e10vqza

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

AMENDMENT NO. 1

(Mark One)


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 4, 2009 or


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission file number 0-16611

GSI COMMERCE, INC.

(Exact name of registrant as specified in its charter)



DELAWARE		04-2958132
(State or other jurisdiction of		(I.R.S. employer identification no.)
incorporation or organization)



935 FIRST AVENUE, KING OF PRUSSIA, PA		19406
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code (610) 491-7000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o

Accelerated filer þ

Non-accelerated filer o
(Do not check if a smaller reporting company)

Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

There were 48,892,325 shares of the registrant’s Common Stock outstanding as of the close of business on May 8, 2009.

FORM 10-Q/A
AMENDMENT NO. 1
FOR THE QUARTER ENDED APRIL 4, 2009
EXPLANATORY NOTE

This Form 10-Q/A (the “Amendment”) is Amendment No. 1 to and amends our Form 10-Q for the period ended April 4, 2009, which was filed with the Securities and Exchange Commission on May 14, 2009 (the “Original Filing”) to correct an immaterial misstatement in our stock-based compensation expense. For discussion regarding the correction, see Note 13 “Financial Statement Correction of Misstatement and Retrospective Application of FSP APB 14-1,” under Notes to Condensed Consolidated Financial Statements.

This Form 10-Q/A amends and corrects only Items 1 and 2 of Part I of the Original Filing to reflect the effects of the adjustments to the Company’s financial statements for the periods presented. The remaining items contained within this Amendment No. 1 consist of all other items originally contained in the Form 10-Q for the quarterly period ended April 4, 2009. These remaining items are not amended hereby, but are included for the convenience of the reader. Except for the forgoing amended information, this Amendment continues to describe conditions as of the date of the Original Filing, and the Company has not updated the disclosures contained herein to reflect events that occurred at a later date. The Company is also updating the Signature Page and certifications contained in Exhibits 31.1, 31.2 and 32.1.

INDEX


		Page
PART I — FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited):
	Condensed Consolidated Balance Sheets as of January 3, 2009 and April 4, 2009 (corrected)		4
	Condensed Consolidated Statements of Operations (corrected) for the three-month periods ended March 29, 2008 and April 4, 2009		5
	Condensed Consolidated Statements of Cash Flows (corrected) for the three-month periods ended March 29, 2008 and April 4, 2009		6
	Notes to Condensed Consolidated Financial Statements		7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		28
Item 4.	Controls and Procedures		28

PART II — OTHER INFORMATION

Item 1.	Legal Proceedings		28
Item 1A.	Risk Factors		28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		29
Item 3.	Defaults Upon Senior Securities		29
Item 4.	Submission of Matters to a Vote of Security Holders		29
Item 5.	Other Information		29
Item 6.	Exhibits		29

SIGNATURES			30

Our fiscal year ends on the Saturday nearest the last day of December. The Company’s fiscal year ends are as follows:

PART I

ITEM 1: FINANCIAL STATEMENTS

GSI COMMERCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(unaudited)


	January 3,			April 4,
	2009			2009⁽¹⁾
ASSETS
Current assets:
Cash and cash equivalents	$	130,315		$	48,105
Accounts receivable, less allowance for doubtful accounts of $2,747 and $1,727		78,544			61,712
Inventory		42,856			39,373
Deferred tax assets		18,125			17,742
Prepaid expenses and other current assets		11,229			11,840

Total current assets		281,069			178,772

Property and equipment, net		164,833			159,153
Goodwill		194,996			194,888
Intangible assets, net of accumulated amortization of $18,340 and $20,788		46,663			44,254
Long-term deferred tax assets		11,296			19,011
Other assets, net of accumulated amortization of $16,384 and $17,010		17,168			15,448

Total assets	$	716,025		$	611,526


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	98,100		$	47,664
Accrued expenses		116,747			68,993
Deferred revenue		20,397			17,375
Current portion of long-term debt		4,887			4,898

Total current liabilities		240,131			138,930

Convertible notes		161,951			164,497
Long-term debt		32,609			31,356
Deferred revenue and other long-term liabilities		6,838			7,645

Total liabilities		441,529			342,428

Commitments and contingencies (Note 7)

Stockholders’ equity:
Preferred stock, $0.01 par value, 5,000,000 shares authorized; 0 shares issued and outstanding as of January 3, 2009 and April 4, 2009		—			—
Common stock, $0.01 par value, 90,000,000 shares authorized; 47,630,824 and 48,534,843 shares issued as of January 3, 2009 and April 4, 2009 respectively; 47,630,621 and 48,534,640 shares outstanding as of January 3, 2009 and April 4, 2009, respectively		476			485
Additional paid in capital		430,933			437,698
Accumulated other comprehensive loss		(2,327	)		(2,389	)
Accumulated deficit		(154,586	)		(166,696	)

Total stockholders’ equity		274,496			269,098


Total liabilities and stockholders’ equity	$	716,025		$	611,526


⁽¹⁾		As corrected, see Note 13.

The accompanying notes are an integral part of these condensed consolidated financial statements.

GSI COMMERCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)


	Three Months Ended
	March 29,			April 4,
	2008⁽¹⁾			2009⁽²⁾

Revenues:
Net revenues from product sales	$	123,120		$	106,191
Service fee revenues		72,423			90,284


Net revenues		195,543			196,475

Costs and expenses:
Cost of revenues from product sales		85,417			79,355
Marketing		16,875			10,861
Account management and operations, inclusive of $1,466 and $2,256 of stock-based compensation		59,443			57,741
Product development, inclusive of $611 and $1,451 of stock-based compensation		22,621			28,374
General and administrative, inclusive of $2,592 and $3,247 of stock-based compensation		16,255			19,277
Depreciation and amortization		13,809			15,401


Total costs and expenses		214,420			211,009


Loss from operations		(18,877	)		(14,534	)

Other (income) expense:
Interest expense		4,370			4,796
Interest income		(1,039	)		(151	)
Other expense		145			229


Total other expense		3,476			4,874


Loss before income taxes		(22,353	)		(19,408	)
Benefit for income taxes		(10,855	)		(7,298	)


Net loss	$	(11,498	)	$	(12,110	)


Basic and diluted loss per share	$	(0.25	)	$	(0.25	)


Weighted average shares outstanding — basic and diluted		46,924			47,926


⁽¹⁾		As retrospectively adjusted and corrected, see Note 13.

⁽²⁾		As corrected, see Note 13.

The accompanying notes are an integral part of these condensed consolidated financial statements.

GSI COMMERCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)


	Three Months Ended
	March 29,			April 4,
	2008⁽¹⁾			2009⁽²⁾

Cash Flows from Operating Activities:
Net loss	$	(11,498	)	$	(12,110	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		11,910			12,962
Amortization		1,899			2,439
Amortization of discount on convertible notes		2,308			2,546
Stock-based compensation		4,669			6,954
Foreign currency transaction losses		—			238
Deferred income taxes		(10,855	)		(7,250	)
Changes in operating assets and liabilities:
Accounts receivable, net		18,750			16,802
Inventory		1,239			3,483
Prepaid expenses and other current assets		1,121			(549	)
Other assets, net		1,662			1,965
Accounts payable and accrued expenses		(65,295	)		(97,854	)
Deferred revenue		3,640			(2,236	)


Net cash used in operating activities		(40,450	)		(72,610	)

Cash Flows from Investing Activities:
Payments for acquisitions of businesses, net of cash acquired		(145,001	)		(750	)
Cash paid for property and equipment, including internal use software		(17,482	)		(7,411	)


Net cash used in investing activities		(162,483	)		(8,161	)

Cash Flows from Financing Activities:
Borrowings on revolving credit loan		15,000			—
Debt issuance costs paid		(454	)		(38	)
Repayments of capital lease obligations		(468	)		(1,195	)
Repayments of mortgage note		(68	)		(47	)
Proceeds from exercise of common stock options		158			72


Net cash provided by (used in) financing activities		14,168			(1,208	)

Effect of exchange rate changes on cash and cash equivalents		4			(231	)


Net decrease in cash and cash equivalents		(188,761	)		(82,210	)
Cash and cash equivalents, beginning of period		231,511			130,315


Cash and cash equivalents, end of period	$	42,750		$	48,105


Supplemental Cash Flow Information
Cash paid during the period for interest	$	782		$	703
Cash paid during the period for income taxes		357			1,458
Noncash Investing and Financing Activities:
Accrual for purchases of property and equipment		3,401			3,581


⁽¹⁾		As retrospectively adjusted and corrected, see Note 13.

⁽²⁾		As corrected, see Note 13.

The accompanying notes are an integral part of these condensed consolidated financial statements.

