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ý
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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87-0634302
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification Number)
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799 West Coliseum Way, Midvale, Utah
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84047
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(Address of principal executive offices)
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(Zip Code)
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(801) 947-3100
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||
(Registrant's telephone number, including area code)
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Common Stock, $0.0001 par value
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|
OSTK
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|
NASDAQ Global Market
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Large accelerated filer o
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Accelerated filer x
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Non-accelerated filer o
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Smaller reporting company o
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Emerging growth company o
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Page
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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Item 1.
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Item 1A.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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•
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the impact that the novel coronavirus, or COVID-19, pandemic may have on our business and the industries in which we and our subsidiaries and investee entities operate;
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•
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the impact that any litigation or regulatory matters could have on our business, financial condition, results of operations, and cash flows;
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•
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the possibility that we will be unable to generate sufficient cash flow from operations, raise any required additional capital or borrow additional funds, in the case of capital-raising or borrowing on acceptable terms, to successfully conduct our business or pursue our initiatives in a timely manner or at all;
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•
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any increases in the price of importing into the U.S. the types of merchandise we sell in our retail business or other supply chain challenges that limit our access to merchandise we sell in our retail business;
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•
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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;
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•
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any strategic transactions, restructurings or other changes we may make to our business;
|
•
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any downturn in the U.S. housing industry or other changes in U.S. and global economic conditions or U.S. consumer spending, as a result of the COVID-19 pandemic or otherwise;
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•
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our exposure to cyber security risks, risks of data loss and other security breaches;
|
•
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any challenges that result in the unavailability of our Website or reduced performance of our transaction systems;
|
•
|
the possibility that we are unable to protect our proprietary technology and to obtain trademark protection for our marks;
|
•
|
current claims of intellectual property infringement to which we are subject and additional infringement claims to which we may become subject in the future;
|
•
|
the commercial, competitive, technical, operational, financial, regulatory, legal, reputational, marketing and other obstacles we face in trying to create a profitable business from our blockchain initiatives, including tZERO;
|
•
|
the extensive regulatory regimes applicable to tZERO and the possibility that various tZERO subsidiaries or ventures do not receive the regulatory approval required to operate their anticipated businesses;
|
•
|
any losses or issues we may encounter as a consequence of accepting or holding bitcoin or other cryptocurrencies;
|
•
|
our inability to attract and retain key personnel;
|
•
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the possibility that the cost of our current insurance policies may increase significantly or fail to adequately protect us as expected; and
|
•
|
the other risks described in this report or in our other public filings.
|
Overstock.com, Inc.
Consolidated Balance Sheets (Unaudited)
(in thousands, except per share data)
|
|||||||
|
March 31,
2020 |
|
December 31,
2019 |
||||
Stockholders' equity:
|
|
|
|
|
|
||
Preferred stock, $0.0001 par value, authorized shares - 5,000
|
|
|
|
|
|
||
Series A-1, issued and outstanding - 4,210 and 4,210 (including 4,085 shares declared as a stock dividend, not yet distributed)
|
—
|
|
|
—
|
|
||
Series B, issued and outstanding - 357 and 357
|
—
|
|
|
—
|
|
||
Common stock, $0.0001 par value, authorized shares - 100,000
|
|
|
|
|
|
||
Issued shares - 43,877 and 42,790
|
|
|
|
|
|
||
Outstanding shares - 40,326 and 39,464
|
4
|
|
|
4
|
|
||
Additional paid-in capital
|
768,055
|
|
|
764,845
|
|
||
Accumulated deficit
|
(596,723
|
)
|
|
(580,390
|
)
|
||
Accumulated other comprehensive loss
|
(564
|
)
|
|
(568
|
)
|
||
Treasury stock at cost - 3,551 and 3,326
|
(70,493
|
)
|
|
(68,807
|
)
|
||
Equity attributable to stockholders of Overstock.com, Inc.
|
100,279
|
|
|
115,084
|
|
||
Equity attributable to noncontrolling interests
|
61,376
|
|
|
62,771
|
|
||
Total stockholders' equity
|
161,655
|
|
|
177,855
|
|
||
Total liabilities and stockholders' equity
|
$
|
456,735
|
|
|
$
|
417,727
|
|
|
Three months ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
Revenue, net
|
|
|
|
|
|
||
Retail
|
$
|
339,598
|
|
|
$
|
362,625
|
|
Other
|
11,975
|
|
|
5,104
|
|
||
Total net revenue
|
351,573
|
|
|
367,729
|
|
||
Cost of goods sold
|
|
|
|
|
|
||
Retail
|
265,392
|
|
|
290,640
|
|
||
Other
|
10,341
|
|
|
3,965
|
|
||
Total cost of goods sold
|
275,733
|
|
|
294,605
|
|
||
Gross profit
|
75,840
|
|
|
73,124
|
|
||
Operating expenses
|
|
|
|
|
|
||
Sales and marketing
|
36,762
|
|
|
33,477
|
|
||
Technology
|
32,796
|
|
|
35,433
|
|
||
General and administrative
|
32,426
|
|
|
40,232
|
|
||
Total operating expenses
|
101,984
|
|
|
109,142
|
|
||
Operating loss
|
(26,144
|
)
|
|
(36,018
|
)
|
||
Interest income
|
272
|
|
|
403
|
|
||
Interest expense
|
(200
|
)
|
|
(127
|
)
|
||
Other income (expense), net
|
6,683
|
|
|
(6,272
|
)
|
||
Loss before income taxes
|
(19,389
|
)
|
|
(42,014
|
)
|
||
Provision for income taxes
|
176
|
|
|
878
|
|
||
Net loss
|
(19,565
|
)
|
|
(42,892
|
)
|
||
Less: Net loss attributable to noncontrolling interests
|
(3,232
|
)
|
|
(3,648
|
)
|
||
Net loss attributable to stockholders of Overstock.com, Inc.
|
$
|
(16,333
|
)
|
|
$
|
(39,244
|
)
|
Net loss per common share—basic:
|
|
|
|
|
|
||
Net loss attributable to common shares—basic
|
$
|
(0.40
|
)
|
|
$
|
(1.18
|
)
|
Weighted average common shares outstanding—basic
|
40,158
|
|
|
32,370
|
|
||
Net loss per common share—diluted:
|
|
|
|
||||
Net loss attributable to common shares—diluted
|
$
|
(0.40
|
)
|
|
$
|
(1.18
|
)
|
Weighted average common shares outstanding—diluted
|
40,158
|
|
|
32,370
|
|
|
Three months ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
Net loss
|
$
|
(19,565
|
)
|
|
$
|
(42,892
|
)
|
Other comprehensive income
|
|
|
|
||||
Unrealized gain on cash flow hedges, net of expense for taxes of $0, and $0
|
4
|
|
|
4
|
|
||
Other comprehensive income
|
4
|
|
|
4
|
|
||
Comprehensive loss
|
(19,561
|
)
|
|
(42,888
|
)
|
||
Less: Comprehensive loss attributable to noncontrolling interests
|
(3,232
|
)
|
|
(3,648
|
)
|
||
Comprehensive loss attributable to stockholders of Overstock.com, Inc.
|
$
|
(16,329
|
)
|
|
$
|
(39,240
|
)
|
Overstock.com, Inc.
