1377720--4/15/2008--CYBERDEFENDER

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{stock, price, share}

{product, market, service}

{stock, price, operating}

{control, financial, internal}

{property, intellectual, protect}

{system, service, information}

{interest, director, officer}

{personnel, key, retain}

{regulation, change, law}

{cost, contract, operation}

{debt, indebtedness, cash}

{provision, law, control}

Risks Related to Our Business We have been in business only since August 2003. Our limited operating history makes evaluation of our business difficult. We incurred net losses for four of our last five fiscal years. If we continue to incur losses for a significant amount of time, the value of your investment could be adversely affected and you could even lose your entire investment. As of March 28, 2008 we had approximately $236,000 in cash. We believe that we can continue to operate through 2008 with this cash, the proceeds from offerings we undertake and the revenues we generate from our suite of Internet security products. In order to meet our financial obligations for a period of 12 months, we will need an additional $1,100,000. If we are not able to raise additional funds by 2008, our business could be adversely affected. We market our product through search engines (for example, Google, Yahoo! and MSN), e-mail and banner advertising and affiliate marketing. If we fail to market our product effectively, our sales could decline and our results of operations would be adversely affected. If we cannot find businesses willing to advertise inside our ad-supported software, we may not achieve our revenue targets and our business and results of operations will be adversely affected. We face intense competition from other providers of Internet security software. If we cannot offer consumers a reason to use our software instead of the software marketed by our competitors, our business and the results of our operations will be adversely affected. If we are unable to develop new and enhanced Internet security products, such as products that protect devices like mobile telephones or PDAs, our operating results could be adversely affected. Because of the constant development of new or improved products in the software industry, we must continually update our products or create new products to keep pace with the latest advances. While we do our best to test these products prior to their release, they may nevertheless contain significant errors and failures, which could adversely affect our operating results. Our ability to effectively recruit and retain qualified officers and directors could be adversely affected if we experience difficulty in obtaining directors' and officers' liability insurance. Loss of any of our key management personnel, particularly Gary Guseinov, could negatively impact our business and the value of our common stock. To date, our business has been developed assuming that laws and regulations that apply to Internet communications and e-commerce will remain minimal. Changes in government regulation and industry standards may adversely affect our business and operating results. Our business is the development and distribution of software. If we do not protect our proprietary information and prevent third parties from making unauthorized use of our technology, our business could be harmed. Third parties claiming that we infringe their proprietary rights could cause us to incur significant legal expenses and prevent us from selling our products. Risks Related to Ownership of Our Securities The holders of our 10% Secured Convertible Debentures and 7.41% Senior Secured Notes have a security interest in all of our assets. If we were to fail to pay these obligations as required, or any other event of default set forth in the debt securities were to occur, these investors could foreclose on their security interest and your securities could become worthless. Holders of our 10% Secured Convertible Debentures have anti-dilution rights that are triggered by a disposition of our common stock at a price per share that is lower than the conversion price of the debt securities. These rights are not available to the holders of our common stock. If future issuances of our common stock trigger the anti-dilution rights, your investment in our common stock would be diluted to the extent such convertible debentures are converted. Our common stock began to be quoted on the OTC Bulletin Board on August 2, 2007. We cannot assure you that an active public trading market for our common stock will develop or be sustained. Even if a market develops, you may be unable to sell at or near ask prices or at all if you need to sell your shares to raise money or otherwise desire to liquidate your shares. Our common stock is considered a penny stock . The application of the penny stock rules to our common stock could limit the trading and liquidity of the common stock, adversely affect the market price of our common stock and increase your transaction costs to sell those shares. The stock market in general and the market prices for penny stocks in particular, have experienced volatility that often has been unrelated to the operating performance of such companies. These broad fluctuations may be the result of unscrupulous practices that may adversely affect the price of our stock, regardless of our operating performance. Our executive officers and directors, along with their friends and family, own or control approximately % of our outstanding common stock, which may limit the ability of our shareholders, whether acting alone or together, to influence our management. Additionally, this concentration of ownership could discourage or prevent a potential takeover that might otherwise result in our shareholders receiving a premium over the market price for our common stock. We do not expect to pay dividends for the foreseeable future, and we may never pay dividends. Limitations on director and officer liability and our indemnification of officers and directors may discourage shareholders from bringing suit against a director. Future sales of our common stock could put downward selling pressure on our shares, and adversely affect the stock price. There is a risk that this downward pressure may make it impossible for an investor to sell his shares at any reasonable price, if at all. The OTC Bulletin Board is an electronic quotation system, not an issuer listing service, market or exchange. Therefore, buying and selling stock on the OTC Bulletin Board is not as efficient as buying and selling stock through an exchange. As a result, it may be difficult for you to sell your common stock or you may not be able to sell your common stock for an optimum trading price.

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1377720--4/15/2008--CYBERDEFENDER_CORP