GSI COMMERCE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)

NOTE 1—BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements of GSI Commerce, Inc. and Subsidiaries (“the Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance with the instructions for Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all information and note disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements.

The accompanying financial information is unaudited; however, in the opinion of the Company’s management, all adjustments (consisting of normal recurring adjustments and accruals) necessary to present fairly the financial position, results of operations and cash flows for the periods reported have been included. The results of operations for the periods reported are not necessarily indicative of those that may be expected for a full year.

The financial statements presented include the accounts of the Company and all wholly-owned subsidiaries. All inter-company balances and transactions among consolidated entities have been eliminated.

This quarterly report should be read in conjunction with the financial statements and notes thereto included in the Company’s audited financial statements for the fiscal year ended January 3, 2009, presented in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission (“SEC”) on August 4, 2009.

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and assumptions.

Reclassifications: Beginning with the second quarter of fiscal 2008, the Company replaced the sales and marketing line item in its Condensed Consolidated Statements of Operations with two separate line items: (i) marketing and (ii) account management and operations. Marketing expenses include client revenue share expenses, net advertising and promotional expenses, subsidized shipping and handling expenses, and catalog expenses. These costs are derived from the Company’s e-commerce services segment. The remaining expenses that were formerly included in sales and marketing are now included within account management and operations. Account management and operations expenses include fulfillment costs, customer care costs, credit card fees, and payroll related to the buying, business management and marketing functions of the Company. This change was made to enable investors to analyze the Company’s expenses in a manner consistent with how the business is viewed internally and managed. The Company conformed this presentation for all periods presented.

This reclassification had no effect on the Company’s previously reported net loss or stockholders’ equity.

Client Revenue Share: Client revenue share charges are payments made to the Company’s clients in exchange for the use of their brand names, logos, the promotion of its clients’ URLs, Web stores and toll-free telephone numbers in clients’ marketing and communications materials, the implementation of programs to provide incentives to consumers to shop through the e-commerce businesses that the Company operates for its clients and other programs and services provided to the consumers of the e-commerce businesses that the Company operates for its clients, net of amounts reimbursed to the Company by its clients. Client revenue share is calculated as either a percentage of product sales or a guaranteed annual amount. Client revenue share charges were $7,274 for the three-month period ended April 4, 2009, and $9,406 for the three-month period ended March 29, 2008 and are included in marketing expenses in the Condensed Consolidated Statements of Operations.

Shipping and Handling Costs: The Company defines shipping and handling costs as only those costs incurred for a third-party shipper to transport products to consumers and these costs are included in cost of revenues from product sales to the extent the costs are less than or equal to shipping revenue. In some instances, shipping and handling costs exceed shipping charges to the consumer and are subsidized by the Company. Additionally, the Company selectively offers

GSI COMMERCE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)

promotional free shipping whereby it ships merchandise to consumers free of all shipping and handling charges. The cost of promotional free shipping and subsidized shipping and handling was $0 for the three-month period ended April 4, 2009, and $2,262 for the three-month period ended March 29, 2008, and is included in marketing expenses in the Condensed Consolidated Statements of Operations.

Fulfillment Costs: The Company defines fulfillment costs as personnel, occupancy and other costs associated with its fulfillment centers, personnel and other costs associated with its logistical support and vendor operations departments and third-party warehouse and fulfillment services costs. Fulfillment costs were $20,348 for the three-month period ended April 4, 2009, and $23,940 for the three-month period ended March 29, 2008, and are included in account management and operations expenses in the Condensed Consolidated Statements of Operations.

Recent Accounting Pronouncements: In February 2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position (“FSP”) 157-2, “Effective Date of FASB Statement No. 157” (“FSP 157-2”), which delayed the effective date of Statement of Financial Accounting Standards (“SFAS”) 157 “Fair Value Measurements” (“SFAS 157”) for nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value on a recurring basis, at least annually, until fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. The Company adopted FSP 157-2 for its non-financial assets and liabilities on January 4, 2009 with no impact to its condensed consolidated financial statements.

In December 2007, the FASB issued SFAS 141(R), “Business Combinations” (“SFAS 141(R)”). SFAS 141(R) establishes principles and requirements for an acquirer in a business combination on recognizing and measuring the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the entity acquired in its financial statements. In addition, SFAS 141(R) provides guidance on the recognition and measurement of goodwill acquired in the business combination or a gain from a bargain purchase as well as what information to disclose to enable users of the financial statements to evaluate the nature and financial impact of the business combination. SFAS 141(R) also requires recognition of assets and liabilities of noncontrolling interests acquired, fair value measurement of consideration and contingent consideration, expense recognition for transaction costs and certain integration costs, recognition of the fair value of contingencies, and adjustments to income tax expense for changes in an acquirer’s existing valuation allowances or uncertain tax positions that result from the business combination. The Company adopted the provisions of SFAS 141(R) on January 4, 2009 with no material impact to its condensed consolidated financial statements.

In December 2007, the FASB issued SFAS 160, “Noncontrolling Interests in Consolidated Financial Statements — an Amendment of ARB No. 51” (“SFAS 160”). SFAS 160 establishes principles and requirements of treatment for the portion of equity in a subsidiary that is not attributable directly or indirectly to a parent. This is commonly known as a minority interest. The objective of SFAS 160 is to improve relevance, comparability, and transparency concerning ownership interests in subsidiaries held by parties other than the parent by providing disclosures that clearly identify between interests of the parent and interest of the noncontrolling owners and the related impacts on the consolidated statement of income and the consolidated statement of financial position. SFAS 160 also provides guidance on disclosures related to changes in the parent’s ownership interest and deconsolidation of a subsidiary. The Company adopted the provisions of SFAS 160 on January 4, 2009 with no impact to its condensed consolidated financial statements.

In March 2008, the FASB issued SFAS 161, “Disclosures about Derivative Instruments and Hedging Activities” (“SFAS 161”). SFAS 161 requires companies with derivative instruments to disclose how and why a company uses derivative instruments, how derivative instruments and related hedged items are accounted for under SFAS 133 “Accounting for Derivative Instruments and Hedging Activities,” and how derivative instruments and related hedged items affect a company’s financial statements. The Company adopted the provisions of SFAS 161 on January 4, 2009 with no impact to the disclosures in its condensed consolidated financial statements.

In May 2008, the FASB issued FSP APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement),” (“FSP APB 14-1”), which changes the accounting treatment for convertible debt instruments that allow for either mandatory or optional cash settlements. FSP APB 14-1 requires the issuer of convertible debt instruments with cash settlement features to separately account for the liability and equity components of the instrument. The Company’s $207,500 principal amount of subordinated convertible notes are subject to the provisions of FSP APB 14-1 because under the notes the Company has the ability to elect cash settlement of the conversion value of the notes. The Company adopted FSP APB 14-1 on January 4, 2009, and is required to apply its provisions retrospectively for all

GSI COMMERCE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)

periods presented. See Note 6, Long-Term Debt and Credit Facility, for additional information regarding the Company’s convertible notes and Note 13, Financial Statement Correction of Misstatement and Retrospective Application of FSP APB 14-1, for the impact of FSP APB 14-1 on the Company’s financial statements.

In June 2008, the FASB ratified the consensus reached on Emerging Issues Task Force (“EITF”) Issue 07-5, “Determining whether an Instrument (or Embedded Feature) is indexed to an Entity’s Own Stock,” (“EITF 07-5”). EITF 07-5 provides a two-step model to be applied in determining whether a financial instrument or an embedded feature is indexed to an issuer’s own stock and thus able to qualify for the scope exception under SFAS 133. The Company adopted the provisions of EITF 07-5 on January 4, 2009 with no impact to its condensed consolidated financial statements.

In June 2008, the FASB issued FSP EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities” (“FSP EITF 03-6-1”). FSP EITF 03-6-1 requires that unvested stock-based compensation awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) should be classified as participating securities and should be included in the computation of earnings per share pursuant to the two-class method as described by SFAS 128, “Earnings per Share.” The Company adopted the provisions of FSP EITF 03-6-1 on January 4, 2009 with no material impact to its condensed consolidated financial statements.

NOTE 3—FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company’s financial assets and liabilities subject to fair value measurements on a recurring basis are as follows (in thousands):


	Fair Value Measurements on January 3, 2009
	Quoted Prices in				Significant
	Active Markets for		Significant Other		Unobservable
	Identical Assets		Observable Inputs		Inputs
Recurring Fair Value Measures	(Level 1)		(Level 2)		(Level 3)

Assets
Cash and cash equivalents⁽¹⁾
Money market mutual funds	$	97,849	$	—	$	—
Other assets
Cash surrender value of life insurance policies		—		991		—

	$	97,849	$	991	$	—


(1)		Cash and cash equivalents total $130,315 as of January 3, 2009, and are comprised of $97,849 of money market mutual funds and $32,466 of bank deposits.

