Digital River 2001 Annual Report Download - page 28

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The Company notes that, except for the historical information contained herein, the matters discussed below contain
forward-looking statements which involve known and unknown risks, uncertainties and other factors which may
cause the actual results, performance or achievements of the Company, or industry results, to be materially different
from any future results, performance or achievements expressed or implied by such forward-looking statements.The
Company expressly disclaims any obligation to update this information or publicly release any revision or reflect
events or circumstances after the date of this report. Such factors include, among others: the Company’s limited
operating history and variability of operating results, expectation of future losses, risks associated with electronic
software delivery, dependence on the Internet and growth in electronic commerce and internet infrastructure
development, dependence on software publishers, dependence on online retailers, system development and electronic
commerce security risks, rapid technological changes, competition in the electronic commerce industry, the importance
of attracting and retaining personnel, management of the Company’s growth, integration of acquired companies,
dependence on key employees and other risk factors referenced in the Company’s Form 10-K for the year ended
December 31, 2001.
Overview
The Company is a leading provider of comprehensive electronic commerce outsourcing solutions.
The Company was incorporated in February 1994 and commenced offering products for sale through
its clients’Web stores in August 1996. From inception through August 1996, the Company had no sales,
and its activities related primarily to the development of its Commerce Network Server (“CNS”)
technology related to electronic commerce. In 1996, the Company began to focus its business
development efforts on the software industry, building its inventory of software products through
contracts with software publishers. In 1997, the Company began to develop software distribution
relationships through contracts with online retailers. As of December 31, 2001, the Company had
approximately 10,000 software publisher clients and online retailer clients served by the Software and
Digital Commerce Services Division. In late 1998, the Company began to offer its comprehensive
electronic commerce outsourcing services in the form of a transaction fee-based e-commerce service
to clients outside of the software industry. As of December 31, 2001, the Company was operating
approximately 11,000 sites under its E-Business Services Division.
The Company has a limited operating history upon which investors may evaluate its business and
prospects. Since inception, the Company has incurred significant losses, and as of December 31, 2001,
had an accumulated deficit of approximately $103.1 million.The Company intends to expend financial
and management resources on the development of additional services, sales and marketing, technology
and operations to support larger-scale operations and greater service offerings. Although the Company
expects to generate positive cash flow from operations in 2002, there can be no assurance that the
26
Management’s Discussion and Analysis of Financial Condition and R esults of O perations
Digital River 2001 Annual Report