Terayon Communications in danger of default on 5% convertibles, awaiting Nasdaq delisting ruling

By Caroline Salls

Pittsburgh, Jan. 10 - Terayon Communication Systems, Inc. could default on its 5% convertible subordinated notes due 2007 as a result of its delay in filing its form 10-Q with the Securities and Exchange Commission for the quarter ended Sept. 30, according to an 8-K filing with the SEC.

If holders of at least 25% of the principal amount of the notes outstanding provide written notice of a default, the default must be cured within 60 days to avoid acceleration of the notes.

There are currently $65 million of the notes outstanding.

Nasdaq also notified Terayon that its stock is subject to delisting based on its failure to solicit proxies and hold an annual meeting of shareholders before Dec. 31.

Terayon had $101 million of cash and equivalents plus short-term investments at the end of 2005.

According to the filing, Terayon was unable to hold its 2005 annual shareholder meeting due in part to its ongoing accounting review.

On Nov. 17, Nasdaq notified Terayon that its stock was subject to delisting from the Nasdaq National Market as a result of its failure to file its 10-Q for the third quarter of 2005 on time.

A listing qualifications panel automatically stayed the delisting pending the issuance of a written decision from the panel.

The filing said the panel will consider the company's failure to comply with Nasdaq's proxy solicitation and annual meeting requirements in rendering its decision regarding the continued listing of Terayon's stock.

Terayon is a Santa Clara, Calif.-based broadband systems company.

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