Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

This quarterly report contains forward-looking statements that involve risks and uncertainties. The statements contained in this report that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Without limiting the foregoing, the words "may," will," "should," "could," "expects," "plans," "intends," "anticipates," "believes," "estimates," "predicts," "potential," "continue" and similar expressions are intended to identify forward-looking statements. All forward-looking statements included in this quarterly report are based on information available to us up to and including the date of this document, and we assume no obligation to update any such forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth below under "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Certain Factors that May Affect Future Results" and elsewhere in this quarterly report. You should also carefully review the risks outlined in other documents that we file from time to time with the Securities and Exchange Commission.

Three Months Ended September 30, 2000 Compared To Three Months Ended September 30, 1999

On August 28, 2000, we acquired the stock of two companies, Checkpoint Holdings, Ltd. (Checkpoint) and Flashpoint, Inc. (Flashpoint). Both transactions have been accounted for as purchases and their financial results have been included in our results from the date of acquisition.

Checkpoint, a private company incorporated in England and Wales, is a provider of electronic commerce and electronic payment software for the United Kingdom. The acquisition was completed pursuant to a Share Purchase Agreement dated August 28, 2000 between the Company and Checkpoint stockholders. The consideration for the acquisition was approximately $60.1 million, consisting of $4.7 million in cash, $19.8 million in loan notes, 1,013,333 shares of the Company's common stock, warrants to purchase a total of 100,000 shares of common stock at an exercise price of $50.00 per share and transaction costs. In connection with the acquisition, 336,667 shares of our common stock were issued to satisfy pre-existing loan note obligations of Checkpoint in the amount of $10.5 million. As a result of the acquisition, intangible assets of approximately $79.8 million, consisting of developed software, trade name, customer list, assembled workforce, and goodwill were recorded and will be amortized over a period of three years.

Flashpoint, a Massachusetts corporation, is a developer of Web-based software. The acquisition was completed pursuant to a Stock Purchase Agreement dated August 28, 2000 by and among the Company, Flashpoint, and the sole stockholder of Flashpoint. The consideration for the acquisition was approximately $16.8 million, consisting of $4.5 million in cash, 242,199 shares of the Company's common stock, the assumption of all outstanding stock options of Flashpoint and transaction costs. As a result of the acquisition, intangible assets of approximately $16.9 million, consisting of contract backlog, assembled workforce, and goodwill were recorded and will be amortized over a period ranging from ten months to three years.

Revenues

Total revenues increased by $7.5 million to $16.0 million in the three months ended September 30, 2000 from $8.5 million in the three months ended September 30, 1999, an increase of 87%. The increase was primarily attributable to strong demand for our NetTransact, BankQuest and PayBase product offerings combined with revenue contribution from Checkpoint. Revenues, based on the point of sales, not on the location of the customer, were $12.7 million and $3.3 million in the United States and United Kingdom, respectively, for the three months ended September 30, 2000. All revenues for the three months ended September 30, 1999 were attributable to the United States.

Software Licenses. Software license fees increased by $3.9 million to $5.7 million in the three months ended September 30, 2000 from $1.8 million in the three months ended September 30, 1999, an increase of 216%. Software license fees represented 36% of total revenues in the three months ended September 30, 2000 compared to 21% of total revenues for the three months ended September 30, 1999. The increase in software license fees was due primarily to the strong demand for our NetTransact, BankQuest and PayBase product offerings, which represented 68% of the increase, combined with revenue contribution from Checkpoint. Based on current product plans, we anticipate software license fees to continue to increase as a percentage of total revenues during the remainder of the fiscal year.

Service and Maintenance. Service and maintenance fees increased by $2.5 million to $6.8 million in the three months ended September 30, 2000 from $4.3 million in the three months ended September 30, 1999, an increase of 61%. Service and maintenance fees represented 43% of total revenues in the three months ended September 30, 2000 compared to 50% of total revenues in the three months ended September 30, 1999. The increase in service and maintenance fees was due primarily to several large BankQuest service contracts, representing 69% of the increase, combined with revenue contribution from Checkpoint. Based on current product plans, we anticipate that service and maintenance fees will continue to decrease as a percentage of total revenues during the remainder of the fiscal year.

