8-K/A

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A
(Amendment No. 1)

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 30, 2010

GSI Commerce, Inc.

(Exact name of registrant as specified in its charter)

Delaware	0-16611	04-2958132
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

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

Not Applicable

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Explanatory Note

This amendment (this “Amendment”) to Current Report on Form 8-K amends the Current Report on Form 8-K filed by GSI Commerce, Inc. (“GSI”) on May 4, 2010, which disclosed the completion, on April 30, 2010, of the acquisition by e-Dialog, Inc., a Delaware corporation (“e-Dialog”) and wholly owned subsidiary of GSI, of all of the issued and outstanding capital stock of MBS Insight, Inc., a Delaware corporation (“MBS”) and wholly owned subsidiary of World Marketing, Inc., a Nebraska corporation (“World Marketing”), upon the terms and subject to the conditions of the Stock Purchase Agreement entered into among e-Dialog, World Marketing and MBS.

This Amendment is filed solely to include the financial statements and pro forma financial information described in Item 9.01 below.

Item 9.01 Financial Statements and Exhibits.

(a) Financial Statements of Businesses Acquired.

(i) The audited balance sheet of MBS as of December 27, 2009 and the related statements of earnings, shareholders’s equity and cash flows for the fiscal year then ended are included as Exhibit 99.2 to this report and incorporated by reference herein.

(ii) The condensed balance sheets of MBS as of March 31, 2010 (unaudited) and December 27, 2009 and the related condensed statements of earnings and cash flows for the fiscal periods ended March 31, 2010 and March 31, 2009 (unaudited) are included as Exhibit 99.3 to this report and incorporated by reference herein.

(b) Pro Forma Financial Information.

GSI’s unaudited pro forma combined condensed balance sheet as of April 3, 2010 and pro forma condensed combined statements of operations for the fiscal year ended January 2, 2010 and the three-month period ended April 3, 2010 are included as Exhibit 99.4 to this report and incorporated by reference herein.

(d) Exhibits.

Exhibit Number			Exhibit Title
	23.1		Consent of KPMG LLP
	99.1	*	Press Release, dated May 3, 2010.
	99.2		Audited Financial Statements of MBS as of and for the fiscal year ended December 27, 2009.
	99.3		Condensed Financial Statements of MBS as of March 31, 2010 (unaudited) and December 27, 2009 and for the fiscal periods ended March 31, 2010 and March 31, 2009 (unaudited).
	99.4		Unaudited Pro Forma Condensed Combined Financial Information of GSI Commerce, Inc.

* Previously filed with GSI’s Current Report on Form 8-K as filed with the SEC on May 4, 2010, and hereby incorporated by reference herein.

1

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

GSI COMMERCE, INC.
By:	/s/ Michael R. Conn
	Name:	Michael R. Conn
	Title:	Executive Vice President and Chief Financial Officer

Dated: June 4, 2010

2

EXHIBIT INDEX

Exhibit Number			Exhibit Title
	23.1		Consent of KPMG LLP
	99.1	*	Press Release, dated May 3, 2010.
	99.2		Audited Financial Statements of MBS as of and for the fiscal year ended December 27, 2009.
	99.3		Condensed Financial Statements of MBS as of March 31, 2010 (unaudited) and December 27, 2009 and for the fiscal periods ended March 31, 2010 and March 31, 2009 (unaudited).
	99.4		Unaudited Pro Forma Condensed Combined Financial Information of GSI Commerce, Inc.

* Previously filed with GSI’s Current Report on Form 8-K as filed with the SEC on May 4, 2010, and hereby incorporated by reference herein.

3

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements (Nos. 333-49363, 333-122186, 333-54060, 333-54062, 333-53982, 333-65694, 333-109043, 333-132523, 333-132526, 333-152896, and 333-145923) on Form S-8 and Registration Statement (No. 333-163167) on Form S-3 of GSI Commerce, Inc. of our report dated April 28, 2010, with respect to the balance sheet of MBS Insight, Inc. as of December 27, 2009, and the related statements of earnings, stockholders’ equity and cash flows for the year then ended, which report appears in this Form 8-K/A of GSI Commerce, Inc.

KPMG LLP

Omaha, Nebraska
June 3, 2010

EX-99.2

Exhibit 99.2

MBS INSIGHT, INC.

Financial Statements

December 27, 2009

(With Independent Auditors’ Report Thereon)

Independent Auditors’ Report

The Board of Directors
MBS Insight, Inc.:

We have audited the accompanying balance sheet of MBS Insight, Inc. as of December 27, 2009 and the related statements of earnings, stockholder’s equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of MBS Insight, Inc. as of December 27, 2009 and the results of its operations and its cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.

/s/ KPMG LLP  

Omaha, Nebraska
April 28, 2010

MBS INSIGHT, INC.

Balance Sheet

December 27, 2009

Assets	2009
Current assets:
Cash and cash equivalents	$	2,257
Accounts receivable, net		2,359,067
Prepaid expenses		526,933
Total current assets		2,888,257
Other assets		105,800
Property, plant, and equipment, net		3,079,426
Goodwill		6,583,324
Total assets	$	12,656,807

Liabilities and Stockholder’s Equity	2009
Current liabilities:
Borrowings from parent	$	2,391,743
Accounts payable		532,357
Accrued payroll		327,827
Accrued expenses		888,651
Deposits		9,430
Deferred income taxes		60,048
Total current liabilities		4,210,056
Long-term liability:
Deferred income taxes		940,190
Stockholder’s equity:
Common stock, $1.00 par value. Authorized 10,000 shares; issued and outstanding 1,000 shares		1,000
Additional paid-in capital		3,181,180
Retained earnings		4,324,381
Total stockholder’s equity		7,506,561
Total liabilities and stockholder’s equity	$	12,656,807

See accompanying notes to financial statements.

2

MBS INSIGHT, INC.

Statement of Earnings

Year ended December 27, 2009

	2009
Operating revenue	$	17,375,398
Operating expenses:
Cost of materials		1,026,478
Labor costs		10,286,539
Depreciation		402,595
Other		2,392,072
Total operating expenses		14,107,684
Operating income		3,267,714
Other expense:
Interest expense to parent		(99,019	)
Earnings before income taxes		3,168,695
Income tax expense		1,304,413
Net earnings	$	1,864,282

See accompanying notes to financial statements.

3

MBS INSIGHT, INC.

Statement of Stockholder’s Equity

Year ended December 27, 2009

			Additional				Total
	Common		paid-in		Retained		stockholder’s
	stock		capital		earnings		equity
Balance at December 28, 2008		1,000		3,181,180		2,460,099		5,642,279
Net earnings		—		—		1,864,282		1,864,282
Balance at December 27, 2009	$	1,000		3,181,180		4,324,381		7,506,561

See accompanying notes to financial statements.

4

MBS INSIGHT, INC.

Statement of Cash Flows

Year ended December 27, 2009

	2009
Cash flows from operating activities:
Net earnings	$	1,864,282
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation		402,595
Deferred income taxes		121,459
Changes in assets and liabilities
(Increase) decrease in:
Accounts receivable		22,667
Prepaid expenses		122,697
Increase (decrease) in:
Accounts payable		353,177
Accrued expenses		398,069
Deposits		(1,691	)
Net cash provided by operating activities		3,283,255
Cash flows from investing activities:
Additions to property, plant, and equipment		(2,389,742	)
Net cash used in investing activities		(2,389,742	)
Cash flows from financing activities:
Net repayment of borrowings from parent		(895,818	)
Net cash used in financing activities		(895,818	)
Net decrease in cash and cash equivalents		(2,305	)
Cash and cash equivalents at beginning of year		4,562
Cash and cash equivalents at end of year	$	2,257
Supplemental disclosure of cash flow information- cash paid during the year for:
Interest	$	99,019
Taxes		1,182,954

See accompanying notes to financial statements.

