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EXHIBIT 99.1

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS AND RISK FACTORS

In passing the Private Securities Litigation Reform Act of 1995 (the Reform
Act), Congress encouraged public companies to make forward-looking
statements by creating a safe harbor to protect companies from securities law
liability in connection with forward-looking statements. We intend to qualify
both our written and oral forward-looking statements for protection under the
Reform Act and any other similar safe harbor provisions.

Forward-looking statements are defined by the Reform Act. Generally,
forward-looking statements include expressed expectations of future events and
the assumptions on which the expressed expectations are based. The words
believe, expect, anticipate, intend, forecast, estimate, project,
and similar expressions identify forward-looking statements. Such statements
may include, but are not limited to, the state of the electronic payments
industry and competition within the industry; projections regarding specific
demand for our products and services; the commercial feasibility of new
products, services and market development initiatives; our future financial
performance and financial condition; the adequacy of our current facilities and
management systems infrastructure to meet our operational needs; the status of
our relationship with and condition of third parties upon whom we rely in the
conduct of our business; the sufficiency of reserves for assets and obligations
exposed to revaluation; our ability to effectively hedge our exposure to
foreign currency exchange rate fluctuations; our ability to successfully expand
our Global Alliance Channel to international markets; expected demand for POS
products in underdeveloped markets such as China, Russia and India; and future
access to capital on terms that are acceptable, as well as assumptions related
to the foregoing. Such forward-looking statements are within the meaning of
that term in Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. All forward-looking
statements are inherently uncertain as they are based on various expectations
and assumptions concerning future events and they are subject to numerous known
and unknown risks and uncertainties that could cause actual events or result to
differ materially from those projected. Due to those and other uncertainties
and risks, you are urged not to place undue reliance on our written or oral
forward-looking statements. We undertake no obligation to update or revise this
Cautionary Statement Regarding Forward-Looking Statements to reflect future
developments. In addition, we undertake no obligation to update or revise
forward-looking statements to reflect changed assumptions, the occurrence of
unanticipated events, or changes to future operating results over time.

We provide the following risk factor disclosure in connection with our
continuing effort to qualify our written and oral forward-looking statements
under the safe harbor protection of the Reform Act and any other similar safe
harbor provisions. Important factors currently known to management that could
cause actual results to differ materially from those in forward-looking
statements include the disclosures contained in our Annual Report on Form 10-K
to which this statement is appended as an exhibit and also include the
following:

RISK FACTORS

Risks Related To Our Business

We have incurred significant losses. If we are unable to improve our financial
performance, the price of our common stock will suffer.

We incurred losses of $61.1 and $19.9 million for the years ended December 31,
2002 and 2001, respectively. Although we have undertaken aggressive efforts to
improve our profitability and increase our cash flows, it is possible that the
steps we have taken will not be successful or of sufficient impact for us to
achieve an acceptable level of profitability or positive cash flow. If we fail
to do so, the price of our common stock will suffer.

We expect our results of operations to vary from quarter to quarter and, as a
result, we may not meet the expectations of our investors and stock analysts,
which could cause the price of our common stock to fluctuate or
decline.

Our revenues and results of operations have fluctuated significantly in the
past and are likely to fluctuate significantly in the future. Accordingly, we
believe that period-to-period comparisons of our results of operations may be
misleading. You should not rely upon the results of one quarter as an
indication of future performance. Our revenue and operating results may fall
below the expectations of securities analysts or investors in some future
quarter or quarters. Our failure to meet these expectations could cause the
market price of our common stock to decline.

