1094814--5/14/2007--MANAGEMENT_NETWORK_GROUP

related topics

{personnel, key, retain}

{stock, price, operating}

{product, market, service}

{cost, contract, operation}

{financial, litigation, operation}

{regulation, change, law}

{acquisition, growth, future}

{customer, product, revenue}

{tax, income, asset}

{control, financial, internal}

{property, intellectual, protect}

{cost, operation, labor}

{operation, international, foreign}

{system, service, information}

{gas, price, oil}

{stock, price, share}

RISKS RELATED TO OUR STOCK OPTION PRACTICES AND RELATED ACCOUNTING The matters relating to the investigation by the Special Committee of the Board of Directors and the restatement of the Company s consolidated financial statements may result in litigation and governmental enforcement actions. We have identified a material weakness in our disclosure controls and procedures and internal controls. Planned improvements in our corporate governance, equity compensation practices and internal controls may not be effective. RISKS RELATED TO OUR BUSINESS Our business is dependent on conditions in the communications industry, which may effect the demand for our services. We have experienced losses from operations, negative cash flow and reductions in our cash reserves. We are dependent on a limited number of large clients for a major portion of our revenues, and the loss of a major client or the cancellation of a significant contract could substantially reduce revenues and harm our business and liquidity. Our revenues and operating results may fluctuate significantly from quarter-to-quarter, which could adversely affect our stock price. There can be no assurance our investment in new offerings will yield the intended results. A significant portion of our business is represented by fixed fee contracts, which expose us to additional risks. Our acquisitions entail risks that could harm our financial performance or stock price. Any future decrease in revenues of acquired businesses may result in asset impairments and adversely affect our profitability. We implemented significant cost reductions which could adversely affect our ability to obtain and perform consulting engagements. The market in which we operate is intensely competitive, and actions by competitors could render our services less competitive, causing revenues and income to decline. We must continually enhance our services to meet the changing needs of the convergence of communications customers with media and entertainment, or we may lose future business to our competitors. If we are not able to effectively recruit and retain management and consulting personnel that provide us with new talent sets enabling the implementation of new strategic offerings in a rapidly changing market, our financial performance may be negatively impacted. Our engagements with clients may not be profitable or may be terminated by our clients on short notice. Our profitability will suffer if we are not able to maintain our pricing and utilization rates and control costs. Our international operations expose us to a number of business and economic risks, which could result in increased expenses and declining profitability. We are dependent on a limited number of key personnel, and the loss of these individuals could harm our competitive position and financial performance. If we fail to perform effectively on project engagements, our reputation, and therefore our competitive position and financial performance, could be harmed. If we fail to develop and maintain long-term relationships with our customers, our success would be jeopardized. We classify a large number of subcontractors as independent contractors for tax and employment law purposes. If these firms or personnel were to be reclassified as employees, we could be subject to back taxes, interest, penalties and other legal claims. We could be subject to claims for professional liability, which could harm our financial performance. Our inability to protect our intellectual property could harm our competitive position and financial performance. RISKS RELATED TO OUR STOCK PRICE The market price of our common stock is volatile, and investors may experience investment losses. Principal stockholders, executive officers and directors have substantial control over our voting stock.

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1094814--5/14/2007--MANAGEMENT_NETWORK_GROUP_INC