5

MBS INSIGHT, INC.

Notes to Financial Statements December 27, 2009

(1) Summary of Significant Accounting Policies

Organization and Nature of Business

MBS Insight, Inc. (the Company) is a wholly owned subsidiary of World Marketing, Inc. (Parent), which is a wholly owned subsidiary of the Omaha World-Herald Company (OWHC). The Company provides a variety of services, including database management and direct marketing activities. The Company’s primary operations are located in Central Islip, New York.

Accounting Period

The Company has adopted a 52 — 53 week fiscal year ending the last Sunday in December. The year ended December 27, 2009 included 52 weeks.

Push-Down Accounting

OWHC has adopted a policy of push-down accounting for acquisitional and operational elements of the business.

Property, Plant, and Equipment

Property, plant, and equipment are recorded at cost. Depreciation over the estimated useful lives of the property is based on the straight-line method. For federal income tax purposes, the declining balance method is used. Deferred income taxes have been recorded on the difference between book and tax depreciation.

In accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 360, Property, Plant, and Equipment (ASC 360), the Company reviews the carrying value of property, plant and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable. If the sum of the expected future cash flows is less than the carrying amount of the asset, an impairment loss is recognized in operating results.

Goodwill

The Company accounts for intangible assets based on FASB Accounting Standards Codification Topic 350, Intangibles — Goodwill and Other (ASC 350). Under ASC 350, goodwill is not amortized but is tested for impairment at least annually.

Revenue

The Company recognizes revenue when services are performed, collection of the relevant receivable is probable, persuasive evidence of an arrangement exists, and the sales price is fixed and determinable. When revenues associated with an initial database build are received and recognized over the term of a contract, the incremental direct costs of the database build are deferred and expensed over the term of the contract as the revenue is recognized.

Income Taxes

Income taxes are accounted for under the asset and liability method. Under this method, deferred income taxes represent the expected future tax consequences of temporary differences between the financial statement carrying amounts and tax bases of assets and liabilities.

In July 2006, FASB issued Financial Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes, which clarifies the accounting for uncertainty in income taxes recognized in the financial statements in accordance with FASB Accounting Standards Codification Topic 740, Income Taxes (ASC 740). FIN 48, which is now a part of ASC 740, provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination based on its technical merits. This interpretation also provides guidance on measurement, classification, interest and penalties, disclosure and transition. Prior to the adoption of FIN 48, the Company recognized the effect of income tax positions only if such positions were probable of being sustained. See note 6 for further information.

Fair Value Measurements

In September 2006, FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements, which is now included in FASB Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures (ASC 820). ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and establishes a framework for measuring fair value. The Company’s carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and debt approximate fair value.

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 amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The current economic environment has increased the degree of uncertainty inherent in those estimates and assumptions.

(2) Accounts Receivable

Components of accounts receivable at December 27, 2009 consist of the following:

	2009
Trade	$	2,337,085
Sundry		125,655
Total accounts receivable		2,462,740
Allowance for doubtful accounts		103,673
Accounts receivable, net	$	2,359,067

6

MBS INSIGHT, INC.

Notes to Financial Statements December 27, 2009

(3) Property, Plant, and Equipment

Components of property, plant, and equipment at December 27, 2009 consist of the following:

	2009
Buildings and improvements	$	10,167
Machinery and equipment		1,764,688
Software		1,435,665
Furniture and fixtures		46,385
Construction in process		2,018,848
		5,275,753
Accumulated depreciation		2,196,327
	$	3,079,426

Costs associated with software are recorded in accordance with FASB Accounting Standards Codification Topic 350, Intangibles — Goodwill and Other. Certain expenditures relating to the development of software for internal use are capitalized and relate primarily to external costs. At December 27, 2009, the Company had capitalized software costs of $1,905,000 included in construction in progress.

(4) Goodwill

Goodwill at December 27, 2009 is $6,583,324. The carrying value of goodwill is reviewed for impairment at least annually. The Company must make various estimates and assumptions in determining estimated fair value. Changes in these estimates or related assumptions could result in the recording of an impairment charge.

(5) Borrowings from Parent

The Company has an intercompany revolving note held by the Parent. Any outstanding borrowings are recorded on the balance sheet of the Company. The note has a maximum principal amount of $6,000,000 and is due April, 2011. At December 27, 2009, the Company had $2,391,743 borrowed against the note. The note has a variable interest rate, and at December 27, 2009, the rate was 4.25%.

(6) Income Taxes

The Company files a consolidated income tax return with OWHC. Provision for income taxes is computed on an individual company basis. Current taxes are paid by OWHC and charged to the Company through intercompany accounts.

Income tax expense consists of the following:

	2009
	Federal		State		Total
Current	$	922,850		260,104		1,182,954
Deferred		93,906		27,553		121,459
	$	1,016,756		287,657		1,304,413

The actual tax expense differs from the “expected” tax expense (computed by applying the appropriate U. S. federal corporate tax rate to earnings before income taxes) as follows:

	2009
Computed “expected” tax expense	$	1,109,043
State tax (net of federal tax benefit)		186,979
Other		8,391
	$	1,304,413

The tax effects of timing differences that give rise to significant portions of the deferred tax asset and deferred tax liability at December 27, 2009 are presented below:

	2009
Deferred tax asset:
Allowance for doubtful accounts	$	42,357
Deferred tax liability:
Excess depreciation		236,793
Excess amortization		703,397
Prepaid expense deduction		102,405
Total deferred tax liabilities		1,042,595
Net deferred tax asset (liability)	$	(1,000,238	)

The Company did not record a deferred tax asset valuation allowance as of December 27, 2009. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be recognized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Based on the level of historical taxable income and projections for future taxable income over the periods which the deferred tax assets are deductible, management believes it is more likely than not the Company will realize the benefits of those deductible differences.

The Company has adopted the provisions of FIN 48 and upon implementation, the Company recognized no liability for unrecognized tax benefits. The Company had no liability for unrecognized tax benefits as of December 27, 2009.

The Company is subject to taxation in the United States and the state of New York. As of December 27, 2009, the 2006 and 2008 tax years remain subject to examination by the Internal Revenue Service (IRS), and tax years 2006 through 2008 remain subject to examination by the state of New York. The IRS completed an examination of the 2007 tax year in 2009. As of December 27, 2009, the Company is no longer subject to federal or state examinations by taxing authorities for years prior to 2006.

7

MBS INSIGHT, INC.

Notes to Financial Statements December 27, 2009

(7) Employee Benefit Plan

The Company participates in a defined contribution plan sponsored by OWHC for all eligible employees. Generally, employees can defer a portion of their eligible compensation into the plan, not to exceed limitations. The Company can make a matching contribution equal to 25% of employee deferrals not to exceed 6% of employee compensation. The Company incurred expenses of $195,095 related to the plan in 2009.

