Overstock.com 2006 Annual Report Download - page 65

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Due to the foregoing factors, in one or more future quarters our operating results may fall below the expectations of securities
analysts and investors. In such an event, the trading price of our common stock would likely be materially adversely affected.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the
Company's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that would be material to investors.
Liquidity and Capital Resources
Prior to the second quarter of 2002, we financed our activities primarily through a series of private sales of equity securities,
warrants to purchase our common stock and promissory notes. During the second quarter of 2002, we completed our initial public
offering pursuant to which we received approximately $26.1 million in cash, net of underwriting discounts, commissions, and other
related expenses. Additionally, we completed follow-on offerings in February 2003, May 2004 and November 2004, pursuant to
which we received approximately $24.0 million, $37.9 million and $75.2 million, respectively, in cash, net of underwriting discounts,
commissions, and other related expenses. In November 2004, we also received $116.2 million in proceeds from the issuance of our
convertible senior notes in a transaction event exempt from registration under the Securities Act. During 2006, we received $64.4
million from two stock offerings in May and December. At December 31, 2006, our cash and cash equivalents balance was
$127.0 million.
Our operating activities resulted in a net cash outflows of $6.1 million and $26.3 million for the years ended December 31, 2005
and 2006, respectively. The primary use of cash and cash equivalents during the year ended December 31, 2006 was to fund our
operations, including net losses of $101.8 million (which includes $43.3 million of loss from discontinued operations and other net
non-cash activity), as well as changes in accounts receivables, accounts payables and accrued liabilities of $2.1 million, $35.2 million
and $6.2 million, respectively. This was offset by the cash provided from changes in inventory, prepaid inventory, prepaid expenses,
and other long-term assets of $67.0 million , $7.4 million, $1.0 million and $496,000, respectively. For the year ended December 31,
2005, the primary use of cash and cash equivalents was to fund our operations, including net losses of $24.9 million, and changes in
inventories ($46.7 million), prepaid expenses ($5.0 million), receivables ($4.3 million) and other long-term assets ($2.2 million). This
was offset by the change in prepaid inventory ($2.7 million), accounts payable ($35.2 million) and accrued liabilities ($23.1 million).
We have payment terms with our fulfillment partners that extend beyond the amount of time necessary to collect proceeds from
our customers. As a result, following our seasonally strong fourth quarter sales, at December 31 of each year, our cash, cash
equivalents, marketable securities and accounts payable balances typically reach their highest level (other than as a result of cash
flows provided by or used in investing and financing activities). However, our accounts payable balance normally declines during the
first three months following year-end, which normally results in a decline in our cash, cash equivalents, and marketable securities
balances in the first quarter each year.
Investing activities resulted in cash outflows of $37.7 million for the year ended December 31, 2005 and cash inflows of $33.4
million for the year ended December 31, 2006. The cash inflows of $33.4 million from investing activities in 2006 resulted from the
sale of marketable securities of $56.8 million, including the sale of our foreign notes of $49.5 million in April, offset by expenditures
for property and equipment of $23.4 million. Cash outflows from investing activities in 2005 resulted from investments in marketable
securities of $185.5 million, expenditures for property and equipment of $44.6 million and the acquisition
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