# EDGAR Filing Document

**Accession Number:** 0001130713
**File Stem:** 0001130713-23-000014
**Filing Date:** 2023-2
**Character Count:** 629003
**Document Hash:** 36ac39f39120b132599f4b2a7735917f
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001130713-23-000014.hdr.sgml**: 20230224

**ACCESSION NUMBER**: 0001130713-23-000014

**CONFORMED SUBMISSION TYPE**: 10-K

**PUBLIC DOCUMENT COUNT**: 123

**CONFORMED PERIOD OF REPORT**: 20221231

**FILED AS OF DATE**: 20230224

**DATE AS OF CHANGE**: 20230224

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** OVERSTOCK.COM, INC
- **CENTRAL INDEX KEY:** 0001130713
- **STANDARD INDUSTRIAL CLASSIFICATION:** RETAIL-CATALOG & MAIL-ORDER HOUSES [5961]
- **IRS NUMBER:** 870634302
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 10-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 000-49799
- **FILM NUMBER:** 23668764

**BUSINESS ADDRESS:**
- **STREET 1:** 799 W. COLISEUM WAY
- **CITY:** MIDVALE
- **STATE:** UT
- **ZIP:** 84047
- **BUSINESS PHONE:** 8019473100

**MAIL ADDRESS:**
- **STREET 1:** 799 W. COLISEUM WAY
- **CITY:** MIDVALE
- **STATE:** UT
- **ZIP:** 84047

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** OVERSTOCK COM INC
- **DATE OF NAME CHANGE:** 20001227

?xml version="1.0" ? ostk-20221231

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 10-K**

**(Mark One)**

---

| | |
|:---|:---|
| 🗷 | **ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |

---

**For the fiscal year ended December 31, 2022** 

---

| | |
|:---|:---|
| | **Or** |
| □ | **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |

---

**For the transition period from&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;** 

**Commission file number: 000-49799**

**OVERSTOCK.COM, INC.**

(Exact name of registrant as specified in its charter)

---

| | | |
|:---|:---|:---|
| **Delaware** | **Delaware** | **87-0634302** |
| (State or other jurisdiction of incorporation or organization) | (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
| **799 West Coliseum Way** | **799 West Coliseum Way** | |
| **Midvale,** | **Utah** | **84047** |
| (Address of principal executive offices) | (Address of principal executive offices) | (Zip code) |

---

**(801) 947-3100** 

(Registrant's telephone number, including area code)

&nbsp;&nbsp;&nbsp;&nbsp;

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

---

| | | |
|:---|:---|:---|
| <u>Title of each class</u> | <u>Trading Symbol(s)</u> | <u>Name of each exchange on which registered</u> |
| Common Stock, $0.0001 par value per share | OSTK | NASDAQ Global Market |

---

Securities registered pursuant to Section 12(g) of the Act: **None**

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes 🗷&nbsp;&nbsp;&nbsp;&nbsp;No □

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes □&nbsp;&nbsp;&nbsp;&nbsp;No 🗷

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 🗷&nbsp;&nbsp;&nbsp;&nbsp;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 has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. 🗷

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. □

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). □

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

The aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant as of the last business day of the registrant's most recently completed second quarter (June 30, 2022), was approximately $1.1 billion based upon the last sales price reported by Nasdaq. For purposes of this disclosure, shares of Common Stock held by directors and certain officers and by others who may be deemed to be affiliates of the registrant have been excluded. The exclusion of such shares is not intended to, and shall not, constitute a determination as to which persons or entities may be affiliates as that term is defined in the federal securities laws.

There were 45,033,198 shares of the Registrant's common stock, par value $0.0001, outstanding on February 17, 2023.

**DOCUMENTS INCORPORATED BY REFERENCE**

Certain information required by Part III of Form 10-K is incorporated by reference to the Registrant's proxy statement for the 2023 Annual Stockholders Meeting, which will be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this Report relates.

------

**Explanatory Note**

Overstock.com, Inc. and our majority-owned subsidiaries ("the Company") holds a minority equity interest in tZERO Group, Inc. ("tZERO") which is accounted for under the equity method under ASC Topic 323*, Investments—Equity Method and Joint Ventures* as we can exercise significant influence, but not control, over tZERO through holding more than a 20% voting interest. In accordance with Rule 3-09 of Regulation S-X ("Rule 3-09"), we must determine if any of our equity method securities is a "significant subsidiary" under prescribed tests. tZERO did not meet the significant subsidiary test for the years ended December 31, 2021 and 2020 but met the significant subsidiary test for the year ended December 31, 2022. Accordingly, pursuant to Rule 3-09, we are required to provide in this Annual Report on Form 10-K ("Form 10-K") the audited financial statements for tZERO for the period ended December 31, 2022. We have requested the audited consolidated financial statements for the year ended December 31, 2022 from tZERO; however, the audited financial statements are not currently available to us. We rely upon tZERO for their audited financial statements and they are not reasonably available to us since they rest peculiarly within the knowledge of tZERO, which we do not control. Therefore, in reliance on Rule 12b-21 under the Securities Exchange Act of 1934, as amended, we are omitting the audited consolidated financial statements of tZERO for the year ended December 31, 2022. In response to our request, however, tZERO has provided us with the audited financial statements for tZERO for the years ended December 31, 2021 and 2020 and unaudited limited financial information for year ended December 31, 2022. As a result, we have included in this Form 10-K the separate audited financial statements of tZERO for the years ended December 31, 2021 and 2020, which are filed herewith as Exhibit 99.3, and have also provided summarized financial information for the period ended December 31, 2022 in Note 8—Equity Securities in the "Notes to Consolidated Financial Statements" included in Item 8 of Part II, "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K aggregated with our other significant subsidiaries required by Rule 4-08(g). As a result of including such financial information for tZERO, we do not believe that the omission of the tZERO audited financial statements for year ended December 31, 2022 will have a material impact on a reader's understanding of our financial condition or our results of operations. We plan to file the audited financial statements for tZERO for the year ended December 31, 2022, once we have them, with an amendment to this Form 10-K.

------

**TABLE OF CONTENTS**

---

| | | |
|:---|:---|:---|
| | <u>[Special Cautionary Note Regarding Forward-Looking Statements](#icd3bbaeb07274feb8765608f8e4b53f8_10)</u> | [4](#icd3bbaeb07274feb8765608f8e4b53f8_10) |
| | **Part I** | |
| Item 1. | <u>[Business](#icd3bbaeb07274feb8765608f8e4b53f8_16)</u> | [6](#icd3bbaeb07274feb8765608f8e4b53f8_16) |
| Item 1A. | <u>[Risk Factors](#icd3bbaeb07274feb8765608f8e4b53f8_19)</u> | [13](#icd3bbaeb07274feb8765608f8e4b53f8_19) |
| Item 1B. | <u>[Unresolved Staff Comments](#icd3bbaeb07274feb8765608f8e4b53f8_22)</u> | [23](#icd3bbaeb07274feb8765608f8e4b53f8_22) |
| Item 2. | <u>[Properties](#icd3bbaeb07274feb8765608f8e4b53f8_25)</u> | [23](#icd3bbaeb07274feb8765608f8e4b53f8_25) |
| Item 3. | <u>[Legal Proceedings](#icd3bbaeb07274feb8765608f8e4b53f8_28)</u> | [23](#icd3bbaeb07274feb8765608f8e4b53f8_28) |
| Item 4. | <u>[Mine Safety Disclosures](#icd3bbaeb07274feb8765608f8e4b53f8_31)</u> | [23](#icd3bbaeb07274feb8765608f8e4b53f8_31) |
| | **Part II** | |
| Item 5. | <u>[Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](#icd3bbaeb07274feb8765608f8e4b53f8_37)</u> | [24](#icd3bbaeb07274feb8765608f8e4b53f8_37) |
| Item 6. | <u>[Reserved](#icd3bbaeb07274feb8765608f8e4b53f8_40)</u> | [27](#icd3bbaeb07274feb8765608f8e4b53f8_40) |
| Item 7. | <u>[Management's Discussion and Analysis of Financial Condition and Results of Operations](#icd3bbaeb07274feb8765608f8e4b53f8_43)</u> | [27](#icd3bbaeb07274feb8765608f8e4b53f8_43) |
| Item 7A. | <u>[Quantitative and Qualitative Disclosures About Market Risk](#icd3bbaeb07274feb8765608f8e4b53f8_58)</u> | [36](#icd3bbaeb07274feb8765608f8e4b53f8_58) |
| Item 8. | <u>[Financial Statements and Supplementary Data](#icd3bbaeb07274feb8765608f8e4b53f8_61)</u> | [37](#icd3bbaeb07274feb8765608f8e4b53f8_61) |
| Item 9. | <u>[Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](#icd3bbaeb07274feb8765608f8e4b53f8_160)</u> | [77](#icd3bbaeb07274feb8765608f8e4b53f8_160) |
| Item 9A. | <u>[Controls and Procedures](#icd3bbaeb07274feb8765608f8e4b53f8_163)</u> | [77](#icd3bbaeb07274feb8765608f8e4b53f8_163) |
| Item 9B. | <u>[Other Information](#icd3bbaeb07274feb8765608f8e4b53f8_166)</u> | [80](#icd3bbaeb07274feb8765608f8e4b53f8_166) |
| Item 9C. | <u>[Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](#icd3bbaeb07274feb8765608f8e4b53f8_1617)</u> | [80](#icd3bbaeb07274feb8765608f8e4b53f8_1617) |
| | **Part III** | |
| Item 10. | <u>[Directors, Executive Officers and Corporate Governance](#icd3bbaeb07274feb8765608f8e4b53f8_172)</u> | [81](#icd3bbaeb07274feb8765608f8e4b53f8_172) |
| Item 11. | <u>[Executive Compensation](#icd3bbaeb07274feb8765608f8e4b53f8_175)</u> | [81](#icd3bbaeb07274feb8765608f8e4b53f8_175) |
| Item 12. | <u>[Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](#icd3bbaeb07274feb8765608f8e4b53f8_178)</u> | [81](#icd3bbaeb07274feb8765608f8e4b53f8_178) |
| Item 13. | <u>[Certain Relationships and Related Transactions, and Director Independence](#icd3bbaeb07274feb8765608f8e4b53f8_181)</u> | [81](#icd3bbaeb07274feb8765608f8e4b53f8_181) |
| Item 14. | <u>[Principal Accounting Fees and Services](#icd3bbaeb07274feb8765608f8e4b53f8_184)</u> | [81](#icd3bbaeb07274feb8765608f8e4b53f8_184) |
| | **Part IV** | |
| Item 15. | <u>[Exhibits, Financial Statement Schedules](#icd3bbaeb07274feb8765608f8e4b53f8_190)</u> | [82](#icd3bbaeb07274feb8765608f8e4b53f8_190) |
| Item 16. | <u>[Form 10-K Summary](#icd3bbaeb07274feb8765608f8e4b53f8_196)</u> | [86](#icd3bbaeb07274feb8765608f8e4b53f8_196) |
| **<u>[Signatures](#icd3bbaeb07274feb8765608f8e4b53f8_199)</u>** | **<u>[Signatures](#icd3bbaeb07274feb8765608f8e4b53f8_199)</u>** | [87](#icd3bbaeb07274feb8765608f8e4b53f8_199) |

---

O, Overstock.com, O.com, and Club O are registered trademarks of Overstock.com, Inc. Overstock and Making Dream Homes Come True are trademarks of Overstock.com, Inc. Other service marks, trademarks and trade names which may be referred to herein are the property of their respective owners.

------

**SPECIAL CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS**

*This Report on Form 10-K 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:*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*• 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;*

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*• a recession, other economic downturns, inflation, rising interest rates, our increasing exposure to the U.S. housing industry, or other changes in U.S. and global economic conditions or U.S. consumer spending;*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*• 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;* 

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

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*• any inability to maintain profitability and/or positive cash flow from operations;*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*• any negative impact from our workforce working on a remote, in-office, or hybrid schedule;*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*• any challenges that would result in the event of any loss of functionality or unavailability of our Website or reduced performance of our transaction systems;*

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*• 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;*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*• the risk that we may be required to recognize losses relating to our equity method investments;*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*• 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;*

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*• any inability to optimize and operate our distribution center, warehouse, and customer service operations;*

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

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

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*• any difficulties we may encounter as a result of our reliance on third-parties that we do not control for their representations regarding product compliance with various laws and regulations;*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*• any difficulties we may encounter as a result of our evolving business practices, including our exit from non-home categories and our continuing expansion into international markets;*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*• 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; and*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*• 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.*

------

**PART I**

 **ITEM 1. BUSINESS**

*The following description of our business contains forward-looking statements relating to future events or our future financial or operating performance that involve risks and uncertainties, as set forth above under "Special Note Regarding Forward-Looking Statements." Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors described in this Annual Report on Form 10-K, including those set forth above in the Special Cautionary Note Regarding Forward-Looking Statements or in Section 1A under the heading "Risk Factors" or elsewhere in this Annual Report on Form 10-K.*

**Introduction**

Through our online business, we offer a broad range of price-competitive products, including furniture, décor, area rugs, bedding and bath, home improvement, outdoor, and kitchen and dining items, among others. We sell our products and services through our Internet websites located at www.overstock.com, www.o.co, www.overstock.ca, and www.overstockgovernment.com (referred to collectively as the "Website") and through our mobile app. Although our four websites are located at different domain addresses, the technology and equipment and processes supporting the Website and the process of order fulfillment described herein are the same for all four websites.

Our company, based near Salt Lake City, Utah, was founded as a Utah limited liability company ("LLC") in 1997, reorganized as a C corporation in the State of Utah in 1998, and reincorporated in Delaware in 2002. We launched our initial website in March 1999. As used herein, "Overstock", "Overstock.com", "the Company", "we", "our" and similar terms include Overstock.com, Inc. and our majority-owned subsidiaries, unless the context indicates otherwise.

**Our Business**

Our goal is to provide furniture and home furnishings to assist consumers in "Making Dream Homes Come True", particularly for our target customers—consumers who seek smart value on quality, stylish furniture and home furnishings at competitive prices, and who want an easy shopping experience. We believe that the furniture and home furnishings market, which is highly fragmented and has traditionally been served by brick and mortar stores, will continue transitioning to online sales as consumers become increasingly comfortable shopping online for goods in this product category. We compete primarily based on:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Simple and easy customer experience with an emphasis on price, value, and quality with a wide assortment of products delivered in a personalized format with the convenience of our mobile app, and supported by our customer care team;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Proprietary technologies and strategic technical relationships which we believe help us provide our customers with an intuitive shopping experience;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Logistics capabilities tailored to the furniture and home furnishings category and developed over our many years of e-commerce experience;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Long-term mutually beneficial relationships with third-party manufacturers, distributors and other suppliers (referred to collectively as our "partners"), which numbered approximately 2,600 as of December 31, 2022; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Our Club O Loyalty Program, which we believe increases customer engagement and retention.

We continue to increase the millions of items we offer by expanding the breadth and depth of our product assortment to meet the current and evolving trends and preferences of our customers. Nearly all our retail sales through our Website and mobile apps were from transactions in which we fulfilled orders through our network of partners. Our use of the term "partner" does not mean that we have formed any legal partnerships with any of our retail partners. We provide our partners with access to a large customer base and convenient services for marketing, order fulfillment, customer service, returns handling, and other services. Our supply chain allows us to ship directly to our customers from our partners or from our warehouses. Our warehouses primarily fulfill orders from sales of our partners' owned inventory, including some customer returns of partner products.

During the years ended December 31, 2022, 2021 and 2020 our sales were almost entirely to customers located in the United States and no single customer accounted for more than 1% of our total net revenue.

------

**Additional Offerings**

We offer additional products or services that may complement our primary retail offerings but are not significant to our revenues, including:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Businesses advertising products or services on our Website;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Marketplace, a service we provide to our partners where they can sell their products through third party sites;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• International sales through third party logistics providers to certain customers outside the United States; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Supplier Oasis, a single integration point through which our partners can manage their products, inventory and sales channels, and obtain multi-channel fulfillment services through our distribution network.

**Manufacturer, Distributor, and Supplier Relationships**

To the extent possible we maintain manufacturer, distributor, and supplier relationships, seek new manufacturer, distributor, and supplier relationships, and use our working capital, to ensure a continuous assortment of product offerings for our customers. Generally, our manufacturers, distributors, or suppliers regularly communicate to us the quantity of products that are held in reserve for us, but our arrangements with them generally do not guarantee the availability of those products for a set duration. Our manufacturer, distributor, and supplier relationships are based on historical experience and are generally non-exclusive, and we retain the right to select and change our suppliers at our discretion. Generally, manufacturers, distributors, and suppliers do not control the terms under which products are sold through our Website.

**Sales and Marketing**

We use a variety of methods to target our retail consumer audience, including direct mail and online campaigns, such as advertising through search engine marketing, display ads, affiliate marketing, e-mail, and social media campaigns. We also do brand advertising through television, video ads, streaming video and audio, social media, and event sponsorships.

**Customer Service**

We are committed to providing superior customer service through our app, Website, and customer service department. We staff our customer service department with dedicated in-house and outsourced professionals who respond to phone, SMS, instant online chat, and e-mail inquiries on products, ordering, shipping status, returns, and other areas of customer inquiry. We also have certain partners who handle their own customer service requests, and we hold them to the same high standards as our in-house services.

**Technology**

We use our internally developed Website and a combination of proprietary technologies, open source technologies, and commercially available licensed technologies and solutions to support our operations. We use the services of multiple telecommunications companies to obtain connectivity to the Internet. Currently, our primary computer infrastructure is in a data center in Utah. We also have other data centers and public cloud providers which we use for backups, redundancy, development, testing, disaster recovery, and corporate systems infrastructure.

**Competition**

E-commerce is intensely competitive and has relatively low barriers to entry. We believe that competition in this industry is based predominantly on:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• price;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• product quality and assortment;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• shopping convenience and product findability;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• website organization and experience;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• order processing and fulfillment;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• order delivery time and accuracy;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• customer service;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• website functionality on mobile devices;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• brand recognition; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• brand reputation.

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We compete with other online pure play, brick-and-mortar, and omni-channel retailers which may specifically adopt our methods and target our customers. We currently or potentially compete with a variety of companies that specialize in several broad categories, including discount general retailers, private sales, specialty retailers, and liquidators.

Our current and potential e-commerce competitors include entities that may have greater brand recognition, longer operating histories, larger customer bases, and significantly greater financial, marketing, and other resources than we do. Further, any of them may enter into strategic or commercial relationships with larger, more established and well-financed companies, including exclusive distribution arrangements with our vendors or service suppliers that could deny us access to key products or needed services, or acquisitions of our suppliers or service providers, having the same effect. Many of them do or could devote greater resources to marketing and promotional campaigns and devote substantially more resources to their websites and systems development than we do. Many have supply chain operations that decrease product shipping times to their customers, have options for in-store product pick-up, allow in-store returns, or offer other delivery and returns options that we do not have. New technologies, the continued enhancement of existing technologies, developments in related areas such as same-day product deliveries, and the development of proprietary delivery systems increase competitive pressures on us.

**Intellectual Property and Trade Secrets**

We regard our domain names and other intellectual property as critical to our success. We rely on a combination of laws and contractual restrictions with our employees, customers, suppliers, affiliates, and others to establish and protect our proprietary rights, including the law pertaining to trade secrets.

**Government Regulation and Legal Matters**

We are subject to a wide variety of laws, rules, mandates, and regulations, some of which apply or may apply to us as a result of our business, and others of which apply to us for other reasons, such as our status as a publicly held company or the places in which we sell certain types or amounts of products. Our business is subject to general business regulations and laws, and regulations and laws specifically governing the internet, e-commerce, and other services we offer. Existing and future laws and regulations may result in increasing expense and may impede our growth. Applicable and potentially applicable regulations and laws include regulations and laws regarding taxation, privacy, data protection, pricing, content, copyrights, distribution, mobile communications, electronic device certification, electronic waste, energy consumption, environmental regulation, electronic contracts and other communications, competition, consumer protection, employment, import and export matters, information reporting requirements, access to our services and facilities, the design and operation of websites, health, safety, and sanitation standards, the characteristics and quality of products and services, product labeling and unfair and deceptive trade practices.

Our business outside of the U.S. exposes us to foreign and additional U.S. laws and regulations, including but not limited to, laws and regulations relating to taxation, business licensing or certification requirements, advertising practices, online services, the use of cryptocurrency, the importation of specified or proscribed items, importation quotas, consumer protection, intellectual property rights, consumer and data protection, privacy, encryption, restrictions on pricing or discounts, and the U.S. Foreign Corrupt Practices Act and other applicable U.S. and foreign laws prohibiting corrupt payments to government officials and other third parties.

From time to time, we receive claims and become subject to regulatory investigations or other governmental actions, consumer protection, employment, intellectual property, and other commercial litigation related to the conduct of our business. We periodically prosecute lawsuits to enforce our legal rights. These matters and other types of claims could result in legal expenses, fines, adverse judgments or settlements and increase the cost of doing business. They could also require us to change our business practices in expensive and significant ways. In addition, litigation could result in legal outcomes or interpretations of the law that may limit our current or future business, require us to change our business practices, or increase our costs or otherwise adversely impact our business.

For further information, see (Item 1A—"Risk Factors") and the information set forth under Item 8 of Part II, "Financial Statements and Supplementary Data"—Note 12—Commitments and Contingencies, *Legal proceedings and contingencies*, contained in the "Notes to Consolidated Financial Statements" of this Annual Report on Form 10-K.

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**Human Capital Management**

On December 31, 2022, we had approximately 1,050 full-time employees. We have never had a work stoppage and none of our employees are represented by a labor union. We consider our employee relations to be good. Competition for qualified personnel in our industry is high, particularly for software engineers and other technical staff. Overstock places great value on its human capital management and knows its people are critical to driving the business to success. We focus on our human capital management in many ways including:

*Diversity & Inclusion*

We embrace diversity and collaboration in our workforce, our ways of thinking, and our decision-making. We know that fostering an inclusive culture delivers better business outcomes. Our commitments to improving diversity include 1) increasing the diversity of our team at all levels, 2) continuing real and meaningful gender and race dialogue within our Company, 3) amplifying the voices of our underrepresented groups of employees, 4) fostering inclusion and safety within our workforce, 5) continuing to condemn all forms of gender and racial discrimination and harassment, 6) encouraging our employees to vote by expanding our paid time off program, and 7) tracking and monitoring our progress. Among the many ways we demonstrate these commitments are through our hiring and development practices, flexible and working-parent-friendly programs, anti-discrimination policies, and efforts of our employee resource groups.

Through our commitments, actions, words, investments, and values, we promote a work environment that enables employees to feel safe to express their ideas and perspectives and feel they belong within our team.

*Workforce Compensation & Pay Equity*

The total rewards philosophy of Overstock is to create and maintain competitive programs that attract, motivate, develop, and retain employees based on the prevailing industry and geographic labor markets where the Company does business. Our competitive compensation programs consist of cash and non-cash compensation based on relevant pay factors designed to balance market competitiveness and cost containment to retain the human capital that enables the Company to achieve business performance goals and objectives. We designed our total rewards to link the market competitiveness of an employee's compensation with overall Company performance, aligning employees' financial interests with the interests of the Company.

Elements of our compensation package for all non-executive employees consists of base salary or wages, short-term bonus incentives to reward the achievement of behavioral goals and business objectives, and for eligible key contributors, long-term equity incentives.

We monitor changes in the value of each employee's job annually and adjust base pay and short-term incentives based on a combination of employee performance to pre-determined goals and the Company's overall performance to broader financial and operational goals and objectives. We determine external market competitiveness by gathering salary information from professionally managed third-party salary surveys and by determining pay for individual employees based on their skill level, experience, education, and any other relevant compensatory factors. We balance internal pay equity with external pay equity to ensure compensation is fairly and equitably dispersed.

Management is committed to the proposition that the total rewards of every employee in pay and benefits are equitably distributed regardless of their race, gender, gender identity, sexual orientation, religion, national origin, color, veteran status, age, or disability. Furthermore, to ensure the commitment to pay equity is aggressively pursued, we define appropriate metrics to track progress. The Human Resources Department prepares periodic reports for senior leadership and the Board of Directors to report progress toward equitable pay, promotions, and opportunities.

We offer all employees the ability to save for retirement by matching dollar for dollar up to 6% of their savings into a qualified savings plan up to certain pre-determined limits set by the IRS. For highly compensated employees who meet the salary threshold set by the IRS and who choose to continue pre-tax savings above the qualified savings plan limits, eligible employees can participate in a non-qualified tax deferred savings plan to save for future needs.

Our intention is to offer every employee fair and equitable cash compensation and competitive non-cash benefits to help employees manage their wealth, health, and wellness and the wealth, health, and wellness of their families.

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*Talent Acquisition & Retention*

We work diligently to attract the best talent from a diverse range of sources and locations in order to meet the current and future demands of our business. We now recruit talent from twenty-one states across the country, as much of our workforce can work in a mostly remote arrangement. We are establishing relationships with universities, professional associations, and industry groups to proactively attract talent. We look for ways to improve our recruiting process regularly and ensure each applicant feels welcome and comfortable through the recruiting process. Our panel interviews are set up with a diverse group of interviewers to ensure for the best candidate experience. We have taken the ParityPledge in support of women and in support of people of color, demonstrating our commitment to improve the opportunity for advancement of women and people of color into senior leadership positions.

We have a strong employee value proposition that leverages our unique culture, collaborative and flexible working environment, shared sense of purpose, desire to do the right thing and innovative work to attract talent to our company. We empower employees to find new and better ways of doing things and the scale of our business means that careers can develop in exciting and unexpected directions. To ensure the long-term continuity of our business, we actively manage the development of existing talent to fill the roles that are most critical to the on-going success of our Company.

In 2022, we hired 180 new employees, excluding our customer service and warehouse departments, and 28 new customer service and warehouse employees. We have a total average tenure of six years, with an average tenure of four and three quarters years in our customer service and warehouse departments.

*Employee Safety & Wellness*

Creating a culture where all employees feel supported and valued is a key part of our corporate mission. We continue to evolve our programs to meet our employees' wealth, health, and wellness needs, which we believe is essential to attract and retain employees of the highest caliber, and we offer a competitive benefits package focused on fostering work/life integration. We offer comprehensive benefit options to our employees and their families to live healthier and more secure lives. Some of the various insurances we offer include medical, dental, and vision, among others, along with health savings accounts, flexible spending accounts and generous 401(k) matching and employee stock purchase plan (ESPP) programs. In addition to these more traditional benefits offerings, we also have programs that encourage better work/life balance. These benefits include a medical clinic, fitness center, child daycare, and two dedicated counselors, employee assistance program (EAP) support, and a 9/80 flexible work schedule. We offer family planning services including fertility coverage to assist potential parents. We offer paid parental leave for all new parents who have been with the Company for at least a year to ensure they are able to adjust to a new work/life balance. We also offer a caregiver benefit to parents who need to travel for work, which allows employees who have a child under the age of two to travel with the employee. In January 2023, we expanded our benefits offerings to include pelvic care benefits for women and lowered copayments for mental health office visits to provide enhanced mental health support.

*Development & Training*

We recognize how important it is for our employees to develop and progress in their careers. We provide a variety of resources to help our employees grow in their current roles and build new skills, including online development resources from a competency model development library to hundreds of online courses in our learning management system. We emphasize individual development planning as part of our annual goal setting process, and offer mentoring programs, along with change management and project management upskilling opportunities. We have leadership development resources for all leaders across the organization and continue to build tools for leaders to develop their teams on the job and in roles to create new opportunities to learn and grow. We also encourage higher education and continuing professional education by subsidizing these opportunities for our employees.

We have an annual training for all employees on the topic of Diversity and Inclusion. This program is designed to strengthen our organization by promoting the inclusion of various viewpoints from the natural talents and abilities of our people regardless of race, sexual orientation, gender, religion, or other differences.

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*Company Culture*

We attribute the high levels of employee engagement to our corporate culture. We strive for a work environment that is results-driven, inclusive, agile, and collaborative. Our corporate vision, mission, values, leadership principles, and employee qualities help define who we are, where we are going, and the behavior we expect of the Company and our employees to be successful in the organization.

To fulfill our vision of "Making Dream Homes Come True" and the long-term financial goals of the Company, we focus on our mission of being a customer-focused online furniture and home furnishings retailer, our leading technology-focused innovation capabilities, and creating enterprise value. Our values articulate our commitment to an inclusive, outcome-driven, and positive work environment, and embody our "becoming" culture and spirit. Our five leadership principles guide our interactions with colleagues, creating a psychologically safe environment for productive and collaborative exchanges for improved outcomes. We strive to clearly define, look for, measure, and develop ten qualities in our employees so that we all become empowered to be effective and valuable contributors in the organization. We believe this culture allows us to attract, develop, engage, and retain highly qualified employees for each role in the organization. Our goal is to have every employee feel they are a valued and empowered member of a winning team, doing meaningful work, in an environment of trust. The Company endeavors to regularly reinforce this culture throughout the entire employee experience.

*Oversight & Governance*

Our focus on human capital management has been a hallmark of the Company for years, understanding that people truly are a Company's most valuable asset, and that culture is an organization's ultimate competitive advantage. Our 401(k) committee meets quarterly to review the plan and determine if any changes need to be made to the portfolio, in order to best serve our employees. Our board of directors dedicates significant time in quarterly meetings with management to discuss trends in hiring, engagement, and attrition. Our Compensation Committee is actively involved in determining competitive compensation strategies to help us continually improve in attracting, developing, and retaining top talent for our Company.

**Information About Our Executive Officers**

The following persons were executive officers of Overstock as of February 24, 2023:

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| | | |
|:---|:---|:---|
| **Executive Officers** | **Age** | **Position** |
| Angela Hsu | 55 | Chief Marketing Officer |
| Jonathan E. Johnson III | 56 | Chief Executive Officer and Director |
| Adrianne Lee | 45 | Chief Financial Officer |
| Carter Lee | 53 | Chief People Officer |
| E. Glen Nickle | 58 | Chief Legal Officer and Corporate Secretary |
| Dave Nielsen | 53 | President |
| Carlisha Robinson | 54 | Chief Product Officer |
| Tushon Robinson | 52 | Chief Supply Chain Officer |
| Joel Weight | 48 | Chief Technology Officer |

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*Angela Hsu* joined Overstock as our Chief Marketing Officer in March 2022. Prior to joining Overstock, Hsu served as Senior Vice President of Marketing and eCommerce at Lamps Plus from June 2017 to March 2022 and held other roles at Lamps Plus including Vice President of Internet Business and Marketing.

*Jonathan E. Johnson III* has served as Chief Executive Officer since September 2019 and as a Director since 2013. Johnson also served as President of Medici Ventures from August 2016 to April 2021, Interim Chief Executive Officer from August 2019 to September 2019, and Chairman of the Board of Directors from 2014 through 2017. Johnson joined Overstock in 2002 and previously served as our President, Executive Vice Chairman, Acting Chief Executive Officer, Senior Vice President, and General Counsel, and various other positions.

*Adrianne Lee* joined Overstock as our Chief Financial Officer in March 2020. Prior to joining Overstock, Lee served as Senior Vice President and CFO of North America RAC from December 2018 to March 2020 and as Vice President - Global Financial Planning and Analysis and Corporate Development from December 2017 to December 2018 at The Hertz Corporation.

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*Carter Lee* has served as our Chief People Officer since January 2023. Lee joined Overstock in 2001 and previously served as Chief International Officer from September 2022 to December 2022, Chief Administrative Officer from August 2018 to September 2022, Acting Chief Marketing Officer from August 2020 to March 2021, Senior Vice President of Technology and People Care from February 2015 to July 2018, and held other roles including Vice President of Technology Operations and Director of Internal Systems.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*E. Glen Nickle* has served as our Chief Legal Officer and Corporate Secretary since February 2021, and previously served as Vice President, Legal and General Counsel from July 2016 to February 2021. Nickle started with Overstock in May 2010 as Associate General Counsel. Prior to joining Overstock, Nickle served as Associate General Counsel at ICON Health & Fitness, Inc.

*Dave Nielsen* has served as our President of Retail (now President) since May 2019, and previously served as our Chief Sourcing and Operations Officer from October 2018 to May 2019, having returned to Overstock after serving as the Chief Executive Officer and board member for Global Access from July 2015 to October 2018. Nielsen originally joined Overstock in 2009 and previously served as our Senior Vice President of Business Development, Senior Vice President and General Merchandise Manager and Co-President.

*Carlisha Robinson* was appointed as our Chief Product Officer in August 2022. Prior to joining Overstock, Robinson served as Vice President of Product at Volusion from July 2020 to July 2022, and Senior Director of Product Management at CPA Global (Innogrpahy) from November 2015 to July 2018.

*Tushon Robinson* was appointed as our Chief Supply Chain Officer in January 2022. Prior to joining Overstock, Robinson served as Chief Operating Officer of Bractlet from October 2019 to January 2022, Advisory Board Member of Bractlet from May 2018 to October 2019, Vice President, Product Management of Pitney Bowes from October 2018 to October 2019, and various other executive leadership at Newgistics prior to October 2018.

*Joel Weight* was appointed as our Chief Technology Officer in February 2020. Weight joined Overstock in 2011 and previously served as Chief Operations Officer of Medici Ventures from January 2019 to February 2020, and Chief Technology Officer of Medici Ventures from October 2016 to January 2019, and various other positions.

There are no family relationships between any of our executive officers.

**Available Information**

We make our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, available free of charge through the Investor Relations section of our main website, www.overstock.com, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (the "SEC"). The SEC also maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information filed by us. Our Internet Website and the information contained therein or connected thereto are not a part of or incorporated into this Annual Report on Form 10-K.

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**ITEM 1A. RISK FACTORS**

*Any investment in our securities involves a high degree of risk. Please consider the following risk factors carefully. If any one or more of the following risks were to occur, it could have a material adverse effect on our business, prospects, financial condition and results of operations, and the market price of our securities could decrease significantly. Statements below to the effect that an event could or would harm our business (or have an adverse effect on our business or similar statements) mean that the event could or would have a material adverse effect on our business, prospects, financial condition and results of operations, which in turn could or would have a material adverse effect on the market price of our securities. Many of the risks we face involve more than one type of risk. Consequently, you should carefully read all of the risk factors below, and in any reports we file with the SEC after we file this Form 10-K, before making any decision to acquire or hold our securities.* 

**Risks Relating to Our Company and its Operational, Litigation and Regulatory Environment**

***We depend on third-party companies to perform functions critical to our business, and any failure or increased cost on their part could have a material adverse effect on our business.*** 

We depend on third-party companies, including third-party carriers and a large number of independent fulfillment partners whose products we offer for sale on our Website, to perform functions critical to our ability to deliver products and services to our customers on time and at a reasonable cost. We depend on our carriers and fulfillment partners to perform traditional retail operations such as maintaining inventory, preparing merchandise for shipment to our customers and delivering purchased merchandise on a timely and cost-effective basis. We also depend on the delivery and product assembly services that we and they utilize, on the payment processors that facilitate our customers' payments for their purchases, and on other third parties (including SaaS, IaaS, and other cloud-based third-party service providers) over which we have no control, for the operation of our business. Difficulties with any of our significant fulfillment partners or third-party carriers, delivery or product assembly services, payment processors or any of the third-party service providers involved in our business, regardless of the reason, could have a material adverse effect on our financial results, business and prospects.

***We face intense competition and may not be able to compete successfully against existing or future competitors.***

The online retail market is evolving rapidly and is intensely competitive. Barriers to entry are minimal, and current and new competitors can launch new websites at a relatively low cost. We currently compete with numerous competitors, including:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• online retailers with or without discount departments, including Amazon.com, AliExpress (part of the Alibaba Group), eBay, and Rakuten.com;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• online shopping services, including Google Shopping, Facebook, Instagram, and TikTok;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• online specialty retailers such as Wayfair, Build.com, Houzz, Hayneedle, Rugs.com, Groupon, World Market, and Zulily;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• furniture specialists including Bob's Discount Furniture, Havertys, Raymour & Flanigan, At Home, Tuesday Morning, Living Spaces, Nebraska Furniture Mart, RC Willey, and Rooms To Go;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• traditional general merchandise and specialty retailers and liquidators including Ashley Furniture, Bed, Bath & Beyond, Best Buy, Big Lots, Costco, Crate and Barrel, Ethan Allen, Gilt, Home Depot, HomeGoods, Hudson's Bay Company, IKEA, J.C. Penney Company, Kirkland's, Kohl's, Lands' End, Lowe's, Macy's, Nordstrom, Pier 1 Imports, Pottery Barn, Restoration Hardware, Ross Stores, Saks Fifth Avenue, Sears, T.J. Maxx, Target, Walmart, West Elm, and Williams-Sonoma, all of which also have an online presence; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• online liquidators such as SmartBargains.

We expect that existing and future traditional manufacturers and retailers will continue to add or improve their e-commerce offerings, and that our existing and future e-commerce competitors, including Amazon, will continue to increase their offerings, their delivery capabilities, and the ways in which they enable shoppers to purchase goods, including their mobile technology and the voice-activated shopping services offered by Amazon. Further, large marketplace websites and sites which aggregate marketplace sellers with a large product selection are becoming increasingly popular, and we may not be able to place our products on these sites to take advantage of their internal search platforms and some shoppers may begin their searches at these websites rather than utilize traditional search engines at all. Many of our competitors specialize in one or more of the areas in which we offer products. For example, our furniture offerings compete with numerous retail furniture websites and traditional furniture retail specialists. We also face competition from shopping services such as Google Shopping, which offers products from Walmart, Costco, Target and many other retailers. Competition from our competitors, many of whom have longer operating histories, larger customer bases, greater brand recognition, greater access to capital and significantly greater financial, marketing and other resources than we do, affects us and has had and could continue to have a material adverse effect on our financial results, business and prospects.

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***Our business depends on effective marketing, including marketing via email, search engine marketing, influencer marketing, and social media marketing, and our competitors have and may continue to directly increase our marketing costs, may outspend us on marketing, and also have and may continue to cause us to decrease certain types of marketing.***

We depend on effective marketing and customer traffic. We depend on search engine marketing, email, and other e-commerce marketing methods to promote our site and offerings and to generate a substantial portion of our revenue. If a significant portion of our target customers no longer utilize email, or if we are unable to effectively and economically deliver email or marketing materials through other channels to our potential customers, whether for legal, regulatory or other reasons, it would have a material adverse effect on our business. We also rely on social media and influencers for marketing purposes, and anything that limits our ability or our customers' ability or desire to utilize social media could have a material adverse effect on our business. In addition to competing with us for customers, suppliers, and employees, our competitors have and may continue to directly increase our operating costs, by driving up the cost of various forms of online advertising. Furthermore, our competitors may outspend us on various forms of advertising or marketing, making our marketing efforts less effective. We may elect to decrease our use of search engine marketing or other forms of marketing from time to time in order to decrease our costs, which may have a material adverse effect on our financial results and business. We may also elect to spend additional amounts on search engine marketing or other forms of marketing from time to time in order to increase traffic to our Website, or to take other strategic actions to increase traffic and/or conversion, and such increased spending may not be effective on a cost-benefit basis, or at all. If we are unable to develop, improve, implement and maintain effective and efficient cost-effective advertising and marketing programs, it would have a material adverse effect on our financial results and business.

***Numerous potential economic factors, including a recession, other economic downturns, inflation, our increasing exposure to the U.S. housing industry, and the potential for a decrease in consumer spending, have affected and could continue to adversely affect us.***

Various potential adverse economic conditions, including a recession, other economic downturns, inflation, and weakness in the U.S. housing market, could decrease consumer discretionary spending and further adversely affect our financial performance. Consumer prices for all items rose 6.5% percent from December 2021 to December 2022. High inflation rates have led to increased interest rates. We believe that our sales of home-related products are affected by the strength of the U.S. housing industry. A recession or other economic downturn, in particular in the U.S. housing industry, has already negatively impacted our sales, and could have a material adverse effect on our financial results, business, and prospects. Similarly, a substantial portion of the products and services we offer are products or services that consumers may view as discretionary items rather than necessities. As a result, our results of operations are sensitive to changes in macroeconomic conditions that impact consumer spending, including discretionary spending. Difficult macroeconomic conditions also impact our customers' ability to obtain consumer credit. Other factors, including consumer confidence, employment levels, interest rates, fuel and energy costs, tax rates, and consumer debt levels could reduce consumer spending or change consumer purchasing habits. Slowdowns in the U.S. or global economy, or an uncertain economic outlook, could materially adversely affect consumer spending habits, have already negatively impacted our sales, and could have a material adverse effect on our financial results, business, and prospects.

***Tariffs, bans, the spread of illness, or other measures or events that increase the effective price of products or limit our ability to access products we or our suppliers or fulfillment partners import into the United States could have a material adverse effect on our business.*** 

We and many of our suppliers and fulfillment partners source a large percentage of the products we offer on our Website from China and other countries. If the United States imposes tariffs or bans on imports, or if other factors that are outside of our control increase the prices of imported products sold on our Website or limit our ability to access products sold on our Website, the increased prices and/or supply chain challenges could have a material adverse effect on our financial results, business and prospects.

***The changing job market, the loss of key personnel, the changing job structure, or any inability to attract, retain and engage additional key personnel could affect our ability to successfully grow our business.***

Our performance is substantially dependent on the continued service and performance of our senior management and other key personnel. Our performance also depends on our ability to retain and motivate our officers and key employees. Given the current labor migration trends in the U.S., and more businesses allowing employees to work remotely, we are forced to compete with businesses in other locations and states to attract and retain key employees. We recently announced that under our FORWARD (Future of Remote Work and Re-entry Design) Plan, most of our local workforce will increase their onsite workdays to three days each week and perform the remaining workdays in that week remotely. This hybrid job structure for most of our workforce, with increased time onsite, could create consequences such as a lack of productivity, a lack of engagement, employee dissatisfaction, and employee fatigue. Some key employees may leave to work for businesses that offer

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full-time remote work schedules, full-time onsite work schedules, or for businesses they otherwise find more attractive. The loss of, or the inability to retain or engage the services of key employees for any reason, could harm our business. Our future success depends on our ability to identify, attract, hire, train, engage, retain, and motivate highly-skilled personnel. Our failure to attract, retain, and engage the personnel necessary to successfully operate our business could have a material adverse effect on our financial results, business and prospects.

***We rely upon paid and natural search engines to rank our product offerings, and our financial results may suffer if we are unable to maintain our prior rankings in natural searches.***

We rely on paid and natural search engines to attract consumer interest in our product offerings, including Google, Bing, and Yahoo!. Changes to their ranking algorithms and competition from other retailers to attract consumer interest may adversely affect our product offerings in paid and/or natural searches, and we may at times be subject to ranking penalties if the operators of search engines believe we are not in compliance with their guidelines. Search engine companies change their natural search engine algorithms periodically and online retailers compete to rank well with these search engine companies. Our ranking in natural searches may be adversely affected by those changes, as has occurred from time to time, which has led us to pursue revenue growth in other more expensive marketing channels. Google's search engine is dominant in our business and has historically been a significant source of traffic to our website, much of it at essentially no incremental cost to us. Search engine companies may also determine that we are not in compliance with their guidelines from time to time, as has occurred in the past, and they may penalize us in their search algorithms as a result. In recent years, we have experienced declines in our rankings in Google's natural search engine, which has required us to utilize more expensive marketing channels or otherwise compensate for the loss of some of the natural search traffic. Any future declines in our rankings in Google's natural search engine could have a material adverse effect on our business.

***If we are not profitable and/or are unable to generate sufficient positive cash flow from operations, our ability to continue in business will depend on our ability to raise additional capital, obtain financing or monetize significant assets, and we may be unable to do so.***

At December 31, 2022 our accumulated deficit was $173.8 million. We experienced significant losses in years leading up to 2020. Although our financial results were significantly better in 2020 and 2021, we incurred additional losses in 2022 which included significant non-cash losses on our equity method investments. If we are unable to successfully manage our business in the future, our ability to continue in business could depend on our ability to raise sufficient additional capital, obtain sufficient financing, or sell or otherwise monetize significant assets such as our corporate headquarters. Additionally, we may not be able to raise capital on acceptable terms or at all. The occurrence of any of the foregoing risks would have a material adverse effect on our financial results, business and prospects.

***Remote or hybrid work schedules, resulting from future pandemics or otherwise, could have technology and security consequences, could result in policies, mandates, or regulations that apply unevenly to businesses, could cause employee fatigue, and could negatively impact our operations.*** 

Many of our employees and contractors continue to work remotely or on a hybrid work schedule. Additional risks are inherent when employees and contractors work remotely, including risks that third-party Internet and phone service providers may not provide adequate services for employees and contractors to perform their responsibilities, risks that hardware, software, or other technological problems or failures could prevent employees or contractors from performing their responsibilities and could take an excessive amount of time to resolve and risks that employees and contractors may not be trained as effectively or monitored as closely from remote locations, creating greater risks for the security of confidential information. Additionally, government policies, mandates, or regulations created in response to the future spread of disease or illness could apply unevenly to businesses, whether based on business size, industry, or some other reason, which could make certain businesses less desirable for employment and could impair our ability to attract and/or retain key employees. Employees may leave to work for businesses they find more attractive. Any such occurrences could have a material negative impact on the business.

***Our business depends on the Internet, our infrastructure and transaction-processing systems.***

We are completely dependent on our infrastructure and on the availability, reliability and security of the Internet and related systems. Although we have migrated and continue to migrate some of our computer systems and operations to the public cloud, a substantial majority of our computer and communications infrastructure is running in our private cloud on hardware that is located at a single Overstock owned and operated facility. Our systems and operations are vulnerable to damage or interruption from fire, flood, power loss, telecommunications failure, terrorist attacks, cyber-attacks, acts of war, break-ins, earthquake and similar events. Our back-up facility by itself is not adequate to support fulfillment of sales orders. Our servers and applications are vulnerable to malware, physical or electronic break-ins, internal sabotage, and other disruptions, the occurrence of any of which could lead to interruptions, delays, loss of critical data or the inability to accept and fulfill customer

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orders. Any internal or critical third-party system interruption that results in the unavailability of our Website or our mobile app or reduced performance of our transaction systems could interrupt or substantially reduce our ability to conduct our business. We have experienced periodic systems interruptions due to server failure, application failure, power failure and intentional cyber-attacks in the past, and may experience additional interruptions or failures in the future. Any failure or impairment of our infrastructure or of the availability of the Internet or related systems could have a material adverse effect on our financial results, business and prospects. In addition, the occurrence of any event that would adversely affect e-commerce or discourage or prevent consumers from shopping online or via mobile apps could significantly decrease the volume of our sales.

***We are subject to cyber security risks and risks of data loss or other security breaches.***

Our business involves the storage and transmission of users' proprietary information, and security breaches could expose us to a risk of loss or misuse of this information, and to resulting claims, fines, and litigation. We have developed certain software products to assist with the operation and management of our business which could contain flaws or vulnerabilities that could present cyber security-related risks, data loss, other security breaches, or damage to our business, our suppliers, or our customers. We have been subjected to a variety of cyber-attacks, which have increased in number and variety over time. We believe our systems are probed by potential hackers virtually 24/7, and we expect the problem will continue to grow worse over time. Cyber-attacks may target us, our customers, our suppliers, banks, credit card processors, delivery services, public cloud providers, e-commerce in general or the communication infrastructure on which we depend. Any flaws or vulnerabilities in the software we created or technologies designed to prevent attacks on our systems and other third-party systems, compromise of our security, data breaches, malfunctions, or errors, could result in a violation of applicable privacy and other laws, significant legal and financial exposure, damage to our reputation, and a loss of confidence in our security measures, any of which could have a material adverse effect on our financial results and business. Moreover, any insurance coverage we may carry may be inadequate to cover the expenses and other potential financial exposure we could face as a result of a cyber-attack or data breach.

***We recently reversed the valuation allowance for a significant portion of our deferred tax assets, and we may not be able to realize these assets in the future. Our deferred tax assets may also be subject to additional valuation allowances, which could adversely affect our operating results.***

Determining whether a valuation allowance for deferred tax assets is appropriate requires judgment and an evaluation of all positive and negative evidence. At each reporting period, we assess the need for, or the sufficiency of a valuation allowance against deferred tax assets. During 2021, based on the weight of all the positive and negative evidence, we concluded that it was more likely than not that we will realize certain federal and state net deferred tax assets based on future taxable income. Therefore, we reversed the valuation allowance on those deferred tax assets during 2021. We maintain a valuation allowance against our deferred tax assets for capital losses and the state of Utah where not supported by future reversals of taxable temporary differences, because of the uncertainty regarding the realizability of these deferred tax assets.

Our conclusion that it is more likely than not that we will realize certain federal and state net deferred tax assets is primarily based on our estimate of future taxable income. Our estimate of future taxable income is based on internal projections which primarily consider historical performance, but also include various internal estimates and assumptions and certain external data. We believe all of these inputs to be reasonable, although inherently subject to judgment. If actual results differ significantly from these estimates of future taxable income, we may need to reestablish a valuation allowance for some or all of our deferred tax assets. Establishing an allowance on our net deferred tax assets could have a material adverse effect on our financial condition and operating results.

***We may be required to recognize losses relating to our equity method investments.***

At December 31, 2022, we held equity method investments totaling approximately $296.3 million. The underlying equity interests are in entities that are in the startup or development stages. Equity method securities are inherently risky because we do not have the ability to influence business decisions. Further, these investments are inherently risky because the markets for the technologies or products these companies are developing are typically in the early stages and may never materialize. Since these investments are in companies that are in the early startup or development stages, even if their technology or products are viable, they may not be able to obtain the capital or resources necessary to successfully bring their technology or products to market. We have recognized losses related to these equity method securities in the past and may in the future recognize additional losses. Additionally, due to tax law limitations around deductibility of capital and investment losses, we may not be able to recognize a tax benefit on these losses when they occur. Any such loss could be material and could have a material adverse effect on our financial results.

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***If governmental entities or providers of consumer devices and internet browsers further restrict or regulate the use of "cookie" tracking technologies, the amount or accuracy of online user information we collect could decrease, which could harm our business and operating results.***

Various federal, state and international governmental entities have enacted or are considering enacting legislation or regulations that could significantly restrict the ability of companies to use proprietary or third-party "cookies" and other methods of online tracking for behavioral advertising. For example, some governmental agencies have regulated the level of consumer notice and consent required before a company can employ cookies or other electronic tracking tools or the use of data gathered with such tools. Additionally, some providers of consumer devices and web browsers have implemented or plan to implement methods of making it easier for Internet users to prevent the placement of cookies, to block other tracking technologies or to require new permissions from users for certain activities, which have impacted us in the past and have the potential to significantly reduce the effectiveness of such practices and technologies in the future. Any further restriction on the use of cookies and other online tracking and advertising practices could limit our ability to effectively retain existing customers or acquire new customers and consequently, materially adversely affect our business, financial condition and operating results.

***If the legal, regulatory, or tax treatment of our company changes adversely, it could impact our ability to conduct business and, accordingly, our financial results.***

New or revised laws, regulations, or court decisions may subject us to additional requirements and new disclosures that could increase the cost of doing business, increase scrutiny for the way decisions are made, decrease our revenues, or impact our business model. For example, the SEC has proposed rules that would affect publicly-traded company disclosure obligations in the areas of climate change and cyber security which, if approved, would increase our costs of doing business and expose us to potential compliance risk. In addition, new or revised tax regulations or court decisions may subject us or our customers to additional taxes. Other new or revised legal, regulatory, or tax treatment could expose us to additional risk, increase the cost of doing business online, and increase internal costs necessary to capture data, report data, and collect and remit taxes. For example, the Tax Cuts and Jobs Act of 2017 eliminated the option to immediately deduct research and development expenditures in 2022, and instead required them to be amortized in future years. This new requirement caused us to utilize significant federal and state net operating loss carryforwards in the current year. We expect to continue to utilize federal and state tax attributes at a faster rate than our financial statement earnings in the future and there may be increases to cash taxes paid unless legislation is passed that would defer, repeal, or otherwise modify these new requirements. Any of these items could have a material adverse effect on our business and financial results.

