Satellite technology is a key element in the worldwide infrastructure of communications systems. Satellites enable communications service where there is no suitable alternative available to provide a redundant backup solution for terrestrial based infrastructure (like fiber-optic cables and microwave networks) or to supplement existing inadequate service. Unlike the cost of land-based networks, such as microwave and fiber cable, the cost to provide services via satellite does not increase with the distance between sending and receiving stations. Satellite networks can be rapidly installed, upgraded, and reconfigured as compared with land-based networks, which require rights-of-way and are expensive and time consuming to install and upgrade.
Satellite communication systems consist of two key segments: satellites (the “space segment”); and ground-based transmission/reception systems (the “ground segment”). The space segment consists of a single satellite or a constellation of satellites in earth orbit, which typically provide continuous communications coverage over a wide geographic area. These satellites typically contain multiple transponders, each of which is capable of simultaneously receiving and transmitting one or more signals to or from multiple users. The satellite ground segment, the segment of the industry within which the Company operates, consists principally of one or more earth stations. An earth station is an integrated system consisting of antennae, radio signal transmitting and receiving equipment, amplifiers, satellite modems, frequency converters, redundancy switches and voice, data, and/or video network interface equipment. Earth stations provide a communications link from the content originator (such as a broadcast studio or Internet service provider) to the end user either directly or through land-based networks.
The ground segment consists of multiple applications in which the Company operates. The three principal categories of satellite communication applications are fixed satellite services, mobile satellite services, and direct broadcast services.
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Fixed Satellite. Fixed satellite services provide point-to-point and point-to-multipoint satellite communication of voice, data, and video between fixed ground-based earth stations. The introduction of high-power satellites has created new opportunities within the fixed satellite services segment by enabling the use of smaller, less costly earth stations for applications such as corporate data networks, Intranet access, and rural telephony. •
Mobile Satellite. Mobile satellite services operate between fixed earth stations and mobile earth stations, or terminals. These services provide mobile voice and data transmission capability on land, sea, and air. New mobile satellite services are being developed to bring more extensive coverage and circuit reliability for mobile telephone and data services to underserved populations throughout the world. Further, there is increased demand for “live” origination of broadcast television programming, such as live coverage of news, sports or cultural events that employ mobile satellite services for transmission from the venue to television studios. •
Direct Broadcast. Direct broadcast services provide a direct transmission link from high-power satellites to customers over a wide geographic area. This includes direct-to-home television and radio services, distribution of television and radio programming to local affiliates direct broadcast data services, and Internet access. Industry Growth and Market Opportunity
We believe that demand for satellite system ground-based equipment has been and will continue to be driven by:
Worldwide Demand for Communications Services. Factors contributing to the demand for communications services include worldwide economic development and the increasing globalization of commerce. Businesses have a need for higher bandwidth services to communicate with their customers and employees around the world and are increasingly reliant upon Internet and multimedia applications. We expect demand for these kinds of higher bandwidth services to continue to grow in both developed and developing countries.
Deregulation and Privatization. Many developing countries that had previously not committed significant resources to or placed a high priority on developing and upgrading their communications systems are now doing so, primarily through deregulation and privatization. A significant number of these countries lack the resources, or have large geographic areas or terrain that make it difficult, to install extensive land-based networks on a cost-effective basis. This provides an opportunity for satellite communications services systems to meet the growing demand for communications services in these countries.
Cost-Effectiveness of Satellite Communications. The relative cost-effectiveness of satellite communications services is a major factor driving the growth of satellite communications services in areas with rapidly growing telecommunications infrastructures. Large geographic areas, where significant distances separate population concentrations, require a technology whose cost and speed of implementation is relatively insensitive to distance. Unlike the cost of land-based networks, the cost to provide services via satellite does not increase with the distance between sending and receiving stations.
Technological Advances. Technological advances continue to increase the capacity of a single satellite and reduce the overall cost of a system and the service it delivers. This increases the number of potential end-users for the services and expands the available market. We believe that recent technological developments such as complex bandwidth efficient modulation schemes, turbo error correcting codes, bandwidth on demand, digital television compression technology, and signal processing methods will continue to stimulate the demand for the use of satellite communication services.