Equipment and Supplies. Equipment and supplies sales increased by approximately $900,000 to $3.4 million in the three months ended September 30, 2000 from $2.5 million in the three months ended September 30, 1999, an increase of 38%. Equipment and supplies sales represented 21% of total revenues in the three months ended September 30, 2000 compared to 29% of total revenues in the three months ended September 30, 1999. The increase in equipment and supplies sales is the result of revenue contribution from Checkpoint. The decrease in equipment and supplies sales as a percentage of revenues is the result of higher software license fees and our de-emphasis of this lower margin source of revenues.

Cost of Revenues

Software Licenses. Software license costs increased by $175,000 to $221,000 in the three months ended September 30, 2000 from $46,000 in the three months ended September 30, 1999, an increase of 380%. Software license costs were 4% of software license fees in the three months ended September 30, 2000 compared to 3% of software license fees in the three months ended September 30, 1999. The increase in software license costs is attributable to the 10% royalty on NetTransact revenues payable to The Northern Trust Company. We anticipate software license costs will continue to increase in future quarters as corresponding NetTransact revenues increase.

Service and Maintenance. Service and maintenance costs increased by $1.4 million to $3.5 million in the three months ended September 30, 2000 from $2.1 million in the three months ended September 30, 1999, an increase of 64%. Service and maintenance costs were 51% of service and maintenance fees in the three months ended September 30, 2000 compared to 50% of service and maintenance fees in the three months ended September 30, 1999. Service and maintenance costs increased primarily due to the corresponding increase in service and maintenance fees. We anticipate that service and maintenance costs will increase as a percentage of revenues over the remainder of the fiscal year due principally to lower historical service and maintenance margins experienced by Checkpoint.

Equipment and Supplies. Equipment and supplies costs increased by approximately $700,000 to $2.6 million in the three months ended September 30, 2000 from $1.9 million in the three months ended September 30, 1999, an increase of 39%. Equipment and supplies costs were 76% of equipment and supplies sales in the three months ended September 30, 2000 compared to 75% of equipment and supplies sales in the three months ended September 30, 1999. Equipment and supplies costs increased primarily due to the corresponding increase in equipment and supplies sales.

Operating Expenses

Sales and Marketing:

Sales and Marketing. Sales and marketing expenses consist primarily of salaries and other related costs for sales and marketing personnel, sales commissions, travel, public relations and marketing materials and trade shows. Sales and marketing expenses increased by $3.3 million to $6.1 million in the three months ended September 30, 2000 from $2.8 million in the three months ended September 30, 1999, an increase of 116%. Sales and marketing expenses were 38% of total revenues in the three months ended September 30, 2000 compared to 33% of total revenues in the three months ended September 30, 1999. The increase was due primarily to additional sales and marketing expenses associated with our ICM, Checkpoint and Flashpoint acquisitions, the NetTransact product and increases in staffing and personnel related costs. We anticipate that sales and marketing expense will decrease as a percentage of revenues during the remainder of the fiscal year.

Product Development and Engineering:

Product Development and Engineering. Product development and engineering expenses consist primarily of personnel costs to support product development. Product development and engineering expenses increased by $1.7 million to $2.9 million in the three months ended September 30, 2000 from $1.2 million in the three months ended September 30, 1999, an increase of 139%. Product development and engineering expenses were 18% of total revenues in the three months ended September 30, 2000 compared to 14% of total revenues in the three months ended September 30, 1999. The increase was due primarily to additional product development and engineering expenses associated with our investment in the NetTransact product and our acquisitions of ICM, Checkpoint and Flashpoint. For the near future, we believe that product development and engineering costs, as a percentage of revenues, will remain consistent with the percentage experienced in the first quarter of fiscal 2001.

Acquired in-process research and development. In-process research and development of $1.3 million represents a non-cash charge related to the NetTransact product acquisition for in-process research and development during the three months ended September 30, 1999. The in-process research and development project was valued using an Income Approach, which included the application of a discounted future earnings methodology. Using this methodology, the value of the in-process technology is comprised of the total present value of the future earnings stream attributable to the technology throughout its anticipated life. No alternative future uses were identified prior to reaching technological feasibility. There was no comparable amount for the three months ended September 30, 2000.

