##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
    Form 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 29, 2007oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to          .   Commission file number 0-16611
    GSI COMMERCE, INC.
 (Exact name of registrant as
    specified in its charter)
  DELAWARE


04-2958132(State or other jurisdiction
    of
    incorporation or organization)


(I.R.S. 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
  Securities registered pursuant to Section 12(b) of the
    Act:
  (Title of Each Class)

Name of Each Exchange on Which RegisteredCommon Stock, par value $.01 per share

The NASDAQ Stock Market LLCPreferred Stock Purchase Rights

The NASDAQ Stock Market LLC   Securities registered pursuant to Section 12(g) of the
    Act:
    None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  Large accelerated
    filer  o

Accelerated
    filer  þ

Non-accelerated
    filer  o

Smaller reporting
    company  o(Do not check if a smaller reporting company)   Rule 12b-2 o x
  (1)
      DOCUMENTS INCORPORATED BY REFERENCE
    Form 10-K,
    (1)
    
    This amount equals the number of
    outstanding shares of the registrants common stock reduced
    by the number of shares that may be deemed held by the
    registrants executive officers, directors and stockholders
    owning in excess of 10% of the registrants common stock,
    multiplied by the last reported sale price for the
    registrants common stock on June 29, 2007 the last
    trading day prior to the last day of registrants fiscal
    second quarter. This information is provided solely for record
    keeping purposes of the Securities and Exchange Commission and
    shall not be construed as an admission that any executive
    officer, director or 10% stockholder of the registrant is an
    affiliate of the registrant or is the beneficial owner of any
    such shares. Any such inference is hereby disclaimed.




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##### 





GSI
    COMMERCE, INC.
    ANNUAL REPORT ON
    FORM 10-K
    FOR FISCAL YEAR ENDED DECEMBER 29, 2007
  TABLE OF
    CONTENTS
   
 PagePART IItem 1.


Business


1Item 1A.


Risk Factors


10Item 1B.


Unresolved Staff Comments


29Item 2.


Properties


30Item 3.


Legal Proceedings


30Item 4.


Submission of Matters to a Vote of Security
    Holders


31Item 4.1.


Executive Officers of the Registrant


31PART IIItem 5.


Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


32Item 6.


Selected Financial Data


34Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


35Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


48Item 8.


Financial Statements and Supplementary Data


49Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


49Item 9A.


Controls and Procedures


49Item 9B.


Other Information


52PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


52Item 11.


Executive Compensation


52Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


52Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


53Item 14.


Principal Accounting Fees and Services


53PART IVItem 15.


Exhibits, Financial Statement Schedules


54Signatures


59GSI Commerce, Inc.'s 1996 Equity incentive planGSI Commerce, Inc.'s 2005 Equity Incentive Plan as amendedLeadership Team Deferral Plan, as amended and restatedForm of Restricted Stock Unit Grant Notice - BasicForm of Restricted Stock Unit Grant Noitce Issued to DirectorsStatement Regarding Computation of Ratio of Earnings to Fixed ChargesList of SubsidiariesConsent of Deloitte & Touche LLPCertification of Chief Executive officerCertification of Chief Financial officerCertification of Chief Executive Officer and Chief Financial Officer, pursuant to Section 906      e-commerce




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PART I  ITEM 1:
    BUSINESS  Overview
  e-commerce, e-commerce e-commerce e-mail ® ® ® ® ® ® ® ® ® ® ® ® ® ® ® ® ® ® ® ®
  Industry
    Trends and Market Opportunity
    e-commerce
  e-commerce
  e-commerce e-commerce
   1




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Our Value
    Proposition
  e-commerce e-commerce e-commerce
  e-commerce e-commerce
  Our
    Services
  e-commerce e-commerce e-commerce e-mail e-commerce
  e-commerce
  e-commerce e-commerce e-commerce
  e-commerce e-commerce e-commerce
 2




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e-commerce e-commerce e-commerce e-commerce e-commerce e-commerce
  Technology
    Services
  e-Commerce
    Engine. e-commerce e-Commerce e-Commerce
  Web Store Management Tools.
  
    create and edit Web site navigation and product categories;
    create, preview and schedule marketing content on their homepage
    and shopping pages;
    create and edit product display characteristics including
    placement of product and branding images and descriptive product
    copy as well as product and category sequencing;
    present special merchandising features such as featured
    products, related products, product collections, promotional
    advertisements and special offers;
    create, customize and manage promotional campaigns;
    establish up-sell and cross-sell relationships, manage pre-sell
    and backordering of yet-to-be-released or out-of-stock items and
    optimize search term mapping to enable consumers to more easily
    locate products on the site; and
    activate and deactivate products based on inventory,
    availability, sell-through velocity and other criteria.  Web Infrastructure and Managed Hosting. cage-and-rack
 3




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Order Management and Processing.
  Reporting and Analytics.
  Fulfillment
    and Drop Shipping Services
        Customer
    Care Services
  e-mail
 4




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Interactive
    Marketing Services
  e-mail e-mail e-Dialog,
  e-marketing, e-commerce E-commerce e-commerce
  User Experience and Design.
  Photography and Content Development.
  Interactive Marketing Services.
 5




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e-mail set-up,
  e-Mail
    Marketing. e-Dialog e-mail e-Dialog e-mail e-mail e-mail
  e-Dialogs tm e-mail e-Dialog e-Dialog e-mail e-mail e-mail e-mail e-Dialog e-mail e-mail e-mail e-Dialog e-Dialog
  Catalog Services. e-commerce, brick-and-mortar plug-and-play
  Growth
    Strategy
  e-commerce e-commerce
  Grow
    Our Existing Partners Businesses
  e-commerce e-commerce
 6




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e-commerce e-commerce e-mail
  Expand
    Our Partner Base
  e-commerce
  Expand
    Internationally
  e-commerce e-commerce e-commerce e-commerce
  Grow
    Revenue from Marketing and Other Value-Added
    Services
  e-commerce sm e-Dialog e-mail e-mail e-commerce
 7




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Selectively
    Pursue Acquisitions
  e-commerce U.S.-based e-commerce e-commerce e-Dialog e-mail
  Competition
  e-commerce e-commerce e-commerce e-commerce e-mail
    
    offering a complete integrated solution designed to increase
    efficiencies and improve integration;
    promoting the partners brand and business  not
    our own;
    providing scale and operating leverage with an enterprise focus;
    establishing our commitment to invest in and grow our platform
    (e.g., international expansion, marketing services); and
    aligning our financial interests with those of our partners.  Intellectual
    Property
    e-commerce e-commerce
   8




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Government
    Regulation
  e-commerce
  e-commerce e-mails e-commerce
  e-commerce.
  Employees
    Seasonality
  Form 10-K.
  Investor
    Information
  1-800-SEC-0330. (http://www.sec.gov)
 9




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##### Table of Contents



Form 10-K, Form 10-Q, Form 8-K Form 10-K
  (610) 491-7000.
  ITEM 1A:
    RISK
    FACTORS  Risk
    Factors
  Any investment in our securities involves a high degree of
    risk. You should carefully consider the following information
    about these risks, together with the other information contained
    in this Annual Report on
    Form 10-K.
    If any of the following risks occur, our business financial
    position and operating results could be materially harmed. In
    these circumstances, the market price of our securities could
    decline, and you may lose all or part of the money you paid to
    buy our securities. The risks described below are not the only
    ones facing our company. Additional risks not necessarily known
    to us or that we currently deem immaterial may also impair our
    business operations.
  Form 10-K, e-commerce,
  Risks
    Related to Our Business
  Our
    future success cannot be predicted based upon our limited
    operating history.
  e-commerce e-commerce.
 10




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Our
    failure to manage growth and diversification of our business
    could harm us.
    We
    have an accumulated deficit and may incur additional
    losses.
      
    launch new partners;
    expand internationally;
    enhance our fulfillment capabilities and increase fulfillment
    capacity;
    develop new technologies and features to improve our
    partners
    e-commerce
    businesses;
    enhance our customer care center capabilities to better serve
    customers needs and increase customer care capacity;
    expand our marketing services efforts;
    increase our general and administrative functions to support our
    growing operations;
    continue our business development, sales and marketing
    activities; and
    make strategic or opportunistic acquisitions of complementary or
    new businesses or assets or internally develop new business
    initiatives.    Our
    substantial indebtedness could adversely affect our financial
    condition.
      
    increase our vulnerability to general adverse economic and
    industry conditions;
    limit our ability to obtain additional financing;
    require the dedication of a substantial portion of our cash flow
    from operations to the payment of interest and principal on our
    indebtedness, thereby reducing the availability of such cash
    flow to fund our growth strategy, working capital, capital
    expenditures and other general corporate purposes;
    limit our flexibility in planning for, or reacting to, changes
    in our business and the industry;
    place us at a competitive disadvantage relative to competitors
    with less debt; and 11




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
    make it difficult or impossible for us to pay the principal
    amount of the subordinated convertible notes at maturity,
    thereby causing an event of default under the subordinated
    convertible notes.    The
    terms of our secured revolving credit facility impose financial
    and operating restrictions.
    
    incur additional indebtedness;
    pay dividends or make other distributions in respect of our
    equity securities;
    sell assets, including the capital stock of our subsidiaries;
    enter into certain transactions with our affiliates;
    transfer any capital stock of any subsidiary or permit any
    subsidiary to issue capital stock;
    create liens;
    make certain loans or investments; and
    effect a consolidation or merger or transfer of all or
    substantially all of our assets.    We may in the future need additional debt or equity
    financing to continue our growth. Such additional financing may
    not be available on satisfactory terms or it may not be
    available when needed, or at all.
  e-commerce
  If we fail to manage our exposure to global financial and
    securities market risk successfully, our operating results and
    financial statements could be materially impacted.
   12




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Seasonal
    fluctuations in sales cause wide fluctuations in our quarterly
    results.
  e-commerce
    e-commerce e-commerce e-commerce e-commerce
  Consumers
    are constantly changing their buying preferences. If we fail to
    anticipate these changes and adjust our inventory accordingly,
    we could experience lower sales, higher inventory markdowns and
    lower margins for the inventory that we own.
  e-commerce e-commerce
  High
    merchandise returns or shrinkage rates could adversely affect
    our business, financial condition and results of
    operations.
    Our
    growth depends, in part, on our ability to add and launch new
    partners on a timely basis and on favorable terms and to extend
    the length of existing partner agreements on favorable
    terms.
   13




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Our
    success is tied to the success of the partners for which we
    operate
    e-commerce
    businesses.
  e-commerce
  We
    enter into contracts with our partners. In fiscal 2007, we
    derived 45.3% of our revenue from five partners
    e-commerce
    businesses. If we do not maintain good working relationships
    with our partners, or perform as required under these
    agreements, it could adversely affect our
    business.
  e-commerce e-commerce e-commerce e-commerce e-commerce e-commerce e-commerce e-commerce e-commerce
  We and
    our partners must develop and maintain relationships with key
    manufacturers to obtain a sufficient assortment and quantity of
    quality merchandise on acceptable commercial terms. If we or our
    partners are unable to do so, it could adversely affect our
    business, results of operations and financial
    condition.
  e-commerce e-commerce
 14




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e-commerce
  We
    rely on our ability to enter into marketing and promotional
    agreements with online services, search engines, comparison
    shopping sites, affiliate marketers other Web sites to drive
    traffic to the
    e-commerce
    businesses we operate. If we are unable to enter into or
    properly develop these marketing and promotional agreements, our
    ability to generate revenue could be adversely affected. In
    addition, new technologies could block our ads and manipulate
    web search results, which could harm our business.
  e-commerce e-commerce e-commerce
  e-mail. e-mail e-mails.
  If we
    experience problems in our fulfillment operations, our business
    could be adversely affected.
      e-commerce
 15




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A
    disruption in our operations could materially and adversely
    affect our business, results of operations and financial
    condition.
      
    fire, flood, hurricane, tornado, earthquake or other natural
    disasters;
    power losses and interruptions;
    Internet, telecommunications or data network failures;
    physical and electronic break-ins or security breaches;
    computer viruses;
    acts of terrorism; and
    other similar events.  e-commerce e-commerce e-commerce
    e-commerce e-commerce
  If we
    do not respond to rapid technological changes, our services and
    proprietary technology and systems may become
    obsolete.
  e-commerce e-commerce e-commerce
  e-commerce e-commerce e-commerce e-commerce e-commerce
 16




