Enom 2010 Annual Report Download - page 32

Table of Contents
As the number of available domain names with commercial value diminishes over time, our domain name registration revenue and our overall business
could be adversely impacted.
As the number of domain registrations increases and the number of available domain names with commercial value diminishes over time, and if it is
perceived that the more desirable domain names are generally unavailable, fewer Internet users might register domain names with us. If this occurs, it could
have an adverse effect on our domain name registration revenue and our overall business.
Risks Relating to our Company
We have a history of operating losses and may not be able to operate profitably or sustain positive cash flow in future periods.
We were founded in 2006 and have a limited operating history. We have had a net loss in every year since inception. As of December 31, 2010, we had
an accumulated deficit of approximately $52 million and we may incur net operating losses in the future. Moreover, we anticipate that our cash flows from
operating activities in the near term will not be sufficient to fund our investments in the production of content and the purchase of property and equipment,
domain names and other intangible assets and may never be. Our business strategy contemplates making substantial investments in our content creation,
distribution processes and the development and launch of new products and services, each of which will require significant expenditures. In addition, as a
public company, we have incurred and will continue to incur significant additional legal, accounting and other expenses that we did not incur as a private
company. Our ability to generate net income in the future will depend in large part on our ability to generate and sustain substantially increased revenue
levels, while continuing to control our expenses. We may incur significant losses in the future for a number of reasons, including those discussed in other risk
factors and factors that we cannot foresee. Our inability to generate net income and positive cash flows would materially and adversely affect our business,
revenue, financial condition and results of operations.
We expect a number of factors to cause our operating results to fluctuate on a quarterly and annual basis, which may make it difficult to predict our
future performance.
Our revenue and operating results could vary significantly from quarter-to-quarter and year-to-year and may fail to match our past performance because
of a variety of factors, many of which are outside of our control. In particular, our operating expenses are fixed and variable and, to the extent variable, less
flexible to manage period-to-period, especially in the short-term. For example, our ability to manage our expenses in the near term period-to-period is affected
by our sales and marketing expenses to refer traffic to or promote our owned and operated websites, generally a variable expense which can be managed
based on operating performance in the near term. This expense has historically represented a relatively small percentage of our operating expenses. In
addition, comparing our operating results on a period-to-period basis may not be meaningful. In addition to other risk factors discussed in this section, factors
that may contribute to the variability of our quarterly and annual results include:
lower than anticipated levels of traffic to our owned and operated websites and to our customers' websites;
failure of our content to generate sufficient or expected revenue during its estimated useful life to recover its unamortized creation costs, which
may result in increased amortization expenses associated with, among other things, a decrease in the estimated useful life of our content, an
impairment charge associated with our existing content, or expensing future content acquisition costs as incurred;
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