the defendants failed to pay overtime compensation and interest
thereon, failed to timely pay compensation to terminated employees and failed to provide meal and
rest periods, all in violation of the California Labor Code and Business and Professions Code. An
order granting preliminary approval of a settlement of the matter for $0.1 million has been entered
and final approval is expected in December 2008.
The seasonality of our service fee business is dependent upon the seasonality of our clients
business and sales of their products. Accordingly, our management must rely upon the projections of
our clients in assessing quarterly variability. We believe with our current client mix and their
current business volumes, our service fee business activity will be at it lowest in the quarter
ended March 31. We anticipate our Supplies Distributors product revenue will be highest during
the quarter ended December 31. Our eCOST business is moderately seasonal, reflecting the general
pattern of peak sales for the retail industry during the holiday shopping season. Typically, a
larger portion of our eCOST revenues occur during the fourth fiscal quarter. We believe our
historical revenue growth makes it difficult to predict the effect of seasonality on our future
revenues and results of operations.
We believe that results of operations for a quarterly period may not be indicative of the
results for any other quarter or for the full year.
Management believes that inflation has not had a material effect on our operations.
Critical Accounting Policies
In 2008, our stock price has significantly declined to levels that may impact our goodwill
impairment test and our review of amortizable intangible assets during the fourth quarter of 2008.
A description of our critical accounting policies, including goodwill and long-lived assets, is
included in Note 2 of the consolidated financial statements in our December 31, 2007 Annual Report
on Form 10-K.