Overstock.com 2004 Annual Report Download - page 26

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We may be unable to generate sufficient cash flow to satisfy our debt service obligations.
Our ability to generate cash flow from operations to make interest payments on our debt obligations will depend on our future performance, which will
be affected by a range of economic, competitive and business factors. We cannot control many of these factors, including general economic conditions and the
health of the internet retail industry. If our operations do not generate sufficient cash flow from operations to satisfy our debt service obligations, we may need
to borrow additional funds to make these payments or undertake alternative financing plans, such as refinancing or restructuring our debt, or reducing or
delaying capital investments and acquisitions. Additional funds or alternative financing may not be available to us on favorable terms, or at all. Our inability
to generate sufficient cash flow from operations or obtain additional funds or alternative financing on acceptable terms could have a material adverse effect on
our business, prospects, financial condition and results of operations.
Issuances of our securities are subject to federal and state securities laws, and certain holders of common stock issued by us may be entitled to
rescind their purchases.
Issuances of securities are subject to federal and state securities laws. From November 1999 through September 2000, we offered and sold common stock
to investors in various states. Certain of those offerings may not have complied with various requirements of applicable state securities laws. In such situations
a number of remedies may be available to regulatory authorities and the investors who purchased common stock in those offerings, including, without
limitation, a right of rescission, civil penalties, seizure of our assets, a restraining order or injunction, and a court order to pay restitution and costs. As a result,
certain investors in our common stock may be entitled to return their shares to Overstock.com and receive from us the full price they paid, plus interest, which
we estimate to be an aggregate amount of approximately $3.2 million at December 31, 2004.
Risks Relating to our Auctions Site Business
Our auctions site is a new business.
Our auctions site began operation in September 2004. The online auctions business is a new business for us, and we cannot assure you that our expansion
into the online auctions business will succeed. Our entry into the online auctions business will require us to devote substantial financial, technical, managerial
and other resources to the business. It will also expose us to additional risks, including legal and regulatory risks, and will require us to compete with
established businesses having substantially greater experience in the online auctions business and substantially greater resources than we do.
Our auction business may be subject to a variety of regulatory requirements.
Many states and other jurisdictions, including Utah, where our company is located, have regulations governing the conduct of traditional "auctions" and
the liability of traditional "auctioneers" in conducting auctions. Although the vast majority of these regulations clearly contemplated only traditional auctions,
and did not contemplate online auctions, the potential application of these types of regulations to online auction sites is not clear. We are aware that several
states and some foreign jurisdictions have attempted to impose such regulations on other companies operating online auction sites or on the users of those
sites. In addition, certain states have laws or regulations that do expressly apply to online auction site services. Although we do not expect these laws to have a
significant effect on our auction site business, we will incur costs in complying with these laws, and we may from time to time be required to make changes in
our business that may increase our costs, reduce our revenues, cause us to prohibit the listing of certain items in certain locations, or make other changes that
may adversely affect our auctions business.
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