***We and certain of our former and current officers and directors are named in shareholder class action lawsuits and shareholder derivative lawsuits, which could require significant additional management time and attention, result in significant additional legal expenses or result in government enforcement actions.***

We and certain of our former and current officers and directors are named in shareholder class action lawsuits and shareholder derivative lawsuits, and may become subject to further litigation, government investigations or proceedings arising therefrom. The pending litigation and any future litigation, investigations or other actions that may be filed or initiated against us or our current or former officers or directors may be time consuming and expensive. We cannot predict what losses, if any, we may incur in these litigation matters, and expect to incur significant legal expenditures in defending and responding to these litigation matters.

Any such legal proceedings, if decided adversely to us, could result in significant monetary damages, penalties and reputational harm, and will likely involve significant defense and other costs. We have entered into indemnification agreements with each of our directors and certain of our officers, requiring us to indemnify them. Further, our insurance may not cover all claims that have been or may be brought against us, and insurance coverage may not continue to be available to us at a reasonable cost. As a result, we may be exposed to substantial uninsured or under-insured liabilities, including pursuant to our indemnification obligations, which could materially adversely affect our business, prospects, results of operations and financial condition.

***We and tZERO, in which we own a direct minority interest, are both the subjects of, and parties to, investigations by the SEC Division of Enforcement, which has required us to expend significant financial and legal resources. The resolution of those investigations may have a material adverse effect on our business, financial condition, results of operations and cash flows.***

As previously disclosed, in October 2019, we received a subpoena from the SEC requiring us to produce documents and other information related to the Series A-1 Preferred stock dividend we announced to stockholders in June 2019 and requesting copies of 10b5-1 plans entered into by certain officers and directors. In December 2019, we received a subpoena from the SEC requesting our insider trading policies and certain employment and consulting agreements. We also received requests from the SEC for our communications with our former Chief Executive Officer and Director, Patrick Byrne, and the matters referenced in the December 2019 subpoenas. In January 2021, we received a subpoena from the SEC requesting

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information regarding our Retail guidance in 2019 and certain communications with current and former executives, board members, and investors. We continue to cooperate with the SEC in these matters.

Although we believe that we have fully complied with all relevant laws and regulations, there can be no assurance that the SEC will not commence an enforcement action against us or members of our management, or as to the ultimate resolution of any enforcement action that the SEC may decide to bring. Under applicable law, the SEC has the ability to impose significant sanctions on companies and individuals who are found to have violated the provisions of applicable federal securities laws, including cease and desist orders, civil money penalties, and barring individuals from serving as directors or officers of public companies. We have expended significant financial and legal resources responding to the SEC subpoena and such responses have required a significant amount of the time and attention of our senior management and personnel. Defending any enforcement action brought by the SEC against us or members of our management would involve further significant expenditures and the resolution of any such enforcement action could have a material adverse effect on our business, financial condition, results of operations and cash flows. Additionally, the outcome of any investigation related to the activities of tZERO could result in negative publicity for tZERO or us or limit the products which tZERO may be able to offer, which may have an adverse effect on the current and future business ventures of tZERO or us.

***If we do not successfully optimize and operate our distribution center, warehouse, and customer service operations, our business could be harmed.***

We have expanded, contracted, and otherwise modified our distribution center, warehouse, and customer service operations from time to time in the past, and expect that we will continue to do so. If we do not successfully optimize and operate our distribution center, warehouse, and customer service operations, it could significantly limit our ability to meet customer demand, customer shipping or return time expectations, or result in excessive costs and expenses for the size of our business. Because it is difficult to predict demand, we may not be able to manage our facilities in an optimal way, which may result in excess or insufficient inventory or warehousing capacity. Our fulfillment and customer service centers may also fail to staff at optimal levels. Our failure to manage our warehouse operations, distribution centers or our fulfillment and customer service centers optimally could adversely affect our financial results and customer experience and could have a material adverse effect on our financial results, business and prospects.

***Global conflict, increasing tensions between the United States and Russia, the United States and China, and other effects of the ongoing conflict in Ukraine, could negatively impact our business, results of operations, and financial condition.***

Global conflict could increase costs and limit availability of fuel, energy, and other resources we depend upon for our business operations and could also limit product assortment availability. For example, while we do not operate in Russia or Ukraine, the increasing tensions between the United States and Russia and the other effects of the ongoing conflict in Ukraine, have resulted in many broader economic impacts such as the United States imposing sanctions and bans against Russia and Russian products imported into the United States. Such sanctions and bans have impacted and may continue to impact commodity pricing such as fuel and energy costs, making it more expensive for us and our partners to deliver products to our customers. Further, we and many of our suppliers and fulfillment partners source a large percentage of the products we offer on our Website from China. Relations between the United States and China have become increasingly strained and if tensions were to escalate, it could limit our ability to provide a full assortment of furniture and home furnishings on our Website. Sanctions, bans, trade restrictions, or other economic actions in response to the present or future conflict in Ukraine, China, or in response to any other global conflict could result in an increase in costs, further disruptions to our supply chain, and a lack of consumer confidence resulting in reduced demand. While the extent of such items is not presently known, any of them could negatively impact our business, results of operations, and financial condition.

***We are partially self-insured with respect to our employees' health insurance. If the actual costs of these claims exceed the amounts we have accrued for them, we would incur additional expense.***

Since January 1, 2017, we have been partially self-insured with respect to our employees' health insurance, except to the extent of stop-loss coverage that limits our losses both on a per employee basis and an aggregate basis. The actual costs of our employees' health insurance claims could exceed our estimates of those costs for a number of reasons, including more claims or larger claims than we expect, and increases in the costs of healthcare generally. If the actual cost of our employees' health insurance claims and related expenses exceeds the amounts we have accrued, we may be required to record additional charges for these claims and/or to establish additional cash reserves, which could have a material adverse effect on our financial results, business and prospects.

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***We may be unable to protect our proprietary technology and to obtain trademark protection for our marks.***

Our success depends to a significant degree upon the protection of our software and other proprietary intellectual property rights. We rely on a combination of laws and contractual restrictions with our employees, customers, suppliers, affiliates, and others to establish and protect our proprietary rights, including the law pertaining to trade secrets. Despite these precautions, it may be possible for a third party to copy or otherwise obtain and use our intellectual property or trade secrets without authorization. In addition, we cannot ensure that others will not independently develop similar intellectual property. Third parties have in the past recruited and may in the future recruit our employees who have had access to our proprietary technologies, processes and operations. These recruiting efforts expose us to the risk that such employees and those hiring them will misappropriate and exploit our intellectual property and trade secrets. We may be unable to protect against such risks, in the United States or elsewhere, which could have a material adverse effect on our business. Although we have registered and are pursuing the registration of our key trademarks in the United States and some other countries, some of our trade names may not be eligible to receive registered trademark protection. In addition, effective trademark protection may not be available or we may not seek protection in every country in which we market or sell our products and services, including in the United States. Our competitors might adopt product or service marks like our marks or might try to prevent us from using our marks. Any claim by another party against us, or customer confusion related to our trademarks, or our failure to obtain trademark registration, could have a material adverse effect on our financial results, business and prospects.

***We are currently subject to claims that we have infringed intellectual property rights of third parties and may be subjected to additional infringement claims in the future.***

We are currently and may in the future be subject to claims that we have infringed the intellectual property rights of others, by offering allegedly infringing products or otherwise. We have contested and expect to continue to contest claims we consider unfounded rather than settling such claims, even when we expect the costs of contesting the claims could potentially exceed the cost of settlement. Any claims may result in significant expenditure of our financial and managerial resources and may result in us making significant damages or settlement payments or changes to our business. We could be prohibited from using software or business processes, or required to obtain licenses from third parties, which could be expensive or unavailable. Any such difficulties could have a material adverse effect on our financial results, business and prospects.

***We depend on our suppliers' and fulfillment partners' representations regarding product safety, content and quality, product compliance with various laws and regulations, including registration and/or reporting obligations, and for proper labeling of products.***

We rely on our suppliers' and fulfillment partners' representations of product safety, content and quality, product compliance with various laws and regulations, including registration and/or reporting obligations, and proper labeling of products. Issues or concerns regarding product safety, compliance, registration and/or reporting, labeling, content or quality could result in consumer or governmental claims and could adversely affect our financial results and business. Any indemnity agreement we may have with a supplier or fulfillment partner of a product may be inadequate or inapplicable, and any insurance coverage we may carry may be inadequate. Even unsuccessful claims could result in the expenditure of funds and management time and could have a negative impact on our business. The occurrence of any of the foregoing could have a material adverse effect on our financial results, business and prospects.

***We have an evolving business model, which increases the complexity of our business.***

In prior years we added additional types of services and product offerings and in some cases, we modified or discontinued those offerings, and in some cases have re-launched offerings we had previously terminated. We may continue to try to offer additional types of products or services, and we do not know whether any of them will be successful. From time to time we have also modified aspects of our business model relating to our product mix and the mix of direct/partner sourcing of the products we offer. We recently eliminated our assortment of non-home goods offered for sale on our Website in order to increase our brand association with "home" expertise. In addition, we continue to experiment with new technologies to enhance the customer experience and iterate on delivery of new features. The additions and modifications to our business have increased the complexity of our business and impacted our management, personnel, operations, systems, technical performance, financial resources, and internal financial control and reporting functions. The elimination of non-home goods has resulted in reduced revenues which we have not yet been able to fully offset. Further, our efforts to promote a culture of innovation amongst our technologists in an attempt to stay ahead of the competition may result in the introduction of technologies that are less mature or stable which could cause problems in our website or back-end logistics systems. Future additions to or modifications of our business are likely to have similar effects. Further, any new business, technology, or website we launch that is not favorably received by consumers could damage our reputation or our brand. The occurrence of any of the foregoing could have a material adverse effect on our financial results, business, prospects, and the trading prices of our securities.

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***If Pelion is not successful in managing the Medici Ventures, L.P. fund or has to resign if there is a change in the interpretation or application of the Investment Advisers Act of 1940 (the "Advisers Act"), we would be unable to realize the anticipated benefits of this arrangement.***

As the general partner of the Medici Ventures, L.P. fund, Pelion has control over the limited partnership and its activities, including day-to-day operations and investment decisions. Pelion is able to sell investments of the limited partnership at any time, make additional investments, modify, amend or change existing investments, make new investments and otherwise control the activities of the limited partnership.

The success of the Medici Ventures, L.P. fund depends on Pelion's ability to successfully manage the activities of the Medici Ventures, L.P. fund portfolio companies and its existing and future portfolio company investments. Pelion may not be successful in managing these investments and we may not receive the benefits we anticipate of the transaction with Pelion. Moreover, even if successful in managing the Partnership, Pelion has the right to withdraw as general partner under certain circumstances, including certain changes in Pelion's status under the Advisers Act. The occurrence of such an event is beyond our control, and, as a result, there can be no assurance that Pelion will remain as general partner for the term contemplated. If Pelion is no longer serving as the general partner, we will have the right under the partnership agreement to appoint a new general partner; however, it may not be possible to accomplish this in a timely manner, which could result in the termination of the partnership. Even if a new general partner is appointed in a timely manner, it may be unable to manage the activities of the Medici Ventures, L.P. fund and its portfolio company investments, which would prevent us from receiving the anticipated benefits of the partnership.

***Our international business efforts could adversely affect us.***

We sell products in international markets. International sales and transactions are subject to inherent risks and challenges that could adversely affect us, including:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the need to develop new supplier and manufacturer relationships;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the need to comply with additional U.S. and foreign laws and regulations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in international laws, regulatory requirements, taxes and tariffs;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our limited experience with different local cultures and standards;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• geopolitical events, such as war and terrorist attacks;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the risk that the products we offer may not appeal to customers in international markets, whether due to the products themselves, the time to deliver, a lack of brand recognition, or another reason; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the additional resources and management attention required for such expansion.

Our international business could expose us to penalties for non-compliance with laws applicable to international business and trade, including the U.S. Foreign Corrupt Practices Act, which could have a material adverse effect on our business. Foreign data protection, privacy and other laws and regulations are different and often more restrictive than those in the United States. Compliance with such laws and regulations will result in additional costs and may necessitate changes to our business practices, which may adversely affect our business. A lack of brand recognition, increased costs associated with shipping products cross-border, increased times to deliver products to customers, or other matters that may reduce customer demand, could adversely affect our business. To the extent that we make purchases or sales denominated in foreign currencies, we would have foreign currency risks, which could have a material adverse effect on our financial results, business and prospects.

**Risks Relating to Our Common Stock**

***The trading price of our common stock may be adversely affected by short-selling activities involving our common stock.***

The trading price of our common stock has been and may continue to be volatile. Our stock price fluctuations may be due in part to short-selling activity related to our common stock. The practice of short-selling activity may adversely affect our common stock price, which in turn could adversely affect our ability to raise capital and could have a material adverse effect on our financial results, business and prospects.

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***Significant fluctuations in our quarterly operating results may adversely affect the market prices of our common stock, and you may lose all or a part of your investment.***

Our revenues and operating results have varied in the past and may continue to vary significantly from quarter to quarter due to a number of factors, many of which are outside our control. In addition to the other risk factors described in this report, factors that have caused and/or could cause our quarterly operating results to fluctuate and in turn affect the market prices of our common stock include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• increases in the cost of advertising and changes in our sales and marketing expenditures;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our inability to retain existing customers or encourage repeat purchases;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the extent to which our existing and future marketing campaigns are successful;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• price competition, particularly in the costs of marketing and product pricing;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the amount and timing of operating costs and capital expenditures;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the amount and timing of our purchases of inventory;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our inability to manage distribution operations or provide adequate levels of customer service;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• increases in the cost of fuel, transportation or distribution;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our inability to implement technology changes or integrate operations and technologies from acquisitions or other business combinations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our efforts to offer new lines of products and services;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our inability to attract users to our website; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• losses associated with our equity method investments.

Any of the foregoing could have a material adverse effect on our financial results and business and our ability to raise capital and could have a material adverse effect on the holders of our common stock.

***Future sales or other distributions of our stock may depress our stock price or subject us to limitations on our ability to use our net operating and tax credit carryforwards.***

Sales or other distributions of a substantial number of shares of our common stock, in the public market or otherwise, by us or by a significant stockholder, has in the past and could in the future, depress the trading price of our common stock and impair our ability to raise capital through the sale of additional equity securities. The transfer of ownership of a significant portion of our outstanding shares of common stock in the public market or otherwise, by us or by a significant stockholder, within a three-year period could adversely affect our ability to use our net operating losses and tax credit carryforwards to offset future taxable net income.

In addition, we may issue additional shares of our common or preferred stock from time to time in the future in amounts that may be significant. We have sold common stock including under "at the market" sales agreement and in follow-on underwritten offerings in the past and may do so in the future. We also previously issued a class of preferred stock that was publicly traded, and may in the future issue preferred stock that is publicly traded. The sale of substantial amounts of our common or preferred stock, by us or a significant stockholder, or the perception that these sales may occur, could adversely affect the trading prices of our securities or subject us to limitations on our ability to use our net operating and tax credit carryforwards.

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***Anti-takeover provisions contained in our amended and restated certificate of incorporation and amended and restated bylaws, and provisions of Delaware law, could impair a takeover attempt.***

Our amended and restated certificate of incorporation, amended and restated bylaws and Delaware law contain provisions which could have the effect of rendering more difficult, delaying, or preventing an acquisition deemed undesirable by our Board of Directors. Among other things, our amended and restated certificate of incorporation and amended and restated bylaws include provisions:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• limiting the liability of, and providing indemnification to, our directors and officers;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• limiting the ability of our stockholders to call and bring business before special meetings;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• providing that our Board of Directors is classified into three classes of directors with staggered three-year terms;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• only permitting the Board of Directors to fix the number of directors and to fill vacancies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• prohibiting cumulative voting in the election of directors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election to our Board of Directors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• controlling the procedures for the conduct and scheduling of Board of Directors and stockholder meetings; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• designating a state court located in the State of Delaware as the sole and exclusive forum for specified matters.

These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management.

Any provision of our amended and restated certificate of incorporation, amended and restated bylaws or Delaware law that has the effect of delaying, preventing or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock or other securities and could also affect the price that some investors are willing to pay for our common stock or other securities.

***We are subject to the risk of possibly becoming an investment company under the Investment Company Act.***

The Investment Company Act regulates certain companies that invest in, hold or trade securities. Primarily as a result of a portion of our assets consisting of indirectly-held minority investment positions through the Medici Ventures, L.P. fund, we are subject to the risk of inadvertently becoming an investment company. Because registration under the Investment Company Act would make it impractical for us to operate our business, we need to avoid becoming subject to the registration requirements of the Investment Company Act. To do so, we may structure transactions in a less advantageous manner than if we did not have Investment Company Act concerns, or we may avoid otherwise economically desirable transactions and/or strategic initiatives due to those concerns. In addition, events beyond our control, including significant appreciation or depreciation in the value of certain of our holdings or adverse developments with respect to our ownership of certain of our subsidiaries, could result in us inadvertently becoming an investment company. If it were established that we were an investment company, there would be a risk, among other material adverse consequences, that we could become subject to monetary penalties or injunctive relief, or both, in an action brought by the SEC, that we would be unable to enforce contracts with third parties or that third parties could seek to obtain rescission of transactions with us undertaken during the period it was established that we were an unregistered investment company. If it were established that we were an investment company, it would have a material adverse effect on our business and financial operations and our ability to continue our business.

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**ITEM 1B. UNRESOLVED STAFF COMMENTS**

None.

**ITEM 2.&nbsp;&nbsp;&nbsp;&nbsp;PROPERTIES**

We own and lease various properties in the United States and internationally. We use the properties for corporate office space, data centers, and warehouse, fulfillment and customer service space. As of December 31, 2022, we operated the following facilities (square feet in thousands):

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| | | | |
|:---|:---|:---|:---|
| | **United States** | **International** | **Total** |
| Owned facilities | 260 |  | 260 |
| Leased facilities | 1018 | 13 | 1031 |
| Total facilities | 1278 | 13 | 1291 |

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**ITEM 3.&nbsp;&nbsp;&nbsp;&nbsp;LEGAL PROCEEDINGS**

From time to time, we are involved in, or become subject to litigation or other legal proceedings 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. We also prosecute lawsuits to enforce our legal rights. In connection with such litigation or other legal proceedings, we have been in the past and we may be in the future subject to significant damages, associated costs, or equitable remedies relating to the operation of our business. 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. For additional details, see the information set forth under Item 8 of Part II, "Financial Statements and Supplementary Data"—Note 12—Commitments and Contingencies, subheading Legal Proceedings and Contingencies, contained in the "Notes to Consolidated Financial Statements" of this Annual Report on Form 10-K, which is incorporated by reference in answer to this Item.

**ITEM 4. MINE SAFETY DISCLOSURES**

Not applicable.

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**PART II**

**ITEM 5.&nbsp;&nbsp;&nbsp;&nbsp;MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES**

*Market information*

The principal U.S. trading market for our common stock is the Nasdaq Global Market. Our common stock is traded under the symbol "OSTK."

*Holders*

&nbsp;&nbsp;&nbsp;&nbsp;

As of February 17, 2023, there were 333 holders of record of our common stock. Many of our shares of common stock are held by brokers and other institutions on behalf of the beneficial owners.

*Dividends*

We have never declared or paid any cash dividends on our common stock. We currently intend to retain any earnings for future growth and do not anticipate paying any cash dividends on our common stock in the foreseeable future. Any future determination to pay any dividends on our common stock will be at the discretion of our Board of Directors and will depend on our results of operations, financial conditions, contractual and legal restrictions and other factors the Board of Directors deems relevant.

We declared and paid a cash dividend of $0.16 per share on our preferred stock during 2021 and 2020. As discussed below under "—Preferred Stock Conversion," we converted all of our then-outstanding Series A-1 and Series B preferred stock into common stock on June 10, 2022, and did not pay a cash dividend prior to conversion in 2022. At December 31, 2022 we had no preferred stock outstanding.

*Recent sales of unregistered securities*

None.

*Issuer purchases of equity securities*

The following table sets forth information with respect to repurchases of shares of our common stock made during the quarter ended December 31, 2022 (in thousands, except share and per share data):

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| | | | | |
|:---|:---|:---|:---|:---|
| **Period** | **Total Number of Common Shares Purchased** | **Average Price Paid per Common Share** | **Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs** | **Approximate Dollar Value of Shares that may yet be Purchased under the Plans or Programs**<sup>(1)</sup> |
| October 1 - 31 |  | $— |  | $39923 |
| November 1 - 30 | 808803 | $24.76 | 808803 | $19884 |
| December 1 - 31 |  | $— |  | $19884 |
| &nbsp;&nbsp;Total | 808803 |  | 808803 |  |

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___________________________________________

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;&nbsp;&nbsp;&nbsp;In August 2021, our Board of Directors approved a stock repurchase program (the "Repurchase Program") for the repurchase of up to $100.0 million of our common stock. On March 9, 2022, our Board of Directors expanded the Repurchase Program to include the repurchase of our Series A-1 preferred stock and/or Series B preferred stock. The Repurchase Program expires in December 2023.

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*Preferred Stock Conversion*

On May 12, 2022, Overstock shareholders voted to approve separate proposals to approve the amendment of the Company's Amended and Restated Certificate of Designation for both classes of its preferred stock to provide that each share of our Series A-1 and Series B preferred stock would be automatically converted into 0.90 of a share of our common stock (the "Conversion"). On June 10, 2022, in connection with the completion of the Conversion, the Company issued 4,097,697 shares of our common stock in exchange for the outstanding Series A-1 and Series B preferred stock on that date. As the fair value of our common stock issued exceeded the fair value of the Series A-1 and Series B preferred stock exchanged on the Conversion date, we recognized a non-cash deemed dividend to our preferred stockholders of $1.7 million due to the excess fair value per share compared to the conversion ratio. Following the Conversion, the Company eliminated the Series A-1 and Series B preferred stock class by filing Certificates of Elimination with the Delaware Secretary of State. The shares of preferred stock previously designated as Series A-1 and Series B preferred stock returned to the status of authorized and undesignated shares of preferred stock under our certificate of incorporation.

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**COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN**

The following graph shows a comparison of the cumulative total stockholder return on our common stock with the cumulative total returns of NASDAQ Market Index, the S&P 500 Index and the S&P Retail Select Index. The graph tracks the performance of a $100 investment in our common stock and in each of the indexes during the last five fiscal years ended December 31, 2022. Data for the NASDAQ Market Index, the S&P 500 Index and the S&P Retail Select Index assume reinvestment of dividends. Stockholder returns over the indicated period are based on historical data and should not be considered indicative of future stockholder returns. They do not necessarily reflect management's opinion that such indices are an appropriate measure of the relative performance of the stock involved, and they are not intended to forecast or be indicative of possible future performance of the Company's common stock.

![ostk-20221231_g1.jpg](ostk-20221231_g1.jpg)

*Prepared by Zacks Investment Research, Inc. Used with permission. All rights reserved. Copyright 1980-2023.*

*Index Data: Copyright NASDAQ OMX, Inc. Used with permission. All rights reserved.*

*Index Data: Copyright Standard and Poor's, Inc. Used with permission. All rights reserved.*

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**ITEM 6.&nbsp;&nbsp;&nbsp;&nbsp;**

Reserved.

**ITEM 7.&nbsp;&nbsp;&nbsp;&nbsp;MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

*The following discussion and analysis contains forward-looking statements relating to future events or our future financial or operating performance that involve risks and uncertainties, as set forth above under "Special Cautionary Note Regarding Forward Looking Statements." or in Item 1A under the heading "Risk Factors" or included elsewhere in this Annual Report on Form 10-K. In addition, our future results may be significantly different from our historical results.* 

**Financial Reporting Presentation Relating to Discontinued Operations**

Unless otherwise specified, disclosures throughout Management's Discussion and Analysis of Financial Condition and Results of Operations, including disclosures under "Liquidity and Capital Resources," reflect continuing operations only. See Note 4—Discontinued Operations in the "Notes to Consolidated Financial Statements" included in Item 8 of Part II, "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for further information.

**Overview**

Overstock provides furniture and home furnishings to assist consumers in "Making Dream Homes Come True," particularly for our target customers—consumers who seek smart value on quality, stylish furniture and home furnishings at competitive prices, and who want an easy shopping experience. We believe that the furniture and home furnishings market, which is highly fragmented and has traditionally been served by brick-and-mortar stores, will continue transitioning to online sales as consumers become increasingly comfortable shopping online. We regularly update our product assortment to meet the evolving preferences of our customers and current trends. Our products include furniture, décor, area rugs, bedding and bath, home improvement, outdoor, and kitchen and dining items, among others. Our supply chain allows us to ship directly to our customers from our suppliers or from our warehouses. See Item 1—"Business—Our Business" for an additional overview on our business.

We are focused on growth drivers including, increasing our home assortment to improve our brand association with home, making it easier for our customers to find and view a broad assortment of products, increasing mobile app adoption driving higher customer retention and brand loyalty, optimizing our marketing efforts to grow Overstock consideration among home shoppers, growing our customer base in Canada, and gaining market share by strengthening our brand pillars of "Product Findability," "Smart Value," and "Easy Delivery and Support."

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**Executive Commentary**

*This executive commentary is intended to provide investors with a view of our business through the eyes of our management. As an executive commentary, it necessarily focuses on selected aspects of our business. This executive commentary is intended as a supplement to, but not a substitute for, the more detailed discussion of our business included elsewhere herein. Investors are cautioned to read our entire "Management's Discussion and Analysis of Financial Condition and Results of Operations," and our interim and audited financial statements, and the discussion of our business and risk factors and other information included elsewhere or incorporated in this report. This executive commentary includes forward-looking statements, and investors are cautioned to read "Special Cautionary Note Regarding Forward-Looking Statements."*

Our consolidated cash and cash equivalents balance decreased from $503.3 million as of December 31, 2021 to $371.3 million as of December 31, 2022, a decrease of $132.1 million, primarily as the result of repurchases of our common stock and Series A-1 preferred stock under the Repurchase Program of $80.1 million, purchases of equity securities of $18.9 million, expenditures of property and equipment of $14.9 million, and net cash outflows from operating activities of $12.5 million during the year ended December 31, 2022.

Revenue decreased 30% in 2022 compared to 2021. This decrease was primarily due to a 39% decrease in the number of customer orders, partially offset by a 15% increase in average order value driven by a continued product mix shift into furniture and home furnishings categories. This decreased order activity was largely driven by the absence of pandemic-related shopping behavior as seen in the prior year, the impact of macroeconomic factors including a heightened inflationary environment and uncertainty impacting consumer sentiment, a shift in consumer spending preferences, and our strategy to exit non-home categories.

Gross profit decreased 29% in 2022 compared to 2021 primarily due to decreased sales volume and partially offset by an increase in gross margin. Gross margin increased to 23.0% in 2022, compared to 22.6% in 2021, primarily due to merchandising actions, advertising revenue, and operational efficiencies. The increase was partially offset by higher promotional discounting and carrier costs.

Sales and marketing expenses as a percentage of revenue increased to 11.2% in 2022 compared to 11.0% in 2021, primarily due to increased brand advertising, partially offset by decreased performance marketing expenses.

Technology expenses decreased $1.8 million in 2022 compared to 2021, primarily due to decreased third party spend and staff-related expenses. The decrease was partially offset by increased licensing costs.

General and administrative expenses decreased $7.7 million in 2022 compared to 2021, primarily driven by reduced legal, third-party vendor, and facilities-related expenses, partially offset by increased staff-related expenses.

**Additional commentary related to macroeconomic trends**

We continue to monitor recent macroeconomic trends, including the impact caused by global developments such as the current conflict between Russia and Ukraine (including the related heightened geopolitical tensions and economic actions in response thereto by various countries), and their impact on our supply chain, customers, and employees. While we have no operations in or direct exposure to Russia or Ukraine, we believe the conflict between Russia and Ukraine combined with higher consumer price inflation has resulted in reduced consumer confidence and consumer spending which negatively impacted our sales during the year. In addition, we have experienced increased employee turnover, inflation in product costs, higher wages, higher share-based compensation expenses, and higher energy and fuel costs, each at a higher rate than what we have experienced in recent years. However, we continue to work with our partners to limit price increases in response to higher costs and have been able to improve gross margins year over year.

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**Liquidity and Capital Resources**

*Overview*

We believe that our cash and cash equivalents currently on hand and expected cash flows from future operations will be sufficient to continue operations for at least the next twelve months. We continue to monitor, evaluate, and manage our operating plans, forecasts, and liquidity considering the most recent developments driven by macroeconomic conditions, such as supply chain challenges, inflation, rising interest rates, and the current conflict between Russia and Ukraine. We proactively seek opportunities to improve the efficiency of our operations and have in the past and may in the future take steps to realize internal cost savings, including aligning our staffing needs based on our current and expected future levels of operations and process streamlining.

We periodically evaluate opportunities to repurchase our equity securities, obtain credit facilities, or issue additional debt or equity securities which may impact our future operations and liquidity. In addition, we may, from time to time, consider the investment in, or acquisition of, complementary businesses, products, services, or technologies to expand our business, any of which might affect our liquidity requirements or cause us to issue additional debt or equity securities that would be dilutive to shareholders.

Cash flows from discontinued operations are disclosed on our statement of cash flows as separate line items in the operating, investing, and financing activities sections. We anticipate that the absence of cash flows from discontinued operations will positively affect future liquidity and capital resources.

*Current sources of liquidity*

Our principal sources of liquidity are existing cash and cash equivalents, and accounts receivable, net. At December 31, 2022, we had cash and cash equivalents of $371.3 million and accounts receivable, net of $17.7 million.

Cash flow information is as follows (in thousands):

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| | | |
|:---|:---|:---|
| | **Year ended December 31,** | **Year ended December 31,** |
| | **2022** | **2021** |
| **Cash provided by (used in):** |  |  |
| &nbsp;&nbsp;&nbsp;Operating activities | $(12535) | $98047 |
| &nbsp;&nbsp;&nbsp;Investing activities | (33034) | (56433) |
| &nbsp;&nbsp;&nbsp;Financing activities | (86340) | (12683) |

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At December 31, 2022, we had $150.0 million available under our "at the market" sales program which permits us to conduct "at the market" public offerings of our common stock under a sales agreement, dated June 26, 2020, with JonesTrading Institutional Services LLC ("JonesTrading") and D.A. Davidson & Co. ("D.A. Davidson"). We did not sell any shares under our at the market sales program during the years ended December 31, 2022 and 2021.

*Operating activities*

Cash received from customers generally corresponds to our net revenues as our customers primarily use credit cards to buy from us causing our receivables from these sales transactions to settle quickly. We have payment terms with our partners that generally extend beyond the amount of time necessary to collect proceeds from our customers.

The $12.5 million of net cash used by continuing operating activities during the year ended December 31, 2022 was primarily due to income from continuing operations, adjusted for non-cash items, of $67.8 million, offset by cash used by changes in operating assets and liabilities of $80.3 million.

The $98.0 million of net cash provided by continuing operating activities during the year ended December 31, 2021 was primarily due to income from continuing operations, adjusted for non-cash items, of $141.6 million, offset by cash used by changes in operating assets and liabilities of $43.6 million.

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*Investing activities*

The $33.0 million of net cash used in investing activities during the year ended December 31, 2022 was primarily due to purchases of equity securities of $18.9 million and expenditures for property and equipment of $14.9 million.

The $56.4 million of net cash used in investing activities during the year ended December 31, 2021 was primarily due to contributions for capital calls relating to our limited partnership interest in the Medici Ventures, L.P. fund of $41.1 million and expenditures for property and equipment of $13.6 million.

*Financing activities*

The $86.3 million net cash used in financing activities during the year ended December 31, 2022 resulted primarily from $80.1 million for repurchases of our common stock and Series A-1 preferred stock under the Repurchase Program, $3.7 million of payments of taxes withheld upon vesting of restricted stock, and $3.4 million of payments on long-term debt.

The $12.7 million net cash used in financing activities during the year ended December 31, 2021 resulted primarily from $8.3 million of payments of taxes withheld upon vesting of restricted stock and $3.0 million of payments on long-term debt.

**Contractual Obligations and Commitments**

The following table summarizes our contractual obligations as of December 31, 2022 and the effect such obligations and commitments are expected to have on our liquidity and cash flow in future periods (in thousands):

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **Payments due by period** | **Payments due by period** | **Payments due by period** | **Payments due by period** | **Payments due by period** |
|<br>**Contractual Obligations** | **Total** | **Less than 1 year** | **1-3 years** | **3-5 years** | **More than 5 years** |
| Operating leases (1) | $8718 | $4816 | $3569 | $333 | $— |
| Loan agreements (2) | 49331 | 5264 | 3261 | 2968 | 37838 |
| Total contractual cash obligations | $58049 | $10080 | $6830 | $3301 | $37838 |

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___________________________________________

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;&nbsp;&nbsp;&nbsp;Represents the future minimum lease payments under non-cancellable operating leases. For information regarding our operating lease obligations, see Item 8 of Part II, "Financial Statements and Supplementary Data"—Note 11—Leases contained in the "Notes to Consolidated Financial Statements" of this Annual Report on Form 10-K.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;&nbsp;&nbsp;&nbsp;Represents future interest and principal payments on our financing agreements. For information regarding our financing agreements, see Item 8 of Part II, "Financial Statements and Supplementary Data"—Note 10—Borrowings contained in the "Notes to Consolidated Financial Statements" of this Annual Report on Form 10-K.

**Tax contingencies**

We are involved in various tax matters, the outcomes of which are uncertain. As of December 31, 2022, and 2021, tax contingencies were $3.5 million and $3.2 million, respectively, which are included in our reconciliation of unrecognized tax benefits (see Item 8 of Part II, "Financial Statements and Supplementary Data"—Note 19—Income Taxes contained in the "Notes to Consolidated Financial Statements" of this Annual Report on Form 10-K). Changes in state, federal, and foreign tax laws may increase our tax contingencies. The timing of the resolution of income tax contingencies is highly uncertain, and the amounts ultimately paid, if any, upon resolution of issues raised by the taxing authorities may differ from the amounts accrued. It is reasonably possible that within the next 12 months we will receive additional assessments by various tax authorities. These assessments may or may not result in changes to our contingencies related to positions on prior years' tax filings.

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**Results of Operations**

**Net revenue, costs of goods sold, gross profit and gross margin**

The following table summarizes our net revenue, costs of goods sold, gross profit and gross margin for the years ended December 31, 2022 and 2021 (in thousands):

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| | | |
|:---|:---|:---|
| | **Year ended December 31,** | **Year ended December 31,** |
| | **2022** | **2021** |
| &nbsp;&nbsp;Net revenue | $1929334 | $2756446 |
| &nbsp;&nbsp;Cost of goods sold |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Product costs and other cost of goods sold | 1409197 | 2026363 |
| &nbsp;&nbsp;&nbsp;&nbsp;Merchant fees, customer service, and other | 76793 | 106181 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total cost of goods sold | 1485990 | 2132544 |
| &nbsp;&nbsp;Gross profit | $443344 | $623902 |
| Year-over-year percentage changes |  |  |
| &nbsp;&nbsp;Net revenue | (30.0)% |  |
| &nbsp;&nbsp;Gross profit | (28.9)% |  |
| Percent of total net revenue |  |  |
| &nbsp;&nbsp;Cost of goods sold |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Product costs and other cost of goods sold | 73.0% | 73.5% |
| &nbsp;&nbsp;&nbsp;&nbsp;Merchant fees, customer service, and other | 4.0% | 3.9% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total cost of goods sold | 77.0% | 77.4% |
| &nbsp;&nbsp;Gross margin | 23.0% | 22.6% |

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The 30% decrease in net revenue for the year ended December 31, 2022, as compared to the same period in 2021, was primarily due to a 39% decrease in the number of customer orders, partially offset by a 15% increase in average order value driven by a continued product mix shift into furniture and home furnishings categories. This decreased order activity was largely driven by the absence of pandemic-related shopping behavior as seen in the prior year, the impact of macroeconomic factors including a heightened inflationary environment and uncertainty impacting consumer sentiment, a shift in consumer spending preferences, and our strategy to exit non-home categories.

We cannot estimate the impact that macroeconomic conditions, such as supply chain challenges, inflation, rising interest rates, or the current conflict between Russia and Ukraine will have on our business in the future due to the unpredictable nature of the ultimate development and duration of these conditions.

International net revenues were less than 1% of total net revenues for 2022 and 2021.

*Estimate of unearned product revenue on undelivered product*

Our revenue related to merchandise sales is recognized upon delivery to our customers. 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. 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 certain macroeconomic conditions, such as supply chain challenges, inflation, rising interest rates, or the current conflict between Russia and Ukraine.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

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The following table shows the effect that hypothetical changes in the estimate of average shipping transit times would have on the reported amount of revenue and income before taxes (in thousands):

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| | | |
|:---|:---|:---|
| | **Year Ended December 31, 2022** | **Year Ended December 31, 2022** |
| **Change in the Estimate of Average Transit Times (Days)** | **Increase (Decrease)<br>Revenue** | **Increase (Decrease) Income Before Income Taxes** |
| 2 | $(8819) | $(1810) |
| 1 | $(5794) | $(1189) |
| As reported | As reported | As reported |
| (1) | $3702 | $760 |
| (2) | $6776 | $1392 |

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*Gross profit and gross margin*

Our overall gross margins fluctuate based on competitive pricing; inventory management decisions; sales coupons and promotions; product mix of sales; advertising revenue and our marketing allowance program; and operational and fulfillment costs. Merchant fees, customer service, and other (previously labeled "Fulfillment and related costs") include merchant processing fees associated with customer payments made by credit cards and other payment methods and other variable fees, customer service costs, costs incurred to operate and staff our warehouses, including rent and depreciation expense associated with these facilities, costs to receive, inspect, pick, and prepare customer order for delivery, and direct and indirect labor costs including payroll, payroll-related benefits, and stock-based compensation, all of which we include as costs in calculating gross margin. Merchant fees, customer service, and other as a percentage of sales may vary due to several factors, such as our ability to effectively manage merchant fees, customer service costs, and warehouse costs. We believe that some companies in our industry, including some of our competitors, account for merchant fees, customer service, and other costs within operating expenses, and therefore exclude merchant fees, customer service, and other costs from gross margin. As a result, our gross margin may not be directly comparable to others in our industry.

Gross margins for the past eight quarterly periods and years ending December 31, 2022 and 2021 were:

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **Q1** | **Q2** | **Q3** | **Q4** | **FY** |
| 2022 | 23.4% | 22.9% | 23.3% | 22.1% | 23.0% |
| 2021 | 23.3% | 22.0% | 22.7% | 22.7% | 22.6% |

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Gross profit for the year ended December 31, 2022 decreased 29% compared to the same period in 2021, primarily due to decreased sales volume and partially offset by an increase in gross margin. Gross margin increased to 23.0% for the year ended December 31, 2022, compared to 22.6% for the same period in 2021, primarily due to merchandising actions, advertising revenue, and operational efficiencies. The increase was partially offset by higher promotional discounting and carrier costs.

**Operating expenses**

*Sales and marketing expenses*

We use a variety of online advertising channels to attract new and repeat customers, including search engine marketing, personalized emails, mobile app, loyalty program, affiliate marketing, display banners, and social media. We also build our brand awareness through linear and streaming TV.

Costs associated with our discounted shipping and other promotions, such as coupons, are not included in sales and marketing expense. Rather, they are accounted for as a reduction in revenue as they reduce the amount of consideration we expect to receive in exchange for goods or services and therefore affect net revenues and gross margin. We consider discounted shipping and other promotions, such as our policy for free shipping on orders, as an effective marketing tool.

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The following table summarizes our sales and marketing expenses for the years ended December 31, 2022 and 2021 (in thousands):

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| | | |
|:---|:---|:---|
| | **Year ended December 31,** | **Year ended December 31,** |
| | **2022** | **2021** |
| Sales and marketing expenses | $215477 | $302430 |
| &nbsp;&nbsp;Advertising expense included in sales and marketing expenses | 205523 | 289019 |
| Year-over-year percentage change |  |  |
| &nbsp;&nbsp;Sales and marketing expenses | (28.8)% |  |
| &nbsp;&nbsp;Advertising expense included in sales and marketing expenses | (28.9)% |  |
| Percentage of net revenue |  |  |
| &nbsp;&nbsp;Sales and marketing expenses | 11.2% | 11.0% |
| &nbsp;&nbsp;Advertising expense included in sales and marketing expenses | 10.7% | 10.5% |

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The 20 basis point increase in sales and marketing expenses as a percent of net revenues for the year ended December 31, 2022, as compared to the same period in 2021, was primarily due to increased brand advertising, partially offset by decreased performance marketing expenses.

*Technology expenses*

We seek to deploy our capital resources efficiently in technology to support operations including private and public cloud, web services, customer support solutions, and product search, and in technology to enhance the customer experience, including machine learning algorithms, improving our process efficiency, modernizing and expanding our systems, and supporting and expanding our logistics infrastructure. We expect to continue to incur technology expenses to support these efforts and these expenditures may continue to be material.

The frequency and variety of cyberattacks on our Website, enterprise systems, services, and on third parties we use to support our technology continues to increase. The impact of such attacks, their costs, and the costs we incur to protect ourselves against future attacks have not been material to date. However, we consider the risk introduced by cyberattacks to be serious and will continue to incur costs related to efforts to protect ourselves against them.

The following table summarizes our technology expenses for the years ended December 31, 2022 and 2021 (in thousands):

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| | | |
|:---|:---|:---|
| | **Year ended December 31,** | **Year ended December 31,** |
| | **2022** | **2021** |
| Technology expenses | $121158 | $123001 |
| Year-over-year percentage change |  |  |
| &nbsp;&nbsp;Technology expenses | (1.5)% |  |
| Technology expenses as a percent of net revenue | 6.3% | 4.5% |

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The $1.8 million decrease in technology expenses for the year ended December 31, 2022, as compared to the same period in 2021, was primarily due to decreased third party spend and staff-related expenses. The decrease was partially offset by increased licensing costs.

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*General and administrative expenses*

The following table summarizes our general and administrative expenses for the years ended December 31, 2022 and 2021 (in thousands):

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| | | |
|:---|:---|:---|
| | **Year ended December 31,** | **Year ended December 31,** |
| | **2022** | **2021** |
| General and administrative expenses | $79701 | $87399 |
| Year-over-year percentage change |  |  |
| &nbsp;&nbsp;General and administrative expenses | (8.8)% |  |
| General and administrative expenses as a percent of net revenue | 4.1% | 3.2% |

---

The $7.7 million decrease in general and administrative expenses for the year ended December 31, 2022, as compared to the same period in 2021, was primarily driven by reduced legal, third-party vendor, and facilities-related expenses, partially offset by increased staff-related expenses.

&nbsp;&nbsp;&nbsp;&nbsp;

**Other income (expense), net**

The $76.3 million decrease in other income (expense), net for the year ended December 31, 2022, as compared to the same period in 2021, was primarily due to a $76.5 million decrease in income recognized on our equity method securities.

**Income taxes**

Our effective tax rate for the years ended December 31, 2022 and 2021 was (4.1)% and (39.6)%, respectively. Our effective tax rate is affected by recurring items such as research tax credits and non-recurring items such as changes in valuation allowances. We record valuation allowances against deferred tax assets when there is uncertainty about our ability to generate future income in relevant jurisdictions. The impact that macroeconomic conditions, such as supply chain challenges, inflation, rising interest rates, or the current conflict between Russia and Ukraine will have on our business in the future make estimates of future income more challenging due to the unpredictable nature of the ultimate development and duration of these conditions. It is also affected to a lesser extent by tax rates in foreign jurisdictions and the relative amount of income we earn in those jurisdictions, which we expect to be fairly consistent in the near term. Our low effective tax rate is primarily attributable to an increase in our valuation allowance for capital loss deferred tax assets associated with unrealized losses on our equity method securities. Our tax expense increased as compared to the same period in 2021 primarily due to the fact we no longer maintain a valuation allowance on most of our federal and state deferred tax assets.

We have indefinitely reinvested foreign earnings of $7.1 million at December 31, 2022. We would need to accrue and pay various taxes on this amount if repatriated. We do not intend to repatriate these earnings.

**Critical Accounting Policies and Estimates**

The preparation of financial statements in conformity with U.S. generally accepted accounting principles ("GAAP") requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities in the consolidated financial statements and accompanying notes. The SEC has defined a company's critical accounting policies as the ones that are most important to the portrayal of the company's financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, we have identified the critical accounting policies, estimates and judgments addressed below. We also have other key accounting policies, which involve the use of estimates, judgments, and assumptions that are significant to understanding our results. For additional information, see Item 8 of Part II, "Financial Statements and Supplementary Data"—Note 2—Accounting Policies and Supplemental Disclosures. We believe that our estimates, assumptions, and judgments are reasonable. We evaluate our estimates and assumptions on an ongoing basis. Actual results may differ significantly from these estimates. Our critical accounting policies are as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• valuation of certain equity method securities carried at fair value.

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*Valuation of certain equity method securities carried at fair value*

We measured certain equity method securities at fair value at the reporting date. In the absence of quoted market prices (e.g., a privately held entity), the fair value was determined in good faith under our valuation policy and process using generally accepted valuation approaches. We utilized an independent third party valuation firm to assist us in determining the fair value of our direct minority interest in tZERO using a market approach. The market approach relied upon market transaction valuations of the subject company, adjusted for enterprise value changes in guideline public companies. The fair value determination of our direct minority interest in tZERO required the use of significant unobservable inputs (Level 3 inputs) as shown in the table within Note 2—Accounting Policies and Supplemental Disclosures, *Equity securities accounted for under the equity method under ASC 323*. Due to the inherent uncertainty of determining the fair value of Level 3 securities that do not have a readily available market value, the determination of fair value required significant judgment or estimation and changes in the estimates and assumptions used in the valuation models could materially affect the determination of fair value for these assets.

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**ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

We are exposed to market risk for the effect of interest rate changes, foreign currency fluctuations, and changes in the market values of our investments. Information relating to quantitative and qualitative disclosures about these market risks is set forth below.

**Interest Rate Sensitivity**

The fair value of our cash and cash equivalents (highly-liquid instruments with an original maturity of 90 days or less at the date of purchase) would not be significantly affected by either an increase or decrease in interest rates due mainly to the short-term nature of these instruments.

Our loan agreements carry a fixed blended annual interest rate of 4.45%. As a result, we have no direct financial statement risk associated with changes in interest rates.

**Foreign Currency Risk**

Most of our sales and operating expenses are denominated in U.S. dollars, and therefore, our total revenue and operating expenses are not currently subject to significant foreign currency risk.

**Inflation**

Increases in commodity and shipping prices and energy and labor costs have resulted in inflationary pressures across various parts of our business and operations, including our partners and supply chain. We continue to monitor the impact of inflation in order to minimize its effects on our customers. We work with our partners to limit the amount of cost increases that are passed on through higher pricing. If costs borne by ourselves or our partners were to be subject to incremental inflationary pressures, we may not be able to fully offset such higher costs through pricing actions or other cost efficiency measures. Our inability or failure to do so could harm our business, financial condition and results of operations.

**Investment Risk**

The fair values of our equity securities may be subject to fluctuations due to volatility of the stock market in general, investment-specific circumstances, and changes in general economic conditions. At December 31, 2022, our recorded value in equity securities in public and private companies was $296.3 million, compared to $342.7 million at December 31, 2021, of which $36,000 relates to publicly traded companies, compared to $174,000 at December 31, 2021, recorded at fair value, which are subject to market price volatility. For our equity interest in Medici Ventures, L.P., we record our proportionate share of the entity's reported net income or loss, which reflects the fair value changes of the underlying investments of the entity and any other income or losses of the entity. We have elected to account for our direct minority interests in tZERO and SpeedRoute using the fair value option. Our assessment includes a review of recent operating results and trends, recent sales/acquisitions of the equity securities, other publicly available data, and the use of third-party valuation experts, as needed. Valuations of private companies are inherently more complex due to the lack of readily available market data. As such, we believe that market sensitivities are not practicable.

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**ITEM 8.&nbsp;&nbsp;&nbsp;&nbsp;FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**

**INDEX TO CONSOLIDATED FINANCIAL STATEMENTS**

---

| | |
|:---|:---|
| <u>[Report of Independent Registered Public Accounting Firm](#icd3bbaeb07274feb8765608f8e4b53f8_64)</u> | [38](#icd3bbaeb07274feb8765608f8e4b53f8_64) |
| <u>[Consolidated Balance Sheets](#icd3bbaeb07274feb8765608f8e4b53f8_67)</u> | [40](#icd3bbaeb07274feb8765608f8e4b53f8_67) |
| <u>[Consolidated Statements of Operations](#icd3bbaeb07274feb8765608f8e4b53f8_70)</u> | [41](#icd3bbaeb07274feb8765608f8e4b53f8_70) |
| <u>[Consolidated Statements of Comprehensive Income (Loss)](#icd3bbaeb07274feb8765608f8e4b53f8_73)</u> | [42](#icd3bbaeb07274feb8765608f8e4b53f8_73) |
| <u>[Consolidated Statements of Changes in Stockholders' Equity](#icd3bbaeb07274feb8765608f8e4b53f8_76)</u> | [43](#icd3bbaeb07274feb8765608f8e4b53f8_76) |
| <u>[Consolidated Statements of Cash Flows](#icd3bbaeb07274feb8765608f8e4b53f8_79)</u> | [46](#icd3bbaeb07274feb8765608f8e4b53f8_79) |
| <u>[Notes to Consolidated Financial Statements](#icd3bbaeb07274feb8765608f8e4b53f8_82)</u> | [48](#icd3bbaeb07274feb8765608f8e4b53f8_82) |
| <u>[Schedule II Valuation and Qualifying Accounts](#icd3bbaeb07274feb8765608f8e4b53f8_157)</u> | [76](#icd3bbaeb07274feb8765608f8e4b53f8_157) |

---

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**Report of Independent Registered Public Accounting Firm**

To the Stockholders and Board of Directors

Overstock.com, Inc.:

*Opinion on the Consolidated Financial Statements*

We have audited the accompanying consolidated balance sheets of Overstock.com, Inc. and subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), changes in stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes and financial statement schedule II (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in *Internal Control – Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 24, 2023 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.

*Basis for Opinion*

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

*Critical Audit Matter*

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

*Valuation of certain equity method securities*

As discussed in Notes 2 and 8 to the consolidated financial statements, the Company values certain equity method securities using a market transaction backsolve approach adjusted for enterprise value changes in guideline public companies. As of December 31, 2022, the Company reported the carrying amount of its equity method securities was $296.3 million, a portion of which related to certain equity method securities valued using this approach.

We identified the valuation of certain equity method securities using a market transaction backsolve approach adjusted for enterprise value changes in guideline public companies as a critical audit matter. A high degree of subjective auditor judgment was required in evaluating the selection of the percentage change in enterprise value for guideline public companies. The valuation was sensitive to reasonably possible changes to this assumption.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company's fair value determination process for equity method securities carried at fair value, including a control related to the development of the percentage change in

------

enterprise value for guideline public companies. We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the selected percentage change in enterprise value for guideline public companies by comparing the selected percentage change to a range of percentages independently developed using publicly available data for comparable entities.

/s/ KPMG LLP

We have served as the Company's auditor since 2009.

