Classmates.com 2006 Annual Report Download - page 22

Currently, ISPs are considered “information service” providers and regulations that apply to telephone companies and other
telecommunications common carriers do not apply to our Internet access services. However, our Internet access services could become subject to
Federal Communications Commission and state regulation as Internet access services and telecommunications services converge. If the
regulatory status of ISPs changes, our business may be adversely affected. The Internet Tax Freedom Act, which placed a moratorium on new
state and local taxes on Internet commerce, is in effect through November 2007. However, future laws imposing taxes or other regulations on the
provision of goods and services over the Internet could make it substantially more expensive to operate our business.
Our social-networking services and loyalty marketing business rely heavily on email campaigns, and any restrictions on the sending of
emails could materially and adversely affect our business.
Our social-networking services and loyalty marketing business deliver a significant number of emails to our members. In addition to any
government laws and regulations, voluntary actions by third parties to block, impose restrictions on or charge for the delivery of emails through
their email systems could materially and adversely impact our business. In addition, from time to time, ISPs block bulk email transmissions or
otherwise experience technical difficulties which result in the inability to transmit emails to our members. Restrictions on the sending of emails
could materially and adversely affect our business and results of operations.
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, floods, 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 in
California, which is particularly subject to earthquakes. Despite our implementation of network security measures, our servers are also
vulnerable to computer viruses, worms, physical and electronic break-ins, sabotage and similar disruptions from unauthorized tampering of our
computer systems. Any prolonged disruption of our services due to these and other events could result in user turnover and decreased revenues
and could severely impact or shut down our business. We may not carry sufficient business interruption insurance to compensate us for losses
that may occur as a result of any events which cause interruptions in our services.
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 product development, customer support and quality assurance
operations would be severely disrupted if telecommunications issues, political instability, labor strife 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 and services. 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, our business and its future prospects may suffer.
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