ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 87-0634302 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |
799 West Coliseum Way, Midvale, Utah | 84047 | |
(Address of principal executive offices) | (Zip Code) | |
(801) 947-3100 | ||
(Registrant's telephone number, including area code) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, $0.0001 par value | OSTK | NASDAQ Global Market |
Large accelerated filer o | Accelerated filer x | |
Non-accelerated filer o | Smaller reporting company o | |
Emerging growth company o |
Page | ||
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 5. | ||
Item 6. | ||
June 30, 2019 | December 31, 2018 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 121,294 | $ | 141,512 | |||
Restricted cash | 2,313 | 1,302 | |||||
Accounts receivable, net | 23,635 | 35,930 | |||||
Inventories, net | 11,877 | 14,108 | |||||
Prepaids and other current assets | 19,513 | 22,415 | |||||
Total current assets | 178,632 | 215,267 | |||||
Property and equipment, net | 131,633 | 134,687 | |||||
Intangible assets, net | 15,474 | 13,370 | |||||
Goodwill | 27,120 | 22,895 | |||||
Equity securities | 43,757 | 60,427 | |||||
Operating lease right-of-use assets | 45,066 | — | |||||
Other long-term assets, net | 7,492 | 14,573 | |||||
Total assets | $ | 449,174 | $ | 461,219 | |||
Liabilities and Stockholders' Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 70,857 | $ | 102,574 | |||
Accrued liabilities | 82,710 | 87,858 | |||||
Deferred revenue | 40,950 | 50,578 | |||||
Operating lease liabilities, current | 5,731 | — | |||||
Short-term debt | 3,108 | — | |||||
Other current liabilities | 486 | 476 | |||||
Total current liabilities | 203,842 | 241,486 | |||||
Long-term debt, net | — | 3,069 | |||||
Operating lease liabilities, non-current | 44,105 | — | |||||
Other long-term liabilities | 2,147 | 5,958 | |||||
Total liabilities | 250,094 | 250,513 | |||||
Commitments and contingencies (Note 7) | |||||||
Stockholders' equity: | |||||||
Preferred stock, $0.0001 par value, authorized shares - 5,000 | |||||||
Series A, issued and outstanding - 3 and 127 | — | — | |||||
Series A-1, issued and outstanding - 123 and 0 | — | — | |||||
Series B, issued and outstanding - 356 and 355 | — | — | |||||
Common stock, $0.0001 par value, authorized shares - 100,000 | |||||||
Issued shares - 38,561 and 35,346 | |||||||
Outstanding shares - 35,239 and 32,146 | 3 | 3 | |||||
Additional paid-in capital | 719,010 | 657,981 | |||||
Accumulated deficit | (522,397 | ) | (458,897 | ) | |||
Accumulated other comprehensive loss | (576 | ) | (584 | ) | |||
Treasury stock at cost - 3,322 and 3,200 | (68,746 | ) | (66,757 | ) | |||
Equity attributable to stockholders of Overstock.com, Inc. | 127,294 | 131,746 | |||||
Equity attributable to noncontrolling interests | 71,786 | 78,960 | |||||
Total stockholders' equity | 199,080 | 210,706 | |||||
Total liabilities and stockholders' equity | $ | 449,174 | $ | 461,219 |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Revenue, net | |||||||||||||||
Retail | $ | 367,475 | $ | 477,683 | $ | 730,100 | $ | 917,679 | |||||||
Other | 6,234 | 5,450 | 11,338 | 10,785 | |||||||||||
Total net revenue | 373,709 | 483,133 | 741,438 | 928,464 | |||||||||||
Cost of goods sold | |||||||||||||||
Retail(1) | 294,984 | 387,252 | 585,624 | 734,832 | |||||||||||
Other | 4,826 | 4,138 | 8,791 | 8,020 | |||||||||||
Total cost of goods sold | 299,810 | 391,390 | 594,415 | 742,852 | |||||||||||
Gross profit | 73,899 | 91,743 | 147,023 | 185,612 | |||||||||||
Operating expenses: | |||||||||||||||
Sales and marketing(1) | 34,560 | 94,416 | 68,037 | 171,630 | |||||||||||
Technology(1) | 33,153 | 32,423 | 68,586 | 63,717 | |||||||||||
General and administrative(1) | 31,964 | 31,440 | 72,196 | 71,195 | |||||||||||
Total operating expenses | 99,677 | 158,279 | 208,819 | 306,542 | |||||||||||
Operating loss | (25,778 | ) | (66,536 | ) | (61,796 | ) | (120,930 | ) | |||||||
Interest income | 630 | 620 | 1,033 | 1,164 | |||||||||||
Interest expense | (105 | ) | (395 | ) | (232 | ) | (1,269 | ) | |||||||
Other income (expense), net | (2,995 | ) | 368 | (9,267 | ) | 359 | |||||||||
Loss before income taxes | (28,248 | ) | (65,943 | ) | (70,262 | ) | (120,676 | ) | |||||||
Provision (benefit) from income taxes | (622 | ) | (27 | ) | 256 | (304 | ) | ||||||||
Net loss | $ | (27,626 | ) | $ | (65,916 | ) | $ | (70,518 | ) | $ | (120,372 | ) | |||
Less: Net loss attributable to noncontrolling interests | (2,945 | ) | (1,005 | ) | (6,593 | ) | (4,552 | ) | |||||||
Net loss attributable to stockholders of Overstock.com, Inc. | $ | (24,681 | ) | $ | (64,911 | ) | $ | (63,925 | ) | $ | (115,820 | ) | |||
Net loss per common share—basic: | |||||||||||||||
Net loss attributable to common shares—basic | $ | (0.69 | ) | $ | (2.20 | ) | $ | (1.85 | ) | $ | (3.94 | ) | |||
Weighted average common shares outstanding—basic | 35,225 | 28,903 | 33,806 | 28,736 | |||||||||||
Net loss per common share—diluted: | |||||||||||||||
Net loss attributable to common shares—diluted | $ | (0.69 | ) | $ | (2.20 | ) | $ | (1.85 | ) | $ | (3.94 | ) | |||
Weighted average common shares outstanding—diluted | 35,225 | 28,903 | 33,806 | 28,736 |
(1) Includes stock-based compensation as follows (Note 10): | |||||||||||||||
Cost of goods sold — retail | $ | 54 | $ | 41 | $ | 101 | $ | 111 | |||||||
Sales and marketing | 533 | 315 | 974 | 1,188 | |||||||||||
Technology | 1,670 | 621 | 2,897 | 1,142 | |||||||||||
General and administrative | 2,914 | 1,996 | 5,184 | 6,967 | |||||||||||
Total | $ | 5,171 | $ | 2,973 | $ | 9,156 | $ | 9,408 |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net loss | $ | (27,626 | ) | $ | (65,916 | ) | $ | (70,518 | ) | $ | (120,372 | ) | |||
Other comprehensive loss: | |||||||||||||||
Unrealized gain on cash flow hedges, net of expense for taxes of $0, and $0 | 4 | 4 | 8 | 8 | |||||||||||
Other comprehensive income | 4 | 4 | 8 | 8 | |||||||||||
Comprehensive loss | $ | (27,622 | ) | $ | (65,912 | ) | $ | (70,510 | ) | $ | (120,364 | ) | |||
Less: Comprehensive loss attributable to noncontrolling interests | (2,945 | ) | (1,005 | ) | (6,593 | ) | (4,552 | ) | |||||||
Comprehensive loss attributable to stockholders of Overstock.com, Inc. | $ | (24,677 | ) | $ | (64,907 | ) | $ | (63,917 | ) | $ | (115,812 | ) |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Equity attributable to stockholders of Overstock.com, Inc. | |||||||||||||||
Number of common shares issued | |||||||||||||||
Balance at beginning of period | 37,802 | 32,048 | 35,346 | 30,632 | |||||||||||
Common stock issued upon vesting of restricted stock | 14 | 55 | 255 | 221 | |||||||||||
Common stock issued for asset purchase | — | 100 | — | 100 | |||||||||||
Exercise of stock warrants | — | — | — | 1,250 | |||||||||||
Common stock sold through ATM offering | 745 | — | 2,960 | — | |||||||||||
Balance at end of period | 38,561 | 32,203 | 38,561 | 32,203 | |||||||||||
Number of treasury stock shares | |||||||||||||||
Balance at beginning of period | 3,319 | 3,182 | 3,200 | 3,135 | |||||||||||
Common stock repurchased through business combination | — | — | 47 | — | |||||||||||
Tax withholding upon vesting of restricted stock | 3 | 14 | 75 | 61 | |||||||||||
Balance at end of period | 3,322 | 3,196 | 3,322 | 3,196 | |||||||||||
Total number of outstanding shares | 35,239 | 29,007 | 35,239 | 29,007 | |||||||||||
Common stock | $ | 3 | $ | 3 | $ | 3 | $ | 3 | |||||||
Number of Series A preferred shares issued and outstanding | |||||||||||||||
Balance at beginning of period | 127 | 127 | 127 | 127 | |||||||||||
Exchange of shares to Series A-1 | (123 | ) | — | (123 | ) | — | |||||||||
Conversion of shares to Series B | (1 | ) | — | (1 | ) | — | |||||||||
Balance at end of period | 3 | 127 | 3 | 127 | |||||||||||
Number of Series A-1 preferred shares issued and outstanding | |||||||||||||||
Balance at beginning of period | — | — | — | — | |||||||||||
Exchange of shares from Series A | 123 | — | 123 | — | |||||||||||
Balance at end of period | 123 | — | 123 | — | |||||||||||
Number of Series B preferred shares issued and outstanding | |||||||||||||||
Balance at beginning of period | 355 | 555 | 355 | 555 | |||||||||||
Conversion of shares from Series A | 1 | — | 1 | — | |||||||||||
Balance at end of period | 356 | 555 | 356 | 555 | |||||||||||
Preferred stock | $ | — | $ | — | $ | — | $ | — | |||||||
Additional paid-in capital | |||||||||||||||
Balance at beginning of period | $ | 701,877 | $ | 547,184 | $ | 657,981 | $ | 494,732 | |||||||
Stock-based compensation to employees and directors | 5,171 | 2,973 | 9,156 | 5,368 | |||||||||||
Common stock issued for asset purchase | — | 2,930 | — | 2,930 | |||||||||||
Issuance and exercise of stock warrants | — | 25 | — | 50,587 | |||||||||||
Common stock sold through ATM offering, net | 12,198 | — | 52,112 | — | |||||||||||
Other | (236 | ) | — | (239 | ) | (505 | ) | ||||||||
Balance at end of period | $ | 719,010 | $ | 553,112 | $ | 719,010 | $ | 553,112 | |||||||
Continued on the following page |
Overstock.com, Inc. Consolidated Statements of Changes in Stockholders' Equity (Unaudited) (in thousands) | |||||||||||||||
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Accumulated deficit | |||||||||||||||
Balance at beginning of period | $ | (497,716 | ) | $ | (300,561 | ) | $ | (458,897 | ) | $ | (254,692 | ) | |||
Cumulative effect of change in accounting principle | — | — | — | 5,040 | |||||||||||
Net loss attributable to stockholders of Overstock.com, Inc. | (24,681 | ) | (64,911 | ) | (63,925 | ) | (115,820 | ) | |||||||
Other | — | — | 425 | — | |||||||||||
Balance at end of period | $ | (522,397 | ) | $ | (365,472 | ) | $ | (522,397 | ) | $ | (365,472 | ) | |||
Accumulated other comprehensive loss | |||||||||||||||
Balance at beginning of period | $ | (580 | ) | $ | (595 | ) | $ | (584 | ) | $ | (599 | ) | |||
Net other comprehensive income | 4 | 4 | 8 | 8 | |||||||||||
Balance at end of period | $ | (576 | ) | $ | (591 | ) | $ | (576 | ) | $ | (591 | ) | |||
Treasury stock | |||||||||||||||
Balance at beginning of period | $ | (68,753 | ) | $ | (66,170 | ) | $ | (66,757 | ) | $ | (63,816 | ) | |||
Common stock repurchased through business combination | — | — | (643 | ) | — | ||||||||||
Tax withholding upon vesting of restricted stock | 7 | (492 | ) | (1,346 | ) | (2,846 | ) | ||||||||
Balance at end of period | (68,746 | ) | (66,662 | ) | (68,746 | ) | (66,662 | ) | |||||||
Total equity attributable to stockholders of Overstock.com, Inc. | $ | 127,294 | $ | 120,390 | $ | 127,294 | $ | 120,390 | |||||||
Equity attributable to noncontrolling interests | |||||||||||||||
Balance at beginning of period | $ | 74,731 | $ | 76,232 | $ | 78,960 | $ | (3,505 | ) | ||||||
Proceeds from security token offering, net | — | 2,491 | — | 78,442 | |||||||||||
Stock-based compensation to employees and directors | — | — | — | 4,040 | |||||||||||
Tax withholding upon vesting of restricted stock | — | — | — | (1,680 | ) | ||||||||||
Net loss attributable to noncontrolling interests | (2,945 | ) | (1,005 | ) | (6,593 | ) | (4,552 | ) | |||||||
Fair value of noncontrolling interest at acquisition | — | — | — | 4,468 | |||||||||||
Other | — | — | (581 | ) | 505 | ||||||||||
Total equity attributable to noncontrolling interests | $ | 71,786 | $ | 77,718 | $ | 71,786 | $ | 77,718 | |||||||
Total stockholders' equity | $ | 199,080 | $ | 198,108 | $ | 199,080 | $ | 198,108 |
Six months ended June 30, | |||||||
2019 | 2018 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (70,518 | ) | $ | (120,372 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
Depreciation of property and equipment | 12,914 | 12,983 | |||||
Amortization of intangible assets | 2,604 | 2,051 | |||||
Amortization of right-of-use assets | 2,992 | — | |||||
Stock-based compensation to employees and directors | 9,156 | 9,408 | |||||
Deferred income taxes, net | 102 | (298 | ) | ||||
Gain on sale of cryptocurrencies | (128 | ) | (8,348 | ) | |||
Impairment of cryptocurrencies | 318 | 9,491 | |||||
Impairment of equity securities | 4,214 | — | |||||
Losses on equity method securities | 3,058 | 1,381 | |||||
Other non-cash adjustments | 1,068 | (1,707 | ) | ||||
Changes in operating assets and liabilities, net of acquisitions: | |||||||
Accounts receivable, net | 12,295 | 1,882 | |||||
Inventories, net | 2,231 | 120 | |||||
Prepaids and other current assets | 3,311 | (7,680 | ) | ||||
Other long-term assets, net | (547 | ) | (3,827 | ) | |||
Accounts payable | (31,722 | ) | 6,686 | ||||
Accrued liabilities | (5,317 | ) | 26,911 | ||||
Deferred revenue | (9,628 | ) | 1,216 | ||||
Operating lease liabilities | (2,340 | ) | — | ||||
Other long-term liabilities | 85 | (476 | ) | ||||
Net cash used in operating activities | (65,852 | ) | (70,579 | ) | |||
Cash flows from investing activities: | |||||||
Purchase of intangible assets | — | (9,241 | ) | ||||
Purchase of equity securities | (2,500 | ) | (29,570 | ) | |||
Proceeds from sale of equity securities | 7,082 | — | |||||
Disbursement of notes receivable | (2,000 | ) | (200 | ) | |||
Acquisitions of businesses, net of cash acquired | 4,886 | (12,912 | ) | ||||
Expenditures for property and equipment | (10,586 | ) | (12,749 | ) | |||
Other investing activities, net | 3 | 22 | |||||
Net cash used in investing activities | (3,115 | ) | (64,650 | ) | |||
Cash flows from financing activities: | |||||||
Payments on long-term debt | — | (40,000 | ) | ||||
Proceeds from issuance and exercise of stock warrants | — | 50,587 | |||||
Proceeds from security token offering, net of offering costs and withdrawals | — | 78,442 | |||||
Proceeds from sale of common stock, net of offering costs | 52,112 | — | |||||
Payments of taxes withheld upon vesting of restricted stock | (1,346 | ) | (4,526 | ) | |||
Other financing activities, net | (1,006 | ) | (248 | ) | |||
Net cash provided by financing activities | 49,760 | 84,255 | |||||
Net increase (decrease) in cash, cash equivalents and restricted cash | (19,207 | ) | (50,974 | ) | |||
Cash, cash equivalents and restricted cash, beginning of period | 142,814 | 203,670 | |||||
Cash, cash equivalents and restricted cash, end of period | $ | 123,607 | $ | 152,696 |
Six months ended June 30, | |||||||
2019 | 2018 | ||||||
Supplemental disclosures of cash flow information: | |||||||
Cash paid during the period: | |||||||
Interest paid, net of amounts capitalized | $ | 173 | $ | 1,113 | |||
Income taxes paid (refunded), net | (469 | ) | 7 | ||||
Non-cash investing and financing activities: | |||||||
Property and equipment financed through accounts payable and accrued liabilities | $ | 43 | $ | 735 | |||
Acquisition of assets through stock issuance | — | 2,930 | |||||
Common stock repurchased through business combination | 643 | — | |||||
Note receivable converted to equity security | 359 | 200 | |||||
Deposit applied to business combination purchase price | 7,347 | — | |||||
Equity method security applied to business combination purchase price | 3,800 | — | |||||
Recognition of right-of-use assets upon adoption of ASC 842 | 30,968 | — |
• | Level 1—Quoted prices for identical instruments in active markets; |
• | Level 2—Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and |
• | Level 3—Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
p | Fair Value Measurements at June 30, 2019: | ||||||||||||||
Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets: | |||||||||||||||
Cash equivalents - Money market mutual funds | $ | 2,991 | $ | 2,991 | $ | — | $ | — | |||||||
Equity securities, at fair value | 1,518 | 1,518 | — | — | |||||||||||
Trading securities held in a "rabbi trust" (1) | 100 | 100 | — | — | |||||||||||
Total assets | $ | 4,609 | $ | 4,609 | $ | — | $ | — | |||||||
Liabilities: | |||||||||||||||
Deferred compensation accrual "rabbi trust" (2) | $ | 102 | $ | 102 | $ | — | $ | — | |||||||
Total liabilities | $ | 102 | $ | 102 | $ | — | $ | — |
Fair Value Measurements at December 31, 2018: | |||||||||||||||
Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets: | |||||||||||||||
Cash equivalents - Money market mutual funds | $ | 3,135 | $ | 3,135 | $ | — | $ | — | |||||||
Equity securities, at fair value | 2,636 | 2,636 | — | — | |||||||||||
Trading securities held in a "rabbi trust" (1) | 84 | 84 | — | — | |||||||||||
Total assets | $ | 5,855 | $ | 5,855 | $ | — | $ | — | |||||||
Liabilities: | |||||||||||||||
Deferred compensation accrual "rabbi trust" (2) | $ | 85 | $ | 85 | $ | — | $ | — | |||||||
Total liabilities | $ | 85 | $ | 85 | $ | — | $ | — |
(1) | — Trading securities held in a rabbi trust are included in Prepaids and other current assets and Other long-term assets, net in the consolidated balance sheets. |
(2) | — Non-qualified deferred compensation in a rabbi trust is included in Accrued liabilities and Other long-term liabilities in the consolidated balance sheets. |
Life (years) | |
Building | 40 |
Land improvements | 20 |
Building machinery and equipment | 15-20 |
Furniture and equipment | 5-7 |
Computer hardware | 3-4 |
Computer software, including internal-use software and website development | 2-4 |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Cost of goods sold - direct | $ | 171 | $ | 83 | $ | 346 | $ | 167 | |||||||
Technology | 4,892 | 5,296 | 10,067 | 10,772 | |||||||||||
General and administrative | 1,277 | 1,023 | 2,501 | 2,044 | |||||||||||
Total depreciation | $ | 6,340 | $ | 6,402 | $ | 12,914 | $ | 12,983 |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net gains/(losses) recognized during the period on equity securities | $ | 220 | $ | 1,836 | $ | (3,810 | ) | $ | 1,836 | ||||||
Less: Net gains recognized during the period on equity securities sold | 720 | — | 266 | — | |||||||||||
Gains/(losses) recognized during the reporting period on equity securities still held | $ | (500 | ) | $ | 1,836 | $ | (4,076 | ) | $ | 1,836 |
Ownership interest | |
Bitt Inc. | 21% |
Boston Security Token Exchange LLC | 50% |
Chainstone Labs, Inc. | 29% |
GrainChain, Inc. | 10% |
Minds, Inc. | 24% |
SettleMint NV | 30% |
Spera, Inc. | 19% |
VinX Network Ltd. | 21% |
Voatz, Inc. | 21% |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net loss recognized on our proportionate share of the net losses of our equity method securities and amortization of the basis difference | $ | 2,033 | $ | 1,032 | $ | 3,058 | $ | 1,381 | |||||||
Impairments on equity method securities | 1,256 | — | 1,256 | — | |||||||||||
Net loss recognized during the period on equity method securities sold | — | — | 524 | — |
Amount | |||
Balances as of December 31, 2017 (1) | $ | 14,698 | |
Goodwill acquired during year | 8,197 | ||
Balances as of December 31, 2018 (2) | 22,895 | ||
Goodwill acquired during year | 1,685 | ||
Purchase price adjustment | 2,540 | ||
Balances as of June 30, 2019 (3) | $ | 27,120 |
June 30, 2019 | December 31, 2018 | ||||||
Intangible assets subject to amortization, gross (1) | $ | 32,343 | $ | 29,099 | |||
Less: accumulated amortization of intangible assets subject to amortization | (16,869 | ) | (15,729 | ) | |||
Total intangible assets, net | $ | 15,474 | $ | 13,370 |
(1) | — At June 30, 2019, the weighted average remaining useful life for intangible assets subject to amortization was 9.50 years. |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Technology | $ | 938 | $ | 895 | $ | 1,791 | $ | 1,650 | |||||||
Sales and marketing | 16 | 204 | 32 | 323 | |||||||||||
General and administrative | 170 | 34 | (659 | ) | 78 | ||||||||||
Total amortization | $ | 1,124 | $ | 1,133 | $ | 1,164 | $ | 2,051 |
Amount | |||
Deferred revenue at December 31, 2017 | $ | 46,468 | |
Increase due to deferral of revenue at period end | 43,216 | ||
Decrease due to beginning contract liabilities recognized as revenue | (39,106 | ) | |
Deferred revenue at December 31, 2018 | 50,578 | ||
Increase due to deferral of revenue at period end | 33,033 | ||
Decrease due to beginning contract liabilities recognized as revenue | (42,661 | ) | |
Deferred revenue at June 30, 2019 | $ | 40,950 |
Amount | |||
Allowance for returns at December 31, 2017 | $ | 17,391 | |
Additions to the allowance | 174,864 | ||
Deductions from the allowance | (176,994 | ) | |
Allowance for returns at December 31, 2018 | 15,261 | ||
Additions to the allowance | 62,545 | ||
Deductions from the allowance | (67,618 | ) | |
Allowance for returns at June 30, 2019 | $ | 10,188 |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||||||
Total revenue, net | $ | 373,709 | 100 | % | $ | 483,133 | 100 | % | $ | 741,438 | 100 | % | $ | 928,464 | 100 | % | |||||||||||
Cost of goods sold | |||||||||||||||||||||||||||
Product costs and other cost of goods sold | 283,502 | 76 | % | 371,841 | 77 | % | 560,719 | 76 | % | 705,361 | 76 | % | |||||||||||||||
Fulfillment and related costs | 16,308 | 4 | % | 19,549 | 4 | % | 33,696 | 5 | % | 37,491 | 4 | % | |||||||||||||||
Total cost of goods sold | 299,810 | 80 | % | 391,390 | 81 | % | 594,415 | 80 | % | 742,852 | 80 | % | |||||||||||||||
Gross profit | $ | 73,899 | 20 | % | $ | 91,743 | 19 | % | $ | 147,023 | 20 | % | $ | 185,612 | 20 | % |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net loss attributable to stockholders of Overstock.com, Inc. | $ | (24,681 | ) | $ | (64,911 | ) | $ | (63,925 | ) | $ | (115,820 | ) | |||
Less: Preferred stock (Token) repurchase (gain)/loss | — | — | (425 | ) | — | ||||||||||
Less: Preferred stock dividends - declared and accumulated | 19 | 27 | 38 | 53 | |||||||||||
Undistributed loss | (24,700 | ) | (64,938 | ) | (63,538 | ) | (115,873 | ) | |||||||
Less: Undistributed loss allocated to participating securities | (333 | ) | (1,495 | ) | (892 | ) | (2,683 | ) | |||||||
Net loss attributable to common shares | $ | (24,367 | ) | $ | (63,443 | ) | $ | (62,646 | ) | $ | (113,190 | ) | |||
Net loss per common share—basic: | |||||||||||||||
Net loss attributable to common shares—basic | $ | (0.69 | ) | $ | (2.20 | ) | $ | (1.85 | ) | $ | (3.94 | ) | |||
Weighted average common shares outstanding—basic | 35,225 | 28,903 | 33,806 | 28,736 | |||||||||||
Effect of dilutive securities: | |||||||||||||||
Stock options and restricted stock awards | — | — | — | — | |||||||||||
Weighted average common shares outstanding—diluted | 35,225 | 28,903 | 33,806 | 28,736 | |||||||||||
Net loss attributable to common shares—diluted | $ | (0.69 | ) | $ | (2.20 | ) | $ | (1.85 | ) | $ | (3.94 | ) |
Three months ended June 30, | Six months ended June 30, | ||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||
Stock options and restricted stock units | 904 | 550 | 967 | 617 | |||||||
Common shares issuable under stock warrant | — | — | — | 42 |
Purchase Price | Fair Value | ||
Cash paid, net of cash acquired | $ | 3,115 | |
Fair value of equity interest in Bitsy held before business combination | 3,800 | ||
Less: Fair value of Overstock.com common stock held by Bitsy at acquisition date | (643 | ) | |
Less: Settlement of receivable due from tZERO at acquisition date | (10 | ) | |
Total transaction consideration, net of cash acquired | $ | 6,262 | |
Allocation | |||
Prepaids and other current assets | $ | 71 | |
Property and equipment | 16 | ||
Intangible assets | 6,093 | ||
Goodwill | 1,685 | ||
Deferred tax liability | (943 | ) | |
Other liabilities assumed | (660 | ) | |
Total net assets, net of cash acquired | $ | 6,262 |
Intangible Assets | Fair Value | Weighted Average Useful Life (years) | |||
Patents | $ | 4,293 | 20 | ||
Technology | 1,500 | 5 | |||
Licenses | 300 | 1 | |||
Total acquired intangible assets as of the acquisition date | $ | 6,093 |
Purchase Price | Fair Value | ||
Cash paid, net of cash acquired | $ | 1,143 | |
Allocation | |||
Accounts receivable, net | $ | 399 | |
Inventories, net | 1,033 | ||
Prepaids and other current assets | 29 | ||
Property and equipment | 154 | ||
Intangible assets | 653 | ||
Goodwill | 3,376 | ||
Accounts payable and accrued liabilities | (1,432 | ) | |
Long-term debt, net | (3,069 | ) | |
Total net assets, net of cash acquired | $ | 1,143 |
June 30, 2019 | December 31, 2018 | ||||||
Accounts payable accruals | $ | 14,386 | $ | 15,872 | |||
Accrued compensation and other related costs | 11,909 | 12,099 | |||||
Accrued loss contingencies | 10,084 | 10,940 | |||||
Allowance for returns | 10,188 | 15,261 | |||||
Sales and other taxes payable | 9,881 | 9,923 | |||||
Accrued marketing expenses | 9,434 | 14,150 | |||||
Accrued freight | 8,437 | 5,343 | |||||
Other accrued expenses | 8,391 | 4,270 | |||||
Total accrued liabilities | $ | 82,710 | $ | 87,858 |
June 30, 2019 | |||
Operating right-of-use assets | $ | 45,066 | |
Operating lease liability - current | 5,731 | ||
Operating lease liability - non-current | 44,105 |
Three months ended June 30, 2019 | Six months ended June 30, 2019 | ||||||
Operating lease cost | $ | 2,363 | $ | 4,868 | |||
Short-term lease cost | 28 | 62 | |||||
Variable lease cost | 442 | 972 |
Six months ended June 30, 2019 | |||
Cash paid for amounts included in the measurement of lease liabilities: | |||
Operating cash flows used in operating leases | $ | (4,202 | ) |
Right-of-use assets obtained in exchange for new operating lease liabilities | $ | 17,090 | |
Weighted-average remaining lease term - operating leases | 7.02 years | ||
Weighted-average discount rate - operating leases | 8 | % |
Payments due by period | ||||
2019 (Remainder) | $ | 4,732 | ||
2020 | 9,385 | |||
2021 | 9,833 | |||
2022 | 9,826 | |||
2023 | 8,985 | |||
Thereafter | 22,774 | |||
Total lease payments | 65,535 | |||
Less interest | (15,699 | ) | ||
Present value of lease liabilities | $ | 49,836 |
Payments due by period | ||||
2019 | $ | 8,822 | ||
2020 | 7,414 | |||
2021 | 7,654 | |||
2022 | 7,579 | |||
2023 | 6,677 | |||
Thereafter | 19,571 | |||
Total lease payments | $ | 57,717 |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Overstock restricted stock awards | $ | 4,560 | $ | 2,700 | $ | 8,428 | $ | 5,084 | |||||||
Medici Ventures stock options | 307 | 123 | 533 | 134 | |||||||||||
tZERO equity awards | 304 | 150 | 195 | 4,190 | |||||||||||
Total stock-based compensation expense | $ | 5,171 | $ | 2,973 | $ | 9,156 | $ | 9,408 |
Six months ended June 30, 2019 | ||||||
Units | Weighted Average Grant Date Fair Value | |||||
Outstanding—beginning of year | 559 | $ | 44.08 | |||
Granted at fair value | 980 | 17.80 | ||||
Vested | (255 | ) | 35.48 | |||
Forfeited | (92 | ) | 20.43 | |||
Outstanding—end of period | 1,192 | $ | 26.14 |
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Equity method losses | $ | (2,033 | ) | $ | (1,031 | ) | $ | (3,058 | ) | $ | (1,381 | ) | ||||
Impairment of equity securities | (1,256 | ) | — | (4,214 | ) | — | ||||||||||
Unrealized gain/(loss) on equity securities | (500 | ) | 1,836 | (1,118 | ) | 1,836 | ||||||||||
Allowance on notes receivable | (5 | ) | — | (1,242 | ) | — | ||||||||||
Gain/(loss) on sale of equity securities | 720 | — | (258 | ) | — | |||||||||||
Other | 79 | (437 | ) | 623 | (96 | ) | ||||||||||
Total other income (expense), net | $ | (2,995 | ) | $ | 368 | $ | (9,267 | ) | $ | 359 |
Three months ended June 30, | |||||||||||||||
Retail | tZERO | Other | Total | ||||||||||||
2019 | |||||||||||||||
Revenue, net | $ | 367,475 | $ | 5,551 | $ | 683 | $ | 373,709 | |||||||
Cost of goods sold | 294,984 | 4,143 | 683 | 299,810 | |||||||||||
Gross profit | 72,491 | 1,408 | — | 73,899 | |||||||||||
Operating expenses (1) | 81,596 | 11,743 | 6,338 | 99,677 | |||||||||||
Interest and other income (expense), net (2) | 40 | 340 | (2,850 | ) | (2,470 | ) | |||||||||
Pre-tax loss | $ | (9,065 | ) | $ | (9,995 | ) | $ | (9,188 | ) | (28,248 | ) | ||||
Benefit from income taxes | (622 | ) | |||||||||||||
Net loss (3) | $ | (27,626 | ) | ||||||||||||
2018 | |||||||||||||||
Revenue, net | $ | 477,683 | $ | 4,890 | $ | 560 | $ | 483,133 | |||||||
Cost of goods sold | 387,252 | 3,578 | 560 | 391,390 | |||||||||||
Gross profit | 90,431 | 1,312 | — | 91,743 | |||||||||||
Operating expenses | 149,437 | 5,927 | 2,915 | 158,279 | |||||||||||
Interest and other income (expense), net (2) | 1,624 | (36 | ) | (995 | ) | 593 | |||||||||
Pre-tax loss | $ | (57,382 | ) | $ | (4,651 | ) | $ | (3,910 | ) | (65,943 | ) | ||||
Benefit from income taxes | (27 | ) | |||||||||||||
Net loss (3) | $ | (65,916 | ) | ||||||||||||
