Zynga 2012 Annual Report Download - page 37

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standard is applied for transfer pricing purposes, or with respect to the valuation of intellectual property. In
addition, tax laws are dynamic and subject to change as new laws are passed and new interpretations of existing
laws are issued or applied. In particular, there is uncertainty in relation to the U.S. tax legislation in terms of the
future corporate tax rate but also in terms of the U.S. tax consequences of income derived from income related to
intellectual property earned overseas in low tax jurisdictions.
Our existing corporate structure and intercompany arrangements have been implemented in a manner we
believe is in compliance with current prevailing tax laws. However, the tax benefits which we intend to
eventually derive could be undermined due to changing tax laws or if we are unable to adapt the manner in which
we operate our business.
Our facilities are located near known earthquake fault zones, and the occurrence of an earthquake or other
natural disaster could cause damage to our facilities and equipment, which could require us to curtail or cease
operations.
Our principal offices and network operations centers are located in the San Francisco Bay Area, an area
known for earthquakes, and are thus vulnerable to damage. We are also vulnerable to damage from other types of
disasters, including power loss, fire, explosions, floods, communications failures, terrorist attacks and similar
events. If any disaster were to occur, our ability to operate our business at our facilities could be impaired and we
could incur significant losses, require substantial recovery time and experience significant expenditures in order
to resume operations.
We may require additional capital to meet our financial obligations and support business growth, and this
capital might not be available on acceptable terms or at all.
We intend to continue to make significant investments to support our business growth and may require
additional funds to respond to business challenges, including the need to develop new games and features or
enhance our existing games, improve our operating infrastructure or acquire complementary businesses,
personnel and technologies. Accordingly, we may need to engage in equity or debt financings to secure
additional funds. If we raise additional funds through future issuances of equity or convertible debt securities, our
existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights,
preferences and privileges superior to those of holders of our Class A common stock. Any debt financing that we
secure in the future could involve restrictive covenants relating to our capital raising activities and other financial
and operational matters, which may make it more difficult for us to obtain additional capital and to pursue
business opportunities, including potential acquisitions. We may not be able to obtain additional financing on
terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to
us when we require it, our ability to continue to support our business growth and to respond to business
challenges could be significantly impaired, and our business may be harmed.
Risks Related to Our Class A Common Stock
The three class structure of our common stock has the effect of concentrating voting control with those
stockholders who held our stock prior to our initial public offering, including our founder and Chief
Executive Officer and our other executive officers, employees and directors and their affiliates; this limits our
other stockholders’ ability to influence corporate matters.
Our Class C common stock has 70 votes per share, our Class B common stock has seven votes per share and
our Class A common stock has one vote per share. Mark Pincus, our Chief Executive Officer, beneficially owned
approximately 59% of the total voting power of our outstanding capital stock as of December 31, 2012. As a
result, Mark Pincus has significant influence over the management and affairs of the company and control over
matters requiring stockholder approval, including the election of directors and significant corporate transactions,
such as a merger or other sale of our company or our assets. Mr. Pincus may hold this voting power for the
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