809012--9/14/2006--HOST_AMERICA

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In addition to risk and uncertainties in the ordinary course of business that are common to all businesses, important factors that are specific to our industry and our company could materially impact our future performance and results. We have provided below a list of these risks factors that should be reviewed when considering our business and securities. These are not all the risks we face, and other factors currently considered immaterial or unknown to us may impact our future operations. Our prior independent registered public accounting firm resigned, issuing a notice that it is no longer able to rely on management s representations and that its report on the 2004 consolidated financial statements may no longer be relied upon. Our cash flow has been negative. There can be no assurance that we will be able to continue as a going concern without sufficient investment capital. Any subsequent fundraising efforts will dilute shareholder ownership interests. There is no assurance that our fundraising efforts will be completed in the short term. Our common stock was delisted from NASDAQ, which could result in loss of investors and limited liquidity. Pending litigation could have a material adverse effect and impact on our liquidity, financial condition and operating results, on the trading price of our securities and on our ability to access the capital markets. The pending SEC investigation could have a material adverse effect and impact on our liquidity, financial condition and operating results, on the trading price of our securities and on our ability to access the capital markets Ongoing SEC inquiries may lead to further amendments to our public disclosures. Material adverse legal judgments, fines, penalties or settlements could adversely affect our financial health and prevent us from fulfilling our obligations under our outstanding indebtedness. Additional negative publicity may adversely affect our business and the market price of our securities. Our senior management team is required to devote significant attention to matters arising from the SEC investigation and restructuring of management. Continued scrutiny of our disclosures could reduce investor confidence and cause the trading price for our securities to decline further. Because our share price is volatile, we may be the target of additional securities litigation, which is costly and time-consuming to defend. Any acquisitions that we undertake could be difficult to integrate and could disrupt our business, dilute shareholder value and adversely affect our operations. Government regulations could adversely affect our business Effective control by current officers and directors and significant sales of shares by officers and directors could have a negative impact on share price We do not anticipate payment of dividends and shareholders are wholly dependent upon the market for the common stock to realize economic benefit. Historically, our stock price has been volatile, which may make it more difficult to resell shares at prices that are attractive Substantially all of our intangible asset values have been fully impaired as a result of a review by an independent valuations expert. There can be no assurance of recoverability of invested capital from our prior acquisitions. Our success depends on the ability to retain and renew existing client contracts. We may not be reimbursed for our investment in a client s facility. We may lose customers if building owners fail to retain tenants. Fluctuating food prices and shortages may affect the quality and variety of food we are able to offer at a given location. Lindley s fixed-price contracts subject us to market risks and uncertainties. We depend upon our key personnel and may experience difficulty attracting and retaining key employees. We may be unable to hire and train a sufficient number of qualified workers to satisfy customer requirements. We may fail to compete effectively in our market. RS Services has a limited operating history upon which to evaluate its potential for future success. RS Services has incurred significant operating losses since inception and may not achieve or sustain profitability in the future. RS Services currently experiences volatility in its cash flows and is subject to an extended sales cycle in connection with the bidding process, purchasing of materials and the installation and testing of electrical and energy saving systems. We currently have limited trademark or patent protection with respect to the energy management products developed and being developed by RS Services. Successful infringement claims by third parties could result in substantial damages, lost product sales and the loss of important proprietary rights. RS Services faces an inherent risk of exposure to product liability claims in the event that the use of its products results in injury. RS Services does not have any long-term agreements with its customers and its future success is dependent on repeat business and obtaining new customers. The energy management industry and products designed to maximize energy efficiency are subject to rapidly changing customer demands and preferences in light of rapid technological advances. The energy management industry is highly competitive. There is limited reliable, comprehensive data available regarding the size of the energy management industry and the historic and future expected growth of such industry. A decrease in electric retail rates could lessen demand for our energy conservation products. Failure to effectively market our energy management products could impair our ability to sell large quantities of these products.

Full 10-K form ▸

809012--9/14/2006--HOST_AMERICA_CORP