SEC Filing | Overstock.com Inc.

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ostk-20220630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 000-49799

OVERSTOCK.COM, INC.

(Exact name of registrant as specified in its charter)

Delaware

87-0634302

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification Number)

799 West Coliseum Way

Midvale

Utah

84047

(Address of principal executive offices)

(Zip Code)

(801) 947-3100

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.0001 par value

OSTK

NASDAQ Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

45,695,694 shares of the registrant's common stock, par value $0.0001, are outstanding on July 29, 2022.

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OVERSTOCK.COM, INC.

TABLE OF CONTENTS TO QUARTERLY REPORT ON FORM 10-Q

For the Quarterly Period Ended June 30, 2022


		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	5
	Consolidated Balance Sheets	5
	Consolidated Statements of Income	7
	Consolidated Statements of Comprehensive Income	8
	Consolidated Statements of Changes in Stockholders' Equity	9
	Consolidated Statements of Cash Flows	11
	Notes to Unaudited Consolidated Financial Statements	13

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34

Item 4.	Controls and Procedures	35

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	36

Item 1A.	Risk Factors	36

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38

Item 3.	Defaults Upon Senior Securities	38

Item 4.	Mine Safety Disclosures	38

Item 5.	Other Information	38

Item 6.	Exhibits	39

Signature		40

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Special Cautionary Note Regarding Forward-Looking Statements

This Report on Form 10-Q and the documents incorporated herein by reference, and our other public documents and statements our officers and representatives may make from time to time, contain forward-looking statements within the meaning of the federal securities laws. These statements are therefore entitled to the protection of the safe harbor provisions of these laws. You can find many of these statements by looking for words such as "may," "would," "could," "should," "will," "expect," "anticipate," "predict," "project," "potential," "continue," "contemplate," "seek," "assume," "believe," "intend," "plan," "forecast," "goal," "estimate," or other similar expressions which identify these forward-looking statements.

These forward-looking statements involve risks and uncertainties and relate to future events or our future financial or operating performance. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry and business, and on management's beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, you are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to assumptions, risks and uncertainties that are difficult to predict, and that actual results and outcomes may be materially different from the results or outcomes expressed or implied by any of our forward-looking statements for a variety of reasons, including among others:

•any difficulties we may encounter as a result of our reliance on third-parties that we do not control for the performance of critical functions material to our business, such as carriers, fulfillment partners, and SaaS/IaaS providers;

•any inability to compete successfully against existing or future competitors or to effectively market our business and generate customer traffic;

•a recession or other economic downturn, in particular in the U.S. housing industry, or other changes in U.S. and global economic conditions or U.S. consumer spending;

•any negative business impacts associated with our strategy to exit from non-home categories;

•any inability to attract and/or retain key personnel;

•any inability to generate and maintain unpaid natural traffic to our Website;

•the impact that the ongoing COVID-19 pandemic, or other wide-spread disease or illness, may have on our business and the industries in which we operate, including the impact that a substantial portion of our workforce is working remotely, and any impacts related to the pandemic that our business may experience as the pandemic or impacts related thereto continue to subside;

•our exposure to cyber security risks, risks of data loss and other security breaches;

•the risk that the amount of deferred tax assets we consider realizable could be reduced if estimates of future taxable income during the carryforward period are reduced;

•any increases in the price of importing into the U.S. or transporting to our customers the types of merchandise we sell or other supply chain challenges that limit our ability to deliver merchandise to our customers in a timely manner;

•increasing global inflation and rising interest rates;

•the impacts that we would experience if governmental entities or providers of consumer devices and internet browsers further restrict or regulate the use of "cookie" tracking technologies;

•the impact that any litigation, claims, or regulatory matters could have on our business, financial condition, results of operations, and cash flows;

•any inability to convert new customers into repeat customers or maintain increased sales volumes;

•negative global economic consequences of global conflict, including the increasing tensions between the United States and Russia, and other effects of the ongoing conflict in Ukraine;

•the impact that any government policies, mandates, or regulations, including those created in response to COVID-19, the climate, or taxes, could have on our business;

•any challenges that would result in the event of any unavailability of our Website or reduced performance of our transaction systems;

•the possibility that we are unable to protect our proprietary technology and to obtain trademark protection for our marks;

•current and future claims of intellectual property infringement to which we are subject;

•any inability of Pelion Venture Partners to successfully manage the Medici Ventures, L.P. fund or tZERO, in which we are the limited partner and have a direct minority interest, respectively;

•any strategic transactions, restructurings or other changes that we undertake and that prove to be detrimental to our business;

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•any losses or issues we may encounter as a consequence of accepting or holding bitcoin or other cryptocurrencies; and

•the other risks described in this report or in our other public filings.

