| NTN BUZZTIME INC ITEM 1A RISK FACTORS RISK FACTORS THAT MAY AFFECT FUTURE RESULTS Our business, results of operation and financial condition could be adversely affected by a number of factors, including the following: WE HAVE EXPERIENCED SIGNIFICANT LOSSES AND WE MAY INCUR SIGNIFICANT LOSSES IN THE FUTURE We have a history of significant losses, including net losses of dlra2cmam019cmam000 in 2005, dlra4cmam979cmam000 in 2004 and dlra2cmam711cmam000 in 2003, and an accumulated deficit of dlra88cmam788cmam000 as of December 31, 2005 |
| Although our 2005 growth of revenues, combined with a lower rate of growth in expenses, allowed us to attain profitability in the third and fourth quarters of 2005, there is no assurance that this profitability will continue |
| Furthermore, we may not sustain or increase profitability on a quarterly or annual basis in the future |
| Our liquidity and capital resources remain limited and this may constrain our ability to operate and grow our business |
| We have a revolving line of credit agreement with Pacific Mercantile Bank, which provides for borrowings of up to dlra1cmam000cmam000 and which was originally set to expire in July 2004 |
| On January 7, 2004, we entered into an agreement with Pacific Mercantile to extend the maturity date of the line of credit to February 1, 2005 |
| We subsequently extended the expiration date to February 11, 2006 |
| The line was amended again to extend the expiration date to May 11, 2006 |
| As of December 31, 2005, we had a balance of dlra700cmam000 outstanding under the line of credit |
| The line of credit is secured by substantially all of our assets |
| Any 15 reduction in availability under our line of credit may further constrain our liquidity |
| Effective March 6, 2006, we signed a new one-year dlra2dtta0 million credit facility agreement with Discovery Bank |
| This new larger credit facility will provide for future working capital requirements |
| In the third and fourth quarters of 2005, we generated cash from operations despite making considerable capital investments due to growth and sustaining losses in our United Kingdom business and Software Solutions segment |
| Capital requirements in 2006 will depend primarily on the following: the success of three growth initiatives; the potential sale of the assets of our Wireless and Software Solutions segments; potential continued losses in our United Kingdom business; our Buzztime licensing efforts; and our Software Solutions segment |
| The three growth initiatives are: (1) the continued sales growth of North American NTN iTV Network sites beyond our historical annual average sales levels; (2) growth of our United Kingdom Buzztime Network; and (3) potential installations of the Buzztime Network if a broad deployment agreement is reached with a cable operator |
| Additionally, if we were to begin losing more subscription sites than we gain, our positive cash flow would be adversely affected |
| We believe our capital on hand, combined with our credit line and expected cash flow, are sufficient to cover our financing requirements for 2006 |
| However, if we generate operating losses in 2006 (excluding non-cash charges) that are greater than operating losses we produced in 2005 (excluding non-cash charges), and if our capital expenditure levels are comparable in 2006 to the capital expenditure levels in 2005, and if we do not sell our Wireless or Software Solutions assets, then we may require additional capital or will be forced to constrain our growth to generate sufficient cash to operate the business |
| There can be no assurance that we will be able to raise capital on acceptable terms, or at all |
| NEW PRODUCTS AND RAPID TECHNOLOGICAL CHANGE MAY RENDER OUR OPERATIONS OBSOLETE OR NONCOMPETITIVE The emergence of new entertainment products and technologies, changes in consumer preferences and other factors may limit the life cycle of our technologies and any future products and services we develop |
| Accordingly, our future performance will depend on our ability to: o identify emerging technological trends in our market; o identify changing consumer needs, desires or tastes; o develop and maintain competitive technology, including new product and service offerings; o improve the performance, features and reliability of our products and services, particularly in response to technological changes and competitive offerings; and o bring technology to the market quickly at cost-effective prices |
| If we do not compete successfully in the development of new products and keep pace with rapid technological change, we will be unable to achieve profitability or sustain a meaningful market position |
| The interactive entertainment and game industry, as well as the wireless paging and software applications industries, are becoming highly competitive and subject to rapid technological changes when compared to other industries |
| We are aware of other companies that are introducing interactive game products on various platforms that allow players to compete across the nation |
| We are also aware of other companies that are developing and introducing wireless technology and software applications that may be suitable for use in the hospitality industry |
| The wireless paging industry is highly competitive; we may experience pricing pressure in the wireless markets that could impact our margins with respect to our wireless product line |
