909494--3/17/2006--TUCOWS_INC

related topics

{system, service, information}

{product, market, service}

{regulation, government, change}

{customer, product, revenue}

{stock, price, share}

{stock, price, operating}

{regulation, change, law}

{property, intellectual, protect}

{condition, economic, financial}

{capital, credit, financial}

{control, financial, internal}

{acquisition, growth, future}

{operation, international, foreign}

{investment, property, distribution}

{loss, insurance, financial}

Risks Related to Our Business and Industry We may not be able to maintain or improve our competitive position and may be forced to reduce our prices because of strong competition from other competitive registrars. Each registry and the ICANN regulatory body impose a charge upon the registrar for the administration of each domain registration. If these fees increase, this may have an impact upon our profits. If we are unable to improve our sales of existing TLDs, improve our renewal rate or generate alternate revenue streams, our business, financial condition and results of operations could be materially adversely affected. We rely on our network of Service Providers to renew their domain registrations through us and to distribute our applications and services, and if we are unable to maintain these relationships or establish new relationships, our revenues will decline. We believe that companies operating on the Internet are facing a period of consolidation. In addition, some of our Service Providers may decide to seek ICANN accreditation. Both of these situations could reduce the number of our active Service Providers, in which case our revenues may suffer. Our failure to secure agreements with country code registries or our subsequent failure to comply with the regulations of the country code registries could cause customers to seek a registrar that offers these services. Our standard domain registration agreement may not be enforceable, which could subject us to liability. If we cannot obtain or develop additional applications and services that are appealing to our customers, we may remain dependent on domain registrations as a primary source of revenue and our net revenues may fall below anticipated levels. As part of our diversification strategy, we recently acquired the hosted messaging business of a leading email services providers. The acquisition expands our presence in the email market but also increases our exposure in this volatile business. As we integrate the new business into our existing operations, a number of factors are likely to contribute to fluctuations in our operating results; these include: If we are unable to maintain our relationships with our customers, our revenue may decline. We believe that part of our growth will be derived from Service Providers in international markets and may suffer if Internet usage does not continue to grow globally. We currently license many third party technologies and may need to license further technologies which could delay and increase the cost of product and service developments We depend on third parties for free and low cost web-based content. Our advertising revenues may be subject to fluctuations. We may acquire companies or make investments in, or enter into licensing arrangements with, other companies with technologies that are complementary to our business and these acquisitions or arrangements could disrupt our business and dilute your holdings in our company. Our corporate culture has contributed to our success, and if we cannot maintain this culture as we grow, we could lose the innovation, creativity and teamwork fostered by our culture, and our business may be harmed. Our business depends on a strong brand. If we are not able to maintain and enhance our brand, our ability to expand our customer base will be impaired and our business and operating results will be harmed. If we fail to protect our proprietary rights, the value of those rights could be diminished. The law relating to the use of and ownership in intellectual property on the Internet is currently unsettled and may expose us to unforeseen liabilities. Once any infringement is detected, disputes concerning the ownership or rights to use intellectual property could be costly and time-consuming to litigate, may distract management from operating the business, and may result in us losing significant rights and our ability to operate all or a portion of our business. The law relating to the liability of online services companies for data and content carried on or disseminated through their networks is currently unsettled and could expose us to unforeseen liabilities. Currency fluctuations may adversely affect us. If we do not maintain a low rate of credit card chargebacks, we will face the prospect of financial penalties and could lose our ability to accept credit card payments from customers, which would have a material adverse affect on our business, financial condition and results of operations. Forecasting our tax rate is complex and subject to uncertainty. While we believe we have adequate internal control over financial reporting, we are required to evaluate our internal controls under Section 404 of the Sarbanes-Oxley Act of 2002. Any adverse results from such evaluation could result in a loss of investor confidence in our financial reports and have an adverse effect on the price of our shares of common stock. New accounting pronouncements may require us to change the way in which we account for our operational or business activities. We could suffer uninsured losses. Current world events and economic trends may have a negative impact on our sales. Our quarterly and annual operating results may fluctuate and our future revenues and profitability are uncertain. Risks Related To the Internet and Our Technology Our business could be materially harmed if the administration and operation of the Internet no longer rely upon the existing domain system. If Internet usage does not grow or if the Internet does not continue to expand as a medium for commerce, our business may suffer. We may be unable to respond to the rapid technological changes in the industry, and our attempts to respond may require significant capital expenditures. We could experience system failures and capacity constraints which would cause interruptions in our services and ultimately cause us to lose customers. Our systems face security risks, and any compromise of the security of these systems could result in liability for damages and in lost customers. Lack of consumer confidence in the security of on-line financial transactions could negatively impact our business. We may be accused of intellectual property infringement of the technology we have employed to support both our back end platform and the products and services we offer to and through our Service Providers and may be sued for damages caused by actual use of the platforms or products and services and we may be required to pay substantial damage awards. Governmental and regulatory policies or claims concerning the domain registration system, and industry reactions to those policies or claims, may cause instability in the industry and disrupt our domain registration business. We may be subject to government regulation that may be costly and may interfere with our ability to conduct business. Risks Related to our Stock We do not intend to declare dividends on our common stock in the foreseeable future. We are controlled by a limited number of principal shareholders, which may limit your ability to influence corporate matters. Our share price is volatile, which may make it difficult for shareholders to sell their shares of common stock when they want to, at an attractive price. Future sales of shares of common stock by our existing shareholders could cause our share price to fall.

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909494--3/17/2006--TUCOWS_INC_/PA/