Enom 2014 Annual Report Download - page 28

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hosted on these properties. Addressing these types of claims could require us to expend time and resources, which could have an
adverse impact on our business and results of operations.
In addition, we license the names “Saatchi” and “Livestrong.com” pursuant to the terms of intellectual property or licensing
agreements with third parties, which may be terminated by such third parties if we do not comply with certain requirements in the
agreements. Charles Saatchi has alleged that we are in breach of our intellectual property agreement with him with respect to our use
of the “Saatchi” name, although we believe that his claim is without merit. If either of the agreements relating to the licenses for the
“Saatchi” or “Livestrong.com” names were terminated, we would experience business disruption and would have to incur significant
resources to rebrand the relevant business, which could have an adverse impact on our business, financial condition and results of
operations.
We may not succeed in expanding our businesses internationally, which may limit our future growth, and operating
internationally exposes us to certain additional risks and operating costs.
One potential area of growth for our business is in the international markets. We have launched eHow sites in the United
Kingdom and Germany, as well as eHow en Español, Livestrong.com en Español and eHow Brasil (Spanish and Portuguese language
sites that target both the U.S. and the worldwide Spanish/Portuguese-speaking markets). In addition, the artwork sold through Saatchi
Art is created by a global community of artists and sold to customers around the world. We are also exploring launching our content
and media properties in certain additional countries, as well as translating our Society6 site into certain foreign languages. We cannot
be certain that we will be successful in introducing or marketing our products and services internationally or that our products and
services will gain market acceptance. If we are unable to expand and market our products and services internationally, it could have a
negative effect on our future growth prospects. There are also risks inherent in conducting business in international markets, including
the need to localize our products and services to foreign customers’ preferences and customs, difficulties in managing operations due
to language barriers, distance, staffing and cultural differences, application of foreign laws and regulations to us, tariffs and other trade
barriers, fluctuations in currency exchange rates, establishing management systems and infrastructures, reduced protection for
intellectual property rights in some countries, changes in foreign political and economic conditions, and potentially adverse tax
consequences. Operating internationally, where we have limited experience, exposes us to additional risks and operating costs.
A reclassification of our freelance professionals from independent contractors to employees by tax authorities could require us to
pay retroactive taxes and penalties and significantly increase our cost of operations.
We contract with freelance professionals as independent contractors to create the substantial majority of the content for our owned
and operated online properties and for our customers’ online properties. Because we consider our freelance professionals with whom we
contract to be independent contractors, as opposed to employees, we do not withhold federal or state income or other employment related
taxes, make federal or state unemployment tax or Federal Insurance Contributions Act payments, or provide workers’ compensation
insurance with respect to such freelance professionals. Our contracts with our independent contractor freelance professionals obligate
these freelance professionals to pay these taxes. The classification of freelance professionals as independent contractors depends on the
facts and circumstances of the relationship. In the event of a determination by federal or state taxing authorities that the freelance
professionals engaged as independent contractors are employees, we may be adversely affected and subject to retroactive taxes and
penalties. In addition, if it was determined that our content creators were employees, the costs associated with content creation would
increase significantly and our financial results would be adversely affected.
Risks Relating to Owning Our Common Stock
The trading price of our common stock is likely to be volatile and an active, liquid and orderly market for our common stock may
not be sustained.
The trading price of our common stock has been, and is likely to be, highly volatile and could be subject to wide fluctuations in
response to various factors, some of which are beyond our control. For example, from the date of our initial public offering in January
2011 through March 5, 2015, our closing stock price, as adjusted for the Distribution and the 1-for-5 reverse stock split, has ranged
from $4.05 to $48.75. In addition, an active trading market for our common stock may not be sustained, which could depress the
market price of our common stock.