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:

March 4, 2008

(February 13, 2008)

(Date of earliest event reported)

GSI COMMERCE, INC.

(Exact Name of Registrant as Specified in Charter)

Delaware	0-16611	04-2958132
(State or other Jurisdiction of Incorporation)	(Commission File No.)	(IRS Employer Identification No.)

935 First Avenue, King of Prussia, PA 19406

(Address of principal executive offices, including zip code)

(610) 491-7000

(Registrant's telephone number, including area code)

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:

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

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

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

□ 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 the Current Report on Form 8-K amends the Current Report on Form 8-K filed by GSI Commerce, Inc. ("GSI") on February 19, 2008, which disclosed the completion, on February 13, 2008, of GSI's acquisition of E-Dialog, Inc. ("E-Dialog").  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 Business Acquired

(i) The audited consolidated balance sheet of E-Dialog as of December 31, 2006, and the related consolidated statements of operations and cash flows, together with the report of independent auditor thereto, are included as Exhibit 99.2 to this report and incorporated by reference herein.

(ii) The unaudited consolidated balance sheets of E-Dialog as of September 30, 2006 and September 30, 2007 and the related consolidated statements of operations and cash flows for the nine-month periods ended September 30, 2006 and September 30, 2007 are included as Exhibit 99.3 to this report and incorporated by reference herein.

(b)  Pro Forma Financial Information

GSI's unaudited pro forma condensed consolidated balance sheet as of September 29, 2007, and pro forma condensed consolidated statements of operations for the fiscal year ended December 30, 2006 and the nine-month period ended September 29, 2007 are included as Exhibit 99.4 to this report and incorporated by reference herein.

(d) Exhibits

23.1	Consent of Independent Auditors of E-Dialog, Inc.
99.1*	Press Release issued by GSI Commerce, Inc., dated February 13, 2008
99.2	Audited Consolidated Financial Statements of E-Dialog, Inc. for the year ended December 31, 2006
99.3	Unaudited Consolidated Financial Statements of E-Dialog, Inc. as of September 30, 2006 and 2007 and for the nine months ended September 30, 2006 and 2007
99.4	Unaudited Pro Forma Consolidated Financial Information of GSI Commerce, Inc.

* Previously filed with GSI's Current Report on Form 8-K as filed with the U.S. Securities and Exchange Commission on February 19, 2008, and hereby incorporated by reference herein.

2

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.

Date:  March 4, 2008	GSI COMMERCE, INC.
	By:	/s/ Arthur H. Miller
		Name:	Arthur H. Miller
		Title:	Executive Vice President and Secretary

EXHIBIT INDEX

Exhibit	Description
23.1	Consent of Independent Auditors of E-Dialog, Inc.
99.1*	Press Release issued by GSI Commerce, Inc., dated February 13, 2008
99.2	Audited Consolidated Financial Statements of E-Dialog, Inc. for the year ended December 31, 2006
99.3	Unaudited Consolidated Financial Statements of E-Dialog, Inc. as of September 30, 2006 and 2007 and for the nine months ended September 30, 2006 and 2007
99.4	Unaudited Pro Forma Consolidated Financial Information of GSI Commerce, Inc.

* Previously filed with GSI's Current Report on Form 8-K as filed with the U.S. Securities and Exchange Commission on February 19, 2008, and hereby incorporated by reference herein.

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT AUDITORS

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-49363,  333-53982, 333-54062, 333-54060, 333-65694, 333-109043, 333-122186, 333-132523, 333-132526, 333-65694, 333-122186, 333-109043, and 333-145923) and on Form S-3 (No. 333-145921) of GSI Commerce, Inc. of our report dated July 2, 2007 relating to the financial statements of e-Dialog, Inc. which appears in this Current Report on Form 8-K/A of GSI Commerce, Inc.

               /s/ Ernst & Young LLP

Boston, Massachusetts

February 28, 2008

EX-99.2

Exhibit 99.2

Consolidated Financial Statements

e-Dialog, Inc.

Year Ended December 31, 2006

With Report of Independent Auditors

e-Dialog, Inc.

Consolidated Financial Statements

Year Ended December 31, 2006

Contents

Audited Consolidated Financial Statements

Report of Independent Auditors	1
Consolidated Balance Sheet	2
Consolidated Statement of Operations	3
Consolidated Statement of Stockholders’ Equity	4
Consolidated Statement of Cash Flows	5
Notes to Consolidated Financial Statements	6

§Ernst & Young LLP 200 Clarendon Street Boston, Massachusetts  02116-5072   §Phone:  (617) 266-2000  Fax:      (617) 266-5843 www.ey.com

Report of Independent Auditors

The Board of Directors and Stockholders

e-Dialog, Inc.

We have audited the accompanying consolidated balance sheet of e-Dialog, Inc. (a Delaware corporation) as of December 31, 2006, and the related consolidated statements of operations, stockholders’ 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 audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included 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, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2006, and the consolidated results of their operations and their cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 2 to the financial statements, on January 1, 2006, the Company adopted the provisions of Statement of Financial Accounting Standards No.123(R), Share-Based Payment, under the prospective method which requires the Company to recognize expense related to the fair value of share-based compensation awards issued or modified subsequent to December 31, 2005. As discussed in Note 6 to the financial statements, on January 1, 2006, the Company adopted the provisions of Financial Accounting Standards Board Staff Position FAS 150-5, Issuer’s Accounting Under FASB Statement No. 150 for Freestanding Warrants and Other Similar Instruments on Shares That Are Redeemable, pursuant to which the Company recorded a cumulative effect adjustment to net income for the year ended December 31, 2006.

July 2, 2007

A member firm of Ernst & Young Global Limited

1

e-Dialog, Inc.

Consolidated Balance Sheet

December 31, 2006

Assets
Current assets:
Cash and cash equivalents	$	852,515
Restricted cash		–
Accounts receivable, net of allowance for doubtful accounts of $89,169 as of December 31, 2006		5,504,906
Prepaid expenses		460,305
Total current assets		6,817,726
Property and equipment:
Computer software and hardware		4,059,562
Furniture and fixtures		325,718
Leasehold improvements		152,864
		4,538,144
Less accumulated depreciation		(2,673,128	)
		1,865,016
Other assets		257,421
	$	8,940,163
Liabilities and stockholders’ equity
Current liabilities:
Capital leases – current portion	$	710,431
Line of credit		–
Accounts payable		377,979
Accrued expenses and other current liabilities		1,598,963
Deferred revenue		19,607
Total current liabilities		2,706,980
Commitments (Note 3)
Long-term liabilities:
Capital lease – long-term portion		460,280
Series C redeemable preferred stock warrants (Note 6)		16,907
Other long-term liabilities		216,160
Total long-term liabilities		693,347
Stockholders’ equity:
Series A redeemable convertible preferred stock, at liquidation and redemption value:
Authorized, issued and outstanding – 7,805,556 shares		7,025,000
Series B redeemable convertible preferred stock, at liquidation and redemption value:
Authorized, issued and outstanding – 10,500,000 shares		10,500,000
Series C redeemable convertible preferred stock, at liquidation and redemption value:
Authorized, issued and outstanding – 3,389,831 shares		2,000,000
Series C-1 redeemable convertible preferred stock, 1,800,000 shares authorized,
no shares issued and outstanding		–
Common stock, $0.01 par value:
Authorized – 50,000,000 shares, issued and outstanding –10,751,838
shares as of December 31, 2006		107,516
Additional paid-in capital		188,631
Less: Treasury Stock at cost, 1,921,600 shares		(138,284	)
Accumulated deficit		(14,143,027	)
Total stockholders’ equity		5,539,836
	$	8,940,163

See accompanying notes.

2

e-Dialog, Inc.

Consolidated Statement of Operations

Year Ended December 31, 2006

Net revenues	$	23,995,102
Cost of revenues		10,125,339
Gross profit		13,869,763
Operating expenses:
Sales and marketing		3,130,338
Research and development		3,599,707
General and administrative		4,387,838
Stock-based compensation		27,258
Total operating expenses		11,145,141
Income from operations		2,724,622
Other expenses:
Interest expense		(128,916	)
Foreign currency exchange loss		(99,729	)
Total other expenses		(228,645	)
Income before income taxes and cumulative effect of a change in accounting principle		2,495,977
Provision for income taxes		86,360
Income before cummulative effect of a change in accounting principle		2,409,617
Cumulative effect of a change in accounting principle (Note 6)		(16,907	)
Net income	$	2,392,710

See accompanying notes.

