UTStarcom (UTSI)

We face a variety of risks related to our convertible subordinated notes.

        We face a variety of risks with respect to our convertible subordinated notes due in 2008 ("Notes"), including the following:

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we have significantly increased our leverage as a result of the sale of the Notes which could have an adverse impact on our ability to obtain additional financing for working capital;



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we may be limited in our ability to purchase the Notes in the event of a change in control, either for cash or stock, which could result in our defaulting on the Notes at the time of the change in control, and purchases for stock would be subject to market risk; and



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hedging transactions related to the Notes and our common stock and other transactions, as well as changes in interest rates and our creditworthiness, may affect the value of our common stock.

        In addition, we are subject to various covenants pursuant to the terms of the indenture governing the Notes, as amended by the First Supplemental Indenture dated January 9, 2007 and the Second Supplemental Indenture dated July 26, 2007 (the "Indenture"). Should we fail to comply with certain covenants in the Indenture, including covenants requiring us to file certain reports required to be filed pursuant to the Exchange Act with the Securities and Exchange Commission (the "SEC") and to provide the Trustee for the notes (the "Trustee") with copies of such reports and certain certificates regarding our compliance with our obligations under the Indenture, the Trustee or the holders of 25% of the aggregate principal amount of the Notes outstanding could accelerate the maturity of the Notes and the Notes could become immediately due and payable. In the past, there have been delays in filing such reports (including our Quarterly Report on Form 10-Q for the quarter ended September 30, 2006, our Annual Report on Form 10-K for the fiscal year ended December 31, 2006, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2007, and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2007) and we have received several notices from the Trustee, asserting purported defaults under the Indenture as a result of our failure to timely file certain of those periodic reports with the SEC, which purported defaults were cured prior to an event of default arising under the Indenture. However, if an event of default under the Indenture were to occur, and the maturity of the Notes were accelerated, and all unpaid principal and accrued interest is declared immediately due and payable, our business would be seriously harmed. In addition, if we are able to raise capital to refinance indebtedness under the Notes by issuing new convertible notes, the terms of such notes may

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be significantly less favorable than the terms of the Notes, and may cause greater dilution to holders of our common stock.