| SKECHERS USA INC ITEM 1A RISK FACTORS In addition to the other information in this annual report, the following factors should be considered in evaluating us and our business |
| The footwear industry is subject to rapidly changing consumer demands and fashion trends |
| Accordingly, we must identify and interpret fashion trends and respond in a timely manner |
| Demand for and market acceptance of new products are uncertain and achieving market acceptance for new products generally requires substantial product development and marketing efforts and expenditures |
| If we do not continue to meet changing consumer demands and develop successful styles in the future, our growth and profitability will be negatively impacted |
| We frequently make decisions about product designs and marketing expenditures several months in advance of the time when consumer acceptance can be determined |
| If we fail to anticipate, identify or react appropriately to changes in styles and trends or are not successful in marketing new products, we could experience excess inventories, higher than normal markdowns or an inability to profitably sell our products |
| Because of these risks, a number of companies in the footwear industry specifically, and others in the fashion and apparel industry in general, have experienced periods of rapid growth in revenues and earnings and thereafter periods of declining sales and losses, which in some cases have resulted in companies in these industries ceasing to do business |
| Similarly, these risks could have a material adverse effect on our results of operations or financial condition |
| If we are unable to timely and appropriately respond to changing consumer demand, our brand name and brand image may be impaired |
| Even if we react appropriately to changes in consumer preferences, consumers may consider our brand image to be outdated or associate our brand with styles of footwear that are no longer popular |
| Our business may be similarly affected in the future |
| We place orders with our manufacturers for some of our products prior to the time we receive all of our customers’ orders |
| We do this to minimize purchasing costs, the time necessary to fill customer orders and the risk of non-delivery |
| We also maintain an inventory of certain products that we anticipate will be in greater demand |
| However, we may be unable to sell the products we have ordered in advance from manufacturers or that we have in our inventory |
| Inventory levels in excess of customer demand may result in inventory write-downs, and the sale of excess inventory at discounted prices could significantly impair our brand image and have a material adverse effect on our operating results and financial condition |
| Conversely, if we underestimate consumer demand for our products or if our manufacturers fail to supply the quality products that we require at the time we need them, we may experience inventory shortages |
| Inventory shortages might delay shipments to customers, negatively impact retailer and distributor relationships, and diminish brand loyalty |
| We face intense competition in the footwear industry from other established companies |
| A number of our competitors have significantly greater financial, technological, engineering, manufacturing, marketing and distribution resources than we do |
| Their greater capabilities in these areas may enable them to better withstand periodic downturns in the footwear industry, compete more effectively on the basis of price and production and more quickly develop new products |
| In addition, new companies may enter the markets in which we compete, further increasing competition in the footwear industry |
| We believe that our ability to compete successfully depends on a number of factors, including the style and quality of our products and the strength of our brand name, as well as many factors beyond our control |
| We may not be able to compete successfully in the future, and increased competition may result in price reductions, reduced profit margins, loss of market share and an inability to generate cash flows that are sufficient to maintain or expand our development and marketing of new products, which would adversely impact the trading price of our Class A Common Stock |
| During 2005, 2004 and 2003, our net sales to our five largest customers accounted for approximately 25dtta4prca, 26dtta8prca and 27dtta7prca of total net sales, respectively |
| No customer accounted for more than 10prca of our net sales during 2005, 2004 and 2003 |
| One customer accounted for 10dtta3prca and 10dtta9prca of net trade receivables at December 31, 2005 and December 31, 2004, respectively |
| Although we have long-term relationships with many of our customers, our customers do not have a contractual obligation to purchase our products and we cannot be certain that we will be able to retain our existing major customers |
| Furthermore, the retail industry regularly experiences consolidation, contractions and closings which may result in our loss of customers or our inability to collect accounts receivable of major customers in excess of amounts that we have insured |
| If we lose a major customer, experience a significant decrease in sales to a major customer or are unable to collect the accounts receivable of a major customer in excess of amounts insured, our business could be harmed |
| Substantially all of our net sales during the year ended December 31, 2005 were derived from sales of footwear manufactured in foreign countries, with most manufactured in China and, to a lesser extent, in Italy, Vietnam and Brazil |
| We also sell our footwear in several foreign countries and plan to increase our international sales efforts as part of our growth strategy |