In evaluating all forward-looking statements, you should specifically consider the risks outlined above and in this Report, especially under the headings "Special Cautionary Note Regarding Forward-Looking Statements," "Risk Factors," "Legal Proceedings," and "Management's Discussion and Analysis of Financial Condition and Results of Operations." These factors may cause our actual results and outcomes to differ materially from those contemplated by any forward-looking statement. Although we believe that our expectations reflected in the forward-looking statements are reasonable, we cannot guarantee or offer any assurance of future results, levels of activity, performance or achievements or other future events. Our forward-looking statements contained in this report speak only as of the date of this report and, except as required by law, we undertake no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this report or any changes in our expectations or any change in any events, conditions or circumstances on which any of our forward-looking statements are based.

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)


Overstock.com, Inc. Consolidated Balance Sheets (Unaudited) (in thousands, except per share data)
	June 30, 2022		December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	442,603	$	503,341
Restricted cash	184		25

Accounts receivable, net of allowance for credit losses of $2,857 and $2,429	23,088		21,190

Inventories	5,666		5,137
Prepaids and other current assets	20,233		22,097

Total current assets	491,774		551,790
Property and equipment, net	108,041		109,479
Deferred tax assets, net	37,413		40,035

Goodwill	6,160		6,160
Equity securities, including securities measured at fair value of $115,338 and $102,529	350,580		342,682
Operating lease right-of-use assets	10,192		12,584
Other long-term assets, net	2,790		3,236

Total assets	$	1,006,950	$	1,065,966
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	96,232	$	102,293
Accrued liabilities	91,794		101,902
Unearned revenue	56,554		59,387
Operating lease liabilities, current	5,636		5,402
Other current liabilities	3,428		3,349

Total current liabilities	253,644		272,333
Long-term debt, net	36,248		37,984
Operating lease liabilities, non-current	5,220		7,960
Other long-term liabilities	3,128		3,303

Total liabilities	298,240		321,580
Commitments and contingencies (Note 9)

Continued on the following page See accompanying notes to unaudited consolidated financial statements.

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Overstock.com, Inc. Consolidated Balance Sheets (Unaudited) (in thousands, except per share data)
	June 30, 2022		December 31, 2021
Stockholders' equity:
Preferred stock, $0.0001 par value, authorized shares - 5,000


Series A-1, issued and outstanding - 0 and 4,204	—		—
Series B, issued and outstanding - 0 and 357	—		—
Common stock, $0.0001 par value, authorized shares - 100,000
Issued shares - 51,026 and 46,625
Outstanding shares - 45,695 and 43,023	5		4
Additional paid-in capital	972,845		960,544
Accumulated deficit	(121,323)		(136,590)
Accumulated other comprehensive loss	(529)		(537)
Treasury stock at cost - 5,331 and 3,602	(142,288)		(79,035)


Total stockholders' equity	708,710		744,386
Total liabilities and stockholders' equity	$	1,006,950	$	1,065,966

See accompanying notes to unaudited consolidated financial statements.

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Overstock.com, Inc.

Consolidated Statements of Income (Unaudited)

(in thousands, except per share data)


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021

Net revenue	$	528,122	$	794,536	$	1,064,159	$	1,454,397
Cost of goods sold	407,017		619,710		817,842		1,126,047
Gross profit	121,105		174,826		246,317		328,350
Operating expenses
Sales and marketing	57,940		85,272		116,453		158,810
Technology	30,542		30,383		63,531		60,906
General and administrative	21,081		22,660		42,337		45,531

