| NEOMAGIC CORP Item 1A RISK FACTORS We Expect to Continue to Incur Significant Losses and Consume Cash in Operations in the Fiscal Year Ending January 31, 2007 We have been incurring substantial losses and consuming cash in operations as we invest heavily in new product development in advance of achieving significant customer sales |
| This is expected to continue during the fiscal year ending January 31, 2007 |
| Our ability to achieve cash flow breakeven is likely to depend on the success of our MiMagic 6+ and NeoMobileTV products |
| However, even if the, MiMagic 6+ and NeoMobileTV, and subsequent products achieve widespread customer acceptance, the length of customer design-in cycles would preclude substantial product shipments in the fiscal year ending January 31, 2007 |
| Accordingly, even if these new products are successful, we are likely to incur significant additional losses and consume cash in operations during the fiscal year ending January 31, 2007 |
| We Are Likely To Need Additional Capital Given the long cycle times required to achieve design wins, convert customer design wins into production orders, and for customers to achieve volume shipments of their products, we are likely to require additional working capital to fund our business |
| We believe that our existing capital resources will be sufficient to meet our capital requirements through at least the end of our fiscal year ending January 31, 2007 |
| However, we expect we will need to raise additional capital to fund future operating activities beyond January 31, 2007 |
| Our future capital requirements will depend on many factors, including the rate of net sales growth, timing and extent of spending to support research and development programs in new and existing areas of technology, expansion of sales and marketing support activities, and timing and customer acceptance of new products |
| Our ability to raise capital and the terms of any financing will depend, in part, on our ability to establish customer engagements and generate sales |
| As discussed below, revenue performance is difficult to forecast |
| We cannot assure you that additional equity or debt financing, if required, will be available on acceptable terms or at all |
| 7 ______________________________________________________________________ [36]Table of Contents Our Revenues Are Difficult To Predict For a variety of reasons, revenues are difficult to predict and may vary significantly from quarter to quarter |
| Our ability to achieve design wins depends on a number of factors, many of which are outside of our control, including changes in the customer’s strategic and financial plans, competitive factors and overall market conditions |
| As our experience demonstrates, design wins themselves do not always lead to production orders because the customer may cancel or delay products for a variety of reasons |
| Such reasons may include the performance of a particular product that may depend on components not supplied by NeoMagic, market conditions, reorganizations or other internal developments at the customer and changes in customer personnel or strategy |
| Even when a customer has begun volume production of a product containing our chips, volumes are difficult to forecast because there may be no history to provide a guide, and because market conditions and other factors may cause changes in the customer’s plans |
| Because of the market uncertainties they face, many customers place purchase orders on a short lead-time basis, rather than providing reliable long-term purchase orders or purchase forecasts |
| The difficulty in forecasting revenues increases the difficulty in forecasting our working capital requirements |
| It also increases the likelihood that we may overproduce particular parts, resulting in inventory charges, or under produce particular parts, affecting our ability to meet customer requirements |
| The difficulty in forecasting revenues also restricts our ability to provide forward-looking revenue and earnings guidance to the financial markets and increases the chance that our performance does not match forecasts |
| Uncertainty Regarding Future Licensing Revenue In the third quarter of fiscal 2006, we collected gross licensing revenue of dlra8dtta5 million, of which, net of commissions and expenses, we actually received dlra5dtta6 million, from the nonexclusive licensing of all of our patents to Sony Corporation of Tokyo, Japan |
| We cannot assure you that we will be able to generate any future licensing revenue from our 26 patents or from any future patents that we will own or have the right to license |
| The licensing agreement with Sony may be the only licensing agreement that we ever complete |
| Furthermore, if we should in the future complete an agreement to license our patents, we cannot assure you that the licensing revenue we receive from such license will equal or exceed the licensing revenue we received from Sony |
| We Depend on Qualified Personnel Our future success depends in part on the continued service of our key engineering, sales, marketing, manufacturing, finance and executive personnel, and our ability to identify, hire and retain additional personnel |
| There is strong competition for qualified personnel in the semiconductor industry, and we cannot assure you that we will be able to continue to attract and retain qualified personnel necessary for the development of our business |
| We have experienced the loss of personnel through headcount reductions and attrition |
| We have recently lost some of our executive management |
| For example, Prakash Agarwal, one of our co-founders who was our President, Chief Executive Officer and a Director since our founding, resigned from all these positions on April 19, 2005 |
| Our new President and Chief Executive Officer, Douglas Young, has been with us only since February 2004 |
| We cannot assure you that the resignation of Mr |