3

e-Dialog, Inc.

Consolidated Statement of Stockholders’ Equity

Series A Redeemable Convertible Preferred Stock

Series B Redeemable Convertible Preferred Stock

Series C Redeemable Convertible Preferred Stock

Common Stock

Additional

Treasury Stock

Total

Number of Shares

Liquidation Value

Number of Shares

Liquidation Value

Number of Shares

Liquidation Value

Number of Shares

Par Value

Paid-in Capital

Number of Shares

Amount

Accumulated Deficit

Stockholders’ Equity

Balance at December 31, 2005

7,805,556

7,025,000

10,500,000

10,500,000

3,389,831

2,000,000

10,292,121

102,919

96,305

–

–

(16,535,737)

3,188,487

–

–

Exercise of common stock options

–

–

–

–

–

–

92,822

928

4,199

–

–

–

5,127

Forfeiture of restricted common stock

–

–

–

–

–

–

(73,105)

(731)

(731)

–

–

–

(1,462)

Purchase of treasury stock

–

–

–

–

–

–

–

–

–

1,921,600

(138,284)

–

(138,284)

Common stock issued in connection with acquisition of Adinfonitum, Inc.

–

–

–

–

–

–

440,000

4,400

61,600

–

–

–

66,000

Stock-based  compensation

–

–

–

–

–

–

–

–

27,258

–

–

–

27,258

Net income

–

–

–

–

–

–

–

–

–

–

–

2,392,710

2,392,710

Balance at December 31, 2006

7,805,556

$7,025,000

10,500,000

$10,500,000

3,389,831

$2,000,000

10,751,838

$107,516

$188,631

1,921,600

$(138,284)

$(14,143,027)

$5,539,836

See accompanying notes.

4

e-Dialog, Inc.

Consolidated Statement of Cash Flows

Year Ended December 31, 2006

Operating activities
Net income	$	2,392,710
Adjustments to reconcile net income to net cash provided by Operating activities:
Cumulative effect of a change in accounting principle		16,907
Depreciation and amortization		1,083,450
Stock-based compensation		27,258
Amortization of lease concession		(162,120	)
Changes in assets and liabilities, net of acquisition:
Accounts receivable		(1,711,965	)
Prepaid expenses and other assets		230,879
Accounts payable		(448,961	)
Accrued expenses and other current liabilities		332,404
Deferred revenue		(346,983	)
Net cash provided by operating activities		1,413,579
Investing activities
Purchases of property and equipment		(723,579	)
Decrease in restricted cash		173,362
Increase in other assets		(22,255	)
Net cash used in investing activities		(572,472	)
Financing activities
Proceeds from exercise of common stock options		5,127
Forfeiture of restricted stock		(1,462	)
Repurchase of common stock		(138,284	)
Proceeds from line of credit		(300,000	)
Repayments of capital leases		(739,271	)
Net cash used in financing activities		(1,173,890	)
Net decrease in cash and cash equivalents		(332,783	)
Cash and cash equivalents at beginning of year		1,185,298
Cash and cash equivalents at end of year	$	852,515
Supplemental disclosure of cash flow information
Cash paid for interest	$	108,316
Non-cash investing and financing activities
Common stock issued for acquisition of Adinfonitum, Inc.	$	66,000
Assets acquired under capital leases	$	–

See accompanying notes.

5

e-Dialog, Inc.

Notes to Consolidated Financial Statements

December 31, 2006

1. Nature of Business and Basis of Presentation

e-Dialog, Inc. (the Company) provides precision marketing services. Services provided include strategic planning, implementation, and analysis of e-mail marketing programs. The Company is subject to a number of risks common to rapidly growing technology-based companies, including rapid technological changes, competition from substitute products and larger companies, and the need to successfully develop and market its commercial products and services. Based upon the Company’s current business plan, and its cash and cash equivalents on hand at December 31, 2006, the Company believes it has the ability to finance its operations through the end of 2007.

2. Summary of Significant Accounting Policies

The accompanying financial statements reflect the application of certain significant accounting policies described in this note and elsewhere in the accompanying notes to financial statements.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, E-Dialog UK, Ltd. All significant intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles 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.

Cash and Cash Equivalents

The Company considers highly liquid investments purchased with an original maturity of 90 days or less at the time of purchase to be cash equivalents. Investments with maturity dates in excess of three months at the time of purchase, but within one year of the balance sheet date, are considered short-term investments. Cash equivalents consisted mainly of money market accounts as of December 31, 2006. Restricted cash as of December 31, 2006 consists of certificates of deposit collateralizing rental deposits.

6

e-Dialog, Inc.

Notes to Consolidated Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Property and Equipment

Property and equipment are stated at cost, and are depreciated by the straight-line method with a half-year convention at rates that are intended to depreciate the cost of these assets over their estimated useful lives as follows:

Asset Classification	Useful Life
Computer software and hardware	3-4 years
Furniture and fixtures	5 years
Leasehold improvements	Life of lease

Financial Instruments

The estimated fair value of the Company’s financial instruments, which include cash and cash equivalents, accounts receivable, line of credit, and capital leases, approximates their carrying value due to the short-term nature of these instruments.

Foreign CurrencyTranslation

The accounts of e-Dialog UK, Ltd. are translated in accordance with Statements of Financial Accounting Standards (SFAS) No. 52, Foreign Currency Translation. The functional currency of e-Dialog UK, Ltd. is the U.S. dollar and, accordingly, translation gains and losses are reflected in the consolidated statements of operations. Revenue and expense accounts were translated using the weighted-average exchange rate in effect during the period. Balance sheet accounts were translated using current and historical exchange rates, as appropriate. Foreign currency transaction gains or losses are also reflected in the consolidated statements of operations in other expenses. e-Dialog UK, Ltd. had a foreign currency exchange loss of $99,729 for the year ended December 31, 2006.

Income Taxes

The Company provides for taxes in accordance with Financial Accounting Standards Board (FASB) SFAS No. 109, Accounting for Income Taxes. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities, and are measured using the enacted rates and laws that will be in effect when the differences are expected to be reversed.

7

e-Dialog, Inc.

Notes to Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Revenue Recognition

The Company applies Staff Accounting Bulletin (SAB) 104, Revenue Recognition,and recognizes revenue when persuasive evidence of an arrangement exists, the service has been delivered, the fee is fixed and determinable, and collection of the resulting receivable is reasonably assured.

The Company generates revenue from the sale of services, such as design and execution of Internet direct marketing or e-marketing campaigns. Revenue is recognized under these arrangements upon completion of the campaign.  For any multi-element arrangement, revenue is recognized once all elements of the arrangement have been delivered, as the Company does not have fair value for each separate element per EITF 00-21. The Company also enters into contractual arrangements to provide a number of e-mail campaigns for a related fee. Revenue is recognized based on completion of campaigns.

In addition, the Company generates revenue through the rental of lists of e-mail addresses and digital printing. The Company records revenue on the rental of lists and digital printing on a net basis which represents the difference between the purchase price paid for the service and sales price of the service in accordance with Emerging Issues Task Force (EITF) Issue No. 99-19, Reporting Revenue Gross as a Principal Versus Net as an Agent.

Cost of Revenue

Cost of revenue includes payroll of the personnel involved in design and execution of Internet direct marketing or e-marketing campaigns.

Research and Development Costs

Research and development costs have been charged to operations as incurred.

Stock-Based Compensation

In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment, or SFAS No. 123(R).  SFAS No. 123(R) addresses the accounting for transactionsin which an enterprise receives employee services in exchange for (a) equity instrumentsof the enterprise or (b) liabilities that are based on the fair value of the enterprise’s equity instruments or that may be settled by the issuance of such equity instruments. SFAS No. 123(R) supersedes APB Opinion No. 25 and requires that such transactions be accounted for using a fair value-based method. SFAS No. 123(R) requires companies to recognize an expense for compensation cost related to share-based payment arrangements, including stock options and employee stock purchase plans.

8

e-Dialog, Inc.

Notes to Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Until December 31, 2005, as permitted by SFAS No. 123, the Company accounted for share-based payments to employees using APB Opinion No. 25’s minimum value method and, as such, generally recognized no compensation cost for employee stock options.

On January 1, 2006, the Company adopted SFAS No. 123(R) on a prospective transition basis as permissible under the standard. The Company granted 92,822 options in fiscal 2006 and established fair value of these awards using the Black-Scholes valuation model. The awards granted in 2006 are service-based awards and expense will be recognized ratably over the four year service period. The fair value of incentive stock options granted in 2006 was $186,413, and the Company recorded compensation expense of $27,258. The remaining amount will be expensed over four years.Cash flows for fiscal year 2006 were not impacted by the adoption.

