Cautionary Statement Regarding Forward-Looking Information

The following Management's Discussion and Analysis of our Financial Condition and Results of Operations should be read in conjunction with the consolidated financial statements and notes thereto included as part of this Form 10-Q. This Form 10-Q contains forward-looking statements that are based upon current expectations. We sometimes identify forward-looking statements with such words as "may", "will", "expect", "anticipate", "estimate", "seek", "intend", "believe" or similar words concerning future events. The forward-looking statements contained herein, include, without limitation, statements concerning future revenue sources and concentration, gross profit margins, selling, general and administrative expenses, capital resources, and the effects of general industry and economic conditions and are subject to risks and uncertainties including, but not limited to, those discussed below and elsewhere in this Form 10-Q that could cause actual results to differ materially from the results contemplated by these forward-looking statements. We also urge you to carefully review the risk factors set forth in other documents we file from time to time with the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2007.

Business Overview and Recent Events

We were formed on March 14, 2006 as a wholly owned subsidiary of HowStuffWorks, Inc. ("HSW") in order to (i) develop exclusive digital publishing rights to HSW's content for the countries of China and Brazil, and (ii) effect the INTAC merger. Our ongoing primary focus is to become an international online publishing company that develops and operates Internet businesses focused on providing consumers in the world's emerging digital economies with locally relevant, high quality content.

The INTAC Merger

The INTAC Merger was done to assist in the development of our digital content database exclusively licensed from HSW by (i) accelerating our obtaining Internet licenses in China for launching our Internet platform, (ii) obtaining INTAC's knowledge of the Chinese markets, relationships, and core competencies to accelerate the growth of our Internet platforms in China, and (iii) providing additional cash flow from INTAC's established businesses. These established businesses included services related to wireless telephone training and the development and sale of educational software delivered to customers in China ("INTAC Legacy Businesses"). As discussed below, the INTAC Legacy Businesses were subsequently disposed.

Prior to the consummation of the merger with INTAC, we had only limited assets and operations incident to our formation and in preparation for the merger with INTAC and subsequent business.

On October 2, 2007, we completed the INTAC Merger and related transactions pursuant to which:

† HSW contributed to us, in exchange for our common stock, perpetual, fully paid up, royalty-free exclusive digital publishing rights to HSW's existing content for the countries of China and Brazil which we are translating and localizing into the predominant languages of China and Brazil.

† A wholly owned subsidiary of ours was merged with INTAC surviving as a wholly owned subsidiary of ours and holders of INTAC common stock received one share of our common stock in exchange for each of their shares of INTAC common stock.

† Certain investors purchased or agreed to purchase shares of our common stock having an aggregate value of approximately $39.4 million, of which $22.5 million and $16.9 million (both before expenses) were received in October 2007, and January and February 2008, respectively.

† Our stock became publicly traded on the NASDAQ Global Market under the symbol "HSWI" in connection with the INTAC Merger. Prior to the INTAC Merger, INTAC's common stock was traded on the NASDAQ Capital Market under the symbol "INTN".

† In connection with and as a condition of the INTAC Merger, INTAC sold its wireless handset and prepaid calling cards distribution businesses ("distribution companies"), to an entity controlled by Mr. Zhou, in exchange for 3.0 million shares of our common stock held by Mr. Zhou. The 3.0 million shares of our common stock were recorded as treasury shares valued at cost as determined by a third party valuation.

As more fully discussed in Note 2 to the consolidated financial statements included in this Form 10-Q, the preliminary allocation of the purchase price of $47.9 million resulted in approximately $29.0 million of goodwill primarily from our expectations that we could utilize INTAC's knowledge of the Chinese markets, relationships, and core competencies to accelerate the growth of our Internet platforms in China. However, as discussed below, we decided to dispose of the entire INTAC Legacy Businesses subsequent to December 31, 2007.

HSW Merger with Discovery Communications, LLC.

In December 2007, HSW was acquired by Discovery Communications, LLC and became a wholly owned subsidiary of Discovery. As a result, certain of our contributions from HSW were modified. At June 30, 2008, Discovery, through its wholly owned subsidiary HSW, owned approximately 42.8% of our outstanding common stock.

