1024022--9/24/2009--MEDIA_SCIENCES_INTERNATIONAL

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{product, market, service}

{customer, product, revenue}

{stock, price, share}

{regulation, change, law}

{acquisition, growth, future}

{operation, international, foreign}

{personnel, key, retain}

{property, intellectual, protect}

{system, service, information}

{debt, indebtedness, cash}

{tax, income, asset}

{control, financial, internal}

{provision, law, control}

{cost, regulation, environmental}

{operation, natural, condition}

{stock, price, operating}

RISKS RELATED TO OUR CORE BUSINESS OPERATIONS We are at a competitive disadvantage because we operate in a market that is dominated by companies that are the original manufacturers of printers for which we supply products. If we do not effectively compete with new and existing competitors, our revenues and operating margins will decline. We may need to change our pricing models to compete successfully. We rely on a small number of suppliers to provide key components for our products. We rely on indirect distribution channels and major distributors that we do not control, and any failure to maintain on-going sales through, or expand, distribution channels could result in lower revenues. We are dependent on commercial delivery services for delivery of raw materials and finished goods as well as delivery of our products to customers Our business is dependent on the continued growth of color printing as we derive revenues from a single group of similar and related products. Historically, a few customers have accounted for a large percentage of our revenues. The loss of a significant customer would significantly reduce our revenues. We offer a liberal product warranty and expenses associated with the program could harm our revenues, substantially increase our costs, and cause volatility in our results of operations. Due to the significance of our inventories, relative to our revenues, assets and equity, we are exposed to inventory risks which could adversely affect our financial position and results of operations. Covenants in our debt instruments could trigger a default adversely affecting our ability to execute our business plan, our ability to obtain further financing, and potentially adversely affect the ownership of our assets. In fiscal 2008 and 2009, we incurred net losses, and if we do not generate sufficient cash flow from operations in the future, we may not be able to fund our product development, potential acquisitions, or fulfill our present or future obligations. We may seek to raise capital in the future to fund expansion plans, our ability to do so may be limited, and our failure to raise capital when needed could prevent us from growing. RISKS RELATED TO OUR INTERNATIONAL BUSINESS AND SENSITIVITY Commodity price fluctuations may increase our cost of goods and adversely affect our results. Given our size, our international operations expose us to greater management, collections, currency, export licensing, intellectual property, tax, regulatory and other risks. Expansion into international markets is important to our long-term success, and our inexperience in the operation of our business outside the U.S. increases the risk that our international expansion efforts might not be successful. Local laws in effect or that may be enacted in foreign jurisdictions may afford less protection to holders of our securities than those in effect in the United States. RISKS RELATED TO OUR TECHNOLOGY AND THE NATURE OF OUR PRODUCTS We operate in an industry characterized by increasingly rapid technological changes and our sales are dependent on the continued development of new technologies and products. Execution risks associated with product development and introduction are significant and could reduce the demand for our products and the profitability of our operations. Our intellectual property and other proprietary rights could offer only limited protection. Competitors may use our technology, which could weaken our competitive position, reduce our revenues and increase our costs. Existing and future claims of intellectual property infringement against us could seriously harm our business because it could inhibit our ability to use certain technologies, divert our management efforts, result in costly litigation, and subject us to significant uncertainty regarding the ultimate outcome. If we fail to manage our operations and grow revenues or fail to continue to effectively control expenses, our future operating results could be adversely affected. If we are unable retain key executive and management personnel, we may not be able to manage and execute our business plan. If we cannot attract and hire enough qualified employees, it will adversely affect our ability to manage our business, develop, acquire new products and increase revenue. We may incur substantial additional costs to motivate, attract, and retain key employees. Disruption of our operations at our corporate headquarters could negatively impact our ability to operate RISKS RELATED TO OUR INFORMATION TECHNOLOGY The success of our business depends on the continuing development, maintenance and operation of our information technology systems. RISKS RELATED TO ACQUISITIONS AND ALLIANCES We are exposed to risks associated with acquisitions. If we determine that any of our goodwill or intangible assets, including technology purchased in acquisitions, are impaired, we would be required to take a charge to earnings, which could have a material adverse effect on our financial condition and results of operations. We cannot provide any assurance that current laws, or any laws enacted in the future, will not have a material adverse effect on our business. Our operating results could be adversely affected as a result of changes in our effective tax rates. Given the complexity of our international operations, in relation to the size of our company, changes in accounting regulations and related interpretations and policies, pose a greater risk that we could recognize lower revenue and profits, adversely impact our ability to provide financial guidance, and negatively affect our results of operations, stock price and our stock price volatility. If we are required to remit significant payroll taxes resulting from employee stock option exercises, it could have an adverse impact on our future financial results. Failure to maintain effective internal control over financial reporting may materially adversely impact our business. RISKS OF OWNING OUR COMMON STOCK Our stock price has been volatile, and you could lose the value of your investment. We do not intend to pay dividends on our common stock. We have authorized a class of preferred stock which may alter the rights of common stock holders by giving preferred stock holders greater dividend rights, liquidation rights and voting rights than our common stockholders have. Anti-takeover defenses in our governing documents and certain provisions under Delaware law could be dilutive and prevent an acquisition of our company or limit the price that investors might be willing to pay for our common stock. We may not be able to maintain our listing on NASDAQ, which may limit the ability of our stockholders to resell their common stock in the secondary market.

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1024022--9/24/2009--MEDIA_SCIENCES_INTERNATIONAL_INC