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Document and Entity Information - shares	3 Months Ended
Document and Entity Information - shares	Mar. 31, 2020	Apr. 29, 2020
Document and Entity Information
Entity Registrant Name	OVERSTOCK.COM, INC
Entity Central Index Key	0001130713
Document Type	10-Q
Document Period End Date	Mar. 31, 2020
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		40,325,793
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q1

Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents	$ 141,260	$ 112,266
Restricted cash	2,661	2,632
Marketable securities at fair value	3,838	10,308
Accounts receivable, net	37,664	24,728
Inventories	4,678	5,840
Prepaids and other current assets	20,783	21,589
Total current assets	210,884	177,363
Property and equipment, net	126,621	130,028
Intangible assets, net	10,837	11,756
Goodwill	27,120	27,120
Equity securities	53,840	42,043
Operating lease right-of-use assets	23,726	25,384
Other long-term assets, net	3,707	4,033
Total assets	456,735	417,727
Current liabilities:
Accounts payable	74,254	75,416
Accrued liabilities	88,457	88,197
Deferred revenue	54,143	41,821
Operating lease liabilities, current	5,968	6,603
Other current liabilities	5,826	3,962
Total current liabilities	228,648	215,999
Long-term debt, net	43,739	0
Operating lease liabilities, non-current	20,409	21,554
Other long-term liabilities	2,284	2,319
Total liabilities	295,080	239,872
Stockholders' equity:
Common stock, $0.0001 par value, authorized shares - 100,000	4	4
Additional paid-in capital	768,055	764,845
Accumulated deficit	(596,723)	(580,390)
Accumulated other comprehensive loss	(564)	(568)
Treasury stock at cost - 3,551 and 3,326	(70,493)	(68,807)
Equity attributable to stockholders of Overstock.com, Inc.	100,279	115,084
Equity attributable to noncontrolling interests	61,376	62,771
Total stockholders' equity	161,655	177,855
Total liabilities and stockholders' equity	456,735	417,727
Series A-1 Preferred Stock [Member]
Stockholders' equity:
Preferred stock, $0.0001 par value, authorized shares - 5,000	0	0
Series B Preferred Stock
Stockholders' equity:
Preferred stock, $0.0001 par value, authorized shares - 5,000	$ 0	$ 0

Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	3 Months Ended	12 Months Ended
	Mar. 31, 2020	Dec. 31, 2019
Preferred Stock, Par or Stated Value 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	43,877,000	42,790,000
Common stock, shares outstanding	40,326,000	39,464,000
Treasury stock, shares	3,551,000	3,326,000
Series A Preferred Stock
Preferred Stock, Par or Stated Value Per Share	$ 0.0001
Series B Preferred Stock
Preferred Stock, Par or Stated Value Per Share	$ 0.0001
Preferred stock, shares issued	357,000	357,000
Preferred stock, shares outstanding	357,000	357,000
Series A-1 Preferred Stock [Member]
Preferred Stock, Par or Stated Value Per Share	$ 0.0001
Preferred stock, shares issued	4,210,000	4,210,000
Dividend declared, not yet distributed (in shares)	4,085,000	4,085,000
Preferred stock, shares outstanding	4,210,000	4,210,000

Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Revenue, net
Total net revenue	$ 351,573	$ 367,729
Cost of goods sold
Total cost of goods sold	275,733	294,605
Gross profit	75,840	73,124
Operating expenses
Sales and marketing	36,762	33,477
Technology	32,796	35,433
General and administrative	32,426	40,232
Total operating expenses	101,984	109,142
Operating loss	(26,144)	(36,018)
Interest income	272	403
Interest expense	(200)	(127)
Other income (expense), net	6,683	(6,272)
Loss before income taxes	(19,389)	(42,014)
Provision for income taxes	176	878
Net loss	(19,565)	(42,892)
Less: Net loss attributable to noncontrolling interests	(3,232)	(3,648)
Net loss attributable to stockholders of Overstock.com, Inc.	$ (16,333)	$ (39,244)
Net loss per common share—basic:
Net loss attributable to common shares—basic	$ (0.40)	$ (1.18)
Weighted average common shares outstanding—basic	40,158	32,370
Net loss per common share—diluted:
Net loss attributable to common shares—diluted	$ (0.40)	$ (1.18)
Weighted average common shares outstanding—diluted	40,158	32,370
Retail
Revenue, net
Total net revenue	$ 339,598	$ 362,625
Cost of goods sold
Total cost of goods sold	265,392	290,640
Gross profit	74,206	71,985
Operating expenses
Total operating expenses	82,835	85,336
Loss before income taxes	(8,928)	(13,216)
Other
Revenue, net
Total net revenue	11,975	5,104
Cost of goods sold
Total cost of goods sold	$ 10,341	$ 3,965

Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Statement of Comprehensive Income [Abstract]
Net loss	$ (19,565)	$ (42,892)
Other comprehensive income
Unrealized gain on cash flow hedges, net of expense for taxes of $0, and $0	4	4
Other comprehensive income	4	4
Comprehensive loss	(19,561)	(42,888)
Less: Comprehensive loss attributable to noncontrolling interests	(3,232)	(3,648)
Comprehensive loss attributable to stockholders of Overstock.com, Inc.	$ (16,329)	$ (39,240)

- Definition

The consolidated profit or loss for the period, net of income taxes, including the portion attributable to the noncontrolling interest.

+ References

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+ Details

Consolidated Statements of Comprehensive Loss (Unaudited) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Statement of Comprehensive Income [Abstract]
Unrealized gain on cash flow hedges, net of expense for taxes of $0, and $0	$ 0	$ 0

Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - USD ($) $ in Thousands	Total	Common stock	Preferred stock	Additional paid-in capital	Accumulated deficit	Accumulated other comprehensive loss	Treasury stock	Parent	Noncontrolling interest	Series A Preferred Stock Preferred stock	Series A-1 Preferred Stock [Member]	Series A-1 Preferred Stock [Member] Preferred stock	Series B Preferred Stock	Series B Preferred Stock Preferred stock
Common stock, beginning balance (in shares) at Dec. 31, 2018		35,346,000					3,200,000
Increase (Decrease) in Stockholders' Equity
Common stock issued upon vesting of restricted stock		242,000
Common stock sold through ATM offering		2,214,000
Common stock repurchased through business combination							47,000
Tax withholding upon vesting of restricted stock							72,000
Preferred stock, ending balance (in shares) at Mar. 31, 2019										127,000		0		355,000
Common stock, ending balance (in shares) at Mar. 31, 2019		37,802,000					3,319,000
Beginning balance at Dec. 31, 2018				$ 657,981	$ (458,897)	$ (584)	$ (66,757)		$ 78,960
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest [Abstract]
Stock-based compensation to employees and directors				3,985
Proceeds from issuance and exercise of stock warrants	$ 30,957			39,914
Other				(3)	425				(581)
Net loss attributable to stockholders of Overstock.com, Inc.	(39,244)				(39,244)
Net other comprehensive income	4					4
Common stock repurchased through business combination							(643)
Tax withholding upon vesting of restricted stock							(1,353)
Net loss attributable to noncontrolling interests	(3,648)								(3,648)
Ending balance at Mar. 31, 2019	209,562		$ 0	701,877	(497,716)	(580)	$ (68,753)	$ 134,831	74,731
Common stock, beginning balance (in shares) at Dec. 31, 2018		35,346,000					3,200,000
Increase (Decrease) in Stockholders' Equity
Dividend declared, not yet distributed (in shares)											4,085,000
Preferred stock, ending balance (in shares) at Dec. 31, 2019											4,210,000		357,000
Common stock, ending balance (in shares) at Dec. 31, 2019		42,790,000					3,326,000
Beginning balance at Dec. 31, 2018				657,981	(458,897)	(584)	$ (66,757)		78,960
Ending balance at Dec. 31, 2019	177,855			764,845	(580,390)	(568)	$ (68,807)		62,771
Common Stock, Value, Issued		$ 3
Increase (Decrease) in Stockholders' Equity
Total number of outstanding shares		34,483,000
Common Stock, Value, Issued	$ 4
Total number of outstanding shares	39,464,000
Common stock issued upon vesting of restricted stock		671,000
Common stock sold through ATM offering		416,000
Common stock repurchased through business combination							0
Tax withholding upon vesting of restricted stock							225,000
Dividend declared, not yet distributed (in shares)											4,085,000
Preferred stock, ending balance (in shares) at Mar. 31, 2020										0	4,210,000	4,210,000	357,000	357,000
Common stock, ending balance (in shares) at Mar. 31, 2020		43,877,000					3,551,000
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest [Abstract]
Stock-based compensation to employees and directors				3,268
Proceeds from issuance and exercise of stock warrants	$ 2,848			0
Other				(58)	0				1,837
Net loss attributable to stockholders of Overstock.com, Inc.	(16,333)				(16,333)
Net other comprehensive income	4					4
Common stock repurchased through business combination							$ 0
Tax withholding upon vesting of restricted stock							(1,686)
Net loss attributable to noncontrolling interests	(3,232)								(3,232)
Ending balance at Mar. 31, 2020	161,655		$ 0	$ 768,055	$ (596,723)	$ (564)	$ (70,493)	$ 100,279	$ 61,376
Common Stock, Value, Issued	$ 4	$ 4
Increase (Decrease) in Stockholders' Equity
Total number of outstanding shares	40,326,000	40,326,000

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Cash flows from operating activities:
Consolidated net loss	$ (19,565)	$ (42,892)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation of property and equipment	6,646	6,575
Amortization of intangible assets	923	1,481
Non-cash operating lease cost	1,630	1,667
Stock-based compensation to employees and directors	3,268	3,985
Deferred income taxes, net	8	895
(Gain)/loss on sale of cryptocurrencies	(219)	9
Impairment of cryptocurrencies	21	318
Impairment of equity securities	0	2,958
Losses on equity method securities	2,468	1,025
Gain on disposal of business	10,705	0
Other non-cash adjustments	1,625	1,858
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable, net	(11,141)	14,068
Inventories	1,162	554
Prepaids and other current assets	1,542	3,106
Other long-term assets, net	457	(189)
Accounts payable	(1,310)	(28,023)
Accrued liabilities	338	(6,962)
Deferred revenue	12,547	(10,640)
Operating lease liabilities	(1,751)	(1,249)
Other long-term liabilities	(171)	27
Net cash used in operating activities	(12,227)	(51,429)
Cash flows from investing activities:
Purchase of equity securities	(85)	(2,500)
Proceeds from sale of equity securities and marketable securities	2,179	5,535
Disbursement for notes receivable	(300)	(2,000)
Acquisitions of businesses, net of cash acquired	0	4,885
Expenditures for property and equipment	(3,638)	(4,144)
Cash Divested from Deconsolidation	(4,056)	0
Other investing activities, net	(99)	(2)
Net cash (used in) provided by investing activities	(5,999)	1,774
Cash flows from financing activities:
Proceeds from long-term debt	47,500	0
Proceeds from sale of common stock, net of offering costs	2,848	30,957
Payments of taxes withheld upon vesting of restricted stock	(1,686)	(1,353)
Other financing activities, net	(1,413)	(648)
Net cash provided by financing activities	47,249	28,956
Net increase (decrease) in cash, cash equivalents and restricted cash	29,023	(20,699)
Cash, cash equivalents and restricted cash, beginning of period	114,898	142,814
Cash, cash equivalents and restricted cash, end of period	143,921	122,115
Cash paid during the period:
Interest paid, net of amounts capitalized	32	86
Income taxes paid, net	4	130
Non-cash investing and financing activities:
Property and equipment financed through accounts payable and accrued liabilities	190	304
Common stock repurchased through business combination	0	643
Receivables converted to equity securities	186	359
Right-of-Use Asset Obtained in Exchange for Operating Lease Liability	41	7,961
Proceeds from sale of common stock included in accounts receivable	0	8,957
Sale of marketable securities included in accounts receivable	3,081	0
Deposit applied to business combination purchase price	0	7,347
Equity method security applied to business combination purchase price	0	3,707
Recognition of right-of-use assets upon adoption of ASC 842	0	30,968
Recognition Of Finance Lease, Right-Of-Use Asset	$ 517	$ 0

BASIS OF PRESENTATION	3 Months Ended
BASIS OF PRESENTATION	Mar. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]
BASIS OF PRESENTATION	1. 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, 2019. 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 months ended March 31, 2020 are not necessarily indicative of the results to be expected for any future period or the full fiscal year, due to seasonal and other factors. For purposes of comparability, we reclassified other certain immaterial amounts in the prior periods presented to conform with the current period presentation.

ACCOUNTING POLICIES

3 Months Ended

Mar. 31, 2020

Accounting Policies [Abstract]

ACCOUNTING POLICIES

2. 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.

