1001916--3/5/2008--SECURE_COMPUTING

related topics

{product, market, service}

{property, intellectual, protect}

{stock, price, share}

{debt, indebtedness, cash}

{stock, price, operating}

{customer, product, revenue}

{provision, law, control}

{system, service, information}

{personnel, key, retain}

{operation, international, foreign}

{product, candidate, development}

{control, financial, internal}

{regulation, change, law}

We have experienced operating losses in the past and may experience operating losses in the future. In 2007 we were cash flow positive; however, we have experienced negative cash flow in the past and may experience negative cash flow in the future. If, at that time, sources of financing are not available, we may not have sufficient cash to satisfy working capital requirements. If we fail to meet the borrowing requirements under our credit agreement, we may be unable to obtain necessary short-term financing and if we default on a secured loan, material assets of ours could be subject to forfeiture. Our significant stockholders could have significant influence over us Holders of our Series A Preferred Stock have rights that are different and senior to those of our common stock. The potential increase in sales from our relationships with various vendors of communications, security, and network management products or managed services may be reduced by requirements to provide volume price discounts and other allowances and significant costs incurred in customizing our products. Competition from companies producing enterprise gateway security products could reduce our sales and market share. Consolidation among competitors may erode our market share The pricing policies of our competitors may impact the overall demand for our products and services and therefore, impacting our profitability. Other vendors may include products similar to ours in their hardware or software and render our products obsolete. Technology in the enterprise gateway security market is changing rapidly, and if we fail to develop new products that are well accepted, our market share will erode. Denial of our patent applications or invalidation or circumvention of our patents may weaken our ability to compete in the enterprise gateway security market. If another party alleges that we infringe its patents or proprietary rights, we may incur substantial litigation costs Disclosure of our trade secrets or proprietary information may undermine our competitive advantages If the use of public switched networks such as the Internet does not continue to grow, our market and ability to sell our products and services may be limited. Our reliance on third party manufacturers of hardware components and subassemblies that are used in our appliances and SafeWord token product lines could cause a delay in our ability to fill orders. Our product lines are not diversified beyond providing enterprise gateway security solutions to our customers, and any drop in the demand for enterprise gateway security products would materially harm our business Our stock price is highly volatile, which may cause our investors to lose money and may impair our ability to raise money, if necessary. If our products fail to function properly or are not properly designed, our reputation may be harmed, and customers may make product liability and warranty claims against us If we lose a significant customer, we will realize smaller profits. If we fail to collect amounts due from our customers on a timely basis, our cash flow and operating results may suffer Quarterly net sales and operating results depend on the volume and timing of orders received, which may be affected by large individual transactions and which sometimes are difficult to predict The Internet may become subject to increased regulation by government agencies Anti-takeover provisions in our charter documents and Delaware law could discourage a takeover or future financing The ability to attract and retain highly qualified personnel to develop our products and manage our business is extremely important, and our failure to do so could harm our business. Our international operations subject us to risks related to doing business in foreign countries

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1001916--3/5/2008--SECURE_COMPUTING_CORP