Six months ended June 30, | |||||||||||||||
Retail | tZERO | Other | Total | ||||||||||||
2019 | |||||||||||||||
Revenue, net | $ | 730,100 | $ | 10,047 | $ | 1,291 | $ | 741,438 | |||||||
Cost of goods sold | 585,624 | 7,500 | 1,291 | 594,415 | |||||||||||
Gross profit | 144,476 | 2,547 | — | 147,023 | |||||||||||
Operating expenses (1) | 166,929 | 27,297 | 14,593 | 208,819 | |||||||||||
Interest and other income (expense), net (2) | 175 | (623 | ) | (8,018 | ) | (8,466 | ) | ||||||||
Pre-tax loss | $ | (22,278 | ) | $ | (25,373 | ) | $ | (22,611 | ) | (70,262 | ) | ||||
Provision for income taxes | 256 | ||||||||||||||
Net loss (3) | $ | (70,518 | ) | ||||||||||||
2018 | |||||||||||||||
Revenue, net | $ | 917,679 | $ | 9,742 | $ | 1,043 | $ | 928,464 | |||||||
Cost of goods sold | 734,832 | 6,977 | 1,043 | 742,852 | |||||||||||
Gross profit | 182,847 | 2,765 | — | 185,612 | |||||||||||
Operating expenses | 274,969 | 25,886 | 5,687 | 306,542 | |||||||||||
Interest and other income (expense), net (2) | 1,169 | 417 | (1,332 | ) | 254 | ||||||||||
Pre-tax loss | $ | (90,953 | ) | $ | (22,704 | ) | $ | (7,019 | ) | (120,676 | ) | ||||
Benefit from income taxes | (304 | ) | |||||||||||||
Net loss (3) | $ | (120,372 | ) |
(1) | — Corporate support costs for three months ended June 30, 2019 have been allocated $9.4 million, $1.3 million, and $2.7 million to Retail, tZERO, and Other, respectively. Unallocated corporate support costs of $1.3 million are included in Other. Corporate support costs for the six months ended June 30, 2019 have been allocated $22.0 million, $3.1 million, and $6.3 million to Retail, tZERO, and Other, respectively. Unallocated corporate support costs of $3.1 million are included in Other. |
(2) | — Excludes intercompany transactions eliminated in consolidation, which consist primarily of service fees and interest. The net amounts of these intercompany transactions were $491,000 and $504,000 for the three months ended June 30, 2019 and 2018 and $907,000 and $2.5 million for the six months ended June 30, 2019 and 2018. |
(3) | — Net income (loss) presented for segment reporting purposes is before any adjustments attributable to noncontrolling interests. |
• | our strategies and plans for our retail business and our Medici businesses, including our tZERO initiatives; |
• | the possibility that we will sell or attempt to sell our retail business or pursue or attempt to pursue one or more other strategic alternatives that could change our business dramatically, as well as the possibility that we will determine not to sell or attempt to sell our retail business or pursue any other strategic alternative at all in the foreseeable future; |
• | whether we would or would not submit any sale of our retail business to a vote of our stockholders; |
• | whether we would or would not distribute any proceeds of any sale of our retail business to our stockholders by any means or use those proceeds in our blockchain initiatives; |
• | our expectations regarding the costs, benefits and risks of Medici Ventures' and tZERO's initiatives, including their acquisitions or purchases of interests in other companies; |
• | potential negotiated equity investments in Overstock and/or tZERO, including the timing of such investments and their likelihood of closing on the agreed upon time frames, if at all; |
• | the plans of tZERO and Medici Ventures and the costs, benefits and risks of their initiatives, including those of tZERO's ownership of SpeedRoute and PRO Securities; |
• | our expectations regarding the costs, benefits and risks of the tZERO security token offering completed in 2018; |
• | our expectations regarding the costs, benefits and risks of our efforts and plans to advertise or offer other additional businesses, innovations and projects that we or our subsidiaries may engage in, offer or advertise in the future; |
• | our expectations regarding Medici Land Governance Inc., a newly-formed public benefit corporation; |
• | our efforts to improve our natural search results in our retail business; |
• | our future operating or financial results, or other GAAP or non-GAAP financial measures or amounts or anticipated changes in any of them; |
• | our capital requirements and our ability to fund them; |
• | the adequacy of our liquidity and our ability, if any, to increase our liquidity or capital resources; |
• | tZERO's plans, including without limitation its plans regarding its Token Trading Systems, as well as its joint venture with Box Digital; |
• | our plans and expectations regarding the costs, benefits, and risks of attempting to develop technology applications including applications using or relating to blockchain technology and our plans to commercialize any of these potential applications; |
• | the competition we currently face and anticipate; |
• | the effects of current and future government regulation; |
• | our expectations for our international sales efforts and the anticipated results of our international operations; |
• | our plans for further changes to our business; |
• | our expectations regarding our emphasis on home and garden product offerings; |
• | our expectations regarding our shipping costs and timing of shipments; |
• | our expectations regarding our potential liabilities or exposure to claims under Delaware's Abandoned Property Law; |
• | our expectations regarding the actual costs of our employees' health insurance claims for which we may be liable; and |
• | our other statements about the anticipated benefits and risks of our business and plans. |
• | the possibility that we may sell our retail business and retain the after-tax proceeds of the sale for use in our blockchain initiatives, which would result in our stockholders owning equity interests in a publicly-held corporation seeking to develop entirely new businesses and revenue streams, without the benefits of our current retail business and the significant annual net revenues that it generates, but with most if not all of the expenses of operating a publicly-held corporation; |
• | the potentially substantial corporate level income tax expense we could incur if we were to sell our retail business in a taxable transaction; |
• | the possibility that our well-publicized review of potential strategic alternatives including the potential sale of our retail business may distract our management and other employees, may cause members of our management and/or other key employees to seek employment elsewhere, and may have adverse effects on our business and financial results; |
• | the technical, operational, financial, regulatory, legal, reputational, marketing and other obstacles we face in trying to create a profitable business from our blockchain initiatives; |
• | our ability to reach a definitive agreement, enforce definitive agreements already entered, or complete a capital raising transaction for tZERO on the terms contemplated by the previously-disclosed memorandum of understanding and/or binding agreements we signed with GSR Capital and Makara Capital; |
• | the possibility that the proceeds of the security token offering completed by tZERO in 2018 might be treated as income to us for federal income tax purposes; |
• | difficulties we have encountered and continue to encounter with changes that Google has made to its natural search engine algorithms, which have periodically resulted in lower rankings of our products and may continue to do so, and future changes that Google and other search engine companies may make to their natural search engine algorithms, which may have similar effects on us; |
• | increasing competition, including from Amazon, from well‑funded companies willing to incur substantial losses in order to build market share, and from others including competitors with delivery capabilities that we cannot currently match and do not expect to be able to match in the foreseeable future; |
• | difficulties we may encounter in connection with our efforts to offer services to our customers outside of our retail business; |
• | difficulties, including expense and any operational or regulatory issues we may encounter in connection with tZERO or its subsidiaries; |
• | technical, operational, regulatory or other difficulties we may encounter with our Medici or tZERO blockchain and financial technology initiatives, including any difficulties we may have marketing any products or services tZERO may offer, whether due to lack of market size or acceptance or as a result of competition from any of the numerous competitors seeking to develop competing technologies or systems or as a result of patents that may be granted to other companies or persons, and losses we may continue to incur in connection with our Medici and tZERO blockchain and technology initiatives; |
• | the difficulties tZERO will face in attempting to generate revenues from blockchain-based applications of any nature, including its potential DLR software product; |
• | impairment charges we may recognize with respect to assets or businesses that we, Medici Ventures or tZERO have acquired or may acquire; |
• | any liability or expense we may incur as a result of our interests in other companies, whether as a result of regulatory issues or otherwise; |
• | any downturn in the U.S. housing industry or other changes in U.S. and global economic conditions or U.S. consumer spending; |
• | the imposition of tariffs or occurrence of other factors that increase the price of importing into the U.S. the types of merchandise we sell in our retail business; |
• | modifications we may make to our business model from time to time; |
• | the mix of products purchased by our customers and changes to that mix; |
• | any claims we may face regarding cyber security issues or data breaches or difficulties we encounter regarding Internet or other infrastructure or communications impairment problems or the costs of preventing or responding to any such problems; |
• | any problems with or affecting our payment card processors, including cyber-attacks, Internet or other infrastructure or communications impairment or other events that could interrupt the normal operation of the payment card processors or any difficulties we may have maintaining compliance with the rules of the payment card processors; |
• | the possibility that we will be unable to raise additional capital or obtain financing adequate to enable us to continue our operations; |
• | problems with or affecting the facility where substantially all of our computer and communications hardware is located or other problems that result in the unavailability of our Website or reduced performance of our transaction systems; |
• | any losses or issues we may encounter as a consequence of accepting or holding bitcoin or other cryptocurrencies, whether as a result of regulatory, tax or other legal issues, technological issues, value fluctuations, lack of widespread adoption of bitcoin or other cryptocurrencies as an acceptable medium of exchange or otherwise; |
• | any difficulties we may encounter as a result of our reliance on numerous third parties that we do not control for the performance of critical functions material to our business; |
• | difficulties we may encounter in connection with our efforts to emphasize our home and garden product offerings and to brand ourselves as a home and garden shopping destination, including the risk that our sales of home and garden product offerings could decrease substantially as a result of a significant downturn in some or all of the U.S. housing market; |
• | difficulties we may encounter in connection with our efforts to expand internationally, including claims we may face and liabilities we may incur in connection with those efforts; |
• | adverse results in legal proceedings, investigations or other claims; |
• | any difficulties we may have optimizing our warehouse operations; |
• | any decrease in the volume of retail sales, particularly in home goods, and the occurrence of any event that would adversely affect e-commerce or discourage or prevent consumers from shopping online or via mobile apps; and |
• | the other risks described in this report or in our other public filings. |
• | Quality customer experience with an emphasis on price, value, and a wide assortment of products delivered in a personalized format with the convenience of our mobile app, and with the benefits of our award-winning customer care; |
• | Proprietary technologies which we believe help us provide our customers with a quality shopping experience; |
• | Logistics capabilities tailored to the furniture and home goods category and developed over our many years of e-commerce experience; |
• | Long-term mutually beneficial relationships with our partners, which currently number approximately 4,000; and |
• | Our Club O Loyalty Program, which we believe increases customer engagement and retention. |
• | Our international business where we offer products to customers outside the United States using third-party logistics providers; |
• | Worldstock Fair Trade, a store within our Website that offers handcrafted products made by artisans all over the world to help improve the lives of people in emerging economies; |
• | Pet Adoptions, a free service and portal within our Website that leverages our technology to display pets available for adoption from shelters across the United States; |
• | Overstock Hotels, a free service and portal within our Website that enables customers to search and book hundreds of thousands of properties worldwide, including big box brands, modern boutiques, and more; |
• | Supplier Oasis, a single integration point through which our partners can manage their products, inventory and sales channels, and also obtain multi-channel fulfillment services through our distribution network; and |
• | Businesses advertising products or services on our Website. |
Three months ended June 30, | Six months ended June 30, | |||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||
(as a percentage of total net revenue) | (as a percentage of total net revenue) | |||||||||||
Revenue, net | ||||||||||||
Retail | 98.3 | % | 98.9 | % | 98.5 | % | 98.8 | % | ||||
Other | 1.7 | 1.1 | 1.5 | 1.2 | ||||||||
Total net revenue | 100.0 | 100.0 | 100.0 | 100.0 | ||||||||
Cost of goods sold | ||||||||||||
Retail | 78.9 | 80.2 | 79.0 | 79.1 | ||||||||
Other | 1.3 | 0.9 | 1.2 | 0.9 | ||||||||
Total cost of goods sold | 80.2 | 81.0 | 80.2 | 80.0 | ||||||||
Gross profit | 19.8 | 19.0 | 19.8 | 20.0 | ||||||||
Operating expenses: | ||||||||||||
Sales and marketing | 9.2 | 19.5 | 9.2 | 18.5 | ||||||||
Technology | 8.9 | 6.7 | 9.3 | 6.9 | ||||||||
General and administrative | 8.6 | 6.5 | 9.7 | 7.7 | ||||||||
Total operating expenses | 26.7 | 32.8 | 28.2 | 33.0 | ||||||||
Operating loss | (6.9 | ) | (13.8 | ) | (8.3 | ) | (13.0 | ) | ||||
Interest and other income (expense), net | (0.7 | ) | 0.1 | (1.1 | ) | — | ||||||
Loss before income taxes | (7.6 | ) | (13.6 | ) | (9.5 | ) | (13.0 | ) | ||||
Provision (benefit) from income taxes | (0.2 | ) | — | — | — | |||||||
Consolidated net loss | (7.4 | )% | (13.6 | )% | (9.5 | )% | (13.0 | )% |
Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||||
2019 | 2018 | $ Change | % Change | 2019 | 2018 | $ Change | % Change | |||||||||||||||||||||||
Revenue, net | ||||||||||||||||||||||||||||||
Retail | $ | 367,475 | $ | 477,683 | $ | (110,208 | ) | (23.1 | )% | $ | 730,100 | $ | 917,679 | $ | (187,579 | ) | (20.4 | )% | ||||||||||||
Other | 6,234 | 5,450 | 784 | 14.4 | % | 11,338 | 10,785 | 553 | 5.1 | % | ||||||||||||||||||||
Total revenue, net | $ | 373,709 | $ | 483,133 | $ | (109,424 | ) | (22.6 | )% | $ | 741,438 | $ | 928,464 | $ | (187,026 | ) | (20.1 | )% |
Three Months Ended June 30, 2019 | ||||||||
Change in the Estimate of Average Transit Times (Days) | Increase (Decrease) Revenue | Increase (Decrease) Pre-Tax Income | ||||||
2 | $ | (14,800 | ) | $ | (2,550 | ) | ||
1 | $ | (5,941 | ) | $ | (1,006 | ) | ||
As reported | As reported | As reported | ||||||
-1 | $ | 5,074 | $ | 864 | ||||
-2 | $ | 9,834 | $ | 1,682 |
Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||||
2019 | 2018 | $ Change | % Change | 2019 | 2018 | $ Change | % Change | |||||||||||||||||||||||
Revenue, net | ||||||||||||||||||||||||||||||
Retail | $ | 367,475 | $ | 477,683 | $ | (110,208 | ) | (23.1 | )% | $ | 730,100 | $ | 917,679 | $ | (187,579 | ) | (20.4 | )% | ||||||||||||
Other | 6,234 | 5,450 | 784 | 14.4 | % | 11,338 | 10,785 | 553 | 5.1 | % | ||||||||||||||||||||
Total net revenue | $ | 373,709 | $ | 483,133 | $ | (109,424 | ) | (22.6 | )% | $ | 741,438 | $ | 928,464 | $ | (187,026 | ) | (20.1 | )% | ||||||||||||
Cost of goods sold | ||||||||||||||||||||||||||||||
Retail | $ | 294,984 | $ | 387,252 | $ | (92,268 | ) | (23.8 | )% | $ | 585,624 | $ | 734,832 | $ | (149,208 | ) | (20.3 | )% | ||||||||||||
Other | 4,826 | 4,138 | 688 | 16.6 | % | 8,791 | 8,020 | 771 | 9.6 | % | ||||||||||||||||||||
Total cost of goods sold | $ | 299,810 | $ | 391,390 | $ | (91,580 | ) | (23.4 | )% | $ | 594,415 | $ | 742,852 | $ | (148,437 | ) | (20.0 | )% | ||||||||||||
Gross Profit | ||||||||||||||||||||||||||||||
Retail | $ | 72,491 | $ | 90,431 | $ | (17,940 | ) | (19.8 | )% | $ | 144,476 | $ | 182,847 | $ | (38,371 | ) | (21.0 | )% | ||||||||||||
Other | 1,408 | 1,312 | 96 | 7.3 | % | 2,547 | 2,765 | (218 | ) | (7.9 | )% | |||||||||||||||||||
Total gross profit | $ | 73,899 | $ | 91,743 | $ | (17,844 | ) | (19.4 | )% | $ | 147,023 | $ | 185,612 | $ | (38,589 | ) | (20.8 | )% |
Q1 2018 | Q2 2018 | Q3 2018 | Q4 2018 | FY 2018 | Q1 2019 | Q2 2019 | |||||||||||||||
Retail | 21.0 | % | 18.9 | % | 19.5 | % | 17.9 | % | 19.3 | % | 19.9 | % | 19.7 | % | |||||||
Other | 27.2 | % | 24.1 | % | 33.1 | % | 26.8 | % | 27.6 | % | 22.3 | % | 22.6 | % | |||||||
Combined | 21.1 | % | 19.0 | % | 19.7 | % | 18.0 | % | 19.4 | % | 19.9 | % | 19.8 | % |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||
Total revenue, net | $ | 373,709 | 100% | $ | 483,133 | 100% | $ | 741,438 | 100% | $ | 928,464 | 100% | |||||||||||
Cost of goods sold | |||||||||||||||||||||||
Product costs and other cost of goods sold | 283,502 | 76% | 371,841 | 77% | 560,719 | 76% | 705,361 | 76% | |||||||||||||||
Fulfillment and related costs | 16,308 | 4% | 19,549 | 4% | 33,696 | 5% | 37,491 | 4% | |||||||||||||||
Total cost of goods sold | 299,810 | 80% | 391,390 | 81% | 594,415 | 80% | 742,852 | 80% | |||||||||||||||
Gross profit | $ | 73,899 | 20% | $ | 91,743 | 19% | $ | 147,023 | 20% | $ | 185,612 | 20% |
Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||||
2019 | 2018 | $ Change | % Change | 2019 | 2018 | $ Change | % Change | |||||||||||||||||||||||
Sales and marketing expenses | $ | 34,560 | $ | 94,416 | $ | (59,856 | ) | (63.4 | )% | $ | 68,037 | $ | 171,630 | $ | (103,593 | ) | (60.4 | )% | ||||||||||||
Sales and marketing expenses as a percent of net revenues | 9.2 | % | 19.5 | % | 9.2 | % | 18.5 | % |
Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||||
2019 | 2018 | $ Change | % Change | 2019 | 2018 | $ Change | % Change | |||||||||||||||||||||||
Technology expenses | $ | 33,153 | $ | 32,423 | $ | 730 | 2.3 | % | $ | 68,586 | $ | 63,717 | $ | 4,869 | 7.6 | % | ||||||||||||||
Technology expenses as a percent of net revenues | 8.9 | % | 6.7 | % | 9.3 | % | 6.9 | % |
Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||||
2019 | 2018 | $ Change | % Change | 2019 | 2018 | $ Change | % Change | |||||||||||||||||||||||
General and administrative expenses | $ | 31,964 | $ | 31,440 | $ | 524 | 1.7 | % | $ | 72,196 | $ | 71,195 | $ | 1,001 | 1.4 | % | ||||||||||||||
General and administrative expenses as a percent of net revenues | 8.6 | % | 6.5 | % | 9.7 | % | 7.7 | % |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Cost of goods sold - direct | $ | 171 | $ | 83 | $ | 346 | $ | 167 | |||||||
Technology | 4,892 | 5,296 | 10,067 | 10,772 | |||||||||||
General and administrative | 1,277 | 1,023 | 2,501 | 2,044 | |||||||||||
Total depreciation | $ | 6,340 | $ | 6,402 | $ | 12,914 | $ | 12,983 |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Technology | $ | 938 | $ | 895 | $ | 1,791 | $ | 1,650 | |||||||
Sales and marketing | 16 | 204 | 32 | 323 | |||||||||||
General and administrative | 170 | 34 | (659 | ) | 78 | ||||||||||
Total amortization of intangible assets other than goodwill | $ | 1,124 | $ | 1,133 | $ | 1,164 | $ | 2,051 |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Cost of goods sold — direct | $ | 54 | $ | 41 | $ | 101 | $ | 111 | |||||||
Sales and marketing | 533 | 315 | 974 | 1,188 | |||||||||||
Technology | 1,670 | 621 | 2,897 | 1,142 | |||||||||||
General and administrative | 2,914 | 1,996 | 5,184 | 6,967 | |||||||||||
Total stock-based compensation | $ | 5,171 | $ | 2,973 | $ | 9,156 | $ | 9,408 |
First Quarter | Second Quarter | Third Quarter | Fourth Quarter | |||||||||||||
2019 | $ | 367,729 | $ | 373,709 | $ | N/A | $ | N/A | ||||||||
2018 | 445,331 | 483,133 | 440,580 | 452,548 | ||||||||||||
2017 | 432,435 | 432,024 | 424,007 | 456,290 |
Six months ended June 30, | ||||||||
2019 | 2018 | |||||||
Cash provided by (used in): | ||||||||
Operating activities | $ | (65,852 | ) | $ | (70,579 | ) | ||
Investing activities | (3,115 | ) | (64,650 | ) | ||||
Financing activities | 49,760 | 84,255 |
Contractual Obligations | Remainder of 2019 | 2020 | 2021 | 2022 | 2023 | Thereafter | Total | |||||||||||||||||||||
Operating leases | $ | 4,732 | $ | 9,385 | $ | 9,833 | $ | 9,826 | $ | 8,985 | $ | 22,774 | $ | 65,535 | ||||||||||||||
Purchase obligations | 104 | — | — | — | — | — | 104 | |||||||||||||||||||||
Technology services | 1,019 | 1,699 | — | — | — | — | 2,718 | |||||||||||||||||||||
High Bench Senior Credit Agreement | 3,108 | — | — | — | — | — | 3,108 | |||||||||||||||||||||
Total contractual cash obligations | $ | 8,963 | $ | 11,084 | $ | 9,833 | $ | 9,826 | $ | 8,985 | $ | 22,774 | $ | 71,465 |
(a) | Exhibits | |||
3.1 | ||||
10.1 | ||||
10.2 | ||||
10.3 | ||||
*31.1 | ||||
*31.2 | ||||
**32.1 | ||||
**32.2 | ||||
101 | Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statements of Cash Flows, (v) Consolidated Statements of Stockholders' Equity, and (vi) Notes to Consolidated Financial Statements. |
Date: | August 8, 2019 | OVERSTOCK.COM, INC. |
/s/ GREGORY J. IVERSON | ||
Gregory J. Iverson | ||
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
Date: | August 8, 2019 | /s/ PATRICK M. BYRNE |
Patrick M. Byrne | ||
Chief Executive Officer | ||
(principal executive officer) |
Date: | August 8, 2019 | /s/ GREGORY J. IVERSON |
Gregory J. Iverson | ||
Chief Financial Officer | ||
(principal financial officer) |
Date: | August 8, 2019 | /s/ PATRICK M. BYRNE |
Patrick M. Byrne | ||
Chief Executive Officer | ||
(principal executive officer) |
Date: | August 8, 2019 | /s/ GREGORY J. IVERSON |
Gregory J. Iverson | ||
Chief Financial Officer | ||
(principal financial officer) |
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Document and Entity Information - shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2019 |
Aug. 02, 2019 |
|
Document and Entity Information | ||
Entity Registrant Name | OVERSTOCK.COM, INC | |
Entity Central Index Key | 0001130713 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2019 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Shell Company | false | |
Entity Emerging Growth Company | false | |
Entity Small Business | false | |
Entity Common Stock, Shares Outstanding | 35,289,096 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q2 |
Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Preferred stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 38,561,000 | 35,346,000 |
Common stock, shares outstanding | 35,239,000 | 32,146,000 |
Treasury stock, shares | 3,322,000 | 3,200,000 |
Series A Preferred Stock | ||
Preferred stock, par value (in dollars per share) | $ 0.0001 | |
Preferred stock, shares issued | 3,000 | 127,000 |
Preferred stock, shares outstanding | 3,000 | 127,000 |
Series B Preferred Stock | ||
Preferred stock, shares issued | 356,000 | 355,000 |
Preferred stock, shares outstanding | 356,000 | 355,000 |
Series A-1 Preferred Stock [Member] | ||
Preferred stock, par value (in dollars per share) | $ 0.0001 | |
Preferred stock, shares issued | 123,000 | 0 |
Preferred stock, shares outstanding | 123,000 | 0 |
Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | |||||
---|---|---|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
||||
Revenue, net | |||||||
Total net revenue | $ 373,709 | $ 483,133 | $ 741,438 | $ 928,464 | |||
Cost of goods sold | |||||||
Total cost of goods sold | 299,810 | 391,390 | 594,415 | 742,852 | |||
Gross profit | 73,899 | 91,743 | 147,023 | 185,612 | |||
Operating expenses: | |||||||
Sales and marketing(1) | [1] | 34,560 | 94,416 | 68,037 | 171,630 | ||
Technology(1) | [1] | 33,153 | 32,423 | 68,586 | 63,717 | ||
General and administrative(1) | [1] | 31,964 | 31,440 | 72,196 | 71,195 | ||
Total operating expenses | 99,677 | 158,279 | 208,819 | 306,542 | |||
Operating loss | (25,778) | (66,536) | (61,796) | (120,930) | |||
Interest income | 630 | 620 | 1,033 | 1,164 | |||
Interest expense | (105) | (395) | (232) | (1,269) | |||
Other income (expense), net | (2,995) | 368 | (9,267) | 359 | |||
Loss before income taxes | (28,248) | (65,943) | (70,262) | (120,676) | |||
Provision (benefit) from income taxes | (622) | (27) | 256 | (304) | |||
Net loss | (27,626) | (65,916) | (70,518) | (120,372) | |||
Less: Net loss attributable to noncontrolling interests | (2,945) | (1,005) | (6,593) | (4,552) | |||
Net loss attributable to stockholders of Overstock.com, Inc. | $ (24,681) | $ (64,911) | $ (63,925) | $ (115,820) | |||
Net loss per common share—basic: | |||||||
Net loss attributable to common shares-basic (in dollars per share) | $ (0.69) | $ (2.20) | $ (1.85) | $ (3.94) | |||
Weighted average common shares outstanding-basic (in shares) | 35,225 | 28,903 | 33,806 | 28,736 | |||
Net loss per common share—diluted: | |||||||
Net loss attributable to common shares-diluted (in dollars per share) | $ (0.69) | $ (2.20) | $ (1.85) | $ (3.94) | |||
Weighted average common shares outstanding-diluted (in shares) | 35,225 | 28,903 | 33,806 | 28,736 | |||
Retail | |||||||
Revenue, net | |||||||
Total net revenue | $ 367,475 | $ 477,683 | $ 730,100 | $ 917,679 | |||
Cost of goods sold | |||||||
Total cost of goods sold | [1] | 294,984 | 387,252 | 585,624 | 734,832 | ||
Gross profit | 72,491 | 90,431 | 144,476 | 182,847 | |||
Operating expenses: | |||||||
Total operating expenses | 81,596 | 149,437 | 166,929 | 274,969 | |||
Loss before income taxes | (9,065) | (57,382) | (22,278) | (90,953) | |||
Other | |||||||
Revenue, net | |||||||
Total net revenue | 6,234 | 5,450 | 11,338 | 10,785 | |||
Cost of goods sold | |||||||
Total cost of goods sold | $ 4,826 | $ 4,138 | $ 8,791 | $ 8,020 | |||
|
Consolidated Statements of Operations (Unaudited) (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Total stock-based compensation | $ 5,171 | $ 2,973 | $ 9,156 | $ 9,408 |
Cost of goods sold — retail | ||||
Total stock-based compensation | 54 | 41 | 101 | 111 |
Sales and marketing | ||||
Total stock-based compensation | 533 | 315 | 974 | 1,188 |
Technology | ||||
Total stock-based compensation | 1,670 | 621 | 2,897 | 1,142 |
General and administrative | ||||
Total stock-based compensation | $ 2,914 | $ 1,996 | $ 5,184 | $ 6,967 |
Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net loss | $ (27,626) | $ (65,916) | $ (70,518) | $ (120,372) |
Other comprehensive loss: | ||||
Unrealized gain on cash flow hedges, net of expense for taxes of $0, and $0 | 4 | 4 | 8 | 8 |
Other comprehensive income | 4 | 4 | 8 | 8 |
Comprehensive loss | (27,622) | (65,912) | (70,510) | (120,364) |
Less: Comprehensive loss attributable to noncontrolling interests | (2,945) | (1,005) | (6,593) | (4,552) |
Comprehensive loss attributable to stockholders of Overstock.com, Inc. | $ (24,677) | $ (64,907) | $ (63,917) | $ (115,812) |
Consolidated Statements of Comprehensive Loss (Unaudited) (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Statement of Comprehensive Income [Abstract] | ||||
Unrealized gain on cash flow hedges, tax benefit (expense) | $ 0 | $ 0 | $ 0 | $ 0 |
BASIS OF PRESENTATION |
6 Months Ended |
---|---|