(8) Commitments

The Company leases equipment and office space from others under operating leases. Annual rent expense under all operating leases amounted to $356,287 in 2009. The aggregate minimum annual payments at December 27, 2009 under these operating leases are as follows:

2010	$	37,014
2011		37,014
2012		37,014
Total minimum lease payments	$	111,042

(9) Major Customers

In 2009, two customers accounted for approximately $5,298,000 or 30% of revenue. These customers accounted for approximately $857,000 or 36% of outstanding receivables at December 27, 2009.

(10) Related Party Transactions

The Company was involved in transactions with related parties for the years ended December 27, 2009 as follows:

	2009
Management fee expense	$	25,008
Interest expense		99,019

The Company has borrowings from Parent for $2,391,743. See note 5 for additional information.

(11) Subsequent Events

The Company has evaluated subsequent events from the balance sheet date through April 28, 2010, the date at which the financial statements were available to be issued, and determined there are no other items to disclose.

8

EX-99.3

Exhibit 99.3

MBS INSIGHT, INC.

Financial Statements

March 31, 2010

MBS INSIGHT, INC.

Condensed Balance Sheets

March 31, 2010 and December 27, 2009

	March 31,		December 27,
Assets	2010		2009
	(Unaudited)
Current assets:
Cash and cash equivalents	$	1,399		2,257
Accounts receivable, net		2,102,785		2,359,067
Prepaid expenses		620,528		526,933
Total current assets		2,724,712		2,888,257
Other assets		76,972		105,800
Property, plant, and equipment, net		2,894,309		3,079,426
Goodwill		6,583,324		6,583,324
Total assets	$	12,279,317		12,656,807

Liabilities and Stockholder’s Equity	2010		2009
Current liabilities:
Borrowings from parent	$	2,367,716		2,391,743
Accounts payable		200,188		532,357
Accrued payroll		296,677		327,827
Accrued expenses		565,574		888,651
Deposits		8,645		9,430
Deferred income taxes		60,048		60,048
Income taxes payable		139,982		—
Total current liabilities		3,638,830		4,210,056
Long-term liability:
Deferred income taxes		940,190		940,190
Stockholder’s equity:
Common stock, $1.00 par value. Authorized 10,000 shares; issued and outstanding 1,000 shares		1,000		1,000
Additional paid-in capital		3,181,180		3,181,180
Retained earnings		4,518,117		4,324,381
Total stockholder’s equity		7,700,297		7,506,561
Total liabilities and stockholder’s equity	$	12,279,317		12,656,807

See accompanying notes to condensed financial statements.

2

MBS INSIGHT, INC.

Condensed Statements of Earnings

Fiscal periods ended March 31, 2010 and March 31, 2009

	Fiscal period ended
	March 31,			March 31,
	2010			2009
	(Unaudited)
Operating revenue	$	4,280,850			4,140,812
Operating expenses:
Cost of materials		211,143			300,093
Labor costs		3,021,820			2,626,956
Depreciation		98,425			111,000
Amortization		10,870			—
Other		579,426			589,036
Total operating expenses		3,921,684			3,627,085
Operating income		359,166			513,727
Other expense:
Interest expense to parent		(25,448	)		(48,194	)
Earnings before income taxes		333,718			465,533
Income tax expense		139,982			193,222
Net earnings	$	193,736			272,311

See accompanying notes to condensed financial statements.

3

MBS INSIGHT, INC.

Condensed Statements of Cash Flows

Fiscal periods ended March 31, 2010 and March 31, 2009

	Fiscal period ended
	March 31,			March 31,
	2010			2009
	(Unaudited
Cash flows from operating activities:
Net earnings	$	193,736			272,311
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		109,295			111,000
Changes in assets and liabilities
(Increase) decrease in:
Accounts receivable		256,282			169,267
Prepaid expenses and other		11,055			(4,163	)
Increase (decrease) in:
Accounts payable		(332,169	)		96,987
Accrued expenses		(354,227	)		21,479
Deposits		(785	)		(2,721	)
Income taxes payable		139,982			193,222
Net cash provided by operating activities		23,169			857,382
Cash flows from investing activities:
Additions to property, plant, and equipment		—			(358,599	)
Net cash used in investing activities		—			(358,599	)
Cash flows from financing activities:
Net repayment of borrowings from parent		(24,027	)		(499,255	)
Net cash used in financing activities		(24,027	)		(499,255	)
Net decrease in cash and cash equivalents		(858	)		(472	)
Cash and cash equivalents at beginning of year		2,257			4,562
Cash and cash equivalents at end of period	$	1,399			4,090
Supplemental disclosure of cash flow information- cash paid during the period for:
Interest	$	25,448			48,194

See accompanying notes to condensed financial statements.

4

MBS Insight Inc.

Notes to Condensed Financial Statements March 31, 2010

(1) Description of Business

Organization and Nature of Business

MBS Insight, Inc. (the Company) is a wholly owned subsidiary of World Marketing, Inc. (Parent), which is a wholly owned subsidiary of the Omaha World-Herald Company (OWHC). The Company provides a variety of services, including database management and direct marketing activities. The Company’s primary operations are located in Central Islip, New York.

(2) Basis of Presentation

Accounting Period

The Company has adopted a 52 – 53 week fiscal year ending the last Sunday in December. The results of operations for the fiscal period ending March 31, 2010 reflect the period December 28, 2009 to March 31, 2010. The results of operations for the fiscal period ending March 31, 2009 reflect the period from December 29, 2008 to March 31, 2009.

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 amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The current economic environment has increased the degree of uncertainty inherent in those estimates and assumptions.

(3) Goodwill

Goodwill at March 31, 2010 is $6,583,324. The carrying value of goodwill is reviewed for impairment at least annually. The Company must make various estimates and assumptions in determining fair value. Changes in these estimates or related assumptions could result in the recording of an impairment charge.

(4) Borrowings from Parent

The Company has an intercompany revolving note held by the Parent. Any outstanding borrowings are recorded on the balance sheet of the Company. The note has a maximum principal amount of $6,000,000 and is due April, 2011. At March 31, 2010, the Company had $2,367,716 borrowed against the note. The note has a variable interest rate, and at March 31, 2010, the rate was 4.25%.

(5) Major Customers

Through the period ending March 31, 2010, two customers accounted for approximately $1,346,000 or 31% of revenue. These customers accounted for approximately $748,000 or 34% of outstanding receivables at March 31, 2010. Through the period ending March 31, 2009, the same two customers accounted for approximately $1,245,000 or 30% of revenue.

(6) Related Party Transactions

The Company was involved in transactions with related parties for the periods ended March 31, 2010 and March 31, 2009 as follows:

	2010		2009
Management fee expense	$	5,979		6,252
Interest expense		25,448		48,194

The Company has borrowings from Parent for $2,367,716. See note 4 for additional information.

(7) Subsequent Events

On April 30, 2010, e-Dialog, a wholly owned subsidiary of GSI Commerce, Inc., acquired 100% of the issued and outstanding stock of the Company for approximately $22.5 million.