Consolidated Statements of Changes in Stockholders' Equity (Unaudited)
(in thousands)
|
|||||||
|
Three months ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
Equity attributable to stockholders of Overstock.com, Inc.
|
|
|
|
||||
Number of common shares issued
|
|
|
|
||||
Balance at beginning of period
|
42,790
|
|
|
35,346
|
|
||
Common stock issued upon vesting of restricted stock
|
671
|
|
|
242
|
|
||
Common stock sold through ATM offering
|
416
|
|
|
2,214
|
|
||
Balance at end of period
|
43,877
|
|
|
37,802
|
|
||
Number of treasury stock shares
|
|
|
|
||||
Balance at beginning of period
|
3,326
|
|
|
3,200
|
|
||
Common stock repurchased through business combination
|
—
|
|
|
47
|
|
||
Tax withholding upon vesting of restricted stock
|
225
|
|
|
72
|
|
||
Balance at end of period
|
3,551
|
|
|
3,319
|
|
||
Total number of outstanding shares
|
40,326
|
|
|
34,483
|
|
||
|
|
|
|
||||
Common stock
|
$
|
4
|
|
|
$
|
3
|
|
|
|
|
|
||||
Number of Series A preferred shares issued and outstanding
|
—
|
|
|
127
|
|
||
Number of Series A-1 preferred shares issued and outstanding (including 4,085 shares declared as a stock dividend, not yet distributed)
|
4,210
|
|
|
—
|
|
||
Number of Series B preferred shares issued and outstanding
|
357
|
|
|
355
|
|
||
|
|
|
|
||||
Preferred stock
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
||||
Additional paid-in capital
|
|
|
|
||||
Balance at beginning of period
|
$
|
764,845
|
|
|
$
|
657,981
|
|
Stock-based compensation to employees and directors
|
3,268
|
|
|
3,985
|
|
||
Common stock sold through ATM offering, net
|
—
|
|
|
39,914
|
|
||
Other
|
(58
|
)
|
|
(3
|
)
|
||
Balance at end of period
|
$
|
768,055
|
|
|
$
|
701,877
|
|
|
|
|
|
||||
Accumulated deficit
|
|
|
|
||||
Balance at beginning of period
|
$
|
(580,390
|
)
|
|
$
|
(458,897
|
)
|
Net loss attributable to stockholders of Overstock.com, Inc.
|
(16,333
|
)
|
|
(39,244
|
)
|
||
Other
|
—
|
|
|
425
|
|
||
Balance at end of period
|
$
|
(596,723
|
)
|
|
$
|
(497,716
|
)
|
|
|||||||
Continued on the following page
|
Overstock.com, Inc.
Consolidated Statements of Changes in Stockholders' Equity (Unaudited)
(in thousands)
|
|||||||
|
Three months ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
Accumulated other comprehensive loss
|
|
|
|
||||
Balance at beginning of period
|
$
|
(568
|
)
|
|
$
|
(584
|
)
|
Net other comprehensive income
|
4
|
|
|
4
|
|
||
Balance at end of period
|
$
|
(564
|
)
|
|
$
|
(580
|
)
|
Treasury stock
|
|
|
|
||||
Balance at beginning of period
|
$
|
(68,807
|
)
|
|
$
|
(66,757
|
)
|
Common stock repurchased through business combination
|
—
|
|
|
(643
|
)
|
||
Tax withholding upon vesting of restricted stock
|
(1,686
|
)
|
|
(1,353
|
)
|
||
Balance at end of period
|
(70,493
|
)
|
|
(68,753
|
)
|
||
Total equity attributable to stockholders of Overstock.com, Inc.
|
$
|
100,279
|
|
|
$
|
134,831
|
|
|
|
|
|
||||
Equity attributable to noncontrolling interests
|
|
|
|
||||
Balance at beginning of period
|
$
|
62,771
|
|
|
$
|
78,960
|
|
Net loss attributable to noncontrolling interests
|
(3,232
|
)
|
|
(3,648
|
)
|
||
Other
|
1,837
|
|
|
(581
|
)
|
||
Total equity attributable to noncontrolling interests
|
$
|
61,376
|
|
|
$
|
74,731
|
|
|
|
|
|
||||
Total stockholders' equity
|
$
|
161,655
|
|
|
$
|
209,562
|
|
Overstock.com, Inc.
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
|
|||||||
|
Three months ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
Cash flows from operating activities:
|
|
|
|
|
|
||
Consolidated net loss
|
$
|
(19,565
|
)
|
|
$
|
(42,892
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
||
Depreciation of property and equipment
|
6,646
|
|
|
6,575
|
|
||
Amortization of intangible assets
|
923
|
|
|
1,481
|
|
||
Non-cash operating lease cost
|
1,630
|
|
|
1,667
|
|
||
Stock-based compensation to employees and directors
|
3,268
|
|
|
3,985
|
|
||
Deferred income taxes, net
|
8
|
|
|
895
|
|
||
(Gain)/loss on sale of cryptocurrencies
|
(219
|
)
|
|
9
|
|
||
Impairment of cryptocurrencies
|
21
|
|
|
318
|
|
||
Impairment of equity securities
|
—
|
|
|
2,958
|
|
||
Losses on equity method securities
|
2,468
|
|
|
1,025
|
|
||
Gain on disposal of business
|
(10,705
|
)
|
|
—
|
|
||
Other non-cash adjustments
|
1,625
|
|
|
1,858
|
|
||
Changes in operating assets and liabilities, net of acquisitions:
|
|
|
|
|
|
||
Accounts receivable, net
|
(11,141
|
)
|
|
14,068
|
|
||
Inventories
|
1,162
|
|
|
554
|
|
||
Prepaids and other current assets
|
1,542
|
|
|
3,106
|
|
||
Other long-term assets, net
|
457
|
|
|
(189
|
)
|
||
Accounts payable
|
(1,310
|
)
|
|
(28,023
|
)
|
||
Accrued liabilities
|
338
|
|
|
(6,962
|
)
|
||
Deferred revenue
|
12,547
|
|
|
(10,640
|
)
|
||
Operating lease liabilities
|
(1,751
|
)
|
|
(1,249
|
)
|
||
Other long-term liabilities
|
(171
|
)
|
|
27
|
|
||
Net cash used in operating activities
|
(12,227
|
)
|
|
(51,429
|
)
|
||
Cash flows from investing activities:
|
|
|
|
|
|
||
Purchase of equity securities
|
(85
|
)
|
|
(2,500
|
)
|
||
Proceeds from sale of equity securities and marketable securities
|
2,179
|
|
|
5,535
|
|
||
Disbursement for notes receivable
|
(300
|
)
|
|
(2,000
|
)
|
||
Acquisitions of businesses, net of cash acquired
|
—
|
|
|
4,885
|
|
||
Expenditures for property and equipment
|
(3,638
|
)
|
|
(4,144
|
)
|
||
Deconsolidation of cash of Medici Land Governance, Inc.
