922658--3/30/2009--ZI

related topics

{interest, director, officer}

{acquisition, growth, future}

{operation, international, foreign}

{product, market, service}

{investment, property, distribution}

{tax, income, asset}

{product, candidate, development}

{condition, economic, financial}

{personnel, key, retain}

{system, service, information}

{stock, price, share}

{competitive, industry, competition}

{property, intellectual, protect}

{regulation, change, law}

{control, financial, internal}

{financial, litigation, operation}

Risks related to the Pending Acquisition of Zi by Nuance Failure to complete the Arrangement with Nuance could materially and adversely affect Zi s results of operations and share price. Zi s officers and directors have certain interests in the Arrangement that are different from, or in addition to, interests of Zi s securityholders. Zi and Nuance may not be able to obtain, or may be delayed in obtaining, the regulatory approvals required to consummate the Arrangement. In certain instances, the Arrangement Agreement requires Zi to pay a termination fee of $1.5 million to Nuance. This payment could affect the decisions of a third-party considering making an alternative acquisition proposal to the Arrangement. If the Arrangement is not consummated, Zi may face significant litigation risks with Nuance. If the Arrangement is not consummated, Zi will likely need additional funding to fund its operations. Risks that May Impact Zi s Business or Results of Operations if the Arrangement is not Consummated Zi has incurred net losses to date and may not become profitable. Zi s operations may have been, and could be in the future, adversely affected by the Receiver for the Lancer Funds holding approximately 37% of the Company s shares. Uncertainties regarding the impact of possible sales of Zi s shares by the Receiver may negatively impact the market price for Zi s securities. The Receiver may negotiate the resale or transfer of all or a significant portion of its shares in Zi without Zi s involvement at any time. Declining general economic, business and industry conditions have adversely affect Zi s business and results of operations. Zi operates in a new and developing market and the Company may not be able to sustain the rapid development required in its industry to remain competitive. Zi operates in an intensely competitive environment and it may not be able to compete successfully or gain market acceptance. Zi s products may contain defects that could harm its reputation, be costly to correct, expose the Company to litigation and harm its operating results and financial condition. Zi may be unable to develop and to maintain collaborative development and marketing relationships, which could result in a decline in revenues or slower than anticipated growth rates. Zi relies on large and small customers to adopt its technology and its financial success may be affected if these customers either do not implement Zi s technology or suffer their own financial hardships. Zi s ability to operate could be hindered by the proprietary rights of others and its inability to adequately protect its intellectual property rights. Zi s business may be adversely affected by a settlement agreement with a principal competitor. Zi needs to be able to manage its growth or else its operating results and financial condition will be materially adversely affected. If the Company does not continue to develop new products, future revenues will be negatively affected. Zi depends on its key personnel and failure to attract and retain these people could have a negative impact on Zi s operations. Zi operates in diverse geographic markets and faces regulatory and political risks abroad which could negatively impact its operations. Zi anticipates the need for additional capital to support its operations and future growth. Zi s quarterly results are subject to fluctuations which could negatively affect its financial results. The laws and policies restricting foreign alliances, partnerships, investments, distribution or sale in the software technology industry could change and adversely affect Zi s operations in the foreign countries in which it operates. Zi is subject to foreign currency exchange risks; accordingly, fluctuations in exchange rates could have a material effect on its results of operations. As a non-U.S. corporation, it may be difficult for shareholders to pursue claims under U.S. securities laws against Zi. Zi is subject to examinations by taxation authorities of the jurisdictions in which it operates in the normal course of operations. If the Company is characterized as a passive foreign investment company, its shareholders may be subject to adverse U.S. federal income tax consequences. The Company may be deemed to be a controlled foreign corporation under the Code. The Company does not currently meet certain NASDAQ bid requirements, and if Zi is unable to meet such requirements, its common shares may be delisted from the NASDAQ. The Company may not be successful in continuing to implement an inter-company royalty program in order to access cash in its Chinese Subsidiaries that is currently classified on its balance sheet as Restricted Cash. Zi may be contractually restricted from announcing the details of important licensing agreements. Certain of Zi s significant customers may terminate their agreements with Zi in the event of a partial change of control of Zi.

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922658--3/30/2009--ZI_CORP