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Our
    success is tied to the continued growth in the use of the
    Internet and the adequacy of the Internet
    infrastructure.
    
    actual or perceived lack of security of information or privacy
    protection;
    lack of access and ease of use;
    congestion of traffic on the Internet;
    inconsistent quality of service and lack of availability of
    cost-effective, high-speed service;
    possible disruptions, computer viruses or other damage to
    Internet servers or to users computers;
    governmental regulation;
    uncertainty regarding intellectual property ownership;
    lack of access to high-speed communications equipment; and
    increases in the cost of accessing the Internet.    Consumers
    may be unwilling to use the Internet to purchase
    goods.
    e-commerce e-commerce e-commerce
  We
    and/or our partners may be unable to protect our and their
    proprietary technology and intellectual property rights or keep
    up with that of competitors.
  e-commerce
 17




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We may
    be subject to intellectual property claims or competition or
    trade practices claims that could be costly and could disrupt
    our business.
  e-commerce e-commerce
  We may
    not be able to compete successfully against current and future
    competitors, which could harm our margins and our
    business.
  e-commerce e-commerce e-commerce e-commerce
  e-commerce
  e-commerce e-commerce
 18




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We may
    be subject to product liability claims that could be costly and
    time-consuming.
  e-commerce
  We may
    be liable if third parties misappropriate our customers
    personal information. Additionally, we are limited in our
    ability to use and disclose customer information.
    Changes
    to credit card association fees, rules, or practices could harm
    our business.
  and/or
  Credit
    card fraud could adversely affect our business.
    If one
    or more states successfully assert that we should collect or
    should have collected sales or other taxes on the sale of our
    merchandise, our business could be harmed.
   19




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e-commerce. e-commerce
  We may
    have exposure to greater than anticipated tax
    liabilities.
    We
    rely on insurance to mitigate some risks and, to the extent the
    cost of insurance increases or we are unable or choose not to
    maintain sufficient insurance to mitigate the risks facing our
    business, our operating results may be diminished.
    Existing
    or future law or regulations could harm our business or
    marketing efforts.
  e-commerce e-commerce,
     20




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Our
    e-Dialog
    e-mail
    marketing solutions business is dependent on the market for
    e-mail
    marketing solutions and there may be changes in the market that
    may harm our business.
  e-Dialog
    
    growth in the number of emails sent or received on a daily or
    regular basis;
    the ability of filters to effectively screen for unwanted emails;
    the ability of smart phones or similar communications to
    adequately display email;
    continued security concerns regarding Internet usage in general
    from viruses, worms or similar problems affecting Internet and
    email utilization; and
    increased governmental regulation or restrictive policies
    adopted by internet service providers (ISPs) that make it more
    difficult or costly to utilize email for marketing
    communications.      Existing
    federal, state and international laws regulating email marketing
    practices impose certain obligations on the senders of
    commercial emails and could expose us to liability for
    violations, decrease the effectiveness of our email marketing
    solutions, and expose us to financial, criminal and other
    penalties for non-compliance, which could increase our operating
    costs.
    
    payment of statutory, actual or other damages;
    criminal penalties; 21




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
    actions by state attorneys general;
    actions by private citizens or class actions; and
    penalties imposed by regulatory authorities of the
    U.S. government, state governments and foreign governments.    Private
    spam blacklists may interfere with our ability to communicate
    with our
    e-commerce
    customers and the ability of the clients of
    e-Dialog to
    effectively deploy our email marketing products or services
    which could harm our business.
  e-commerce e-Dialog
    From
    time to time, we may acquire or invest in other companies. There
    are risks associated with potential acquisitions and investments
    and we may not achieve the expected benefits of future
    acquisitions and investments.
   22




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We
    plan to continue to expand our business internationally which
    may cause our business to become increasingly susceptible to
    numerous international business risks and challenges. We have
    limited experience in international operations.
  e-commerce e-commerce
    
    the need to develop new supplier and manufacturer relationships,
    particularly because major manufacturers may require that our
    international operations deal with local distributors;
    compliance with international legal and regulatory requirements
    and tariffs;
    managing fluctuations in currency exchange rates;
    difficulties in staffing and managing foreign operations;
    greater difficulty in accounts receivable collection;
    potential adverse tax consequences;
    uncertain political and economic climates;
    potentially higher incidence of fraud;
    price controls or other restrictions on foreign
    currency; and
    difficulties in obtaining export and import licenses and
    compliance with applicable export controls.  and/or
  e-commerce
   23




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The
    uncertainty regarding the general economy may reduce our
    revenues.
    Our
    success is dependent upon our executive officers and other key
    personnel.
    We may
    be unable to hire and retain skilled personnel which could limit
    our growth.
    There
    are limitations on the liabilities of our directors and
    executive officers. Under certain circumstances, we are
    obligated to indemnify our directors and executive officers
    against liability and expenses incurred by them in their service
    to us.
   24




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If we
    fail to maintain an effective system of internal controls, we
    may not be able to accurately report our financial results or
    prevent fraud. As a result, current and potential stockholders
    and partners could lose confidence in our financial reporting,
    which could harm our business, the trading price of our common
    stock and our ability to retain our current partners and obtain
    new partners.
    Risks
    Related to Our Common Stock
  We may
    enter into future acquisitions and take certain actions in
    connection with such acquisitions that could affect the price of
    our common stock.
    
    use a significant portion of our available cash;
    issue equity securities, which would dilute current
    stockholders percentage ownership;
    incur substantial debt;
    incur or assume contingent liabilities, known or unknown;
    incur amortization expenses related to intangibles; and
    incur large, immediate accounting write-offs.    Our
    operating results have fluctuated and may continue to fluctuate
    significantly, which may cause the market price of our common
    stock to be volatile.
      
    our ability to obtain new partners or to retain existing
    partners in our
    e-commerce
    and marketing services businesses;
    the performance of one or more of our partners
    e-commerce
    businesses;
    our and our partners ability to obtain new customers at a
    reasonable cost or encourage repeat purchases;
    the number of visitors to the
    e-commerce
    businesses operated by us or our ability to convert these
    visitors into customers;
    our and our partners ability to offer an appealing mix of
    products or to sell products that we purchase;
    our ability to achieve effective results for our marketing
    services clients; 25




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
    our ability to adequately develop, maintain and upgrade our
    partners
    e-commerce
    businesses or the technology and systems we use to process
    customers orders and payments;
    the timing and costs of upgrades and developments of our systems
    and infrastructure;
    the ability of our competitors to offer new or superior
    e-commerce
    businesses, services or products or new or superior marketing
    services;
    price competition that results in lower profit margins or losses;
    the seasonality of our business, especially the importance of
    our fiscal fourth quarter to our business;
    our inability to obtain or develop specific products or brands
    or unwillingness of vendors to sell their products to us;
    unanticipated fluctuations in the amount of consumer spending on
    various products that we sell, which tend to be discretionary
    spending items;
    the cost of advertising and the amount of free shipping and
    other promotions we offer;
    increases in the amount and timing of operating costs and
    capital expenditures relating to expansion of our operations;
    our inability to manage our shipping costs on a profitable basis
    or unexpected increases in shipping costs or delivery times,
    particularly during the holiday season;
    inflation of prices of fuel and gasoline and other raw material
    that impact our costs;
    technical difficulties, system security breaches, system
    downtime or Internet slowdowns;
    our inability to manage inventory levels or control inventory
    shrinkage;
    our inability to manage fulfillment operations or provide
    adequate levels of customer care or our inability to forecast
    the proper staffing levels in fulfillment and customer care;
    an increase in the level of our product returns or our inability
    to effectively process returns;
    government regulations related to the Internet or
    e-commerce
    which could increase the costs associated with operating our
    businesses, including requiring the collection of sales tax on
    all purchases through the
    e-commerce
    businesses we operate; and
    unfavorable economic conditions in general or specific to the
    Internet or
    e-commerce,
    which could reduce demand for the products sold through our
    partners
    e-commerce
    businesses.  Future
    sales of our common stock in the public market or the issuance
    of securities senior to our common stock could adversely affect
    the trading price of our common stock and our ability to raise
    funds in new securities offerings.
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We
    have never paid dividends on our common stock and do not
    anticipate paying dividends in the foreseeable
    future.
    We are
    controlled by certain principal stockholders.
    It may
    be difficult for a third-party to acquire us and this could
    depress our stock price.
    and/or
      The
    price of our common stock may fluctuate
    significantly.
   27




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
    our performance and prospects;
    the performance and prospects of our partners;
    the depth and liquidity of the market for our common stock;
    investor perception of us and the industry in which we operate;
    changes in earnings estimates or buy/sell recommendations by
    analysts;
    general financial and other market conditions; and
    general economic conditions.    Holders
    of our common stock will be subordinated to our secured
    revolving credit facility, convertible notes and other
    indebtedness.
    Conversion
    of our subordinated convertible notes will dilute the ownership
    interest of existing stockholders.
    Future
    changes in financial accounting standards or practices or
    existing taxation rules or practices may cause adverse
    unexpected revenue and/or expense fluctuations and affect our
    reported results of operations.
   28




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14-a,
  ITEM 1B:
    UNRESOLVED
    STAFF COMMENTS.   29




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ITEM 2:  PROPERTIES.    SquareUse

Footage


Location

Owned/Leased/LicensedPrincipal Office


104,000


King of Prussia, PA


Owned
(2)(3)Office


56,000


King of Prussia, PA


OwnedOffice


75,000


King of Prussia, PA


LeasedOffice


3,749


Los Angeles, CA


LeasedOffice


1,899


San Jose, CA


LeasedOffice


4,758


Barcelona, Spain


LeasedOffice


9,807


Huntersville, NC


LeasedOffice


6,142


Roanoke, VA


LeasedFulfillment


470,000


Louisville, KY


OwnedFulfillment


400,000


Shepherdsville, KY


LeasedFulfillment


297,000


Shepherdsville, KY


Leased
(4)Fulfillment


540,000


Richwood, KY


LeasedFulfillment


108,000


Pacoima, CA


LeasedFulfillment


125,000


Edwardsville, IL


LicensedFulfillment


478,750


Martinsville, VA


LeasedFulfillment


25,000


Portland, TN


LeasedFulfillment


63,000


Rochdale, United Kingdom


LeasedFulfillment/Call Center/Office


137,000


Chadderton, United Kingdom


LeasedFulfillment/Call Center/Office


70,558


Pacoima, CA


LeasedCall Center


82,000


Melbourne, FL


LeasedCall Center


48,000


Eau Claire, WI


OwnedCall Center


25,000


Brunswick, GA


LeasedCall Center


36,150


Martinsville, VA


Leased     (1)
    
    We also lease additional space to fill short term needs on an as
    needed basis. We believe that our properties are adequate for
    our present needs and that suitable additional or replacement
    space will be available as required.(2)
    
    We own our principal executive office in King of Prussia,
    Pennsylvania, which is subject to a $13.0 million mortgage.
    None of our other owned properties is subject to a mortgage.(3)
    
    We also have an option through February 2009 to purchase an
    additional building lot adjacent to our principal executive
    office in King of Prussia, Pennsylvania.(4)
    
    We executed a lease for this facility in 2007, but operations
    will begin in 2008.  ITEM 3:
    LEGAL
    PROCEEDINGS.  e-commerce
 30




---



##### Table of Contents



ITEM 4:
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS.    ITEM 4.1:
    EXECUTIVE
    OFFICERS OF THE REGISTRANT.    Name

Age(1)

TitleMichael G. Rubin


35



Chairman, President and Chief Executive OfficerMichael R. Conn


37



Executive Vice President, Finance and Chief Financial OfficerSteven C. Davis


37



Executive Vice President, International and President and
    Managing Director of GSI Commerce Solutions International,
    S.a.r.lStephen J. Gold


48



Executive Vice President and Chief Information OfficerJ. Scott Hardy


46



Executive Vice President, Business ManagementArthur H. Miller


54



Executive Vice President and General CounselDamon Mintzer


42



Executive Vice President, Sales     (1)
    
    As of March 1, 2008    Michael G. Rubin
  Michael R. Conn
  Steven C. Davis
  Stephen J. Gold
  J. Scott Hardy
 31




---



##### Table of Contents



Arthur H. Miller
  Damon Mintzer e-commerce
 PART II  ITEM 5:
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES.    Common StockPriceHigh


LowFiscal 2006First Quarter

$
17.59


$
13.60Second Quarter

$
18.23


$
12.71Third Quarter

$
15.37


$
10.67Fourth Quarter

$
19.52


$
14.47Fiscal 2007First Quarter

$
23.25


$
16.09Second Quarter

$
24.75


$
19.85Third Quarter

$
27.38


$
19.65Fourth Quarter

$
29.27


$
19.06        32




---



##### Table of Contents



STOCK
    PERFORMANCE GRAPH
    TOTAL
    RETURN TO STOCKHOLDERS
 (Assumes $100 investment on 12/28/02)
  
  Total
    Return Analysis
  12/28/2002



1/3/2004



1/1/2005



12/31/2005



12/30/2006



12/29/2007GSI Commerce, Inc.