|
(4,056
|
)
|
|
—
|
|
||
Other investing activities, net
|
(99
|
)
|
|
(2
|
)
|
||
Net cash (used in) provided by investing activities
|
(5,999
|
)
|
|
1,774
|
|
||
|
|||||||
Continued on the following page
|
|||||||
|
Overstock.com, Inc.
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
|
|||||||
|
Three months ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
Cash flows from financing activities:
|
|
|
|
|
|
||
Proceeds from long-term debt
|
47,500
|
|
|
—
|
|
||
Proceeds from sale of common stock, net of offering costs
|
2,848
|
|
|
30,957
|
|
||
Payments of taxes withheld upon vesting of restricted stock
|
(1,686
|
)
|
|
(1,353
|
)
|
||
Other financing activities, net
|
(1,413
|
)
|
|
(648
|
)
|
||
Net cash provided by financing activities
|
47,249
|
|
|
28,956
|
|
||
Net increase (decrease) in cash, cash equivalents and restricted cash
|
29,023
|
|
|
(20,699
|
)
|
||
Cash, cash equivalents and restricted cash, beginning of period
|
114,898
|
|
|
142,814
|
|
||
Cash, cash equivalents and restricted cash, end of period
|
$
|
143,921
|
|
|
$
|
122,115
|
|
|
|
|
|
||||
Supplemental disclosures of cash flow information:
|
|
|
|
||||
Cash paid during the period:
|
|
|
|
||||
Interest paid, net of amounts capitalized
|
$
|
32
|
|
|
$
|
86
|
|
Income taxes paid, net
|
4
|
|
|
130
|
|
||
Non-cash investing and financing activities:
|
|
|
|
|
|
||
Property and equipment financed through accounts payable and accrued liabilities
|
$
|
190
|
|
|
$
|
304
|
|
Common stock repurchased through business combination
|
—
|
|
|
643
|
|
||
Receivables converted to equity securities
|
186
|
|
|
359
|
|
||
Recognition of ROU Asset and Liabilities for new lease (Operating)
|
41
|
|
|
7,961
|
|
||
Recognition of ROU Asset and Liabilities for new lease (Financing)
|
517
|
|
|
—
|
|
||
Recognition of right-of-use assets upon adoption of ASC 842
|
—
|
|
|
30,968
|
|
||
Proceeds from sale of common stock included in accounts receivable
|
—
|
|
|
8,957
|
|
||
Proceeds from the sale of marketable securities included in accounts receivable
|
3,081
|
|
|
—
|
|
||
Deposit applied to business combination purchase price
|
—
|
|
|
7,347
|
|
||
Equity method security applied to business combination purchase price
|
—
|
|
|
3,707
|
|
•
|
Level 1—Quoted prices for identical instruments in active markets;
|
•
|
Level 2—Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and
|
•
|
Level 3—Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
|
|
Fair Value Measurements at March 31, 2020:
|
||||||||||||||
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents - Money market mutual funds
|
$
|
2,811
|
|
|
$
|
2,811
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Equity securities, at fair value
|
414
|
|
|
414
|
|
|
—
|
|
|
—
|
|
||||
Marketable securities, at fair value
|
3,838
|
|
|
3,838
|
|
|
—
|
|
|
—
|
|
||||
Trading securities held in a "rabbi trust" (1)
|
85
|
|
|
85
|
|
|
—
|
|
|
—
|
|
||||
Total assets
|
$
|
7,148
|
|
|
$
|
7,148
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Deferred compensation accrual "rabbi trust" (2)
|
$
|
84
|
|
|
$
|
84
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Total liabilities
|
$
|
84
|
|
|
$
|
84
|
|
|
$
|
—
|
|
|
$
|
—
|
|
(1)
|
— Trading securities held in a rabbi trust are included in Prepaids and other current assets and Other long-term assets, net in the consolidated balance sheets.
|
(2)
|
— Non-qualified deferred compensation in a rabbi trust is included in Accrued liabilities and Other long-term liabilities in the consolidated balance sheets.
|
|
Life
(years)
|
Building
|
40
|
Land improvements
|
20
|
Building machinery and equipment
|
15-20
|
Furniture and equipment
|
5-7
|
Computer hardware
|
3-4
|
Computer software, including internal-use software and website development
|
2-4
|
|
Three months ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
Cost of goods sold - retail
|
$
|
190
|
|
|
$
|
175
|
|
Technology
|
4,771
|
|
|
5,175
|
|
||
General and administrative
|
1,685
|
|
|
1,225
|
|
||
Total depreciation
|
$
|
6,646
|
|
|
$
|
6,575
|
|
|
Three months ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
Impairments and downward adjustments of equity securities without readily determinable fair values
|
$
|
—
|
|
|
$
|
(2,958
|
)
|
|
Three months ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
Net losses recognized during the period on equity securities
|
$
|
(1,619
|
)
|
|
$
|
(618
|
)
|
Less: Net losses recognized during the period on equity securities sold
|
(90
|
)
|
|
—
|
|
||
Unrealized losses during the reporting period on equity securities still held
|
$
|
(1,529
|
)
|
|
$
|
(618
|
)
|
|
Ownership
interest
|
Bitt Inc.
|
21%
|
Boston Security Token Exchange LLC
|
50%
|
Chainstone Labs, Inc.
|
29%
|
FinClusive Capital, Inc.
|
10%
|
GrainChain, Inc.
|
18%
|
Medici Land Governance
|
35%
|
Minds, Inc.
|
24%
|
PeerNova, Inc.
|
11%
|
SettleMint NV
|
29%
|
Spera, Inc.
|
19%
|
VinX Network Ltd.
|
29%
|
Voatz, Inc.
|
20%
|
|
Three months ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
Net loss recognized on our proportionate share of the net losses of our equity method securities and amortization of the basis difference
|
$
|
2,468
|
|
|
$
|
1,025
|
|
Net loss recognized during the period on equity method securities sold
|
—
|
|
|
524
|
|
|
March 31,
2020 |
|
December 31,
2019 |
||||
Intangible assets subject to amortization, gross (1)
|
$
|
30,267
|
|
|
$
|
30,284
|
|
Less: accumulated amortization of intangible assets subject to amortization
|
(19,430
|
)
|
|
(18,528
|
)
|
||
Total intangible assets, net
|
$
|
10,837
|
|
|
$
|
11,756
|
|
(1)
|
— At March 31, 2020, the weighted average remaining useful life for intangible assets subject to amortization was 5.52 years.