Jun. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BASIS OF PRESENTATION | BASIS OF PRESENTATION Overstock.com, Inc. is an online retailer and advancer of blockchain technology. As used herein, "Overstock," "the Company," "we," "our" and similar terms include Overstock.com, Inc. and its majority-owned subsidiaries, unless the context indicates otherwise. We have prepared the accompanying unaudited consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") regarding interim financial reporting. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States ("GAAP") have been omitted in accordance with the rules and regulations of the SEC. These financial statements should be read in conjunction with our audited annual consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2018. The accompanying unaudited consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, which are, in our opinion, necessary for a fair presentation of results for the interim periods presented. The results of operations for the three and six months ended June 30, 2019 are not necessarily indicative of the results to be expected for any future period or the full fiscal year. In the fourth quarter of 2018, we completed our annual review of our segment reporting and in light of a strategic shift in our Chief Operating Decision Maker's long-term strategic focus for our organization of transitioning our retail business to focus on the retail partner portion of our business which has resulted in the retail direct portion of our business becoming less significant, we no longer consider the split of retail direct and retail partner as a distinct and relevant measure of our business. Accordingly, revenues and cost of goods sold previously recorded in "Direct" and "Partner and Other" are now split between "Retail" and "Other" on the consolidated statements of operations. "Retail" includes retail revenue and costs of goods sold from both "Direct" and "Partner" transactions. Our revenues and costs of goods sold related to our Medici business remains in "Other". In addition, we have recast the prior period revenues and cost of goods sold to conform with current year presentation. Direct and Partner are no longer considered separate reportable segments in our Business Segment disclosures. In addition, tZERO has been identified as a reportable segment separate from Other due to its operating activities exceeding quantitative thresholds for separate reporting. For purposes of comparability, we reclassified other certain immaterial amounts in the prior periods presented to conform with the current period presentation. |
ACCOUNTING POLICIES |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACCOUNTING POLICIES | ACCOUNTING POLICIES Principles of consolidation The accompanying consolidated financial statements include our accounts and the accounts of our wholly-owned subsidiaries and other subsidiaries for which we exercise control. All intercompany account balances and transactions have been eliminated in consolidation. Included in our consolidated financial statements are the financial results of Bitsy, Inc. from the acquisition date of January 1, 2019, Verify Investor, LLC from the acquisition date of February 12, 2018, and Mac Warehouse, LLC from the acquisition date of June 25, 2018. Use of estimates The preparation of financial statements in conformity with GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent liabilities in our consolidated financial statements and accompanying notes. Estimates are used for, but not limited to, receivables valuation, revenue recognition, Club O and gift card breakage, sales returns, incentive discount offers, inventory valuation, depreciable lives of property and equipment and internally-developed software, goodwill valuation, intangible asset valuation, equity securities valuation, income taxes, stock-based compensation, performance-based compensation, self-funded health insurance liabilities and contingencies. Although these estimates are based on our best knowledge of current events and actions that we may undertake in the future, actual results may differ materially from these estimates. Cash equivalents We classify all highly liquid instruments, including instruments with a remaining maturity of three months or less at the time of purchase, as cash equivalents. Cash equivalents were $3.0 million and $3.1 million at June 30, 2019 and December 31, 2018, respectively. Restricted cash We consider cash that is legally restricted and cash that is held as compensating balances for credit arrangements, surety bonds, and self-funded health insurance as restricted cash. Fair value of financial instruments We account for our assets and liabilities using a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. These two types of inputs have created the fair-value hierarchy below. This hierarchy requires us to minimize the use of unobservable inputs and to use observable market data, if available, when determining fair value.
Our assets and liabilities that are adjusted to fair value on a recurring basis are cash equivalents, certain equity securities, and deferred compensation liabilities, which fair values are determined using quoted market prices from daily exchange traded markets on the closing price as of the balance sheet date and are classified as Level 1. Our other financial instruments, including cash, restricted cash, accounts receivable, accounts payable, accrued liabilities, finance obligations, and debt are carried at cost, which approximates their fair value. Certain assets, including long-lived assets, certain equity securities, goodwill, cryptocurrencies, and other intangible assets, are measured at fair value on a nonrecurring basis; that is, the assets are not measured at fair value on an ongoing basis, but are subject to fair value adjustments using fair value measurements with unobservable inputs (level 3), apart from cryptocurrencies which use quoted prices from various digital currency exchanges with active markets, in certain circumstances (e.g., when there is evidence of impairment). The following tables summarize our assets and liabilities measured at fair value on a recurring basis using the following levels of inputs as of June 30, 2019 and December 31, 2018, as indicated (in thousands):
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Accounts receivable, net Accounts receivable consist primarily of carrier rebates, trade amounts due from customers in the United States, and uncleared credit card transactions at period end. Accounts receivable are recorded at invoiced amounts and do not bear interest. From time to time, we grant credit to some of our business customers on normal credit terms (typically 30 days). We maintain an allowance for doubtful accounts receivable based upon our business customers' financial condition and payment history, and our historical collection experience and expected collectability of accounts receivable. The allowance for doubtful accounts receivable was $2.5 million and $2.1 million at June 30, 2019 and December 31, 2018, respectively. Concentration of credit risk One bank held the majority of our cash and cash equivalents at June 30, 2019 and December 31, 2018. Our cash equivalents primarily consist of money market securities which are uninsured. We do not believe that, as a result of this concentration, we are subject to any unusual financial risk beyond the normal risk associated with commercial banking relationships. Inventories, net Inventories, net include merchandise purchased for resale, which are accounted for using a standard costing system which approximates the first-in-first-out ("FIFO") method of accounting, and are valued at the lower of cost and net realizable value. Inventory valuation requires us to make judgments, based on currently available information, about the likely method of disposition, such as through sales to individual customers, returns to product vendors, or liquidations, and expected recoverable values of each disposition category. Prepaids and other current assets Prepaids and other current assets represent expenses paid prior to receipt of the related goods or services, including advertising, license fees, maintenance, packaging, insurance, prepaid inventories, other miscellaneous costs, and cryptocurrency-denominated assets ("cryptocurrencies"). See Cryptocurrencies below. Cryptocurrencies We hold cryptocurrency-denominated assets ("cryptocurrencies") such as bitcoin and we include them in Prepaids and other current assets in our consolidated balance sheets. Our cryptocurrencies were $2.3 million and $2.4 million at June 30, 2019 and December 31, 2018, respectively, and are recorded at cost less impairment. We recognize impairment on these assets caused by decreases in market value, determined by taking quoted prices from various digital currency exchanges with active markets, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. See Fair value of financial instruments above. Such impairment in the value of our cryptocurrencies is recorded in General and administrative expense in our consolidated statements of operations. Impairments on cryptocurrencies were zero and $318,000 for the three and six months ended June 30, 2019. There was $702,000 and $9.5 million impairment on cryptocurrencies during the three and six months ended June 30, 2018. Gains and losses realized upon sale of cryptocurrencies are also recorded in General and administrative expense in our consolidated statements of operations. We occasionally use our cryptocurrencies to purchase other cryptocurrencies. Gains and losses realized with these non-cash transactions are also recorded in General and administrative expense in our consolidated statements of operations. These non-cash transactions as well as gains (losses) from cryptocurrencies received through our tZERO security token offering are also presented as an adjustment to reconcile Net income (loss) to Net cash provided by (used in) operating activities in our consolidated statements of cash flows. Further, the proceeds from the sale of cryptocurrencies received through our tZERO security token offering are presented as a financing activity in our consolidated statements of cash flows due to its near immediate conversion into cash and its economic similarity to the receipt of cash proceeds under the tZERO security token offering. Realized gains on sale of cryptocurrencies were $119,000 and $128,000 for the three and six months ended June 30, 2019. There were $6.8 million and $8.3 million realized gains on sale of cryptocurrencies for the three and six months ended June 30, 2018. Property and equipment, net Property and equipment are recorded at cost and stated net of depreciation and amortization. Upon sale or retirement of assets, cost and related accumulated depreciation and amortization are removed from the balance sheet and the resulting gain or loss is reflected in our consolidated statements of operations. Property and equipment are depreciated using the straight-line method over the estimated useful lives of the related assets or the term of the related finance lease, whichever is shorter, as follows:
Leasehold improvements are amortized over the shorter of the term of the related leases or estimated useful lives. Included in property and equipment is the capitalized cost of internal-use software and website development, including software used to upgrade and enhance our Website and processes supporting our business. We capitalize costs incurred during the application development stage of internal-use software and amortize these costs over the estimated useful life. Costs incurred related to design or maintenance of internal-use software are expensed as incurred. During the three months ended June 30, 2019 and 2018, we capitalized $4.1 million and $8.3 million, respectively, of costs associated with internal-use software and website development, both developed internally and acquired externally. Depreciation of costs for the same periods associated with internal-use software and website development was $3.1 million and $3.2 million, respectively. During the six months ended June 30, 2019 and 2018, we capitalized $7.6 million and $10.6 million, respectively, of costs associated with internal-use software and website development, both developed internally and acquired externally. Depreciation of internal-use software and website development during the six months ended June 30, 2019 and 2018 was $6.4 million and $6.7 million, respectively. Depreciation expense is classified within the corresponding operating expense categories on our consolidated statements of operations as follows (in thousands):
Total accumulated depreciation of property and equipment was $215.1 million and $204.9 million at June 30, 2019 and December 31, 2018, respectively. Equity securities under ASC 321 At June 30, 2019, we held minority interests (less than 20%) in certain privately held entities accounted for under Accounting Standards Codification ("ASC") Topic 321, Investments - Equity Securities ("ASC 321"), which are included in Equity securities in our consolidated balance sheets. One of these equity securities, which had a carrying value of $1.5 million at June 30, 2019, is carried at fair value based on Level 1 inputs. See Fair value of financial instruments above. The remaining equity securities lack readily determinable fair values and therefore the securities are measured at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar equity securities of the same issuer. Dividends received are reported in earnings if and when received. We review our securities individually for impairment by evaluating if events or circumstances have occurred that may indicate the fair value of the investment is less than its carrying value. If such events or circumstances have occurred, we estimate the fair value of the investment and recognize an impairment loss equal to the difference between the fair value of the investment and its carrying value, which are recorded as unrealized gains or losses on our investments in Other income (expense), net on our consolidated statements of operations. In such cases, the estimated fair value of the investment is determined using unobservable inputs including assumptions by the investee's management including quantitative information such as lower valuations in recently completed or proposed financings. These inputs are classified as Level 3. Because several of these private companies are in the early startup or development stages, these entities are subject to potential changes in cash flows and valuation, as well as inability to raise additional capital which may be necessary for the liquidity needed to support their operations. The carrying amount of our equity securities under ASC 321 was approximately $15.1 million and $20.3 million at June 30, 2019 and December 31, 2018, respectively. The portion of unrealized gains and losses for the period related to equity securities still held at June 30, 2019 and 2018 is calculated as follows:
Equity method securities under ASC 323 At June 30, 2019, we held minority interests in certain privately held entities accounted for as equity method securities under ASC Topic 323, Investments - Equity Method and Joint Ventures ("ASC 323"), which are included in Equity securities in our consolidated balance sheets. We can exercise significant influence, but not control, over these entities through either holding more than a 20% voting interest in the entity or through our representation on the entity's board of directors. The following table includes our equity method securities and related ownership interest as of June 30, 2019:
The carrying amount of our equity method securities was approximately $28.6 million and $40.1 million at June 30, 2019 and December 31, 2018, respectively. The carrying value of our equity method securities exceeded the amount of underlying equity in net assets of our equity method securities and the difference was primarily related to goodwill and the fair value of intangible assets. The basis difference attributable to amortizable intangible assets is amortized over their estimated useful lives. We record our proportionate share of the net income or loss from our equity method securities and the amortization of the basis difference related to intangible assets in Other income (expense), net in our consolidated statements of operations with corresponding adjustments to their carrying value. The following table summarizes the net losses recognized on equity method securities for the three and six months ended June 30, 2019 and 2018:
Noncontrolling interests in Controlled Subsidiaries Our wholly-owned subsidiary, Medici Ventures, Inc. ("Medici Ventures"), holds a majority ownership interest in tZERO Group, Inc. ("tZERO"), formerly tØ.com, Inc., and Medici Land Governance Inc., a Delaware public benefit corporation ("MLG"). tZERO's subsidiaries include a financial technology company, two related registered broker dealers, a digital wallet and exchange services company, and an accredited investor verification company. tZERO, MLG, and their consolidated subsidiaries are included in our consolidated financial statements. For controlled subsidiaries that are not wholly-owned, the noncontrolling interests are included in Net loss and Total equity. Intercompany transactions have been eliminated and the amounts of contributions and gains or losses that are attributable to the noncontrolling interests are disclosed in our consolidated financial statements. Leases We determine if an arrangement is a lease at inception. We account for lease agreements as either operating or finance leases depending on certain defined criteria. Operating leases are recognized in Operating lease right-of-use ("ROU") assets, Operating lease liabilities, current, and Operating lease liabilities, non-current on our consolidated balance sheets. Finance leases are included in Other long-term assets, net, Other current liabilities, and Other long-term liabilities on our consolidated balance sheets. Lease assets and liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. In certain of our lease agreements, we receive rent holidays and other incentives. We recognize lease costs on a straight-line basis over the lease term without regard to deferred payment terms, such as rent holidays, that defer the commencement date of required payments. Our lease terms may include options to extend or terminate the lease, and we adjust our measurement of the lease when it is reasonably certain that we will exercise that option. Lease payments used in measurement of the lease liability typically do not include executory costs, such as taxes, insurance, and maintenance, unless those costs can be reasonably estimated at lease commencement. Leasehold improvements are capitalized at cost and amortized over the lesser of their expected useful life or the life of the lease, without assuming renewal features, if any, are exercised. We do not separate lease and non-lease components for our leases. Treasury stock We account for treasury stock of our common shares under the cost method and include treasury stock as a component of stockholders' equity. Goodwill Goodwill represents the excess of the purchase price paid over the fair value of the net assets acquired in business combinations (see Note 3—Business Combinations for current period activity). Goodwill is not amortized but is tested for impairment at least annually or when we deem that a triggering event has occurred. When evaluating whether goodwill is impaired, we make a qualitative assessment to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative assessment determines that it is more likely than not that its fair value is less than its carrying amount, we compare the fair value of the reporting unit to which the goodwill is assigned to its carrying amount. If the carrying amount exceeds its fair value, an impairment loss is recognized in an amount equal to the excess of the carrying amount over the fair value of the reporting unit, not to exceed the carrying amount of the goodwill. There were no impairments to goodwill recorded during the six months ended June 30, 2019 and 2018. The following table provides information about changes in the carrying amount of goodwill for the periods presented (in thousands):
___________________________________________ (1), (2), (3) — Goodwill is net of an accumulated impairment loss of $3.3 million. Intangible assets other than goodwill We capitalize and amortize intangible assets other than goodwill over their estimated useful lives unless such lives are indefinite. Intangible assets other than goodwill acquired separately from third-parties are capitalized at cost while such assets acquired as part of a business combination are capitalized at their acquisition-date fair value. Definite lived intangible assets are amortized using the straight-line method of amortization over their useful lives, with the exception of certain intangibles (such as acquired technology, customer relationships, and trade names) which are amortized using an accelerated method of amortization based on cash flows. These definite lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable as described below under Impairment of long-lived assets. Intangible assets, net consist of the following (in thousands):
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Amortization of intangible assets other than goodwill is classified within the corresponding operating expense categories in our consolidated statements of operations as follows (in thousands):
General and administrative amortization above was net of reversals due to adjustments to the purchase price allocation for Mac Warehouse, as further described in Note 3—Business Combinations. Estimated amortization expense for the next five years is: $2.2 million for the remainder of 2019, $3.2 million in 2020, $2.9 million in 2021, $1.5 million in 2022, $705,000 in 2023, and $5.0 million thereafter. Impairment of long-lived assets We review property and equipment, right-of-use assets, and other long-lived assets, including intangible assets other than goodwill, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. See the Cryptocurrencies section above for our impairment policy over cryptocurrencies. Recoverability is measured by comparison of the assets' carrying amount to future undiscounted net cash flows the asset group is expected to generate. Cash flow forecasts are based on trends of historical performance and management's estimate of future performance, giving consideration to existing and anticipated competitive and economic conditions. If such asset group is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds their fair values. There were no impairments to long-lived assets recorded during the three and six months ended June 30, 2019 and 2018. Other long-term assets, net Other long-term assets, net consist primarily of long-term prepaid expenses, deposits, and assets acquired under finance leases. Revenue recognition Revenue is recognized when, or as, control of a promised product or service transfers to a customer, in an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring those products or services. Revenue excludes taxes that have been assessed by governmental authorities and that are directly imposed on revenue-producing transactions between the Company and its customers, including sales and use taxes. Revenue recognition is evaluated through the following five-step process: 1) identification of the contract with a customer; 2) identification of the performance obligations in the contract; 3) determination of the transaction price; 4) allocation of the transaction price to the performance obligations in the contract; and 5) recognition of revenue when or as a performance obligation is satisfied. Product Revenue We derive our revenue primarily from our retail business through our Website, but may also derive revenue from sales of merchandise through offline and other channels. Our Retail revenue is derived primarily from merchandise sold at a point in time and shipped to customers. Merchandise sales are fulfilled with inventory sourced through our partners or from our owned inventory, depending on the most efficient means of fulfilling the customer contract. The majority of our sales, however, are fulfilled from inventory sourced through our partners. Revenue is recognized when control of the product passes to the customer, typically at the date of delivery of the merchandise to the customer or the date a service is provided, and is recognized in an amount that reflects the expected consideration to be received in exchange for such goods or services. As such, customer orders are recorded as deferred revenue prior to delivery of products or services ordered. As we ship high volumes of packages through multiple carriers, it is not practical for us to track the actual delivery date of each shipment. Therefore, we use estimates to determine which shipments are delivered and, therefore, recognized as revenue at the end of the period. Our delivery date estimates are based on average shipping transit times, which are calculated using the following factors: (i) the type of shipping carrier (as carriers have different in-transit times); (ii) the fulfillment source (either our warehouses, those warehouses we control, or those of our partners); (iii) the delivery destination; and (iv) actual transit time experience, which shows that delivery date is typically one to eight business days from the date of shipment. We review and update our estimates on a quarterly basis based on our actual transit time experience. However, actual shipping times may differ from our estimates. Generally, we require authorization from credit card or other payment vendors whose services we offer to our customers (such as PayPal), or verification of receipt of payment, before we ship products to consumers or business purchasers. From time to time we grant credit to our business purchasers with normal credit terms (typically 30 days). We generally receive payments from our customers before our payments to our suppliers are due. We do not recognize assets associated with costs to obtain or fulfill a contract with a customer. Shipping and handling is considered a fulfillment activity, as it takes place prior to the customer obtaining control of the merchandise, and fees charged to customers are included in net revenue upon completion of our performance obligation. We present revenue net of sales taxes, discounts, and expected refunds. Our merchandise sales contracts include terms that could cause variability in the transaction price for items such as discounts, credits, or sales returns. Accordingly, the transaction price for product sales includes estimates of variable consideration to the extent it is probable that a significant reversal of revenue recognized will not occur. At the time of sale, we estimate a sales return liability for the variable consideration based on historical experience, which is recorded within Accrued liabilities in the consolidated balance sheet. We record an allowance for returns based on current period revenues and historical returns experience. We analyze actual historical returns, current economic trends and changes in order volume and acceptance of our products when evaluating the adequacy of the sales returns allowance in any accounting period. We evaluate the criteria outlined in ASC 606-10-55, Principal versus Agent Considerations, in determining whether it is appropriate to record the gross amount of merchandise sales and related costs or the net amount earned as commissions. When we are the principal in a transaction and control the specific good or service before it is transferred to the customer, revenue is recorded gross; otherwise, revenue is recorded on a net basis. Through contractual terms with our partners, we have the ability to control the promised goods or services and as a result record the majority of our retail revenue on a gross basis. Our Other revenue occurs primarily through our broker dealer subsidiaries in our tZERO segment. We evaluate the revenue recognition criteria above for our broker dealer subsidiaries and we recognize revenue based on the gross amount of consideration that we expect to receive on securities transactions (commission revenue) on a trade date basis. Club O loyalty program We have a customer loyalty program called Club O Gold for which we sell annual memberships. For Club O Gold memberships, we record membership fees as deferred revenue and we recognize revenue ratably over the membership period. The Club O Gold loyalty program allows members to earn Club O Reward dollars for qualifying purchases made on our Website. Customers may redeem Club O Reward dollars on future purchases made through our Website, which conveys a material right to the customer. As such, the initial transaction price giving rise to the reward dollar is allocated to each separate performance obligation based upon its relative standalone selling price. In determining the stand-alone selling price, we incorporate assumptions about the redemption rates of loyalty points. We recognize revenue for Club O Reward dollars when customers redeem such rewards as part of a purchase on our Website. We record the standalone value of reward dollars earned in deferred revenue at the time the reward dollars are earned. Club O Reward dollars expire 90 days after the customer's Club O Gold membership expires. We recognize estimated reward dollar breakage, to which we expect to be entitled, over the expected redemption period in proportion to actual redemptions by customers. Upon adoption of Topic 606, Revenue Contracts with Customers, on January 1, 2018, we began classifying the breakage income related to Club O Reward dollars and gift cards as a component of Retail revenue in our consolidated statements of operations rather than as a component of Other income (expense), net. Breakage included in revenue was $923,000 and $1.3 million for the three months ended June 30, 2019 and 2018 and $2.0 million and $3.0 million for the six months ended June 30, 2019 and 2018. Our total deferred revenue related to the outstanding Club O Reward dollars was $7.0 million and $6.9 million at June 30, 2019 and December 31, 2018, respectively. The timing of revenue recognition of these reward dollars is driven by actual customer activities, such as redemptions and expirations. Advertising Revenue Advertising revenues are derived primarily from sponsored links and display advertisements that are placed on our Website, distributed via email, or sent out as direct mailers. Advertising revenue is recognized in Retail revenue when the advertising services are rendered. Advertising revenues were less than 2% of total net revenues for all periods presented. Revenue Disaggregation Disaggregation of revenue by major product line is included in Segment Information in Note 12—Business Segments. Deferred Revenue When the timing of our provision of goods or services is different from the timing of the payments made by our customers, we recognize a contract liability (customer payment precedes performance). Customer orders are recorded as deferred revenue prior to delivery of products or services ordered. We record amounts received for Club O Gold membership fees as deferred revenue and we recognize it ratably over the membership period. We record Club O Reward dollars earned from purchases as deferred revenue at the time they are earned based upon the relative standalone selling price of the Club O Reward dollar and we recognize it as Retail revenue in proportion to the estimated pattern of rights exercised by the customer. If reward dollars are not redeemed, we recognize Retail revenue upon expiration. In addition, we sell gift cards and record related deferred revenue at the time of the sale. We sell gift cards without expiration dates and we recognize revenue from a gift card upon redemption of the gift card. For the unredeemed portion of our gift cards and loyalty program rewards, we will recognize Retail revenue over the expected redemption period based upon the estimated pattern of rights exercised by the customer. The following table provides information about deferred revenue from contracts with customers, including significant changes in deferred revenue balances during the periods presented (in thousands):
