721773--12/14/2007--ELECTRONIC_CLEARING_HOUSE

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{stock, price, share}

{product, market, service}

{cost, contract, operation}

{loss, insurance, financial}

{property, intellectual, protect}

{operation, natural, condition}

{product, liability, claim}

{customer, product, revenue}

{acquisition, growth, future}

{financial, litigation, operation}

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Risks Related To Our Business We rely on cooperative relationships with, and sponsorship by, banks, the absence of which may affect our operations. Merchant fraud with respect to bankcard and ACH transactions could cause us to incur significant losses. Excessive chargeback losses could significantly affect our results of operations and liquidity. Excessive check return activity could significantly affect our results of operations and liquidity Failure to participate in the Visa POS Check Service Program would cause us to significantly shift our operating and marketing strategy. Our inability to implement, and/or the inability of third-party software vendors to continue to support and provide maintenance services with respect to, the third-party vendors products, could significantly affect our results of operations and financial condition. A significant amount of our bankcard processing revenue is dependent on approximately 100 merchant accounts, several of which are very large merchants. The loss of a substantial portion of these accounts would adversely affect our results of operations. The business activities of our merchants, third party independent sales organizations and/or third party processors could affect our business, financial condition and results of operations. Actions by federal, state or other authorities, or private third parties, could attempt to seize or otherwise attempt to take action against the reserve and settlement accounts we hold pursuant to our agreements with our merchants (to protect against returns and other losses we may incur), the loss of which could adversely affect our financial condition and results of operation. New or amended legislation and/or regulations could significantly affect our business operations and the business operations of our merchants. The business in which we compete is highly competitive and there is no assurance that our current products and services will stay competitive or that we will be able to introduce new products and services to compete successfully. If we are unable to process significantly increased volume activity, this could affect our operations and we could lose our competitive position. We incur financial risk from our check guarantee service. Security breaches could impact our continued operations, our results of operations and liquidity. The industry in which we operate involves rapidly changing technology and our failure to improve our products and services or to offer new products and services could cause us to lose customers. Our inability to protect or defend our trade secrets and other intellectual property could hurt our business. If we do not continue to invest in research and development, and/or otherwise improve our technology platforms, we could lose our competitive position. Failure to obtain additional funds can impact our operations and future growth. While we maintain insurance protection against claims related to our services, there is no assurance that such protection will be adequate to cover potential claims and our inability to otherwise pay such claims could harm our business. Involvement in litigation could harm our business. Our inability to recover from natural disasters could harm our business. Increases in the costs and requirements of technical compliance could harm our business. Risks Associated With Our Common Stock If we need to sell or issue additional shares of common stock or assume additional debt to finance future growth, our stockholders ownership could be diluted or our earnings could be adversely impacted. We have adopted a number of anti-takeover measures that may depress the price of our common stock. Our stock price has been volatile. We have not paid and do not currently plan to pay dividends, and you must look to price appreciation alone for any return on your investment.

Full 10-K form ▸

721773--12/14/2007--ELECTRONIC_CLEARING_HOUSE_INC