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Our quarterly revenue and operating results may vary depending on a number of
factors, including:



| |  |  | the type, timing and size of orders and shipments for major
customers;                                                                                    
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | demand for and acceptance of our new product offerings, and returns
or warranty costs from new product failures that exceed our established
reserves;     
|
| |  |  | delays in the implementation and delivery of our products and
services, which may impact the timing of our recognition of revenue;                        
|
| |  |  | write-offs of receivables in excess of reserves;                                                                                                          
|
| |  |  | variations in product mix and margins during any period;                                                                                                  
|
| |  |  | inventory obsolescence;                                                                                                                                   
|
| |  |  | development of new relationships and maintenance and enhancement of
existing relationships with customers and strategic partners;                         
|
| |  |  | manufacturing or production difficulties;                                                                                                                 
|
| |  |  | deferral of customer contracts in anticipation of product or service enhancements;                                                                        
|
| |  |  | foreign currency exchange rate fluctuations;                                                                                                              
|
| |  |  | availability of financing; and                                                                                                                            
|
| |  |  | industry and economic conditions,
including competition, industry standards, product certification
requirements, trade restrictions and other regulations.

The loss of one or more of our key customers could significantly reduce our
revenues and profits.

We have derived, and believe that we may continue to derive, a significant
portion of our revenues from a limited number of large customers. For the
fiscal year ended December 31, 2002, our two largest customers accounted for
17.7% of our net revenue and our five largest customers accounted for 29.7% of
our net revenue. As of December 31, 2002, three customers represented 58%, or
$45.0 million, of our total backlog of $77.4 million. Our customers may buy
less of our products or services depending on their own technological
developments and internal budget cycles. A major customer in one year may not
purchase any of our products or services in another year, which may negatively
affect our financial performance.

Our products may contain defects that may be difficult or even impossible to
correct. Product defects could result in sales delays, lost sales, delays in our collection
of receivables and claims against us.

We offer technically complex products which, when first introduced or released
in new versions, may contain software or hardware defects that are difficult to
detect and correct. The existence of defects and delays in correcting them
could result in negative consequences, including the following:



| |  |  | delays in shipping products;                            
| | - |  | --------------------------------------------------------
|
| |  |  | loss of market acceptance for our products;             
|
| |  |  | product returns;                                        
|
| |  |  | additional warranty expenses;                           
|
| |  |  | diversion of resources from product development;        
|
| |  |  | loss of credibility with
distributors and customers; and
|
| |  |  | lost sales.                                             

Even though we test all of our products, defects may continue to be identified
after products are shipped. In past periods, we have experienced various issues
in connection with product launches, including the need to rework these
products and stabilize

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product designs. Correcting defects can be a
time-consuming and difficult task. Software errors may take several months to
correct, and hardware errors may take even longer. Such issues may result in
sales delays, delays in the collection of receivables, and cancellation of
orders, which could adversely affect our results of operations and financial
condition, and future business.

We may accumulate excess or obsolete inventory that could result in
unanticipated price reductions and write downs and adversely affect our
financial condition.

Managing the proper inventory levels for components and finished products is
challenging. In formulating our product offerings, we have focused our efforts
on providing to our customers products with greater capacity and functionality,
which requires us to develop and incorporate the most current technologies in
our products. This approach tends to increase the risk of obsolescence for
products and components we hold in inventory and may compound the difficulties
posed by other factors that affect our inventory levels, including the
following:



| |  |  | the need to maintain significant inventory of components that are in limited supply;
| | - |  | ------------------------------------------------------------------------------------
|
| |  |  | buying components in bulk for the best pricing;                                     
|
| |  |  | responding to the unpredictable demand for products; and                            
|
| |  |  | responding to customer requests for quick delivery schedules.                       

If we accumulate excess or obsolete inventory, price reductions and inventory
write downs may result, which could adversely affect our business and financial
condition.

If we are unable to adequately protect our proprietary technology, our
competitors may develop products substantially similar to our products and use
similar technologies, which may result in the loss of customers.

