of our technologies or to obtain information that we regard as
proprietary. We may not be able to police unauthorized use of our intellectual
property. Our failure to protect our proprietary technology and intellectual
property could adversely affect our competitive position.
We generally rely on confidentiality agreements with our employees and
some of our suppliers to protect our proprietary technology. We also control
access to and distribution of confidential information concerning our
proprietary technology. We cannot guarantee that the other parties to these
agreements will not disclose or misappropriate the confidential information
concerning our proprietary technology, which could have a material adverse
effect on our business.
We rely on patents to protect certain of our proprietary technology.
Patents, however, often provide only narrow protection that may not prevent
competitors from developing products that function in a manner similar to those
covered by our patents. In addition, some foreign countries in which we sell our
products do not provide the same level of protection to intellectual property as
the laws of the United States provide. We cannot assure you that any patents we
currently own or control, or that we may acquire in the future, will prevent our
competitors from independently developing products that are substantially
similar or superior to ours.
We may find it necessary to take legal action in the future to enforce or
protect our intellectual property rights. Litigation can be very expensive and
can distract our management's time and attention, which could adversely affect
our business. In addition, we may not be able to obtain a favorable outcome in
any intellectual property litigation.
Our Products Could Infringe On The Intellectual Property Of Others.
Third parties may in the future assert that our technology violates their
intellectual property rights. As a result of such claims, we could be required
to enter into licensing arrangements or develop non-infringing products, which
could be prohibitively expensive or could divert a significant amount of
resources from other aspects of our business.
We may find it necessary to take legal action in the future to defend
against claims that our products or technologies infringe the rights of third
parties. Litigation can be very expensive and can distract our management's time
and attention, which could adversely affect our business. In addition, we may
not be able to obtain a favorable outcome in any intellectual property
litigation.
We Depend Upon Certain Suppliers And Subcontractors, The Loss Of Which Could
Cause An Interruption In The Production Of Our Products.
We rely on subcontractors to assemble and test some of our products.
Additionally, our products use a number of specialized chips and customized
components or subassemblies produced by a limited number of suppliers. We
maintain limited inventories of these products and do not have long-term supply
contracts with our vendors. In the event our subcontractors or suppliers are
unable or unwilling to fulfill our requirements, we could experience an
interruption in product availability until we are able to secure alternative
sources of supplies. We are also subject to price increases by suppliers that
could increase the cost of our products or require us to develop alternative
suppliers, which could interrupt our business. It may not be possible to obtain
alternative sources at a reasonable cost. Supply interruptions could cause us to
lose orders or customers, which would result in a material adverse impact on our
business, financial condition, and
results of operations.
The Ownership Interest Of Our Controlling Shareholder May Make Our Stock Less
Attractive To Investors And Potential Acquirers.
Stetsys Pte Ltd, or ST, owns a majority of our outstanding common stock.
ST will, therefore, continue to have the ability to elect all of our directors
and to control the outcome of all issues submitted to a vote of our
stockholders. It also would be impossible for a third party to acquire us
without the consent or participation of ST.
Our Outstanding Options And Warrants May Dilute Our Stockholders' Interests And
Could Hinder Us From Obtaining Additional Financing.
We grant options and warrants to purchase shares of common stock to
employees, directors and others with business relationships with us. To the
extent that outstanding options and warrants are exercised, our stockholders'
interests will be diluted. Also, we may not be able to obtain additional equity
capital on acceptable terms, because the holders of the outstanding options and
warrants will likely exercise them at a time when we may be able to obtain such
capital on better terms than those under the options and warrants.
Our Redemption Of Redeemable Warrants May Have An Adverse Effect On The Holders
Of The Warrants.
We have the right to redeem all, but not less than all, of the redeemable
warrants under certain conditions. Redemption of the redeemable warrants could
encourage holders to exercise them and pay the exercise price at a time when it
may be disadvantageous for the holders to do so, to sell the redeemable warrants
at the current market price when they might otherwise wish to hold the
redeemable warrants or to accept the redemption price, which may be
substantially less than the market value of the redeemable warrants at the time
of redemption. The holders of the redeemable warrants will automatically forfeit
their rights to purchase the shares of common stock issuable upon exercise of
those warrants unless the warrants are exercised before they are redeemed. The
holders of redeemable warrants will not possess any rights as stockholders
unless and until the redeemable warrants are exercised.
Stock Prices Of Technology Companies Have Declined Precipitously And The Trading
Price Of Our Common Stock And Redeemable Warrants Is Likely To Be Volatile,
Which Could Result In Substantial Losses To Investors.
The trading price of our common stock and redeemable warrants have fallen
over the past couple of years and could continue to be volatile in response to
factors including the following, some of which are beyond our control:
- decreased demand in the Internet-services sector;
- variations in our operating results;
- announcements of technological innovations or new services by us or our
competitors;
- changes in expectations of our future financial performance, including
financial estimates by securities analysts and investors;
- changes in operating and stock price performance of other technology
companies similar to us;
- conditions or trends in the technology industry;
- additions or departures of key personnel; and
- future sales of our common stock.
Domestic and international stock markets often experience significant
price and volume fluctuations. These fluctuations, as well as general economic
and political conditions unrelated to our performance, may adversely affect the
price of our common stock and redeemable warrants.
The Large Number Of Shares Eligible For Future Sale May Adversely Affect The
Market Price Of Our Common Stock.
A large number of our issued and outstanding shares of common stock are
eligible for future sale. The sale, or
availability for sale, of a substantial number of shares of common stock in the
public market could materially adversely affect the market price of our common
stock and could impair our ability to raise additional capital through the sale
of our equity securities.