|
|
Three months ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
Technology
|
$
|
847
|
|
|
$
|
853
|
|
Sales and marketing
|
11
|
|
|
16
|
|
||
General and administrative
|
65
|
|
|
(830
|
)
|
||
Total amortization
|
$
|
923
|
|
|
$
|
39
|
|
|
Amount
|
||
Deferred revenue at December 31, 2018
|
$
|
50,578
|
|
Increase due to deferral of revenue at period end
|
36,622
|
|
|
Decrease due to beginning contract liabilities recognized as revenue
|
(45,379
|
)
|
|
Deferred revenue at December 31, 2019
|
41,821
|
|
|
Increase due to deferral of revenue at period end
|
41,520
|
|
|
Decrease due to beginning contract liabilities recognized as revenue
|
(29,198
|
)
|
|
Deferred revenue at March 31, 2020
|
$
|
54,143
|
|
|
Amount
|
||
Allowance for returns at December 31, 2018
|
$
|
15,261
|
|
Additions to the allowance
|
117,040
|
|
|
Deductions from the allowance
|
(121,194
|
)
|
|
Allowance for returns at December 31, 2019
|
11,107
|
|
|
Additions to the allowance
|
25,688
|
|
|
Deductions from the allowance
|
(26,643
|
)
|
|
Allowance for returns at March 31, 2020
|
$
|
10,152
|
|
|
Three months ended
March 31, |
||||||||||||
|
2020
|
|
2019
|
||||||||||
Total revenue, net
|
$
|
351,573
|
|
|
100
|
%
|
|
$
|
367,729
|
|
|
100
|
%
|
Cost of goods sold
|
|
|
|
|
|
|
|
|
|
|
|
||
Product costs and other cost of goods sold
|
259,946
|
|
|
74
|
%
|
|
277,218
|
|
|
75
|
%
|
||
Fulfillment and related costs
|
15,787
|
|
|
4
|
%
|
|
17,387
|
|
|
5
|
%
|
||
Total cost of goods sold
|
275,733
|
|
|
78
|
%
|
|
294,605
|
|
|
80
|
%
|
||
Gross profit
|
$
|
75,840
|
|
|
22
|
%
|
|
$
|
73,124
|
|
|
20
|
%
|
|
Three months ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
Net loss attributable to stockholders of Overstock.com, Inc.
|
$
|
(16,333
|
)
|
|
$
|
(39,244
|
)
|
Less: Preferred stock TZROP repurchase gain
|
—
|
|
|
(425
|
)
|
||
Less: Preferred stock dividends - declared and accumulated
|
19
|
|
|
19
|
|
||
Undistributed loss
|
(16,352
|
)
|
|
(38,838
|
)
|
||
Less: Undistributed loss allocated to participating securities
|
(194
|
)
|
|
(569
|
)
|
||
Net loss attributable to common shares
|
$
|
(16,158
|
)
|
|
$
|
(38,269
|
)
|
Net loss per common share—basic:
|
|
|
|
|
|
||
Net loss attributable to common shares—basic
|
$
|
(0.40
|
)
|
|
$
|
(1.18
|
)
|
Weighted average common shares outstanding—basic
|
40,158
|
|
|
32,370
|
|
||
Effect of dilutive securities:
|
|
|
|
|
|||
Stock options and restricted stock awards
|
—
|
|
|
—
|
|
||
Weighted average common shares outstanding—diluted
|
40,158
|
|
|
32,370
|
|
||
Net loss attributable to common shares—diluted
|
$
|
(0.40
|
)
|
|
$
|
(1.18
|
)
|
|
Three months ended
March 31, |
||||
|
2020
|
|
2019
|
||
Stock options and restricted stock units
|
737
|
|
|
1,030
|
|
|
March 31,
2020 |
|
December 31,
2019 |
||||
|
|
|
|
||||
Accrued compensation and other related costs
|
$
|
18,224
|
|
|
$
|
13,012
|
|
Accrued marketing expenses
|
12,109
|
|
|
13,063
|
|
||
Other accrued expenses
|
10,862
|
|
|
9,714
|
|
||
Allowance for returns
|
10,152
|
|
|
11,107
|
|
||
Accounts payable accruals
|
9,855
|
|
|
15,692
|
|
||
Accrued loss contingencies
|
9,555
|
|
|
9,550
|
|
||
Sales and other taxes payable
|
9,058
|
|
|
10,105
|
|
||
Accrued freight
|
8,642
|
|
|
5,954
|
|
||
Total accrued liabilities
|
$
|
88,457
|
|
|
$
|
88,197
|
|
|
March 31, 2020
|
|
December 31, 2019
|
||||
Operating right-of-use assets
|
$
|
23,726
|
|
|
$
|
25,384
|
|
Operating lease liabilities - current
|
5,968
|
|
|
6,603
|
|
||
Operating lease liabilities - non-current
|
20,409
|
|
|
21,554
|
|
|
Three months ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
Operating lease cost
|
$
|
2,132
|
|
|
$
|
2,505
|
|
Short-term lease cost
|
11
|
|
|
34
|
|
||
Variable lease cost
|
405
|
|
|
528
|
|
|
Three months ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
||||
Operating cash flows used in operating leases
|
$
|
(2,261
|
)
|
|
$
|
(2,018
|
)
|
Right-of-use assets obtained in exchange for new operating lease liabilities
|
$
|
41
|
|
|
$
|
7,961
|
|
Weighted-average remaining lease term - operating leases
|
5.91 years
|
|
|
7.27 years
|
|
||
Weighted-average discount rate - operating leases
|
8
|
%
|
|
8
|
%
|
Payments due by period
|
|
Amount
|
||
2020 (Remainder)
|
|
$
|
6,382
|
|
2021
|
|
5,777
|
|
|
2022
|
|
5,628
|
|
|
2023
|
|
4,683
|
|
|
2024
|
|
3,485
|
|
|
Thereafter
|
|
7,358
|
|
|
Total lease payments
|
|
33,313
|
|
|
Less interest
|
|
6,936
|
|
|
Present value of lease liabilities
|
|
$
|
26,377
|
|
|
Three months ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
Cost of goods sold — retail
|
$
|
53
|
|
|
$
|
47
|
|
Sales and marketing
|
389
|
|
|
441
|
|
||
Technology
|
915
|
|
|
1,227
|
|
||
General and administrative
|
1,911
|
|
|
2,270
|
|
||
Total stock-based compensation
|
$
|
3,268
|
|
|
$
|
3,985
|
|
|
Three months ended
March 31, 2020 |
|||||
|
Units
|
|
Weighted
Average Grant Date Fair Value |
|||
Outstanding—beginning of year
|
1,051
|
|
|
$
|
26.22
|
|
Granted at fair value
|
436
|
|
|
9.03
|
|
|
Vested
|
(671
|
)
|
|
23.96
|
|
|
Forfeited
|
(79
|
)
|
|
28.35
|
|
|
Outstanding—end of period
|
737
|
|
|
$
|
17.88
|
|
|
|
Three months ended
March 31, |
||||||
|
|
2020
|
|
2019
|
||||
Gain on deconsolidation of net assets of Medici Land Governance, Inc.
