1062530--2/29/2008--DIGITAL_RIVER_INC

related topics

{system, service, information}

{acquisition, growth, future}

{tax, income, asset}

{regulation, change, law}

{financial, litigation, operation}

{product, market, service}

{property, intellectual, protect}

{stock, price, operating}

{cost, regulation, environmental}

{operation, international, foreign}

{interest, director, officer}

{provision, law, control}

{control, financial, internal}

{competitive, industry, competition}

{personnel, key, retain}

{cost, contract, operation}

{regulation, government, change}

We intend to continue to expand our international operations and these efforts may not be successful in generating additional revenue. Our operating results are subject to fluctuations in demand for products and services offered by us or our clients. New obligations to collect or pay transaction taxes could substantially increase the cost to us of doing business. We could be liable for fraudulent, improper or illegal uses of our platforms. Loss of our credit card acceptance privileges would seriously hamper our ability to process the sale of merchandise. Our failure to attract and retain software and digital products publishers, manufacturers, online retailers and online channel partners as clients would cause our revenue and operating profits to decline. The matters relating to the investigation by the Special Committee of the Board of Directors and the restatement of our consolidated financial statements may result in additional litigation and governmental enforcement actions. Activities related to our internal review of historical stock option practices have required us to incur substantial expenses for legal, accounting, tax and other professional services, have diverted management s attention from our business, and could, in the future, harm our business, financial condition, results of operations and cash flows. We may incur additional expenses in order to assist our employees with potential income tax liabilities which may arise under Section 409A of the Internal Revenue Code. Implementing our acquisition strategy could result in dilution and operating difficulties leading to a decline in revenue and operating profit. We may need to raise additional capital to achieve our business objectives, which could result in dilution to existing investors or increase our debt obligations. Our operating results have fluctuated in the past and are likely to continue to do so, which could cause the price of our common stock to be volatile. Security breaches could hinder our ability to securely transmit confidential information. Claims of infringement of other parties intellectual property rights could require us to expend significant resources, enter into unfavorable licenses or require us to change our business plans. Claims against us related to the software products that we deliver electronically and the tangible goods that we deliver physically could require us to expend significant resources. If our internal control over financial reporting or disclosure controls and procedures are not effective, there may be errors in our financial statements that could require a restatement or our filings may not be timely and investors may lose confidence in our reported financial information, which could lead to a decline in our stock price. Because the e-commerce industry is highly competitive and has low barriers to entry, we may be unable to compete effectively. Changes in government regulation could limit our Internet activities or result in additional costs of doing business over the Internet. Failure to develop our technology to accommodate increased traffic could reduce demand for our services and impair the growth of our business. System failures could reduce the attractiveness of our service offerings. We may become liable to clients who are dissatisfied with our services. We depend on key personnel. Protecting our intellectual property is critical to our success. Our clients sales cycles are lengthy, which may cause us to incur substantial expenses and expend management time without generating corresponding consumer revenue, which would impair our cash flow. The listing of our network addresses on anti-spam lists could harm our ability to service our clients and deliver goods over the Internet. We are subject to regulations relating to consumer privacy. Compliance with future laws imposed on e-commerce may substantially increase our costs of doing business or otherwise adversely affect our ability to offer our services. We are exposed to foreign currency exchange risk. Changes in our tax rates could affect our future results. Developments in accounting standards may cause us to increase our recorded expenses, which in turn would jeopardize our ability to demonstrate sustained profitability. Internet-related stock prices are especially volatile and this volatility may cause our stock price to fluctuate significantly. Provisions of our charter documents, other agreements and Delaware law may inhibit potential acquisition bids for us.

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1062530--2/29/2008--DIGITAL_RIVER_INC_/DE