1060801--4/4/2006--CRITICAL_PATH

related topics

{stock, price, operating}

{acquisition, growth, future}

{stock, price, share}

{system, service, information}

{control, financial, internal}

{product, market, service}

{operation, international, foreign}

{property, intellectual, protect}

{customer, product, revenue}

{personnel, key, retain}

{regulation, change, law}

{financial, litigation, operation}

{tax, income, asset}

{cost, operation, labor}

{provision, law, control}

{product, liability, claim}

We have a history of losses, expect continuing losses and may never achieve profitability. Our failure to continue to carefully manage expenses could require us to use substantial resources and cause our operating results to decline. Certain of our cash resources are not readily available for our operations. We may need to raise additional capital and may need to initiate other operational strategies to continue our operations. Our common stock has been delisted from the Nasdaq National Market and thus the price and liquidity of our common stock has been affected and our ability to obtain future financing may be further impaired. The conversion of our preferred stock would result in a substantial number of additional shares of common stock outstanding, which could decrease the price of our common stock. Our preferred stock carries a substantial liquidation preference, which could significantly impact the return to common equity holders upon an acquisition. As the preferred stock accrues dividends, the number of shares of common stock issuable upon conversion will increase, which may increase the dilution to our holders of common stock and further decrease the price of our common stock. We may be unable to grow our business through effective sales and marketing, which could cause our operating results to decline. We have identified material weaknesses in our disclosure controls and procedures and our internal control over financial reporting, which, if not remedied effectively, could have an adverse effect on the trading price of our common stock and otherwise seriously harm our business. Failure or circumvention of our controls and procedures could seriously harm our business. Due to our evolving business strategy and the nature of the markets in which we compete, our future revenues are difficult to predict and our quarterly operating results may fluctuate. We have in the past, and will continue in the future, to evaluate the performance of our business operations and, where appropriate, invest further in certain business operations, and reduce investment in or divest other business operations. A limited number of customers and markets account for a high percentage of our revenues and if we lose a major customer, are unable to attract new customers, or the markets which we serve suffer financial difficulties, our revenues could decline. Our sales cycle is lengthy, and any delays or cancellations in orders in a particular quarter could cause our operating results to be below expectations, which may cause our stock price to decline. If we are unable to successfully compete in our product market, our ability to retain our customers and attract new customers could decline. We depend on strategic relationships with our customers and others and the loss of such relationships could cause our revenues to decline. We may not be able to respond to the rapid technological change of the messaging industry. We have experienced significant turnover of senior management and our current management team has been together for a limited time, which could slow the growth of our business and cause our operating results to decline. We may experience difficulty in attracting and retaining key personnel, which may negatively affect our ability to develop new products or services or retain and attract customers. If we are not successful in implementing strategic plans for our operations, our expenses may not be offset by our corresponding sales and our financial results could significantly decline. The debt and significant equity ownership by the General Atlantic Investors and the Cheung Kong Investors may limit the ability of our other shareholders to influence significant corporate decisions which could delay or prevent a change of control or depress our stock price. The debt and significant equity ownership by the General Atlantic Investors and the Cheung Kong Investors may result in potential conflicts of interests, which could adversely affect the holders of our common stock, delay a change in control and depress our stock price. We may experience a decrease in market demand due to concerns of international terrorism, war and social and political instability. We currently license many third-party technologies and may need to license further technologies, which could delay and increase the cost of product and service developments. Unplanned system interruptions and capacity constraints could reduce our ability to provide services and could harm our business reputation. Changes in the regulatory environment for the operation of our business or those of our customers could pose risks. We may have liability for Internet content and we may not have adequate liability insurance. Unknown software defects could disrupt our services and harm our business and reputation. If our system security is breached, our reputation could suffer and our revenues could decline. We rely on trademark, copyright, trade secret laws, contractual restrictions and patents to protect our proprietary rights, and if these rights are not sufficiently protected, our ability to compete and generate revenue could be harmed. Our proprietary rights may not be adequately protected because: If we do not successfully address the risks inherent in the conduct of our international operations, our revenues and financial results could decline. The use of our net operating losses (NOLs) could be limited if an ownership change occurred during the preceding three-year period. Changes in accounting rules for employee stock options could significantly impact our GAAP financial results. Our stock price has demonstrated volatility and overall declines during recent quarters and continued volatility in the stock market may cause further fluctuations and/or decline in our stock price. A decline in our stock price could result in securities class action litigation against us that could divert management s attention and harm our business. Our articles of incorporation and bylaws contain provisions that could delay or prevent a change in control. Limitations of our director and officer liability insurance may cause us to use our capital resources, which could cause our financial results to decline or slow our growth.

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1060801--4/4/2006--CRITICAL_PATH_INC