Sales returns allowance We inspect returned items when they arrive at our processing facilities. We refund the full cost of the merchandise returned and all original shipping charges if the returned item is defective or we or our partners have made an error, such as shipping the wrong product. If the return is not a result of a product defect or a fulfillment error and the customer initiates a return of an unopened item within 30 days of delivery, for most products we refund the full cost of the merchandise minus the original shipping charge and actual return shipping fees. However, we reduce refunds for returns initiated more than 30 days after delivery or that are received at our returns processing facility more than 45 days after initial delivery. If our customer returns an item that has been opened or shows signs of wear, we issue a partial refund minus the original shipping charge and actual return shipping fees. Revenue is recorded net of estimated returns. We record an allowance for returns based on current period revenues and historical returns experience. We analyze actual historical returns, current economic trends and changes in order volume and acceptance of our products when evaluating the adequacy of the sales returns allowance in any accounting period. The following table provides additions to and deduction from the sales returns allowance (in thousands):
Cost of goods sold Our Retail cost of goods sold includes product costs, warehousing costs, outbound shipping costs, handling and fulfillment costs, customer service costs, and credit card fees, and is recorded in the same period in which related revenues have been recorded. Our Other cost of goods sold primarily consists of exchange fees, clearing agent fees, and other exchange fees from our broker dealer subsidiaries in our tZERO segment. These fees are primarily for executing, processing, and settling trades on exchanges and other venues. These fees fluctuate based on changes in trade and share volumes, rate of clearance fees charged by clearing brokers, and exchanges.
Advertising expense We expense the costs of producing advertisements the first time the advertising takes place and expense the cost of communicating advertising in the period during which the advertising space or airtime is used. Internet advertising expenses are recognized as incurred based on the terms of the individual agreements, which are generally: 1) a commission for traffic driven to our Website that generates a sale or 2) a referral fee based on the number of clicks on keywords or links to our Website generated during a given period. Advertising expense is included in Sales and marketing expenses and totaled $29.9 million and $88.9 million during the three months ended June 30, 2019 and 2018, respectively. For the six months ended June 30, 2019 and 2018, advertising expense totaled $58.4 million and $157.8 million, respectively. Prepaid advertising (included in Prepaids and other current assets in the accompanying consolidated balance sheets) was $367,000 and $961,000 at June 30, 2019 and December 31, 2018, respectively. Stock-based compensation We measure compensation expense for all outstanding unvested share-based awards at fair value on the date of grant and recognize compensation expense over the service period for awards at the greater of a straight-line basis or on an accelerated schedule when vesting of the share-based awards exceeds a straight-line basis. When an award is forfeited prior to the vesting date, we recognize an adjustment for the previously recognized expense in the period of the forfeiture. See Note 10—Stock-Based Awards. Loss contingencies In the normal course of business, we are involved in legal proceedings and other potential loss contingencies. We accrue a liability for such matters when it is probable that a loss has been incurred and the amount can be reasonably estimated. When only a range of probable loss can be estimated, the most probable amount in the range is accrued. If no amount within this range is a better estimate than any other amount within the range, the minimum amount in the range is accrued. We expense legal fees as incurred (see Note 7—Commitments and Contingencies). Income taxes Our income tax provision for interim periods is determined using an estimate of our annual effective tax rate adjusted for discrete items, if any, for relevant interim periods. We update our estimate of the annual effective tax rate each quarter and make cumulative adjustments if our estimated annual effective tax rate changes. Our quarterly tax provision and our quarterly estimate of our annual effective tax rate are subject to significant variations due to several factors including variability in predicting our pre-tax and taxable income and the mix of jurisdictions to which those items relate, relative changes in expenses or losses for which tax benefits are not recognized, how we do business, fluctuations in our stock price, and changes in law, regulations, and administrative practices. Our effective tax rate can be volatile based on the amount of pre-tax income. For example, the impact of discrete items on our effective tax rate is greater when pre-tax income is lower. Each quarter we assess the recoverability of our deferred tax assets under ASC Topic 740. We assess the available positive and negative evidence to estimate whether we will generate sufficient future taxable income to use our existing deferred tax assets. We have limited carryback ability and do not have significant taxable temporary differences to recover our existing deferred tax assets, therefore we must rely on future taxable income, including tax planning strategies, to support their realizability. We have established a valuation allowance for our deferred tax assets not supported by carryback ability or taxable temporary differences, primarily due to uncertainty regarding our future taxable income. We have considered, among other things, the cumulative loss incurred over the three-year period ended June 30, 2019 as a significant piece of objective negative evidence. We intend to continue maintaining a valuation allowance on our net deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances. The amount of the deferred tax asset considered realizable could be adjusted if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as long-term projections for growth. We will continue to monitor the need for a valuation allowance against our remaining deferred tax assets on a quarterly basis. We have indefinitely reinvested foreign earnings of $1.6 million at June 30, 2019. We would need to accrue and pay various taxes on this amount if repatriated. We do not intend to repatriate these earnings. We are subject to taxation in the United States and several state and foreign jurisdictions. Tax years beginning in 2014 are subject to examination by taxing authorities, although net operating loss and credit carryforwards from all years are subject to examinations and adjustments for at least three years following the year in which the attributes are used. An audit by the Ireland Revenue Agency for the calendar year 2016 was finalized during 2019 with no assessment. Net loss per share Our Blockchain Voting Series A Preferred Stock, Voting Series A-1 Preferred Stock, and our Voting Series B Preferred Stock (collectively the "preferred shares") are considered participating securities, and as a result, net loss per share is calculated using the two-class method. Under this method, we give effect to preferred dividends and then allocate remaining net loss attributable to our stockholders to both common shares and participating securities (based on the percentages outstanding) in determining net loss per common share. Basic net loss per common share is computed by dividing net loss attributable to common shares (after allocating between common shares and participating securities) by the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing net loss attributable to common shares (after allocating between common shares and participating securities) by the weighted average number of common and potential common shares outstanding during the period (after allocating total dilutive shares between our common shares outstanding and our preferred shares outstanding). Potential common shares, comprising incremental common shares issuable upon the exercise of stock options, warrants, and restricted stock awards are included in the calculation of diluted net loss per common share to the extent such shares are dilutive. Net loss attributable to common shares is adjusted for options and restricted stock awards issued by our subsidiaries when the effect of our subsidiary's diluted earnings per share is dilutive. The following table sets forth the computation of basic and diluted net loss per common share for the periods indicated (in thousands, except per share data):
The following shares were excluded from the calculation of diluted shares outstanding as their effect would have been anti-dilutive (in thousands):
Recently adopted accounting standards In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842), which requires lessees to recognize operating leases on-balance sheet and disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-10, Codification Improvements to Topic 842, Leases; and ASU No. 2018-11, Targeted Improvements. The new standard establishes a right-of-use model (ROU) that requires a lessee to recognize an ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. We adopted the new standard on January 1, 2019. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. If an entity chooses the second option, the transition requirements for existing leases also apply to leases entered into between the date of initial application and the effective date. The entity must also recast its comparative period financial statements and provide the disclosures required by the new standard for the comparative periods. We adopted the new standard on January 1, 2019 and thus used the effective date as our date of initial application. Consequently, financial information has not been updated and the disclosures required under the new standard are not provided for dates and periods before January 1, 2019. Upon adoption we recognized cumulative operating lease liabilities of approximately $35.1 million and operating right-of-use assets of approximately $31.0 million which were reflected as non-cash items in the consolidated statement of cash flows. The difference of $4.2 million represented deferred rent for leases that existed as of the date of adoption, which was an offset to the opening balance of right-of-use assets. The new standard provides a number of optional practical expedients in transition. We elected the "package of practical expedients", which permits us to not reassess under the new standard our prior conclusions about lease identification, lease classification, and initial direct costs as well as the practical expedient pertaining to land easements. We did not elect the use-of-hindsight practical expedient. The new standard also provides practical expedients for an entity's ongoing accounting. We elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, we did not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition. We also elected the practical expedient to not separate lease and non-lease components for all of our leases. The standard had a material effect on our financial statements, primarily related to (1) the recognition of new ROU assets and lease liabilities on our balance sheet for our warehouse, office, data center, and equipment operating leases; and (2) providing significant new disclosures about our leasing activities. The additional operating liabilities on our consolidated balance sheets were recognized based on the present value of the remaining minimum rental payments under current leasing standards for our existing operating leases, discounted by our incremental borrowing rate for borrowings of a similar duration on a fully secured basis, with corresponding ROU assets of approximately the same amount. In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting; which aligns the measurement and classification guidance for share-based payments to nonemployees with the guidance for share-based payments to employees, with certain exceptions. Under the guidance, the measurement of equity-classified nonemployee awards will be fixed at the grant date. We adopted the changes under the new standard on January 1, 2019 on a prospective basis. The implementation of ASU 2017-01 did not have a material impact on our consolidated financial statements and related disclosures. |
BUSINESS COMBINATIONS |
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BUSINESS COMBINATIONS | BUSINESS COMBINATIONS Bitsy, Inc. Through a series of transactions in 2018, Medici Ventures acquired a 33% equity interest in Bitsy, Inc. ("Bitsy"), a U.S.-based startup company that plans to build a regulatory-compliant bridge between the U.S. Dollar and cryptocurrencies and offer our customers the ability to purchase cryptocurrencies. Bitsy was founded by Steve Hopkins, Medici Ventures' former chief operating officer and general counsel, and current president of tZERO, who held a significant equity interest in Bitsy. On December 21, 2018, tZERO entered into a stock purchase agreement with the owners of Bitsy to acquire the remaining 67% equity interest in Bitsy for $8.0 million with effective control of Bitsy transferring to tZERO effective January 1, 2019. tZERO plans to integrate the software and technology of Bitsy to offer customers a digital wallet service intended to create a bridge between traditional fiat currencies and cryptocurrencies. In connection with the December 2018 stock purchase agreement, Medici Ventures transferred its 33% equity interest in Bitsy to tZERO for a $4.0 million convertible promissory note due December 31, 2020 and an assignment of certain intellectual property to Medici Ventures. We estimated the fair value of the acquired assets based on Level 3 inputs, which were unobservable (see Note 2—Accounting Policies, Fair value of financial instruments). These inputs included our estimate of future revenues, operating margins, discount rates, and assumptions about the relative competitive environment. As of March 31, 2019, our determination and allocation of the purchase price to net tangible and intangible assets was based upon preliminary estimates. During the quarter ended June 30, 2019, we received the final valuation information and completed our determination and allocation of the purchase price and recognized adjustments to the provisional values as of June 30, 2019, which decreased Intangible assets by $650,000, increased Deferred tax liabilities by $943,000 and resulted in a corresponding increase to Goodwill of $1.7 million. We recognized an impairment of $1.3 million as a result of remeasuring to fair value our 33% equity interest in Bitsy held before the business combination which was based on Level 3 inputs (see Note 2—Accounting Policies, Fair value of financial instruments). The impairment is included in Other income (expense), net in our consolidated statement of operations for the six months ended June 30, 2019. The fair values of the assets acquired and liabilities assumed at the acquisition date are as follows (in thousands):
The following table details the identifiable intangible assets acquired at their fair value and their corresponding useful lives at the acquisition date (amounts in thousands):
Acquired intangible assets primarily include patents, technology, and licenses. The acquired assets, liabilities, and associated operating results of Bitsy were consolidated into our financial statements at the acquisition date. The acquired assets, liabilities, and associated operating results were consolidated into our financial statements at the acquisition date. The goodwill recognized arises from expected synergies with our tZERO operations that do not qualify for separate recognition as intangible assets and also the deferred tax liabilities arising from the business combination. None of the goodwill recognized is expected to be deductible for tax purposes. Pro forma results of operations have not been presented because the effects of this acquisition were not material to our consolidated results of operations. Mac Warehouse, LLC On June 25, 2018, we acquired 100% of the total equity interests of Mac Warehouse, LLC, an electronics retailer of refurbished Apple products, to complement our retail business. As of December 31, 2018, our determination and allocation of the purchase price to net tangible and intangible assets was based upon preliminary estimates. During the quarter ended March 31, 2019, we received the final valuation information and completed our determination and allocation of the purchase price and recognized adjustments to the provisional values as of March 31, 2019, which decreased the recognized Intangibles assets by $2.8 million, increased Accrued liabilities by $527,000, decreased Deferred tax liabilities by $837,000 and resulted in a corresponding increase to Goodwill of $2.5 million. Additionally, the change to the provisional amount resulted in a decrease in amortization expense and accumulated depreciation of $1.4 million, of which $981,000 relates to the year ended December 31, 2018, and a $459,000 increase in Other Income related to the Accrued Liabilities that were expensed in 2018. We estimated the fair value of the acquired assets and liabilities based on Level 3 inputs, which were unobservable (see Note 2—Accounting Policies, Fair value of financial instruments). These inputs included our estimate of future revenues, operating margins, discount rates, royalty rates, and assumptions about the relative competitive environment. The fair values of the assets acquired and liabilities assumed at the acquisition date are as follows (in thousands):
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ACCRUED LIABILITIES |
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ACCRUED LIABILITIES | ACCRUED LIABILITIES Accrued liabilities consist of the following (in thousands):
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BORROWINGS |
6 Months Ended |
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Jun. 30, 2019 | |
Debt Disclosure [Abstract] | |
BORROWINGS | BORROWINGS High Bench Senior Credit Agreement On June 25, 2018, we became party to a senior credit agreement, as amended, with High Bench-Mac Warehouse-Senior Debt, LLC (the "High Bench Loan"), in connection with our acquisition of Mac Warehouse, LLC. Under the amended agreement, at the time of the acquisition, the loan carried an annual interest rate of 11.0% and a default rate of 18.0% and was subject to monthly interest only payments with the remaining principal amount and any then unpaid interest due and payable on April 18, 2020. At the time of the acquisition, the High Bench Loan was subject to mandatory prepayment under certain circumstances, such as a change-in-control of the business, and was prepayable at our election at any time without penalty or premium. There were no financial covenants associated with the High Bench Loan. At June 30, 2019, our outstanding balance on the High Bench Loan was $3.1 million. During July 2019, we repaid the entire outstanding balance of the High Bench Loan. Letters of credit At June 30, 2019 and December 31, 2018, letters of credit totaling $205,000 and $280,000, respectively, were issued on our behalf collateralized by compensating cash balances held at a bank, which are included in Restricted cash in our consolidated balance sheets. Commercial purchasing card agreement We have a commercial purchasing card (the "Purchasing Card") agreement. We use the Purchasing Card for business purpose purchasing and must pay it in full each month. At June 30, 2019, $64,000 was outstanding and $936,000 was available under the Purchasing Card. At December 31, 2018, $48,000 was outstanding and $952,000 was available under the Purchasing Card. |
LEASES |
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LEASES | LEASES We have operating and finance leases for warehouses, office space, data centers, and certain equipment. Our leases have remaining lease terms of 1 year to 12 years, some of which may include options to extend the leases perpetually, and some of which may include options to terminate the leases within 1 year. We note our finance leases are immaterial to our financial statements as a whole and thus are not discussed below. The following table provides a summary of leases by balance sheet location as of June 30, 2019 (in thousands):
The components of lease expenses for the three and six months ended June 30, 2019 were as follows (in thousands):
The following tables provides a summary of other information related to leases for the six months ended June 30, 2019 (in thousands, apart from weighted-average lease term and weighted average discount rate):
Maturity of lease liabilities under our non-cancellable operating leases as of June 30, 2019, are as follows (in thousands):
Information for our leases for the year ended December 31, 2018 under ASC Topic 840, Leases, follows for comparative purposes. Minimum future payments under all operating leases as of December 31, 2018, were as follows (in thousands):
Our subsidiary, tZERO, commenced a new lease subsequent to December 31, 2018. We have included the future lease payments associated with this lease in the table above. |
COMMITMENTS AND CONTINGENCIES |
6 Months Ended |