|
|
$
|
10,741
|
|
|
$
|
—
|
|
Other
|
|
44
|
|
|
543
|
|
||
Impairment of equity securities
|
|
—
|
|
|
(2,958
|
)
|
||
Impairment of notes receivable
|
|
(15
|
)
|
|
(1,237
|
)
|
||
Loss on sale of equity securities and marketable securities
|
|
(90
|
)
|
|
(977
|
)
|
||
Unrealized loss on equity securities and marketable securities
|
|
(1,529
|
)
|
|
(618
|
)
|
||
Equity method losses
|
|
(2,468
|
)
|
|
(1,025
|
)
|
||
Total other income (expense), net
|
|
$
|
6,683
|
|
|
$
|
(6,272
|
)
|
|
Three months ended March 31,
|
||||||||||||||||||
|
Retail
|
|
tZERO
|
|
MVI
|
|
Other
|
|
Total
|
||||||||||
2020
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenue, net
|
$
|
339,598
|
|
|
$
|
10,239
|
|
|
$
|
1,574
|
|
|
$
|
162
|
|
|
$
|
351,573
|
|
Cost of goods sold
|
265,392
|
|
|
8,767
|
|
|
1,574
|
|
|
—
|
|
|
275,733
|
|
|||||
Gross profit
|
74,206
|
|
|
1,472
|
|
|
—
|
|
|
162
|
|
|
75,840
|
|
|||||
Operating expenses
|
82,835
|
|
|
12,258
|
|
|
2,908
|
|
|
3,983
|
|
|
101,984
|
|
|||||
Interest and other income (expense), net (1)
|
(299
|
)
|
|
(1,782
|
)
|
|
8,833
|
|
|
3
|
|
|
6,755
|
|
|||||
Pre-tax income (loss)
|
$
|
(8,928
|
)
|
|
$
|
(12,568
|
)
|
|
$
|
5,925
|
|
|
$
|
(3,818
|
)
|
|
(19,389
|
)
|
|
Provision for income taxes
|
|
|
|
|
|
|
|
|
176
|
|
|||||||||
Net loss (2)
|
|
|
|
|
|
|
|
|
$
|
(19,565
|
)
|
||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
2019
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Revenue, net
|
$
|
362,625
|
|
|
$
|
4,496
|
|
|
$
|
608
|
|
|
$
|
—
|
|
|
$
|
367,729
|
|
Cost of goods sold
|
290,640
|
|
|
3,357
|
|
|
608
|
|
|
—
|
|
|
294,605
|
|
|||||
Gross profit
|
71,985
|
|
|
1,139
|
|
|
—
|
|
|
—
|
|
|
73,124
|
|
|||||
Operating expenses
|
85,336
|
|
|
15,553
|
|
|
4,253
|
|
|
4,000
|
|
|
109,142
|
|
|||||
Interest and other income (expense), net (1)
|
135
|
|
|
(963
|
)
|
|
(5,164
|
)
|
|
(4
|
)
|
|
(5,996
|
)
|
|||||
Pre-tax loss
|
$
|
(13,216
|
)
|
|
$
|
(15,377
|
)
|
|
$
|
(9,417
|
)
|
|
$
|
(4,004
|
)
|
|
(42,014
|
)
|
|
Provision for income taxes
|
|
|
|
|
|
|
|
|
878
|
|
|||||||||
Net loss (2)
|
|
|
|
|
|
|
|
|
$
|
(42,892
|
)
|
(1)
|
— Excludes intercompany transactions eliminated in consolidation, which consist primarily of service fees and interest. The net amounts of these intercompany transactions were $1.1 million and $415,000 for the three months ended March 31, 2020 and 2019.
|
(2)
|
— Net loss presented for segment reporting purposes is before any adjustments attributable to noncontrolling interests.
|
|
March 31,
2020 |
|
December 31,
2019 |
||||
SpeedRoute
|
|
|
|
||||
Net capital
|
$
|
1,427
|
|
|
$
|
850
|
|
Required net capital
|
370
|
|
|
145
|
|
||
Net capital, in excess of required
|
$
|
1,057
|
|
|
$
|
705
|
|
Net capital ratio
|
3.88
|
|
|
2.56
|
|
||
|
|
|
|
||||
tZERO ATS, LLC
|
|
|
|
||||
Net capital
|
$
|
66
|
|
|
$
|
110
|
|
Required net capital
|
5
|
|
|
5
|
|
||
Net capital, in excess of required
|
$
|
61
|
|
|
$
|
105
|
|
Net capital ratio
|
0.28
|
|
|
0.27
|
|
•
|
Improve Mobile Experience - As more website visitors move to mobile, we are focusing on ensuring our mobile experience is fast, frictionless, and meets the unique needs of the mobile shopping journey. We believe an improved mobile experience improves product findability, conversion, search engine rankings, and organic traffic.
|
•
|
Overhaul Discounting and Pricing Experience - "Smart Value" is the central brand pillar of our value proposition. We believe clarifying our pricing and discounting experience allows customers to more confidently purchase at Overstock. Savvy shoppers expect a "smart deal," including saving through coupons, site sales, Club O rewards and financing. We have historically offered free shipping (over $45) but during the COVID-19 pandemic, in order to serve our customers during this challenging time, we are offering free shipping on everything to the continental U.S. We believe our net promoter score (NPS), repeat purchase rates and conversion will improve as we better optimize the mix of offers and clarify the pricing and discounting experience.
|
•
|
Real Time Performance and SKU Profitability - We are improving our ability to address site, assortment and pricing issues more quickly by enhancing our real-time visibility into site, category, and marketing channel performance. We believe this initiative allows us to improve margin by more quickly resolving site issues for an improved customer experience.
|
•
|
Expand Partner Sponsored Marketing - We are expanding the "Overstock Sponsored Product" program, a platform for our drop ship partners to promote their products to shoppers through a cost-per-click auction platform. In addition, we have implemented a marketing allowance program across our partner network. This marketing allowance program allows us to optimize the marketing promotion type, mix and on-sale assortment to better meet the needs of our target customer segments and adapt to seasonal relevance.