GSI COMMERCE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)


	Fair Value Measurements on April 4, 2009
	Quoted Prices in				Significant
	Active Markets for		Significant Other		Unobservable
	Identical Assets		Observable Inputs		Inputs
Recurring Fair Value Measures	(Level 1)		(Level 2)		(Level 3)

Assets
Cash and cash equivalents⁽¹⁾
Money market mutual funds	$	20,499	$	—	$	—
Other assets
Cash surrender value of life insurance policies		—		964		—


	$	20,499	$	964	$	—

(1)

Cash and cash equivalents total $48,105 as of April 4, 2009, and are comprised of $20,499 of money market mutual funds and $27,606 of bank deposits.

The Company’s financial assets and liabilities subject to fair value measurements on a non-recurring basis are as follows (in thousands):


	Fair Value Measurements on January 3, 2009
	Quoted Prices in				Significant
	Active Markets for		Significant Other		Unobservable
	Identical Assets		Observable Inputs		Inputs
Nonrecurring Fair Value Measures	(Level 1)		(Level 2)		(Level 3)

Assets
Other assets
Equity investments	$	—	$	—	$	1,418


	$	—	$	—	$	1,418

For fiscal 2008, the Company recognized an other than temporary impairment loss of $1,665 which reduced the carrying value of one of its equity investments from $3,083 to its estimated fair value of $1,418.

The Company did not have any non-recurring fair value measurements in the first quarter of fiscal 2009.

NOTE 4—PROPERTY AND EQUIPMENT

GSI COMMERCE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)

The major classes of property and equipment, at cost, as of January 3, 2009 and April 4, 2009 are as follows:


	January 3,			April 4,
	2009			2009
Computer hardware and software	$	190,957		$	196,892
Building and building improvements		44,721			44,729
Furniture, warehouse and office equipment, and other		40,423			40,785
Land		7,889			7,889
Leasehold improvements		4,592			4,724
Capitalized leases		28,141			28,141
Construction in progress		1,497			1,497


		318,220			324,657
Less: Accumulated depreciation		(153,387	)		(165,504	)


Property and equipment, net	$	164,833		$	159,153

The Company’s net book value in capital leases, which consist of warehouse equipment and computer hardware, was $21,283 as of April 4, 2009 and $22,595 as of January 3, 2009. Amortization of capital leases is included within depreciation and amortization expense on the Condensed Consolidated Statements of Operations. Interest expense recorded on capital leases was $396 for the three-month period ended April 4, 2009 and $276 for the three-month period ended March 29, 2008.

NOTE 5—GOODWILL AND OTHER INTANGIBLE ASSETS

The following table summarizes the changes in the carrying amount of goodwill for each of the Company’s reportable segments:


				Interactive
	E-Commerce			Marketing
	Services			Services		Consolidated
January 3, 2009	$	82,758		$	112,238	$	194,996
Foreign currency translation		(108	)		—		(108	)

April 4, 2009	$	82,650		$	112,238	$	194,888

The Company’s intangible assets are as follows:

GSI COMMERCE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)


							Weighted-
	January 3,			April 4,			Average
	2009			2009			Life
							(in years)
Gross carrying value of intangible assets subject to amortization:
Customer contracts	$	38,773		$	38,773			2.5
Non-compete agreements		3,838			3,838			3.0
Purchased technology		4,493			4,493			4.0
Trade name		470			470			1.1
Foreign currency translation		(691	)		(652	)

		46,883			46,922			2.5

Accumulated amortization:
Customer contracts		(15,302	)		(17,099	)
Non-compete agreements		(1,599	)		(1,919	)
Purchased technology		(1,152	)		(1,463	)
Trade name		(470	)		(470	)
Foreign currency translation		183			163

		(18,340	)		(20,788	)

Net carrying value:
Customer contracts		23,471			21,674
Non-compete agreements		2,239			1,919
Purchased technology		3,341			3,030
Trade name		—			—
Foreign currency translation		(508	)		(489	)

Total intangible assets subject to amortization, net		28,543			26,134

Indefinite life intangible assets:
Trade name		18,120			18,120

Total intangible assets	$	46,663		$	44,254

Amortization expense of intangible assets was $2,448 for the three-month period ended April 4, 2009 and $1,885 for the three-month period ended March 29, 2008. Estimated future amortization expense related to intangible assets as of April 4, 2009, which does not reflect any foreign currency translation effects, is as follows:


Fiscal 2009	$	7,284
Fiscal 2010		7,892
Fiscal 2011		5,641
Fiscal 2012		2,538
Fiscal 2013		1,786
Thereafter		1,482

	$	26,623

GSI COMMERCE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)

NOTE 6—LONG-TERM DEBT AND CREDIT FACILITY

The following table summarizes the Company’s long-term debt as of:


	January 3,			April 4,
	2009			2009

Convertible notes	$	161,951		$	164,497
Notes payable ⁽¹⁾		12,663			12,615
Capital lease obligations		24,833			23,639
Credit facility ⁽²⁾		—			—


		199,447			200,751
Less: Current portion of notes payable		(184	)		(187	)
Less: Current portion of capital lease obligations		(4,703	)		(4,711	)


	$	194,560		$	195,853


(1)		The estimated fair market value of the notes payable approximated their carrying value as of April 4, 2009 and January 3, 2009.

(2)		The Company had no outstanding borrowings and $1,575 of outstanding letters of credit under its $90,000 secured revolving credit facility as of April 4, 2009.

In May 2008, the FASB issued FSP APB 14-1, which requires the issuer of convertible debt instruments with cash settlement features to separately account for the liability and equity components of the instrument. The Company’s $207,500 principal amount of subordinated convertible notes are subject to the provisions of FSP APB 14-1 because the Company has the ability to elect cash settlement of the conversion value of the notes. The liability component of the notes is determined based on the present value of the notes using the Company’s nonconvertible debt borrowing rate on the issuance date. In order to determine the fair value of the debt portion and equity portion of the Company’s convertible notes in accordance with SFAS 157, the Company used a market approach to determine the market rate for comparable transactions had the Company issued nonconvertible debt with similar embedded features other than the conversion feature by using prices and other relevant information generated by market transactions at or near the issuance date of our convertible notes. The equity component is the difference between the proceeds from the issuance of the note and the fair value of the liability component. The resulting debt discount, equal to the excess of the principal amount of the liability over its carrying amount, will be amortized to interest expense using the effective interest method over the expected life of the debt. The Company adopted FSP APB 14-1 on January 4, 2009 and applied it retrospectively to all periods presented.

3% Convertible Notes due 2025

In fiscal 2005, the Company completed a public offering of $57,500 aggregate principal amount of 3% subordinated convertible notes due June 1, 2025. The notes bear interest at 3%, payable semi-annually on June 1 and December 1.

Holders may convert the notes into shares of the Company’s common stock (or cash or a combination of the Company’s common stock and cash, if the Company so elects) at a conversion rate of 56.1545 shares per $1,000 principal amount of notes (representing a conversion price of approximately $17.81 per share). Based on the Company’s closing stock price of $13.60 on April 3, 2009, the if-converted value of the notes does not exceed the aggregate principal amount of the notes.

GSI COMMERCE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)

The following table provides additional information about the Company’s 3% convertible notes:


	As of		As of
	January 3, 2009		April 4, 2009
Carrying amount of the equity component		18,187		18,187
Principal amount of the liability component		57,500		57,500
Unamortized discount of liability component		6,574		5,478
Net carrying amount of liability component		50,926		52,022
Remaining amortization period of discount			14 months
Effective interest rate on liability component				12.00	%

The Company recognized interest expense from the 3% convertible notes of $1,624 for the three-months ended April 4, 2009, which was comprised of $1,096 for the amortization of the discount on the liability component, $431 for the contractual interest coupon, and $97 for the amortization of the liability component of the issue costs. The Company recognized interest expense of $1,495 for the three-months ended March 29, 2008 which was comprised of $976 for the amortization of the discount on the liability component, $431 for the contractual interest coupon, and $88 for the amortization of the liability component of the issue costs.

The estimated fair market value of the subordinated convertible notes was $50,959 as of April 4, 2009 and $40,825 as of January 3, 2009 based on quoted market prices.

2.5% Convertible Notes due 2027

In fiscal 2007, the Company completed a private placement of $150,000 of aggregate principal amount of 2.5% subordinated convertible notes due June 1, 2027, raising net proceeds of approximately $145,000, after deducting initial purchaser’s discount and issuance costs. The notes bear interest at 2.5%, payable semi-annually on June 1 and December 1.