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Jun. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Legal proceedings and contingencies From time to time, we are involved in litigation concerning consumer protection, employment, intellectual property, claims under the securities laws, and other commercial matters related to the conduct and operation of our business and the sale of products on our Website. In connection with such litigation, we have been in the past and we may be in the future subject to significant damages. In some instances, other parties may have contractual indemnification obligations to us. However, such contractual obligations may prove unenforceable or non-collectible, and if we cannot enforce or collect on indemnification obligations, we may bear the full responsibility for damages, fees, and costs resulting from such litigation. We may also be subject to penalties and equitable remedies that could force us to alter important business practices. Such litigation could be costly and time consuming and could divert or distract our management and key personnel from our business operations. Due to the uncertainty of litigation and depending on the amount and the timing, an unfavorable resolution of some or all of such matters could materially affect our business, results of operations, financial position, or cash flows. The nature of the loss contingencies relating to claims that have been asserted against us are described below. On September 23, 2009, SpeedTrack, Inc. sued us along with 27 other defendants in the United States District Court in the Northern District of California. We are alleged to have infringed a patent covering search and categorization software. We believe that certain third-party vendors of products and services sold to us are contractually obligated to indemnify us, and we have tendered defense of the case to an indemnitor who accepted the defense. On April 21, 2016, the court entered an order partially dismissing the claims against us. On May 4, 2016, the plaintiff filed an amended complaint, and we filed our answer. No estimate of the possible loss or range of loss can be made. We intend to continue vigorously defending this action and pursuing our indemnification rights with our vendors. On February 11, 2013, RPost Holdings, Inc., RPost Communications Limited, and RMail Limited, filed suit against us in the United States District Court in the Eastern District of Texas for infringement of patents covering products and services that verify the delivery and integrity of email messages. We tendered defense of the case to an indemnitor who accepted the defense. On June 27, 2019, the court granted a motion to dismiss the case, thereby dismissing all claims asserted against us. On March 15, 2019, Consolidated Transaction Processing, LLC, filed suit against us in the United States District Court for the District of Delaware for infringement of patents covering our electronic transaction processing methods. On July 24, 2019, the case was dismissed. In June 2013, William French ("French") and the State of Delaware ("Delaware") sued us, along with numerous other defendants, in the Superior Court of the State of Delaware for alleged violations of Delaware's unclaimed property laws. French and Delaware alleged that we knowingly refused to fulfill obligations under Delaware's Abandoned Property Law by failing to report and deliver unclaimed gift card funds to the State of Delaware, and knowingly made, used or caused to be made or used, false statements and records to conceal, avoid or decrease an obligation to pay or transmit money to Delaware in violation of the Delaware False Claims and Reporting Act. On June 28, 2019, the court entered a judgment against us in the amount of approximately $7.3 million (for certain unredeemed gift card balances, treble damages, and penalties) as a result of a jury verdict which was returned September 20, 2018. The court has not yet determined an award of attorneys’ fees and costs which will be added to the judgment. We intend to file an appeal. Our estimated liability for these amounts was included in Accrued liabilities at June 30, 2019. The expense associated with these litigation charges was included in general and administrative expense in our consolidated statement of operations for the year ended December 31, 2018. In February 2018, the Division of Enforcement of the SEC informed tZERO and subsequently informed us that it is conducting an investigation and requested that we and tZERO voluntarily provide certain information and documents related to tZERO and the tZERO security token offering in connection with its investigation. In December of 2018, we received a follow-up request from the SEC relating to its investigation. We are cooperating fully with the SEC in connection with its investigation. tZERO's broker-dealer subsidiaries are, and any broker-dealer subsidiaries that it acquires or forms in the future will be, subject to extensive regulatory requirements under federal and state laws and regulations and self-regulatory organization ("SRO") rules. Each of SpeedRoute LLC ("SpeedRoute") and PRO Securities LLC ("PRO Securities") is registered with the SEC as a broker-dealer under the Exchange Act and in the states in which it conducts securities business and is a member of FINRA and other SROs (as applicable). In addition, PRO Securities owns and operates the PRO Securities ATS, which is registered with the SEC as an alternative trading system. Each of SpeedRoute and PRO Securities is subject to regulation, examination, investigation, and disciplinary action by the SEC, FINRA, and state securities regulators, as well as other governmental authorities and SROs with which it is registered or licensed or of which it is a member. Moreover, as a result of tZERO's projects seeking to apply distributed ledger technologies to the capital markets, tZERO's subsidiaries have been, and remain involved in, ongoing oral and written communications with regulatory authorities. As previously disclosed, tZERO's broker-dealer subsidiaries are currently undergoing various examinations, inquiries, and/or investigations undertaken by various regulatory authorities; as appropriate or required, we will provide further information regarding such matters. Any failure by tZERO's broker-dealer subsidiaries to satisfy regulatory authorities that they are in compliance with all applicable rules and regulations could have a material adverse effect on tZERO and on us. In addition, a newly-incorporated tZERO subsidiary recently applied for regulatory approvals to operate as a broker-dealer in a variety of areas, including retail activities. The approval process will involve satisfying the regulatory authorities that the tZERO subsidiary can operate in the manner it proposes and, in addition, if approval is granted, the tZERO subsidiary will be subject to a number of legal and regulatory requirements, some of which will be new to tZERO’s broker-dealer subsidiaries. On January 31, 2019, a putative class action lawsuit was filed against us in the United States District Court, Southern District of New York, alleging that our website violates the Americans with Disabilities Act ("ADA") in addition to other New York specific laws, because it is not accessible to blind and visually impaired people. No estimate of the possible loss or range of loss can be made. We intend to vigorously defend this action. We establish liabilities when a particular contingency is probable and estimable. At June 30, 2019 and December 31, 2018, we have accrued $10.1 million and $10.3 million, respectively, which are included in Accrued liabilities in our consolidated balance sheets. It is reasonably possible that the actual losses may exceed our accrued liabilities. |
INDEMNIFICATIONS AND GUARANTEES |
6 Months Ended |
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Jun. 30, 2019 | |
INDEMNIFICATIONS AND GUARANTEES | |
INDEMNIFICATIONS AND GUARANTEES | INDEMNIFICATIONS AND GUARANTEES During our normal course of business, we have made certain indemnities, commitments, and guarantees under which we may be required to make payments in relation to certain transactions. These indemnities include, but are not limited to, indemnities to various lessors in connection with facility leases for certain claims arising from such facility or lease, the environmental indemnity we entered into in favor of the lenders under our prior loan agreements, customary indemnification arrangements in underwriting agreements and similar agreements, and indemnities to our directors and officers to the maximum extent permitted under the laws of the State of Delaware. The duration of these indemnities, commitments, and guarantees varies, and in certain cases, is indefinite. In addition, the majority of these indemnities, commitments, and guarantees do not provide for any limitation of the maximum potential future payments we could be obligated to make. As such, we are unable to estimate with any reasonableness our potential exposure under these items. We have not recorded any liability for these indemnities, commitments, and guarantees in the accompanying consolidated balance sheets. We do, however, accrue for losses for any known contingent liability, including those that may arise from indemnification provisions, when future payment is both probable and reasonably estimable. |
STOCKHOLDERS' EQUITY (Notes) |
6 Months Ended |
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Jun. 30, 2019 | |
Equity [Abstract] | |
STOCKHOLDERS' EQUITY | STOCKHOLDERS' EQUITY Common Stock Each share of common stock has the right to one vote. The holders of common stock are also entitled to receive dividends declared by the Board of Directors out of funds legally available, subject to prior rights of holders of all classes of stock outstanding having priority rights as to dividends. No dividends have been declared or paid on our common stock through June 30, 2019. Preferred Stock On May 1, 2019, we informed holders of our Blockchain Voting Series A Preferred Stock, par value $0.0001 per share (the "Series A Preferred"), of an opportunity to exchange (the "Exchange") outstanding Series A Preferred for newly-issued shares of the Company's Digital Voting Series A-1 Preferred Stock, par value $0.0001 per share (the "Series A-1 Preferred"). On June 26, 2019, the Exchange was completed for participating stockholders. In connection with the Exchange, 122,526 shares of Series A Preferred were validly tendered and accepted for exchange by the Company and the Company issued 122,526 shares of Series A-1 Preferred in exchange therefore. On June 26, 2019, in connection with the completion of the Exchange, 1,144 shares of Series A Preferred were converted into shares of Voting Series B Preferred Stock (the "Series B Preferred") (such transaction, the "Conversion"). Following the Conversion, 2,895 shares of Series A Preferred remained outstanding as of June 30, 2019 and in July 2019, 2,020 of those remaining shares were exchanged for shares of Series A-1 Preferred and 875 of those remaining shares were converted into shares of Series B Preferred. Following that time, the Company eliminated the Series A Preferred by filing a Certificate of Elimination with the Delaware Secretary of State. Each share of Series A Preferred, each share of Series A-1 Preferred, and each share of Series B Preferred (collectively the "preferred shares") is intended to have voting and dividend rights similar to those of one share of common stock. Preferred shares rank senior to common stock with respect to dividends. Holders of the preferred shares will be entitled to an annual cash dividend of $0.16 per share, in preference to any dividend payment to the holders of the common stock, out of funds of the Company legally available for payment of dividends and subject to declaration by our Board of Directors. Holders of the preferred shares are also entitled to participate in any cash dividends we pay to the holders of the common stock and are also entitled to participate in non-cash dividends we pay to holders of the common stock, subject to potentially different treatment if we effect a stock dividend, stock split, or combination of the common stock. There are no arrearages in cumulative preferred dividends. We declared and paid a cash dividend of $0.16 per share to the holders of our preferred stock during 2017 and 2018. Neither the Series A Preferred, Series A-1 Preferred, nor Series B Preferred is required to be converted into or exchanged for shares of our common stock or any other entity; however, at our sole discretion, we may convert the Series A Preferred shares or Series A-1 Preferred shares into Series B Preferred shares at any time on a one-to-one basis. Until December 15, 2019, we may redeem, at our discretion, the Series A, Series A-1, and Series B Preferred shares for an amount equal to the highest of the following: (1) $15.68 plus any accrued but unpaid dividends, (2) 105% of the average trading price of our common stock during a five-trading-day period and (3) 105% of the average trading price of the series of preferred shares during the same five-day-trading period. In the event of any liquidation, any amount available for distribution to stockholders after payment of all liabilities will be distributed proportionately, with each share of Series A Preferred, each share of Series A-1 Preferred, and each share of Series B Preferred being treated as though it were a share of our common stock. JonesTrading Sales Agreement In August 2018, we entered into a sales agreement with JonesTrading Institutional Services LLC ("JonesTrading"), under which we conducted "at the market" public offerings of our common stock from time to time. Under the sales agreement, JonesTrading, acting as our agent, sold 5,843,147 shares of our common stock resulting in $146.7 million in proceeds, net of $3.3 million of offering costs, including commissions paid to JonesTrading. Of the cumulative amount sold under the sales agreement, we sold shares of common stock for $52.1 million, net of offering expenses (including commissions) during the six months ended June 30, 2019. The average gross price per share of stock sold pursuant to the sales agreement during the six months ended June 30, 2019 was $17.84. tZERO Tokens On December 18, 2017, tZERO launched an offering (the "security token offering") of the right to acquire tZERO Preferred Equity Tokens (the "tZERO Security Token") through a Simple Agreement for Future Equity ("SAFE"). The security token offering closed on August 6, 2018 and funded through August 8, 2018, and on October 12, 2018 tZERO distributed the tZERO Security Tokens in settlement of the SAFEs. tZERO Security Token holders have the right to, prior to distributing earnings to tZERO common shareholders, a noncumulative dividend equal to 10% of tZERO's consolidated Adjusted Gross Revenue (as defined by the security token offering documents) for the most recently completed fiscal quarter, if declared by tZERO's Board of Directors, to be paid out of funds lawfully available on a quarterly basis. tZERO Security Token holders are not entitled to participate in any dividends paid to the holders of tZERO's common stock, have no rights to vote, and have no rights to the undistributed earnings of tZERO and are not entitled to any utility functionality as part of the tZERO Security Tokens. Any remaining undistributed earnings or losses of tZERO for a period shall be allocated to the noncontrolling interest held by the tZERO Security Token holders based on the contractual participation rights of the security to share in those earnings as if all the earnings for the period had been distributed and the effect will be reflected in determining net income/(loss) per share under the two-class method. In the event of any liquidation, dissolution or winding up of tZERO, the tZERO Security Token holders will be entitled to the limited preferential liquidation rights equal to USD $0.10 per token to the extent funds are available. At December 31, 2018, cumulative proceeds since December 18, 2017 from the security token offering totaling $104.8 million, net of $22.0 million of withdrawals, were classified as a component of noncontrolling interest within our consolidated financial statements. As of December 31, 2018, tZERO incurred $21.5 million of offering costs associated with the security token offering that are classified as a reduction in proceeds within noncontrolling interest of our consolidated financial statements. During the six months ended June 30, 2018, proceeds from the security token offering were $95.9 million, net of $22.0 million of withdrawals. During the six months ended June 30, 2018, tZERO incurred offering costs of $16.5 million. GSR Agreement In August 2018, Overstock signed a Token Purchase Agreement with GSR Capital Ltd., a Cayman Islands exempted company ("GSR"). The Token Purchase Agreement sets forth the terms on which GSR had agreed to purchase, for $30 million, on May 6, 2019 or such other date as agreed by the parties, security tokens at a price of $6.67 per security token. On May 8, 2019, the parties executed an Investment Agreement to replace the Token Purchase Agreement under which GSR agreed to purchase 508,710 shares of tZERO common stock, representing approximately 0.5% of the issued and outstanding common stock of tZERO. In exchange, GSR agreed to transfer to tZERO a total $5.0 million in consideration, consisting of $1.0 million U.S. dollars, $1.0 million U.S. dollars' worth of Chinese Renminbi, and securities traded on the Hong Kong Stock Exchange with a market value on the date of the Investment Agreement of $3.0 million U.S. dollars. As of June 30, 2019, GSR had not fully completed the funding by the anticipated closing date as outlined in the Investment Agreement. As of June 30, 2019, GSR had provided $1.0 million of USD, and such amount is included in Accrued liabilities at June 30, 2019. Subsequent to June 30, 2019, GSR provided an additional $1.0 million of USD. Warrants On November 8, 2017, we issued warrants to purchase up to a combined aggregate of 3,722,188 shares of our common stock to two purchasers in privately negotiated transactions, for an aggregate purchase price of $6.5 million, net of issuance costs. The exercise price for the warrants was $40.45 per share of common stock. On December 29, 2017, one of the warrant holders exercised its warrant in full and purchased a total of 2,472,188 shares of common stock for $100.0 million. On January 17, 2018, the other warrant holder exercised its warrant in full and purchased 1,250,000 shares of common stock for $50.6 million. |
STOCK-BASED AWARDS |
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Share-based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCK-BASED AWARDS | STOCK-BASED AWARDS We have equity incentive plans that provide for the grant to employees and board members of stock-based awards, including stock options, and restricted stock. Employee accounting applies to awards granted by the Company or subsidiary in the company or subsidiary's shares only to its own employees, respectively. Stock-based compensation expense was as follows (in thousands):
Overstock restricted stock awards The Overstock.com, Inc. Amended and Restated 2005 Equity Incentive Plan provides for the grant of restricted stock units and other types of equity awards of the Company to our officers, board members and employees. These restricted stock awards generally vest over three years at 33.3% at the end of the first year, 33.3% at the end of the second year and 33.3% at the end of the third year, subject to the recipient's continuing service to us. In addition to our traditional equity awards, during the quarter ended March 31, 2019, we granted 502,765 restricted stock awards with a cumulative grant date fair value of $8.6 million which vest over a one-year period. The cost of restricted stock units is determined using the fair value of our common stock on the date of the grant and compensation expense is either recognized on a straight-line basis over the vesting schedule or on an accelerated schedule when vesting of restricted stock awards exceeds a straight-line basis. The cumulative amount of compensation expense recognized at any point in time is at least equal to the portion of the grant date fair value of the award that is vested at that date. The following table summarizes restricted stock award activity during the six months ended June 30, 2019 (in thousands):
Medici Ventures stock options The Medici Ventures, Inc. 2017 Stock Option Plan provides for the grant of options to employees and directors of and consultants to Medici Ventures to acquire up to approximately 9% of the authorized shares of Medici Ventures' common stock. Medici Ventures authorized 1.5 million shares, 900,000 of which are issued and outstanding to Overstock, and 130,000 of which are subject to the 2017 Stock Option Plan. The remaining 470,000 are authorized but unissued. During the six months ended June 30, 2019, Medici Ventures granted 27,350 stock options with a cumulative grant date fair value of $2.4 million which vest over a three-year period. tZERO equity awards The tZERO.com 2017 Equity Incentive Plan provides for grant of options to employees and directors of and consultants to tZERO to acquire up to 5% of the authorized shares of tZERO's common stock. During the six months ended June 30, 2019, tZERO granted awards to acquire 3,103,822 shares of its stock with a cumulative grant date fair value of $453,000 which will be expensed on a straight-line basis over the vesting period of three years. Additionally, during the six months ended June 30, 2019, tZERO granted 245,500 restricted stock awards with a cumulative grant date fair value of $749,000 which will be expensed on a straight-line basis over a cliff vesting period of two years. |
OTHER INCOME (EXPENSE), NET |
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OTHER INCOME (EXPENSE), NET | OTHER INCOME (EXPENSE), NET Other income (expense), net consisted of the following (in thousands):
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BUSINESS SEGMENTS | BUSINESS SEGMENTS Segment information has been prepared in accordance with ASC Topic 280 Segment Reporting. As described in Note 1—Basis of Presentation, we have recast our segment information to conform with current year presentation. We determined our segments based on how we manage our business. In the fourth quarter of 2018, we completed our review of our segment reporting and in light of a strategic shift in our Chief Operating Decision Maker's long-term strategic focus for our organization, we no longer consider the split of retail direct and retail partner as a distinct and relevant measure of our business. Accordingly, Direct and Partner are no longer considered separate reportable segments but are included under Retail in our Business Segment disclosures. Beginning in the first quarter of 2019, we began allocating corporate support costs (administrative functions such as finance, human resources, and legal) to our operating segments based on their estimated usage and based on how we manage our business. Comparative prior year information has not been recast and as a result our corporate support costs for those comparative prior periods remain allocated to our Retail segment. Our Medici business includes one reportable segment, tZERO. We use pre-tax net income (loss) as the measure to determine our reportable segments. As a result, the remainder of our Medici business is not significant as compared to our Retail and tZERO segments. Our Other segment consists of Medici Ventures' remaining operations and the remainder of our unallocated corporate support costs (administrative functions such as finance, human resources, and legal). Our Retail segment primarily consists of amounts earned through e-commerce sales through our Website. Our tZERO segment primarily consists of amounts earned through securities transactions through our broker-dealers and costs incurred to execute our tZERO business initiatives. We do not allocate assets between our segments for our internal management purposes, and as such, they are not presented here. There were no significant inter-segment sales or transfers during the three and six months ended June 30, 2019 and 2018. The following table summarizes information about reportable segments for three and six months ended June 30, 2019 and 2018 (in thousands):
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For the three and six months ended June 30, 2019 and 2018, substantially all of our revenues were attributable to customers in the United States. At June 30, 2019 and December 31, 2018, substantially all our property and equipment were located in the United States. |
BROKER DEALERS |
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Jun. 30, 2019 | |
Brokers and Dealers [Abstract] | |
BROKER DEALERS | BROKER DEALERS As part of our Medici blockchain and fintech technology initiatives, we hold a controlling interest in each of two broker dealers, SpeedRoute LLC ("SpeedRoute") and PRO Securities LLC ("Pro Securities"), which we acquired in January 2016. SpeedRoute is an electronic, agency-only FINRA-registered broker dealer that provides connectivity for its customers to U.S. equity exchanges as well as off-exchange sources of liquidity such as dark pools. All of SpeedRoute's customers are registered broker dealers. SpeedRoute does not hold, own or sell securities. PRO Securities is a FINRA-registered broker dealer that owns and operates the PRO Securities alternative trading system ("ATS"), which is registered with the SEC. An ATS is a trading system that is not regulated as an exchange, but is a licensed venue for matching buy and sell orders. The PRO Securities ATS is a closed system available only to its broker dealer subscribers. PRO Securities does not accept orders from non-broker dealers, nor does it hold, own or sell securities. SpeedRoute and PRO Securities are subject to the SEC's Uniform Net Capital Rule (SEC Rule 15c3-1), which requires the maintenance of minimum net capital and requires that the ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 15 to 1 and that equity capital may not be withdrawn or cash dividends paid if the resulting net capital ratio would exceed 10 to 1. At June 30, 2019, SpeedRoute had net capital of $780,173, which was $615,124 in excess of its required net capital of $165,049 and SpeedRoute's net capital ratio was 3.17 to 1. At June 30, 2019, PRO Securities had net capital of $59,312 which was $54,312 in excess of its required net capital of $5,000 and PRO Securities net capital ratio was 0.34 to 1. At December 31, 2018, SpeedRoute had net capital of $1,251,579, which was $1,152,854 in excess of its required net capital of $98,725 and SpeedRoute's net capital ratio was 1.2 to 1. At December 31, 2018, PRO Securities had net capital of $13,958, which was $8,958 in excess of its required net capital of $5,000 and PRO Securities net capital ratio was 2 to 1. SpeedRoute and PRO Securities did not have any securities owned or securities sold, not yet purchased at June 30, 2019 and December 31, 2018, respectively. |
Subsequent Events (Notes) |
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Subsequent Events [Abstract] | |
Subsequent Events [Text Block] | SUBSEQUENT EVENTS On July 30, 2019, we announced that our Board of Directors declared a dividend (the "Dividend") payable in shares of our Series A-1 Preferred Stock. The record date for the Dividend will be September 23, 2019, and the payment date for the Dividend will be November 15, 2019. The Dividend will be payable at a ratio of 1:10, meaning that one share of Series A-1 will be issued for every ten shares of common stock, Series A-1 or Voting Series B Preferred Stock held by all holders of such shares as of the record date. Existing Series A-1 shares can currently be traded on the PRO Securities ATS operated by PRO Securities, LLC, a subsidiary of Overstock.com. The Series A-1 shares to be issued in the dividend are anticipated to be subject to restrictions on resales under federal and state securities laws. |
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Principles of consolidation | Principles of consolidation The accompanying consolidated financial statements include our accounts and the accounts of our wholly-owned subsidiaries and other subsidiaries for which we exercise control. All intercompany account balances and transactions have been eliminated in consolidation. Included in our consolidated financial statements are the financial results of Bitsy, Inc. from the acquisition date of January 1, 2019, Verify Investor, LLC from the acquisition date of February 12, 2018, and Mac Warehouse, LLC from the acquisition date of June 25, 2018. |
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Use of estimates | Use of estimates The preparation of financial statements in conformity with GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent liabilities in our consolidated financial statements and accompanying notes. Estimates are used for, but not limited to, receivables valuation, revenue recognition, Club O and gift card breakage, sales returns, incentive discount offers, inventory valuation, depreciable lives of property and equipment and internally-developed software, goodwill valuation, intangible asset valuation, equity securities valuation, income taxes, stock-based compensation, performance-based compensation, self-funded health insurance liabilities and contingencies. Although these estimates are based on our best knowledge of current events and actions that we may undertake in the future, actual results may differ materially from these estimates. |
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Cash equivalents | Cash equivalents We classify all highly liquid instruments, including instruments with a remaining maturity of three months or less at the time of purchase, as cash equivalents. |
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Restricted cash | Restricted cash We consider cash that is legally restricted and cash that is held as compensating balances for credit arrangements, surety bonds, and self-funded health insurance as restricted cash. |
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Fair value of financial instruments | Fair value of financial instruments We account for our assets and liabilities using a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. These two types of inputs have created the fair-value hierarchy below. This hierarchy requires us to minimize the use of unobservable inputs and to use observable market data, if available, when determining fair value.