|
•
|
Enable existing keiretsu companies to extend runway to profitability - The companies in Medici Ventures' keiretsu continue to release products into production. Medici Ventures supports its keiretsu companies by offering a variety of services including development, design, public relations services, and assistance in raising capital from third parties to extend the companies' runway to profitability.
|
•
|
Educate the public and policy makers on blockchain technologies - Medici Ventures works to increase general knowledge of blockchain technology, use cases, and corresponding value through speaking opportunities, article publication, policy maker outreach, and other public relations work.
|
•
|
Opportunistically approach future partnerships - Medici Ventures continues to review and seek out strategic opportunities to take ownership interests in seed-stage and startup companies that effectively use blockchain technology. This includes looking for companies that can effectively use Medici Ventures' enterprise-level technology development and design talent.
|
•
|
Promote trading - tZERO ATS is focused on quoting for trading high-quality digital securities. tZERO ATS, LLC is working with prospective issuers spanning various industries, including real estate, technology, health care and sports, as they seek to structure and issue new digital securities using the tZERO Technology Stack, as well as to provide liquidity to existing investors. Additionally, tZERO is enhancing the tZERO Technology Stack to support third party issuance protocols in order to support securities which have been digitally enabled by other technology companies and is cultivating relationships with established investment banks to help prospective issuers raise capital, prior to tokenizing and trading on the tZERO ATS.
|
•
|
Enhance liquidity - tZERO ATS is focused on enhancing liquidity. To achieve this, tZERO ATS, LLC is in discussions with several broker-dealers interested in subscribing to the tZERO ATS, which would enable their customers to trade digital securities traded on the ATS. tZERO is also supporting the distribution of Overstock's digital dividend, which it believes will serve as a catalyst for greater participation on the tZERO ATS. tZERO also continues to develop new trading venues for digital securities such as BSTX as it seeks regulatory approval for a U.S. national exchange facility, as well as working to launch tZERO Markets (subject to regulatory approval) to support further investors who wish to access such trading venues.
|
•
|
Create a world class trading experience - tZERO continues to seek opportunities to enhance the tZERO Technology Stack and improve investors' trading experience for all types of financial products. tZERO is working to allow digital securities to be traded via mobile application. It is also developing further enhancements of tZERO Crypto's separate wallet and exchange services, such as ensuring it is accessible on a web platform. tZERO believes a world-class trading experience will be key to investors' adoption of digital securities and tZERO's products and services.
|
•
|
Advocacy - tZERO operates businesses which are subject to complex and often uncertain legal environments and believes active engagement with regulatory authorities is necessary to realize the full potential of its business. tZERO continues, in partnership with other industry participants, to advocate regulatory reform with legislators and regulators in order to spur market innovation through the adoption of distributed ledger technology.
|
|
|
Three months ended
March 31, |
|
|
|
|
|||||||||
|
|
2020
|
|
2019
|
|
$ Change
|
|
% Change
|
|||||||
Revenue, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Retail
|
|
$
|
339,598
|
|
|
$
|
362,625
|
|
|
$
|
(23,027
|
)
|
|
(6.4
|
)%
|
Other
|
|
11,975
|
|
|
5,104
|
|
|
6,871
|
|
|
134.6
|
%
|
|||
Total revenue, net
|
|
$
|
351,573
|
|
|
$
|
367,729
|
|
|
$
|
(16,156
|
)
|
|
(4.4
|
)%
|
|
|
Three months ended
March 31, 2020 |
||||||
Change in the Estimate of Average Transit Times (Days)
|
|
Increase (Decrease)
Revenue
|
|
Increase (Decrease)
Pre-Tax Income
|
||||
2
|
|
$
|
(9,539
|
)
|
|
$
|
(1,716
|
)
|
1
|
|
$
|
(4,712
|
)
|
|
$
|
(846
|
)
|
As reported
|
|
As reported
|
|
|
As reported
|
|
||
-1
|
|
$
|
6,266
|
|
|
$
|
1,093
|
|
-2
|
|
$
|
18,286
|
|
|
$
|
3,284
|
|
|
|
Three months ended
March 31, |
|
|
|
|
|||||||||
|
|
2020
|
|
2019
|
|
$ Change
|
|
% Change
|
|||||||
Revenue, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Retail
|
|
$
|
339,598
|
|
|
$
|
362,625
|
|
|
$
|
(23,027
|
)
|
|
(6.4
|
)%
|
Other
|
|
11,975
|
|
|
5,104
|
|
|
6,871
|
|
|
134.6
|
%
|
|||
Total net revenue
|
|
351,573
|
|
|
367,729
|
|
|
(16,156
|
)
|
|
(4.4
|
)%
|
|||
Cost of goods sold
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Retail
|
|
265,392
|
|
|
290,640
|
|
|
(25,248
|
)
|
|
(8.7
|
)%
|
|||
Other
|
|
10,341
|
|
|
3,965
|
|
|
6,376
|
|
|
160.8
|
%
|
|||
Total cost of goods sold
|
|
275,733
|
|
|
294,605
|
|
|
(18,872
|
)
|
|
(6.4
|
)%
|
|||
Gross Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Retail
|
|
74,206
|
|
|
71,985
|
|
|
2,221
|
|
|
3.1
|
%
|
|||
Other
|
|
1,634
|
|
|
1,139
|
|
|
495
|
|
|
43.5
|
%
|
|||
Total gross profit
|
|
$
|
75,840
|
|
|
$
|
73,124
|
|
|
$
|
2,716
|
|
|
3.7
|
%
|
|
|
Q1 2019
|
|
Q2 2019
|
|
Q3 2019
|
|
Q4 2019
|
|
FY 2019
|
|
Q1 2020
|
||||||
Retail
|
|
19.9
|
%
|
|
19.7
|
%
|
|
20.0
|
%
|
|
20.7
|
%
|
|
20.1
|
%
|
|
21.9
|
%
|
Other
|
|
22.3
|
%
|
|
22.6
|
%
|
|
20.6
|
%
|
|
19.1
|
%
|
|
21.0
|
%
|
|
13.6
|
%
|
Combined
|
|
19.9
|
%
|
|
19.8
|
%
|
|
20.0
|
%
|
|
20.6
|
%
|