The weighted-average fair value per share of options granted was $0.10 in 2006, respectively. The fair value of each option grant was estimated on the grant date using the following weighted-average assumptions.

	2006
Volatility	70%
Risk-free interest rate	4.36%-5.07%
Expected life of options	6.25 years
Dividend yield	–

As there is no public market for the Company’s common stock, the volatility for options granted in 2006 has been determined based on the analysis of reported data for a peer group of companies that issued options with substantially similar terms.  The expected life of options has been determined utilizing the “simplified” method as prescribed by the SEC’s Staff Accounting Bulletin No. 107, Share-Based Payment.  The risk-free interest rate is based on a zero coupon United States Treasury instrument whose term is consistent with the expected life of the stock options.  The Company has not paid, and does not anticipate paying, cashdividends on its shares of common stock; therefore, the expected divided yield is assumed to be zero.  SFAS No. 123(R) requires companies to utilize an estimated forfeiture when calculating the expense for the period. As a result, the Company estimated forfeitures based upon a history of grants, exercises, terminations for the period 1998 through early 2007, for both officers and non-officers, the corresponding forfeiture ratesbeing 24% and 30%, respectively. These percentages were applied to the 2006 Black-Scholes valuation model, being the Company’s best estimate of future forfeitures.

9

e-Dialog, Inc.

Notes to Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Comprehensive Income

Comprehensive income represents net income plus the change in equity of a business enterprise resulting from transactions and circumstances from non-owner sources. The Company’s comprehensive income equaled net income for the year ended December 31, 2006.

Concentration of Credit Risk

Financial instruments that subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents, and accounts receivable. The Company’s cash and cash equivalents are held at accredited financial institutions. For the Company’s accounts receivable, the Company performs ongoing credit evaluations of its customers’ financial condition, but does not require collateral. The Company continuously monitors collections from customers and maintains a provision for estimated credit losses based upon historical experience and any specific customer collections issues that the Company has identified. Historically, the Company has not experienced significant losses related to its accounts receivable. If the financial condition of its customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

The Company had no customers that represented greater than 10% of net revenues for the year ended December 31, 2006. The Company had one customer that represented 11% of total accounts receivable as of December 31, 2006.

Recent Accounting Pronouncements

In June 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109 (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109, Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The adoption of FIN 48 is not expected to have a material impact on the Company’s financial condition, results of operations, or liquidity.

10

e-Dialog, Inc.

Notes to Financial Statements (continued)

3. Commitments

The Company leases its facility under an operating lease that expires in 2009. The Company also leases various equipment under capital leases that expire through 2009. Future minimum lease payments under noncancelable operating leases, and the present value of future minimum lease payments under capital leases as of December 31, 2006 are as follows:

	Capital Leases			Operating Leases
Years Ended December 31,
2007	$	744,507		$	581,168
2008		410,929			611,409
2009		70,538			243,562
2010		–			42,070
2011		–			43,332
Total minimum lease payments		1,225,974		$	1,521,541
Less amount representing interest		(55,263	)
Present value of future minimum
lease payments		1,170,711
Less current installments of obligations
under capital leases		(710,431	)
Obligation under capital leases, excluding current portion	$	460,280

The Company maintains capital lease agreements with several different lending institutions. In October 2005, the Company entered into a master lease agreement with a bank to provide up to $2,000,000 of growth capital financing. Under the terms of the agreement, the Company may draw down against the line at any time through September 1, 2007, with no minimum. The master lease agreement requires the Company to maintain a certain financial covenant, which the Company was in compliance with at December 31, 2006.

In August 2004, the Company entered into a master lease agreement with a venture debt lender to provide up to $750,000 of growth capital financing, which is included in the total obligations under capital leases. The master lease agreement does not require the Company to maintain covenants. In connection with the lease agreement, the Company issued warrants to the lender to purchase up to 44,491 shares of the Company’s Series C-1 preferred stock at $0.59 per share. The fair value of the warrants was deemed to be immaterial at the date of issuance.

11

e-Dialog, Inc.

Notes to Financial Statements (continued)

3. Commitments (continued)

At December 31, 2006, assets under capital leases was approximately $2,529,000 and. Accumulated amortization of leased assets at December 31, 2006 was approximately $1,541,803.

In June 2005, the Company executed an addendum to its facilities lease, which included an increase in space of 13,644 square feet. This addendum was executed for a period of 46 months, which is co-terminus with the existing facilities lease that will terminate in April 2009.

In May 2004, the Company executed an addendum to its facilities lease, which included a reduction in space and resulted in the release of the Company from total unpaid rent of approximately $810,600 at that date, in exchange for a cash payment of $100,000 and an extension of the time period of that lease until April 2009. The leasing concession totaling $810,600 is being amortized ratably over the remaining term of the lease. For the year ended December 31, 2006, the Company recorded $162,120, as an offset to rental expense related to this amortization. The current portion of the deferred charge totals $162,120 and is included in accrued expenses and other current liabilities at December 31, 2006. The remaining portion of $216,160 is included in other long-term liabilities as of December 31, 2006.

Rental expense under the Company’s operating leases for 2006 was $504,753.

4. Financing Arrangement

In October 2005, the Company entered into an agreement for a revolving line of creditwith a bank that provides up to $2,000,000 to finance operations. The line of credit is available to the Company through September 1, 2007 and can be renewed on annual go-forward basis from that date. Borrowings bear interest at the bank’s prime rate less 0.5%. Borrowings are secured by equipment, inventory and accounts receivable of the Company. The agreement requires the Company to maintain certain financial covenants, which the Company was in compliance with at December 31, 2006.There were no borrowings outstanding as of December 31, 2006.

5. Income Taxes

As of December 31, 2006, the Company had net operating loss carryforwards of approximately $11,210,464 available to reduce future federal and state income taxes, if any. If not utilized, these carryforwards will begin to expire at various dates through 2023. If substantial changes in the Company’s ownership were to occur, as defined by Section 382 of the Internal Revenue Code, there could be annual limitations on the amount of carryforwards that can be utilized in future periods.

12

e-Dialog, Inc.

Notes to Financial Statements (continued)

5. Income Taxes (continued)

The Company also has research and development credits of approximately $610,831 as of December 31, 2006  to reduce future federal income taxes.

The approximate income tax effects of the temporary differences and carryforwards are as follows:

	2006
Net operating loss carryforwards	$	4,514,454
Research and development credit carryforwards		954,477
Temporary differences		354,547
Gross deferred tax asset		5,823,478
Valuation allowance		(5,823,478	)
Net deferred tax asset	$	–

The provision for income taxes consisted of the following:

	2006
Current:
Federal (including Alternative Minimum Tax)	$	32,359
Foreign		54,001
		86,360
Deferred:
Federal		–
Foreign		–
		–
Income tax expense	$	86,360

During 2006, the Company utilized a part of its net operating loss carryforwards to offset the majority of its federal and state tax liability. The Company has recorded a full valuation allowance against its remaining gross deferred tax assets as of December 31, 2006, because the future realizability of such assets is uncertain.

13

e-Dialog, Inc.

Notes to Financial Statements (continued)

6. Stockholders’ Equity

Redeemable Convertible Preferred Stock

The rights and preferences of the Series A, B, C, and C-1 preferred stock are as follows:

Voting

Series A, B, and C preferred stockholders are entitled to vote with the shares of the Company’s voting common stock at any annual or special meeting, and are entitled to the number of votes equal to the number of shares of common stock into which each share of preferred stock is then convertible. All matters impacting the terms of Series A, B, and C preferred stockholders must be approved by a majority of the preferred stockholders. The holders of Series C-1 preferred stock have no voting rights.

Dividends

Series A, B, C, and C-1 preferred stockholders are entitled to participate in all dividends (other than stock dividends in the nature of a stock split or the like) that are declared and paid on common stock on the same basis as if all of the shares of Series A, B, C, and C-1 held by such holders had been converted to common stock.

Liquidation Rights

Upon any liquidation, dissolution, or winding-up of the Company, whether voluntary or involuntary, before any distribution of payments is made to common shareholders, the holders of Series A, B, C, and C-1 preferred stock are entitled to be paid an amount equal to $0.90, $1.00, $0.59, and $0.59, respectively (subject to appropriate adjustment for any stock splits, stock dividends, reclassifications and the like with respect to such series of preferred stock) plus any declared or unpaid dividends to which such holder is entitled. Any net assets remaining after payment of such preferential amount to the holders of preferred stock will be shared ratably by the holders of preferred stock and common stock, provided that such amounts shall not exceed $5.40, $6.00, $3.54, and $3.54 per share of the Series A, B, C, and C-1 preferred stock, respectively.