| Foreign manufacturing and sales are subject to a number of risks, including the following risks: political and social unrest, including the military presence in Iraq; 15 _________________________________________________________________ [50]Table of Contents changing economic conditions; currency exchange rate fluctuations; international political tension and terrorism; labor shortages and work stoppages; electrical shortages, transportation delays; loss or damage to products in transit; expropriation; nationalization; the imposition of domestic and international tariffs and trade duties, import and export controls and other non-tariff barriers, exposure to different legal standards (particularly with respect to intellectual property), compliance with foreign laws, and changes in domestic and foreign governmental policies |
| We have not, to date, been materially affected by any such risks, but we cannot predict the likelihood of such developments occurring or the resulting long-term adverse impact on our business, results of operations or financial condition |
| In particular, because most of our products are manufactured in China, adverse changes in trade or political relations with China, political instability in China, the occurrence of a natural disaster such as an earthquake or hurricane in China or the outbreak of a pandemic disease such as Severe Acute Respiratory Syndrome (SARS) or the Avian Flu in China would severely interfere with the manufacture of our products and would have a material adverse effect on our operations |
| In addition, electrical shortages, labor shortages or work stoppages may extend the production time necessary to produce our orders, and there may be circumstances in the future where we may have to incur premium freight charges to expedite the delivery of product to our customers |
| If we incur a significant amount of premium charges to airfreight product for our customers, our gross profit will be negatively affected if we are unable to collect those charges |
| Also, our manufacturers located in China may be subject to the effects of exchange rate fluctuations should the Chinese currency not remain stable with the US dollar |
| The value of the Chinese currency depends to a large extent on the Chinese government’s policies and China’s domestic and international economic and political developments |
| Since 1994, the official exchange rate for the conversion of the Chinese currency was pegged to the US dollar at a virtually fixed rate of approximately 8dtta28 Yuan per US dollar |
| However, on July 21, 2005, the Chinese government revalued the Yuan by 2dtta1prca, setting the exchange rate at 8dtta11 Yuan per US dollar, and adopted a more flexible system based on a trade-weighted basket of foreign currencies of China’s main trading partners |
| Under the new “managed float” policy, the exchange rate of the Yuan may shift each day up to 0dtta3prca in either direction from the previous day’s close, and as a result, the valuation of the Yuan may increase incrementally over time should the China central bank allow it to do so, which could significantly increase labor and other costs incurred in the production of our footwear in China |
| All of our products manufactured overseas and imported into the United States, the European Union (“EU”) and other countries are subject to customs duties collected by customs authorities |
| Customs information submitted by us is routinely subject to review by customs authorities |
| We are unable to predict whether additional customs duties, anti-dumping duties, quotas, safeguard measures or other trade restrictions may be imposed on the importation of our products in the future |
| Such actions could result in increases in the cost of our products generally and might adversely affect the sales and profitability of Skechers and the imported footwear industry as a whole |
| Following the phase-out at the beginning of 2005 of quotas that had been imposed by the EU since 1994 on the import of certain types of footwear manufactured in China, and the expiration of a separate EU anti-dumping case in 2003 against footwear made in China, Indonesia and Thailand, there has been renewed pressure from the EU footwear manufacturing industry to re-impose some level of trade protection on imported footwear from China, India, Vietnam and other exporting countries |
| In mid-2005, the EU Trade Commission initiated an anti-dumping investigation into leather footwear imported from China and Vietnam |
| Along with other major footwear manufacturers, we have been actively participating as respondents in this investigation and are taking the position that certain categories of footwear should not be within the product scope of this investigation and do not meet the legal requirements of injury and price in an anti-dumping investigation, as part of our efforts to minimize any adverse financial impact on our results of operations in 2006 and beyond |
| We believe that our major competitors stand in much the same position of risk regarding these potential trade measures |
| Although our company has generally exhibited steady growth since we started our business, we had a decrease in size in the past and our rate of growth has declined at times as well, and we may experience similar decreases in size or declines in rate of growth again in the future |
| Our ability to grow in the future depends upon, among other things, the continued success of our efforts to maintain our brand image and expand our footwear offerings and distribution channels |
| Furthermore, as our business becomes larger, we may not be able to effectively manage our growth |
| We anticipate that as our business continues to grow, we will have to improve 16 _________________________________________________________________ [51]Table of Contents and enhance our overall financial and managerial controls, reporting systems and procedures |
| We may be unable to successfully implement our current growth strategy or other growth strategies or effectively manage our growth, any of which would negatively impact our business, results of operations and financial condition |