We rely on patent, copyright, trademark and trade secret laws, as well as
confidentiality, licensing and other contractual arrangements, to establish and
protect the proprietary aspects of our products. Our efforts may result in only
limited protection, and our competitors may develop, market and sell products
substantially equivalent to our products, or utilize technologies similar to
those used by us. If we are unable to adequately protect our proprietary
technology, these third parties will be able to compete more effectively
against us, which could result in the loss of customers and affect our business
adversely.

Our products and other proprietary rights may infringe on the proprietary
rights of third parties, which may expose us to litigation.

Although we believe that our products do not infringe on any third partys
patents, we cannot be certain that we will not become involved in litigation
involving patents or proprietary rights. Patent and proprietary rights
litigation entails substantial legal and other costs, and there can be no
assurance that we will have the necessary financial resources to defend or
prosecute our rights in connection with any such litigation. Responding to,
defending or bringing claims related to our intellectual property rights may
require our management to redirect our human and monetary resources to address
these claims.

A disruption in the manufacturing capabilities of our third-party manufacturers
or suppliers would negatively impact our ability to meet customer demands.

We rely on third-party manufacturers to manufacture and assemble our products.
We also depend upon third-party suppliers to deliver components that are free
from defects, competitive in functionality and cost and in compliance with our
specifications and delivery schedules. Since we generally do not maintain large
inventories of our products or components, any termination of, or significant
disruption in, our relationship with our third-party manufacturers or suppliers
may prevent us from filling customer orders in a timely manner.

We have occasionally experienced, and may in the future experience, delays in
delivery of products and delivery of products of inferior quality from
third-party manufacturers. Although alternate manufacturers and suppliers are
available to produce our products and product components, the number of
manufacturers or suppliers of some of our products and components is
limited, and qualifying a replacement manufacturer or supplier could take
several months. In addition, our use of third-party manufacturers reduces our
direct control over product quality, manufacturing timing, yields and costs.
Disruption of the

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manufacture or supply of our products and components, or a
third-party manufacturers or suppliers failure to remain competitive in
functionality, quality or price, could delay or interrupt our ability to
manufacture or deliver our products to customers on a timely basis, which would
have a material adverse effect on our business.

Force Majeure events, such as terrorist attacks, other acts of
violence or war, and health epidemics may
affect the markets in which our common stock trades, the markets in which we
operate and our profitability.

Recent terrorist attacks and the war
in Iraq have caused instability in the global financial markets, and
contributed to downward pressure on securities prices of United States publicly
traded companies, such as us. Future terrorist attacks or armed conflict,
and epidemics, such as SARS, could result in economic, political
and other uncertainties that could adversely affect our revenues and operating
results, and further depress securities prices, including the price of our
common stock. Terrorist attacks have disrupted the global insurance and
reinsurance industries, and we may experience delays in renewing some insurance
policies and may not be able to obtain insurance at historical levels for all
of our facilities. Future terrorist attacks, armed conflicts and
epidemics could affect
our domestic and international sales, disrupt our supply chain and impair our
ability to produce and deliver our products. Such events could
directly impact our physical facilities or those of our suppliers or customers,
both in the United States and elsewhere. Our primary facilities include
administrative, sales and R&D facilities in the United States, and
manufacturing facilities in China. Acts of terrorism, wars and
epidemics may make
transportation of our supplies and products more difficult or cost prohibitive.
Any impairment of our financial performance as a result of such events would increase the risk of non-compliance with the financial
covenants under our senior secured credit facility and other lending
arrangements, resulting in events of default and the possible acceleration of
our indebtedness.

Our results of operations could be harmed if our operating expenses do not
correspond with the timing of our revenue.

Most of our operating expenses, such as employee compensation, manufacturing,
and rental expense for properties, are either relatively fixed in the
short-term or incurred in advance of sales. Moreover, our spending levels are
based in part on our expectations regarding future revenue. As a result, if
revenue for a particular quarter is below expectations, we may not be able to
proportionately reduce operating expenses for that quarter. A shortfall in
revenue, therefore, could have a disproportionate effect on our expected
operating results for that quarter and could cause the trading price of our
common stock to decline.