Conversion

At any time, any holder of Series A, B, C, and C-1 shall have the right, at its option, to convert all or a portion of the preferred stock held by such holder into a number of shares of fully paid and non-assessable common stock computed by dividing the purchase price of preferred stock by the conversion price in effect on the conversion date. The initial conversion price shall be the purchase price, which may be adjusted from time to time based on consideration received for the issuance of securities in the future. In addition, each share of preferred stock will

14

e-Dialog, Inc.

Notes to Financial Statements (continued)

6. Stockholders’ Equity (continued)

automatically convert into fully paid and non-assessable shares of common stock upon the consummation of (1) a public offering with the approval of the conversion by the requisite percentage (greater than 50%) of preferred stock outstanding at the time of the approval or (ii) upon the completion of a public stock offering involving aggregate gross proceeds of at least $20,000,000 at a price per share of not less than $5.00, subject to certain adjustments.

Redemption

The Series A, B, C, and C-1 are redeemable in whole, at the option of the holders of the requisite percentage (greater than 50%) of preferred stock, commencing on January 2, 2009. The redemption price for each share of Series A preferred stock shall be cash in an amount equal to the greater of (i) the preferred stock preference amount on the date the redemption is completed or (ii) the fair market value of the preferred stock as of the date of the redemption notice. The redemption price for each share of Series B, C, and C-1 stock shall be cash in the amount equal to the fair value of preferred stock as of the date of redemption notice. Series B and Series C stock fair value is equal to the preference amount plus the residual distribution amount.

The Company may elect to redeem the preferred stock in three equal installments; the first installment shall be payable on the determination date and the balance shall be due and payable on the first and second anniversary dates of the determination date. In the event of such election, the installments not paid on the determination date shall bear interest at the prime rate plus 2%.

Series A and Series B Conversion Price

As a result of the Series C financing round, the conversion price for Series A preferred stock and Series B preferred stock was revised based on the anti-dilution provisions of the Series A and Series B preferred stock. The revised conversion price for Series A and Series B preferred stock is $0.83 and $0.59 per share, respectively.

In accordance with the provisions of EITF Issue No. 00-27, Application of Issue No. 98-5 to Certain Convertible Instruments, the Company is required to recognize the beneficial conversion feature based on the incremental intrinsic value, which is calculated using the number of additional shares to be issued upon conversion multiplied by the price of the common stock on the issuance date of the Series C preferred stock. These provisions are only applicable to securities issued subsequent to November 16, 2000; therefore, the Company has only calculated the impact on Series B preferred stock. The value of the beneficial conversion feature is approximately $643,000, and has been recognized ratably through the original redemption date of the Series B preferred stock.

15

e-Dialog, Inc.

Notes to Financial Statements (continued)

6. Stockholders’ Equity (continued)

Management Bonus Plan

Concurrent with the Series C financing, and in accordance with the amended and restated stockholders’ agreement, the Company has agreed to adopt for the benefit of certain of its key employees a Cash Incentive Plan whereby upon any consolidation, reorganization or merger (as further defined) employees would receive an aggregate amount of the sum of 5% of the first $10,000,000 of liquidation preference and 20% of the next $10,000,000 of Liquidation Preference payable to the Company’s stockholders but in no event to exceed $2,500,000. In case of the liquidation event or change in control, such amount will be paid on a pari passu basis with the liquidation preference.

Deferred Stock Plan

On December 19, 2001, the Board and stockholders of the Company authorized the creation of a new incentive for certain employees by adopting the e-Dialog Deferred Stock Plan (the Plan), and authorizing the issuance of restricted shares of a new series of preferred stock of the Company pursuant to the Amended Stock Plan (the Restricted Stock Grants). Under the terms of the Plan, certain employees of the Company will be eligible, on a quarterly basis, to receive allocations of rights to obtain shares of the Company’s new Series C-1 preferred stock. For the year ended December 31, 2006, no shares were allotted or issued. As of December 31, 2006, 624,482 shares were allocated to the preferred stock bonus account and remain unissued.

Stock Options

The Company’s 1998 Stock Option Plan (the 1998 Plan) provides for the grant of incentive stock options and nonqualified stock options. The Board has the authority to select the employees and non-employees to whom options are granted, and determine the terms of each option, including (1) the number of shares of common stock subject to the option; (ii) when the option becomes exercisable; (iii) the option exercise price, which, in the case of incentive stock options, must be at least 100% (110% in the case of incentive stock options granted to a stockholder owning in excess of 10% of the Company’s common stock) of the fair market value of the common stock as of the date of grant; and (iv) the duration of the option, which, in the case of incentive stock options, may not exceed ten years (five years in the case of an incentive option granted to a stockholder owning in excess of 10% of the Company’s common stock). Options granted under the 1998 Plan vest monthly over a four-year period, following a one-year cliff vesting provision. On May 12, 2005, an additional 2,000,000 common, non-voting shares were authorized and added to the option pool. As of December 31, 2006, there were 2,494,283 available for grant under the 1998 Plan.

16

e-Dialog, Inc.

Notes to Financial Statements (continued)

6. Stockholders’ Equity (continued)

In June 2005, employees were allowed to convert eligible stock options into restricted shares of the Company’s voting common stock on the basis of one share of restricted stock for each share subject to an option held by an employee.The restricted common shares carry voting rights, and contain a buy-back provision which allows the Company the first right to repurchase the stock upon the employees termination at the original issuance price. As a result, 5,651,704 options were cancelled and the related amounts of restrictedcommon stock were issued.

A summary of the activity under the 1998 Option Plan is as follows:

	Number of Options			Weighted- Average Price
Outstanding at December 31, 2005		1,255,840			0.03
Granted		2,498,748			0.15
Exercised		(92,822	)		0.06
Canceled		(289,289	)		0.06
Outstanding at December 31, 2006		3,372,477		$	0.11
Exercisable at December 31, 2006		449,030		$	0.05

The weighted-average remaining contractual lives for options outstanding at December 31, 2006 is approximately 8.66.

The following table summarizes information relating to currently outstanding and exercisable stock options as of December 31, 2006:

Exercise Price	Number of Shares Outstanding	Weighted- Average Remaining Contractual Life (Years)	Number of Shares Exercisable
$0.02	908,645	8.28	358,739
0.09	59,582	5.59	66,239
0.15	2,404,250	9.46	24,052
	3,372,477		449,030

17

e-Dialog, Inc.

Notes to Financial Statements (continued)

7.  Warrants

All warrant activity for the year ended December 31, 2006, is as follows:

	Number of Warrants	Warrant Exercise Price	Weighted- Average Warrant Exercise Price
Outstanding and exercisable,  December 31, 2006	44,491	$0.59	$0.59

Each warrant granted is exchangeable for one share of the Company’s C-1 preferred stock. The Company accounted for warrants at the time of issuance in accordance with EITF 96-18 at the fair value of the warrants. The warrants expire in August 2011. These warrants provide for net share settlement under which the maximum number of shares that could be issued represents the total amount of shares under the warrant agreements. The Company had previously determined in accordance with EITF 00-19, that these warrants be properly classified as permanent equity. The Company has reserved 44,491 shares of Series C-1preferred stock for the exercise of these warrants. On January 1, 2006, the Company adopted FASB Staff Position FAS 150-5 (FSP FAS 150-5), Issuer’s Accounting Under FASB Statement No. 150 for Freestanding Warrants and Other Similar Instruments on Shares That Are Redeemable, and upon adoption, the warrants to purchase redeemable preferred stock were required to be reclassified to liabilities as of January 1, 2006. The difference between original valuation of the warrants upon their issuance and their fair value at January 1, 2006 (FSP 150-5 adoption date) of $16,907 has been recorded as a cumulative effect type adjustment. The change in the fair value of the warrants subsequent to adoption was not material.

8.  Acquisition

On April 7, 2006, the Company acquired all the outstanding shares of Adinfonitum, Inc, a full-service interactive marketing agency with headquarters in Bellevue, Washington. The acquisition extends the Company’s strategic marketing service capabilities while broadening the Company’s client base to include several west coast based clients including a large airline based in the Northwest. As part of the purchase agreement, the Company assumed all assets and certain liabilities in exchange for 440,000 shares of the Company’s common stock, the total consideration being $290,862.