$
100.00



$
267.12



$
487.12



$
413.42



$
513.70



$
534.25Morgan Stanley Internet Index


$
100.00



$
164.14



$
187.37



$
188.89



$
206.69



$
273.99Nasdaq Composite


$
100.00



$
150.01



$
162.89



$
165.13



$
180.85



$
198.60     EQUITY
    INCENTIVE PLANS
  Form 10-K.
 33




---



##### Table of Contents



ITEM 6:  SELECTED
    FINANCIAL DATA.  Form 10-K. Form 10-K.
  Fiscal Year EndedJanuary 3,


January 1,


December 31,


December 30,


December 29,2004


2005


2005


2006


2007STATEMENT OF OPERATIONS DATA:Revenues:Net revenues from product sales

$
216,510


$
274,988


$
355,374


$
461,183


$
512,194Service fee revenues


25,409



60,116



85,018



148,370



237,763Net revenues


241,919



335,104



440,392



609,553



749,957Cost of revenues from product sales


154,731



203,383



263,829



331,253



356,541Gross profit


87,188



131,721



176,563



278,300



393,416Total operating expenses


100,252



132,122



173,685



268,653



388,474Income (loss) from operations


(13,064
)


(401
)


2,878



9,647



4,942Total other (income) expense


(1,177
)


(64
)


(142
)


(58
)


1,990Income (loss) before income taxes


(11,887
)


(337
)


3,020



9,705



2,952Provision (benefit) for income taxes(1)










321



(43,728
)


(87
)Net income (loss) before cumulative effect of change in
    accounting principle


(11,887
)


(337
)


2,699



53,433



3,039Cumulative effect of change in accounting principle














268



Net income (loss)

$
(11,887
)

$
(337
)

$
2,699


$
53,701


$
3,039Basic earnings (loss) per share:Prior to cumulative effect of change in accounting principle

$
(0.30
)

$
(0.01
)

$
0.06


$
1.18


$
0.07Net income (loss) per share

$
(0.30
)

$
(0.01
)

$
0.06


$
1.19


$
0.07Diluted earnings (loss) per share:Prior to cumulative effect of change in accounting principle

$
(0.30
)

$
(0.01
)

$
0.06


$
1.09


$
0.06Net income (loss) per share(2)

$
(0.30
)

$
(0.01
)

$
0.06


$
1.10


$
0.06BALANCE SHEET DATA:Total assets

$
175,583


$
231,823


$
332,646


$
463,557


$
693,640Total long-tem liabilities






13,564



70,594



74,257



240,379Working capital


36,506



30,106



109,804



125,172



165,822Stockholders equity


111,586



118,053



153,173



227,707



249,421  34




---



##### Table of Contents



(1)
    
    Included in fiscal 2006 was a $44.4 million non-cash income
    tax benefit. For additional information, see Note 11,
    Income Taxes, to our consolidated financial statements included
    in Item 15, Exhibits, Financial Statement Schedules, of
    this Annual Report on
    Form 10-K.(2)
    
    For additional information on the diluted earnings (loss) per
    share calculation, see Note 12, Earnings Per Share, to our
    consolidated financial statements included in Item 15,
    Exhibits, Financial Statement Schedules, of this Annual Report
    on
    Form 10-K.  ITEM 7:
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATION.  All
    statements made in this Annual Report on
    Form 10-K,
    other than statements of historical fact, are forward-looking
    statements, as defined under federal securities law. The words
    look forward to, anticipate,
    believe, estimate, expect,
    intend, may, plan,
    will, would, should,
    could, guidance, potential,
    opportunity, continue,
    project, forecast,
    confident, prospects,
    schedule, designed, future
    discussions, if and similar expressions
    typically are used to identify forward-looking statements.
    Forward-looking statements are based on the then-current
    expectations, beliefs, assumptions, estimates and forecasts
    about our business. These statements are not guarantees of
    future performance and involve risks, uncertainties and
    assumptions which are difficult to predict. Therefore, actual
    outcomes and results may differ materially from what is
    expressed or implied by these forward-looking statements.
    Factors which may affect our business, financial condition and
    operating results include the effects of changes in the economy,
    consumer spending, the financial markets and the industries in
    which we and our partners operate, changes affecting the
    Internet and
    e-commerce,
    our ability to develop and maintain relationships with strategic
    partners and suppliers and the timing of our establishment,
    extension or termination of our relationships with strategic
    partners, our ability to timely and successfully develop,
    maintain and protect our technology, confidential and
    proprietary information, and product and service offerings and
    execute operationally, our ability to attract and retain
    qualified personnel, our ability to successfully integrate our
    acquisitions of other businesses, and the performance of
    acquired businesses. More information about potential factors
    that could affect us is described in Item 1A of
    Part I, Risk Factors. We expressly disclaim any
    intent or obligation to update these
    forward-looking
    statements.
  Executive
    Overview
    
    We are a leading provider of services for
    e-commerce,
    multichannel retailing and interactive marketing to large
    business-to-consumer enterprises, which we call partners. For
    e-commerce
    and multichannel retailing, we deliver customized solutions to
    partners through an integrated
    e-commerce
    platform, which is comprised of three components: technology,
    fulfillment and customer care. We offer each of the
    platforms components on a modular basis, or as part of an
    integrated, end-to-end solution. For interactive marketing, we
    offer a full suite of online interactive marketing, advertising,
    e-mail and
    design services.
    We derive our revenues from sales of products by us through our
    partners
    e-commerce
    businesses, service fees earned by us in connection with the
    development and operation of our partners
    e-commerce
    businesses, and service fees earned by us through the provision
    of interactive marketing services.
    We generate the majority of our cash from operating activities
    in our fourth fiscal quarter due to the seasonality of our
    business. In our first fiscal quarter, we typically use cash
    from operating activities to satisfy accounts payable and
    accrued expenses incurred in the fourth fiscal quarter of our
    prior fiscal year.    
    Net revenue grew $140 million, or 23%, over fiscal 2006.
    Net income decreased from $53.7 million in fiscal 2006 to
    $3.0 million in fiscal 2007. Included in net income for
    fiscal 2006 was a $44.4 million non-cash income tax benefit. 35




---



##### Table of Contents




    In July 2007, we completed a subordinated convertible note
    offering of $150 million. Our net proceeds from the
    offering were approximately $145 million. We used the
    proceeds for both working capital and acquisitions.
    In September 2007, we acquired Accretive Commerce, Inc.
    (Accretive), a Huntersville, N.C.-based
    e-commerce
    solutions provider for $98.6 million, including acquisition
    costs. We believe the acquisition of Accretive has strengthened
    our position in the
    e-commerce
    industry by expanding our infrastructure and expanding our
    partner base. Accretives results of operations are
    included in our income statement beginning on the acquisition
    date of September 10, 2007.
    In December 2007, we acquired Zendor.com Ltd.
    (Zendor), a Manchester, U.K.-based provider of
    fulfillment, customer care and
    e-commerce
    solutions for $9.1 million, including acquisition costs. We
    believe that by adding the assets, employees and partners of
    Zendor, we have strengthened our ability to deliver an
    integrated, multichannel,
    e-commerce
    solution to both U.K. and global retailers and brands.
    Zendors results of operations are included in our income
    statement beginning on the acquisition date of December 14,
    2007.
    We added four fulfillment centers and three customer call
    centers in connection with the Accretive acquisition and two
    fulfillment centers and one customer call center in connection
    with the Zendor acquisition. In June 2007, we opened our new
    fulfillment center in Richwood, Kentucky, which is approximately
    540,000 square feet. We now manage approximately two and a
    half million square feet of fulfillment center space.
    In fiscal 2007, we signed agreements with nine new partners and
    launched twelve partner Web stores. We also extended or expanded
    agreements with fourteen partners.    
    In January 2008, we obtained a $75 million revolving
    secured bank line of credit. The five-year, revolving secured
    line of credit is available to us for working capital and
    general corporate purposes, including possible acquisitions, and
    contains certain financial and negative covenants with which we
    must comply.
    In February 2008, we acquired
    e-Dialog,
    Inc., a Lexington, Mass.  based market-leading
    provider of advanced
    e-mail
    marketing services and solutions to more than 100 blue-chip
    companies in the U.S. and Europe for $149.2 million,
    including estimated acquisition costs. We expect the acquisition
    to significantly expand the breadth and depth of our interactive
    marketing services capabilities, our reach into existing and new
    vertical markets, and our growing European presence.    
    Based on forecasts of Forrester Research, we expect global
    online general merchandise sales to reach an estimated $1.0
    trillion by 2010 from an estimated $643.3 billion in 2007.
    We expect global online advertising revenues to reach
    $81.1 billion by 2011 from an estimated $41.3 billion
    in 2007.
    While we expect the opportunity for partnered
    e-commerce
    to continue to grow, we also anticipate continuing intense
    competition. We compete with in-house solutions and a variety of
    third-party vendors that provide one of more components of an
    e-commerce
    solution. To satisfy our existing partners and to continue to
    attract new partners, we offer a complete integrated solution
    designed to increase efficiencies and improve integration. This
    includes a high level of direct-to-consumer expertise and
    infrastructure. Through our solution, we help our partners grow
    their
    e-commerce
    businesses and use their
    e-commerce
    businesses as a channel to complement and enhance their offline
    businesses. Our solution is provided to partners through an
    integrated platform, which is comprised of three components:
    technology, fulfillment and customer care. For interactive
    marketing, we offer a full suite of online marketing,
    advertising, e-mail and design services. To differentiate our
    solution in the marketplace, we continually add new services and
    functions to our platform. As part of our continuing efforts to
    add value to our platform, we evaluate opportunities to acquire
    complementary or new businesses or assets. 36




---



##### Table of Contents




    Our objective is to grow our business by expanding the
    e-commerce
    businesses of our existing partners, by adding new partners, by
    expanding internationally, by generating incremental revenue
    from marketing and other services, and selectively through
    acquisitions.  Results
    of Operations
  Comparison
    of Fiscal 2007 and 2006 (amounts in tables in
    millions):
  Net
    Revenues
    Fiscal 2007vs.Fiscal 2006


Fiscal 2007


Fiscal 2006$


%


$


%


$


%Net revenues from product sales  sporting goods

$
314.7



51.6
%

$
384.5



51.3
%

$
69.8



22.2
%Net revenues from product sales  other


146.5



24.1
%


127.7



17.0
%


(18.8
)


(12.8
%)Net revenue from product sales


461.2



75.7
%


512.2



68.3
%


51.0



11.1
%Service fee revenue


148.4



24.3
%


237.8



31.7
%


89.4



60.2
%Net revenues

$
609.6



100
%

$
750.0



100
%

$
140.4



23.0
%   Net Revenues from Product Sales. e-commerce
    Service Fee Revenues. e-commerce 99-19, (EITF 99-19)
  e-commerce
  Gross
    Profit
   37