Government and Military. Satellites allow the military to have instant secure communications when deploying rapidly to troubled parts of the world and further support the infrastructure necessary for military tactical deployments. The U.S. government provides a significant market opportunity for satellite equipment manufacturers as government policies encourage the use of commercial “off-the-shelf” components whenever feasible. This provides us with the opportunity to configure our standard products for a sizable customer that is likely to provide consistent business.
Because of current concerns with international terrorism, the militaries of many countries have increased requirements for communications as their forces are spread around the world in such places as Afghanistan and Iraq. The U.S. government’s needs, such as maintaining communications with embassies, and the U.S. military’s worldwide command and control requirements, continue to drive more demand for satellite communications.
Television Video Distribution . Compressed HDTV digital video is a technology that has the potential to provide significant new market growth. The development of digital compression technology preserves the quality of TV signals and allows the transmission of television signals via satellite, point-to-point or fiber in a smaller bandwidth than is currently possible through alternative technologies, the most prevalent of which is over-the-air analog signals which use much larger frequency spectums than digital systems require. This advance in communications technology is enabling a wider application of satellite solutions for television and video broadcast services. The increased compression allows broadcasters to increase their channel offering within a smaller, allocated spectrum. New HDTV content provides opportunities for additional network and local programming choices along with related revenue opportunities. Satellites provide television broadcasters with an efficient and economical method to distribute their programming to cable service providers and direct broadcast satellite operators. Direct Broadcast Services, in turn, use satellites to distribute digital television programming. Compressed video encoding and decoding make satellites available for less demanding video transmissions, including business teleconferencing, private business networks, and telemedicine. The economics of compressed video allow the use of satellite transmission for long-distance teaching applications. Digital cinema distribution is a viable alternative to the physical distribution of feature length films and special media events.
Radio Broadcasts. Satellites are an ideal transmission medium for broadcast services, as a single satellite has the ability to communicate with ground locations spread across up to one-third of the surface of the earth. Radio network operators, financial news providers, merchandise retailers, and others use satellite systems to provide financial data and other audio transmissions for a variety of applications, such as local radio programming, news wire services and supermarket in-store radio. In addition, direct radio broadcasters use satellites to broadcast multiple channels of programming directly to consumers.
Private Networks. As businesses and other organizations expand into regions of the world where the telecommunications infrastructure is inadequate for land-based networks, the need for alternative communications connections among multiple facilities becomes evident. A private network is a dedicated communications and/or data transmission network. Such a network may link employees of a multiple-location business with co-workers located throughout the world. Users can consolidate multiple applications over a single satellite network and receive the same quality of service at a lower over-all cost. We believe the satellite communications industry is poised to gain a foothold in this market by offering reliable high-speed connectivity. Satellite systems can bypass the complexity of land-based networks, multiple carriers, and varying price and billing schedules.
Internet Communications. The Internet has evolved into a global medium, allowing millions of individuals throughout the world to communicate, share information, and engage in electronic commerce. Growth in this sector is expected to be driven by the large and growing number of personal computers installed in homes and offices, the declining prices of personal computers, improvements in network infrastructure, the availability of faster and cheaper Internet access, and the increasing familiarity with and acceptance of the Internet by businesses and consumers. Internet usage also is expected to continue to grow rapidly due to unique characteristics that differentiate it from traditional media, such as real-time access to interactive content, real-time communication capabilities, and the absence of geographic or temporal limitations.
We expect satellite communications to continue to offer a cost-effective augmentation capability for Internet service providers, particularly in markets where land-based networks are unlikely to be either cost-effective or abundant, such as rural areas.