18

e-Dialog, Inc.

Notes to Financial Statements (continued)

8. Acquisition (continued)

The following represents the allocation of the purchase price:

Cash	$	24,818
Accounts receivable		40,725
Identified intangibles – customer lists		186,898
Fixed assets		26,539
Prepaid/deposits		11,882
Purchase price	$	290,862

The identifiable intangible asset is being amortized over the estimated useful life of four years, as it relates to customer relationships. Amortization expense for the year ended December 31, 2006 was $38,937.

9. Subsequent event (unaudited)

On February 13, 2008, GSI Commerce, Inc.  (“GSI”) completed the acquisition of the Company.  Pursuant to an Agreement and Plan of Merger dated as of January 23, 2008 among GSI, Dolphin Acquisition Corporation (“Newco”), a wholly-owned subsidiary of GSI, the Company, and the stockholders’ representative, Newco merged with the Company and the Company survived the merger as a wholly-owned subsidiary of GSI.

 19

EX-99.3

Exhibit 99.3

e-Dialog, Inc.
Consolidated Balance Sheets (Unaudited)
September 30, 2007 and 2006
	2007			2006
Assets
Current Assets:
Cash and cash equivalents	$	1,384,497		$	840,234
Accounts receivable, net allowance for doubtful accounts of 88,928  and 39,699, as of September 30, 2007 and 2006, respectively		8,266,682			4,261,335
Prepaids and other current assets		859,805			799,278
Total Current Assets		10,510,984			5,900,847
Fixed Assets:
Computer software and hardware		5,645,415			3,899,714
Furniture and fixtures		332,690			243,102
Leasehold improvements		151,824			151,824
		6,129,929			4,294,640
Less accumulated depreciation		(3,607,289	)		(2,356,217	)
		2,522,640			1,938,423
Other assets		470,488			275,942
Restricted cash		-			151,371
	$	13,504,112		$	8,266,583
Liabilities & Shareholders’Equity
Current Liabilities:
Capital lease obligations	$	447,587		$	764,397
Line of credit		-			350,000
Accounts payable		1,025,296			730,988
Accrued expenses and other current liabilities		2,271,850			1,145,791
Deferred revenue		-			10,558
Total Current Liabilities		3,744,733			3,001,734
Long-Term Liabilities:
Capital lease obligations		152,264			588,732
Series C redeemable preferred stock warrants		16,907			16,907
Other long-term liabilities		94,570			256,690
Total Long-term Liabilities		263,741			862,329
Shareholders' Equity
Preferred stock		19,525,000			19,525,000
Common stock		91,546			106,042
Additional paid-in capital		122,190			36,686
Accumulated deficit		(10,243,098	)		(15,265,208	)
Total Shareholders' Equity		9,495,638			4,402,520
	$	13,504,112		$	8,266,583

See notes to consolidated unaudited financial statements

e-Dialog, Inc.
Consolidated Statements of Operations (Unaudited)
Nine Months Ended September 30, 2007 and 2006
		2007	2006
Revenue	$	26,483,854	$   16,580,357
Cost of revenues		10,992,081	7,011,577
Gross profit		15,491,773	9,568,780
Operating Expenses:
Sales & marketing		3,068,593	2,207,001
Research & development		3,747,929	2,618,576
General and administrative		4,760,445	3,308,907
Stock-based compensation		51,298	13,108
Total operating expenses		11,628,265	8,147,592
Income from operations		3,863,508	1,421,188
Other income/(expenses):
Other expenses		(2,756)	(96,378)
Foreign exchange gain/(loss)		34,716	(37,374)
Total other income (expenses)		31,960	(133,752)
Income before income taxes and cumulative effect of a change in accounting principle		3,895,468	1,287,436
Provision for income taxes		-	-
Income before cumulative effect of a change in accounting principle		3,895,468	1,287,436
Cumulative effect of a change in accounting principle		-	16,907
Net Income	$	3,895,468	$    1,270,529

See notes to consolidated unaudited financial statements

e-Dialog, Inc.
Consolidated Statements of Cash Flows (Unaudited)
Nine months ended September 30, 2007 and 2006
	2007			2006
Operating activities:
Net income	$	3,895,468		$	1,270,529
Adjustments to reconcile net income to net cash provided by Operating activities:
Depreciation and amortization		934,161			766,539
Cumulative effect of change in accounting principle		-			16,907
Amortization of lease concession		(138,497	)		(138,497	)
Changes in assets and liabilities:
Accounts receivable		(2,761,775	)		(509,119	)
Prepaid expenses and other assets		(399,500	)		(273,439	)
Accounts payable		647,317			20,558
Accrued expenses and other current liabilities		694,254			(97,207	)
Deferred revenue		(19,607	)		(356,032	)
Net cash provided by operating activities		2,851,821			700,239
Investing activities:
Purchases of property and equipment		(1,591,785	)		(480,075	)
Decrease in restricted cash		-			173,362
Increase in other assets		(213,067	)		(192,148	)
Net cash used in investing activities		(1,804,852	)		(498,861	)
Financing activities:
Proceeds from exercise of common stock options		55,873			(39,589	)
Proceeds from line of credit		-			50,000
Repayments of capital leases		(570,860	)		(556,853	)
Net cash used in financing activities		(514,987	)		(546,442	)
Net increase/(decrease) in cash and cash equivalents		531,982			(345,064	)
Cash and cash equivalents at beginning of year		852,515			1,185,298
Cash and cash equivalents at end of year	$	1,384,497		$	840,234
Supplemental disclosure of cash flow information:
Cash paid for interest	$	96,859		$	41,409
Non-cash investing and financing activities:
Common stock issued for acquisition of Adinfonitum, Inc.		-		$	66,000

See notes to consolidated unaudited financial statements

Notes to consolidated unaudited financial statements

1. Nature of Business and Basis of Presentation

e-Dialog, Inc. (the Company) provides precision marketing services. Services provided include strategic planning, implementation, and analysis of e-mail marketing programs. The Company is subject to a number of risks common to rapidly growing technology-based companies, including rapid technological changes, competition from substitute products and larger companies, and the need to successfully develop and market its commercial products and services.

The balance sheets as of September 30, 2007 and 2006 and the statements of operations and cash flows as of and for the nine months ended September 30, 2007 and 2006 have been presented without audit. In the opinion of the Company’s management, all adjustments (which include normal recurring adjustments) necessary for a fair presentation of financial position, results of operations and cash flows as of and of the nine months ended September 30, 2007 and 2006 have been made.

2. Summary of Significant Accounting Policies

The accompanying financial statements reflect the application of certain significant accounting policies described in this note and elsewhere in the accompanying notes to financial statements.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, E-Dialog UK, Ltd. All significant intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles 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.

Cash and Cash Equivalents

The Company considers highly liquid investments purchased with an original maturity of 90 days or less at the time of purchase to be cash equivalents. Investments with maturity dates in excess of three months at the time of purchase, but within one year of the balance sheet date, are considered short-term investments.

Property and Equipment

Property and equipment are stated at cost, and are depreciated by the straight-line method with a half-year convention at rates that are intended to depreciate the cost of these assets over their estimated useful lives as follows:

Asset Classification	Useful Life
Computer software and hardware	3-4 years
Furniture and fixtures	5 years
Leasehold improvements	Life of lease

Financial Instruments

The estimated fair value of the Company’s financial instruments, which include cash and cash equivalents, accounts receivable, line of credit, and capital leases, approximates their carrying value due to the short-term nature of these instruments.

Foreign Currency Translation

The accounts of e-Dialog UK, Ltd. are translated in accordance with Statements of Financial Accounting Standards (SFAS) No. 52, Foreign Currency Translation. The functional currency of e-Dialog UK, Ltd. is the U.S. dollar and, accordingly, translation gains and losses are reflected in the consolidated statements of operations. Revenue and expense accounts were translated using the weighted-average exchange rate in effect during the period. Balance sheet accounts were translated using current and historical exchange rates, as appropriate. Foreign currency transaction gains or losses are also reflected in the consolidated statements of operations in other income/expenses.

Revenue Recognition

The Company applies Staff Accounting Bulletin (SAB) 104, Revenue Recognition,and recognizes revenue when persuasive evidence of an arrangement exists, the service has been delivered, the fee is fixed and determinable, and collection of the resulting receivable is reasonably assured.

