The Year 2000 Issue is the result of computer programs being written using two digits rather than four digits to define the applicable year. Computer programs that have sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices or engage in similar normal business activities.

Based on our internal assessment, Pro-Props has determined that its software programs, developed internally and purchased from outside vendors, are already Year 2000 compliant, or that the cost of any needed modifications will not have a material effect on the Company's consolidated financial position, results of operations or cash flows. However, the Company is currently unable to determine if its strategic partners have fully addressed the Year 2000 Issue as it relates to their respective operating systems. A Year 2000 system failure by a strategic partner of the Company could have a material adverse effect on the Company's results of operations.