Nasdaq Could Delist Our Common Stock Or Redeemable Warrants, Which Could Make It
More Difficult For You To Sell Or Obtain Quotations As To The Price Of Our
Common Stock Or Redeemable Warrants.
We are currently in compliance with Nasdaq's continued listing
requirements. However, if our stockholder's equity falls below $10 million, the
price of our common stock or redeemable warrants falls below $3, or if we are
not otherwise able to demonstrate to Nasdaq our ability to comply with its other
listing standards, our shares of common stock or redeemable warrants might be
delisted.
If we cannot satisfy Nasdaq's continued listing criteria in the future,
Nasdaq could delist our common stock or redeemable warrants. In the event of
delisting, trading, if any, would be conducted only in the over-the-counter
market in the so-called "pink sheets" or the NASD's Electronic Bulletin Board.
As a result, an investor would likely find it more difficult to sell or obtain
quotations as to the price of our common stock or redeemable warrants.
A delisting could also subject our common stock to the rules of the
Securities and Exchange Commission relating to "penny stocks." These rules
require broker-dealers to make special suitability determinations for purchasers
other than established customers and certain institutional investors, and to
receive the purchasers' prior written consent for a purchase transaction prior
to sale. Consequently, these penny-stock rules may adversely affect the ability
of broker-dealers to sell our common stock and may adversely affect an
investor's ability to purchase or sell shares quickly or inexpensively. This
lack of liquidity also could make it more difficult for us to raise capital in
the future
We Have Provisions In Our Certificate Of Incorporation That Substantially
Eliminate The Personal Liability Of Members Of Our Board Of Directors For
Violations Of Their Fiduciary Duty Of Care As A Director And That Allow Us To
Indemnify Our Officers And Directors. This Could Make It Very Difficult For You
To Bring Any Legal Actions Against Our Directors For Such Violations Or Could
Require Us To Pay Any Amounts Incurred By Our Directors In Any Such Actions.
Pursuant to our certificate of incorporation, members of our Board of
Directors will have no liability for violations of their fiduciary duty of care
as a director, except in limited circumstances. This means that you may be
unable to prevail in a legal action against our directors even if you believe
they have breached their fiduciary duty of care. In addition, our certificate of
incorporation allows us to indemnify our directors from and against any and all
expenses or liabilities arising from or in connection with their serving in such
capacities with us. This means that if you were able to enforce an action
against our directors or officers, in all likelihood we would be required to pay
any expenses they incurred in defending the lawsuit and any judgment or
settlement they otherwise would be required to pay.
The Loss Of The Services Of Certain Members Of Our Senior Management Or The
Inability To Attract Or Retain Additional Technical Personnel Could Impair Our
Ability To Conduct And Expand Our Business.
Our future performance depends significantly on Robert C. Fitting, our
Chief Executive Officer, and Steve Eymann, our Executive Vice President and
Chief Technical Officer. The loss of either of these key employees would
adversely affect our operations. Mr. Fitting is 65 years old and we may
eventually need to effect an appropriate transition to a new Chief Executive
Officer. Any such transition may disrupt our business, customers and employees.
Our continued ability to attract and retain highly skilled personnel also
is critical to the operation and expansion of our business. The market for
skilled engineers and other technical personnel is extremely competitive, and
recruitment and retention costs are high. Although we have been able to attract
and retain the personnel necessary to operate our business, we may not be able
to do so in the future, particularly as we continue to expand our business into
Internet-related products and other markets. The failure to attract and retain
personnel with the necessary skills when needed could materially and adversely
affect our business and expansion plans.
Since Some Members Of Our Board Of Directors Are Not Residents Of The United
States And Certain Of Our Assets Are Located Outside Of The United States, You
May Not Be Able To Enforce Any U.S. Judgment For Claims You May Bring Against
Such Directors Or Assets.
Two members of our board of directors are residents of Singapore, and an
immaterial portion of our assets and a substantial portion of the assets of
these directors are located outside the United States. As a result, it may be
more difficult for you to enforce a lawsuit within the United States against
these non-U.S. residents than if they were residents of the United States. Also,
it may be more difficult for you to enforce any judgment obtained in the United
States against our assets or the assets of our non-U.S. resident directors
located outside the United States than if these assets were located within the
United States. We cannot assure you that foreign courts would enforce
liabilities predicated on U.S. federal securities laws in original actions
commenced in such foreign jurisdiction or judgments of U.S. courts obtained in
actions based upon the civil liability provisions of U.S. federal securities
laws.
Anti-Takeover Effect Of Delaware Law And Our Charter.
Under the Delaware general Corporation Law, which we are subject to, it
will be more difficult for a third party to take control of the Company and may
limit the price some investors are willing to pay for shares of our common
stock. Furthermore, our certificate of incorporation authorizes the issuance of
up to 10,000,000 shares of preferred stock without a vote or other stockholder
approval.
Terrorist Attacks and Threats or Actual War May Negatively Impact All Aspects of
Our Operations, Revenues, Costs and Stock Price.
Recent terrorist attacks in the United States, as well as future events
occurring in response or connection to them, including, without limitation,
future terrorist attacks against United States targets, rumors or threats of
war, actual conflicts involving the United States or its allies or military or
trade disruptions impacting our domestic or foreign suppliers of merchandise,
may impact our operations, including, among other things, causing delays or
losses in the delivery of wafer supplies to us and decreased sales of our
products. More generally, any of these events could cause consumer confidence
and spending to decrease or result in increased volatility in the United States
and worldwide financial markets and economy. They also could result in economic
recession in the United States or abroad. Any of these occurrences could have a
significant impact on our operating results, revenues and costs.