Overstock.com 2011 Annual Report Download - page 30

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Table of Contents
We may be subject to product liability claims that could be costly and time consuming.
We sell products manufactured for us by third parties, some of which may be defective. If any product that we sell were to cause physical injury or injury
to property, the injured party or parties could bring claims against us as the manufacturer and/or retailer of the product. Our insurance coverage may not be
adequate to cover claims that could be asserted. If a successful claim were brought against us in excess of our insurance coverage, it could adversely affect our
business. Even unsuccessful claims could result in the expenditure of funds and management time and could have a negative impact on our business.
We have indebtedness.
As of December 31, 2011, we had indebtedness of $18.6 million. Although we have reduced our indebtedness substantially over the last several years,
the degree to which we are indebted 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.
Our ability to generate cash flow from operations to make interest and principal 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 indebtedness, we
may need to borrow additional funds to make these payments or undertake alternative financing plans, such as refinancing 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 disclosed previously, we have received a notice from the Securities and Exchange Commission 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. Prior to October
2010, we were asked for information in the form of records connected to this matter, all of which we provided. The SEC has interviewed several witnesses.
However we do not know the present status of the investigation. We have not heard formally from the SEC on this matter after October 2010, and we know of
no person interviewed since that time related to this matter. We have been cooperating and intend to continue to cooperate fully with the investigation.
However, an unfavorable
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