5

EX-99.4

Exhibit 99.4

Unaudited Pro Forma Combined Financial Information

e-Dialog, Inc (“e-Dialog”), a wholly owned subsidiary of GSI Commerce, Inc. (the “Company”), completed the acquisition of MBS Insight, Inc. (“MBS”), a wholly owned subsidiary of World Marketing, Inc. (“World Marketing”), on April 30, 2010 (“Acquisition Date”). The Company also completed the acquisition of Retail Convergence, Inc. (“Rue La La”) on November 17, 2009 and a registered public offering of the Company’s common stock (“Public Offering”) on August 18, 2009. The following unaudited pro forma combined financial statements are derived by applying pro forma adjustments to the Company’s historical consolidated financial statements incorporated by reference herein. The following unaudited pro forma combined financial statements for the fiscal year ended January 2, 2010 and the three months ended April 3, 2010 assume the Company’s acquisitions of MBS and Rue La La, and the Public Offering occurred on January 4, 2009, the first day of the Company’s fiscal 2009, and have been prepared to illustrate the effects of the following:

MBS Insight Acquisition:

On April 30, 2010, e-Dialog entered into and consummated a Stock Purchase Agreement (the “Stock Purchase Agreement”) with World Marketing and MBS. Upon the terms and conditions of the Stock Purchase Agreement, e-Dialog purchased from World Marketing all of the issued and outstanding capital stock of MBS for $22.5 million, of which $2.4 million was used to pay off indebtedness of MBS. Of the purchase price, $2.7 million was paid into an escrow account to secure post-closing indemnification obligations of World Marketing. The purchase price is subject to increase or decrease, to the extent that the working capital of MBS is more or less than the agreed working capital target of $1.5 million.

Rue La La Acquisition:

On November 17, 2009, the Company completed the acquisition of Rue La La. Under the terms of the Merger Agreement, Cola Acquisition Corporation, a wholly owned subsidiary of the Company, merged with and into Rue La La (the “Merger”), with Rue La La surviving as a subsidiary of the Company. The Company acquired all of the outstanding capital stock of Rue La La.

Under the Merger Agreement, the stockholders and optionholders of Rue La La were entitled to receive an initial payment of approximately $186.0 million, consisting of $92.1 million cash (less certain transaction expenses) and shares of the Company’s common stock (“GSI Stock”) with an aggregate value of approximately $93.9 million. Any stockholder or optionholder who held 0.2 million or fewer shares of Rue La La common stock (or vested options, in the case of an optionholder) received cash in lieu of shares of GSI Stock. The initial payment disclosed above includes the initial payment payable upon the Company’s acquisition of the capital stock of Rue La La which was acquired on December 31, 2009. The stockholders and employees of Rue La La will be eligible to receive an earnout payable in cash and shares of GSI Stock for each of the 2010, 2011 and 2012 fiscal years with an aggregate value of up to $170.0 million based upon Rue La La achieving minimum earnings before interest, taxes, depreciation, amortization, stock compensation and certain other adjustments (“Financial Performance Target”) for fiscal 2010, fiscal 2011 and fiscal 2012. The maximum earn-out payment for the fiscal 2010 Financial Performance Target is $40.0 million. The maximum earn-out payment for the fiscal 2011 Financial Performance Target is $95.0 million less any payments made for the 2010 Financial Performance Target, if any. The maximum earn-out payment for the fiscal 2012 Financial Performance Target is $170.0 million less any payments made for the 2010 and 2011 Financial Performance Targets, if any. Of the maximum earnout payment of $170.0 million, approximately $46.2 million is payable to Rue La La employees based on the same financial performance targets in 2010, 2011 and 2012 but receipt of these payments, to the extent paid, is contingent upon the employee’s continuing employment with Rue La La, subject to certain exceptions. These payments will be accounted for as compensation expense over the earn-out period to the extent the financial targets are achieved and the earn-out is paid and will not be included as consideration under the acquisition method of accounting.

The accompanying unaudited pro forma combined financial statements give pro forma effect to the Company’s acquisition of Rue La La using the acquisition method of accounting assuming an estimated purchase price of $246.1 million. The purchase price consists of cash of approximately $92.1 million, shares of GSI Stock common valued at $93.9 million, or approximately 4.6 million shares based on the Company’s closing stock price on the acquisition date of $20.38, and the estimated $60.0 million fair value of the earnout payments. Additionally, the Company incurred approximately $2.1 million in transaction costs directly related to the acquisition that were expensed as incurred.

Registered Public Offering:

On August 18, 2009, the Company completed the Public Offering of 5.4 million shares of GSI Stock sold by the Company. The Public Offering price was $17.00 per share and the Company received net proceeds from the sale of the common shares of $88.0 million after deducting underwriting discounts and commissions and offering expenses.

Pursuant to the requirements of Article 11 of Regulation S-X, the unaudited pro forma combined balance sheet and combined statements of operations give effect to adjustments for transactions regardless of whether they have a continuing impact on the Company or are non-recurring, that are (1) directly attributable to the MBS acquisition and are factually supportable, and (2) represent material events which have occurred after January 4, 2009 (the beginning of fiscal 2009) and had or will have a material effect on our historical financial statements and capital structure.

The following unaudited pro forma combined financial statements were prepared using the historical consolidated financial statements of the Company and MBS, and should be read in conjunction with the:

• Financial statements of the Company as of and for the fiscal year ended January 2, 2010, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 5, 2010.

• Unaudited financial statements of the Company as of and for the three months ended April 3, 2010 included in the Company’s Quarterly Report on Form 10-Q filed with the SEC on May 5, 2010.

• Financial statements of MBS as of and for the year ended December 27, 2009 included in this Current Report on Form 8-K/A.

• Unaudited financial statements of MBS as of and for the three months ended March 31, 2010 included in this Current Report on Form 8-K/A.

The pro forma adjustments related to the acquisition of MBS are preliminary and do not reflect the final purchase price or final allocation of the excess of the purchase price over the net book value of the net assets of MBS as the Company has yet to finalize its valuation of MBS’s net assets. Final adjustments could result in a materially different purchase price and/or allocations of the purchase price, which would affect the values assigned to tangible or intangible assets and the amount of depreciation and amortization expense recorded in the combined statements of operations. The effect of any changes to the pro forma combined statements of operations would depend on the final purchase price and the nature and amount of the final purchase price allocation and could be material.

The pro forma financial statements do not reflect potential revenue opportunities and cost savings that the Company expects to realize after the acquisitions. No assurance can be given with respect to the estimated revenue opportunities and operating cost savings that are expected to be realized as a result of the acquisitions. The pro forma financial information also does not reflect pro forma adjustments for non-recurring charges related to integration activities or exit costs that may be incurred by the Company, MBS, or Rue La La in connection with the acquisitions.

The accompanying unaudited pro forma combined balance sheet assumes that the acquisition of MBS took place on April 3, 2010, the end of the Company’s fiscal first quarter, and combines the Company’s unaudited April 3, 2010 balance sheet with the unaudited balance sheet of MBS as of March 31, 2010, the end of MBS’s fiscal first quarter. The Company’s April 3, 2010 balance sheet includes the purchase accounting effects of Rue La La, and the effects of the Public Offering which both occurred prior to April 3, 2010. Accordingly, no pro forma adjustments were made to the unaudited pro forma combined balance sheet related to the purchase accounting for the Rue La La acquisition and effects of the Public Offering.

The accompanying unaudited pro forma combined statements of operations for the Company’s fiscal year ended January 2, 2010 and the three-months ended April 3, 2010 assume that acquisitions of MBS and Rue La La, as well as the Public Offering took place on January 4, 2009, the first day of the Company’s fiscal 2009. The unaudited pro forma combined statement of operations for the fiscal year ended January 2, 2010 combines the Company’s audited consolidated statement of operations for the fiscal year ended January 2, 2010 with MBS’s audited consolidated statement of operations for the fiscal year ended December 27, 2009, Rue La La’s unaudited consolidated statement of operations for the forty-six weeks ended November 17, 2009, and takes into effect an adjustment to the basic and diluted weighted average shares outstanding for the Public Offering for the period of January 4, 2009 through August 18, 2009.