Our Operations

Our initial focus is online publishing of localized, translated Chinese and Brazilian editions of the HowStuffWorks Internet site, utilizing strategies based on those employed by HSW, as tailored to the needs of each localized market.

We launched our Brazilian website in March 2007. At June 30, 2008, we had approximately 4,600 articles that were either (i) articles from the HSW content database translated from English to Portuguese, or (ii) originally created content. The web site address is http://hsw.com.br/. We are in the early development of our business strategy in Brazil as we continue to expand by
(i) adding original proprietary digital content designed to meet the information needs of the Brazilian online community, (ii) expanding the amount of translated content from HSW, and (iii) refining local marketing strategies. We recognized $127,989 and $172,826 of revenue during the second quarter and first half of 2008, respectively.

In June 2008, we entered the Chinese online publishing market and utilizing a combination of the licensed and sublicensed content that we recently received from HSW with the benefits of INTAC International, Inc.'s relationships and knowledge of the Chinese markets in obtaining our Internet licenses. The website address is http://bowenwang.com.cn. We have hired Chinese personnel, received licenses to conduct certain business in China and translated and localized our content for the China online publishing business.

We also intend to generate revenue by assembling our own library of digital content (including originally authored content and content that has been acquired from third parties) for our own use and for licensing to various customers, including HSW, in territories outside of our markets. We believe that both China and Brazil represent significant, growing markets for our initial online publishing strategy.

Sale of the INTAC Legacy Businesses (Discontinued Operations) and Related Transactions

Due to an increased focus of our management and resources on our primary Internet publishing business, a change of control in our majority ownership leading to further refinement in our strategies, and an under performance of the INTAC Legacy Businesses after the INTAC Merger, in early 2008, we decided to dispose of the INTAC Legacy Businesses. The INTAC Legacy Businesses were comprised of two lines of business which were both unrelated to our core Internet platform businesses.

We had originally estimated when deciding to acquire the INTAC Legacy Businesses that, in addition to accelerating our obtaining Internet licenses in China for launching our Internet platform, INTAC would provide us (i) further knowledge of the Chinese markets, relationships, and core competencies to accelerate the growth of our Internet platforms in China, and (ii) additional cash flow from its established businesses. Following the underperformance of the INTAC Legacy Businesses in the fourth quarter of 2007, that resulted in short-term negative cash flow from these operations of $1.1 million, and a change-in-control of our business through the acquisition of our largest shareholder, HSW, by Discovery, we reconsidered the potential risk of excessive short-term consumption of cash and management resources by our acquired non-core INTAC Legacy Businesses and refined our strategic direction.

We decided that it was critical that all our current resources be fully focused on expanding our Brazilian platform and the June 2008 launch of our Chinese Internet platform. Although we believe we have benefited in the short-term from INTAC's relationships and knowledge of the Chinese markets in obtaining our Internet licenses, this refined strategic focus did not allow us the time required to realize the expected long-term synergies, embodied in our acquired INTAC goodwill, from INTAC's knowledge of the Chinese markets, relationships, and core competencies. In addition, we were provided with and acted on an opportunity to sell the unrelated INTAC Legacy Businesses for approximately their stand-alone appraised value, and through simultaneous sale of the treasury stock received, generate significant additional cash resources for investing into our core Internet businesses.

At December 31, 2007, we recognized in loss from operations before income taxes in the statement of operations, a preliminary goodwill write off of approximately $22.5 million related to the February 29, 2008, INTAC Legacy disposition. During the six months ended June 30, 2008, we recognized a loss of $133,526, which has been recorded as discontinued operations in the accompanying consolidated financial statements. All the goodwill resulting from the INTAC acquisition was included in the INTAC Legacy Businesses when we determined the potential write off, because such operations had not been integrated with our online publishing segment prior to our decision to dispose of the INTAC Legacy Businesses.

