828750--3/5/2010--GSI_COMMERCE

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{product, market, service}

{condition, economic, financial}

{regulation, government, change}

{debt, indebtedness, cash}

{system, service, information}

{loss, insurance, financial}

{property, intellectual, protect}

{personnel, key, retain}

{stock, price, share}

{control, financial, internal}

{competitive, industry, competition}

{tax, income, asset}

{acquisition, growth, future}

{customer, product, revenue}

{cost, operation, labor}

{capital, credit, financial}

{operation, international, foreign}

{regulation, change, law}

{interest, director, officer}

{provision, law, control}

{stock, price, operating}

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{operation, natural, condition}

We may not achieve the expected benefits of acquisitions and investments. Our failure to manage growth and diversification of our business could harm us. We plan to continue to expand our business internationally which may cause our business to become increasingly susceptible to numerous international business risks and challenges. We have limited experience in international operations. We may not be able to compete successfully against current and future competitors. Our business is highly seasonal; a weak fourth quarter would have a material adverse effect on our operating results for the year. General economic conditions may adversely affect our results of operations and financial condition. We have an accumulated deficit and may incur additional losses. We may not be able to access on satisfactory terms, or at all, the credit and capital markets as needed to finance a portion of our working capital requirements and support our liquidity needs. Our substantial leverage and significant debt service obligations could adversely affect our financial condition and our ability to fulfill our obligations and operate our business. The terms of our secured revolving bank credit facility impose financial and operating restrictions on us. We may become obligated to make earnout payments to the former stockholders and employees of RCI, which may limit our available cash or affect our ability to engage in other business activities that may be in our best interests. If we fail to manage our exposure to global financial and securities market risk successfully, our operating results and financial condition could be materially impacted. Our growth and success depend, in part, on our ability to add new clients and maintain and expand our relationships with existing clients. Our success is tied to the offline businesses of our clients. A large percentage of our revenue is derived from a small number of our clients businesses. We are subject to significant inventory risks. Our business could suffer if we are unsuccessful in making, integrating, and maintaining commercial agreements and other business relationships. Our revenue from our affiliate marketing network may fail to grow or may decline if the reputation of the affiliate marketing network is damaged by unscrupulous activities of network participants. A disruption in our operations could materially and adversely affect our business, results of operations and financial condition. Problems in our fulfillment operations could adversely affect our business. Our success is tied to the adequacy of the Internet infrastructure. We are dependent upon consumers willingness to use the Internet to purchase goods. We may be liable if third parties misappropriate our customers personal information. If we do not respond to rapid technological changes, our services and proprietary technology and systems may become obsolete. Our business is heavily dependent on the use of e-mail, and any decrease in the use of e-mail may harm our business, results of operations and financial condition. We and/or our clients may be unable to protect our and their proprietary technology and intellectual property rights. We have been, and may in the future be subject to intellectual property claims or competition or trade practices claims that could be costly and could disrupt our business. We may be subject to product liability claims that could be costly and time-consuming. Credit card and payment fraud could adversely affect our business. If one or more states successfully assert that we should collect or should have collected sales or other taxes on the sale of our merchandise, our business could be harmed. We may have exposure to greater than anticipated tax liabilities. Our ability to use net operating loss carryforwards to reduce future tax payments may be limited. We rely on insurance to mitigate some risks facing our business, and to the extent our insurance does not mitigate the risks facing our business or our insurers are unable to meet their obligations, our operating results may be negatively impacted. Variability in self-insurance liability estimates could significantly impact our financial results. Existing or future laws or regulations could harm our business or marketing efforts. Existing federal, state and international laws regulating e-mail marketing practices impose certain obligations on the senders of commercial e-mails and could expose us to liability for violations, decrease the effectiveness of our e-mail marketing solutions, and expose us to financial, criminal and other penalties for non-compliance, which could increase our operating costs. Loss of our credit card acceptance privileges or changes to credit card association fees, rules, or practices could harm our business. Future changes in financial accounting standards or practices or taxation rules or practices may adversely affect our reported financial results. Our success is dependent upon our executive officers and other key personnel. We may be unable to hire and retain skilled personnel which could limit our growth. There are limitations on the liabilities of our directors and executive officers. Under certain circumstances, we are obligated to indemnify our directors and executive officers against liability and expenses incurred by them in their service to us. If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud. The price of our common stock may fluctuate significantly. Future sales of our common stock in the public market or the issuance of our common stock or securities senior to our common stock could adversely affect the trading price of our common stock. We have never paid dividends on our common stock and do not anticipate paying dividends in the foreseeable future. It may be difficult for a third party to acquire us and this could depress our stock price. Holders of our common stock will be subordinated to our secured revolving bank credit facility, convertible notes and other indebtedness.

Full 10-K form ▸

828750--3/5/2010--GSI_COMMERCE_INC