1366340--3/30/2009--Converted_Organics

related topics

{acquisition, growth, future}

{control, financial, internal}

{product, candidate, development}

{competitive, industry, competition}

{property, intellectual, protect}

{product, liability, claim}

{debt, indebtedness, cash}

{capital, credit, financial}

{customer, product, revenue}

{operation, natural, condition}

{personnel, key, retain}

{cost, contract, operation}

{cost, regulation, environmental}

{system, service, information}

{loan, real, estate}

We will need to obtain additional debt and equity financing to complete subsequent stages of our business plan. Constructing and equipping our Woodbridge facility has taken longer and cost more than we expected, which has resulted in significant amounts being owed to construction vendors for which we do not have the cash resources to satisfy. We have limited operating history, and our prospects are difficult to evaluate. We expect to incur significant losses for some time, and we may never operate profitably. If we are unable to manage our transition to an operating company effectively, our operating results will be adversely affected. Our plan to develop relationships with strategic partners and vendors may not be successful. We may be unable to effectively implement new transaction accounting, operational and financial systems. We are exposed to risks from legislation requiring companies to evaluate internal control over financial reporting. Our future success is dependent on our existing key employees, and hiring and assimilating new key employees, and our inability to attract or retain key personnel in the future would materially harm our business and results of operations. We have little or no experience in the organic waste or fertilizer industries, which increases the risk of our inability to build and operate our facilities. We license certain technology from a third party, and our failure to perform under the terms of the license could result in material adverse consequences. The EATAD technology we will use to operate our Woodbridge facility is unproven at the scale we intend to operate. Our Woodbridge and Gonzales facility sites may have unknown environmental problems that could be expensive and time consuming to correct. We may not be able to successfully operate our Woodbridge facility. Our lack of business diversification may have a material negative effect on our financial performance. We may not be able to manufacture products from our facilities in commercial quantities or sell them at competitive prices. We may be unable to establish marketing and sales capabilities necessary to commercialize and gain market acceptance for our potential products. Pressure by our customers to reduce prices and agree to long-term supply arrangements may adversely affect our net sales and profit margins. The fertilizer industry is highly competitive, which may adversely affect our ability to generate and grow sales. Defects in our products or failures in quality control could impair our ability to sell our products or could result in product liability claims, litigation and other significant events with substantial additional costs. Energy and fuel cost variations could adversely affect operating results and expenses. We may not be able to obtain sufficient organic material. Our license agreement with IBRC restricts the territory into which we may sell our products and grants a cooperative a right of first refusal to purchase our products. Successful infringement claims by third parties could result in substantial damages, lost product sales and the loss of important proprietary rights. Our license agreement with IBRC imposes obligations on us related to infringement actions that may become burdensome or result in termination of our license agreement. Our HTLC technology imposes obligations on us related to infringement actions that may become burdensome. Development of our business is dependent on our ability to obtain additional debt financing which may not be available on acceptable terms. Our agreements with our bond investors may hinder our ability to operate our business by imposing restrictive loan covenants, which may prohibit us from paying dividends or taking other actions to manage or expand our business. Mandatory redemption of our bonds could have a material adverse effect on our liquidity and cash resources.

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1366340--3/30/2009--Converted_Organics_Inc.