| Some of these companies have substantially greater financial resources and organizational capital than we do, which could allow them to identify emerging trends |
| In addition, changes in customer tastes may render our network and its content, our technology, and our wireless and software products obsolete or noncompetitive |
| We may not be successful in developing and marketing new products and services that respond to technological and competitive developments and changing customer needs |
| Such products and services may not gain market acceptance |
| Any significant delay or failure in developing new or enhanced technology, including new product and service offerings, could result in a loss of actual or potential market share and a decrease in revenues |
| WE MUST EFFECTIVELY COMPETE WITHIN THE HIGHLY COMPETITIVE SOFTWARE INDUSTRY The software industry is intensely competitive |
| Several large vendors develop and market database management programs, business and management applications, collaboration products and business intelligence products that compete with our Software Solutions offerings |
| Some of these competitors have significantly greater financial and technical resources than we do |
| We expect to continue to face intense competition in the software market in which we compete |
| We could lose market share if our competitors introduce new competitive products into one or more of our markets, add new functionality into an existing 16 competitive product, acquire a competitive product, reduce prices, or form strategic alliances with other companies |
| In addition, because new distribution methods and opportunities offered by the internet and electronic commerce have removed many of the barriers to entry that were historically faced by small and start-up companies in the software industry, we expect to face additional future competition from these companies |
| IF WE FAIL TO MANAGE OUR GROWTH EFFECTIVELY, WE MAY LOSE BUSINESS AND EXPERIENCE REDUCED PROFITABILITY Continued implementation of our business plan requires an effective planning and management process |
| Our anticipated future growth will continue to place a significant strain on our management systems and resources |
| If we are to grow successfully, we must: o improve our operational, administrative and financial systems; o expand, train and manage our workforce; and o attract and retain qualified management and technical personnel |
| THE INTERACTIVE GAMING AND ENTERTAINMENT INDUSTRY IS HIGHLY COMPETITIVE The entertainment business is highly competitive |
| We compete with other companies for total entertainment related revenues in the marketplace |
| Our network programming competes generally with broadcast television, direct satellite programming, pay-per-view, other content offered on cable television, and other forms of entertainment |
| Furthermore, some of our competitors have greater financial or other resources available to them |
| The entrance of motion picture, cable and television companies to the interactive entertainment and multimedia industries will likely intensify competition in the future |
| We also compete with other content and services available to consumers through online services |
| The expanded use of online networks and the internet provide computer users with an increasing number of alternatives to video games and entertainment software |
| With this increasing competition and rapidly changing factors, we must be able to compete in terms of technology, content and management strategy |
| If we fail to provide quality services and products, we will lose revenues to other competitors in the entertainment industry |
| Increased competition may also result in price reductions, fewer customer orders, reduced gross margins, longer sales cycles, reduced revenues and loss of market share |
| IF INTELLECTUAL PROPERTY LAW AND PRACTICE DO NOT ADEQUATELY PROTECT OUR PROPRIETARY RIGHTS AND INTELLECTUAL PROPERTY, OUR BUSINESS COULD BE SERIOUSLY DAMAGED We rely on a combination of trademarks, copyrights and trade secret laws to protect our proprietary rights in some of our products |
| Furthermore, it is our policy that all employees and consultants involved in research and development activities sign non-disclosure agreements |
| Our competitors may, however, misappropriate our technology or independently develop technologies that are as good as, or better than, ours |
| Our competitors may also challenge or circumvent our proprietary rights |
| If we have to initiate or defend against an infringement claim in the future to protect our proprietary rights, the litigation over such claims could be time-consuming and costly to us, adversely affecting our financial condition |
| In November 2005, we discovered that a former business partner, and party to a Non-Disclosure and Confidentiality Agreement, had developed and was distributing a live interactive game substantially similar to our game |
| We demanded that this former partner cease and desist its use of the interactive game application we believe had been developed by that partner as a result of misappropriation of our trade secrets and proprietary technology |
| In addition, we believe that the game constituted an infringement of our copyrights and other intellectual property rights |
| From time to time, we hire or retain employees or external consultants who may work for other companies developing products similar to those offered by us |