In February 2020, Medici Land Governance, Inc. ("MLG"), an indirect majority-owned subsidiary, consummated the sale of shares of its common stock to an unrelated third-party. Upon completion of the transaction, our indirect ownership in MLG was reduced from 57% to 35% of MLG's issued and outstanding shares of common stock. As a result of our loss of a controlling financial interest in MLG under the voting interest model, we performed an assessment of control under the variable interest entity ("VIE") model and determined MLG does not meet the qualifications of a VIE for purposes of our consolidation. Accordingly, we deconsolidated MLG's consolidated net assets and noncontrolling interest from our consolidated financial statements and results beginning on February 22, 2020, the date that control ceased. The amount of gain recognized on the deconsolidation was $10.7 million, which is included in our consolidated statements of operations in Other income (expense), net. The gain primarily relates to the remeasurement of our retained equity interest in MLG at fair value, which was determined based on the same price per share MLG provided for the sale of common stock to the third-party and price per share we received in settling a portion of our intercompany debt for additional shares in MLG. Post deconsolidation, MLG became one of our equity method investees for which we perform services. See Equity method securities under ASC 323 below for additional information.

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, vendor 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. Our estimates involving, among other items, sales volume, pricing, cost and availability of inventory, consumer demand and spending habits, and the continued operations of our supply chain and logistics network are even more difficult to estimate as a result of uncertainties associated with the duration of the various shelter-in-place orders across the globe related to the novel coronavirus ("COVID-19") pandemic and the post-pandemic economic recovery. Although these estimates are based on our best knowledge of current events and actions that we may undertake in the future, the variability of these factors depends on a number of conditions, including uncertainty associated with the recent COVID-19 pandemic, and thus our accounting estimates may change from period to period. To the extent there are differences between these estimates and actual results, our consolidated financial statements may be materially affected.

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 $2.8 million and $2.8 million at March 31, 2020 and December 31, 2019, 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.


•	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.

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 March 31, 2020 and December 31, 2019, as indicated (in thousands):



	Fair Value Measurements at March 31, 2020:
	Total		Level 1		Level 2		Level 3
Assets:
Cash equivalents - Money market mutual funds	$	2,811	$	2,811	$	—	$	—
Equity securities, at fair value	414		414		—		—
Marketable securities, at fair value	3,838		3,838		—		—
Trading securities held in a "rabbi trust" (1)	85		85		—		—
Total assets	$	7,148	$	7,148	$	—	$	—
Liabilities:
Deferred compensation accrual "rabbi trust" (2)	$	84	$	84	$	—	$	—
Total liabilities	$	84	$	84	$	—	$	—



	Fair Value Measurements at December 31, 2019:
	Total		Level 1		Level 2		Level 3
Assets:
Cash equivalents - Money market mutual funds	$	2,799	$	2,799	$	—	$	—
Equity securities, at fair value	823		823		—		—
Marketable securities, at fair value	10,308		10,308		—		—
Trading securities held in a "rabbi trust" (1)	116		116		—		—
Total assets	$	14,046	$	14,046	$	—	$	—
Liabilities:
Deferred compensation accrual "rabbi trust" (2)	$	116	$	116	$	—	$	—
Total liabilities	$	116	$	116	$	—	$	—

___________________________________________


(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.

Accounts receivable, net

Accounts receivable consist primarily of 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 expected credit losses based upon our business customers' financial condition, payment history, our historical collection experience, and any future expected economic conditions. The allowance for credit losses was $1.0 million and $2.5 million at March 31, 2020 and December 31, 2019, respectively.

Concentration of credit risk

One bank held the majority of our cash and cash equivalents at March 31, 2020 and December 31, 2019. 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

Inventories 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, notes receivables, and cryptocurrency-denominated assets ("cryptocurrencies").

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:



	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

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 March 31, 2020 and 2019, we capitalized $2.9 million and $3.5 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 $3.4 million and $3.2 million, respectively.

Depreciation expense is classified within the corresponding operating expense categories on our consolidated statements of operations as follows (in thousands):



	Three months ended March 31,
	2020		2019
Cost of goods sold - retail	$	190	$	175
Technology	4,771		5,175
General and administrative	1,685		1,225
Total depreciation	$	6,646	$	6,575

Total accumulated depreciation of property and equipment was $226.4 million and $221.8 million at March 31, 2020 and December 31, 2019, respectively. 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.

Equity securities under ASC 321

At March 31, 2020, we held minority interests (less than 20%) in certain public and privately held entities, accounted for under ASC Topic 321, Investments—Equity Securities ("ASC 321"), which are included in Equity securities and Marketable securities in our consolidated balance sheets. We measure our ASC 321 equity securities and marketable securities at fair value, unless there is no readily determinable fair value for the underlying security. Where there is no readily determinable fair value, we have elected the measurement alternative described in ASC 321 and below. 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 security is less than its carrying value. If such events or circumstances have occurred, we estimate the fair value of the security and recognize an impairment loss equal to the difference between the fair value of the security and its carrying value which is recorded in Other income (expense), net in our consolidated statements of operations. In such cases, the estimated fair value of the security 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, valuation, as well as inability to raise additional capital which may be necessary for the liquidity needed to support their operations.

Certain of our 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. The carrying amount of our equity securities without readily determinable fair values was approximately $3.9 million and $3.9 million at March 31, 2020 and December 31, 2019, respectively. Cumulative downward adjustments for price changes and impairments for our equity securities without readily determinable fair values were $6.2 million, and the cumulative upward adjustments for price changes to equity investments were $958,000 as of March 31, 2020. The impairments and downward adjustments for the period related to equity securities without readily determinable fair values at March 31, 2020 and 2019 is as follows (in thousands):



	Three months ended March 31,
	2020		2019
Impairments and downward adjustments of equity securities without readily determinable fair values	$	—	$	(2,958	)

Certain of these equity securities and our marketable securities, which had a carrying value of $4.3 million at March 31, 2020 and $11.1 million at December 31, 2019, are carried at fair value based on Level 1 inputs. See Fair value of financial instruments above. The portion of unrealized gains and losses for the period related to equity securities with readily determinable fair value still held at March 31, 2020 and 2019 is calculated as follows (in thousands):



	Three months ended March 31,
	2020			2019
Net losses recognized during the period on equity securities	$	(1,619	)	$	(618	)
Less: Net losses recognized during the period on equity securities sold	(90		)	—
Unrealized losses during the reporting period on equity securities still held	$	(1,529	)	$	(618	)

Equity method securities under ASC 323

At March 31, 2020, 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. For certain of these entities, we provide developer and other secondment services. For the three months ended March 31, 2020 and 2019, we recognized $1.6 million and $608,000 of developer and other secondment services revenue, respectively, in Other revenue on our consolidated statements of operations.

