| SPEEDUS CORP ITEM 1A RISK FACTORS Risks related to our business generally Although we have been a public company since February 1996, we have reoriented our business several times and our current business has not generated any significant revenues to date |
| At the time of our initial public offering, our business was primarily a subscription television service |
| In November 1998, we terminated the subscription television business and began a limited pilot program for the delivery of high-speed Internet access |
| We encountered technical difficulties in this pilot program and reoriented our business on wireless data and other services |
| We have not yet generated any significant revenue from these businesses |
| We have recorded operating losses in each reporting period since our inception and may never be profitable |
| We have recorded operating losses and negative operating cash flows in all reporting periods since inception and, at December 31, 2005, had an accumulated deficit of approximately dlra63dtta9 million |
| We believe that we have sufficient liquidity to finance our current level of operations through the 2006 fiscal year |
| However, we do not expect to have earnings from operations, exclusive of non-cash charges, until such time as we substantially increase our customer base and/or form a strategic alliance for use of our capabilities in the future |
| Our existing operations and infrastructure may not be adequate to manage the growth necessary for successful implementation of our business plan |
| Successful implementation of our business plan will require the management of growth |
| Our existing operations and infrastructure may not be adequate to manage such growth, and any steps taken to improve such systems and controls may not be sufficient |
| Our future success will depend in part upon attracting and retaining the services of current management and technical personnel |
| We also may not be successful in attracting, assimilating and retaining new personnel in the future as future growth takes place |
| We do not maintain “key person” life insurance policies on any of our key personnel |
| Shant S Hovnanian and Vahak S Hovnanian, who in the aggregate own approximately 41prca of our Common Stock, may have the power acting together to control the direction and future operations of our company |
| Shant S Hovnanian and Vahak S Hovnanian in the aggregate own approximately 41prca of our outstanding Common Stock at February 15, 2006 |
| As a result, acting together they may have the power to elect all of the members of our Board of Directors, amend our certificate of incorporation and by-laws and control the direction and future operations of our Company, in each case without the approval of any of our other stockholders |
| Our stock price has historically been volatile, which may make it more difficult for you to resell shares when you want at prices you find attractive |
| The trading price of our Common Stock has been and may continue to be subject to wide fluctuations |
| During 2005, 2004 and 2003, the high and low sale prices of our Common Stock on the Nasdaq Stock Market ranged from dlra2dtta92 to dlra1dtta06, dlra4dtta28 to dlra1dtta39 and dlra1dtta65 to dlra0dtta71, respectively |
| The closing sale price of our Common Stock was dlra1dtta31 on March 21, 2006 |
| Our stock price may fluctuate in response to a number of events and factors, such as quarterly variations in operating results, announcements of technological innovations or new products and media properties by us or our competitors, the operating and stock price performance of other companies that investors may deem comparable, and news reports relating to trends in our markets |
| On several occasions through 2003, we were not in compliance with Marketplace Rule 4450(a)(5), which requires listed companies to maintain a closing bid price equal to or greater than dlra1dtta00 |
| Most recently, in June 2003, we received notice from Nasdaq that we had regained compliance with Marketplace Rule 4450(a)(5) and the matter was closed |
| If our Common Stock were delisted from Nasdaq, trading in our Common Stock would have to be conducted on the OTC Bulletin Board or in the non-Nasdaq over-the-counter market, also referred to as the “pink sheets” |
| If that were to occur, liquidity for our Common Stock could be significantly decreased which could reduce the trading price and increase the transaction costs of trading shares of our Common Stock |
| 6 ______________________________________________________________________ Sales of shares of Common Stock by Shant S Hovnanian and Vahak S Hovnanian could adversely affect the market price of the Common Stock |
| Future sales of shares of Common Stock, or the availability of shares of Common Stock for future sale, may adversely impact the market price of the Common Stock prevailing from time to time |
| Sales of substantial amounts of our Common Stock, or the perception that such sales could occur, could adversely affect the prevailing market price of the Common Stock |
| Shares of Common Stock held by Shant S Hovnanian and Vahak S Hovnanian have been held by each of them for the requisite holding periods under Rule 144 under the Securities Act and may be sold in accordance with volume restrictions |
| Risks related to certain short-term investments Securities that we invest in are subject to market price risks |