Our assets and liabilities that are adjusted to fair value on a recurring basis are cash equivalents, certain equity securities, and deferred compensation liabilities, which fair values are determined using quoted market prices from daily exchange traded markets on the closing price as of the balance sheet date and are classified as Level 1. Our other financial instruments, including cash, restricted cash, accounts receivable, accounts payable, accrued liabilities, finance obligations, and debt are carried at cost, which approximates their fair value. Certain assets, including long-lived assets, certain equity securities, goodwill, cryptocurrencies, and other intangible assets, are measured at fair value on a nonrecurring basis; that is, the assets are not measured at fair value on an ongoing basis, but are subject to fair value adjustments using fair value measurements with unobservable inputs (level 3), apart from cryptocurrencies which use quoted prices from various digital currency exchanges with active markets, in certain circumstances (e.g., when there is evidence of impairment). |
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Accounts receivable, net | Accounts receivable, net Accounts receivable consist primarily of carrier rebates, trade amounts due from customers in the United States, and uncleared credit card transactions at period end. Accounts receivable are recorded at invoiced amounts and do not bear interest. |
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Allowance for doubtful accounts | From time to time, we grant credit to some of our business customers on normal credit terms (typically 30 days). We maintain an allowance for doubtful accounts receivable based upon our business customers' financial condition and payment history, and our historical collection experience and expected collectability of accounts receivable. |
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Concentration of credit risk | Concentration of credit risk One bank held the majority of our cash and cash equivalents at June 30, 2019 and December 31, 2018. Our cash equivalents primarily consist of money market securities which are uninsured. We do not believe that, as a result of this concentration, we are subject to any unusual financial risk beyond the normal risk associated with commercial banking relationships. |
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Inventories, net | Inventories, net Inventories, net include merchandise purchased for resale, which are accounted for using a standard costing system which approximates the first-in-first-out ("FIFO") method of accounting, and are valued at the lower of cost and net realizable value. Inventory valuation requires us to make judgments, based on currently available information, about the likely method of disposition, such as through sales to individual customers, returns to product vendors, or liquidations, and expected recoverable values of each disposition category. |
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Prepaids and other current assets | Prepaids and other current assets Prepaids and other current assets represent expenses paid prior to receipt of the related goods or services, including advertising, license fees, maintenance, packaging, insurance, prepaid inventories, other miscellaneous costs, and cryptocurrency-denominated assets ("cryptocurrencies"). See Cryptocurrencies below. |
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Cryptocurrencies | Cryptocurrencies We hold cryptocurrency-denominated assets ("cryptocurrencies") such as bitcoin and we include them in Prepaids and other current assets in our consolidated balance sheets. Our cryptocurrencies were $2.3 million and $2.4 million at June 30, 2019 and December 31, 2018, respectively, and are recorded at cost less impairment. We recognize impairment on these assets caused by decreases in market value, determined by taking quoted prices from various digital currency exchanges with active markets, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. See Fair value of financial instruments above. Such impairment in the value of our cryptocurrencies is recorded in General and administrative expense in our consolidated statements of operations. Impairments on cryptocurrencies were zero and $318,000 for the three and six months ended June 30, 2019. There was $702,000 and $9.5 million impairment on cryptocurrencies during the three and six months ended June 30, 2018. Gains and losses realized upon sale of cryptocurrencies are also recorded in General and administrative expense in our consolidated statements of operations. We occasionally use our cryptocurrencies to purchase other cryptocurrencies. Gains and losses realized with these non-cash transactions are also recorded in General and administrative expense in our consolidated statements of operations. These non-cash transactions as well as gains (losses) from cryptocurrencies received through our tZERO security token offering are also presented as an adjustment to reconcile Net income (loss) to Net cash provided by (used in) operating activities in our consolidated statements of cash flows. Further, the proceeds from the sale of cryptocurrencies received through our tZERO security token offering are presented as a financing activity in our consolidated statements of cash flows due to its near immediate conversion into cash and its economic similarity to the receipt of cash proceeds under the tZERO security token offering. |
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Fixed assets, net | Property and equipment, net Property and equipment are recorded at cost and stated net of depreciation and amortization. Upon sale or retirement of assets, cost and related accumulated depreciation and amortization are removed from the balance sheet and the resulting gain or loss is reflected in our consolidated statements of operations. Property and equipment are depreciated using the straight-line method over the estimated useful lives of the related assets or the term of the related finance lease, whichever is shorter, as follows:
Leasehold improvements are amortized over the shorter of the term of the related leases or estimated useful lives. Included in property and equipment is the capitalized cost of internal-use software and website development, including software used to upgrade and enhance our Website and processes supporting our business. We capitalize costs incurred during the application development stage of internal-use software and amortize these costs over the estimated useful life. Costs incurred related to design or maintenance of internal-use software are expensed as incurred. |
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Investments | Equity securities under ASC 321 At June 30, 2019, we held minority interests (less than 20%) in certain privately held entities accounted for under Accounting Standards Codification ("ASC") Topic 321, Investments - Equity Securities ("ASC 321"), which are included in Equity securities in our consolidated balance sheets. One of these equity securities, which had a carrying value of $1.5 million at June 30, 2019, is carried at fair value based on Level 1 inputs. See Fair value of financial instruments above. The remaining equity securities lack readily determinable fair values and therefore the securities are measured at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar equity securities of the same issuer. Dividends received are reported in earnings if and when received. We review our securities individually for impairment by evaluating if events or circumstances have occurred that may indicate the fair value of the investment is less than its carrying value. If such events or circumstances have occurred, we estimate the fair value of the investment and recognize an impairment loss equal to the difference between the fair value of the investment and its carrying value, which are recorded as unrealized gains or losses on our investments in Other income (expense), net on our consolidated statements of operations. In such cases, the estimated fair value of the investment is determined using unobservable inputs including assumptions by the investee's management including quantitative information such as lower valuations in recently completed or proposed financings. These inputs are classified as Level 3. Because several of these private companies are in the early startup or development stages, these entities are subject to potential changes in cash flows and valuation, as well as inability to raise additional capital which may be necessary for the liquidity needed to support their operations. The carrying amount of our equity securities under ASC 321 was approximately $15.1 million and $20.3 million at June 30, 2019 and December 31, 2018, respectively. The portion of unrealized gains and losses for the period related to equity securities still held at June 30, 2019 and 2018 is calculated as follows:
Equity method securities under ASC 323 At June 30, 2019, we held minority interests in certain privately held entities accounted for as equity method securities under ASC Topic 323, Investments - Equity Method and Joint Ventures ("ASC 323"), which are included in Equity securities in our consolidated balance sheets. We can exercise significant influence, but not control, over these entities through either holding more than a 20% voting interest in the entity or through our representation on the entity's board of directors. The following table includes our equity method securities and related ownership interest as of June 30, 2019:
The carrying amount of our equity method securities was approximately $28.6 million and $40.1 million at June 30, 2019 and December 31, 2018, respectively. The carrying value of our equity method securities exceeded the amount of underlying equity in net assets of our equity method securities and the difference was primarily related to goodwill and the fair value of intangible assets. The basis difference attributable to amortizable intangible assets is amortized over their estimated useful lives. We record our proportionate share of the net income or loss from our equity method securities and the amortization of the basis difference related to intangible assets in Other income (expense), net in our consolidated statements of operations with corresponding adjustments to their carrying value. The following table summarizes the net losses recognized on equity method securities for the three and six months ended June 30, 2019 and 2018:
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Noncontrolling Interest | Noncontrolling interests in Controlled Subsidiaries Our wholly-owned subsidiary, Medici Ventures, Inc. ("Medici Ventures"), holds a majority ownership interest in tZERO Group, Inc. ("tZERO"), formerly tØ.com, Inc., and Medici Land Governance Inc., a Delaware public benefit corporation ("MLG"). tZERO's subsidiaries include a financial technology company, two related registered broker dealers, a digital wallet and exchange services company, and an accredited investor verification company. tZERO, MLG, and their consolidated subsidiaries are included in our consolidated financial statements. For controlled subsidiaries that are not wholly-owned, the noncontrolling interests are included in Net loss and Total equity. Intercompany transactions have been eliminated and the amounts of contributions and gains or losses that are attributable to the noncontrolling interests are disclosed in our consolidated financial statements. |
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Leases | Leases We determine if an arrangement is a lease at inception. We account for lease agreements as either operating or finance leases depending on certain defined criteria. Operating leases are recognized in Operating lease right-of-use ("ROU") assets, Operating lease liabilities, current, and Operating lease liabilities, non-current on our consolidated balance sheets. Finance leases are included in Other long-term assets, net, Other current liabilities, and Other long-term liabilities on our consolidated balance sheets. Lease assets and liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. In certain of our lease agreements, we receive rent holidays and other incentives. We recognize lease costs on a straight-line basis over the lease term without regard to deferred payment terms, such as rent holidays, that defer the commencement date of required payments. Our lease terms may include options to extend or terminate the lease, and we adjust our measurement of the lease when it is reasonably certain that we will exercise that option. Lease payments used in measurement of the lease liability typically do not include executory costs, such as taxes, insurance, and maintenance, unless those costs can be reasonably estimated at lease commencement. Leasehold improvements are capitalized at cost and amortized over the lesser of their expected useful life or the life of the lease, without assuming renewal features, if any, are exercised. We do not separate lease and non-lease components for our leases. |
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Treasury stock | Treasury stock We account for treasury stock of our common shares under the cost method and include treasury stock as a component of stockholders' equity. |
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Goodwill | Goodwill Goodwill represents the excess of the purchase price paid over the fair value of the net assets acquired in business combinations (see Note 3—Business Combinations for current period activity). Goodwill is not amortized but is tested for impairment at least annually or when we deem that a triggering event has occurred. When evaluating whether goodwill is impaired, we make a qualitative assessment to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative assessment determines that it is more likely than not that its fair value is less than its carrying amount, we compare the fair value of the reporting unit to which the goodwill is assigned to its carrying amount. If the carrying amount exceeds its fair value, an impairment loss is recognized in an amount equal to the excess of the carrying amount over the fair value of the reporting unit, not to exceed the carrying amount of the goodwill. |
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Intangible assets other than goodwill | Intangible assets other than goodwill We capitalize and amortize intangible assets other than goodwill over their estimated useful lives unless such lives are indefinite. Intangible assets other than goodwill acquired separately from third-parties are capitalized at cost while such assets acquired as part of a business combination are capitalized at their acquisition-date fair value. Definite lived intangible assets are amortized using the straight-line method of amortization over their useful lives, with the exception of certain intangibles (such as acquired technology, customer relationships, and trade names) which are amortized using an accelerated method of amortization based on cash flows. These definite lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable as described below under Impairment of long-lived assets. |
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Impairment of long-lived assets | Impairment of long-lived assets We review property and equipment, right-of-use assets, and other long-lived assets, including intangible assets other than goodwill, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. See the Cryptocurrencies section above for our impairment policy over cryptocurrencies. Recoverability is measured by comparison of the assets' carrying amount to future undiscounted net cash flows the asset group is expected to generate. Cash flow forecasts are based on trends of historical performance and management's estimate of future performance, giving consideration to existing and anticipated competitive and economic conditions. If such asset group is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds their fair values. |
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Other long-term assets, net | Other long-term assets, net Other long-term assets, net consist primarily of long-term prepaid expenses, deposits, and assets acquired under finance leases. |
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Revenue recognition | Revenue recognition Revenue is recognized when, or as, control of a promised product or service transfers to a customer, in an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring those products or services. Revenue excludes taxes that have been assessed by governmental authorities and that are directly imposed on revenue-producing transactions between the Company and its customers, including sales and use taxes. Revenue recognition is evaluated through the following five-step process: 1) identification of the contract with a customer; 2) identification of the performance obligations in the contract; 3) determination of the transaction price; 4) allocation of the transaction price to the performance obligations in the contract; and 5) recognition of revenue when or as a performance obligation is satisfied. Product Revenue We derive our revenue primarily from our retail business through our Website, but may also derive revenue from sales of merchandise through offline and other channels. Our Retail revenue is derived primarily from merchandise sold at a point in time and shipped to customers. Merchandise sales are fulfilled with inventory sourced through our partners or from our owned inventory, depending on the most efficient means of fulfilling the customer contract. The majority of our sales, however, are fulfilled from inventory sourced through our partners. Revenue is recognized when control of the product passes to the customer, typically at the date of delivery of the merchandise to the customer or the date a service is provided, and is recognized in an amount that reflects the expected consideration to be received in exchange for such goods or services. As such, customer orders are recorded as deferred revenue prior to delivery of products or services ordered. As we ship high volumes of packages through multiple carriers, it is not practical for us to track the actual delivery date of each shipment. Therefore, we use estimates to determine which shipments are delivered and, therefore, recognized as revenue at the end of the period. Our delivery date estimates are based on average shipping transit times, which are calculated using the following factors: (i) the type of shipping carrier (as carriers have different in-transit times); (ii) the fulfillment source (either our warehouses, those warehouses we control, or those of our partners); (iii) the delivery destination; and (iv) actual transit time experience, which shows that delivery date is typically one to eight business days from the date of shipment. We review and update our estimates on a quarterly basis based on our actual transit time experience. However, actual shipping times may differ from our estimates. Generally, we require authorization from credit card or other payment vendors whose services we offer to our customers (such as PayPal), or verification of receipt of payment, before we ship products to consumers or business purchasers. From time to time we grant credit to our business purchasers with normal credit terms (typically 30 days). We generally receive payments from our customers before our payments to our suppliers are due. We do not recognize assets associated with costs to obtain or fulfill a contract with a customer. Shipping and handling is considered a fulfillment activity, as it takes place prior to the customer obtaining control of the merchandise, and fees charged to customers are included in net revenue upon completion of our performance obligation. We present revenue net of sales taxes, discounts, and expected refunds. Our merchandise sales contracts include terms that could cause variability in the transaction price for items such as discounts, credits, or sales returns. Accordingly, the transaction price for product sales includes estimates of variable consideration to the extent it is probable that a significant reversal of revenue recognized will not occur. At the time of sale, we estimate a sales return liability for the variable consideration based on historical experience, which is recorded within Accrued liabilities in the consolidated balance sheet. We record an allowance for returns based on current period revenues and historical returns experience. We analyze actual historical returns, current economic trends and changes in order volume and acceptance of our products when evaluating the adequacy of the sales returns allowance in any accounting period. We evaluate the criteria outlined in ASC 606-10-55, Principal versus Agent Considerations, in determining whether it is appropriate to record the gross amount of merchandise sales and related costs or the net amount earned as commissions. When we are the principal in a transaction and control the specific good or service before it is transferred to the customer, revenue is recorded gross; otherwise, revenue is recorded on a net basis. Through contractual terms with our partners, we have the ability to control the promised goods or services and as a result record the majority of our retail revenue on a gross basis. Our Other revenue occurs primarily through our broker dealer subsidiaries in our tZERO segment. We evaluate the revenue recognition criteria above for our broker dealer subsidiaries and we recognize revenue based on the gross amount of consideration that we expect to receive on securities transactions (commission revenue) on a trade date basis. Club O loyalty program We have a customer loyalty program called Club O Gold for which we sell annual memberships. For Club O Gold memberships, we record membership fees as deferred revenue and we recognize revenue ratably over the membership period. The Club O Gold loyalty program allows members to earn Club O Reward dollars for qualifying purchases made on our Website. Customers may redeem Club O Reward dollars on future purchases made through our Website, which conveys a material right to the customer. As such, the initial transaction price giving rise to the reward dollar is allocated to each separate performance obligation based upon its relative standalone selling price. In determining the stand-alone selling price, we incorporate assumptions about the redemption rates of loyalty points. We recognize revenue for Club O Reward dollars when customers redeem such rewards as part of a purchase on our Website. We record the standalone value of reward dollars earned in deferred revenue at the time the reward dollars are earned. Club O Reward dollars expire 90 days after the customer's Club O Gold membership expires. We recognize estimated reward dollar breakage, to which we expect to be entitled, over the expected redemption period in proportion to actual redemptions by customers. Upon adoption of Topic 606, Revenue Contracts with Customers, on January 1, 2018, we began classifying the breakage income related to Club O Reward dollars and gift cards as a component of Retail revenue in our consolidated statements of operations rather than as a component of Other income (expense), net. Breakage included in revenue was $923,000 and $1.3 million for the three months ended June 30, 2019 and 2018 and $2.0 million and $3.0 million for the six months ended June 30, 2019 and 2018. Our total deferred revenue related to the outstanding Club O Reward dollars was $7.0 million and $6.9 million at June 30, 2019 and December 31, 2018, respectively. The timing of revenue recognition of these reward dollars is driven by actual customer activities, such as redemptions and expirations. Advertising Revenue Advertising revenues are derived primarily from sponsored links and display advertisements that are placed on our Website, distributed via email, or sent out as direct mailers. Advertising revenue is recognized in Retail revenue when the advertising services are rendered. Advertising revenues were less than 2% of total net revenues for all periods presented. Revenue Disaggregation Disaggregation of revenue by major product line is included in Segment Information in Note 12—Business Segments. Deferred Revenue When the timing of our provision of goods or services is different from the timing of the payments made by our customers, we recognize a contract liability (customer payment precedes performance). Customer orders are recorded as deferred revenue prior to delivery of products or services ordered. We record amounts received for Club O Gold membership fees as deferred revenue and we recognize it ratably over the membership period. We record Club O Reward dollars earned from purchases as deferred revenue at the time they are earned based upon the relative standalone selling price of the Club O Reward dollar and we recognize it as Retail revenue in proportion to the estimated pattern of rights exercised by the customer. If reward dollars are not redeemed, we recognize Retail revenue upon expiration. In addition, we sell gift cards and record related deferred revenue at the time of the sale. We sell gift cards without expiration dates and we recognize revenue from a gift card upon redemption of the gift card. For the unredeemed portion of our gift cards and loyalty program rewards, we will recognize Retail revenue over the expected redemption period based upon the estimated pattern of rights exercised by the customer. The following table provides information about deferred revenue from contracts with customers, including significant changes in deferred revenue balances during the periods presented (in thousands):
Sales returns allowance We inspect returned items when they arrive at our processing facilities. We refund the full cost of the merchandise returned and all original shipping charges if the returned item is defective or we or our partners have made an error, such as shipping the wrong product. If the return is not a result of a product defect or a fulfillment error and the customer initiates a return of an unopened item within 30 days of delivery, for most products we refund the full cost of the merchandise minus the original shipping charge and actual return shipping fees. However, we reduce refunds for returns initiated more than 30 days after delivery or that are received at our returns processing facility more than 45 days after initial delivery. If our customer returns an item that has been opened or shows signs of wear, we issue a partial refund minus the original shipping charge and actual return shipping fees. Revenue is recorded net of estimated returns. We record an allowance for returns based on current period revenues and historical returns experience. We analyze actual historical returns, current economic trends and changes in order volume and acceptance of our products when evaluating the adequacy of the sales returns allowance in any accounting period. |