| Agarwal and the appointment of Mr |
| Young will not have a material adverse effect on our business, financial condition and results of operations |
| All our executive officers are employees “at will” |
| We do not maintain key person insurance on any of our personnel |
| If we are not able to maintain key personnel, if our headcount is not appropriate for our future direction, or if we fail to recruit key personnel critical to our future direction in a timely manner, this may have a material adverse effect on our business, financial condition and results of operations |
| In addition, our future success will depend in part on our ability to identify and retain qualified individuals to serve on our board of directors |
| We believe that maintaining a board of directors comprised of qualified members is critical given the current status of our business and operations |
| Moreover, Nasdaq Stock Market rules require three outside board members to serve on our audit committee |
| Any inability on our part to identify and retain qualified board members could have a material adverse effect on our business or could lead to the delisting of our securities from the Nasdaq Stock Market |
| 8 ______________________________________________________________________ [37]Table of Contents We have a Limited Customer Base Three customers accounted for 32prca, 21prca, and 15prca, respectively, of product revenue in fiscal 2006 |
| Three customers accounted for 33prca, 26prca, and 13prca, respectively, of product revenue in fiscal 2005 |
| Four customers accounted for 25prca, 24prca, 14prca and 10prca, respectively, of product revenue in fiscal 2004 |
| One licensee accounted for 100prca of our licensing revenue in fiscal 2006 |
| There was no licensing revenue in fiscal 2005 and 2004 |
| We expect that a small number of customers will account for a substantial portion of our product revenue for the foreseeable future |
| Furthermore, the majority of our sales were historically made, and are expected to continue to be made, on the basis of purchase orders rather than pursuant to long-term purchase agreements |
| As a result, our business, financial condition and results of operations could be materially adversely affected by the decision of a single customer to cease using our products, or by a decline in the number of handheld devices sold by a single customer |
| We May Lose Our Customer Base Our products are designed to afford the mobile phone and handheld device manufacturer significant advantages with respect to product performance, power consumption and size |
| To the extent that other future developments in components or subassemblies incorporate one or more of the advantages offered by our products, the market demand for our products may be negatively impacted |
| We Face Intense Competition in Our Markets The market for Applications Processors is intensely competitive and is characterized by rapid technological change, evolving industry standards and declining average selling prices |
| We believe that the principal factors of competition in this market are video and 3D graphics performance, price, features, power consumption, size and customer support |
| Our ability to compete successfully in the Applications Processor market depends on a number of factors, including success in designing and subcontracting the manufacture of new products that implement new technologies, product quality and reliability, price, ramp of production of our products, customer demand and acceptance of more sophisticated multimedia functionality on mobile phones and other handheld devices, end-user acceptance of our customers’ products, market acceptance of competitors’ products and general economic conditions |
| Our ability to compete will also depend on our ability to identify and ensure compliance with evolving industry standards and market trends |
| We compete with both domestic and international companies, some of which have substantially greater financial and other resources than us with which to pursue engineering, manufacturing, marketing and distribution of their products |
| Our principal competitors include Texas Instruments, Renesas, ST Microelectronics and Broadcom as well as a number of vertically integrated electronics firms that are developing their own solutions |
| We may also face increased competition from new entrants into the market, including companies currently at developmental stages |
| We believe we have significant intellectual properties and have historically demonstrated expertise in SOC technology |
| However, our inability to introduce timely new products for our market, to support these products in customer programs, or to manufacture these products could have a material adverse effect on our business, financial condition and operating results |
| Some of our current and potential competitors operate their own manufacturing facilities |
| Since we do not operate our own manufacturing facility and may from time-to-time make binding commitments to purchase products (binding purchase orders totaling dlra23cmam000 were outstanding as of January 31, 2006), we may not be able to reduce our costs and cycle time or adjust our production to meet changing demand as rapidly as companies that operate their own facilities, which could have a material adverse effect on our results of operations |
| In addition, if production levels increase the amount of binding purchase orders may increase significantly |
| Our Products May be Incompatible with Evolving Industry Standards and Market Trends Our ability to compete in the future will also depend on our ability to identify and ensure compliance with evolving industry standards and market trends |
| Unanticipated changes in market trends and industry standards 9 ______________________________________________________________________ [38]Table of Contents could render our products incompatible with products developed by major hardware manufacturers and software developers |