On February 29, 2008, we completed the sale of the INTAC Legacy Businesses. The INTAC Legacy Businesses were sold to China Trend Holdings Ltd., a British Virgin Islands corporation that is owned by Mr. Zhou, CEO, director and significant stockholder of INTAC prior to the INTAC Merger in October 2007. Mr. Zhou was also on our board of directors from October 2007 to December 2007. In accordance with the share purchase agreement with China Trend Holdings, we were to receive 5.0 million of our common shares owned by Mr. Zhou. In addition, as a condition to the February 29, 2008, INTAC Legacy Businesses disposition, the INTAC Legacy Businesses were to include $4.5 million in cash at closing.

At the February 29, 2008, INTAC Legacy Businesses disposition, we received only 4.5 million shares of our common stock from Mr. Zhou and accordingly, we only funded the INTAC Legacy Businesses with $2.7 million in cash. Mr. Zhou delivered his additional 0.5 million shares of our common stock to us on March 26, 2008, and on March 31, 2008, we released another $1.6 million in cash to the INTAC Legacy Businesses ($1.8 million for the stock received net of an estimated $0.2 million withheld for disposition expenses). As of June 30, 2008, all of HSWI's assets were in our core Internet businesses and the sole asset we retained from the INTAC Merger is the Internet licenses intangible we used to enter the Chinese markets in June 2008.

On February 15, 2008, we entered into a stock purchase agreement where we agreed to sell and two qualified institutional buyers agreed to purchase the 5.0 million shares of our common stock received from the INTAC Legacy Businesses disposition at a purchase price of $3.68 per share. Simultaneously with the February 29, 2008 disposition, we sold the 4.5 million shares we received to the institutional buyers. Subsequently on March 26, 2008, we sold the additional 0.5 million shares from Mr. Zhou to the institutional buyers.

Results of Operations

Prior to the consummation of the merger with INTAC, we had only limited assets and operations incident to our formation and in preparation for the merger with INTAC and subsequent businesses.

The following table sets forth our operations for the three and six months ended June 30, 2008 and 2007. As discussed in Notes 1, 2, and 3 to the consolidated financial statements included in this Form 10-Q, HSWI merged with INTAC International Inc. on October 2, 2007, and the INTAC Legacy Businesses were subsequently disposed on February 29, 2008. Following the disposition, the primary assets we retained from INTAC were the indefinite-lived Internet Licenses intangible and no revenue was realized from this asset in 2007 or through the six months ended June 30, 2008.

                                          Three Months Ended June 30,       Six Months Ended June 30,
                                             2008              2007            2008            2007

Operating revenue
Digital online publishing               $        30,841    $     32,674   $       75,678   $     32,674
Sales to affiliates                              97,148               -           97,148              -
Total revenue                                   127,989          32,674          172,826         32,674

Cost of services                                240,683         545,506          565,955        545,506

Gross loss                                     (112,694 )      (512,832 )       (393,129 )     (512,832 )

Operating expenses
Selling, general and administrative           4,239,175       2,760,319        8,785,282      5,642,725
Depreciation and amortization                    56,702           5,133           84,862          9,511
Total operating expenses                      4,295,877       2,765,452        8,870,144      5,652,236

Loss from continuing operations
before other income (expense) and
income taxes                                 (4,408,571 )    (3,278,284 )     (9,263,273 )   (6,165,068 )

Other income (expense)
Interest income                                 165,352               -          257,259              -
Interest expense                                      -         (19,871 )              -        (19,871 )
Total other income (expense)                    165,352         (19,871 )        257,259        (19,871 )

Loss from continuing operations
before income taxes                          (4,243,219 )    (3,298,155 )     (9,006,014 )   (6,184,939 )

Income taxes                                          -               -                -              -

Loss from continuing operations              (4,243,219 )    (3,298,155 )     (9,006,014 )   (6,184,939 )

Loss from discontinued operations,
net of income taxes                                   -               -         (133,526 )            -

Net loss                                $    (4,243,219 )  $ (3,298,155 ) $   (9,139,540 ) $ (6,184,939 )

Revenue

Revenue for the three and six months ended June 30, 2008 of approximately $128,000 and $173,000, respectively, was generated in Brazil. For the six months ended June 30, 2008, approximately 63% of revenue was generated from paid-for impression advertising and 37% was generated from pay for performance ads. There was no China digital online publishing revenue during the three and six months ended June 30, 2008 as the website in China was launched in June 2008.

