1365295--6/28/2007--Hostopia.com

related topics

{product, market, service}

{system, service, information}

{personnel, key, retain}

{stock, price, operating}

{regulation, change, law}

{property, intellectual, protect}

{control, financial, internal}

{acquisition, growth, future}

{operation, international, foreign}

{stock, price, share}

{customer, product, revenue}

{condition, economic, financial}

Loss of significant customers could significantly decrease our revenues. Our revenue and profit depend upon retention and growth of our customer base as well as their end-user base. Our recent profitability may not be sustained. We may not be able to sustain our average revenue and profitability per customer or end-user. We may not be able continue our growth. We face intense and growing competition not only from other private-label, wholesale web hosting providers, but also from our customers and our customers competitors. If we are unable to compete successfully, our market share will decline and our business will be seriously harmed. We operate in multiple tax jurisdictions and have recently become taxable in most of them and face the risk of double taxation if one jurisdiction does not acquiesce to the tax claims of another jurisdiction. We rely on the reliability, security, and performance of our internally developed systems and operations, and any difficulties in maintaining these systems may result in service interruptions, decreased customer and end-user service, or increased expenditures. We may not be able to integrate our new hardware and software successfully and our reliability, reputation and revenues could suffer. If our security systems are breached we could incur liability, our services may be perceived as not being secure, and our business and reputation could suffer. Our business depends in part on our ability to continue to provide value added services, many of which are dependent upon a single related party contractor, and our business will be harmed if we are unable to provide these services in a cost-effective manner. Most of our Web services are sold by our customers on a month-to-month basis to end-user businesses and, if such businesses are either unable or unwilling to subscribe to our Web services, our revenue may decrease. If economic or other factors negatively affect the small and medium-sized business sector, end-users may become unwilling or unable to purchase our Web services, which could cause our revenue to decline and impair our ability to operate profitably. We may expand through acquisitions of, or investments in, other companies or technologies, which may result in additional dilution to our stockholders and consume resources that may be necessary to sustain our business. Likely fluctuations in our financial results may make it difficult to predict our future performance and may result in volatility in the market price of our common stock. The systems and data centers we use are vulnerable to natural disasters and other unexpected problems that could lead to interruptions, delays, loss of data, or the inability to accept and fulfill end-user subscriptions. We may be unable to respond to the rapid technological changes in our industry and our attempts to respond may require significant capital expenditures. The provision of Web services to small and medium sized businesses which are designed to allow them to establish and maintain an Internet presence is a new and emerging market; if this market fails to develop, we will not be able to grow our business. We may be unable to protect our intellectual property adequately or cost-effectively, which may cause us to lose market share or force us to reduce our prices. We are dependent on our executive officers and our specialized workforce, and the loss of any key member of this team may compromise our ability to manage our business and pursue our growth strategy successfully. Our growth will be adversely affected if we cannot successfully retain, hire, train and manage our key employees, particularly in the sales and customer service areas. Changes in pricing of bandwidth could have an adverse effect on margins. If agreements with third party suppliers, including bandwidth and software suppliers, are terminated or materially altered, we may not be able to offer our Web services profitably. Our Web services are dependent upon open source software which exposes us to uncertainty and potential liability. Currency fluctuations may adversely affect our revenue and profitability. The success of our business depends on the continued growth of the Internet as a business tool for small and medium-sized businesses. We could become subject to litigation regarding intellectual property brought by other parties, which could divert management s attention, increase our legal expenses and prevent us from using or selling the challenged technology. Governmental regulation involving the transmission of information over the Internet is evolving, and we may face liability in connection with the information that is transmitted using our Web services. Governments may in the future levy taxes on Internet access and electronic commerce transactions, which could result in a decrease in the attractiveness of the Internet to our customers and potential customers, and could reduce demand for our Web services. Our management has limited experience in managing and operating a public company. Any failure to comply or adequately comply with federal securities laws, rules or regulations could subject us to fines or regulatory actions, which may materially adversely affect our business, results of operations and financial condition. Our former Chairman controls a significant portion of our outstanding common stock and he has indicted his intentions to reduce his holdings which could cause our share price to decline.. Limited liquidity in our common shares could result in a lower price We are exposed to potential risks from recent legislation requiring public companies to evaluate controls under Section 404 of the Sarbanes-Oxley Act of 2002.

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1365295--6/28/2007--Hostopia.com_Inc.