Overstock.com 2005 Annual Report Download - page 26

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performance, which will be subject to financial, business and other factors affecting our operations, many of which are beyond our
control.
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.
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
ensure 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 it will require us to compete with established businesses having substantially greater
experience in the online auctions business and substantially greater resources than we have.
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, not 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.
Current and future laws could affect our auctions business.
Like our shopping site business, our auction site business is subject to the same laws and regulations that apply to other
companies conducting business on and off the Internet. In addition, our auction site business may be affected by other laws and
regulations, such as those that expressly apply to online auction site services. Further, because of the wide range of items that users of
our auctions service may choose to list on the site, a variety of additional laws and regulations may apply to transactions between
users of our site, such as those requiring a license to sell or purchase certain items or mandating particular disclosures in connection
with an offer or sale of an item. To the extent that such current or future laws or regulations prevent users from selling items on our
auction site, they could harm our business.
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