| As part of our overall investment strategy, we invest in publicly traded equity securities |
| We purchase these securities in anticipation of increases in the fair market values of the securities |
| We have in the past and may in the future sell publicly traded equity securities that we do not own in anticipation of declines in the fair market values of the securities |
| When we sell securities that we do not own, we must borrow the securities we sold in order to deliver them and settle the trades |
| Thereafter, we must buy the securities and deliver them to the lender of the securities |
| Our potential for loss on these transactions is unlimited since the value of the underlying security can keep increasing which could have a material adverse effect on the Company’s consolidated financial statements |
| The Company is seeking to eliminate the risk that it could be deemed to be an investment company |
| The Company has substantial liquidity |
| Although a portion of the Company’s cash is invested in securities, the Company is pursuing an acquisition strategy that will, if successfully executed, eliminate any risk of it being deemed to be an investment company |
| Generally, a company must register under the Investment Company Act of 1940 and comply with significant restrictions on operations and transactions with affiliates if its investment securities exceed 40prca of the company’s total assets, or if it holds itself out as being primarily engaged in the business of investing, owning or holding securities |
| If it is deemed to be an investment company, it might need to dispose of or acquire investments in order to avoid investment company status |
| Risks related to investments in other companies Ability to successfully identify investment opportunities We will face substantial competition in identifying and closing appropriate investment opportunities from, among others, venture capital firms, large corporate investors and other publicly traded companies |
| These competitors may limit our opportunity to acquire interests in new partner companies |
| In addition, we may be unable to acquire interests in appropriate companies for other reasons, including the inability to agree on terms, such as price and ownership percentages, incompatibility between us and management and access to sufficient funding |
| Our growth will be materially adversely affected if we cannot successfully identify investments in a sufficient number of companies |
| The value of our business may fluctuate because of companies that we may invest in |
| These companies may be development stage or privately held companies for which no public market exists for their stock |
| The valuations of our investments in privately held companies that we may invest in are indeterminate prior to their public offerings, and there can be no assurance that these offerings will occur since they will be dependent upon the development of these businesses, market conditions and other conditions over which we may have no control |
| Capital and management resources There will be a number of special issues that we will have to address for investment in start-up companies, including: the diversion of management attention in connection with both negotiating and overseeing these transactions; the potential issuance of additional shares of our Common Stock in connection with these transactions, which could dilute the rights of existing shareholders, and the need to incur additional debt in connection with these transactions |
| In addition, many, if not all, of these start-up companies will face the same, or similar, risks as we face in our own business |
| 7 ______________________________________________________________________ Managing growth Successful implementation of our business plan will require the management of growth |
| We cannot assure you that our existing operations and infrastructure will be adequate to manage such growth, or that any steps taken to improve such systems and controls will be sufficient |
| Our future success will depend in part upon attracting and retaining the services of current management and technical personnel |
| We cannot assure you that we will be successful in attracting, assimilating and retaining new personnel in the future as future growth takes place |
| Risks related to medical device companies Risks related to government regulation and future regulatory requirements Medical devices such as ours are subject to strict regulation by state and federal authorities, including the Food and Drug Administration and comparable authorities in certain states |
| Manufacturers of medical devices are required to comply with very specific rules and regulations concerning the testing, manufacturing, packaging, labeling and marketing of medical devices |
| Failure to comply with applicable regulatory requirements could result in, among other things, civil and criminal fines, product recalls, detentions, seizures, injunctions and criminal prosecutions |
| In addition, these regulations are subject to future change |
| We cannot predict what material impact, if any, these changes might have on our business |
| Future changes in regulations or enforcement policies could impose more stringent requirements on us, compliance with which could adversely affect our business |
| Potential product recalls In the event that any of our products prove to be defective, we could voluntarily recall, or the FDA could require us to redesign or implement a recall of, any defective product |