Holders may convert the notes into shares of the Company’s common stock (or cash or a combination of the Company’s common stock and cash, if the Company so elects) at a conversion rate of 33.3333 shares per $1,000 principal amount of notes (representing a conversion price of approximately $30.00 per share). Based on the Company’s closing stock price of $13.60 on April 3, 2009, the if-converted value of the notes does not exceed the aggregate principal amount of the notes.

The following table provides additional information about the Company’s 2.5% convertible notes:


	As of		As of
	January 3, 2009		April 4, 2009
Carrying amount of the equity component		26,783		26,783
Principal amount of the liability component		150,000		150,000
Unamortized discount of liability component		38,975		37,525
Net carrying amount of liability component		111,025		112,475
Remaining amortization period of discount			62 months
Effective interest rate on liability component				8.60	%

The Company recognized interest expense on the 2.5% convertible notes of $2,500 for the three-months ended April 4, 2009 which was comprised of $1,450 for the amortization of the discount on the liability component, $938 for the contractual interest coupon, and $112 for the amortization of the liability component of the issue costs. The Company recognized interest expense of $2,378 for the three-months ended March 29, 2008 which was comprised of $1,332 for the amortization of the discount on the liability component, $938 for the contractual interest coupon, and $108 for the amortization of the liability component of the issue costs.

The estimated fair market value of the subordinated convertible notes was $91,875 as of April 4, 2009 and $68,748 as of January 3, 2009 based on quoted market prices.

GSI COMMERCE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)

NOTE 7—COMMITMENTS AND CONTINGENCIES

Legal Proceedings

The Company is involved in various litigation incidental to its business, including alleged contractual claims, claims relating to infringement of intellectual property rights of third parties, claims relating to the manner in which goods are sold through its integrated platform and claims relating to the Company’s collection of sales taxes in certain states. The Company collects sales taxes for goods owned and sold by it and shipped into certain states. As a result, the Company is subject from time to time to claims from other states alleging that the Company failed to collect and remit sales taxes for sales and shipments of products to customers in states.

Based on the merits of the cases and/or the amounts claimed, the Company does not believe that any claims are likely to have a material adverse effect on its business, financial position or results of operations. The Company may, however incur substantial expenses and devote substantial time to defend these claims whether or not such claims are meritorious. In addition, litigation is inherently unpredictable. In the event of a determination adverse to the Company, the Company may incur substantial monetary liability and may be required to implement expensive changes in its business practices, enter into costly royalty or licensing agreements, or begin to collect sales taxes in states in which we previously did not. An adverse determination could have a material adverse effect on the Company’s business, financial position or results of operations. Expenditures for legal costs are expensed as incurred.

Operating and Capital Commitments

The following summarizes the Company’s principal operating and capital commitments as of April 4, 2009:


	Payments due by fiscal year
	2009		2010		2011		2012		2013		Thereafter		Total

Operating lease obligations⁽¹⁾	$	12,462	$	15,775	$	12,747	$	9,347	$	7,402	$	18,057	$	75,790

Purchase obligations⁽¹⁾		69,546		5,953		992		—		—		—		76,491

Client revenue share payments⁽¹⁾		14,951		27,173		27,683		20,818		8,707		53,850		153,182

Debt interest⁽¹⁾		6,589		5,241		4,509		4,497		4,481		11,062		36,379

Debt obligations		136		57,696		209		563		237		161,275		220,116

Capital lease obligations, including interest⁽²⁾		4,513		5,976		5,925		5,705		3,608		1,747		27,474


Total	$	108,197	$	117,814	$	52,065	$	40,930	$	24,435	$	245,991	$	589,432


(1)		Not required to be recorded in the Condensed Consolidated Balance Sheet as of April 4, 2009 in accordance with accounting principles generally accepted in the United States of America.

(2)		Capital lease obligations, excluding interest, are recorded in the Condensed Consolidated Balance Sheets.

Approximately $1,793 of unrecognized tax benefits have been recorded as liabilities as of April 4, 2009, in accordance with FIN 48, and the Company is uncertain as to if or when such amounts may be settled; as a result, these obligations are not included in the table above. Changes to these tax contingencies that are reasonably possible in the next 12 months are not expected to be material.

NOTE 8—STOCK AWARDS

The Company currently maintains the 2005 Equity Incentive Plan (“the Plan”) which provides for the grant of equity to certain employees, directors and other persons. As of April 4, 2009, 1,399 shares of common stock were available for

GSI COMMERCE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)

future grants under the Plan. The equity awards granted under the Plan generally vest at various times over periods ranging up to five years and have terms of up to ten years after the date of grant, unless the optionee’s service to the Company is interrupted or terminated.

Stock Options and Warrants

The following table summarizes the stock option and warrant activity for the three-month period ended April 4, 2009:


						Weighted
				Weighted		Average
	Number of			Average		Remaining		Aggregate
	Shares			Exercise		Contractual		Intrinsic
	(in thousands)			Price		Life (in years)		Value
Outstanding at January 3, 2009		4,244		$	9.50
Granted		—			—
Exercised		(12	)	$	6.11
Forfeited/Cancelled		(94	)	$	11.41


Outstanding at April 4, 2009		4,138		$	9.47		3.39	$	19,097

Vested and expected to vest at April 4, 2009		4,138		$	9.47		3.39	$	19,097

Exercisable at April 4, 2009		3,938		$	9.83		3.46	$	16,877

The Company recognized no stock-based compensation expense for stock options for the three-month period ended April 4, 2009, and $57 of stock-based compensation expense for the three-month period ended March 29, 2008.

Restricted Stock Units and Awards

The Company also has issued restricted stock units and restricted stock awards to certain employees. The grant-date fair value of restricted stock is based on the market price of the stock, and compensation cost is amortized to expense on a straight-line basis over the vesting period during which employees perform services.

The following summarizes the restricted stock unit and restricted stock award activity for the three-month period ended April 4, 2009:


				Weighted
	Number of			Average
	Shares			Grant Date
	(in thousands)			Fair Value
Nonvested shares at January 3, 2009		3,793		$	18.86
Granted		1,643		$	10.58
Vested		(579	)	$	15.36
Forfeited/Cancelled		(105	)	$	14.63


Nonvested shares at April 4, 2009		4,752		$	16.52

The Company recognized $6,700 of stock-based compensation expense for restricted stock for the three-month period ended April 4, 2009, and $4,359 of stock-based compensation expense for the three-month period ended March 29, 2008.

NOTE 9—INCOME TAXES

GSI COMMERCE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)

At the end of each interim period, the Company estimates its annual effective tax rate and applies that rate to its ordinary year-to-date earnings. FASB’s Interpretation (“FIN”) 18, “Accounting for Income Taxes in Interim Periods,” (“FIN 18”) provides that if in a separate jurisdiction, the Company anticipates an ordinary loss for the year in which a tax benefit cannot be recognized in accordance with SFAS 109, then the Company excludes the ordinary loss in that jurisdiction and the related tax benefit from the computation of its estimated annual effective tax rate. In addition, the effect of changes in enacted tax laws, rates or tax status is recognized in the interim period in which the change occurs, however, the related benefit or expense is excluded from the annual effective tax rate. The tax expense or benefit related to significant, unusual, or extraordinary items are individually computed and recognized as a discrete item in the interim period in which the item occurs.

The computation of the annual estimated effective tax rate at each interim period requires certain estimates and significant judgment including, but not limited to, the expected operating income for the year, projections of the proportion of income earned and taxed in foreign jurisdictions, permanent and temporary differences as a result of differences between amounts measured and recognized in accordance with tax laws and financial accounting standards, and the likelihood of recovering deferred tax assets. The accounting estimates used to compute the provision for income taxes may change as new events occur, additional information is obtained or as the tax environment changes. The Company has a historical seasonal pattern of reporting a net loss before income taxes in the first three quarters of its fiscal year offset by income before income taxes in its fiscal fourth quarter. The Company recognizes a tax benefit and increases its deferred tax assets in its interim periods as realization of the tax benefit at the end of the fiscal year is more likely than not.

The Company’s tax provision for the three months ended April 4, 2009 was determined using an estimate of its annual effective tax rate which is 37.9% for fiscal 2009 plus any discrete items that affect taxes that occur during the quarter. The effective tax rate is higher than the 35% federal statutory tax rate primarily due to the benefit from state taxes partially offset by permanent items. FIN 18 provides that if in a separate jurisdiction, the Company anticipates an ordinary loss for the year in which a tax benefit cannot be recognized in accordance with SFAS 109, the Company should exclude the ordinary loss in that jurisdiction and the related tax benefit from the computation of the estimated annual effective tax rate. Estimated annual losses from international operations yield no tax benefit and were removed from the calculation of the annual effective tax rate. The Company does not provide for U.S. taxes on its undistributed earnings of foreign subsidiaries since it intends to invest such undistributed earnings indefinitely outside of the U.S.

