Overstock.com 2014 Annual Report Download - page 25

Table of Contents
Our effort to develop code for the purposes of facilitating the creation of a decentralized facility for the trading of securities is an area in which we have
limited experience, may be expensive, and is subject to the resolution of significant technical and legal and regulatory constraints.
We are working to develop code for the purposes of facilitating the creation of a decentralized facility for the trading of securities. Although we have
hired employees with significant experience in the technical workings of Bitcoin and other cryptocurrencies, we do not have significant experience with the
types of projects we are now pursuing. These projects may be expensive, and are subject to substantial risk that they may ultimately be unsuccessful. Further,
the creation of a decentralized facility for the trading of securities would be subject to the future resolution of numerous significant legal and regulatory
constraints and prohibitions. Consequently, even if all technical challenges to these projects were solved, the legal and regulatory constraints and
prohibitions may be insurmountable.
We may be adversely affected by fluctuations in precious metal prices.
At December 31, 2014 our investment in precious metals was $10.9 million. Our financial results may be adversely affected by declines in the price
of precious metals. The prices of precious metals may fluctuate widely in the future and are affected by numerous factors beyond our control such as interest
rates, exchange rates, inflation or deflation, fluctuation in the value of the United States dollar and foreign currencies, global and regional supply and
demand, and the political and economic conditions of mineral producing countries throughout the world. Our investment consists of actual precious metals,
rather than financial instruments. We store our precious metals off-site in a third party facility. Consequently, we are subject to the risks of physical storage
with a third party that we do not control.
We have a history of significant losses. If we do not maintain profitability, our financial condition and our stock price could suffer.
We have a history of losses, and we may incur operating and net losses in the foreseeable future. At December 31, 2014, our accumulated deficit was
$153.9 million. We need to generate significant revenues to maintain profitability, and we may not be able to do so. Although we have generated positive net
income in recent years, we incurred a net loss of $19.4 million in 2011. We may be unable to maintain profitability in the future. If our revenues grow more
slowly than we anticipate or decline, or if our expenses exceed our expectations, our financial results would be harmed and our business, prospects, financial
condition and results of operations could fall below the expectations of public market analysts and investors.
If we fail to accurately forecast our expenses and revenues, our business, prospects, financial condition and results of operations may suffer and the price
of our securities may decline.
The rapidly evolving nature of our industry and the constantly evolving nature of our business make forecasting operating results difficult. We
periodically implement large, complex and expensive infrastructure upgrades in order to increase our ability to handle larger volumes of sales and to develop
or increase our ability to perform a variety of analytical procedures relating to our business. We are continuing to upgrade and further expand these and other
components of our infrastructure. We are also in the process of designing and constructing a facility to serve as our corporate headquarters. In the past, we
have experienced difficulties with upgrades of our infrastructure, and have incurred increased expenses as a result of these difficulties. As a result of
expenditures on our infrastructure and headquarters, our ability to reduce our expenditures is and will be limited. Therefore, any significant shortfall in the
revenues for which we have built and are continuing to build our business would likely harm our business.
The seasonality of our business places increased strain on our operations.
A disproportionate amount of our sales normally occur during our fourth quarter. If we do not stock or are otherwise unable to source products
sufficient to meet customer demand, our business would be adversely affected. If we liquidate products, as we have in the past, we may be required to take
significant inventory markdowns or write-offs, which could reduce gross profits. We may experience an increase in our net shipping cost due to
complimentary upgrades, split-shipments, and additional long-zone shipments necessary to ensure timely delivery for the holiday season. If too many
customers access our Website within a short period of time due to increased holiday demand, we may experience system interruptions that make our Website
unavailable or prevent us from efficiently fulfilling orders, which may reduce the volume of goods we sell and the attractiveness of our products and services.
In addition, we may be unable to adequately staff our fulfillment and customer service centers during peak periods, and delivery services and other
fulfillment companies and customer service providers may be unable to meet the seasonal demand.
25