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Cost of goods sold | Cost of goods sold Our Retail cost of goods sold includes product costs, warehousing costs, outbound shipping costs, handling and fulfillment costs, customer service costs, and credit card fees, and is recorded in the same period in which related revenues have been recorded. Our Other cost of goods sold primarily consists of exchange fees, clearing agent fees, and other exchange fees from our broker dealer subsidiaries in our tZERO segment. These fees are primarily for executing, processing, and settling trades on exchanges and other venues. These fees fluctuate based on changes in trade and share volumes, rate of clearance fees charged by clearing brokers, and exchanges. |
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Advertising expense | Advertising expense We expense the costs of producing advertisements the first time the advertising takes place and expense the cost of communicating advertising in the period during which the advertising space or airtime is used. Internet advertising expenses are recognized as incurred based on the terms of the individual agreements, which are generally: 1) a commission for traffic driven to our Website that generates a sale or 2) a referral fee based on the number of clicks on keywords or links to our Website generated during a given period. |
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Stock-based compensation | Stock-based compensation We measure compensation expense for all outstanding unvested share-based awards at fair value on the date of grant and recognize compensation expense over the service period for awards at the greater of a straight-line basis or on an accelerated schedule when vesting of the share-based awards exceeds a straight-line basis. When an award is forfeited prior to the vesting date, we recognize an adjustment for the previously recognized expense in the period of the forfeiture. See Note 10—Stock-Based Awards. |
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Loss contingencies | Loss contingencies In the normal course of business, we are involved in legal proceedings and other potential loss contingencies. We accrue a liability for such matters when it is probable that a loss has been incurred and the amount can be reasonably estimated. When only a range of probable loss can be estimated, the most probable amount in the range is accrued. If no amount within this range is a better estimate than any other amount within the range, the minimum amount in the range is accrued. We expense legal fees as incurred (see Note 7—Commitments and Contingencies). |
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Income taxes | Income taxes Our income tax provision for interim periods is determined using an estimate of our annual effective tax rate adjusted for discrete items, if any, for relevant interim periods. We update our estimate of the annual effective tax rate each quarter and make cumulative adjustments if our estimated annual effective tax rate changes. Our quarterly tax provision and our quarterly estimate of our annual effective tax rate are subject to significant variations due to several factors including variability in predicting our pre-tax and taxable income and the mix of jurisdictions to which those items relate, relative changes in expenses or losses for which tax benefits are not recognized, how we do business, fluctuations in our stock price, and changes in law, regulations, and administrative practices. Our effective tax rate can be volatile based on the amount of pre-tax income. For example, the impact of discrete items on our effective tax rate is greater when pre-tax income is lower. Each quarter we assess the recoverability of our deferred tax assets under ASC Topic 740. We assess the available positive and negative evidence to estimate whether we will generate sufficient future taxable income to use our existing deferred tax assets. We have limited carryback ability and do not have significant taxable temporary differences to recover our existing deferred tax assets, therefore we must rely on future taxable income, including tax planning strategies, to support their realizability. We have established a valuation allowance for our deferred tax assets not supported by carryback ability or taxable temporary differences, primarily due to uncertainty regarding our future taxable income. We have considered, among other things, the cumulative loss incurred over the three-year period ended June 30, 2019 as a significant piece of objective negative evidence. We intend to continue maintaining a valuation allowance on our net deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances. The amount of the deferred tax asset considered realizable could be adjusted if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as long-term projections for growth. We will continue to monitor the need for a valuation allowance against our remaining deferred tax assets on a quarterly basis. We have indefinitely reinvested foreign earnings of $1.6 million at June 30, 2019. We would need to accrue and pay various taxes on this amount if repatriated. We do not intend to repatriate these earnings. We are subject to taxation in the United States and several state and foreign jurisdictions. Tax years beginning in 2014 are subject to examination by taxing authorities, although net operating loss and credit carryforwards from all years are subject to examinations and adjustments for at least three years following the year in which the attributes are used. An audit by the Ireland Revenue Agency for the calendar year 2016 was finalized during 2019 with no assessment. |
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Net loss per share | Net loss per share Our Blockchain Voting Series A Preferred Stock, Voting Series A-1 Preferred Stock, and our Voting Series B Preferred Stock (collectively the "preferred shares") are considered participating securities, and as a result, net loss per share is calculated using the two-class method. Under this method, we give effect to preferred dividends and then allocate remaining net loss attributable to our stockholders to both common shares and participating securities (based on the percentages outstanding) in determining net loss per common share. Basic net loss per common share is computed by dividing net loss attributable to common shares (after allocating between common shares and participating securities) by the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing net loss attributable to common shares (after allocating between common shares and participating securities) by the weighted average number of common and potential common shares outstanding during the period (after allocating total dilutive shares between our common shares outstanding and our preferred shares outstanding). Potential common shares, comprising incremental common shares issuable upon the exercise of stock options, warrants, and restricted stock awards are included in the calculation of diluted net loss per common share to the extent such shares are dilutive. Net loss attributable to common shares is adjusted for options and restricted stock awards issued by our subsidiaries when the effect of our subsidiary's diluted earnings per share is dilutive. T |
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Recently adopted and issued accounting standards | Recently adopted accounting standards In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842), which requires lessees to recognize operating leases on-balance sheet and disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-10, Codification Improvements to Topic 842, Leases; and ASU No. 2018-11, Targeted Improvements. The new standard establishes a right-of-use model (ROU) that requires a lessee to recognize an ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. We adopted the new standard on January 1, 2019. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. If an entity chooses the second option, the transition requirements for existing leases also apply to leases entered into between the date of initial application and the effective date. The entity must also recast its comparative period financial statements and provide the disclosures required by the new standard for the comparative periods. We adopted the new standard on January 1, 2019 and thus used the effective date as our date of initial application. Consequently, financial information has not been updated and the disclosures required under the new standard are not provided for dates and periods before January 1, 2019. Upon adoption we recognized cumulative operating lease liabilities of approximately $35.1 million and operating right-of-use assets of approximately $31.0 million which were reflected as non-cash items in the consolidated statement of cash flows. The difference of $4.2 million represented deferred rent for leases that existed as of the date of adoption, which was an offset to the opening balance of right-of-use assets. The new standard provides a number of optional practical expedients in transition. We elected the "package of practical expedients", which permits us to not reassess under the new standard our prior conclusions about lease identification, lease classification, and initial direct costs as well as the practical expedient pertaining to land easements. We did not elect the use-of-hindsight practical expedient. The new standard also provides practical expedients for an entity's ongoing accounting. We elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, we did not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition. We also elected the practical expedient to not separate lease and non-lease components for all of our leases. The standard had a material effect on our financial statements, primarily related to (1) the recognition of new ROU assets and lease liabilities on our balance sheet for our warehouse, office, data center, and equipment operating leases; and (2) providing significant new disclosures about our leasing activities. The additional operating liabilities on our consolidated balance sheets were recognized based on the present value of the remaining minimum rental payments under current leasing standards for our existing operating leases, discounted by our incremental borrowing rate for borrowings of a similar duration on a fully secured basis, with corresponding ROU assets of approximately the same amount. In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting; which aligns the measurement and classification guidance for share-based payments to nonemployees with the guidance for share-based payments to employees, with certain exceptions. Under the guidance, the measurement of equity-classified nonemployee awards will be fixed at the grant date. We adopted the changes under the new standard on January 1, 2019 on a prospective basis. The implementation of ASU 2017-01 did not have a material impact on our consolidated financial statements and related disclosures. |
ACCOUNTING POLICIES (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of assets and liabilities measured at fair value on recurring basis | The following tables summarize our assets and liabilities measured at fair value on a recurring basis using the following levels of inputs as of June 30, 2019 and December 31, 2018, as indicated (in thousands):
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Schedule of estimated useful lives of the fixed assets | Property and equipment are depreciated using the straight-line method over the estimated useful lives of the related assets or the term of the related finance lease, whichever is shorter, as follows:
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Schedule of depreciation and amortization expense which is classified within the corresponding operating expense categories on the consolidated statements of income | Depreciation expense is classified within the corresponding operating expense categories on our consolidated statements of operations as follows (in thousands):
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Schedule of equity method securities | The following table summarizes the net losses recognized on equity method securities for the three and six months ended June 30, 2019 and 2018:
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Schedule of unrealized gains and losses related to equity securities | The portion of unrealized gains and losses for the period related to equity securities still held at June 30, 2019 and 2018 is calculated as follows:
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Schedule goodwill, net of accumulated impairment | The following table provides information about changes in the carrying amount of goodwill for the periods presented (in thousands):
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Schedule of intangible assets | Intangible assets, net consist of the following (in thousands):
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Intangible assets amortization expense | Amortization of intangible assets other than goodwill is classified within the corresponding operating expense categories in our consolidated statements of operations as follows (in thousands):
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Schedule of deferred revenues and contracts with customers | The following table provides information about deferred revenue from contracts with customers, including significant changes in deferred revenue balances during the periods presented (in thousands):
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Schedule of sales returns | The following table provides additions to and deduction from the sales returns allowance (in thousands):
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Schedule of costs of goods sold, including product cost and other costs and fulfillment and related costs |
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Schedule of computation of basic and diluted net income per common share | The following table sets forth the computation of basic and diluted net loss per common share for the periods indicated (in thousands, except per share data):
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Schedule of anti-dilutive securities excluded from the calculation of diluted shares outstanding | The following shares were excluded from the calculation of diluted shares outstanding as their effect would have been anti-dilutive (in thousands):
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BUSINESS COMBINATIONS (Tables) |
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Finite-Lived and Indefinite-Lived Intangible Assets Acquired as Part of Business Combination [Table Text Block] | The following table details the identifiable intangible assets acquired at their fair value and their corresponding useful lives at the acquisition date (amounts in thousands):
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Estimated Fair Values of Assets Acquired and Liabilities Assumed | The fair values of the assets acquired and liabilities assumed at the acquisition date are as follows (in thousands):
The fair values of the assets acquired and liabilities assumed at the acquisition date are as follows (in thousands):
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ACCRUED LIABILITIES (Tables) |
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Schedule of Accrued Liabilities | Accrued liabilities consist of the following (in thousands):
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LEASES (Tables) |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Leases by Balance Sheet Location | The following table provides a summary of leases by balance sheet location as of June 30, 2019 (in thousands):
|
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Schedule of Components of Lease Costs and Other Operating Lease Information | The components of lease expenses for the three and six months ended June 30, 2019 were as follows (in thousands):
The following tables provides a summary of other information related to leases for the six months ended June 30, 2019 (in thousands, apart from weighted-average lease term and weighted average discount rate):
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Schedule of Maturities of Lease Liabilities under Operating Leases After Adoption of 842 | Maturity of lease liabilities under our non-cancellable operating leases as of June 30, 2019, are as follows (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block] | Minimum future payments under all operating leases as of December 31, 2018, were as follows (in thousands):
|
STOCK-BASED AWARDS (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Stock Based Compensation | Stock-based compensation expense was as follows (in thousands):
|
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Summary of Restricted Stock Award Activity | The following table summarizes restricted stock award activity during the six months ended June 30, 2019 (in thousands):
|
OTHER INCOME (EXPENSE), NET (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Income and Expenses [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Other Income (Expense), Net | Other income (expense), net consisted of the following (in thousands):
|
BUSINESS SEGMENTS (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Information About Reportable Segments | The following table summarizes information about reportable segments for three and six months ended June 30, 2019 and 2018 (in thousands):
__________________________________________
|
ACCOUNTING POLICIES (Details 2) $ in Millions |
Jun. 30, 2019
USD ($)
bank
|
Dec. 31, 2018
USD ($)
|
---|---|---|
Allowance for doubtful accounts | ||
Allowance for doubtful accounts receivable | $ | $ 2.5 | $ 2.1 |
Concentration of credit risk | ||
Number of banks who hold majority of cash and cash equivalents | bank | 1 |
ACCOUNTING POLICIES (Details 3) - USD ($) |
3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
---|---|---|---|---|---|---|---|
Jun. 30, 2019 |
Mar. 31, 2019 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
Dec. 31, 2018 |
|
Fixed assets | |||||||
Impairment of long-lived assets | $ 0 | $ 0 | |||||
Depreciation | |||||||
Depreciation of property and equipment | $ 6,340,000 | $ 6,402,000 | 12,914,000 | 12,983,000 | |||
Accumulated depreciation of fixed assets | 215,100,000 | 215,100,000 | $ 204,900,000 | ||||
Equity investments under ASC 321 | |||||||
Carrying amount of equity investments under ASC 321 | 15,100,000 | 15,100,000 | 20,300,000 | ||||
Equity method investments | |||||||
Equity Investments | 28,600,000 | 28,600,000 | 40,100,000 | ||||
Noncontrolling Interest | |||||||
Proceeds from security token offering | 95,900,000 | 104,800,000 | |||||
Capitalized Offering Costs for Security Token Offering | 16,500,000 | 16,500,000 | 21,500,000 | ||||
Cryptocurrencies | |||||||
Impairment of cryptocurrencies | $ 0 | $ 702,000 | 318,000 | 9,491,000 | |||
Realized gain (loss) on sale of cryptocurrencies | 119,000 | 6,800,000 | 128,000 | 8,300,000 | |||
Cryptocurrency | |||||||
Cryptocurrencies | |||||||
Other assets, current | 2,300,000 | 2,300,000 | $ 2,400,000 | ||||
Cost of goods sold — retail | |||||||
Depreciation | |||||||
Depreciation of property and equipment | 171,000 | 83,000 | 346,000 | 167,000 | |||
Technology | |||||||
Depreciation | |||||||
Depreciation of property and equipment | 4,892,000 | 5,296,000 | 10,067,000 | 10,772,000 | |||
General and administrative | |||||||
Depreciation | |||||||
Depreciation of property and equipment | 1,277,000 | 1,023,000 | $ 2,501,000 | 2,044,000 | |||
Building | |||||||
Fixed assets | |||||||
Life | 40 years | ||||||
Land improvements | |||||||
Fixed assets | |||||||
Life | 20 years | ||||||
Building machinery and equipment | Minimum | |||||||
Fixed assets | |||||||
Life | 15 years | ||||||
Building machinery and equipment | Maximum | |||||||
Fixed assets | |||||||
Life | 20 years | ||||||
Furniture and equipment | Minimum | |||||||
Fixed assets | |||||||
Life | 5 years | ||||||
Furniture and equipment | Maximum | |||||||
Fixed assets | |||||||
Life | 7 years | ||||||
Computer hardware | Minimum | |||||||
Fixed assets | |||||||
Life | 3 years | ||||||
Computer hardware | Maximum | |||||||
Fixed assets | |||||||
Life | 4 years | ||||||
Computer software | Minimum | |||||||
Fixed assets | |||||||
Life | 2 years | ||||||
Computer software | Maximum | |||||||
Fixed assets | |||||||
Life | 4 years | ||||||
Internal-use software and website development | |||||||
Additional Disclosure | |||||||
Capitalized costs | 4,100,000 | 8,300,000 | $ 7,600,000 | 10,600,000 | |||
Amortization of capitalized costs | $ 3,100,000 | $ 3,200,000 | $ 6,400,000 | $ 6,700,000 |
ACCOUNTING POLICIES (Details 4) - USD ($) $ in Thousands |
6 Months Ended | ||||
---|---|---|---|---|---|
Jun. 30, 2019 |
Dec. 31, 2018 |
||||
Finite-Lived Intangible Assets | |||||
Intangible assets subject to amortization, gross | $ 32,343 | [1] | $ 29,099 | ||
Less: accumulated amortization of intangible assets subject to amortization | (16,869) | (15,729) | |||
Intangible assets, net | $ 15,474 | $ 13,370 | |||
Weighted average | |||||
Finite-Lived Intangible Assets | |||||
Useful life of intangible assets | 9 years 6 months | ||||
|
ACCOUNTING POLICIES (Details 5) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Finite-Lived Intangible Assets | ||||
Amortization of intangible assets | $ 2,604 | $ 2,051 | ||
Amortization Of Intangible Assets Including Impact Of Purchase Price Allocation Adjustments | $ 1,124 | $ 1,133 | 1,164 | |
Estimated amortization expense for the next five years | ||||
Remainder of 2018 | 2,200 | 2,200 | ||
2019 | 3,200 | 3,200 | ||
2020 | 2,900 | 2,900 | ||
2021 | 1,500 | 1,500 | ||
2022 | 705 | 705 | ||
Thereafter | 5,000 | 5,000 | ||
Technology | ||||
Finite-Lived Intangible Assets | ||||
Amortization of intangible assets | 938 | 895 | 1,791 | 1,650 |
Sales and marketing | ||||
Finite-Lived Intangible Assets | ||||
Amortization of intangible assets | 16 | 204 | 32 | 323 |
General and administrative | ||||
Finite-Lived Intangible Assets | ||||
Amortization of intangible assets | $ 170 | $ 34 | $ (659) | $ 78 |
ACCOUNTING POLICIES (Details 6) - USD ($) |
3 Months Ended | 6 Months Ended | 11 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|||
Product Information [Line Items] | |||||||||
Undistributed Earnings of Foreign Subsidiaries | $ 1,600,000 | $ 1,600,000 | $ 1,600,000 | ||||||
Normal credit term granted to customers | 30 days | ||||||||
Loyalty Program Expiration Period | 90 days | ||||||||
Equity securities, at fair value | 1,518,000 | $ 1,518,000 | 1,518,000 | $ 2,636,000 | |||||
Revenue recognition | |||||||||
Product delivery period from date of shipment, minimum | 1 day | ||||||||
Product delivery period from date of shipment, maximum | 8 days | ||||||||
Advertising revenue as a percentage of total revenues | 2.00% | 2.00% | |||||||
Allowance for returns | 10,188,000 | $ 10,188,000 | 10,188,000 | 15,261,000 | $ 17,391,000 | ||||
Deferred revenue | 40,950,000 | 40,950,000 | 40,950,000 | 50,578,000 | |||||
Club O loyalty program | |||||||||
Gift card and Club O Rewards breakage | 923,000 | $ 1,300,000 | 2,000,000 | $ 3,000,000 | |||||
Total net revenue | $ 373,709,000 | $ 483,133,000 | $ 741,438,000 | $ 928,464,000 | |||||
Total revenue, net (as a percent) | 100.00% | 100.00% | 100.00% | 100.00% | |||||
Cost of goods sold | |||||||||
Product costs and other cost of goods sold | $ 283,502,000 | $ 371,841,000 | $ 560,719,000 | $ 705,361,000 | |||||
Fulfillment and related costs | 16,308,000 | 19,549,000 | 33,696,000 | 37,491,000 | |||||
Total cost of goods sold | $ 299,810,000 | $ 391,390,000 | $ 594,415,000 | $ 742,852,000 | |||||
Product costs and other cost of goods sold (as a percent) | 76.00% | 77.00% | 76.00% | 76.00% | |||||
Fulfillment and related costs (as a percent) | 4.00% | 4.00% | 5.00% | 4.00% | |||||
Total cost of goods sold (as a percent) | 80.00% | 81.00% | 80.00% | 80.00% | |||||
Gross profit | $ 73,899,000 | $ 91,743,000 | $ 147,023,000 | $ 185,612,000 | |||||
Gross profit (as a percent) | 20.00% | 19.00% | 20.00% | 20.00% | |||||
Advertising expense | |||||||||
Advertising expense | $ 29,900,000 | $ 88,900,000 | $ 58,400,000 | $ 157,800,000 | |||||
Prepaid advertising expense | 367,000 | $ 367,000 | 367,000 | 961,000 | |||||
Sales Return Period for which Full Refund will be Granted | 30 days | ||||||||
Sales Return Period for which Reduced Refund will be Granted | 30 days | ||||||||
Sales Return Received at Processing Facility Period for which Reduced Refund will be Granted | 45 days | ||||||||
Club O Membership Fees and Reward Points | |||||||||
Revenue recognition | |||||||||
Deferred revenue | 7,000,000 | $ 7,000,000 | $ 7,000,000 | $ 6,900,000 | |||||
Retail | |||||||||
Club O loyalty program | |||||||||
Total net revenue | 367,475,000 | 477,683,000 | 730,100,000 | 917,679,000 | |||||
Cost of goods sold | |||||||||
Total cost of goods sold | [1] | 294,984,000 | 387,252,000 | 585,624,000 | 734,832,000 | ||||
Gross profit | $ 72,491,000 | $ 90,431,000 | $ 144,476,000 | $ 182,847,000 | |||||
JonesTrading Institutional Services LLC | At-The-Market Agreement | |||||||||
Product Information [Line Items] | |||||||||
Aggregate offering price | 5,843,147 | ||||||||
|
ACCOUNTING POLICIES (Details 7) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | |||||
---|---|---|---|---|---|---|---|
Jan. 17, 2018 |
Dec. 29, 2017 |
Nov. 08, 2017 |
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Earnings per share | |||||||
Net loss attributable to stockholders of Overstock.com, Inc. | $ (24,681) | $ (64,911) | $ (63,925) | $ (115,820) | |||
Less: Preferred stock (Token) repurchase (gain)/loss | 0 | 0 | (425) | 0 | |||
Less: Preferred stock dividends - declared and accumulated | 19 | 27 | 38 | 53 | |||
Undistributed loss | (24,700) | (64,938) | (63,538) | (115,873) | |||
Less: Undistributed loss allocated to participating securities | (333) | (1,495) | (892) | (2,683) | |||
Net loss attributable to common shares | $ (24,367) | $ (63,443) | $ (62,646) | $ (113,190) | |||
Net loss per common share—basic: | |||||||
Net loss attributable to common shares-basic (in dollars per share) | $ (0.69) | $ (2.20) | $ (1.85) | $ (3.94) | |||
Weighted average common shares outstanding-basic (in shares) | 35,225,000 | 28,903,000 | 33,806,000 | 28,736,000 | |||
Effect of dilutive securities: | |||||||
Stock options and restricted stock awards (in shares) | 0 | 0 | 0 | 0 | |||
Weighted average common shares outstanding-diluted (in shares) | 35,225,000 | 28,903,000 | 33,806,000 | 28,736,000 | |||
Net loss attributable to common shares-diluted (in dollars per share) | $ (0.69) | $ (2.20) | $ (1.85) | $ (3.94) | |||
Anti-dilutive securities excluded from computation of earnings per share | |||||||
Number of securities called by warrants or rights (in shares) | 1,250,000 | 2,472,188 | 3,722,188 | ||||
Proceeds from issuance and exercise of stock warrants | $ 50,600 | $ 100,000 | $ 0 | $ 50,587 | |||
Proceeds from issuance of stock warrants | $ 6,500 | ||||||
Exercise price of warrants or rights (in dollars per share) | $ 40.45 | ||||||
Stock options and restricted stock units | |||||||
Anti-dilutive securities excluded from computation of earnings per share | |||||||
Anti-dilutive securities excluded from computation of earnings per share (in shares) | 904,000 | 550,000 | 967,000 | 617,000 | |||
Common shares issuable under stock warrant | |||||||
Anti-dilutive securities excluded from computation of earnings per share | |||||||
Anti-dilutive securities excluded from computation of earnings per share (in shares) | 0 | 0 | 0 | 42,000 |
ACCOUNTING POLICIES ACCOUNTING POLICIES - Summary of Equity Investment Ownerships (Details) |