2

The unaudited pro forma condensed combined statement of operations for the three-months ended April 3, 2010 combines the Company’s unaudited condensed consolidated statement of operations for the three-months ended April 3, 2010 with MBS’s unaudited condensed consolidated statement of operations for the three-months ended March 31, 2010. Reclassifications have been made to the balance sheet and condensed consolidated statements of operations of MBS in order to conform to the Company’s financial statement classifications as described in “Note 3 – Unaudited Pro Forma Adjustments.” The Company’s unaudited condensed consolidated statement of operations for the three months ended April 3, 2010 includes the revenue and expense activity for Rue La La for the entire period as well as the impact of the Public Offering for the entire period. Accordingly, no pro forma adjustments were made to the unaudited pro forma condensed consolidated statement of operations relating to the acquisition of Rue La La and the effects of the Public Offering.

The unaudited pro forma condensed combined financial statements are accounted for under accounting standards for “Business Combinations.” In merger transactions in which the consideration given is not in the form of cash (that is, in the form of non-cash assets, liabilities incurred, or equity interests issued), measurement of the acquisition consideration is based on the fair value of the consideration given or the fair value of the asset (or net assets) acquired, whichever is more clearly evident and, thus, more reliably measurable.

The Business Combinations accounting standards require that all the assets acquired and liabilities assumed in a business combination be recognized at their acquisition-date fair value, while transaction costs and restructuring costs associated with the business combination are expensed as incurred. The excess of the acquisition consideration over the fair value of assets acquired and liabilities assumed, if any, is allocated to goodwill. For those assets in the combined company that may be phased out or may no longer be used, additional amortization, depreciation and possibly impairment charges may be recorded.

The pro forma financial information is based on the estimates and assumptions set forth in the notes to such information. The pro forma financial information is preliminary and is being furnished solely for information purposes and, therefore, is not necessarily indicative of the combined results of operations or financial position that might have been achieved for the dates or periods indicated, nor is it necessarily indicative of the results of operations or financial position that may occur in the future.

3

GSI COMMERCE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(In thousands)

						Preliminary
	GSI Commerce, Inc.			MBS Insight, Inc.		Pro Forma			Pro Forma
	April 3, 2010			March 31, 2010		Adjustments			Combined
ASSETS
Current assets:
Cash and cash equivalents	$	132,403		$	1	$	(22,500	)(a)	$	109,904
Accounts receivable, net		53,879			2,103		—			55,982
Inventory		58,299			—		—			58,299
Deferred tax assets		14,436			—		(60	)(b)		14,376
Prepaid expenses and other current assets		13,678			621		—			14,299
Total current assets		272,695			2,725		(22,560	)		252,860
Property and equipment, net		165,518			2,894		(2,000	)(c)		166,412
Goodwill		372,611			6,583		8,357	(d)		387,551
Intangible assets, net		128,723			—		7,625	(e)		136,348
Long-term deferred tax assets		7,371			—		(2,490	)(f)		4,881
Other assets, net		12,949			77		—			13,026
Total assets	$	959,867		$	12,279	$	(11,068	)	$	961,078
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	71,094		$	200	$	—		$	71,294
Accrued expenses		95,858			565		446	(g)		96,869
Accrued payroll		—			297		(297	)(g)
Deferred revenue		21,553			—		—			21,553
Deposits		—			9		(9	)(g)		—
Income taxes payable		—			140		(140	)(g)		—
Deferred income taxes		—			60		(60	)(b)		—
Convertible notes		56,675			—		—			56,675
Current portion of long-term debt		5,246			2,368		(2,368	)(h)		5,246
Total current liabilities		250,426			3,639		(2,428	)		251,637
Convertible notes		118,525			—		—			118,525
Long-term debt		26,632			—		—			26,632
Deferred acquisition payments		65,960			—		—			65,960
Deferred tax liabilities		—			940		(940	)(i)		—
Deferred revenue and other long-term liabilities		9,596			—		—			9,596
Total liabilities		471,139			4,579		(3,368	)		472,350
Commitments and contingencies		—			—		—			—
Stockholders’ equity:
Preferred stock		—			—		—			—
Common stock		615			1		(1	)(j)		615
Additional paid in capital		664,053			3,181		(3,181	)(j)		664,053
Accumulated other comprehensive loss		(2,201	)		—		—			(2,201	)
(Accumulated deficit) retained earnings		(173,739	)		4,518		(4,518	)(j)		(173,739	)
Total stockholders’ equity		488,728			7,700		(7,700	)		488,728
Total liabilities and stockholders’ equity	$	959,867		$	12,279	$	(11,068	)	$	961,078

See accompanying notes to unaudited pro forma condensed combined financial statements, including Note 3 for an explanation of the preliminary pro forma adjustments.

4

GSI COMMERCE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(In thousands, except per share data)

												Retail Convergence Inc.
	GSI Commerce, Inc.			MBS Insight, Inc.		Preliminary						For The Period						Public Offing
	Fiscal Year Ended			Fiscal Year Ended		Pro Forma			Pro Forma			of January 4, 2009 to			Pro Forma			Pro Forma			Pro Forma
	January 2, 2010			December 27, 2009		Adjustments			Combined			November 17, 2009			Adjustments			Adjustments			Combined
Revenues:
Net revenues from product sales	$	542,249		$	—	$	—		$	542,249		$	106,293		$	—		$	—		$	648,542
Service fee revenues		461,966			—		17,376	(k)		479,342			978			—			—			480,320
Operating revenues		—			17,376		(17,376	)(k)		—			—			—			—			—
Net revenues		1,004,215			17,376		—			1,021,591			107,271			—			—			1,128,862
Costs and expenses:
Cost of materials		—			1,026		(1,026	)(l)		—			—			—			—			—
Cost of revenues from product sales		398,604			—		—			398,604			66,123			1,508	(w)		—			466,235
Marketing		54,831			—		—			54,831			6,738			—			—			61,569
Labor costs		—			10,287		(10,287	)(m)		—			—			—			—			—
Account management and operations		273,070			—		4,560	(n)		277,630			22,077			—			—			299,707
Product development		120,176			—		6,225	(o)		126,401			4,703			—			—			131,104
General and administrative		82,922			—		2,920	(p)		85,842			8,718			—			—			94,560
Other		—			2,392		(2,392	)(q)		—			—			—			—			—
Depreciation and amortization		63,395			—		2,350	(r)		65,745			3,366			6,047	(x)		—			75,158
Depreciation		—			403		(403	)(s)		—			—			—			—			—
Changes in fair value of deferred acquisition payments		951			—		—			951			—			7,259	(y)		—			8,210
Total costs and expenses		993,949			14,108		1,947			1,010,004			111,725			14,814			—			1,136,543
Income (loss) from operations		10,266			3,268		(1,947	)		11,587			(4,454	)		(14,814	)		—			(7,681	)
Other (income) expense:
Interest expense		19,430			99		(99	)(t)		19,430			1,272			—			—			20,702
Interest income		(478	)		—		213	(u)		(265	)		(36	)		301	(z)		—			—
Other income, net		(2	)		—		—			(2	)		—			—			—			(2	)
Total other expense (income)		18,950			99		114			19,163			1,236			301			—			20,700
(Loss) income before income taxes		(8,684	)		3,169		(2,061	)		(7,576	)		(5,690	)		(15,115	)		—			(28,381	)
Provision (benefit) for income taxes		2,344			1,305		(824	)(v)		2,825			—			(6,046	)(aa)		—			(3,221	)
Net (loss) income	$	(11,028	)	$	1,864	$	(1,237	)	$	(10,401	)	$	(5,690	)	$	(9,069	)	$	—		$	(25,160	)
Loss per share — basic and diluted	$	(0.21	)						$	(0.20	)										$	(0.43	)
Weighted average shares outstanding — basic and diluted		51,457								51,457						4,001	(bb)		3,173	(cc)		58,630

See accompanying notes to unaudited pro forma condensed combined financial statements, including Note 3 for an explanation of the preliminary pro forma adjustments.