Products
Satellite Electronics and Broadcast Equipment
The Company supplies satellite modems, converters, and switches and HDTV broadcast products and standard/digital encoders and decoders thru its Radyne and Tiernan brands. The two principal product groups are listed below:
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Satellite Electronics •
Modems—Satellite modems transform user information, such as data, video or audio, into a signal that can be further processed for transmission via satellite. We produce several varieties of satellite modems, which operate at different speeds using a variety of modulation techniques. Featured products include: the DMD20 – Universal Satellite Modem, the DMD2050 – MIL-STD Compliant Universal Satellite Modem, and the DMD20LBST – L-Band Satellite Modem and ODU Driver. •
Frequency Converters/Transceivers—Each satellite is configured to receive or transmit a particular radio wave pattern, otherwise called a frequency band, which is typically different from the frequency of the satellite modem. Frequency converters are used to alter the input/output of a satellite modem into a wave pattern that can be interpreted by the particular satellite being used in the satellite system to relay communication signals. The Company currently markets a variety of converters used to transmit and receive signals over satellites in the commercial satellite frequency ranges of C-Band, Ka-Band, and Ku-Band. We also produce a redundancy control unit, which will switch a satellite system to stand-by equipment in the event of a malfunction in a satellite modem or converter. Such redundancy is a critical element for many of our customers, such as rural or international telephony networks, that strive to provide uninterrupted satellite communications services to their customers. Featured products include: SFC-1450 Ku-Band up-converter and SFC-1275 Ku-Band down-converter. •
Earth Stations—Our earth stations typically consist of several components, including a satellite modem, a frequency converter, a transceiver, a transmitter, redundancy switches and an antenna. Earth stations serve as an essential link in transmitting signals to and receiving signals from satellites. Our earth stations enable users to program power levels and operating parameters in order to compensate for low signal levels, extreme weather conditions, and other variables. We design and manufacture our earth stations using components that we manufacture as well as components that we obtain from other manufacturers. Featured products include: the DMD20LB/ST – Satellite Earth Station. •
Troposcatter – In 2005, the Company introduced a new troposcatter product or “over-the-horizon” modem in partnership with General Dynamics C4 Systems. The TM-20 modem has the ability to transmit and receive radio waves over the curvature of the Earth by reflecting signals off irregularities in the troposphere which is approximately 10Km above the Earth’s surface. The TM-20’s patented software is a major advance in troposcatter technology and will be marketed to the U.S. military, which currently employs troposcatter systems throughout the world, and to commercial interests. •
Broadcast Equipment •
Standard and High Definition TV Encoders/Decoders – TV encoders convert analog signals to digital format and compress the signal to fit over available bandwidth. Decoders are used to convert the compressed signal back into a form that can be viewed and edited. Encoders are used in satellite, cable and terrestrial applications. Many U.S. broadcasters rely on encoders to provide news/live event gathering and direct to home service. The Company offers a complete product line of SDTV and HDTV encoders for professional applications. Both models feature MPEG-2 video encoding capability and audio compression. The HDTV encoder features a monitor screen on its faceplate which enables the technician to monitor actual unit performance in real time. Featured products include: the HE4000 – High and Standard Definition Encoder, the SE4000 – DVB MPEG-2 Contribution Encoder, the HD4000 – High Definition Contribution Decoder, and the TDR4022 – DVB Professional Integrated Receiver/Decoder. In early 2007, the Tiernan Division introduced a new standard definition encoder employing advance video codec, also known as MPEG-4. This encoder, known as the AVC-4000, is the first product in a new family of products that employ this technology which allows for further compression of video signals to levels that allow more efficient use of available bandwidth when compared with MPEG-2 alternatives.
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High-Speed and DVB Modems—Modulators and demodulators are similar to modems as they transform a signal for transmission to a satellite and then, at the receiving station, convert the signal back into a form usable as part of the broadcast data stream. Featured products include: the DM240 – Digital Video Broadcast Modulator and the DD240— Digital Video Broadcast Demodulator. •
Cable and Microwave—Our cable modulators are used primarily in the distribution of digital video for use by cable television distributors and in HDTV. The design of our cable modulators allows for the transmission of digital video on terrestrial, broadband cable and enables system operators to manage and control available bandwidth. Our microwave modems are used with point-to-point microwave radios and usually feature high-speed and multidata-rate capabilities that provide a complete point-to-multipoint communication link that facilitates microwave link upgrades. For example, television stations use our microwave modems to transmit audio and video over a microwave link to and from digital newsgathering trucks. Featured products include: the MM200—Terrestrial Microwave Modem and the QAM256 – Digital Video Modulator. Satellite electronics and broadcast equipment products accounted for 54% of consolidated revenue for the year ended 2006.
Amplifiers
The Company provides a variety of high powered amplifiers thru the Amplifier segment under the Xicom brand.
Satellite amplifiers boost the strength of a signal prior to transmission to satellites which are often more than 21,000 miles from the surface of the earth. Xicom’s Solid State Power Amplifiers (“SSPA”), Traveling Wave Tube Amplifiers (“TWTA”), and Klystron Tube Amplifiers (“KTA”) are used in commercial and military satellite communications terminals throughout the world. These High Power Amplifiers (“HPA”) provide power levels vital to satellite communications in fixed, satellite news gathering (“SNG”), flyaway, mobile, shipboard, and airborne platforms. Applications include mobile SNG television trucks, fixed satellite ground stations and mobile platforms such as helicopters and ships. Featured products include antenna and rack-mount SSPAs, single-band (C-, X-, Ku-, Ka-, and DBS), and multi-band TWTAs.
