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DISCONTINUED OPERATIONS | 12 Months Ended
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Dec. 31, 2021
Discontinued Operations and Disposal Groups [Abstract] |
DISCONTINUED OPERATIONS | 4. DISCONTINUED OPERATIONS On January 25, 2021, we entered into the Transaction Agreement with Medici Ventures, Pelion, and Pelion, Inc., pursuant to which the parties agreed, among other things, that: (i) Medici Ventures would convert to a Delaware limited partnership (the "Partnership"), (ii) pursuant to the terms and subject to the conditions of the Limited Partnership Agreement which was entered into on the date of the Medici Closing, Pelion would become the sole general partner of the Partnership, and we (along with any other stockholders of Medici Ventures at the time of the Medici Closing), would become the limited partners of the Partnership, (iii) prior to the Medici Closing, Overstock would convert the outstanding intercompany debt owed to us by Medici Ventures into shares of common stock in Medici Ventures; and (iv) prior to the Medici Closing, Overstock would convert the outstanding intercompany debt owed to us by tZERO into shares of common stock in tZERO, in each case, on the terms and subject to the conditions set forth in the Transaction Agreement and the relevant definitive agreements to be entered into in connection therewith. Pursuant to the terms of the Limited Partnership Agreement, we and any other partners subsequently admitted to the Partnership agreed to make a capital commitment of $45 million to the Partnership in proportion to our equity interest in the Partnership in order to fund the Partnership's capital needs. The term of the Partnership is eight years. The debt conversion outlined in (iii) and (iv) above was completed during the quarter ended March 31, 2021, following which Medici Ventures and Overstock held approximately 42% and 41%, respectively, of tZERO's common stock. The Transaction Agreement represents a strategic shift for Overstock and a substantive change in the purpose and design of Medici Ventures and its interplay with Overstock’s overall business objectives. The Board of Directors has determined that it is in the best interest of Overstock and its shareholders to have the Overstock management team focus on Overstock’s core e-commerce home furnishings business and strategies. Accordingly, after six years of committed effort to advance blockchain technology, Overstock has determined that the Medici Ventures businesses will be better served under the management of Pelion, a professional asset manager with technology expertise in early-stage companies. From and after the Medici Closing, Pelion has sole authority and responsibility regarding investing decisions, appointing board members of the portfolio companies, and exercising all shareholder rights for assets held by the Partnership, with the intent of generating capital appreciation for the held entities and investment income for the partners. On April 23, 2021, we entered into the Limited Partnership Agreement with Pelion, as part of the Medici Closing, 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. The Partnership meets the definition of an investment company under ASC Subtopic 946 - Financial Services - Investment Companies. As a result of the Medici Closing, we performed an assessment of control under the VIE model and determined that upon the Medici Closing, we held a variable interest in both Medici Ventures and tZERO which meet the definition of variable interest entities; however, we are not the primary beneficiary of either entity 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 the Partnership or tZERO that most significantly impact their economic performance. Pelion was not a related party at the time of the Medici Closing and apart from its capacity as the general partner of the Partnership, we have no other relationship with Pelion. We may not voluntarily withdraw from the Partnership without the consent of the general partner or upon certain limited events as outlined in the Limited Partnership Agreement. Any proceeds from the sales of assets by the Partnership will be allocated on an asset-by-asset basis to the partners of the Partnership in accordance with the Limited Partnership Agreement following such events. 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:
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%
| Enterprise value to revenue multiple |  | 0.75x - 5.00x |  | 4.40x
| Projected terminal year |  | 2023 - 2027 |  | 2025
| Annual revenue growth rate |  | 1.3% - 124.0% |  | 109.4%
| Annual EBITDA % of revenues |  | 5.2% - 41.2% |  | 36.3%
Discounted cash flows - perpetual growth |  | Discount rate |  | 30.0% |  | 30.0%
| Projected terminal year |  | 2028 |  | 2028
