Sales of our product licenses and the related revenue from those sales require
significant time and effort and are therefore difficult to predict accurately. This unpredictability in the timing or amount of our receipt of revenue may cause our results of operations to vary considerably.
Our direct sales force’s efforts to attract new customers require substantial time
and effort, and we cannot assure you that we will be successful in establishing
new relationships or maintaining or advancing our current relationships.
Further, many of our customers typically require one or more internal levels of
approval before they can purchase our products and services. As a result,
during our sales efforts, we must identify multiple people involved in the
purchasing decision and devote a sufficient amount of time to presenting our
products and services to those individuals. The breadth of our offerings often
requires us to spend substantial time and effort assisting potential customers
in evaluating our products and services, including providing demonstrations.
This process can be costly and time consuming, and we often do not know if any
given sales efforts will be successful until the latter stages of those efforts. Additionally, if we are unable to forecast market demand and conditions, we may not be able to expand our sales efforts at appropriate times and our revenue and related results of operations could be materially adversely affected.
Our failure to successfully develop, market or sell our products or adopt new
technology platforms could materially adversely affect our results of operations and financial condition.
The introduction of new products or updated versions of existing products has inherent risks, including, but not limited to, risks concerning: our customers choosing to adopt I-PASS, and engage us to support their adoption; product quality, including the possibility of software defects, which could result in the inability to sell our products; marketing effectiveness; and the accuracy of research or assumptions about the nature and extent of customer demand. We may need to adopt newer technology platforms for our enterprise software products as older technologies become obsolete. We cannot assure you that we will be successful in making the transition to new technology platforms for our products in the future. We may be unable to adapt to the new technology, may encounter errors resulting from a significant rewrite of the software code for our products or may be unable to complete the transition in a timely manner.
I-PASS can be implemented by hospitals on their own, or hospitals may choose to not implement any handoff system.
The I-PASS program can be implemented by a hospital on their own, and certain I-PASS implementation materials are available for free download on the internet. Accordingly, potential customers may choose to try to implement I-PASS without the assistance of I-PASS Institute’s software or professional services. Additionally, hospitals may choose to not implement any formalized handoff system.
Our future revenue depends in part on our installed user base continuing to purchase new software licenses, and to renew initial agreements or purchase additional professional services. If then-existing customers do not continue, or expand, the use of our products or services our results of operations could be materially adversely affected.
The success of a portion of our strategic plan depends on our ability to satisfy our customers and see our customers continue to use our products. In future periods, then-existing customers may not decide to renew their contract for additional periods or other services. In the future, if we are not able to maintain a meaningful level of renewals of our then-existing customer contracts, our revenue and related results of operations could be materially adversely affected.
We depend on the services of key personnel to execute our business strategy. If we lose the services of our key personnel or are unable to attract and retain
other qualified personnel, we may be unable to operate our business
We believe that the future success of our business depends on the services of a number of key management and operating personnel, including, in particular, certain of our founders. Some of these founders have strong relationships with existing and potential customers and our business may be harmed if those persons leave us. In addition, our ability to manage our growth depends, in part, on our ability to identify, hire and retain additional qualified employees. Further, we may be unable to attract and retain suitably qualified individuals, or maybe required to pay increased compensation in order to do so. If we are unsuccessful in attracting and retaining these key management and operating personnel, our ability to operate our business effectively could be negatively impacted and our business, operating results and financial condition would be materially adversely affected.
If we are unable to meet minimum future revenue requirements, we may not be able to maintain exclusivity of our licensed trademark.
Additionally, we are required to achieve certain minimum levels of sales to maintain exclusivity to the I-PASS service mark that we have licensed from Boston Children’s Hospital, if we are unable to achieve such revenue levels, we may lose exclusivity to that license, which could impair our business, and our operating results and financial condition could be materially adversely affected.
If we are unable to protect our intellectual property and proprietary rights, our competitive position and our business could be materially adversely affected.
We regard the protection of our developed technologies and intellectual property rights as an important element of our business operations and as crucial to our success. Unauthorized use of our intellectual property and proprietary rights may reduce our revenue, devalue our brands and property and harm our reputation. We rely primarily on a combination of patent laws, trademark laws,copyright laws, trade secrets, confidentiality procedures and contractual provisions to protect our proprietary technology. We generally require our employees, consultants and advisors to enter into confidentiality agreements. These agreements provide that all confidential information developed or made known to the individual during the course of the individual’s relationship with us is to be kept confidential and not disclosed to third parties except under specific circumstances.
