Overstock.com 2009 Annual Report Download - page 35

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Table of Contents
We have significant indebtedness.
As a result of the sale of our 3.75% Convertible Senior Notes (the "Senior Notes") in November 2004, we incurred $120.0 million of indebtedness, due
December 1, 2011. As of December 31, 2009, a face amount of $60.0 million of the Senior Notes remained outstanding. The degree to which we are
leveraged could materially and adversely affect our ability to obtain additional financing for working capital, acquisitions or other purposes and could make us
more vulnerable to industry downturns and competitive pressures. Our ability to meet our debt service obligations is dependent upon our future performance,
which will be subject to financial, business and other factors affecting our operations, many of which are beyond our control. Although only half of the Senior
Notes we originally issued remain outstanding, the remaining face amount of $60.0 million principal obligation is a significant amount, and we will have to
refinance any portion of the amount due December 1, 2011 that we are unable to repay with proceeds from operations. If we fail to comply with our debt
covenants, we will be in default.
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 acceptable 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.
Public statements we or our chief executive officer, Patrick M. Byrne, have made or may make in the future may antagonize regulatory officials or
others.
We and our chief executive officer, Patrick M. Byrne, have from time to time made public statements regarding our or his beliefs about matters of public
interest, including statements regarding naked short selling. Some of those public statements have been critical of the Securities and Exchange Commission
and other regulatory agencies. These public statements may have consequences for us, whether as a result of increased regulatory scrutiny or otherwise.
We remain subject to an investigation by the Securities and Exchange Commission.
As previously announced, we have received a notice from the Securities and Exchange Commission ("SEC") stating that the SEC is conducting an
investigation concerning our previously-announced financial restatements of 2006 and 2008 and other matters. The subpoena accompanying the notice covers
documents related to the restatements and also to our billings to our partners in the fourth quarter of 2008 and related collections, and our accounting for and
implementation of software relating to our accounting for customer refunds and credits, including offsets to partners, and related matters. We have been
cooperating and intend to continue to cooperate fully with the investigation. However, an unfavorable resolution of this matter could materially affect our
business, results of operations, financial position or cash flow.
We remain subject to an investigation by District Attorneys in California.
As previously announced, in April 2008, we received a letter from the Office of the District Attorney of Marin County, California, stating that the
District Attorneys of Marin and four other
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