1096376--3/14/2006--NUTRI_SYSTEM_INC

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{provision, law, control}

{acquisition, growth, future}

{regulation, government, change}

{product, liability, claim}

{system, service, information}

{condition, economic, financial}

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Risks Related to Our Business Our future growth and profitability will depend in large part upon the effectiveness and efficiency of our marketing expenditures and our ability to select the right markets and media in which to advertise. If we are able to grow our business, we may not be able to manage our growth successfully. We rely on third parties to provide us with adequate food supply and certain fulfillment, internet, networking and call center services, the loss of any of which could cause our revenue, earnings or reputation to suffer. We are dependent on the QVC Shopping Network for a significant percentage of revenue. We may be subject to claims that our personnel are unqualified to provide proper weight loss advice. We may be subject to health-related claims from our customers. The weight management industry is highly competitive. If any of our competitors or a new entrant into the market with significant resources pursues a weight management program similar to ours, our business could be significantly affected. New weight loss products or services may put us at a competitive disadvantage. If we pursue competitive advertising, we may be subject to litigation from our competitors. If consumers do not widely accept an online or telephonic source for weight management products and services, we will be unable to increase our customer base. Future acquisitions and the pursuit of new business opportunities present risks, and we may be unable to achieve the financial and strategic goals of any acquisition or new business. If we do not continue to receive referrals from existing customers, our customer acquisition cost may increase. We use spokespersons to promote our products. If these spokespersons suffer adverse publicity, our revenue could be adversely affected. If we cannot protect and enforce our trademarks and other intellectual property rights, our brand and our business will suffer. We are dependent on our Chief Executive Officer and other key executive officers for future success. Development of our Slim and Tone business may have a negative impact on our core business. Our Slim and Tone subsidiary is subject to franchise law and regulations that govern its status as a franchisor and regulates aspects of its franchise relationships. Slim and Tone s ability to develop facilities and to enforce contractual rights against its franchisees may be adversely affected by these laws and regulations, which could cause its franchise revenue to decline and adversely affect our growth strategy. Provisions in our certificate of incorporation may deter or delay an acquisition of us or prevent a change in control, even if an acquisition or a change of control would be beneficial to our stockholders. Risks Related to Our Industry The weight loss industry is subject to adverse publicity, which could harm our business. Our industry is subject to governmental regulation that could increase in severity and hurt results of operations. Changes in consumer preferences and discretionary spending could negatively impact our operating results. The sale of ingested products involves product liability and other risks.

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1096376--3/14/2006--NUTRI_SYSTEM_INC_/DE/