Amplifiers accounted for 46% of consolidated revenue for the year ended 2006.
Competition
We face significant competition in the satellite communications field. The major competitors include companies such as Comtech EFData Corp., Paradise Datacom, Tandberg Television, and Scopus in the Satellite Electronics and Broadcast Equipment segment. In the Amplifier segment, CPI (Communications & Power Industries) and Miteq Inc. are the principal competitors. The Company maintains a sizable market share in each of these segments and anticipates further penetration with subsequent acquisition and organic growth.
We compete by deploying a direct sales effort in domestic and international markets and emphasizing our product features, quality and service. We believe that the quality, performance, and capabilities of our products, our ability to customize certain network functions, and the relatively lower overall cost of our products as compared to the cost of the competing products generally offered by our major competitors represent major factors in our ability to compete. However, our major competitors have the resources to develop products with features and functions that are competitive with or superior to our products. 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.
We believe we are well positioned to capitalize on the demand for satellite ground segment systems and that our future success in this market will be based upon our ability to leverage our competitive advantages, which include the following:
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An experienced management group, which has extensive technological and engineering expertise and excellent customer relationships. The members of our management team average over 20 years experience in the satellite communications industry. •
A broad line of well-known, well-respected, off-the-shelf, state-of-the-art equipment that enables us to meet our customers’ requirements. •
Ongoing new product development and product introductions that address changing customer needs. •
Our ability to custom design products for our customers’ special applications and to provide a one-stop shopping option to our customers. •
Equipment that meets or exceeds all applicable military and government standards, including the first satellite modem to obtain Defense Information Systems Administration (“DISA”) certification, the DMD-20. •
The ability to meet the complex satellite ground communications systems requirements of our customers in diverse political, economic, and regulatory environments in various locations around the world. •
Our worldwide sales and service organization with the expertise to successfully conduct business internationally through sales and service offices staffed by our employees in most of our major markets throughout the world, including Beijing, Singapore, London, Jakarta, and Amsterdam. •
The ability to offer a full line of satellite ground equipment with the mix of the Company’s different product lines. Strategy
Our primary business goals are to expand market share in our ground-based satellite systems business and improve profitability. We expect to achieve these goals through the following strategies:
Target Providers of Fixed, Mobile, and Direct Broadcast Communications Services in Developing Markets. We plan to target developing markets that we believe will account for a significant portion of the demand for satellite-based systems. These markets typically lack terrestrial infrastructure adequate to support demand for domestic and international communications services. We believe that we offer a cost effective alternative to land based networks. We plan to target providers of mobile and rural telephony services and Internet service providers in developing markets because we believe they will rely extensively upon satellite communication solutions. In developed countries, we plan to target emerging satellite communications service providers such as those offering direct broadcast applications.
Pursue Military, Homeland Defense and Other US Government Markets. Continued demand for technological solutions to national defense, homeland security and other government security requirements represents a key opportunity for our products. We plan to extend development of existing and new products in all of our lines of business to serve these needs.
Capitalize On Our Existing Technology Leadership. We believe that the global satellite communications services and equipment market and the digital television market present a number of attractive opportunities to apply our advanced technologies and capabilities. We plan to develop new products and enhance existing products by leveraging our technology to capture a share of these growth opportunities.
Develop New Products to Exploit New Market Opportunities. We plan to use our international sales force and our research and development capabilities to identify new market opportunities and develop new products to exploit these opportunities. We intend to develop new products to penetrate and increase our presence in the markets for digital television, Internet communications, mobile and rural telephony for developing markets, high-speed satellite communications, government data equipment, cable television distribution, and private networks for businesses and governments.
Provide High-Margin Customized Products to Niche Markets. We design our products so we can adapt them to differing specifications with minimal engineering. We plan to design and produce customized products for niche markets, particularly military and government markets, which require customized technology.
Continual Emphasis on Operational Efficiency and Financial Performance. We have historically maintained a strong emphasis on operation efficiency and financial performance. We believe that continued focus on our operational efficiencies is essential to future financial success while continuing to grow our business. As part of this continued emphasis, we plan to devote significant time and resources to key components of our business, such as our manufacturing processes, design systems and customer relationships.