---



##### Table of Contents



Fiscal 2007vs.Fiscal 2006


Fiscal 2007


Fiscal 2006% of


% of


% of





% of


% of


% ofProduct


Service


Net





Product


Service


Net


$


%$


Sales


Fees


Revenue


$


Sales


Fees


Revenue


Change


ChangeGross profit from product sales

$
129.9



28.2
%









$
155.6



30.4
%









$
25.7



19.8
%Gross profit from service fees


148.4







100
%






237.8







100
%






89.4



60.2
%Gross profit

$
278.3











45.7
%

$
393.4











52.5
%

$
115.1



41.4
%     Operating
    Expenses
      Fiscal 2007vs.Fiscal 2006


Fiscal 2007


Fiscal 2006% of





% ofNet





Net$


Revenues


$


Revenues


$ Change


% ChangeSales and marketing expenses

$
165.9



27.2
%

$
241.9



32.2
%

$
76.0



45.8
%Product development expenses


45.4



7.5
%


65.9



8.8
%


20.5



45.2
%General and administrative expenses


36.1



5.9
%


43.4



5.8
%


7.3



20.2
%Depreciation and amortization expenses


21.3



3.5
%


37.3



5.0
%


16.0



75.1
%Total operating expenses

$
268.7



44.1
%

$
388.5



51.8
%

$
119.8



44.6
%   Sales and Marketing Expenses. e-commerce
  start-up,
 38




---



##### Table of Contents



e-commerce
  Product Development Expenses. e-commerce
  e-commerce
  General and Administrative Expenses.
  e-commerce
  Depreciation and Amortization
    Expenses.
   39




---



##### Table of Contents



Comparison
    of Fiscal 2006 and 2005 (amounts in tables in
    millions):
  Net
    Revenues
    Fiscal 2006vs.Fiscal 2005


Fiscal 2006


Fiscal 2005$


%


$


%


$


%Net revenues from product sales  sporting goods

$
213.0



48.4
%

$
314.7



51.6
%

$
101.7



47.7
%Net revenues from product sales  other


142.4



32.3
%


146.5



24.1
%


4.1



2.9
%Net revenue from product sales


355.4



80.7
%


461.2



75.7
%


105.8



29.8
%Service fee revenue


85.0



19.3
%


148.4



24.3
%


63.4



74.6
%Net revenues

$
440.4



100
%

$
609.6



100
%

$
169.2



38.4
%   Net Revenues from Product Sales. e-commerce
  Service Fee Revenues. e-commerce e-commerce E-commerce
  Gross
    Profit
    Fiscal 2006vs.Fiscal 2005


Fiscal 2006


Fiscal 2005% of


% of


% of





% of


% of


% ofProduct


Service


Net





Product


Service


Net


$


%$


Sales


Fees


Revenue


$


Sales


Fees


Revenue


Change


ChangeGross profit from product sales

$
91.6



25.8
%









$
129.9



28.2
%









$
38.3



41.8
%Gross profit from service fees


85.0







100
%






148.4







100
%






63.4



74.6
%Gross profit

$
176.6











40.1
%

$
278.3











45.7
%

$
101.7



57.6
%    40




---



##### Table of Contents



Operating
    Expenses
    Fiscal 2006vs.Fiscal 2005


Fiscal 2006


Fiscal 2005% of





% ofNet





Net$


Revenues


$


Revenues


$ Change


% ChangeSales and marketing expenses

$
107.5



24.4
%

$
165.9



27.2
%

$
58.4



54.3
%Product development expenses


28.8



6.5
%


45.4



7.5
%


16.6



57.6
%General and administrative expenses


22.8



5.2
%


36.1



5.9
%


13.3



58.3
%Depreciation and amortization expenses


14.6



3.3
%


21.3



3.5
%


6.7



45.9
%Total operating expenses

$
173.7



39.4
%

$
268.7



44.1
%

$
95.0



54.7
%   Sales and Marketing Expenses.
  Product Development Expenses. e-commerce e-commerce
  General and Administrative Expenses.
  Depreciation and Amortization
    Expenses.
  Income
    Taxes
     41




---



##### Table of Contents



Seasonality
  Form 10-K.
  Liquidity
    and Capital Resources
  Fiscal Year EndedDecember 31,


December 30,


December 29,2005


2006


2007(In millions)Cash and cash equivalents

$
48.4


$
71.4


$
231.5Marketable securities


108.3



113.1



Total cash, cash equivalents, and marketable securities

$
156.7


$
184.5


$
231.5Percentage of total assets


47.1
%


39.8
%


33.4
%   e-commerce
  Form 10-K
      e-Dialog,
 42




---



##### Table of Contents



30-45 days.
  Cash
    flow changes
       43




---



##### Table of Contents



Debt
    Financing
  3%  Subordinated Convertible Notes due
    2025.
  2.5% Subordinated Convertible Notes due
    2027.
  Form 10-K.
    Secured
    Revolving Bank Credit Facility
    Capital
    expenditures
   44




---



##### Table of Contents



Payments Due by Fiscal YearLess ThanContractual Obligations(1)(2)

Total


1 Year


1-3 Years


4-5 Years


ThereafterOperating lease obligations

$
65,106


$
13,191


$
20,089


$
13,319


$
18,507Purchase obligations (3)


74,169



74,169











Advertising and media agreements


93



93











Partner revenue share payments


183,858



19,250



53,550



48,501



62,557Debt interest


43,162



6,801



11,500



9,006



15,855Debt obligations


220,358



193



58,096



429



161,640Capital lease obligations


20,653



3,208



6,529



6,529



4,387Total contractual obligations

$
607,399


$
116,905


$
149,764


$
77,784


$
262,946     (1)
    
    For additional information, see Note 7, Long-Term Debt and
    Credit Facility, and Note 8, Commitments and Contingencies,
    of the Notes to Consolidated Financial Statements, included in
    Item 15, Exhibits, Financial Statement Schedules, of this
    Annual Report on
    Form 10-K.(2)
    
    Approximately $1.0 million of unrecognized tax benefits
    have been recorded as liabilities in accordance with Financial
    Accounting Standards Boards Interpretation
    (FIN) 48, Accounting for Uncertainty in Income
    Taxes, an interpretation of FASB Statement 109
    (FIN 48), and we are uncertain as to if or when
    such amounts may be settled; as a result, these obligations are
    not included in the table above.(3)
    
    Purchase obligations are defined as agreements to purchase goods
    or services that are enforceable and legally binding and that
    specify all significant terms, including fixed or minimum
    quantities to be purchased, fixed, minimum or variable pricing
    provisions and the approximate timing of the transactions. These
    obligations relate primarily to commitments to purchase
    inventory, which generally are cancelable without penalty if
    canceled prior to shipment.  Off
    Balance Sheet Arrangements
    Critical
    Accounting Policies and Estimates
    Form 10-K.
  Revenue
    Recognition
   45




---



##### Table of Contents



EITF 99-19,
  EITF 00-21,
    Net
    Revenues from Product Sales
  e-commerce
  e-commerce EITF 01-09, (EITF 01-09), EITF 01-09 EITF 01-09
  Service
    Fee Revenues
  e-commerce EITF 99-19,
   46




---



##### Table of Contents



e-commerce
  Accounting
    for Inventory
    Accounting
    for Internal Use Software
  98-1,
  Goodwill
    and Other Intangible Assets
     47




---



##### Table of Contents



Income
    Taxes and Deferred Taxes
      Form 10-K
  ITEM 7A:
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.   48




---



##### Table of Contents



EstimatedFair ValueFiscal Year








at the End of2008


2009


2010


2011


Thereafter


Total


Fiscal 2007Money market accounts


224,875


$



$



$



$




224,875



224,875Weighted average interest rate


4.24
%


















4.24
%Cash equivalents


224,875


$



$



$



$




224,875



224,875         ITEM 8:
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA.  Form 10-K Form 10-K.
  ITEM 9:
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE.    ITEM 9A:
    CONTROLS
    AND PROCEDURES.  Evaluation of disclosure controls and
    procedures. Rule 13a-15(e).
  Rule 13a-15(e),
 49




---



##### Table of Contents



Changes in internal control over financial
    reporting. Rule 13a-15(d),
  Managements annual report on internal control over
    financial reporting. Rule 13a-15(f).
  Internal Control  Integrated
    Framework Internal
    Control  Integrated Framework
   50




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
      Internal Control  Integrated Framework
        Internal Control  Integrated Framework
        51




---



##### Table of Contents



ITEM 9B:
    OTHER
    INFORMATION.  Form 8-K
  Form 8-K.
 PART III ITEM 10:  DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.    Form 10-K.
  Form 8-K
 ITEM 11:  EXECUTIVE
    COMPENSATION.    ITEM 12:
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS.   52




---



##### Table of Contents



Equity
    Compensation Plan Information as of the End of Fiscal
    2007
    Number of SecuritiesNumber of Securities





Remaining Available forto be Issued


Weighted-Average


Future Issuance UnderUpon Exercise of


Exercise Price of


Equity Compensation PlansOutstanding Options,


Outstanding Options,


(Excluding SecuritiesWarrants and Rights


Warrants and Rights


Listed in Column (a))Plan Category

(a)


(b)


(c)Equity compensation plans approved by stockholders (1)


6,036,848


$
9.94



3,247,321Equity compensation plans not approved by stockholders (2)


229,500


$
3.01



Total


6,266,348


$
9.58



3,247,321     (1)
    
    These plans are the 1996 Equity Incentive Plan and the 2005
    Equity Incentive Plan (the Plans). The 2005 Plan
    provides for the grant of incentive stock options, nonstatutory
    stock options, stock appreciation rights, stock purchase awards,
    stock bonus awards, stock unit awards, and other forms of equity
    compensation. We issued restricted stock units under these
    Plans. These restricted stock units generally expire
    10 years from the date of grant and vest over four years,
    although some restricted stock units vest in less than four
    years. Upon the occurrence of a change in control, certain of
    these restricted stock units will immediately become exercisable
    in full. The weighted average exercise price in the table above
    does not take these restricted stock units into account.(2)
    
    Included are (a) stock options at less than the then-fair
    market value of our Common Stock to attract new key employees,
    to retain key employees of acquired companies and to retain
    existing employees in connection with restructured compensation
    packages, and (b) warrants to purchase our Common Stock to
    consultants, advisors, partners and investors. The Board of
    Directors approved these grants in 1999 through 2001, although
    some of these warrant grants relate to earlier periods. Except
    for these limited grants, grants are generally made by us under
    the 2005 Plan. These grants include options which generally
    expire 10 years from the date of grant and vests over four
    years. Upon the occurrence of a change in control, certain of
    these options will immediately become exercisable in full. These
    grants also include warrants which generally expire no less than
    five years and no more than 15 years from the date of
    grant. The exercise prices for these warrants range from $2.50
    to $7.63.  ITEM 13:
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE.    ITEM 14:
    PRINCIPAL
    ACCOUNTING FEES AND SERVICES.   53




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##### Table of Contents



PART IV  ITEM 15:
    EXHIBITS,
    FINANCIAL STATEMENT SCHEDULES  (a)
    1.
    CONSOLIDATED FINANCIAL STATEMENTS  PageReport of Independent Registered Public
    Accounting Firm


F-1Consolidated Balance Sheets as of
    December 30, 2006 and December 29, 2007


F-2Consolidated Statements of Operations for the
    Fiscal Years Ended December 31, 2005, December 30,
    2006 and December 29, 2007


F-3Consolidated Statements of Stockholders
    Equity for the Fiscal Years Ended December 31, 2005,
    December 30, 2006 and December 29, 2007


F-4Consolidated Statements of Cash Flows for the
    Fiscal Years Ended December 31, 2005, December 30,
    2006 and December 29, 2007


F-5Notes to Consolidated Financial Statements


F-6   2.
    FINANCIAL
    STATEMENT SCHEDULES  SCHEDULE II 
    VALUATION AND QUALIFYING ACCOUNTS
  Balance at


Charged toBeginning


Costs and





Balance atof Year


Expenses


Deductions*


End of Year(In thousands)Allowance for Doubtful Accounts:Fiscal Year 2005

$
408


$
1,504


$
(1,185
)

$
727Fiscal Year 2006

$
727


$
2,456


$
(2,105
)

$
1,078Fiscal Year 2007

$
1,078


$
3,341


$
(2,586
)