Total operating expenses	109,563		138,315		222,321		265,247
Operating income	11,542		36,511		23,996		63,103
Interest income (expense), net	115		(130)		(10)		(285)
Other income (expense), net	(1,981)		298		(2,095)		72
Income from continuing operations before income taxes	9,676		36,679		21,891		62,890
Provision (benefit) for income taxes	2,529		(45,726)		4,621		(45,533)
Income from continuing operations	7,147		82,405		17,270		108,423
Income from discontinued operations, net of income taxes	—		227,372		—		217,246
Consolidated net income	$	7,147	$	309,777	$	17,270	$	325,669
Less: Net loss attributable to noncontrolling interests—discontinued operations	—		(134)		—		(335)
Net income attributable to stockholders of Overstock.com, Inc.	$	7,147	$	309,911	$	17,270	$	326,004
Consolidated net income per share of common stock:
Net income attributable to common shares—basic
Continuing operations	$	0.12	$	1.73	$	0.33	$	2.27
Discontinued operations	—		4.78		—		4.58
Total	$	0.12	$	6.51	$	0.33	$	6.85
Net income attributable to common shares—diluted
Continuing operations	$	0.12	$	1.72	$	0.33	$	2.26
Discontinued operations	—		4.75		—		4.54
Total	$	0.12	$	6.47	$	0.33	$	6.80
Weighted average shares of common stock outstanding:
Basic	43,072		43,009		43,062		42,948
Diluted	43,159		43,314		43,221		43,317

See accompanying notes to unaudited consolidated financial statements.

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Overstock.com, Inc.

Consolidated Statements of Comprehensive Income (Unaudited)

(in thousands)


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Consolidated net income	$	7,147	$	309,777	$	17,270	$	325,669
Other comprehensive income
Unrealized gain on cash flow hedges, net of expense for taxes of $0, $0, $0, and $0	4		4		8		8
Other comprehensive income	4		4		8		8
Comprehensive income	7,151		309,781		17,278		325,677
Less: Comprehensive loss attributable to noncontrolling interests—discontinued operations	—		(134)		—		(335)
Comprehensive income attributable to stockholders of Overstock.com, Inc.	$	7,151	$	309,915	$	17,278	$	326,012

See accompanying notes to unaudited consolidated financial statements.

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Overstock.com, Inc. Consolidated Statements of Changes in Stockholders' Equity (Unaudited) (in thousands)
	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Equity attributable to stockholders of Overstock.com, Inc.
Shares of common stock issued
Balance at beginning of period	46,910		46,589		46,625		46,331
Common stock issued upon vesting of restricted stock	18		18		261		276
Common stock issued for ESPP purchases	—		—		42		—

Conversion of preferred stock	4,098		—		4,098		—


Balance at end of period	51,026		46,607		51,026		46,607
Shares of treasury stock
Balance at beginning of period	4,190		3,589		3,602		3,563

Repurchases of common stock	1,135		—		1,652		—
Tax withholding upon vesting of restricted stock	6		6		77		79
Sale of treasury stock	—		—		—		(47)
Balance at end of period	5,331		3,595		5,331		3,595
Total shares of common stock outstanding	45,695		43,012		45,695		43,012
Common stock
Balance at beginning of period	$	4	$	4	$	4	$	4
Conversion and elimination of preferred stock	1		—		1		—

Balance at end of period	$	5	$	4	$	5	$	4








Shares of Series A-1 preferred shares issued
Balance at beginning of period	4,204		4,204		4,204		4,204
Conversion and elimination of preferred stock in treasury	(4,204)		—		(4,204)		—
Balance at end of period	—		4,204		—		4,204
Shares of treasury stock
Balance at beginning of period	6		—		—		—
Repurchases of shares	1		—		7		—
Conversion and elimination of preferred stock	(7)		—		(7)		—
Balance at end of period	—		—		—		—

Total shares of Series A-1 preferred shares outstanding	—		4,204		—		4,204
Shares of Series B preferred stock issued and outstanding
Balance at beginning of period	357		357		357		357
Conversion and elimination of preferred stock	(357)		—		(357)		—
Balance at end of period	—		357		—		357
Preferred stock	$	—	$	—	$	—	$	—

Continued on the following page See accompanying notes to unaudited consolidated financial statements.