Salt Lake City, Utah

February 24, 2023

------

**Overstock.com, Inc.**

**Consolidated Balance Sheets**

**(in thousands, except share data)**

---

| | | |
|:---|:---|:---|
| | **December 31,<br>2022** | **December 31,<br>2021** |
| **Assets** | | |
| Current assets: |  |  |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents | $371263 | $503341 |
| &nbsp;&nbsp;&nbsp;Restricted cash | 194 | 25 |
| &nbsp;&nbsp;Accounts receivable, net of allowance for credit losses of $3,223 and $2,429 | 17693 | 21190 |
| &nbsp;&nbsp;&nbsp;Inventories | 6526 | 5137 |
| &nbsp;&nbsp;&nbsp;Prepaids and other current assets | 18833 | 22097 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets | 414509 | 551790 |
| Property and equipment, net | 109906 | 109479 |
| Deferred tax assets, net | 41439 | 40035 |
| Goodwill | 6160 | 6160 |
| Equity securities, including securities measured at fair value of $82,823 and $102,529 | 296317 | 342682 |
| Operating lease right-of-use assets | 7460 | 12584 |
| Other long-term assets, net | 2755 | 3236 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $878546 | $1065966 |
| **Liabilities and Stockholders' Equity** |  |  |
| Current liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;Accounts payable | $75130 | $102293 |
| &nbsp;&nbsp;&nbsp;Accrued liabilities | 63614 | 101902 |
| &nbsp;&nbsp;&nbsp;Unearned revenue | 44480 | 59387 |
| &nbsp;&nbsp;&nbsp;Operating lease liabilities, current | 4410 | 5402 |
| &nbsp;&nbsp;&nbsp;Other current liabilities | 3508 | 3349 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities | 191142 | 272333 |
| Long-term debt, net | 34476 | 37984 |
| Operating lease liabilities, non-current | 3626 | 7960 |
| Other long-term liabilities | 3476 | 3303 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities | 232720 | 321580 |
| Commitments and Contingencies (Note 12) |  |  |
| Stockholders' equity: |  |  |
| &nbsp;&nbsp;Preferred stock, $0.0001 par value, authorized shares - 5,000 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Series A-1, issued and outstanding - 0 and 4,204  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Series B, issued and outstanding - 0 and 357 |  |  |
| &nbsp;&nbsp;Common stock, $0.0001 par value, authorized shares - 100,000 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Issued shares - 51,102 and 46,625 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Outstanding shares - 44,951 and 43,023 | 5 | 4 |
| &nbsp;&nbsp;&nbsp;Additional paid-in capital | 982718 | 960544 |
| &nbsp;&nbsp;&nbsp;Accumulated deficit | (173829) | (136590) |
| &nbsp;&nbsp;&nbsp;Accumulated other comprehensive loss | (522) | (537) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Treasury stock at cost - 6,151 and 3,602 | (162546) | (79035) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Equity attributable to stockholders of Overstock.com, Inc. | 645826 | 744386 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Equity attributable to noncontrolling interests |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total stockholders' equity | 645826 | 744386 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and stockholders' equity | $878546 | $1065966 |

---

**See accompanying notes to consolidated financial statements.**

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**Overstock.com, Inc.**

**Consolidated Statements of Operations**

**(in thousands, except per share data)**

---

| | | | |
|:---|:---|:---|:---|
| | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
| | **2022** | **2021** | **2020** |
| Net revenue | $1929334 | $2756446 | $2493915 |
| Cost of goods sold | 1485990 | 2132544 | 1922559 |
| &nbsp;&nbsp;&nbsp;Gross profit | 443344 | 623902 | 571356 |
| Operating expenses: |  |  |  |
| &nbsp;&nbsp;&nbsp;Sales and marketing | 215477 | 302430 | 260714 |
| &nbsp;&nbsp;&nbsp;Technology | 121158 | 123001 | 116248 |
| &nbsp;&nbsp;&nbsp;General and administrative | 79701 | 87399 | 97679 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total operating expenses | 416336 | 512830 | 474641 |
| Operating income | 27008 | 111072 | 96715 |
| Interest income (expense), net | 2965 | (556) | (838) |
| Other income (expense), net | (63825) | 12500 | 613 |
| &nbsp;&nbsp;&nbsp;Income (loss) before income taxes from continuing operations | (33852) | 123016 | 96490 |
| Provision (benefit) for income taxes | 1384 | (48775) | 1363 |
| &nbsp;&nbsp;Income (loss) from continuing operations | (35236) | 171791 | 95127 |
| Income (loss) from discontinued operations, net of income taxes |  | 217246 | (48956) |
| Consolidated net income (loss) | $(35236) | $389037 | $46171 |
| &nbsp;&nbsp;&nbsp;Less: Net loss attributable to noncontrolling interests from discontinued operations |  | (335) | (9830) |
| Net income (loss) attributable to stockholders of Overstock.com, Inc. | $(35236) | $389372 | $56001 |
| &nbsp;&nbsp;Net income (loss) attributable to common shares—basic |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Continuing operations | $(0.83) | $3.60 | $2.13 |
| &nbsp;&nbsp;&nbsp;&nbsp;Discontinued operations |  | 4.58 | (0.88) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $(0.83) | $8.18 | $1.25 |
| &nbsp;&nbsp;Net income (loss) attributable to common shares—diluted |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Continuing operations | $(0.83) | $3.57 | $2.12 |
| &nbsp;&nbsp;&nbsp;&nbsp;Discontinued operations |  | 4.54 | (0.88) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $(0.83) | $8.11 | $1.24 |
| Weighted average shares of common stock outstanding: |  |  |  |
| &nbsp;&nbsp;Basic | 44323 | 42981 | 41217 |
| &nbsp;&nbsp;Diluted | 44323 | 43332 | 41607 |

---

**See accompanying notes to consolidated financial statements.**

------

**Overstock.com, Inc.**

**Consolidated Statements of Comprehensive Income (Loss)** 

**(in thousands)**

---

| | | | |
|:---|:---|:---|:---|
| | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
| | **2022** | **2021** | **2020** |
| Consolidated net income (loss) | $(35236) | $389037 | $46171 |
| Other comprehensive income: |  |  |  |
| &nbsp;&nbsp;Unrealized gain on cash flow hedges, net of tax of $0, $0 and $0 | 15 | 16 | 15 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other comprehensive income | 15 | 16 | 15 |
| Comprehensive income (loss) | $(35221) | $389053 | $46186 |
| &nbsp;&nbsp;&nbsp;&nbsp;Less: Comprehensive loss attributable to noncontrolling interests—discontinued operations |  | (335) | (9830) |
| Comprehensive income (loss) attributable to stockholders of Overstock.com, Inc. | $(35221) | $389388 | $56016 |

---

**See accompanying notes to consolidated financial statements.**

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---

| | | | |
|:---|:---|:---|:---|
| **Overstock.com, Inc.<br>Consolidated Statements of Changes in Stockholders' Equity<br>(in thousands, except per share data)** | **Overstock.com, Inc.<br>Consolidated Statements of Changes in Stockholders' Equity<br>(in thousands, except per share data)** | **Overstock.com, Inc.<br>Consolidated Statements of Changes in Stockholders' Equity<br>(in thousands, except per share data)** | **Overstock.com, Inc.<br>Consolidated Statements of Changes in Stockholders' Equity<br>(in thousands, except per share data)** |
| | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** | **2020** |
| **Equity attributable to stockholders of Overstock.com, Inc.** |  |  |  |
| &nbsp;&nbsp;&nbsp;Shares of common stock issued |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Balance at beginning of year | 46625 | 46331 | 42790 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common stock issued upon vesting of restricted stock | 295 | 294 | 710 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common stock issued for ESPP purchases | 84 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Conversion of preferred stock | 4098 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common stock sold through offerings |  |  | 2831 |
| &nbsp;&nbsp;&nbsp;&nbsp;Balance at end of year | 51102 | 46625 | 46331 |
| &nbsp;&nbsp;&nbsp;Shares of treasury stock |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Balance at beginning of year | 3602 | 3563 | 3326 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Repurchases of common stock | 2461 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tax withholding upon vesting of employee stock awards | 88 | 86 | 237 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sale of treasury stock |  | (47) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Balance at end of year | 6151 | 3602 | 3563 |
| &nbsp;&nbsp;&nbsp;Total shares of common stock outstanding | 44951 | 43023 | 42768 |
| &nbsp;&nbsp;&nbsp;Common stock |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Balance at beginning of year | $4 | $4 | $4 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Conversion and elimination of preferred stock | 1 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Balance at end of year | $5 | $4 | $4 |
| &nbsp;&nbsp;&nbsp;Shares of Series A-1 preferred stock issued |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Balance at beginning of year | 4204 | 4204 | 4210 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Conversion and elimination of preferred stock | (4204) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares declared, not distributed |  |  | (6) |
| &nbsp;&nbsp;&nbsp;&nbsp;Balance at end of year |  | 4204 | 4204 |
| &nbsp;&nbsp;&nbsp;Shares of treasury stock |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Balance at beginning of year |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Repurchases of shares | 7 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Conversion and elimination of preferred stock | (7) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Balance at end of year |  |  |  |
| &nbsp;&nbsp;&nbsp;Total shares of Series A-1 preferred stock outstanding |  | 4204 | 4204 |
| &nbsp;&nbsp;&nbsp;Shares of Series B Preferred stock issued and outstanding |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Balance at beginning of year | 357 | 357 | 357 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Conversion and elimination of preferred stock | (357) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Balance at end of year |  | 357 | 357 |
| &nbsp;&nbsp;&nbsp;Preferred stock | $— | $— | $— |
| &nbsp;&nbsp;*Continued on the following page* | &nbsp;&nbsp;*Continued on the following page* | &nbsp;&nbsp;*Continued on the following page* | &nbsp;&nbsp;*Continued on the following page* |

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| | | | |
|:---|:---|:---|:---|
| **Overstock.com, Inc.<br>Consolidated Statements of Changes in Stockholders' Equity<br>(in thousands, except per share data)** | **Overstock.com, Inc.<br>Consolidated Statements of Changes in Stockholders' Equity<br>(in thousands, except per share data)** | **Overstock.com, Inc.<br>Consolidated Statements of Changes in Stockholders' Equity<br>(in thousands, except per share data)** | **Overstock.com, Inc.<br>Consolidated Statements of Changes in Stockholders' Equity<br>(in thousands, except per share data)** |
| | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** | **2020** |
| &nbsp;&nbsp;&nbsp;Additional paid-in capital |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Balance at beginning of year | $960544 | $970873 | $764845 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation to employees and directors | 18318 | 11700 | 12930 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common stock issued for ESPP purchases | 2779 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Conversion and elimination of preferred stock | 1043 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sale of treasury stock |  | 2726 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subsidiary equity award tender offer |  | (2130) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Change in noncontrolling interest ownership |  | (22625) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common stock sold through offerings, net |  |  | 192692 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other | 34 |  | 406 |
| &nbsp;&nbsp;&nbsp;&nbsp;Balance at end of year | $982718 | $960544 | $970873 |
| &nbsp;&nbsp;&nbsp;Accumulated deficit |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Balance at beginning of year | $(136590) | $(525233) | $(580390) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net income (loss) attributable to stockholders of Overstock.com, Inc. | (35236) | 389372 | 56001 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dividend issued upon conversion and elimination of preferred stock | (1697) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Conversion and elimination of preferred stock | (306) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Declaration and payment of preferred dividends |  | (729) | (731) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other |  |  | (113) |
| &nbsp;&nbsp;&nbsp;&nbsp;Balance at end of year | $(173829) | $(136590) | $(525233) |
| &nbsp;&nbsp;&nbsp;Accumulated other comprehensive loss |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Balance at beginning of year | $(537) | $(553) | $(568) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net other comprehensive income | 15 | 16 | 15 |
| &nbsp;&nbsp;&nbsp;&nbsp;Balance at end of year | $(522) | $(537) | $(553) |
| &nbsp;&nbsp;&nbsp;Treasury stock |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Balance at beginning of year | $(79035) | $(71399) | $(68807) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Repurchases of common and Series A-1 preferred stock | (80117) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tax withholding upon vesting of restricted stock | (3700) | (8279) | (2592) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Conversion and elimination of preferred stock | 306 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sale of treasury stock |  | 643 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Balance at end of year | (162546) | (79035) | (71399) |
| Total equity attributable to stockholders of Overstock.com, Inc. | $645826 | $744386 | $373692 |
| *Continued on the following page* | *Continued on the following page* | *Continued on the following page* | *Continued on the following page* |

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| | | | |
|:---|:---|:---|:---|
| **Overstock.com, Inc.<br>Consolidated Statements of Changes in Stockholders' Equity<br>(in thousands, except per share data)** | **Overstock.com, Inc.<br>Consolidated Statements of Changes in Stockholders' Equity<br>(in thousands, except per share data)** | **Overstock.com, Inc.<br>Consolidated Statements of Changes in Stockholders' Equity<br>(in thousands, except per share data)** | **Overstock.com, Inc.<br>Consolidated Statements of Changes in Stockholders' Equity<br>(in thousands, except per share data)** |
| | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** | **2020** |
| **Equity attributable to noncontrolling interests** |  |  |  |
| &nbsp;&nbsp;&nbsp;Balance at beginning of year | $— | $62634 | $62771 |
| &nbsp;&nbsp;&nbsp;&nbsp;Paid in capital for noncontrolling interest |  |  | 5000 |
| &nbsp;&nbsp;&nbsp;&nbsp;Fair value of noncontrolling interest at acquisition |  |  | 3320 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net loss attributable to noncontrolling interests |  | (335) | (9830) |
| &nbsp;&nbsp;&nbsp;&nbsp;Change in noncontrolling interest ownership |  | 22625 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Deconsolidation of subsidiaries |  | (84924) | 1837 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other |  |  | (464) |
| Total equity attributable to noncontrolling interests | $— | $— | $62634 |
| **Total stockholders' equity** | $645826 | $744386 | $436326 |

---

**See accompanying notes to consolidated financial statements.**

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**Overstock.com, Inc.**<br>**Consolidated Statements of Cash Flows**<br>**(in thousands)**<br>

---

| | | | |
|:---|:---|:---|:---|
| | **Year ended December 31,** | **Year ended December 31,** | **Year ended December 31,** |
| | **2022** | **2021** | **2020** |
| **Cash flows from operating activities:** |  |  |  |
| &nbsp;&nbsp;&nbsp;Consolidated net income (loss) | $(35236) | $389037 | $46171 |
| &nbsp;&nbsp;&nbsp;(Income) loss from discontinued operations, net of income taxes |  | (217246) | 48956 |
| &nbsp;&nbsp;&nbsp;Adjustments to reconcile consolidated net income (loss) to net cash provided by (used in) operating activities: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization | 16706 | 18564 | 21776 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-cash operating lease cost | 5304 | 5021 | 4971 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation to employees and directors | 18318 | 11133 | 7841 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Increase) decrease in deferred tax assets, net | (1404) | (53829) | 35 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Income) loss from equity method securities | 63923 | (12585) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other non-cash adjustments | 185 | 1537 | (542) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Changes in operating assets and liabilities: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable, net | 3805 | 1677 | (6715) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories | (1389) | 1106 | (403) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaids and other current assets | 4076 | 2958 | (5358) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other long-term assets, net | (1116) | (1755) | (264) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable | (28821) | (7787) | 34428 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued liabilities | (36625) | (21595) | 48907 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unearned revenue | (14907) | (12778) | 31049 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating lease liabilities | (5527) | (5261) | (5995) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other long-term liabilities | 173 | (150) | 1769 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by (used in) continuing operating activities | (12535) | 98047 | 226626 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in discontinued operating activities |  | (17128) | (30152) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by (used in) operating activities | (12535) | 80919 | 196474 |
| **Cash flows from investing activities:** |  |  |  |
| &nbsp;&nbsp;&nbsp;Purchase of equity securities | (18920) |  |  |
| &nbsp;&nbsp;&nbsp;Contributions for capital calls |  | (41122) |  |
| &nbsp;&nbsp;&nbsp;Capital distribution from investment | 1224 |  |  |
| &nbsp;&nbsp;&nbsp;Expenditures for property and equipment | (14899) | (13617) | (14874) |
| &nbsp;&nbsp;&nbsp;Other investing activities, net | (439) | (1694) | (397) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in continuing investing activities | (33034) | (56433) | (15271) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in discontinued investing activities |  | (29703) | (8284) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in investing activities | (33034) | (86136) | (23555) |
| &nbsp;&nbsp;&nbsp;*Continued on the following page* | &nbsp;&nbsp;&nbsp;*Continued on the following page* | &nbsp;&nbsp;&nbsp;*Continued on the following page* | &nbsp;&nbsp;&nbsp;*Continued on the following page* |

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| | | | |
|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Overstock.com, Inc.**<br>**Consolidated Statements of Cash Flows**<br>**(in thousands)** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Overstock.com, Inc.**<br>**Consolidated Statements of Cash Flows**<br>**(in thousands)** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Overstock.com, Inc.**<br>**Consolidated Statements of Cash Flows**<br>**(in thousands)** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Overstock.com, Inc.**<br>**Consolidated Statements of Cash Flows**<br>**(in thousands)** |
| | **Year ended December 31,** | **Year ended December 31,** | **Year ended December 31,** |
|  | **2022** | **2021** | **2020** |
| **Cash flows from financing activities:** |  |  |  |
| &nbsp;&nbsp;&nbsp;Repurchase of shares | (80117) |  |  |
| &nbsp;&nbsp;&nbsp;Payments on long-term debt | (3447) | (3030) | (2635) |
| &nbsp;&nbsp;&nbsp;Proceeds from long-term debt |  |  | 47500 |
| &nbsp;&nbsp;&nbsp;Proceeds from sale of common stock, net of offering costs |  |  | 195540 |
| &nbsp;&nbsp;&nbsp;Payments of taxes withheld upon vesting of employee stock awards | (3700) | (8279) | (2592) |
| &nbsp;&nbsp;&nbsp;Proceeds from employee stock purchase plan | 924 |  |  |
| &nbsp;&nbsp;&nbsp;Other financing activities, net |  | (1374) | (6449) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by (used in) continuing financing activities | (86340) | (12683) | 231364 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by discontinued financing activities |  | 2085 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by (used in) financing activities | (86340) | (10598) | 231364 |
| Net increase (decrease) in cash, cash equivalents, and restricted cash | (131909) | (15815) | 404283 |
| Cash, cash equivalents, and restricted cash, beginning of year, inclusive of cash balances of discontinued operations | 503366 | 519181 | 114898 |
| Cash, cash equivalents, and restricted cash, end of year, inclusive of cash balances of discontinued operations | 371457 | 503366 | 519181 |
| &nbsp;&nbsp;Less: Cash, cash equivalents, and restricted cash of discontinued operations |  |  | 22559 |
| Cash, cash equivalents, and restricted cash, end of year | $371457 | $503366 | $496622 |

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**See accompanying notes to consolidated financial statements.**

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**Overstock.com, Inc.**

**Notes to Consolidated Financial Statements**

**1. BASIS OF PRESENTATION**

*Business and organization*

As used herein, "Overstock," "Overstock.com," "the Company," "we," "our" and similar terms include Overstock.com, Inc. and our majority-owned subsidiaries, unless the context indicates otherwise. We were formed on May 5, 1997 as D2-Discounts Direct, a limited liability company ("LLC"). On December 30, 1998, we were reorganized as a C Corporation in the State of Utah and reincorporated in Delaware in May 2002. On October 25, 1999, we changed our name to Overstock.com, Inc.

Through our online business, we offer a wide selection of quality furniture, décor, area rugs, bedding and bath, home improvement, outdoor, and kitchen and dining items, among others. We sell our products and services through our Internet websites located at www.overstock.com, www.o.co, www.overstock.ca, and www.overstockgovernment.com (referred to collectively as the "Website") and through our mobile app. Although our four websites are located at different domain addresses, the technology, equipment, and processes supporting the Website and the process of order fulfillment described herein are the same for all four websites.

*Basis of presentation* 

We have prepared the accompanying consolidated financial statements pursuant to generally accepted accounting principles in the United States ("GAAP"). Preparing financial statements requires us to make estimates and assumptions that affect the amounts that are reported in the consolidated financial statements and accompanying disclosures. Although these estimates are based on our best knowledge of current events and actions that we may undertake in the future, our actual results may be different from our estimates. The results of operations presented herein are not necessarily indicative of our results for any future period.

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. ("tZERO"), our former subsidiaries, for the periods prior to their deconsolidation have been reflected in our consolidated statements of operations 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 4—Discontinued Operations for further information.

**2. ACCOUNTING POLICIES AND SUPPLEMENTAL DISCLOSURES**

*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, inventory valuation, depreciable lives, equity securities valuation, income taxes, stock-based compensation, performance-based compensation, self-funded health insurance liabilities, and contingencies. Although these estimates are based on our best knowledge of current events and actions that we may undertake in the future, to the extent there are differences between these estimates and actual results, our consolidated financial statements may be materially affected.

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*Supplemental cash flow information*

The following table shows supplemental cash flow information (in thousands):

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| | | | |
|:---|:---|:---|:---|
| | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
| | **2022** | **2021** | **2020** |
| **Supplemental disclosures of cash flow information:** |  |  |  |
| **Cash paid during the period:** |  |  |  |
| &nbsp;&nbsp;&nbsp;Interest paid, net of amounts capitalized | $1777 | $1775 | $1808 |
| &nbsp;&nbsp;&nbsp;Income taxes paid, net | 2562 | 2262 | 1452 |
| **Non-cash investing and financing activities:** |  |  |  |
| &nbsp;&nbsp;&nbsp;Purchases of property and equipment included in accounts payable and accrued liabilities | $2527 | $508 | $336 |

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See also Note 11—Leases for additional supplemental disclosures of cash flow information related to our leases.

*Cash equivalents*

We classify all highly liquid instruments, including instruments with an original maturity of three months or less at the time of purchase, as cash equivalents.

*Restricted cash*

We consider cash that is legally restricted and cash that is held as compensating balances for credit arrangements 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.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• <u>Level 1</u>—Quoted prices for identical instruments in active markets;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• <u>Level 2</u>—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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• <u>Level 3</u>—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, our equity securities under ASC 321, 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 equity securities under ASC 323 accounted for under the fair value option are measured on a recurring basis using unobservable inputs (level 3). 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 under ASC 323, goodwill, cryptocurrencies, and other intangible assets, are measured at fair value on a nonrecurring basis; that is, the assets are not measured at fair value on an ongoing basis, but are subject to fair value adjustments using fair value measurements with unobservable inputs (level 3), apart from cryptocurrencies which use quoted prices from various digital currency exchanges with active markets in certain circumstances (e.g., when there is evidence of impairment).

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*Accounts receivable, net*

Accounts receivable consist primarily of trade amounts due from customers in the United States and uncleared credit card transactions at period end. Accounts receivables are recorded at invoiced amounts and do not bear interest. We maintain an allowance for expected credit losses based upon our business customers' financial condition and payment history, our historical collection experience, and any future expected economic conditions.

*Inventories*

Inventories include merchandise acquired for resale and processed returns 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, liquidations, and expected recoverable values of each disposition category.

*Prepaids and other current assets*

Prepaids and other current assets represent expenses paid prior to receipt of the related goods or services, including advertising, license fees, maintenance, packaging, insurance, prepaid inventories, other miscellaneous costs, and cryptocurrencies.

*Property and equipment, net*

Property and equipment are recorded at cost and stated net of depreciation and amortization. Property and equipment are depreciated using the straight-line method over the estimated useful lives of the related assets or the term of the related finance lease, whichever is shorter, as follows:

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| | |
|:---|:---|
| | **Life<br>(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 |

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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.

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.

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*Initial valuation of retained noncontrolling interest in former subsidiaries*

During the second quarter of 2021, we measured our retained noncontrolling interest in former subsidiaries at fair value at the date of deconsolidation. In the absence of quoted market prices (since the equity of these entities is not traded on a public market), the fair value was determined in good faith under our valuation policy and process using generally accepted valuation approaches. We utilized an independent third party valuation firm to assist us in determining the fair values of our retained noncontrolling interest in former subsidiaries using a combination of a market approach and income approach. The market approach relied upon a comparison with guideline public companies or guideline transactions and entails selecting relevant financial information of the subject company, and capitalizing those amounts using valuation multiples that are based on empirical market observations. The income approach relied upon an analysis of its projected economic earnings discounted to present value (discounted cash flows). The fair value determination of our retained noncontrolling interest required the use of significant unobservable inputs (Level 3 inputs) as shown in the table within Note 4—Discontinued Operations. Due to the inherent uncertainty of determining the fair value of Level 3 securities that do not have a readily available market value, the determination of fair value required significant judgment or estimation and changes in the estimates and assumptions used in the valuation models could materially affect the determination of fair value for these assets. See Note 4—Discontinued Operations for further information.

*Equity securities under ASC 321*

At December 31, 2022, we held minority interests (less than 20%) in certain public entities, accounted for under ASC Topic 321, *Investments—Equity Securities* ("ASC 321"), which are included in Equity securities at fair value in our consolidated balance sheets. We measure our ASC 321 equity securities at fair value (based on Level 1 inputs) with changes in fair value recorded in Other income (expense), net in our consolidated statements of operations. Dividends received are reported in earnings if and when received.

*Equity securities accounted for under the equity method under ASC 323*

At December 31, 2022, we held minority interests in privately held entities, Medici Ventures, L.P., tZERO, and SpeedRoute, LLC ("SpeedRoute"), accounted for under the equity method 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 holding more than a 20% voting interest.

Based on the nature of our ownership interests and the extent of our contributed capital, we held a variable interest in Medici Ventures, L.P. and SpeedRoute, both of which meet the definition of variable interest entities; however, we are not the primary beneficiary of these entities for purposes of consolidation as we do not have the power (either explicit or implicit), through voting rights or otherwise, to direct the activities of Medici Ventures, L.P. and SpeedRoute that most significantly impact their economic performance. Our investments in these variable interest entities totaled $217.4 million as of December 31, 2022, representing our maximum exposures to loss.

We record our proportionate share of Medici Ventures, L.P.'s net assets assuming the entity (i) liquidated its net assets at their book values and (ii) distributed the proceeds to the investors based on the distribution waterfall in the investment agreement, which reflects the fair value changes of the underlying investments of the entity, any investor-level adjustments, and any other operating income or losses of the entity, in Other income (expense), net in our consolidated statements of operations with corresponding adjustments to the carrying value of the asset. If such events or circumstances have occurred that may indicate the fair value of our equity interest is less than its carrying value, we estimate the fair value of our equity interest 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. There is no difference between the carrying amount of our investment in the entity and the amount of underlying equity we have in the entity's net assets.

We have elected to apply the fair value option for valuing our direct minority interests in tZERO and SpeedRoute as we determined that accounting for our direct minority interests in tZERO and SpeedRoute under the fair value option would approximate the same valuation approach used by Medici Ventures, L.P. for valuing our indirect interest in tZERO and SpeedRoute and would be the most meaningful and transparent option for evaluating our continued exposure to the economics of tZERO and SpeedRoute. The fair value was determined in good faith under our valuation policy and process using generally accepted valuation approaches through the use of a third-party valuation firm. Our assessment includes a review of recent operating results and trends, recent sales/acquisitions of the equity securities, and other publicly available data.

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The methods and significant assumptions to estimate the fair value of our direct minority interests in tZERO under the fair value option include using a market approach. The market approach relied upon market transaction valuations of the subject company, adjusted for enterprise value changes in guideline public companies. Due to the new Series B financing round led by the Intercontinental Exchange, the valuation approach used for valuing our direct interest in tZERO changed to a market approach using a transaction backsolve with an option pricing model valuation technique in the current period compared to a market approach with guideline public companies and income approach valuation technique in the prior period. The methods and significant assumptions to estimate the fair value of our direct minority interests in SpeedRoute under the fair value option include using a market approach based on recent market transaction valuations.

The following table summarizes the valuation techniques and significant unobservable inputs used in the fair value measurement of our Level 3 equity securities:

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| | | | | |
|:---|:---|:---|:---|:---|
| **Investment** | **Fair Value** | **Valuation technique** | **Unobservable inputs** | **Inputs** |
| tZERO | $78867 | Market approach - transaction backsolve with an option pricing model | Term to liquidity | 5.0 years |
|  |  |  | Volatility | 125% |
|  |  |  | Percentage change in enterprise value for guideline public companies | (32.4)% |
| SpeedRoute | 3920 | Market approach - recent transactions | N/A | N/A |
| Total | $82787 |  |  |  |

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A significant change in the term to liquidity, volatility, or percentage change in enterprise value for guideline public companies inputs could result in a significant change in the fair value measurement.

*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 the 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 the 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.

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*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. There were no impairments to goodwill recorded during the years ended December 31, 2022, 2021 and 2020 and no other changes to the carrying amount of goodwill during the years ended December 31, 2022 and 2021. Our goodwill balance of $6.2 million as of December 31, 2022 and 2021 is net of accumulated impairment losses and other adjustments of $3.3 million.

*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 a comparison of the assets' carrying amount to future undiscounted net cash flows the asset group is expected to generate. Cash flow forecasts are based on trends of historical performance and management's estimate of future performance, giving consideration to existing and anticipated competitive and economic conditions. If such asset group is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds their fair values. There were no impairments to long-lived assets recorded during the years ended December 31, 2022, 2021 and 2020.

*Other long-term assets, net*

Other long-term assets, net consist primarily of long-term prepaid expenses and deposits.

*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*

&nbsp;&nbsp;&nbsp;&nbsp;

We derive our revenue primarily through our Website but may also derive revenue from sales of merchandise through other channels. Our 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. The vast majority of our sales, however, are fulfilled from inventory sourced through our partners.

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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 unearned revenue prior to delivery of products or services ordered. As we ship high volumes of packages through multiple carriers, we use estimates to determine which shipments are delivered and, therefore, recognized as revenue at the end of the period. Our delivery date estimates are based on average shipping transit times, which are calculated using the following factors: (i) the type of shipping carrier (as carriers have different in-transit times); (ii) the fulfillment source (either our warehouses, those warehouses we control, or those of our partners); (iii) the delivery destination; and (iv) actual transit time experience, which shows that delivery date is typically one to eight business days from the date of shipment. We review and update our estimates on a quarterly basis based on our actual transit time experience. However, actual shipping times may differ from our estimates.

Generally, we require authorization from credit card or other payment vendors whose services we offer to our customers (such as PayPal, Apple Pay, Klarna), or verification of receipt of payment, before we ship products to consumers or business purchasers. 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 revenue on a gross 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 unearned 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. As such, the initial transaction price giving rise to the reward dollar is allocated to each separate performance obligation based upon its relative standalone selling price. In determining the stand-alone selling price, we incorporate assumptions about the redemption rates of loyalty points. We recognize revenue for Club O Reward dollars when customers redeem such rewards as part of a purchase on our Website.

We record the standalone value of reward dollars earned in unearned 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.

*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 revenue when the advertising services are rendered. Advertising revenues were approximately 2% of total net revenues for all periods presented.

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*Unearned 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 unearned revenue when payment is received prior to delivery of products or services ordered. We record amounts received for Club O membership fees as unearned revenue and we recognize it ratably over the membership period. We record Club O Reward dollars earned from purchases as unearned 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 revenue in proportion to the estimated pattern of rights exercised by the customer. If reward dollars are not redeemed, we recognize revenue upon expiration. In addition, we sell gift cards and record related unearned 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. The unredeemed portion of our gift cards are recognized in revenue over the expected redemption period based upon the estimated pattern of rights exercised by the customer, if the gift cards are not subject to escheat laws.

*Sales returns allowance*

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.

*Cost of goods sold*

Our cost of goods sold includes product costs, warehousing costs, outbound shipping costs, handling and fulfillment costs, customer service costs, and merchant fees, and is recorded in the same period in which related revenues have been recorded.

*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 in our consolidated statements of operations. Prepaid advertising is included in Prepaids and other current assets in our consolidated balance sheets.

*Stock-based compensation*

We measure compensation expense for our outstanding unvested restricted stock 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 15—Stock-Based Awards.

We use the Black-Scholes option pricing model to determine the fair value of our employee stock purchase plan shares. The determination of the fair value of stock-based payment awards on the date of grant using an option pricing model is affected by our stock price and assumptions regarding a number of complex and subjective variables. These variables include our expected stock price volatility over the expected term of the awards, actual and projected employee stock option exercise behaviors, a risk-free interest rate and any expected dividends.

*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 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 12—Commitments and Contingencies).

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*Income taxes*

Income taxes are accounted for under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

We recognize deferred tax assets to the extent that we believe these assets are more likely than not to be realized. In evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise, we consider all available positive and negative evidence, including projected future taxable income, scheduled reversals of our deferred tax liabilities, tax planning strategies, and results of recent operations. Our projections of future taxable income are subject to change due to economic outlook, political climate, and other conditions such as supply chain challenges, inflation, rising interest rates, and other macroeconomic conditions, and judgment is required in determining our ability to use our deferred tax assets.

We record uncertain tax positions in accordance with ASC 740 on the basis of a two-step process whereby (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. We recognize interest and penalties related to unrecognized tax benefits within the income tax expense line in the accompanying consolidated income statements. Accrued interest and penalties are included within the related tax liability line in our consolidated balance sheets.

*Net income (loss) per share*

Our Series A-1 preferred stock and Series B preferred stock (collectively, the "Preferred Shares") were considered participating securities, and as a result, net income (loss) per share has historically been calculated using the two-class method. Under this method, we give effect to preferred dividends and then allocate undistributed net income (loss) attributable to participating securities (based on the weighted average percentage of shares outstanding) in determining net income (loss) attributable to common shares. In periods of net loss, a determination is also made on whether a participating security holder has an obligation to share in the losses before allocating to participating securities. As of December 31, 2022, there were no participating securities following our preferred stock conversion. See Note 14—Stockholders' Equity, *Preferred stock conversion*, for further information.

Basic net income (loss) per common share is computed by dividing net income (loss) attributable to common shares by the weighted average number of common shares outstanding during the period.

Diluted net income (loss) per share is computed by dividing net income (loss) attributable to common shares by the weighted average number of common and potential common shares outstanding during the period. Potential common shares, comprising incremental common shares issuable from the employee stock purchase plan and restricted stock awards are included in the calculation of diluted net income (loss) per common share to the extent such shares are dilutive.

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**3. 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 as of December 31, 2022 and 2021, as indicated (in thousands):

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Fair Value Measurements at December 31, 2022** | **Fair Value Measurements at December 31, 2022** | **Fair Value Measurements at December 31, 2022** | **Fair Value Measurements at December 31, 2022** |
| | **Total** | **Level 1** | **Level 2** | **Level 3** |
| Assets: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Cash equivalents—Money market mutual funds | $252650 | $252650 | $— | $— |
| &nbsp;&nbsp;&nbsp;Equity securities, at fair value | 82823 | 36 |  | 82787 |
| &nbsp;&nbsp;&nbsp;Trading securities held in a "rabbi trust" (1) | 399 | 399 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $335872 | $253085 | $— | $82787 |
| Liabilities: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Deferred compensation accrual "rabbi trust" (2) | $396 | $396 | $— | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities | $396 | $396 | $— | $— |

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Fair Value Measurements at December 31, 2021** | **Fair Value Measurements at December 31, 2021** | **Fair Value Measurements at December 31, 2021** | **Fair Value Measurements at December 31, 2021** |
| | **Total** | **Level 1** | **Level 2** | **Level 3** |
| Assets: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Cash equivalents—Money market mutual funds | $— | $— | $— | $— |
| &nbsp;&nbsp;&nbsp;Equity securities, at fair value | 102529 | 174 |  | 102355 |
| &nbsp;&nbsp;&nbsp;Trading securities held in a "rabbi trust" (1) | 179 | 179 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $102708 | $353 | $— | $102355 |
| Liabilities: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Deferred compensation accrual "rabbi trust" (2) | $188 | $188 | $— | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities | $188 | $188 | $— | $— |

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___________________________________________

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;&nbsp;&nbsp;&nbsp;Non-qualified deferred compensation in a rabbi trust is included in Accrued liabilities and Other long-term liabilities in the consolidated balance sheets.

The following table provides activity for our Level 3 investments during the periods presented (in thousands):

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| | |
|:---|:---|
| | **Amount** |
| Level 3 investments at December 31, 2020 | $— |
| Increase due to acquisition of Level 3 investments | 99723 |
| Increase in fair value of Level 3 investments | 2632 |
| Level 3 investments at December 31, 2021 | 102355 |
| Increase due to purchases of Level 3 investments | 18920 |
| Decrease in fair value of Level 3 investments | (38488) |
| Level 3 investments at December 31, 2022 | $82787 |

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**4. DISCONTINUED OPERATIONS**

On January 25, 2021, we entered into an agreement with Medici Ventures, Pelion, and Pelion, Inc. (the "Medici Closing"), 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.

At the Medici Closing, our retained equity interest in the Partnership and our direct minority interest in tZERO had a fair value of $288.8 million, inclusive of $3.4 million of capital calls funded at the Medici Closing. The fair value of these equity securities at the Medici Closing was estimated by taking the mid-point from a valuation range using a weighting of multiple valuation techniques on the underlying components of the equity securities to calculate a fair value for the whole, including discounted cash flow models and market transactional data, both of which incorporate significant unobservable inputs (Level 3). Approximately $149.9 million of the total $288.8 million Level 3 equity securities have been valued using unadjusted inputs that have not been internally developed by management, including third-party transactions and quotations. The significant unobservable inputs used in the $288.8 million fair value measurement of these Level 3 equity securities at the Medici Closing are summarized as follows:

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| | | | |
|:---|:---|:---|:---|
| **Valuation technique** | **Unobservable inputs** | **Range (1)** | **Weighted average (2)** |
| Market approach | Enterprise value to revenue multiple | 0.88x | 0.88x |
| Discounted cash flows - exit multiple | Discount rate | 9.0% - 35.0% | 32.4% |
| Discounted cash flows - exit multiple | Enterprise value to revenue multiple | 0.75x - 5.00x | 4.40x |
| Discounted cash flows - exit multiple | Projected terminal year | 2023 - 2027 | 2025 |
| Discounted cash flows - exit multiple | Annual revenue growth rate | 1.3% - 124.0% | 109.4% |
| Discounted cash flows - exit multiple | Annual EBITDA % of revenues | 5.2% - 41.2% | 36.3% |
| Discounted cash flows - perpetual growth | Discount rate | 30.0% | 30.0% |
| Discounted cash flows - perpetual growth | Projected terminal year | 2028 | 2028 |
| Discounted cash flows - perpetual growth | Perpetual revenue growth rate | 3.0% | 3.0% |
| Discounted cash flows - perpetual growth | Annual revenue growth rate | 25.7% | 25.7% |
| Discounted cash flows - perpetual growth | Annual EBITDA % of revenues | 14.9% | 14.9% |

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__________________________________________

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;&nbsp;&nbsp;&nbsp; — The range for the Annual revenue growth rate and Annual EBITDA % of revenues are based on the weighted average metrics for the annual periods of the separate cash flow models for the respective component.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;&nbsp;&nbsp;&nbsp; — Unobservable inputs were weighted by the relative fair value based on the fair value of the underlying components subjected to the identified valuation technique. For projected terminal year, the amount represents the median of the inputs and is not a weighted average.

We recognized a $243.5 million gain upon deconsolidation of these entities which primarily relates to the remeasurement of our retained equity method interest in the Partnership and our direct minority interest in tZERO at fair value, which was included in our consolidated statements of operations as part of Income (loss) from discontinued operations, net of income taxes. We completed the entire funding of our $44.6 million capital commitment consistent with our proportional ownership interest, which was completed and funded in the second quarter of 2021.

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

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| | | | |
|:---|:---|:---|:---|
| | **Year ended December 31,** | **Year ended December 31,** | **Year ended December 31,** |
| | **2022** | **2021** | **2020** |
| Net revenue | $— | $17394 | $55868 |
| Cost of goods sold |  | 13716 | 47691 |
| &nbsp;&nbsp;&nbsp;Gross profit |  | 3678 | 8177 |
| Operating expenses |  |  |  |
| &nbsp;&nbsp;&nbsp;Technology |  | 7133 | 20750 |
| &nbsp;&nbsp;&nbsp;Selling, general, and administrative |  | 13509 | 31916 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total operating expenses |  | 20642 | 52666 |
| Operating loss from discontinued operations |  | (16964) | (44489) |
| Interest income, net |  | 192 | 600 |
| Other income (loss), net |  | 4081 | (5441) |
| Gain on deconsolidation |  | 243541 |  |
| &nbsp;&nbsp;Income (loss) from discontinued operations before income taxes |  | 230850 | (49330) |
| Provision (benefit) for income taxes |  | 13604 | (374) |
| Income (loss) from discontinued operations, net of income taxes | $— | $217246 | $(48956) |
| &nbsp;&nbsp;Less: Net loss attributable to noncontrolling interests from discontinued operations |  | (335) | (9830) |
| Net income (loss) from discontinued operations attributable to stockholders of Overstock.com, Inc. | $— | $217581 | $(39126) |

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**5. ACCOUNTS RECEIVABLE, NET**

Accounts receivable, net consist of the following (in thousands):

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| | | |
|:---|:---|:---|
| | **December 31,** | **December 31,** |
| | **2022** | **2021** |
| Credit card receivables, trade | $10595 | $14148 |
| Accounts receivable, trade | 5760 | 6501 |
| Other receivables | 4561 | 2970 |
|  | 20916 | 23619 |
| Less: allowance for credit losses | (3223) | (2429) |
| Total accounts receivable, net | $17693 | $21190 |

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**6. PREPAIDS AND OTHER CURRENT ASSETS**

Prepaids and other current assets consist of the following (in thousands):

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| | | |
|:---|:---|:---|
| | **December 31,** | **December 31,** |
| | **2022** | **2021** |
| Prepaid maintenance | $8767 | $10780 |
| Other current assets | 5467 | 5071 |
| Prepaid other | 4599 | 6246 |
| Total prepaids and other current assets | $18833 | $22097 |

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**7. PROPERTY AND EQUIPMENT, NET**

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

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| | | |
|:---|:---|:---|
| | **December 31,** | **December 31,** |
| | **2022** | **2021** |
| Computer hardware and software, including internal-use software and website development | $240148 | $225256 |
| Building | 69350 | 69293 |
| Land | 12781 | 12781 |
| Furniture and equipment | 12642 | 12067 |
| Building machinery and equipment | 9791 | 9809 |
| Land improvements | 7060 | 7025 |
| Leasehold improvements | 2904 | 2601 |
|  | 354676 | 338832 |
| Less: accumulated depreciation | (244770) | (229353) |
| Total property and equipment, net | $109906 | $109479 |

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Capitalized costs associated with internal-use software and website development, both developed internally and acquired externally, and depreciation of costs for the same periods associated with internal-use software and website development consist of the following (in thousands):

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| | | | |
|:---|:---|:---|:---|
| | **Year ended December 31,** | **Year ended December 31,** | **Year ended December 31,** |
| | **2022** | **2021** | **2020** |
| Capitalized internal-use software and website development | $7915 | $6126 | $10246 |
| Depreciation of internal-use software and website development | 6571 | 7237 | 10262 |

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

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| | | | |
|:---|:---|:---|:---|
| | **Year ended December 31,** | **Year ended December 31,** | **Year ended December 31,** |
| | **2022** | **2021** | **2020** |
| Cost of goods sold | $682 | $605 | $680 |
| Technology | 12233 | 13801 | 15708 |
| General and administrative | 3742 | 4064 | 5279 |
| &nbsp;&nbsp;&nbsp;Total depreciation | $16657 | $18470 | $21667 |

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**8. EQUITY SECURITIES**

Equity securities consist of the following (in thousands):

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| | | |
|:---|:---|:---|
| | **December 31,** | **December 31,** |
| | **2022** | **2021** |
| Equity securities accounted for under the equity method under ASC 323 | $213494 | $240153 |
| Equity securities accounted for under the equity method under the fair value option | 82787 | 102355 |
| Equity securities under ASC 321 | 36 | 174 |
| Total equity securities | $296317 | $342682 |

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The following table includes our equity securities accounted for under the equity method (ASC 323) and related ownership interest as of December 31, 2022:

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| | |
|:---|:---|
| | **Ownership<br>interest** |
| Medici Ventures, L.P. | 99% |
| tZERO Group, Inc. | 29% |
| SpeedRoute, LLC | 49% |

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During the year ended December 31, 2022, we completed our investment of an additional $15.0 million in tZERO through their Series B financing round led by the Intercontinental Exchange. We also acquired an equity interest in SpeedRoute, LLC ("SpeedRoute"), a former subsidiary of tZERO, which provides connectivity to tZERO's registered broker-dealer clients to U.S. equity exchanges and off-exchange sources of liquidity for $3.9 million.

The carrying amount of our equity method securities was $296.3 million at December 31, 2022, which is included in Equity securities on our consolidated balance sheets, of which $82.8 million is valued under the fair value option (tZERO and SpeedRoute). These investments are valued using Level 3 inputs, which represents 24.6% of assets measured at fair value. For our investments in Medici Ventures, L.P., tZERO, and SpeedRoute there is no difference in the carrying amount of the assets and liabilities and our maximum exposure to loss, and there is no difference between the carrying amount of our investment in Medici Ventures, L.P. and the amount of underlying equity we have in the entity's net assets.

The following table summarizes the net gain (loss) recognized on equity method securities recorded in Other income (expense), net in our consolidated statements of operations (in thousands):

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| | | |
|:---|:---|:---|
| | **Years ended December 31,** | **Years ended December 31,** |
| | **2022** | **2021** |
| Net gain (loss) recognized on our proportionate share of the net assets of our equity method securities | $(25435) | $9953 |
| Increase (decrease) in fair value of equity method securities held under fair value option | (38488) | 2632 |

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*Regulation S-X Rules 4-08(g) and 3-09*

In accordance with SEC Rules 4-08(g) and 3-09 of Regulation S-X, we must determine which, if any, of our equity method securities is a "significant subsidiary". Regulation S-X mandates the use of three different tests to determine if any of our equity securities are significant subsidiaries: the investment test, the asset test, and the income test. The table below provides the summarized financial information required by Rule 4-08(g) for those equity method securities in aggregate that have met the significance criteria (in thousands):

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| | | |
|:---|:---|:---|
| | **December 31,** | **December 31,** |
| **Balance Sheet (1)** | **2022** | **2021** |
| Assets | $122015 | $76192 |
| Liabilities | (25055) | (21683) |
| Equity | $(96960) | $(54509) |

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| | | | |
|:---|:---|:---|:---|
| | **Years ended December 31,** | **Years ended December 31,** | **Years ended December 31,** |
| **Results of Operations (1)** | **2022** | **2021** | **2020** |
| Revenues | $31187 | $20800 | $4788 |
| Pre-tax loss | (37619) | (24528) | (36533) |
| Net loss | (37477) | (24590) | (36625) |

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___________________________________________

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) The balance sheet and results of operations in the summarized financial information above excludes the financial information for the periods subsequent to the date an equity method investee ceased being accounted for under the equity method and only includes the financial information for the periods subsequent to the date an investee became an equity method investment and was accounted for under the equity method.

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In accordance with Rule 3-09 of Regulation S-X, separate audited financial statements of Medici Ventures, L.P. for the periods ended September 30, 2022, and 2021, their fiscal year-ends, are being filed herewith as Exhibit 99.2 and Exhibit 99.1, respectively, and as such are excluded from the table above. In addition, tZERO was not deemed significant for the years ended December 31, 2021 and 2020 but was significant for the year ended December 31, 2022. In accordance with Rule 3-09 of Regulation S-X, separate audited financial statements for tZERO for the year ended December 31, 2022 will be filed subsequently as an amendment to this Form 10-K.

**9. ACCRUED LIABILITIES**

Accrued liabilities consist of the following (in thousands):

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| | | |
|:---|:---|:---|
| | **December 31,** | **December 31,** |
| | **2022** | **2021** |
| Accounts payable accruals | $14343 | $25571 |
| Accrued compensation and other related costs | 12018 | 21910 |
| Allowance for returns | 10222 | 13923 |
| Accrued marketing expenses | 9670 | 15317 |
| Accrued freight | 7880 | 10982 |
| Sales and other taxes payable | 5288 | 8756 |
| Other accrued expenses | 4193 | 5443 |
| Total accrued liabilities | $63614 | $101902 |

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**10. BORROWINGS**

*2020 loan agreements*

In March 2020, we entered into two loan agreements. 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. Our debt issuance costs and debt discount are amortized using the straight-line basis which approximates the effective interest method.

As of December 31, 2022, the total outstanding debt on these loans was $38.0 million, net of $404,000 in capitalized debt issuance costs, and the total amount of the current portion of these loans included in Other current liabilities on our consolidated balance sheets was $3.5 million.

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. The financial covenants require that Overstock maintain a net worth in excess of $30 million and minimum liquid assets of $3 million for so long as the Mezzanine Note is outstanding and is reduced to maintaining a net worth in excess of $15 million and minimum liquid assets of $1 million for the remainder of the term that the Senior Note is outstanding. We are in compliance with our debt covenants and continue to monitor our ongoing compliance with our debt covenants.

Future principal payments on our total debt as of December 31, 2022, are as follows (in thousands):

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| | |
|:---|:---|
| **Payments due by period** | |
| 2023 | $3606 |
| 2024 | 282 |
| 2025 |  |
| 2026 |  |
| 2027 |  |
| Thereafter | 34500 |
|  | $38388 |

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**11. LEASES**

We have operating leases for warehouses, office space, and data centers. Our leases have remaining lease terms of one year to five years, some of which may include options to extend the leases perpetually, and some of which may include options to terminate the leases within one year. Variable lease costs include executory costs, such as taxes, insurance, and maintenance.

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

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| | | | |
|:---|:---|:---|:---|
| | **Years ended December 31,** | **Years ended December 31,** | **Years ended December 31,** |
| | **2022** | **2021** | **2020** |
| Operating lease cost | $5975 | $6583 | $6352 |
| Variable lease cost | 1489 | 1702 | 1536 |

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The following tables provides a summary of other information related to leases (in thousands):

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| | | | |
|:---|:---|:---|:---|
| | **Years ended December 31,** | **Years ended December 31,** | **Years ended December 31,** |
| | **2022** | **2021** | **2020** |
| Cash payments included in operating cash flows from lease arrangements | $6237 | $6478 | $7224 |
| Right-of-use assets obtained in exchange for new operating lease liabilities | 437 | 835 | 5316 |
| Derecognition of right-of-use assets due to reassessment of lease term | 257 | 527 | 666 |

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The following table provides a summary of balance sheet information related to leases:

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| | | |
|:---|:---|:---|
| | **December 31,** | **December 31,** |
| | **2022** | **2021** |
| Weighted-average remaining lease term—operating leases | 2.04 years | 2.72 years |
| Weighted-average discount rate—operating leases | 7% | 7% |

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&nbsp;&nbsp;&nbsp;&nbsp;

Maturity of lease liabilities under our non-cancellable operating leases as of December 31, 2022, are as follows (in thousands):

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| | |
|:---|:---|
| **Payments due by period** | |
| 2023 | $4816 |
| 2024 | 2880 |
| 2025 | 689 |
| 2026 | 250 |
| 2027 | 83 |
| Thereafter |  |
| &nbsp;&nbsp;&nbsp;Total lease payments | 8718 |
| Less interest | 682 |
| &nbsp;&nbsp;&nbsp;Present value of lease liabilities | $8036 |

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**12. 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

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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.

As previously disclosed, in October 2019, we received a subpoena from the SEC requiring us to produce documents and other information related to the Series A-1 Preferred stock dividend we announced to stockholders in June 2019 and requesting copies of 10b5-1 plans entered into by certain officers and directors. In December 2019, we received a subpoena from the SEC requesting our insider trading policies and certain employment and consulting agreements. We also received requests from the SEC for our communications with our former Chief Executive Officer and Director, Patrick Byrne, and the matters referenced in the December 2019 subpoenas. In January 2021, we received a subpoena from the SEC requesting information regarding our retail guidance in 2019 and certain communications with current and former executives, board members, and investors. We continue to cooperate with the SEC on these matters.

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 of Utah, alleging violations under Section 10(b), Rule 10b-5, Section 20(a), and Section 20A of the Securities Exchange Act of 1934, as amended (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 us 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, our former Chief Executive Officer, and our former Chief Financial Officer. We filed a motion to dismiss and, on September 28, 2020, the court granted our motion and entered judgment in our favor. The plaintiffs filed a motion to amend their complaint on October 23, 2020. The United States District Court of Utah granted the plaintiffs' motion to amend their complaint on January 6, 2021. The plaintiffs filed their amended complaint on January 11, 2021. We filed a motion to dismiss plaintiffs' amended complaint, and on September 20, 2021, the court granted our motion and entered judgment in our favor. On October 18, 2021, the plaintiffs filed a Notice of Appeal, appealing the ruling of the district court to the United States Court of Appeals for the Tenth Circuit. We are awaiting a ruling from the Tenth Circuit that heard oral argument on the appeal on February 9, 2023. No estimates of the possible losses or range of losses can be made at this time. We intend to continue 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 ours 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. The case remains stayed pending the outcome of the plaintiffs' appeal to the Tenth Circuit in the securities class action. 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. We removed the case to United States District Court, Eastern District of Missouri on May 22, 2020, and on February 9, 2021, the case against us was dismissed. On March 1, 2021, a putative class action lawsuit was filed against us in the Circuit Court of the County of St. Louis, State of Missouri, alleging similar allegations to the April 23, 2020 putative class action lawsuit that was dismissed, that we over-collected taxes on products sold into the state of Missouri. We filed a motion to compel arbitration, which was denied on October 13, 2021. We filed a motion to dismiss, which was denied on March 16, 2022. No estimates of the possible losses or range of losses can be made at this time. We intend to vigorously defend this action.

