1125536--5/1/2007--CONVERA

related topics

{control, financial, internal}

{property, intellectual, protect}

{system, service, information}

{product, market, service}

{stock, price, operating}

{operation, international, foreign}

{regulation, government, change}

{regulation, change, law}

{provision, law, control}

{personnel, key, retain}

{tax, income, asset}

{stock, price, share}

We have had a history of operating losses and will likely incur future losses; if our losses continue and we are unable to achieve profitability, our stock price will likely suffer. Our ability to achieve profitability is highly dependent on our Excalibur Web offering and if Excalibur fails to achieve market acceptance we will be unable to grow our business and achieve profitability. We experience quarterly fluctuations in our operating results, which may adversely affect our stock price . We are in an extremely competitive market, and if we fail to compete effectively or respond to rapid technological change, our revenues and market share will be adversely affected. We design our products to work with certain systems and changes to these systems may render our products incompatible with these systems, and we may be unable to sell our products. Our software products are complex and may contain errors that could damage our reputation, decrease sales and delay product development and enhancement. We derive a significant portion of our revenues from sales to U.S. Government agencies, which are subject to budget cuts and, consequently, a change in the size and timing of our U.S. Government contracts may materially affect our operating results. As a U.S. Government contractor, we are subject to a number of procurement rules and regulations. We depend on international sales, particularly in the United Kingdom, and any economic downturn, changes in laws, changes in currency exchange rates or political unrest in the United Kingdom or in other countries could have a material adverse effect on our business. Our Excalibur Web offering relies on a third party hosting facility, and any failure or interruption in the services provided by this third party could harm our ability to operate our business and damage our reputation. We depend on proprietary technology licensed from third parties; if we lose these licenses, it could delay shipments of products incorporating this technology and could be costly. Because of the technical nature of our business, our intellectual property is extremely important to our business, and adverse changes to our intellectual property could harm our competitive position. We may in the future be subject to intellectual property rights claims, which are costly to defend and could require us to pay damages and could limit our ability to use certain technologies in the future. We depend on our key personnel, the loss of whom would adversely affect our business, and we may have difficulty attracting and retaining skilled employees. Our stock price may fluctuate which may make it difficult to resell shares of our stock. We may not be able to use net operating loss carryforwards. Our amended and restated certificate of incorporation, bylaws, ownership and Delaware law contain provisions that could discourage a third party from acquiring us and consequently decrease the market value of an investment in our stock. Allen Holding Inc. and related parties exercise voting control over a significant percentage of our outstanding shares, and our other shareholders may not have an effective say in any matters upon which our shareholders vote. Legislative actions and potential new accounting pronouncements are likely to impact our future financial position or results of operations. Our internal controls may not be sufficient to achieve all stated goals and objectives. We may be subject to regulatory scrutiny and sustain a loss of public confidence if we are unable to satisfy regulatory requirements relating to our internal controls over financial reporting and/or we have internal control weaknesses which result in material financial reporting errors.

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1125536--5/1/2007--CONVERA_CORP