The following table includes our equity method securities and related ownership interest as of March 31, 2020:



	Ownership interest
Bitt Inc.	21%
Boston Security Token Exchange LLC	50%
Chainstone Labs, Inc.	29%
FinClusive Capital, Inc.	10%
GrainChain, Inc.	18%
Medici Land Governance	35%
Minds, Inc.	24%
PeerNova, Inc.	11%
SettleMint NV	29%
Spera, Inc.	19%
VinX Network Ltd.	29%
Voatz, Inc.	20%

The carrying amount of our equity method securities was approximately $49.5 million and $37.3 million at March 31, 2020 and December 31, 2019, 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 the carrying value of the asset. We review our securities individually for impairment by evaluating if events or circumstances have occurred that may indicate the fair value of the security is less than its carrying value. If such events or circumstances have occurred and deemed to be "other-than-temporary," we estimate the fair value of the security and recognize an impairment loss equal to the difference between the fair value of the security and its carrying value which is recorded in Other income (expense), net in our consolidated statements of operations.

The following table summarizes the net losses recognized on equity method securities for the three months ended March 31, 2020 and 2019 (in thousands):



	Three months ended March 31,
	2020		2019
Net loss recognized on our proportionate share of the net losses of our equity method securities and amortization of the basis difference	$	2,468	$	1,025
Net loss recognized during the period on equity method securities sold	—		524

At March 31, 2020, we had a $5 million contractual off-balance sheet contingent obligation to provide additional funding in the future to our Boston Security Token Exchange LLC ("BSTX") joint venture if and when, during the first 48 months after the establishment of the entity, the aggregate cash balance of BSTX's combined bank accounts fall below $2 million for any reason. Such obligation has not been accrued for as the timing of the resolution of the contingency and payment of such obligation is not determinable as of the balance sheet date.

Noncontrolling interests in Controlled Subsidiaries

Our wholly-owned subsidiary, Medici Ventures, Inc. ("Medici Ventures"), conducts its primary business through its majority-owned subsidiaries, tZERO Group, Inc. ("tZERO"), which includes a financial technology company, two related registered broker-dealers and another entity which has applied to become a registered broker-dealer, a digital wallet and exchange services company, and certain strategic interests in other entities which support or align with tZERO's objectives and strategies. Medici Ventures and tZERO, and their respective consolidated subsidiaries are included in our consolidated financial statements. We deconsolidated MLG's consolidated net assets and noncontrolling interest from our consolidated financial statements and results beginning on February 22, 2020, the date that control ceased. 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. 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. Our December 2019 annual impairment tests of goodwill indicated no impairment of our goodwill at December 31, 2019.

Due to the impact of the COVID-19 pandemic on the retail sector, overall economy, and our market capitalization, we performed an interim goodwill impairment assessment to determine whether an impairment loss may have been incurred. We qualitatively assessed whether it was more likely than not that goodwill was impaired as of March 31, 2020. We reviewed our forecasts and assumptions based on our current projections that are subject to various risks and uncertainties, including: (1) forecasted revenues, expenses and cash flows, including the duration and extent of impact to our business from the COVID-19 pandemic, (2) the reduction in our market capitalization, (3) the impact of social distancing on our workforce, along with any other government mandated measures and (4) the impact the COVID-19 pandemic has had to our supply chain. Based on our interim impairment assessment as of March 31, 2020, we have determined that our goodwill is not impaired. However, we are unable to predict how long these conditions will persist, what additional measures may be introduced by governments or private parties or what effect any such additional measures may have on our business. There were no impairments to goodwill recorded during the three months ended March 31, 2020 and 2019.

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):



	March 31, 2020			December 31, 2019
Intangible assets subject to amortization, gross (1)	$	30,267		$	30,284
Less: accumulated amortization of intangible assets subject to amortization	(19,430		)	(18,528		)
Total intangible assets, net	$	10,837		$	11,756

___________________________________________


(1)	— At March 31, 2020, the weighted average remaining useful life for intangible assets subject to amortization was 5.52 years.

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):



	Three months ended March 31,
	2020		2019
Technology	$	847	$	853
Sales and marketing	11		16
General and administrative	65		(830		)
Total amortization	$	923	$	39

In connection with our 2018 acquisition of Mac Warehouse, we received the final valuation information and completed our determination and allocation of the purchase price during the quarter ended March 31, 2019 and recognized adjustments to the provisional values as of March 31, 2019, which among other items decreased the recognized Intangible assets and resulted in a reversal of previously recognized amortization expense of $1.4 million during the quarter ended March 31, 2019.

Estimated amortization expense for the next five years is: $2.7 million for the remainder of 2020, $3.3 million in 2021, $2.1 million in 2022, $1.6 million in 2023, $804,000 in 2024, and $323,000 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. 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. Although these estimates are based on our best knowledge of current events and actions that we may undertake in the future, the variability of these factors depends on a number of conditions, including uncertainty associated with the recent COVID-19 pandemic, and thus our accounting estimates may change from period to period. 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 months ended March 31, 2020 and 2019.

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 which can be further impacted by uncertainty, volatility, and any disruption to our carriers caused by the COVID-19 pandemic.

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 for which we sell annual memberships. For Club O memberships, we record membership fees as deferred revenue and we recognize revenue ratably over the membership period. The Club O 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 standalone 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 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. Breakage income related to Club O Reward dollars and gift cards are recognized as a component of Retail revenue in our consolidated statements of operations. Breakage included in revenue was $905,000 and $1.1 million for the three months ended March 31, 2020 and 2019.

Our total deferred revenue related to the outstanding Club O Reward dollars was $6.8 million and $6.7 million at March 31, 2020 and December 31, 2019, 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 3% of total net revenues for all periods presented.