| As a result, we could be required to invest significant time and resources to redesign our products or obtain license rights to technologies owned by third parties to comply with relevant industry standards and market trends |
| We cannot assure you that we will be able to redesign our products or obtain the necessary third-party licenses within the appropriate window of market demand |
| If our products are not in compliance with prevailing market trends and industry standards for a significant period of time, we could miss crucial OEM and ODM design cycles, which could result in a material adverse effect on our business, financial condition and results of operations |
| We Depend on New Product Development to Meet Rapid Market and Technological Change NeoMagic is focused on providing high-performance semiconductor solutions for sale to manufacturers of mobile phones and handheld devices |
| New product planning is focused on integrated SOC semiconductor products for handheld devices that integrate multimedia technologies such as H264 video compression, 3D graphics and audio technologies |
| Our future business, financial condition and results of operations will depend to a significant extent on our ability to develop new products that address these market opportunities |
| As a result, we believe that significant expenditures for research and development will continue to be required in the future |
| We must anticipate the features and functionality that consumers and infrastructure providers will demand, incorporate those features and functionality into products that meet the exacting design requirements of equipment manufacturers, price our products competitively and introduce new products to the market on a timely basis |
| The success of new product introductions is dependent on several factors, including proper new product definition, timely completion and introduction of new product designs, the ability to create or acquire intellectual property, the ability of manufacturing partners to effectively manufacture new products, quality of new products, differentiation of new products from those of our competitors and market acceptance of our products and the products of our customers |
| We cannot assure you that the products we expect to introduce will incorporate the features and functionality demanded by mobile phone and handheld device manufacturers and consumers, will be successfully developed, or will be introduced within the appropriate window of market demand |
| We cannot assure you that customers who use our semiconductor products will achieve the levels of market success with their own products that they may project to us |
| Because of the complexity of our products, we often have experienced delays in completing development and introduction of new products |
| If there are delays in production of current products, or in the completion of development of future products, including the products currently under development for introduction over the next 12 to 18 months, our potential future business, financial condition, and results of operations will be materially adversely affected |
| In addition, the time required for competitors to develop and introduce competing products may be shorter, their manufacturing yields may be better, and their production costs may be lower than those experienced by us |
| We Depend on Third-Party Manufacturers to Produce Our Products Our products require wafers manufactured with state-of-the-art fabrication equipment and techniques |
| We currently use several third-party foundries for wafer fabrication |
| We expect that, for the foreseeable future, some of our products will be manufactured by a single source |
| For example, our MiMagic 3, MiMagic 5 and MiMagic 6+ products are all manufactured at Taiwan Semiconductor Manufacturing Corporation on a purchase order by purchase order basis |
| Since, in our experience, the lead time needed to establish a relationship with a new wafer fabrication partner is at least 12 months, and the estimated time for a foundry to switch to a new product line ranges from four to nine months, we may have no readily available alternative source of supply for specific products |
| A manufacturing disruption experienced by our manufacturing partners, the failure of our manufacturing partners to dedicate adequate resources to the production of our products, or the financial instability of our manufacturing partners would have a material adverse effect on our business, financial condition and results of operations |
| Furthermore, if the transition to the next generation of manufacturing technologies by our manufacturing partners is unsuccessful, our business, financial condition and results of operations would be materially and adversely affected |
| 10 ______________________________________________________________________ [39]Table of Contents We have many other risks because we depend on third-party manufacturers, including: reduced control over delivery schedules, quality, manufacturing yields and cost; the potential lack of adequate capacity during periods of excess demand; limited warranties on wafers supplied to us; and potential misappropriation of our intellectual property |
| We are dependent on our manufacturing partners to produce wafers with acceptable quality and manufacturing yields, to deliver those wafers on a timely basis to our third party assembly subcontractors and to allocate a portion of their manufacturing capacity sufficient to meet our needs |
| Although our products are designed using the process design rules of the particular manufacturer, we cannot assure you that our manufacturing partners will be able to achieve or maintain acceptable yields or deliver sufficient quantities of wafers on a timely basis or at an acceptable cost |