Stock compensation expense. In connection with our acquisition of Flashpoint, we assumed all of the outstanding common stock options of Flashpoint, which were exchanged for our common stock options, and recorded deferred compensation of $1.3 million at the date of acquisition relating to the intrinsic value of the unvested options. The deferred compensation is being amortized to expense over the remaining vesting period of the options resulting in $37,000 of stock compensation expense during the three months ended September 30, 2000. There was no comparable amount for the three months ended September 30, 1999.

General and Administrative:

General and Administrative. General and administrative expenses consist primarily of salaries and other related costs for operations and finance employees and legal and accounting services. General and administrative expenses increased by approximately $500,000 to $2.6 million in the three months ended September 30, 2000 from $2.1 million in the three months ended September 30, 1999, an increase of 23%. General and administrative expenses were 16% of total revenues in the three months ended September 30, 2000 compared to 25% of total revenues in the three months ended September 30, 1999. The dollar increase was due primarily to additional general and administrative expenses as a result of our acquisitions of ICM, Checkpoint and Flashpoint.

Amortization of Intangible Assets. Amortization of intangible assets related to our acquisitions increased by $3.2 million to $3.3 million in the three months ended September 30, 2000 from $126,000 in the three months ended September 30, 1999. We expect to incur approximately $9.0 million of such amortization expense during each of the remaining quarters of the fiscal year.

Interest Income, Net. Interest income, net consists of interest income less interest expense. Interest income, net decreased by $217,000 to $264,000 in the three months ended September 30, 2000 from $481,000 in the three months ended September 30, 1999, a decrease of 45%. The decrease was due to interest expense on promissory notes issued in connection with our acquisition of Checkpoint and due to a reduced cash balance in the current period as a result of cash used in our acquisitions. We expect interest expense to exceed interest income during each of the remaining quarters of the fiscal year as a result of the promissory notes issued in connection with our acquisition of Checkpoint.

Provision (benefit) for Income Taxes. The provision for income taxes was $1.9 million in the three months ended September 30, 2000 compared with a benefit of $1.0 million in the three months ended September 30, 1999. In the three months ended September 30, 2000, we incurred a substantial operating loss due primarily to the amortization of recently acquired intangible assets. Since amortization expense will continue to be incurred over the next three years and we have utilized a significant portion of our income tax loss carryback benefit, we determined that the existing deferred tax assets are less likely, rather than more likely, to be realized. Accordingly, we provided a valuation reserve against such assets that resulted in the net income tax provision of $1.9 million. In the three months ended September 30, 1999, we had sufficient income tax loss carryback available to benefit a portion of the operating loss.

Liquidity and Capital Resources

We have financed our operations primarily from cash provided by the sale of our common stock and operating activities. We had negative working capital of $5.1 million at September 30, 2000, which included cash, cash equivalents and short-term investments totaling $12.4 million.

The negative working capital position at September 30, 2000 is the result of $20.4 million of promissory notes issued in connection with the acquisition of Checkpoint. The promissory notes, including accrued interest, mature on August 28, 2001. Prior to the maturity date, the Company may repay the promissory notes, including accrued interest, in cash. On the maturity date, at the Company's sole discretion, the promissory notes, including accrued interest, may be repaid in either cash, common stock of the Company or a combination of cash and common stock.

In August 2000, we entered into a ten-year lease for approximately 83,000 square feet of space for a new headquarters facility in Portsmouth, New Hampshire. Total lease payments for this new facility will be approximately $15 million, which we anticipate will commence in September 2001.

Cash used in operating activities was $3.0 million in the three months ended September 30, 2000 and cash provided by operating activities was $3.4 million in the three months ended September 30, 1999. Net cash used in operating activities, for the three months ended September 30, 2000, was primarily the result of the net loss and an increase in accounts receivable offset by increases in accounts payable, accrued expenses and deferred revenues.

Net cash used in investing activities was $8.6 million in the three months ended September 30, 2000 and $4.5 million in the three months ended September 30, 1999. Cash was used in the three months ended September 30, 2000 for the acquisition of businesses and to acquire property and equipment offset by proceeds from the sale of short-term investments.

Net cash provided by financing activities was $784,000 in the three months ended September 30, 2000 and $1.2 million in the three months ended September 30, 1999. Net cash provided by financing activities was the result of the net proceeds from the exercise of options pursuant to our stock incentive plans and employee stock purchase plan.