Cost of Services

Cost of services includes the ongoing third party translation costs incurred by third party vendors for services of translating, localizing, and enhancing articles in English to Portuguese and Mandarin Chinese. Portuguese article translation costs totaled $221,000 and $443,000 and Chinese translation costs totaled $20,000 and $116,000 for the three and six months ended June 30, 2008, respectively.

Operations - Selling, General and Administrative Expenses

Our total selling, general and administrative expenses increased by $1.5 million and $3.1 million for the three and six months ended June 30, 2008, respectively, from the comparable periods in 2007. The increase is primarily attributable to increased costs of establishing our operations related to the Brazil website, and launching the China market, as well as additional costs incurred for operation as a public company. These increases over the second quarter of 2007 are primarily comprised of $0.4 million in personnel related costs and $0.6 million in professional fees related to being a public company. These increases over the first six months of 2007 are primarily comprised of $0.8 million in personnel related costs and $2.0 million in professional fees related to being a public company. Some of the costs are related to our initial public company registration efforts and should not reoccur to this magnitude in future periods. These increases are partially offset by an $87,000 and $650,000 decrease in stock-based compensation expense for the three and six months ended June 30, 2008, respectively, from the comparable 2007 periods.

Other Income (Expense)

Other income (expense) increased approximately $185,000 and $277,000 for the three and six months ended June 30, 2008, respectively, compared to the comparable periods in 2007. The increase in interest income reflects an increase in cash on hand resulting from the sale of our stock to certain institutional investors. The decrease in interest expense is due to full payment on an affiliated party loan during the second half of 2007.

Discontinued Operations - INTAC Legacy Businesses

The discussion that follows relates to the INTAC Legacy Businesses results of operations for the three months ended March 31, 2008. Revenue of approximately $39,000 was for services related to wireless telephone training and the development and sale of educational software in China. The cost of such revenue, approximately $28,000, is primarily comprised of service fees paid for the provision of software training and technological services and amortization of the software.

Product development costs of $312,000 are primarily from the development, production and delivery of our career development services, including salaries and facility costs. Selling, general and administrative expenses of $177,000 are primarily occupancy, insurance costs and personnel related expenses.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. We believe that of our significant accounting policies, revenue recognition, stock-based compensation and long-lived assets, including goodwill and other intangible assets, may involve a high degree of judgment and complexity.

Revenue Recognition

Online publishing revenue is generally recognized as visitors are exposed to or react to advertisements on our website. Revenue is generated from advertising in the form of sponsored links and image ads. This includes both pay-per-performance ads and paid-for-impression advertising. In the pay-per-performance model, we earn revenue based on the number of clicks associated with such ad. In the paid-for-impression model (sponsorships), revenue is derived from the display of ads.

We recognize revenue when the service has been provided, and the other criteria set forth in Staff Accounting Bulletin ("SAB") 104, Revenue Recognition, have been met; namely, the fees we charge are fixed or determinable, we and our advertisers understand the specific nature and terms of the agreed-upon transactions and the collectability is reasonably assured.

Stock-Based Compensation

Under the Plan, HSWI authorized 8,000,000 shares for grant as part of a long term incentive plan to attract, retain and motivate its eligible executives, employees, officers, directors and consultants. Options to purchase common stock under the Plan have been granted to our officers and employees with an exercise price equal to the fair market value of the underlying shares on the date of grant. Additionally, during the first quarter of 2008, restricted shares were granted to certain members of our Board of Directors at the fair market value on the grant date. As of June 30, 2008, no options had been exercised under the Plan.

We account for stock based compensation in accordance with SFAS 123(R) which requires us to recognize expense related to the fair value of our stock-based compensation awards.