| These former employers may claim that our products are based on their products and that we have misappropriated their intellectual property |
| Any such litigation could prevent us from exploiting our proprietary portfolio and cause us to incur substantial costs, which in turn could materially adversely affect our business |
| We believe that the success of our business depends on such factors as the technical expertise, innovative skills and marketing and customer relations abilities of our employees, as well as on patents, copyrights, trade secrets and other intellectual property rights |
| As of December 31, 2005, we owned one US patent covering certain aspects of technology related to an interactive learning system |
| This patent will expire in 2017 |
| As of December 31, 2005, we had applied for three additional patents in the United States |
| Our pending patent applications and any future applications might not be approved |
| Our patents might not provide us with competitive advantages |
| Third parties might challenge our patents |
| In addition, patents held by third parties might have an adverse effect on our ability to do business |
| Furthermore, third parties might independently develop similar products, duplicate our products or, to the extent patents are issued to us, design around those patents |
| 17 Others may have filed and in the future may file patent applications that are similar or identical to ours |
| To determine the priority of inventions, we may have to participate in interference proceedings declared by the United States Patent and Trademark Office |
| Such third-party patent applications might have priority over patent applications filed by us |
| WE MAY BE LIABLE FOR THE CONTENT WE MAKE AVAILABLE ON THE BUZZTIME NETWORK, THE BUZZTIME TRIVIA CHANNEL AND THE INTERNET We make content available on the Buzztime Hospitality Network, the Buzztime Trivia Channel and the internet |
| The availability of this content could result in claims against us based on a variety of theories, including defamation, obscenity, negligence or copyright or trademark infringement |
| We could also be exposed to liability for third-party content accessed through the links from our websites to other websites |
| Federal laws may limit, but not eliminate, our liability for linking to third-party websites that include materials that infringe copyrights or other rights, so long as we comply with certain statutory requirements |
| We may incur costs to defend ourselves against baseless claims, and our financial condition could be materially adversely affected if we are found liable for information that we make available |
| Implementing measures to reduce our exposure may require us to spend substantial resources and may limit the attractiveness of our services to users |
| WE MAY FACE EXPOSURE ON SALES AND/OR USE TAXES IN VARIOUS STATES From time to time, state tax authorities will make inquiries as to whether or not a portion of our services might require the collection of sales and use taxes from customers in those states |
| In the current difficult economic climate, many states are expanding their interpretation of their sales and use tax statutes to derive additional revenue |
| While in the past the sales and use tax assessments we have paid have not been significant to our operations, it is likely that such expenses will grow in the future |
| OUR GAMES AND GAME SHOWS ARE SUBJECT TO GAMING REGULATIONS We operate games of skill and chance that, in some instances, reward prizes |
| These games are regulated in many jurisdictions |
| The selection of prizewinners is sometimes based on chance, although none of our games require any form of monetary payment |
| We also operate interactive skill card games, such as Texas Hold &apos em poker and Blackjack |
| These skill card games are restricted in several jurisdictions |
| The laws and regulations that govern these games, however, are subject to differing interpretations in each jurisdiction and are subject to legislative and regulatory change in any of the jurisdictions in which we offer our games |
| If such changes were to happen, we may find it necessary to eliminate, modify or cancel certain components of our products that could result in additional development costs and/or the possible loss of revenue |
| OUR WIRELESS SEGMENT GROSS MARGINS MAY NOT CONTINUE TO IMPROVE The gross margin of NTN Wireless in 2005 is 41dtta4prca, a 3dtta3prca increase from the 2004 gross margin of 38dtta1prca |
| The gross margin increase was due to overall costs of goods sold reduction, as well as selling more of the higher margin pilot series product |
| There is no assurance that this gross margin can continue to improve or be maintained, both due to the competitive nature of the market and to fluctuations in the cost of goods |
| OUR DOMINO &apos S HELP DESK BUSINESS IN OUR SOFTWARE SOLUTIONS SEGMENT MAY NOT GROW AS STRONGLY AS IT DID IN 2005 |
| In 2005, our Help Desk business grew by over 1cmam100 new subscribers |
| Competition for this business may impede our growth in 2006, though our overall revenue contribution should grow during the year |
| DEALER SALES OF OUR SOFTWARE SOLUTIONS PRODUCT MAY BE SLOWER TO DEVELOP THAN PLANNED In early 2005, we began aligning sales of our Software Solutions products with many independent dealers who also represented Radiant Corporation, a distributor of point-of-sale software and hardware to restaurants |
