1136174--3/16/2006--HYTHIAM

related topics

{regulation, government, change}

{property, intellectual, protect}

{product, liability, claim}

{stock, price, operating}

{product, candidate, development}

{regulation, change, law}

{competitive, industry, competition}

{provision, law, control}

{personnel, key, retain}

{operation, international, foreign}

{acquisition, growth, future}

{system, service, information}

{product, market, service}

We may fail to successfully manage and maintain the growth of our business, which could adversely affect our results of operations Our treatment protocols may not be as effective as we believe them to be, which could limit or prevent us from maintaining revenues Our marketing efforts may not result in acceptance of our protocols in the marketplace, which could adversely affect our revenues and earnings Our industry is highly competitive, and we may not be able to compete successfully We depend on key personnel, the loss of which could impact the ability to manage our business We are subject to personal injury claims, which could result in substantial liabilities that may exceed our insurance coverage If government and third-party payors fail to provide coverage and adequate payment rates for treatment using our protocols, our revenue and prospects for profitability will be harmed Our planned international operations may be subject to foreign regulation, and the success of our foreign operations will depend on many factors. Risks Related to our Intellectual Property We may not be able to adequately protect the proprietary treatment protocols which are the core of our business Confidentiality agreements with employees, licensees and others may not adequately prevent disclosure of trade secrets and other proprietary information We may not be able to adequately protect our other intellectual property rights, which could limit our ability to compete We may be subject to claims that we infringe the intellectual property rights of others, and unfavorable outcomes could harm our business Risks Related to our Industry The healthcare industry in which we operate is subject to substantial regulation by state and federal authorities, which could hinder, delay or prevent us from commercializing our protocols We may be subject to regulatory and investigative proceedings, which may find that our policies and procedures do not fully comply with complex and changing healthcare regulations The promotion of our protocols may be found to violate federal law concerning off-label uses of prescription drugs, which could prevent us from marketing our protocols Treatment using our protocols may be found to require review or approval, which could delay or prevent the study or use of our protocols Failure to comply with the Federal Trade Commission Act or similar state laws could result in sanctions or limit the claims we can make Our business practices may be found to constitute illegal fee-splitting or corporate practice of medicine, which may lead to penalties and adversely affect our business Our business practices may be found to violate anti-kickback, self-referral or false claims laws, which may lead to penalties and adversely affect our business We may be subject to healthcare anti-fraud initiatives, which may lead to penalties and adversely affect our business Our use and disclosure of patient information is subject to privacy and security regulations, which may result in increased costs We may not be able to profitably adapt to the changing healthcare and substance dependence treatment industry, which may reduce or eliminate our commercial opportunity Risks Related to our Common Stock Our stock price may be subject to substantial volatility, and you may lose all or a substantial part of your investment Over one-third of our stock is controlled by a single stockholder who has the ability to substantially influence the election of directors and the outcome of matters submitted to stockholders Provisions in our certificate of incorporation, bylaws and Delaware law could discourage a change in control, and adversely affect existing stockholders

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1136174--3/16/2006--HYTHIAM_INC