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Overstock.com, Inc. Consolidated Statements of Changes in Stockholders' Equity (Unaudited) (in thousands)
	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Additional paid-in capital
Balance at beginning of period	$	967,073	$	951,615	$	960,544	$	970,873
Stock-based compensation to employees and directors	4,695		2,903		9,334		5,674
Common stock issued for ESPP purchases	—		—		1,890		—
Conversion and elimination of preferred stock	1,043		—		1,043		—

Sale of treasury stock	—		—		—		2,726
Subsidiary equity award tender offer	—		—		—		(2,130)
Change in noncontrolling interest ownership	—		—		—		(22,625)

Other	34		—		34		—
Balance at end of period	$	972,845	$	954,518	$	972,845	$	954,518
Accumulated deficit
Balance at beginning of period	$	(126,467)	$	(509,140)	$	(136,590)	$	(525,233)

Net income attributable to stockholders of Overstock.com, Inc.	7,147		309,911		17,270		326,004
Dividend issued upon conversion and elimination of preferred stock	(1,697)		—		(1,697)		—
Conversion and elimination of preferred stock	(306)		—		(306)		—

Balance at end of period	$	(121,323)	$	(199,229)	$	(121,323)	$	(199,229)




Accumulated other comprehensive loss
Balance at beginning of period	$	(533)	$	(549)	$	(537)	$	(553)
Net other comprehensive income	4		4		8		8
Balance at end of period	$	(529)	$	(545)	$	(529)	$	(545)
Treasury stock
Balance at beginning of period	$	(107,467)	$	(78,048)	$	(79,035)	$	(71,399)
Repurchases of common stock and Series A-1 preferred shares	(34,912)		—		(60,077)		—
Tax withholding upon vesting of employee stock awards	(215)		(520)		(3,482)		(7,812)
Conversion and elimination of preferred stock	306		—		306		—
Sale of treasury stock	—		—		—		643
Balance at end of period	(142,288)		(78,568)		(142,288)		(78,568)
Total equity attributable to stockholders of Overstock.com, Inc.	$	708,710	$	676,180	$	708,710	$	676,180

Equity attributable to noncontrolling interests
Balance at beginning of period	$	—	$	85,058	$	—	$	62,634




Net loss attributable to noncontrolling interests	—		(134)		—		(335)
Change in noncontrolling interest ownership	—		—		—		22,625
Deconsolidation of subsidiaries	—		(84,924)		—		(84,924)

Total equity attributable to noncontrolling interests	$	—	$	—	$	—	$	—

Total stockholders' equity	$	708,710	$	676,180	$	708,710	$	676,180

See accompanying notes to unaudited consolidated financial statements.

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Overstock.com, Inc. Consolidated Statements of Cash Flows (Unaudited) (in thousands)
	Six months ended June 30,
	2022		2021
Cash flows from operating activities:
Consolidated net income	$	17,270	$	325,669
Income from discontinued operations, net of income taxes	—		(217,246)
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Depreciation and amortization	8,350		9,949


Non-cash operating lease cost	2,736		2,528
Stock-based compensation to employees and directors	9,334		5,107

Decrease (increase) in deferred income taxes, net	2,622		(47,046)





Loss from equity method securities	2,583		—




Other non-cash adjustments	(114)		721
Changes in operating assets and liabilities:
Accounts receivable, net	(1,504)		(10,141)
Inventories	(529)		(766)
Prepaids and other current assets	2,318		(3,452)
Other long-term assets, net	(943)		(368)
Accounts payable	(6,104)		56,543
Accrued liabilities	(8,339)		(10,651)
Unearned revenue	(2,833)		12,282
Operating lease liabilities	(2,850)		(2,812)
Other long-term liabilities	(175)		(270)
Net cash provided by continuing operating activities	21,822		120,047
Net cash used in discontinued operating activities	—		(17,128)
Net cash provided by operating activities	21,822		102,919
Cash flows from investing activities:
Purchase of equity securities	(11,420)		—

Contributions for capital calls	—		(41,122)
Capital distribution from investment	1,162		—



Expenditures for property and equipment	(6,406)		(5,620)

Other investing activities, net	(505)		(908)
Net cash used in continuing investing activities	(17,169)		(47,650)
Net cash used in discontinued investing activities	—		(29,703)
Net cash used in investing activities	(17,169)		(77,353)

Continued on the following page See accompanying notes to unaudited consolidated financial statements.