| Our business depends on the general economic environment and levels of consumer spending that affect not only the ultimate consumer, but also retailers, our primary direct customers |
| Purchases of footwear tend to decline in periods of recession or uncertainty regarding future economic prospects, when consumer spending, particularly on discretionary items, declines |
| During periods of recession or economic uncertainty, we may not be able to maintain or increase our sales to existing customers, make sales to new customers, open and operate new retail stores, maintain sales levels at our existing stores, maintain or increase our international operations on a profitable basis, or maintain or improve our earnings from operations as a percentage of net sales |
| As a result, our operating results may be adversely and materially affected by downward trends in the economy or the occurrence of events that adversely affect the economy in general |
| Furthermore, in anticipation of continued increases in net sales, we have significantly expanded our infrastructure and workforce to achieve economies of scale |
| Because these expenses are fixed in the short term, our operating results and margins will be adversely impacted if we do not continue to grow as anticipated |
| For example, due in large part to the slowdown in the global economy, our net sales for 2003 were lower than anticipated |
| This lower level of sales adversely affected our operating results for 2003 and could do so again in 2006 and beyond |
| We market and sell our products and services throughout the world |
| The September 11, 2001 terrorist attacks disrupted commerce throughout the United States and other parts of the world |
| The continued threat of similar attacks throughout the world and the military action, or possible military action, taken by the United States and other nations, in Iraq or other countries may cause significant disruption to commerce throughout the world |
| To the extent that such disruptions further slow the global economy or, more particularly, result in delays or cancellations of purchase orders for our products, our business and results of operations could be materially adversely affected |
| We are unable to predict whether the threat of new attacks or the responses thereto will result in any long-term commercial disruptions or if such activities or responses will have a long-term material adverse effect on our business, results of operations or financial condition |
| Our quarterly revenues and operating results have varied significantly in the past and can be expected to fluctuate in the future due to a number of factors, many of which are beyond our control |
| Our major customers generally have no obligation to purchase forecasted amounts and may cancel orders, change delivery schedules or change the mix of products ordered with minimal notice and without penalty |
| As a result, we may not be able to accurately predict our quarterly sales |
| In addition, sales of footwear products have historically been somewhat seasonal in nature with the strongest sales generally occurring in our second and third quarters for the back-to-school selling season |
| Back-to-school sales typically ship in June, July and August, and delays in the timing, cancellation, or rescheduling of these customer orders and shipments by our wholesale customers could negatively impact our net sales and results of operations for our second and third quarters |
| More specifically, the timing of when products are shipped is determined by the delivery schedules set by our wholesale customers, which could cause sales to shift between our second and third quarters |
| Because our expense levels are partially based on our expectations of future net sales, our expenses may be disproportionately large relative to our revenues, and we may be unable to adjust spending in a timely manner to compensate for any unexpected revenue shifts, which could have a material adverse effect on our operating results |
| Also, our annualized tax rate is based on projections of our domestic and international operating results for the year, which we review and revise as necessary at the end of each quarter, and it is highly sensitive to fluctuations in projected international earnings |
| Any quarterly fluctuations in our annualized tax rate that may occur could have a material impact on our quarterly operating results |
| As a result of these specific and other general factors, our operating results will likely vary from quarter to quarter and the results for any particular quarter may not be necessarily indicative of results for the full year |
| Any shortfall in revenues or net income from levels expected by securities analysts and investors could cause a decrease in the trading price of our Class A Common Stock |
| Our footwear products are currently manufactured by independent contract manufacturers |
| During 2005 and 2004, the top four manufacturers of our products produced approximately 59dtta7prca and 56dtta1prca of our total purchases, respectively |
| One manufacturer accounted for 32dtta4prca and 28dtta2prca of total purchases during 2005 and 2004, respectively |
| A second manufacturer accounted for 11dtta2prca and 11dtta0prca of our total purchases during 2005 and 2004, respectively |
| We do not have long-term contracts with our manufacturers, and we compete with other footwear companies for production facilities |
| We could experience difficulties with these manufacturers, including reductions in the availability of production capacity, failure to meet our quality control standards, failure to meet production deadlines or increased manufacturing costs |
| In particular, manufacturers in China are facing a labor shortage as migrant workers seek better wages and working conditions in farming and other vocations, and if this trend continues, our current manufacturers’ operations could be adversely affected |