| There is a possibility that we may recall products in the future and that future recalls could result in significant costs to us and in significant negative publicity which could harm our ability to market our products in the future |
| We could be exposed to significant liability claims |
| We could be exposed to significant liability claims if we are unable to obtain insurance at acceptable costs and adequate levels or otherwise protect ourselves against potential product liability claims |
| The testing, manufacture, marketing and sale of medical devices involve the inherent risk of liability claims |
| A successful product liability claim could affect or prevent commercialization of our medical devices, or cause a significant financial burden on us, or both, and could have a material adverse effect on our business, financial condition, and ability to market our medical devices |
| Health care providers may not be able to obtain adequate levels of third-party reimbursement |
| The success of our product will depend to a significant extent on the ability of health care providers to obtain adequate levels of third-party reimbursement |
| The amount of reimbursement available may vary |
| The cost of medical care is funded, in substantial part, by government insurance programs, such as Medicare and Medicaid, and private and corporate health insurance plans |
| Third-party payers may deny reimbursement at adequate levels if they determine that a prescribed device or diagnostic procedure is not used in accordance with cost-effective treatment methods as determined by the payer, or is experimental, unnecessary or inappropriate |
| The inadequacy of the reimbursement would have a material adverse effect on our business |
| The medical device industry is characterized by rapid technological changes and advances |
| Although the Company believes that its products are technologically current, the development of new technologies or refinements of existing ones by the Company’s competitors could at any time make the Company’s existing products technologically or economically obsolete |
| Although the Company is not aware of any pending technological developments that would be likely to materially and adversely affect its business or financial position, there can be no assurance that such developments will not occur at any time |
| We may rely on third parties to support the manufacture or commercialization of our products |
| We may rely on third parties, and possibly single third parties, to manufacture or commercialize our products |
| Third parties may not perform their obligations as expected |
| The amount and timing of resources that third parties devote to manufacturing or commercializing our product may not be within our control |
| The third party on which we rely to commercialize our products may not be able to recruit and retain skilled sales representatives |
| 8 ______________________________________________________________________ Furthermore, our interests may differ from those of the third party that manufacture or commercializes our products |
| Disagreements that may arise with the third party could limit the manufacture or commercialization of our products, or result in litigation or arbitration, which would be time-consuming, distracting and expensive |
| If the third party that supports the manufacture or commercialization of our products breaches or terminates its agreement with us, or fails to conduct its activities in a timely manner, such breach, termination or failure could result in the disruption of our business and could have a material adverse effect on our results of operations |
| Risks related to our high-speed Internet access service We may be unable to solve ongoing technical difficulties in our deployment and equipment for our high-speed Internet access service is not, and may never be, available at a cost and with performance levels that allow for commercial implementation on an economically attractive basis |
| Our super high-speed Internet service utilizes a new technology that has a limited operating history and that remains subject to further development and refinement |
| The equipment necessary to provide our high-speed Internet access service is not currently manufactured on a scale and at a cost suitable for the commercialization of our service |
| Such equipment may never become available at a cost and with performance levels that allow for commercial implementation on an economically attractive basis |
| Many financially stronger competitors with broader market coverage are offering high-speed Internet access |
| The market for Internet access and related services is highly competitive |
| We expect local, regional and national Internet service providers to be competitors for our super high-speed Internet access service |
| Telephone companies with digital subscriber line technology, which increases the effective capacity of existing copper telephone cables, are among other competitors |
| Also, cable operators with high-speed cable modems are among the other communications companies also providing high-speed Internet access |
| Many of the competing Internet service providers have, or can be expected to have, greater financial, marketing and other resources than us |
| We may not be able to compete successfully with these entities |