If we cannot manage the additional challenges presented by our international
operations, our revenues and profitability may suffer.

We derived approximately 59% of our total net revenues from sales outside the
United States, principally in Latin America and Europe, for the year ended
December 31, 2002. We expect that international sales will continue to account
for a significant percentage of our net revenue in the foreseeable future.
Because a substantial percentage of our revenues are derived from foreign
customers, we face numerous risks associated with conducting international
operations, any of which could negatively affect our financial performance and
results of operations. These risks include the following:



| |  |  | we are subject to foreign regulatory requirements that may change without notice;                                  
| | - |  | -------------------------------------------------------------------------------------------------------------------
|
| |  |  | our expenses related to sales and marketing and research and development may increase;                             
|
| |  |  | we are subject to various import/export restrictions, and import/export licenses may not always be available;      
|
| |  |  | we are subject to foreign tariffs and other trade barriers;                                                        
|
| |  |  | some of the foreign countries that we deal with suffer from political and economic instability;                    
|
| |  |  | some of the foreign currencies that we deal with fluctuate significantly and are subject to inflationary pressures;
|
| |  |  | we may have difficulty staffing and managing our foreign operations;                                               
|
| |  |  | there is a tendency for international payment cycles to be longer than for our North American operations;          

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| |  |  | we may have difficulty collecting accounts receivable; and                                                                                                             
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | we are subject to the Foreign Corrupt Practices Act, which may place
us at a competitive disadvantage to foreign companies that are not
subject to similar regulations.

Our Golden Eagle Leasing subsidiary is engaged in micro-ticket leasing of POS
related appliances. By nature, this activity carries a high rate of lease
default that, if excessive, can result in a substantial write-off of our lease
portfolio and further impair profitability.

Golden Eagle Leasing, Inc., our equipment leasing subsidiary, is focused on
providing micro-ticket leasing (generally less than $5,000) through nation-wide
vendors of equipment in defined niche markets that are not served by
traditional lessors. Golden Eagles primary market is that of POS equipment,
the leases for which currently account for nearly its entire portfolio. It also
originates leases in other commercial-use microticket markets, such as computer
and office equipment, and is actively exploring expansion into these and other
lines of equipment having similar dollar value and market risk. Golden Eagle
originates its leases directly with the equipment end-user, which for POS
equipment is most often a merchant. Golden Eagles micro ticket leasing
business is characterized by high incidences of delinquencies, which in turn
can lead to significant levels of loan losses. The current level of
profitability could be substantially impaired if existing lease loss reserves
prove inadequate or leases originated in the future experience a default rate
greater than that for which reserves are established at the time of inception.

We are dependent on current management and key personnel. The loss of certain
of these individuals could cause material harm to the operation and future
prospects of our business.

Christopher Alexander, our Chairman, President and Chief Executive Officer,
John W. Smolak, our Executive Vice President, Chief Financial and Administrative Officer, and Jairo Gonzalez, President of Hypercom
Transactions Systems Group, are instrumental in the development, growth and
operations of Hypercom. The loss of any of these key executives could have a
material adverse effect on the operation and future prospects of our business.

We also believe our future success will depend largely upon our ability to
attract and retain highly-skilled hardware and software engineers, managerial,
and sales and marketing personnel. We compete against numerous companies,
including larger, more established companies, for our personnel. We do not know
if we will be successful in attracting or retaining skilled personnel. Further,
the loss of certain key employees or our inability to attract and retain other
qualified employees could negatively affect our financial performance.

We have in the past and may in the future make acquisitions and strategic
investments, which will involve numerous risks. We may not be able to address
these risks without substantial expense, delay or other operational or
financial problems.