We establish liabilities when a particular contingency is probable and estimable which are included in Accrued liabilities in our consolidated balance sheets. At December 31, 2022 and 2021, our established liabilities were not material.

**13. 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 building loan agreements,

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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.

**14. 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.

*Preferred stock conversion*

On May 12, 2022, Overstock shareholders voted to approve separate proposals to approve the amendment of the Company's Amended and Restated Certificate of Designation for both classes of its preferred stock to provide that each share of our Series A-1 and Series B preferred stock be automatically converted into 0.90 of a share of our common stock (the "Conversion"). On June 10, 2022, in connection with the completion of the Conversion, the Company issued 4,097,697 shares of our common stock in exchange for the outstanding Series A-1 and Series B preferred stock on that date. As the fair value of our common stock issued exceeded the fair value of the Series A-1 and Series B preferred stock exchanged on the Conversion date, we recognized a non-cash deemed dividend to our preferred stockholders of $1.7 million due to the excess fair value per share compared to the conversion ratio. Following the Conversion, the Company eliminated the Series A-1 and Series B preferred stock classes by filing Certificates of Elimination with the Delaware Secretary of State.

*JonesTrading Sales Agreement*

We entered into an Amended and Restated Capital on Demand<sup>TM</sup> Sales Agreement (the "Sales Agreement") dated June 26, 2020 with JonesTrading Institutional Services LLC ("JonesTrading") and D.A. Davidson & Co. ("D.A. Davidson"), under which we may conduct "at the market" public offerings of our common stock. Under the Sales Agreement, JonesTrading and D.A. Davidson, acting as our agents, 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 years ended December 31, 2022 and 2021, we did not sell any shares of our common stock pursuant to the Sales Agreement. For the year ended December 31, 2020, we 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 415,904 shares of our common stock under the prior iteration of the agreement that were executed in late December 2019. As of December 31, 2022, we had $150.0 million available under our "at the market" sales program.

*Common Stock Offering*

We completed a public offering of our common stock on August 14, 2020 and issued 2,415,000 shares of our common stock pursuant to an underwriting agreement, dated August 11, 2020, for proceeds totaling $192.7 million, net of $11.4 million in offering costs.

------

*Common and Preferred Stock Repurchase Program*

On August 17, 2021, we announced that our Board of Directors had approved a stock repurchase program (the "Repurchase Program"), pursuant to which we may, from time to time, purchase shares of our outstanding common stock for an aggregate repurchase price not to exceed $100.0 million at any time through December 31, 2023. Repurchases under the Repurchase Program may be effected through open market purchases. The Repurchase Committee designated by the Board of Directors will determine the actual timing, number, and value of any shares repurchased under the Repurchase Program in its discretion using factors including, but not limited to, our stock price and trading volume, general market conditions, and the ongoing assessment of our capital needs. There is no assurance of the number or aggregate price of any shares that we will ultimately repurchase under the Repurchase Program, which may be extended, suspended, or terminated at any time by the Board of Directors.

For the year ended December 31, 2022, we repurchased $79.8 million of our common stock and $306,000 of our Series A-1 preferred stock under the Repurchase Program at average prices of $32.41 and $42.16 per share, respectively. As of December 31, 2022, we had $19.9 million available for future share repurchases under our current repurchase authorization through December 31, 2023. For the year ended December 31, 2022, we retired 7,244 shares of our Series A-1 preferred stock treasury stock which had been previously repurchased under the Repurchase Program. The retirement increased Accumulated deficit by $306,000.

**15. STOCK-BASED AWARDS**

We have equity incentive and compensatory plans that provide for the grant of stock-based awards, including restricted stock, to employees and board members and provide employees the ability to purchase shares of our common stock through an employee stock purchase plan. Employee accounting applies to equity incentives and compensation granted by the Company to its own employees. 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.

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

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| | | | |
|:---|:---|:---|:---|
| | **Years ended December 31,** | **Years ended December 31,** | **Years ended December 31,** |
| | **2022** | **2021** | **2020** |
| Cost of goods sold | $132 | $102 | $169 |
| Sales and marketing | 693 | 987 | 799 |
| Technology | 7659 | 3799 | 1654 |
| General and administrative | 9834 | 6245 | 5219 |
| &nbsp;&nbsp;&nbsp;Total stock-based compensation expense | $18318 | $11133 | $7841 |

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*Overstock restricted stock awards*

The Overstock.com, Inc. Amended and Restated 2005 Equity Incentive Plan provides for the grant of restricted stock units to employees and directors of the Company and other types of equity awards of the Company. The Compensation Committee of the Board of Directors approves grants of restricted stock awards to our officers, board members and employees. These restricted stock awards generally vest over three years at 33.3% at the end of the first year, 33.3% at the end of the second year and 33.4% at the end of the third year; subject to the recipient's continuing service to us. At December 31, 2022, 1.3 million shares of stock remained available for future grants under the Plan.

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.

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The following table summarizes restricted stock award activity (in thousands, except fair value data):

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **2022** | **2022** | **2021** | **2021** | **2020** | **2020** |
| | **Units** | **Weighted<br>Average<br>Grant Date<br>Fair Value** | **Units** | **Weighted<br>Average<br>Grant Date<br>Fair Value** | **Units** | **Weighted<br>Average<br>Grant Date<br>Fair Value** |
| Outstanding—beginning of year | 663 | $56.37 | 639 | $17.98 | 1051 | $26.22 |
| &nbsp;&nbsp;Granted at fair value | 618 | 42.75 | 415 | 92.29 | 484 | 10.39 |
| &nbsp;&nbsp;&nbsp;Vested | (295) | 43.32 | (294) | 24.88 | (710) | 23.58 |
| &nbsp;&nbsp;&nbsp;Forfeited | (205) | 57.77 | (97) | 52.26 | (186) | 23.43 |
| Outstanding—end of year | 781 | $50.17 | 663 | $56.37 | 639 | $17.98 |

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*Employee Stock Purchase Plan*

The Overstock.com, Inc. 2021 Employee Stock Purchase Plan (the "ESPP") grants our eligible employees a right to purchase shares of our common stock at a discount through payroll deductions of up to 25% of eligible compensation, subject to a cap of $21,250 in any calendar year. The ESPP provides for consecutive 24-month offering periods beginning March 1 and September 1 of each year. Each offering period shall consist of four consecutive six-month purchase periods. The first offering period under the ESPP commenced on September 1, 2021, with the first purchase date occurring on February 28, 2022.

On each purchase date, participating employees will purchase shares of our common stock at a price per share equal to 85% of the lesser of the fair market value of our common stock on (i) the offering date of the offering period or (ii) the purchase date (the "look-back" period). If the stock price of our common stock on any purchase date in an offering period is lower than the stock price on the offering date of that offering period, every participant in the offering will automatically be withdrawn from the offering after the purchase of shares on such purchase date and automatically enrolled in a new offering period commencing immediately subsequent to such purchase date.

The maximum number of shares of common stock that may be issued under the ESPP in aggregate is 3.0 million shares. For the year ended December 31, 2022, 83,570 shares were purchased at an average price per share of $35.41. At December 31, 2022, approximately 2.9 million shares of common stock remained available under the ESPP.

The ESPP is considered a compensatory plan and the fair value of the discount and the look-back period will be estimated using the Black-Scholes option pricing model and expense will be recognized straight-line over the 24-month offering period. For the year ended December 31, 2022, we recognized $2.4 million in share-based compensation expense related to the ESPP, which is included in the stock compensation expense table above combined with the expense associated with our restricted stock units.

**16. EMPLOYEE RETIREMENT PLAN**

We have a 401(k) defined contribution plan which permits participating employees to defer a portion of their compensation, subject to limitations established by the Internal Revenue Code. During the years ended December 31, 2022, 2021 and 2020, employees who completed 3 months of service and are 21 years of age or older are qualified to participate in the plan which matches 100% of the first 6% of each participant's contributions to the plan subject to IRS limits. Matching contributions vest immediately. Participant contributions also vest immediately. Our matching contribution totaled $5.7 million, $5.2 million and $4.9 million for the years ended December 31, 2022, 2021 and 2020, respectively. We made no discretionary contributions to eligible participants for the years ended December 31, 2022, 2021 and 2020, respectively.

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**17. REVENUE AND CONTRACT LIABILITY**

*Unearned revenue*

Unearned revenue consists of the following (in thousands):

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| | | |
|:---|:---|:---|
| | **December 31,** | **December 31,** |
| | **2022** | **2021** |
| Club O membership fees and reward points | $16795 | $16701 |
| In store credits | 12046 | 11777 |
| Unearned product revenue on undelivered product | 10932 | 20689 |
| Unearned product revenue on unshipped orders | 3536 | 9107 |
| Other | 1171 | 1113 |
| Total unearned revenue | $44480 | $59387 |

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The following table provides information about unearned revenue from contracts with customers, including significant changes in unearned revenue balances during the period (in thousands):

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| | |
|:---|:---|
| | **Amount** |
| Unearned revenue at December 31, 2020 | $72165 |
| Increase due to deferral of revenue at period end, net | 51384 |
| Decrease due to beginning contract liabilities recognized as revenue | (64162) |
| Unearned revenue at December 31, 2021 | 59387 |
| Increase due to deferral of revenue at period end, net | 32993 |
| Decrease due to beginning contract liabilities recognized as revenue | (47900) |
| Unearned revenue at December 31, 2022 | $44480 |

---

Our total unearned revenue related to outstanding Club O Reward dollars was $10.9 million and $10.0 million at December 31, 2022 and 2021, respectively. Breakage income related to Club O Reward dollars and gift cards is recognized in Net revenue in our consolidated statements of operations. Breakage included in revenue was $4.4 million, $6.9 million, and $5.4 million for the years ended December 31, 2022, 2021, and 2020, respectively. The timing of revenue recognition of these reward dollars is driven by actual customer activities, such as redemptions and expirations.

*Sales returns allowance*

The following table provides additions to and deduction from the sales returns allowance, which is included in our Accrued liabilities balance in our consolidated balance sheets (in thousands):

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| | |
|:---|:---|
| | **Amount** |
| Allowance for returns at December 31, 2019 | $11106 |
| Additions to the allowance | 204810 |
| Deductions from the allowance | (196726) |
| Allowance for returns at December 31, 2020 | 19190 |
| Additions to the allowance | 237622 |
| Deductions from the allowance | (242889) |
| Allowance for returns at December 31, 2021 | 13923 |
| Additions to the allowance | 161492 |
| Deductions from the allowance | (165193) |
| Allowance for returns at December 31, 2022 | $10222 |

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**18. OTHER INCOME (EXPENSE), NET**

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

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| | | | |
|:---|:---|:---|:---|
| | **Years ended December 31,** | **Years ended December 31,** | **Years ended December 31,** |
| | **2022** | **2021** | **2020** |
| Income (loss) from equity method securities | $(63923) | $12585 | $— |
| Gain (loss) on equity securities | (137) | (1238) | 305 |
| Other | 235 | 1153 | 308 |
| Total other income (expense), net | $(63825) | $12500 | $613 |

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**19. INCOME TAXES**

**&nbsp;&nbsp;&nbsp;&nbsp;**

For financial reporting purposes, income (loss) from continuing operations before income taxes includes the following components (in thousands):

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| | | | |
|:---|:---|:---|:---|
| | **Years ended December 31,** | **Years ended December 31,** | **Years ended December 31,** |
| | **2022** | **2021** | **2020** |
| United States income (loss) | $(35272) | $121180 | $95115 |
| Foreign income | 1420 | 1836 | 1375 |
| Total income (loss) from continuing operations before income taxes | $(33852) | $123016 | $96490 |

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The provision (benefit) for income taxes for 2022, 2021 and 2020 consists of the following (in thousands):

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| | | | |
|:---|:---|:---|:---|
| | **Years ended December 31,** | **Years ended December 31,** | **Years ended December 31,** |
| | **2022** | **2021** | **2020** |
| Current: |  |  |  |
| &nbsp;&nbsp;&nbsp;Federal | $802 | $532 | $— |
| &nbsp;&nbsp;&nbsp;State | 1874 | 4344 | 1316 |
| &nbsp;&nbsp;&nbsp;Foreign | 112 | 183 | 68 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total current | 2788 | 5059 | 1384 |
| Deferred: |  |  |  |
| &nbsp;&nbsp;&nbsp;Federal | (1275) | (49045) |  |
| &nbsp;&nbsp;&nbsp;State | (50) | (4763) |  |
| &nbsp;&nbsp;&nbsp;Foreign | (79) | (26) | (21) |
| &nbsp;&nbsp;&nbsp;&nbsp;Total deferred | (1404) | (53834) | (21) |
| Total provision (benefit) for income taxes | $1384 | $(48775) | $1363 |

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The provision (benefit) for income taxes for 2022, 2021 and 2020 differ from the amounts computed by applying the U.S. federal income tax rate of 21% to income (loss) before income taxes for the following reasons (in thousands):

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| | | | |
|:---|:---|:---|:---|
| | **Year ended December 31,** | **Year ended December 31,** | **Year ended December 31,** |
| | **2022** | **2021** | **2020** |
| U.S. federal income tax provision (benefit) at statutory rate | $(7109) | $25833 | $20263 |
| State income tax expense, net of federal benefit | (1170) | 5734 | 3224 |
| Global intangible low-tax income | 919 | 143 | 229 |
| Non-deductible executive compensation | 905 | 1908 | 147 |
| Stock based compensation expense | 219 | (3851) | 1839 |
| Other, net | (67) | (33) | (34) |
| Delaware gift card litigation reversal |  |  | (1022) |
| Research and development credit | (2956) | (1419) | (1266) |
| Change in valuation allowance | 10643 | (77090) | (22017) |
| Total provision (benefit) for income taxes | $1384 | $(48775) | $1363 |

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The components of our deferred tax assets and liabilities as of December 31, 2022 and 2021 are as follows (in thousands):

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| | | |
|:---|:---|:---|
| | **December 31,** | **December 31,** |
| | **2022** | **2021** |
| Deferred tax assets: |  |  |
| &nbsp;&nbsp;&nbsp;Net operating loss carryforwards | $20711 | $35247 |
| &nbsp;&nbsp;&nbsp;Research and development tax credits | 20549 | 19551 |
| &nbsp;&nbsp;&nbsp;Basis difference in equity securities | 15302 | 6092 |
| &nbsp;&nbsp;&nbsp;Capitalized software development | 12604 |  |
| &nbsp;&nbsp;&nbsp;Unearned revenue | 5694 | 5431 |
| &nbsp;&nbsp;&nbsp;Accrued expenses | 4259 | 5750 |
| &nbsp;&nbsp;&nbsp;Reserves and other | 2592 | 2835 |
| &nbsp;&nbsp;&nbsp;Operating lease liabilities | 1844 | 3128 |
| &nbsp;&nbsp;&nbsp;Other tax credits and carryforwards | 288 | 207 |
| &nbsp;&nbsp;&nbsp;Intangible assets | 208 | 135 |
| &nbsp;&nbsp;&nbsp;&nbsp;Gross deferred tax assets | 84051 | 78376 |
| &nbsp;&nbsp;&nbsp;&nbsp;Valuation allowance | (21459) | (11384) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total deferred tax assets | 62592 | 66992 |
| Deferred tax liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;Basis difference in equity securities | (15072) | (20831) |
| &nbsp;&nbsp;&nbsp;Operating lease right-of-use assets | (1702) | (3077) |
| &nbsp;&nbsp;&nbsp;Fixed assets | (3730) | (2264) |
| &nbsp;&nbsp;&nbsp;Prepaid expenses | (649) | (785) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total deferred tax liabilities | (21153) | (26957) |
| Total deferred tax assets (liabilities), net | $41439 | $40035 |

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For tax years beginning on or after January 1, 2022, the Tax Cuts and Jobs Act of 2017 eliminated the option to deduct research and development expenditures, including software development, as defined under IRC Section 174, in the year incurred. Instead, taxpayers are required to amortize such expenditures over five years if incurred in the U.S. and over fifteen years if incurred in a foreign jurisdiction. This new requirement caused us to utilize significant federal and state tax net operating loss carryforwards in the current year. We will continue to utilize federal and state tax attributes at a faster rate than our financial statement earnings in the future and there may be increases to cash taxes paid unless legislation is passed that would defer, repeal, or otherwise modify these new requirements. This change also impacted certain other computations within our tax provision, such as our global intangible low-tax income and our research and development credit, increasing both items over prior years.

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At December 31, 2022, we have federal net operating loss carryforwards with no expiration date of approximately $73.6 million; the utilization of these net operating loss carryforwards is limited to 80% of taxable income in any given year. We have state net operating loss carryforwards with no expiration date of approximately $37.4 million primarily in the state of Utah; the utilization of these net operating loss carryforwards is limited to 80% of taxable income in the state in any given year. We also have state net operating loss carryforwards of approximately $68.9 million that expire between 2026 and 2039.

At December 31, 2022, we have federal research credit carryforwards of approximately $23.2 million that expire between 2032 and 2042. We also have state research credit carryforwards of approximately $9.8 million that expire between 2023 and 2036. Ownership changes under Internal Revenue Code Section 382 could limit the amount of net operating losses or credit carryforwards that can be used in the future.

Each quarter we assess the recoverability of our deferred tax assets under ASC Topic 740. We assess available positive and negative evidence to estimate whether we will generate sufficient future taxable income to use our existing deferred tax assets. We have no carryback ability, and therefore we must rely on future taxable income, including tax planning strategies and future reversals of taxable temporary differences, to support their realizability. We maintain a valuation allowance against our deferred tax assets for capital losses and the state of Utah where not supported by future reversals of taxable temporary differences, because of the uncertainty regarding the realizability of these deferred tax assets. We will continue to monitor the need for a valuation allowance against our remaining deferred tax assets on a quarterly basis.

A reconciliation of the beginning and ending unrecognized tax benefits, excluding interest and penalties, as of December 31, 2022, 2021 and 2020 is as follows (in thousands):

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| | | | |
|:---|:---|:---|:---|
| | **Year ended December 31,** | **Year ended December 31,** | **Year ended December 31,** |
| | **2022** | **2021** | **2020** |
| Beginning balance | $11961 | $9638 | $9058 |
| Additions for tax positions related to the current year | 1083 | 1992 | 971 |
| Additions (reductions) for tax positions taken in prior years | 444 | 331 | (35) |
| Reduction due to settlements |  |  | (301) |
| Reduction due to cash payments |  |  | (55) |
| Ending balance | $13488 | $11961 | $9638 |

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Included in the balance of unrecognized tax benefits as of December 31, 2022, 2021 and 2020, are approximately $13.5 million, $12.0 million, and $9.6 million, respectively, of tax benefits that, if recognized, would affect the effective tax rate. We believe it is reasonably possible that these unrecognized tax benefits will continue to increase in the future.

Accrued interest and penalties on unrecognized tax benefits as of December 31, 2022 and 2021 were $1.1 million and $753,000, respectively.

We are subject to taxation in the United States and various state and foreign jurisdictions. Tax years beginning in 2018 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.

We have indefinitely reinvested foreign earnings of $7.1 million at December 31, 2022. We would need to accrue and pay various taxes on this amount if repatriated. We do not intend to repatriate these earnings.

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**20. NET INCOME (LOSS) PER SHARE**

The following table sets forth the computation of basic and diluted net income (loss) per common share for the periods indicated (in thousands, except per share data):

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| | | | |
|:---|:---|:---|:---|
| | **Year ended December 31,** | **Year ended December 31,** | **Year ended December 31,** |
| | **2022** | **2021** | **2020** |
| **Numerator:** |  |  |  |
| Income (loss) from continuing operations | $(35236) | $171791 | $95127 |
| &nbsp;&nbsp;Less: Preferred stock dividends—declared and accumulated | 1697 | 729 | 731 |
| Undistributed income (loss) from continuing operations | (36933) | 171062 | 94396 |
| &nbsp;&nbsp;Less: Undistributed income (loss) allocated to participating securities |  | 16409 | 6427 |
| Net income (loss) from continuing operations attributable to common stockholders | $(36933) | $154653 | $87969 |
| Income (loss) from discontinued operations | $— | $217581 | $(39126) |
| &nbsp;&nbsp;Less: Undistributed income (loss) allocated to participating securities |  | 20870 | (2664) |
| Net income (loss) from discontinued operations attributable to common stockholders |  | 196711 | (36462) |
| Net income (loss) attributable to common stockholders | $(36933) | $351364 | $51507 |
| **Denominator:** |  |  |  |
| Weighted average shares of common shares outstanding—basic | 44323 | 42981 | 41217 |
| Effect of dilutive securities: |  |  |  |
| &nbsp;&nbsp;&nbsp;Restricted stock awards |  | 351 | 390 |
| Weighted average shares of common shares outstanding—diluted | 44323 | 43332 | 41607 |
| **Net income (loss) from continuing operations per share of common stock:** |  |  |  |
| &nbsp;&nbsp;Basic | $(0.83) | $3.60 | $2.13 |
| &nbsp;&nbsp;Diluted | $(0.83) | $3.57 | $2.12 |
| **Net income (loss) from discontinued operations per share of common stock:** |  |  |  |
| &nbsp;&nbsp;Basic | $— | $4.58 | $(0.88) |
| &nbsp;&nbsp;Diluted | $— | $4.54 | $(0.88) |
| **Net income (loss) per share of common stock:** |  |  |  |
| &nbsp;&nbsp;Basic | $(0.83) | $8.18 | $1.25 |
| &nbsp;&nbsp;Diluted | $(0.83) | $8.11 | $1.24 |

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

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| | | | |
|:---|:---|:---|:---|
| | **Year ended December 31,** | **Year ended December 31,** | **Year ended December 31,** |
| | **2022** | **2021** | **2020** |
| Restricted stock units | 781 | 170 | 228 |
| Employee stock purchase plan | 116 | 24 |  |

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**21. BUSINESS SEGMENTS**

We evaluated our reportable segments in accordance with ASC Topic 280 *Segment Reporting* based on how we manage our business. At the conclusion of this evaluation, we concluded that we have one reportable segment, Retail, 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. The results of that segment are shown on our consolidated statements of operations as continuing operations.

For the years ended December 31, 2022, 2021 and 2020, substantially all our revenues were attributable to customers in the United States. At December 31, 2022 and 2021, substantially all our property and equipment were located in the United States.

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**22. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)**

The following tables set forth our unaudited quarterly results of operations data for the eight most recent quarters for the period ended December 31, 2022. We have prepared this information on the same basis as the consolidated statements of operations and the information includes all adjustments that we consider necessary for a fair statement of its financial position and operating results for the quarters presented.

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** |
| | **March 31,**<br>**2022** | **June 30,**<br>**2022** | **September 30,**<br>**2022** | **December 31,**<br>**2022** |
| | **(in thousands, except per share data)** | **(in thousands, except per share data)** | **(in thousands, except per share data)** | **(in thousands, except per share data)** |
| &nbsp;&nbsp;&nbsp;**Consolidated Statement of Operations Data:** | | | | |
| Net revenue | $536037 | $528122 | $460279 | $404896 |
| Cost of goods sold | 410825 | 407017 | 352807 | 315341 |
| &nbsp;&nbsp;&nbsp;Gross profit | 125212 | 121105 | 107472 | 89555 |
| Operating expenses: |  |  |  |  |
| &nbsp;&nbsp;Sales and marketing | 58513 | 57940 | 53520 | 45504 |
| &nbsp;&nbsp;Technology | 32989 | 30542 | 29628 | 27999 |
| &nbsp;&nbsp;General and administrative | 21256 | 21081 | 18665 | 18699 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total operating expenses | 112758 | 109563 | 101813 | 92202 |
| &nbsp;&nbsp;&nbsp;Operating income (loss) | 12454 | 11542 | 5659 | (2647) |
| &nbsp;&nbsp;&nbsp;Interest income (expense), net | (125) | 115 | 976 | 1999 |
| &nbsp;&nbsp;&nbsp;Other expense, net | (114) | (1981) | (46283) | (15447) |
| &nbsp;&nbsp;&nbsp;&nbsp;Income (loss) before income taxes from continuing operations | 12215 | 9676 | (39648) | (16095) |
| &nbsp;&nbsp;&nbsp;Provision (benefit) for income taxes | 2092 | 2529 | (2653) | (584) |
| &nbsp;&nbsp;&nbsp;&nbsp;Income (loss) from continuing operations | 10123 | 7147 | (36995) | (15511) |
| &nbsp;&nbsp;&nbsp;Income (loss) from discontinued operations, net of income taxes |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Consolidated net income (loss) | $10123 | $7147 | $(36995) | $(15511) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Less: Net loss attributable to noncontrolling interests - discontinued operations |  |  |  |  |
| Net income (loss) attributable to stockholders of Overstock.com, Inc. | $10123 | $7147 | $(36995) | $(15511) |
| &nbsp;&nbsp;Net income (loss) attributable to common shares—basic |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Continuing operations | $0.21 | $0.12 | $(0.81) | $(0.34) |
| &nbsp;&nbsp;&nbsp;&nbsp;Discontinued operations |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $0.21 | $0.12 | $(0.81) | $(0.34) |
| &nbsp;&nbsp;Net income (loss) attributable to common shares—diluted |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Continuing operations | $0.21 | $0.12 | $(0.81) | $(0.34) |
| &nbsp;&nbsp;&nbsp;&nbsp;Discontinued operations |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $0.21 | $0.12 | $(0.81) | $(0.34) |
| Weighted average shares of common stock outstanding: |  |  |  |  |
| &nbsp;&nbsp;Basic | 43052 | 43072 | 45708 | 45420 |
| &nbsp;&nbsp;Diluted | 43282 | 43159 | 45708 | 45420 |

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** |
| | **March 31,**<br>**2021** | **June 30,**<br>**2021** | **September 30,**<br>**2021** | **December 31,**<br>**2021** |
| | **(in thousands, except per share data)** | **(in thousands, except per share data)** | **(in thousands, except per share data)** | **(in thousands, except per share data)** |
| &nbsp;&nbsp;&nbsp;**Consolidated Statement of Operations Data:** | | | | |
| Net revenue | $659861 | $794536 | $689390 | $612659 |
| Cost of goods sold | 506337 | 619710 | 532682 | 473815 |
| &nbsp;&nbsp;&nbsp;Gross profit | 153524 | 174826 | 156708 | 138844 |
| Operating expenses: |  |  |  |  |
| &nbsp;&nbsp;Sales and marketing | 73538 | 85272 | 75650 | 67970 |
| &nbsp;&nbsp;Technology | 30523 | 30383 | 31178 | 30917 |
| &nbsp;&nbsp;General and administrative | 22871 | 22660 | 21031 | 20837 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total operating expenses | 126932 | 138315 | 127859 | 119724 |
| &nbsp;&nbsp;&nbsp;Operating income | 26592 | 36511 | 28849 | 19120 |
| &nbsp;&nbsp;&nbsp;Interest expense, net | (155) | (130) | (139) | (132) |
| &nbsp;&nbsp;&nbsp;Other income (expense), net | (226) | 298 | (79) | 12507 |
| &nbsp;&nbsp;&nbsp;&nbsp;Income before income taxes from continuing operations | 26211 | 36679 | 28631 | 31495 |
| &nbsp;&nbsp;&nbsp;Provision (benefit) for income taxes | 193 | (45726) | (1795) | (1447) |
| &nbsp;&nbsp;&nbsp;&nbsp;Income from continuing operations | 26018 | 82405 | 30426 | 32942 |
| &nbsp;&nbsp;&nbsp;Income (loss) from discontinued operations, net of income taxes | (10126) | 227372 |  |  |
| &nbsp;&nbsp;&nbsp;Consolidated net income | $15892 | $309777 | $30426 | $32942 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Less: Net loss attributable to noncontrolling interests - discontinued operations | (201) | (134) |  |  |
| &nbsp;&nbsp;&nbsp;Net income attributable to stockholders of Overstock.com, Inc. | $16093 | $309911 | $30426 | $32942 |
| &nbsp;&nbsp;Net income (loss) attributable to common shares—basic |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Continuing operations | $0.57 | $1.73 | $0.64 | $0.69 |
| &nbsp;&nbsp;&nbsp;&nbsp;Discontinued operations | (0.23) | 4.78 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $0.34 | $6.51 | $0.64 | $0.69 |
| &nbsp;&nbsp;Net income (loss) attributable to common shares—diluted |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Continuing operations | $0.56 | $1.72 | $0.63 | $0.68 |
| &nbsp;&nbsp;&nbsp;&nbsp;Discontinued operations | (0.23) | 4.75 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $0.33 | $6.47 | $0.63 | $0.68 |
| Weighted average shares of common stock outstanding: |  |  |  |  |
| &nbsp;&nbsp;Basic | 42885 | 43009 | 43014 | 43016 |
| &nbsp;&nbsp;Diluted | 43320 | 43314 | 43324 | 43370 |

---

**23. SUBSEQUENT EVENTS**

In January 2023, we invested $10 million through a convertible promissory note from GrainChain, Inc. The convertible promissory note bears interest at an annual interest rate of 5%. The convertible promissory note has a maturity date of January 3, 2025 at which time the outstanding principal balance and any unpaid accrued interest will automatically convert into shares of a newly created series of Preferred Stock issued by GrainChain, Inc.

------

**Schedule II**

**Valuation and Qualifying Accounts**

**(in thousands)**

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Balance at<br>Beginning of<br>Year** | **Charged to<br>Expense** | **Deductions / (Other Additions)** | **Balance at<br>End of Year** |
| Year ended December 31, 2022 |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Deferred tax valuation allowance | $11384 | $10075 | $— | $21459 |
| &nbsp;&nbsp;&nbsp;Allowance for sales returns | 13923 | 161492 | 165193 | 10222 |
| &nbsp;&nbsp;&nbsp;Allowance for doubtful accounts | 2429 | 794 |  | 3223 |
| Year ended December 31, 2021 |  |  |  |  |
| &nbsp;&nbsp;Deferred tax valuation allowance <sup>(1)</sup> | $134305 | $(77090) | $45831 | $11384 |
| &nbsp;&nbsp;&nbsp;Allowance for sales returns | 19190 | 237622 | 242889 | 13923 |
| &nbsp;&nbsp;&nbsp;Allowance for doubtful accounts | 1417 | 1012 |  | 2429 |
| Year ended December 31, 2020 |  |  |  |  |
| &nbsp;&nbsp;Deferred tax valuation allowance <sup>(1)</sup> | $146856 | $(13066) | $(515) | $134305 |
| &nbsp;&nbsp;&nbsp;Allowance for sales returns | 11106 | 204810 | 196726 | 19190 |
| &nbsp;&nbsp;&nbsp;Allowance for doubtful accounts | 2443 | 1008 | 2034 | 1417 |

---

___________________________________________

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) Amounts contain continuing and discontinued operations

------

**ITEM 9.&nbsp;&nbsp;&nbsp;&nbsp;CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE**

None.

**ITEM 9A.&nbsp;&nbsp;&nbsp;&nbsp;CONTROLS AND PROCEDURES**

**Disclosure Controls and Procedures**

We maintain disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The term disclosure controls and procedures means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

**Evaluation of Disclosure Controls and Procedures**

We carried out an evaluation required by the Exchange Act under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act, as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and to provide reasonable assurance that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

**Limitations on Disclosure Controls and Procedures**

Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives as specified above. Management does not expect, however, that our disclosure controls and procedures will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.

**Changes in Disclosure Controls and Procedures and Internal Control over Financing Reporting**

During the quarter ended December 31, 2022, we evaluated and replaced the design of certain internal controls supporting the valuation of our equity method securities as a result of a change in the valuation approach used for valuing our equity method securities. Except for these replacements, there were no other changes in either our disclosure controls and procedures or our internal control over financial reporting that occurred during the quarter ended December 31, 2022, that have materially affected, or are reasonably likely to materially affect, our disclosure controls and procedures or our internal control over financial reporting.

**Management's Report on Internal Control over Financial Reporting**

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness of internal control over financial reporting to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

------

Management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2022. In making our assessment of the effectiveness of internal control over financial reporting, management used the criteria set forth in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Based on this assessment, management has concluded that, as of December 31, 2022, our internal control over financial reporting was effective.

Our internal control over financial reporting is designed to provide reasonable assurance of achieving its objectives as specified above. Management does not expect, however, that our internal control over financial reporting will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.

The effectiveness of our internal control over financial reporting as of December 31, 2022 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report which is included below.

------

**Report of Independent Registered Public Accounting Firm**

To the Stockholders and Board of Directors

Overstock.com, Inc.:

*Opinion on Internal Control Over Financial Reporting*

We have audited Overstock.com, Inc. and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2022, based on criteria established in *Internal Control - Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in *Internal Control - Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), changes in stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes and financial statement schedule II (collectively, the consolidated financial statements), and our report dated February 24, 2023 expressed an unqualified opinion on those consolidated financial statements.

*Basis for Opinion*

The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

*Definition and Limitations of Internal Control Over Financial Reporting*

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ KPMG LLP

Salt Lake City, Utah

February 24, 2023

------

**ITEM 9B. OTHER INFORMATION**

None.

**ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS**

Not applicable.

------

**PART III**

**ITEM 10.&nbsp;&nbsp;&nbsp;&nbsp;DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE**

Information regarding our Executive Officers required by Item 10 of Part III is set forth in Item 1 of Part I under "Business—Executive Officers of the Registrant." Information required by Item 10 of Part III regarding our Board of Directors and any material changes to the process by which security holders may recommend nominees to the Board of Directors will be included in our definitive proxy statement for our 2023 annual meeting of stockholders and is incorporated herein by reference. Information relating to compliance with Section 16(a) of the 1934 Act will be set forth in our definitive proxy statement for our 2023 annual meeting of stockholders and is incorporated herein by reference.

We have adopted a Code of Business Conduct and Ethics ("Code"), which applies to all employees of the Company, including our principal executive officer, principal financial officer, and principal accounting officer. We intend to disclose any amendments to the Code and any waivers granted to our principal executive officer, principal financial officer or principal accounting officer or other persons to the extent required by applicable rules or regulations in the Investor Relations section of our Website, www.overstock.com. We will provide a copy of the Code to any person without any charge upon request in writing addressed to Overstock.com. Attn: Investor Relations, 799 West Coliseum Way, Midvale, UT 84047.

**ITEM 11.&nbsp;&nbsp;&nbsp;&nbsp;EXECUTIVE COMPENSATION**

The information required by this Item is incorporated by reference to our definitive proxy statement for the 2023 annual meeting of stockholders.

**ITEM 12.&nbsp;&nbsp;&nbsp;&nbsp;SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS**

The information required by this Item is incorporated by reference to our definitive proxy statement for the 2023 annual meeting of stockholders.

**ITEM 13.&nbsp;&nbsp;&nbsp;&nbsp;CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE**

The information required by this Item is incorporated by reference to our definitive proxy statement for the 2023 annual meeting of stockholders.

**ITEM 14.&nbsp;&nbsp;&nbsp;&nbsp;PRINCIPAL ACCOUNTING FEES AND SERVICES**

Our independent registered public accounting firm is KPMG LLP, Salt Lake City, Utah, Auditor Firm ID: 185.

The information required by this Item is incorporated by reference to our definitive proxy statement for the 2023 annual meeting of stockholders.

------

**PART IV**

**ITEM 15.&nbsp;&nbsp;&nbsp;&nbsp;EXHIBITS, FINANCIAL STATEMENT SCHEDULES**

**(a) The following documents are filed as part of this Annual Report on Form 10-K:**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) **Financial Statements:**

The financial statements are filed as part of this Annual Report on Form 10-K under "Item 8. Financial Statements and Supplementary Data."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) **Financial Statement Schedules:**

Schedule II Valuation and Qualifying Accounts is provided in "Item 8. Financial Statements and Supplementary Data." Other schedules have been omitted as they are either not required, not applicable, or the information has otherwise been shown in the consolidated financial statements or notes thereto under "Item 8. Financial Statements and Supplementary Data."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) **Exhibits:**

See exhibits listed under Part (b) below.

**(b) Exhibits**

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **Exhibit Number** | **Exhibit Description** | **Form** | **File No.** | **Exhibit** | **Filing Date** | **Filed Herewith** |
| 3.1 | <u>[Amended and Restated Certificate of Incorporation](http://www.sec.gov/Archives/edgar/data/1130713/000113071314000051/ex-31certificateofincorpor.htm)</u> | 10-Q | 000-49799 | 3.1 | July 29, 2014 |  |
| 3.2 | <u>[Second Amended and Restated Bylaws](https://www.sec.gov/Archives/edgar/data/1130713/000113071322000048/exhibit3.htm)</u> | 8-K | 000-49799 | 3.1 | August 12, 2022 |  |
| 3.3 | <u>[Certificate of Elimination for Blockchain Voting Series A Preferred Stock of Overstock.com, Inc.](http://www.sec.gov/Archives/edgar/data/1130713/000113071319000053/a32certificateofelimination.htm)</u> | 8-K | 000-49799 | 3.2 | July 30, 2019 |  |
| 3.4 | <u>[Amended and Restated Certificate of Designation of Digital Voting Series A-1 Preferred Stock of Overstock.com, Inc.](https://www.sec.gov/Archives/edgar/data/1130713/000113071320000030/ostk-20200331xexx31.htm)</u> | 10-Q | 000-49799 | 3.1 | May 7, 2020 |  |
| 3.5 | <u>[Certificate of Amendment of the Amended and Restated Certificate of Designation of Digital Voting Series A-1 Preferred Stock of Overstock.com, Inc.](https://www.sec.gov/Archives/edgar/data/1130713/000113071322000031/certofamendmentseriesa-1.htm)</u> | 8-K | 000-49799 | 3.1 | June 14, 2022 |  |
| 3.6 | <u>[Certificate of Elimination of the Amended and Restated Certificate of Designation of Digital Voting Series A-1 Preferred Stock of Overstock.com, Inc.](https://www.sec.gov/Archives/edgar/data/1130713/000113071322000031/certofeliminationseriesa-1.htm)</u> | 8-K | 000-49799 | 3.3 | June 14, 2022 |  |
| 3.7 | <u>[Amended and Restated Certificate of Designation for the Voting Series B Preferred Stock of Overstock.com, Inc.](https://www.sec.gov/Archives/edgar/data/1130713/000113071320000030/ostk-20200331xexx32.htm)</u> | 10-Q | 000-49799 | 3.2 | May 7, 2020 |  |
| 3.8 | <u>[Certificate of Amendment of the Amended and Restated Certificate of Designation of Voting Series B Preferred Stock of Overstock.com, Inc.](https://www.sec.gov/Archives/edgar/data/1130713/000113071322000031/certofamendmentseriesb.htm)</u> | 8-K | 000-49799 | 3.2 | June 14, 2022 |  |

---

------

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **Exhibit Number** | **Exhibit Description** | **Form** | **File No.** | **Exhibit** | **Filing Date** | **Filed Herewith** |
| 3.9 | <u>[Certificate of Elimination of the Amended and Restated Certificate of Designation of Voting Series B Preferred Stock of Overstock.com, Inc.](https://www.sec.gov/Archives/edgar/data/1130713/000113071322000031/certofeliminationseriesb.htm)</u> | 8-K | 000-49799 | 3.4 | June 14, 2022 |  |
| 4.1 | <u>[Form of specimen common stock certificate](http://www.sec.gov/Archives/edgar/data/1130713/000091205702018495/a2078361zex-4_1.htm)</u> | S-1/A | 333-83728 | 4.1 | May 6, 2002 |  |
| 4.2 | <u>[Description of Securities Registered Under Section 12 of the Securities Exchange Act of 1934](ostk-20221231xexx42.htm)</u> |  |  |  |  | X |
| 10.1<sup>(a)</sup> | <u>[Form of Indemnification Agreement between Overstock.com, Inc. and each of its directors and officers](http://www.sec.gov/Archives/edgar/data/1130713/000113071319000016/ostk-20181231xexx101a.htm)</u> | 10-K | 000-49799 | 10.1 | March 18, 2019 |  |
| 10.2<sup>(a)</sup> | <u>[Overstock.com, Inc. Amended and Restated 2005 Equity Incentive Plan](https://www.sec.gov/Archives/edgar/data/1130713/000113071321000019/ostk-20201231xexx102a.htm)</u> | 10-K | 000-49799 | 10.2 | February 26, 2021 |  |
| 10.3<sup>(a)</sup> | <u>[Overstock.com, Inc. 2005 Equity Incentive Plan (Amended and Restated November 9, 2022)](ostk-20221231xexx103a.htm)</u> |  |  |  |  | X |
| 10.4<sup>(a)</sup> | <u>[Form of Restricted Stock Unit Grant Notice and Restricted Stock Agreement under the 2005 Equity Incentive Plan](http://www.sec.gov/Archives/edgar/data/1130713/000104746913001400/a2212820zex-10_12.htm)</u> | 10-K | 000-49799 | 10.12 | February 21, 2013 |  |
| 10.5 | <u>[Purchase and Sale Agreement dated May 5, 2014 between O.Com Land LLC, Gardner Bingham Junction Holdings, L.C. and Arbor Bingham Junction Holdings, L.C.](http://www.sec.gov/Archives/edgar/data/1130713/000113071314000033/ex101-purchaseandsaleagree.htm)</u> | 8-K | 000-49799 | 10.1 | May 7, 2014 |  |
| 10.6 | <u>[First Amendment dated July 29, 2014 to Purchase and Sale Agreement dated May 5, 2014 between O.Com Land LLC, Gardner Bingham Junction Holdings, L.C. and Arbor Bingham Junction Holdings, L.C.](http://www.sec.gov/Archives/edgar/data/1130713/000113071314000055/ex-101purchandsaleagreemen.htm)</u> | 8-K | 000-49799 | 10.1 | August 6, 2014 |  |
| 10.7 | <u>[Second Amendment dated September 3, 2014 to Purchase and Sale Agreement dated May 5, 2014 between O.Com Land LLC, Gardner Bingham Junction Holdings, L.C. and Arbor Bingham Junction Holdings, L.C.](http://www.sec.gov/Archives/edgar/data/1130713/000113071314000060/ex-101purchandsaleagreemen.htm)</u> | 8-K | 000-49799 | 10.1 | September 8, 2014 |  |
| 10.8 | <u>[Project Management Agreement dated May 5, 2014 between O.Com Land LLC and Gardner CMS, L.C.](http://www.sec.gov/Archives/edgar/data/1130713/000113071314000033/ex102-projectmanagementagr.htm)</u> | 8-K | 000-49799 | 10.2 | May 7, 2014 |  |
| 10.9 | <u>[Purchase and Sale Agreement dated September 17, 2014 by and between the Redevelopment Agency of Midvale City and O.com Land LLC](http://www.sec.gov/Archives/edgar/data/1130713/000113071314000062/ex-101landpurch1sep14.htm)</u> | 8-K | 000-49799 | 10.1 | September 23, 2014 |  |

---

------

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **Exhibit Number** | **Exhibit Description** | **Form** | **File No.** | **Exhibit** | **Filing Date** | **Filed Herewith** |
| 10.10 | <u>[Lease Agreement dated October 24, 2014 between O.com Land, LLC and Overstock.com Inc.](http://www.sec.gov/Archives/edgar/data/1130713/000110465914074251/a14-23077_1ex10d19.htm)</u> | 8-K | 000-49799 | 10.19 | October 28, 2014 |  |
| 10.11<sup>(a)</sup> | <u>[Summary of Unwritten Compensation Arrangements Applicable to Non-Employee Directors of Overstock.com, Inc.](https://www.sec.gov/Archives/edgar/data/1130713/000113071320000014/ostk-20191231xexx1016a.htm)</u> | 10-K | 000-49799 | 10.16 | March 13, 2020 |  |
| 10.12 | <u>[Amended and Restated Capital on DemandTM Sales Agreement with JonesTrading Institutional Services LLC, as agent, dated June 26, 2020](https://www.sec.gov/Archives/edgar/data/1130713/000110465920077647/tm2021032d3_ex1-1.htm)</u> | 8-K | 000-49799 | 1.1 | June 29, 2020 |  |
| 10.13 | <u>[Loan Agreement by and between Peace Coliseum, LLC, as Borrower, and LoanCore Capital Markets LLC, as Lender, dated as of March 6, 2020](https://www.sec.gov/Archives/edgar/data/1130713/000110465920032488/a20-12286_1ex10d1.htm)</u> | 8-K | 000-49799 | 10.1 | March 12, 2020 |  |
| 10.14 | <u>[Mezzanine Loan Agreement by and between Peace Coliseum Mezzanine, LLC, as Borrower, and LoanCore Capital Markets LLC, as Lender, dated as of March 6, 2020](https://www.sec.gov/Archives/edgar/data/1130713/000110465920032488/a20-12286_1ex10d2.htm)</u> | 8-K | 000-49799 | 10.2 | March 12, 2020 |  |
| 10.15 | <u>[Guaranty of Recourse Obligations made by Overstock.com, Inc., as Guarantor, in favor of LoanCore Capital Markets LLC, dated as of March 6, 2020](https://www.sec.gov/Archives/edgar/data/1130713/000110465920032488/a20-12286_1ex10d3.htm)</u> | 8-K | 000-49799 | 10.3 | March 12, 2020 |  |
| 10.16 | <u>[Mezzanine Guaranty of Recourse Obligations made by Overstock.com, Inc., as Guarantor, in favor of LoanCore Capital Markets LLC, dated as of March 6, 2020](https://www.sec.gov/Archives/edgar/data/1130713/000110465920032488/a20-12286_1ex10d4.htm)</u> | 8-K | 000-49799 | 10.4 | March 12, 2020 |  |
| 10.17<sup>(a)</sup> | <u>[Form of Executive Retention Agreement](https://www.sec.gov/Archives/edgar/data/1130713/000113071320000021/a101formofexecutiveretenti.htm)</u> | 8-K | 000-49799 | 10.1 | April 17, 2020 |  |
| 10.18 | <u>[Transaction Agreement, dated as of January 25, 2021, by and among Overstock.com, Inc., Medici Ventures, Inc., Pelion MV GP, L.L.C. and Pelion, Inc., as guarantor](https://www.sec.gov/Archives/edgar/data/0001130713/000119312521016477/d83997dex101.htm)</u> | 8-K | 000-49799 | 10.1 | January 25, 2021 |  |
| 10.19 | <u>[Medici Ventures, L.P. Limited Partnership Agreement, dated as of April 23, 2021, between Overstock.com, Inc., and Pelion MV GP, L.L.C.](https://www.sec.gov/Archives/edgar/data/0001130713/000119312521130399/d150210dex101.htm)</u> | 8-K | 000-49799 | 10.1 | April 26, 2021 |  |
| 10.20 | <u>[First Amendment, dated August 30, 2021, to the Medici Ventures, L.P. Limited Partnership Agreement, dated April 23, 2021, between Overstock.com, Inc., and Pelion MV GP, L.L.C.](https://www.sec.gov/Archives/edgar/data/1130713/000113071321000051/ostk-20210930xexx101.htm)</u> | 10-Q | 000-49799 | 10.1 | November 4, 2021 |  |
| 10.21 | <u>[Overstock.com, Inc. 2021 Employee Stock Purchase Plan](https://www.sec.gov/Archives/edgar/data/1130713/000119312521093428/d53847ddef14a.htm#toc53847_69)</u> | DEF 14A | 000-49799 | Annex A | March 25, 2021 |  |
| 21 | <u>[Subsidiaries of the Registrant](ostk-20221231xexx21.htm)</u> |  |  |  |  | X |

---

------

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **Exhibit Number** | **Exhibit Description** | **Form** | **File No.** | **Exhibit** | **Filing Date** | **Filed Herewith** |
| 23 | <u>[Consent of Independent Registered Public Accounting Firm](ostk-20221231xexx23.htm)</u> |  |  |  |  | X |
| 24 | Powers of Attorney (see signature page) |  |  |  |  | X |
| 31.1 | <u>[Certification of Principal Executive Officer](ostk-20221231xexx311.htm)</u> |  |  |  |  | X |
| 31.2 | <u>[Certification of Principal Financial Officer](ostk-20221231xexx312.htm)</u> |  |  |  |  | X |
| 32.1 | <u>[Section 1350 Certification of Principal Executive Officer](ostk-20221231xexx321.htm)</u> |  |  |  |  | X |
| 32.2 | <u>[Section 1350 Certification of Principal Financial Officer](ostk-20221231xexx322.htm)</u> |  |  |  |  | X |
| 99.1 | <u>[Audited financial statements of Medici Ventures, L.P. as of and for the period ended September 30, 2021](ostk-20221231xexx991.htm)</u> |  |  |  |  | X |
| 99.2 | <u>[Audited financial statements of Medici Ventures, L.P. as of and for the period ended September 30, 2022](ostk-20221231xexx992.htm)</u> |  |  |  |  | X |
| 99.3 | <u>[Audited financial statements of tZERO Group, Inc. as of and for the periods ended December 31, 2021 and 2020](ostk-20221231xexx993.htm)</u> |  |  |  |  | X |
| 101 | The following financial statements from the Company's Annual Report on Form 10-K for the year ended December 31, 2022 formatted in Inline XBRL: (i) Consolidated Balance Sheets at December 31, 2022 and 2021; (ii) Consolidated Statements of Operations for the years ended December 31, 2022, 2021, and 2020; (iii) Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2022, 2021, and 2020; (iv) Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 2022, 2021, and 2020; (v) Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021, and 2020; and (vi) Notes to Consolidated Financial Statements |  |  |  |  | X |
| 104 | The cover page from the Company's Annual Report on Form 10-K for the year ended December 31, 2022, formatted in Inline XBRL (included as Exhibit 101) |  |  |  |  | X |

---

__________________________________________

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Management contract or compensatory plan or arrangement.

------

**ITEM 16.&nbsp;&nbsp;&nbsp;&nbsp;FORM 10-K SUMMARY**

Not applicable.

------

**SIGNATURES**

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on February 24, 2023.

---

| | |
|:---|:---|
| OVERSTOCK.COM, INC. | OVERSTOCK.COM, INC. |
| By: | /s/ JONATHAN E. JOHNSON III |
|  | Jonathan E. Johnson III |
|  | *Chief Executive Officer<br>(Principal Executive Officer)* |

---

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

**POWER OF ATTORNEY**

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of Jonathan E. Johnson III and Adrianne B. Lee, his or her attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendments to this Annual Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and conforming all that said attorney-in-fact, or his or their substitute or substitutes, may do or cause to be done by virtue hereof.

---

| | | |
|:---|:---|:---|
| **Signature** | **Title** | **Date** |
| /s/ JONATHAN E. JOHNSON III | Chief Executive Officer and Director (Principal Executive Officer) | 2/24/2023 |
| Jonathan E. Johnson III | Chief Executive Officer and Director (Principal Executive Officer) |  |
| /s/ ALLISON H. ABRAHAM | Chairwoman of the Board | 2/24/2023 |
| Allison H. Abraham | Chairwoman of the Board |  |
| /s/ ADRIANNE B. LEE | Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | 2/24/2023 |
| Adrianne B. Lee | Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |  |
| /s/ BARBARA H. MESSING | Director | 2/24/2023 |
| Barbara H. Messing | Director |  |
| /s/ BARCLAY F. CORBUS | Director | 2/24/2023 |
| Barclay F. Corbus | Director |  |
| /s/ JOSEPH J. TABACCO, JR. | Director | 2/24/2023 |
| Joseph J. Tabacco, Jr. | Director |  |
| /s/ ROBERT J. SHAPIRO | Director | 2/24/2023 |
| Robert J. Shapiro | Director |  |
| /s/ WILLIAM B. NETTLES, JR. | Director | 2/24/2023 |
| William B. Nettles, Jr. | Director |  |

---

## Exhibit 4.2

**Exhibit 4.2**

**DESCRIPTION OF SECURITIES REGISTERED UNDER SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934**

The following information describes our common stock, par value $0.0001 per share, which is the only class of our securities registered under Section 12 of the Securities Exchange Act of 1934, as amended, as well as certain provisions of our amended and restated certificate of incorporation and amended and restated bylaws. This description is only a summary. For a complete statement of the terms and rights of the common stock, you should also refer to our amended and restated certificate of incorporation and amended and restated bylaws which are filed as exhibits to our annual reports on Form 10-K filed with the SEC, as well as the General Corporation Law of the State of Delaware ("DGCL"), including Section 203.