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Overstock.com, Inc. Consolidated Statements of Cash Flows (Unaudited) (in thousands)
	Six months ended June 30,
	2022		2021
Cash flows from financing activities:

Repurchase of shares	(60,077)		—

Payments on long-term debt	(1,707)		(1,366)








Payments of taxes withheld upon vesting of employee stock awards	(3,482)		(7,812)
Other financing activities, net	34		(1)
Net cash used in continuing financing activities	(65,232)		(9,179)
Net cash provided by discontinued financing activities	—		2,085
Net cash used in financing activities	(65,232)		(7,094)
Net increase (decrease) in cash, cash equivalents, and restricted cash	(60,579)		18,472
Cash, cash equivalents, and restricted cash, beginning of period, inclusive of cash balances of discontinued operations	503,366		519,181
Cash, cash equivalents, and restricted cash, end of period, inclusive of cash balances of discontinued operations	442,787		537,653
Less: Cash, cash equivalents, and restricted cash of discontinued operations	—		—
Cash, cash equivalents, and restricted cash, end of period	$	442,787	$	537,653

See accompanying notes to unaudited consolidated financial statements.

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Overstock.com, Inc.

Notes to Unaudited Consolidated Financial Statements

1. DESCRIPTION OF BUSINESS

Overstock.com, Inc. is a leading e-commerce retailer and technology innovator that sells furniture and home furnishings at a smart value. Our online shopping site offers a wide selection of quality furniture, décor, area rugs, bedding and bath, home improvement, outdoor, and kitchen and dining items, among others. Overstock.com, which receives tens of millions of visits per month, provides customers access to millions of products from third-party partners. As used herein, "Overstock," "the Company," "we," "our" and similar terms include Overstock.com, Inc. and its wholly-owned subsidiaries, unless the context indicates otherwise. As used herein, the term "Website" refers to the Company's internet websites located at www.overstock.com, www.o.co, www.overstock.ca, and www.overstockgovernment.com and the Company's mobile app.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

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, 2021. There have been no significant changes to our significant accounting policies disclosed in Note 2—Accounting Policies, included in Part II, Item 8, Financial Statements and Supplementary Data, of our Annual Report on Form 10-K for the year ended December 31, 2021.

The accompanying unaudited consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, which are, in our opinion, necessary for a fair presentation of results for the interim periods presented. The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be expected for any future period or the full fiscal year, due to seasonality and other factors.

We operate as a single segment that includes all of our continuing operations, which primarily consists of amounts earned through e-commerce product sales through our Website. All corporate support costs (administrative functions such as finance, human resources, and legal) are allocated to our single reportable segment. Substantially all of our revenues are attributable to customers in the United States. Substantially all our property and equipment are located in the United States.

Unless otherwise specified, disclosures in these consolidated financial statements reflect continuing operations only. The operating results for Medici Ventures Inc. ("Medici Ventures") and tZERO Group, Inc.'s ("tZERO"), our former subsidiaries, for the periods prior to their deconsolidation have been reflected in our consolidated statements of income as discontinued operations for all periods presented. Certain prior period data, primarily related to discontinued operations, have been reclassified in the consolidated financial statements and accompanying notes to conform to the current period presentation. See Note 3—Discontinued Operations for further information.

Principles of consolidation

The accompanying consolidated financial statements include our accounts and the accounts of our wholly-owned subsidiaries. All intercompany account balances and transactions have been eliminated in consolidation.

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 and valuation 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.

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Our estimates involve, among other items, forecasted revenues, sales volume, pricing, cost and availability of inventory, cost and availability of labor supply, consumer demand and spending habits, and the continued operations of our supply chain and logistics network. 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 factors, including uncertainty associated with macroeconomic conditions, such as the COVID-19 pandemic, supply chain challenges, inflation, rising interest rates, or the current conflict between Russia and Ukraine, how long these conditions will persist, what additional regulations may be introduced or reintroduced by governments or private parties or what effect any such additional regulations may have on our business 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.