The Company’s reported effective tax rate for the three months ended April 4, 2009 was 37.6%. The annual effective tax rate of 37.9% is different from the actual tax rate of 37.6% primarily due to the benefit from certain discrete state items partially offset by losses in foreign operations that generate no tax benefit and therefore they are not included in the pre-tax book income calculation for the annual effective tax rate.

The total amount of liabilities, interest and penalties related to uncertain tax positions and recognized in the Condensed Consolidated Balance Sheet as of April 4, 2009 was $1,793. During the first three months of fiscal 2009 and fiscal 2008, the Company recorded an $85 and an $89, respectively, increase in liabilities, including interest and penalties for uncertain tax positions that were recorded as income tax expense.

NOTE 10—LOSS PER SHARE

Basic net loss per share for all periods has been computed in accordance with SFAS 128. Basic and diluted net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the fiscal year.

The following is a summary of the securities outstanding during the respective periods that have been excluded from the calculations because the effect on net loss per share would have been anti-dilutive for the three-month period ended:

GSI COMMERCE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)


	March 29,		April 4,
	2008		2009
Stock units and awards		3,791		4,752
Stock options and warrants		4,372		4,138
Convertible notes		8,229		8,229

		16,392		17,119

The potential number of common shares and dilution from the Company’s Series A Junior Participating Preferred Stock from its Stockholders Right Plan cannot be determined because these shares are not exercisable unless certain future contingent events occur.

NOTE 11 — COMPREHENSIVE LOSS

Comprehensive income is computed as net earnings plus certain other items that are recorded directly to shareholders’ equity in accordance with SFAS 130 “Reporting Comprehensive Income.” Comprehensive loss is calculated as follows:


	Three Months Ended
	March 29,			April 4,
	2008			2009

Net loss	$	(11,498	)	$	(12,110	)
Other comprehensive income (loss):
Cumulative translation adjustment		46			(62	)


Comprehensive loss	$	(11,452	)	$	(12,172	)

NOTE 12—SEGMENT INFORMATION

The Company operates two reportable segments: e-commerce services and interactive marketing services. For e-commerce services, the Company delivers customized solutions to its clients through an integrated platform which is comprised of three components: technology, fulfillment and customer care. The Company offers each of the platform’s components on a modular basis, or as part of an integrated, end-to-end solution. For interactive marketing services, the Company offers online marketing and advertising, user experience and design, studio and e-mail marketing services.

The Company manages its segments based on an internal management reporting process that provides segment revenue and segment operating income before depreciation, amortization and stock-based compensation expense for determining financial decisions and allocating resources. The Company believes that segment operating income before depreciation, amortization and stock-based compensation expense is an appropriate measure of evaluating the operational performance of the Company’s segments. The Company uses this financial measure for financial and operational decision making and as a means to evaluate segment performance. It is also used for planning, forecasting and analyzing future periods. However, this measure should be considered in addition to, not as a substitute for, or superior to, income from operations or other measures of financial performance prepared in accordance with GAAP.

The Company manages its working capital on a consolidated basis and does not allocate long-lived assets to segments. In addition, segment assets are not reported to, or used by, the Company and therefore, pursuant to SFAS 131, “Disclosures about Segments of an Enterprise and Related Information,” total segment assets have not been disclosed.

GSI COMMERCE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)

The following tables present summarized information by segment:


	Three Months Ended March 29, 2008
	E-Commerce			Interactive		Intersegment
	Services			Marketing Services		Eliminations			Consolidated
Net revenues	$	187,599		$	12,085	$	(4,141	)	$	195,543
Costs and expenses before depreciation, amortization and stock-based compensation expense		188,891			11,192		(4,141	)		195,942

Operating (loss) income before depreciation, amortization and stock-based compensation expense		(1,292	)		893		—			(399	)
Depreciation and amortization										13,809
Stock-based compensation expense										4,669

Loss from operations										(18,877	)

Interest expense										4,370
Interest income										(1,039	)
Other expense, net										145

Loss before income taxes									$	(22,353	)


	Three Months Ended April 4, 2009
	E-Commerce		Interactive		Intersegment
	Services		Marketing Services		Eliminations			Consolidated
Net revenues	$	178,510	$	25,122	$	(7,157	)	$	196,475
Costs and expenses before depreciation, amortization and stock-based compensation expense		174,841		20,970		(7,157	)		188,654

Operating income before depreciation, amortization and stock-based compensation expense		3,669		4,152		—			7,821
Depreciation and amortization									15,401
Stock-based compensation expense									6,954

Loss from operations									(14,534	)

Interest expense									4,796
Interest income									(151	)
Other expense, net									229

Loss before income taxes								$	(19,408	)

The Company’s operations are substantially within the United States.

GSI COMMERCE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)

NOTE 13—FINANCIAL STATEMENT CORRECTION OF MISSTATEMENT AND RETROSPECTIVE APPLICATION OF FSP APB 14-1

The Company adopted FSP APB 14-1 on January 4, 2009 and retrospectively applied its provisions for all periods presented. See Recent Accounting Pronouncements in Note 2, Summary of Significant Accounting Policies, and Note 6, Long-Term Debt and Credit Facility, for more information regarding the Company’s adoption of FSP APB 14-1.

The Company recognizes stock-based compensation expense for all stock-based awards over the requisite service period, net of estimated forfeitures, in accordance with SFAS 123(R), “Share-Based Payment” (“SFAS 123(R)”). SFAS 123(R) requires that the amount of stock-based compensation expense recognized at any date must at least equal the portion of grant date value of the award that has vested at that date. Subsequent to the issuance of the Company’s Form 10-Q for the quarterly period ended April 4, 2009, the Company discovered a computational error in the software used by the Company to calculate the stock-based compensation expense whereby the expense recognized for each vested portion of the award was less than the grant date fair value of that vested portion of the award. This error resulted in an understatement of stock-based compensation expense in fiscal 2006, 2007, 2008 and the first fiscal quarter of 2009.

In accordance with Staff Accounting Bulletin (“SAB”) 99, “Materiality,” and SAB 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” the Company evaluated the materiality of the error from qualitative and quantitative perspectives, and concluded that the error was immaterial to any prior year financial statements.

The following tables reflect the impact of the retrospective application of FSP APB 14-1 and the correction of the stock-based compensation misstatement on the Company’s (i) Condensed Consolidated Balance Sheet as of April 4, 2009, (ii) Condensed Consolidated Statement of Operations for the three months ended April 4, 2009 and March 29, 2008, and (iii) Condensed Consolidated Statement of Cash Flows for the three months ended April 4, 2009 and March 29, 2008:

Condensed Consolidated Balance Sheet


				Effect of					As Retrospectively
	As Originally			Retrospective		Effect of			Adjusted and
	Reported			Application		Correction			Corrected
	As of April 4, 2009
Assets:
Long-term deferred tax assets	$	17,747		$	—	$	1,264		$	19,011
Total assets		610,262			—		1,264			611,526
Stockholders’ Equity:
Additional paid in capital		434,115			—		3,583			437,698
Accumulated deficit		(164,377	)		—		(2,319	)		(166,696	)
Total stockholders’ equity		267,834			—		1,264			269,098
Total liabilities and stockholders’ equity		610,262			—		1,264			611,526

GSI COMMERCE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)

Condensed Consolidated Statements of Operations


				Effect of						As Retrospectively
	As Originally			Retrospective			Effect of			Adjusted and
	Reported			Application			Correction			Corrected
	Three Months Ended March 29, 2008
Account management and operations	$	59,111		$	—		$	332		$	59,443
Product development		22,436			—			185			22,621
General and administrative		15,724			—			531			16,255
Total costs and expenses		213,372			—			1,048			214,420
Loss from operations		(17,829	)					(1,048	)		(18,877	)
Interest expense		2,177			2,193			—			4,370
Total other expense		1,283			2,193			—			3,476
Loss before income taxes		(19,112	)		(2,193	)		(1,048	)		(22,353	)
Benefit for income taxes		(9,547	)		(910	)		(398	)		(10,855	)
Net loss		(9,565	)		(1,283	)		(650	)		(11,498	)
Basic and diluted loss per share		(0.20	)		(0.03	)		(0.02	)		(0.25	)

	Three Months Ended April 4, 2009
Account management and operations	$	57,292		$	—		$	449		$	57,741
Product development		28,049			—			325			28,374
General and administrative		18,549			—			728			19,277
Total costs and expenses		209,507			—			1,502			211,009
Loss from operations		(13,032	)		—			(1,502	)		(14,534	)
Loss before income taxes		(17,906	)		—			(1,502	)		(19,408	)
Benefit for income taxes		(6,825	)		—			(473	)		(7,298	)
Net loss		(11,081	)		—			(1,029	)		(12,110	)
Basic and diluted loss per share		(0.23	)		—			(0.02	)		(0.25	)

Condensed Consolidated Statements of Cash Flows


				Effect of						As Retrospectively
	As Originally			Retrospective			Effect of			Adjusted and
	Reported			Application			Correction			Corrected
	Three Months Ended March 29, 2008
Net loss	$	(9,565	)	$	(1,283	)	$	(650	)	$	(11,498	)
Amortization of discount on convertible notes		—			2,308			—			2,308
Stock-based compensation		3,621			—			1,048			4,669
Deferred income taxes		(9,547	)		(910	)		(398	)		(10,855	)
Other assets, net		1,777			(115	)		—			1,662
Net cash used in operating activities		(40,450	)		—			—			(40,450	)

	Three Months Ended April 4, 2009
Net loss	$	(11,081	)	$	—		$	(1,029	)	$	(12,110	)
Stock-based compensation		5,452			—			1,502			6,954
Deferred income taxes		(6,777	)		—			(473	)		(7,250	)
Net cash used in operating activities		(72,610	)		—			—			(72,610	)

ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.