**Capital Stock**

Our authorized capital stock consists of 100,000,000 shares of common stock, par value $0.0001 per share, and 5,000,000 shares of preferred stock, par value $0.0001 per share. Our board of directors may establish the rights, powers and preferences of undesignated preferred stock from time to time. Our board of directors is authorized, without stockholder approval except as required by the listing standards of the Nasdaq Global Market, to issue additional shares of our authorized capital stock.

**Common Stock** 

*Voting Rights*

&nbsp;&nbsp;&nbsp;&nbsp;

The holders of our common stock are entitled to one vote per share on all matters to be voted upon by the stockholders. Our amended and restated certificate of incorporation prohibits cumulative voting. Rather, the election of directors shall be decided by a plurality vote of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. With respect to matters other than the election of directors, if a quorum is present, the affirmative vote of a majority of the shares represented and voting at a duly held meeting (which shares voting affirmatively also constitute at least a majority of the required quorum) shall be the act of the stockholders, unless the vote of a greater number or a vote by classes is required by law, by our amended and restated certificate of incorporation or by our amended and restated bylaws. The holders of a majority of the shares issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of the stockholders. Our amended and restated certificate of incorporation prohibits stockholders from taking action by written consent in lieu of a meeting.

*Dividend Rights*

Subject to any preferential rights of holders of any outstanding shares of preferred stock, holders of our common stock are entitled to receive ratably any dividends or other distributions that may be declared from time to time by the board of directors out of funds legally available therefor. We have never declared or paid any cash dividends on our common stock. We currently intend to retain any earnings for future growth and do not anticipate paying any cash dividends in the foreseeable future. Any future determination to pay dividends will be at the discretion of our board of directors and will depend on our results of operations, financial conditions, contractual and legal restrictions and other factors the board deems relevant.

*Liquidation Rights*

In the event of our liquidation, dissolution or winding up, holders of our common stock would be entitled to share ratably in our assets remaining after the payment of liabilities, subject to prior distribution rights of holders of any shares of preferred stock then outstanding.

*Preemption, Conversion, and Redemption Rights*

Holders of our common stock have no preemptive or conversion rights or other subscription rights, and there are no redemption provisions applicable to the common stock. The outstanding shares of common stock are fully paid and non-assessable. The rights, preferences and privileges of the holders of our common stock are subject to, and may be adversely affected by, the rights of the holders of shares of our outstanding preferred stock and of any series of preferred stock that we may designate and/or issue in the future.

------

**Board of Directors** 

The board of directors is divided into three classes designated as Class I, Class II and Class III, respectively, with staggered three-year terms. As a result, only one class of directors is elected at each annual meeting of stockholders, with the other classes continuing for the remainder of their respective three-year terms. Directors are assigned to each class in accordance with a resolution or resolutions adopted by the board of directors. Each class consists, as nearly as may be possible, of one-third of the total number of directors constituting the entire board of directors. At each annual meeting of stockholders, the class of directors to be elected at such annual meeting is elected for a full term of three years. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, and any additional director of any class elected to fill a vacancy resulting from an increase in such class shall hold office for a term that shall coincide with the remaining term of that class, but in no case will a decrease in the number of directors shorten the term of any incumbent director. No stockholder will be permitted to cumulate votes at any election of directors. Directors may be removed by the affirmative vote of the holders of the outstanding shares of common stock only for cause.

**Anti-Takeover Effects of Certain Provisions of Delaware Law**

Provisions of Delaware law and of our amended and restated certificate of incorporation and amended and restated bylaws could make the acquisition of the company through a tender offer, a proxy contest or other means more difficult and could make the removal of incumbent officers and directors more difficult. These provisions to discourage inadequate takeover bids and to encourage persons seeking to acquire control of the company to first negotiate with our board of directors. We believe that the benefits provided by our ability to negotiate with the proponent of an unsolicited proposal would outweigh the disadvantages of discouraging these proposals. We believe the negotiation of an unsolicited proposal could result in terms more favorable to our stockholders.

We are subject to Section 203 of the DGCL, an anti-takeover law. In general, Section 203 prohibits a publicly-held Delaware corporation from engaging in a "business combination" with an "interested stockholder" for a period of three years following the time the person became an interested stockholder, unless:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• prior to such time, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding (a) shares owned by persons who are directors and also officers, and (b) shares owned by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• on or subsequent to such time, the business combination is approved by the board and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least two-thirds of the outstanding voting stock that is not owned by the interested stockholder.

In general, Section 203 defines a business combination to include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• any merger or consolidation involving the corporation and the interested stockholder;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• any sale, transfer, pledge or other disposition involving the interested stockholder of 10% or more of the assets of the corporation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• subject to exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by the interested stockholder; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation.

In general, an "interested stockholder" is a person who owns or, in certain circumstances, within three years prior to the determination of interested stockholder status, did own 15% or more of a corporation's outstanding voting securities. We expect the existence of this provision to have an anti-takeover effect with respect to transactions our board of directors does not approve in advance.

This summary of the provisions of Section 203 of the DGCL does not purport to be complete and is qualified in its entirety by reference to our amended and restated certificate of incorporation, our amended and restated bylaws, and the DGCL.

------

**Anti-Takeover Provisions of the Company's Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws**

Certain provisions in our amended and restated certificate of incorporation and amended and restated bylaws summarized below could discourage, delay or prevent a change in control of our company or changes in our management that the stockholders of our company may deem advantageous.

*Preferred Stock*

Under our amended and restated certificate of incorporation, the board of directors may issue, without further stockholder approval, shares of preferred stock in one or more series and may also set forth the voting powers, full or limited or none, of each such series of preferred stock, which the board could use to implement a stockholder rights plan (also known as a "poison pill"). The board of directors shall fix the designations, preferences and relative, participating, optional or other special rights of each such series of preferred stock and the qualifications, limitations or restrictions of such powers, designations, preferences or rights.

*No Action by Written Consent* 

Under our amended and restated certificate of incorporation and amended and restated bylaws, stockholders of the company may not take action by written consent in lieu of a meeting.

*Special Meetings of Stockholders*

Under our amended and restated bylaws, special meetings of our stockholders may be called only by the board of directors, the chairman of the board, the chief executive officer, or the president of the company.

*Advance Notice Requirements for Stockholders Proposals and Director Nominations*

Under our amended and restated bylaws, for nominations for election to our board or for proposing matters that can be properly acted upon by stockholders at annual stockholder meetings , the stockholder must (i) provide timely notice thereof in writing and in proper form to the secretary of the corporation and (ii) provide any updates or supplements to such notice at the times and in the forms required by the amended and restated bylaws. To be timely, a stockholder's notice must be delivered to, or mailed and received at, the principal executive offices of the corporation not less than ninety (90) days nor more than one hundred twenty (120) days prior to the one year anniversary of the preceding year's annual meeting; provided, however, that if the date of the annual meeting is more than thirty (30) days before or more than sixty (60) days after such anniversary date, notice by the stockholder to be timely must be so delivered, or mailed and received, not earlier than the one hundred twentieth (120th) day prior to such annual meeting and not later than the ninetieth (90th) day prior to such annual meeting or, if later, the tenth (10th) day following the day on which public disclosure of the date of such annual meeting was first made.

*Board of Directors and Vacancies*

The authorized number of directors on the board of directors will be established from time to time by resolution of the board of directors. Vacancies arising through death, resignation, removal, an increase in the number of directors or otherwise may be filled only by a majority of the directors then in office, though less than a quorum, or by a sole remaining director.

*Amendment of Our Amended and Restated Certificate of Incorporation*

&nbsp;&nbsp;&nbsp;&nbsp;

Our amended and restated certificate of incorporation provides that it may be amended only with the affirmative vote of a majority of the outstanding stock entitled to vote thereon.

*Amendment of Our Amended and Restated Bylaws*

The board of directors is expressly authorized to make, alter or repeal our amended and restated bylaws. Our amended and restated bylaws provide that stockholders are permitted to amend the amended and restated bylaws only with the approval of the holders of sixty-six and two-thirds percent (66<sup>2</sup>/3%) of the voting power of outstanding capital stock entitled to vote at an election of directors.

------

*Forum Selection Clause*

Under the amended and restated certificate of incorporation and the amended and restated bylaws, unless the company consents in writing to the selection of an alternative forum, the sole and exclusive forum for making certain types of claims will be a state or federal court located within the State of Delaware. This provision applies to (i) any derivative action or proceeding brought on behalf of the company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director or officer or other employee of the company to the company or its stockholders, (iii) any action asserting a claim against the company or any director or officer or other employee of the company arising pursuant to any provision of the DGCL or our amended and restated certificate of incorporation and the amended and restated bylaws, or (iv) any action asserting a claim against the company or any director or officer or other employee of the company governed by the internal affairs doctrine.

*Transfer Agent and Registrar*

&nbsp;&nbsp;&nbsp;&nbsp;

Our transfer agent and registrar for our common stock is Computershare Trust Company, N.A.

*Listing*

&nbsp;&nbsp;&nbsp;&nbsp;

Our common stock is listed on the Nasdaq Global Market under the trading symbol "OSTK."

## Exhibit 10.3

**Exhibit 10.3(a)**

**OVERSTOCK.COM, INC.**

**2005 EQUITY INCENTIVE PLAN**

(Amended and Restated November 9, 2022)

1.&nbsp;&nbsp;&nbsp;&nbsp;*Purposes of the Plan and Limitation on Awards to Non-Employee Directors*. The purposes of this 2005 Equity Incentive Plan are:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;&nbsp;&nbsp;&nbsp;to attract and retain the best available personnel for positions of substantial responsibility,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;&nbsp;&nbsp;&nbsp; to provide additional incentive to Service Providers, and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.&nbsp;&nbsp;&nbsp;&nbsp; to promote the success of the Company's business.

Awards granted under the Plan may be Incentive Stock Options, Nonstatutory Stock Options, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights, Performance Shares, Performance Units or Deferred Stock Units, as determined by the Administrator at the time of grant.

Awards to any non-employee Director during any Fiscal Year plus the cash fees payable to such Director during such Fiscal Year for service as an non-employee Director shall not exceed $400,000 in total value (calculating the value of any such Awards based on the grant date fair value for financial reporting purposes of such Awards), plus up to an additional $200,000 for service on any special committee of the Board. Consulting fees or other compensation the Company may pay or provide to any non-employee Director for services in addition to the services normally performed by a non-employee Director shall not be included in calculating such limits.

2.&nbsp;&nbsp;&nbsp;&nbsp;*Definitions*. As used herein, the following definitions shall apply:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;&nbsp;&nbsp;&nbsp;"*Administrator*" means the Board or any of its Committees that shall be administering the Plan, in accordance with Section 4 of the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;&nbsp;&nbsp;&nbsp;"*Applicable Laws*" means the requirements relating to the administration of equity compensation plans under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Awards are granted under the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.&nbsp;&nbsp;&nbsp;&nbsp;"*Award*" means, individually or collectively, a grant under the Plan of Options, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights, Performance Shares, Performance Units or Deferred Stock Units.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.&nbsp;&nbsp;&nbsp;&nbsp;"*Award Agreement*" means the written or electronic agreement setting forth the terms and provisions applicable to each Award granted under the Plan. The Award Agreement is subject to the terms and conditions of the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e.&nbsp;&nbsp;&nbsp;&nbsp;"*Award Exchange Program*" means a program whereby outstanding Awards are surrendered or cancelled in exchange for Awards (of the same or different type), which may have a lower exercise or purchase price, or in exchange for cash or a combination of cash and Awards.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f.&nbsp;&nbsp;&nbsp;&nbsp;"*Awarded Stock*" means the Common Stock subject to an Award.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g.&nbsp;&nbsp;&nbsp;&nbsp;"*Board*" means the Board of Directors of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;h.&nbsp;&nbsp;&nbsp;&nbsp;"*Cash Position*" means the Company's level of cash and cash equivalents.

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i.&nbsp;&nbsp;&nbsp;&nbsp;"*Cause*" means (i) an act of personal dishonesty taken by a Participant in connection with his or her responsibilities as a Service Provider and intended to result in personal enrichment of the Participant, (ii) a Participant being convicted of a felony, (iii) a willful act by a Participant which constitutes gross misconduct and which is injurious to the Company, or (iv) following delivery to a Participant of a written demand for performance from the Company which describes the basis for the Company's reasonable belief that the Participant has not substantially performed his duties, continued violations by the Participant of his or her obligations to the Company which are demonstrably willful and deliberate on the Participant's part.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;j.&nbsp;&nbsp;&nbsp;&nbsp;"*Change of Control*" means the occurrence of any of the following events:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i.&nbsp;&nbsp;&nbsp;&nbsp;Any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than Patrick M. Byrne, Dorothy M. Byrne or John J. Byrne or an individual or entity that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with Patrick M. Byrne, Dorothy M. Byrne and/or John J. Byrne, becomes the "beneficial owner" (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company's then outstanding voting securities; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii.&nbsp;&nbsp;&nbsp;&nbsp;The consummation of the sale or disposition by the Company of all or substantially all of the Company's assets;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iii.&nbsp;&nbsp;&nbsp;&nbsp;A change in the composition of the Board occurring within a one-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. "Incumbent Directors" means directors who either (A) are Directors as of the effective date of the Plan, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but will not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iv.&nbsp;&nbsp;&nbsp;&nbsp;The consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation.

Notwithstanding anything herein to the contrary, and only to the extent that an Award is subject to Section 409A of the Code and payment of the Award pursuant to the application of the definition of "Change of Control" above would cause such Award not to otherwise comply with Section 409A of the Code, payment of an Award may occur upon a "Change of Control" only to the extent that the event constitutes a "change in the ownership or effective control" of the Company or a "change in the ownership of a substantial portion of the assets" of the Company under Section 409A of the Code and the applicable Internal Revenue Service and Treasury Department regulations thereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;k.&nbsp;&nbsp;&nbsp;&nbsp;*"Change of Control Value"* means, with respect to a Change of Control, (i) the per share price offered to stockholders of the Company in any merger, consolidation, reorganization, sale of assets or dissolution transaction, (ii) the price per share offered to stockholders of the Company in any tender offer, exchange offer or sale or other disposition of outstanding voting stock of the Company, or (iii) if such Change of Control occurs other than as described in clause (i) or clause (ii), the Fair Market Value per share of the Shares into which Awards are exercisable, as determined by the Administrator, whichever is applicable. In the event that the consideration offered to stockholders of the Company consists of anything other than cash, the Administrator shall determine the fair cash equivalent of the portion of the consideration offered which is other than cash.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;l.&nbsp;&nbsp;&nbsp;&nbsp;"*Code*" means the Internal Revenue Code of 1986, as amended.

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;m.&nbsp;&nbsp;&nbsp;&nbsp;"*Committee*" means a committee of Directors or Officers appointed by the Board in accordance with Section 4 of the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;n.&nbsp;&nbsp;&nbsp;&nbsp;"*Common Stock*" means the common stock of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o.&nbsp;&nbsp;&nbsp;&nbsp;"*Company*" means Overstock.com, Inc.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;p.&nbsp;&nbsp;&nbsp;&nbsp;"*Consultant*" means any natural person, including an advisor, engaged by the Company or a Parent or Subsidiary to render services to such entity.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;q.&nbsp;&nbsp;&nbsp;&nbsp;"*Deferred Stock Unit*" means a deferred stock unit Award granted to a Participant pursuant to Section 14.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;r.&nbsp;&nbsp;&nbsp;&nbsp;"*Director*" means a member of the Board.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;s.&nbsp;&nbsp;&nbsp;&nbsp;"*Disability*" means total and permanent disability as defined in Section 22(e)(3) of the Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;t.&nbsp;&nbsp;&nbsp;&nbsp;"*Earnings Per Share*" means as to any Fiscal Year, the Company's or a business unit's Net Income, divided by a weighted average number of common shares outstanding and dilutive common equivalent shares deemed outstanding, determined in accordance with generally accepted accounting principles.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;u.&nbsp;&nbsp;&nbsp;&nbsp;"*Employee*" means any person, including Officers and Directors, employed by the Company or any Parent or Subsidiary of the Company. A Service Provider shall not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company, its Parent, any Subsidiary, or any successor. For purposes of Incentive Stock Options, no such leave may exceed ninety days, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, then three (3) months following the 91st day of such leave any Incentive Stock Option held by the Participant shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory Stock Option.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;v.&nbsp;&nbsp;&nbsp;&nbsp;"*Exchange Act*" means the Securities Exchange Act of 1934, as amended.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;w.&nbsp;&nbsp;&nbsp;&nbsp;"*Expenses*" means as to any Performance Period, the Company's or business unit's incurred expenses.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;x.&nbsp;&nbsp;&nbsp;&nbsp;"*Fair Market Value*" means, as of any date, the value of Common Stock determined as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i.&nbsp;&nbsp;&nbsp;&nbsp;If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system on the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii.&nbsp;&nbsp;&nbsp;&nbsp;If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iii.&nbsp;&nbsp;&nbsp;&nbsp;In the absence of an established market for the Common Stock, the Fair Market Value shall be determined in good faith by the Administrator.

Notwithstanding the foregoing, for purposes of establishing the exercise price of Options and SARs, the determination of Fair Market Value in all cases shall be in accordance with Section 409A of the Code and the regulations thereunder, with the intent that Options and SARs granted under this Plan shall not constitute deferred compensation subject to Section 409A of the Code.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;y.&nbsp;&nbsp;&nbsp;&nbsp;"*Fiscal Year*" means a fiscal year of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;z.&nbsp;&nbsp;&nbsp;&nbsp;"*Gross Margin*" means as to any Performance Period, the Company's Revenues less the related cost of Revenues expressed in dollars or as a percentage of Revenues.

aa.&nbsp;&nbsp;&nbsp;&nbsp;"*Incentive Stock Option*" means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.

bb.&nbsp;&nbsp;&nbsp;&nbsp;"*Individual Objectives*" means, as to any Participant for any Performance Period, the objective and measurable goals set by a process and approved by the Administrator.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;cc.&nbsp;&nbsp;&nbsp;&nbsp;"*Net Income*" means as to any Fiscal Year, the income after taxes of the Company for the Fiscal Year determined in accordance with generally accepted accounting principles.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;dd.&nbsp;&nbsp;&nbsp;&nbsp;"*Nonstatutory Stock Option*" means an Option not intended to qualify as an Incentive Stock Option.

ee.&nbsp;&nbsp;&nbsp;&nbsp;"*Notice of Grant*" means a written or electronic notice evidencing certain terms and conditions of an individual Award. The Notice of Grant is part of the Option Agreement or Award Agreement.

ff.&nbsp;&nbsp;&nbsp;&nbsp;"*Officer*" means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

gg.&nbsp;&nbsp;&nbsp;&nbsp;"*Operating Cash Flow*" means the Company's or a business unit's sum of Net Income plus depreciation and amortization less capital expenditures plus changes in working capital comprised of accounts receivable, inventories, other current assets, trade accounts payable, accrued expenses, product warranty, advance payments from customers and long-term accrued expenses, determined in accordance with generally acceptable accounting principles.

hh.&nbsp;&nbsp;&nbsp;&nbsp;"*Operating Income*" means the Company's or a business unit's income from operations but excluding any unusual items, determined in accordance with generally accepted accounting principles.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii.&nbsp;&nbsp;&nbsp;&nbsp;"*Operating Margin*" means, as to any Performance Period, the Company's or a business unit's Operating Income divided by Revenue, expressed as a percentage.

jj.&nbsp;&nbsp;&nbsp;&nbsp;"*Option*" means a stock option granted pursuant to the Plan.

kk.&nbsp;&nbsp;&nbsp;&nbsp;"*Option Agreement*" means a written or electronic agreement between the Company and a Participant evidencing the terms and conditions of an individual Option grant. The Option Agreement is subject to the terms and conditions of the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ll.&nbsp;&nbsp;&nbsp;&nbsp;"*Parent*" means a "parent corporation", whether now or hereafter existing, as defined in Section 424(e) of the Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;mm.&nbsp;&nbsp;&nbsp;&nbsp;"*Participant*" means the holder of an outstanding Award granted under the Plan.

nn.&nbsp;&nbsp;&nbsp;&nbsp;"*Performance Goals*" means the goal(s) (or combined goal(s)) determined by the Administrator (in its discretion) to be applicable to a Participant with respect to an Award. As determined by the Administrator, the Performance Goals applicable to an Award may provide for a targeted level or levels of achievement using one or more of the following measures: (a) Cash Position, (b) Earnings Per Share, (c) Expenses, (d) Gross Margin, (e) Individual Objectives, (f) Net Income, (g) Operating Cash Flow, (h) Operating Income, (i) Operating Margin, (j) Return on Assets, (k) Return on Equity, (l) Return on Sales, (m) Revenue, (n) Total Stockholder Return, and/or (o) Unit Sales. The Performance Goals may differ from Participant to Participant and from Award to Award. Any criteria used may be measured, as applicable, (i) in absolute terms, (ii) in relative terms (including, but not limited

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to, passage of time and/or against another company or companies), (iii) on a per-share basis, (iv) against the performance of the Company as a whole or of a business unit of the Company or by product or product line, (v) on a pre-tax or after-tax basis, and/or on a GAAP or non-GAAP basis. Prior to the beginning of the applicable Performance Period, the Administrator shall determine whether any significant element(s) shall be included or excluded from the calculation of any Performance Goal with respect to any Participants. For example, but not by way of limitation, the Administrator may determine that the measures for one or more Performance Goals shall consist of non-GAAP variations of any of the foregoing measures. The Committee may set different goals for Awards not intended to qualify for exemption from the limitations of Section 162(m) of the Code.

The Administrator is authorized, in its sole and absolute discretion, to adjust or modify the calculation of a Performance Goal for a Performance Period (provided, that if an Award is intended to constitute "performance-based compensation" under Section 162(m) of the Code, such adjustment or modification may be made only to the extent permitted under Section 162(m) of the Code) in order to prevent the dilution or enlargement of the rights of Participants based on the following events: (A) asset write-downs; (B) litigation or claim judgments or settlements; (C) the effect of changes in tax laws, accounting principles, or other laws or regulatory rules affecting reported results; (D) any reorganization and restructuring programs; (E) extraordinary nonrecurring items as described in Accounting Principles Board Opinion No. 30 (or any successor or pronouncement thereto) and/or in management's discussion and analysis of financial condition and results of operations appearing in the Company's annual report to stockholders for the applicable year; (F) acquisitions or divestitures; (G) any other specific unusual or nonrecurring events, or objectively determinable category thereof; (H) foreign exchange gains and losses; and (I) a change in the Company's fiscal year.

oo.&nbsp;&nbsp;&nbsp;&nbsp;"*Performance Period*" means any Fiscal Year or such other period as determined by the Administrator in its sole discretion.

pp.&nbsp;&nbsp;&nbsp;&nbsp;"*Performance Share*" means a performance share Award granted to a Participant pursuant to Section 12.

qq.&nbsp;&nbsp;&nbsp;&nbsp;"*Performance Unit*" means a performance unit Award granted to a Participant pursuant to Section 13.

rr.&nbsp;&nbsp;&nbsp;&nbsp;"*Plan*" means this 2005 Equity Incentive Plan.

ss.&nbsp;&nbsp;&nbsp;&nbsp;"*Restricted Award*" means an Award granted pursuant to Section 11 of the Plan.

tt.&nbsp;&nbsp;&nbsp;&nbsp;"*Return on Assets*" means the percentage equal to the Company's or a business unit's Operating Income before incentive compensation, divided by average net Company or business unit, as applicable, assets, determined in accordance with generally accepted accounting principles.

uu.&nbsp;&nbsp;&nbsp;&nbsp;"*Return on Equity*" means the percentage equal to the Company's Net Income divided by average stockholder's equity, determined in accordance with generally accepted accounting principles.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;vv.&nbsp;&nbsp;&nbsp;&nbsp;"*Return on Sales*" means the percentage equal to the Company's or a business unit's Operating Income before incentive compensation, divided by the Company's or the business unit's, as applicable, revenue, determined in accordance with generally accepted accounting principles.

ww.&nbsp;&nbsp;&nbsp;&nbsp;"*Revenue*" means, as to any Performance Period, the Company's or a business unit's gross revenues, net sales or gross sales, as determined by the Administrator.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;xx.&nbsp;&nbsp;&nbsp;&nbsp;"*Rule 16b-3*" means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when discretion is being exercised with respect to the Plan.

yy.&nbsp;&nbsp;&nbsp;&nbsp;"*Section 16(b)*" means Section 16(b) of the Exchange Act.

zz.&nbsp;&nbsp;&nbsp;&nbsp;"*Securities Act*" means the Securities Act of 1933, as amended.

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aaa.&nbsp;&nbsp;&nbsp;&nbsp;"*Service Provider*" means an Employee, Director or Consultant.

bbb.&nbsp;&nbsp;&nbsp;&nbsp;"*Share*" means a share of the Common Stock, as adjusted in accordance with Section 16 of the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ccc.&nbsp;&nbsp;&nbsp;&nbsp;"*Stock Appreciation Right*" or "*SAR*" means an Award granted pursuant to Section 10 hereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ddd.&nbsp;&nbsp;&nbsp;&nbsp;"*Subsidiary*" means a "subsidiary corporation", whether now or hereafter existing, as defined in Section 424(f) of the Code.

eee.&nbsp;&nbsp;&nbsp;&nbsp;"*Total Stockholder Return*" means the total return (change in share price plus reinvestment of any dividends) of a Share.

fff.&nbsp;&nbsp;&nbsp;&nbsp;"*Unit Sales*" means, as to any Performance Period, gross or net sales of units, consisting of any merchandise or type or category of merchandise or other product or service sold by the Company at any time, now or hereafter, as determined and specified by the Administrator.

ggg.&nbsp;&nbsp;&nbsp;&nbsp;"*Voluntary Termination for Good Reason*" means a Participant voluntarily resigns within ninety (90) days after the occurrence of any of the following, provided the Participant gives notice to the Company of such occurrence within sixty (60) days after such occurrence and the Company does not remedy the condition within thirty (30) days after the Company's receipt of such notice: (i) without the Participant's express written consent, a material reduction of the Participant's duties, title, authority or responsibilities, relative to the Participant's duties, title, authority or responsibilities as in effect immediately prior to such reduction, or the assignment to Participant of such reduced duties, title, authority or responsibilities; provided, however, that a reduction in duties, title, authority or responsibilities solely by virtue of the Company being acquired and made part of a larger entity (as, for example, when the Chief Executive Officer of the Company remains as such following a Change of Control and is not made the Chief Executive Officer of the acquiring corporation) shall not by itself constitute grounds for a "Voluntary Termination for Good Reason;" (ii) a reduction by the Company in the base salary of the Participant as in effect immediately prior to such reduction; (iii) the relocation of the Participant to a facility or a location outside of a 35 mile radius from the present facility or location, without the Participant's express written consent; or (iv) any act or set of facts or circumstances which would, under applicable case law or statute constitute a constructive termination of the Participant.

3.&nbsp;&nbsp;&nbsp;&nbsp;*Stock Subject to the Plan*. Subject to the provisions of Section 16 of the Plan, the maximum aggregate number of Shares which will be available for grant under the Plan after approval by the stockholders at the 2017 annual meeting of stockholders is 1,978,307, less the number of shares, if any, subjected to Awards between February 15, 2017 and the date of the 2017 annual meeting, and increased by the number of Shares, if any, subject to Awards forfeited back to the Plan between February 15, 2017 and the date of the 2017 annual meeting. The Shares may be authorized, but unissued, or reacquired Common Stock. All shares reserved for issuance under this Plan may be used for Incentive Stock Options.

To the extent that Shares subject to an Award are not issued to a Participant because the Award terminates, expires, lapses or becomes unexercisable without having been exercised in full for any reason, or an Award is settled in cash, or is surrendered pursuant to an Award Exchange Program, or, with respect to Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units or Deferred Stock Units, is forfeited to or repurchased by the Company, the unissued Shares (or for Awards other than Options and SARs, the forfeited or repurchased shares) which were subject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated). However, the full number of Stock Appreciation Rights granted that are to be settled by the issuance of Shares shall be counted against the number of Shares available for award under the Plan, regardless of the number of Shares actually issued upon settlement of such Stock Appreciation Rights. Shares that have actually been issued under the Plan under any Award shall not be returned to the Plan and shall not become available for future distribution under the Plan. Shares surrendered or withheld in payment of the exercise price of an Option and Shares withheld by the Company to satisfy any minimum tax withholding obligation shall count against the aggregate plan limit described above. To the extent an Award under the Plan is paid out in cash rather than Shares, such cash payment shall not result in a reduction to the number of Shares available for issuance under the Plan. Shares repurchased by the Company on the open market with the proceeds of an Option exercise shall not be added to the number of Shares available for grant under the Plan. No fractional shares of Stock may be issued hereunder.

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4.&nbsp;&nbsp;&nbsp;&nbsp;*Administration of the Plan*.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;&nbsp;&nbsp;&nbsp;*Procedure*.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i.&nbsp;&nbsp;&nbsp;&nbsp;*Multiple Administrative Bodies*. The Plan may be administered by different Committees with respect to different groups of Service Providers.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii.&nbsp;&nbsp;&nbsp;&nbsp;*Section 162(m) of the Code*. To the extent that the Administrator determines it to be desirable to qualify Options or other Awards granted hereunder as "performance-based compensation" within the meaning of Section 162(m) of the Code, the Plan shall be administered by a Committee of two or more "outside directors" within the meaning of Section 162(m) of the Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iii.&nbsp;&nbsp;&nbsp;&nbsp;*Rule 16b-3*. To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder shall be structured to satisfy the requirements for exemption under Rule 16b-3, including the composition of the Committee that grants any related Awards.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iv.&nbsp;&nbsp;&nbsp;&nbsp;*Other Administration*. Other than as provided above, the Plan shall be administered by (A) the Board or (B) a Committee, which committee shall be constituted to satisfy Applicable Laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;&nbsp;&nbsp;&nbsp;*Powers of the Administrator*. Subject to the provisions of the Plan, and in the case of a Committee, subject to the specific duties delegated by the Board to such Committee, the Administrator shall have the authority, in its discretion:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i.&nbsp;&nbsp;&nbsp;&nbsp;to determine the Fair Market Value;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii.&nbsp;&nbsp;&nbsp;&nbsp;to select the Service Providers to whom Awards may be granted hereunder;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iii.&nbsp;&nbsp;&nbsp;&nbsp;to determine whether and to what extent Awards or any combination thereof, are granted hereunder;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iv.&nbsp;&nbsp;&nbsp;&nbsp;to determine the number of shares of Common Stock or equivalent units to be covered by each Award granted hereunder;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;v.&nbsp;&nbsp;&nbsp;&nbsp;to approve forms of agreement for use under the Plan;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;vi.&nbsp;&nbsp;&nbsp;&nbsp;to reduce the exercise price of an Award to the then current Fair Market Value if the Fair Market Value of the Common Stock covered by such Award shall have declined since the date the Award was granted, provided that such action shall first have been approved by a vote of the stockholders of the Company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;vii.&nbsp;&nbsp;&nbsp;&nbsp;to institute an Award Exchange Program, provided that no exchange shall cause the exercise price of an Option or SAR to be reduced unless such action shall first have been approved by a vote of the stockholders of the Company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;viii.&nbsp;&nbsp;&nbsp;&nbsp;to determine or modify the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder, provided that no such modification may cause an Option or SAR to become deferred compensation subject to Section 409A of the Code. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Options or SARs may be exercised or other Awards vest (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Award or the shares of Common Stock relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ix.&nbsp;&nbsp;&nbsp;&nbsp;to construe and interpret the terms of the Plan and Awards and to reconcile any inconsistency, correct any defect and/or supply any omission in the Plan or Award Agreement;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;x.&nbsp;&nbsp;&nbsp;&nbsp;to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of qualifying for preferred tax treatment under foreign tax laws;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;xi.&nbsp;&nbsp;&nbsp;&nbsp;to modify or amend each Award (subject to Section 18.c of the Plan), including the discretionary authority to extend the post-service-termination exercisability period of Options and SARs longer than is otherwise provided for in the Plan, provided that no such modification or extension may cause an Option or SAR to become deferred compensation subject to Section 409A of the Code;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;xii.&nbsp;&nbsp;&nbsp;&nbsp;to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Award previously granted by the Administrator;

xiii&nbsp;&nbsp;&nbsp;&nbsp;to allow Participants to satisfy withholding tax obligations by tendering cash or unencumbered Shares owned by the Participant having a Fair Market Value equal to the amount required to be withheld, or electing to have the Company withhold from the Shares or cash to be issued upon exercise or vesting of an Award (or distribution of a Deferred Stock Unit) that number of Shares or cash having a Fair Market Value equal to amount required to be withheld, in each case, up to the maximum statutory tax rate applicable to a Participant's withholding tax obligations. The Fair Market Value of any Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to be determined. All elections by a Participant to have Shares or cash withheld for this purpose shall be made in such form and under such conditions as the Administrator may deem necessary or advisable;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;xiv.&nbsp;&nbsp;&nbsp;&nbsp;to determine the terms and restrictions applicable to Awards;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;xv.&nbsp;&nbsp;&nbsp;&nbsp;to delegate its authority to one or more Officers of the Company with respect to Awards that do not involve "insiders" within the meaning of Section 16 of the Exchange Act; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;xv.&nbsp;&nbsp;&nbsp;&nbsp;to make all other determinations deemed necessary or advisable for administering the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.&nbsp;&nbsp;&nbsp;&nbsp;*Effect of Administrator's Decision*. The Administrator's decisions, determinations and interpretations shall be final and binding on all Participants and any other holders of Awards.

5.&nbsp;&nbsp;&nbsp;&nbsp;*Eligibility*. Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units, Stock Appreciation Rights, Deferred Stock Units and Nonstatutory Stock Options may be granted to Service Providers. Incentive Stock Options may be granted only to Employees. A Consultant shall not be eligible for the grant of an Award if, at the time of grant, a Form S-8 Registration Statement ("Form S-8") under the Securities Act, is not available to register either the offer or the sale of the Company's securities to such Consultant because of the nature of the services that the Consultant is providing to the Company (i.e., capital raising), or because the Consultant is not a natural person, or as otherwise provided by the rules governing the use of Form S-8, unless the Company determines both (i) that such grant (A) shall be registered in another manner under the Securities Act (e.g., on a Form S-3 Registration Statement) or (B) does not require registration under the Securities Act in order to comply with the requirements of the Securities Act, if applicable, and (ii) that such grant complies with the securities laws of all other relevant jurisdictions.

6.&nbsp;&nbsp;&nbsp;&nbsp;*No Employment Rights*. Neither the Plan nor any Award shall confer upon a Participant any right with respect to continuing the Participant's employment with the Company or its Subsidiaries, nor shall they interfere in any way with the Participant's right or the Company's or Subsidiary's right, as the case may be, to terminate such employment at any time, with or without cause.

7.&nbsp;&nbsp;&nbsp;&nbsp;*Code Section 162(m) Provisions*.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;&nbsp;&nbsp;&nbsp;*Option and SAR Annual Share Limit*. No Participant shall be granted, in any Fiscal Year, Options to purchase more than 200,000 Shares or Stock Appreciation Rights covering more than 500,000 Shares; provided,

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however, that such limits shall be 300,000 Shares with respect to Options and 750,000 shares with respect to Stock Appreciation Rights in the Participant's first Fiscal Year of Company service.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;&nbsp;&nbsp;&nbsp;*Restricted Awards and Performance Share Annual Limit*. No Participant shall be granted, in any Fiscal Year, more than 100,000 Shares of Restricted Stock, 100,000 shares of Restricted Stock Units or 100,000 Performance Shares; provided, however, that each such limit shall be 250,000 Shares in the Participant's first Fiscal Year of Company service.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.&nbsp;&nbsp;&nbsp;&nbsp;*Performance Units Annual Limit*. No Participant shall receive Performance Units, in any Fiscal Year, having an initial value greater than $1,000,000, provided, however, that such limit shall be $2,500,000 in the Participant's first Fiscal Year of Company service.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.&nbsp;&nbsp;&nbsp;&nbsp;*Section 162(m) Performance Restrictions*. For purposes of qualifying grants of Restricted Stock, Restricted Stock Units, Performance Shares or Performance Units as "performance-based compensation" under Section 162(m) of the Code, the Administrator, in its discretion, may set restrictions based upon the achievement of Performance Goals. The Performance Goals shall be set by the Administrator on or before the latest date permissible to enable the Restricted Stock, Restricted Stock Units, Performance Shares or Performance Units to qualify as "performance-based compensation" under Section 162(m) of the Code. In granting Restricted Stock, Restricted Stock Units, Performance Shares or Performance Units which are intended to qualify under Section 162(m) of the Code, the Administrator shall follow any procedures determined by it from time to time to be necessary or appropriate to ensure qualification of the Award under Section 162(m) of the Code (e.g., in determining the Performance Goals). A Participant shall be eligible to receive payment in respect of an Award that is intended to constitute "performance-based compensation" only to the extent that the applicable Performance Goals are achieved.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e.&nbsp;&nbsp;&nbsp;&nbsp;*Changes in Capitalization*. The numerical limitations in Sections 7.a and 7.b shall be adjusted proportionately in connection with any change in the Company's capitalization as described in Section 16.a.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f.&nbsp;&nbsp;&nbsp;&nbsp;*Certification*. Prior to the payment of any Award that is intended to constitute "performance-based compensation," the Administrator shall review and certify in writing whether, and to what extent, the Performance Goals have been achieved and, if so, calculate and certify in writing that amount of the Award earned based upon the achievement of the Performance Goals. The Administrator may reduce or eliminate the amount of such an Award earned through the use of negative discretion if, in its sole judgment, such reduction or elimination is appropriate. With respect to any Award intended to constitute "performance-based compensation," the Administrator shall not have the discretion to (A) grant or provide payment in respect of Awards if the Performance Goals have not been attained; (B) increase an Award above the maximum amount payable under this Section 7; or (C) cause an increase in a Participant's Award as a result of the use of negative discretion with respect to another Participant's Award. In addition, if an Award intended to constitute "performance-based compensation" is based, in whole or in part, on a percentage of a Participant's salary, base pay or other compensation, the maximum amount of the Award must be fixed at the time the Performance Goals are established. Notwithstanding the foregoing, an Award Agreement may provide that an Award may be payable upon death, disability or change of ownership or control prior to the attainment of the Performance Goals, provided that any such Award will not constitute "performance-based compensation" under Section 162(m) of the Code to the extent the Award is actually paid prior to the attainment of the Performance Goals.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g.&nbsp;&nbsp;&nbsp;&nbsp;If, after the attainment of the applicable Performance Goals, payment of an Award intended to constitute "performance-based compensation" in cash is accelerated to an earlier date, the amount paid will be discounted to reasonably reflect the time value of money. Any such Award that has been deferred shall not (between the date as of which the Award is deferred and the payment date) increase (A) with respect to an Award that is payable in cash, by a measuring factor for each fiscal year greater than a reasonable rate of interest set by the Administrator, or (B) with respect to an Award that is payable in Common Stock, by an amount greater than the appreciation of a Share from the date such Award is deferred to the payment date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;h.&nbsp;&nbsp;&nbsp;&nbsp;If an Award is cancelled in the same Fiscal Year in which it was granted (other than in connection with a transaction described in Section 16), the cancelled Award will be counted against the limits set forth in subsections

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) and (b) above. For this purpose, if the exercise price of an Award is reduced, the transaction will be treated as a cancellation of the Award and the grant of a new Award.

8.&nbsp;&nbsp;&nbsp;&nbsp;*Effective Date; Term of Plan*. The Plan's effective date is the date on which it is adopted by the Board, so long as it is approved by the Company's stockholders at any time within 12 months of such adoption. The Plan will have no fixed expiration date; provided, however, that no Incentive Stock Options may be granted more than 10 years after the later of (a) the Plan's adoption by the Board, or (b) the adoption by the Board of any amendment to the Plan that constitutes the adoption of a new plan for purposes of Section 422 of the Code.

9.&nbsp;&nbsp;&nbsp;&nbsp;*Stock Options*.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;&nbsp;&nbsp;&nbsp;The term of each Option shall be stated in the Notice of Grant; provided, however, that the term shall be ten (10) years from the date of grant or such shorter term as may be provided in the Notice of Grant. Moreover, in the case of an Incentive Stock Option granted to a Participant who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Incentive Stock Option shall be five (5) years from the date of grant or such shorter term as may be provided in the Notice of Grant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;&nbsp;&nbsp;&nbsp;*Option Exercise Price*. The per share exercise price for the Shares to be issued pursuant to exercise of an Option shall be determined by the Administrator, subject to the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i.&nbsp;&nbsp;&nbsp;&nbsp;In the case of an Incentive Stock Option:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;&nbsp;&nbsp;&nbsp;granted to an Employee who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;&nbsp;&nbsp;&nbsp;granted to any Employee other than an Employee described in paragraph (A) immediately above, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii.&nbsp;&nbsp;&nbsp;&nbsp;In the case of a Nonstatutory Stock Option, the per Share exercise price shall be determined by the Administrator and shall be no less than 100% of the Fair Market Value per Share on the date of grant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iii.&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding the foregoing, an Option may be granted with a per Share exercise price of less than 100% of the Fair Market Value per Share if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Sections 409A and 424(a) of the Code and the regulations thereunder. No Option shall include any feature for the deferral of compensation other than the deferral of recognition of income until the exercise of the Option.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.&nbsp;&nbsp;&nbsp;&nbsp;*Waiting Period and Exercise Dates*. At the time an Option is granted, the Administrator shall fix the period within which the Option may be exercised and shall determine any conditions which must be satisfied before the Option may be exercised. In so doing, the Administrator may specify that an Option may not be exercised until the completion of a service period or until performance milestones are satisfied.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.&nbsp;&nbsp;&nbsp;&nbsp;*Form of Consideration*. The Administrator shall determine the acceptable form of consideration for exercising an Option, including the method of payment. In the case of an Incentive Stock Option, the Administrator shall determine the acceptable form of consideration at the time of grant. Subject to Applicable Laws, such consideration may consist entirely of:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i.&nbsp;&nbsp;&nbsp;&nbsp;cash;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii.&nbsp;&nbsp;&nbsp;&nbsp;check;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iii.&nbsp;&nbsp;&nbsp;&nbsp;other Shares which are owned by the Participant and have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option shall be exercised;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iv.&nbsp;&nbsp;&nbsp;&nbsp;delivery of a properly executed exercise notice together with such other documentation as the Administrator and the broker, if applicable, shall require to effect an exercise of the Option and delivery to the Company of the sale proceeds required to pay the exercise price;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;v.&nbsp;&nbsp;&nbsp;&nbsp;such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws, including, to the extent permitted by Applicable Laws and approved by the Administrator, delivery of a promissory note, consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan, or a reduction in the amount of any Company liability to the Participant; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;vi.&nbsp;&nbsp;&nbsp;&nbsp;any combination of the foregoing methods of payment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e.&nbsp;&nbsp;&nbsp;&nbsp;*Exercise of Option; Rights as a Stockholder*. Any Option granted hereunder shall be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the Option Agreement. An Option may not be exercised for a fraction of a Share. An Option shall be deemed exercised when the Company receives: (i) written or electronic notice of exercise (in accordance with the Option Agreement) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised. Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Option Agreement and the Plan. Shares issued upon exercise of an Option shall be issued in the name of the Participant or, if requested by the Participant, in the name of the Participant and his or her spouse. Until the stock certificate evidencing such Shares is issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the optioned stock, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such stock certificate promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 16 of the Plan. Exercising an Option in any manner shall decrease the number of Shares thereafter available for sale under the Option, by the number of Shares as to which the Option is exercised.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f.&nbsp;&nbsp;&nbsp;&nbsp;*Termination of Relationship as a Service Provider*. If a Participant ceases to be a Service Provider, other than upon the Participant's death or Disability, the Participant may exercise his or her Option within such period of time as is specified in the Option Agreement to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for three months following the Participant's termination. If, on the date of termination, the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Participant does not exercise his or her Option within the time specified by the Administrator, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g.&nbsp;&nbsp;&nbsp;&nbsp;*Disability*. If a Participant ceases to be a Service Provider as a result of the Participant's Disability, the Participant may exercise his or her Option within such period of time as is specified in the Option Agreement to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following the Participant's termination. If, on the date of termination, the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Participant does not exercise his or her Option within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;h.&nbsp;&nbsp;&nbsp;&nbsp;*Death of Participant*. If a Participant dies while a Service Provider, the Option may be exercised following the Participant's death within such period of time as is specified in the Option Agreement to the extent that the Option is vested on the date of death (but in no event may the option be exercised later than the expiration of the

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term of such Option as set forth in the Option Agreement), by the Participant's designated beneficiary, provided such beneficiary has been designated prior to Participant's death in a form acceptable to the Administrator. If no such beneficiary has been designated by the Participant, then such Option may be exercised by the personal representative of the Participant's estate or by the person(s) to whom the Option is transferred pursuant to the Participant's will or in accordance with the laws of descent and distribution. In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following Participant's death. If, at the time of death, the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall immediately revert to the Plan. If the Option is not so exercised within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i.&nbsp;&nbsp;&nbsp;&nbsp;*ISO $100,000 Rule*. Each Option shall be designated in the Notice of Grant as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designations, to the extent that the aggregate Fair Market Value of Shares subject to a Participant's Incentive Stock Options (determined without regard to this paragraph) granted by the Company, any Parent or Subsidiary, which become exercisable for the first time during any calendar year (under all plans of the Company or any Parent or Subsidiary) exceeds $100,000, such excess Options shall be treated as Nonstatutory Stock Options. For purposes of this Section 9.i, Incentive Stock Options shall be taken into account in the order in which they were granted (or as otherwise provided under applicable regulations), and the Fair Market Value of the Shares shall be determined as of the time of grant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;j.&nbsp;&nbsp;&nbsp;&nbsp;*Section 409A of the Code*. Notwithstanding anything herein to the contrary, if an Option is granted to a Service Provider with respect to whom Common Stock does not constitute "service recipient stock" (as defined in Treasury Regulation Section 1.409A-1(b)(5)(iii)), the Option shall comply with Section 409A of the Code to the extent applicable.

10.&nbsp;&nbsp;&nbsp;&nbsp;*Stock Appreciation Rights*.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;&nbsp;&nbsp;&nbsp;*Grant of SARs*. Subject to the terms and conditions of the Plan, SARs may be granted to Participants at any time and from time to time as shall be determined by the Administrator, in its sole discretion. The Administrator shall have complete discretion to determine the number of SARs granted to any Participant. SARs may be granted either alone ("Free Standing Rights") or in conjunction with all or part of any Option granted under the Plan ("Related SARs"). Free Standing Rights shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Administrator. Related SARs shall be exercisable only at such time or times and to the extent that the Options to which they relate shall be exercisable. No Related SAR may be granted for more shares of Common Stock than are subject to the Option to which it relates. The number of shares of Common Stock subject to an SAR must be fixed on the date of grant of the SAR, and the SAR must not include any feature for the deferral of compensation other than the deferral of recognition of income until the exercise of the SAR. The provisions of SARs need not be the same with respect to each Participant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;&nbsp;&nbsp;&nbsp;*Exercise Price and other Terms*. Subject to Section 7.a of the Plan, the Administrator, subject to the provisions of the Plan, shall have complete discretion to determine the terms and conditions of SARs granted under the Plan; provided, however, that no SAR may have a term of more than ten (10) years from the date of grant. An SAR must be granted with an exercise price per Share not less than the Fair Market Value per Share on the date of grant. The exercise price for the Shares or cash to be issued pursuant to an already granted SAR may not be changed without the consent of the Company's stockholders. This shall include, without limitation, a repricing of the SAR as well as an SAR exchange program whereby the Participant agrees to cancel an existing SAR in exchange for an Option, SAR or other Award. Upon any exercise of a Related SAR, the number of Shares for which the related Option shall be exercisable shall be reduced by the number of Shares for which the SAR shall have been exercised. The number of Shares for which a Related SAR shall be exercisable shall be reduced upon any exercise of the related Option by the number of Shares for which such Option shall have been exercised.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.&nbsp;&nbsp;&nbsp;&nbsp;*Payment of SAR Amount*. Upon exercise of a SAR, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i.&nbsp;&nbsp;&nbsp;&nbsp;The difference between the Fair Market Value of a Share on the date of exercise over the exercise price; times

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii.&nbsp;&nbsp;&nbsp;&nbsp;the number of Shares with respect to which the SAR is exercised.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.&nbsp;&nbsp;&nbsp;&nbsp;*Payment upon Exercise of SAR*. At the discretion of the Administrator, payment for a SAR may be in cash, Shares or a combination thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e.&nbsp;&nbsp;&nbsp;&nbsp;*SAR Agreement*. Each SAR grant shall be evidenced by an Award Agreement that shall specify the exercise price, the term of the SAR, the conditions of exercise, and such other terms and conditions as the Administrator, in its sole discretion, shall determine.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f.&nbsp;&nbsp;&nbsp;&nbsp;*Expiration of SARs*. A SAR granted under the Plan shall expire upon the date determined by the Administrator, in its sole discretion, and set forth in the Award Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g.&nbsp;&nbsp;&nbsp;&nbsp;*Termination of Relationship as a Service Provider*. If a Participant ceases to be a Service Provider, other than upon the Participant's death or Disability termination, the Participant may exercise his or her SAR within such period of time as is specified in the Award Agreement to the extent that the SAR is vested on the date of termination (but in no event later than the expiration of the term of such SAR as set forth in the SAR Agreement). In the absence of a specified time in the Award Agreement, the SAR shall remain exercisable for three months following the Participant's termination. If, on the date of termination, the Participant is not vested as to his or her entire SAR, the Shares covered by the unvested portion of the SAR shall revert to the Plan. If, after termination, the Participant does not exercise his or her SAR within the time specified by the Administrator, the SAR shall terminate, and the Shares covered by such SAR shall revert to the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;h.&nbsp;&nbsp;&nbsp;&nbsp;*Disability*. If a Participant ceases to be a Service Provider as a result of the Participant's Disability, the Participant may exercise his or her SAR within such period of time as is specified in the Award Agreement to the extent the SAR is vested on the date of termination (but in no event later than the expiration of the term of such SAR as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the SAR shall remain exercisable for twelve (12) months following the Participant's termination. If, on the date of termination, the Participant is not vested as to his or her entire SAR, the Shares covered by the unvested portion of the SAR shall revert to the Plan. If, after termination, the Participant does not exercise his or her SAR within the time specified herein, the SAR shall terminate, and the Shares covered by such SAR shall revert to the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i.&nbsp;&nbsp;&nbsp;&nbsp;*Death of Participant*. If a Participant dies while a Service Provider, the SAR may be exercised following the Participant's death within such period of time as is specified in the Award Agreement (but in no event may the SAR be exercised later than the expiration of the term of such SAR as set forth in the Award Agreement), by the Participant's designated beneficiary, provided such beneficiary has been designated prior to Participant's death in a form acceptable to the Administrator. If no such beneficiary has been designated by the Participant, then such SAR may be exercised by the personal representative of the Participant's estate or by the person(s) to whom the SAR is transferred pursuant to the Participant's will or in accordance with the laws of descent and distribution. In the absence of a specified time in the SAR Agreement, the SAR shall remain exercisable for twelve (12) months following Participant's death. If the SAR is not so exercised within the time specified herein, the SAR shall terminate, and the Shares covered by such SAR shall revert to the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;j.&nbsp;&nbsp;&nbsp;&nbsp;*Section 409A of the Code*. An SAR that is subject to Section 409A of the Code shall satisfy the requirements of this Section 10.j and the additional conditions applicable to nonqualified deferred compensation under Section 409A of the Code. The requirements herein shall apply in the event any SAR under this Plan is granted with an exercise price less than the Fair Market Value per Share on the date the SAR is granted, is granted to a Service Provider with respect to whom Common Stock does not constitute "service recipient stock" (as defined in Treasury Regulation Section 1.409A-1(b)(5)(iii)), or is otherwise determined to constitute "nonqualified deferred compensation" within the meaning of Section 409A of the Code. Any such SAR may provide that it is exercisable at any time permitted under the governing Award Agreement, but such exercise shall be limited to fixing the measurement of the amount, if any, by which the Fair Market Value of a Share on the date of exercise exceeds the exercise price (the "SAR Amount"). However, once the SAR is exercised, the SAR Amount may be paid only on the fixed time, payment schedule or other event specified in the governing Award Agreement.