3. DISCONTINUED OPERATIONS

On January 25, 2021, we entered into an agreement with Medici Ventures, Pelion MV GP, L.L.C. ("Pelion"), and Pelion, Inc., pursuant to which Medici Ventures converted to a Delaware limited partnership (the "Partnership") and Pelion became the sole general partner of the Partnership, and we became the limited partner of the Partnership. The term of the Partnership is eight years. A tZERO debt conversion was completed during the quarter ended March 31, 2021, following which Medici Ventures and Overstock held approximately 42% and 41%, respectively, of tZERO's outstanding common stock. On April 23, 2021, we entered into the Limited Partnership Agreement with Pelion, pursuant to which Pelion became the sole general partner, holding a 1% equity interest in the Partnership, and Overstock became a limited partner, holding a 99% equity interest in the Partnership. Our retained equity interest in these entities are classified as equity method securities as we are deemed to have significant influence, but not control, over these entities through holding more than a 20% interest in the entity. See Note 6—Equity Securities for further information. The operating results for the periods prior to the April 23, 2021 deconsolidation of Medici Ventures and tZERO have been reflected in our consolidated statements of income as discontinued operations for all periods presented.

Results of discontinued operations through the transaction date were as follows (in thousands):


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Net revenue	$	—	$	1,802	$	—	$	17,394
Cost of goods sold	—		1,325		—		13,716
Gross profit	—		477		—		3,678
Operating expenses
Technology	—		577		—		7,133
Selling, general, and administrative	—		2,084		—		13,509
Total operating expenses	—		2,661		—		20,642
Operating loss from discontinued operations	—		(2,184)		—		(16,964)
Interest income, net	—		5		—		192
Other income (loss), net	—		(398)		—		4,081
Gain on deconsolidation	—		243,541		—		243,541
Income from discontinued operations before income taxes	—		240,964		—		230,850
Provision for income taxes	—		13,592		—		13,604
Net income from discontinued operations	$	—	$	227,372	$	—	$	217,246
Less: Net loss attributable to noncontrolling interests from discontinued operations	—		(134)		—		(335)
Net income from discontinued operations attributable to stockholders of Overstock.com, Inc.	$	—	$	227,506	$	—	$	217,581

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4. FAIR VALUE MEASUREMENT

The following tables summarize our assets and liabilities measured at fair value on a recurring basis using the following levels of inputs (in thousands):


	Fair Value Measurements at June 30, 2022
	Total		Level 1		Level 2		Level 3
Assets:
Cash equivalents—Money market funds	$	250,000	$	250,000	$	—	$	—
Equity securities, at fair value	115,338		398		—		114,940

Trading securities held in a "rabbi trust" (1)	264		264		—		—
Total assets	$	365,602	$	250,662	$	—	$	114,940
Liabilities:

Deferred compensation accrual "rabbi trust" (2)	$	(263)	$	(263)	$	—	$	—
Total liabilities	$	(263)	$	(263)	$	—	$	—


	Fair Value Measurements at December 31, 2021
	Total		Level 1		Level 2		Level 3
Assets:
Cash equivalents—Money market funds	$	—	$	—	$	—	$	—
Equity securities, at fair value	102,529		174		—		102,355

Trading securities held in a "rabbi trust" (1)	179		179		—		—
Total assets	$	102,708	$	353	$	—	$	102,355
Liabilities:

Deferred compensation accrual "rabbi trust" (2)	$	188	$	188	$	—	$	—
Total liabilities	$	188	$	188	$	—	$	—

___________________________________________

(1) — Trading securities held in a rabbi trust are included in Other long-term assets, net in the consolidated balance sheets.

(2) — Non-qualified deferred compensation in a rabbi trust is included in Other long-term liabilities in the consolidated balance sheets.

The following table provides activity for our Level 3 investments (in thousands):


	Amount
Level 3 investments at December 31, 2020	$	—
Increase due to acquisition of Level 3 investments	99,723
Increase in fair value of Level 3 investments	2,632
Level 3 investments at December 31, 2021	102,355
Increase due to acquisition of Level 3 investments	11,420
Increase in fair value of Level 3 investments	1,165
Level 3 investments at June 30, 2022	$	114,940

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5. PROPERTY AND EQUIPMENT, NET

Property and equipment, net consist of the following (in thousands):


	June 30, 2022		December 31, 2021
Computer hardware and software, including internal-use software and website development	$	230,901	$	225,256