All statements made in this Amendment No. 1 to the Quarterly Report on Form 10-Q/A, other than statements of historical fact, are forward-looking statements, as defined under federal securities law. The words “look forward to,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “will,” “would,” “should,” “could,” “guidance,” “potential,” “opportunity,” “continue,” “project,” “forecast,” “confident,” “prospects,” “schedule,” “designed,” “future,” “discussions,” “if” and similar expressions typically are used to identify forward-looking statements. Forward-looking statements are based on the then-current expectations, beliefs, assumptions, estimates and forecasts about our business. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or implied by these forward-looking statements. Factors which may affect our business, financial condition and operating results include the effects of changes in the economy, consumer spending, the financial markets and the industries in which we and our clients operate, changes affecting the Internet and e-commerce, our ability to develop and maintain relationships with strategic clients and suppliers and the timing of our establishment, extension or termination of our relationships with strategic clients, our ability to timely and successfully develop, maintain and protect our technology, confidential and proprietary information, and product and service offerings and execute operationally, our ability to attract and retain qualified personnel, our ability to successfully integrate our acquisitions of other businesses, and the performance of acquired businesses. In addition, the current global economic environment could have a significant impact on many of these risks. More information about potential factors that could affect us are described in Part I, Item 1A in our Form 10-K for the fiscal year ended January 3, 2009, filed with the SEC on March 16, 2009. We expressly disclaim any intent or obligation to update these forward-looking statements.

Executive Overview

First Quarter of Fiscal 2009 Financial Results and Significant Events:

	•		Net revenues remained relatively constant compared to the first quarter of fiscal 2008. Service fee revenues grew 25% and net revenues from product sales decreased 14%. E-commerce services segment net revenues decreased by 5% and interactive marketing services segment net revenues increased by 107%.

	•		Net loss was $12.1 million in the first quarter of fiscal 2009, inclusive of a benefit for income taxes of $7.3 million, compared to a net loss of $11.5 million in the first quarter of fiscal 2008, inclusive of a tax benefit of $10.9 million. Loss from operations improved to $14.5 million in the first quarter of fiscal 2009 compared to a loss of $18.9 million in the first quarter of 2008.

2009 Outlook:

•

For the remainder of fiscal 2009, compared to the same period in fiscal 2008, we expect a modest decrease in net revenues due primarily to the termination of a client relationship of one our top ten contributors of service fee revenues in fiscal 2008 as a result of the client’s liquidation, and the transition during fiscal 2009 of one owned inventory client to a non-owned inventory deal structure. We believe that the client transition will result in a decrease in net revenues from product sales partially offset by an increase in service fee revenues and will have no material effect on earnings. We also expect this transition will decrease our cost of revenues from product sales and our marketing expenses. In addition, we believe, due to the current economic environment, same store e-commerce revenues for the remainder of fiscal 2009 will grow at a more moderate rate than in fiscal 2008 and that capital expenditures will modestly decrease in fiscal 2009. We continue to expect that we will have a net loss in fiscal 2009.

Financial Statement Correction

The accompanying condensed consolidated financial statements have been corrected from amounts previously reported. Accordingly, amounts presented in Management’s Discussion and Analysis include the effects of the changes. See Note 13, Financial Statement Correction of Misstatement and Retrospective Application of FSP APB 14-1, for a summary of the impact of the correction.

Results of Operations

Three-month period ended April 4, 2009 and March 29, 2008 (amounts in tables in millions):

Net Revenues

We derive our revenues from products we sell through our clients’ e-commerce business, from service fees we earn for developing and operating our clients’ e-commerce businesses, and from service fees we earn from providing interactive marketing services.

Net Revenues from Product Sales. Net revenues from product sales are derived from products we sell through our clients’ e-commerce Web stores, including outbound shipping charges for all clients for which we provide fulfillment services. Net revenues from product sales are net of allowances for returns and discounts. We recognize revenue from product sales and shipping when products are shipped and title and risk of ownership passes to the consumer.

Service Fee Revenues. Service fee revenues include revenues we earn from providing e-commerce services and interactive marketing services. E-commerce service fee revenues are generated from a client’s use of one or more of our e-commerce platform components, which include technology, fulfillment and customer care, as well as from professional services and gift card breakage. Interactive marketing service fee revenues are generated from online marketing, advertising, email and design services. Service fee revenues can be fixed or variable and are based on the activity performed, the value of merchandise sold, or the gross profit from a transaction.


											First Qtr Fiscal 2009
											vs.
											First Qtr Fiscal 2008
	First Qtr Fiscal 2008					First Qtr Fiscal 2009					Change			Change
Net Revenues by Type:
Net revenues from product sales	$	123.1		63	%	$	106.2		54	%	$	(16.9	)		(14	%)
Service fee revenues		72.4		37	%		90.3		46	%		17.9			25	%

Total net revenues	$	195.5		100	%	$	196.5		100	%	$	1.0			1	%


Net Revenues by Segment:
E-Commerce services	$	187.5		96	%	$	178.5		91	%	$	(9.0	)		(5	%)
Interactive marketing services		12.1		6	%		25.1		13	%		13.0			107	%
Intersegment eliminations		(4.1	)	(2	%)		(7.1	)	(4	%)		(3.0	)		73	%

Total net revenues	$	195.5		100	%	$	196.5		100	%	$	1.0			1	%

Net Revenues by Type

Net Revenues from Product Sales. Net revenues from product sales decreased $16.9 million in the first quarter of fiscal 2009. This decrease was primarily due to the transition during the first quarter of fiscal 2009 of one owned inventory client to a non-owned inventory deal structure, a decrease in revenue from our professional sports league clients, and a decrease in sales from one consumer electronics client. Of this decrease, $11.0 million was due to a decrease in revenues due to the client transition and from clients that ceased doing business with us after the first quarter of fiscal 2008, and $5.9 million was due to a decrease in revenues from clients that operated for the entirety of both periods. Shipping revenue for all clients for which we provide fulfillment services was $26.7 million for the first quarter of fiscal 2009 and $24.8 million for the first quarter of fiscal 2008.

Service Fee Revenues. Service fee revenues increased $17.9 million in the first quarter of fiscal 2009. This increase was primarily due to the addition and growth of e-Dialog, Inc. (“e-Dialog”), which we acquired in February 2008, the client transition discussed above, increased revenues from clients that operated for the entirety of both periods, and increased revenues from clients that initially began generating revenue after the first quarter of fiscal 2008. Partially offsetting these increases was a decrease in revenues from clients that terminated their relationship with us, including the liquidation of the business of a client that was one of our top ten contributors of service fee revenues for fiscal 2008.

For the remainder of fiscal 2009, we expect a continued decrease in net revenues from product sales due to the client transition discussed above. We expect this transition to continue to result in an increase in service fee revenues for the remainder of fiscal 2009, but an overall decline in total net revenues.

Net Revenues by Segment

E-Commerce Services Segment Revenues. Net revenues from e-commerce services decreased $9.0 million in the first quarter of fiscal 2009 due to a $16.9 million decrease in net revenues from product sales which was partially offset by an increase of $7.9 million in service fee revenues.

Of the $9.0 million decrease in net revenues from our e-commerce services segment, $8.2 million was from clients that did not operate for the entirety of both periods, including a client that was one of our top ten contributors of service fee revenues for fiscal 2008 with which we terminated our relationship as a result of that client’s liquidation, and $0.8 million was from clients that operated for the entirety of both periods.

Of the $7.9 million service fee revenue increase, $5.1 million was from an increase in revenues from clients that operated for the entirety of both periods, and $2.8 million was from clients that did not operate for the entirety of both periods. See the discussion above under Net Revenues by Type — Net Revenues from Product Sales for an explanation of the $16.9 million decrease in net revenues from product sales.