| If our current manufacturers cease doing business with us, we could experience an interruption in the manufacture of our products |
| Although we believe that we could find alternative manufacturers, we may be unable to establish relationships with alternative manufacturers that will be as favorable as the relationships we have now |
| For example, new manufacturers may have higher prices, less favorable payment terms, lower manufacturing capacity, lower quality standards or higher lead times for delivery |
| If we are unable to provide products consistent with our standards or the manufacture of our footwear is delayed or becomes more expensive, this could result in our customers canceling orders, refusing to accept deliveries or demanding reductions in purchase prices, any of which could have a material adverse effect on our business and results of operations |
| We require our independent contract manufacturers, suppliers and licensees to operate in compliance with applicable United States and foreign laws and regulations |
| Manufacturers are required to certify that neither convicted, forced or indentured labor (as defined under United States law) nor child labor (as defined by the manufacturer’s country) is used in the production process, that compensation is paid in accordance with local law and that their factories are in compliance with local safety regulations |
| Although we promote ethical business practices and our sourcing personnel periodically visit and monitor the operations of our independent contract manufacturers, suppliers and licensees, we do not control them or their labor practices |
| If one of our independent contract manufacturers, suppliers or licensees violates labor or other laws or diverges from those labor practices generally accepted as ethical in the United States, it could result in adverse publicity for us, damage our reputation in the United States or render our conduct of business in a particular foreign country undesirable or impractical, any of which could harm our business |
| In addition, if we, or our foreign manufacturers, violate United States or foreign trade laws or regulations, we may be subject to extra duties, significant monetary penalties, the seizure and the forfeiture of the products we are attempting to import or the loss of our import privileges |
| Possible violations of United States or foreign laws or regulations could include inadequate record keeping of our imported products, misstatements or errors as to the origin, quota category, classification, marketing or valuation of our imported products, fraudulent visas or labor violations |
| The effects of these factors could render our conduct of business in a particular country undesirable or impractical and have a negative impact on our operating results |
| We attempt to hedge this risk by offering a broad range of products, and no style comprised over 5prca of our gross wholesale sales during 2005 or 2004 |
| However, this may change in the future and fluctuations in sales of any given style that represents a significant portion of our future net sales could have a negative impact on our operating results |
| Our ability to open and operate new stores successfully depends on many factors, including, among others, our ability to identify suitable store locations, the availability of which is outside of our control; negotiate acceptable lease terms, including desired tenant improvement allowances; source sufficient levels of inventory to meet the needs of new stores; hire, train and retain store personnel; successfully integrate new stores into our existing operations; and satisfy the fashion preferences in new geographic areas |
| 18 _________________________________________________________________ [53]Table of Contents In addition, some or a substantial number of new stores could be opened in regions of the United States in which we currently have few or no stores |
| Any expansion into new markets may present competitive, merchandising and distribution challenges that are different from those currently encountered in our existing markets |
| Any of these challenges could adversely affect our business and results of operations |
| In addition, to the extent that any new store openings are in existing markets, we may experience reduced net sales volumes in existing stores in those markets |
| Many of our concept stores are located in shopping malls and some of our factory outlet stores are located in manufacturers’ outlet malls where we depend on obtaining prominent locations and the overall success of the malls to generate customer traffic |
| We cannot control the development of new malls, the availability or cost of appropriate locations within existing or new malls or the success of individual malls |
| Some of our concept stores occupy street locations that are heavily dependent on customer traffic generated by tourism |
| Any substantial decrease in tourism resulting from political, social or military events, a downturn in the economy or otherwise, is likely to adversely affect sales in our existing stores, particularly those with street locations |
| The effects of these factors could hinder our ability to open retail stores in new markets or reduce sales of particular existing stores, which could negatively affect our operating results |
| Our future success depends upon the continued services of Robert Greenberg, Chairman of the Board and Chief Executive Officer, Michael Greenberg, President, and David Weinberg, Executive Vice President and Chief Operating Officer |
| The loss of the services of any of these individuals or any other key employee could harm us |
| Our future success also depends on our ability to identify, attract and retain additional qualified personnel |
| Competition for employees in our industry is intense and we may not be successful in attracting and retaining such personnel |
