1104855--3/16/2007--SUPPORTSOFT

related topics

{system, service, information}

{property, intellectual, protect}

{customer, product, revenue}

{regulation, change, law}

{product, market, service}

{control, financial, internal}

{stock, price, operating}

{condition, economic, financial}

{personnel, key, retain}

{capital, credit, financial}

{acquisition, growth, future}

{financial, litigation, operation}

{regulation, government, change}

{tax, income, asset}

{operation, international, foreign}

We were not profitable in 2006 and will continue to sustain a loss in the foreseeable future. Our quarterly results have in the past, and may in the future, fluctuate significantly. Our inability to meet future financial performance targets that we announce or that are published by research analysts could cause the market price of our common stock to decline. Because a small number of customers have historically accounted for and may in future periods account for substantial portions of our revenue, our revenue could decline because of delays or losses of specific customer orders. Our sales cycle is lengthy and if revenue forecasted for a particular quarter is not realized in that quarter, significant expenses incurred may not be offset by corresponding revenue. Our recently announced consumer technology support initiative will increase operating expenses without any assurance of yielding increased revenue. Our future product and service offerings may not achieve market acceptance. If our existing customers do not renew maintenance contracts or purchase additional products and services, our operating results could suffer. We are seeking to increase our international revenues and if our revenue from this effort does not exceed the expense of establishing and maintaining international operations, our business could suffer. Our operating results will suffer if we do not expand and manage our professional services organization effectively. Our failure to establish and expand third-party alliances would harm our ability to sell our software and provide our services. We may engage in investments or acquisitions or other strategic matters that could divert management attention and prove difficult to integrate with our business. We must compete successfully in the market for software and services that resolve technology problems or our business will suffer. The loss of key personnel and the integration of new management may affect our ability to achieve our business goals. Our exposure to the credit risks of our customers and resellers could adversely affect our operating results and financial condition. Our products depend on and work with products containing complex software, and if our products fail to perform properly due to errors in the software, we may need to devote resources to correct the errors or compensate for losses from these errors and our reputation could be harmed. Our software may not operate with the hardware and software platforms that are used by our customers now or in the future, and, as a result, our business and operating results may suffer. We rely on third-party technologies and our inability to use or integrate third-party technologies could delay product or service development. Our system security is important to our customers and we may need to spend significant resources to protect against or correct problems caused by security breaches. Our reported results of operations will continue to be materially and adversely affected by our adoption of SFAS 123R. If we are unable to successfully address the material weakness in our disclosure controls and procedures or otherwise maintain effective disclosure controls and procedures, including our internal control over financial reporting, our ability to report our financial results on a timely and accurate basis may be adversely affected. We have recorded long-lived assets, and our results of operations would be adversely affected if their value becomes impaired. Failure to resolve pending securities claims and other lawsuits may lead to continued costs and expenses and divert management s attention from our business, which could cause our revenue and our stock price to decline. Privacy concerns and laws or other domestic or foreign regulations may reduce the effectiveness of our solutions or harm our reputation and cause us to lose customers. We may not obtain sufficient patent protection, which could harm our competitive position, increase our expenses and harm our business. We rely upon patents, trademarks, copyrights and trade secrets to protect our proprietary rights and if these rights are not sufficiently protected, it could harm our ability to compete and to generate revenue. We may face intellectual property infringement claims that could be costly to defend and result in our loss of significant rights. If the growth of demand for digital services does not continue, our ability to increase our revenue could suffer. We may experience a decrease in market demand due to uncertain economic conditions in the United States and in international markets, which has been further exacerbated by the concerns of terrorism, war and social and political instability. We may be required to change our business practices if there are changes in accounting regulations and related interpretations and policies. New rules and regulations for public companies have increased and may continue to increase our administrative costs.

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1104855--3/16/2007--SUPPORTSOFT_INC