$
1,833     *
    
    Deductions include write-offs   54




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##### Table of Contents



3.
    EXHIBITS  ExhibitNumber

Description2
.1

Agreement and Plan of Merger dated as of August 16, 2007
    among GSI Commerce, Inc., Blue Route, Inc., Accretive Commerce,
    Inc. and certain of the principal stakeholders of Accretive
    Commerce, Inc. (filed with GSI Commerce, Inc.s Current
    Report on
    Form 8-K
    filed on August 17, 2007 and incorporated herein by
    reference)3
.1

Amended and Restated Certificate of Incorporation of Global
    Sports, Inc. (filed as Appendix B to GSI Commerce,
    Inc.s Definitive Proxy Statement on Schedule 14A
    filed on April 27, 2001 and incorporated herein by
    reference)3
.2

Certificate of Amendment to Amended and Restated Certificate of
    Incorporation of Global Sports, Inc. (filed with GSI Commerce,
    Inc.s Quarterly Report on
    Form 10-Q
    for the quarter ended June 29, 2002 and incorporated herein
    by reference)3
.3

Amended and Restated Bylaws GSI Commerce, Inc. (filed with GSI
    Commerce, Inc.s Current Report on
    Form 8-K
    filed on November 13, 2007 and incorporated herein by
    reference)3
.4

Certificate of Designations, Preferences and Rights of
    Series A Junior Participating Preferred Stock (filed with
    GSI Commerce, Inc.s Current Report on
    Form 8-K
    filed on April 3, 2006 and incorporated herein by reference)4
.1

Form of Investor Warrant (filed with GSI Commerce, Inc.s
    Quarterly Report on
    Form 10-Q
    for the quarter ended September 29, 2001 and incorporated
    herein by reference)4
.2

Form of Partner Warrant (filed with GSI Commerce, Inc.s
    Quarterly Report on
    Form 10-Q
    for the quarter ended September 29, 2001 and incorporated
    herein by reference)4
.3

Warrant to Purchase 200,000 Shares of Common Stock dated
    January 30, 2002 (filed with GSI Commerce, Inc.s
    Annual Report on
    Form 10-K
    for the fiscal year ended December 29, 2001 and
    incorporated herein by reference)4
.4

Specimen Common Stock Certificate (filed with GSI Commerce,
    Inc.s Quarterly Report on
    Form 10-Q
    for the Quarter ended June 29, 2002 and incorporated herein
    by reference)4
.5

Registration Rights Agreement, dated July 31, 1995, by and
    between Global Sports, Inc. and MR Acquisitions, Inc. (filed
    with GSI Commerce, Inc.s Current Report on
    Form 8-K
    filed on July 31, 1995 and incorporated herein by reference)4
.6

Second Amended and Restated Registration Rights Agreement, dated
    as of September 13, 2000, by and between Global Sports,
    Inc., Interactive Technology Holdings, LLC, SOFTBANK Capital
    Advisors Fund LP and TMCT Ventures, L.P. (filed with GSI
    Commerce, Inc.s Current Report on
    Form 8-K
    filed on September 13, 2000 and incorporated herein by
    reference)4
.7

Second Amendment to Second Amended and Restated Registration
    Rights Agreement, dated as of July 20, 2001, among Global
    Sports, Inc., SOFTBANK Capital Partners LP, SOFTBANK Capital
    Advisors Fund LP, Rustic Canyon Ventures, LP (f/k/a TMCT
    Ventures, LP) and Interactive Technology Holdings, LLC (filed
    with GSI Commerce, Inc.s Current Report on
    Form 8-K
    filed on August 27, 2001 and incorporated herein by
    reference)4
.8

Third Amendment to Second Amended and Restated Registration
    Rights Agreement, dated as of July 25, 2003, among Global
    Sports, Inc. (n/k/a GSI Commerce, Inc.), SOFTBANK Capital
    Partners LP, SOFTBANK Capital Advisors Fund LP, Rustic
    Canyon Ventures, LP (f/k/a TMCT Ventures, LP) and Interactive
    Technology Holdings, Inc. (filed with GSI Commerce, Inc.s
    Current Report on
    Form 8-K
    on July 29, 2003 and incorporated herein by reference)4
.9

Fourth Amendment to Second Amended and Restated Registration
    Rights Agreement, dated as of June 26, 2004, among Global
    Sports, Inc. (n/k/a GSI Commerce, Inc.), SOFTBANK Capital
    Partners LP, SOFTBANK Capital Advisors Fund LP, Rustic
    Canyon Ventures, LP (f/k/a TMCT Ventures, LP) and Interactive
    Technology Holdings, Inc.(filed with GSI Commerce, Inc.s
    Annual Report
    Form 10-K
    filed on March 17, 2005 and incorporated herein by
    reference)4
.10

Rights Agreement, dated as of April 3, 2006, between GSI
    Commerce, Inc. and American Stock Transfer &
    Trust Company, as Rights Agent, including all exhibits
    thereto (filed with GSI Commerce, Inc.s Current Report on
    Form 8-K
    filed on April 3, 2006 and incorporated herein by
    reference) 55




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##### Table of Contents



ExhibitNumber

Description4
.11

Indenture dated as of June 1, 2005 by and between GSI
    Commerce, Inc. and JPMorgan Chase Bank, N.A. (filed with GSI
    Commerce, Inc.s Current Report on
    Form 8-K
    dated June 1, 2005 and incorporated herein by reference)4
.12

Form of 3% Convertible Note due 2025 (filed as
    Exhibit A to Exhibit 4.1 of GSI Commerce, Inc.s
    Current Report on
    Form 8-K
    dated June 1, 2005 and incorporated herein by reference)4
.13

Form of 2.50% Convertible Senior Note due 2027 (filed with
    GSI Commerce, Inc.s Current Report on
    Form 8-K
    dated July 5, 2007 and incorporated herein by reference)4
.14

Indenture dated as of July 2, 2007 between the Company and
    The Bank of New York, as trustee (filed with GSI Commerce,
    Inc.s Current Report on
    Form 8-K
    dated July 5, 2007 and incorporated herein by reference)4
.15

Registration Rights Agreement dated as of July 2, 2007
    between the Company and the initial purchaser named therein
    (filed with GSI Commerce, Inc.s Current Report on
    Form 8-K
    dated July 5, 2007 and incorporated herein by reference)10
.1+

GSI Commerce, Inc.s 1996 Equity Incentive Plan, amended
    and restated as of March 5, 200810
.2+

GSI Commerce, Inc.s 2005 Equity Incentive Plan as amended10
.3+

Leadership Team Deferral Plan, as amended and restated effective
    March 5, 200810
.4+

Employment Agreement, dated August 23, 2006, by and between
    GSI Commerce, Inc. and Michael G. Rubin (filed with GSI
    Commerce, Inc.s Current Report on
    Form 8-K
    filed on August 29, 2006 and incorporated herein by
    reference)10
.5+

Michael Rubin Form of PRSU Agreement (filed with GSI Commerce,
    Inc.s Current Report on
    Form 8-K
    filed on August 29, 2006 and incorporated herein by
    reference)10
.6

Stock Purchase Agreement dated June 10, 1999, by and
    between Global Sports, Inc., a Delaware corporation, and
    SOFTBANK America Inc., a Delaware corporation (filed with GSI
    Commerce, Inc.s
    Form 8-K
    on June 21, 1999 and incorporated herein by reference)10
.7

Stock and Warrant Purchase Agreement, dated as of
    September 13, 2000, by and between Global Sports, Inc. and
    Interactive Technology Holdings, LLC (filed with GSI Commerce,
    Inc.s
    Form 8-K
    on September 20, 2000 and incorporated herein by reference)10
.8

Stock Purchase Agreement, dated as of July 20, 2001, by and
    among Global Sports, Inc., Michael G. Rubin and Interactive
    Technology Holdings, LLC (filed with GSI Commerce, Inc.s
    Current Report on
    Form 8-K
    filed on August 27, 2001 and incorporated herein by
    reference)10
.9

Amendment to Stock and Warrant Purchase Agreement, dated as of
    April 27, 2000, by and among Global Sports, Inc. (n/k/a GSI
    Commerce, Inc.), and TMCT Ventures, L.P. (n/k/a Rustic Canyon
    Ventures, LP, dated as of June 26, 2004 (filed with GSI
    Commerce, Inc.s Annual Report on
    Form 10-K
    filed on March 17, 2005 and incorporated herein by
    reference)10
.10

Letter Agreement, dated as of July 20, 2001, among Global
    Sports, Inc., Interactive Technology Holdings, LLC, SOFTBANK
    Capital Partners LP and SOFTBANK Capital Advisors Fund LP
    (filed with GSI Commerce, Inc.s Current Report on
    Form 8-K
    filed on August 27, 2001 and incorporated herein by
    reference)10
.11

Stock and Warrant Exchange Agreement, dated as of July 25,
    2003, by and between GSI Commerce, Inc. and Interactive
    Technology Holdings, LLC (filed with GSI Commerce, Inc.s
    Current Report on
    Form 8-K
    on July 29, 2003 and incorporated herein by reference)10
.12

Promissory Note from 935 HQ Associates, LLC to CIBC Inc. dated
    June 9, 2004 (filed with GSI Commerce, Inc.s
    Quarterly Report on
    Form 10-Q
    for the quarter ended July 3, 2004 and incorporated herein
    by reference)10
.13

Mortgage, Assignment of Leases and Rents and Security Agreement
    from 935 HQ Associates, LLC in favor of CIBC Inc. dated as of
    June 9, 2004 (filed with GSI Commerce, Inc.s
    Quarterly Report on
    Form 10-Q
    for the quarter ended July 3, 2004 and incorporated herein
    by reference)10
.14+

Offer Letter, dated January 31, 2005, between GSI Commerce,
    Inc. and Stephen J. Gold (filed with GSI Commerce, Inc.s
    Current Report on
    Form 8-K
    on February 2, 2005 and incorporated herein by reference) 56




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##### Table of Contents



ExhibitNumber

Description10
.15+

Form of Change in Control Agreement (filed with GSI Commerce,
    Inc.s Current Report on
    Form 8-K
    filed on August 7, 2006 and incorporated herein by
    reference)10
.16+

Form of Restricted Stock Award Under the GSI Commerce, Inc. 1996
    Equity Incentive Plan (filed with GSI Commerce, Inc.s
    Current Report on
    Form 8-K
    filed on March 11, 2005 and incorporated herein by
    reference)10
.17+

Form of Option Agreement Issued to Executive Officers Under the
    1996 Equity Incentive Plan (filed with GSI Commerce, Inc.s
    Current Report on
    Form 8-K
    filed on March 11, 2005 and incorporated herein by
    reference)10
.18+

Form of Option Agreement Issued to Directors Under the 1996
    Equity Incentive Plan (filed with GSI Commerce, Inc.s
    Current Report on
    Form 8-K
    filed on March 11, 2005 and incorporated herein by
    reference)10
.19+

Form of Deferred Stock Award Under the 1996 Equity Incentive
    Plan (filed with GSI Commerce, Inc.s Current Report on
    Form 8-K
    filed on March 11, 2005 and incorporated herein by
    reference)10
.20+

Form of Restricted Stock Award Grant Notice (Basic) Under the
    GSI Commerce, Inc. 2005 Equity Incentive Plan (filed with GSI
    Commerce, Inc.s Annual Report on
    Form 10-K
    filed on March 15, 2006 and incorporated herein by
    reference)10
.21+

Form of Restricted Stock Award Grant Notice (Alternate) Under
    the GSI Commerce, Inc. 2005 Equity Incentive Plan (filed with
    GSI Commerce, Inc.s Annual Report on
    Form 10-K
    filed on March 15, 2006 and incorporated herein by
    reference)10
.22

Form of Restricted Stock Unit Grant Notice (Basic) Under the GSI
    Commerce, Inc. 2005 Equity Incentive Plan10
.23

Form of Restricted Stock Unit Grant Notice (Alternate) Under the
    GSI Commerce, Inc. 2005 Equity Incentive Plan (filed with GSI
    Commerce, Inc.s Annual Report on
    Form 10-K
    filed on March 15, 2006 and incorporated herein by
    reference)10
.24

Form of Restricted Stock Unit Grant Notice Issued to Directors
    Under the 2005 Equity Incentive Plan10
.25+