Revenue Disaggregation

Disaggregation of revenue by major product line is included in Segment Information in Note 11—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 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):



	Amount
Deferred revenue at December 31, 2018	$	50,578
Increase due to deferral of revenue at period end	36,622
Decrease due to beginning contract liabilities recognized as revenue	(45,379		)
Deferred revenue at December 31, 2019	41,821
Increase due to deferral of revenue at period end	41,520
Decrease due to beginning contract liabilities recognized as revenue	(29,198		)
Deferred revenue at March 31, 2020	$	54,143

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 deductions from the sales returns allowance (in thousands):



	Amount
Allowance for returns at December 31, 2018	$	15,261
Additions to the allowance	117,040
Deductions from the allowance	(121,194		)
Allowance for returns at December 31, 2019	11,107
Additions to the allowance	25,688
Deductions from the allowance	(26,643		)
Allowance for returns at March 31, 2020	$	10,152

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 (in thousands, except for percentages).



	Three months ended March 31,
	2020				2019
Total revenue, net	$	351,573	100	%	$	367,729	100	%
Cost of goods sold
Product costs and other cost of goods sold	259,946		74	%	277,218		75	%
Fulfillment and related costs	15,787		4	%	17,387		5	%
Total cost of goods sold	275,733		78	%	294,605		80	%
Gross profit	$	75,840	22	%	$	73,124	20	%

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 $32.6 million and $28.5 million during the three months ended March 31, 2020 and 2019, respectively. Prepaid advertising (included in Prepaids and other current assets in the accompanying consolidated balance sheets) was $245,000 and $138,000 at March 31, 2020 and December 31, 2019, 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 9—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, or a range of amounts, 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 6—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 March 31, 2020 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 $2.7 million at March 31, 2020. 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 2015 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.

Net loss per share

Our Blockchain Voting Series A Preferred Stock, par value $0.0001 per share (the "Series A Preferred"), Digital Voting Series A-1 Preferred Stock, par value $0.0001 per share (the "Series A-1 Preferred"), and our Voting Series B Preferred Stock, par value $0.0001 per share (the "Series B Preferred" together with the Series A Preferred and Series A-1 Preferred, 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.

On July 30, 2019, we announced that our Board of Directors had declared a dividend (the "Dividend") payable in shares of our Series A-1 Preferred Stock. The Dividend is payable at a ratio of 1:10, meaning that one share of Series A-1 Preferred Stock will be issued for every ten shares of OSTK common stock, ten shares of Series A-1 Preferred Stock, or ten shares of Series B Preferred Stock held by all holders of such shares as of the record date for the Dividend. The record date for the Dividend was April 27, 2020, and the distribution date for the Dividend will be May 19, 2020.

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):



	Three months ended March 31,
	2020			2019
Net loss attributable to stockholders of Overstock.com, Inc.	$	(16,333	)	$	(39,244	)
Less: Preferred stock TZROP repurchase gain	—			(425		)
Less: Preferred stock dividends - declared and accumulated	19			19
Undistributed loss	(16,352		)	(38,838		)
Less: Undistributed loss allocated to participating securities	(194		)	(569		)
Net loss attributable to common shares	$	(16,158	)	$	(38,269	)
Net loss per common share—basic:
Net loss attributable to common shares—basic	$	(0.40	)	$	(1.18	)
Weighted average common shares outstanding—basic	40,158			32,370
Effect of dilutive securities:
Stock options and restricted stock awards	—			—
Weighted average common shares outstanding—diluted	40,158			32,370
Net loss attributable to common shares—diluted	$	(0.40	)	$	(1.18	)

The following shares were excluded from the calculation of diluted shares outstanding as their effect would have been anti-dilutive (in thousands):



	Three months ended March 31,
	2020	2019
Stock options and restricted stock units	737	1,030

Recently adopted accounting standards

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which revises how entities account for credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. Topic 326 was subsequently amended by ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments and ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments—Credit Losses. Under the guidance, the measurement of credit losses will be based on a current expected credit losses methodology. We adopted the changes under the new standard on January 1, 2020. We utilized a prospective transition approach for our debt securities for which other-than-temporary impairment had been recognized prior to January 1, 2020. As a result, the amortized cost basis remains the same before and after the effective date of ASU 2016-13. The implementation of ASU 2016-13 did not have a material impact on our consolidated financial statements and disclosures. We will continue to actively monitor the impact of the recent COVID-19 pandemic on expected credit losses.

Recently issued accounting standards

In December 2019, the FASB issued ASU 2019-12, Income Taxes ("Topic 740")—Simplifying the Accounting for Income Taxes, which removes certain exceptions to the general principles in Topic 740 and amends existing guidance to improve consistent application. For public entities, ASU 2019-12 is required to be adopted for annual periods beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted. Management is currently evaluating the impact of the adoption of this ASU on our consolidated financial statements and related disclosures.

In January 2020, the FASB issued ASU 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815, which clarifies the interaction of the accounting for equity securities under Topic 321, the accounting for equity method investments in Topic 323, and the accounting for certain forward contracts and purchased options in Topic 815. For public entities, ASU 2020-01 is required to be adopted for annual periods beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted. Management is currently evaluating the impact of the adoption of this ASU on our consolidated financial statements and related disclosures.

ACCRUED LIABILITIES

3 Months Ended

Mar. 31, 2020

Payables and Accruals [Abstract]

Accounts Payable and Accrued Liabilities Disclosure [Text Block]

3. ACCRUED LIABILITIES

Accrued liabilities consist of the following (in thousands):



	March 31, 2020		December 31, 2019

Accrued compensation and other related costs	$	18,224	$	13,012
Accrued marketing expenses	12,109		13,063
Other accrued expenses	10,862		9,714
Allowance for returns	10,152		11,107
Accounts payable accruals	9,855		15,692
Accrued loss contingencies	9,555		9,550
Sales and other taxes payable	9,058		10,105
Accrued freight	8,642		5,954
Total accrued liabilities	$	88,457	$	88,197

BORROWINGS	3 Months Ended
BORROWINGS	Mar. 31, 2020
Debt Disclosure [Abstract]
BORROWINGS	4. BORROWINGS Loan Core Capital Funding Corporation LLC loan agreements In March 2020, we entered into two loan agreements with Loan Core Capital Funding Corporation LLC. The loan agreements provide a $34.5 million Senior Note, carrying interest at an annual rate of 4.242%, and a $13.0 million Mezzanine Note, carrying interest at an annual rate of 5.002%. The loans carry a blended annual interest rate of 4.45%. The Senior Note is for a 10-year term (stated maturity date is March 6, 2030) and requires interest only payments, with the principal amount and any then unpaid interest due and payable at the end of the 10-year term. The Mezzanine Note has a stated 10-year term, though the agreement requires principal and interest payments monthly over approximately a 46 month payment period. Both loans include certain financial and non-financial covenants and are secured by our corporate headquarters and the related land and rank senior to stockholders. As of March 31, 2020, the total outstanding debt on these loans was $46.8 million, and the total amount of the current portion of these loans included in Other current liabilities on our consolidated balance sheets was $3.1 million. Our debt issuance costs and debt discount are amortized using the straight-line basis which approximates the effective interest method. While the ultimate impact of the COVID-19 pandemic on our business, financial condition, liquidity and results of operations is dependent on future developments which are highly uncertain, we are in compliance with our debt covenants and we are closely monitoring the most recent developments regarding the COVID-19 pandemic, and potential impact to our ongoing compliance with debt covenants and ability to continue to meet our loan payment obligations as they become due.

