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Lower than expected gross margins would negatively affect our operating results and could contribute to volatility in the market price of our
publicly traded securities.
Cash flow fluctuations may affect our ability to fund our working capital requirements or achieve our business objectives in a timely
manner. Additional sources of funds may not be available or may not be available on acceptable terms.
Our working capital requirements and cash flows historically have been, and are expected to continue to be, subject to quarterly and yearly
fluctuations, depending on such factors as timing and size of capital expenditures, levels of sales, timing of deliveries and collection of
receivables, inventory levels, customer payment terms, customer financing obligations and supplier terms and conditions. In addition, if the
industry or our current condition deteriorates, notwithstanding the EDC Support Facility, an increased portion of our cash and cash equivalents
may be restricted as cash collateral for customer performance bonds and contracts. We believe our cash on hand will be sufficient to fund our
current business model, manage our investments and meet our customer commitments for at least the next 12 months. In making this estimate,
we have not made provision for any material payments in connection with our pending civil litigation actions and investigations related to the
First Restatement and Second Restatement, other than our anticipated professional fees and expenses. Any material adverse legal judgments,
fines, penalties or settlements arising from these pending civil litigation actions and investigations could require additional funding which may
not be available on commercially reasonable terms, or at all. This could have a material adverse effect on our liquidity, which could be very
significant.
In addition, a greater than expected slow down in capital spending by service providers and other customers may require us to adjust our
current business model. As a result, our revenues and cash flows may be materially lower than we expect and we may be required to further
reduce our capital expenditures and investments or take other measures in order to meet our cash requirements.
We may seek additional funds from liquidity-generating transactions and other sources of external financing (which may include a variety of
debt, convertible debt and/or equity financings). We cannot provide any assurance that our net cash requirements will be as we currently
expect, that we will continue to have access to the EDC Support Facility when and as needed, or that liquidity-generating transactions or
financings will be available to us on acceptable terms or at all. Our inability to manage cash flow fluctuations resulting from the above factors
and the potential reduction, expiry or termination of the EDC Support Facility could have a material adverse effect on our ability to fund our
working capital requirements from operating cash flows and other sources of liquidity or to achieve our business objectives in a timely manner.
We may be materially and adversely affected by cautious capital spending by our customers. The loss of customers in certain markets
could have a material adverse effect on our business, results of operations and financial condition.
We expect that our consolidated revenues in 2004 will be slightly lower compared to 2003. The 2003 consolidated revenues included revenues
that were deferred from prior periods. Continued cautiousness in capital spending by service providers and other customers may affect our
revenues more than we currently expect. Our revenues and operating results have been and may continue to be materially and adversely
affected by the continued cautiousness in capital spending by our customers. We have focused on the larger customers in certain markets,
which provide a substantial portion of our revenues. A reduction or delay in business from one or more of these customers, or a failure to
achieve a significant market share with
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• higher product, material or labor costs;
• increased inventory provisions or contract and customer settlement costs;
• warranty costs;
• obsolescence charges;
• loss of cost savings on future inventory purchases as a result of high inventory levels;
• introduction of new products and costs of entering new markets;
• increased levels of customer services;
• changes in distribution channels;
• excess capacity or excess fixed assets;
• accruals for employee incentive bonuses;
• further restructuring costs; and
• costs related to our restatements, including the possibility of substantial fines, settlements and/or damages or other penalties, and/or
remedial actions.