Stock Option Grant Notice (Basic) Under the 2005 Equity
    Incentive Plan (filed with GSI Commerce, Inc.s Annual
    Report on
    Form 10-K
    filed on March 15, 2006 and incorporated herein by
    reference)10
.26+

Stock Option Grant Notice (Alternate) Under the 2005 Equity
    Incentive Plan (filed with GSI Commerce, Inc.s Annual
    Report on
    Form 10-K
    filed on March 15, 2006 and incorporated herein by
    reference)10
.27+

Stock Option Grant Notice Issued to Directors Under the 2005
    Equity Incentive Plan (filed with GSI Commerce, Inc.s
    Annual Report on
    Form 10-K
    filed on March 15, 2006 and incorporated herein by
    reference)10
.28

Stock Purchase Agreement, dated as of April 27, 2000,
    between SOFTBANK Capital Partners LP, a Delaware limited
    partnership and SOFTBANK Capital Advisors Fund LP, a
    Delaware limited partnership and Global Sports, Inc., a Delaware
    corporation. (filed as Exhibit I of Amendment No. 1 to
    the Statement on Schedule 13D filed by SOFTBANK Capital
    Partners LP, a Delaware limited partnership, SOFTBANK Capital
    Partners LLC, a Delaware limited liability company, SOFTBANK
    Capital Partners Investment Inc., a Delaware corporation, Ronald
    D. Fisher, Charles R. Lax, SOFTBANK Holdings Inc., a Delaware
    corporation, SOFTBANK Corp., a Japanese corporation and
    Masayoshi Son on May 1, 2000 with respect GSI Commerce,
    Inc. and incorporated herein by reference).10
.29

Stock and Warrant Purchase Agreement, dated as of April 27,
    2000 between Global Sports, Inc. and TMCT Ventures, L.P. (filed
    with GSI Commerce, Inc.s Annual Report on
    Form 10-K
    filed on March 17, 2005 and incorporated herein by
    reference)10
.30

Agreement dated December 20, 2005 between Interactive
    Commerce Partners LLC and GSI Commerce, Inc. (filed with GSI
    Commerce, Inc.s Current Report on
    Form 8-K
    filed on March 9, 2006 and incorporated herein by reference)10
.31

Purchase Agreement dated June 27, 2007 between Goldman,
    Sachs & Co. and GSI Commerce, Inc. (filed with GSI
    Commerce, Inc.s Current Report on
    Form 8-K
    dated July 5, 2007 and incorporated herein by reference)12
.1

Statement Regarding Computation of Ratios of Earnings to Fixed
    Charges 57




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##### Table of Contents



ExhibitNumber

Description21
.1

List of Subsidiaries 57.1




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##### Table of Contents



ExhibitNumber

Description23
.1

Consent of Deloitte & Touche LLP24
.1

Power of Attorney, incorporated by reference to the signature
    page of this Annual Report on
    Form 10-K31
.1

Certification of Chief Executive Officer pursuant to
    Rule 13a-14(a)
    under the Securities Exchange Act of 193431
.2

Certification of Chief Financial Officer pursuant to
    Rule 13a-14(a)
    under the Securities Exchange Act of 193432
.1

Certification of Chief Executive Officer and Chief Financial
    Officer pursuant to 18 U.S.C. Section 1350, as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002     +
    
    Management contract or compensatory plan or arrangement 58




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##### Table of Contents



SIGNATURES  Pursuant to the requirements of Section 13 or 15(d) of
    the Securities Exchange Act of 1934, the registrant has duly
    caused this Report to be signed on its behalf on the date
    indicated by the undersigned thereunto duly authorized.
      By:
    /s/  Michael
    G. Rubin  Michael G Rubin
 Chairman, President and Chief Executive Officer
  POWER OF
    ATTORNEY AND SIGNATURES
  KNOW ALL PERSONS BY THESE PRESENTS, that each person whose
    signature appears below constitutes and appoints Michael G.
    Rubin and Michael R. Conn, and each or any one of them, his true
    and lawful attorney-in-fact and agent, with full power of
    substitution and resubstitution, for him and in his name, place
    and stead, in any and all capacities, to sign any and all
    amendments to this
    Form 10-K,
    and to file the same, with all exhibits thereto, and other
    documents in connection therewith, with the Securities and
    Exchange Commission, granting unto said attorneys-in-fact and
    agents, and each of them, full power and authority to do and
    perform each and every act and thing requisite and necessary to
    be done in connection therewith, as fully to all intents and
    purposes as he might or could do in person, hereby ratifying and
    confirming all that said attorneys-in-fact and agents, or any of
    them, or their or his substitutes or substitute, may lawfully do
    or cause to be done by virtue hereof.
  Pursuant to the requirements of the Securities Exchange Act
    of 1934, this Report has been signed below by the following
    persons on behalf of the registrant and in the capacities and on
    the dates indicated.
  Signature

Title(s)

Date/s/  Michael
    G. RubinMichael
    G. Rubin

Chairman, President and Chief Executive Officer (principal
    executive officer)

March 13, 2008/s/  Michael
    R. ConnMichael
    R. Conn

Executive Vice President, Finance and Chief Financial Officer
    (principal financial officer and principal accounting officer)

March 13, 2008/s/  M.
    Jeffrey BranmanM.
    Jeffrey Branman

Director

March 13, 2008/s/  Michael
    DonahueMichael
    Donahue

Director

March 13, 2008/s/  Ronald
    D. FisherRonald
    D. Fisher

Director

March 13, 2008/s/  John
    A. HunterJohn
    A. Hunter

Director

March 13, 2008 59




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##### Table of Contents



Signature

Title(s)

Date/s/  Mark
    S. MenellMark
    S. Menell

Director

March 13, 2008/s/  Jeffrey
    F. RayportJeffrey
    F. Rayport

Director

March 13, 2008/s/  Lawrence
    S. SmithLawrence
    S. Smith

Director

March 13, 2008/s/  Andrea
    M. WeissAndrea
    M. Weiss

Director

March 13, 2008  60




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM              Internal Control  Integrated Framework
      F-1




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##### Table of Contents



GSI
    COMMERCE, INC. AND SUBSIDIARIES
 CONSOLIDATED
    BALANCE SHEETS  December 30,


December 29,2006


2007(In thousands,except share data)ASSETSCurrent assets:Cash and cash equivalents

$
71,382


$
231,511Marketable securities


113,074



Accounts receivable, net of allowance of $1,078 and $1,833


38,681



64,285Inventory


46,816



47,293Deferred tax assets


10,403



14,114Prepaid expenses and other current assets


6,409



12,459Total current assets


286,765



369,662Property and equipment, net


106,204



156,774Goodwill


17,786



82,757Intangible assets, net of accumulated amortization of $441 and
    $4,972


2,027



16,476Equity investments


2,435



6,202Long-term deferred tax assets


36,792



45,234Other assets, net of accumulated amortization of $11,926 and
    $14,545


11,548



16,535Total assets

$
463,557


$
693,640LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
76,553


$
85,667Accrued expenses


72,740



98,179Deferred revenue


11,790



17,588Current portion of long-term debt


510



2,406Total current liabilities


161,593



203,840Convertible notes


57,500



207,500Long-term debt


12,856



27,245Deferred revenue and other long-term liabilities


3,901



5,634Total liabilities


235,850



444,219Commitments and contingencies (Note 8)Stockholders equity:Preferred stock, $0.01 par value, 5,000,000 shares
    authorized; 0 shares issued and outstanding as of
    December 30, 2006 and December 29, 2007






Common stock, $0.01 par value, 90,000,000 shares
    authorized; 45,878,527 and 46,847,919 shares issued as of
    December 30, 2006 and December 29, 2007 respectively;
    45,878,324 and 46,847,716 shares outstanding as of
    December 30, 2006 and December 29, 2007, respectively


458



468Additional paid in capital


347,676



366,400Accumulated other comprehensive loss


(97
)


(156
)Accumulated deficit


(120,330
)


(117,291
)Total stockholders equity


227,707



249,421Total liabilities and stockholders equity

$
463,557


$
693,640    F-2




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##### Table of Contents



GSI
    COMMERCE, INC. AND SUBSIDIARIES
 CONSOLIDATED
    STATEMENTS OF OPERATIONS  Fiscal Year EndedDecember 31,


December 30,


December 29,2005


2006


2007(In thousands, except per share data)Revenues:Net revenues from product sales

$
355,374


$
461,183


$
512,194Service fee revenues


85,018



148,370



237,763Net revenues


440,392



609,553



749,957Cost of revenues from product sales


263,829



331,253



356,541Gross profit


176,563



278,300



393,416Operating expenses:Sales and marketing, inclusive of $3,200, $3,654 and $3,101 of
    stock-based compensation


107,503



165,919



241,906Product development, inclusive of $398, $936 and $1,615 of
    stock-based compensation


28,833



45,375



65,898General and administrative, inclusive of $207, $2,988 and $3,703
    of stock-based compensation


22,714



36,062



43,333Depreciation and amortization


14,635



21,297



37,337Total operating expenses


173,685



268,653



388,474Income from operations


2,878



9,647



4,942Other (income) expense:Interest expense


2,220



3,107



6,016Interest income


(2,944
)


(6,075
)


(9,270
)Other expense, net


582



37



237Loss on investments






2,873



5,007Total other (income) expense


(142
)


(58
)


1,990Income before income taxes


3,020



9,705



2,952Provision (benefit) for income taxes


321



(43,728
)


(87
)Net income before cumulative effect of change in accounting
    principle


2,699



53,433



3,039Cumulative effect of change in accounting principle






268



Net income

$
2,699


$
53,701


$
3,039Basic earnings per share:Prior to cumulative effect of change in accounting principle

$
0.06


$
1.18


$
0.07Cumulative effect of change in accounting principle






0.01



Earnings per share- basic:

$
0.06


$
1.19


$
0.07Diluted earnings per share:Prior to cumulative effect of change in accounting principle

$
0.06


$
1.09


$
0.06Cumulative effect of change in accounting principle






0.01



Earnings per share- diluted:

$
0.06


$
1.10


$
0.06Weighted average shares outstanding  basic


43,216



45,174



46,433Weighted average shares outstanding  diluted


45,321



50,624



48,739    F-3




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##### Table of Contents



GSI
    COMMERCE, INC. AND SUBSIDIARIES
 CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY  AccumulatedAdditional








OtherCommon Stock


Paid in


Accumulated


Comprehensive


Comprehensive


Treasury StockShares


Dollars


Capital


Deficit


(Loss) Income


Loss


Shares


Dollars


Total(In thousands)Consolidated balance at January 1, 2005


41,584


$
416


$
294,471


$
(176,730
)





$
(104
)


1


$



$
118,053Net income














2,699



2,699















2,699Net unrealized loss on available- for-sale securities, net of
    tax of $0


















(370
)


(370
)










(370
)Unrealized loss on investment in Odimo recorded at fair value,
    net of tax of $0 (See Note 3)


















(1,870
)


(1,870
)










(1,870
)Comprehensive income

















$
459Stock-based compensation expense










686























686Issuance of common stock during public offering


1,872



19



27,763























27,782Issuance costs related to the common stock public offering










(1,839
)






















(1,839
)Issuance of common stock upon exercise of options


1,013



10



7,939















(1
)






7,949Tax benefit in connection with exercise of stock options and
    awards










83























83Consolidated balance at December 31, 2005


44,469


$
445


$
329,103


$
(174,031
)





$
(2,344
)





$



$
153,173Net income














53,701



53,701















53,701Net unrealized gain on available- for-sale securities, net of
    tax of $57


















388



388











388Unrealized loss on investment in Odimo recorded at fair value,
    net of tax of $0 (See Note


















(860
)


(860
)










(860
)3)Add: Reclassification adjustment for losses realized in net
    income


















2,730



2,730











2,730Cumulative translation adjustment, net of tax of $0


















(11
)


(11
)










(11
)Comprehensive income

















$
55,948Stock-based compensation expense










4,951























4,951Common stock issued to finance acquisition


83



1



1,299























1,300Issuance of common stock and warrants upon exercise of options


1,246



12



10,154























10,166Issuance of stock awards upon vesting


81







(242
)






















(242
)Tax benefit in connection with exercise of stock options and
    awards










2,679























2,679Cumulative effect of change in accounting principle










(268
)






















