Risk Factors
Dizziness/giddiness, nausea and vomiting, diarrhea, dyspepsia and stomach disorder, fever, pain in joint, headache - wait . . . wrong list, that's Flovent®.
We face current and potential adverse determinations in litigation stemming from our efforts to protect and enforce our patents and intellectual property, which could broadly impact our intellectual property rights, distract our management and cause a substantial decline in our revenues and stock price.
As of March 31, 2005, we were in litigation with five such potential SDRAM compatible and DDR compatible licensees.
These potential licensees have also relied or may rely upon defenses and counterclaims (some not yet formally asserted) that our patents are unenforceable based on various allegations concerning our alleged conduct in the 1990s and early 2000s, including that we engaged in litigation misconduct and/or acted improperly during our 1991-96 participation in the JEDEC standard setting organization.
For example, Hynix has now broadened its counterclaims to attempt to include our 1990s relationship with Intel and our alleged disparagement of DDR and SDRAM products in the 1990s. You are known by the company you keep . . .
Furthermore, any adverse determination or other resolution in litigation could result in our losing certain rights, beyond the rights at issue in a particular case, including, among other things: our being effectively barred from suing others for violating certain or all of our intellectual property rights; our patents being held invalid or unenforceable; our being subjected to significant liabilities; our being required to seek licenses from third parties; our being prevented from licensing our patented technology; or our being required to renegotiate with current licensees on a temporary or permanent basis. Failure to achieve positive results in litigation will also result in a failure to trigger certain contractual provisions which would convert certain flat rate royalty arrangements to per unit royalties. Any or all of these adverse results could cause a substantial decline in our revenues. Dizziness/giddiness, nausea . . .
An adverse resolution by or with a governmental agency, such as the Federal Trade Commission or the European Patent Office, could result in severe limitations on our ability to protect and license our intellectual property, and would cause our revenues to decline substantially.
We might experience payment disputes for amounts owed to us under our licensing agreements, and this may harm our results of operations.
Royalty audits may also trigger disagreements over contract terms with our licensees and such disagreements could hamper customer relations, divert the efforts and attention of our management from normal operations and impact our business operations and financial condition.
We may not succeed in satisfying the requirements under the Infineon settlement and license agreement that would require Infineon to pay us up to an additional $100 million in royalty payments. Vomiting . . .
Our revenue is concentrated in a few customers, and if we lose any of these customers, our revenues may decrease substantially.
For the quarter and six months ended June 30, 2005, revenues from our top five licensees accounted for approximately 74% and 72% of our revenues, respectively.
Substantially all of our licensees, including Intel, have the right to cancel their licenses, and all but one of our patent licenses covering SDRAM and DDR SDRAM memory and controllers are set to expire in 2005. Failure to renew our existing licenses and/or the loss of any of our top five licensees would cause revenues to decline substantially.
We are substantially leveraged, which could adversely affect our ability to adjust our business to respond to competitive pressures and to obtain sufficient funds to satisfy our future research and development needs and defense of our intellectual property. Well, there has been marked improvement in this area with the purchase of the $60M of the CB . . .
Our financial results are materially dependent upon Intel, and if we cannot maintain this relationship into the future, our results of operations may decline significantly. Diarrhea . . . wait, this shouldn't be a problem. When is the new road map being released?
We have other licenses with Intel, in addition to the patent cross-license agreement, for the development of serial link interfaces. If we cannot maintain our relationship with Intel into the future, our results of operations may decline significantly. Harold Hughes to the rescue . . .
A substantial portion of our revenues are derived from sources outside of the United States and these revenues are subject to risks related to international operations which are often beyond our control.
For the quarters and six months ended June 30, 2005 and 2004, revenues from our international operations constituted approximately 71% and 66% of our total revenues, respectively.
Compliance with changing regulation of corporate governance and public disclosure may result in additional expenses.
We are committed to maintaining high standards of corporate governance and public disclosure.
FASB’s adoption of Statement 123(R) will cause, and changes to existing accounting pronouncements or taxation rules or practices may cause, adverse revenue fluctuations, affect our reported results of operations or how we conduct our business. I have some more checks somewhere . . .
Under this new rule, companies are allowed to implement SFAS No. 123(R) which will require us, starting in the first quarter of fiscal year 2006, to measure compensation costs for all stock based compensation (including stock options and our employee stock purchase plan, as currently constructed) at fair value and take a compensation charge equal to that value.
This change to existing rules, future changes, if any, or the questioning of current practices may adversely affect our reported financial results or the way we conduct our business.
Ah, I don't feel so bad after all . . . slight headache, too much fine print . . . (photo - Lake Natoma, Folsom, CA)
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