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11.&nbsp;&nbsp;&nbsp;&nbsp;*Restricted Awards*.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;&nbsp;&nbsp;&nbsp;*Grant of Restricted Awards*. Subject to the terms and conditions of the Plan, Restricted Awards may be granted to Participants at any time as shall be determined by the Administrator, in its sole discretion. A Restricted Award is an Award of Common Stock ("Restricted Stock") or hypothetical shares of Common Stock ("Restricted Stock Units") having a value equal to the Fair Market Value of an identical number of shares of Common Stock, which may, but need not, provide that such Restricted Award will be subject to forfeiture and may not be sold, assigned, transferred or otherwise disposed of, pledged or hypothecated as collateral for a loan or as security for the performance of any obligation or for any other purpose for such period as the Administrator shall determine. Subject to Section 7.b hereof, the Administrator shall have complete discretion to determine (i) the number of Shares subject to a Restricted Award granted to any Participant, and (ii) the conditions that must be satisfied, which may include a performance-based component, upon which is conditioned the grant, vesting or issuance of a Restricted Award.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;&nbsp;&nbsp;&nbsp;*Restricted Stock*. Each Participant granted Restricted Stock shall execute and deliver to the Company an Award Agreement with respect to the Restricted Stock setting forth the restrictions and other terms and conditions applicable to such Restricted Stock. If the Administrator determines that the Restricted Stock shall be held by the Company or in escrow rather than delivered to the Participant pending the release of the applicable restrictions, the Administrator may require the Participant to additionally execute and deliver to the Company (i) an escrow agreement satisfactory to the Administrator, if applicable and (ii) the appropriate blank stock power with respect to the Restricted Stock covered by such agreement.

Subject to the restrictions set forth in the Award Agreement, the Participant generally shall have the rights and privileges of a holder of Common Stock as to such Restricted Stock, including the right to vote such Restricted Stock. At the discretion of the Administrator, cash dividends and stock dividends with respect to the Restricted Stock may be either currently paid to the Participant on the day on which the corresponding dividend on shares of Common Stock is paid to stockholders, or withheld by the Company for the Participant's account, and interest may be credited on the amount of the cash dividends withheld at a rate and subject to such terms as determined by the Administrator. Any cash dividends or stock dividends so withheld by the Administrator and attributable to any particular Share (and earnings thereon, if applicable) shall be distributed to the Participant in cash or, at the discretion of the Administrator, in Shares having a Fair Market Value equal to the amount of such dividends, if applicable, upon the release of restrictions on such Shares and, if such Shares are forfeited, the Participant shall have no right to such dividends.

Restricted Stock awarded to a Participant shall be subject to the following restrictions until the expiration of such restrictions, and to such other terms and conditions as may be set forth in the applicable Award Agreement: (A) if an escrow arrangement is used, the Participant shall not be entitled to delivery of the stock certificate; (B) the Shares shall be subject to the restrictions on transferability set forth in the Award Agreement; (C) the Shares shall be subject to forfeiture to the extent provided in the Award Agreement; and (D) to the extent such Shares are forfeited, the stock certificates shall be returned to the Company, and all rights of the Participant to such shares and as a stockholder with respect to such Shares shall terminate without further obligation on the part of the Company.

Upon the expiration of the restrictions with respect to any Restricted Stock, the restrictions set forth in this Section 11 and the applicable Award Agreement shall be of no further force or effect with respect to such Shares, except as set forth in the applicable Award Agreement. If an escrow arrangement is used, upon such expiration, the Company shall deliver to the Participant, or his beneficiary, without charge, the stock certificate evidencing the Restricted Stock which has not then been forfeited and with respect to which the restrictions have expired (to the nearest full Share) and any cash distributions or stock dividends credited to the Participant's account with respect to such Restricted Stock and the interest thereon, if any.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.&nbsp;&nbsp;&nbsp;&nbsp;*Restricted Stock Units*. The terms and conditions of a grant of Restricted Stock Units shall be reflected in a written Award Agreement. Each Restricted Stock Unit shall be the equivalent of one Share for purposes of determining the number of Shares subject to an Award. No Shares shall be issued at the time a Restricted Stock Unit is granted, and the Company will not be required to set aside a fund for the payment of any such Award. Until the Shares are issued, no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to Restricted Stock Units. At the discretion of the Administrator, and only to the extent set forth in the

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applicable Award Agreement, each Restricted Stock Unit may be credited with cash distributions and stock dividends paid by the Company in respect of one share of Stock ("Dividend Equivalents"). At the discretion of the Administrator, Dividend Equivalents may be either currently paid to the Participant on the day on which the corresponding dividend on shares of Common Stock is paid to stockholders, or withheld by the Company for the Participant's account, and interest may be credited on the amount of cash Dividend Equivalents withheld at a rate and subject to such terms as determined by the Administrator. Dividend Equivalents credited to a Participant's account and attributable to any particular Restricted Stock Unit (and earnings thereon, if applicable) shall be distributed in cash or, at the discretion of the Administrator, in Shares having a Fair Market Value equal to the amount of such Dividend Equivalents and earnings, if applicable, to the Participant upon settlement of such Restricted Stock Unit and, if such Restricted Stock Unit is forfeited, the Participant shall have no right to such Dividend Equivalents.

Restricted Stock Units awarded to any Participant shall be subject to (A) forfeiture until the expiration of the restrictions applicable to such Award, and satisfaction of any applicable Performance Goals during such period, to the extent provided in the applicable Award Agreement, and to the extent such Restricted Stock Units are forfeited, all rights of the Participant to such Restricted Stock Units shall terminate without further obligation on the part of the Company and (B) such other terms and conditions as may be set forth in the applicable Award Agreement.

Except as otherwise provided in the Plan or an Award Agreement, upon the expiration of the restrictions with respect to any outstanding Restricted Stock Units, the Company shall deliver to the Participant, or his beneficiary, without charge, one Share for each such outstanding Restricted Stock Unit ("Vested Unit") and cash equal to any Dividend Equivalents credited with respect to each such Vested Unit and the interest thereon or, at the discretion of the Administrator, in Shares having a Fair Market Value equal to such Dividend Equivalents' interest thereon, if any; provided, however, that, if explicitly provided in the applicable Award Agreement, the Administrator may, in its sole discretion, elect to pay cash or part cash and part Shares in lieu of delivering only Shares for Vested Units. If a cash payment is made in lieu of delivering Shares, the amount of such payment shall be equal to the aggregate Fair Market Value of the Shares as of the date on which the restrictions lapsed with respect to such Vested Unit.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.&nbsp;&nbsp;&nbsp;&nbsp;*Other Terms*. The Administrator, subject to the provisions of the Plan, shall have complete discretion to determine the terms and conditions of Restricted Awards granted under the Plan. Restricted Award grants shall be subject to the terms, conditions, and restrictions determined by the Administrator at the time the Restricted Stock or the Restricted Stock Unit is awarded. Any certificates representing the Shares of stock awarded shall bear such legends as shall be determined by the Administrator.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e.&nbsp;&nbsp;&nbsp;&nbsp;*Restricted Award Agreement*. Each Restricted Award grant shall be evidenced by an Award Agreement that shall specify the purchase price (if any) and such other terms and conditions as the Administrator, in its sole discretion, shall determine; provided; however, that if the Restricted Award grant has a purchase price, such purchase price must be paid no more than ten (10) years following the date of grant.

12.&nbsp;&nbsp;&nbsp;&nbsp;*Performance Shares*.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;&nbsp;&nbsp;&nbsp;*Grant of Performance Shares*. Subject to the terms and conditions of the Plan, Performance Shares may be granted to Participants at any time as shall be determined by the Administrator, in its sole discretion. Subject to Section 7.b hereof, the Administrator shall have complete discretion to determine (i) the number of Shares subject to a Performance Share award granted to any Participant, and (ii) the conditions that must be satisfied, which typically will be based principally or solely on achievement of performance milestones but may include a service-based component, upon which is conditioned the grant or vesting of Performance Shares. Performance Shares shall be granted in the form of units to acquire Shares. Each such unit shall be the equivalent of one Share for purposes of determining the number of Shares subject to an Award. Until the Shares are issued, no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the units to acquire Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;&nbsp;&nbsp;&nbsp;*Other Terms*. The Administrator, subject to the provisions of the Plan, shall have complete discretion to determine the terms and conditions of Performance Shares granted under the Plan. Performance Share grants shall be subject to the terms, conditions, and restrictions determined by the Administrator at the time the stock is awarded, which may include such performance-based milestones as are determined appropriate by the Administrator. The

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Administrator may require the recipient to sign an Award Agreement as a condition of the award. Any certificates representing the Shares of stock awarded shall bear such legends as shall be determined by the Administrator.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.&nbsp;&nbsp;&nbsp;&nbsp;*Performance Share Award Agreement*. Each Performance Share grant shall be evidenced by an Award Agreement that shall specify such other terms and conditions as the Administrator, in its sole discretion, shall determine.

13.&nbsp;&nbsp;&nbsp;&nbsp; *Performance Units*.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;&nbsp;&nbsp;&nbsp;*Grant of Performance Units*. Performance Units are similar to Performance Shares, except that they shall be settled in a cash equivalent to the Fair Market Value of the underlying Shares, determined as of the vesting date. Subject to the terms and conditions of the Plan, Performance Units may be granted to Participants at any time and from time to time as shall be determined by the Administrator, in its sole discretion. The Administrator shall have complete discretion to determine the conditions that must be satisfied, which typically will be based principally or solely on achievement of performance milestones but may include a service-based component, upon which is conditioned the grant or vesting of Performance Units. Performance Units shall be granted in the form of units to acquire Shares. Each such unit shall be the cash equivalent of one Share of Common Stock. No right to vote or receive dividends or any other rights as a stockholder shall exist with respect to Performance Units or the cash payable thereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;&nbsp;&nbsp;&nbsp;*Number of Performance Units*. Subject to Section 7.c hereof, the Administrator will have complete discretion in determining the number of Performance Units granted to any Participant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.&nbsp;&nbsp;&nbsp;&nbsp;*Other Terms*. The Administrator, subject to the provisions of the Plan, shall have complete discretion to determine the terms and conditions of Performance Units granted under the Plan. Performance Unit grants shall be subject to the terms, conditions, and restrictions determined by the Administrator at the time the grant is awarded, which may include such performance-based milestones as are determined appropriate by the Administrator. The Administrator may require the recipient to sign an Award Agreement as a condition of the award. Any certificates representing the units awarded shall bear such legends as shall be determined by the Administrator.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.&nbsp;&nbsp;&nbsp;&nbsp;*Performance Unit Award Agreement*. Each Performance Unit grant shall be evidenced by an Award Agreement that shall specify such terms and conditions as the Administrator, in its sole discretion, shall determine.

14.&nbsp;&nbsp;&nbsp;&nbsp;*Deferred Stock Units*.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;&nbsp;&nbsp;&nbsp;*Description*. Deferred Stock Units shall consist of a Restricted Stock, Restricted Stock Unit, Performance Share or Performance Unit Award that the Administrator, in its sole discretion permits to be paid out in installments or on a deferred basis, in accordance with rules and procedures established by the Administrator. Deferred Stock Units shall remain subject to the claims of the Company's general creditors until distributed to the Participant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;&nbsp;&nbsp;&nbsp;*Code Section 162(m) Limits*. Deferred Stock Units shall be subject to the annual limits under Section 162(m) of the Code applicable to the underlying Restricted Stock, Restricted Stock Unit, Performance Share or Performance Unit Award as set forth in Section 7 hereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.&nbsp;&nbsp;&nbsp;&nbsp;*Code Section 409A Limitations*. If any Deferred Stock Units are considered to be deferred compensation under Section 409A of the Code, then the terms of such Deferred Stock Units shall comply with Section 409A of the Code.

15.&nbsp;&nbsp;&nbsp;&nbsp;*Non-Transferability of Awards*. Unless determined otherwise by the Administrator, an Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the recipient, only by the recipient. If the Administrator makes an Award transferable, such Award shall contain such additional terms and conditions as the Administrator deems appropriate.

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16.&nbsp;&nbsp;&nbsp;&nbsp;*Adjustments Upon Changes in Capitalization, Dissolution or Liquidation or Change of Control*.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;&nbsp;&nbsp;&nbsp;*Changes in Capitalization*. In the event that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, or other change in the corporate structure of the Company affecting the Shares, then the Administrator shall, in an equitable manner and to the extent necessary to preserve the economic intent of Awards, adjust the number and class of Shares which may be delivered under the Plan, the number, class, and exercise price of Shares covered by each outstanding Award, and the maximum number of Shares with respect to which any one person may be granted Awards during any period stated in Section 7. Unless the Committee specifically determines that such adjustment is in the best interests of the Company, any adjustments under this Section 16.a shall be made in a manner which does not result in a violation of Section 409A of the Code or the modification, extension or renewal of any Incentive Stock Option. Any adjustments under this Section 16.a shall be made in a manner which does not adversely affect the exemption provided pursuant to Rule 16b-3. Further, with respect to Awards intended to qualify as "performance-based compensation" under Section 162(m) of the Code, any adjustments or substitutions will not cause the Company to be denied a tax deduction on account of Section 162(m) of the Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;&nbsp;&nbsp;&nbsp;*Dissolution or Liquidation*. In the event of the proposed dissolution or liquidation of the Company, the Administrator shall notify each Participant as soon as practicable prior to the effective date of such proposed transaction. The Administrator in its discretion may provide for a Participant to have the right to exercise his or her Option or SAR until ten (10) days prior to such transaction as to all of the Awarded Stock covered thereby, including Shares as to which the Award would not otherwise be exercisable. In addition, the Administrator may provide that any Company repurchase option or forfeiture rights applicable to any Award shall lapse 100%, and that any Award vesting shall accelerate 100%, provided the proposed dissolution or liquidation takes place at the time and in the manner contemplated. To the extent it has not been previously exercised (with respect to Options and SARs) or vested (with respect to other Awards), an Award will terminate immediately prior to the consummation of such proposed action.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.&nbsp;&nbsp;&nbsp;&nbsp;*Change of Control*.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i.&nbsp;&nbsp;&nbsp;&nbsp;*Stock Options and SARs*. In the event of a Change of Control, each outstanding Option and SAR shall be assumed or an equivalent option or SAR substituted by the successor entity or a Parent or Subsidiary of the successor entity. Notwithstanding the foregoing, in the event that the successor entity refuses to assume or substitute for the Option or SAR, or if the successor entity does not have outstanding common equity securities required to be registered under Section 12 of the Exchange Act, the Participant shall fully vest in and have the right to exercise the Option or SAR as to all of the Awarded Stock, including Shares as to which it would not otherwise be vested or exercisable. If an Option or SAR becomes fully vested and exercisable in lieu of assumption or substitution in the event of a Change of Control, the Administrator may take one or more actions with respect to such Option or SAR including, but not limited to, the following: (i) notifying the Participant in writing or electronically that such Option or SAR may be exercised in full for a limited period of time on or before a specified date (before or after the Change of Control) fixed by the Administrator, after which specified date the unexercised portion of such Option or SAR and all rights of the Participant thereunder shall terminate, (ii) requiring the mandatory surrender to the Company by the Participant of some or all of the outstanding Options or SARs held by such Participant as of a date, before or after such Change of Control, specified by the Administrator, in which event the Administrator shall thereupon cancel such Options and SARs and the Company shall pay to such Participant an amount of cash per share equal to the excess, if any, of the Change of Control Value of the Shares subject to such Options and SARs over the exercise price(s) under such Options and SARs for such Shares, or (iii) making such adjustments to Options and SARs then outstanding as the Administrator deems appropriate to reflect such Change of Control. For the purposes of this paragraph, the Option or SAR shall be considered assumed if, following the Change of Control, the option or stock appreciation right confers the right to purchase or receive, for each Share of Awarded Stock subject to the Option or SAR immediately prior to the Change of Control, the consideration (whether stock, cash, or other securities or property) received in the Change of Control by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if

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such consideration received in the Change of Control is not solely common stock of the successor entity or its Parent, the Administrator may, with the consent of the successor entity, provide for the consideration to be received upon the exercise of the Option or SAR, for each Share of Awarded Stock subject to the Option or SAR, to be solely common stock of the successor entity or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in the Change of Control.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii.&nbsp;&nbsp;&nbsp;&nbsp;*Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units and Deferred Stock Units*. In the event of a Change of Control, each outstanding Restricted Stock, Restricted Stock Unit, Performance Share, Performance Unit and Deferred Stock Unit Award shall be assumed or an equivalent Restricted Stock, Restricted Stock Unit, Performance Share, Performance Unit or Deferred Stock Unit Award substituted by the successor entity or a Parent or Subsidiary of the successor entity. Notwithstanding the foregoing, in the event that the successor entity refuses to assume or substitute for the Restricted Stock, Restricted Stock Unit, Performance Share, Performance Unit or Deferred Stock Unit Award, or if the successor entity does not have outstanding common equity securities required to be registered under Section 12 of the Exchange Act, the Participant shall fully vest in the Restricted Stock, Restricted Stock Unit, Performance Share, Performance Unit or Deferred Stock Unit Award, including as to Shares (or with respect to Performance Units, the cash equivalent thereof) which would not otherwise be vested. For the purposes of this paragraph, a Restricted Stock, Restricted Stock Unit, Performance Share, Performance Unit and Deferred Stock Unit Award shall be considered assumed if, following the Change of Control, the award confers the right to purchase or receive, for each Share (or with respect to Performance Units, the cash equivalent thereof) subject to the Award immediately prior to the Change of Control, the consideration (whether stock, cash, or other securities or property) received in the Change of Control by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the Change of Control is not solely common stock of the successor entity or its Parent, the Administrator may, with the consent of the successor entity, provide for the consideration to be received, for each Share and each unit/right to acquire a Share subject to the Award, to be solely common stock of the successor entity or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in the Change of Control.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.&nbsp;&nbsp;&nbsp;&nbsp;*Involuntary Termination other than for Cause, Death or Disability or a Voluntary Termination for Good Reason, Following a Change of Control*. If, within eighteen (18) months following a Change of Control, a Participant's employment is terminated (i) involuntarily by the Company or successor entity other than (A) for Cause, or (B) on account of death or Disability, or (ii) by the Participant by a Voluntary Termination for Good Reason, then the Participant shall fully vest in and receive payment of or have the right to exercise his Award, as applicable, as to all of the Shares subject to each such Award including Shares as to which such Award would not otherwise be vested or exercisable. Notwithstanding the foregoing or anything in an Award Agreement to the contrary, (i) if an Award is subject to Section 409A of the Code and payment of the Award at the time of termination of employment under this paragraph would cause the Award not to comply with Section 409A of the Code, the Award shall be paid only at such time and in such form as will comply with Section 409A of the Code, and (ii) any Restricted Stock, Restricted Stock Unit, Performance Share, Performance Unit or Deferred Stock Award that is intended to constitute "performance-based compensation" under Section 162(m) of the Code shall not vest in connection with the Participant's involuntary termination of employment or Voluntary Termination for Good Reason until the end of the applicable Performance Period, and then only to the extent that the applicable Performance Goals have been satisfied.

17.&nbsp;&nbsp;&nbsp;&nbsp;*Date of Grant*. The date of grant of an Award shall be, for all purposes, the date on which the Administrator makes the determination granting such Award, or such other later date as is determined by the Administrator. Notice of the determination shall be provided to each Participant within a reasonable time after the date of such grant.

18.&nbsp;&nbsp;&nbsp;&nbsp;*Amendment and Termination of the Plan*.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;&nbsp;&nbsp;&nbsp;*Amendment and Termination*. The Board may at any time amend, alter, suspend or terminate the Plan; provided, however, that the Board may not materially amend the Plan without obtaining stockholder approval.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;&nbsp;&nbsp;&nbsp;*Stockholder Approval*. The Company shall obtain stockholder approval of any Plan amendment to the extent necessary and desirable to comply with Applicable Law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.&nbsp;&nbsp;&nbsp;&nbsp;*Effect of Amendment or Termination*. No amendment, alteration, suspension or termination of the Plan shall impair the rights of any Participant, unless mutually agreed otherwise between the Participant and the Administrator, which agreement must be in writing (or electronic format) and signed by the Participant and the Company. Termination of the Plan shall not affect the Administrator's ability to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior to the date of such termination.

19.&nbsp;&nbsp;&nbsp;&nbsp;*Conditions Upon Issuance of Shares*.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;&nbsp;&nbsp;&nbsp;*Legal Compliance*. Shares shall not be issued pursuant to the exercise of an Award unless the exercise of the Award or the issuance and delivery of such Shares (or with respect to Performance Units, the cash equivalent thereof) shall comply with Applicable Laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;&nbsp;&nbsp;&nbsp;*Investment Representations*. As a condition to the exercise or receipt of an Award, the Company may require the person exercising or receiving such Award to represent and warrant at the time of any such exercise or receipt that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required.

20.&nbsp;&nbsp;&nbsp;&nbsp;*Liability of Company*.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;&nbsp;&nbsp;&nbsp;*Inability to Obtain Authority*. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;&nbsp;&nbsp;&nbsp;*Grants Exceeding Allotted Shares*. If the Awarded Stock covered by an Award exceeds, as of the date of grant, the number of Shares which may be issued under the Plan without additional stockholder approval, such Award shall be void with respect to such excess Awarded Stock, unless stockholder approval of an amendment sufficiently increasing the number of Shares subject to the Plan is timely obtained in accordance with Section 18 of the Plan.

21.&nbsp;&nbsp;&nbsp;&nbsp;*General Provisions*.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;&nbsp;&nbsp;&nbsp;*Section 409A of the Code*. The Plan is intended to comply with Section 409A of the Code to the extent subject thereto, and, accordingly, to the maximum extent permitted, the Plan shall be interpreted and administered to be in compliance therewith. Any payments described in the Plan that are due within the "short-term deferral period" as defined in Section 409A of the Code shall not be treated as deferred compensation unless Applicable Laws require otherwise. Notwithstanding anything to the contrary in the Plan, to the extent required to avoid accelerated taxation and tax penalties under Section 409A of the Code, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to the Plan during the six (6) month period immediately following a Participant's "separation from service" within the meaning of Section 409A of the Code shall instead be paid on the first payroll date after the six-month anniversary of the Participant's separation from service.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;&nbsp;&nbsp;&nbsp;*Section 16*. It is the intent of the Company that the Plan satisfy, and be interpreted in a manner that satisfies, the applicable requirements of Rule 16b-3 so that Participants will be entitled to the benefit of Rule 16b-3, or any other rule promulgated under Section 16 of the Exchange Act, and will not be subject to short-swing liability under Section 16 of the Exchange Act. Accordingly, if the operation of any provision of the Plan would conflict with the intent expressed in this Section 21.b, such provision to the extent possible shall be interpreted and/or deemed amended so as to avoid such conflict.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.&nbsp;&nbsp;&nbsp;&nbsp;*Clawbacks*. Notwithstanding any other provisions in this Plan, any Award which is subject to recovery under any law, government regulation or stock exchange listing requirement, will be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation or stock exchange listing

------

requirement (or any policy adopted by the Company pursuant to any such law, government regulation or stock exchange listing requirement).

22.&nbsp;&nbsp;&nbsp;&nbsp;*Reservation of Shares*. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.

## Ex-21

**Exhibit 21**

**Subsidiaries of the Registrant**

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| | | |
|:---|:---|:---|
| **<u>Name</u>** | **Jurisdiction of Formation** | **Trade Names** |
| Overstock.com Services, Inc. | Utah | Overstock.com Services |
| Supplier Oasis Fulfillment Services, Inc. | Utah | SOFS |
| Overstock Ireland Limited | Ireland | O.co Ireland.ie |
| O Agency Group, Inc. | Utah | Overstock.com Insurance |
| O.com Land, LLC | Utah | |
| O.com Ventures, Inc. | Utah | |
| O.com Gift Cards, Inc. | Utah | |
| O.co HK Limited (HK) | Hong Kong | |
| Mac Warehouse, LLC | Utah | |
| Peace Coliseum Mezzanine, LLC | Utah | |
| Peace Coliseum, LLC | Utah | |

---

## Ex-23

**Exhibit 23**

**Consent of Independent Registered Public Accounting Firm**

We consent to the incorporation by reference in the registration statements (Nos. 333-123540, 333-124441, 333-160512, 333-162674, 333-181422, 333-184344, 333-203175, 333-203176, and 333-256179) on Form S-8 and (Nos. 333-207141, 333-226729, 333-233913, and 333-239498) on Form S-3 of our reports dated February 24, 2023, with respect to the consolidated financial statements and financial statement schedule II of Overstock.com, Inc. and the effectiveness of internal control over financial reporting.

/s/ KPMG LLP

Salt Lake City, Utah

February 24, 2023

## Exhibit 31.1

**Exhibit 31.1**

**CERTIFICATION OF CHIEF EXECUTIVE OFFICER**

I, Jonathan E. Johnson III, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; I have reviewed this Annual Report on Form 10-K of Overstock.com, Inc.;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

---

| | | |
|:---|:---|:---|
| Date: | February 24, 2023 | /s/ JONATHAN E. JOHNSON III |
| | | Jonathan E. Johnson III |
| | | Chief Executive Officer |
| | | (Principal Executive Officer) |

---

## Exhibit 31.2

**Exhibit 31.2**

**CERTIFICATION OF CHIEF FINANCIAL OFFICER**

I, Adrianne B. Lee, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; I have reviewed this Annual Report on Form 10-K of Overstock.com, Inc.;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

---

| | | |
|:---|:---|:---|
| Date: | February 24, 2023 | /s/ ADRIANNE B. LEE |
| | | Adrianne B. Lee |
| | | Chief Financial Officer |
| | | (Principal Financial Officer and Principal Accounting Officer) |

---

## Exhibit 32.1

**Exhibit 32.1**

**CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER**

**PURSUANT TO**

**18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO**

**SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

I, Jonathan E. Johnson III, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report of Overstock.com, Inc. on Form 10-K for the year ended December 31, 2022 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as applicable, and that information contained in such Report fairly presents in all material respects the financial condition and results of operations of Overstock.com, Inc.

---

| | | |
|:---|:---|:---|
| Date: | February 24, 2023 | /s/ JONATHAN E. JOHNSON III |
| |  | Jonathan E. Johnson III |
| |  | Chief Executive Officer |
| |  | (Principal Executive Officer) |

---

## Exhibit 32.2

**Exhibit 32.2**

**CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER**

**PURSUANT TO**

**18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO**

**SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

I, Adrianne B. Lee, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report of Overstock.com, Inc. on Form 10-K for the year ended December 31, 2022 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as applicable, and that information contained in such Report fairly presents in all material respects the financial condition and results of operations of Overstock.com, Inc.

---

| | | |
|:---|:---|:---|
| Date: | February 24, 2023 | /s/ ADRIANNE B. LEE |
| |  | Adrianne B. Lee |
| |  | Chief Financial Officer |
| |  | (Principal Financial Officer and Principal Accounting Officer) |

---

## Exhibit 99.1

**Exhibit 99.1**

**MEDICI VENTURES, L.P.**

(A Delaware Limited Partnership)

Financial Statements

September 30, 2021

(With Independent Auditors' Report Thereon)

------

**Independent Auditors' Report**

The Partners

Medici Ventures, L.P.:

We have audited the accompanying financial statements of Medici Ventures, L.P., which comprise the statement of assets and liabilities, including the schedule of investments, as of September 30, 2021, and the related statements of operations, changes in partners' capital, and cash flows for the period from April 23, 2021 to September 30, 2021, and the related notes to the financial statements.

*Management's Responsibility for the Financial Statements*

Management is responsible for the preparation and fair presentation of these financial statements in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

*Auditors' Responsibility*

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

*Opinion*

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Medici Ventures, L.P. as of September 30, 2021, and the results of its operations, changes in its partners' capital, and its cash flows for the period from April 23, 2021 to September 30, 2021 in accordance with U.S. generally accepted accounting principles.

/s/ KPMG LLP

Salt Lake City, Utah

February 15, 2022

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| | |
|:---|:---|
| **MEDICI VENTURES, L.P.** | **MEDICI VENTURES, L.P.** |
| (A Delaware Limited Partnership) | (A Delaware Limited Partnership) |
| Statement of Assets and Liabilities | Statement of Assets and Liabilities |
| September 30, 2021 | September 30, 2021 |
| **Assets** |  |
| Portfolio investments, at fair value (note 3, cost of $194,239,002) | $201770765 |
| Cash | 39699457 |
| Prepaid management fees | 1458333 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total assets** | 242928555 |
| **Liabilities** |  |
| Related party payable (note 7) | 33947 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total liabilities** | 33947 |
| **Partners' capital** | $242894608 |
| See accompanying notes to financial statements. |  |

---

2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

------

---

| | | | | |
|:---|:---|:---|:---|:---|
| **MEDICI VENTURES, L.P.** | **MEDICI VENTURES, L.P.** | **MEDICI VENTURES, L.P.** | **MEDICI VENTURES, L.P.** | **MEDICI VENTURES, L.P.** |
| (A Delaware Limited Partnership) | (A Delaware Limited Partnership) | (A Delaware Limited Partnership) | (A Delaware Limited Partnership) | (A Delaware Limited Partnership) |
| Schedule of Investments | Schedule of Investments | Schedule of Investments | Schedule of Investments | Schedule of Investments |
| September 30, 2021 | September 30, 2021 | September 30, 2021 | September 30, 2021 | September 30, 2021 |
|  |  |  |  | **Percentage** |
|  | **Number of** |  |  | **of partners'** |
|  | **shares** | **Cost** | **Fair value** <sup>(1)</sup> | **capital** |
| **Private operating companies:** |  |  |  |  |
| &nbsp;&nbsp;**Blockchain and financial technology services:** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;**United States:** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;tZERO Group, Inc. |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common stock and equivalents | 112095577 | $101405000 | $104866394 | 43.2% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Medici Land Governance, Inc. |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common stock | 836377 | 13544000 | 12128965 | 5.0% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PeerNova, Inc. |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common stock and warrants | 2038906 | 6258749 | 3271985 | 1.3% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Series A preferred stock | 2009133 | 2336823 | 5063015 | 2.1% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Series B preferred stock | 397598 | 499999 | 485106 | 0.2% |
|  |  | 9095571 | 8820106 | 3.6% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Voatz, Inc. |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Series seed preferred stock | 385516 | 6250780 | 6250780 | 2.6% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Minds, Inc. |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Series A preferred stock | 670841 | 5999995 | 5999995 | 2.5% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;GrainChain, Inc. |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Class A common stock | 7173184 | 8392625 | 9175220 | 3.8% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Class B common stock | 2391061 | 2797541 | 3058406 | 1.3% |
|  |  | 11190166 | 12233626 | 5.0% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Spera, Inc. |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Series A preferred stock | 2670583 | 2000000 | 2000000 | 0.8% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FinClusive Capital, Inc. |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common stock | 14933 | 3733250 | 3733250 | 1.5% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Vital Chain, Inc. |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common stock | 721658 | 462000 |  | 0.0% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Vinsent (VinX Network, Ltd.) |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common stock | 145126 | 2499675 | 2221879 | 0.9% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Chainstone labs, Inc. |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common stock | 3600000 | 3600000 | 3600000 | 1.5% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Evernym, Inc. |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SAFE note | N/A | 2193922 | 2511484 | 1.0% |

---

See accompanying notes to financial statements.

(continued)

------

---

| | | | | |
|:---|:---|:---|:---|:---|
| **MEDICI VENTURES, L.P.** | **MEDICI VENTURES, L.P.** | **MEDICI VENTURES, L.P.** | **MEDICI VENTURES, L.P.** | **MEDICI VENTURES, L.P.** |
| (A Delaware Limited Partnership) | (A Delaware Limited Partnership) | (A Delaware Limited Partnership) | (A Delaware Limited Partnership) | (A Delaware Limited Partnership) |
| Schedule of Investments | Schedule of Investments | Schedule of Investments | Schedule of Investments | Schedule of Investments |
| September 30, 2021 | September 30, 2021 | September 30, 2021 | September 30, 2021 | September 30, 2021 |
|  |  |  |  | **Percentage** |
|  | **Number of** |  |  | **of partners'** |
|  | **shares** | **Cost** | **Fair Value** <sup>(1)</sup> | **capital** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Symbiont.io, Inc. |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Series A-1 preferred stock | 343643 | 1051548 | 1051548 | 0.4% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Votem Corp. |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Series B preferred stock | 48780 |  |  | 0.0% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Factom, Inc. (Inveniam) |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Series A preferred stock | 419932 |  |  | 0.0% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Netki, Inc. |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Convertible note (5%)<sup>(2)</sup> |  | 1360849 | 1360849 | 0.6% |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total United States** |  | 164386756 | 166778876 | 68.7% |
| &nbsp;&nbsp;&nbsp;&nbsp;**Barbados** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Bitt, Inc. |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common stock | 2265245950 | 17674000 | 18498242 | 7.6% |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Barbados** |  | 17674000 | 18498242 | 7.6% |
| &nbsp;&nbsp;&nbsp;&nbsp;**Cayman Islands** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ripio (BitPagos, Inc.) |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Series A-1 preferred stock | 268641 | 4641158 | 8956491 | 3.7% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Series B preferred stock | 59990 | 2000000 | 2000067 | 0.8% |
|  |  | 6641158 | 10956558 | 4.5% |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Cayman Islands** |  | 6641158 | 10956558 | 4.5% |
| &nbsp;&nbsp;&nbsp;&nbsp;**Belgium** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Settlemint NV |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common stock | 251732 | 3537088 | 3537088 | 1.5% |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Belgium** |  | 3537088 | 3537088 | 1.5% |
| &nbsp;&nbsp;&nbsp;&nbsp;**Luxemborg** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ambr S.a.r.l |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Preferred stock | 3755869 | 2000000 | 2000000 | 0.8% |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Luxemborg** |  | 2000000 | 2000000 | 0.8% |
| **Total portfolio investments, at fair value** |  | $194239002 | $201770765 | 83.1% |
| <sup>(1)</sup> as determined by the general partner (notes 2 and 3). | <sup>(1)</sup> as determined by the general partner (notes 2 and 3). |  |  |  |
| <sup>(2)</sup> Rates shown as simple interest per annum | <sup>(2)</sup> Rates shown as simple interest per annum |  |  |  |
| See accompanying notes to financial statements. | See accompanying notes to financial statements. |  |  |  |

---

------

---

| | |
|:---|:---|
| **MEDICI VENTURES, L.P.** | **MEDICI VENTURES, L.P.** |
| (A Delaware Limited Partnership) | (A Delaware Limited Partnership) |
| Statement of Operations | Statement of Operations |
| Period from April 23, 2021 to September 30, 2021 | Period from April 23, 2021 to September 30, 2021 |
| **Investment income:** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest income | $736 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total investment income** | 736 |
| **Expenses:** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Management fees (note 5) | 1041667 |
| &nbsp;&nbsp;&nbsp;&nbsp;Professional fees | 328344 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other general expenses | 6882 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total expenses** | 1376893 |
| **Net investment loss** | (1376157) |
| **Realized and unrealized gain (loss) from investments:** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net unrealized gain from investments | 7531762 |
| **Net gain from investments** | 7531762 |
| **Net increase in partners' capital from operations** | $6155605 |
| See accompanying notes to financial statements. |  |

---

------

---

| | | | |
|:---|:---|:---|:---|
| **MEDICI VENTURES, L.P.** | **MEDICI VENTURES, L.P.** | **MEDICI VENTURES, L.P.** | **MEDICI VENTURES, L.P.** |
| (A Delaware Limited Partnership) | (A Delaware Limited Partnership) | (A Delaware Limited Partnership) | (A Delaware Limited Partnership) |
| Statement of Changes in Partners' Capital | Statement of Changes in Partners' Capital | Statement of Changes in Partners' Capital | Statement of Changes in Partners' Capital |
| Period from April 23, 2021 to September 30, 2021 | Period from April 23, 2021 to September 30, 2021 | Period from April 23, 2021 to September 30, 2021 | Period from April 23, 2021 to September 30, 2021 |
|  | **General** | **Limited** |  |
|  | **partner** | **partner** | **Total** |
| **Balance at April 23, 2021** | $— | 191739003 | 191739003 |
| &nbsp;&nbsp;&nbsp;&nbsp;Transfer of partnership interest | 1917388 | (1917388) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Capital contributions | 450000 | 44550000 | 45000000 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net increase in partners' capital from operations (note 6) | 71973 | 6083632 | 6155605 |
| **Balance at September 30, 2021** | $2439361 | 240455247 | 242894608 |
| See accompanying notes to financial statements. |  |  |  |

---

------

---

| | |
|:---|:---|
| **MEDICI VENTURES, L.P.** | **MEDICI VENTURES, L.P.** |
| (A Delaware Limited Partnership) | (A Delaware Limited Partnership) |
| Statement of Cash Flows | Statement of Cash Flows |
| Period from April 23, 2021 to September 30, 2021 | Period from April 23, 2021 to September 30, 2021 |
| **Cash flows from operating activities:** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net increase in partners' capital from operations | $6155605 |
| &nbsp;&nbsp;&nbsp;&nbsp;Adjustments to reconcile net increase in partners' capital from operations to |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;net cash used by operating activities: |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net unrealized gain from investments | (7531762) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Purchase of investments | (2499999) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Change in operating assets and liabilities |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid management fees | (1458333) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Related party payable | 33946 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net cash used by operating activities** | (5300543) |
| **Cash flows from financing activities:** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Capital contributions | 45000000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net cash provided by financing activities** | 45000000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net increase in cash** | 39699457 |
| **Cash, beginning of period** |  |
| **Cash, end of period** | $39699457 |
| **Supplemental disclosure of noncash financing activities:** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Transfer of partnership interest | $1917388 |
| See accompanying notes to financial statements. |  |

---

------

**MEDICI VENTURES, L.P.**

(A Delaware Limited Partnership)

Notes to Financial Statements

September 30, 2021

**(1)&nbsp;&nbsp;&nbsp;&nbsp;Organization**

Medici Ventures, L.P. (the Partnership), a Delaware limited partnership, converted to a partnership on April 23, 2021 under the laws of the State of Delaware. The Partnership is managed by Pelion MV GP, L.L.C. (the General Partner). The Partnership will continue until April 23, 2029, unless terminated earlier or extended pursuant to the terms of the Limited Partnership Agreement of the Partnership.

The Partnership was previously a corporation, Medici Ventures, Inc., wholly owned by Overstock.com, Inc., and held a number of investments in blockchain-focused companies working to introduce blockchain technology to various industries including identity, land governance, money and banking, capital markets, supply chain, and voting. On April 23, 2021, Overstock.com, Inc. entered into an agreement with Pelion MV GP, L.L.C. to convert Medici Ventures, Inc. into a limited partnership with Overstock.com, Inc. being the sole limited partner of the Partnership and to transfer a 1% partnership interest to Pelion MV GP, L.L.C. as the general partner of the Partnership.

The transaction resulted in a change in control event as sole authority and responsibility regarding the Partnership's investment decisions and rights the Partnership holds in the portfolio companies was transferred to the General Partner. In addition, the Partnership's treatment for financial accounting purposes transitioned to that of an investment company, and as such the Partnership is applying the guidance in Accounting Standards Codification (ASC) Topic 946, Financial Services – Investment Companies. Accordingly, all investments were recorded at fair value as of the transaction date, which represents the Partnership's basis in the investments upon the change in control. Therefore, although the Partnership was converted from a previously existing corporation, the Partnership is being treated for financial accounting purposes as having commenced operations as a new investment company beginning April 23, 2021.

The General Partner is responsible for the management and operation of the Partnership and the formulation of investment policy. The primary purpose of the Partnership is to act as a venture capital fund, to provide the partners with the opportunity to realize significant long term capital appreciation from holdings in the current portfolio and other portfolio companies acquired. The general purpose of the Partnership is to buy, sell, hold, and otherwise invest in securities of every kind and nature and rights and options with respect thereto, including, without limitation, stock, notes, bonds and debentures; to exercise all rights, powers, privileges, and other incidents of ownership or possession with respect to securities held or owned by the Partnership; to enter into, make, and perform all contracts and other undertakings; to advance and promote blockchain technology; and to engage in all activities and transactions as may be necessary, advisable, or desirable to carry out the foregoing.

**(2)&nbsp;&nbsp;&nbsp;&nbsp;Summary of Significant Accounting Policies**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***(a)&nbsp;&nbsp;&nbsp;&nbsp;Basis of Presentation***

The financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) as issued by the Financial Accounting Standards Board (FASB).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***(b)&nbsp;&nbsp;&nbsp;&nbsp;Use of Estimates***

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions in determining the reported amounts of assets and liabilities,

------

**MEDICI VENTURES, L.P.**

(A Delaware Limited Partnership)

Notes to Financial Statements

September 30, 2021

including the fair value of investments, and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***(c)&nbsp;&nbsp;&nbsp;&nbsp;Investment Valuation***

The Partnership determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Partnership's market assumptions. These two types of inputs create the following hierarchy:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Level 1 – quoted prices in active markets for identical securities

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, credit risk, etc.)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Level 3 – significant unobservable inputs (including the Partnership's own assumptions in determining the fair value of investments)

The availability of valuation techniques and observable inputs can vary from investment to investment and are affected by a wide variety of factors, including the type of investment, whether the investment is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, determining fair value requires more judgment. Because of the inherent uncertainty of valuation, estimated values may be materially higher or lower than the values that would have been used had a ready market for the investments existed. Therefore, the degree of judgment exercised by the Partnership in determining fair value is greatest for investments categorized in Level 3.

In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.

When determining fair value, the Partnership uses valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. The valuation techniques used by the Partnership to determine fair value consist of both market and income approaches depending on the investment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***(d)&nbsp;&nbsp;&nbsp;&nbsp;Cash***

Cash consists of cash held in a preferred deposit for business and checking accounts. The Partnership maintains a portion of its cash in FDIC-insured bank deposit accounts which, at times, may exceed federally insured limits. To date, the Partnership has not experienced any losses in such account. Based on the size and strength of the banking institutions used, the Partnership does not believe it is exposed to any significant credit risks on cash.

------

**MEDICI VENTURES, L.P.**

(A Delaware Limited Partnership)

Notes to Financial Statements

September 30, 2021

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***(e)&nbsp;&nbsp;&nbsp;&nbsp;Income Taxes***

The Partnership does not record a provision for U.S. federal, state, or local income taxes, because partners report their share of the Partnership's income or loss on their income tax returns; accordingly, no provision for income taxes is made in the accompanying financial statements. The tax rules governing the reporting of annual tax information to the partners may not follow the financial accounting policies used in preparing financial statements for the Partnership in accordance with U.S. GAAP.

The Partnership has determined that there is no tax liability resulting from unrecognized tax benefits related to uncertain income tax positions taken or expected to be taken on the tax return to be filed for the tax year ending December 31, 2021. The Partnership's policy is to record penalties and interest as incurred in income tax expense. No income tax returns are currently under examination. The statute of limitations on the Partnership's state and local tax returns may remain open for an additional year depending on the jurisdiction.

**(3)&nbsp;&nbsp;&nbsp;&nbsp;Investment Valuation**

The following is a summary of investments at fair value as of September 30, 2021:

---

| | |
|:---|:---|
| | **Investments** |
| Level 1 - quoted prices | $— |
| Level 2 - other significant observable inputs |  |
| Level 3 - significant unobservable inputs | 201770765 |
| Balance as of September 30, 2021 | $201770765 |

---

The following table presents the changes in assets classified in Level 3 of the fair value hierarchy during the period ended September 30, 2021, attributable to the following:

---

| | | | |
|:---|:---|:---|:---|
| | **Preferred**<br>**stock** | **Common**<br>**stock** | **Convertible and**<br>**SAFE notes** |
| Purchases | $2499999 |  |  |

---

During the period ended September 30, 2021, there were no transfers between levels of assets.

The following table summarizes the valuation techniques and significant unobservable inputs used for the Partnership's investments that are categorized in Level 3 of the fair value hierarchy as of September 30, 2021:

------

**MEDICI VENTURES, L.P.**

(A Delaware Limited Partnership)

Notes to Financial Statements

September 30, 2021

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Fair value at**<br>**September 30,**<br>**2021** |<br>**Valuation**<br>**technique** |<br>**Unobservable**<br>**inputs** | **Range of inputs**<br>**(weighted**<br>**average)** |
| Private operating companies | $89229548 | Market | Adjusted | 0.8x to 24.5x |
|  |  | comparables | valuation | (4.61) |
|  |  |  | multiples |  |
|  |  |  | (revenue) |  |
|  |  | Option pricing | Volatility | 35% to 80% |
|  |  | model |  | (56.3)% |
|  |  |  | Term to liquidity | 5 years |
|  |  |  |  | (5 years) |
|  | 58497680 | Discounted | Discount rates | 32-33% |
|  |  | cash flow model |  | (32)% |

---

Certain of the Partnership's level 3 investments have been valued using unadjusted inputs that have not been internally developed by the Partnership, including third-party recent transactions. As a result, the fair value of assets of $54,043,537 have been excluded from the preceding table.

**(4)&nbsp;&nbsp;&nbsp;&nbsp;Capital Contributions**

As of September 30, 2021, committed and contributed capital is as follows:

---

| | | |
|:---|:---|:---|
| | **General**<br>**partner** | **Limited**<br>**partner** |
| Committed | $450000 | 44550000 |
| Contributed | 450000 | 44550000 |
| Remaining | $— |  |

---

**(5)&nbsp;&nbsp;&nbsp;&nbsp;Management Fee**

An entity controlled by the General Partner is paid an annual management fee for services rendered during the term of the Partnership. The annual management fee is $2,500,000 per year over the first eight years of the term of the Partnership.

The management fee paid for the period ended September 30, 2021, was $2,500,000, of which $1,041,667 was recognized as management fee expense for the period and $1,458,333 is deferred as a prepaid asset.

**(6)&nbsp;&nbsp;&nbsp;&nbsp;Allocation of Partnership Profit and Loss**

All operating expenses of the Partnership, except for management fees, for each accounting period are allocated to the Capital Accounts of all the partners in proportion to their respective capital account

------

**MEDICI VENTURES, L.P.**

(A Delaware Limited Partnership)

Notes to Financial Statements

September 30, 2021

commitment percentages. Management fees for each accounting period are allocated to the Capital Accounts of the Limited Partners in proportion to their respective capital account commitment percentages.

**(7)&nbsp;&nbsp;&nbsp;&nbsp;Related-Party Transactions**

During the period ended September 30, 2021, entities controlled by the General Partner pay expenses on behalf of the Partnership and the Partnership reimburses these expenses, which include legal, accounting, professional and other general expenses. The amount paid on behalf of the Partnership for the period ended September 30, 2021, was $33,947, which is the amount owed to related parties at period end.

**(8)&nbsp;&nbsp;&nbsp;&nbsp;Financial Highlights**

The limited partner's ratio of net investment loss to average net assets for the period from April 23, 2021 to September 30, 2021 is approximately -0.62%. The net investment loss is calculated by summing investment and other income, less total expenses, which include management fees. The limited partner's ratio of expenses to average net assets for the period from April 23, 2021 to September 30, 2021 is approximately -0.62%. Expenses are the Partnership's expenses, including the management fees.

The Internal Rate of Return (IRR) for the limited partner since inception to the period ended September 30, 2021 is 6.37%. The IRR was computed based on the actual dates of the cash inflows (capital contributions), outflows (distributions), and the ending net assets at the end of the period (residual value) of the limited partner's capital account. These may not be indicative of the future performance of the Partnership.

**(9)&nbsp;&nbsp;&nbsp;&nbsp;Subsequent Events**

The Partnership has evaluated subsequent events through February 15, 2022, the date the financial statements were available to be issued.

## Exhibit 99.2

**Exhibit 99.2**

**MEDICI VENTURES, L.P.**

(A Delaware Limited Partnership)

Financial Statements

September 30, 2022

(With Independent Auditors' Report Thereon)

------

**Report of Independent Auditors**

The General Partner

Medici Ventures, L.P.

**Opinion**

We have audited the financial statements of Medici Ventures, L.P., (the "Partnership") which comprise the statement of assets and liabilities, including the schedule of investments, as of September 30, 2022, and the related statements of operations, changes in partners' capital, and cash flows for the year then ended, and the related notes (collectively referred to as the "financial statements").

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Partnership at September 30, 2022, and the results of its operations, changes in its partners' capital and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

**Basis for Opinion**

We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Partnership and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

**Responsibilities of Management for the Financial Statements**

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Partnership's ability to continue as a going concern for one year after the date that the financial statements are available to be issued.

**Auditor's Responsibilities for the Audit of the Financial Statements**

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free of material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists.

