| INVESTOOLS INC Item 1A Risk Factors That May Affect Future Results Our business may suffer if we are not successful in developing, maintaining and defending proprietary aspects of technology used in our products and services |
| Our success and ability to compete are dependent on our ability to develop and maintain the proprietary aspects of our technology |
| Litigation may be necessary in the future to enforce our intellectual property rights, to protect trade secrets, to determine the validity and scope of the proprietary rights of others or to defend against claims of infringement or invalidity |
| Any such litigation, even if we prevailed, could be costly, divert resources and could have a material adverse effect on our business, operating results and financial condition |
| We can give no assurance that our means of protecting our proprietary rights will be adequate, or that our competitors will not independently develop similar technology |
| Any failure by us to protect our intellectual property could have a material adverse effect on our business, operating results and financial condition |
| We integrate third-party software into code creating and supporting some of our products and services |
| This third-party software may not continue to be available on commercially reasonable terms |
| If we are unable to maintain licenses to the third-party software included in the code supporting our product services, features of our products or services could be unavailable, until equivalent software could be developed or licensed and integrated |
| This delay could adversely affect our business, operating results and financial condition |
| Any negative changes in economic conditions, significant price increases, inflation or adverse events related to various industries, or the willingness of investors to trade could harm discretionary spending and have a material adverse effect |
| We believe that the level of public interest in investing, particularly in the securities and option markets as well as electronic trading has significantly influenced the market for these products and services |
| The securities markets have experienced substantial volatility in recent periods |
| A sharp drop or sustained or gradual decline in securities prices or other developments in the securities markets typically could cause individual investors to be less inclined to invest in the securities markets, which would be likely to result in reduced interest in our investor educational 8 ______________________________________________________________________ products and services |
| We depend on continued growth in use of the Internet and online commerce |
| Our ability to expand our delivery platforms and penetrate new markets could be stagnated without continued growth in the use and efficient operation of the Internet |
| Web-based markets for information, products and services are new and rapidly evolving |
| If Internet usage does not continue to grow or grow slower than anticipated, we may be unable to secure new sponsorship and subscription arrangements for our offerings |
| To the extent our business relies on web-based delivery platforms, our operations will also be dependent on adequate network infrastructure, consistent quality of service and availability to customers of cost-effective, high-speed Internet access |
| If our systems cannot meet customer demand for access and reliability, these requirements will not be satisfied, and customer satisfaction could degrade substantially, adversely affecting our prospects for market penetration and profitability |
| Future regulations or the interpretation of existing laws pertaining to the Internet could decrease the demand for our products or increase the cost of doing business |
| Any new law or regulation pertaining to the Internet, or the application or interpretation of existing laws, could increase our cost of doing business, decrease the demand for our products and services, or otherwise harm our business |
| We must comply with a variety of federal and state laws affecting the content of materials distributed over the Internet, as well as regulations and other laws restricting the collection, use and disclosure of personal information that we may obtain in the course of providing our online services |
| Future laws or regulations may relate to information retrieved from or transmitted over the Internet, consumer protection, online content, user privacy, taxation and the quality of products and services |
| Compliance with future laws and regulations, or existing laws as they may be interpreted in the future, could be expensive, time consuming, impractical or impossible |
| We may be liable for invasion of privacy or misappropriation by others of our users’ information, which could adversely affect our reputation and financial results |
| Some of our services require the disclosure of sensitive information by the user |
| We rely on a number of security systems for our services to protect this information from unauthorized use or access |
| We cannot predict whether new technological developments could circumvent these security measures |
| If the security measures that we use to protect personal information or credit card information are ineffective, we may be subject to liability, including claims for invasion of privacy, impersonation, unauthorized purchases with credit card information or other similar claims |
| In addition, the Federal Trade Commission and several states have investigated the use of personal information by certain Internet companies |
| We could incur significant expenses if new regulations regarding the use of personal information are introduced or if our privacy practices are investigated |
| Laws and regulations can affect our operations and may limit our ability to operate in certain jurisdictions |
| Federal, state and international laws and regulations impact our operations and may limit our ability to obtain authorization to operate in some states or countries |
| Many federal, state and international governmental agencies assert authority to regulate providers of investment education programs |
| Although we believe that we are currently in compliance with all such regulations, there can be no assurance that the federal, state or international regulatory structure will not change |
| For example, if we were required to comply with, or found to be in violation of, a regulatory body’s current or future licensing or regulatory requirements, we could be subject to civil or criminal sanctions, including monetary penalties |
| Additionally, we could be required to incur significant on-going expenses to comply with regulatory requirements or, conceivably, could be barred from providing investment education services in that jurisdiction |
| If any of these things occur, it could have a material adverse effect on our business and results of operations and may cause our stock price to decline |
| If we are not able to continually enhance our web-based products and services and adapt them to changes in technology, our future revenue growth could be adversely affected |
| If our improvement and adaptation of our web-based products and services is delayed, results in systems interruptions or is not aligned with market expectations or preferences, our revenue growth could be adversely affected |