5

GSI COMMERCE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(In thousands, except per share data)

	GSI Commerce, Inc.			MBS Insight, Inc.		Preliminary
	Three Months Ended			Three Months Ended		Pro Forma			Pro Forma
	April 3, 2010			March 31, 2010		Adjustments			Combined
Revenues:
Net revenues from product sales	$	159,275		$	—	$	—		$	159,275
Service fee revenues		113,317			—		4,281	(dd)		117,598
Operating revenue		—			4,281		(4,281	)(dd)		—
Net revenues		272,592			4,281		—			276,873
Costs and expenses:
Cost of materials		—			211		(211	)(ee)		—
Cost of revenues from product sales		117,474			—		—			117,474
Marketing		10,807			—		—			10,807
Labor costs		—			3,022		(3,022	)(ff)		—
Account management and operations		77,694			—		1,105	(gg)		78,799
Product development		34,317			—		1,992	(hh)		36,309
General and administrative		24,397			—		716	(ii)		25,113
Other		—			580		(580	)(jj)		—
Depreciation and amortization		18,761			—		508	(kk)		19,269
Depreciation		—			98		(98	)(ll)		—
Amortization		—			11		(11	)(mm)		—
Changes in fair value of deferred acquisition payments		2,074			—		—			2,074
Total costs and expenses		285,524			3,922		399			289,845
(Loss) income from operations		(12,932	)		359		(399	)		(12,972	)
Other (income) expense:
Interest expense		5,208			25		(25	)(nn)		5,208
Interest income		(234	)		—		49	(oo)		(185	)
Other expense, net		474			—		—			474
Total other expense		5,448			25		24			5,497
(Loss) income before income taxes		(18,380	)		334		(423	)		(18,469	)
(Benefit) provision for income taxes		(10,255	)		140		(169	)(pp)		(10,284	)
Net (loss) income	$	(8,125	)	$	194	$	(254	)	$	(8,185	)
Loss per share — basic and diluted	$	(0.13	)						$	(0.14	)
Weighted average shares outstanding — basic and diluted		60,446								60,446

See accompanying notes to unaudited pro forma condensed combined financial statements, including Note 3 for an explanation of the preliminary pro forma adjustments.

6

GSI COMMERCE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(in thousands)

NOTE 1—BASIS OF PRESENTATION

The unaudited pro forma condensed combined financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and certain note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been omitted pursuant to such rules and regulations; however, management believes that the disclosures are adequate to make the information presented not misleading.

Acquisition of MBS Insight

On April 30, 2010, e-Dialog Inc. (“e-Dialog”), a wholly owned subsidiary of the GSI Commerce, Inc., (the “Company”), acquired all of the issued and outstanding capital stock of MBS Insight, Inc. (“MBS”), a wholly owned subsidiary of World Marketing, Inc. (“World Marketing”) for $22,500 in cash, of which $2,368 was used to pay off indebtedness of MBS. The purchase price is subject to increase or decrease, to the extent that the working capital of MBS is more or less than the agreed working capital target of $1,500. MBS is a database marketing solutions provider that offers a unique mix of knowledge-based marketing services and solutions that help marketers innovate, advance, and automate their marketing efforts for greater return on their investment.

Acquisition of Rue La La

On October 27, 2009, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Retail Convergence, Inc. (“Rue La La”), and completed the acquisition on November 17, 2009 (“Acquisition Date”). Pursuant to the Merger Agreement among the Company, Cola Acquisition Corporation (“Acquisition Sub”), a wholly-owned subsidiary of the Company, and Rue La La, Acquisition Sub merged with and into Rue La La with Rue La La surviving as a subsidiary of the Company. Rue La La operates RueLaLa.com, an operator of online private sales and SmartBargains.com, an off-price e-commerce marketplace.

The accompanying unaudited pro forma condensed combined financial statements give pro forma effect to the Company’s acquisition of Rue La La using the acquisition method of accounting assuming an estimated purchase price of approximately $246,090. The purchase price consists of cash of approximately $92,133, shares of the Company’s common stock valued at $93,945, or 4,572 shares, and the estimated $60,012 fair value of the earnout payments. Additionally, the Company incurred approximately $2,100 in transaction expense directly related to the acquisition.

The maximum earn-out payment per the Merger Agreement is $170,000 based upon Rue La La achieving minimum earnings before interest, taxes, depreciation, amortization, stock compensation and certain other adjustments (“Financial Performance Target”) for fiscal 2010, fiscal 2011 and fiscal 2012. The maximum earn-out payment for the fiscal 2010 Financial Performance Target is $40,000. The maximum earn-out payment for the fiscal 2011 Financial Performance Target is $95,000 less any payments made for the 2010 Financial Performance Target, if any. The maximum earn-out payment for the fiscal 2012 Financial Performance Target is $170,000 less any payments made for the 2010 and 2011 Financial Performance Targets, if any. Of the maximum earnout payment of $170,000, approximately $46,200 is payable to Rue La La employees based on the same financial performance targets in 2010, 2011 and 2012 but receipt of these payments, to the extent paid, is contingent upon the employee’s continuing employment with Rue La La, subject to certain exceptions. These payments will be accounted for as compensation expense over the earn-out period to the extent the financial targets are achieved and the earn-out is paid and will not be included as consideration under the acquisition method of accounting.

7

Registered Public Offering

On August 18, 2009, the Company completed a registered public offering of 5,439 common shares sold by the Company (“Public Offering”). The Public Offering price was $17.00 per share and the Company received net proceeds from the sale of the common shares after deducting underwriting discounts and commissions and offering expenses of $88,000.

NOTE 2—PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The accompanying unaudited pro forma condensed combined balance sheet assumes that the acquisition of MBS took place on April 3, 2010, the end of the Company’s fiscal first quarter, and combines the Company’s unaudited April 3, 2010 balance sheet with the unaudited balance sheet of MBS as of March 31, 2010, the end of MBS’s fiscal first quarter. The Company’s April 3, 2010 balance sheet includes the acquisition of Rue La La, and the effects of the Public Offering which both occurred prior to April 3, 2010. Accordingly, no pro forma adjustments were made to the unaudited pro forma combined balance sheet related to the purchase accounting for the Rue La La acquisition and effects of the Public Offering.