SFAS 123(R) requires the use of a valuation model to calculate the fair value of the stock based awards. We have elected to use the Black-Scholes options pricing model to determine the fair value of stock options on the dates of grant, consistent with that used for pro forma disclosures under SFAS 123. We measure stock-based compensation based on the fair values of all stock-based awards on the dates of grant, and recognize stock-based compensation expense using the straight-line method over the vesting periods. Stock-based compensation expense was $1.6 million for the three months ended June 30, 2008 and 2007, and $2.9 million and $3.5 million for the six months ended June 30, 2008 and 2007, respectively.

Long-Lived Assets Including Goodwill and Other Intangible Assets

We review property and equipment and intangible assets, excluding goodwill, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of these assets is measured by a comparison of the carrying amounts to future net cash flows the assets are expected to generate. If these assets are considered to be impaired, the impairment to be recognized equals the amount the carrying value of the assets exceeds its fair market value. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

In accordance with SFAS 142, Goodwill and Other Intangible Assets, we test goodwill for impairment at least annually or more frequently if events or changes in circumstances indicate that this asset may be impaired. SFAS 142 also requires that intangible assets with definite lives be amortized over their estimated useful lives and reviewed for impairment whenever events or circumstances indicate an asset's carrying value may not be recoverable in accordance with SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets.

Liquidity and Capital Resources

Our core Internet publishing platforms in Brazil and China are our only remaining businesses subsequent to the February 29, 2008 INTAC Legacy Businesses disposition and are in the early development of our strategy. We launched our Brazilian Internet platform in March 2007. At June 30, 2008, we had approximately 4,600 articles and we will continue to expand the platform by
(i) adding original proprietary digital content designed to meet the information needs of the Brazilian online community, (ii) expanding the digital data base with translated content, and (iii) refining local marketing strategies.

We launched our Internet platform in China in June 2008. We have hired Chinese personnel to manage our operations in Beijing and to translate and localize our content for the China online publishing business as well as adding original proprietary digital content designed to meet the information needs of the Chinese online community.

We also intend to assemble a library of digital content and license it to various customers, including HSW in territories outside of our markets. It is anticipated that this content will include originally authored content as well as content acquired from other parties.

We expect to expend significant resources in launching, expanding and gaining market share for our Internet platforms in Brazil and China. We believe that our current cash balance and expected cash generated from future operations will be more than sufficient to fund operations for the next twelve months. If cash on hand and generated from operations is insufficient to satisfy our working capital and capital expenditure requirements, we may be required to sell additional equity or obtain additional credit facilities. There is no assurance that such financing will be available or that we will be able to complete financing on satisfactory terms, if at all.

Due to the start up nature of the online publishing segment of HSWI, revenue recorded for the three and six months ended June 30, 2008 was approximately $128,000 and $173,000, respectively. Revenue recorded for the three and six months ended June 30, 2007 was approximately $33,000.

As of June 30, 2008, our cumulative losses were $61.4 million, which included non-cash expenses of $19.9 million for stock-based compensation. We used a significant amount of the $21.0 million net proceeds from the October 2, 2007, sale of stock to pay transaction costs, to pay off advances from HSW, and to fund operations. As discussed above, in the first quarter of 2008, we received $33.4 million before expenses from the sale of our stock.

Cash flows from operations

Cash and cash equivalents was $27.7 million at June 30, 2008, compared to $3.5 million at December 31, 2007. The increase in cash is primarily attributable to the sale of our stock to certain institutional investors during the first quarter of 2008.

Our net cash used in continuing operating activities during the six months ended June 30, 2008 increased by $3.2 million compared to the prior year period. The increase was due to increased funding requirements to support our operations in Brazil and China. Net cash used in discontinued operating activities was $0.5 million for the six months ended June 30, 2008.

Cash used in investing activities

During the six months ended June 30, 2008, net cash used in investing activities was $5.1 million compared to $0.1 million in the same period of 2007. Cash used in investing activities during the six months ended June 30, 2008 reflects the purchases of property and equipment, as well as cash used in conjunction with the sale of our INTAC Legacy Businesses.

Cash flows from financing activities

For the six months ended June 30, 2008, net cash provided by financing activities was approximately $35.2 million versus $2.2 million for the comparable period of 2007. The significant increase in the six months ended June 30, 2008 is a direct result of the proceeds we received from the sale of our common stock during the first quarter.