| Additionally, we cannot assure you that our manufacturing partners will continue to devote adequate resources to produce our products or continue to advance the process design technologies on which the manufacturing of our products are based |
| We do not have long-term agreements with any of these subcontractors |
| Such assembly and testing is conducted on a purchase order basis |
| Because we rely on third-party subcontractors to assemble and test our products, we cannot directly control product delivery schedules, which could lead to product shortages or quality assurance problems that could increase the costs of manufacturing or assembly of our products |
| Due to the amount of time normally required to qualify assembly and test subcontractors, product shipments could be delayed significantly if we were required to find alternative subcontractors |
| Any problems associated with the delivery, quality or cost of the assembly and test of our products could have a material adverse effect on our business, financial condition and results of operations |
| We May Encounter Inventory Excess or Shortage The lead times required by our wafer manufacturers have increased over the last year |
| However, market conditions require that we be prepared to ship products to our customers with much shorter lead times |
| Consequently, to have product inventory to meet potential customer purchase orders, we sometimes place purchase orders for wafers from our manufacturers in advance of having firm purchase orders from our customers |
| We had binding orders for wafers totaling dlra23cmam000 outstanding as of January 31, 2006 |
| If we do not have sufficient demand for our products and cannot cancel our current and future commitments without material impact, we may experience excess inventory, which will result in a write-off affecting gross margin and results of operations |
| If we cancel a purchase order, we must pay cancellation penalties based on the status of work in process or the proximity of the cancellation to the delivery date |
| We must place purchase orders for wafers before we receive purchase orders from our own customers |
| This limits our ability to react to fluctuations in demand for our products, which can be unexpected and dramatic, and from time-to-time will cause us to have an excess or shortage of wafers for a particular product |
| As a result of the long lead-time for manufacturing wafers and the increase in “just in time” ordering by customers, semiconductor companies from time-to-time take charges for excess inventory |
| We did in fact incur such charges in fiscal 2006 of dlra0dtta2 million and in fiscal 2005 of dlra0dtta4 million |
| Significant write-offs of excess inventory have had and could continue to have a material adverse effect on our financial condition and results of operations |
| Conversely, failure to order sufficient wafers would cause us to miss revenue opportunities and, if significant, could impact sales by our customers, which could adversely affect our customer relationships and thereby materially adversely affect our business, financial condition and results of operations |
| Our Manufacturing Yields May Fluctuate Fabricating semiconductors is an extremely complex process, which typically includes hundreds of process steps |
| Minute levels of contaminants in the manufacturing environment, defects in masks used to print circuits on a wafer, variation in equipment used and numerous other factors can cause a substantial percentage of wafers to be rejected or a significant number of die on each wafer to be nonfunctional |
| Many of these problems are difficult to diagnose and time consuming or expensive to remedy |
| As a result, semiconductor companies often experience 11 ______________________________________________________________________ [40]Table of Contents problems in achieving acceptable wafer manufacturing yields, which are represented by the number of good die as a proportion of the total number of die on any particular wafer |
| We often purchase wafers, not die, and pay an agreed upon price for wafers meeting certain acceptance criteria |
| Accordingly, we bear the risk of the yield of good die from wafers purchased meeting the acceptance criteria |
| Semiconductor manufacturing yields are a function of both product design, which is developed largely by us, and process technology, which is typically proprietary to the manufacturer |
| Historically, we have experienced lower yields on new products |
| Since low yields may result from either design or process technology failures, yield problems may not be effectively determined or resolved until an actual product exists that can be analyzed and tested to identify process sensitivities relating to the design rules that are used |
| As a result, yield problems may not be identified until well into the production process, and resolution of yield problems would require cooperation and communication between the manufacturer and us |
| This risk is compounded by the offshore location of our manufacturers, increasing the effort and time required to identify, communicate and resolve manufacturing yield problems |
| As our relationships with new manufacturing partners develop, yields could be adversely affected due to difficulties associated with adapting our technology and product design to the proprietary process technology and design rules of each manufacturer |
| Any significant decrease in manufacturing yields could result in an increase in our per unit product cost and could force us to allocate our available product supply among our customers, potentially adversely impacting customer relationships as well as revenues and gross margins |
| We cannot assure you that our manufacturers will achieve or maintain acceptable manufacturing yields in the future |
| Uncertainty and Litigation Risk Associated with Patents and Protection of Proprietary Rights We rely in part on patents to protect our intellectual property |