The Company generates revenue from the sale of services, such as design and execution of Internet direct marketing or e-marketing campaigns. Revenue is recognized under these arrangements upon completion of the campaign.  For any multi-element arrangement, revenue is recognized once all elements of the arrangement have been delivered, as the Company does not have fair value for each separate element per Emerging Issues Task Force (EITF) 00-21. The Company also enters into contractual arrangements to provide a number of e-mail campaigns for a related fee. Revenue is recognized based on completion of campaigns.

In addition, the Company generates revenue through the rental of lists of e-mail addresses and digital printing. The Company records revenue on the rental of lists and digital printing on a net basis which represents the difference between the purchase price paid for the service and sales price of the service in accordance with EITF Issue No. 99-19, Reporting Revenue Gross as a Principal Versus Net as an Agent.

Cost of Revenue

Cost of revenue includes payroll of the personnel involved in design and execution of Internet direct marketing or e-marketing campaigns.

Research and Development Costs

Research and development costs have been charged to operations as incurred.

Stock-Based Compensation

In December 2004, the Financial Accounting Standards Board issued SFAS No. 123 (revised 2004), Share-Based Payment, or SFAS No. 123(R). SFAS No. 123(R) addresses the accounting for transactionsin which an enterprise receives employee services in exchange for (a) equity instrumentsof the enterprise or (b) liabilities that are based on the fair value of the enterprise’s equity instruments or that may be settled by the issuance of such equity instruments. SFAS No. 123(R) supersedes Accounting Principles Board (APB) Opinion No. 25 and requires that such transactions be accounted for using a fair value-based method. SFAS No. 123(R) requires companies to recognize an expense for compensation cost related to share-based payment arrangements, including stock options and employee stock purchase plans.

Until December 31, 2005, as permitted by SFAS No. 123, the Company accounted for share-based payments to employees using APB Opinion No. 25’s minimum value method and, as such, generally recognized no compensation cost for employee stock options. On January 1, 2006, the Company adopted SFAS No. 123(R) on a prospective transition basis as permissible under the standard.

Concentration of Credit Risk

Financial instruments that subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents, and accounts receivable. The Company’s cash and cash equivalents are held at accredited financial institutions. For the Company’s accounts receivable, the Company performs ongoing credit evaluations of its customers’ financial condition, but does not require collateral. The Company continuously monitors collections from customers and maintains a provision for estimated credit losses based upon historical experience and any specific customer collections issues that the Company has identified. Historically, the Company has not experienced significant losses related to its accounts receivable. If the financial condition of its customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

3. Acquisition

On April 7, 2006, the Company acquired all assets and certain liabilities of Adinfonitum, Inc, a full-service interactive marketing agency with headquarters in Bellevue, Washington. The acquisition extends the Company’s strategic marketing service capabilities while broadening the Company’s client base to include several west coast based clients including a large airline based in the Northwest. As part of the purchase agreement, the Company issued 440,000 shares of the Company’s common stock, the total consideration being $290,862.

The following represents the allocation of the purchase price:

Cash	$	24,818
Accounts receivable		40,725
Identified intangibles – customer lists		186,898
Fixed assets		26,539
Prepaid/deposits		11,882
Purchase price	$	290,862

The identifiable intangible asset is being amortized over the estimated useful life of four years, as it relates to customer relationships.

4.  Subsequent Event

On February 13, 2008, GSI Commerce, Inc. (“GSI”) completed the acquisition of the Company.  Pursuant to an Agreement and Plan of Merger dated as of January 23, 2008 among GSI, Dolphin Acquisition Corporation (“Newco”), a wholly-owned subsidiary of GSI, the Company, and the stockholders’ representative, Newco merged with the Company and the Company survived the merger as a wholly-owned subsidiary of GSI.

EX-99.4

Exhibit 99.4

Unaudited Pro Forma Combined Financial Statements

On February 13, 2008, GSI Commerce, Inc. (the “Company”) completed the acquisition of e-Dialog, Inc. (“e-Dialog”).  Pursuant to an Agreement and Plan of Merger dated as of January 23, 2008 among the Company, Dolphin Acquisition Corporation (“Newco”), a wholly-owned subsidiary of the Company, e-Dialog and the stockholders’ representative, Newco merged with e-Dialog and e-Dialog survived the merger as a wholly-owned subsidiary of the Company.  The accompanying unaudited pro forma combined financial statements give pro forma effect to the Company’s acquisition of e-Dialog using the purchase method of accounting assuming a cash purchase price of approximately $149.2 million including acquisition costs of $1.5 million.  In addition, the Company will be obligated to make an additional cash payment of $0.75 million in fiscal 2009 if e-Dialog achieves minimum net revenue targets in fiscal 2008.  In connection with the acquisition, the Company issued approximately $9.3 million of restricted common stock units to certain employees of e-Dialog based on the market price of the Company’s common stock on the closing date.   Recipients are required to remain employed for specified periods of time subsequent to the acquisition in order to vest in the stock units.  The $9.3 million will be recognized as compensation cost, net of estimated forfeitures, over the required service period.

The following unaudited pro forma combined financial statements were prepared using the historical consolidated financial statements of the Company and e-Dialog. This information should be read in conjunction with, and is qualified in its entirety, by the consolidated financial statements and accompanying notes of the Company and e-Dialog incorporated by reference into this current report.

The pro forma adjustments related to the acquisition 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 e-Dialog, as the process to assign a fair value to the various tangible and intangible assets acquired, including goodwill, has only just commenced. Final adjustments could result in a materially different purchase price and/or allocation of the purchase price, which will affect the value assigned to the tangible or intangible assets and amount of depreciation and amortization expense recorded in the consolidated statements of operations. The effect of the changes to the consolidated statements of operations will depend on the final purchase price and the nature and amount of the final purchase price allocation and could be material.

The pro forma financials do not reflect potential revenue opportunities and cost savings that we expect to realize after the acquisition of e-Dialog.  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 acquisition of e-Dialog.  The pro forma financial information also does not reflect non-recurring charges related to integration activity or exit costs that may be incurred by the Company or e-Dialog in connection with the acquisition of e-Dialog.

The accompanying unaudited pro forma combined balance sheet assumes that the acquisition of e-Dialog took place on September 29, 2007 and combines the Company’s unaudited September 29, 2007 balance sheet with the unaudited balance sheet of e-Dialog as of September 30, 2007.  e-Dialog’s change in financial position for the one day period between September 29 and September 30, 2007 was immaterial.

The accompanying unaudited pro forma combined statements of operations for the fiscal year ended December 30, 2006 and the nine-months ended September 29, 2007 assumes that the acquisition took place on January 1, 2006, the first day of fiscal 2006. The unaudited pro forma combined statement of operations for the fiscal year ended December 30, 2006 combines the Company’s audited consolidated statement of operations for the fiscal year ended December 30, 2006 with e-Dialog’s audited consolidated statement of operations for the year ended December 31, 2006.  e-Dialog’s revenues, expenses and net income for the one day ended December 31, 2006 were immaterial. The unaudited pro forma combined statement of operations for the nine-months ended September 29, 2007 combines the Company’s unaudited consolidated statement of operations for the nine-months ended September 29, 2007 with e-Dialog’s unaudited consolidated statement of operations for the nine-months ended September 30, 2007.  e-Dialog’s revenues, expenses and net income for the one day ended September 30, 2007 were immaterial.  Reclassifications have been made to the consolidated statements of operations of e-Dialog in order to conform to the Company’s financial statement classifications as described in “Note 2 – Unaudited Pro Forma Adjustments.”

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.