| We are subject to various legal proceedings and threatened legal proceedings from time to time as part of our business |
| We are not currently a party to any legal proceedings or aware of any threatened legal proceedings, the adverse outcome of which, individually or in the aggregate, we believe would have a material adverse effect on our business, results of operations or financial condition |
| However, any unanticipated litigation in the future, regardless of its merits, could significantly divert management’s attention from our operations and result in substantial legal fees to us |
| Further, there can be no assurance that any actions that have been or will be brought against us will be resolved in our favor or, if significant monetary judgments are rendered against us, that we will have the ability to pay such judgments |
| Such disruptions, legal fees and any losses resulting from these claims could have a material adverse effect on our business, results of operations and financial condition |
| We believe that our trademarks, design patents and other proprietary rights are important to our success and our competitive position |
| We devote substantial resources to the establishment and protection of our trademarks and design patents on a worldwide basis |
| In the course of our international expansion, we have, however, experienced conflicts with various third parties that have acquired or claimed ownership rights in certain trademarks similar to ours or have otherwise contested our rights to our trademarks |
| We have in the past successfully resolved these conflicts through both legal action and negotiated settlements, none of which we believe has had a material impact on our financial condition and results of operations |
| Nevertheless, we cannot assure you that the actions we have taken to establish and protect our trademarks and other proprietary rights 19 _________________________________________________________________ [54]Table of Contents outside the United States will be adequate to prevent imitation of our products by others or to prevent others from seeking to block sales of our products as a violation of the trademarks and proprietary rights of others |
| Also, we cannot assure you that others will not assert rights in, or ownership of, trademarks, designs and other proprietary rights of ours or that we will be able to successfully resolve these types of conflicts to our satisfaction |
| In addition, the laws of certain foreign countries may not protect proprietary rights to the same extent as do the laws of the United States |
| We may face significant expenses and liability in connection with the protection of our intellectual property rights outside the United States, and if we are unable to successfully protect our rights or resolve intellectual property conflicts with others, our business or financial condition may be adversely affected |
| We use trademarks on nearly all of our products and believe that having distinctive marks that are readily identifiable is an important factor in creating a market for our goods, in identifying us and in distinguishing our goods from the goods of others |
| We consider our Skechers®, S in Shield Design® and Performance-S Shifted Design® trademarks to be among our most valuable assets and we have registered these trademarks in many countries |
| In addition, we own many other trademarks, which we utilize in marketing our products |
| We continue to vigorously protect our trademarks against infringement |
| We also have a number of design patents and a limited number of utility patents covering components and features used in various shoes |
| We believe that our success depends primarily upon skills in design, research and development, production and marketing rather than upon our patent position |
| However, we have followed a policy of filing applications for United States and foreign patents on designs and technologies that we deem valuable |
| We believe that our patents and trademarks are generally sufficient to permit us to carry on our business as presently conducted |
| We cannot, however, know whether we will be able to secure patents or trademark protection for our intellectual property in the future or that protection will be adequate for future products |
| Further, we face the risk of ineffective protection of intellectual property rights in the countries where we source and distribute our products |
| We have been sued for patent and trademark infringement and cannot be sure that our activities do not and will not infringe on the proprietary rights of others |
| If we are compelled to prosecute infringing parties, defend our intellectual property or defend ourselves from intellectual property claims made by others, we may face significant expenses and liability and necessary management attention to such matters, which could negatively impact our business or financial condition |
| If our working capital needs exceed our current expectations, we may need to raise additional capital through public or private equity offerings or debt financings |
| If we cannot raise needed funds on acceptable terms, we may not be able to successfully execute our growth strategy, take advantage of future opportunities or respond to competitive pressures or unanticipated requirements |
| To the extent we raise additional capital by issuing debt, it may become difficult for us to meet debt service obligations |
| To the extent we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution |
| Also, any new equity securities may have greater rights, preferences or privileges than our existing Class A Common Stock |
| A substantial portion of our operations are located in California, including 38 of our retail stores, our headquarters in Manhattan Beach and our domestic distribution center in Ontario |