| In April 2005, we sold 58 patents to Faust Communications, LLC for net proceeds of dlra3dtta5 million |
| The patents sold related to products we no longer sell and not to products that we currently sell or plan to sell |
| We retained a worldwide, non-exclusive license under the patents sold |
| The sale did not include several of our important patents covering embedded DRAM technology nor any of the unique array processing technology used in our MiMagic 6+ and NeoMobileTV products |
| Additionally, we have several patent applications pending |
| We cannot assure you that our pending patent applications, or any future applications, will be approved |
| Further, we cannot assure you that any issued patents will provide us with significant intellectual property protection, competitive advantages, or will not be challenged by third parties, or that the patents of others will not have an adverse effect on our ability to do business |
| In addition, we cannot assure you that others will not independently develop similar products, duplicate our products or design around any patents that may be issued to us |
| We also rely on a combination of mask work protection, trademarks, copyrights, trade secret laws, employee and third-party nondisclosure agreements and licensing arrangements to protect our intellectual property |
| Despite these efforts, we cannot assure you that others will not independently develop substantially equivalent intellectual property or otherwise gain access to our trade secrets or intellectual property, disclose such intellectual property or trade secrets, or that we can meaningfully protect our intellectual property |
| Our failure to meaningfully protect our intellectual property could have a material adverse effect on our business, financial condition and results of operations |
| As a general matter, the semiconductor industry has experienced substantial litigation regarding patent and other intellectual property rights |
| In December 1998, the Company filed a lawsuit in the United States District Court for the District of Delaware seeking damages and an injunction against Trident Microsystems, Inc |
| The suit alleged that Trident’s embedded DRAM graphics accelerators infringe certain patents held by the Company |
| In January 1999, Trident filed a counter claim against the Company alleging an attempted monopolization in violation of antitrust laws, arising from NeoMagic’s filing of the patent infringement action against Trident |
| The Court ruled that there was no infringement by Trident |
| The Company filed an appeal in the United States Court of Appeals, for the Federal Circuit |
| On April 17, 2002, the United States Court of Appeals for the Federal Circuit 12 ______________________________________________________________________ [41]Table of Contents affirmed the lower court’s judgment of non-infringement on one patent and vacated the court’s judgment of non-infringement on another patent, thereby remanding it to the lower court for further proceedings |
| In November 2002, the lower court heard oral arguments on cross-motions for summary judgment on the matter |
| In May 2003, the lower court ruled in favor of Trident |
| In December 2003, the Company filed an appeal in the United States Court of Appeals, for the Federal Circuit |
| In August 2004, the Federal Circuit rejected the appeal and affirmed the lower court’s decision of no infringement by the Trident products |
| On September 2, 2005 the United States District Court for the District of Delaware approved the Trident request that its counterclaim against NeoMagic filed in January 1999 be dismissed without prejudice |
| Any patent litigation, whether or not determined in our favor or settled by us, would at a minimum be costly and could divert the efforts and attention of our management and technical personnel from productive tasks, which could have a material adverse effect on our business, financial condition and results of operations |
| We cannot assure you that current or future infringement claims by third parties or claims for indemnification by customers or end users of our products resulting from infringement claims will not be asserted in the future or that such assertions, if proven to be true, will not materially adversely affect our business, financial condition and results of operations |
| If any adverse ruling in any such matter occurs, we could be required to pay substantial damages, which could include treble damages, to cease the manufacturing, use and sale of infringing products, to discontinue the use of certain processes, or to obtain a license under the intellectual property rights of the third party claiming infringement |
| We cannot assure you, however, that a license would be available on reasonable terms or at all |
| Any limitations in our ability to market our products, or delays and costs associated with redesigning our products or payments of license fees to third parties, or any failure by us to develop or license a substitute technology on commercially reasonable terms could have a material adverse effect on our business, financial condition and results of operations |
| Sales to customers located outside the United States (including sales to the foreign operations of customers with headquarters in the United States and foreign manufacturers that sell to United States-based OEMs) accounted for 60prca, 91prca and 91prca of our product revenue for fiscal 2006, 2005, and 2004, respectively |
| We expect that product revenue derived from foreign sales will continue to represent a significant portion of our total product revenue |
| Letters of credit issued by customers have supported a portion of our foreign sales |
| To date, our foreign sales have been denominated in United States dollars |
