Excel (EXCC) Risk Analysis

The market prices of securities of merchant services-related companies are extremely volatile and sometimes reach unsustainable levels that bear no relationship to the past or present operating performance of such companies. Factors that are expected to contribute to the volatility of the trading price of our common stock include, among others: - our quarterly results of operations;         - the variance between our actual quarterly results of operations and predictions by stock analysts;         - financial predictions and recommendations by stock analysts concerning companies engaged in merchant services-related and companies competing in our market in general, and concerning us in particular;         - public announcements of regulatory changes or new ventures relating to our business, new products or services by us or our competitors, or acquisitions, joint ventures or strategic alliances by us or our competitors;         - public reports concerning our services or those of our competitors;         - the operating and stock price performance of other companies that investors or stock analysts may deem comparable to us;         - large purchases or sales of our common stock;         - investor perception of our business prospects or the merchant card processing and acquisition industry in general; and         - general economic, political, and financial conditions, and the occurrence of natural disasters and terrorist attacks. In addition to the foregoing factors, the trading prices for equity securities in the stock market in general, and of merchant services-related companies in particular, have been subject to wide fluctuations that may be unrelated to the operating performance of the particular company affected by such fluctuations. Consequently, broad market fluctuations may have an adverse effect on the trading price of our common stock, regardless of our results of operations.

Our common stock may be deemed to be a "penny stock" as that term is defined in Rule 3a51-1 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Penny stocks are stocks (i) with a price of less than $5.00 per share; (ii) that are not traded on a "recognized" national exchange; (iii) whose prices are not quoted on the NASDAQ automated quotation system (NASDAQ-listed stocks must still meet requirement (i) above); or (iv) of issuers with net tangible assets of less than $2,000,000 (if the issuer has been in continuous operation for at least three years) or $5,000,000 (if in continuous operation for less than three years), or with average revenues of less than $6,000,000 for the last three years. Section 15(g) of the Exchange Act, and Rule 15g-2 promulgated thereunder, require broker-dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document before effecting any transaction in a penny stock for the investor's account. Moreover, Rule 15g-9 promulgated under the Exchange Act requires broker-dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor. This procedure requires the broker-dealer to (i) obtain from the investor information concerning his or her financial situation, investment experience and investment objectives; (ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement setting forth the basis on which the broker-dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor's financial situation, investment experience and investment objectives. Compliance with these requirements may make it more difficult for investors in our common stock to resell their shares to third parties or to otherwise dispose of them.

Future sales of our common stock by existing stockholders pursuant to an effective registration statement covering the resale of such shares or Rule 144 could adversely affect the market price of our common stock and could materially impair our future ability to generate funds through sales of our equity securities.

Our certificate of incorporation allows us to issue shares of preferred stock without any vote or further action by our common stockholders. Our Board of Directors has the authority to fix and determine the relative rights and preferences of preferred stock. As a result, our Board of Directors could authorize the issuance of a series of preferred stock that would grant to holders the preferred right to our assets upon liquidation, the right to receive dividend payments before dividends are distributed to the holders of common stock and the right to the redemption of the shares, together with a premium, prior to the redemption of our common stock. Preferred stock could be used to dilute a potential hostile acquirer. Accordingly, any future issuance of preferred stock or any rights to purchase preferred shares may have the effect of making it more difficult for a third party to acquire control of us. This may delay, defer or prevent a change of control or an unsolicited acquisition proposal. The issuance of preferred stock also could decrease the amount of earnings attributable to, and assets available for distribution to, the holders of our common stock and could adversely affect the rights and powers, including voting rights, of the holders of our common stock.

We have 4,600,000 shares of Series B Convertible Preferred Stock ("Series B Shares") outstanding. The Series B Shares are convertible into shares of the Company's common stock par value $0.0001 ("Common Stock") on a ratio of one to one, subject to adjustment for stock splits and stock dividends. The Series B Shares rank senior to the Common Stock and other preferred shares and carry a liquidation preference of $.05 per share. Holders of the Series B Shares are entitled to receive dividends declared on the Company's Common Stock on an as converted basis. Each Series B Share entitles the Holder thereof to 20 votes per share on all matters subject to voting by holders of the Company's Common Stock. The issuance of a total of 4,600,000 shares of Series B Shares, entitles the Holders thereof to vote a combined 92,000,000 shares. Under the terms of the Series B Shares, the Company has the right to require a Holder to convert the Series B Shares into Common Stock at any time after the Holder resigns, is terminated or otherwise ceases to be an officer of the Company. In addition, the Company has the right at any time to repurchase and retire all but not less than all of the Series B Preferred Stock for $0.05 per share provided that it gives notice to the Holder of the Company's intent to redeem the shares and the Holder does not elect to convert the Series B Shares into Common Stock in lieu of the redemption. In connection with the issuance of the Series B Shares, the Company and the Holders executed a Stockholders Agreement (the "Agreement") whereby the Holders agreed to not to initiate directly or indirectly any stockholder vote or action, by written consent or otherwise, to increase the size or structure of the Company's board of directors or remove any existing director, nor initiate directly or indirectly any stockholder vote or action by written consent or otherwise, to affect Holders' executive compensation, bonus criteria and amounts, or other similar action. The Holders also agreed to convert the Series B Shares immediately upon termination, whether voluntary or involuntary, or upon their resignation for any reason.