| In 2005, NTN and Radiant Corporation announced an agreement by which Radiant would receive a fee to endorse our reseller efforts |
| In the fourth quarter, both parties determined to discontinue this endorsement relationship, though we continue to sell directly to the reseller network |
| The lack of an agreement with Radiant may slow the growth of dealer sales; however, we are now free to approach non-Radiant resellers and are doing so |
| 18 IF OUR CHIEF EXECUTIVE OFFICER WERE TO LEAVE US PRIOR TO THE APPOINTMENT OF A NEW CHIEF EXECUTIVE OFFICER, OUR BUSINESS MAY BE ADVERSELY AFFECTED Our success greatly depends on the efforts of our Chief Executive Officer (CEO) |
| Our ability to operate successfully will depend significantly on the services and contributions of the person in this position |
| In December 2005, our CEO, Stanley B Kinsey, informed our Board of Directors that he would like to resign his position at a future date, would not seek renewal of his employment contract when it expired on February 28, 2006, and has urged our Board to seek a successor to replace him |
| Kinsey has agreed to stay on with us on a month-to-month basis until after that date, if necessary, until a new permanent or interim CEO is named |
| We commenced a search for a new CEO and will announce our Boardapstas decision at the appropriate time |
| Our business and operations may be adversely affected if Mr |
| Kinsey were to leave before a new CEO has been appointed |
| WE MAY HAVE DIFFICULTY RECRUITING PROFESSIONALS FOR OUR BUSINESS Our business requires experienced programmers, creative designers and application developers |
| Our success will depend on identifying, hiring, training and retaining such experienced, knowledgeable professionals |
| We must recruit talented professionals in order for our business to grow |
| There is significant competition for employees with the skills required to develop the products and perform the services we offer |
| There can be no assurance that we will be able to attract a sufficient number of qualified employees in the future to sustain and grow our business, or that we will be successful in motivating and retaining the employees we are able to attract |
| If we cannot attract, motivate and retain qualified professionals, our business, financial condition and results of operations will suffer |
| FLUCTUATIONS IN FOREIGN CURRENCY EXCHANGE RATES COULD HARM OUR BUSINESS On December 15, 2003, we acquired, through NTN Canada, most of the operating assets, certain liabilities and the operations of NTNIN from Chell Group Corporation |
| This acquisition added an additional 350 customer sites that pay us in Canadian dollars to use our interactive technology and to receive our game service |
| Additionally, we are now operating the Buzztime Network in the United Kingdom, and receive payment in Great Britain Pounds (GBP) from subscribers who use our technology and receive our game service |
| Since service fees and operating expenses from both our Canadian and United Kingdom subsidiaries are recognized in their local currencies, our financial results could be significantly affected by large fluctuations in foreign currency exchange rates or by weak economic conditions in foreign markets |
| COMMUNICATION FAILURES WITH OUR SUBSCRIBER LOCATIONS COULD RESULT IN THE CANCELLATION OF SUBSCRIBERS AND A DECREASE IN OUR REVENUES We rely on both satellite and telephone systems to communicate with our subscriber locations |
| We currently transmit the majority of our data to our hospitality customer sites via DSL connectivity and, to a lesser extent, via PanAmSatapstas Galaxy IIIR satellite |
| At December 31, 2005, we had 38prca of sites connected by DSL and 62prca by satellite |
| Interruption in communications with our subscriber locations under either system could decrease customer loyalty and satisfaction and result in a cancellation of our services |
| We are continually reviewing alternative telephone service providers and establishing contingency plans; however, such alternative providers and contingency plans have not been finalized |
| In the event that we were forced to switch to another satellite, we could incur significant costs associated with re-pointing our VSAT satellite receivers |
| In addition, we could experience higher operating costs to transmit data to our customers via telephone lines and the internet during the transition period |
| Another potential risk is the possibility that our government could preempt our satellite for national security reasons, as the United States satellite operators are federally licensed |
| This would appear to be unlikely as our government has a strong communications infrastructure in place domestically |
| RISK FACTORS ASSOCIATED WITH BUZZTIME WE MAY SELL EQUITY INTERESTS IN BUZZTIME TO THIRD PARTIES, WHICH COULD RESULT IN THE LOSS OF CONTROL OF BUZZTIME OR DEVALUATION OF OUR EQUITY INTEREST IN BUZZTIME In June 2001, we sold a 6prca interest in Buzztime to an affiliate of Scientific-Atlanta, a leading cable television set-top box manufacturer |
| While Scientific-Atlantaapstas investment position was converted to our common stock in January 2003, we believe there may be divergent investment preferences between 19 the strategies pursued by the NTN iTV Network and Buzztime, and may decide in the future to continue to raise additional financing by issuing and selling equity interests in Buzztime to third parties |