|
20.1
|
%
|
|
21.6
|
%
|
|
Three months ended
March 31, |
||||||||||
|
2020
|
|
2019
|
||||||||
Total revenue, net
|
$
|
351,573
|
|
|
100%
|
|
$
|
367,729
|
|
|
100%
|
Cost of goods sold
|
|
|
|
|
|
|
|
|
|
||
Product costs and other cost of goods sold
|
259,946
|
|
|
74%
|
|
277,218
|
|
|
75%
|
||
Fulfillment and related costs
|
15,787
|
|
|
4%
|
|
17,387
|
|
|
5%
|
||
Total cost of goods sold
|
275,733
|
|
|
78%
|
|
294,605
|
|
|
80%
|
||
Gross profit
|
$
|
75,840
|
|
|
22%
|
|
$
|
73,124
|
|
|
20%
|
|
|
Three months ended
March 31, |
|
|
|
|
|||||||||
|
|
2020
|
|
2019
|
|
$ Change
|
|
% Change
|
|||||||
Sales and marketing expenses
|
|
$
|
36,762
|
|
|
$
|
33,477
|
|
|
$
|
3,285
|
|
|
9.8
|
%
|
Sales and marketing expenses as a percent of net revenues
|
|
10.5
|
%
|
|
9.1
|
%
|
|
|
|
|
|
|
|
|
Three months ended
March 31, |
|
|
|
|
|||||||||
|
|
2020
|
|
2019
|
|
$ Change
|
|
% Change
|
|||||||
Technology expenses
|
|
$
|
32,796
|
|
|
$
|
35,433
|
|
|
$
|
(2,637
|
)
|
|
(7.4
|
)%
|
Technology expenses as a percent of net revenues
|
|
9.3
|
%
|
|
9.6
|
%
|
|
|
|
|
|
|
|
|
Three months ended
March 31, |
|
|
|
|
|||||||||
|
|
2020
|
|
2019
|
|
$ Change
|
|
% Change
|
|||||||
General and administrative expenses
|
|
$
|
32,426
|
|
|
$
|
40,232
|
|
|
$
|
(7,806
|
)
|
|
(19.4
|
)%
|
General and administrative expenses as a percent of net revenues
|
|
9.2
|
%
|
|
10.9
|
%
|
|
|
|
|
|
|
|
|
Three months ended
March 31, |
||||||
|
|
2020
|
|
2019
|
||||
Cash provided by (used in):
|
|
|
|
|
|
|
||
Operating activities
|
|
$
|
(12,227
|
)
|
|
$
|
(51,429
|
)
|
Investing activities
|
|
(5,999
|
)
|
|
1,774
|
|
||
Financing activities
|
|
47,249
|
|
|
28,956
|
|
|
|
|
||||||||||||||||||
Contractual Obligations
|
|
Total
|
|
Less than 1 year
|
|
1-3 years
|
|
3-5 years
|
|
More than 5 years
|
||||||||||
Operating leases
|
|
$
|
33,313
|
|
|
$
|
7,867
|
|
|
$
|
11,258
|
|
|
$
|
7,350
|
|
|
$
|
6,838
|
|
Loan agreements
|
|
63,806
|
|
|
5,264
|
|
|
10,528
|
|
|
6,091
|
|
|
41,923
|
|
|||||
Technology services
|
|
2,557
|
|
|
1,940
|
|
|
617
|
|
|
—
|
|
|
—
|
|
|||||
Total contractual cash obligations
|
|
$
|
99,676
|
|
|
$
|
15,071
|
|
|
$
|
22,403
|
|
|
$
|
13,441
|
|
|
$
|
48,761
|
|
(a)
|
|
Exhibits
|
|
|
|
|
3.1*
|
|
|
|
|
3.2*
|
|
|
|
|
10.1
|
|
|
|
|
10.2
|
|
|
|
|
10.3
|
|
|
|
|
10.4
|
|
|
|
|
31.1*
|
|
|
|
|
31.2*
|
|
|
|
|
32.1**
|
|
|
|
|
32.2**
|
|
|
|
|
101
|
|
Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statements of Cash Flows, (v) Consolidated Statements of Stockholders' Equity, and (vi) Notes to Consolidated Financial Statements.
|
Date:
|
May 7, 2020
|
OVERSTOCK.COM, INC.
|
|
|
|
|
|
/s/ ADRIANNE B. LEE
|
|
|
Adrianne B. Lee
|
|
|
Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
|
|
|
OVERSTOCK.COM, INC.
|
|
|
|
|
|
|
By:
|
/s/ GLEN NICKLE
|
|
|
|
Name: Glen Nickle
|
|
|
|
Title: VP, Legal & General Counsel
|
|
|
|
OVERSTOCK.COM, INC.
|
|
|
|
|
|
|
By:
|
/s/ GLEN NICKLE
|
|
|
|
Name: Glen Nickle
|
|
|
|
Title: VP, Legal & General Counsel
|
|
Section 1.
|
Designation. The designation of such series is “Voting Series B Preferred Stock” (“Series B Preferred”).
|
Section 2.
|
Number of Shares. The number of shares of Series B Preferred shall be 370,000. Such number may from time to time be increased (but not in excess of the total number of authorized shares of Preferred Stock undesignated as to series) or decreased (but not below the number of shares of Series B Preferred then outstanding) by the Board of Directors. Shares of Series B Preferred that are redeemed, purchased or otherwise acquired by the Corporation shall be cancelled and the Corporation shall take all such actions as are necessary to cause such shares to revert to status of authorized but unissued shares of Preferred Stock undesignated as to series.
|
Section 3.
|
Definitions. As used herein with respect to the Series B Preferred:
|
(a)
|
“Accrued Dividends” with respect to any share of the Series B Preferred, means an amount computed at the annual Dividend Rate (as defined below) from the Original Issue Date to and including the date to which such dividends have accrued (whether or not such dividends have been declared), less the aggregate amount of all dividends previously paid on such share.
|
(b)
|
“Junior stock” means the Common Stock and any other class or series of stock of the Corporation hereafter authorized as to which the Series B Preferred has preference or priority in the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding up of the Corporation.
|
(c)
|
“Original Issue Date” means December 15, 2016.
|
(d)
|
“Original Purchase Price” means $15.68 per share of Series B Preferred.
|
(e)
|
“Parity stock” means the Series A Preferred and any other class or series of stock of the Corporation, other than the Common Stock, that ranks on a parity with the Series B Preferred in the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding up of the Corporation.
|
(f)
|
Series A Preferred” means the Blockchain Voting Series A Preferred Stock designated by the Corporation.
|
Section 4.
|
Dividends.
|
(a)
|
Rate. Each holder of issued and outstanding Series B Preferred shall be entitled to receive, when, as and if declared by the Board of Directors, for each share of Series B Preferred held by such holder, annual dividends payable in cash at the annual rate of 1.0% (the “Dividend Rate”) multiplied by the Original Purchase Price, in preference to any dividend payment to the holders of the Common Stock (the “Priority Dividends”), but only out of funds that are legally available therefor, with all cash dividends being rounded to the nearest $0.01 per share.
