944765--3/8/2007--MERGE_TECHNOLOGIES

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{system, service, information}

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{control, financial, internal}

{acquisition, growth, future}

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We have identified material weaknesses in our disclosure controls and procedures and our internal control over financial reporting, which, if not remedied effectively, could have an adverse effect on the trading price of our Common Stock and otherwise seriously harm our business The actual costs and savings associated with our reorganization and rightsizing initiatives may differ materially from amounts we estimate We intend to rapidly grow our India operations, which are subject to regulatory, economic and political uncertainties Anti-outsourcing legislation, if adopted, could adversely affect our business, financial condition and results of operations and impair our ability to service our customers and develop products Our recent headcount reductions have placed additional strain on our resources, may impair our operations and may adversely impact our ability to attract and retain qualified technical, managerial and sales personnel Changes in the healthcare industry, including the changes to reimbursement schedules under the Deficit Reduction Act of 2005, could negatively impact our business Our operating results may be impacted by actions related to the implementation of a new information technology (or accounting) system Litigation or regulatory actions could adversely affect our financial condition Our ability to obtain directors and officers liability insurance in the future and to maintain coverage under existing policies may be adversely affected by the lawsuits and regulatory actions against us and certain of our executive officers The turnover in our management team could negatively impact our business and the trading price of our Common Stock Our performance and future success depends on our ability to attract, integrate and retain qualified technical, managerial and sales personnel Relationships with our customers, potential customers and suppliers have been adversely affected, and our competitors competitive position improved, by our restatement of our financial results, related litigation and regulatory proceedings and management turnover Our quarterly net sales may vary significantly The length of our sales and implementation cycles may adversely affect our future operating results We face aggressive competition in many areas of our business, and our business will be harmed if we fail to compete effectively Our proprietary technology may be subjected to infringement claims or may be infringed upon which could result in additional costs or lost sales We depend on licenses from third parties for rights to some technology we use, and if we are unable to continue these relationships and maintain our rights to this technology, our business could suffer We are subject to government regulation, changes to which could negatively impact our business Changes in federal and state regulations relating to patient data could depress the demand for our software and impose significant software redesign costs on us The complexity presented by international operations could negatively affect our business We provide our customers with certain warranties which could result in higher costs than we anticipate We may be unable to successfully integrate acquisitions, which could negatively impact our results Product liability suits against us could result in expensive and time consuming litigation, payment of substantial damages and an increase in our insurance rates We may not be able to generate sufficient cash from our operations to meet our future operating, financing and capital requirements We maintain substantial deposits of cash and cash equivalents at a limited number of financial institutions in excess of amounts covered by insurance. If one or more of these financial institutions fail, our financial condition may be adversely affected Healthcare industry consolidation could impose pressure on our software prices, reduce our potential client base and reduce demand for our software The trading price of our Common Stock has been volatile and may fluctuate substantially in the future Anti-takeover provisions in our governing documents and under Wisconsin law and our shareholders rights plan could make an acquisition of us, which may be beneficial to our shareholders, more difficult

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944765--3/8/2007--MERGE_TECHNOLOGIES_INC