Overstock.com 2009 Annual Report Download - page 22

Table of Contents
We will continue to incur significant operating expenses and capital expenditures to:
further enhance our distribution and order fulfillment capabilities;
further improve our order processing systems and capabilities;
develop enhanced technologies and features;
continue to expand our customer service capabilities to better serve our customers' needs;
expand or modify our product offerings;
build out and occupy warehouse and office space;
increase our general and administrative functions to support our operations; and
maintain or increase our sales, branding and marketing activities, including maintaining existing or entering into new online marketing or
marketing analytics arrangements, and continuing or increasing our national television and radio advertising, direct mail and/or other marketing
campaigns.
Because we will incur many of these expenses before we receive any revenues from our improvement and enhancement efforts, our losses may be
greater than the losses we would incur if we developed our business more slowly. Further, we base our expenses in large part on our operating plans and
future revenue projections. Many of our expenses are fixed in the short term, and we may not be able to reduce spending quickly or at all if our revenues are
lower than we project. Therefore, any significant shortfall in revenues would likely harm our business, prospects, operating results and financial condition. In
addition, we may find that these efforts are more expensive than we anticipate, which would adversely affect our profitability. Also, the timing of these
expenses may contribute to fluctuations in our quarterly operating results.
We have identified material weaknesses in our internal control over financial reporting.
We are required to make an assessment of the effectiveness of our internal control over financial reporting. Our management concluded, and the Audit
Committee of the Board of Directors agreed with management's conclusions, that the following control failures constitute material weaknesses in the
Company's internal control over financial reporting as of December 31, 2009 (see Item 9A of Part II, "Controls and Procedures"):
We lacked a sufficient number of accounting professionals with the necessary knowledge, experience and training to adequately account for and
perform adequate supervisory reviews of significant transactions that resulted in misapplications of GAAP.
Information technology program change and program development controls were inadequately designed to prevent changes in our accounting
systems which led to the failure to appropriately capture and accurately process data.
The Public Company Accounting Oversight Board (United States) ("PCAOB"), defines a material weakness as a deficiency, or combination of
deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of annual or interim financial
statements will not be prevented or detected on a timely basis.
If we are unable to correct the identified deficiencies in our internal control in a timely manner, or if we identify other material weaknesses or
deficiencies in the future, our ability to record, process, summarize and report financial information accurately and within the time periods specified in the
rules and forms of the SEC could be adversely affected. This failure could cause investors to lose confidence in our reported financial information, negatively
affect the market price of our common
19
•
•
•
•
•
•
•
•
•
•