| Perpetual revenue growth rate |  | 3.0% |  | 3.0%
| Annual revenue growth rate |  | 25.7% |  | 25.7%
| Annual EBITDA % of revenues |  | 14.9% |  | 14.9%
__________________________________________ (1) — 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. (2) — 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. Our retained equity interest in these entities is classified as equity method securities as we can exercise significant influence, but not control, over these entities through holding more than a 20% interest in the entity. As of December 31, 2021, our 99% equity interest in the Partnership and the 40% direct minority interest in tZERO had a carrying value of $342.5 million which is included in Equity securities on our consolidated balance sheets, of which, $102.4 million is valued under the fair value option. Our direct equity interest in tZERO is valued using Level 3 inputs, which interest represents 99.7% of assets measured at fair value. This amount also constitutes our maximum exposure to loss as a result of our involvement in these entities as we have no additional financing obligations to these entities. During the period ended December 31, 2021 we recognized an increase in the valuation of our direct equity interest in tZERO of $2.6 million that was recorded in Other income (expense), net on our consolidated statements of operations. The operations of the Partnership subsequent to the Medici Closing include a net increase in partners' capital from operations of $10.1 million through the period ended December 31, 2021. We recognized $10.0 million of income from equity method securities due to our proportionate share of this increase associated with our equity interest in the Partnership through the period ended December 31, 2021, which was recorded in Other income (expense), net on our consolidated statements of operations. Results of discontinued operations through the Medici Closing were as follows (in thousands):
|  |  | Year ended December 31,
|  |  |  |  | 2021 |  | 2020 |  | 2019
Revenue, net |  |  |  |  | $ | 17,394 |  |  | $ | 55,868 |  |  | $ | 24,444 |
Cost of goods sold |  |  |  |  | 13,716 |  |  | 47,691 |  |  | 19,300 |
Gross profit |  |  |  |  | 3,678 |  |  | 8,177 |  |  | 5,144 |
Operating expenses |  |  |  |  |  |  |  |  |
Technology |  |  |  |  | 7,133 |  |  | 20,750 |  |  | 22,315 |
Selling, general, and administrative |  |  |  |  | 13,509 |  |  | 31,916 |  |  | 43,911 |
Total operating expenses |  |  |  |  | 20,642 |  |  | 52,666 |  |  | 66,226 |
Operating loss from discontinued operations |  |  |  |  | (16,964) |  |  | (44,489) |  |  | (61,082) |
Interest income, net |  |  |  |  | 192 |  |  | 600 |  |  | 254 |
Other income (loss), net |  |  |  |  | 4,081 |  |  | (5,441) |  |  | (11,859) |
Gain on deconsolidation |  |  |  |  | 243,541 |  |  | — |  |  | — |
Income (loss) from discontinued operations before income taxes |  |  |  |  | 230,850 |  |  | (49,330) |  |  | (72,687) |
Provision (benefit) for income taxes |  |  |  |  | 13,604 |  |  | (374) |  |  | (875) |
Income (loss) from discontinued operations, net of income taxes |  |  |  |  | $ | 217,246 |  |  | $ | (48,956) |  |  | $ | (71,812) |
Less: Net loss attributable to noncontrolling interests from discontinued operations |  |  |  |  | (335) |  |  | (9,830) |  |  | (12,879) |
Net income (loss) from discontinued operations attributable to stockholders of Overstock.com, Inc. |  |  |  |  | $ | 217,581 |  |  | $ | (39,126) |  |  | $ | (58,933) |
Assets and liabilities of discontinued operations were as follows (in thousands):
| December 31, 2021 |  | December 31, 2020
Cash and cash equivalents | $ | — |  |  | $ | 21,075 |
Other current assets | — |  |  | 13,054 |
Total current assets of discontinued operations | $ | — |  |  | $ | 34,129 |
Property and equipment, net | $ | — |  |  | $ | 8,783 |
Intangible assets, net | — |  |  | 13,852 |
Goodwill | — |  |  | 28,790 |
Equity securities | — |  |  | 45,878 |
Operating lease right-of-use assets | — |  |  | 7,226 |
Other long-term assets, net | — |  |  | 1,626 |
Total long-term assets of discontinued operations | $ | — |  |  | $ | 106,155 |
Accounts payable and accrued liabilities | $ | — |  |  | $ | 11,939 |
Other current liabilities | — |  |  | 1,985 |
Total current liabilities of discontinued operations | $ | — |  |  | $ | 13,924 |
Operating lease liabilities, non-current | — |  |  | 7,099 |
Other long-term liabilities | — |  |  | 586 |
Total long-term liabilities of discontinued operations | $ | — |  |  | $ | 7,685 |

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- Definition The entire disclosure related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -URI http://asc.fasb.org/topic&trid=2155823 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 + Details
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