| Increases in the value of the US dollar relative to the local currency of our customers could make our products relatively more expensive than competitors’ products sold in the customer’s local currency |
| Foreign manufacturers have produced, and are expected to continue to produce for the foreseeable future, all of our wafers |
| In addition, many of the assembly and test services we use are procured from foreign sources |
| Wafers are priced in US dollars under our purchase orders with our manufacturing suppliers |
| Foreign sales and manufacturing operations are subject to a variety of risks, including fluctuations in currency exchange rates, tariffs, import restrictions and other trade barriers, unexpected changes in regulatory requirements, longer accounts receivable payment cycles, potentially adverse tax consequences and export license requirements |
| In addition, we are subject to the risks inherent in conducting business internationally including foreign government regulation, political and economic instability, and unexpected changes in diplomatic and trade relationships |
| Moreover, the laws of certain foreign countries in which our products may be developed, manufactured or sold, may not protect our intellectual property rights to the same extent as do the laws of the United States, thus increasing the possibility of piracy of our products and intellectual property |
| We cannot assure you that one or more of these risks will not have a material adverse effect on our business, financial condition and results of operations |
| Our Financial Results Could Be Affected by Changes in Accounting Principles Generally accepted accounting principles in the United States are subject to interpretation by the Financial Accounting Standards Board (FASB), the American Institute of Certified Public Accountants, the Securities and 13 ______________________________________________________________________ [42]Table of Contents Exchange Commission (SEC) and various bodies formed to promulgate and interpret appropriate accounting principles |
| A change in these principles or interpretations could have a significant effect on our reported financial results, and could affect the reporting of transactions completed before the announcement of a change |
| For example, we currently are not required to record stock-based compensation charges if an employee’s stock option exercise price is equal to or exceeds the deemed fair value of our common stock at the date of grant |
| The FASB published a pronouncement in December 2004, Statement of Financial Accounting Standards Nodtta 123(R), Share Based Payment (SFAS 123R), that would require us to record expense for the fair value of stock options granted |
| SFAS 123R is effective for fiscal years beginning after June 15, 2005 and will be applicable starting in our fiscal year ending January 31, 2007 |
| Our future operating expenses may be adversely affected in connection with the issuance of stock options |
| Our Stock Price May Be Volatile The market price of our Common Stock, like that of other semiconductor companies, has been and is likely to continue to be, highly volatile |
| The market has from time to time experienced significant price and volume fluctuations that may be unrelated to the operating performance of particular companies |
| The market price of our Common Stock could be subject to significant fluctuations in response to various factors, including sales of our common stock, quarter-to-quarter variations in our anticipated or actual operating results, announcements of new products, technological innovations or setbacks by us or our competitors, general conditions in the semiconductor industry, unanticipated shifts in the markets for mobile phones and other handheld devices or changes in industry standards, losses of key customers, litigation commencement or developments, the impact of our financing activities, including dilution to shareholders, changes in or the failure by us to meet estimates of our performance by securities analysts, market conditions for high technology stocks in general, and other events or factors |
| In future quarters, our operating results may be below the expectations of public market analysts or investors |
| Potential Nasdaq Stock Market Delisting On February 28, 2005, we received a notice from the Nasdaq Stock Market that we were no longer in compliance with the requirements for continued inclusion of our common stock on the Nasdaq National Market pursuant to the Nasdaq’s Marketplace Rule 4450(a)(5) (the “Rule”) because our common stock had closed below dlra1dtta00 per share for 30 consecutive business days |
| We were given 180 calendar days, or until August 29, 2005, to regain compliance with the Rule |
| To regain compliance with the Rule, the closing bid price of our common stock had to be dlra1dtta00 per share or more for a minimum of 10 consecutive business days before August 29, 2005 |
| To regain compliance with the Rule, we effected a five-for-one reverse stock split on August 12, 2005 that brought the closing bid price of our common stock above dlra1dtta00 |
| The closing bid price of our common stock has stayed above dlra1dtta00 since the reverse stock split occurred |
| If we fail to comply with the continued listing requirements of the Nasdaq National Market, including the minimum bid price per share requirement and the minimum stockholders equity requirement, we may be delisted from trading on such market, and thereafter trading in our common stock, if any, would be conducted through the Nasdaq Small Cap Market, the over-the-counter market or on the Electronic Bulletin Board of the National Association of Securities Dealers, Inc |
| There is no guarantee that an active trading market for our common stock will be maintained on the Nasdaq National Market |
| You may not be able to sell your shares quickly, at the market price or at all if trading in our stock is not active |