1283073--4/1/2008--Answers

related topics

{system, service, information}

{acquisition, growth, future}

{control, financial, internal}

{regulation, change, law}

{product, market, service}

{stock, price, operating}

{property, intellectual, protect}

{personnel, key, retain}

{provision, law, control}

{stock, price, share}

{operation, international, foreign}

{customer, product, revenue}

{cost, contract, operation}

{regulation, government, change}

{financial, litigation, operation}

{condition, economic, financial}

{investment, property, distribution}

Risks Relating to our Business We have incurred significant and continuing net losses since our inception and may If search engines alter their algorithms or methods or otherwise restrict the flow of users visiting our Web properties, our business and financial results could suffer. We depend on Google to direct traffic to Answers.com through its definition link, and the loss of this source of traffic could significantly reduce our ad revenues and adversely affect our business and financial results. If our GSA is terminated by Google, we would have to seek an alternative provider of listings and advertisements, which could adversely affect our business and financial If in the interest of improving user experience and user satisfaction, we decide to decrease the number of ad elements displayed on our Web properties, our advertising revenues will decline and our financial results will be adversely impacted. The failure of WikiAnswers to grow in accordance with our expectations could have an adverse impact on our business and financial results. If Internet users do not interact with our WikiAnswers Web property frequently or if we fail to attract new users to the service, our business and financial results will If we are unable to improve and maintain the quality of content being contributed to WikiAnswers, the Web property will become less valuable to the users, less popular as a destination for obtaining answers to questions and its growth will be negatively affected, which in turn could adversely impact our financial results. If we are unable to attract and retain dedicated supervisors for WikiAnswers for the administration of the Web property and the encouragement of the community s expansion, our plans for growing WikiAnswers may fail and our results of operations Our direct ad sales efforts may suffer if advertisers do not find our Web properties to be effective for promoting their products and services, which could have an adverse effect on our business and financial results. Components of our business and operations are experiencing rapid growth. If we fail to effectively manage our growth, our business and operating results could be harmed. We have a short operating history and a relatively new business model in an emerging and rapidly evolving market. This makes it difficult to evaluate our future prospects and may increase the risks that we will not continue to be successful and that our We may not be able to obtain capital when desired on favorable terms, if at all, or without dilution to our stockholders. We generate our revenue almost entirely from advertising so uncertainties in the Internet advertising market and our failure to increase advertising inventory on our Web properties could adversely affect our ad revenues. New technologies could block Internet ads, which could harm our financial results. We face significant competition from search engines, destination portals and other free reference and industry-specific Web properties that could adversely impact our Our failure to generate direct traffic to our Web properties could adversely affect our business and financial results. Traffic to our Web properties and advertising demand fluctuates significantly on a seasonal basis, which impacts our operations from quarter to quarter. Our operating results may fluctuate, which makes our results difficult to predict and could cause our results to fall short of expectations. Our partnerships and revenue-sharing arrangements with third-parties may not be renewed or continued, which could impact our credibility in the marketplace, which could adversely affect our traffic and revenues. We may not be successful in expanding our business through acquisitions, business combinations and other transactions, and, even if we are successful, our operations may be adversely affected as a result of these transactions. If we fail to maintain and enhance awareness of our Web properties, our business and financial results could be adversely affected. Our failure to offer compelling content and provide our users with quality information could result in lost revenue, as a result of a loss of users If we are unable to maintain and expand our computer and communications systems, then interruptions and failures in our services could result, making our services less attractive to consumers and subjecting us to lost revenue from the loss of users and If we were to lose the services of our key personnel, we may not be able to execute our business plan and our business could be adversely affected. Our business depends on increasing use of the Internet by users searching for information, advertisers marketing products and services and Web properties seeking to earn revenue to support their web content. If the Internet infrastructure does not grow and is not maintained to support these activities, our business will be harmed. Rules established by the Financial Accounting Standards Board, or FASB, require us to expense equity compensation given to our employees and may impact our ability to effectively utilize equity compensation to attract and retain employees. We may be subject to liability for online services, which may not be limited by the safe harbors in The Digital Millennium Copyright Act, or DMCA, The Communications Decency Act, or CDA, or the U.S. Children s Online Privacy Protection Act, or COPPA. If we do not meet the safe harbor requirements, or if it is otherwise determined that our Web properties contain actionable content, we could be subject to claims, which could be costly and time-consuming to defend. Third parties may claim that we are infringing on their patents, trademarks or copyrights, which could result in substantial costs, diversion of significant managerial resources and significant harm to our reputation. Misappropriation of our intellectual property could harm our reputation, adversely affecting our competitive position and financial results. New government regulation and legal uncertainties could require us to incur Risks Related to our Common Stock We have a limited number of common shares available for future issuance which could adversely affect our ability to raise capital or consummate acquisitions. Our common stock may be affected by limited trading volume and may fluctuate There may be substantial sales of our common stock, which could cause our stock price We do not intend to pay dividends on our common stock. We could issue blank check preferred stock without stockholder approval with the effect of diluting then current stockholder interests. Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable. We are at risk of securities class action litigation. We have determined that we have material weaknesses in our internal control over financial reporting. As a result, current and potential stockholders could lose confidence in our financial reporting, which could harm our business and trading price of our stock. Material weaknesses in our internal controls may impede our ability to produce timely and accurate financial statements, which could cause us to fail to file our periodic reports timely, result in inaccurate financial reporting or restatements of our financial statements, subject our stock to delisting and materially harm our business reputation and stock price. Risks Related to our Location in Israel Conditions in Israel may limit our ability to produce and sell our product, which would lead to a decrease in revenues. We may not be able to enforce covenants not-to-compete under current Israeli law that might result in added competition for our products. The Israeli government tax benefits program in which we currently participate and from which we receive benefits requires us to meet several conditions. These programs or benefits may be terminated or reduced in the future, which may result in an increase in our tax liability. U.S. and Israeli tax authorities may interpret tax issues in manners other than those which we have adopted, which may expose us to tax liabilities. Our business may be impacted by NIS exchange rate fluctuations, which may negatively

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1283073--4/1/2008--Answers_CORP