| The online environment is rapidly evolving, and the technology used in web-based products changes quickly |
| We must therefore be able to quickly modify our solutions to adapt to emerging online standards and practices, technological advances, and changing user and sponsor preferences |
| Ongoing enhancement of our web site, web-based products and related technology will entail significant expense and technical risk |
| We may use new technologies ineffectively or fail to adapt our web site, web-based products and related technology on a timely and cost-effective basis |
| We rely on our strategic partners to provide us with access to leads and customers |
| We currently access approximately 69prca of our revenue through co-branding (Business Week) and co-marketing (Success Magazine and Money in Training) relationships |
| Our strategic partners may enter into identical or similar relationships with our competitors, which could diminish the value of the partners for customer acquisition |
| Our strategic partners could terminate their relationship with us |
| If any of these organizations were to terminate their relationship with us our ability to distribute our product and services could be impaired |
| We may not be able to maintain our existing relationships or enter into new strategic relationships |
| 9 ______________________________________________________________________ Our ability to offer courses may be affected by natural disaster, strikes and other unpredictable events |
| Natural disasters, external labor disruptions and other adverse events may affect our ability to conduct our business, resulting in loss of revenue |
| Severe blizzards or floods may reduce the ability of our course participants to travel to our courses |
| These natural disasters may also disrupt the printing and transportation of the materials used in our direct mail campaigns |
| Furthermore, postal strikes could occur in the countries where we operate which could delay and reduce delivery of our direct mail marketing materials |
| Transportation strikes could also occur in the countries where we operate, adversely affecting course attendance |
| The future occurrence of any of these events could have a material adverse effect on our business and results of operations and may cause our stock price to decline |
| If we do not successfully introduce new programs, products and services, our growth rate and revenue will be reduced |
| Our growth strategy is dependent on our ability to sell existing training programs, products and services to new students, to open new markets and to develop and introduce new educational programs, products and services |
| If we are unable to expand our markets and products, our growth rate and revenue will be reduced |
| Market conditions and the level of customer interest may be different for our current products than for new products, and there can be no assurance that we will be able to compete favorably with, and obtain market acceptance for, any such new programs, products or services |
| We may desire or need to raise additional capital in the future and it may not be available on acceptable terms |
| If we need but are unable to obtain additional capital to expand our operations and invest in new products and services, our business may be adversely affected |
| In the future we may require substantial additional capital to finance ongoing operations or the growth of our business |
| To the extent that our existing sources of liquidity and cash flow from operations are insufficient to fund our activities, we may need to raise additional funds |
| We cannot be certain that we will be able to obtain additional financing on favorable terms |
| If we fail to raise additional funds, we may need to sell debt or additional equity securities or to reduce our growth to a level that can be supported by our cash flow |
| Without additional capital, we may not be able to: further develop or enhance our services and products; acquire necessary technologies, products or businesses; expand operations in the United States or internationally; hire, train and retain employees; market our services and products; or respond to competitive pressures or unanticipated capital requirements |
| We need to successfully integrate recently acquired and potential additional operating companies |
| As a result of recent acquisitions and, as part of our general business strategy, we expect to experience significant growth and expect such growth to continue into the future |
| This growth is expected to place a significant strain on our management, financial, operating and technical resources |
| Failure to manage this growth effectively could have a material adverse effect on our financial condition or results of operations |
| There can be no assurance that we will be able to effectively integrate the acquired companies with our own operations |
| Expansion will place significant demands on our marketing, sales, administrative, operational, financial and management information systems, controls and procedures |
| Accordingly, our performance and profitability will depend on the ability of our officers and key employees to (i) manage our business and our subsidiaries as a cohesive enterprise, (ii) manage expansion through the timely implementation and maintenance of appropriate administrative, operational, financial and management information systems, controls and procedures, (iii) add internal capacity, facilities and third-party sourcing arrangements as and when needed, (iv) maintain service quality controls, and (v) attract, train, retain, motivate and manage effectively our employees |
| There can be no assurance that we will integrate and manage successfully new systems, controls and procedures for our business, or that our systems, controls, procedures, facilities and personnel, even if successfully integrated, will be adequate to support our projected future operations |
| Any failure to implement and maintain such systems, controls and procedures, add internal capacity, facilities and third-party sourcing arrangements or attract, train, retain, motivate and manage effectively our employees could have a material adverse effect on our business, financial condition and results of operations |
| We are dependent on our chief executive officer and chairman of the board for his depth of industry experience and knowledge |
| We are highly dependent on the services of Lee K Barba, our CEO and Chairman of the Board |
| Barba has extensive experience, knowledge and contacts in the financial and investment industries |
| Barba were to terminate his employment with us, we would lose valuable human capital, adversely affecting our business |
| We currently do not maintain key man insurance on Mr |
| Barba or any other member of our senior management team |
| Neither Mr |
| Barba nor any other member of our senior management team intends to retire or is nearing retirement age |
| Legal proceedings could adversely affect our business and results of operations |
| We are from time to time involved in various lawsuits and legal proceedings |
| While we intend to vigorously defend the lawsuit filed against us by Ross |