LEASES

3 Months Ended

Mar. 31, 2020

Leases [Abstract]

Lessee, Operating Leases [Text Block]

5. 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 11 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 (in thousands):



	March 31, 2020		December 31, 2019
Operating right-of-use assets	$	23,726	$	25,384
Operating lease liabilities - current	5,968		6,603
Operating lease liabilities - non-current	20,409		21,554

The components of lease expenses were as follows (in thousands):



	Three months ended March 31,
	2020		2019
Operating lease cost	$	2,132	$	2,505
Short-term lease cost	11		34
Variable lease cost	405		528

The following tables provides a summary of other information related to leases (in thousands, apart from weighted-average lease term and weighted average discount rate):



	Three months ended March 31,
	2020			2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used in operating leases	$	(2,261	)	$	(2,018	)
Right-of-use assets obtained in exchange for new operating lease liabilities	$	41		$	7,961
Weighted-average remaining lease term - operating leases	5.91 years			7.27 years
Weighted-average discount rate - operating leases	8		%	8		%

Maturity of lease liabilities under our non-cancellable operating leases as of March 31, 2020, are as follows (in thousands):



Payments due by period	Amount
2020 (Remainder)	$	6,382
2021	5,777
2022	5,628
2023	4,683
2024	3,485
Thereafter	7,358
Total lease payments	33,313
Less interest	6,936
Present value of lease liabilities	$	26,377

