1366340--3/31/2010--Converted_Organics

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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 did not have the cash resources to satisfy and for which we entered into deferred payment plans. 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. If the National Organic Program changes its standards with respect to the use of corn steep liquor in organic crop production, we may no longer be allowed to sell certain of our products into the organic markets, which would materially lower our sales at our Gonzales facility. We are dependent on a small number of major customers for our revenues and the loss of any of these major customers would adversely affect our results of operations. Problems with our production equipment could negatively affect sales. 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; 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 food waste conversion or fertilizer industries, which increases the risk of our inability to build our facilities and operate our business. Our Woodbridge and Gonzales facility sites, as well as future facility sites, may have unknown environmental problems that could be expensive and time-consuming to correct. We have recently commenced operations and may not be able to successfully operate our Woodbridge or Gonzales facility. Our lack of business diversification may have a material negative effect on our financial performance. We may not be able to produce 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 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 material to produce our products, and we are dependent on a small number of waste haulers to provide the food waste we use to produce our products. Successful infringement claims by third parties could result in substantial damages, lost product sales and the loss of important proprietary rights. Our HTLC technology imposes obligations on us related to infringement actions that may become burdensome. We have provided a bond guaranty to the holders of the bonds issued in connection with our Woodbridge facility, and the terms of the guaranty may hinder our ability to operate our business by imposing restrictive covenants, which may prohibit us from taking actions to manage or expand our business. Mandatory redemption of our bonds issued in connection with our Woodbridge facility could have a material adverse effect on our liquidity and cash resources. The communities where our facilities may be located may be averse to hosting waste handling and manufacturing facilities. Our facilities will require certain permits to operate, which we may not be able to obtain at all or obtain on a timely basis. Changes in environmental regulations or violations of such regulations could result in increased expense and could have a material negative effect on our financial performance. Risks Related to Investment in Our Securities We have a significant number of warrants outstanding, and while these warrants are outstanding, it may be more difficult to raise additional equity capital. Additionally, certain of these warrants contain anti-dilution and price-protection provisions that may result in the reduction of their exercise prices in the future. If we issue shares of preferred stock, your investment could be diluted or subordinated to the rights of the holders of preferred stock. Future issuances or sales, or the potential for future issuances or sales, of shares of our common stock, the exercise of warrants to purchase our common stock, or the conversion of convertible notes into our common stock, may cause the trading price of our securities to decline and could impair our ability to raise capital through subsequent equity offerings. We may not be able to adequately raise the bid price of our common stock to remain compliant with NASDAQ listing standards.

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1366340--3/31/2010--Converted_Organics_Inc.