We believe that the cash generated from operations, our cash, cash equivalents and short-term investments on hand and our ability to repay the promissory notes with common stock will be sufficient to meet our working capital requirements for at least the next twelve months. We also may receive additional investments from, and make investments in, customers or other companies.

CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS

Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below before purchasing our common stock. The risks and uncertainties described below are not the only ones facing our company. Additional risks and uncertainties may also impair our business operations. If any of the following risks actually occur, our business, financial condition or results of operations would likely suffer. In that case, the trading price of our common stock could fall, and you may lose all or part of the money you paid to buy our common stock.

A significant percentage of our revenues to date has come from our payment management offerings and our performance will depend on continued market acceptance of these offerings

A significant percentage of our revenues to date has come from the license and maintenance of our payment management offerings and sales of related products and services. Any reduction in demand for our payment management offerings could have a material adverse effect on our business, operating results and financial condition. Our future performance will depend to a large degree upon the market acceptance of our payment management offerings as a payment management solution. Our prospects will also depend upon enterprises seeking to enhance their payment functions to integrate electronic payment capabilities. In addition, our future results will depend on the continued market acceptance of desktop software for use in a departmental setting, including our laser check printing solutions, as well as our ability to introduce enhancements to meet the market's evolving needs for secure, payment management solutions.

Our future financial results will depend upon continued market acceptance of our NetTransact and BankQuest products

If the NetTransact and BankQuest products that we acquired do not continue to achieve market acceptance, our future financial results will be adversely affected. We acquired the NetTransact bill presentment software from The Northern Trust Company, a financial institution, in July 1999. General availability of the NetTransact product was announced in February 2000. We acquired the web-based BankQuest cash management software in our acquisition of Integrated Cash Management Services, Inc. in October 1999. BankQuest was commercially introduced in April 2000 and is now generally available. If either of these products has any unanticipated performance problems or bugs, or does not enjoy wide commercial success, our long-term business strategy would be adversely affected.

Integration of acquisitions or strategic investments could disrupt our business and our financial condition could be harmed

We have made acquisitions of companies, including our recent acquisitions of Checkpoint and Flashpoint, and we may acquire or make investments in other businesses, products or technologies in the future. Our acquisitions of Checkpoint and Flashpoint, as well as any other acquisitions or strategic investments, if any, may entail numerous risks that include the following:

. difficulties in assimilating acquired operations, technologies or products;

. diversion of management's attention from our core business concerns;

. risks of entering markets in which we have no or limited prior experience;

. substantial dilution of our current stockholders' ownership;

. incurrence of substantial debt;

. incurrence of significant amortization expenses related to goodwill and other intangible assets; and

. incurrence of significant immediate write-offs.

Any such difficulties encountered as a result of any mergers or acquisition could materially affect our business, operating results and financial condition.

We face risks associated with our international operations that could harm our financial condition and results of operations

Our future growth rates and success are in part dependent on continued growth and success in international markets. As is the case with most international operations, the success and profitability of our international operations are subject to numerous risks and uncertainties that include the following:

. difficulties and costs of staffing and managing foreign operations;

. certification requirements and differing regulatory and industry standards;

. reduced protection for intellectual property rights in some countries;

. fluctuations in currency exchange rates; and

. import or export licensing requirements.

We must attract and retain highly skilled personnel with knowledge of electronic payment and bill presentment technology and the banking industry

We are dependent upon the ability to attract, hire, train and retain highly skilled technical, sales and marketing, and support personnel, particularly with expertise in electronic payment and bill presentment technology and knowledge of the banking industry. Competition for qualified personnel is intense. In addition, our corporate headquarters location in Portsmouth, New Hampshire may limit our access to skilled personnel. Any failure to attract, hire or retain qualified personnel could have a material adverse effect on our business, operating results and financial condition. In addition, we plan to expand our sales and marketing and product development organizations. Based on our experience, it takes an average of nine months for a salesperson to become fully productive. We cannot assure you that we will be successful in increasing the productivity of our sales personnel, and the failure to do so could have a material adverse effect on our business, operating results and financial condition.