COMMITMENTS AND CONTINGENCIES	3 Months Ended
COMMITMENTS AND CONTINGENCIES	Mar. 31, 2020
Commitments and Contingencies Disclosure [Abstract]
COMMITMENTS AND CONTINGENCIES	6. 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. In September 2009, SpeedTrack, Inc. sued us along with 27 other defendants in the United States District Court in the Northern District of California, alleging that we 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. In April 2016, the court entered an order partially dismissing the claims against us. In May 2016, the plaintiff filed an amended complaint and we filed an answer. In March 2020, the court entered a judgment of non-infringement in our favor and against the plaintiff. 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. On October 23, 2019, the court entered an award of attorneys' fees and costs of $1.3 million and entered final judgment in the amount of $8.6 million. We filed an appeal in October 2019, and are awaiting a ruling from the Court. Our estimated liability for these amounts was included in Accrued liabilities at March 31, 2020. 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 2018, we received a follow-up request from the SEC relating to its investigation. As previously disclosed, on October 7, 2019, we received a subpoena from the SEC requesting documents related to the Dividend we announced to stockholders in June 2019 and requesting 10b-5-1 plans of our officers and directors that were in effect during the period of January 1, 2018 through October 7, 2019. On December 9, 2019, we received a subpoena from the SEC requesting documents related to the GSR transaction and the alternative trading system run by tZERO ATS, LLC. On December 19, 2019, we received a subpoena from the SEC requesting our insider trading policies as well as certain employment and consulting agreements. We have also previously received requests from the SEC regarding our communications with our former chief executive officer and director, Patrick Byrne and the matters referenced in the December 2019 subpoenas. We are in regular, active communication with the SEC and are cooperating fully with it in connection with its investigations and information requests. tZERO's broker-dealer subsidiaries are subject to extensive regulatory requirements under federal and state laws and regulations and self-regulatory organization ("SRO") rules. Each of SpeedRoute LLC ("SpeedRoute") and tZERO ATS, LLC is registered with the SEC as a broker-dealer under the Securities Exchange Act of 1934 (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, tZERO ATS, LLC owns and operates an alternative trading system registered with the SEC. Each of SpeedRoute and tZERO ATS, LLC 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, which may result in financial and other settlements or penalties. Any significant 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. tZERO's subsidiary, tZERO Crypto, Inc., is registered as or is applying to become a money transmitter (or its equivalent) in many states and is subject to extensive regulatory requirements applicable to money services businesses, including the requirements of the Financial Crimes Enforcement Network of the U.S. Department of the Treasury ("FinCEN"), anti-money laundering requirements, know-your-customer requirements, record-keeping, reporting and capital and bonding requirements, and inspection by state and federal regulatory agencies. Compliance with these requirements requires the dedication of significant resources and any material failure by tZERO Crypto, Inc. to remain in compliance with the applicable regulatory requirements could subject it to liability or limit the services it may offer. On September 27, 2019, a purported securities class action lawsuit was filed against us and our former chief executive officer and former chief financial officer in the United States District Court in the Central District of Utah, alleging violations under Section 10(b), Rule 10b-5, Section 20(a), Section 20(A) of the Exchange Act. On October 8, 2019, October 17, 2019, October 31, 2019, and November 20, 2019, four similar lawsuits were filed in the same court also naming the Company and the above referenced former executives as defendants, bringing similar claims under the Exchange Act, and seeking similar relief. These cases were consolidated into a single lawsuit in December 2019. The Court appointed The Mangrove Partners Master Fund Ltd. as lead plaintiff in January 2020. In March 2020, an amended consolidated complaint was filed against us, our president of retail, our former chief executive officer, and our former chief financial officer. No estimates of the possible losses or range of losses can be made at this time. We intend to vigorously defend this consolidated action. On November 22, 2019, a shareholder derivative suit was filed against us and certain past and present directors and officers of the Company in the United States District Court for the District of Delaware, with allegations that include: (i) breach of fiduciary duties, (ii) unjust enrichment, (iii) insider selling and misappropriation of the company's information, and (iv) contribution under Sections 10(b) and 21D of the Exchange Act. On December 17, 2019, a similar lawsuit was filed in the same court, naming the same defendants, bringing similar claims, and seeking similar relief. These cases were consolidated into a single lawsuit in January 2020. In March 2020, the court entered a stay on litigation, pending the outcome of the securities class action motion to dismiss. No estimates of the possible losses or range of losses can be made at this time. We intend to vigorously defend these actions. On April 23, 2020, a putative class action lawsuit was filed against us in the Circuit Court of the County of St. Louis, State of Missouri, alleging that we over-collected taxes on products sold into the state of Missouri. No estimate of the possible loss or range of loss can be made at this time. We intend to vigorously defend this action. We establish liabilities when a particular contingency is probable and estimable. At March 31, 2020 and December 31, 2019, we have accrued $9.6 million and $9.6 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	3 Months Ended
INDEMNIFICATIONS AND GUARANTEES	Mar. 31, 2020
INDEMNIFICATIONS AND GUARANTEES
INDEMNIFICATIONS AND GUARANTEES	7. 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 we entered into in favor of Loan Core Capital Funding Corporation LLC under our loan agreements, 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	3 Months Ended
STOCKHOLDERS' EQUITY	Mar. 31, 2020
Equity [Abstract]
STOCKHOLDERS' EQUITY	8. 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. On July 30, 2019, we announced that our Board of Directors had declared the Dividend payable in shares of our Series A-1 Preferred stock. On September 18, 2019, we announced our intent to register the Series A-1 Preferred stock to be issued pursuant to the Dividend under the Securities Act of 1933 and postponed the previously announced record and distribution dates for the Dividend. On October 28, 2019, we announced that we would seek a stockholder vote at a stockholder special meeting to allow us to amend the certificates of designation for our preferred shares and removing certain restrictions, to facilitate issuance of the Dividend. On February 13, 2020, a special meeting of stockholders was held, where the stockholders approved amendments to our certificate of designation allowing us to proceed with issuing the Dividend. On April 7, 2020, we announced a record date of April 27, 2020 for the Dividend and a distribution date for the Dividend of May 19, 2020. Preferred Stock On May 1, 2019, we informed holders of our Series A Preferred stock of an opportunity to exchange (the "Exchange") outstanding Series A Preferred stock for newly-issued shares of the Company's Series A-1 Preferred stock. On June 26, 2019, the Exchange was completed for participating stockholders. In connection with the Exchange, 122,526 shares of Series A Preferred stock were validly tendered and accepted for exchange by the Company and the Company issued 122,526 shares of Series A-1 Preferred stock in exchange therefore. On June 26, 2019, in connection with the completion of the Exchange, 1,144 shares of Series A Preferred stock were converted into shares of Series B Preferred stock (such transaction, the "Conversion"). Following the Conversion, 2,895 shares of Series A Preferred stock 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 stock and 875 of those remaining shares were converted into shares of Series B Preferred stock. Following that time, the Company eliminated the Series A Preferred stock by filing a Certificate of Elimination with the Delaware Secretary of State. Except as required by law, the preferred shares are 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 are 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 2018 and 2019. Neither the Series A-1 Preferred stock nor Series B Preferred stock 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-1 Preferred stock into Series B Preferred stock at any time on a one-to-one basis. 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-1 Preferred stock and each share of Series B Preferred stock being treated as though it were a share of our common stock. If we are party to any merger or consolidation in which our common stock is changed into or exchanged for stock or other securities of any other person (or the Company) or cash or any other property (or a right to receive the foregoing), we will use all commercially reasonable efforts to cause each outstanding share of the Preferred Stock to be treated as if such share were an additional outstanding share of common stock in connection with any such transaction. Neither the Series A-1 Preferred stock nor the Series B Preferred stock is registered under the Exchange Act. JonesTrading Sales Agreement We entered into a Capital on Demand^TMSales agreement dated August 9, 2018 (which was subsequently amended on March 15, 2019, November 12, 2019, and April 9, 2020) with JonesTrading Institutional Services LLC ("JonesTrading"), under which we may conduct "at the market" public offerings of our common stock. Under the sales agreement, JonesTrading, acting as our agent, may offer our common stock in the market on a daily basis or otherwise as we request from time to time. We have no obligation to sell additional shares under the sales agreement, but we may do so from time to time. For the three months ended March 31, 2020, we did not sell any shares of our common stock pursuant to the sales agreement but have received $2.8 million of proceeds that was included in Accounts receivable, net on our consolidated balance sheet at December 31, 2019 for the sale of an aggregate of 415,904 shares of our common stock under the agreement that were executed in late December 2019. As of the effective date of the amended agreement, April 9, 2020, we had $80.0 million remaining available under our "at the market" sales program. 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 agreed to purchase, for $30.0 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 of $5.0 million in consideration. On September 16, 2019, in recognition of GSR's remaining obligations under the Investment Agreement, tZERO and GSR entered into a Promissory Note under which GSR promised to pay the remaining consideration due to tZERO under the Investment Agreement in the form of U.S. dollars in multiple installments by December 6, 2019. A further letter agreement was entered into by tZERO and GSR in March 2020 obligating GSR to make the remaining payments by March 31, 2020 to avoid all payments becoming non-exclusive damages and relieving tZERO of any obligation to issue shares to GSR. GSR completed their final payment of principal and accrued interest on March 31, 2020, satisfying its obligations under the Promissory Note and Investment Agreement. tZERO issued the shares of tZERO common stock to GSR on April 1, 2020 in full satisfaction of the Investment Agreement.

STOCK-BASED AWARDS

3 Months Ended

Mar. 31, 2020

Share-based Payment Arrangement [Abstract]

STOCK-BASED AWARDS

9. 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 of the Company or subsidiary's shares only to its own employees, respectively. Stock-based compensation expense is classified within the corresponding operating expense categories on our consolidated statements of operations as follows (in thousands):



	Three months ended March 31,
	2020		2019
Cost of goods sold — retail	$	53	$	47
Sales and marketing	389		441
Technology	915		1,227
General and administrative	1,911		2,270
Total stock-based compensation	$	3,268	$	3,985

Overstock restricted stock awards

The Overstock.com, Inc. Amended and Restated 2005 Equity Incentive Plan (the "Plan") provides for the grant of incentive stock options to employees and directors of the Company and non-qualified stock options to consultants, as well as restricted stock units and other types of equity awards of the Company. 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 vested 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 three months ended March 31, 2020 (in thousands, except per share data):



	Three months ended March 31, 2020
	Units		Weighted Average Grant Date Fair Value
Outstanding—beginning of year	1,051		$	26.22
Granted at fair value	436		9.03
Vested	(671	)	23.96
Forfeited	(79	)	28.35
Outstanding—end of period	737		$	17.88

Medici Ventures stock options

The Medici Ventures, Inc. 2017 Stock Option Plan, as amended, 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. Options vested under this plan expire at the end of ten years. No stock option awards were granted during the three months ended March 31, 2020.

tZERO equity awards

The tZERO Group, Inc. 2017 Equity Incentive Plan, as amended, provides for grant of options and restricted stock 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 three months ended March 31, 2020, tZERO granted 10,000 restricted stock awards with a cumulative grant date fair value of $30,500 which will be expensed on a straight-line basis over a cliff vesting period of two years. No stock option awards were issued during the three months ended March 31, 2020.