The laws in the United States and elsewhere change rapidly, and any future changes could materially adversely affect us and our intellectual property. Monitoring unauthorized use of our intellectual property is difficult and costly. Our efforts to protect our proprietary rights may not be adequate to prevent misappropriation of our intellectual property.
Further, we may not be able to detect unauthorized use of, or take appropriate steps to enforce, our intellectual property rights. We may in the future need to initiate infringement claims or litigation. Litigation, whether we are a plaintiff or a defendant, can be expensive, time-consuming and may divert the efforts of our technical staff and managerial personnel, which could harm our business,whether or not such litigation results in a determination favorable to us. In addition, litigation is inherently uncertain, and thus we may not be able to stop our others from infringing upon our intellectual property rights.
We operate in an industry with intellectual property litigation. Claims of infringement against us could materially adversely affect our business, operating results and financial condition.
Our success depends, in part, upon us and our customers not infringing upon intellectual property rights owned by others and being able to resolve claims of intellectual property infringement without major financial expenditures or adverse consequences. The technology industry generally is characterized by extensive intellectual property litigation. Many participants that own, or claim to own, intellectual property historically have aggressively asserted their rights. Many of our contracts provide our customers or partners with indemnification with respect to their use of our intellectual property. We cannot predict whether any existing or future third party intellectual property rights would require us to alter our technologies, obtain licenses or cease certain activities.
Future litigation may be necessary to defend ourselves, our customers or our partners by determining the scope, enforceability and validity of third party proprietary rights or to establish our proprietary rights. Regardless of whether claims that we are infringing patents or other intellectual property rights have any merit, these claims are time-consuming and costly to evaluate and defend and could: adversely affect our relationships with our current or future customers or partners; cause delays or stoppages in providing new sales of our products; divert management’s attention and resources; require technology changes that would cause us to incur substantial cost; subject us to significant liabilities; and require us to cease certain activities. If any of these events were to occur, they could materially alter our product offerings and our business, operating results and financial condition could be materially adversely affected.
If we are unable to expand our presence outside of the United States, it could have a material adverse effect on our business, operating results and financial condition.
Our initial focus is on the United States market. If we are unable to expand, or alter our operations and our product offerings to meet demands of markets outside of the United States, or if the costs to expend our operations outside of the United States are excessive, our business, operating and financial condition could be materially adversely affected.
We may need to raise additional funds to support our business operations or to finance future acquisitions, including through the issuance of equity or debt securities, which could have a material adverse effect on our ability to grow our business.
If we do not generate sufficient cash from operations or do not otherwise have sufficient cash and cash equivalents to support our business operations or to finance future acquisitions, we may need to issue debt or equity, if prevailing market conditions are favorable. We may not be able to raise cash on terms acceptable to us or at all. Financings, if available, may be on terms that are dilutive to our shareholders, and the prices at which new investors would be willing to purchase our securities may be lower than the current price of our common shares. The holders of new securities may also receive rights, preferences or privileges that are senior to those of existing holders of our common shares. If new sources of financing are required but are insufficient or unavailable, we would be required to modify our plans to the extent of available funding, which could harm our ability to grow our business. We may have to, or choose to, seek loans from financial institutions. Typical loan agreements might contain restrictive covenants that may impair our operating flexibility. A default under any loan agreement could result in a charging order that would have a material adverse effect on our business, results of operations or financial condition.
Our business and products are dependent on the availability, integrity and security of our and other third party information technology systems.
Our, and certain of our third-party partners’, information technology (IT) systems, including telecommunications, and related software applications are integral to our business. We rely on controls and systems to ensure data integrity of critical business information. Lack of data integrity could create inaccuracies and hinder our ability to perform meaningful business analysis and make informed business decisions. A number of websites have been subject to denial of service attacks, where a website is bombarded with information requests eventually causing the website to overload, resulting in a delay or disruption of service.Also, there is a growing trend of advanced persistent threats being launched by organized and coordinated groups against corporate networks to breach security for malicious purposes. If successful, any of these events could damage our computer or telecommunications systems or those of our customers and could disrupt or prevent us from providing timely maintenance services for our products. Computer programmers and hackers also may be able to develop and deploy viruses, worms and other malicious software programs that attack our products or otherwise exploit any security vulnerabilities of our products. The costs to us to eliminate or alleviate security problems, bugs, viruses, worms,malicious software programs and security vulnerabilities could be significant,and the efforts to address these problems could result in interruptions,delays, cessation of service and loss of existing or potential customers and may impede our sales, distribution and other critical functions.