Jun. 30, 2019 |
---|---|
Bitt Inc. [Member] | |
Schedule of Equity Method Investments [Line Items] | |
Equity Method Investment, Ownership Percentage | 21.00% |
Spera, Inc. [Member] | |
Schedule of Equity Method Investments [Line Items] | |
Equity Method Investment, Ownership Percentage | 19.00% |
SettleMint NV [Member] [Member] | |
Schedule of Equity Method Investments [Line Items] | |
Equity Method Investment, Ownership Percentage | 30.00% |
Voatz, Inc. [Member] | |
Schedule of Equity Method Investments [Line Items] | |
Equity Method Investment, Ownership Percentage | 21.00% |
Chainstone Labs | |
Schedule of Equity Method Investments [Line Items] | |
Equity Method Investment, Ownership Percentage | 29.00% |
Minds, Inc. [Member] | |
Schedule of Equity Method Investments [Line Items] | |
Equity Method Investment, Ownership Percentage | 24.00% |
VinX Network Ltd. [Member] | |
Schedule of Equity Method Investments [Line Items] | |
Equity Method Investment, Ownership Percentage | 21.00% |
GrainChain, Inc. [Member] | |
Schedule of Equity Method Investments [Line Items] | |
Equity Method Investment, Ownership Percentage | 10.00% |
Boston Security Token Exchange LLC [Member] | |
Schedule of Equity Method Investments [Line Items] | |
Equity Method Investment, Ownership Percentage | 50.00% |
ACCOUNTING POLICIES ACCOUNTING POLICIES - Schedule of Deferred Revenues (Details) - USD ($) $ in Thousands |
6 Months Ended | 12 Months Ended | |
---|---|---|---|
Jun. 30, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Accounting Policies [Abstract] | |||
Contract with Customer, Liability | $ 40,950 | $ 50,578 | $ 46,468 |
Increase (Decrease) in Contract with Customer, Liability | 33,033 | 43,216 | |
Contract with Customer, Liability, Revenue Recognized | $ (42,661) | $ (39,106) |
ACCOUNTING POLICIES ACCOUNTING POLICIES - Allowance for Sales Returns Rollforward (Details) - USD ($) $ in Thousands |
6 Months Ended | 12 Months Ended | |
---|---|---|---|
Jun. 30, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Accounting Policies [Abstract] | |||
Allowance for returns | $ 10,188 | $ 15,261 | $ 17,391 |
Revenue Recognition, Sales Returns, Reserve for Sales Returns | 62,545 | 174,864 | |
Deductions From Sales Returns, Current | $ (67,618) | $ (176,994) |
ACCOUNTING POLICIES - Adoption of New Lease Standard (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Jan. 01, 2019 |
Dec. 31, 2018 |
---|---|---|---|
Accounting Policies [Line Items] | |||
Operating lease liability | $ 49,836 | ||
Operating lease right-of-use assets | $ 45,066 | $ 0 | |
Accounting Standards Update 2016-02 | |||
Accounting Policies [Line Items] | |||
Operating lease liability | $ 35,100 | ||
Operating lease right-of-use assets | 31,000 | ||
Deferred rent offset to right-of-use asset | $ 4,200 |
ACCOUNTING POLICIES - Equity Method Investments (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Accounting Policies [Abstract] | ||||
Equity Method Investment, Summarized Financial Information, Net Income (Loss) | $ (2,033) | $ (1,032) | $ (3,058) | $ (1,381) |
Equity Method Investment, Other than Temporary Impairment | 1,256 | 0 | 1,256 | 0 |
Less: Net gains recognized during the period on equity securities sold | 720 | 0 | 266 | 0 |
Net loss recognized during the period on equity method securities sold | $ 0 | $ 0 | $ (524) | $ 0 |
ACCOUNTING POLICIES - Unrealized Gain (Loss) on Equity Securities Still Held (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Accounting Policies [Abstract] | ||||
Net gains/(losses) recognized during the period on equity securities | $ 220 | $ 1,836 | $ (3,810) | $ (1,836) |
Less: Net gains recognized during the period on equity securities sold | 720 | 0 | 266 | 0 |
Gains/(losses) recognized during the reporting period on equity securities still held | $ (500) | $ 1,836 | $ (4,076) | $ (1,836) |
ACCOUNTING POLICIES - Goodwill, Net of Accumulated Impairment (Details) - USD ($) |
6 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Accounting Policies [Abstract] | ||||
Goodwill, Impairment Loss | $ 0 | $ 0 | ||
Goodwill [Roll Forward] | ||||
Beginning balance | 22,895,000 | $ 14,698,000 | $ 14,698,000 | |
Goodwill acquired during year | 1,685,000 | 8,197,000 | ||
Purchase price adjustment | 2,540,000 | |||
Ending balance | 27,120,000 | 22,895,000 | ||
Goodwill, Impaired, Accumulated Impairment Loss | $ (3,300,000) | $ (3,283,000) | $ (3,283,000) |
ACCOUNTING POLICIES - Gift Card & Club O (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Accounting Policies [Abstract] | ||||
Gift card and Club O Rewards breakage | $ 923,000 | $ 1,300,000 | $ 2,000,000 | $ 3,000,000 |
BUSINESS COMBINATIONS - Narrative (Details) - USD ($) |
1 Months Ended | 3 Months Ended | 6 Months Ended | 9 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 |
Dec. 21, 2018 |
Jul. 31, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Dec. 31, 2018 |
Jun. 30, 2018 |
Mar. 31, 2019 |
Jun. 25, 2018 |
|
Business Acquisition [Line Items] | ||||||||||
Increase in goodwill | $ 2,540,000 | |||||||||
Equity Method Investment, Other than Temporary Impairment | $ 1,256,000 | $ 0 | 1,256,000 | $ 0 | ||||||
Mac Warehouse, LLC | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Percentage of voting Interests acquired | 100.00% | |||||||||
Decrease in recognized intangible assets | $ 2,800,000 | |||||||||
Increase in accrued liabilities | 527,000 | |||||||||
Decrease in deferred tax liabilities | 837,000 | |||||||||
Increase in goodwill | 2,500,000 | |||||||||
Decrease in amortization and accumulated depreciation | $ 981,000 | $ 1,400,000 | ||||||||
Increase in other income | $ 459,000 | |||||||||
tZero.com, Inc. | Bitsy, Inc. | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Decrease in recognized intangible assets | (650,000) | |||||||||
Decrease in deferred tax liabilities | (943,000) | |||||||||
Increase in goodwill | 1,700,000 | |||||||||
Equity Method Investment, Other than Temporary Impairment | $ 1,300,000 | |||||||||
Bitsy, Inc. | Medici Ventures | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Percentage of ownership interest | 33.00% | |||||||||
Bitsy, Inc. | tZero.com, Inc. | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Percentage of equity interest before sale of stock | 67.00% | |||||||||
Payments to Acquire Equity Method Investments | $ 8,000,000 | |||||||||
Scenario, Forecast | Bitsy, Inc. | tZero.com, Inc. | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Payments to Acquire Equity Method Investments | $ 4,000,000 |
BUSINESS COMBINATIONS - Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands |
6 Months Ended | |||||
---|---|---|---|---|---|---|
Jan. 01, 2019 |
Jun. 25, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Purchase Price | ||||||
Cash paid, net of cash acquired | $ (4,886) | $ 12,912 | ||||
Allocation | ||||||
Goodwill | $ 27,120 | $ 22,895 | $ 14,698 | |||
Mac Warehouse, LLC | ||||||
Purchase Price | ||||||
Cash paid, net of cash acquired | $ 1,143 | |||||
Allocation | ||||||
Accounts receivable, net | 399 | |||||
Inventories, net | 1,033 | |||||
Prepaids and other current assets | 29 | |||||
Property and equipment | 154 | |||||
Intangibles | 653 | |||||
Accounts payable and accrued liabilities | (1,432) | |||||
Long-term debt, net | (3,069) | |||||
Goodwill | 3,376 | |||||
Total net assets, net of cash acquired | $ 1,143 | |||||
tZero.com, Inc. | Bitsy, Inc. | ||||||
Purchase Price | ||||||
Cash paid, net of cash acquired | $ 3,115 | |||||
Fair value of equity interest in Bitsy held before business combination | 3,800 | |||||
Less: Fair value of Overstock.com common stock held by Bitsy at acquisition date | (643) | |||||
Less: Settlement of receivable due from tZERO at acquisition date | (10) | |||||
Total transaction consideration, net of cash acquired | 6,262 | |||||
Allocation | ||||||
Prepaids and other current assets | 71 | |||||
Property and equipment | 16 | |||||
Intangibles | 6,093 | |||||
Goodwill | 1,685 | |||||
Deferred tax liability | (943) | |||||
Other liabilities assumed | (660) | |||||
Total net assets, net of cash acquired | 6,262 | |||||
Finite-lived Intangible Assets Acquired | 6,093 | |||||
Patents | tZero.com, Inc. | Bitsy, Inc. | ||||||
Allocation | ||||||
Finite-lived Intangible Assets Acquired | $ 4,293 | |||||
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life | 20 years | |||||
Technology | tZero.com, Inc. | Bitsy, Inc. | ||||||
Allocation | ||||||
Finite-lived Intangible Assets Acquired | $ 1,500 | |||||
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life | 5 years | |||||
Licenses | tZero.com, Inc. | Bitsy, Inc. | ||||||
Allocation | ||||||
Finite-lived Intangible Assets Acquired | $ 300 | |||||
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life | 1 year |
ACCRUED LIABILITIES (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|---|
Payables and Accruals [Abstract] | |||
Accounts payable accruals | $ 14,386 | $ 15,872 | |
Accrued compensation and other related costs | 11,909 | 12,099 | |
Accrued loss contingencies | 10,084 | 10,940 | |
Allowance for returns | 10,188 | 15,261 | $ 17,391 |
Sales and other taxes payable | 9,881 | 9,923 | |
Accrued marketing expenses | 9,434 | 14,150 | |
Accrued freight | 8,437 | 5,343 | |
Other accrued expenses | 8,391 | 4,270 | |
Total accrued liabilities | $ 82,710 | $ 87,858 |
BORROWINGS (Details) - USD ($) |
Jun. 30, 2019 |
Dec. 31, 2018 |
Jun. 25, 2018 |
---|---|---|---|
Debt Instrument [Line Items] | |||
Outstanding balance of loan | $ 3,108,000 | $ 0 | |
U.S. Bank | |||
Debt Instrument [Line Items] | |||
Letters of credit, outstanding amount | 205,000 | 280,000 | |
Commercial purchasing card | |||
Debt Instrument [Line Items] | |||
Outstanding balance | 64,000 | 48,000 | |
Unused borrowing capacity | 936,000 | $ 952,000 | |
Senior Notes | High Bench Loan | |||
Debt Instrument [Line Items] | |||
Annual interest rate | 11.00% | ||
Outstanding balance of loan | $ 3,100,000 | ||
Senior Notes | High Bench Loan | Default rate | |||
Debt Instrument [Line Items] | |||
Annual interest rate | 18.00% |
LEASES - Additional Information (Details) |
6 Months Ended |
---|---|
Jun. 30, 2019 | |
Minimum | |
Lessee, Lease, Description [Line Items] | |
Remaining lease terms | 1 year |
Maximum | |
Lessee, Lease, Description [Line Items] | |
Remaining lease terms | 12 years |
LEASES - Leases by Balance Sheet Location (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Leases [Abstract] | ||
Operating lease right-of-use assets | $ 45,066 | $ 0 |
Operating lease liability - current | 5,731 | 0 |
Operating lease liability - non-current | $ 44,105 | $ 0 |
LEASES - Components of Lease Cost and Other Operating Lease Information (Details) $ in Thousands |
3 Months Ended | 6 Months Ended |
---|---|---|
Jun. 30, 2019
USD ($)
|
Jun. 30, 2019
USD ($)
|
|
Lease, Cost [Abstract] | ||
Operating lease cost | $ 2,363 | $ 4,868 |
Short-term lease cost | 28 | 62 |
Variable lease cost | $ 442 | 972 |
Operating cash flows used in operating leases | (4,202) | |
Right-of-use assets obtained in exchange for new operating lease liabilities | $ 17,090 | |
Weighted-average remaining lease term - operating leases | 7 years 6 days | 7 years 6 days |
Weighted-average discount rate - operating leases | 8.00% | 8.00% |
LEASES - Operating Lease Maturities and Future Minimum Payments (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Operating Leases After Adoption of 842 | ||
2019 (Remainder) | $ 4,732 | |
2020 | 9,385 | |
2021 | 9,833 | |
2022 | 9,826 | |
2023 | 8,985 | |
Thereafter | 22,774 | |
Total lease payments | 65,535 | |
Less interest | (15,699) | |
Present value of lease liabilities | $ 49,836 | |
Operating Leases, Before Adoption of 842 | ||
2019 | $ 8,822 | |
2020 | 7,414 | |
2021 | 7,654 | |
2022 | 7,579 | |
2023 | 6,677 | |
Thereafter | 19,571 | |
Total lease payments | $ 57,717 |
COMMITMENTS AND CONTINGENCIES - Additional Information (Details) $ in Millions |
Sep. 23, 2009
defendent
|
Jun. 30, 2019
USD ($)
|
Jun. 28, 2019
USD ($)
|
Dec. 31, 2018
USD ($)
|
---|---|---|---|---|
Loss contingency, legal proceedings | ||||
Estimated litigation liability, including attorney and other costs | $ 7.3 | |||
Accrued liabilities for contingencies | $ 10.1 | $ 10.3 | ||
SpeedTrack, Inc. | ||||
Loss contingency, legal proceedings | ||||
Number of other defendants | defendent | 27 |
STOCKHOLDERS' EQUITY - Common Stock (Details) |
Jun. 30, 2019
vote
|
---|---|
Equity [Abstract] | |
Number of votes | 1 |
STOCKHOLDERS' EQUITY - Preferred Stock (Details) |
1 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|---|---|
Jun. 26, 2019
shares
|
Jul. 31, 2019
shares
|
Jun. 30, 2019
vote
$ / shares
shares
|
Jun. 30, 2018
shares
|
Jun. 30, 2019
day
vote
$ / shares
shares
|
Jun. 30, 2018
shares
|
Dec. 31, 2017
$ / shares
shares
|
Mar. 31, 2019
shares
|
Dec. 31, 2018
$ / shares
shares
|
Mar. 31, 2018
shares
|
|
Class of Stock [Line Items] | ||||||||||
Preferred stock, par value (in dollars per share) | $ / shares | $ 0.0001 | $ 0.0001 | $ 0.0001 | |||||||
Number of votes for preferred stock | vote | 1 | 1 | ||||||||
Eligible dividend rate (in usd per share) | $ / shares | $ 0.16 | |||||||||
Dividend paid (in usd per share) | $ / shares | 0.16 | $ 0.16 | ||||||||
Series A Preferred Stock | ||||||||||
Class of Stock [Line Items] | ||||||||||
Preferred stock, par value (in dollars per share) | $ / shares | $ 0.0001 | $ 0.0001 | ||||||||
Preferred stock, shares outstanding | 3,000 | 3,000 | 127,000 | |||||||
Number of convertible preferred shares upon conversion (in shares) | 1 | 1 | ||||||||
Preferred stock, percentage of average trading price | 105.00% | 105.00% | ||||||||
Number of trading days for preferred stock | day | 5 | |||||||||
Series A-1 Preferred Stock [Member] | ||||||||||
Class of Stock [Line Items] | ||||||||||
Preferred stock, par value (in dollars per share) | $ / shares | $ 0.0001 | $ 0.0001 | ||||||||
Preferred stock, shares outstanding | 123,000 | 123,000 | 0 | |||||||
Preferred Stock, Convertible, Conversion Price, Increase | $ / shares | $ 15.68 | $ 15.68 | ||||||||
Preferred stock | Series A Preferred Stock | ||||||||||
Class of Stock [Line Items] | ||||||||||
Shares converted (in shares) | 123,000 | 0 | 123,000 | 0 | ||||||
Preferred stock, shares outstanding | 3,000 | 127,000 | 3,000 | 127,000 | 127,000 | 127,000 | 127,000 | 127,000 | ||
Preferred stock | Series A-1 Preferred Stock [Member] | ||||||||||
Class of Stock [Line Items] | ||||||||||
Shares converted (in shares) | 122,526 | (123,000) | 0 | (123,000) | 0 | |||||
Preferred stock, shares outstanding | 123,000 | 0 | 123,000 | 0 | 0 | 0 | 0 | 0 | ||
Series A Preferred Stock Exchange [Member] | Preferred stock | Series A Preferred Stock | ||||||||||
Class of Stock [Line Items] | ||||||||||
Shares converted (in shares) | 122,526 | |||||||||
Series A Preferred Stock Exchange [Member] | Subsequent Event | Preferred stock | Series A Preferred Stock | ||||||||||
Class of Stock [Line Items] | ||||||||||
Shares converted (in shares) | 2,020 | |||||||||
Series A Preferred Stock Conversion [Member] | Preferred stock | Series A Preferred Stock | ||||||||||
Class of Stock [Line Items] | ||||||||||
Shares converted (in shares) | 1,144 | |||||||||
Series A Preferred Stock Conversion [Member] | Subsequent Event | Preferred stock | Series A Preferred Stock | ||||||||||
Class of Stock [Line Items] | ||||||||||
Shares converted (in shares) | 875 |
STOCKHOLDERS' EQUITY - JonesTrading Agreements (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | 11 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Dec. 31, 2018 |
|
Class of Stock [Line Items] | ||||||
Proceeds from security token offering, net | $ 95,900 | $ 104,800 | ||||
Proceeds from sale of common stock, net of offering costs | $ 52,112 | 0 | ||||
At-The-Market Agreement | JonesTrading Institutional Services LLC | ||||||
Class of Stock [Line Items] | ||||||
Aggregate offering price | 5,843,147 | |||||
Proceeds from sale of common stock | $ 146,700 | |||||
Offering costs associated with the sale of common stock | $ 3,300 | $ 3,300 | $ 3,300 | |||
Sale of stock (in usd per share) | $ 17.84 | $ 17.84 | $ 17.84 | |||
Additional paid-in capital | ||||||
Class of Stock [Line Items] | ||||||
Proceeds from sale of common stock, net of offering costs | $ 12,198 | $ 0 | $ 52,112 | $ 0 |
STOCKHOLDERS' EQUITY - GSR Agreement (Details) - USD ($) $ / shares in Units, $ in Millions |
6 Months Ended | |||
---|---|---|---|---|
Jul. 11, 2019 |
May 08, 2019 |
May 06, 2019 |
Jun. 30, 2019 |
|
GSR Capital | ||||
Class of Stock [Line Items] | ||||
Sale of tokens (in usd per token) | $ 6.67 | |||
tZero.com, Inc. | ||||
Class of Stock [Line Items] | ||||
Number of shares sold in transaction (in shares) | 508,710 | |||
Number of shares sold in transaction as percentage of total shares issued and outstanding | 0.50% | |||
Total consideration received from sale of stock | $ 5.0 | |||
Consideration received from sale of stock | 1.0 | |||
Value of shares received from sale of stock | $ 3.0 | |||
tZero.com, Inc. | GSR Capital | ||||
Class of Stock [Line Items] | ||||
Cash portion of acquisition price | $ 30.0 | |||
Consideration received from sale of stock | $ 1.0 | |||
tZero.com, Inc. | GSR Capital | Subsequent Event | ||||
Class of Stock [Line Items] | ||||
Consideration received from sale of stock | $ 1.0 |
STOCKHOLDERS' EQUITY - tZERO Tokens (Details) - USD ($) $ / shares in Units, $ in Millions |
6 Months Ended | 12 Months Ended | |
---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Dec. 31, 2018 |
|
Equity [Abstract] | |||
Noncumulative Dividend Percentage1 | 10.00% | ||
Temporary Equity, Liquidation Preference Per Share | $ 0.10 | ||
Withdrawal Under Security Token Offering | $ 22.0 | $ 22.0 | |
Capitalized Offering Costs for Security Token Offering | 16.5 | 21.5 | |
Proceeds from security token offering, net | $ 95.9 | $ 104.8 |
STOCKHOLDERS' EQUITY - Warrants (Details) - USD ($) $ / shares in Units, $ in Thousands |
6 Months Ended | ||||
---|---|---|---|---|---|
Jan. 17, 2018 |
Dec. 29, 2017 |
Nov. 08, 2017 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Equity [Abstract] | |||||
Number of securities called by warrants or rights (in shares) | 1,250,000 | 2,472,188 | 3,722,188 | ||
Proceeds from issuance and exercise of stock warrants | $ 50,600 | $ 100,000 | $ 0 | $ 50,587 | |
Proceeds from issuance of stock warrants | $ 6,500 | ||||
Exercise price of warrants or rights (in dollars per share) | $ 40.45 |
STOCK-BASED AWARDS - Stock-based Compensation Expense (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||
Total stock-based compensation | $ 5,171 | $ 2,973 | $ 9,156 | $ 9,408 |
Restricted Stock Awards | ||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||
Total stock-based compensation | 4,560 | 2,700 | 8,428 | 5,084 |
Medici Ventures | Employee Stock Options | ||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||
Total stock-based compensation | 307 | 123 | 533 | 134 |
tZero.com, Inc. | Employee Stock Options | ||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||
Total stock-based compensation | $ 304 | $ 150 | $ 195 | $ 4,190 |
STOCK-BASED AWARDS - Additional Information (Details) - USD ($) |
1 Months Ended | 3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|---|
Dec. 31, 2017 |
Jul. 31, 2017 |
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
Dec. 31, 2018 |
|
Weighted Average Grant Date Fair Value | |||||||
Common stock, shares authorized | 100,000,000 | 100,000,000 | 100,000,000 | ||||
Common stock, shares issued | 38,561,000 | 38,561,000 | 35,346,000 | ||||
Stock-based compensation expense | $ 5,171,000 | $ 2,973,000 | $ 9,156,000 | $ 9,408,000 | |||
Restricted Stock Awards | |||||||
Units | |||||||
Outstanding-beginning of year (in shares) | 559,000 | ||||||
Granted at fair value (in shares) | 980,000 | ||||||
Vested (in shares) | (255,000) | ||||||
Forfeited (in shares) | (92,000) | ||||||
Outstanding-end of period (in shares) | 1,192,000 | 1,192,000 | |||||
Weighted Average Grant Date Fair Value | |||||||
Outstanding-beginning of year (in dollars per share) | $ 44.08 | ||||||
Granted at fair value (in dollars per share) | 17.80 | ||||||
Vested (in dollars per share) | 35.48 | ||||||
Forfeited (in dollars per share) | 20.43 | ||||||
Outstanding-end of period (in dollars per share) | $ 26.14 | $ 26.14 | |||||
Stock-based compensation expense | $ 4,560,000 | 2,700,000 | $ 8,428,000 | 5,084,000 | |||
Medici Ventures | |||||||
Weighted Average Grant Date Fair Value | |||||||
Common stock, shares authorized | 1,500,000 | ||||||
Common stock, shares issued | 900,000 | 900,000 | |||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Number of Shares | 470,000 | 470,000 | |||||
Medici Ventures | Employee Stock Options | |||||||
Stock-Based Awards | |||||||
Vesting period | 3 years | ||||||
Weighted Average Grant Date Fair Value | |||||||
Restricted stock units authorized, percentage | 9.00% | ||||||
Stock options granted in period (in shares) | 27,350 | ||||||
Value of stock options granted in period | $ 2,400,000 | $ 2,400,000 | |||||
Stock-based compensation expense | 307,000 | 123,000 | $ 533,000 | 134,000 | |||
tZero.com, Inc. | Restricted Stock Awards | |||||||
Weighted Average Grant Date Fair Value | |||||||
Restricted stock units authorized, percentage | 5.00% | ||||||
Stock options granted in period (in shares) | 245,500 | ||||||
Value of stock options granted in period | 749,000 | $ 749,000 | |||||
tZero.com, Inc. | Employee Stock Options | |||||||
Weighted Average Grant Date Fair Value | |||||||
Stock options granted in period (in shares) | 3,103,822 | ||||||
Value of stock options granted in period | 453,000 | $ 453,000 | |||||
Stock-based compensation expense | 304,000 | $ 150,000 | $ 195,000 | $ 4,190,000 | |||
Maximum | tZero.com, Inc. | Restricted Stock Awards | |||||||
Stock-Based Awards | |||||||
Vesting period | 2 years | ||||||
Maximum | tZero.com, Inc. | Employee Stock Options | |||||||
Stock-Based Awards | |||||||
Vesting period | 3 years | ||||||
Equity Incentive Plan, Three-Year Vesting | Restricted Stock Units | |||||||
Stock-Based Awards | |||||||
Vesting period | 3 years | ||||||
Equity Incentive Plan, Three-Year Vesting | Restricted Stock Units | First year | |||||||
Stock-Based Awards | |||||||
Annual award vesting percentage | 33.30% | ||||||
Equity Incentive Plan, Three-Year Vesting | Restricted Stock Units | Second year | |||||||
Stock-Based Awards | |||||||
Annual award vesting percentage | 33.30% | ||||||
Equity Incentive Plan, Three-Year Vesting | Restricted Stock Units | Third year | |||||||
Stock-Based Awards | |||||||
Annual award vesting percentage | 33.30% | ||||||
Equity Incentive Plan, One-Year Vesting | Restricted Stock Awards | |||||||
Stock-Based Awards | |||||||
Vesting period | 1 year | ||||||
Units | |||||||
Granted at fair value (in shares) | 502,765 | ||||||
Share-Based Compensation Arrangement By Share-Based Payment Award, Equity Instruments Other Than Options, Nonvested, Cumulative Grant Date Fair Value | $ 8,600,000 | $ 8,600,000 | |||||
2017 Stock Option Plan | Medici Ventures | Employee Stock Options | |||||||
Weighted Average Grant Date Fair Value | |||||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number | 130,000 | 130,000 |
OTHER INCOME (EXPENSE), NET (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Other Income and Expenses [Abstract] | ||||
Equity method losses | $ (2,033) | $ (1,031) | $ (3,058) | $ (1,381) |
Impairment of equity securities | (1,256) | 0 | (4,214) | 0 |
Unrealized gain/(loss) on equity securities | (500) | 1,836 | (1,118) | 1,836 |
Allowance on notes receivable | (5) | 0 | (1,242) | 0 |
Gain/(loss) on sale of equity securities | 720 | 0 | (258) | 0 |
Other | 79 | (437) | 623 | (96) |
Total other income (expense), net | $ (2,995) | $ 368 | $ (9,267) | $ 359 |
BUSINESS SEGMENTS (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|||
Segment reporting information | ||||||
Revenue, net | $ 373,709,000 | $ 483,133,000 | $ 741,438,000 | $ 928,464,000 | ||
Cost of goods sold | 299,810,000 | 391,390,000 | 594,415,000 | 742,852,000 | ||
Gross profit | 73,899,000 | 91,743,000 | 147,023,000 | 185,612,000 | ||
Operating expenses | 99,677,000 | 158,279,000 | 208,819,000 | 306,542,000 | ||
Other income (expense), net | (2,470,000) | 593,000 | (8,466,000) | 254,000 | ||
Pre-tax income (loss) | (28,248,000) | (65,943,000) | (70,262,000) | (120,676,000) | ||
Provision for income taxes | (622,000) | (27,000) | 256,000 | (304,000) | ||
Net loss | (27,626,000) | (65,916,000) | (70,518,000) | (120,372,000) | ||
Retail Total | ||||||
Segment reporting information | ||||||
Revenue, net | 367,475,000 | 477,683,000 | 730,100,000 | 917,679,000 | ||
Cost of goods sold | [1] | 294,984,000 | 387,252,000 | 585,624,000 | 734,832,000 | |
Gross profit | 72,491,000 | 90,431,000 | 144,476,000 | 182,847,000 | ||
Operating expenses | 81,596,000 | 149,437,000 | 166,929,000 | 274,969,000 | ||
Other income (expense), net | 40,000 | 1,624,000 | 175,000 | 1,169,000 | ||
Pre-tax income (loss) | (9,065,000) | (57,382,000) | (22,278,000) | (90,953,000) | ||
tZero.com, Inc. | ||||||
Segment reporting information | ||||||
Revenue, net | 5,551,000 | 4,890,000 | 10,047,000 | 9,742,000 | ||
Cost of goods sold | 4,143,000 | 3,578,000 | 7,500,000 | 6,977,000 | ||
Gross profit | 1,408,000 | 1,312,000 | 2,547,000 | 2,765,000 | ||
Operating expenses | 11,743,000 | 5,927,000 | 27,297,000 | 25,886,000 | ||
Other income (expense), net | 340,000 | (36,000) | (623,000) | 417,000 | ||
Pre-tax income (loss) | (9,995,000) | (4,651,000) | (25,373,000) | (22,704,000) | ||
Other | ||||||
Segment reporting information | ||||||
Revenue, net | 683,000 | 560,000 | 1,291,000 | 1,043,000 | ||
Cost of goods sold | 683,000 | 560,000 | 1,291,000 | 1,043,000 | ||
Gross profit | 0 | 0 | 0 | 0 | ||
Operating expenses | 6,338,000 | 2,915,000 | 14,593,000 | 5,687,000 | ||
Other income (expense), net | (2,850,000) | (995,000) | (8,018,000) | (1,332,000) | ||
Pre-tax income (loss) | (9,188,000) | (3,910,000) | (22,611,000) | (7,019,000) | ||
Unallocated Corporate, Other | ||||||
Segment reporting information | ||||||
Support costs | 1,300,000 | 3,100,000 | ||||
Inter-segment sales or transfers | ||||||
Segment reporting information | ||||||
Other income (expense), net | 491,000 | $ 504,000 | 907,000 | $ 2,500,000 | ||
Corporate | Retail Total | ||||||
Segment reporting information | ||||||
Support costs | 9,400,000 | 22,000,000 | ||||
Corporate | tZero.com, Inc. | ||||||
Segment reporting information | ||||||
Support costs | 1,300,000 | 3,100,000 | ||||
Corporate | Other | ||||||
Segment reporting information | ||||||
Support costs | $ 2,700,000 | $ 6,300,000 | ||||
|
BROKER DEALERS (Details) |
6 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 2019
USD ($)
subsidiary
|
Dec. 31, 2018
USD ($)
|
|
Related Party Transaction [Line Items] | ||
Number of broker-dealer subsidiaries (in subsidiary) | subsidiary | 2 | |
SpeedRoute | ||
Related Party Transaction [Line Items] | ||
Actual net capital | $ 780,173 | $ 1,251,579 |
Amount in excess of required net capital | 615,124 | 1,152,854 |
Minimum required net capital | $ 165,049 | $ 98,725 |
Net capital ratio | 3.17 | 1.2 |
Pro Securities | ||
Related Party Transaction [Line Items] | ||
Actual net capital | $ 59,312 | $ 13,958 |
Amount in excess of required net capital | 54,312 | 8,958 |
Minimum required net capital | $ 5,000 | $ 5,000 |
Net capital ratio | 0.34 | 2 |
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