GSI COMMERCE, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA COMBINED BALANCE SHEET

(In thousands)

	GSI Commerce, Inc, September 29, 2007			e-Dialog, Inc. September 30, 2007			Preliminary Pro Forma Adjustments				Pro forma Combined
ASSETS
Current assets:
Cash and cash equivalents	$	93,943		$	1,384		$	(76,900	)	(a)	$	18,427
Marketable securities		72,300			-			(72,300	)	(a)		-
Accounts receivable, net		39,631			8,267			-				47,898
Inventory		52,758			-			-				52,758
Deferred tax assets		11,520			-			-				11,520
Prepaid expenses and other current assets		14,761			859			-				15,620
Total current assets		284,913			10,510			(149,200	)			146,223
Property and equipment, net		148,273			2,523			-				150,796
Goodwill		88,556			-			139,704		(b)		228,260
Intangible assets, net		19,855			-			-				19,855
Equity investments and other		2,777			-			-				2,777
Long-term deferred tax assets		47,338			-			-				47,338
Other assets, net		16,768			471			-				17,239
Total assets	$	608,480		$	13,504		$	(9,496	)		$	612,488
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	55,677		$	1,025		$	-			$	56,702
Accrued expenses and other		71,579			2,272							73,851
Deferred revenue		15,832			-			-				15,832
Current Portion - long-term debt and capital leases		2,399			448			-				2,847
Total current liabilities		145,487			3,745							149,232
Convertible notes		207,500			-			-				207,500
Long-term debt and capital leases		26,893			152			-				27,045
Series C redeemable preferred stock warrants					17			-				17
Deferred revenue and other		3,782			94			-				3,876
Total liabilities		383,662			4,008			-				387,670
Commitments and contingencies		-			-			-				-
Stockholders' equity:
Preferred stock		-			-			-				-
Preferred stock - Series A		-			7,025			(7,025	)	(c)		-
Preferred stock - Series B		-			10,500			(10,500	)	(c)		-
Preferred stock - Series C		-			2,000			(2,000	)	(c)		-
Common stock		466			92			(92	)	(c)		466
Additional paid in capital		358,121			122			(122	)	(c)		358,121
Accumulated other comprehensive income		25			-			-				25
Accumulated deficit		(133,794	)		(10,243	)		10,243		(c)		(133,794	)
Total stockholders' equity		224,818			9,496			(9,496	)			224,818
Total liabilities and stockholders' equity	$	608,480		$	13,504		$	(9,496	)		$	612,488

See accompanying notes to unaudited pro forma combined financial statements, including Note 2 for an explanation of the preliminary pro forma adjustments.

GSI COMMERCE, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

(In thousands, except per share data)

	GSI Commerce, Inc.  Nine-months ended  September 29, 2007			e-Dialog, Inc. Nine-months ended September 30, 2007			Preliminary Pro Forma Adjustments				Pro forma Combined
Revenues:
Net revenues from product sales	$	289,053		$	-		$	-			$	289,053
Service fee revenues		125,780			26,484			-				152,264
Net revenues		414,833			26,484			-				441,317
Cost of revenues		-			10,992			(10,992	)	(d)		-
Cost of revenues from product sales		207,843			-			-				207,843
Gross profit		206,990			15,492			10,992				233,474
Operating expenses:
Sales and marketing		132,802			3,069			3,954		(e)		139,825
Product development		44,737			-			8,913		(f)		53,650
Research and development		-			3,748			(3,748	)	(g)		-
General and administrative		31,014			4,760			990		(h)		36,764
Stock-based compensation		-			51			(51	)	(i)		-
Depreciation and amortization		23,744			-			934		(j)		24,678
Total operating expenses		232,297			11,628			10,992				254,917
(Loss) income from operations		(25,307	)		3,864			-				(21,443	)
Other (income) expense:
Interest expense		3,842			-			-				3,842
Interest income		(7,025	)					5,926		(k)		(1,099	)
Other (income) expense, net		51			(31	)		-				20
Total other (income) expense		(3,132	)		(31	)		5,926				2,763
Income (loss) before income taxes		(22,175	)		3,895			(5,926	)			(24,206	)
Benefit for income taxes		(8,711	)		-			(2,264	)	(l)		(10,975	)
Net income (loss)	$	(13,464	)	$	3,895		$	(3,662	)		$	(13,231	)
Basic and diluted loss per share:
Net loss	$	(0.29	)								$	(0.29	)
Weighted average shares outstanding -    basic and diluted		46,320										46,320
See accompanying notes to unauditing pro forma combined financial statements, including Note 2 for an explanation of the preliminary pro forma adjustments.

GSI COMMERCE, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

(In thousands, except per share data)

	GSI Commerce, Inc. Fiscal Year Ended December 30, 2006			e-Dialog, Inc. Fiscal Year Ended December 31, 2006		Preliminary Pro Forma Adjustments				Pro forma Combined
Revenues:
Net revenues from product sales	$	461,183		$	-	$	-			$	461,183
Service fee revenues		148,370			23,995		-				172,365
Net revenues		609,553			23,995		-				633,548
Cost of revenues		-			10,125		(10,125	)	(m)		-
Cost of revenues from product sales		331,253			-		-				331,253
Gross profit		278,300			13,870		10,125				302,295
Operating expenses:
Sales and marketing		165,919			3,130		2,729		(n)		171,778
Product development		45,375			-		6,033		(o)		51,408
Research and development		-			3,600		(3,600	)	(p)		-
General and administrative		36,062			4,388		3,908		(q)		44,358
Stock-based compensation		-			27		(27	)	(r)		-
Depreciation and amortization		21,297			-		1,082		(s)		22,379
Total operating expenses		268,653			11,145		10,125				289,923
Income from operations		9,647			2,725		-				12,372
Other (income) expense:
Interest expense		3,107			129		-				3,236
Interest income		(6,075	)		-		6,075		(t)		-
Other expense, net		37			100		-				137
Impairment on investment		2,873			-		-				2,873
Total other (income) expense		(58	)		229		6,075				6,246
Income (loss) before income taxes		9,705			2,496		(6,075	)			6,126
(Benefit) provision for income taxes		(43,728	)		86		(2,339	)	(u)		(45,981	)
Net income (loss) prior to cumulative effect of     change in accounting principle	$	53,433		$	2,410	$	(3,736	)		$	52,107
Basic earnings per share:
Prior to cumulative effect of change     in accounting principle	$	1.18								$	1.15
Diluted earnings per share:
Prior to cumulative effect of change      in accounting principle	$	1.09									0.99
Weighted average shares outstanding - basic		45,174									45,174
Weighted average shares outstanding - diluted		50,624									50,624

See accompanying notes to unauditing pro forma combined financial statements, including Note 2 for an explanation of the preliminary pro forma adjustments.

GSI COMMERCE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

(In thousands)

NOTE 1—BASIS OF PRESENTATION

On February 13, 2008, GSI Commerce, Inc. (the “Company”) completed the acquisition of e-Dialog, Inc. (“e-Dialog”). Pursuant to an Agreement and Plan of Merger dated as of January 23, 2008 among the Company, Dolphin Acquisition Corporation (“Newco”), a wholly-owned subsidiary of the Company, e-Dialog and the stockholders’ representative, Newco merged with e-Dialog and e-Dialog survived the merger as a wholly-owned subsidiary of the Company. e-Dialog is an e-mail marketing solutions provider that offers e-mail marketing and marketing strategies.

The total preliminary cash purchase price is approximately $149,200, including estimated acquisition related transaction costs of approximately $1,500. In addition, the Company will be obligated to make an additional cash payment of $750 in fiscal 2009 if e-Dialog achieves minimum net revenue targets in fiscal 2008.

The accompanying unaudited pro forma combined balance sheet assumes that the acquisition of e-Dialog took place on September 29, 2007 and combines the Company’s unaudited September 29, 2007 balance sheet with the unaudited balance sheet of e-Dialog as of September 30, 2007. e-Dialog’s change in financial position for the one day period between September 29 and September 30, 2007 was immaterial.

The accompanying unaudited pro forma combined statements of operations for the fiscal year ended December 30, 2006 and the nine-months ended September 29, 2007 assumes that the acquisition took place on January 1, 2006, the first day of fiscal 2006. The unaudited pro forma combined statement of operations for the fiscal year ended December 30, 2006 combines the Company’s audited consolidated statement of operations for the fiscal year ended December 30, 2006 with e-Dialog’s audited consolidated statement of operations for the year ended December 31, 2006.  e-Dialog’s revenues, expenses and net income for the one day ended December 31, 2006 were immaterial. The unaudited pro forma combined statement of operations for the nine-months ended September 29, 2007 combines the Company’s unaudited consolidated statement of operations for the nine-months ended September 29, 2007 with e-Dialog’s unaudited consolidated statement of operations for the nine-months ended September 30, 2007.  e-Dialog’s revenues, expenses and net income for the one day ended September 30, 2007 were immaterial.

The pro forma 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 2—UNAUDITED PRO FORMA ADJUSTMENTS

The pro forma adjustments related to the acquisition 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 e-Dialog, as the process to assign a fair value to the various tangible and intangible assets acquired, including goodwill has only just commenced.  Final adjustments could result in a materially different purchase price and/or allocation of the purchase price, which will affect the value assigned to the tangible or intangible assets and amount of depreciation and amortization expense recorded in the consolidated statement of operations.

The pro forma adjustments included in the unaudited pro forma combined balance sheet as of September 29, 2007 are as follows:

(a)   Reduction to cash and cash equivalents and marketable securities represents the $149,200 cash purchase price to acquire e-Dialog.