| To enhance the ability of Buzztime to raise such financing, we have previously contributed, and may contribute in the future, some of our assets to Buzztime in order to allow the development of a distinct identity that we believe is necessary for it to effectively grow as a separate concern |
| These assets include our extensive trivia game show library and our interactive play-along sports games and related intangible assets |
| In 2005, the operations of our Buzztime Network were re-integrated with operations of our NTN iTV Network, and we have no current plans to sell the subsidiary |
| IF OUR NEW BUZZTIME PROGRAMMING IS NOT ACCEPTED BY CONSUMERS, WE ARE NOT LIKELY TO GENERATE SIGNIFICANT REVENUES OR BECOME PROFITABLE The new Buzztime Trivia Channel for cable television faces risks as to whether consumers will accept interactive television products and the trivia programming produced by Buzztime |
| If interactive television does not become a successful, scaleable medium or if consumers do not accept our trivia play-along sports games and other game products, then we will be unable to draw revenues from advertising, direct-marketing of third-party products, subscription fees or pay-per-play fees |
| Until a sufficient market develops for the digital set-top boxes enabled to run our interactive television game applications, our profit potential is uncertain |
| We may also be unable to attract local cable operators to add Buzztime programming as a channel to their service |
| THE MARKET FOR INTERACTIVE TELEVISION GAMES AND SERVICES IS NEW AND MAY NOT DEVELOP AS ANTICIPATED The interactive television market currently is small and emerging |
| The success of Buzztime will partially depend on the growth and development of this market in the United States and it will depend upon the commercialization and broad acceptance by consumers and businesses of a wide variety of interactive television products |
| Demand and market acceptance of recently introduced products and services are subject to a high level of uncertainty and, as a result, our profit potential is unproven |
| In addition, the potential size of this new market opportunity and the timing of its development and deployment are currently uncertain |
| Development schedules of interactive television offered by our competitors have been delayed or refocused as the industry evolves |
| If the market for interactive television does not develop, or develops more slowly than anticipated, our revenues will not grow as fast as anticipated, if at all |
| COMPETITION MAY INCREASE IN THE INTERACTIVE TELEVISION INDUSTRY The number of competitors in the game portion of the interactive television industry may increase as the industry matures |
| Some of those competitors may be larger and better capitalized than we are |
| THE ADOPTION OF INCOMPATIBLE STANDARDS COULD RENDER OUR PRODUCTS OBSOLETE OR NON-COMPETITIVE As new digital set-top box standards or middleware platforms are defined, we do not know whether Buzztimeapstas products will be compatible with such standards once defined |
| The establishment of multiple standards could hurt our business and significantly increase our expenses, particularly if our products require significant redevelopment in order to conform to the newly established standards |
| Any delay or failure on our part to respond quickly, cost-effectively and sufficiently to these developments could render our existing products and services obsolete and cause us not to be competitive, resulting in a decrease in our revenues without a corresponding decrease in our expenses |
| We may have to incur substantial expenditures to modify or adapt our products or services to respond to these developments |
| We must be able to incorporate new technologies into the products we design and develop in order to address the increasingly complex and varied needs of our customer base |
| INCREASING GOVERNMENT REGULATION COULD CAUSE DEMAND FOR OUR PRODUCTS AND SERVICES TO DECLINE SIGNIFICANTLY We are subject not only to regulations applicable to businesses generally, but also to laws and regulations that apply directly to the industry of interactive television products |
| Although there are currently few such laws and regulations, state and federal governments may adopt a number of these laws and regulations governing any of the following issues: o user privacy; o copyrights; o consumer protection; o the media distribution of specific material or content; and o the characteristics and quality of interactive television products and services |
| 20 One or more states or the federal government could enact regulations aimed at companies like us that provide interactive television products |
| The likelihood of such regulation being enacted will increase as interactive television becomes more pervasive and affects the daily lives of more people |
| Any such legislation or regulation could dampen the growth of the industry of interactive television |
| If such a reduction in growth occurs, demand for our products and services may decline significantly |
| On January 18, 2001, the Federal Communications Commission issued a Notice of Inquiry concerning interactive television |
| The notice raised a series of questions that suggest that cable systems might be regarded as essential open platforms of spectrum for non-discriminatory third-party access, rather than facilities-based providers competing in a wider market |
