Classmates.com 2007 Annual Report Download - page 31

There are risks associated with our strategy of an initial public offering of Classmates Media Corporation.
Our wholly-owned subsidiary, Classmates Media Corporation, or CMC, filed a registration statement relating to the initial public offering,
or IPO, of CMC's Class A common stock. The registration statement was withdrawn in December of 2007 due to then-
current market conditions.
It is still our strategy to complete an IPO of CMC and we have capitalized approximately $3.6 million of IPO costs at December 31, 2007 which
we will have to expense in a future period if we do not proceed with an offering. There is no assurance that an IPO will be completed in the near
term, if at all. If we do not complete the IPO, the market price of our common stock could be adversely affected.
If the IPO is completed, CMC would be a new public company. We are unable to predict what the market price of our common stock would
be after the IPO. We cannot assure you that the IPO, if completed, will produce any increase for our stockholders in the market value of their
holdings in our Company. Additionally, Mark R. Goldston, our chairman, president and chief executive officer, will continue to serve as the
chairman, president and chief executive officer of CMC. Although we have an employment agreement with Mr. Goldston, he will not be
dedicated to our business on a full-time basis and the loss of his full-time services could harm our business.
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, services or technologies or for
other purposes. Additional financing may not be available in a timely manner, on terms favorable to us, or at all. If adequate funds are not
available or not available when required and in sufficient amounts or on acceptable terms, our business and future prospects may suffer.
We may stop paying, or reduce, 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 is subject to determination by our Board of Directors each quarter following its review of
our financial condition, results of operations and cash flows and such other factors as are deemed relevant by our Board of Directors. Our future
cash flows may significantly decline due to, among other things, declines in our dial-up Internet access business and other factors. In addition, it
remains our strategy to complete an IPO of CMC and, if such offering were consummated, we would no longer receive the cash flow from CMC
that we historically received. Our cash balances will also decline if we use our cash to acquire businesses, services or technologies, repurchase
our common stock or for other purposes. A change in our business needs, including working capital and funding for acquisitions, or a change in
tax laws relating to dividends, among other factors, could cause our Board of Directors to decide to cease the payment of, or reduce, the dividend
in the future. 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 price offered by a potential acquirer. In addition, our Board of Directors
adopted a stockholder rights plan, which is an anti-takeover measure that will cause substantial dilution to a third-party who attempts to acquire
our Company on terms not approved by our Board of Directors.
Our stock price has been highly volatile and may continue to be volatile.
The market price of our common stock has fluctuated significantly since our stock began trading on the Nasdaq Stock Market in September
2001 and it may continue to be volatile with extreme trading volume fluctuations. In addition, the Nasdaq Stock Market, where most publicly-
held Internet companies are traded, has experienced substantial price and trading volume fluctuations. The broad market and industry factors that
influence or affect such fluctuations may harm the market price of our common stock, regardless of our actual operating performance, and for
this or other reasons we could suffer significant declines in the market price of our common stock.
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