Interactive Marketing Services Segment Revenues. Net revenues increased by 107%, or $13.0 million, due primarily to our acquisition of e-Dialog in February 2008 as well as from organic growth in our e-mail marketing, online marketing, design, and digital photo studio services.

Costs and Expenses

Costs and expenses consist of costs of revenues from product sales, marketing expenses, account management and operations expenses, product development expenses, general and administrative expenses and depreciation and amortization expenses. Starting in the second quarter of fiscal 2008 we replaced the former expense line of sales and marketing with two separate line items: (i) marketing, and (ii) account management and operations. We conformed all periods presented to this presentation. This change was made to enable investors to analyze our expenses in a manner consistent with management’s internal view which is used to manage the business.

Costs of Revenues from Product Sales. Costs of revenues from product sales consist primarily of direct costs associated with (i) products we sell through our clients’ Web stores, and (ii) our shipping charges for all clients for which we provide fulfillment services. All costs of revenues from product sales were attributable to our e-commerce services segment.

Marketing. Marketing expenses consist primarily of net client revenue share charges, promotional free shipping and subsidized shipping and handling costs, catalog costs, and net advertising and promotional expenses. All marketing expenses were attributable to our e-commerce services segment and generally supported revenues from product sales.

Account Management and Operations. Account management and operations expenses consist primarily of costs to operate our fulfillment centers and customer care centers, credit card fees, and payroll related to our buying, business management, operations and marketing functions.

Product Development. Product development expenses consist primarily of expenses associated with planning, maintaining and operating our proprietary e-commerce and e-mail platforms and related systems, and payroll and related expenses for engineering, production, creative and management information systems.

General and Administrative. General and administrative expenses consist primarily of payroll and related expenses for executive, finance, human resources, legal, sales and administrative personnel, as well as bad debt expense and occupancy costs for our headquarters and other offices.

Depreciation and Amortization. Depreciation and amortization expenses relate primarily to the depreciation or amortization of the capitalized costs for our purchased and internally-developed technology, including a portion of the cost related to the employees that developed such technology, hardware and software; furniture and equipment at our corporate headquarters, fulfillment centers and customer care centers; the office buildings and other facilities owned by us; and acquisition-related intangible assets.


											First Quarter of Fiscal 2009
	First Quarter					First Quarter					vs.
	of Fiscal 2008					of Fiscal 2009					First Quarter of Fiscal 2008
			% of					% of
			Net					Net
	$		Revenues			$		Revenues			$ Change			% Change
Cost of revenues from product sales	$	85.4		44	%	$	79.4		41	%	$	(6.0	)		(7	%)
Marketing		16.9		9	%		10.9		6	%		(6.0	)		(36	%)
Account management and operations		59.4		30	%		57.7		29	%		(1.7	)		(3	%)
Product development		22.6		12	%		28.3		14	%		5.7			25	%
General and administrative		16.3		8	%		19.3		9	%		3.0			18	%
Depreciation and amortization		13.8		7	%		15.4		8	%		1.6			12	%

Total costs and expenses	$	214.4		110	%	$	211.0		107	%	$	(3.4	)		(2	%)

Cost of Revenues from Product Sales:


	First Qtr			First Qtr
	Fiscal 2008			Fiscal 2009
Cost of revenues from product sales	$	85.4		$	79.4
As a percentage of net revenues from product sales		69	%		75	%

Cost of revenues from product sales decreased $6.0 million in the first quarter of fiscal 2009. The decrease in cost of revenues as a percentage of net revenues from 44% in the first quarter of fiscal 2008 to 41% in the first quarter of fiscal 2009 was primarily due to the increase in service fees and the decrease in product sales, because service fees have no associated cost of revenue. We continue to expect a decrease in cost of revenues from product sales as a percentage of net revenues as we expect service fee revenues to continue to grow and net revenues from product sales to continue to decrease.

The increase in cost of revenues from product sales as a percentage of net revenues from product sales from 69% to 75% was primarily due to an increase in shipping revenue. Our cost of generating shipping revenue is higher than our cost of generating revenue on sale of products.

Marketing:


	First Qtr			First Qtr
	Fiscal 2008			Fiscal 2009
Marketing	$	16.9		$	10.9
As a percentage of net revenues from product sales		14	%		10	%

Marketing expense decreased $6.0 million in the first quarter of fiscal 2009. As a percentage of net revenues, marketing expenses decreased from 9% to 6%. This decrease was primarily due to the increase in service fees and the decrease in product sales, because service fees have no associated marketing expenses.

As a percentage of net revenues from product sales, marketing expenses decreased from 14% to 10% due primarily to the transition during fiscal 2009 of one owned inventory client to a non-owned inventory deal structure and a decrease in net revenues from product sales. Of the $6.0 million decrease in marketing expenses, $2.3 million was due to a decrease in promotional free shipping and subsidized shipping and handling costs, $2.1 million was due to a decrease in client revenue share expenses caused by decreased sales from owned inventory clients, $1.4 million was due to a decrease in marketing costs, and $0.2 million decrease in other marketing expenses. We expect marketing expenses to continue to decrease in absolute dollars during fiscal 2009 compared to fiscal 2008, because of the expected decrease in net revenues from product sales. We continue to expect a decrease in marketing expenses as a percentage of net revenues, as we expect service fee revenues to increase and net revenues from product sales to decrease.

Account Management and Operations. Account management and operations expenses decreased $1.7 million in the first quarter of fiscal 2009. As a percentage of net revenues, account management and operations expenses decreased from 30% to 29%. The decreases in absolute dollars and as a percentage of net revenues were primarily due to decreases in fulfillment expenses, occupancy costs and credit card fees, partially offset by the e-Dialog acquisition in February 2008. We expect account management and operations expenses to be relatively constant in absolute dollars during fiscal 2009 compared to fiscal 2008, as we believe our fulfillment and call center capacity will be sufficient to accommodate the growth of our domestic and international e-commerce businesses and our interactive marketing services business.

Product Development. Product development expenses increased $5.7 million in the first quarter of fiscal 2009. As a percentage of net revenues, product development expenses increased from 12% to 14%. The increases in absolute dollars and as a percentage of net revenues were primarily due to the e-Dialog acquisition and increased personnel expenses to enhance our e-commerce technology platform. Of the $5.7 million increase in product development expenses, $5.3 million was due to an increase in personnel and related costs and $0.4 million was due to an increase in other product development costs. We continue to expect product development expenses to increase in absolute dollars in fiscal 2009 compared to fiscal 2008, as we plan to continue to launch additional client Web stores, invest in our e-commerce and interactive marketing services platforms and expand our international operations.

General and Administrative. General and administrative expenses increased $3.0 million in the first quarter of fiscal 2009. As a percentage of net revenues, general and administrative expenses increased from 8% to 9%. The increases in absolute dollars and as a percentage of net revenues were primarily due to the e-Dialog acquisition and a $1.3 million charge for acquisition related costs for a potential acquisition that terminated in the first quarter of fiscal 2009. We continue to expect general and administrative expenses to increase in absolute dollars in fiscal 2009 compared to fiscal 2008 as we expect to add new clients, expand our e-commerce and interactive marketing services platforms, and expand our international operations.

Depreciation and Amortization. Depreciation and amortization expenses increased $1.6 million in the first quarter of fiscal 2009. As a percentage of net revenues, depreciation and amortization expenses increased from 7% to 8%. Depreciation expenses increased $1.1 million due to the depreciation of prior and current year fixed asset additions. Amortization expenses increased $0.5 million primarily due to the intangible asset amortization related to the e-Dialog acquisition. While we expect capital expenditures for fiscal 2009 to decrease, we continue to expect depreciation expenses to increase in fiscal 2009 compared to fiscal 2008, as we continue to depreciate capital expenditures made in prior years. We expect amortization expenses to decrease in fiscal 2009 compared to fiscal 2008 due a decrease in intangible asset amortization associated with the Accretive and e-Dialog acquisitions.

Other (Income) Expense


													First Quarter of Fiscal 2009
	First Quarter						First Quarter						vs.
	of Fiscal 2008						of Fiscal 2009						First Quarter of Fiscal 2008
				% of						% of
				Net						Net
	$			Revenues			$			Revenues			$ Change		% Change
Interest expense	$	4.4			0.6	%	$	4.8			0.5	%	$	0.4		9	%
Interest income		(1.0	)		(0.1	%)		(0.1	)		0.0	%		0.9		(90	%)
Other expense		0.1			0.0	%		0.2			0.0	%		0.1		100	%

Total other expenses	$	3.5			0.5	%	$	4.9			0.5	%	$	1.4		40	%

Total other expenses increased $1.4 million in the first quarter of fiscal 2009. The $0.4 million increase in interest expense is due to the amortization of the debt discount on our convertible notes in accordance with FSP APB 14-1. The $0.9 million decrease in interest income was due to lower cash balances as a result of the February 2008 acquisition of e-Dialog, as well as lower interest rates earned in the first quarter of fiscal 2009. The $0.1 million increase in other expense was primarily due to foreign currency exchange losses on transactions denominated in currencies other than the functional currency.