OTHER INCOME , NET

3 Months Ended

Mar. 31, 2020

Other Income and Expenses [Abstract]

OTHER INCOME (EXPENSE), NET

10. OTHER INCOME (EXPENSE), NET

Other income (expense), net consisted of the following (in thousands):



	Three months ended March 31,
	2020			2019
Gain on deconsolidation of net assets of Medici Land Governance, Inc.	$	10,741		$	—
Other	44			543
Impairment of equity securities	—			(2,958		)
Impairment of notes receivable	(15		)	(1,237		)
Loss on sale of equity securities and marketable securities	(90		)	(977		)
Unrealized loss on equity securities and marketable securities	(1,529		)	(618		)
Equity method losses	(2,468		)	(1,025		)
Total other income (expense), net	$	6,683		$	(6,272	)

BUSINESS SEGMENTS

3 Months Ended

Mar. 31, 2020

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

11. BUSINESS SEGMENTS

Segment information has been prepared in accordance with ASC Topic 280 Segment Reporting. We determined our segments based on how we manage our business. We allocate 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. Our Medici business includes two reportable segments, tZERO and the unconsolidated financial information for Medici Ventures ("MVI"). MVI was identified as a reportable segment separate from Other during 2019. We have recast prior period segment information to conform with current year presentation. MVI consists of the Medici business not associated with tZERO or MLG. We deconsolidated MLG's consolidated net assets and noncontrolling interest from our consolidated financial statements beginning on February 22, 2020, the date that control ceased. We use pre-tax net income (loss) as the measure to determine our reportable segments. Other consists of MLG, which was deconsolidated beginning February 22, 2020, and our unallocated corporate support costs.

Our Retail segment primarily consists of amounts earned through e-commerce sales through our Website, excluding intercompany transactions eliminated in consolidation.

Our tZERO segment primarily consists of amounts earned through securities transactions through our broker-dealers and costs incurred to execute our tZERO business initiatives, excluding intercompany transactions eliminated in consolidation.

Our MVI segment primarily consists of costs incurred to create or foster a set of products and solutions that leverage blockchain technology to generate efficiencies and increase security and control, excluding intercompany transactions eliminated in consolidation.

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 months ended March 31, 2020 and 2019.

The following table summarizes information about reportable segments and a reconciliation to consolidated net income (loss) for the three months ended March 31, 2020 and 2019 (in thousands):



	Three months ended March 31,
	Retail			tZERO			MVI			Other			Total
2020
Revenue, net	$	339,598		$	10,239		$	1,574		$	162		$	351,573
Cost of goods sold	265,392			8,767			1,574			—			275,733
Gross profit	74,206			1,472			—			162			75,840
Operating expenses	82,835			12,258			2,908			3,983			101,984
Interest and other income (expense), net (1)	(299		)	(1,782		)	8,833			3			6,755
Pre-tax income (loss)	$	(8,928	)	$	(12,568	)	$	5,925		$	(3,818	)	(19,389		)
Provision for income taxes													176
Net loss (2)													$	(19,565	)

2019
Revenue, net	$	362,625		$	4,496		$	608		$	—		$	367,729
Cost of goods sold	290,640			3,357			608			—			294,605
Gross profit	71,985			1,139			—			—			73,124
Operating expenses	85,336			15,553			4,253			4,000			109,142
Interest and other income (expense), net (1)	135			(963		)	(5,164		)	(4		)	(5,996		)
Pre-tax loss	$	(13,216	)	$	(15,377	)	$	(9,417	)	$	(4,004	)	(42,014		)
Provision for income taxes													878
Net loss (2)													$	(42,892	)

__________________________________________


(1)	— Excludes intercompany transactions eliminated in consolidation, which consist primarily of service fees and interest. The net amounts of these intercompany transactions were $1.1 million and $415,000 for the three months ended March 31, 2020 and 2019.


(2)	— Net loss presented for segment reporting purposes is before any adjustments attributable to noncontrolling interests.

Upon deconsolidation of MLG, we recognized our retained equity interest in MLG as an equity method security held by our MVI segment which resulted in a $10.7 million gain included in Interest and other income (expense), net in the table above for our MVI segment for the three months ended March 31, 2020. See Note 2. Accounting Policies, Principles of consolidation, for additional details on the gain recognized.

For the three months ended March 31, 2020 and 2019, substantially all of our revenues were attributable to customers in the United States. At March 31, 2020 and December 31, 2019, substantially all our property and equipment were located in the United States.

BROKER DEALERS

3 Months Ended

Mar. 31, 2020

Brokers and Dealers [Abstract]

BROKER DEALERS

12. BROKER DEALERS

tZERO wholly owns two broker-dealers, SpeedRoute and tZERO ATS, LLC, which were 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.

tZERO ATS, LLC is a FINRA-registered broker-dealer that owns and operates the tZERO ATS and is a wholly-owned subsidiary of tZERO. The tZERO ATS is a closed trading system available only to broker-dealer subscribers. The tZERO ATS does not accept orders from non-broker-dealers, nor does it hold, own or sell securities. The tZERO ATS currently supports the trading of two digital securities, the Series A-1 Preferred stock and TZROP and, in the future, is expected to support digital securities from other issuers.

SpeedRoute and tZERO ATS, LLC 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. The following table summarizes the net capital ratio (in thousands, apart from the net capital ratio):



	March 31, 2020		December 31, 2019
SpeedRoute
Net capital	$	1,427	$	850
Required net capital	370		145
Net capital, in excess of required	$	1,057	$	705
Net capital ratio	3.88		2.56

tZERO ATS, LLC
Net capital	$	66	$	110
Required net capital	5		5
Net capital, in excess of required	$	61	$	105
Net capital ratio	0.28		0.27

SpeedRoute and tZERO ATS, LLC Securities did not have any securities owned or securities sold, not yet purchased at March 31, 2020 and December 31, 2019, respectively.