768892--3/27/2007--HEALTHAXIS

related topics

{regulation, government, change}

{regulation, change, law}

{system, service, information}

{customer, product, revenue}

{financial, litigation, operation}

{control, financial, internal}

{acquisition, growth, future}

{property, intellectual, protect}

{stock, price, share}

{provision, law, control}

{investment, property, distribution}

{cost, contract, operation}

{gas, price, oil}

{personnel, key, retain}

{product, market, service}

Because we have a history of operating losses, it is difficult to evaluate our future prospects and to know when, if ever, Healthaxis will become consistently profitable. A small number of clients account for a substantial portion of our business, and the loss of any one of them could have an adverse impact on our business and financial condition. Some of our client contracts contain a fixed-price component or minimal start-up fees, and because we sometimes incur costs in excess of our projections, we could experience decreased operating margins or increased operating losses. Our competitors may be more successful in attracting customers, which could result in decreased sales, a loss of revenue and a decrease in the value of our common stock. Undetected errors in our application solutions or our data capture services could detract from the reliability and quality of our information systems, which, in turn, could result in decreased sales, liability for damage claims and a negative impact on our results of operations. Our future success significantly depends on the experience of our executive officers and key personnel, and the departure of several of them could impair our ability to do business and otherwise negatively impact the price of our common stock. Our reliance on third party vendors could place us at risk for increased expenses, failure to meet our contractual obligations, and/or lost clients. If we are unable to protect our proprietary technology, our competitors could use our proprietary technology to compete against us, which could negatively impact our revenues and otherwise result in our engaging in costly litigation. We may be subject to intellectual property infringement claims that could result in costly litigation and losses or decreased revenues. Our failure to meet performance standards described in our service agreements could result in the termination of those agreements, the loss of other business and the imposition of penalties, any of which, in turn, could lead to decreased revenues and larger losses. Our Jamaican operations could subject us to additional risks, including problems enforcing legal rights, expropriation, political or social instability, labor difficulties and tropical storms. If we encounter any of these problems in Jamaica, it is possible that our operations would be disrupted, that we would incur higher expenses and that we could fail to meet our contractual obligations owed to customers and other third parties. Our current and prospective customers may become reluctant to allow us to perform processing services in our Jamaican facility or through our India operations, thereby forcing us to relocate these services on-shore, which could increase our costs. Acquisitions, which are part of our long-term business strategy, involve inherent risks that could compromise the success of our business and dilute the holdings of current shareholders. In order to achieve and maintain compliance with federal securities regulations, such as the Sarbanes-Oxley Act of 2002 and the corporate governance rules of The Nasdaq Stock Market, we are required to expend financial and managerial resources that increase our expense. If we fail to maintain an effective system of internal controls in the future, we may not be able to accurately report our financial results or prevent fraud. As a result, investors may lose confidence in our financial reporting. Internet and Health Insurance Industry Related Risks The substantial time required for us to convert a business opportunity into revenue depresses our potential near term growth rate. When we provide web-based solutions, we are exposed to potential Internet access problems, which could adversely affect some of our software hosting services and negatively impact our operating results. Changes in the regulation or taxation of the Internet could depress our revenues and increase our operating expenses. In order to maintain compliance with applicable insurance regulations, we may need to expend financial and managerial resources that could increase our expenses. If our software is not in compliance with HIPAA, then we could lose business; and if our internal operations are not HIPAA-compliant, then we could face possible liability claims. The insolvency of our customers, or the inability of our customers to pay for our services, would adversely affect our revenues and, hence, our results of operations. The consolidation of health insurance payer organizations and benefits administrators could decrease the number or the size of our existing and potential customers, which could depress our revenue prospects. Changes in government regulation of the healthcare industry could increase our expenses and otherwise adversely affect our clients businesses, which could, in turn, adversely affect our business. Capital Structure and Trading Market Risks The shares of common stock and warrants to purchase shares of common stock currently held by Tak Investments, Inc. ( Tak Investments ) could enable Tak Investments to significantly influence or control the outcome of shareholder votes and otherwise pursue control transactions involving us. Tak Investments contractual relationships with us subject our common shareholders to certain risks. The registration of the resale of the shares of a substantial amount of shares of our common stock by Tak Investments and by other shareholders entails some risks, including the fact that the sale of shares of our common stock in the public market, or the possibility of these sales, could depress or lower our stock price.

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768892--3/27/2007--HEALTHAXIS_INC