Our fixed costs may lead to fluctuations in operating results if our revenues are below expectations, and if our operating results are below external expectations, the market price of our common stock may fall

A significant percentage of our expenses, particularly personnel costs and rent, are relatively fixed, and based in part on expectations of future revenues. We may be unable to reduce spending in a timely manner to compensate for any significant fluctuations in revenues. Accordingly, shortfalls in revenues may cause significant fluctuations in operating results in any quarter. Quarterly operating results that are below the expectations of public market analysts could adversely affect the market price for our common stock. Factors that could cause these fluctuations include the following:

. the timing of orders and longer sales cycles, particularly due to any increase in average selling prices of our software solutions;

. the timing and market acceptance of new products or product enhancements by either us or our competitors;

. the timing of product implementations, which are highly dependent on customers' resources and discretion;

. the incurrence of costs relating to the integration of software products and operations in connection with acquisitions of technologies or businesses;

. delivery interruptions relating to equipment and supplies purchased from third-party vendors, which could delay system sales; and

. economic conditions which may affect our customers' and potential customers' budgets for technological expenditures.

Because of these factors, we believe that period to period comparisons of our results of operations are not necessarily meaningful.

The market price of our common stock has experienced, and may continue to be subject to, extreme price and volume fluctuations

Stock markets, in general, and The Nasdaq Stock Market in particular, have experienced extreme price and volume fluctuations. Broad market fluctuations of this type may adversely affect the market price of our common stock.

The market price of our common stock has experienced, and may continue to be subject to extreme fluctuations due to a variety of factors, including:

. public announcements concerning us, our competitors or our industry;

. fluctuations in operating results;

. introductions of new products or services by us or our competitors;

. adverse developments in patent or other proprietary rights;

. changes in analysts' earnings estimates;

. announcements of technological innovations by our competitors; and

. general and industry-specific business, economic and market conditions

Our success depends on our ability to develop new and enhanced software, services and related products

The bill presentment, payment and cash management software markets in which we compete are subject to rapid technological change and our success is dependent on our ability to develop new and enhanced software, services and related products that meet our evolving market needs. Trends which could have a critical impact on us include:

. rapidly changing technology that could require us to make our products compatible with new database or network systems;

. evolving industry standards and mandates, such as those mandated by the National Automated Clearing House Association, the Association for Payment Clearing Services and the Debt Collection Improvement Act of 1996; and

. developments and changes relating to the Internet that we must address as we introduce new products.

If we are unable to develop and introduce new products, or enhancements to existing products, in a timely and successful manner, our business, operating results and financial condition could be materially adversely affected.

Our success depends on the wide-spread adoption of the Internet and growth of electronic business

Our future success will in large part depend upon the willingness of businesses and financial institutions to adopt the Internet as a medium of e- business. These entities will probably accept this new medium only if the Internet provides substantially greater efficiency and enhances their competitiveness. There are critical issues involved in the commercial use of the Internet which are not yet fully resolved, including concerns regarding the Internet's:

. security;

. reliability;

. ease of access; and

. quality of services.

To the extent that any of these issues inhibit or limit the adoption of the Internet as a medium of e-commerce, our business prospects could be adversely affected. If electronic business does not continue to grow or grows more slowly than expected, demand for our products and services may be reduced.

If the Internet infrastructure is not adequately maintained, the demand for our products and services may decrease

Our future success will depend, in part, on the maintenance of the Internet infrastructure. To the extent that the Internet continues to experience increased numbers of users, frequency of use or increased bandwidth requirements of users, the Internet infrastructure may not continue to support the demands placed on it and, as a result, the performance or reliability of the Internet may be adversely affected. In addition, the Internet could lose its viability as a form of media due to delays in the development or adoption of new standards and protocols that can handle increased levels of activity. The infrastructure and complementary products and services necessary to maintain the Internet as a viable communications and commercial medium may not be developed or maintained. Any failure in performance or reliability of the Internet could adversely affect the demand for our products and services and, consequently, adversely affect our operating results.

Increased government regulation and legal uncertainties may impair the growth of the Internet and decrease demand for our products and services

The laws governing the Internet remain largely unsettled, even in areas where there has been some legislative action. It may take years to determine whether and how existing laws, including those governing intellectual property, privacy, libel and taxation, apply to the Internet generally and to e-commerce in particular. Legislation could limit the growth in the use of the Internet generally and decrease the acceptance of the Internet as a communications and commercial medium, which may decrease demand for our products and services and thus have a material adverse effect on our business, operating results and financial condition.