The accompanying unaudited pro forma condensed combined statements of operations for the fiscal year ended January 2, 2010 and the three months ended April 3, 2010 assume that the acquisitions of MBS and Rue La La and the Public Offering took place on January 4, 2009, the first day of the Company’s fiscal 2009. The unaudited pro forma condensed combined statement of operations for the fiscal year ended January 2, 2010 combines the Company’s audited consolidated statement of operations for the fiscal year ended January 2, 2010 with MBS’s audited consolidated statement of operations for the fiscal year ended December 27, 2009, and Rue La La’s unaudited consolidated statement of operations for the period from January 4, 2009 to November 17, 2009 and takes into effect an adjustment to the basic and diluted weighted average shares outstanding for the Public Offering for the period of January 4, 2009 through August 18, 2009.

The unaudited pro forma condensed combined statement of operations for the three months ended April 3, 2010 combines the Company’s unaudited condensed consolidated statement of operations for the three months ended April 3, 2010 with MBS’s unaudited condensed consolidated statement of operations for the three months ended March 31, 2010. The Company’s unaudited condensed consolidated statement of operations for the three months ended April 3, 2010 includes the revenue and expense activity for Rue La La for the entire period as well as the impact of the Public Offering for the entire period. Accordingly, no pro forma adjustments were made to the unaudited pro forma condensed consolidated statement of operations relating to the acquisition of Rue La La and the effects of the Public Offering.

The pro forma condensed combined statements of operations have been prepared for informational purposes only and do not purport to be indicative of the actual results that would have been achieved by the Company or the combined Company for the periods presented or that will be achieved by the Company or the combined Company in the future.

NOTE 3—UNAUDITED PRO FORMA ADJUSTMENTS

The pro forma adjustments related to the acquisition of MBS are preliminary and do not reflect the final purchase price or allocation of the excess purchase price over the net book value of the net assets of MBS as the Company has yet to finalize MBS’s valuation of net assets. Final adjustments could result in a materially different purchase price and/or allocations of the purchase price, which would affect the values assigned to tangible or intangible assets and the amount of depreciation and amortization expense recorded in the combined statements of operations. The effect of any changes to the consolidated statements of operations would depend on the final purchase prices and the nature and amount of final purchase price allocations and could be material.

8

The pro forma adjustments included in the unaudited pro forma condensed combined balance sheet as of April 3, 2010 are as follows:

(a)	Reduction to cash and cash equivalents represents the upfront $22,500 cash purchase price to acquire MBS.
(b)	Represents the reclassification of $60 of MBS’s short-term deferred tax liabilities to short-term deferred tax assets.
(c)	Reduction of $2,000 represents the reclassification of technology acquired to intangible assets.
(d)	Represents the following:
	an increase of $8,357 to goodwill related to the Company’s acquisition of MBS. A preliminary calculation of the goodwill resulting from the Company’s acquisition of MBS is shown below. The final allocation of the purchase price may have a material impact on the pro forma balance sheet primarily due to the final valuation of purchase price and intangible assets. Therefore, the final purchase price allocation and goodwill recorded could be materially different than the amount calculated below.

Purchase Price of MBS Insight:
Total cash consideration	$	22,500
Net Assets Acquired:
MBS’s total assets		12,279
MBS’s liabilities		(4,579	)
Book value of net assets acquired		7,700
Excess of purchase price over book value of net assets acquired		14,800
Estimated adjustments to reflect fair value of acquired assets and liabilities:
Estimated fair value of intangible assets as stated in footnote (e)  below		(7,625	)
Estimated long-term deferred tax liability on intangible assets as stated in footnote (f) below		2,250
Pay off of MBS’ indebtness upon acquisition as stated in footnote (h)  below		(2,368	)
Adjustment for fixed asset valuation as stated in (c) above		2,000
Deferred tax liability adjustment as stated in footnote (i) below		(700	)
Pro forma adjustment to goodwill	$	8,357

9

(e) Represents the Company’s preliminary estimated fair value of intangible assets of $7,625. The Company’s preliminary estimated fair value of intangible assets of $7,625 consist of the following: $2,700 indefinite lived intangible asset for MBS’s trade name, $2,925 finite lived intangible asset for MBS’ customer list with an estimated useful life of seven years, and $2,000 finite lived intangible asset for MBS’ technology with an estimated useful life of four years. These are only preliminary estimates, as the valuation of MBS’s intangible assets is not yet complete. The final valuation of MBS’s intangible assets could be materially different.

(f) Represents a decrease of $2,250 for the estimated the total long-term deferred tax liability from MBS’s intangible asset valuation as noted in footnote (e) above, recorded at the Company’s estimated statutory tax rate of 40%. Also represents a decrease of $240 due to the reclassification of MBS’s long-term deferred tax liability to long-term deferred tax assets.

(g) Represents an increase of $446 to accrued expenses, and reductions of MBS’s accrued payroll of $297, deposits of $9, and income taxes payable of $140 to conform to the presentation of the Company’s Balance Sheet.

(h) Represents the payoff of MBS’s indebtedness of $2,368 by the Company as part of consideration paid for MBS.

(i) Represents the elimination of MBS’s historical long-term deferred tax liabilities related to goodwill of $700, and the reclassification of $240 to long-term deferred tax assets as stated in footnote (f) above.

(j) Represents a decrease of $7,700 for the elimination of the historical equity of MBS based on MBS’s balances of its common stock $1, additional paid in capital $3,181, and retained earnings $4,518.

The pro forma adjustments included in the unaudited pro forma condensed combined statement of operations for the fiscal year ended January 2, 2010 are as follows:

Preliminary pro forma adjustments for the acquisition of MBS:

(k) Represents the reclassification of $17,376 relating to MBS’s reported operating revenues to service fee revenues to conform to the presentation of the Company’s Statement of Operations.

(l)	Represents a decrease of $1,026 for the reclassification of MBS’s reported cost of materials to product development expense to conform to the presentation of the Company’s Statement of Operations.
(m)	Represents the following:

• a decrease of $4,305 to reflect the reclassification of a portion of MBS’s reported labor costs to product development expense to conform to the presentation of the Company’s Statement of Operations. These costs primarily relate to MBS’s payroll for its application development and program production;

• a decrease of $4,560 to reflect the reclassification of a portion of MBS’s reported labor costs to account management and operations expense to conform to the presentation of the Company’s Statement of Operations. These costs primarily relate to MBS’s payroll for account management, strategic services, and sales and marketing functions;

• a decrease of $1,422 to reflect the reclassification of a portion of MBS’s reported labor costs to general and administrative expense to conform to the presentation of the Company’s Statement of Operations. These costs primarily relate to MBS’s payroll for general and administrative functions.

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(n)	Represents an increase of $4,560 for the reclassification of MBS’s reported labor costs to account management and operations expense as stated in footnote (m) above.
(o)	Represents the following:

• an increase of $1,026 for the reclassification of a portion of MBS’s reported cost of materials to product development expense as stated in footnote (l) above;

• an increase of $4,305 for the reclassification of a portion of MBS’s reported labor costs to product development expense as stated in footnote (m) above;

• an increase of $894 for the reclassification of a portion of MBS’s reported other expense to product development expense to conform to the presentation of the Company’s Statement of Operations. These costs primarily relate to MBS’s product development labor.

(p) Represents the following:

• an increase of $1,422 to reflect the reclassification of a portion MBS’s reported labor costs to general and administrative expense as stated in footnote (m) above;

• an increase of $1,498 to reflect the reclassification of a portion of MBS’s reported other expense to general and administrative expense to conform to the presentation of the Company’s Statement of Operations. These costs primarily relate to MBS’s rent and utilities.