(268
)Consolidated balance at December 30, 2006


45,879


$
458


$
347,676


$
(120,330
)





$
(97
)





$



$
227,707Net income














3,039



3,039















3,039Net unrealized gain on available- for-sale securities, net of
    tax of $0


















11



11











11Add: Reclassification adjustment for losses realized in net
    income


















80



80











80Cumulative translation adjustment, net of tax of $0


















(150
)


(150
)










(150
)Comprehensive income

















$
2,980Stock-based compensation expense










7,405























7,405Issuance of common stock and warrants upon exercise of options


805



8



8,072























8,080Issuance of stock awards upon vesting


164



2



(2
)






















Share-based awards retained for taxes










(1,288
)






















(1,288
)Tax benefit in connection with exercise of stock options and
    awards










4,537























4,537Consolidated balance at December 29, 2007


46,848


$
468


$
366,400


$
(117,291
)





$
(156
)





$



$
249,421    F-4




---



##### Table of Contents



GSI
    COMMERCE, INC. AND SUBSIDIARIES
 CONSOLIDATED
    STATEMENTS OF CASH FLOWS  Fiscal Year EndedDecember 31,


December 30,


December 29,2005


2006


2007(In thousands)Cash Flows from Operating Activities:Net income

$
2,699


$
53,701


$
3,039Adjustments to reconcile net income to net cash provided by
    operating activities:Depreciation


14,587



20,821



32,763Amortization


48



476



4,574Stock-based compensation


3,805



7,578



8,419Tax benefit in connection with exercise of stock options and
    awards


83







Loss on investments






2,873



5,007Loss on disposal of equipment


78



329



34Deferred income taxes






(44,404
)


(505
)Cumulative effect of change in accounting principle






(268
)


Changes in operating assets and liabilities:Accounts receivable, net


(9,317
)


(14,280
)


(7,005
)Inventory


3,171



(12,204
)


(471
)Prepaid expenses and other current assets


(659
)


(3,272
)


(2,265
)Other assets, net


(397
)


(2,256
)


1,106Accounts payable and accrued expenses and other


13,005



48,377



7,633Deferred revenue


(2,818
)


8,606



5,805Net cash provided by operating activities


24,285



66,077



58,134Cash Flows from Investing Activities:Payments for acquisitions of businesses, net of cash acquired


(768
)


(5,849
)


(100,574
)Cash paid for property and equipment, including internal use
    software


(29,551
)


(42,621
)


(54,196
)Proceeds from government grant related to corporate headquarters






3,000



Funding of restricted cash escrow funds






(1,052
)


Other deferred cost


(95
)


95



Cash paid for equity investments


(136
)


(2,435
)


(3,083
)Purchases of marketable securities


(176,789
)


(226,968
)


(263,688
)Sales of marketable securities


123,480



222,685



371,264Net cash used in investing activities


(83,859
)


(53,145
)


(50,277
)Cash Flows from Financing Activities:Proceeds from convertible notes


57,500







150,000Proceeds from long-term borrowing






343



Issuance costs paid for convertible notes


(2,589
)






(5,042
)Repayments of loan


(339
)






Repayments of capital lease obligations


(452
)


(469
)


(935
)Repayments of mortgage note


(153
)


(170
)


(182
)Proceeds from sales of common stock


27,782







Equity issuance costs paid


(1,839
)






Excess tax benefit in connection with exercise of stock options
    and awards






145



359Proceeds from exercise of common stock options and warrants


7,949



10,166



8,080Net cash provided by financing activities


87,859



10,015



152,280Effect of exchange rate changes on cash and cash equivalents


12



74



(8
)Net increase in cash and cash equivalents


28,297



23,021



160,129Cash and cash equivalents, beginning of period


20,064



48,361



71,382Cash and cash equivalents, end of period

$
48,361


$
71,382


$
231,511Supplemental Cash Flow InformationCash paid during the period for interest

$
2,073


$
3,182


$
5,622Cash paid during the period for income taxes










564Noncash Investing and Financing Activities:Temporary unrealized loss on investment in Odimo recorded at
    fair value


(1,870
)






Accrual for purchases of property and equipment


1,773



1,619



2,943Equipment financed under capital lease










15,562Common stock issued to finance acquisition






1,300



    F-5




---



##### Table of Contents



GSI
    COMMERCE, INC. AND SUBSIDIARIES
 NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (amounts in thousands, except per share data)  NOTE 1 
    DESCRIPTION
    OF BUSINESS  e-commerce, e-commerce e-commerce e-commerce e-commerce
  NOTE 2 
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES    Fiscal Year:
  Basis of Consolidation:
  Use of Estimates:
  Fair Values: and/or
  Reclassifications:
  Cash and Cash Equivalents:
  Inventory:
 F-6




---



##### Table of Contents



GSI
    COMMERCE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (amounts
    in thousands, except per share data)
    Property and Equipment:
  
    Three years for office equipment;
    Three to four years for computer hardware and software;
    Seven years for furniture and fulfillment center equipment;
    The lesser of fifteen years or lease term for leasehold
    improvements;
    Fifteen years for building improvements; and
    Thirty years for buildings.    Goodwill and Other Intangible Assets:
      Long-Lived Assets:
  Equity Investments and Other:
 F-7




---



##### Table of Contents



GSI
    COMMERCE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (amounts
    in thousands, except per share data)
  Other Assets, Net:
        Accrued Expenses:
  Revenue Recognition:
  99-19, (EITF 99-19),
  EITF 00-21, (EITF 00-21),
 F-8




---



##### Table of Contents



GSI
    COMMERCE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (amounts
    in thousands, except per share data)
  Net Revenues from Product Sales: e-commerce
  e-commerce EITF 01-09, (EITF 01-09), EITF 01-09 EITF 01-09
  Service Fee Revenues: e-commerce EITF 99-19,
    e-commerce
  Cost of Revenues: EITF 99-19.
 F-9




---



##### Table of Contents



GSI
    COMMERCE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (amounts
    in thousands, except per share data)
  Vendor Allowances: EITF 02-16,
  Sales and Marketing: e-commerce e-commerce e-commerce
  Shipping and Handling Costs:
  Fulfillment Costs:
  Advertising: 93-7, (SOP 93-7).
  Catalog Costs: SOP 93-7,
 F-10




---



##### Table of Contents



GSI
    COMMERCE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (amounts
    in thousands, except per share data)
    Product Development: e-commerce SOP 98-1, (SOP 98-1) SOP 98-1
  Stock-Based Compensation: EITF 96-18, EITF 00-18,
  .
   F-11




---



##### Table of Contents



GSI
    COMMERCE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (amounts
    in thousands, except per share data)
          Fiscal Year EndedDecember 31,2005Net income, as reported

$
2,699Add: Stock-based compensation expense included in reported net
    income


684Deduct: Total stock-based compensation determined under fair
    value based method for all stock option awards


(9,209
)Pro forma net loss

$
(5,826
)Income (loss) per share:As reported  basic

$
0.06Pro forma  basic

$
(0.13
)As reported  diluted

$
0.06Pro forma  diluted

$
(0.13
)  F-12




---



##### Table of Contents



GSI
    COMMERCE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (amounts
    in thousands, except per share data)
    Fiscal Year EndedDecember 31,Assumption

2005Dividend yield


NoneExpected volatility


57.09
%Average risk free interest rate


3.82
%Average expected lives


1.60 years     Income Taxes:
      New Accounting Pronouncements:
   F-13




---



##### Table of Contents



GSI
    COMMERCE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (amounts
    in thousands, except per share data)
          Proposed Accounting Pronouncement: 14-a, 14-a). 14-a
 F-14




---



##### Table of Contents



GSI
    COMMERCE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (amounts
    in thousands, except per share data)
    NOTE 3 
    CASH AND
    CASH EQUIVALENTS AND MARKETABLE SECURITIES           F-15




---



##### Table of Contents



GSI
    COMMERCE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (amounts
    in thousands, except per share data)
    December 30, 2006GrossAmortized


UnrealizedCost


Losses


Fair ValueAuction rate securities

$
73,625


$



$
73,625Corporate bonds


27,888



(70
)


27,818Certificates of deposit


1,500







1,500U.S. government agency securities


10,204



(73
)


10,131$
113,217


$
(143
)

$
113,074     Less than 12 Months


12 Months or More


TotalUnrealized





Unrealized





UnrealizedFair Value


Losses


Fair Value


Losses


Fair Value


LossesCorporate bonds

$
14,322


$
(11
)

$
13,496


$
(59
)

$
27,818


$
(70
)U.S. government agency securities


2,495



(8
)


7,636



(65
)


10,131



(73
)$
16,817


$
(19
)

$
21,132


$
(124
)

$
37,949


$
(143
)     NOTE 4 
    PROPERTY
    AND EQUIPMENT    December 30,


December 29,2006


2007Computer hardware and software

$
101,985


$
148,091Building and building improvements


43,842



44,213Furniture, warehouse and office equipment, and other


21,698



38,916Land


7,889



7,889Leasehold improvements


1,333



4,200Capitalized lease


1,692



17,403Construction in progress


689



1,528179,128



262,240Less: accumulated depreciation


(72,924
)


(105,466
)Property and equipment, net

$
106,204


$
156,774  F-16




---



##### Table of Contents



GSI
    COMMERCE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (amounts
    in thousands, except per share data)
        NOTE 5 
    GOODWILL
    AND OTHER INTANGIBLE ASSETS    December 31, 2005

$
13,932Aspherio S.L. acquisition


3,854December 30, 2006


17,786Accretive Commerce acquisition


61,930Zendor.com acquisition


3,041December 29, 2007

$
82,757The Companys intangible assets consisted of:   Weighted-December 30,


December 29,


Average2006


2007


LifeGross carrying value of intangible assets subject to
    amortization:Customer contracts

$
2,140


$
17,282



1.9Non-compete agreements






3,838



3.0Other


328



328



1.52,468



21,448



2.1Accumulated amortization:Customer contracts


(378
)


(4,570
)Non-compete agreements






(320
)Other


(63
)


(82
)(441
)


(4,972
)Net carrying value:Customer contracts


1,762



12,712Non-compete agreements






3,518Other


265



246$
2,027


$
16,476  F-17




---



##### Table of Contents



GSI
    COMMERCE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (amounts
    in thousands, except per share data)
    2008

$
6,9022009


4,2032010


3,1442011


1,5952012


386$
16,230   NOTE 6 
    ACQUISITIONS    Zendor.com
    Ltd.
  e-commerce e-commerce e-commerce
  and/or
 F-18




---



##### Table of Contents



GSI
    COMMERCE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (amounts
    in thousands, except per share data)
    Total current assets

$
9,830Property, plant and equipment


3,089Goodwill


3,041Total assets acquired


15,960Total liabilities assumed


(6,827
)Net assets acquired

$
9,133   Accretive
    Commerce, Inc.
  e-commerce e-commerce e-commerce
  and/or
  Total current assets

$
19,325Property, plant and equipment


9,165Identifiable intangible assets:Customer contracts


15,142Employee non-compete agreements


3,838Goodwill


61,930Other assets


8,424Total assets acquired


117,824Total current liabilities


(17,387
)Total non-current liabilities


(1,837
)Total liabilities assumed


(19,224
)Net assets acquired

$
98,600  F-19




---



##### Table of Contents



GSI
    COMMERCE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (amounts
    in thousands, except per share data)
      Unaudited
    Pro Forma Financial Information
    Fiscal Year EndedDecember 30,


December 29,2006


2007(Unaudited)Net revenues

$
682,976


$
804,969Net income (loss) prior to cumulative effect of change in
    accounting principle

$
44,605


$
(4,941
)Net income (loss)

$
44,873


$
(4,941
)Basic earnings (loss) per share:Prior to cumulative effect of change in accounting principle

$
0.98


$
(0.11
)Net earnings (loss) per share

$
0.99


$
(0.11
)Diluted earnings (loss) per share:Prior to cumulative effect of change in accounting principle

$
0.92


$
(0.11
)Net earnings (loss) per share

$
0.93


$
(0.11
)   Aspherio
    S.L.
  e-commerce
 F-20




---



##### Table of Contents



GSI
    COMMERCE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (amounts
    in thousands, except per share data)
    Other
    NOTE 7 
    LONG-TERM
    DEBT AND CREDIT FACILITY    December 30,


