1127439--12/14/2006--INTAC_INTERNATIONAL

related topics

{operation, international, foreign}

{cost, operation, labor}

{customer, product, revenue}

{product, market, service}

{regulation, change, law}

{control, financial, internal}

{stock, price, share}

{system, service, information}

{competitive, industry, competition}

{operation, natural, condition}

{stock, price, operating}

{acquisition, growth, future}

{property, intellectual, protect}

{interest, director, officer}

{product, liability, claim}

{condition, economic, financial}

{investment, property, distribution}

{regulation, government, change}

{provision, law, control}

{personnel, key, retain}

{financial, litigation, operation}

{product, candidate, development}

{loss, insurance, financial}

{cost, contract, operation}

Risks Related to our Proposed Merger with HSW International and the Combined Company The failure to close, in a timely manner or at all, the merger between us and HSW International, or any negative market perception of the merger may adversely affect our business and the market price of our common stock. Whether or not the merger is consummated, the announcement and pendency of the merger could cause disruptions in our business, which could have an adverse effect on our business and financial results. We will incur significant costs associated with the merger whether or not the merger is consummated. The combined company may not realize the intended benefits of the merger if the combined company does not integrate our operations and assets with the contributed assets in a timely and efficient manner. The combined company expects to incur substantial expenses related to the integration of the contributed assets. The combined company may not succeed in marketing and selling the contributed assets to potential customers or developing strategic partnerships for the distribution of its products and services. Resales of the combined company s common stock following the merger and additional obligations to issue the combined company s common stock may cause the market price of that stock to fall. Risks Related To Our Business We need additional working capital, the lack of which would likely have a significant negative impact on our long-term business plan and our ability to take advantage of our strategic alliances and to successfully execute our expansion plan. We are an early stage company and therefore our business and prospects are difficult to evaluate. The growth we seek is rare. We are controlled by Wei Zhou, our Chief Executive Officer. We depend, almost entirely, on the services of Mr. Zhou. We depend on other key personnel and our business may be severely disrupted if we lose the services of our other key executives and employees. The enacted and proposed changes in securities laws and regulations are likely to increase our costs. Our internal control over financial reporting and our disclosure controls and procedures may not prevent all possible errors that could occur. Material weaknesses existed at September 30, 2005 ith our internal control over financial reporting. Internal control over financial reporting and disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system s objective will be met. Risks Related to our Career Development and Training Services Many of our products and services in the career development and training services segment are new and unproven and we may not be able to implement them profitably or at all. Because we face significant competition, including intense competition in several of our markets, we may lose market share and our results of operations may be materially and adversely affected. A significant delay by the PRC government in issuing 3G telecommunications licenses to telecommunications services providers may materially and adversely affect the implementation of our business strategy in the mobile telecommunications training area. If we fail to effectively identify, establish and operate new institutes, to license our courseware, or to gain acceptance of our corporate training in the marketplace, our growth may be slowed and our profitability may be impaired. Our financial performance depends, in part, on our ability to continue to develop awareness and acceptance of our programs among high school graduates and working adults. We rely on our exclusive relationship with the MOE and the EMIC to ensure the success of the career development and training services segment. Risks Related to the Internet and Our Technology Infrastructure The state of the telecommunications and Internet infrastructure in China may limit our growth. Our operations are vulnerable to natural disasters and other events, as we only have limited backup systems and do not maintain any backup servers outside of China. Our network operations may be vulnerable to hacking, viruses and other disruptions, which may make our products and services less attractive and reliable. Unauthorized use of our intellectual property by third parties, and the expenses incurred in protecting our intellectual property rights, may adversely affect our business. We may be subject to intellectual property infringement claims, which may force us to incur substantial legal expenses and, if determined adversely against us, materially disrupt our business. Risks Related To the Distribution Industry Our efficient distribution business model may not continue to be successful, which could result in the need to quickly change our growth strategy or business plan. We are a small player in a highly competitive environment. We are dependent on a single supplier and do not maintain sufficient redundant sources of supply at this time. Our largest customer represents a majority of our distribution business and our success depends, in significant part, on our ability to retain this customer. We are subject to risks of customers defaulting on payments due. We do not have any vendor or customer contracts for new premium wireless handsets, which renders our supply and distribution channels particularly unstable. Our distribution business operates on a low-margin basis, and our margins may be reduced in the future. We are subject to risks of inventory price declines and obsolescence. If we experience problems in our distribution operations, we could lose customers. New technologies may reduce the demand for our products. We may become subject to suits alleging medical risks associated with our wireless handsets. Risks Attributable To International Operations A slowdown or other adverse developments in the PRC economy may materially and adversely affect our customers, demand for our services and our business. PRC laws and regulations related to the PRC Internet sector are unclear and will likely change in the near future. If we are found to be in violation of current or future PRC laws or regulations, we could be subject to severe penalties. Our international operations subject us to other significant risks. Political, Economic and Regulatory Risks Restrictions on currency exchange may limit our ability to utilize our revenues effectively. We are subject to risks of currency fluctuations and exchange restrictions. Regulation and censorship of information collection and distribution in China may adversely affect our business. Political and economic policies of the PRC government could affect our business. The PRC legal system embodies uncertainties which could limit the legal protections available to us. It may be difficult to enforce any civil judgments against us or our board of directors or officers, because most of our assets are located outside of the United States. Risks Related to the Market for Our Common Stock Because of factors unique to us and our forecast of anticipated financial performance, the market price of our common stock is likely to be particularly volatile. The market price of our common stock has been and will likely continue to be volatile. The sale or availability for sale of substantial amounts of our common stock could adversely affect its market price. Anti-takeover provisions of Nevada Law, our certificate of incorporation and bylaws could delay or deter a change in control. The power of our board of directors to designate and issue shares of preferred stock could have an adverse effect on holders of our common stock.

Full 10-K form ▸

1127439--12/14/2006--INTAC_INTERNATIONAL_INC