| Because a significant portion of our net sales is derived from sales in California, a decline in the economic conditions in California, whether or not such decline spreads beyond California, could materially adversely affect our business |
| Furthermore, a natural disaster or other catastrophic event, such as an earthquake or wild fires affecting California, could significantly disrupt our business including the operation of our only domestic distribution center |
| We may be more susceptible to these issues than our competitors whose operations are not as concentrated in California |
| A significant decrease in our operating results could adversely effect our ability to maintain required financial covenants under our various long-term debt agreements and our dlra150 million credit facility |
| If these financial covenants are not maintained, the creditors will have the option to require immediate repayment of all outstanding long-term debt and any amounts outstanding under the credit facility, if any, and some of these agreements also contain cross-default provisions |
| The most likely result would require us to renegotiate certain terms of these agreements, obtain waivers from the creditors or obtain new debt agreements with other creditors, which may contain less favorable terms |
| If we are unable to renegotiate acceptable terms, obtain necessary waivers or obtain new debt agreements, this could have a material adverse effect on our business, results of operations and financial condition |
| 20 _________________________________________________________________ [55]Table of Contents Recognizing Compensation Expense Related To Stock Options Under FASB Statement 123(R) Will Reduce Our Future Reported Earnings |
| The Financial Accounting Standards Board (FASB) has issued a new accounting standard (Statement 123(R)) requiring companies to begin recognizing compensation expense related to all unvested and newly granted stock options |
| We included such expenses on a pro forma basis in the notes to our quarterly and annual financial statements through December 31, 2005 in accordance with US GAAP and did not include compensation expense related to stock options in reported earnings |
| We adopted Statement 123(R) on January 1, 2006 as required |
| Thus, our reported earnings will be lower in 2006 and thereafter than they would otherwise be under the previous accounting treatment for stock options, and as a result, the trading price of our Class A Common Stock could decline |
| As of December 31, 2005, Robert Greenberg, Chairman of the Board and Chief Executive Officer, beneficially owned 73dtta5prca of our outstanding Class B Common Stock and members of Mr |
| Greenberg’s immediate family beneficially owned the remainder of our outstanding Class B Common Stock |
| The holders of Class A Common Stock and Class B Common Stock have identical rights except that holders of Class A Common Stock are entitled to one vote per share while holders of Class B Common Stock are entitled to ten votes per share on all matters submitted to a vote of our stockholders |
| As a result, as of December 31, 2005, Mr |
| Greenberg beneficially owned approximately 64dtta5prca of the aggregate number of votes eligible to be cast by our stockholders, and together with shares beneficially owned by other members of his immediate family, he beneficially owned approximately 87dtta5prca of the aggregate number of votes eligible to be cast by our stockholders |
| Therefore, Mr |
| Greenberg is able to control substantially all matters requiring approval by our stockholders |
| Matters that require the approval of our stockholders include the election of directors and the approval of mergers or other business combination transactions |
| Greenberg also has control over our management and affairs |
| As a result of such control, certain transactions are not possible without the approval of Mr |
| Greenberg, including proxy contests, tender offers, open market purchase programs or other transactions that can give our stockholders the opportunity to realize a premium over the then-prevailing market prices for their shares of our Class A Common Stock |
| The differential in the voting rights may adversely affect the value of our Class A Common Stock to the extent that investors or any potential future purchaser view the superior voting rights of our Class B Common Stock to have value |
| Provisions of Delaware law, our certificate of incorporation or our bylaws could make it more difficult for a third party to acquire us, even if closing such a transaction would be beneficial to our stockholders |
| Greenberg’s substantial beneficial ownership position, together with the authorization of Preferred Stock, the disparate voting rights between our Class A Common Stock and Class B Common Stock, the classification of our Board of Directors and the lack of cumulative voting in our certificate of incorporation and bylaws, may have the effect of delaying, deferring or preventing a change in control, may discourage bids for our Class A Common Stock at a premium over the market price of the Class A Common Stock and may adversely affect the market price of our Class A Common Stock |
| We are subject to various regulatory requirements, including the Sarbanes-Oxley Act of 2002 |
| We, like all other public companies, are incurring expenses and, to a lesser extent, diverting management’s time in an effort to comply with Section 404 of the Sarbanes-Oxley Act of 2002 |
| We have implemented processes documenting and evaluating our system of internal controls |
| If, in the future, management identifies one or more material weaknesses, or our external auditors are unable to attest that our management’s report is fairly stated or to express an opinion on the effectiveness of our internal controls, this could result in a loss of investor confidence in our financial reports, have an adverse effect on our stock price and/or subject us to sanctions or investigation by regulatory authorities |