Interruptions could also result from the intentional acts of others, like hackers. If our
systems are penetrated by computer hackers, or if computer viruses infect our systems, our
computers could fail or proprietary information could be misappropriated.
If our clients suffer similar interruptions in their operations, for any of the reasons
discussed above or for others, our business could also be adversely affected. Many of our clients
computer systems interface with our systems. If our clients suffer interruptions in their systems,
the link to our systems could be severed and sales of the clients products could be slowed or
A breach of our e-commerce security measures could reduce demand for its services. Credit card
fraud and other fraud could adversely affect our business.
A requirement of the continued growth of e-commerce is the secure transmission of confidential
information over public networks. A party who is able to circumvent our security measures could
misappropriate proprietary information or interrupt our operations. Any compromise or elimination
of our security could reduce demand for our services.
We may be required to expend significant capital and other resources to protect against
security breaches or to address any problem they may cause. Because our activities involve the
storage and transmission of proprietary information, such as credit card numbers, security breaches
could damage its reputation, cause us to lose clients, impact our ability to attract new clients
and we could be exposed to litigation and possible liability. Our security measures may not prevent
security breaches, and failure to prevent security breaches may disrupt our operations. In certain
circumstances, we do not carry insurance against the risk of credit card fraud and other fraud, so
the failure to adequately control fraudulent transactions on our clients behalf could increase our
expenses. To date we have not suffered material losses due to fraud.
We may be a party to litigation involving our e-commerce intellectual property rights.
In recent years, there has been significant litigation in the United States involving patent
and other intellectual property rights. We may be a party to intellectual property litigation in
the future to protect our trade secrets or know-how. United States patent applications are
confidential until a patent is issued and most technologies are developed in secret. Accordingly,
we are not, and cannot be, aware of all patents or other intellectual property rights of which our
services may pose a risk of infringement. Others asserting rights against us could force us to
defend ourself or our customers against alleged infringement of intellectual property rights. We
could incur substantial costs to prosecute or defend any such litigation.
If we fail to maintain an effective system of internal controls, we may not be able to accurately
report our financial results or prevent fraud. As a result, current and potential stockholders
could lose confidence in our financial reporting, which could harm our business, and the trading
price of our common stock.
We have begun a process to document and evaluate our internal controls over financial
reporting to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, which requires
annual management assessments of the effectiveness of our internal controls over financial
reporting and a report by our independent auditors addressing these assessments. Based on the
current requirements, and our current public float, we are not required to comply with Section 404.
However, in this regard, our management has been dedicating internal resources, has engaged outside
consultants and has begun to develop a detailed work plan to (i) assess and document the adequacy
of internal controls over financial reporting, (ii) take steps to improve control processes, where
appropriate, and (iii) validate through testing that controls are functioning as documented. If we
fail to correct any issues in the design or operating effectiveness of internal controls over
financial reporting or fail to prevent fraud, current and potential stockholders could lose
confidence in our financial reporting, which could harm our business and the trading price of our