eTrade 1999 Annual Report Download - page 24

We have established a number of strategic relationships with online and Internet service providers, as well as software and information
service providers. There can be no assurance that any such relationships will be maintained, or that if they are maintained, they will be
successful or profitable. Additionally, we may not develop any new such relationships in the future. We also make investments in
equity securities of other companies without acquiring control of those companies. There is generally no public market for the
securities of the companies we invest in. In order for us to realize a return on our investment, such companies must be acquired or
successfully complete a public offering of their securities. There can be no assurance that such companies will be acquired or complete
a public offering or that such an acquisition or public offering will allow the Company to sell its securities at a profit, or at all.
Due to the foregoing factors, quarterly revenues and operating results are difficult to forecast. We believe that period-to-period
comparisons of our operating results will not necessarily be meaningful and you should not rely on them as any indication of future
performance. Our future quarterly operating results may not consistently meet the expectations of securities analysts or investors,
which in turn may have an adverse effect on the market price of our common stock.
Risks Associated with Potential Reduction In Order Flow Rebates
Order flow revenue as a percentage of revenue has decreased over the past three years. There can be no assurance that payments for
order flow will continue to be permitted by the SEC, the NASD or other regulatory agencies, courts or governmental units. Loss of any
or all of these revenues could have a material adverse effect on our business, financial condition and operating results.
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ITEM 2. PROPERTIES
During fiscal 1999, the Company entered into agreements to lease facilities in Menlo Park, California, where it will consolidate its
existing Silicon Valley locations. Additionally, the Company has facilities in Rancho Cordova, California and Alpharetta, Georgia.
Through ClearStation and TIR, the Company also has offices in San Francisco, New York, Australia, Hong Kong, Ireland, the
Philippines and the United Kingdom. The leases comprise an aggregate of 750,705 square feet and expire at various dates through
June 2009. The Company believes that it has adequate space for its current needs.
ITEM 3. LEGAL AND ADMINISTRATIVE PROCEEDINGS
On November 21, 1997, a putative class action was filed in the Superior Court of California, County of Santa Clara, by Larry R.
Cooper on behalf of himself and other similarly situated individuals. The action alleges, among other things, that the Company's
advertising, other communications and business practices regarding the Company's commission rates and its ability to timely execute
and confirm transactions through its online brokerage services were false and deceptive. The action seeks injunctive relief enjoining
the purported deceptive and unfair practices alleged in the action and also seeks unspecified compensatory and punitive damages, as
well as attorney fees. On June 1, 1999, the court entered an order denying plaintiffs' motion for class certification. While the court
declined to certify a class as to any of plaintiffs' alleged claims, it did indicate that plaintiffs may be able to pursue one of their claims
(relating to the Company's commission structure) on a representative basis. This proceeding is currently in the discovery phase and the
Company is unable to predict its ultimate outcome.
On February 8, 1999, a putative class action was filed in the Superior Court of California, County of Santa Clara, by Coleen Divito, on
behalf of herself and other similarly situated individuals. Subsequently on February 19, 1999, a putative class action was filed in the
Superior Court of California, County of Santa Clara, by Mario Cirignani, on behalf of himself and other similarly situated individuals.
Both complaints allege damages and seek injunctive relief arising out of, among other things, the February 3, 4 and 5, 1999, system
interruptions and allege a class of all E*TRADE account holders from February 2, 1999. Pursuant to a stipulation of counsel dated
March 23, 1999, the Court consolidated the Divito and Cirignani actions for all purposes. This proceeding is currently at a very early
stage and the Company is unable to predict its ultimate outcome.
On February 11, 1999, a putative class action was filed in the Supreme Court of New York, County of New York, by Evan Berger, on
behalf of himself and other similarly situated individuals. The action alleges, among other things, that the Company's advertising, other
communications and business practices regarding its ability to timely execute and confirm transactions through its online brokerage
services were false and deceptive. Plaintiff seeks damages based on causes of action for breach of contract and violation of New York
consumer protection statutes. This proceeding is currently at a very early stage and the Company is unable to predict its ultimate
outcome.
On March 1, 1999, a putative class action was filed in the Court of Common Pleas, Cuyahoga County, Ohio, by Truc Q. Hoang. The
Hoang complaint seeks damages and injunctive relief arising out of, among other things, plaintiff's alleged problems accessing his
account and placing orders. Plaintiff alleges causes of action for breach of contract, fiduciary duty and unjust enrichment, fraud, unfair
and deceptive trade practices, negligence/intentional tort and injunctive relief. This proceeding is currently at a very early stage and the
2002. EDGAR Online, Inc.