| The notice sought comments on the nature of interactive television and whether cable systems will be a "e superior platform "e for providing interactive television |
| The outcome of the inquiry will determine whether or not a subsequent rulemaking will be held in order to create regulations for the interactive television industry |
| Any regulation of this industry could have an impact on Buzztime and its operations |
| At December 31, 2005, we were compliant with AMEX listing measures |
| If we fail to maintain compliance with the AMEX listing standards, our common stock may not remain listed on AMEX or any other exchange or quotation system in the future |
| If our common stock is delisted from AMEX, spreads can often be higher for securities traded on the over-the-counter market and the execution time for orders may be longer |
| Thus, removing our stock from AMEX may result in decreased liquidity by making the trading of our stock less efficient |
| On May 1, 2003, we received a letter from the AMEX stating that we were in compliance with their listing standards |
| Prior to that, we had been out of compliance since our shareholders &apos equity was below dlra6cmam000cmam000, the minimum threshold established by AMEX for companies with multiple years of losses |
| AMEX rules alternatively permit a company to remain listed if it has the following combined elements: a total market capitalization of at least dlra50cmam000cmam000, has at least 1dtta1 million shares publicly held, has a market value of publicly held shares of at least dlra15cmam000cmam000, and has a minimum of 400 round lot shareholders |
| At December 31, 2005, we were compliant with all of these listing standards |
| OUR STOCK PRICE HAS BEEN HIGHLY VOLATILE AND YOUR INVESTMENT COULD SUFFER A DECREASE IN VALUE The trading price of our common stock has been, and may continue to be, subject to wide fluctuations |
| Our stock price may fluctuate in response to a number of events and factors, such as quarterly variations in operating results, announcements of technological innovations or new products and media properties by us or our competitors, changes in financial estimates and recommendations by securities analysts, the operating and stock price performance of other companies that investors may deem comparable, and news reports relating to trends in our markets |
| In addition, the stock market in general, and the market prices for technology-related companies in particular, have experienced extreme volatility that often has been unrelated to the operating performance of such companies |
| These broad market and industry fluctuations may adversely affect the price of our stock, regardless of our operating performance |
| OUR CHARTER CONTAINS PROVISIONS THAT MAY HINDER OR PREVENT A CHANGE IN CONTROL OF OUR COMPANY, WHICH COULD RESULT IN OUR INABILITY TO APPROVE A CHANGE IN CONTROL AND POTENTIALLY RECEIVE A PREMIUM OVER THE CURRENT MARKET VALUE OF YOUR STOCK Certain provisions of our certificate of incorporation could make it more difficult for a third party to acquire control of us, even if such a change in control would benefit our stockholders |
| For example, our certificate of incorporation requires a supermajority vote of at least 80prca of the total voting power, voting together as a single class, to amend certain provisions of such document, including those provisions relating to: o the number, election and term of directors; o the removal of directors and the filling of vacancies; and o the supermajority voting requirements of our restated certificate of incorporation |
| These provisions could discourage third parties from taking control of our company |
| Such provisions may also impede a transaction in which you could receive a premium over then current market prices and your ability to approve a transaction that you consider in your best interests |
| 21 IF THE SHARES OF OUR COMMON STOCK ELIGIBLE FOR FUTURE SALE ARE SOLD, THE MARKET PRICE OF OUR COMMON STOCK MAY BE ADVERSELY AFFECTED Future sales of substantial amounts of our common stock in the public market or the anticipation of such sales could have a material adverse effect on then-prevailing market prices |
| As of December 31, 2005, there were approximately 10cmam428cmam000 shares of common stock reserved for issuance upon the exercise of outstanding stock options at exercise prices ranging from dlra0dtta45 to dlra4dtta94 per share |
| As of December 31, 2005, there were also outstanding warrants to purchase an aggregate of approximately 1cmam344cmam000 shares of common stock at exercise prices ranging from dlra1dtta00 to dlra3dtta91 per share |
| The foregoing options and warrants could adversely affect our ability to obtain future financing or engage in certain mergers or other transactions, since the holders of these options and warrants can be expected to exercise them at a time when we would be able to obtain additional capital through a new offering of securities on terms more favorable than those provided by such options and warrants |
| For the life of such options and warrants, the holders are given the opportunity to profit from a rise in the market price of our common stock without assuming the risk of ownership |
| To the extent the trading price of our common stock at the time of exercise of any such options or warrants exceeds the exercise price, such exercise will have a dilutive effect on our stockholders |