The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with GAAS, we:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Exercise professional judgment and maintain professional skepticism throughout the audit.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Identify and assess the risks of material misstatements of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership's internal control. Accordingly, no such opinion is expressed.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Partnership's ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

/s/ ERNST & YOUNG LLP

February 14, 2023

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| | |
|:---|:---|
| **MEDICI VENTURES, L.P.** | **MEDICI VENTURES, L.P.** |
| (A Delaware Limited Partnership) | (A Delaware Limited Partnership) |
| Statement of Assets and Liabilities | Statement of Assets and Liabilities |
| September 30, 2022 | September 30, 2022 |
| **Assets** |  |
| Investments, at fair value (note 3, cost of $207,744,566) | $208815299 |
| Cash | 21237569 |
| Prepaid management fees | 1458333 |
| Receivable from sale of assets (note 7) |  |
| Other assets | 16314 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total assets** | $231527515 |
| **Liabilities and partners' capital** |  |
| Performance fee liability | 747481 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total liabilities** | 747481 |
| **Partners' capital - general partner** | 17444262 |
| **Partners' capital - limited partner** | 213335772 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total partners' capital** | 230780034 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total liabilities and partners' capital** | $231527515 |
| See accompanying notes to financial statements. |  |

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| | | | | |
|:---|:---|:---|:---|:---|
| **MEDICI VENTURES, L.P.** | **MEDICI VENTURES, L.P.** | **MEDICI VENTURES, L.P.** | **MEDICI VENTURES, L.P.** | **MEDICI VENTURES, L.P.** |
| (A Delaware Limited Partnership) | (A Delaware Limited Partnership) | (A Delaware Limited Partnership) | (A Delaware Limited Partnership) | (A Delaware Limited Partnership) |
| Schedule of Investments | Schedule of Investments | Schedule of Investments | Schedule of Investments | Schedule of Investments |
| September 30, 2022 | September 30, 2022 | September 30, 2022 | September 30, 2022 | September 30, 2022 |
|  |  |  |  | **Percentage** |
|  | **Number of** |  |  | **of partners'** |
|  | **shares/units** | **Cost** | **Fair value** <sup>(1)</sup> | **capital** |
| **Portfolio investments, at fair value:** |  |  |  |  |
| **Private operating companies** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;**Blockchain and financial technology services:** | &nbsp;&nbsp;&nbsp;**Blockchain and financial technology services:** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**United States:** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;tZERO Group, Inc. |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common stock | 112095577 | $101405000 | $60933481 | 26.4% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Series B preferred stock | 9140645 | 5025069 | 5790707 | 2.5% |
|  |  | 106430069 | 66724188 | 28.9% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Bitt, Inc. |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common stock | 2265245950 | 17674000 | 65523532 | 28.4% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Convertible note |  | 3000000 | 3287600 | 1.4% |
|  |  | 20674000 | 68811132 | 29.8% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Medici Land Governance, Inc. |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common stock | 870487 | 14044000 | 6770333 | 2.9% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PeerNova, Inc. |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common stock and warrants | 2038906 | 5758751 | 2766945 | 1.2% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Series A preferred stock | 2009133 | 2336823 | 5053170 | 2.2% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Series B preferred stock | 596397 | 1499997 | 1499997 | 0.6% |
|  |  | 9595571 | 9320112 | 4.0% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Voatz, Inc. |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Series seed preferred stock | 385516 | 2785967 | 2785967 | 1.2% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Series A preferred stock | 448454 | 3240795 | 3240795 | 1.4% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Series A-1 preferred stock | 30999 | 224017 | 224017 | 0.1% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SAFE note |  | 100000 | 100000 | 0.0% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SAFE note |  | 150000 | 150000 | 0.1% |
|  |  | 6500779 | 6500779 | 2.8% |

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| | | | | |
|:---|:---|:---|:---|:---|
| **MEDICI VENTURES, L.P.** | **MEDICI VENTURES, L.P.** | **MEDICI VENTURES, L.P.** | **MEDICI VENTURES, L.P.** | **MEDICI VENTURES, L.P.** |
| (A Delaware Limited Partnership) | (A Delaware Limited Partnership) | (A Delaware Limited Partnership) | (A Delaware Limited Partnership) | (A Delaware Limited Partnership) |
| Schedule of Investments | Schedule of Investments | Schedule of Investments | Schedule of Investments | Schedule of Investments |
| September 30, 2022 | September 30, 2022 | September 30, 2022 | September 30, 2022 | September 30, 2022 |
|  |  |  |  | **Percentage** |
|  | **Number of** |  |  | **of partners'** |
|  | **shares** | **Cost** | **Fair Value** <sup>(1)</sup> | **capital** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Minds, Inc. |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Series A preferred stock | 670841 | 5999995 | 5999995 | 2.6% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;GrainChain, Inc. |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Class A common stock | 7173184 | 8392625 | 9175220 | 4.0% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Class B common stock | 2391061 | 2797541 | 3058406 | 1.3% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SAFE note |  | 1000000 | 1000000 | 0.4% |
|  |  | 12190166 | 13233626 | 5.7% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Spera, Inc. |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Series A preferred stock | 2670583 | 2000000 | 2000000 | 0.9% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FinClusive Capital, Inc. |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common stock | 14933 | 3733250 | 2654208 | 1.2% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Convertible note |  | 1000000 | 1000063 | 0.4% |
|  |  | 4733250 | 3654271 | 1.6% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Vital Chain, Inc. |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common stock | 721658 | $462000 | $— | 0.0% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Vinsent (VinX Network, Ltd.) |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common stock | 145126 | 2499675 | 465340 | 0.2% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Chainstone labs, Inc. |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common stock | 3600000 | 3600000 | 3600000 | 1.6% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SpeedRoute |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Class A units |  | 3920000 | 3920000 | 1.7% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Symbiont.io, Inc. |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Series A-1 preferred stock | 343643 | 1051548 |  | 0.0% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Votem Corp. |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Series B preferred stock | 48780 |  |  | 0.0% |

---

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| | | | | |
|:---|:---|:---|:---|:---|
| **MEDICI VENTURES, L.P.** | **MEDICI VENTURES, L.P.** | **MEDICI VENTURES, L.P.** | **MEDICI VENTURES, L.P.** | **MEDICI VENTURES, L.P.** |
| (A Delaware Limited Partnership) | (A Delaware Limited Partnership) | (A Delaware Limited Partnership) | (A Delaware Limited Partnership) | (A Delaware Limited Partnership) |
| Schedule of Investments | Schedule of Investments | Schedule of Investments | Schedule of Investments | Schedule of Investments |
| September 30, 2022 | September 30, 2022 | September 30, 2022 | September 30, 2022 | September 30, 2022 |
|  |  |  |  | **Percentage** |
|  | **Number of** |  |  | **of partners'** |
|  | **shares** | **Cost** | **Fair Value** <sup>(1)</sup> | **capital** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Netki, Inc. |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Convertible note |  | 1360849 | 1360849 | 0.6% |
| &nbsp;&nbsp;&nbsp;**Total United States** |  | **195061902** | **192360625** | **83.3%** |
| &nbsp;&nbsp;&nbsp;**Cayman Islands** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ripio Holding, Inc. |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Series A-1 preferred stock | 268641 | 4641158 | 3169080 | 1.4% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Series B preferred stock | 59990 | 2000000 | 1749680 | 0.8% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Warrants | 5999 |  | 17638 | —% |
|  |  | 6641158 | 4936398 | 2.2% |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Cayman Islands** |  | **6641158** | **4936398** | **2.2%** |
| &nbsp;&nbsp;&nbsp;&nbsp;**Belgium** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Settlemint NV |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common stock | 251750 | 3537088 | 9013858 | 3.9% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Series A preferred stock | 14088 | 504418 | 504418 | 0.2% |
|  |  | 4041506 | 9518276 | 4.1% |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Belgium** |  | **4041506** | **9518276** | **4.1%** |
| &nbsp;&nbsp;&nbsp;&nbsp;**Luxemborg** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ambr S.a.r.l |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Preferred stock | 3755869 | 2000000 | 2000000 | 0.9% |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Luxemborg** |  | **2000000** | **2000000** | **0.9%** |
| **Total portfolio investments, at fair value** |  | $**207744566** | $**208815299** | **90.5%** |
| <sup>(1)</sup> As determined by the General Partner (notes 2 and 3). | <sup>(1)</sup> As determined by the General Partner (notes 2 and 3). |  |  |  |
| See accompanying notes to financial statements. | See accompanying notes to financial statements. |  |  |  |

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| | |
|:---|:---|
| **MEDICI VENTURES, L.P.** | **MEDICI VENTURES, L.P.** |
| (A Delaware Limited Partnership) | (A Delaware Limited Partnership) |
| Statement of Operations | Statement of Operations |
| Year ended September 30, 2022 | Year ended September 30, 2022 |
| **Investment income:** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest income | $116429 |
| **Expenses:** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Management fees (note 5) | 2500000 |
| &nbsp;&nbsp;&nbsp;&nbsp;Performance fee - realized (note 7) | 1077125 |
| &nbsp;&nbsp;&nbsp;&nbsp;Performance fee - unrealized (note 7) | 747481 |
| &nbsp;&nbsp;&nbsp;&nbsp;Professional fees | 279459 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other general and administrative expenses | 49112 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total expenses** | 4653177 |
| **Net investment loss** | (4536748) |
| **Realized and unrealized gain from investments:** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net realized gain from investments | 277890 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net unrealized loss from investments | (6461030) |
| **Net loss from investments** | (6183140) |
| **Net decrease in partners' capital from operations** | $(10719888) |
| See accompanying notes to financial statements. |  |

---

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| | | | |
|:---|:---|:---|:---|
| **MEDICI VENTURES, L.P.** | **MEDICI VENTURES, L.P.** | **MEDICI VENTURES, L.P.** | **MEDICI VENTURES, L.P.** |
| (A Delaware Limited Partnership) | (A Delaware Limited Partnership) | (A Delaware Limited Partnership) | (A Delaware Limited Partnership) |
| Statement of Changes in Partners' Capital | Statement of Changes in Partners' Capital | Statement of Changes in Partners' Capital | Statement of Changes in Partners' Capital |
| Year ended September 30, 2022 | Year ended September 30, 2022 | Year ended September 30, 2022 | Year ended September 30, 2022 |
|  | **General** | **Limited** |  |
|  | **partner** | **partner** | **Total** |
| **Balance at October 1, 2021** | $2439361 | 240455247 | 242894608 |
| &nbsp;&nbsp;&nbsp;&nbsp;Distributions | (171140) | (1223546) | (1394686) |
| &nbsp;&nbsp;&nbsp;&nbsp;Performance fee - realized | (10771) | (1066354) | (1077125) |
| &nbsp;&nbsp;&nbsp;&nbsp;Performance fee - unrealized | (7475) | (740006) | (747481) |
| &nbsp;&nbsp;&nbsp;&nbsp;Net investment loss | (2122) | (2710020) | (2712142) |
| &nbsp;&nbsp;&nbsp;&nbsp;Net realized gain from investments | 2779 | 275111 | 277890 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net unrealized loss from investments | (64610) | (6396420) | (6461030) |
| &nbsp;&nbsp;&nbsp;&nbsp;Allocation of carried interest | 15258240 | (15258240) |  |
| **Balance at September 30, 2022** | $17444262 | 213335772 | 230780034 |
| See accompanying notes to financial statements. |  |  |  |

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| | |
|:---|:---|
| **MEDICI VENTURES, L.P.** | **MEDICI VENTURES, L.P.** |
| (A Delaware Limited Partnership) | (A Delaware Limited Partnership) |
| Statement of Cash Flows | Statement of Cash Flows |
| Year ended September 30, 2022 | Year ended September 30, 2022 |
| **Cash flows from operating activities:** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net decrease in partners' capital from operations | $(10719888) |
| &nbsp;&nbsp;&nbsp;&nbsp;Adjustments to reconcile net decrease in partners' capital from operations to | &nbsp;&nbsp;&nbsp;&nbsp;Adjustments to reconcile net decrease in partners' capital from operations to |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;net cash used by operating activities: |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net realized gain from investments | (277890) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net unrealized loss from investments | 6461030 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Purchase of investments | (15699485) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from sale of investments | 2347285 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from escrow | 124526 |
| **Changes in operating assets and liabilities:** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Increase in other assets | (16314) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Decrease in related party payable | (33947) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Increase in performance fee liability | 747481 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net cash used by operating activities** | (17067202) |
| **Cash flows from financing activities:** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Distributions to partners | (1394686) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net cash used by financing activities** | (1394686) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net decrease in cash** | (18461888) |
| **Cash, beginning of year** | 39699457 |
| **Cash, end of year** | $21237569 |
| **Supplemental disclosure of cashflow information:** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest income | $116429 |
| See accompanying notes to financial statements. |  |

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**MEDICI VENTURES, L.P.**

(A Delaware Limited Partnership)

Notes to Financial Statements

September 30, 2022

**(1)&nbsp;&nbsp;&nbsp;&nbsp;Organization**

Medici Ventures, L.P. (the "Partnership"), a Delaware limited partnership, commenced operations on April 23, 2021, under the laws of the State of Delaware. The Partnership is managed by Pelion MV GP, L.L.C. (the "General Partner"). The Partnership will continue until April 23, 2029, unless terminated earlier or extended under the terms of the Limited Partnership Agreement of the Partnership. The Limited Partnership Agreement was executed on April 23, 2021 (the "Formation Date"). The First Amendment to the agreement was executed on August 30, 2021, and a Clarifying Letter was executed on February 1, 2023 (with the agreement, the amendment, and the related letter herein after referred to as the "Agreement").

The Partnership was previously a corporation, Medici Ventures, Inc., that was wholly owned by Overstock.com, Inc., and held several investments in blockchain-focused companies working to introduce blockchain technology to various industries including identity, land governance, money and banking, capital markets, supply chain, agriculture, and voting. On the Formation Date, Overstock.com, Inc. entered into an agreement with the General Partner to convert Medici Ventures, Inc. into a limited partnership with Overstock.com, Inc. (the "Limited Partner") being the sole limited partner of the Partnership and to transfer a 1% partnership interest to the General Partner of the Partnership (the "Transaction").

The Transaction resulted in a change in control event as sole authority and responsibility regarding the Partnership's investment decisions and rights the Partnership holds in the portfolio companies were transferred to the General Partner. Therefore, although the Partnership was converted from a previously existing corporation, the Partnership is being treated for financial accounting purposes as having commenced operations as a new investment company beginning April 23, 2021.

The General Partner is responsible for the management and operation of the Partnership and the formulation of investment policy. The Partnership's primary purpose is to act as a venture capital fund, to provide the partners with the opportunity to realize significant long-term capital appreciation from holdings in the current portfolio and other portfolio companies acquired. The general purpose of the Partnership is to buy, sell, hold, and otherwise invest in securities of every kind and nature and rights and options with respect thereto, including, without limitation, stock, notes, bonds, and debentures; to exercise all rights, powers, privileges, and other incidents of ownership or possession with respect to securities held or owned by the Partnership; to enter into, make, and perform all contracts and other undertakings; to advance and promote blockchain technology; and to engage in all activities and transactions as may be necessary, advisable, or desirable to carry out the foregoing.

The Agreement limits the sale of Group A and Group B portfolio companies, as defined in the Agreement, for three and two years, after the Partnership's Formation Date, respectively. The Agreement limits the Performance Fee and carried interest allocation paid to the General Partner if the portfolio companies are sold within the restricted time period.

**(2)&nbsp;&nbsp;&nbsp;&nbsp;Summary of Significant Accounting Policies**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***(a)&nbsp;&nbsp;&nbsp;&nbsp;Basis of Presentation***

The accompanying financial statements are presented in conformity with U.S. generally accepted accounting principles ("U.S. GAAP"). The Partnership considered investment companies under U.S. GAAP and follow the accounting and reporting guidance applicable to investment companies in the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 946, Financial Services – Investment Companies ("ASC 946"). The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.

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**MEDICI VENTURES, L.P.**

(A Delaware Limited Partnership)

Notes to Financial Statements

September 30, 2022

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***(b)&nbsp;&nbsp;&nbsp;&nbsp;Use of Estimates***

The preparation of financial statements in conformity with the U.S. generally accepted accounting principles requires the General Partner to make estimates and assumptions in determining the reported amounts of assets and liabilities, including the fair value of investments, and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***(c)&nbsp;&nbsp;&nbsp;&nbsp;Investment Valuation***

The Partnership determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Partnership's market assumptions. These two types of inputs create the following hierarchy:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Level 1 – quoted prices in active markets for identical securities

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, credit risk, etc.)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Level 3 – significant unobservable inputs (including the Partnership's own assumptions in determining the fair value of investments)

The availability of valuation techniques and observable inputs can vary from investment to investment and are affected by a wide variety of factors, including the type of investment, whether the investment is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, determining fair value requires more judgment. Because of the inherent uncertainty of valuation, estimated values may be materially higher or lower than the values that would have been used had a ready market for the investments existed. Therefore, the degree of judgment exercised by the Partnership in determining fair value is greatest for investments categorized in Level 3.

In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.

Fair value - Valuation techniques and inputs

When determining fair value, the Partnership uses valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. The Partnership generally uses the market approach to value equity and debt investments in private operating companies. The market approach includes valuation techniques that use prices and other relevant information generated by market transactions involving identical or comparable assets, liabilities, or a group of assets and liabilities.

The market approach includes valuation techniques that use observable market data (e.g., current trading and/or acquisition multiples) of comparable companies and applying the data to key financial metrics of the investment. The comparability (as measured by size, growth profile, and geographic concentration, among other factors) of the identified set of comparable companies to the investment is considered in applying the market approach.

------

**MEDICI VENTURES, L.P.**

(A Delaware Limited Partnership)

Notes to Financial Statements

September 30, 2022

Marketable equity securities: The Partnership values equity securities that are traded on a national securities exchange at their last reported sales price.

Private operating companies

Investments in private operating companies may consist of common stock, preferred stock, and debt of privately owned portfolio companies. The transaction price, excluding transaction costs, is typically the Partnership's best estimate of fair value at acquisition. At each subsequent measurement date, the Partnership reviews the valuation of each investment and records adjustments as necessary to reflect the expected exit value of the investment under current market conditions. Ongoing reviews by the Partnership's management are based on an assessment of the type of investment, the stage in the lifecycle of the portfolio company, and trends in the performance and credit profile of each portfolio company as of the measurement date.

The Partnership uses an independent valuation service firm to value private operating companies. In certain instances, the Partnership may use multiple valuation approaches for a particular investment and estimate its fair value based on a weighted average or a selected outcome within a range of multiple valuation results. The decision to use a valuation approach will depend on the investment type and the information available. When applying valuation techniques used to determine fair value, the Partnership assumes a reasonable period of time for estimating cash flows and considers the financial condition and operating results of the portfolio company, the nature of the investment, restrictions on marketability, market conditions, foreign currency exposures, and other factors. When determining the fair value of investments, the Partnership exercises significant judgment and uses the best information available as of the measurement date. Due to the inherent uncertainty of valuations, the fair values reflected in the financial statements as of the measurement date may differ from (1) values that would have been used had a readily available market existed for those investments and (2) the values that may ultimately be realized.

Inputs used under a market approach may include valuation multiples applied to corresponding performance metrics, such as earnings before interest, taxes, depreciation, and amortization (EBITDA); revenue; or net forecasted earnings. The selected valuation multiples were estimated through a comparative analysis of the performance and characteristics of each investment within a range of comparable companies or transactions in the observable marketplace. In addition, recent merger and acquisition transactions of comparable companies may be used as a basis to develop implied valuation multiples. Investment valuations using the market approach may also consider factors such as liquidity, credit, and market risk factors of the portfolio company.

The option pricing model which could be used to allocate the enterprise value of a portfolio company at each share class level, if necessary, treats a portfolio company's common stock and preferred stock as call options on the equity value of the portfolio company, with exercise or strike prices based on the characteristics of each series or class of equity in the portfolio company's capital structure (e.g., the liquidation preference of a given series of preferred stock). This method is sensitive to certain key assumptions, such as volatility and time to exit, that are not observable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***(d)&nbsp;&nbsp;&nbsp;&nbsp;Cash***

Cash consists of cash held in a preferred deposit for business and checking accounts. The Partnership maintains a portion of its cash in FDIC-insured bank deposit accounts which, at times, may exceed federally insured limits. To date, the Partnership has not experienced any losses in such accounts. Based on the size and strength of the banking institutions used, the Partnership does not believe it is exposed to any significant credit risks on cash. There are no cash equivalents on September 30, 2022, nor is any cash subject to restrictions on its use.

------

**MEDICI VENTURES, L.P.**

(A Delaware Limited Partnership)

Notes to Financial Statements

September 30, 2022

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***(e)&nbsp;&nbsp;&nbsp;&nbsp;Income Taxes***

The Partnership does not record a provision for U.S. federal, state, or local income taxes, because partners report their share of the Partnership's income or loss on their income tax returns; accordingly, no provision for income taxes is made in the accompanying financial statements. The tax rules governing the reporting of annual tax information to the partners may not follow the financial accounting policies used in preparing financial statements for the Partnership in accordance with the U.S. generally accepted accounting principles.

The authoritative guidance on accounting for and disclosure of uncertainty in tax positions requires the General Partner to determine whether a tax position of the Partnership is more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. For tax positions meeting the more likely than not threshold, the tax amount recognized in the financial statements is reduced by the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement with the relevant taxing authority.

The Partnership has determined that there is no tax liability resulting from unrecognized tax benefits related to uncertain income tax positions taken or expected to be taken on the tax return to be filed for the year ending December 31, 2022. The Partnership's policy is to record penalties and interest as incurred in income tax expenses. No income tax returns are currently under examination. The statute of limitations on the Partnership's state and local tax returns may remain open for an additional year depending on the jurisdiction.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***(f)***&nbsp;&nbsp;&nbsp;&nbsp;***Interest Income***

Investment interest income is recorded on an accrual basis. Accrual of interest ceases when, in the judgment of management, the collectability of such income is not reasonably assured.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***(g)&nbsp;&nbsp;&nbsp;&nbsp;Escrow Receivable***

During the year, the Partnership completed the sale of its investment in Evernym, Inc. (a Group B portfolio company as defined in the Agreement) and $124,256 of the proceeds from the sale were held in escrow as recourse for indemnity claims that may arise under the sale agreement. These amounts were fully collected as of September 30, 2022. Amounts held in escrow are held at estimated realizable value and included in net realized gain on investments.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***(h)&nbsp;&nbsp;&nbsp;&nbsp; Realized and Change in Unrealized Appreciation or Depreciation on Investments***

Realized gains or losses on investments represent the difference between the original cost of the investment and the fair value of the investment at the sale or distribution date. Realized gains or losses on security transactions are determined on the basis of specific identification. Change in unrealized appreciation or depreciation represents the change between the original cost of the investment and the fair value of the investment for the period. Security transactions are accounted for on the date the securities are purchased or sold (trade date).

------

**MEDICI VENTURES, L.P.**

(A Delaware Limited Partnership)

Notes to Financial Statements

September 30, 2022

**(3)&nbsp;&nbsp;&nbsp;&nbsp;Fair Value Measurements**

The Partnership's assets recorded at fair value have been categorized based on a fair value hierarchy as described in the Partnership's significant accounting policies in note 2. The following table presents information about the Partnership's assets measured at fair value as of September 30, 2022:

---

| | | | |
|:---|:---|:---|:---|
| | **<u>Level I</u>** | **<u>Level III</u>** | **<u>Total</u>** |
| **Investments, at fair value** | | | |
| Common Stock | $— | 163961323 | 163961323 |
| Preferred stock |  | 37937826 | 37937826 |
| Convertible notes |  | 5798512 | 5798512 |
| Warrants |  | 17638 | 17638 |
| SAFE |  | 1100000 | 1100000 |
| **Total investments, at fair value** | $— | 208815299 | 208815299 |

---

**Change in Level 3 Measurements**

The following table presents changes in assets classified in Level 3 of the fair value hierarchy during the year ended September 30, 2022, attributable to the following:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **<u>Common stock</u>** | **<u>Preferred stock</u>** | **<u>Convertible notes</u>** | **<u>Warrants</u>** | **<u>SAFE</u>** | **<u>Total</u>** |
| Purchases | 500000 | 4949486 | 10250000 |  |  | 15699486 |
| Sales |  |  |  |  | (2193922) | (2193922) |
| Transfers into Level 3 |  |  |  |  |  |  |
| Transfers out of Level 3 |  |  |  |  |  |  |
| **Total Level 3 Changes** | **500000** | **4949486** | **10250000** | **—** | **(2193922)** | **13505564** |

---

**Significant Unobservable Inputs**

The following table summarizes the valuation techniques and significant unobservable inputs used for the Partnership's investments that are categorized in Level 3 of the fair value hierarchy as of September 30, 2022.

------

**MEDICI VENTURES, L.P.**

(A Delaware Limited Partnership)

Notes to Financial Statements

September 30, 2022

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **<u>Fair value at</u>** | | | |
| | **<u>September</u>** | **<u>Valuation technique</u>** | **<u>Unobservable</u>** | **<u>Inputs</u>** |
| Investments, at fair value | **<u>30, 2022</u>** |  | **<u>inputs</u>** |  |
| Common stock | $135881554 | Option pricing model, Market comparables | Adjusted valuation | 10.6x |
|  |  |  | multiples (revenue) |  |
|  | 31999769 | Market approach - Recent Transactions | N/A | N/A |
| Preferred stock | 10709467 | Option pricing model | N/A | N/A |
|  | 23308359 | Market approach - Recent Transactions | N/A | N/A |
| Convertible notes | 4287663 | Option pricing model, Market comparables | Adjusted valuation | 10.6x |
|  |  |  | multiples (revenue) |  |
|  | 1360849 | Market approach - Recent Transactions | N/A | N/A |
| Warrants | 17638 | Transaction backsolve | N/A | N/A |
| Safe Notes | 1250000 | Market approach - Recent Transactions | N/A | N/A |
|  | $208815299 |  |  |  |

---

The investments are categorized as Level 3 due to the valuation methodology having significant unobservable inputs, and little or no market activity for the investments. All valuations were performed in accordance with the Partnership's valuation policy, which is in accordance with ASC 820 and reflects management's best judgment of the fair value of the assets. The General Partner values the investments based on the information available at the balance sheet date.

**(4)&nbsp;&nbsp;&nbsp;&nbsp;Capital Contributions**

As of September 30, 2022, the total capital committed to the Partnership was $45,000,000 and of which $450,000 was committed by the General Partner and $44,550,000 by the Limited Partner. A total of $45,000,000 (100%) of capital commitments was called as of September 30, 2022.

**(5)&nbsp;&nbsp;&nbsp;&nbsp;Management Fee**

The Management Company of the General Partner is paid an annual management fee for services rendered during the term of the Partnership The annual management fee is $2,500,000 per year over the first eight years of the term of the Partnership. The annual management fee paid to the Management Company in April 2022, was $2,500,000, of which $1,458,333 is included in prepaid management fees as of September 30, 2022.

The management fee expense for the year ended September 30, 2022, was $2,500,000.

**(6)&nbsp;&nbsp;&nbsp;&nbsp;Allocation of Partnership Profit and Loss**

All operating expenses of the Partnership, except for Management Fees, are allocated to the Capital Accounts of all the partners in proportion to their respective partnership percentages. Management Fees are allocated to the Capital Account of the Limited Partner.

Allocations of carried interest to the General Partner are limited within the restricted sales windows unless a Group A portfolio company's estimated fair value is above the Threshold NAV, which is defined in the Agreement. For the Group A companies with estimated fair value above the Threshold NAV, the allocation of hypothetical carried interest to the General Partner within the restricted sales window is 30% of Excess proceeds, which are the funds received from the sale of a Group A portfolio company above the Reference

------

**MEDICI VENTURES, L.P.**

(A Delaware Limited Partnership)

Notes to Financial Statements

September 30, 2022

NAV, as defined by the Agreement. In the case of a sale of a portfolio company during the restricted sales window that the General Partner cannot prevent, the General Partner and Limited Partner will reach a consensus on allocating and distributing the funds pursuant to the Agreement.

Allocations to the capital accounts at September 30, 2022, only reflect the General Partner's carried interest as if the Partnership had realized the sale of Group A assets above the Threshold NAV at the fair value reported in the financial statements and assumes a hypothetical allocation and distribution of the net assets to the Partners as of September 30, 2022, consistent with the provisions of the Agreement. As of September 30, 2022, allocations of hypothetical carried interest to the General Partner were $15,258,240. Hypothetical carried interest to the General Partner will remain provisional until assets are realized. If the sales restriction of two or three years (see note 1) were lifted and the Partnership were able to liquidate the portfolio companies and distribute the funds at the estimated fair values reported as of September 30, 2022, the hypothetical carried interest allocation would be $18,201,596. The hypothetical carried interest allocation is not a projection of future events, but rather it is a calculation according to accounting guidelines of what the allocation would be if the Partnership were liquidated as of September 30, 2022. Due to the inherent uncertainties of the valuation process and the potential exit scenarios for the Partnership's investments, the estimates of fair value, and therefore the hypothetical allocations of carried interest as of September 30, 2022, may differ significantly from the amounts realized in future periods and those differences could be material.

**(7)&nbsp;&nbsp;&nbsp;&nbsp;Distributions**

Per the Agreement, proceeds from a sale of a portfolio company are distributed to the General and Limited Partners on a deal-by-deal basis. The Performance Fee (see note 8), if any, will first be distributed to the General Partner and thereafter the remaining proceeds will be allocated and distributed in accordance with the Agreement.

**(8)&nbsp;&nbsp;&nbsp;&nbsp;Performance Fees**

Per the Agreement, following the disposition by the Partnership of a portfolio company, the Partnership may pay to the General Partner a Performance Fee in situations where the General Partner's carried interest is less than the Target Performance Entitlement as defined in the Agreement. Depending on the amount of carried interest allocated to the General Partner, the Performance Fee could be a fixed amount or a percentage of the Excess Proceeds or a percentage of the cumulative proceeds. Performance Fee expenses are allocated to the Partnership capital accounts based on the respective Partnership percentages.

As of September 30, 2022, the Performance Fee liability was $747,481. This represents an estimated Performance Fee payable to the General Partner for the hypothetical liquidation of a Group A portfolio company with a valuation that is higher than the Threshold NAV at September 30, 2022.

Upon the expiration of the sales restriction windows, the estimated Performance Fee payable is expected to increase. If the sales restriction of two years for Group B companies or three years for Group A companies were lifted and the limitation on the Performance Fee and carried interest during the sales restriction window were removed, and the Partnership were able to liquidate the portfolio companies and distribute the funds at the fair values reported as of September 30, 2022, consistent with the Agreement, the Performance Fee liability for Group A and Group B companies would be $7,133,729 and $5,733,848, respectively. These values are not a projection of future events, but rather they are calculations according to the hypothetical liquidation accounting guidelines. Any portfolio company that is ultimately shut down due to the inability to obtain adequate financing, or to achieve adequate product market fit, and provides no exit or liquidation proceeds to the Partnership will not trigger any Performance Fee. Due to the inherent uncertainties of the valuation process and the potential exit scenarios for the Partnership's investments, the estimates of fair

------

**MEDICI VENTURES, L.P.**

(A Delaware Limited Partnership)

Notes to Financial Statements

September 30, 2022

value, and therefore the Performance Fee liability as of September 30, 2022, may differ significantly from the amount realized in future periods and that difference could be material.

**(9)&nbsp;&nbsp;&nbsp;&nbsp;Related-Party Transactions**

During the year ended September 30, 2022, the Partnership had the following related-party transactions:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The management company of the General Partner pays expenses on behalf of the Partnership, and the Partnership reimburses these expenses, which include legal, accounting, professional, and other general expenses. The amount paid on behalf of the Partnership for the period ended September 30, 2022, was $320,826. The related party payable at period end was $0.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• During the year, the Partnership sold investments in Evernym, Inc. and paid a Performance Fee of $1,077,125 to the General Partner in accordance with the Agreement. Additionally, $1,223,546 was distributed to the Limited Partner and $171,140, which includes $158,781 of carried interest, was distributed to the General Partner.

**(10) &nbsp;&nbsp;&nbsp;&nbsp;Financial Highlights**

The Limited Partner's ratio of net investment loss to average net assets for the period from October 1, 2021, to September 30, 2022, is approximately -1.96%. The net investment loss is calculated by summing investment and other income, less total expenses, which include management fees. The Limited Partner's ratio of expenses to average net assets for the period from October 1, 2021, to September 30, 2022, is approximately -2.01%. Expenses are the Partnership's expenses, including the management fees.

The Internal Rate of Return (IRR) for the limited partner from inception to the year ended September 30, 2022, is -6.02%. The IRR for the previous fiscal year ending September 30, 2021, was 6.37%. The IRR was computed based on the actual dates of the cash inflows (capital contributions), outflows (distributions), and the ending net assets at the end of the period (residual value) of the limited partner's capital account. These may not be indicative of the future performance of the Partnership.

**(11)&nbsp;&nbsp;&nbsp;&nbsp;Risk Management**

In the ordinary course of business, the Partnership manages a variety of risks, including market risk and liquidity risk. The Partnership seeks to identify and monitor risk through diversification of exposures and activities across a variety of instruments, markets, and counterparties.

Market risk is the risk of potentially adverse changes to the value of financial instruments. The Partnership manages its exposure to market risk through various risk management strategies.

Liquidity risk is the risk that the Partnership may not be able to sell assets when it desires to do so or to realize what it estimates to be its fair value in the event of a sale. The sale of illiquid assets and restricted securities often requires more time and results in higher selling expenses than does the sale of securities eligible for trading on national securities exchanges or on the over-the-counter markets. Restricted securities may sell at a price lower than similar securities that are not subject to a restriction on resale.

The Partnership has provided general indemnifications to officers, directors, members, employees, and agents of the General Partners, when they act, in good faith, in the best interests of the Partnership. Such indemnifications provided by the Partnership are subordinate to the liability coverage carried by the General Partner and should serve to mitigate any potential liability which may arise at the Partnership level. The Partnership is unable to develop an estimate of the maximum potential amount of future payments that could potentially result from any hypothetical future claim but expects the risk of having to make significant payments under these general business indemnifications to be remote.

------

**MEDICI VENTURES, L.P.**

(A Delaware Limited Partnership)

Notes to Financial Statements

September 30, 2022

**(12)&nbsp;&nbsp;&nbsp;&nbsp;Subsequent Events**

On December 30, 2022, the Partnership agreed with the board of Medici Land Governance, Inc. (MLG) to sell a significant portion of common shares to a third-party investor. Upon completion of the transaction, the Partnership's interest in MLG will be reduced to 2%, and the Partnership will not have a representative on the MLG board. This transaction reduced the Partnership's value of the MLG investment to $20,408.

Subsequent to September 30, 2022, there have been negative activities relating to the cryptocurrency market. In addition, the global economic downturn contributed to significant volatility in financial markets. The General Partner is monitoring developments relating to these events. The extent of the impact of these activities on the financial performance of investments and the Partnership's operations is highly uncertain and cannot be predicted.

The Partnership has evaluated subsequent events through February 14, 2023, the date the financial statements were available to be issued, and except for the matters disclosed above, did not note any items that would adjust the financial statements or require disclosure.

## Exhibit 99.3

**Exhibit 99.3**

**tZERO Group, Inc.**

**Consolidated Financial Statements**

**December 31, 2021 and 2020**

**(With Independent Registered Public Accounting Firm Thereon)**

------

**tZERO Group, In.**

**Consolidated Financial Statements**

**December 31, 2021 and 2020**

**TABLE OF CONTENTS**

---

| | |
|:---|:---|
| | **Page** |
| Report of Independent Registered Public Accounting Firm | 1-2 |
| Consolidated Balance Sheets | 3 |
| Consolidated Statement of Operations | 4 |
| Consolidated Statement of Changes in Stockholders' Equity | 5 |
| Consolidated Statements of Cash Flows | 6-7 |
| Notes to Consolidated Financial Statements | 8-33 |

---

------

**Independent Auditors' Report**

The Board of Directors of

tZERO Group, Inc.

**Opinion**

We have audited the consolidated financial statements of tZERO Group, Inc., and its subsidiaries (the Company), which comprise the consolidated balance sheet as of December 31, 2021, and the related consolidated statement of operations, changes in stockholders' equity and cash flows for the year then ended, and the related notes to the consolidated financial statements.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

**Basis for Opinion**

We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

**Emphasis of Matter**

As discussed in Note 19 to the consolidated financial statements, the Company has suffered recurring losses from operations. Management's evaluation of the events and conditions and management's plans to mitigate this matter is also described in Note 19. Our opinion is not modified with respect to this matter.

**Other Matter**

The consolidated financial statements of the Company for the year ended December 31, 2020, were audited by another auditor, who expressed an unmodified opinion on those statements on March 21, 2022.

**Responsibilities of Management for the Consolidated Financial Statements**

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for one year after the date that the consolidated financial statements are available to be issued.

------

**Auditors' Responsibilities for the Audit of the Consolidated Financial Statements**

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the consolidated financial statements.

In performing an audit in accordance with GAAS, we:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Exercise professional judgment and maintain professional skepticism throughout the audit.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, no such opinion is expressed.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the consolidated financial statements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings and certain internal control-related matters that we identified during the audit.

/s/ BAKER TILLY US, LLP

New York, New York

November 2, 2022

------

**tZERO Group, Inc.**

**Consolidated Balance Sheets** 

**December 31, 2021 and 2020**

**(in thousands, except per share amounts)**

---

| | | |
|:---|:---|:---|
| | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2021** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2020** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Assets** | | |
| Current assets: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Cash, cash equivalents and restricted cash | $17664 | $15165 |
| &nbsp;&nbsp;&nbsp;&nbsp;Marketable securities |  | 1762 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable, net | 3008 | 5419 |
| &nbsp;&nbsp;&nbsp;&nbsp;Crypto assets held | 1027 | 129 |
| &nbsp;&nbsp;&nbsp;&nbsp;Prepaid and other assets, net | 1494 | 470 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets | 23193 | 22945 |
| Fixed assets, net | 8417 | 8681 |
| Intangible assets, net | 3012 | 5772 |
| Goodwill | 25453 | 25453 |
| Operating lease right-of-use assets | 7102 | 7226 |
| Equity securities | 9014 | 10786 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $76191 | $80863 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Liabilities and Stockholders' Equity** |  |  |
| Current liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts payable and accrued liabilities | $8519 | $11135 |
| &nbsp;&nbsp;&nbsp;&nbsp;Operating lease liabilities, current | 614 | 1478 |
| &nbsp;&nbsp;&nbsp;&nbsp;Acquisition note payable to Overstock |  | 4000 |
| &nbsp;&nbsp;&nbsp;&nbsp;Note payable to parent | 5000 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Operating note payable to Overstock |  | 84601 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accrued interest payable | 4 | 10714 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities | 14137 | 111928 |
| Operating lease liabilities, non-current | 7629 | 7099 |
| Other long-term liabilities | 426 | 370 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities | 22192 | 119397 |
| Commitments and contingencies (Note 10) |  |  |
| Stockholders' equity (deficit): |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Preferred equity tokens, $0.01 par value, authorized shares - 100,000 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares issued and outstanding - 21,278 and 20,819 | 213 | 208 |
| &nbsp;&nbsp;&nbsp;&nbsp;Common stock, $0.01 par value, authorized shares - 500,000 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares issued - 243,881 at December 31, 2021 and 101,791 at December 31, 2020; Shares outstanding - 243,748 at December 31, 2021 and 101,658 at December 31, 2020 | 2434 | 1013 |
| &nbsp;&nbsp;&nbsp;&nbsp;Treasury stock | (266) | (266) |
| &nbsp;&nbsp;&nbsp;&nbsp;Additional paid-in capital | 242908 | 129670 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accumulated deficit | (193608) | (171670) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Equity attributable to stockholders of tZERO Group, Inc. | 51681 | (41045) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Equity attributable to noncontrolling interests | 2318 | 2511 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total stockholders' equity (deficit) | 53999 | (38534) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and stockholders' equity (deficit) | $76191 | $80863 |

---

**See accompanying notes to Consolidated financial statements.**

------

**tZERO Group, Inc.**

**Consolidated Statement of Operations** 

**Years ended December 31, 2021 and 2020** 

**(in thousands)**

---

| | | |
|:---|:---|:---|
| | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2021** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2020** |
| **Revenues** | | |
| Commissions income, net of rebates from trade executions | $32916 | $43357 |
| Investor verification revenue | 1264 | 1042 |
| Commissions income, net from ATS platform | 612 | 1032 |
| Commissions income from cryptocurrency platform | 393 | 51 |
| Due diligence and other income | 110 | 384 |
| **Total Revenues** | **35295** | **45866** |
| **Cost of revenues** |  |  |
| Commission expenses | 22604 | 35230 |
| Clearance and other charges | 3244 | 3008 |
| **Cost of revenues** | **25848** | **38238** |
| **Revenues, net** | **9447** | **7628** |
| **Operating Expenses** |  |  |
| Employee compensation, payroll taxes and benefits | 16169 | 14915 |
| Software licenses, services, and communication | 3827 | 2965 |
| Professional services | 5538 | 3617 |
| Legal fees | 4282 | 4607 |
| Rent and occupancy | 2873 | 2377 |
| General and administrative | 866 | 702 |
| Depreciation and amortization | 7723 | 8168 |
| Stock Compensation | 1199 | 6670 |
| Impairment of cryptocurrencies | 122 | 11 |
| **Total Operating Expenses** | **42599** | **44032** |
| **Operating Loss** | **(33152)** | **(36404)** |
| <br>**Other Income (Expense)** |  |  |
| Realized gain (loss) on sale of equity securities | 11337 | (7056) |
| Penalties and fines |  | (1310) |
| Other | (36) | (4386) |
| **Loss before taxes** | **(21851)** | **(49156)** |
| **Provision for income taxes** | **(280)** | **(49)** |
| **Net loss** | **(22131)** | **(49205)** |
| <br>**Non controlling interests** | **(193)** | **(204)** |
| **Net loss attributable to common shares** | $**(21938)** | $**(49001)** |

---

**See accompanying notes to Consolidated financial statements.**

------

**tZERO Group, Inc.**

**Consolidated Statement of Changes in Stockholders' Equity**

**Years ended December 31, 2021 and 2020**

**(in thousands, except per share amounts)**

---

| | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Common Stock** | **Common Stock** | &nbsp;&nbsp;&nbsp;**Preferred Stock (TZROP)** | &nbsp;&nbsp;&nbsp;**Preferred Stock (TZROP)** | **Treasury Stock** | **Treasury Stock** | | | | |
| | &nbsp;&nbsp;<br>**Shares** | <br>**Amount** | <br>**Shares** | &nbsp;&nbsp;<br>**Amount** | <br>**Shares** | &nbsp;&nbsp;<br>**Amount** |<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br>**APIC** |<br>**Accumulated Deficit** |<br>&nbsp;&nbsp;**Noncontrolling Interest** |<br>&nbsp;&nbsp;&nbsp;&nbsp;<br>**Total** |
| **At December 31, 2019** | &nbsp;&nbsp;**101282** | $**1013** | **20807** | $**208** | **—** | $**(266)** | $**121185** | $**(122655)** | $**2715** | $**2200** |
| Stock-based compensation to employees and directors |  |  |  |  |  |  | 3471 |  |  | 3471 |
| Shares issued upon vesting of equity awards expense |  |  | 12 |  |  |  |  |  |  |  |
| Common stock sold at market | 509 |  |  |  |  |  | 5000 |  |  | 5000 |
| Dividends (Stock awards to parent employees) |  |  |  |  |  |  | 14 | (14) |  |  |
| Net loss |  |  |  |  |  |  |  | (49001) | (204) | (49205) |
| **At December 31, 2020** | &nbsp;&nbsp;**101791** | &nbsp;&nbsp;**1013** | &nbsp;&nbsp;**20819** | &nbsp;&nbsp;**208** | &nbsp;&nbsp;**—** | &nbsp;&nbsp;**(266)** | &nbsp;&nbsp;**129670** | &nbsp;&nbsp;**(171670)** | &nbsp;&nbsp;**2511** | &nbsp;&nbsp;**(38534)** |
| Stock-based compensation to employees and directors |  |  |  |  |  |  | 1199 |  |  | 1199 |
| Consulting and other expense | 1089 | 11 | 459 | 5 |  |  | 1208 |  |  | 1224 |
| Conversion of debt into common stock | 124898 | 1249 |  |  |  |  | 97992 |  |  | 99241 |
| Cash investment by Medici | 16103 | 161 |  |  |  |  | 12839 |  |  | 13000 |
| Net loss |  |  |  |  |  |  |  | (21938) | (193) | (22131) |
| **At December 31, 2021** | &nbsp;&nbsp;**243881** | $**2434** | &nbsp;&nbsp;**21278** | $**213** | &nbsp;&nbsp;**—** | $**(266)** | $**242908** | $**(193608)** | $**2318** | $**53999** |

---

**See accompanying notes to Consolidated financial statements.**

------

---

| | | |
|:---|:---|:---|
| **tZERO Group, Inc**<br>**Consolidated Statements of Cash Flow**<br>**Years ended December 31, 2021 and 2020** <br>**(in thousands)** | **tZERO Group, Inc**<br>**Consolidated Statements of Cash Flow**<br>**Years ended December 31, 2021 and 2020** <br>**(in thousands)** | **tZERO Group, Inc**<br>**Consolidated Statements of Cash Flow**<br>**Years ended December 31, 2021 and 2020** <br>**(in thousands)** |
|  | **2021** | **2020** |
| **Cash flows from operating activities:** |  |  |
| Net loss | $(22131) | $(49205) |
| Adjustments to reconcile net loss to net cash used in operating activities: |  |  |
| Depreciation of fixed assets | 4934 | 5203 |
| Amortization of intangible assets | 2790 | 2964 |
| Stock-based compensation to employees and directors | 2353 | 3471 |
| Loss on sale of equity securities | (10953) | (2161) |
| Loss on equity method securities |  | 4341 |
| Fair value adjustment for equity securities under ASC 321 |  | 2715 |
| Other |  | (224) |
| Changes in operating assets and liabilities, net of acquisitions: |  |  |
| Accounts receivable, net | 2411 | (2115) |
| Prepaids and other assets, net | (1024) | 197 |
| Crypto assets held | (898) | (28) |
| Accounts payable and accrued liabilities | (2616) | 8093 |
| Operating lease liabilities | (334) | (85) |
| Amortization of right-of-use asset | 124 | 752 |
| Other long-term liabilities | 56 | 233 |
| **Net cash used in operating activities** | **(25288)** | **(25849)** |
| <br>**Cash flows from investing activities:** |  |  |
| Purchase of equity securities |  | (5000) |
| Proceeds from sale of equity securities | 14487 | 6306 |
| Expenditure for fixed ass | (4700) | (4008) |
| **Net cash provided by (used in) investing activities** | **9787** | **(2702)** |
| **<br>Cash flows from financing activities:** |  |  |
| Proceeds from sale of tZERO shares to Medici Ventures, L.P. | 13000 |  |
| Proceeds from note payable to Medici Venture, L.P. | 5000 |  |
| Proceeds from operating note payable |  | 30227 |
| Paid in capital for noncontrolling interest |  | 912 |
| **Net cash provided by financing activities** | **18000** | **31139** |
| Net increase in cash and cash equivalents | 2499 | 2588 |
| Cash, cash equivalents, and restricted cash beginning of year | 15165 | 12577 |
| **Cash, cash equivalents, restricted cash end of year** | $**17664** | $**15165** |
| <br>*Continued on the following page* | <br>*Continued on the following page* | <br>*Continued on the following page* |

---

------

---

| | | |
|:---|:---|:---|
| **tZERO Group, Inc.**<br>**Consolidated Statements of Cash Flow** <br>**Years ended December 31, 2021 and 2020** | **tZERO Group, Inc.**<br>**Consolidated Statements of Cash Flow** <br>**Years ended December 31, 2021 and 2020** | **tZERO Group, Inc.**<br>**Consolidated Statements of Cash Flow** <br>**Years ended December 31, 2021 and 2020** |
| | **Year Ended<br>December 31,** | **Year Ended<br>December 31,** |
|  | **2021** | **2020** |
| <br>**Supplemental disclosures of cash flow information:** |  |  |
| Notes payable to Overstock converted into equity | $10082 | $&nbsp;&nbsp;— |
| <br>Issuance of common stock in exchange for consulting services | 884 |  |
| <br>Overstock downstream stock comp expense recognition |  | 1412 |
| Proceeds from sale of marketable securities included in accounts receivable |  | 5 |
| <br>tZERO upstream stock comp expense (dividend to Overstock) |  | 14 |
| Right-of-use assets obtained in exchange for new operating lease liabilities | 688 | 367 |
| Cash paid for income taxes |  | 1410 |

---

**See accompanying notes to Consolidated financial statements.**

------

**tZERO Group, Inc.**

**Notes to Consolidated Financial Statements**

**December 31, 2021 and 2020**

**1. BASIS OF PRESENTATION**

*Business and Organization*

On December 1, 2014, Medici Inc. ("Medici") was incorporated in the State of Utah, as a wholly owned subsidiary of Overstock.com, Inc. ("Overstock"), as a financial technology company pursuing initiatives to develop and commercialize financial applications of blockchain technologies. Pursuant to an agreement dated November 21, 2014, on July 16, 2015, Overstock transferred 24.9% of its shares of Medici to a third-party. On August 26, 2015, the third-party transferred 5.9% of the shares back to Overstock and redistributed some of its shares to other individuals or entities. On October 21, 2016, Medici formally changed its name to t0.com, Inc. On February 3, 2017, Overstock transferred its 81.0% ownership of t0.com, Inc. to its wholly owned subsidiary, Medici Ventures, Inc. ("Medici Ventures"). On October 1, 2018, t0.com, Inc. was re-incorporated in the State of Delaware and changed its name to tZERO Group, Inc. (the "Company").

As used herein, "we," "our" and similar terms include the Company and its subsidiaries, unless the context indicates otherwise.

The Company is a financial technology company with the goal of democratizing access to private capital markets whose primary focus is on the development and adoption of digital securities. We offer institutional-grade solutions for issuers looking to digitize their capital table through blockchain technology and the use of digital securities, and trade on a regulated alternative trading system. We democratize access to private assets by providing a simple, automated, and efficient trading venue to broker-dealers, institutions, and investors. We have developed a suite of technologies (the"tZERO Technology Stack") that enables issuers to issue, and relevant regulated market participants to support the issuance, trading, clearance, and settlement of digital securities.

"Digital securities" are conventional uncertificated securities where the issuer arranges for a digital "courtesy carbon copy" of the transfer agent's share registry to be viewable on the blockchain to enhance the investor experience through added transparency, but which have no controlling legal effect. The Company and its affiliates are working with regulators and other stakeholders to expand the role of blockchain in the lifecycle of digital securities and to facilitate the infrastructure, issuance, recording, trading, clearing, settlement, and regulatory compliance of "digital asset securities" as described in the July 8, 2019 Joint Staff Statement on Broker-Dealer Custody of Digital Asset Securities in a manner consistent with existing market and legal infrastructure.

We also support the adoption of such assets by developing the tZERO Technology Stack for use by regulated venues on which those digital securities can trade, as well as investing in subsidiaries and joint venture entities that own and operate such trading venues. These investments include the alternative trading system (the "tZERO ATS") run by our wholly-owned subsidiary, tZERO ATS, LLC, an SEC-registered broker-dealer which provides a regulated venue for matching buy and sell orders to our broker-dealer subscribers, including for the trading of digital securities, and our joint venture with BOX Digital Markets LLC ("BOX Digital"), intended to develop a U.S. national securities exchange facility with regulatory approvals enabling it to support trading in a type of security for which order and transaction data would be captured on a proprietary blockchain and to also support settlement of transactions in such securities on BSTX faster than T+2. Another wholly owned subsidiary, tZERO Markets, LLC ("tZERO Markets"), is an SEC-registered broker-dealer which offers a website, and in the future intends to provide a mobile application, that allows retail customers to conduct self-directed trading of digital securities.

------

**tZERO Group, Inc.**

**Notes to Consolidated Financial Statements**

**December 31, 2021 and 2020**

In addition, we also maintain certain other businesses, including the broker-dealer activities of our subsidiary SpeedRoute LLC ("SpeedRoute"), which provides connectivity to its registered broker-dealer clients to U.S. equity exchanges and off- exchange sources of liquidity. tZERO Technologies LLC ("tZERO Tech") is a company that holds our fixed assets. It also enters into technology contracts and deploys purchased software and technology company wide. Our remaining businesses include tZERO Crypto, Inc. ("tZERO Crypto"), a virtual currency wallet and exchange services business that we acquired 100% ownership interest in the first quarter of 2019, and Verify Investor, LLC, an accredited investor verification company that we acquired a majority ownership interest in the first quarter of 2018.

*Basis of presentation and Going Concern*

These Consolidated Financial Statements have been prepared in accordance with GAAP assuming the Company will continue as a going concern.

*Going Concern*

The going concern assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business. However, substantial doubt about the Company's ability to continue as a going concern exists. As discussed in Note 19 - Going Concern, the Company has incurred recurring losses from operations since inception. The Company will require additional liquidity to continue its operations over the next 12 months.

The Consolidated Financial Statements do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if the Company were unable to continue as a going concern. See Note 20 - Subsequent Events.

In that regard, the audit report issued by our independent registered public accounting firm for the audit of our 2020 and 2021 financial statements includes an emphasis of matter paragraph describing the existence of conditions that raise substantial doubt about our ability to continue as a going concern. See Note 20 - Subsequent Events.

*Reclassifications and Revisions*

Certain reclassifications have been made to the prior periods Consolidated financial statements in order to conform to the current period presentation. Such classifications have no effect on previously reported Consolidated net losses.

During 2021, we discovered that the par value of our common was understated and preferred stock was overstated. The overstatement had no effect on the Consolidated Financial Statements as the corresponding adjustment was to Additional paid-in capital.

------

**tZERO Group, Inc.**

**Notes to Consolidated Financial Statements**

**December 31, 2021 and 2020**

**2. SIGNIFICANT ACCOUNTING POLICIES**

*Principles of consolidation*

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

*Use of estimates*

The Company's Consolidated Financial Statements are prepared in conformity with U.S. GAAP, which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, allowance for doubtful accounts, goodwill and intangibles, compensation accruals, capitalized software, leases, litigation accruals, and other matters that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenue and expenses during the reporting period. Accordingly, actual results could differ materially from those estimates.

