Classmates.com 2006 Annual Report Download - page 56

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Management
’s Report on Internal Control Over Financial Reporting
Management of United Online, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting. The
Company’s internal control over financial reporting has been designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external reporting purposes in accordance with accounting principles generally accepted
in the United States of America.
The Company’s internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect transactions and dispositions of assets of the Company; provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted
in the United States of America, and that receipts and expenditures are being made only in accordance with authorization of management and
directors of the Company; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of the Company’s assets that could have a material effect on the Company’s financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Company’s internal control over financial reporting at December 31, 2006. In making this
assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in
Internal Control
—Integrated Framework . Based on that assessment under those criteria, management has determined that, at December 31,
2006, the Company’s internal control over financial reporting was effective.
Management has excluded from its assessment of internal control over financial reporting as of December 31, 2006 certain elements of the
internal control over financial reporting of MyPoints.com, Inc. (“MyPoints”), a wholly-owned subsidiary of the Company, because MyPoints
was acquired by the Company in a purchase business combination in April 2006. Subsequent to the acquisition, certain elements of the acquired
business’ internal control over financial reporting and related processes were integrated into the Company’
s existing systems and internal control
over financial reporting. Those controls that were not integrated have been excluded from management’s assessment of the effectiveness of the
Company’s internal control over financial reporting as of December 31, 2006. The excluded elements represent controls over accounts of
approximately 4% of the Company’s consolidated assets as of December 31, 2006 and 8% of consolidated revenue for the year then ended.
Management’s assessment of the effectiveness of the Company’s internal control over financial reporting at December 31, 2006 has been
audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.
Changes in Internal Control Over Financial Reporting
On April 10, 2006, we completed the acquisition of MyPoints. We are in the process of integrating MyPoints and continuing our evaluation
of internal controls pursuant to the Sarbanes-Oxley Act of 2002. Excluding the changes described above, there have not been any changes in the
Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during
the fourth quarter of 2006 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over
financial reporting.
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