December 29,2006


2007Convertible notes

$
57,500


$
207,500Notes payable


13,037



12,858Capital lease obligations


329



16,79370,866



237,151Less: Current portion of notes payable


(181
)


(193
)Less: Current portion of capital lease obligations


(329
)


(2,213
)$
70,356


$
234,745   3%
    Convertible
    Notes due 2025    and/or
 F-21




---



##### Table of Contents



GSI
    COMMERCE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (amounts
    in thousands, except per share data)
        2.5% Convertible
    Notes due 2027
         F-22




---



##### Table of Contents



GSI
    COMMERCE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (amounts
    in thousands, except per share data)
      Note
    Payable
    Capital
    Lease Obligations
    December 29,2007Gross capital lease obligations

$
20,653Less: imputed interest


(3,860
)Total present value of future minimum lease payments


16,793Less: current portion


(2,213
)Long-term portion

$
14,580   Credit
    Facility
     F-23




---



##### Table of Contents



GSI
    COMMERCE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (amounts
    in thousands, except per share data)
    NOTE 8 
    COMMITMENTS
    AND CONTINGENCIES  Legal
    Proceedings
  e-commerce
  Operating
    and capital commitments
    Payments Due by Fiscal Year2008


2009


2010


2011


2012


Thereafter


TotalOperating lease obligations(1)

$
13,191


$
11,059


$
9,030


$
6,768


$
6,551


$
18,507


$
65,106Purchase obligations(1)


74,169























74,169Advertising and media agreements(1)


93























93Partner revenue share payments(1)


19,250



26,500



27,050



27,683



20,818



62,557



183,858Debt interest(1)


6,801



6,259



5,241



4,509



4,497



15,855



43,162Debt obligations


193



400



57,696



209



220



161,640



220,358Capital lease obligations, including interest(2)


3,208



3,265



3,264



3,265



3,264



4,387



20,653Total

$
116,905


$
47,483


$
102,281


$
42,434


$
35,350


$
262,946


$
607,399     (1)
    
    Not required to be recorded in the Consolidated Balance Sheet as
    of December 29, 2007, which is in accordance principles
    generally accepted in the United States of America.(2)
    
    Capital lease obligations, excluding interest, are recorded in
    the Consolidated Balance Sheets.   F-24




---



##### Table of Contents



GSI
    COMMERCE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (amounts
    in thousands, except per share data)
    NOTE 9 
    STOCKHOLDERS
    EQUITY  Preferred
    Stock:
    Common
    Stock:
      Stockholders
    Right Plan:
    NOTE 10 
    SHARE-BASED
    AWARDS   F-25




---



##### Table of Contents



GSI
    COMMERCE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (amounts
    in thousands, except per share data)
  Stock
    Options and Warrants
    WeightedWeighted


AverageAverage


Remaining


AggregateNumber of


Exercise


Contractual


IntrinsicShares


Price


Life (In Years)


Value(In thousands)Outstanding at December 30, 2006


4,984


$
9.97Granted





$
Exercised


(805
)

$
10.04Forfeited/Cancelled


(16
)

$
12.38Outstanding at December 29, 2007


4,163


$
9.94



4.74


$
40,049Vested and expected to vest at December 29, 2007


4,153


$
9.94



4.73


$
39,956Exercisable at December 29, 2007


4,094


$
9.94



4.71


$
39,420         WeightedWeighted


AverageAverage


Remaining


AggregateNumber of


Exercise


Contractual


IntrinsicShares


Price


Life (In Years)


Value(In thousands)Outstanding at December 30, 2006


303


$
3.09Granted





$
Exercised





$
Forfeited/Cancelled


(73
)

$
3.36Outstanding at December 29, 2007


230


$
3.01



3.11


$
3,793Vested and expected to vest atDecember 29, 2007


230


$
3.01



3.11


$
3,793Exercisable at December 29, 2007


30


$
6.48



2.01


$
385  F-26




---



##### Table of Contents



GSI
    COMMERCE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (amounts
    in thousands, except per share data)
    Restricted
    Stock Units
      WeightedAverage


AggregateNumber of


Grant Date


ValueShares


Fair Value


Intrinsic(In thousands)Nonvested shares at December 30, 2006


1,064


$
14.90Granted


1,095


$
20.16Vested


(223
)

$
21.02Forfeited/Cancelled


(66
)

$
17.48Nonvested shares at December 29, 2007


1,870


$
23.40


$
43,751         Restricted
    Stock Awards
     F-27




---



##### Table of Contents



GSI
    COMMERCE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (amounts
    in thousands, except per share data)
    NOTE 11 
    INCOME
    TAXES    Fiscal Year EndedDecember 31,


December 30,


December 29,2005


2006


2007Income before income taxes:Domestic

$
3,020


$
9,750


$
3,816Foreign






(45
)


(864
)Total

$
3,020


$
9,705


$
2,952Provision for income taxes:Current:Federal

$



$
441


$
64State


302



438



682Foreign


19







10Total Current

$
321


$
879


$
756Deferred:Federal

$



$
(42,035
)

$
1,032State






(2,572
)


(1,875
)Foreign










Total Deferred

$



$
(44,607
)

$
(843
)Total:Federal

$



$
(41,594
)

$
1,096State


302



(2,134
)


(1,193
)Foreign


19







10Total

$
321


$
(43,728
)

$
(87
)  F-28




---



##### Table of Contents



GSI
    COMMERCE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (amounts
    in thousands, except per share data)
    December 30,


December 29,2006


2007Deferred tax assets:Net operating loss carryforwards

$
150,380


$
162,532Alternative minimum tax credits


441



1,011Deferred revenue


5,283



8,073Employee benefits


97



313Inventory


1,167



1,346Restructuring






2,096Provision for doubtful accounts


341



684Allowance for sales returns


2,568



2,657Stock-based compensation


1,502



2,987Investment impairment and losses


1,103



2,902Accrued expenses






1,295Amortization


1,011



3,323Other


815



874Total deferred tax assets


164,708



190,093Valuation allowance


(115,381
)


(121,417
)Total deferred tax assets, net of valuation allowance


49,327



68,676Deferred tax liabilities:Property and equipment, net


(2,132
)


(3,110
)Amortization of intangibles






(6,218
)Total deferred tax liabilities


(2,132
)


(9,328
)Net deferred tax asset

$
47,195


$
59,348          F-29




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##### Table of Contents



GSI
    COMMERCE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (amounts
    in thousands, except per share data)
        Fiscal Year EndedDecember 31,


December 30,


December 29,2005


2006


2007Statutory federal income tax rate


34.0
%


35.0
%


35.0
%Increase (decrease) in taxes resulting from:Valuation allowance


(34.0
)%


(427.5
)%


(10.0
)%State taxes


10.0
%


(14.3
)%


(26.3
)%Effect of federal rate change


0.0
%


(46.5
)%


0.0
%Other


0.6
%


2.7
%


(1.7
)%Effective income tax rate


10.6
%


(450.6
)%


(3.0
)%    F-30




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##### Table of Contents



GSI
    COMMERCE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (amounts
    in thousands, except per share data)
    Balance at December 31, 2006

$
437Increases for tax positions related to prior years


281Increases for tax positions related to current year


351Decreases for tax positions related to prior years


(28
)Decreases as a result of a lapse of the statute of limitations


(27
)Balance at December 29, 2007

$
1,014           NOTE 12 
    EARNINGS
    PER SHARE   F-31




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##### Table of Contents



GSI
    COMMERCE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (amounts
    in thousands, except per share data)
    Fiscal Year EndedDecember 31,


December 30,


December 29,2005


2006


2007Net income for basic earnings per share

$
2,699


$
53,701


$
3,039Effect of convertible notes






2,008



Net income as adjusted for diluted earnings per share

$
2,699


$
55,709


$
3,039Weighted average shares outstanding  basic


43,216



45,174



46,433Earnings per common share  basic

$
0.06


$
1.19


$
0.07Dilutive effect of stock units and awards


39



165



552Dilutive effect of stock options and warrants


2,066



2,056



1,754Dilutive effect of convertible notes






3,229



Weighted average shares outstanding  diluted


45,321



50,624



48,739Earnings per common share  diluted

$
0.06


$
1.10


$
0.06     Fiscal Year EndedDecember 31,


December 30,


December 29,2005


2006


2007Stock units and awards






17



20Stock options and warrants


492



689



4Convertible notes


3,229







5,7153,721



706



5,739   NOTE 13 
    MAJOR
    SUPPLIERS/ECONOMIC DEPENDENCY    e-commerce e-commerce e-commerce
  e-commerce e-commerce e-commerce
  e-commerce e-commerce e-commerce
 F-32




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##### Table of Contents



GSI
    COMMERCE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (amounts
    in thousands, except per share data)
    NOTE 14 
    SEGMENT
    INFORMATION  e-commerce e-commerce, e-commerce e-commerce e-mail
    Fiscal Year EndedDecember 31,


December 30,


December 29,2005


2006


2007Product groupings:Product sales from sporting goods

$
212,932


$
314,696


$
384,511Other product sales


142,442



146,487



127,683Service fees


85,018



148,370



237,763Total net revenues

$
440,392


$
609,553


$
749,957   NOTE 15 
    RELATED
    PARTY TRANSACTIONS  E-Commerce and/or and/or
   F-33




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##### Table of Contents



GSI
    COMMERCE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (amounts
    in thousands, except per share data)
           F-34




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##### Table of Contents



GSI
    COMMERCE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (amounts
    in thousands, except per share data)
  NOTE 16 
    QUARTERLY
    RESULTS (UNAUDITED)    For the Fiscal Year Ended December 30, 2006First


Second


Third


FourthQuarter


Quarter


Quarter


QuarterNet revenues

$
114,243


$
119,628


$
118,475


$
257,207Gross profit

$
47,177


$
46,592


$
57,664


$
126,868Net income (loss)

$
(4,371
)

$
(3,581
)

$
(6,215
)

$
67,868Income (loss) per share  basic(1)

$
(0.10
)

$
(0.08
)

$
(0.14
)

$
1.49Income (loss) per share  diluted(1)

$
(0.10
)

$
(0.08
)

$
(0.14
)

$
1.33Weighted average shares outstanding  basic


44,680



44,993



45,344



45,679Weighted average shares outstanding  diluted


44,680



44,993



45,344



51,285     (1)
    
    The sum of the quarterly per share amounts may not equal per
    share amounts reported for year-to-date periods. This is due to
    changes in the number of weighted average shares outstanding and
    the effects of rounding for each period.    For the Fiscal Year Ended December 29, 2007First


Second


Third


FourthQuarter


Quarter


Quarter


QuarterNet revenues

$
146,283


$
131,264


$
137,285


$
335,125Gross profit

$
69,481


$
65,482


$
72,027


$
186,426Net income (loss)

$
(2,345
)

$
(5,033
)

$
(6,086
)

$
16,503Income (loss) per share  basic(1)

$
(0.05
)

$
(0.11
)

$
(0.13
)

$
0.35Income (loss) per share  diluted(1)

$
(0.05
)

$
(0.11
)

$
(0.13
)

$
0.30Weighted average shares outstanding  basic


45,999



46,391



46,567



46,774Weighted average shares outstanding  diluted


45,999



46,391



46,567



57,432     (1)
    
    The sum of the quarterly per share amounts may not equal per
    share amounts reported for year-to-date periods. This is due to
    changes in the number of weighted average shares outstanding and
    the effects of rounding for each period.  NOTE 17 
    SUBSEQUENT
    EVENTS  e-Dialog, (e-Dialog) e-Dialog e-mail e-Dialog e-commerce e-Dialog,
 F-35




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##### Table of Contents



GSI
    COMMERCE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (amounts
    in thousands, except per share data)
  e-Dialog e-Dialog
  e-Dialog e-Dialog,
  e-Dialog
  Total current assets

$
12,131Property, plant and equipment


3,444Excess purchase price over fair value of net assets acquired


137,559Other assets


775Total assets acquired


153,909Total current liabilities


(4,468
)Total non-current liabilities


(241
)Total liabilities assumed


(4,709
)Net assets acquired

$
149,200   * * * * * *
 F-36