Income Taxes

We recorded a benefit of $7.3 million in the first quarter of fiscal 2009. Our tax provision for interim periods was determined using an estimate of our annual effective tax rate which is 37.9% for fiscal 2009 plus any discrete items that effect taxes that occur during the quarter. The effective tax rate is higher than the 35% federal statutory tax rate primarily due to the benefit from state taxes partially offset by permanent items.

As of January 3, 2009, we had available federal net operating loss carryforwards of approximately $430.9 million which expire in the years 2009 through 2028. As of January 3, 2009, we had available state net operating loss carryforwards of approximately $187.0 million which expire in the years 2010 through 2028 and foreign net operating loss carryforwards of approximately $8.5 million that either begin expiring in 2021 or have no expiration date. A portion of these net operating loss carryforwards are offset by a valuation allowance. Management monitors all available positive and negative evidence related to our ability to utilize our deferred tax assets. Should management determine that it is more likely than not that these

deferred tax assets will be utilized, we will release a portion of the remaining valuation allowance. Should management determine that it is more likely than not that these deferred tax assets will not be utilized, we will increase the valuation allowance.

We have federal net operating losses of approximately $231.5 million which will expire as a result of the Internal Revenue Code Section 382 limitation regardless of the amount of future taxable income; and thus has a full valuation allowance recorded against this deferred tax asset.

Seasonality

We have experienced and expect to continue to experience seasonal fluctuations in our revenues from e-commerce services. These seasonal patterns will cause quarterly fluctuations in our operating results. In particular, our fourth fiscal quarter has accounted for and is expected to continue to account for a disproportionate percentage of our total annual revenues. We experience less seasonality in our revenues from interactive marketing services. We believe that results of operations for a quarterly period may not be indicative of the results for any other quarter or for the full year.

Liquidity and Capital Resources


	As of
	January 3,			April 4,
	2009			2009
	(in millions)
Cash and cash equivalents	$	130.3		$	48.1
Percentage of total assets		18	%		8	%

We expect to generate positive cash flow from operations in fiscal 2009, the substantial majority of which will be generated in our fourth fiscal quarter. We believe that our cash flow from operating activities, cash and cash equivalents balances, and borrowing availability under our $90 million secured revolving credit facility will be sufficient to meet our anticipated operating cash needs for at least the next 12 months.

Sources of Cash

Our principal sources of liquidity in the first quarter of fiscal 2009 were our cash and cash equivalents balances. As of April 4, 2009, we had cash and cash equivalents totaling $48.1 million, compared to $130.3 million of cash and cash equivalents as of January 3, 2009. Our cash equivalents are comprised of money market mutual funds.

We have experienced and expect to continue to experience seasonal fluctuations in our cash flows. We generate the substantial majority of cash from our operating activities in our fourth fiscal quarter. In our first fiscal quarter, we typically use cash generated from operating activities in the fourth quarter of the prior fiscal year to satisfy accounts payable and accrued expenses incurred in the fourth fiscal quarter of our prior fiscal year. During our second and third fiscal quarters, we generally fund our operating expenses and capital expenditures from either cash generated from operating activities, cash and cash equivalents, or financing activities.

As of April 4, 2009, we had no outstanding borrowings under our $90 million secured revolving bank credit facility, compared with $15.0 million of borrowings as of March 29, 2008. The credit facility contains financial and restrictive covenants that limit our ability to engage in activities that may be in our long term best interests. We do not believe the financial covenants will limit our ability to utilize the entire borrowing availability in fiscal 2009, if necessary.

Uses of Cash

We used $72.6 million and $40.5 million of cash flows from operating activities in the first quarter of fiscal 2009 and fiscal 2008, respectively.

We invest cash to support our operations and infrastructure needs and to make acquisitions and strategic investments. We invested $0.75 million in the first quarter of fiscal 2009 and $145.0 million in the first quarter of fiscal 2008 for our acquisition of e-Dialog. Our capital expenditures totaled $7.4 million and $17.5 million in the first quarter of fiscal 2009 and fiscal 2008, respectively. Our capital expenditures have generally comprised purchases of computer hardware and software, internally developed software, furniture and fixtures, and real estate. We expect a modest decrease in capital expenditures in fiscal 2009.

Critical Accounting Policies

The preparation of our consolidated financial statements requires us to make estimates, assumptions and judgments that affect our assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities. We base these estimates and assumptions on historical data and trends, current fact patterns, expectations and other sources of information we believe are reasonable. Actual results may differ from these estimates under different conditions. For a full description of our critical accounting policies, see Item 7— Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Current Report on Form 8-K filed with the SEC on August 4, 2009.

Recent Accounting Pronouncements

See Item 1 of Part I, “Financial Statements — Note 2, Summary of Significant Accounting Policies” for recent accounting pronouncements that could have an effect on us.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

There have been no significant changes in market risks for the fiscal quarter ended April 4, 2009. See the information set forth in Part II, Item 7A of the Company’s Annual Report on Form 10-K for the fiscal year ended January 3, 2009 filed with the Securities and Exchange Commissions (“SEC”) on March 16, 2009.

ITEM 4: CONTROLS AND PROCEDURES.

Evaluation of disclosure controls and procedures. Our management, with the participation of our chief executive officer and our chief financial officer, conducted an evaluation, as of April 4, 2009, of the effectiveness of our disclosure controls and procedures, as such term is defined in Exchange Act Rule 13a-15(e).

Based on this evaluation, our chief executive officer and our chief financial officer have concluded that, as of April 4, 2009, our disclosure controls and procedures, as defined in Rule 13a-15(e), were effective at the reasonable assurance level, to ensure that (i) information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting. We monitor and evaluate on an ongoing basis our internal control over financial reporting in order to improve its overall effectiveness. In the course of these evaluations, we modify and refine our internal processes and controls as conditions warrant. As required by Rule 13a-15(d), our management, including our chief executive officer and our chief financial officer, also conducted an evaluation of our internal control over financial reporting to determine whether any changes occurred during the fiscal quarter ended April 4, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, there has been no such change during the fiscal quarter ended April 4, 2009.

PART II — OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS.

See Item 1 of Part I, “Financial Statements — Note 7, Commitments and Contingencies.”

ITEM 1A: RISK FACTORS.

There have been no material changes with regard to the risk factors set forth in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended January 3, 2009 filed with the Securities and Exchange Commissions on March 16, 2009.

ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3: DEFAULTS UPON SENIOR SECURITIES.

None

ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS WHO ARE NOT ALSO DIRECTORS.

None

ITEM 5: OTHER INFORMATION.

None

ITEM 6: EXHIBITS.


3.1		Amended and Restated Bylaws of GSI Commerce, Inc. (filed with the Company’s current Report on Form 8-K filed on January 29, 2009 and incorporated herein by reference)

10.1		Termination Agreement, dated as of January 28, 2009, by and among GSI Commerce, Inc., Bulldog Acquisition Corp. and Innotrac Corporation (filed with the Company’s current Report on Form 8-K filed on March 16, 2009 and incorporated herein by reference)

10.2		Michael Rubin Form of PRSU Agreement (filed with the Company’s quarterly Report on Form 10-Q filed on May 14, 2009 and incoporated herein by reference)

31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934

31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934

32.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


References To		Refer to the Years Ended/Ending
Fiscal 2005		December 31, 2005
Fiscal 2006		December 30, 2006
Fiscal 2007		December 29, 2007
Fiscal 2008		January 3, 2009
Fiscal 2009		January 2, 2010
Fiscal 2010		January 1, 2011
Fiscal 2011		December 31, 2011
Fiscal 2012		December 29, 2012
Fiscal 2013		December 28, 2013


	GSI COMMERCE, INC.
	By:	/s/ MICHAEL G. RUBIN
		Michael G. Rubin
		Chairman, President and Chief Executive Officer


	By:	/s/ MICHAEL R. CONN
		Michael R. Conn
		Executive Vice President, Finance and Chief Financial Officer (principal financial officer & principal accounting officer)



	By:	/s/ Michael G. Rubin
		Michael G. Rubin
		Chief Executive Officer



	By:	/s/ Michael R. Conn
		Michael R. Conn
		Chief Financial Officer



	By:	/s/ Michael G. Rubin
		Michael G. Rubin
		Chief Executive Officer