Despite network security, disaster recovery and systems management measures in place, we may encounter unexpected general systems outages or failures that may affect our ability to conduct research and development, provide maintenance services for our products, manage our contractual arrangements, accurately and efficiently maintain our books and records, record our transactions, provide critical information to our management and prepare our financial statements. Additionally, these unexpected systems outages or failures may require additional personnel and financial resources, disrupt our business or cause delays in the reporting of our financial results.
We could be subject to potential product liability claims and third-party litigation related to our products and services, which could materially adversely affect our operating results and financial condition.
Limitation of liability provisions included in our license agreements may not sufficiently protect us from product liability claims because of limitations in existing or future laws or unfavorable judicial decisions. The sale and support of our products may give rise to claims in the future that may be substantial. Liability claims could require expenditure of significant time and money in litigation or payment of significant damages which could materially adversely affect our operating results and financial condition.
Our future results of operations could be materially adversely affected by
unanticipated performance problems or bugs in our software product offerings.
If the software products that we offer and continue to introduce are not accepted in the marketplace, our future financial results could be materially adversely affected. Most of our products are continually being enhanced or further developed in response to general marketplace demands. Accordingly, any unanticipated performance problems or bugs that we have not been able to detect could result in additional development costs, diversion of technical and other resources from our other development efforts, negative publicity regarding us and our products, harm to our customer relationships and exposure to potential liability claims. In addition, if our products do not enjoy wide commercial success, our long-term business strategy could be affected, which could materially adversely affect our business, operating results and financial condition.
Our business could be adversely affected by the loss of licenses to use third-party intellectual property or the lack of support or enhancement of such software.
We currently utilize a limited number of third-party software providers for inclusion of their intellectual property in our product offerings. If such third-party intellectual property were not available from these or alternative providers, we might experience delays or increased costs in the development of our products. These third-party intellectual property licenses may not continue to be available to us on commercially reasonable terms, and the intellectual property may not continue to be appropriately supported, maintained, or enhanced by the licensors. The loss by us of the license to use, or the inability by licensors to support, maintain, and enhance any of such intellectual property, could result in increased costs or in delays or reductions in product shipments until equivalent intellectual property is developed or licensed and integrated with internally developed intellectual property. Such increased costs or delays could adversely affect our business.
Management Discretion as to Use of Proceeds.
Our success will be substantially dependent upon the discretion and judgment of our management team with respect to the application and allocation of the proceeds of this Offering. The use of proceeds described below is an estimate based on our current business plan. We, however, may find it necessary or advisable to re-allocate portions of the net proceeds reserved for one category to another, and we will have broad discretion in doing so.
Control by Majority Stockholder.
I-Pass EC Holdings, LLC, a holding company owned by certain of the Company's founders, together with affiliated persons, holds approximately 60.41% of our voting stock, prior to the sale of shares in this offering. Following this offering, I-Pass EC Holdings, LLC will continue to hold greater than 50% of the voting stock of the Company. Therefore, investors in this offering will not be able to control the Company.
We may, but do not anticipate, paying dividends in the foreseeable future.
We do not currently pay dividends. Any future determination to declare dividends will be made at the discretion of our Board of Directors, subject to compliance with applicable laws, which may restrict or limit our ability to pay dividends, and will depend on our financial condition, operating results, capital requirements, general business conditions and other factors that our Board of Directors may deem relevant. We may, but do not anticipate, paying any dividends for the foreseeable future. As a result, a return on your investment will only occur if our share price appreciates.
Transferability and Liquidity of the Preferred Stock is not guaranteed.
Each investor agrees that it will acquire our Preferred Stock for investment purposes only and not with a view towards distribution. The Series A Preferred Stock may be transferable in certain cases, but is subject to a right of first refusal of the Company and other shareholders, and the Series B Preferred Stock is generally not transferable pursuant to the terms of the Second Amended and Restated Stockholders Agreement entered into by each investor. No public market exists for our Preferred Stock and no market is expected to develop. The Company cannot assure liquidity through an initial public offering, nor a sale of the Company.
Projections: Forward Looking Information.
Any projections or forward looking statements regarding our anticipated financial performance are hypothetical and are based on management's best estimate of the probable results of our operations, and will not have been reviewed by our independent accountants. These projections will be based on assumptions which management believes are reasonable. Some assumptions invariably will not materialize due to unanticipated events and circumstances beyond management's control. Therefore, actual results of operations will vary from such projections, and such variances may be material. Any projected results cannot be guaranteed.