|
(b)
|
Priority of Priority Dividends. Priority Dividends on the Series B Preferred shall be paid pari passu with dividends on the Series A Preferred. So long as any share of Series B Preferred is outstanding, no dividend may be declared or paid or set aside for payment or other distribution declared or made upon any junior stock of any kind unless, in each case, full cumulative Priority Dividends on all shares of Series B Preferred have been or are contemporaneously paid as provided in Section 4(a). If Priority Dividends are not paid in full or a sum sufficient for such full payment is not so set apart upon the Series B Preferred, all dividends declared upon the Series B Preferred and all dividends declared on any parity stock shall be declared pro rata so that the amount of dividends declared per share of the Series B Preferred and dividends declared per share of such parity stock shall in all cases bear to each other the same ratio that accrued and unpaid Priority Dividends per share on the Series B Preferred and accrued and unpaid dividends per share of such parity stock bear to each other.
|
(c)
|
Participation Rights in Dividends on Common Stock. In addition to the dividend rights set forth above regarding the Priority Dividends, the Corporation shall not pay a dividend, whether payable in cash, securities or other property, to the holders of the Common Stock unless the Corporation substantially concurrently pays a dividend to the holders of the Series B Preferred (as of the same record date as the record date for such distribution to the holders of the Common Stock) of the same kind and of the same amount per share of Series B Preferred as is paid per share of Common Stock, payable on the same payment date set for the holders of the Common Stock with respect to such dividend to the holders of record of the Series B Preferred on the same record date as the record date for such dividend to holders of the Common Stock; provided, however, that this Section 4(c) shall not require any dividend payment to the holders of the Series B Preferred and shall not prevent or restrict any dividend to the holders of the Common Stock if the Corporation pays a dividend on the Common Stock consisting solely of shares of its Common Stock, in which case the provisions of Section 7 hereof shall control. If the Corporation redeems or otherwise acquires shares of Series B Preferred prior to the record date for any dividend on the Series B Preferred, the redeemed or acquired shares of Series B Preferred shall have no right to any such dividend.
|
Section 5.
|
Liquidation Rights.
|
(a)
|
Liquidation. In the event of any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, the outstanding shares of Series B Preferred shall be treated as if such shares were additional outstanding shares of Common Stock for the purpose of determining any rights to any distributions of assets.
|
(b)
|
Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the merger or consolidation of the Corporation with any other corporation, including a merger in which the holders of Series B Preferred receive cash or property for their shares, or the sale of all or substantially all of the assets of the Corporation, shall not constitute a liquidation, dissolution or winding up of the Corporation.
|
Section 6.
|
Redemption.
|
(a)
|
Optional Redemption. Shares of Series B Preferred may be redeemed, in whole or in part, at the option of the Corporation, by the Corporation by giving notice of such redemption at any time prior to the third anniversary of the Original Issue Date. If the Corporation gives notice of redemption prior to the third anniversary of the Original Issuance Date, the Corporation may effect the redemption after the third anniversary of the Original Issuance Date. Notice of redemption may be given either by mailing notice to the holders of record or by press release or other public announcement. If notice is given by public announcement, by press release or otherwise, such notice shall be effective as of the date of such announcement, regardless of whether notice is also mailed or otherwise given to holders of record. The redemption price for any shares of Series B Preferred to be redeemed (the “Redemption Price”) shall be payable in cash, out of funds legally available therefor, and shall be equal to the highest of the following: (1) the Original Purchase Price plus any Accrued Dividends; (2) 105% of the average trading price of the Common Stock during a five-trading-day period determined by the Corporation in its sole discretion (the “Trading Period”); and (3) 105% of the average trading price of the Series B Preferred during
|
(b)
|
Effectiveness of Redemption. From and after the redemption date specified in the notice of redemption, if funds necessary for the redemption are available and have been irrevocably deposited or set aside, dividends on the Series B Preferred to be redeemed on such redemption date will cease to accrue; such shares will no longer be deemed to be outstanding; and all rights of the holder thereof as a holder of Series B Preferred (except the right to receive from the Corporation the Redemption Price without interest) shall cease and terminate with respect to such shares; provided, that if a share of Series B Preferred is not redeemed on the Redemption Date for any reason (including without limitation, because the Corporation is unable to lawfully pay the Redemption Price), such share of Series B Preferred will remain outstanding and will be entitled to, without interruption, all of the rights, preferences and powers as provided herein.
|
Section 7.
|
Certain Adjustments. If the Corporation pays a dividend on the Common Stock consisting solely of shares of its Common Stock or if it splits or combines the Common Stock, the Corporation shall use its reasonable efforts to make a corresponding pro rata adjustment to the outstanding shares of Series B Preferred.
|
Section 8.
|
Voting Rights. Except as otherwise provided herein or as required by law, the holders of the shares of Series B Preferred shall vote together with the holders of the shares of Series A Preferred and the holders of the shares of Common Stock (and not as a separate class) at any annual or special meeting of stockholders of the Corporation, and each holder of Series B Preferred shall have one vote on all matters submitted to a vote of the holders of the Common Stock for each share of Series B Preferred owned by such holder on the applicable record date. Holders of Series B Preferred will vote as a class upon any amendment increasing or decreasing the aggregate number of authorized shares of Series B Preferred or altering or changing the powers, preferences or special rights of the Series B Preferred that would adversely affect the holders of the Series B Preferred.
|
Section 9.
|
Rights in the Event of Merger or Consolidation Involving the Corporation. If the Corporation is party to any merger or consolidation pursuant to which all or part of the Common Stock shall be changed into or exchanged for stock or other securities of any other person (or the Corporation) or cash or any other property (or a right to receive the foregoing), then, and in each such case, the Corporation shall use all commercially reasonable efforts to make proper provision so that each outstanding share of Series B Preferred shall be treated as if such share were an additional outstanding share of Common Stock for all purposes in connection with any such merger or consolidation.
|
Section 10.
|
Other Rights. The shares of Series B Preferred shall not have any voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein.
|
Date:
|
May 7, 2020
|
/s/ JONATHAN E. JOHNSON III
|
|
|
Jonathan E. Johnson III
|
|
|
Chief Executive Officer
|
|
|
(Principal Executive Officer)
|
Date:
|
May 7, 2020
|
/s/ ADRIANNE B. LEE
|
|
|
Adrianne B. Lee
|
|
|
Chief Financial Officer
|
|
|
(Principal Financial Officer and Principal Accounting Officer)
|
Date:
|
May 7, 2020
|
/s/ JONATHAN E. JOHNSON III
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Jonathan E. Johnson III
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Chief Executive Officer
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(Principal Executive Officer)
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Date:
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May 7, 2020
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/s/ ADRIANNE B. LEE
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Adrianne B. Lee
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Chief Financial Officer
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(Principal Financial Officer and Principal Accounting Officer)
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