Pursue Strategic Acquisitions. We intend to pursue strategic acquisitions of competitive or complementary companies in order to gain market share, increase our revenues, expand our product lines, improve our sales force and increase our profitability.
Research and Development
We conduct an active and ongoing research and development program that focuses on advancing technology, developing improved design and manufacturing processes, and improving the overall quality of the products we provide. Our goal is to provide our customers with new solutions that address their needs. Our research and development personnel concentrate on technology for the satellite and microwave communications, telecommunications, and cable television industries. Our future growth depends on increasing the market share of our new products, adapting our existing products/technologies to new applications, and introducing new communications products that will find market acceptance and benefit from our established international distribution channels. Accordingly, we are actively applying our communications technology expertise to improving the performance of our existing products and developing new products to serve existing and new markets.
We work closely with our customers and potential customers to assess their needs in order to facilitate our design and development of new products. We believe that this approach minimizes our development risk and improves the potential for market acceptance of our product introductions. Additionally, we use information obtained from our customers and our technological expertise to develop custom-designed products for our customers’ special applications.
We intend to use a significant portion of our cash flows from operations to fund our research into products for improved satellite communications, over-the-horizon (troposcatter) communications, new amplifier products, audio and HDTV encoders, and other new telecommunications products. We also plan to focus our research and development activities on digital audio, video, and data products. However, there is no assurance that we will continue to have access to sufficient capital to fund the necessary research and development or that such efforts, even if adequately funded, will ultimately prove successful. Refer to Item 7.—Management’s Discussion and Analysis of Financial Condition and Results of Operations for research and development expense over a two year period.
Sales and Marketing
We sell our products through an international direct sales force with sales and/or service offices in the United States (Phoenix, Arizona; San Diego and Santa Clara California; and Boca Raton, Florida, Singapore, China, Indonesia, the United Kingdom, and the Netherlands. Our direct sales force consists of 36 individuals supported by systems and applications engineers. We focus direct sales activities on expanding our international sales by identifying emerging markets and establishing new customer accounts. Additionally, we directly target certain major accounts that may provide entry into new markets or lead to subsequent distribution arrangements. International representatives, agents and systems integrators sell our products, supported by our sales and marketing personnel.
We supplement our direct sales force through the use of distributors and local agents who help develop sales leads and provide ongoing support. Typically, a member of our direct sales staff then assists in completing the sale. Generally, our distributors do not carry inventory of our products.
We participate in approximately 15 trade shows each year. We also generate new sales leads through advertising in trade magazines, direct mail, and our website. For further information on our products please visit www.radn.com .
We maintain a warranty department that also includes customer service and support staff that support customers and agents and provide installation supervision, if needed. In certain instances, we use third-party companies to install and maintain our products at customer sites.
Refer to Item 7.—Management’s Discussion and Analysis of Financial Condition and Results of Operations for selling, general and administrative expense over a two year period.
Customers
Our customers generally include national and international telecommunications providers (including radio and television stations), digital television users (including broadcast and cable networks), Internet service providers, financial information providers, systems integrators, and other corporate entities and the U.S. government.
Our direct sales into principal foreign markets for the periods indicated consisted of the following percentages of total sales.
| Years ended December 31, | |||||||||
| Region |
2006 | 2005 | 2004 | ||||||
| Asia |
19 | % | 16 | % | 21 | % | |||
| Africa/Middle East |
5 | % | 7 | % | 10 | % | |||
| Americas |
2 | % | 3 | % | 3 | % | |||
| Europe |
16 | % | 15 | % | 13 | % | |||
| Total Foreign Sales |
42 | % | 41 | % | 47 | % | |||
| Domestic |
58 | % | 59 | % | 53 | % | |||
| 100 | % | 100 | % | 100 | % | ||||
In addition to the above sales, we believe that a substantial portion of our domestic sales are for products which ultimately are installed in foreign countries. We believe that foreign sales will continue to make up a major portion of our total sales in subsequent periods. We consider our ability to continue to sell our products in developing markets to be important to our future growth. We may not, however, succeed in our efforts to cultivate such markets due to political or other factors. Besides the USA, there is no other country that represents more than 10% of consolidated revenue for 2006. See note 11 – Significant Customers and Foreign and Domestic Sales for significant customers with 10% or more of segment sales.