We may acquire or make substantial investments in related businesses,
technologies, products or services in the future. These acquisitions or investments
involve various risks, such as:



| |  |  | the difficulty of assimilating the technologies, operations and
personnel of the acquired business, technology, product or service;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the potential disruption of our ongoing business, including the diversion of management attention;                                 
|
| |  |  | the possible inability to obtain the desired financial and strategic benefits from the acquisition or investment;                  
|
| |  |  | the loss of key employees of an acquired business; and                                                                             
|
| |  |  | the possibility of our entering
markets and offering products or services with which we have limited prior experience.             

Future acquisitions and investments could also result in substantial cash
expenditures, potentially dilutive issuance of our equity securities, our
incurring of additional debt and contingent liabilities, and amortization
expenses related to other intangible assets that could adversely affect our
business, operating results and financial condition. Our prior acquisitions
have consumed and will continue to consume management attention and company
resources, and will continue to require significant
efforts and involve ongoing risks in the integration of these operations. To
date, we have not achieved expected results from

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certain of our acquisitions.
We will be dependent on the retention and performance of these businesses
existing management and employees for the day-to-day management and future
operating results of these businesses.

Risks Related To The Industry

The markets in which we compete
are highly competitive, maturing, and subject to price
erosion.

The markets in which we operate are
maturing and highly competitive. Increased competition
from manufacturers or distributors of products similar to or competitive with
our products, or from service providers that provide services similar to our
services, could result in price reductions, reduced margins and a loss of
market share or could render our products obsolete.

We expect to continue to experience significant and increasing levels of
competition in the future. With respect to our POS payment system products, we
compete primarily on the basis of ease-of-use, product performance, price,
features, quality, the availability of application software programs, the
number of third-party network host and telecommunication system certifications
we have obtained for our products and application programs, rapid development,
release and delivery of software products and customer support and
responsiveness. Software products compete on the basis of functionality,
scalability, quality and support.



| |  |  | In the POS terminal segment, our global competitors are Ingenico, a
France-based company, VeriFone, Inc., a privately-held domestic company, and
Lipman, an Israel-based company. In any particular market, we may also find
ourselves in competition with local or regional manufacturers and distributors.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | In the electronic cash register market, we compete with companies such as
IBM, Siemens, NCR, ICL and Micros.                                                                                                                                                                                                
|
| |  |  | In the specialty network products niche of the marketplace, our primary
competitors are Cisco, 3Com, Motorola and Suntec all of which are U.S.-based.                                                                                                                                                       
|
| |  |  | In the equipment leasing segment, our primary competitors are
MicroFinancial (Leasecomm), Ladco Leasing, CIT Lease Finance Group, and
Northern Leasing.                                                                                                                                                     
|

We often face additional competitive factors in foreign countries,
including preferences for national vendors and difficulties in obtaining
necessary certifications and in meeting the requirements of government
policies. Some of our competitors and potential competitors are more
established, benefit from greater name recognition and have significantly
greater resources than we do. Moreover, there are limited barriers to entry
that could keep our competitors from developing products or services and
technology similar to ours or from selling competing products or services in
our markets.

We are subject to industry and technology changes and are dependent on
development and market acceptance of new products. If we are unable to
adequately respond to these changes and to market demands in a timely manner,
our business will not be successful.

The industry in which we operate is characterized by rapid changes in
technology and numerous new product introductions. Our success, particularly in
this industry, depends to a large degree upon our continued ability to offer
new products and enhancements to our existing products to meet changing market
and industry requirements. The introduction of new products and technologies by
third parties could have an adverse effect on the sales of our existing
products and technologies. We cannot be certain of our ability to successfully:



| |  |  | identify, develop, or manufacture new products and technologies;                                           
| | - |  | -----------------------------------------------------------------------------------------------------------
|
| |  |  | market or support these new products and technologies;                                                     
|
| |  |  | eliminate defects in new products;                                                                         
|
| |  |  | control delays in introducing new products;                                                                
|
| |  |  | gain market acceptance for the new products and technologies; or                                           
|
| |  |  | respond to technological changes, new industry standards, and announcements of new products by competitors.