Our business can be adversely affected by problems with third-party hardware that we resell

Any problems with third-party hardware that we resell could harm our customer relationships, industry credibility and financial condition. In a prior fiscal year, we experienced a significant problem with a third-party printer that we were then reselling which had a material adverse effect on our operating results. Any repetition of these or similar problems with third party hardware could have a material adverse effect on our business, operating results and financial condition.

Increased competition may result in price reductions and decreased demand for our products and services

The market for bill presentment, payment and cash management software is intensely competitive and characterized by rapid technological change. Growing competition may result in price reductions of our products and services, reduced revenues and gross margins and loss of market share, any one of which could have a material adverse effect on our business, operating results and financial condition. Some competitors in our market have longer operating histories, significantly greater financial, technical, marketing and other resources, greater brand recognition and a larger installed customer base than we do. In addition, current and potential competitors may make strategic acquisitions or establish cooperative relationships to expand their product offerings and to offer more comprehensive solutions. We also expect to face additional competition as other established and emerging companies enter the market for payment management solutions.

Rapid growth could strain our personnel, systems and controls

In the past, rapid growth has strained our managerial and other resources. Our ability to manage any future growth will depend in part on our ability to continue to enhance our operating, financial and management information systems. We cannot assure you that our personnel, systems and controls will be adequate to support any future growth. If we are not able to manage growth effectively, should it occur, the quality of our services, our ability to retain key personnel and our business, operating results and financial condition could be materially adversely affected.

We depend on a few key employees who are skilled in e-commerce, payment and bill presentment methodology and Internet and other technologies

Our success depends upon the efforts and abilities of our executive officers and key technical employees who are skilled in e-commerce, payment methodology and regulation, and Internet, database and network technologies. We currently do not maintain "key man" life insurance policies on any of our employees. While some of our executive officers have employment agreements with us, the loss of the services of any of our executive officers or other key employees could have a material adverse effect on our business, operating results and financial condition.

Undetected bugs in our software could adversely affect the performance of our software and demand for our products

Our software products could contain errors or "bugs" that we have not been able to detect which could adversely affect their performance and reduce demand for our products. Any defects or errors in new products, such as NetTransact or BankQuest, or enhancements could harm our customer relationships and result in negative publicity regarding us and our products, which could have a material adverse effect on our business, operating results and financial condition.

Our business could be subject to product liability claims

Because our software and hardware products are designed to provide critical payment management, invoicing and cash management functions, we may be subject to significant product liability claims. Our insurance may not be sufficient to cover us against these claims or may not be available at all. A product liability claim brought against us, even if not successful, could require us to spend significant time and money in litigation. As a result, any such claim, whether successful or not, could seriously damage our reputation and harm our business, operating results and financial condition.

Our business could be adversely affected if we are unable to protect our proprietary technology

We rely upon a combination of patent, copyright and trademark laws and non- disclosure and other intellectual property contractual arrangements to protect our proprietary rights. However, we cannot assure you that our patents, pending applications that may be issued in the future, or other intellectual property will be of sufficient scope and strength to provide meaningful protection of our technology or any commercial advantage to us, or that the patents will not be challenged, invalidated or circumvented. We enter into agreements with our employees and clients that seek to limit and protect the distribution of proprietary information. We cannot assure you that the steps we have taken to protect our intellectual property rights will be adequate to deter misappropriation of proprietary information, and we may not be able to detect unauthorized use and take appropriate steps to enforce our intellectual property rights.

We could become subject to litigation regarding intellectual property rights, which could seriously harm our business

In recent years, there has been significant litigation in the United States involving patents and other intellectual property rights. We may be a party to litigation in the future to protect our intellectual property or as a result of an alleged infringement of the intellectual property of others. These claims could require us to spend significant sums in litigation, pay damages, delay product installments, develop non-infringing intellectual property or acquire licenses to intellectual property that is the subject of the infringement claim. These claims could have a material adverse effect on our business, operating results and financial condition.

We may incur significant costs from class action litigation due to the expected volatility of our common stock

In the past, companies that have experienced volatility in the market price of their stock have been the object of securities class action litigation. If we were the object of securities class action litigation, we could incur substantial costs and experience a diversion of our management's attention and resources and such securities class action litigation could have a material adverse effect on our business, financial condition and results of operations.