Manufacturing
We assemble and test certain products at our Phoenix, Arizona and San Diego and Santa Clara, California facilities using subsystems and circuit boards acquired from subcontractors. We obtain the remainder of our products, completely assembled and tested, from subcontractors. Although we believe that we maintain adequate stock to minimize the procurement lead-time for certain components, our products use a number of specialized components or subassemblies produced by a limited number of suppliers. In the event that such suppliers were unable or unwilling to fulfill our requirements, we could experience interruptions in production while we develop alternative procurement sources. We maintain an inventory of certain chips, components and subassemblies to limit the exposure for such an interruption; and we believe that there are a number of alternative suppliers capable of providing replacements for the types of chips, customized components and subassemblies used in production. However, there can be no assurance that this inventory is sufficient or that alternative suppliers can be secured quickly enough to prevent a significant interruption of our business.
For both segments, the Company maintains an adequate supply of inventory based upon a master production schedule that is reviewed by management on a regular basis. Although there is not a firm forecast, the Company takes into account current market trends and historical data to supply their product.
As of December 31, 2006, the Company had backlog (orders to be shipped in future periods) of $9.1 million in the Satellite Electronics and Broadcast Equipment segment and $16.6 million for the Amplifier segment before eliminations.
The Company’s Phoenix, San Diego, and Santa Clara facilities have been awarded ISO 9001 certification, the international quality control standard for research and development, marketing, sales, manufacturing, and distribution processes. Subsequently, we have continued to improve our processes and methods of operations, consistent with our goals and the certification requirements. This certification assists in increasing the acceptance of our products. As of December 31, 2006, the Company’s ISO 9001 certifications remained in effect.
Intellectual Property
We rely on our proprietary technology and intellectual property to maintain our competitive position. We protect a significant portion of our proprietary technology as trade secrets by relying on confidentiality agreements with our employees and certain suppliers. We also control access to and distribution of confidential information concerning our proprietary information.
We also have patents, which protect certain of our proprietary technology. We have been cautious in seeking to obtain patent protection for our products, since patents 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 of the 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. We will continue to seek patent protection for our proprietary technology in those cases where we think it can be obtained and will provide us with a competitive advantage.
We also license proprietary technology from third parties under license agreements. Some of these agreements include royalty payments based on the number of units sold. These agreements allow us to produce sufficient numbers of units to assure availability of all of our products as required by market demands.
Employees
As of December 31, 2006, we had 343 full-time employees, including 4 executive officers, 177 manufacturing and operations personnel, 79 research and development personnel, and 83 selling, general and administration personnel. These figures include employees who are based outside the United States. Our employees are not represented by a labor union. We believe that our relationships with our employees are satisfactory and in good standing.
Available Information
The Company’s website is www.radn.com . We make available (free of charge), through our website, our annual, quarterly, and current reports, and any amendments to those reports as soon as practicable after electronically filing the reports with the Securities and Exchange Commission (the “Commission”). Any materials we file with the Commission may be read and copied at the Commission’s Public Reference Room at 450 Fifth Street N.W., Washington, D.C. 20549. Information concerning the operation of the Commission’s Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330. The Commission also maintains a website at www.sec.gov where you can view and download copies of reports, proxy and information statements and other information filed electronically through the Electronic Data Gathering, Analysis and Retrieval (“EDGAR”) system. Information contained on our website is not a part of this report.
Item 1A. Risk Factors
In addition to the factors affecting specific business operations identified in connection with the description of these operations contained elsewhere in this Form 10-K, the following risk factors should be considered in evaluating the Company’s business. The Company’s business, financial condition or results of operations could be materially adversely affected by any of these risks. Please note that additional risks not presently known to the Company or that the Company currently deems immaterial may also impair its business and operations.
We Have A History Of Inconsistent Operating Results, And Could Suffer A Reduction In Profitability and Even Losses In The Future.
As a result of operating losses from time to time in prior years, we had an accumulated deficit of $9.5 million at December 31, 2003. While the Company regained profitability, and has continued to be profitable each year since 2003, we are in a highly competitive business and our profitability is dependent on growth in our markets, the continued introduction and market acceptance of our products, and management of our expenses. There can be no assurance that we will be able to continue our earnings growth, maintain current earnings levels, or remain profitable at all. We anticipate that 2007 earnings could be impacted by margin pressures.
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