*Cash, cash equivalents and restricted cash*

Cash equivalents include money market accounts, which are payable on demand, and short-term investments with an original maturity of less than 90 days. The Company maintains cash in bank deposit accounts that, at times, may exceed federally insured limits. The Company manages this risk by selecting financial institutions deemed highly creditworthy to minimize the risk. The Company has not experienced any credit losses associated with its Cash, cash equivalents and restricted cash accounts.

Cash restricted is segregated under a collateral agreement. There was $1.0 million restricted cash at December 31, 2021, and $0.6 million at December 31, 2020, related to this collateral agreement.

Additionally, the Company maintains a cash balance with Metropolitan Commercial Bank as part of its operating agreement with the bank related to the purchase of bitcoin on cryptocurrency exchange markets. There was a balance of $250,000 at December 31, 2021, and 2020.

*Fair Value Measurement*

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.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Level 1 - Quoted prices for identical instruments in active markets;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Level 3 - Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

------

**tZERO Group, Inc.**

**Notes to Consolidated Financial Statements**

**December 31, 2021 and 2020**

Under GAAP, certain assets and liabilities are required to be recorded at fair value on a recurring basis. Our assets and liabilities that are adjusted to fair value on a recurring basis includes cash equivalents and certain equity securities. Our other financial instruments, including cash, accounts receivable, accounts payable, accrued liabilities, and notes payables 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 in certain circumstances (e.g., when there is evidence of impairment); 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.

*Accounts receivable*

Receivables are obligations due from the customer (broker-dealers or exchanges) under terms requiring payments up to thirty days from the previous production month. The Company does not accrue interest on unpaid receivables. Receipts of accounts receivable are applied to specific invoices identified on the customer remittance advice or, if unspecified, are applied to earliest unpaid invoices. Customer receivables balances with invoice dates that are greater than thirty days old are considered aged, non-allowable for regulatory purposes and reviewed for delinquency. The carrying amounts of aged receivables are reduced where necessary, and an allowance of $37,060 was recorded as of December 31, 2021 and $121,029 as of December 31, 2020.

*Current Expected Credit Losses*

The Company had $3.6 million and $5.6 million receivable from third parties on December 31, 2021 and on December 31, 2020, respectively. The Company carries its receivables at cost less an allowance for credit losses to present the net amount expected to be collected as of the date of the statement of financial condition. The Company generally does not require collateral. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts.

*Concentration of credit risk*

We maintain cash balances with financial institutions in amounts which, at times, are more than amounts insured by the Federal Deposit Insurance Corporation. Management monitors the soundness of these institutions and has not experienced any credit losses with them.

*Due from Brokers*

The Company holds cash collateral at clearing broker-dealers or exchanges. These amounts are generally due to the Company on demand pending settlement of any outstanding transactions. These amounts are not covered by FDIC insurance, but the Company has not experienced any losses associated with these funds. As of December 31, 2021, $0.8 million was on deposit and is included in Prepaid and other current assets, net on the Consolidated Balance Sheets. As of December 31, 2020, $0.5 million was on deposit and is included in Prepaid and other current assets, net on the Consolidated Balance Sheets.

*Crypto Assets Held*

Crypto Assets Held represent cryptocurrencies held by the Company. The Company uses three different exchanges to conduct its purchases, sales, and custody of its crypto assets, which are all held in unique wallets that are controlled by the Company. Crypto Assets Held are accounted for as intangible assets with indefinite useful lives.

------

**tZERO Group, Inc.**

**Notes to Consolidated Financial Statements**

**December 31, 2021 and 2020**

An intangible asset with an indefinite useful life is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating that it is more likely than not that the indefinite- lived asset is impaired. Impairment exists when the carrying amount exceeds its fair value, which is measured using the quoted price of the cryptocurrency at the time its fair value is being measured. In testing for impairment, the Company has the option to first perform a qualitative assessment to determine whether it is more likely than not that an impairment exists. If it is determined that it is not more likely than not that an impairment exists, a quantitative impairment test is not necessary. If the Company concludes otherwise, it is required to perform a quantitative impairment test. To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset. Subsequent reversal of impairment losses is not permitted. During the years ended December 31, 2021 and 2020, the Company recorded impairment charges of $122,000 and $11,000, respectively and is recorded in the Consolidated Statements of Operations.

The Company accounts for purchases of crypto assets at cost and the Company tracks the cost basis of each crypto asset purchased, by way of exchange or customer sale. These transactions include transaction costs which are not identifiable and are immaterial. Principal purchases and sales performed by the Company are booked in conjunction with customer transactions, and accordingly, all net purchases and sales are netted on the statement of cash flows.

Realized gains and losses related to crypto asset transactions are recorded when the fair value does not equal the carrying value at the time of sale. They are computed using the first-in-first-out (FIFO) method. They are reported as realized gain (loss) on crypto asset sales on the Consolidated Statement of Operations.

The crypto assets to be transferred represent cryptocurrencies purchased to fulfill prospective customer purchase orders.

*Due to Customers*

Through May 2021, the Company waited five days before fulfilling cryptocurrency customer orders. The purpose of the five-day holding period was to minimize the risk of fraudulent customer activity or of chargeback returns due to insufficient funds.

In June 2021, due to the Company's transition to its current business model whereby third-party custodians, such as Prime Trust, provide custodial services to customers residing in permitted jurisdictions utilizing the tZERO Crypto Platform, all customer cryptocurrency orders are processed and satisfied instantaneously. A one-day lag is used to book payables to customers. The unfulfilled obligation of transferring the cryptocurrency is recognized as a liability. The unfulfilled obligation amounted to approximately $16,000 and $83,000 at December 31, 2021 and 2020, respectively are recorded within Accounts payable and accrued liabilities on the Consolidated Balance Sheets.

*Marketable Securities*

Marketable securities consisted of equity securities in a public entity which owned the majority of the Company. The marketable equity securities have a readily determinable fair value and are measured and recorded at fair value on a recurring basis. In February 2021, all the marketable securities were sold resulting in a recognized gain of $2.1 million. In accordance with Accounting Standard Codification (ASC) Topic 321, Investments – Equity Securities realized gains and losses and unrealized holding gains or losses on marketable securities are reported as gains or losses on the Consolidated Statements of Operations.

------

**tZERO Group, Inc.**

**Notes to Consolidated Financial Statements**

**December 31, 2021 and 2020**

*Fixed assets, net*

Fixed assets, which include assets such as our furniture and equipment, technology infrastructure, internal use software, and website development, are recorded at cost and depreciated using the straight-line method over the estimated useful lives.

Included in fixed assets 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, both developed internally and acquired externally. We capitalize costs incurred during the application development stage of internal use software and amortize these costs over the estimated useful life of two to three years. Costs incurred related to design or maintenance of internal use software are expensed as incurred.

---

| | |
|:---|:---|
| | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Life**<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(years)** |
| Furniture and equipment | 5 - 7 |
| Computer hardware | 3 - 4 |
| Computer software, including internal-use software and website development | 2 - 4 |

---

*Equity securities under ASC 321*

At December 31, 2020, we held minority interests in certain public 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 based on Level 1 inputs (see *Fair value of measurement* above) 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, in Other expense, net in the Consolidated Statement of Operations. 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 expense, net in our Consolidated Statement 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. During 2021, we sold these equity securities resulting in realized gains of $7.1 million, which is included in Other Income (Expense) in the Consolidated Statements of Operations. At December 31, 2021, we did not have any minority interest in any public entities, accounted for under ASC Topic 321.

The carrying amount of our marketable securities and equity securities under ASC 321 consists of the following (in thousands):

---

| | | |
|:---|:---|:---|
| | **December 31, 2021** | **December 31, 2020** |
| Marketable securities with readily determinable fair value | $— | $1762 |
| Equity securities with readily determinable fair value |  | 2272 |
| &nbsp;&nbsp;&nbsp;Total marketable and equity securities under ASC321 | $— | $4034 |

---

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**tZERO Group, Inc.**

**Notes to Consolidated Financial Statements**

**December 31, 2021 and 2020**

The portion of unrealized gains and losses for the period related to marketable and equity securities with readily determinable fair value still held at December 31, 2021 and 2020 is as calculated as follows (in thousands):

---

| | | |
|:---|:---|:---|
|  | **Year ended<br>December 31,** | **Year ended<br>December 31,** |
|  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2021** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2020** |
| Net gain/losses recognized during the period on marketable and equity securities with readily determinable fair values | $— | $(554) |
| Less: Net gain/losses recognized during the period on marketable equity securities sold with readily determinable fair values |  | 2161 |
| &nbsp;&nbsp;&nbsp;&nbsp;Unrealized losses recognized during the reporting period on marketable equity securities still held at the reporting period with readily determinable fair values | $— | $(2715) |

---

*Equity method securities under ASC 323*

Minority interests in other entities in which we can exercise significant influence, but not control, over the entity through either holding more than a 20% voting interest in the entity or through our representation on the entity's board of directors are accounted for as equity method securities under ASC Topic 323, *Investments - Equity Method and Joint Ventures* ("ASC 323"), and are included in Equity securities in our Consolidated Balance Sheets.

As of December 31, 2021, and 2020, we have a 50% ownership interest in Boston Security Token Exchange LLC ("BSTX"), a joint venture with BOX Digital Markets LLC. Based on the nature of our ownership interests and extent of our contributed capital, we have a variable interest in BSTX. However, we have insufficient voting rights or other means to influence the investee such that we do not have power to direct the investee's activities that most significantly impact the economic performance of each entity. Further, we are not the investee's primary beneficiary and we therefore do not consolidate the investee in our financial statements. Over the period of time of our 50% ownership of BSTX, we invested $15.0 million in cash. See Note 20 – Subsequent Events.

The following table summarizes the carrying amount of our equity method securities (in thousands):

---

| | | |
|:---|:---|:---|
| | **December 31, 2021** | **December 31, 2020** |
| Equity method securities | $8131 | $8514 |

---

At December 31, 2021, the carrying value of our equity method securities exceeded the amount of underlying equity in net assets of the investees 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 of the investee and the amortization of the basis difference related to intangible assets in Other within the Other income (expense) section in our Consolidated Statement of Operations with corresponding adjustments to the carrying value of the investment.

The following table summarizes the net losses recognized on equity method securities for the years ended December 31, 2021 and 2020:

---

| | | |
|:---|:---|:---|
| | **December 31, 2021** | **December 31, 2020** |
| Net loss recognized on our proportionate share of the net |  |  |
| &nbsp;&nbsp;&nbsp;losses of our equity method investees and amortization |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;of the basis difference | $383 | $4341 |

---

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**tZERO Group, Inc.**

**Notes to Consolidated Financial Statements**

**December 31, 2021 and 2020**

*Investment carried under the cost method*

We own a minority interest in Blue Ocean Technologies. During 2021, we sold a portion of our ownership resulting in a $4 million realized gain which is included in Realized gain (loss) on sale of equity securities in our Consolidated Statement of Operations. Its' subsidiary, Blue Ocean ATS, LLC, is the operator of the alternative trading system, and uses electronic order-delivery and live data to provide an "exchange-like" experience for global investors in overnight trading, bridging the eight-hour time gap in US equities trading. As of December 31, 2021, this investment was carried at a cost of $0.9 million. We account for this investment under the cost method.

*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 our reporting unit is less than its carrying amount. If the qualitative assessment determines that it is more likely than not that its fair value is less than its carrying amount, we compare the fair value of the reporting unit to which the goodwill is assigned to its carrying amount. If the carrying amount exceeds its fair value, an impairment loss is recognized in an amount equal to the excess of the carrying amount over the fair value of the reporting unit, not to exceed the carrying amount of the goodwill. There were no impairments to goodwill recorded during the years ended December 31, 2021 and 2020.

*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.

During the normal course of business, the Company develops software programs through which its products and services are sold to its customers. Capitalized development costs include certain expenditures to develop these programs. Additionally, development costs are capitalized when there is a major revision to an existing program that requires a significant re-write of the program. Costs incurred to maintain existing offerings are expensed when incurred. In addition, development costs incurred in the research and development of new products are expensed as incurred until economic feasibility has been established.

Indefinite-lived intangible assets are tested for impairment annually or more frequently when events or circumstances indicate that the carrying value more likely than not exceeds its fair value. In addition, we routinely evaluate the remaining useful life of intangible assets not being amortized to determine whether events or circumstances continue to support an indefinite useful life, including any legal, regulatory, contractual, competitive, economic, or other factors that may limit their useful lives. Definite lived intangible assets are amortized using the straight-line method of amortization over their useful lives, except for 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*.

For all periods presented, we had no intangible assets that had an indefinite life.

------

**tZERO Group, Inc.**

**Notes to Consolidated Financial Statements**

**December 31, 2021 and 2020**

*Impairment of long-lived assets*

We review property and equipment and other long-lived assets, including intangible assets other than goodwill, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. See the *Cryptocurrencies* section above for our impairment policy over cryptocurrencies. Recoverability is measured by comparison of the assets' carrying amount to future undiscounted net cash flows the asset group is expected to generate. Cash flow forecasts are based on trends of historical performance and management's estimate of future performance, giving consideration to existing and anticipated competitive and economic conditions. If such asset group is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds their fair values. There were no impairments to long-lived assets recorded during the years ended December 31, 2021 and 2020.

*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. No dividends have been declared or paid on our common stock since inception through December 31, 2021.

*TZROP*

Our tZERO Preferred Equity Tokens ("TZROP") are classified as Stockholders' equity within our Consolidated Balance Sheets. TZROP holders have the right to, prior to distributing earnings to common stockholders, a noncumulative dividend equal to 10% of our Consolidated Adjusted Gross Revenue (as defined by the TZROP offering documents) for the most recently completed fiscal quarter, if declared by our Board of Directors, to be paid out of funds lawfully available on a quarterly basis. TZROP holders are not entitled to participate in any dividends paid to the holders of our common stock, have no rights to vote, and have no rights to the undistributed earnings and are not entitled to any utility functionality as part of the TZROP. Any remaining undistributed earnings or losses of the Company for a period shall be allocated to the TZROP holders based on the contractual participation rights of the security to share in those earnings as if all the earnings for the period had been distributed. In the event of any liquidation, dissolution or winding up of the Company, the TZROP holders will be entitled to the limited preferential liquidation rights equal to USD $0.10 per token to the extent funds are available.

At December 31, 2018, cumulative proceeds since December 18, 2017, from the TZROP offering totaling $104.8 million, net of $22.0 million of withdrawals, have been classified as Stockholders' equity within our Consolidated Balance Sheets. As of December 31, 2018, tZERO incurred $21.5 million of offering costs associated with the TZROP offering that are classified as a reduction in proceeds within Additional paid-in capital of our Consolidated Balance Sheets. There was 21.3 million TZROP outstanding as of December 31, 2021, and there was 20.8 million TZROP outstanding as of December 31, 2020.

*GSR Agreement*

In August 2018, Overstock signed a Token Purchase Agreement with GSR Capital Ltd., a Cayman Islands exempted company ("GSR"). The Token Purchase Agreement sets forth the terms on which GSR had agreed to purchase, for $30 million, on May 6, 2019 or such other date as agreed by the parties, security tokens at a price of $6.67 per security token. On May 8, 2019, the parties executed an Investment Agreement to replace the Token Purchase Agreement under which GSR agreed to purchase 508,710 shares of tZERO common stock, representing approximately 0.5% of the issued and outstanding common stock of tZERO. In exchange, GSR agreed to transfer to tZERO a total $5.0 million in consideration. 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. On April 1, 2020, tZERO issued 508,710 shares of tZERO common

------

**tZERO Group, Inc.**

**Notes to Consolidated Financial Statements**

**December 31, 2021 and 2020**

stock, representing approximately 0.5% of our issued and outstanding common stock, to GSR in exchange for $5.0 million in consideration in full satisfaction of the Investment Agreement.

*Noncontrolling interests*

We hold an 81.0% equity interest in Verify Investor, LLC, an accredited investor verification company. The financial position and results of operations for Verify Investor, LLC is included in our Consolidated financial statements. 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.

*Revenue Recognition*

The Company recognizes revenue under ASC 606, Revenue from Contracts with Customers. The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Step 1: Identify the contract with the customer

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Step 2: Identify the performance obligations in the contract

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Step 3: Determine the transaction price

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Step 4: Allocate the transaction price to the performance obligations in the contract

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Step 5: Recognize revenue when the Company satisfies a performance obligation

In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606's definition of a "distinct" good or service (or bundle of goods or services) if both of the following criteria are met: The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct), and the entity's promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract).

If a good or service is not distinct, the good or service is combined with other promised goods or services until a bundle of goods or services is identified that is distinct.

Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The transaction price is allocated to each performance obligation on a relative standalone selling price basis. The transaction price allocated to each performance obligation is recognized when that performance obligation is satisfied, at a point in time or over time as appropriate.

The Company earns revenue, from fees charged in relation to the sale and purchase of cryptocurrency by consumers using the tZERO Crypto Platform. Fees are collected from consumers, utilizing funds custodied by Prime Trust, at the time of the transaction. Based on this format, the Company has concluded it is not the principal agent in these transactions and therefore recognizes the net commission revenue earned. Each transaction is considered a separate agreement between the Company and the consumer and includes only one performance obligation that is satisfied at a point in time, which is when the cryptocurrency is transferred to the consumer.

For any unperformed obligation, the Company recognizes a liability in relation to the cryptocurrency to be transferred and the portion of the revenue which is unearned. For the years ended December 31, 2021 and 2020, the Company recognized approximately $16,000 and $83,000 in obligations, which are recorded within Accounts payable and accrued expenses on the Consolidated Balance Sheets. The associated unearned revenue was approximately

------

**tZERO Group, Inc.**

**Notes to Consolidated Financial Statements**

**December 31, 2021 and 2020**

$200 and $1,000 for the years ended December 31, 2021 and 2020 and are included in the Accounts payable and accrued expense on the Consolidated Balance Sheets.

Transaction expenses are comprised of vendor services related to anti-money laundering and know-your- client protection ("AML/KYC"), bank verification, and cryptocurrency source tracking. AML/KYC and bank verification costs are directly related to the onboarding of new customers.

Normally, the Company does not provide refunds and as such, no liability is recognized in relation to refunds.

Significant fluctuations in the prices of cryptocurrencies may adversely affect interest in and demand for cryptocurrencies. While the Company is in its early days of operations, this may affect our ability to generate revenue in the foreseeable future.

We currently derive our revenue primarily from commissions earned through our broker dealer business. Securities transactions routed through SpeedRoute (and the related commission revenue and expense) are recorded on the trade date and on a gross basis. We treat cash consideration paid to our customers in the form of rebates as a reduction of gross revenue. These rebates totaled $1.8 million and $0.9 million during the years ended December 31, 2021 and 2020, respectively.

Due diligence fees are received from issuers before onboarding and offering their security on the trading platform. An initial fee of $10,000, which covers the initial diligence review, is charged, and booked immediately after receipt. Upon completion of the initial diligence review, the Company determines whether there are existing facts or circumstances about the issuer or the security, which would pose an inordinate amount of legal or reputational risk. For this inordinate risk review, the issuer is charged $20,000, along with an annual fee of $20,000. Since both the Company and its potential issuers have the right to cancel these contracts at will, these due diligence fees are not recognized until received, for the issuance of a new security token cannot occur without the completion of these due diligence procedures. For the year ended December 31, 2021 the Company earned $110,000 of due diligence income.

*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. Certain of our employees hold equity awards (grants of options and restricted stock awards) originally issued by our parent entity, Medici Ventures, and its parent Overstock, which provides the right to acquire shares of common stock in those entities. These awards were originally granted to these employees while employed by either Medici Ventures or Overstock and prior to the employees transfer to tZERO. The downstream awards will continue to vest while these employees are providing services to tZERO over their original vesting term of 3 years. We recognize down stream stock equity awards to our employees as stock compensation expense with a corresponding adjustment to contributed capital (Additional paid-in capital). See Note 12 - Stock-Based Awards.

*Income taxes*

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on

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**tZERO Group, Inc.**

**Notes to Consolidated Financial Statements**

**December 31, 2021 and 2020**

deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. We recognize the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.

Our tax provision is allocated by applying the requirements of ASC 740 as if each group member were filing a separate tax return. Our stand-alone financial statements include a valuation allowance because of insufficient taxable income on a separate return basis.

Each quarter we assess the recoverability of our deferred tax assets under ASC 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 December 31, 2021 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.

*Loss contingencies*

In the normal course of business, we may become involved in legal proceedings and other potential loss contingencies. We accrue a liability for such matters when it is probable that a loss has been incurred and the amount can be reasonably estimated. When only a range of probable loss can be estimated, the most probable amount in the range is accrued. If no amount within this range is a better estimate than any other amount within the range, the minimum amount in the range is accrued. We expense legal fees as incurred. See Note 10 - Commitments and Contingencies.

*Recently adopted accounting standards*

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016 02, Leases (Topic 842), which requires lessees to recognize operating leases on Balance Sheets and disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU No. 2018 01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018 10, Codification Improvements to Topic 842, Leases; and ASU No. 2018 11, Targeted Improvements. The new standard establishes a right of use model (ROU) that requires a lessee to recognize an ROU asset and lease liability on the Balance Sheets for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.

We elected to early adopt the new standard on January 1, 2019. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. If an entity chooses the second option, the transition requirements for existing leases also apply to leases entered into between the date of initial application and the effective date. The entity must also recast its comparative period financial statements and provide the disclosures required by the new standard for the comparative periods. We adopted the new standard on January 1, 2019 and thus used the effective date as our date of initial application. Consequently, financial information has not been

------

**tZERO Group, Inc.**

**Notes to Consolidated Financial Statements**

**December 31, 2021 and 2020**

updated and the disclosures required under the new standard are not provided for dates and periods before January 1, 2019. Upon adoption we recognized cumulative operating lease liabilities of approximately $1.0 million and operating right of use assets of approximately $0.9 million which were reflected as noncash items in the Consolidated Statement of Cash Flows. The difference of $0.1 million represented deferred rent for leases that existed as of the date of adoption, which was an offset to the opening balance of right of use assets.

The new standard provides a number of optional practical expedients in transition. We elected the "package of practical expedients," which permits us to not reassess under the new standard our prior conclusions about lease identification, lease classification, and initial direct costs as well as the practical expedient pertaining to land easements. We did not elect the use of hindsight practical expedient. The new standard also provides practical expedients for an entity's ongoing accounting. We elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, we did not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition. We also elected the practical expedient to not separate lease and non lease components for all of our leases.

The standard had a material effect on our financial statements, primarily related to (1) the recognition of new ROU assets and lease liabilities on our Balance Sheets for our warehouse, office, data center, and equipment operating leases; and (2) providing significant new disclosures about our leasing activities. The additional operating liabilities on our Consolidated Balance Sheets were recognized based on the present value of the remaining minimum rental payments under current leasing standards for our existing operating leases, discounted by our incremental borrowing rate for borrowings of a similar duration on a fully secured basis, with corresponding ROU assets of approximately the same amount.

In June 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. For private entities, ASU 2016 13 is required to be adopted for annual periods beginning after December 15, 2020, including interim periods within those fiscal years, with early adoption permitted. We have adopted the standard on January 1, 2020. The Company has completed its analysis of the impact of this guidance and the adoption of this standard did not have a material impact on our Consolidated Financial Statements and related disclosures.

*Recently announced 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 private entities, ASU 2019-12 is required to be adopted for annual periods beginning after December 15, 2021, including interim periods within fiscal years beginning after December 15, 2022. 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 private entities, ASU 2020-01 is required to be adopted for annual periods beginning after December 15, 2021, 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 October 2020, the FASB issued ASU 2020-10, *Codification Improvements*, which amends and provides Codification improvements to either clarify the Codification or correct unintended application of guidance that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to

------

**tZERO Group, Inc.**

**Notes to Consolidated Financial Statements**

**December 31, 2021 and 2020**

most entities. For private entities, ASU 2020-10 is required to be adopted for annual periods beginning after December 15, 2021, including interim periods within fiscal years beginning after December 15, 2022. Early adoption is permitted. Management is currently evaluating the impact of the adoption of this ASU on our Consolidated Financial Statements and related disclosures.

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**tZERO Group, Inc.**

**Notes to Consolidated Financial Statements**

**December 31, 2021 and 2020**

**3. GOODWILL AND INTANGIBLE ASSETS**

*Goodwill*

The carrying amount of our goodwill was $25.5 million at December 31, 2021 and 2020.

*Intangibles*

The following table summarizes the Company's intangible assets, net of accumulated amortization (in thousands):

---

| | | |
|:---|:---|:---|
| | **December 31** | **December 31** |
| | **2021** | **2020** |
| Technology: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Gross carrying amount | $21400 | 21400 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accumulated amortization | (18536) | (16355) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net carrying amount | 2864 | 5045 |
| &nbsp;&nbsp;&nbsp;&nbsp;Trade Names<br>Gross carrying amount | 1173 | 1173 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accumulated amortization | (1025) | (609) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net carrying amount | 148 | 564 |
| Patent: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Gross carrying amount | $315 | 315 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accumulated amortization | (315) | (152) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net carrying amount |  | 163 |
| Total: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Gross carrying amount | 22888 | 22888 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accumulated amortization | (19876) | (17116) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net carrying amount | $3012 | 5772 |

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_______________________________________

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<sup>(1)</sup> At December 31, 2021, the weighted average remaining useful life for intangible assets, other, excluding fully amortized intangible assets, was 4.22 years.

At December 31, 2020, the weighted average remaining useful life for intangible assets, other, excluding fully amortized intangible assets, was 5.56 years.

Estimated amortization expense for the next five years is: $1.7 million in 2022, $1.0 million in 2023, $0.4 million in 2024, $0.2 million in 2025, and $0.1 million thereafter.

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**tZERO Group, Inc.**

**Notes to Consolidated Financial Statements**

**December 31, 2021 and 2020**

**4. FAIR VALUE**

The following table summarizes our assets measured at fair value on a recurring basis using the following levels of inputs, as indicated (in thousands):

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Fair value measurements at December 31** | **Fair value measurements at December 31** | **Fair value measurements at December 31** | **Fair value measurements at December 31** |
| | **2021** | **2021** | **2020** | **2020** |
| | **Total** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Level 1** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total** | **Level 1** |
| <br>Assets: |  |  |  |  |
| Cash equivalents – money market mutual funds | $1000 | $1000 | $567 | $567 |
| Investment in marketable securities, at fair value |  |  | 1762 | 1762 |
| Investment in equity securities at fair value |  |  | 2272 | 2272 |
| &nbsp;&nbsp;&nbsp;Total assets | $1000 | $1000 | $4601 | $4601 |

---

There were no transfers of assets or liabilities held at fair value between levels of the fair value hierarchy for any periods presented.

**5. ACCOUNTS RECEIVABLE, NET**

Accounts receivable, net consist of the following (in thousands):

---

| | | |
|:---|:---|:---|
| | **December 31, 2021** | **December 31, 2020** |
| Accounts receivable | $3045 | $5540 |
| Less: allowance for credit losses | (37) | (121) |
| &nbsp;&nbsp;&nbsp;Total accounts receivable, net | $3008 | $5419 |

---

**6. PREPAIDS AND OTHER CURRENT ASSETS**

Prepaids and other current assets consist of the following (in thousands):

---

| | | |
|:---|:---|:---|
| | **December 31, 2021** | **December 31, 2020** |
| Other current assets | $763 | $155 |
| Prepaid other | 731 | 315 |
| &nbsp;&nbsp;&nbsp;Total prepaids and other current assets | $1494 | $470 |

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**tZERO Group, Inc.**

**Notes to Consolidated Financial Statements**

**December 31, 2021 and 2020**

**7. FIXED ASSETS, NET**

Fixed assets, net consist of the following (in thousands):

---

| | | |
|:---|:---|:---|
| | **December 31, 2021** | **December 31, 2020** |
| Computer hardware and software | $19811 | $15054 |
| Furniture and equipment | 2947 | 2926 |
|  | 22758 | 17980 |
| Less: accumulated depreciation | (14431) | (9299) |
| &nbsp;&nbsp;&nbsp;Total fixed assets, net | $8327 | $8681 |

---

Upon sale or retirement of assets, cost and related accumulated depreciation and amortization are removed from the Consolidated Balance Sheets and the resulting gain or loss, if any, is reflected in the Consolidated Statement of Operations.

**8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES**

Accounts payable and accrued liabilities consist of the following (in thousands):

---

| | | |
|:---|:---|:---|
| | **December 31, 2021** | **December 31, 2020** |
| Accounts payable and other accruals | $4072 | $6517 |
| Accrued legal fees | 912 | 720 |
| Accrued compensation and other related costs | 1870 | 1769 |
| Accrued loss contingencies | 1575 | 2085 |
| Accrued taxes | 90 | 44 |
| &nbsp;&nbsp;&nbsp;Total accounts payable and accrued liabilities | $8519 | $11135 |

---

**9. LEASES**

We have operating leases for office space, data centers, and certain equipment. Our leases have remaining lease terms of 1 year to 10 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.

The table provides a summary of leases by Balance Sheet location as of December 31, 2021 and 2020, respectively (in thousands):

---

| | | |
|:---|:---|:---|
| | **Year ended<br>December 31,** | **Year ended<br>December 31,** |
| | **2021** | **2020** |
| Operating right-of-use assets | $7102 | $7226 |
| Operating lease liability - current | 614 | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1478 |
| Operating lease liability - non-current | 7629 | 7099 |

---

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**tZERO Group, Inc.**

**Notes to Consolidated Financial Statements**

**December 31, 2021 and 2020**

Lease expense for the year ended December 31, 2021 and 2020 were as follows (in thousands):

---

| | | |
|:---|:---|:---|
| | **Year ended<br>December 31,** | **Year ended<br>December 31,** |
| | **2021** | **2020** |
| Operating lease cost | $1439 | $1391 |

---

The following tables provides supplemental Balance Sheets information related to leases:

---

| | | |
|:---|:---|:---|
| | **December 31, 2021** | **December 31, 2020** |
| Weighted-average remaining lease term - operating | 9.90 years | 9.52 years |
| Weighted-average discount rate - operating leases | 7% | 8% |

---

Cash paid for amounts included in the measurement of lease liabilities:

Maturity of lease liabilities under our non-cancellable operating leases as of December 31, 2021, are as follows (in thousands):

---

| | |
|:---|:---|
| **Payments due by per** | **Amount** |
| 2022 | $982 |
| 2023 | 1117 |
| 2024 | 1112 |
| 2025 | 1112 |
| 2026 | 1118 |
| Thereafter | 5806 |
| &nbsp;&nbsp;&nbsp;Total lease payments | 11247 |
| Less interest | (3004) |
| &nbsp;&nbsp;&nbsp;Present value of lease liabilities | $8243 |

---

**10. COMMITMENTS AND CONTINGENCIES**

*Loss contingencies*

In the normal course of business, we may become involved in legal proceedings and other potential loss contingencies. We accrue a liability for such matters when it is probable that a loss has been incurred and the amount can be reasonably estimated. When only a range of probable loss can be estimated, the most probable amount in the range is accrued. If no amount within this range is a better estimate than any other amount within the range, the minimum amount in the range is accrued. 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.

The Company is currently the subject of various regulatory reviews by FINRA. In some instances, these matters may rise to a disciplinary action. There is one specific case that management is awaiting to hear back potential fines and penalties from FINRA. No range of settlement value has been formally discussed, and accordingly, management has not accrued a liability for this uncertainty. However, we believe it is likely we will be subject to a monetary fine or penalty, which could be material. We believe we have sufficient working capital to cover the amount of the ultimate fine or penalty.

------

**tZERO Group, Inc.**

**Notes to Consolidated Financial Statements**

**December 31, 2021 and 2020**

We establish liabilities when a particular contingency is probable and estimable. At December 31, 2021, $1.6 million was the accrued liability balance and at December 31, 2020, $2.1 million was the accrued balance, which is included in Accounts payable and accrued liabilities on the Consolidated Balance Sheets and relate to broker-dealer activities. It is reasonably possible that the actual losses may exceed our accrued liabilities. See Note 20 – Subsequent Events.

*TZROP Offering*

In February 2018, the Division of Enforcement of the SEC informed us that it is conducting an investigation and requested that we voluntarily provide certain information and documents related to the TZROP offering in connection with its investigation. In December of 2018, Overstock received a follow-up request from the SEC relating to its investigation. On October 7, 2019, Overstock received a subpoena from the SEC requesting documents related to the Dividend Overstock announced to shareholders in June of 2019 and requesting 10b-5-1 plans of Overstock's officers and directors, some of whom are or were also officers and directors of tZERO, that were in effect during the period of January 1, 2018 through October 7, 2019. On December 9, 2019, Overstock received a subpoena from the SEC requesting documents related to the GSR transaction and the alternative trading system run by tZERO ATS, LLC, formerly known as Pro Securities, LLC. On December 19, 2019, Overstock received a subpoena from the SEC requesting our insider trading policies as well as certain employment and consulting agreements. We and Overstock 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.

*Broker-Dealer Subsidiaries*

Our 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 and tZERO ATS, LLC is registered with the SEC as a broker-dealer under the Securities Exchange Act of 1934 ("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. 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 our projects seeking to apply distributed ledger technologies to the capital markets, our subsidiaries have been, and remain involved in, ongoing oral and written communications with regulatory authorities. As previously disclosed, our 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 our 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 us.

In June 2021, SpeedRoute settled a disciplinary action which resulted in the payment of $0.3 million.

*tZERO Crypto*

Our subsidiary, tZERO Crypto, 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 these requirements could subject it to liability or limit the services it may offer.

------

**tZERO Group, Inc.**

**Notes to Consolidated Financial Statements**

**December 31, 2021 and 2020**

**11. REVENUES FROM CONTRACTS WITH CUSTOMERS**

The timing of the revenue recognition may differ from the timing of payment from customers. The Company records a receivable when revenue is recognized prior to payment, and when the Company has an unconditional right to payment. The Company records contract liability when payment is received, prior to the time at which the satisfaction of the service obligation. We had gross receivables related to revenues from contracts with customers of $2.9 million as of December 31, 2021 and $5.2 million on December 31, 2020.

The Company adopted ASU 2014-09, Revenue from Contracts with Customers, as of January 1, 2018 in the Consolidated Financial Statements by applying the modified retrospective method. The Company's revenue recognition methods for its contracts with customers prior to the adoption of ASU 2014-09 are consistent with its methods after the adoption. Accordingly, the adoption of the new standard did not result in a transition adjustment to opening retained earnings, and as a result, revenues for contracts with customers would not have been adjusted in prior periods and are not presented herein on an adjusted basis.

The Company earns commission revenue by acting as an agent on behalf of customers. The Company's performance obligations consist of trade execution and are satisfied on the trade date; accordingly, commission revenues are recorded on the trade date. Commission revenues are paid on settlement date; therefore, a receivable is recognized as of the trade date. The Company also earns revenue from verification of investor accreditations. The Company earns the majority of its revenue through commission income.

The following tables present the Company's revenue from contracts with customers disaggregated by entities for the years ended December 31, 2021 and 2020 (in thousands):

---

| | | | |
|:---|:---|:---|:---|
| | | **Year ended<br>December 31,** | **Year ended<br>December 31,** |
| | | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2021** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2020** |
| **Entity** | **Income statement classification** | | |
| Speed Route | Commissions income, net | $32916 | $43357 |
| Verify Investor | Investor verification revenue | 1264 | 1042 |
| ATS | Commissions income, net | 612 | 1032 |
| Crypto | Commissions income, net | 393 | 51 |
| ATS | Due diligence and other income | 110 | 384 |
| Total revenue |  | $35295 | $45866 |

---

We currently derive our revenue primarily from our broker dealer business. During the year ended December 31, 2021, we earned revenue from three customers totaling 32%, 17% and 12% of Consolidated net revenues. During the year ended December 31, 2020, we earned revenue from two customers totaling 25%, and 17% of Consolidated net revenues.

At December 31, 2021, 21%, 14% and 13% of accounts receivable was owed from three customers. At December 31, 2020, 20% and 19% of accounts receivable was owed from two customers.

------

**tZERO Group, Inc.**

**Notes to Consolidated Financial Statements**

**December 31, 2021 and 2020**

**12. STOCK-BASED AWARDS**

*Stock based awards*

The tZERO.com 2017 Equity Incentive Plan provides for grant of options and restricted stock awards to employees and directors of and consultants to acquire up to 5% of the authorized shares of our common stock. In 2020, we granted 60,000 stock option awards with a cumulative grant date fair value of $46,000. In June 2020, we completed the restructuring of our outstanding equity awards through the amendment and cancellation of each of our outstanding stock option awards in favor of the issuance of restricted stock awards, with each participant under the plan receiving one restricted stock unit for each stock option canceled. In addition to the original service-based vesting condition (generally three years), the restricted stock unit awards included an added performance-based vesting condition that a liquidity event must occur in order for the restricted stock unit awards to vest. The exchange was accounted for as a Type II modification with an incremental fair value of $6.9 million for the modified awards which will be expensed for the fully vested portion of the grant once the performance-based vesting condition becomes probable and the remaining fair value of the grant will be expensed on a straight-line basis over the remaining vesting period. During the year ended December 31, 2021, we granted 19,432,321 restricted stock awards with a cumulative grant date fair value of $15.8 million. No stock option awards were issued during the year ended December 31, 2021.

Certain of our employees hold equity awards (grants of options and restricted stock awards) originally issued by our parent entity, Medici Ventures, and its parent Overstock, which provides the right to acquire shares of common stock in those entities. These awards were originally granted to these employees while employed by either Medici Ventures or Overstock and prior to the employees transfer to tZERO. The downstream awards will continue to vest while these employees are providing services to tZERO over their original vesting term of 3 years.

Cumulative stock-based compensation expense, including down stream awards, was $2.4 million and $3.5 million for the year ended December 31, 2021 and 2020, respectively.

**13. OTHER INCOME (EXPENSE), NET**

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

---

| | | |
|:---|:---|:---|
| | **Year ended<br>December 31,** | **Year ended<br>December 31,** |
| | **2021** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2020** |
| Overstock.com overhead charges | $(662) | $(3781) |
| Other | 626 | (431) |
| Medici Ventures employees charges |  | (174) |
| &nbsp;&nbsp;&nbsp;Total other income (expense), net | $(36) | $(4386) |

---

See Note 18 - Related Party and Affiliated Transactions for more information about the commission earned from Overstock.

------

**tZERO Group, Inc.**

**Notes to Consolidated Financial Statements**

**December 31, 2021 and 2020**

**14. INCOME TAXES**

The provision (benefit) for income taxes consists of the following (in thousands):

---

| | | |
|:---|:---|:---|
| | **Year ended<br>December 31,** | **Year ended<br>December 31,** |
| | **2021** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2020** |
| Current | $32 | $8 |
| Deferred | 248 | 41 |
| &nbsp;&nbsp;&nbsp;Total provision (benefit) for income taxes | $280 | $49 |

---

The tax expense for the year ended December 31, 2021 and 2020 is primarily related to state minimum taxes and amortization of indefinite-lived goodwill.

The components of our deferred tax assets and liabilities as of December 31, 2021 and 2020 are as follows (in thousands):

---

| | | |
|:---|:---|:---|
| | **December 31** | **December 31** |
| | **2021** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2020** |
| Deferred tax assets |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net operating loss carryforwards | $34503 | $28710 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Intangible assets | 2736 | 2717 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating lease liabilities | 2366 | 2453 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued expenses | 2066 | 2320 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research and development tax credits | 449 | 782 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other | 2427 | 2366 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross deferred tax assets | 44547 | 39348 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Valuation allowance | (40352) | (34526) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total deferred tax assets | 4195 | 4822 |
| Deferred tax liabilities |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating lease right-of-use assets | (2040) | (2066) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Goodwilll | (1275) | (996) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other | (1306) | (1938) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total deferred tax liabilities | (4621) | (5000) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total deferred tax assets (liabilities), net | $(426) | $(178) |

---

Deferred tax assets (liabilities), net are recorded as a component of Other long-term liabilities on the Consolidated Balance Sheets as of December 31, 2021 and 2020, respectively.

At December 31, 2021, we have federal net operating loss carryforwards with no expiration date of approximately $141.3 million; the utilization of these net operating loss carryforwards is limited to 80% of taxable income in any given year. We also have federal net operating loss carryforwards of approximately $10.7 million which expire between 2034 and 2037. We have state net operating loss carryforwards of approximately $1.5 million which primarily expire in 2027 and 2030. At December 31, 2021, we have federal research credit carryforwards of

------

**tZERO Group, Inc.**

**Notes to Consolidated Financial Statements**

**December 31, 2021 and 2020**

approximately $0.6 million that expire between 2035 and 2040. Ownership changes under Internal Revenue Code Section 382 could limit the amount of net operating losses or credit carryforwards that can be used in the future.

We are subject to taxation in the United States and various state jurisdictions, and we file a U.S. Corporation Form 1120 return as we have taken a C Corporation election. Tax years beginning in 2016 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.

Each quarter we assess the recoverability of our deferred tax assets under ASC 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 December 31, 2021 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. Since December 31, 2021, the valuation allowance increased by $5.8 million.

**15. BROKER DEALERS**

The Company wholly owns three broker-dealers, SpeedRoute and tZERO ATS, LLC, which were acquired in January 2016, and tZERO Markets, LLC, whose broker-dealer registration with the SEC became effective in August 2020.

SpeedRoute is an electronic, agency-only, FINRA-member broker-dealer that provides connectivity for its customers to U.S. equity exchanges as well as off-exchange sources of liquidity such as alternate trading systems. All of SpeedRoute's customers are registered broker-dealers. SpeedRoute does not hold, own, or sell securities.

tZERO ATS, LLC is a FINRA-member broker-dealer that owns and operates an alternative trading system (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 three digital securities, the Series A-1 preferred stock, TZROP, and Aspen Digital, Inc.'s depository receipts for its common stock.

tZERO Markets, LLC is a FINRA-member broker-dealer that provides online brokerage services, supporting the trading of digital securities on the tZERO ATS. It launched its web application and began to open individual retail accounts in October 2020. tZERO Markets is also approved to act as a placement agent or underwriter in certain securities offerings but has not yet launched these business lines.

------

**tZERO Group, Inc.**

**Notes to Consolidated Financial Statements**

**December 31, 2021 and 2020**

Each of the Company's broker-dealers 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):

---

| | | |
|:---|:---|:---|
| | **December 31, 2021** | **December 31, 2020** |
| **SpeedRoute** | | |
| Net capital | $2923 | $2360 |
| Required net capital | 214 | 319 |
| Net capital, in excess of required | $3137 | $2679 |
| Net capital ratio | 1.10 | 2.03 |
| **tZERO ATS, LLC** |  |  |
| Net capital | $795 | $822 |
| Required net capital | 250 | 5 |
| Net capital, in excess of required | $1045 | $827 |
| Net capital ratio | 0.12 | 0.04 |
| **tZERO Markets, LLC** |  |  |
| Net capital | $728 | $1576 |
| Required net capital | 50 | 50 |
| Net capital, in excess of required | $778 | $1626 |
| Net capital ratio | 0.21 | 0.07 |

---

Each of the Company's broker-dealers did not have any securities owned or securities sold, not yet purchased at December 31, 2021 and December 31, 2020, respectively.

**16. PELION TRANSACTION AGREEMENT**

On January 25, 2021, Overstock entered into the Transaction Agreement with Medici Ventures Pelion MV GP,

L.L.C (the "General Partner"), and Pelion, Inc. (the "Transaction Agreement"). The transactions contemplated by the Transaction Agreement closed on April 23, 2021. Pursuant to the Transaction Agreement, (i) Medici Ventures converted to a Delaware limited partnership (the "Partnership"), (ii) the General Partner became the sole general partner of the Partnership, and Overstock, along with any other stockholders of Medici Ventures at the time of the closing of the Transaction Agreement became limited partners of the Partnership, (iii) Overstock converted the outstanding intercompany debt owed to it by tZERO into shares of common stock in tZERO, and (iv) Medici made an additional investment of $13.0 million in the common shares of tZERO. See Note 16 - Borrowings. Pursuant to the terms of the Partnership's Limited Partnership Agreement, Overstock and any other limited partners subsequently admitted to the Partnership agreed to make a capital commitment of $45.0 million to the Partnership in proportion to their equity interest in the Partnership to fund the Partnership's capital needs. The term of the Partnership is eight years commencing on April 23, 2021, which may be extended for one year by the General Partner.

------

**tZERO Group, Inc.**

**Notes to Consolidated Financial Statements**

**December 31, 2021 and 2020**

The debt conversion of $99.2 million described above was completed during the quarter ended March 31, 2021. As of December 31, 2021, Medici Ventures and Overstock held approximately 41.1% and 40.3%, respectively, of tZERO's outstanding common stock.

The closing of the transactions contemplated by the Transaction Agreement occurred on April 23, 2021. At this closing, Overstock entered into the Limited Partnership Agreement with the Partnership, the General Partner, and Pelion, Inc., pursuant to which the General Partner 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. As a result, the General Partner has sole authority and responsibility regarding investing decisions, appointing board members of the portfolio companies, and exercising all shareholder rights for assets of the Partnership currently holds — including its interest in tZERO.

In connection with the Pelion transaction, Overstock reported that it would no longer consolidate tZERO as part of its financial statements. As a result, Overstock ceased reporting tZERO as a separate segment in its quarterly report for the quarter ended March 31, 2021 and is expected to include substantially less disclosure regarding tZERO in its future public filings than it has in prior periods.

As of December 31, 2021, Overstock indirectly owns 91.0% of the issued and outstanding common stock of the Company and the remaining 9.0% of the Company is held by 33 other individual or entity shareholders, many of whom are employees or former employees of the Company.

**17. BORROWINGS**

*Acquisition Note Payable to Parent*

In connection with the acquisition of tZERO Crypto Inc. ("tZERO Crypto"), we entered into a demand note dated December 21, 2018 with Medici Ventures. Under the demand note, we have borrowed $4.0 million, which matured on December 31, 2020 and subsequently was extended. The notes bear interest at a rate equal to 4.0% per annum.

During the first quarter of 2021, we converted the outstanding balance of the Acquisition Note Payable to Parent into shares of tZERO common stock. See Note 16 – Pelion Transaction Agreement

*Operating Note Payable to Overstock*

Overstock provides additional services or funding to and for our benefit; however, any such additional services or funding are at the sole discretion of Overstock, which has no obligation to provide any additional services or funding. All additional services, funding, intellectual development work, and other costs and expenses incurred by Overstock, or advanced to us, in the furtherance of our business is deemed a loan by Overstock to the us. Such amounts bear interest at 7.0% per annum, compounded, and, unless otherwise agreed by Overstock, must be repaid by us in monthly payments due on the 15th day of each month in an amount equal to 50% of our net revenues (gross revenues minus operating costs) for the preceding calendar month. Our results have not yet allowed for any of these monthly repayments to date. We may prepay any amount of any such loans at any time without penalty.

During the first quarter of 2021, we converted the outstanding balance of the Operating Note Payable to Parent into shares of tZERO common stock. See Note 1 - Basis Of Presentation

------

**tZERO Group, Inc.**

**Notes to Consolidated Financial Statements**

**December 31, 2021 and 2020**

*Note Payable to Medici Ventures L.P.*

The Company entered into a promissory note with Medici Ventures L.P. dated December 22, 2021. Under the promissory note, we have borrowed $5.0 million, which matures on December 31, 2023. The note bears interest at a rate equal to 3.0% per annum.

During the first quarter of 2022, we converted the outstanding balance and accrued interest into shares of tZERO preferred shares as a part of the Intercontinental Exchange ("ICE") Investment. See Note 20 - Subsequent Events.

**18. RELATED PARTY AND AFFILIATED TRANSACTIONS**

In October 2016, we entered into an agreement to provide Overstock with access to the Existing tZERO Software Platform in exchange for a $20,000 per month subscription fee, which is included in Revenues, net in the Consolidated Statement of Operations. This agreement was terminated during 2021.

On January 1, 2019, Medici Ventures transferred its 33% equity interest in tZERO Crypto to us for a

$4.0 million convertible promissory note maturing on December 31, 2020 and the assignment of certain intellectual property to Medici Ventures. This note was paid as part of the Pelion transaction. See Note 17 – Borrowings.

Overstock, which holds an indirect majority interest in us, provides additional services or funding to and for our benefit; however, any such additional services or funding are at the sole discretion of Overstock, which has no obligation to provide any additional services or funding. All additional services, funding, intellectual development work, and other costs and expenses incurred by Overstock, or advanced to us, in the furtherance of our business is deemed a loan by Overstock to us. During 2021 we were allocated $0.6 million and during 2020, we were allocated

$3.8 million as allocated expenses from Overstock.

As part of the Acquisition of Bitsy in December 2018, we entered into an agreement with Medici Ventures to provide its technical personnel for a limited period of time to assist us in building out the Bitsy software (tZERO Crypto App) with payment to be made in form of Company's common stock upon completion. We have recognized $0.0 million and $0.2 million in compensation expense for the year ended December 31, 2021 and December 31, 2020, respectively.

Certain of our employees hold equity awards (grants of options and restricted stock awards) originally issued by our parent entity, Medici Ventures, and its parent Overstock, which provides the right to acquire shares of common stock in those entities. These awards were originally granted to these employees while employed by either Medici Ventures or Overstock and prior to the employees transfer to tZERO. The downstream awards will continue to vest while these employees are providing services to tZERO over their original vesting term of 3 years. There was $0.0 million down stream stock compensation expense for the year ended December 31, 2021 and $1.4 million for the year ended December 31, 2020.

**19. GOING CONCERN**

We have generated limited revenue and have accumulated losses since inception. As such, our continuation as a going concern is currently dependent upon obtaining sufficient financing. There is no assurance that sufficient financing will be available to us when needed to allow us to continue as a going concern, therefore substantial doubt about the Company's ability to continue as a going concern exists. The Company is evaluating strategies to obtain the required additional funding for future operations. These strategies may include but are not limited to obtaining equity financing, issuing debt, or entering into other financing arrangements and restructuring

------

**tZERO Group, Inc.**

**Notes to Consolidated Financial Statements**

**December 31, 2021 and 2020**

of operations to grow revenues and decrease expenses. However, given the impact of the economic downturn on the U.S. and global financial markets, the Company may be unable to access further equity or debt financing when needed. As such, there can be no assurance that the Company will be able to obtain additional liquidity when needed or under acceptable terms, if at all.

The Consolidated financial statements do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if the Company were unable to continue as a going concern. See Note 20 - Subsequent Events.

**20. SUBSEQUENT EVENTS**

*Speedroute and ATS Settlement*

In January 2022 Speedroute, a settlement was reached between the Company and NYSE & NASDQ and a total of $0.9 million of which $0.4 million was paid to NASDAQ and $0.5 million to NYSE. ATS agreed to an Offer of Settlement with the SEC, related to admitted infractions between 2014 and 2020. A fine of $0.8 million was imposed and subsequently paid in January 2022.

*Intercontinental Exchange Investment*

On February 22, 2022, tZERO completed an initial strategic funding round (the "ICE Investment") from new and existing investors, including Intercontinental Exchange, Inc. ("ICE"), a leading operator of global exchanges and clearing houses and provider of mortgage technology, data and listings services, Overstock and Medici. As part of the transaction, each of the participants acquired shares of new Series B convertible preferred stock and Medici Ventures converted the outstanding intercompany debt owed to it by us into shares of our Series B convertible preferred stock. As a result of the strategic investment, ICE became a significant minority shareholder in tZERO.

On August 22, 2022, ICE and certain other investors closed a second funding round.

*Sale of SpeedRoute, LLC*

In connection with the Intercontinental Exchange investment, the Company sold its broker-dealer subsidiary SpeedRoute, LLC, to Overstock, Medici Ventures and SMPV, LLC.

*BSTX Impairment*

BSTX has incurred substantial losses and had a retained deficit as of December 31, 2021. BSTX 's deteriorating financial condition, negative cash flows from operations and a working-capital deficiency casts doubt about the BSTX's ability to continue as a going concern. As a result, Company management has determined that the investment in BSTX was impaired and has written it off in the first quarter of calendar year 2022.

We have evaluated the impact of all subsequent events through November 2, 2022, the date these financial statements were available to be issued and determined that all subsequent events have been appropriately recognized and disclosed in the accompanying financial statements.

<br>