(b)   Represents the addition of goodwill of $139,704 related to the Company’s acquisition of e-Dialog.  A preliminary calculation of the goodwill resulting from the Company’s acquisition of e-Dialog is

shown below.  The final allocation of the purchase price will likely have a material impact on the pro forma balance sheet primarily due to the allocation of excess of assets acquired to intangible assets, which are expected to consist primarily of contractual customer contracts, and therefore final goodwill recorded could be materially different than the amount calculated below.

Cash purchase Price	$           147,700
Estimated transaction fees	1,500
Adjusted purchase price	149,200
Book value of e-Dialog net assets	(9,496)
Purchase price in excess of net assets acquired	$           139,704

(c)   Reflects the elimination of the historical equity of e-Dialog, which results in a reduction to pro forma equity of $9,496.

The pro forma adjustments included in the unaudited pro forma combined statement of operations for the nine-months ended September 29, 2007 are as follows:

(d)   Represents a reclassification of e-Dialog’s reported cost of revenues of $10,992.  e-Dialog’s cost of revenues included payroll for the personnel involved in design and execution of Internet direct marketing and e-marketing campaigns.  The Company reclassified e-Dialog’s cost of revenues of $4,471 to sales and marketing expenses, $3,426 to product development expenses, and $3,095 to general and administrative expenses to conform to the presentation of the Company’s Statement of Operations.

(e)   Represents the following:

·   an increase of $4,471 for the reclassification of e-Dialog’s reported cost of revenues, as stated in footnote (d) above;

·   an increase of $30 for the reclassification of e-Dialog’s stock-based compensation expense, as stated in footnote (i) below;

·   a decrease of $547 for a reclassification of e-Dialog’s reported depreciation and amortization. e-Dialog’s sales and marketing expenses included depreciation and amortization expenses.  The Company reclassified e-Dialog’s depreciation and amortization expense from sales and marketing expenses to depreciation and amortization expenses to conform to the presentation of the Company’s Statement of Operations.

(f)   Represents the following:

·   an increase of $3,426 for the reclassification of e-Dialog’s reported cost of revenues, as stated in footnote (d) above;

·   an increase of $3,748 for the reclassification of e-Dialog’s research and development expenses to product development expenses to conform to the presentation of the Company’s Statement of Operations;

·   an increase of $1,963 for the reclassification of e-Dialog’s general and administrative expenses, as stated in footnote (h) below;

·   an increase of $13 for the reclassification of e-Dialog’s stock-based compensation expense, as stated in footnote (i) below;

·   a decrease of $237 for the reclassification of e-Dialog’s reported depreciation and amortization expenses from product development expenses to depreciation and

amortization expenses to conform to the presentation of the Company’s Statement of Operations.

(g)   Represents a decrease of $3,748 for the reclassification of e-Dialog’s research and development expenses, as stated in footnote (f) above, to product development expenses to conform to the presentation of the Company’s Statement of Operations.

(h)   Represents the following:

·   an increase of $3,095 for the reclassification of e-Dialog’s reported cost of revenues, as stated in footnote (d) above;

·   a decrease of $1,963 for the reclassification of e-Dialog’s general and administrative expenses to product development expenses to conform to the presentation of the Company’s Statement of Operations;

·   a decrease of $150 for the reclassification of e-Dialog’s depreciation and amortization expense from general and administrative expenses to depreciation and amortization expenses to conform to the presentation of the Company’s Statement of Operations;

·   an increase of $8 for the reclassification of e-Dialog’s stock-based compensation expense, as stated in footnote (i) below.

(i)   Represents a decrease of $51 for the reclassification of e-Dialog’s stock-based compensation expenses to sales and marketing expenses ($30), product development expenses ($13) and general and administrative expenses ($8) from stock-based compensation expense to conform to the presentation of the Company’s Statement of Operations.

(j)   Represents an increase of $934 for the reclassification of e-Dialog’s depreciation and amortization expenses from sales and marketing expenses ($547), product development expenses ($237) and general and administrative expenses ($150) to depreciation and amortization expense to conform to the presentation of the Company’s Statement of Operations.

The pro forma adjustments related to the acquisition 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 e-Dialog, as the process to assign a fair value to the various tangible and intangible assets acquired, including goodwill, has only just commenced. Final adjustments could result in a materially different purchase price and/or allocation of the purchase price, which will affect the value assigned to the tangible or intangible assets and amount of depreciation and amortization expense recorded in the Company’s Statements of Operations. A $10,000 adjustment to the value assigned to finite intangibles would have an impact on annual amortization expense of $3,333, based on the assets being amortized over a three year period.  Any adjustment to a tangible asset could have a material impact on depreciation expense.

(k)   Represents a $5,926 reduction to interest income to reflect the use of the Company’s cash and cash equivalents and marketable securities to fund the acquisition on the first day of the period presented.

(l)   Represents an increase to the income tax benefit of $2,264 for the income tax effect of the pro forma adjustments, recorded at the Company’s estimated statutory rate of 38.2%.

The pro forma adjustments included in the unaudited pro forma combined statement of operations for the fiscal year ended December 30, 2006 are as follows:

(m)   Represents a reclassification of e-Dialog’s reported cost of revenues of $10,125.  e-Dialog’s cost of revenues included payroll for the personnel involved in design and execution of Internet direct marketing and e-marketing campaigns.  The Company reclassified e-Dialog’s cost of revenues of $3,368 to sales and marketing expenses, $2,719 to product development expenses, and $4,038 to general and administrative expenses to conform to the presentation of the Company’s Statement of Operations.

(n)   Represents the following:

·   an increase of $3,368 for the reclassification of e-Dialog’s reported cost of revenues, as stated in footnote (m) above;

·   a decrease of $639 for a reclassification of e-Dialog’s reported depreciation and amortization expense.  e-Dialog’s sales and marketing expenses included depreciation and amortization expense.  The Company reclassified e-Dialog’s depreciation and amortization from sales and marketing expenses to depreciation and amortization expenses to conform to the presentation of the Company’s Statement of Operations.

(o)   Represents the following:

·   an increase of $2,719 for the reclassification of e-Dialog’s reported cost of revenues, as stated in footnote (m) above;

·   an increase of $3,600 for the reclassification of e-Dialog’s research and development expenses to product development expenses to conform to the presentation of the Company’s Statement of Operations;

·   a decrease of $286 for the reclassification of e-Dialog’s reported depreciation and amortization expenses from product development expenses to depreciation and amortization expenses to conform to the presentation of the Company’s Statement of Operations.

(p)   Represents a decrease of $3,600 for the reclassification of e-Dialog’s research and development expenses, as stated in footnote (o) above.

(q)   Represents the following:

·   an increase of $4,038 for the reclassification of e-Dialog’s reported cost of revenues, as stated in footnote (m) above;

·   an increase of $27 for the reclassification of e-Dialog’s stock-based compensation expenses to general and administrative expenses to conform to the presentation of the Company’s Statement of Operations;

·   a decrease of $157 for the reclassification of e-Dialog’s reported depreciation and amortization expenses. e-Dialog’s general and administrative expenses included depreciation and amortization expense. The Company reclassified e-Dialog’s general and administrative expenses and depreciation expenses to conform to the presentation of the Company’s Statement of Operations.

(r)   Represents a decrease of $27 for the reclassification of e-Dialog’s stock-based compensation expenses, as stated in footnote (q) above.

(s)   Represents an increase of $1,082 for the reclassification of e-Dialog’s depreciation and amortization expenses from sales and marketing expenses ($639), product development expenses

($286) and general and administrative expenses ($157) to depreciation and amortization expense to conform to the presentation of the Company’s Statement of Operations.

The pro forma adjustments related to the acquisition 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 e-Dialog, as the process to assign a fair value to the various tangible and intangible assets acquired, including goodwill has only just commenced. Final adjustments could result in a materially different purchase price and/or allocation of the purchase price, which will affect the value assigned to the tangible or intangible assets and amount of depreciation and amortization expense recorded in the Company’s Statements of Operations. A $10,000 adjustment to the value assigned to finite intangibles would have an impact on annual amortization expense of $3,333, based on the assets being amortized over a three year period.  Any adjustment to a tangible asset could have a material impact on depreciation expense.

(t)   Represents a $6,075 reduction to interest income to reflect the use of the Company’s cash and cash equivalents, and marketable securities to fund the acquisition on the first day of the period presented.

(u)   Represents an increase to the income tax benefit of $2,339 for the income tax effect of the pro forma adjustments, recorded at the Company’s estimated statutory rate of 38.5%.