Classmates.com 2005 Annual Report Download - page 31

Our business could be shut down or severely impacted by a catastrophic event.
Our computer equipment and the telecommunications infrastructure of our third-party network providers are vulnerable to damage from
fire, earthquakes, power loss, telecommunications failures, terrorism and similar events. We have experienced situations where power loss and
telecommunications failures have adversely impacted our services, although to date such failures have not been material to our operations. A
significant portion of our computer equipment, including critical equipment dedicated to our Internet access services, is located at our
headquarters in Woodland Hills, California and at facilities in and around Los Angeles, California; San Jose, California; Ashburn, Virginia;
Renton, Washington and New York, New York. In the past, areas in California have experienced repeated episodes of diminished electrical
power supply, or “rolling blackouts.” A natural disaster, terrorism, power blackout or other unanticipated problem at our headquarters or at a
network hub, or within a third-party network provider’s network, could cause interruptions in the services that we provide. Our systems are not
fully redundant. Any prolonged disruption of our services due to system failures could result in user turnover and decreased revenues.
Our business could be severely impacted due to political instability or other factors in India.
We have a significant number of employees located in our India office. Our operations in India primarily handle email customer support,
product development and quality assurance. A portion of our outsourced customer support is also based in India. Our product development,
customer support and quality assurance operations would be severely disrupted if telecommunications issues, political instability or other factors
adversely impacted these operations or our ability to communicate with these operations. Any disruption that continued for an extended period of
time would likely have a material adverse effect on our ability to service our customers and develop our products since it would take a
significant period of time to transition these operations internally or to an outside vendor. If we were to cease our operations in India and transfer
these operations to another geographic area, such change could result in increased overhead costs which could materially and adversely impact
our results of operations.
We cannot predict our future capital needs and we may not be able to secure additional financing.
We may need to raise additional funds in the future to fund our operations, for acquisitions of businesses or technologies or for other
purposes. Additional financing may not be available on terms favorable to us, or at all. If adequate funds are not available or not available when
required in sufficient amounts or on acceptable terms, we may not be able to devote sufficient cash resources to continue to provide our services
in their current form, acquire additional users, enhance or expand our services, respond to competitive pressures or take advantage of perceived
opportunities, and our business and its future prospects may suffer.
We may stop paying quarterly cash dividends on our common stock.
Commencing with the second quarter of 2005, we have declared and paid a quarterly cash dividend of $0.20 per share of common stock.
The payment of future dividends is discretionary and will be subject to determination by our board of directors each quarter following its review
of our financial performance. Our future cash flows will significantly decline from what we experienced in 2005 due to the payment of income
taxes, and our cash balances will decline if we use our cash to acquire businesses, repurchase stock or for other purposes. We cannot assure you
that we will continue to pay quarterly cash dividends, and if we do not, our stock price could be negatively impacted.
We have anti-takeover provisions that may make it difficult for a third party to acquire us.
Provisions of our certificate of incorporation, our bylaws and Delaware law could make it difficult for a third party to acquire us, even if
doing so might be beneficial to our stockholders because of a premium
30