1040261--3/16/2006--PEGASUS_SOLUTIONS

related topics

{product, market, service}

{condition, economic, financial}

{debt, indebtedness, cash}

{system, service, information}

{customer, product, revenue}

{operation, international, foreign}

{personnel, key, retain}

{acquisition, growth, future}

{financial, litigation, operation}

{regulation, change, law}

{property, intellectual, protect}

{investment, property, distribution}

{stock, price, operating}

{tax, income, asset}

{provision, law, control}

{competitive, industry, competition}

Risks related to our industry As nearly all of our revenues are derived from the hotel industry, a downturn in the hotel industry would likely adversely affect our business. Reductions in room rates and hotel commission payments would reduce our revenues and net income. Consolidation in the travel industry, including hotels, travel agencies and electronic reservation providers, could result in reduced revenues. Risks Related to the Company Our failure to close the acquisition of the Company as contemplated by the Agreement and Plan of Merger dated December 19, 2005 among Perseus Holding Corp., 406 Acquisition Corp. and the Company or delays with respect to such closing could adversely affect our business. If we do not develop new technologies and services that meet the changing needs of participants in the hotel industry or if the new technologies and services we develop are not utilized, we may be unable to compete effectively and our continuing operations may be adversely affected. If we are unable to effectively deliver services and solutions to the hotel industry in a timely manner with acceptable performance levels, we may be unable to compete effectively, lose market share and be forced to reduce the prices of our services. We face significant competitive pressure. Loss of our arrangements with key customers could adversely affect our business. Our reliance on third party service arrangements presents risks to our business and the loss of any of these third party service arrangements could adversely affect our business. Our computer systems and databases may suffer system failures, business interruptions or security breaches that could impede our ability to service our customers and could negatively impact our business. We may not have the resources to effectively manage our growth, and difficulties in managing and integrating organizations may cause future acquisitions or joint ventures to disrupt our operations and impede our operating results. Because our expenses are largely fixed in the short-term and we cannot accurately predict our competitive environment, unexpected revenue shortfalls and quarterly variations may adversely affect our business. We are exposed to credit risk from hotels, travel agencies and other customers. Our international operations make us susceptible to currency fluctuations, global economic factors, foreign tax law issues, information privacy laws and foreign business practices, which could reduce our revenues, increase our cost of doing business and erode our profit margins. We may be unable to adequately protect our intellectual property or prevent its unauthorized use, which could divert our financial resources and harm our business. Our success significantly depends on the experience of our key personnel and our ability to attract and retain additional personnel. Government regulation, taxes, new or amended laws and other legal uncertainties could force us to change our operations. We have deterrents that may discourage a third party from acquiring control of Pegasus, and such deterrents may prevent an acquisition of Pegasus that may be in a stockholder s best interest. Litigation or other proceedings could result in substantial costs and divert our management s time and attention. We have material indebtedness in the form of convertible notes. We may be unable to generate sufficient cash flow to satisfy our operating costs and debt service obligations. We may be unable to repay or purchase the principal amount of the convertible notes. Our stock price has been and may continue to be significantly volatile due to many factors. Our investments could adversely affect our financial condition and results of operations.

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1040261--3/16/2006--PEGASUS_SOLUTIONS_INC