(q) Represents the following:

• a decrease of $894 for the reclassification of a portion of MBS’s reported other expense to product development expense as stated in footnote (o) above;

• a decrease of $1,498 for the reclassification of a portion of MBS’s reported other expense to general and administrative expense as stated in footnote (p) above.

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(r) Represents the following:

• an increase of $1,947 to reflect the amortization expense per the Company’s estimated valuation of MBS’s intangible assets. Any adjustment to the valuation of intangible assets could have a material impact on depreciation and amortization expense. A ten percent adjustment to the Company’s estimated valuation of MBS’s intangible assets would have a corresponding impact to amortization expense of approximately $195. A one year reduction to the estimated useful life would have a corresponding impact to amortization expense of approximately $74;

• an increase of $403 for the reclassification of MBS’s reported depreciation expense to depreciation and amortization expense to conform to the presentation of the Company’s Statement of Operations.

(s) Represents a decrease of $403 for the reclassification of MBS’s reported depreciation expense to depreciation and amortization expense as stated in footnote (r) above.

(t) Represents a decrease of $99 to interest expense to reflect the payoff by the Company of MBS’s indebtness upon closing the acquisition.

(u) Represents a decrease of $213 to interest income to reflect the use of the Company’s cash and cash equivalents to fund the acquisition on the first day of the period presented.

(v) Represents a decrease to the income tax provision of $824 for the income tax effect of the pro forma adjustments, recorded at the Company’s statutory tax rate of 40.0%. This rate is not necessarily indicative of the Company’s future effective tax rate.

Pro forma adjustments for the acquisition of Rue La La:

(w)	Represents an increase of $1,508 from the adjustment of Rue La La’s inventory to its estimated net realizable value. The Company increased the cost of revenues from product sales for the remaining adjusted inventory amount as the Company assumes the entire existing inventory held as of the acquisition date would be sold during the fiscal year.
(x)	Represents the following:

• an increase of $5,985 to reflect the amortization expense per the Company’s estimated valuation of Rue La La’s intangible assets. Any adjustment to the valuation of intangible assets could have a material impact on depreciation and amortization expense. A ten percent adjustment to the Company’s estimated valuation of Rue La La’s intangible assets would have a corresponding impact to amortization expense of approximately $599. A one year reduction to the estimated useful life would have a corresponding impact to amortization expense of approximately $1,031.

• an increase of $62 to reflect the depreciation expense per the Company’s estimated valuation of Rue La La’s fixed assets.

(y) Represents an increase of $7,259 to reflect the changes in fair value of deferred acquisition payments. The amount represents the accretion of the Company’s estimate of the fair value of future acquisition payments relating to the earnout. The liability is accreted up to the estimated payment over the earnout period of three years by using a risk-adjusted discount rate.

(z) Represents a decrease of $301 to interest income to reflect the use of the Company’s cash and cash equivalents to fund the acquisition on the first day of the period presented.

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(aa) Represents an increase to the income tax benefit of $6,046 for the income tax effect of the pro forma adjustments, recorded at the Company’s statutory tax rate of 40.0%. This rate is not necessarily indicative of the Company’s future effective tax rate.

(bb) Represents an increase of 4,001 of basic and diluted weighted average shares outstanding shares that represent the Company’s common stock valued at $93,945 based on the closing price of the Company’s stock on the closing date of the acquisition.

Pro forma adjustments for the Public Offering:

(cc) Represents an increase of 3,173 of basic and diluted weighted average shares outstanding shares that were issued by the Company in the Public Offering.

The pro forma adjustments included in the unaudited pro forma condensed combined statement of operations for the three-months ended April 3, 2010 are as follows:

Preliminary pro forma adjustments for the acquisition of MBS:

(dd) Represents the reclassification of $4,281 relating to MBS’s reported operating revenues to service fee revenues to conform to the presentation of the Company’s Statement of Operations.

(ee)	Represents a decrease of $211 for the reclassification of MBS’s reported cost of materials to product development expense to conform to the presentation of the Company’s Statement of Operations.
(ff)	Represents the following:

• a decrease of $1,547 to reflect the reclassification of a portion of MBS’s reported labor costs to product development expense to conform to the presentation of the Company’s Statement of Operations. These costs primarily relate to MBS’s payroll for its application development and program production;

• a decrease of $1,105 to reflect the reclassification of a portion of MBS’s reported labor costs to account management and operations expense to conform to the presentation of the Company’s Statement of Operations. These costs primarily relate to MBS’s payroll for account management, strategic services, and sales and marketing functions;

• a decrease of $370 to reflect the reclassification of a portion of MBS’s reported labor costs to general and administrative expense to conform to the presentation of the Company’s Statement of Operations. These costs primarily relate to MBS’s payroll for general and administrative functions.

(gg)	Represents an increase of $1,105 for the reclassification of MBS’s reported labor costs to account management and operations expense as stated in footnote (ff) above.
(hh)	Represents the following:

• an increase of $211 for the reclassification of a portion of MBS’s reported cost of materials to product development expense as stated in footnote (ee) above;

• an increase of $1,547 for the reclassification of a portion of MBS’s reported labor costs to product development expense as stated in footnote (ff) above;

• an increase of $234 for the reclassification of a portion of MBS’s reported other expense to product development expense to conform to the presentation of the Company’s Statement of Operations. These costs primarily relate to MBS’s product development labor.

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(ii) Represents the following:

•	an increase of $370 to reflect the reclassification of a portion MBS’s reported labor costs to general and administrative expense as stated in footnote (ff) above;
	an increase of $346 to reflect the reclassification of a portion of MBS’s reported other expense to general and administrative expense to conform to the presentation of the Company’s Statement of Operations. These costs primarily relate to MBS’s rent and utilities.

(jj) Represents the following:

• a decrease of $234 for the reclassification of a portion of MBS’s reported other expense to product development expense as stated in footnote (hh) above;

• a decrease of $346 for the reclassification of a portion of MBS’s reported other expense to general and administrative expense as stated in footnote (ii) above.

(kk) Represents the following:

• an increase of $399 to reflect the amortization expense per the Company’s estimated valuation of MBS’s intangible assets. Any adjustment to the valuation of intangible assets could have a material impact on depreciation and amortization expense. A ten percent adjustment to the Company’s estimated valuation of MBS’s intangible assets would have a corresponding impact to amortization expense of approximately $40. A one year reduction to the estimated useful life would have a corresponding impact to amortization expense of approximately $15;

• an increase of $98 for the reclassification of MBS’s reported depreciation expense to depreciation and amortization expense to conform to the presentation of the Company’s Statement of Operations:

• an increase of $11 for the reclassification of MBS’s reported amortization expense to depreciation and amortization expense to conform to the presentation of the Company’s Statement of Operations.

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(ll) Represents a decrease of $98 to reflect the reclassification of MBS’s reported depreciation expense to depreciation and amortization expense as stated in footnote (kk) above.

(mm) Represents a decrease of $11 to reflect the reclassification of MBS’s reported amortization expense to depreciation and amortization expense as stated in footnote (kk) above.

(nn) Represents a decrease of $25 to interest expense to reflect the payoff by the Company of MBS’s indebtness upon closing the acquisition.

(oo) Represents a decrease of $49 to interest income to reflect the use of the Company’s cash and cash equivalents to fund the acquisition on the first day of the period presented.

(pp) Represents an increase to the income tax benefit of $169 for the income tax effect of the pro forma adjustments, recorded at the Company’s statutory tax rate of 40.0%. This rate is not necessarily indicative of the Company’s future effective tax rate.

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