Overstock.com 2002 Annual Report Download - page 18

From time to time, we receive claims of and become subject to consumer protection, employment, intellectual property and other commercial litigation
related to the conduct of our business. Such litigation could be costly and time consuming and could divert our management and key personnel from our
business operations. The uncertainty of litigation increases these risks. In connection with such litigation, we may be subject to significant damages or
equitable remedies relating to the operation of our business and the sale of products on our websites. Any such litigation may materially harm our business,
results of operations and financial condition.
In February 2002, Microsoft Corporation filed a complaint against us in the United States District Court for the Northern District of California alleging
that we have distributed counterfeit and otherwise unauthorized Microsoft software in violation of federal copyright and trademark law and related state laws.
The complaint seeks damages in an unspecified amount and injunctive relief. Although we believe we have defenses to the allegations and intend to pursue
them vigorously, we do not have sufficient information to assess the validity of the claims or the amount of potential damages. Although this litigation matter
is ongoing and unresolved it could result in settlement arrangements or an unfavorable outcome, including potential statutory damages.
In January 2003, we received a letter from NCR Corporation claiming that certain of our business practices and information technology systems infringe
patents owned by NCR. The letter further stated that NCR would vigorously protect its intellectual property rights if we did not agree to enter into licensing
arrangements with respect to the asserted patents. On January 31, 2003, we filed a complaint in the United States District Court of Utah, Central Division,
seeking declaratory judgment that we do not infringe any valid claim of the patents asserted by NCR.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth quarter of 2002.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Our common stock is traded on the Nasdaq National Market under the symbol "OSTK." Prior to May 30, 2002, there was no public market for our
common stock. The following table sets forth, for the periods indicated, the high and low closing prices per share for our common stock as reported on the
Nasdaq National Market since May 30, 2002.
Common Stock Price
High Low
Year Ended December 31, 2002
Second Quarter (from May 30, 2002) $14.60 $12.25
Third Quarter 14.55 5.40
Fourth Quarter 15.43 4.41
As of December 31, 2002, there were approximately 472 holders of record of our common stock. Because many of our shares of common stock are held
by brokers and other institutions on behalf of shareholders, we are unable to estimate the total number of shareholders represented by these record holders.
We have never declared or paid any cash dividends on shares of our non-redeemable common stock. We currently intend to retain our earnings for future
growth and do not anticipate paying any cash dividends in the foreseeable future. Any future determination to pay dividends will be at the discretion of our
board of directors and will depend on our results of operations, financial conditions, contractual and legal restrictions and other factors the board deems
relevant.
On May 29, 2002, a Registration Statement on Form S-1 (Commission File No. 333-83728) relating to our initial public offering was declared effective
by the SEC. The net proceeds to us from the offering were approximately $26.1 million after deducting underwriting discounts and commissions and other
expenses related to the offering. During the quarter ended December 31, 2002, we used approximately $20.25 million of such funds for inventory purchases.
On February 12, 2003, a Registration Statement on Form S-1 (Commission File No. 333-102763) relating to a follow-on public offering was declared
effective by the SEC. The net proceeds to us from the offering were approximately $24.1 million after deducting underwriting discounts and commissions and
other expenses related to the offering.
We have used and intend to continue to use the net proceeds of our public offerings for working capital and general corporate purposes, including the
expansion of our marketing and sales activity, capital expenditures and inventory purchases. The amounts and timing of our actual expenditures for each of
these purposes may vary significantly depending upon numerous factors, including the amount of cash generated or used by our operations, competitive
developments, marketing and sales activities and market acceptance of our services, and the rate of growth, if any, of our business. Pending use for these or
other purposes, we intend to invest the available proceeds of the offerings in short-term, interest-bearing investment-grade securities.
ITEM 6. SELECTED FINANCIAL DATA
The following selected consolidated financial data as of December 31, 2001 and 2002 and for each of the three years in the period ended December 31,
2002, are derived from our consolidated financial statements that have been audited, and are included elsewhere in this Form 10-K. The consolidated financial
data as of December 31, 1998, 1999 and 2000 and for the years ended December 31, 1998 and 1999, are derived from consolidated financial statements,
which have been audited, but are not contained herein. The historical results do not necessarily indicate results expected for any future period. This