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Developing new products and technologies is a complex, uncertain process
requiring innovation and accurate anticipation of technological and market
trends. When changes to the product line are announced, we will be challenged
to manage possible shortened life cycles for existing products, continue to
sell existing products and prevent customers from returning existing products.
Our inability to respond effectively to any of these challenges may have a
material adverse effect on our business and financial success. We may suffer
other business and financial losses if we are not successful in marketing new
products and responding to industry changes and new product introductions or
enhancements by our competitors.

We are subject to extensive industry standards and government regulations. Our
failure to properly comply with these standards and regulations could adversely
affect our production and sales.

Our product sales are subject to a substantial and complex array of industry
driven standards and governmental regulation, both domestic and foreign,
including:



| |  |  | industry standards imposed by EuroPay International, Mastercard International, VISA International, and others;
| | - |  | --------------------------------------------------------------------------------------------------------------
|
| |  |  | certification standards required for connection to some public telecommunications networks;                   
|
| |  |  | Federal Communications Commission regulations; and                                                            
|
| |  |  | Underwriters Laboratories regulations.                                                                       

Our failure to properly comply with these standards and regulations could
result in lost product sales, significant costs associated with required
remedial measures or production stoppages, any of which could have a material
adverse effect on our financial condition and future prospects.

Risks Related To Our Common Stock

Certain of our existing stockholders have effective voting control over our
affairs, which substantially limits your rights as a stockholder and may affect
the market value of our stock.

George Wallner and his brother, Paul
Wallner, together owned approximately 40.4%
of our outstanding common stock as of April 4, 2003. Accordingly, the Wallners have the ability to
effectively control our affairs, including the election of our Board of
Directors. They can also, except as otherwise provided by law, approve or
disapprove other matters submitted to a vote of our stockholders, including a
merger, consolidation, or sale of assets. This voting control also may have the
effect of delaying or preventing a change of control of Hypercom and may affect
the price investors are willing to pay in the future for shares of our common
stock.

Our stock price has been and may continue to be volatile.

The market price of our common stock has been, and is likely to continue to be,
volatile. When we or our competitors announce new customer orders or services,
change pricing policies, experience quarterly fluctuations in operating
results, announce strategic relationships or acquisitions, change earnings
estimates, experience government regulatory actions or suffer from generally
adverse economic conditions, our stock price is often affected. Recently,
companies similar to ours have experienced extreme price fluctuations, often
for reasons unrelated to their performance.

We are subject to anti-takeover effects of certain charter and bylaw provisions
and Delaware law.

We have provisions in our certificate of incorporation and bylaws which:



| |  |  | make it more difficult for a third party to acquire control of us,
and discourage a third party from attempting to acquire control of us;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | may limit the price some investors are willing to pay for our common stock;                                                              
|
| |  |  | enable us to issue preferred stock without a vote of our stockholders or other stockholder action;                                       

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| |  |  | provide for a classified Board of Directors and regulate nominations for the Board of Directors;
| | - |  | ------------------------------------------------------------------------------------------------
|
| |  |  | make it more difficult for stockholders to take certain corporate actions; and                  
|
| |  |  | may delay or prevent a change of control.                                                       

These and other provisions of our charter documents, as well as certain
provisions of Delaware law, could delay or make more difficult certain types of
transactions involving a change of control of Hypercom or our management. As a
result, the price of our common stock may be adversely affected.

Our stock price could be affected because a substantial number of shares of our
common stock will be available for sale in the future.

As of May 13, 2003, we had
48,258,759 shares of our common stock outstanding,
all of which were eligible for trading on the New York Stock Exchange. We also
had outstanding, as of May 13, 2003, options and warrants to acquire an
additional 12,864,373 shares of our common stock. All of the shares underlying
the outstanding options and warrants have been registered for resale. Future
public sales of such common stock, or the availability of such shares for sale,
including the shares subject to outstanding options and warrants, could
adversely affect the prevailing market price of our common stock and impair our
ability to raise capital through the sale of additional equity securities.

