Year 2000 Dilemma and Compliance
One of the major challenges facing the consumer financial data
processing services industry is the problem of Year 2000 compliance. The Year
2000 dilemma deals with the underlying fact that many existing computer programs
use only two digits to identify a year in the date field. These programs were
designed and developed without considering the impact of the upcoming change in
the 21st century. If not corrected, many computer applications could fail or
create erroneous results by or at the year 2000. The Year 2000 dilemma affects
virtually all companies and organizations, including the Company.
The philosophy and practice regarding upgrades of equipment and
software, in the opinion of management of the Company, allow the Company to
offer a meaningful alternative to existing and prospective customers as an
outsource, rather than such customers' attempting to perform these tasks
in-house. Management feels that an additional opportunity to bring in bank
processing customers exists by providing a solution to the Year 2000 dilemma.
The Company's new banking software is certified and fully Year 2000 compliant
and, therefore, a solution for banks facing this processing crisis. However, no
assurance to this effect can be given. See "Description of Business-Sales and
Marketing" and "Description of Business-Competition."
Prospective and existing customers must comply with numerous required
regulatory mandates and are faced with the Year 2000 dilemma. These mandates
include: regulatory exams and audits supervised by the Federal Deposit Insurance
Corporation ("FDIC"), Office of the Comptroller of the Currency of the United
States and other state regulatory agencies, external audits by independent third
party auditors, proper disaster recovery planning and testing, installation of
proper procedures and controls, insurance that key personnel are properly backed
up so that reliance on key individuals for services are not interrupted and a
host of other issues. The removal of these overhead burdens is a significant
marketing opportunity for the Company with existing and prospective customers.
See "Description of Business-Year 2000 Dilemma and Compliance," "Description of
Business-Sales and Marketing," "Description of Business-Competition" and
"Description of Business-Regulation of the Company's Business."
Over the past few years, the Company has attempted to actively address
the Year 2000 dilemma. The Company has had in place a project plan and project
team reviewing all hardware and software, as necessary. The Company has already
made much of the investment needed for the Year 2000 Issue. The Company has also
instituted policies and procedures that require all new hardware and software
acquired or licensed by the Company to be Year 2000 compliant. As of the date of
this Report, all hardware is expected to be Year 2000 compliant by the fourth
quarter of 1998. It is management's opinion that any remaining Year 2000 issues
are not significant and should be able to be funded through normal operating
revenue and income. See "Item 6 - Management's Discussion and Analysis or Plan
of Operation."
Specifically, to address this problem the Company has installed newly
acquired banking software systems, licensed from The Kirchman Corporation, an
unaffiliated third party ("Kirchman"), that provides a solution to the Year 2000
dilemma. The Company's new banking software is certified by Kirchman as fully
Year 2000 compliant, and, therefore, a solution for other companies which are
facing the need to solve this impending crisis. These software upgrades are
system and application functional upgrades. However, no assurance can be given
that all Year 2000 issues have been solved by the acquisition of this software.
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