We do not plan to pay any dividends on our common stock.

We do not anticipate paying any dividends on, or repurchasing shares of, our
common stock for the foreseeable future. Our credit agreements restrict our
ability to pay cash dividends or repurchase our common stock.

Risks Related To Our Indebtedness

Our indebtedness and the restrictions imposed by the terms of our debt could
adversely affect our financial condition and our ability to respond to changes
in our business.

As a result of the terms of our senior secured credit facility:



| |  |  | our vulnerability to adverse general economic conditions and
competitive pressures is heightened;                                                                                                                                                                                                                                       
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | we are and will continue to be governed by restrictive covenants that
require us to maintain certain financial ratios and limit our ability
to, among other things, borrow additional funds, make capital
expenditures, pay dividends, make investments, purchase our stock,
consummate asset sales or conduct mergers and acquisitions;
|
| |  |  | our flexibility in planning for, or reacting to, changes in our
business and industry will be limited;                                                                                                                                                                                                                                  
|
| |  |  | we are sensitive to fluctuations in interest rates because some of
our debt obligations are subject to variable interest rates; and                                                                                                                                                                                                     
|
| |  |  | our ability to obtain additional financing in the future for working
capital, capital expenditures, acquisitions, general corporate purposes
or other purposes may be impaired.                                                                                                                                                         

We cannot assure you that our leverage and such restrictions will not
materially and adversely affect our ability to finance our future operations or
capital needs or to engage in other business activities. In addition, we cannot
assure you that additional financing will be available when required or, if
available, will be on terms satisfactory to us. Further, even if we were able
to obtain additional financing, we may be required to use proceeds to repay a
portion of our debt.

Our loan agreement contains restrictive and financial covenants and, if we are
unable to comply with these covenants, we will be in default. A default could
result in the acceleration of our outstanding indebtedness, which would have an
adverse effect on our business and the price of our common stock.

Our senior secured credit facility contains customary covenants that require us
to maintain certain specified financial ratios and consolidated net worth and
restrict our ability to make certain distributions with respect to our capital
stock, prepay other debt,

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or undertake various other corporate activities. For
example, our senior secured credit facility contains covenants that, subject to
specified exceptions, prohibit us from:



| |  |  | incurring any additional indebtedness;                                                                                       
| | - |  | -----------------------------------------------------------------------------------------------------------------------------
|
| |  |  | incurring or permitting to exist any additional liens on our assets;                                                         
|
| |  |  | engaging in a change of control transaction or other fundamental
change, such as a merger, recapitalization or liquidation;  
|
| |  |  | disposing of our assets, including equipment and inventory, outside the ordinary course of business;                         
|
| |  |  | prepaying or modifying the terms of our existing indebtedness, except in connection with a permitted refinancing;            
|
| |  |  | redeeming, repurchasing or paying dividends or other distributions on our capital stock;                                     
|
| |  |  | engaging in certain transactions with our affiliates;                                                                        
|
| |  |  | failing to maintain specified levels of EBITDA and tangible net worth
and ratios of senior debt and total debt to EBITDA; and
|
| |  |  | issuing or selling any prohibited preferred stock.                                                                           

If we are unable to comply with any of these covenants, we will be in default,
which could cause cross-defaults under other loans or agreements. A default, if
not waived by our lenders, could result in the acceleration of our outstanding
indebtedness and cause our debt to become immediately due and payable. If we
were required to obtain waivers of defaults, we may incur significant fees and
transaction costs. If waivers of defaults are not obtained and acceleration
occurs, we may not be able to repay our debt and we may not be able to borrow
sufficient additional funds to refinance this debt. Even if new financing is
made available to us, it may not be available on acceptable terms.

9